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[LOGO]
1995
SEC FORM 10-K
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-2384
TRW INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-0575430
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1900 RICHMOND ROAD, CLEVELAND, OHIO 44124
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 291-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, par value $0.625 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
Rights to Purchase Cumulative Redeemable New York Stock Exchange
Serial Preference Stock II, Series 4 Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
Cumulative Serial Preference Stock II, New York Stock Exchange
$4.40 Convertible Series 1
Cumulative Serial Preference Stock II, New York Stock Exchange
$4.50 Convertible Series 3
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [__]
The aggregate market value of the registrant's voting stock held by
non-affiliates was $5,594,990,827 as of March 1, 1996. This amount was computed
on the basis of the closing price of the registrant's voting securities included
in the NYSE-Composite Transactions report for such date, as published in the
Midwest edition of THE WALL STREET JOURNAL or, in the case of the registrant's
voting cumulative preference stock, for the date of the most recent trade, as
reported in the Dow Jones News Retrieval Service.
As of March 1, 1996 there were 65,988,663 shares of TRW Common Stock, $0.625 par
value, outstanding.
The following documents have been incorporated herein by reference to the extent
indicated herein:
TRW Proxy Statement dated March 20, 1996 Part III
TRW Annual Report to Security Holders for the year ended December 31,
1995 Parts I, II and IV
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TRW INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1995
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PART I PAGE
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Item 1. Business.......................................................................... 1
Item 2. Properties........................................................................ 6
Item 3. Legal Proceedings................................................................. 6
Item 4. Submission of Matters to a Vote of Security Holders............................... 7
Executive Officers of the Registrant......................................................... 7
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PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters............. 10
Item 6. Selected Financial Data........................................................... 10
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 11
Item 8. Financial Statements and Supplementary Data....................................... 11
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure...................................................................... 11
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PART III
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Item 10. Directors and Executive Officers of the Registrant................................ 11
Item 11. Executive Compensation............................................................ 11
Item 12. Security Ownership of Certain Beneficial Owners and Management.................... 12
Item 13. Certain Relationships and Related Transactions.................................... 12
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PART IV
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Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................. 12
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PART I
ITEM 1. BUSINESS
INDUSTRY SEGMENTS AND PRODUCT CLASSIFICATIONS
TRW is an international company that provides advanced technology products
and services. The principal businesses of TRW and its subsidiaries are the
design, manufacture and sale of products and the performance of systems
engineering, research and technical services for industry and the United States
Government in three industry segments: Automotive; Space & Defense; and
Information Systems & Services. TRW's principal products and services include
automotive systems and components; spacecraft; software and systems engineering
support services; electronic systems, equipment and services; and information
systems and services. TRW was incorporated under the laws of Ohio on June 17,
1916. As used herein the terms "TRW" and the "Company" refer to TRW Inc. or to
TRW Inc. and its subsidiaries or to a subsidiary of TRW Inc.
AUTOMOTIVE
TRW's Automotive segment designs, manufactures and sells a broad range of
steering, suspension, engine, safety, engineered fastening, electronic,
electromechanical and other components and systems as original equipment for
passenger cars and commercial vehicles, including trucks, buses, farm machinery
and off-highway vehicles. These products include occupant safety systems such as
seat belt systems and inflatable restraint systems, manual and power steering
gears, engine valves and valve train components, suspension components,
electronic monitoring and control systems, electromechanical assemblies,
fasteners, stud welding systems and other components.
Automotive original equipment included in this industry segment is sold
primarily to original equipment manufacturers. In addition, TRW sells its
automotive components for use as aftermarket parts to original equipment
manufacturers and others for resale through their own independent distribution
networks.
SPACE & DEFENSE
TRW's Space & Defense segment includes spacecraft, software and systems
engineering support services and electronic systems, equipment and services.
The Company's spacecraft activities include the design and manufacture of
spacecraft equipment, propulsion subsystems, electro-optical and instrument
systems, spacecraft payloads, high-energy lasers and laser technology and other
high-reliability components. TRW's software and systems engineering support
services are in the fields of command and control, security for defense and
nondefense applications, counterterrorism, undersea surveillance, antisubmarine
warfare and other high-technology space and defense mission support systems,
management of radioactive waste, automated fingerprint matching, upgrading of
the nation's air traffic control program and other civilian applications. The
Company's electronic systems, equipment and services include the design and
manufacture of communications systems, avionics systems and other electronic
technologies for space and defense applications.
Products and services in this industry segment are sold and distributed
principally to the United States Government. TRW's spacecraft business involves
the sale to the United States Government of subsystems and components for space
propulsion and unmanned spacecraft for defense, scientific research and
communications purposes. TRW is currently participating in a number of
spacecraft programs. Software and systems engineering and integration support
services are sold primarily to the United States Government defense agencies and
to Federal civilian and other state and local governmental agencies. These
services include a wide variety of computer software systems and analytical
services for space and defense, air traffic control, and advanced communication
and data retrieval applications. Sales to the United States Government of
electronic systems, equipment and services consist of systems and subsystems for
defense and space applications, including communications, command and
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control, guidance, navigation, electric power, sensing and electronic display
equipment. While classified projects are not discussed herein, the operating
results relating to classified projects are included in the Company's
consolidated financial statements and the business risks associated with such
projects do not differ materially from those of other projects for the United
States Government.
TRW also performs diverse testing and general research projects in many of
the technical disciplines related to its Space & Defense products and services
under both private and United States Government contracts, including several
advanced defense system projects.
INFORMATION SYSTEMS & SERVICES
TRW's Information Systems & Services segment includes consumer credit
information services, real estate information services, direct marketing
services and business credit information services.
Products and services in this industry segment are sold primarily to
commercial entities. Consumer and business credit information services are sold
primarily to credit-granting organizations and businesses. Real estate
information services are sold to financial institutions, title companies and
other customers. Marketing services are sold primarily to direct marketing
customers.
On February 9, 1996, the Company entered into an agreement to sell
substantially all of the businesses in the Information Systems & Services
segment. The proposed sale, which has been structured as a recapitalization and
is expected to be completed in the second half of 1996, is subject to corporate
and governmental approvals and certain significant conditions to closing,
including the implementation of certain computer systems.
RESULTS BY INDUSTRY SEGMENT
Reference is made to the information relating to the Company's industry
segments, including sales, operating profit and identifiable assets attributable
to each segment for each of the years 1993 through 1995, presented under the
note entitled "Industry segments" in the Notes to Financial Statements on pages
37 and 38 of the TRW 1995 Annual Report. Such information is incorporated herein
by reference.
FOREIGN AND DOMESTIC OPERATIONS
TRW manufactures products and has facilities in 23 countries throughout the
world. TRW's operations outside the United States are in Australia, Austria,
Brazil, Canada, China, the Czech Republic, France, Germany, India, Italy, Japan,
Malaysia, Mexico, Poland, South Africa, South Korea, Spain, Taiwan, Thailand,
Turkey, the United Kingdom and Venezuela. TRW also exports products manufactured
by it in the United States. Such export sales accounted for 8% of total sales
during 1995, 7% of total sales during 1994 and 6% during 1993, or $842 million,
$638 million and $438 million, respectively.
TRW's foreign operations are subject to the usual risks that may affect such
operations. These include, among other things, customary exchange controls and
currency restrictions, currency fluctuations, changes in local economic
conditions, exposure to possible expropriation or other government actions,
unsettled political conditions and foreign government-sponsored boycotts of the
Company's products or services for noncommercial reasons. Most of the
identifiable assets associated with TRW's foreign operations are located in
countries where the Company believes such risks to be minimal.
Reference is made to the information relating to the dollar amounts of
sales, operating profit and identifiable assets by geographic area for each of
the years 1993 through 1995 presented under the note entitled "Geographic
segments" in the Notes to Financial Statements on page 38 of the TRW 1995 Annual
Report. Such information is incorporated herein by reference.
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GENERAL
COMPETITION
TRW encounters intense competition in substantially all segments of its
business. The Company's competitive position varies for its different products
and services. However, TRW believes that it is a significant supplier of many of
the products it manufactures and of many of the services it provides.
In the Automotive segment, competitors include independent suppliers of
parts and components as well as the Company's original equipment customers, many
of whom are integrated manufacturers and produce or could produce substantial
portions of their requirements for parts and components internally. Depending on
the particular product, the number of the Company's competitors may vary
significantly and many of the products have high capital requirements and
require high engineering content. In the Automotive segment, the principal
methods of competition are price, engineering excellence, product quality,
customer service, delivery time and proprietary position.
TRW competes for contracts covering a variety of United States Government
projects and programs, principally in the Space & Defense segment of its
business. Such competition is based primarily on technical ability, product
quality and price. TRW's competitors for United States Government contracts
typically are large, technically-competent firms with substantial assets.
In its Information Systems & Services segment, TRW competes in markets for
consumer and business credit information services, real estate information
services and marketing services with other large firms doing business nationally
and with many smaller local and regional firms. Competitive factors in this
business include proprietary position, product quality, customer service,
delivery time and price.
CUSTOMERS
Sales, directly and indirectly, to the United States Government, including
the Department of Defense, the National Aeronautics and Space Administration and
other agencies, constituted 28% of TRW's sales for 1995 and 28% for 1994, or
$2,899 million and $2,545 million, respectively. Sales to the United States
Government represented 93% of the sales of the Space & Defense segment in 1995
and 90% in 1994, or $2,887 million and $2,528 million, respectively.
Companies engaged in United States Government contracting are subject to
certain unique business risks, including dependence on Congressional
appropriations and administrative allotment of funds, changes in Government
policies that may reflect military and political developments, time required for
design and development, significant changes in contract scheduling, complexity
of designs and the rapidity with which they become obsolete, necessity of design
improvements, difficulty in forecasting costs and schedules when bidding on
developmental and highly sophisticated technical work and other factors
characteristic of the industry.
United States Government contracting laws also provide that the Government
is to do business only with responsible contractors. In this regard, the United
States Department of Defense and other federal agencies have the authority,
under certain circumstances, to suspend or debar a contractor or organizational
parts of a contractor from further Government contracting for a certain period
"to protect the Government's interest." Such action may be taken for, among
other reasons, commission of fraud or a criminal offense in connection with a
United States Government contract. A suspension may also be imposed if a
contractor is indicted for such matters. In the event of any suspension or
debarment, the Company's existing contracts would continue unless terminated or
canceled by the United States Government under applicable contract provisions.
Other than the United States Government, TRW's largest customers (determined
by including sales to their affiliates throughout the world but excluding sales
to such customers or their affiliates that ultimately result in sales to the
United States Government) are Ford Motor Company, Volkswagen AG and General
Motors Corporation. Such sales by TRW's Automotive segment to Ford, Volkswagen
and General Motors and their respective subsidiaries during 1995 accounted for
23%, 10% and 10%, respectively, of total sales of the Automotive segment,
compared to 24%, 9% and 10%, respectively, during 1994.
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BACKLOG
The backlog of orders for TRW's domestic operations, without options, at
December 31, 1995 and December 31, 1994 is estimated to have been approximately
$5,438 million and $4,640 million, respectively, of which it is estimated that,
directly or indirectly, United States Government business accounted for
approximately $4,466 million and $3,895 million, respectively. Reported backlog
at the end of 1995 does not include approximately $2.6 billion of negotiated and
priced, but unexercised, options for defense and non-defense programs.
Unexercised options at the end of 1994 were valued at $1.0 billion. The exercise
of options is at the discretion of the customer, and as in the case of
Government contracts generally, dependent on future government funding. Of the
total domestic backlog at December 31, 1995 and at December 31, 1994, 90% and
89%, respectively, were attributable to the Space & Defense segment, and
virtually all of the backlog attributable to United States Government business
related to that segment.
The determination of TRW's backlog involves substantial estimating,
particularly with respect to customer requirements contracts and long-term
contracts of a cost-reimbursement or incentive nature. A substantial portion of
the variations in the estimated backlog of TRW in recent years is attributable
to the timing of the award and performance of United States Government and
certain other contracts. Subject to various qualifications, including those set
forth herein, and assuming no terminations, cancellations or changes and
completion of orders in the normal course, TRW has estimated that approximately
55% of the December 31, 1995 backlog will be delivered in 1996, 24% in 1997 and
21% thereafter.
United States Government contracts and related customer orders generally are
subject to termination in whole or in part at the convenience of the Government
whenever the Government believes that such termination would be in its best
interest. Multi-year Government contracts and related orders are subject to
cancellation if funds for contract performance for any subsequent contract year
become unavailable. If any of its Government contracts were to be terminated or
canceled under these circumstances, TRW generally would be entitled to receive
payment for work completed and allowable termination or cancellation costs.
Whether the occurrence of any such termination or cancellation would have an
adverse effect on TRW would depend upon the particular contract and the
circumstances of the termination or cancellation.
Backlog data and comparisons thereof as of different dates may not be
reliable indicators of either future sales or the ratio of future direct and
indirect United States Government sales to other sales.
INTELLECTUAL PROPERTY
TRW owns significant intellectual property, including a large number of
patents, copyrights and trade secrets, and is involved in numerous licensing
arrangements. Although TRW's intellectual property plays an important role in
maintaining TRW's competitive position in a number of the markets that it
serves, no single patent, copyright, trade secret or license, or group of
related patents, copyrights, trade secrets or licenses, is, in the opinion of
management, of such value to TRW that the business of TRW or of any industry
segment of TRW would be materially affected by the expiration or termination
thereof. TRW's general policy is to apply for patents on an ongoing basis in the
United States and appropriate other countries on its significant patentable
developments. TRW is party to a lawsuit involving air bag patents and
technology. See "Item 3. -- Legal Proceedings" for a further discussion of this
suit.
TRW also views its name and mark as significant to its business as a whole.
In addition, TRW owns a number of other trade names and marks applicable to
certain of its businesses and products that it views as important to such
businesses and products.
RESEARCH AND DEVELOPMENT
Research and development costs totaled $1,963 million, $1,709 million and
$1,737 million in 1995, 1994 and 1993, respectively, of which customer-funded
research and development was $1,387 million in 1995, $1,157 million in 1994 and
$1,223 million in 1993. Company-funded research and development costs, which
included research and development for commercial products, independent research
and development and bid and proposal work related to government products and
services, totaled $422 million in 1995, $412 million in 1994 and $378 million in
1993.
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A portion of the cost incurred for independent research and development and bid
and proposal work is recoverable through overhead charged to government
contracts. Company-funded product development costs, including engineering and
field support for new customer requirements, were $154 million in 1995, $140
million in 1994 and $136 million in 1993.
EMPLOYEES
At December 31, 1995, TRW had approximately 66,500 employees, of whom
approximately 37,000 were employed in the United States.
RAW MATERIALS AND SUPPLIES
Materials used by TRW include or contain steel, stainless steel, pig iron,
ferro-chrome, aluminum, brass, copper, tin, platinum, special alloys, sodium
azide, glass, ceramics, plastic powders and laminations, carbon and plastic
materials, synthetic rubber, paper, and gold, silver, nickel, zinc and copper
plating materials. TRW also purchases from suppliers various types of equipment
and component parts that may include such materials. TRW's operations are
dependent upon the ability of its suppliers of materials, equipment and
component parts to meet performance and quality specifications and delivery
schedules. In some cases, there is only a limited number of suppliers for a
material or product due to the specialized nature of the item. Shortages of
certain raw materials, equipment and component parts have existed in the past
and may exist again in the future. TRW has taken a number of steps to protect
against and to minimize the effect of such shortages. However, any future
inability of TRW to obtain raw materials, equipment or component parts could
have a material adverse effect on the Company. TRW's operations also are
dependent on adequate supplies of energy. TRW has continued its programs to
conserve energy used in its operations and has made available alternative
sources of energy.
ENVIRONMENTAL REGULATIONS
Federal, state and local requirements relating to the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, have had and will continue to have an effect on TRW and its
operations. The Company has made and continues to make expenditures for projects
relating to the environment, including pollution control devices for new and
existing facilities. The Company is conducting a number of environmental
investigations and remedial actions at current and former Company locations to
comply with various federal, state and local laws and, along with other
companies, has been named a potentially responsible party for certain waste
management sites. Each of these matters is subject to various uncertainties, and
some of these matters may be resolved unfavorably to the Company. A reserve
estimate reflecting cost ranges is established using standard engineering cost
estimating techniques for each matter for which sufficient information is
available. In the determination of cost ranges, consideration is given to the
professional judgment of the Company's environmental engineers in consultation
with outside environmental specialists when necessary. At multi-party sites, the
reserve estimate also reflects the expected allocation of total project costs
among the various potentially responsible parties. At December 31, 1995, the
Company had reserves for environmental matters of $84 million, including $7
million of accruals recorded during the year. The Company aggressively pursues
reimbursement for environmental costs from its insurance carriers. Insurance
recoveries are recorded as a reduction of environmental costs when fixed and
determinable. The Company does not believe that compliance with environmental
protection laws and regulations will have a material effect upon its capital
expenditures or competitive position, and TRW's capital expenditures for
environmental control facilities during 1996 and 1997 are not expected to be
material to the Company. The Company believes that any liability that may result
from the resolution of environmental matters for which sufficient information is
available to support cost estimates will not have a material adverse effect on
the Company's earnings. However, the Company cannot predict the effect on future
earnings of expenditures for aspects of certain matters for which there is
insufficient information. In addition, the Company cannot predict the effect on
future earnings of compliance with environmental laws and regulations with
respect to currently unknown environmental matters or the possible effect on
future earnings of compliance with environmental requirements imposed in the
future.
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CAPITAL EXPENDITURES
During the five years ended December 31, 1995, TRW's capital expenditures
and the net book value of its assets retired or sold were:
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(IN MILLIONS)
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CAPITAL EXPENDITURES
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LAND, BUILDINGS NET BOOK VALUE OF
YEAR ENDED AND LEASEHOLD MACHINERY AND ASSETS RETIRED OR
DECEMBER 31, IMPROVEMENTS EQUIPMENT TOTAL SOLD
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1995.................... $ 77 $ 408 $ 485 $ 23
1994.................... 93 413 506 21
1993.................... 77 405 482 61
1992.................... 95 435 530 74
1991.................... 73 464 537 71
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On an industry segment basis, capital expenditures during 1995 and 1994 were
as follows: Automotive, $314 million and $388 million, respectively; Space &
Defense, $114 million and $98 million, respectively; and Information Systems &
Services, $19 million and $18 million, respectively. Of total capital
expenditures, 67% in 1995 and 64% in 1994 were invested in the United States.
ITEM 2. PROPERTIES
TRW's operations include numerous manufacturing, research and development
and warehousing facilities located in 28 states in the United States and in 22
other countries. TRW owns a majority of its facilities; the remainder were
leased. In 1995, approximately 42% of the domestic facilities were used by the
Automotive segment, 50% were used by the Space & Defense segment and 8% were
used by the Information Systems & Services segment. Substantially all of the
foreign facilities were used by the Automotive segment.
The Company also owns or leases certain smaller research and development
properties and administrative, processing, marketing, sales and office
facilities throughout the United States and in various parts of the world. In
addition, TRW operates facilities on property owned directly or indirectly by
the United States Government. The Company owns its world headquarters in
Lyndhurst, Ohio and its regional headquarters for its Space & Defense segment in
Redondo Beach, California.
In the opinion of management, the Company's facilities are generally well
maintained and are suitable and adequate for their intended use.
Reference is made to the information concerning long-term rental obligations
under operating leases presented under the note entitled "Lease commitments" in
the Notes to Financial Statements on page 35 of the TRW 1995 Annual Report. Such
information is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
On December 15, 1987, the Commissioner of the Indiana Department of
Environmental Management issued an Order to TRW and several other respondents
relating to alleged contamination of the public water supply in Shelbyville,
Indiana by, among other sources, two closed facilities that were formerly
operated by TRW's Connectors Division. The Order requires the respondents to
fund the relocation of the main well field for Shelbyville to a location that
can provide a safe source of potable water and to perform a remedial
investigation of the source and extent of contamination within a one-mile radius
of the well field. The Order also requires the
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respondents to pay civil penalties of $25,000 per day for violations of law
which allegedly occurred prior to issuance of the Order. TRW has filed a
petition for review of the Order. The Order is not expected to have a material
effect on the Company's financial position.
On February 15, 1994, TRW filed suit in the United States District Court for
the District of Arizona against Talley Industries, Inc. and certain Talley
subsidiary companies. The suit relates to TRW's 1989 purchase of Talley's air
bag business. In the complaint, TRW claimed that, among other violations of
TRW's rights, Talley breached the non-compete provision contained in the
purchase agreement by providing products and services to competitors of TRW. As
a result of the breach, TRW exercised its rights under the agreement and the
license from Talley to TRW to make a one-time payment of $26.5 million to Talley
for a paid-up royalty-free license to use Talley's air bag patents and
technology. On March 1, 1994, Talley filed an answer and counterclaims against
TRW alleging that TRW had acted improperly in making the $26.5 million payment
and requesting that TRW be ordered to pay immediately to Talley the value of all
anticipated royalties, claimed by Talley to be not less than $250 million. On
May 19, 1994, the court granted Talley's motion for an injunction requiring TRW
to continue to make quarterly royalty payments pursuant to the 1989 asset
purchase agreement and ancillary agreements pending trial of TRW's claims. On
April 5, 1995, trial began before a jury on TRW's claims and Talley's
counterclaims. On May 30, 1995, at the close of all the evidence, the trial
judge directed a verdict against TRW on TRW's claims against Talley, ruling that
there was not sufficient evidence to send TRW's claims to the jury. However, the
judge allowed Talley's counterclaims to go to the jury. On June 6, 1995, the
jury entered its verdict that Talley was entitled to the present value of the
future royalty stream in the sum of $138 million on the contract claim, but that
TRW had not acted in bad faith and that the technology on which royalties were
due was limited to that in existence when TRW purchased Talley's air bag
business.
Judgment was entered against TRW on June 27, 1995 and TRW timely filed a
notice of appeal on July 12, 1995. On July 26, 1995, the trial judge entered an
order requiring that TRW continue to pay quarterly royalty payments to Talley as
they become due, notwithstanding the fact it filed an appropriate bond in
connection with its notice of appeal. TRW immediately appealed the judge's
ruling requiring that TRW continue to pay the royalties pending appeal; however,
the Ninth Circuit U.S. Court of Appeals denied TRW's appeal without prejudice
and accelerated the schedule for the appeal on the judge's decision directing a
verdict against TRW in connection with TRW's claims against Talley. Oral
argument before the Ninth Circuit took place on February 14, 1996. The judgment
against TRW, if it stands after appeal, is not expected to have a material
financial effect on the Company.
On November 13, 1995, TRW Vehicle Safety Systems Inc. ("VSSI") entered into
agreements with the Arizona Attorney General's Office and the Arizona Department
of Environmental Quality ("ADEQ") regarding a September 16, 1994 accident at
Mesa Plant I as well as other outstanding issues between VSSI and ADEQ. Under
the agreement with the Attorney General, on November 13, 1995 VSSI pleaded no
contest to a single misdemeanor charge of violating hazardous waste management
requirements which was filed on the same date. VSSI agreed to pay a fine and
restitution of $1.0 million. VSSI also agreed to pay $100,000 in investigative
costs to the Attorney General's office. Under the agreement with the ADEQ, VSSI
agreed to implement plans to continue to improve emergency response procedures
and reporting requirements as well as implement site assessments and other
safety and environmental quality studies. VSSI agreed to pay $79,000 in
administrative penalties to ADEQ. The State of Arizona has a penalty assessment
provision of 57% that increased the total fines paid by TRW to $1.75 million.
These actions resolve all material outstanding proceedings arising out of the
September 16, 1994 accident.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of, and the positions and offices held by, each person
designated an executive officer of the Company as of March 20, 1996, together
with the offices held by each such person during the last five years, are listed
below. For purposes hereof, the term "executive officer" includes the Chairman
of the Board, the President,
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each Vice President in charge of a principal business function and any other
officer who performs a policy-making function for the Company. Each executive
officer is elected annually and, unless the executive officer resigns or
terminates employment with the Company or is removed from office by action of
the Company's Directors, will hold office for the ensuing year or until a
successor is elected in accordance with the Company's Regulations. None of the
Company's executive officers has a family relationship to any other executive
officer.
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POSITIONS AND BUSINESS EXPERIENCE
NAME AGE DURING THE PAST FIVE YEARS
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M. A. Coyle 54 Executive Vice President (1989 to the present),
General Counsel (1980 to the present) and
Secretary (1976 to the present)
J. T. Gorman 58 Chairman of the Board and Chief Executive
Officer (1988 to the present) and Director
(1984 to the present)
President (1985 - 1991)
T. W. Hannemann 53 Executive Vice President and General Manager,
TRW Space & Electronics Group (1993 to the
present)
Executive Vice President and General Manager,
TRW Space & Defense Sector (1991 - 1992)
Vice President and General Manager, TRW
Electronic Systems Group (1989 - 1991)
P. S. Hellman 46 President, Chief Operating Officer and Director
(1995 to the present)
Executive Vice President and Assistant
President (1994)
Executive Vice President, Chief Financial
Officer and Assistant President (1994)
Executive Vice President and Chief Financial
Officer (1991 - 1994)
Vice President and Treasurer (1989 - 1991)
J. A. Janitz 53 Executive Vice President and General Manager,
TRW Occupant Restraint Systems Group (1994 to
the present)
Vice President and General Manager, TRW Vehicle
Safety Systems, Inc. (1991 - 1994)
Vice President and General Manager, TRW
Steering & Suspension Systems, North America
(1990 - 1991)
H. V. Knicely 60 Executive Vice President, Human Resources and
Communications (1995 to the present)
Executive Vice President, Human Resources,
Communications & Information Resources (1989
- 1994)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND BUSINESS EXPERIENCE
NAME AGE DURING THE PAST FIVE YEARS
- ------------------------- ---- -----------------------------------------------
<S> <C> <C>
W. B. Lawrence 51 Executive Vice President, Planning, Development
& Government Affairs (1989 to the present)
C. G. Miller 53 Executive Vice President, Chief Financial
Officer and Controller (1996 to the present)
Vice President and Controller (1990 - 1996)
J. S. Remick 57 Executive Vice President and General Manager,
TRW Steering, Suspension & Engine Group (1995
to the present)
Vice President and Deputy General Manager,
Automotive (1995)
Vice President and General Manager, TRW
Steering & Suspension Systems, North and
South America (1991 - 1995)
Deputy General Manager, TRW Steering Systems
Group (1990 - 1991)
D. V. Skilling 62 Executive Vice President and General Manager,
TRW Information Systems & Services Group
(1989 to the present)
P. Staudhammer 62 Vice President, Science & Technology (1993 to
the present)
Vice President and Director of the Center for
Automotive Technology (1990 - 1993)
J. P. Stenbit 55 Executive Vice President and General Manager,
TRW Systems Integration Group (1994 to the
present)
Vice President and General Manager, TRW Systems
Integration Group (1990 - 1994)
R. D. Sugar 47 Executive Vice President and General Manager,
TRW Automotive Electronics Group (1996 to the
present)
Executive Vice President and Chief Financial
Officer (1994 - 1996)
Vice President, Group Development, TRW Space &
Electronics Group (1992 - 1994)
Vice President, Strategic Business Development,
TRW Space & Defense Sector (1992)
Vice President and General Manager, TRW Space
Communications Division (1987 - 1992)
</TABLE>
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Reference is made to the information set forth in the table presented under
"Stock prices and dividends (unaudited)" on page 39 of the TRW 1995 Annual
Report and to the information presented under the note entitled "Debt and credit
agreements" in the Notes to Financial Statements on pages 34 and 35 of the TRW
1995 Annual Report. The information contained in such table and the information
contained in the second paragraph of text on page 35 in such note to financial
statements are incorporated herein by reference.
The Company's Common Stock is traded principally on the New York Stock
Exchange and is also traded on the Chicago, Pacific, Philadelphia, London and
Frankfurt exchanges.
On March 1, 1996, there were 27,168 shareholders of record of the Company's
Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Sales........................................... $ 10,172 $ 9,087 $ 7,948 $ 8,311 $ 7,913
Net earnings (loss)............................. 446 333 195 (156) (140)
Per share of Common Stock:
Fully diluted earnings (loss)................. 6.62 5.01 2.97 (2.51) (2.30)
Primary earnings (loss)....................... 6.69 5.05 3.01 (2.51) (2.30)
Cash dividends declared....................... 2.10 1.97 1.88 1.84 1.80
Total assets.................................... 5,890 5,636 5,336 5,458 5,635
Long-term debt.................................. 541 694 870 941 1,213
Shares used in computing per share amounts:
Fully diluted................................. 67.4 66.4 65.7 62.3 61.2
Primary....................................... 66.6 65.8 64.7 62.3 61.2
</TABLE>
In February 1996, the Company entered into a sales agreement to sell
substantially all of the businesses in the Information Systems and Services
segment. The sale is subject to corporate and regulatory approvals and other
significant conditions to closing, including the implementation of certain
computer systems. The impact of the proposed divestiture, which is expected to
result in a gain, has not been fully determined.
In 1993, the Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits," and took a one-time
charge of $25 million, or $.38 per share, for the prior years' cumulative effect
of the accounting change. The effect of this accounting change on 1993 operating
results, after recording the cumulative effect for years prior to 1993, was
immaterial.
In 1992, the Company adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
for its U.S. and Canadian retiree health care and life insurance plans and
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," and took a one-time charge of $350 million, or $5.60 per share, for the
prior years' cumulative effect of the accounting changes. In 1992, net earnings
were reduced by $23 million for the change in accounting for postretirement
benefits and were increased by $11 million for the change in accounting for
income taxes.
10
<PAGE>
In December 1991, TRW announced a restructuring plan. Net earnings (loss)
for 1991 include the effect of an aftertax charge of $256 million, or $4.18 per
share, to cover costs associated with divestiture and restructuring activities,
including reserves relating to environmental costs.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reference is made to the information presented under the heading
"Management's Discussion and Analysis of the Results of Operations and Financial
Condition" on pages 19 through 22 of the TRW 1995 Annual Report. Such
information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements headed "Statements of
Earnings," "Balance Sheets," "Statements of Cash Flows" and "Statements of
Changes in Shareholders' Investment," and the accompanying notes thereto, on
pages 23 through 38 of the TRW 1995 Annual Report. Reference is also made to the
information included in the table presented under the headings "Events
subsequent to date of independent auditors' report (unaudited)" and "Quarterly
financial information (unaudited)" on page 39 of such report. Such statements,
the accompanying notes and such table are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information relating to TRW's Directors which is
presented under the heading "Election of Directors" on pages 1 through 5 of the
TRW Proxy Statement dated March 20, 1996, as filed with the Securities and
Exchange Commission (the "TRW Proxy Statement"). Such information, beginning
with the third full paragraph on page 1 and ending with the first paragraph on
page 5, is incorporated herein by reference. Reference is made to the
information relating to Section 16(a) compliance which is presented under the
heading "Section 16(a) Compliance" on page 7 of the TRW Proxy Statement. Such
information is incorporated herein by reference.
See the information presented in Part I of this Report under the heading
"Executive Officers of the Registrant" for information relating to TRW's
executive officers.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information presented under the heading
"Compensation of Executive Officers" on pages 9 through 18 of the TRW Proxy
Statement. Reference is also made to the information presented under the heading
"Relationships and Transactions" on pages 6 through 7 of the TRW Proxy
Statement. Such information is incorporated herein by reference.
11
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information presented under the heading "Ownership
of Shares" on page 6 of the TRW Proxy Statement. Reference is also made to the
information presented under the heading "Outstanding Securities" on pages 19
through 20 of the TRW Proxy Statement. Such information is incorporated herein
by reference.
There are no agreements or arrangements known to TRW that might, at a
subsequent date, result in a change in control of TRW.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to the information presented under the heading
"Relationships and Transactions" on pages 6 through 7 of the TRW Proxy
Statement. Such information is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
(1) FINANCIAL STATEMENTS
The following financial statements of the registrant and its
subsidiaries included in the TRW 1995 Annual Report are incorporated herein
by reference:
Statements of Earnings -- Years ended December 31, 1995, 1994 and 1993
(page 23)
Balance Sheets -- December 31, 1995 and 1994 (pages 24 and 25)
Statements of Cash Flows -- Years ended December 31, 1995, 1994 and 1993
(page 26)
Statements of Changes in Shareholders' Investment -- Years ended
December 31, 1995, 1994 and 1993 (page 27)
Notes to Financial Statements -- (pages 28 - 38)
(2) FINANCIAL STATEMENT SCHEDULES
All Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are not applicable and, therefore, have been
omitted.
Financial statements and summarized financial information of
unconsolidated subsidiaries and 50% or less owned persons accounted for by
the equity method have been omitted because such subsidiaries and persons,
considered individually or in the aggregate, do not constitute a significant
subsidiary.
(3) EXHIBITS
<TABLE>
<C> <S>
3(a) Amended Articles of Incorporation as amended December 14, 1988 (Exhibit 3(a) to TRW
Annual Report on Form 10-K for the year ended December 31, 1988 is incorporated
herein by reference).
3(b) Regulations as amended April 30, 1980 (Exhibit 3(b) to TRW Annual Report on Form
10-K for the year ended December 31, 1980 is incorporated herein by reference).
</TABLE>
12
<PAGE>
<TABLE>
<C> <S>
4(a) Rights Agreement dated as of December 14, 1988 between TRW Inc. and National City
Bank, as successor Rights Agent (Exhibit 2 to TRW Form 8-A Registration Statement
dated December 21, 1988 is incorporated herein by reference).
4(b) Indenture between TRW Inc. and The Chase Manhattan Bank (National Association), as
successor Trustee, dated as of May 1, 1986 (Exhibit 2 to TRW Form 8-A Registration
Statement dated July 3, 1986 is incorporated herein by reference).
4(c) First Supplemental Indenture between TRW Inc. and The Chase Manhattan Bank (National
Association), as successor Trustee, dated as of July 26, 1989 (Exhibit 4(b) to TRW
Form S-3 Registration Statement, File No. 33-30350, is incorporated herein by
reference).
*10(a) 1967, 1973 and 1979 Stock Option Plans as amended April 28, 1982 (Exhibit A to TRW
Proxy Statement dated March 18, 1982 is incorporated herein by reference).
*10(b) TRW Operational Incentive Plan (Exhibit 10(b) to TRW Annual Report on Form 10-K for
the year ended December 31, 1989 is incorporated herein by reference).
*10(c) TRW Executive Health Care Plan as amended and restated effective August 1, 1995.
*10(d) 1984 Stock Option Plan (Exhibit A to TRW Proxy Statement dated March 19, 1984 is
incorporated herein by reference).
*10(e) 1989 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement dated March 17,
1989 is incorporated herein by reference).
*10(f) 1994 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement dated March 17,
1994 is incorporated herein by reference).
*10(g) Form of Strategic Incentive Grant (Exhibit 10(g) to TRW Annual Report on Form 10-K
for the year ended December 31, 1994 is incorporated herein by reference).
*10(h) Form of Nonqualified Stock Option Agreement.
*10(i) Deferred Compensation Plan for Non-Employee Directors of TRW Inc. reflecting
amendments effective August 1, 1990 (Exhibit 10(k) to TRW Annual Report on Form 10-K
for the year ended December 31, 1990 is incorporated herein by reference).
*10(j) TRW Directors' Pension Plan as amended and restated effective August 1, 1990
(Exhibit 10(l) to TRW Annual Report on Form 10-K for the year ended December 31,
1990 is incorporated herein by reference).
*10(k) Form of Amended and Restated Employment Continuation Agreements with executive
officers.
*10(l) Consulting Agreement dated December 11, 1995 between TRW Inc. and C. O. Macey.
*10(m) Consulting Agreement dated January 16, 1996 between TRW Inc. and R. G. Williams.
10(n) Three Year Revolving Credit Agreement dated July 1, 1992 among TRW Inc. and various
financial institutions (Exhibit 19.1 to TRW Quarterly Report on Form 10-Q for the
quarter ended June 30, 1992 is incorporated herein by reference).
10(o) Amendment dated June 30, 1993 to Three Year Revolving Credit Agreement dated July 1,
1992 among TRW Inc. and various financial institutions. (Exhibit 10.1 to TRW
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 is incorporated
herein by reference).
10(p) Amendment dated as of March 1, 1994 to Three Year Revolving Credit Agreement dated
July 1, 1992 among TRW Inc. and various financial institutions. (Exhibit 10(cc) to
TRW Annual Report on Form 10-K for the year ended December 31, 1993 is incorporated
herein by reference).
10(q) Amendment dated February 28, 1995 to Multi-Year Revolving Credit Agreement (formerly
entitled Three Year Revolving Credit Agreement) dated July 1, 1992 among TRW Inc.
and various financial institutions (Exhibit 10(u) to TRW Annual Report on Form 10-K
for the year ended December 31, 1994 is incorporated herein by reference).
*10(r) TRW Inc. Stock Plan for Non-Employee Directors (as Amended and Restated, effective
August 1, 1995) (Exhibit 10.1 to TRW Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995 is incorporated herein by reference).
</TABLE>
13
<PAGE>
<TABLE>
<C> <S>
*10(s) TRW Inc. Deferred Compensation Plan (as Amended and Restated December 13, 1995).
*10(t) TRW Benefits Equalization Plan (as Amended and Restated, effective August 1, 1995)
(Exhibit 10.3 to TRW Quarterly Report on Form 10-Q for the quarter ended June 30,
1995 is incorporated herein by reference).
*10(u) TRW Supplementary Retirement Income Plan (as Amended and Restated, effective August
1, 1995) (Exhibit 10.4 to TRW Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995 is incorporated herein by reference).
*10(v) TRW Inc. Key Executive Life Insurance Plan dated as of February 7, 1996.
*10(w) TRW Inc. Financial Counseling Program.
11 Computation of Earnings per Share.
12 Computation of Ratio of Earnings to Fixed Charges - Unaudited.
13 Portions of the TRW Annual Report to Security Holders for the year ended December
31, 1995 incorporated by reference herein.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Auditors.
23(b) Consent of Independent Auditors (with respect to financial statements of The TRW
Canada Stock Savings Plan).
24(a) Power of Attorney.
24(b) Certified Resolutions.
27 Financial Data Schedule
99(a) Financial Statements of The TRW Employee Stock Ownership and Stock Savings Plan for
the year ended December 31, 1995.
99(b) Financial Statements of The TRW Canada Stock Savings Plan for the year ended
December 31, 1995.
</TABLE>
Certain instruments with respect to long-term debt have not been filed as
exhibits as the total amount of securities authorized under any one of such
instruments does not exceed 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis. The registrant agrees to furnish to the
Commission a copy of each such instrument upon request.
*Management contract, compensatory plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of this report.
(b) REPORTS ON FORM 8-K
Form 8-K dated February 29, 1996.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRW INC.
Date: March 20, 1996 By /s/ MARTIN A. COYLE
------------------------------------
MARTIN A. COYLE,
EXECUTIVE VICE PRESIDENT AND SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------- -------------------------------- --------------
<S> <C> <C>
J. T. GORMAN* Chairman of the Board,
Chief Executive Officer
and Director
P. S. HELLMAN* President, Chief Operating
Officer and Director
C. G. MILLER* Executive Vice President,
Chief Financial Officer
and Controller
M. H. ARMACOST* Director
M. FELDSTEIN* Director
March 20, 1996
R. M. GATES* Director
C. H. HAHN* Director
G. H. HEILMEIER* Director
K. N. HORN* Director
E. B. JONES* Director
W. S. KISER* Director
D. B. LEWIS* Director
J. T. LYNN* Director
R. W. POGUE* Director
</TABLE>
MARTIN A. COYLE, by signing his name hereto, does hereby sign and execute
this report on behalf of each of the above-named officers and Directors of TRW
Inc., pursuant to a power of attorney executed by each of such officers and
Directors and filed with the Securities and Exchange Commission as an exhibit to
this report.
*By /s/ MARTIN A. COYLE March 20, 1996
- -------------------------------------------
MARTIN A. COYLE, ATTORNEY-IN-FACT
15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Directors
TRW Inc.
We have audited the consolidated financial statements of TRW Inc. and
subsidiaries listed in Item 14(a)(1) of the annual report on Form 10-K of TRW
Inc. for the year ended December 31, 1995. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TRW Inc. and
subsidiaries at December 31, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in the notes to financial statements, effective January 1, 1993,
the company changed its method of accounting for postemployment benefits.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
January 23, 1996
F-1
<PAGE>
EXHIBIT 10(c)
TRW
EXECUTIVE
HEALTH
CARE
PLAN
EHCP 8/95
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- ------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
TABLE OF CONTENTS Introduction................................................1
Who Is Eligible.............................................1
Contributions...............................................1
Eligible Dependents.........................................1
Comprehensive Health Care Expense Benefits..................2
Covered Health Care Expenses................................2
Examples of Health Care Expenses Covered by the Plan........3
Examples of Health Care Expenses to be Approved in Advance..3
Examples of Health Care Expenses Not Covered by the Plan....4
Definitions.................................................5
Payment of Claims and Recordkeeping.........................6
Coordination of Benefits Provision..........................6
Reimbursement From a Third Party............................7
When Your Health Care Coverage Terminates...................7
After Health Care Coverage Terminates.......................7
Continuation of Coverage--COBRA.............................8
Cost of COBRA Coverage......................................8
Duration of COBRA Coverage..................................8
TRW Retirement Medical Plan.................................8
Additional Information......................................9
Plan Administration.........................................9
Employee Rights............................................11
Appendix...................................................12
</TABLE>
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
INTRODUCTION
The TRW Executive Health Care Plan ("Plan") is a plan which provides payment for
a wide range of health care expenses.
To encourage good health, the Plan covers the expenses for physical
examinations, as well as other preventive care. A simplified claim
reimbursement procedure is also a major feature of the Plan.
TRW reserves the right to modify or terminate the Plan at its discretion at any
time.
The elections you make when enrolled must remain in effect until the end of the
plan year (calendar year), unless you have an eligible change in life status.
Even then, the only changes allowed are those consistent with your change in
life status or as required to add a dependent as a result of a Qualified Medical
Child Support Order. Please see allowable life status changes listed in the
ChoicePlus Employee Benefits Book applicable for your unit.
WHO IS ELIGIBLE
You are eligible for the benefits of the Plan as of the date you have been
designated as a member of the Special Executive Group by the Chief Executive
Office. Your eligible dependents will be covered on the date your coverage
begins or the date he or she becomes a dependent, or is first enrolled,
whichever is latest. Your eligibility for benefits from any other TRW health
insurance plan will cease when you become a member of the Plan.
CONTRIBUTIONS
All participants are required to contribute to the cost of the Plan. Your
contribution will be determined by TRW and will be based on the number of
dependents you elect to include in the Plan. IRS regulations require that your
contribution be made on an "after-tax" basis. The amount of the contribution
will be reviewed annually.
ELIGIBLE DEPENDENTS
Dependents eligible for benefits are:
- - your legal spouse;
- - your unmarried child up to age 19 or age 25, if a full-time student;
(If the dependent is on an internship through the school and is not
over age 25, the employee may continue to cover the dependent through
the end of the internship or age 25.)
- - your child regardless of age if incapable of self-sustaining employment,
because of mental or physical disability.
The term "child" also includes your legally adopted child or one placed with you
for adoption, foster child, stepchild, or any other child living with you in a
regular parent-child relationship. To qualify as a dependent for purposes of
the Plan, each child must also qualify as a "Dependent" under Section 152(a) of
the Internal Revenue Code. Where this summary of the Plan refers to a dependent
below, it means a person who is eligible to be and has been enrolled in the
Plan.
Dependents not enrolled when first eligible may be added in accordance with the
Life Status Change Rules described in the "Life Status Change" section of the
ChoicePlus Employee Benefits Book.
Page 1
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
COMPREHENSIVE HEALTH CARE EXPENSE BENEFITS
Full reimbursement will be made for covered medical, dental and vision expenses
incurred by you or your eligible dependents while covered by the Plan.
Reimbursement will be made regardless of where the expenses are incurred-
- -whether in or out of the hospital--as long as they are incurred in connection
with health care (see "Definitions" page 5). Except as described in the
section entitled "After Health Care Coverage Terminates" (page 7), all expenses
must be incurred while you or your dependents are covered by the Plan.
An expense or charge will be deemed incurred as of the date the service is
rendered or the supply is furnished.
Services rendered after the termination of coverage will not be paid.
COVERED HEALTH CARE EXPENSES
Covered Health Care Expenses are the reasonable charges incurred in connection
with the medical, dental, and vision care of you or your eligible dependent, and
must be those which would qualify as a tax deduction. Covered Health Care
Expenses, therefore, are those which are Reasonably Necessary and if not
reimbursed, could be deducted by you (or you and your spouse in a joint return)
when computing your taxable income under Section 213 of the Internal Revenue
Code. The provision of Section 213 which limits deductible expenses to an
amount measured against adjusted gross income does not apply.
Covered Health Care Expenses include, but are not limited to, the following
expenses for services and supplies:
- - Room, board, and other medical services and supplies furnished by a
hospital or other institution qualified to provide medical care.
- - Services of any legally qualified doctor of medicine (M.D.), doctor of
osteopathy (D.O.), doctor of podiatry (D.P.M.), doctor of chiropracty
(D.C.), doctor of optometry (O.D.), doctor of chiropody (D.P.M. - D.S. C.),
dentist (D.D.S. or D.M.D.), Christian Science practitioner listed in the
Christian Science Journal (C.S.), registered nurse (R.N.), licensed
practical or vocational nurse under the direction of an R.N. (L.P.N. or
L.V.N.), midwife, physician's assistant certified by the National
Commission on Certification of Physicians' Assistants (P.A.), audiologist,
occupational therapist, physical therapist, psychologist, respiratory
therapist, social worker, or speech therapist.
- - Necessary transportation to and from an area or facility where the services
or supplies covered hereunder may be obtained, including transportation by
personal automobile.
- - Drugs or medicines prescribed by a physician.
- - Purchase or rental of medical or surgical supplies, aids, and prosthetic
appliances, including eyeglasses, hearing aids, or dental prosthetic
appliances.
Examples of health care expenses that must be approved in advance are shown on
page 3. Examples of health care expenses covered and NOT covered are shown on
pages 3 and 4.
Page 2
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
EXAMPLES OF HEALTH CARE EXPENSES COVERED BY THE PLAN
- - AMBULANCE SERVICES
- - DIAGNOSTIC & PREVENTATIVE SERVICES
- Allergy & Dermatology Tests
- Immunization & Inoculations
- Physical Examinations -
- X-ray & Laboratory Examinations
- - DRUGS & SUPPLIES
- Crutches
- Eyeglasses
- Hearing Aids
- Hospital Beds
- Prescription Drugs
- Prostheses
- Wheelchairs
- HOSPITAL SERVICES
- Emergency Care
- Inpatient Care
- Outpatient Care
- - NURSING SERVICES
- Licensed Vocational Nurses
- Practical Nurses
- Registered Nurses
- - PHYSICAL THERAPY
- - PROFESSIONAL SERVICES
- Chiropodists
- Chiropractors
- Christian Science Practitioners
- Dentists
- Optometrists
- Osteopaths
- Physicians
- Podiatrists
- Psychiatrists
- Psychologists
EXAMPLES OF HEALTH CARE EXPENSES TO BE APPROVED IN ADVANCE
Since reimbursement is made only when the expense is both reasonable and tax
deductible, you should request approval from The Prudential Insurance Company
(216-668-6662) for any unusual expense prior to the date it is incurred. Some
examples of expenses that must be approved in advance are:
- - Charges made by suppliers other than:
- licensed medical practitioners,
- licensed medical care institutions, or
- providers of medically-related services and supplies.
- - Charges representing, in whole or in part, expenses of a capital nature.
- - Charges for medically necessary cosmetic procedures, including surgery.
- - Charges which appear to have been made for purely custodial care.
- - Charges for the use of scheduled airline and any other transportation
expense except:
- Those representing reimbursement for the reasonable use of a personal
auto at the prevailing rate per mile, as defined by the IRS for
medical transportation.
- Those representing the actual cost of any mode of necessary emergency
transportation.
- - Meals and lodging not furnished by a hospital or similar institution
as a necessary incident to medical care.
- - Dental implants.
Page 3
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- ------------------------------------------------------------------------------
EXAMPLES OF HEALTH CARE EXPENSES NOT COVERED BY THE PLAN
- - Non-prescription drugs.
- - Antiseptic diaper service.
- - Bottled distilled water.
- - Care of a normal and healthy baby by a nurse.
- - Cosmetic surgery, similar procedures and related expenses unless necessary
to correct a birth defect, an accidental injury or trauma, or a disease.
This includes non-surgical medical or dental procedures which are primarily
directed at improving bodily function rather than preventing/treating
illness or disease.
- - Domestic help.
- - Funeral and burial expenses.
- - Health club dues.
- - Insurance premiums for hospitalization and medical care (including contact
lens insurance).
- - Social activities, such as dancing lessons, swimming lessons, etc. for the
general improvement of health, even though recommended by a doctor.
- - Trips and services for the general improvement of health, or to visit a
sick or injured family member unless the traveler is an integral part of
the treatment.
- - Vitamins for general health (vitamins prescribed for a specific condition
are covered).
- - Personal and household expenses such as electric bills or cosmetics
(including hypoallergenic cosmetics) and toiletries.
- - Tuition or room and board expenses for day camps or schools with a primary
focus on education rather than licensed medical care.
- - Expenses associated with work-related injuries which are covered under
Workers' Compensation.
Page 4
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
DEFINITIONS
COSMETIC SURGERY
A procedure done to improve a patient's appearance and not to promote the body's
proper function or to prevent or treat a disease.
HEALTH CARE
The diagnosis, cure, mitigation, treatment or prevention of disease, or
treatment affecting any structure or function of the body due to defect, illness
or accidental bodily injury, or care during and following pregnancy, including
treatment of any condition arising therefrom.
INTERNAL REVENUE CODE
Chapter 1 of Subtitle A of Title 26 of the United States Code of 1986, as
currently constituted and as it may be later amended.
PLAN
The TRW Executive Health Care Plan ("Plan") is a plan which provides payment for
a wide range of health care expenses. As used in this booklet, the term Plan
refers to the "TRW Executive Health Care Plan."
REASONABLE CHARGE
An amount determined by the frequency, duration, and cost of services and
supplies as compared with those customarily incurred for similarly situated
individuals.
REASONABLY NECESSARY
The service or supply must be ordered by a physician and must be commonly and
customarily recognized throughout the physician's profession as appropriate in
the treatment of the patient's diagnosed sickness or injury. The service or
supply must not be educational or experimental in nature, nor provided primarily
for the purpose of medical or other research. In addition, in the case of
hospital confinement on an inpatient basis, the length of confinement and
hospital services and supplies will be considered "Reasonably Necessary" only to
the extent that they are determined by The Prudential to be (a) related to the
treatment of the condition involved and (b) not allocable to scholastic
education or vocational training of the patient.
TOTAL DISABILITY
1. Your complete inability to perform every duty pertaining to your occupation
or employment.
2. Your dependent's complete inability to perform the normal activities of a
person of similar age and sex.
Page 5
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
PAYMENT OF CLAIMS AND RECORDKEEPING
The Plan will reimburse you for covered expenses promptly after receipt of your
claim. The Plan is designed to reimburse participants directly for covered
expenses. You may wish to authorize payment directly to the provider in the
case of significant expense such as in the case of hospital confinement.
Benefits should not be assigned for other than a significant expense.
Participants should file a claim for reimbursement by the Plan of any expenses
resulting from an annual physical. Examinations may be performed by any
physician selected by the participant, who is located within a reasonable
distance of the participant's home. The procedures for claiming reimbursement
for the expense of the examination are the same as for any other expenses.
You may claim reimbursement of any Covered Health Care Expense simply by
completing a "Claim Expense Form," attaching a copy of either your bill or
receipt, and sending it to your Plan representative (as indicated in your
enrollment package issued to all members when first eligible for the Plan) or if
on direct claim processing, submit it directly to The Prudential Insurance
Company. If more convenient, however, you may use an itemized statement to
claim reimbursement and not complete the Claim Expense Form. Itemized
statements must include the following information:
- - Name and social security number of patient.
- - Nature of illness or injury.
- - Name, address, and tax identification number of the doctor, hospital, or
supplier.
- - Date of charge.
- - Amount of charge.
Cancelled checks or balance due bills are not acceptable as proof of loss.
A claim for reimbursement must be made within two years after incurring the
expense. In the case of minor expenses, it may be helpful for you to record
them on the Claim Expense Form at the time they are incurred, and file for
reimbursement when you feel a sufficient amount has been accumulated. A
separate Claim Expense Form must be submitted for each individual family member
for whom a claim is filed; therefore, records of medical expenses incurred for
yourself and each of your dependents should be kept separately.
COORDINATION OF BENEFITS PROVISION
The purpose of health care coverage is to reimburse participants for health care
expenses which they have incurred. In line with that purpose, our Plan contains
a provision for coordinating with other group plans under which an employee or
dependent is covered so that the total benefits available do not exceed 100
percent of the allowable expenses.
When there is coverage by two or more group plans for health care treatment for
an employee and/or dependent, the insurance companies involved work together to
arrive at a payment of up to 100 percent of the allowable expenses, but no more.
If any of your dependents are employed and have other coverage, that coverage is
considered primary. In this case, the individual should submit the claim/bill
to his/her primary insurance carrier first. Once the individual receives an
explanation of benefits (EOB) from the primary insurance carrier and if there is
a balance owing, he/she can then submit a copy of the original bill and the EOB
from the primary insurance carrier to the secondary payer (The Prudential).
Alternately, if he/she has received a statement from the provider
(doctor/dentist, etc.) which shows the amount the primary insurance carrier has
paid and a balance owed by the patient, he/she can submit this document alone to
The Prudential for payment. No other documentation is needed in this situation
in order for The Prudential to pay as secondary payer.
Page 6
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
REIMBURSEMENT FROM A THIRD PARTY
If a covered person receives Plan benefits to which that person is not entitled
under the Plan (because a third party is responsible), the covered person will
be charged for the amount of such benefits that have been paid by this Plan.
When someone other than the covered person is responsible for a sickness or
injury, the covered person must, in return for the Plan's providing benefits for
that sickness or injury, reimburse the Plan immediately upon receipt of any
payments or damages with respect to that sickness or injury.
Examples include payments received through a lawsuit, a settlement, or from any
third party or his or her insurer (including no-fault insurance). The
employee's agreement to reimburse the Plan will apply regardless of whether the
responsible party admits liability or the payments are itemized.
WHEN YOUR HEALTH CARE COVERAGE TERMINATES
Your coverage under the Plan will terminate, unless otherwise agreed in writing,
at the earliest time stated below:
1. the end of the month next following the month in which your employment
terminates;
2. the end of the month coinciding with the month in which your retirement
from active employment is effective;
3. the date you cease to be a member of the Special Executive Group, or;
4. the date the Plan is discontinued or modified.
In addition to the above, coverage terminates with respect to an individual
dependent when he/she ceases to meet the eligibility requirements of the Plan
(i.e., a child who reaches the age limit or a spouse who becomes divorced from
you). However, coverage will not terminate until the end of the third month
following the month in which a dependent attains the applicable age limitation
or the divorce is effective.
In the event of your death while covered by the Plan, coverage for your
dependents will be continued for a period of six months following the end of the
month in which death occurs.
AFTER HEALTH CARE COVERAGE TERMINATES
Reimbursement will not be made for expenses which are incurred after coverage
terminates unless they are incurred with respect to an injury or illness,
including pregnancy, that cause you or your dependent to be continuously and
totally disabled from such termination date. Only those expenses incurred
relating to a continuous and total disability during the calendar year in which
coverage terminates and the next calendar year shall be reimbursed, unless such
expenses are reimbursed under any other group insurance policy or plan.
Page 7
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
CONTINUATION OF COVERAGE--COBRA
Under the provisions of the Consolidated Omnibus Budget Reconciliation Act
(COBRA), you or your dependents are eligible to continue coverage, at your
expense, but only if that coverage ends as the result of one of the following
"qualifying events."
1. Termination of employment for any reason (except gross misconduct);
reduction in hours, layoff or retirement;
2. Death of the employee;
3. Divorce or legal separation;
4. Loss of dependent status by a dependent child due to attainment of the
maximum age limitation under the Plan, or cessation of full-time schooling.
COST OF COBRA COVERAGE
Coverage may be continued at the same rates applicable to active employees, with
an administration charge of two percent. You are required to pay the full cost
of the coverage.
DURATION OF COBRA COVERAGE
If your active employee coverage would cease because of retirement, termination
of employment, layoff, leave of absence, or reduction in your work hours, you or
your dependents may elect to continue the existing coverage for up to 18 months
from the date of the qualifying event (or up to 29 months if disabled). For all
other qualifying events, you or your dependents may elect to continue coverage
for up to 36 months.
However, COBRA coverage will not continue beyond the date that the earliest of
the following occurs:
1. Failure to pay the required premiums.
2. Entitlement to Medicare.
3. Coverage under another employer-sponsored health plan which does not
contain pre-existing condition exclusions applicable to the COBRA
participant.
4. Any payment of COBRA costs by the company will not extend the applicable 18
or 36 month period.
If your dependent loses coverage as a result of a divorce or loss of dependent
status, it is your or your dependent's responsibility to advise TRW within 60
days of the later of the qualifying event or the date of loss of coverage, if
you wish to continue coverage.
Any questions regarding the COBRA eligibility and coverage provisions should be
directed to your TRW Plan representative.
TRW RETIREMENT MEDICAL PLAN
If your coverage is ceasing due to your retirement, you may be entitled to
enroll in TRW's Retirement Medical Plan (RMP). At retirement, you may elect only
one option--RMP or COBRA.
Page 8
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
In providing this Plan to employees, certain legal requirements must be met.
You must be fully informed of the benefits being provided and your rights
regarding these benefits under the Employee Retirement Income Security Act of
1974. ERISA was signed into law to provide additional protection for employees
covered under any benefit plan. Your rights, as specified by law, are described
on page 11.
PLAN ADMINISTRATION
1. NAME, ADDRESS, AND TELEPHONE NUMBER OF EMPLOYER WHOSE EMPLOYEES ARE COVERED
BY THE PLAN:
TRW Inc.
1900 Richmond Road
Cleveland, OH 44124
Phone No.: 216.291.7000
2. PLAN ADMINISTRATOR:
TRW Inc.
1900 Richmond Road
Cleveland, OH 44124
Phone No.: 216.291.7436
3. SOURCE OF CONTRIBUTIONS TO THE PLAN:
Employer and employee contributions.
4. PLAN YEAR:
Plan Year ends on each December 31.
5. THE AGENT FOR SERVICE OF LEGAL PROCESS:
Secretary
TRW Inc.
1900 Richmond Road
Cleveland, OH 44124
6. TYPE OF ADMINISTRATION OF THE PLAN:
The Plan is insured by The Prudential Insurance Company of America, Central
Group Operations,
Horsham, Pennsylvania 19044.
7. PLAN NUMBERS:
The Plan is on file with the Department of Labor under TRW's Employer
Identification Number
34-0575430.
The Plan number is 705.
The Prudential control number is 39400.
Page 9
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
PLAN ADMINISTRATION cont'd
8. CLAIMS NOTICE OF DECISION:
The Prudential Insurance Company will provide notice of decision on a
wholly or partially-denied claim to the participant no later than 90 days
after receipt of the claim by the Plan, unless special circumstances
require an extension. If an extension is required, written notice of the
extension shall be provided before the end of the initial 90-day period,
and the extension itself shall not exceed 90 days from the end of the
initial period. A denial notice should also give the specific reason for
the denial, a specific reference to pertinent Plan provisions, a
description of any additional material necessary to perfect the claim, and
information on steps to be taken to appeal the denial.
8. APPEALS PROCESS:
If you are denied a claim, you can request a review of your claim, review
pertinent documents, and submit issues and comments in writing to The
Prudential Insurance Company, P.O. Box 3699, Akron, OH 44309-3699 within 60
days of the initial denial of your claim. The Prudential will review the
appeal no later than 60 days after its receipt, unless special
circumstances require an extension, in which case a decision shall be
rendered no later than 120 days after receipt of the request for review.
The participant will be notified if an extension of time is needed.
9. PLAN TERMINATION:
TRW reserves the right to terminate, suspend, withdraw, or amend the Plan
in whole or in part at any time.
Page 10
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
EMPLOYEE RIGHTS
As a participant in this benefit Plan at TRW Inc., you are entitled to:
- - Examine, without charge, at the Plan Administrator's office all Plan
documents filed for the Plan with the U. S. Department of Labor, such as
annual reports and Plan descriptions and all insurance contracts.
- - Obtain copies of all Plan documents and other Plan information upon written
request to the Plan Administrator. The Administrator may make a reasonable
charge for the copies.
- - Receive a summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each participant with a copy of
this summary annual report.
In addition to creating rights for Plan participants, ERISA imposes obligations
upon the persons who are responsible for the operation of the employee benefit
Plan. These persons are referred to as "fiduciaries" in the law. Fiduciaries
must act in the interest of the Plan participants and do so prudently.
Fiduciaries who violate ERISA may be removed and required to make good any
losses they have caused the Plan.
Your employer may not fire you or discriminate against you to prevent you from
obtaining a benefit or exercising your rights under ERISA.
If you are improperly denied a benefit in full or in part, you have a right to
file suit in a federal or state court. You may also file suit in federal court
if any Plan documents or any other materials to which you are entitled are not
received within 30 days of your written request, and the court may require the
Plan Administrator to pay up to $100 for each day's delay until the materials
are received, unless the failure was beyond the control of the Plan
Administrator.
If Plan fiduciaries are misusing the Plan's money, or if you are discriminated
against for asserting your rights, you have the right to file suit in a federal
court or request assistance from the U.S. Department of Labor. The court will
decide who should pay court costs and legal fees. If you are successful in your
lawsuit, the court may, if it so decides, require the other party to pay your
legal costs, including attorney's fees. If you lose, the court may order you to
pay these costs and fees, for example, if it finds your claim is frivolous.
If you have any questions about this statement or your rights under ERISA, you
should contact the Plan Administrator or the nearest Area Office of the U.S.
Labor-Management Service Administration, Department of Labor.
Page 11
<PAGE>
TRW EXECUTIVE HEALTH CARE PLAN (EHCP)
- --------------------------------------------------------------------------------
APPENDIX
<TABLE>
<CAPTION>
COVERED EXPENSES BENEFIT
- ---------------- -------
<C> <S> <C>
HOSPITAL Charges by a hospital for medical 100% of eligible charges
services on an inpatient or outpatient
basis, including room and board,
operating room, intensive care, tests,
therapy, medication, and drugs dis-
pensed for inpatient care, and other
services. Covered services include
medical care and diagnostic services.
SURGERY Charges by a physician for performing 100% of eligible charges
surgery on an inpatient or outpatient
basis. Services include the surgeon,
assistant surgeon, anesthesiologist,
anesthetist and other professional
personnel supporting the surgical
procedure.
PRESCRIPTION DRUGS Drugs requiring a prescription.
Insulin is also covered. 100% of eligible charges
MAJOR MEDICAL Charges for medical care and diagnos- 100% of eligible charges
tic services and equipment. Included
are physician services, routine medical
examinations, nursing services, rental
of wheelchairs or other needed medical
equipment (or purchase where appro-
priate), tests, therapy, and other
professional health care services.
DENTAL Charges for dental services and sup- 100% of eligible charges
plies. Included are dentists, dental
hygienists, prosthodontics, oral
surgery, and others.
VISION Charges for vision services and sup- 100% of eligible charges
plies. Included are optometrists and
professional eye care supplies.
</TABLE>
Page 12
<PAGE>
EXHIBIT 10(h)
[TRW LOGO]
NONQUALIFIED
STOCK OPTION
AGREEMENT
To: Name
- ----------------------------
SS Number
- -----------------------------
(SOCIAL SECURITY NUMBER)
There hereby is granted to you, as a key employee of TRW Inc. ("TRW") or of a
subsidiary, an option to purchase (AMOUNT) shares of Common Stock, par
value $0.625 each, of TRW ("TRW Common") at an option price of $87.94 per
share. This option is granted to you pursuant to the
Plan and is subject to the terms and
- ---------------------------------
conditions set forth below.
Date of Grant: February 7, 1996
This option is not intended to be an incentive stock option as defined in
Section 422A of the Internal Revenue Code.
TRW INC.
By:
-----------------------------------------
AUTHORIZED OFFICER
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS
1. PURCHASE RIGHTS.
This option cannot be exercised before the first anniversary of the date of
grant. After that you will be entitled to purchase up to 33-1/3% of the shares
covered by this option, rounded down to the nearest whole share for each of the
first two years, for each full year of your continuous employment with TRW after
the date of grant. The purchase rights accumulate as shown in the following
table.
<TABLE>
<CAPTION>
Cumulative Maximum
Number of Full Years Percentage of
Of Continous Service Optioned Shares That
After Date of Grant May Be Purchased
- ---------------------------------------------------------
<S> <C>
1 33-1/3%
2 66-2/3%
3 100%
</TABLE>
Notwithstanding the foregoing, in the event of a change in control of TRW, this
option will immediately become exercisable in respect of all of the shares
covered by this grant. For purposes of this agreement, a change in control is
defined in resolutions adopted by the Compensation and Stock Option Committee of
the Directors of TRW on July 26, 1989, which, in summary, provide that a change
in control is a change occurring (a) by virtue of TRW's merger, consolidation or
reorganization into or with, or transfer of assets to, another corporation or
(b) by virtue of a change in the majority of the Directors of TRW during any
two-year period unless the election of each new Director was approved by a two-
thirds vote of the Directors in office at the beginning of such period or
(c) through the acquisition of shares representing 20% or more of the voting
power of TRW or (d) through any other change in control reported in any filing
with the Securities and Exchange Commission; provided that no change in control
is deemed to have occurred by the acquisition of shares, or any report of such
acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored employee benefit
plan. The language of the resolutions controls over this summary language.
2. EXERCISE IN WHOLE OR PART.
To the extent this option has become exercisable, you may purchase on any date
or dates all or any part of the shares which you are then entitled to purchase.
However, no fractional shares may be purchased.
3. TERM OF OPTION.
To the extent this option has become exercisable in accordance with paragraph 1
above, it may be exercised by you at any time during the 10-year period
beginning on the date of grant. To the extent this option remains unexercised
at the end of the 10-year period, your unexercised purchase rights will
terminate. To the extent unexercised, this stock option will terminate before
the end of such 10-year period in the following cases:
(a) If your employment with TRW terminates before you reach age 55, your
unexercised purchase rights will terminate three months after the date your
employment terminates.
(b) If the Directors of TRW shall find that you intentionally committed an act
materially inimical to the interests of TRW or a subsidiary, your unexercised
purchase rights will terminate as of the time you committed such act, as
determined by the Directors.
<PAGE>
If your employment is terminated by death or disability, your purchase rights
will not be subject to termination under clause (a) above and will continue for
the entire 10-year period. In the event of a change in control of TRW (as
defined herein), your purchase rights will not under any circumstances be
subject to termination before the end of the 10-year period beginning on the
date of grant. Nothing contained in this option shall extend this option beyond
a 10-year period beginning on the date of grant or shall limit whatever right
TRW or a subsidiary might otherwise have to terminate your employment at any
time.
4. PAYMENT OF OPTION PRICE.
The option price shall be payable at the time of exercise. The option price
shall be paid at the Office of Secretary at TRW's corporate headquarters or at
any other place designated by the Secretary. The option price may be paid in
cash, in full shares of TRW Common, or in a combination of both, in accordance
with such procedures and subject to such further conditions as the Secretary of
TRW may establish from time to time. Notwithstanding the foregoing, the
Compensation and Stock Option Committee of TRW at any time may suspend or
terminate your right to pay any or all of the option price in shares of TRW
Common.
Cash payments shall be made in United States dollars, except that, if at the
time of exercise you are employed by or on assignment for TRW or a subsidiary at
a location outside the United States, a cash payment may, with the prior
approval of the Secretary of TRW, be made in the official currency used at such
location in an amount specified by the Secretary as equivalent to the same
amount in United States dollars.
Shares delivered in payment of the option price shall be valued at their fair
market value on the date of exercise. For purposes of this option, "fair market
value" is the mean of the high and low sales prices of a share of TRW Common on
the date of exercise on the New York Stock Exchange Composite Transactions
Listing as reported in the Midwest edition of THE WALL STREET JOURNAL (or if
there are no sales on such date, then the closing sale price on such Listing on
the nearest date before the date of exercise) or such other method or procedure
for determining fair market value as the Compensation and Stock Option Committee
of TRW in its sole discretion may determine. For purposes of this option, the
"date of exercise" is the date on which written notice, accompanied by the
option price, is received by the Secretary of TRW or his designee that you have
elected to exercise all or part of this option.
5. TAXES.
Upon any exercise of this option, TRW may withhold delivery of certificates for
the purchased shares until you make arrangements satisfactory to TRW to pay any
withholding, transfer or other taxes due as a result of such exercise. You may
elect, in accordance with applicable regulations of the Compensation and Stock
Option Committee of TRW, to pay a portion or all of the amount of required
withholding taxes in shares of TRW Common, either by delivering to TRW
previously held shares of TRW Common or by having shares of TRW Common withheld
from the shares purchased hereunder.
6. SECURITIES LAWS.
This option shall not be exercisable if such exercise would violate any Federal
or state securities law. TRW will use its best efforts to make such filings and
initiate such proceedings as may be necessary to prevent such violations unless
the Directors of TRW determine, in their sole discretion, that such filings or
proceedings would result in undue expense or hardship for TRW. TRW may place
appropriate legends on the certificates for the optioned shares, give stop-
transfer instructions to its transfer agents or take any other action to achieve
compliance with those laws in connection with any exercise of this option or
your resale of the optioned shares.
7. TRANSFERABILITY.
This option is not transferable other than by will or the laws of descent and
distribution and shall be exercisable during your lifetime only by you or your
guardian or legal representative.
8. LEAVES OF ABSENCE.
If you take a leave of absence for illness, military or governmental service or
other reasons, and such leave has been specifically approved by the Chairman of
the Board or the President of TRW for purposes of this option, then such leave
will not be treated as an interruption of your employment.
9. ADJUSTMENTS.
The Compensation and Stock Option Committee of TRW may make such adjustments in
the option price and in the number or kind of shares of TRW Common or other
securities covered by this option as it in its sole discretion may determine are
equitably required to prevent dilution or enlargement of your rights that would
otherwise result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of TRW, merger,
consolidation, reorganization, partial or complete liquidation or other
corporate transaction or event having an effect similar to any of the foregoing.
10. CERTAIN DEFINITIONS.
For purposes of this option, employment with a subsidiary will be treated as
equivalent to employment with TRW itself, and your continuous employment will
not be deemed to be interrupted by reason of your transfer among TRW and its
subsidiaries. "Subsidiary" means a corporation or other entity in an unbroken
chain of entities beginning with TRW if each of the entities other than the last
entity in the unbroken chain owns stock or other ownership interests possessing
50% or more of the total outstanding combined voting power of all classes of
stock or other interests in the next entity in the chain.
11. MISCELLANEOUS.
This stock option is subject to all the terms and conditions of the TRW plan
pursuant to which it is granted. The Compensation and Stock Option Committee of
TRW has authority to interpret and construe any provision of this instrument and
the TRW plan pursuant to which this stock option is granted, and any such
interpretation and construction shall be binding and conclusive. Any reference
in this option to the Directors of TRW includes the Executive Committee of the
Directors.
<PAGE>
EXHIBIT 10(k)
AMENDED AND RESTATED EMPLOYMENT CONTINUATION AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT CONTINUATION AGREEMENT (this
"Agreement"), is made and entered into on this 7th day of February, 1996, by TRW
INC., an Ohio corporation (the "Company"), and _________________ (the
"Executive").
WITNESSETH:
WHEREAS, the Executive presently is the ____________________ of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case with many publicly-
held companies, the possibility of a Change in Control (as that term is
hereafter defined) exists;
WHEREAS, the Company wishes to assure itself of both present and future
continuity of management in the event of any Change in Control;
WHEREAS, the Company wishes to ensure that certain of its executives are
not practically disabled from discharging their duties upon a Change in Control;
<PAGE>
WHEREAS, the Company and the Executive are parties to an Employment
Continuation Agreement (the "Prior Agreement") providing certain benefits in the
event of a Change in Control and the Company and the Executive desire to amend
and restate the Prior Agreement; and
WHEREAS, although effective and binding as of the date hereof, this
Agreement shall become operative only upon the occurrence of a Change in
Control;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of the Agreement.
(a) This Agreement shall be effective and binding immediately upon
its execution, but anything in this Agreement to the contrary notwithstanding,
this Agreement shall not be operative unless and until there shall have occurred
a Change in Control. For purposes of this Agreement, a "Change in Control"
shall have occurred if at any time during the Term (as that word is hereafter
defined) any of the following events shall occur:
(i) The Company is merged or consolidated or reorganized
into or with another corporation or other legal person and as a result of
such merger, consolidation or reorganization less than 51% of the combined
voting power of the then-outstanding securities of such corporation or
person immediately after such transaction is held in the aggregate by the
holders of then-outstanding securities entitled to vote generally in the
election of Directors ("Voting Stock") of the Company immediately prior to
such transaction;
-2-
<PAGE>
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal
person if less than 51% of the combined voting power of the then-
outstanding Voting Stock of such corporation or person immediately after
such sale or transfer is held in the aggregate by the holders of Voting
Stock of the Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"),
disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
securities representing 20% or more of the then-outstanding Voting Stock of
the Company;
(iv) The Company shall file a report or proxy statement with
the Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of
Schedule 14A thereunder (or any successor schedule, form or report or item
therein) that a change in control of the Company has or may have occurred
or will or may occur in the future pursuant to any then-existing contract
or transaction; or
-3-
<PAGE>
(v) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the Directors of
the Company cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the
Company's shareholders, of each Director of the Company first elected
during such period was approved by a vote of at least two-thirds of
the Directors of the Company then still in office who were Directors
of the Company at the beginning of any such period.
Notwithstanding the foregoing provisions of Section 1(a)(iii) and 1(a)(iv)
hereof, a Change in Control shall not be deemed to have occurred for purposes of
this Agreement solely because (A) the Company, (B) an entity in which the
Company directly or indirectly beneficially owns more than 50% of the voting
securities or (C) any Company-sponsored employee stock ownership plan or any
other employee benefit plan of the Company, or any entity holding shares of
Voting Stock for or pursuant to the terms of any such plan, either files or
becomes obligated to file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Item 1 of Form 8-K or Item 6(e) of Schedule 14A
(or any successor schedule, form or report or item therein) under the Exchange
Act, disclosing beneficial ownership by it of shares of Voting Stock of the
Company, whether in excess of 20% or otherwise, or because the Company reports
that a change in control of the Company has or may have occurred or will or may
occur in the future by reason of such beneficial ownership by the entities
described in clauses (A), (B) and (C) of this paragraph.
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(b) Upon the occurrence of a Change in Control at any time during
the Term, this Agreement shall become immediately operative.
(c) The period during which this Agreement shall be in effect (the
"Term") shall commence as of the date hereof and shall expire as of the later of
(i) the close of business on June 1, 2001 or (ii) the expiration of the Period
of Employment (as that term is hereafter defined); provided, however, that
(i) commencing on June 1, 1997 and each June 1 thereafter, the Term of this
Agreement shall automatically be extended for an additional year unless, not
later than January 1 of each such year, the Company or the Executive shall have
given notice that it or he, as the case may be, does not wish to have the Term
extended, and (ii) subject to Section 14 hereof, if, prior to a Change in
Control, the Executive ceases for any reason to be an elected officer or
assistant officer of the Company, thereupon the Term shall be deemed to have
expired and this Agreement shall immediately terminate and have no further
effect.
2. Employment; Period of Employment.
(a) Subject to the terms and conditions of this Agreement, upon the
occurrence of a Change in Control, the Company shall continue the Executive in
its employ and the Executive shall remain in the employ of the Company for the
period set forth in Section 2(b) below (the "Period of Employment"), with the
duties and responsibilities set forth in Schedule A hereto and any additional
duties and responsibilities that he may have immediately prior to the Change in
Control or to which the Company and the Executive may hereafter mutually agree
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in writing. So long as the Executive remains in the employ of the Company, the
Executive shall devote substantially all of his time during normal business
hours (subject to vacations, sick leave and other absences in accordance with
the policies of the Company as in effect for executives immediately prior to the
Change in Control) to the business and affairs of the Company, but nothing in
this Agreement shall preclude the Executive from devoting reasonable periods of
time during normal business hours to (i) serving as a director, trustee or
member of or participant in any organization or business so long as such
activity would not constitute Competitive Activity (as that term is hereafter
defined), (ii) engaging in charitable and community activities or (iii) managing
his personal affairs.
(b) The Period of Employment shall commence on the date of the
occurrence of a Change in Control and, subject only to the provisions of Section
4 hereof, shall continue until the earlier of (i) the Executive's death;
(ii) the Executive's attainment of age 65; or (iii) the expiration of the third
anniversary of the occurrence of the Change in Control.
3. Compensation During Period of Employment.
(a) Upon the occurrence of a Change in Control, the Executive shall
receive during the Period of Employment (i) annual base salary at a rate not
less than the Executive's annual fixed or base compensation as in effect
immediately prior to a Change in Control or such higher rate as may be
determined from time to time by the Company, payable monthly or otherwise as in
effect immediately prior to a Change in Control ("Base Pay") and (ii) an annual
amount equal to not
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less than the highest annual aggregate bonuses or incentive payments of
compensation in addition to the amounts referred to in clause (i) above made or
to be made (regardless of when, or in what form, such compensation is paid) for
services rendered in any calendar year during the three calendar years
immediately preceding the year in which a Change in Control occurred pursuant to
any bonus, incentive, profit-sharing or similar policy, plan, program or
arrangement of the Company or any successor thereto ("Incentive Pay"); provided,
however, that nothing herein shall preclude a change in the mix of Base Pay and
Incentive Pay by an increase in the relative amount of Base Pay, provided that
the aggregate compensation received by the Executive in any one year is not
reduced and provided, further, that in no event shall any increase in the
Executive's aggregate compensation or any portion thereof in any way diminish
any other obligation of the Company under this Agreement. For the purposes of
this Agreement, any compensation the Executive elected to defer under any
policy, plan, program or arrangement shall be included in the determination of
Base Pay and/or Incentive Pay, as applicable.
(b) For his service pursuant to Section 2(a) hereof, during the
Period of Employment the Executive shall be a full participant in any and all
employee retirement income and welfare benefit policies, plans, programs or
arrangements in which executives of the Company participate immediately prior to
the Change in Control or during the Period of Employment, including without
limitation the TRW Salaried Pension Plan ("Retirement Plan"), the TRW
Nonqualified Supplementary Retirement Income Plan ("SRIP"), the TRW Benefits
Equalization Plan
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("BEP"), the TRW Employee Stock Ownership and Stock Savings Plan ("ESOSSP"),
the TRW Long-Term Disability Benefits Plan (the "Disability Plan"), the TRW
Deferred Compensation Plan (the "DCP") and any executive automobile, stock
option, stock purchase, stock appreciation, performance improvement, long-term
incentive, medical or health, life insurance, vacation, disability, salary
continuation and any other retirement income or welfare benefit policy,
plan, program or arrangement or any equivalent successor policy, plan, program
or arrangement that may now exist or be adopted hereafter by the Company or any
successor thereto providing benefits and other perquisites at least as great as
are payable thereunder prior to a Change in Control (collectively, "Employee
Benefits"). If and to the extent that any such Employee Benefits shall not or
cannot be paid or provided under any policy, plan, program or arrangement of the
Company as a result of the amendment or termination thereof, the Company shall
itself pay or provide therefor. Nothing in this Agreement shall preclude
improvement of reward opportunities in any Employee Benefits, provided that no
such improvement shall in any way diminish any other obligation of the Company
under this Agreement.
4. Termination Following a Change in Control.
(a) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Company during the Period of Employment only
upon the occurrence thereafter of one or more of the following events:
(i) If the Executive shall become permanently disabled and
begins actually to receive disability benefits pursuant
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to the Disability Plan or any successor plan adopted prior to a Change in
Control; or
(ii) For "Cause", which for purposes of this Agreement shall
mean that, prior to any termination pursuant to Section 4(b) hereof, the
Executive shall have committed:
(A) an act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Company;
(B) intentional wrongful damage to the property of the
Company;
(C) intentional wrongful disclosure of secret
processes or confidential information of the Company; or
(D) intentional wrongful engagement in any Competitive
Activity (as that term is hereafter defined) while the Executive
remains in the employ of the Company;
and any such act shall be determined by the Directors of the Company as
hereafter provided to have been materially harmful to the Company. For
purposes of this Agreement, no act, or failure to act, on the part of the
Executive shall be deemed for "Cause" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for "Cause" hereunder unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the Direc-
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tors then in office at a meeting of the Directors called and held for such
purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the
Directors), finding that, in the good faith opinion of the Directors, the
Executive had committed an act set forth above in this Section 4(a)(ii) and
specifying the particulars thereof in detail. Nothing herein shall limit
the right of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(b) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Executive with the right to receive benefits
under Section 5 hereof and, if applicable, Section 6 hereof, only upon the
occurrence thereafter of one or more of the following events:
(i) Any termination by the Company of the employment of the
Executive during the Period of Employment, unless (x) Cause for termination
shall exist or (y) as a result of the death of the Executive or (z) by
reason of the Executive's disability and the actual receipt of disability
benefits as provided in Section 4(a)(i) hereof; or
(ii) Termination by the Executive of his employment with the
Company during the Period of Employment and upon the occurrence of any of
the following events:
(A) Failure to elect, reelect or otherwise maintain
the Executive in the office or position in the Company which the
Executive held immediately prior to a
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<PAGE>
Change in Control, or the removal of the Executive as a Director of
the Company (or any successor thereof) if the Executive shall have
been a Director of the Company immediately prior to the Change in
Control;
(B) A significant adverse change in the nature or
scope of the authorities, powers, functions, responsibilities or
duties in respect of the Company which the Executive had immediately
prior to the Change in Control, a reduction in the aggregate of the
Executive's Base Pay and Incentive Pay received from the Company, or
the termination of the Executive's rights to Employee Benefits to
which he was entitled immediately prior to the Change in Control or a
reduction in scope or value thereof without the prior written consent
of the Executive, any of which is not remedied within 10 calendar days
after receipt by the Company of written notice from the Executive of
such change, reduction or termination, as the case may be;
(C) A determination by the Executive (which
determination will be conclusive and binding upon the parties hereto
provided it has been made in good faith and in all events will be
presumed to have been made in good faith unless otherwise shown by the
Company by clear and convincing evidence) that a change in
circumstances has occurred significantly affecting his position,
including without limitation a change in the scope of the business or
other activities for which he was responsible or a substantial
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<PAGE>
reduction in any of the resources available to carry out any of the
authorities, powers, functions, responsibilities or duties that he had
immediately prior to the Change in Control, has been rendered
substantially unable to carry out, has been substantially hindered in
the performance of or has suffered a substantial reduction in any of
such authorities, powers, functions, responsibilities or duties, which
situation is not remedied within 10 calendar days after receipt by the
Company of written notice from the Executive of such determination;
(D) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or transfer of all or a
significant portion of its business and/or assets unless the successor
or successors (by liquidation, merger, consolidation, reorganization
or otherwise) to which all or a significant portion of its business
and/or assets have been transferred (directly or by operation of law)
shall have assumed all duties and obligations of the Company under
this Agreement pursuant to Section 8 hereof;
(E) The relocation of the Company's principal
executive offices or the requirement by the Company that the Executive
change his principal location of work to any location which is in
excess of 35 miles from his principal location immediately prior to
the Change in Control or travel away from his office in the course of
discharging his responsibilities or duties hereunder more than 20
consecutive cal-
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endar days or an aggregate of more than 30 calendar days in any
consecutive 90 calendar-day period without in either case his prior
written consent; or
(F) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company.
The Executive's continued employment shall constitute consent to, and a waiver
of rights with respect to, any event described in this Section 4(b)(ii) unless
the Executive terminates his employment with the Company within 120 days after
the Executive has actual knowledge of the occurrence of an event described in
this Section 4(b)(ii) that is not remedied as provided herein. The parties
agree that any consent to or waiver of any such event shall not be deemed to
constitute a consent to or waiver of any other circumstance constituting an
event described in this Section 4(b)(ii).
(c) Notwithstanding anything contained in this Agreement to the
contrary, in the event of a Change in Control, the Executive may terminate
employment with the Company for any reason, or without reason, during the 60-day
period immediately following the first anniversary of the first occurrence of a
Change in Control, with the right to severance compensation as provided in
Section 5 hereof and, if applicable, Section 6 hereof.
(d) A termination by the Company pursuant to Section 4(a) hereof or
by the Executive pursuant to Section 4(b) or Section 4(c) hereof shall not
affect any rights which the Executive may have pursuant to any other agreement,
policy, plan, program or
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<PAGE>
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof; provided, however, that if the Executive shall
have received or shall be receiving benefits under Section 5 hereof and, if
applicable, Section 6 hereof, the Executive shall not be entitled to receive
benefits under any other policy, plan, program or arrangement of the Company
providing severance compensation to which the Executive would otherwise be
entitled. If this Agreement or the employment of the Executive is terminated
under circumstances in which the Executive is not entitled to any payments under
Sections 3 or 5 hereof, the Executive shall have no further obligation or
liability to the Company hereunder with respect to his prior or any future
employment by the Company.
(e) The Company shall provide the Executive with timely notice of
any of the events referred to in Section 4(b)(ii)(D) hereof so that a
determination can be made as to the assumption of duties and obligations by any
successor or successors.
5. Severance Compensation.
(a) If, following the occurrence of a Change in Control, the
Company shall terminate the Executive's employment other than pursuant to
Section 4(a) hereof, or if the Executive shall terminate his employment pursuant
to Section 4(b) or Section 4(c) hereof:
(i) The Company shall pay or cause to be paid to the
Executive, within five business days after the effective date of any such
termination (the "Termination Date"), in lieu of any further payments to
the Executive for the portion of the Period of Employment subsequent to the
Termination Date, but without
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affecting the rights of the Executive referred to in Section 5(b) hereof
and the Executive's rights at law or in equity (other than rights to
damages for termination of his employment or this Agreement), a lump sum
severance payment (the "Severance Payment") equal to the present value
(using a discount rate equal to the applicable interest rate promulgated by
the Internal Revenue Service "IRS" under Section 417(e)(3) of the Code for
the third month preceding the month in which the Termination Date occurs,
and if the IRS ceases to promulgate such interest rates, the last such
interest rate so promulgated) of the sum of (A) the aggregate Base Pay (at
the highest rate in effect at any time during the Period of Employment or
immediately prior to the Change in Control) which the Executive would have
received pursuant to this Agreement for (x) each remaining year or fraction
thereof during the Period of Employment or (y) two years, whichever is the
longer period, had his employment with the Company continued for the longer
of such periods; plus (B) the aggregate Incentive Pay (based upon the
highest annual aggregate Incentive Pay that the Executive received with
respect to any calendar year during the three calendar years immediately
preceding the calendar year in which the Change in Control occurred or the
Incentive Pay that the Executive received with respect to the calendar year
preceding the calendar year in which the Termination Date occurs, whichever
is the larger amount) which the Executive would have received pursuant to
this Agreement with respect to (x) each remaining year or fraction thereof
during the Period of Employ-
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<PAGE>
ment or (y) two years, whichever is the longer period, had his employment
with the Company continued for the longer of such periods; plus (C) the
cash value of all Employee Benefits, other than stock option, stock
purchase, stock appreciation or similar compensatory benefits (based upon
the highest annual aggregate rate that the Executive received Employee
Benefits with respect to any calendar year during the three calendar years
immediately preceding the calendar year in which the Change in Control
occurred or the Employee Benefits that the Executive received with respect
to the calendar year preceding the calendar year in which the Termination
Date occurs, whichever is the larger amount), which the Executive would
have received pursuant to this Agreement with respect to (x) each remaining
year or fraction thereof during the Period of Employment or (y) two years,
whichever is the longer period, had his employment with the Company
continued for the longer of such periods, other than Employee Benefits
providing Base Pay, Incentive Pay and the Employee Benefits to be provided
pursuant to Sections 5(a)(ii) and 5(a)(iv) hereof;
(ii) The Company shall pay or cause to be paid to the Executive,
within five business days after the Termination Date, a lump sum payment equal
to the sum of the following:
(A) The present value of the benefit that would be payable to the
Executive from the SRIP and the Defined Benefit Portion of the BEP (as such
term is used therein), commencing at the earliest time permissible under
the SRIP and the BEP, assuming,
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solely for the purposes of the SRIP and the BEP (but not for purposes of
the Retirement Plan), that (I) the SRIP and the BEP contained no vesting
requirements, (II) the Executive was credited with additional service with
the Company equal to the remaining Period of Employment or two years,
whichever is the longer period, (III) the Executive's age was increased an
amount equal to the remaining Period of Employment or two years, whichever
is the longer period, and (IV) the Executive's final average compensation
was determined by including the compensation that would have been paid to
the Executive for a period equal to the remaining Period of Employment or
two years, whichever is the longer period, had his employment with the
Company continued for the longer of such periods, if the Executive's annual
compensation for such period was the sum of the amounts described in
Sections 5(a)(i)(A) and 5(a)(i)(B), such present value to be determined
using the applicable mortality table promulgated by the IRS under
Section 417(e)(3) of the Code in effect on the Termination Date and the
applicable interest rate promulgated by the IRS under Section 417(e)(3) of
the Code for the third month preceding the month in which the Termination
Date occurs, and if the IRS ceases to promulgate such interest rates, the
last such interest rate so promulgated. The Executive hereby waives, in
consideration of, and subject to receipt of, the payment contemplated by
this Section 5(ii)(A), any payments under the provisions of the SRIP and
the Defined Benefit Portion of the BEP.
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(B) The amount credited to the Executive's Account (as such term is
defined in the BEP) under the defined contribution portion of the BEP. The
Executive hereby waives, in consideration of, and subject to receipt of,
the payment contemplated by this Section 5(ii)(B), any payments under the
provisions of the defined contribution portion of the BEP.
(C) The amount of TRW Matching Contributions (as such term is
defined in the ESOSSP) that would have been contributed to the ESOSSP on
behalf of the Executive for the remaining Period of Employment or two
years, whichever is the longer period, had his employment with the Company
continued for the longer of such periods, if (I) the Executive's employment
had not been terminated, (II) the Executive had received Base Pay and
Incentive Pay during such period at the rates or in the amounts described
in Section 5(a)(i) hereof, (III) the ESOSSP did not contain provisions
implementing the requirements of Sections 401(a)(4), 401(a)(17), 401(k),
401(m), 402(g), and 415 of the Code or any other provisions of the Code
limiting the amount of contributions that may be made to the ESOSSP by or
on behalf of the Executive and (IV) the Executive had elected to contribute
the maximum amount of Before-Tax Contributions (as such term is defined in
the ESOSSP) permitted to be contributed to the ESOSSP for such period.
(D) The amounts (including interest through the Termination Date)
credited to the Executive's Account (as such term is defined in the DCP).
The Executive acknowledges that the Execu-
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tive's receipt of the payment contemplated by this Section 5(ii)(D) shall
discharge the Company's obligations to the Executive under the DCP.
The Executive and the Company acknowledge that references in this Section
5(a)(ii) to the Retirement Plan, the ESOSSP, the BEP, the SRIP and the DCP shall
be deemed to be references to such plans as amended or restated from time to
time and to any similar plan of the Company that supplements or supersedes any
such plans; provided that any amendment following a Change in Control that
reduces benefits under the Retirement Plan, the ESOSSP, the BEP, the SRIP or the
DCP (or any similar plan of the Company that supplements or supersedes any of
such plans) in any way (including without limitation by reducing the rate of
benefit accruals or contribution levels under any of such plans, or by changing
the basis upon which actuarial equivalents are determined under any such plans)
shall be disregarded for purposes of this Section 5(a)(ii). In addition, the
Executive and the Company acknowledge that references in this Section 5 to any
Section of the Code shall be deemed to be references to such Section as amended
from time to time or to any successor thereto.
(iii) The Company shall pay all legal fees and expenses incurred by
the Executive as a result of such termination (including without limitation all
such fees and expenses, if any, incurred in seeking to obtain or enforce any
right or benefit provided by this Agreement in accordance with Section 17
hereof); and
(iv) The Company shall arrange to provide to the Executive, for the
remainder of the Period of Employment or two years,
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whichever is the longer period, with Employee Benefits that are welfare benefits
(and not stock option, stock purchase, stock appreciation or similar
compensatory benefits) which the Executive was receiving or entitled to receive
during the Period of Employment. If and to the extent that any such Employee
Benefits shall not or cannot be paid or provided under any policy, plan, program
or arrangement of the Company (i) solely due to the fact that the Executive is
no longer an officer or employee of the Company or did not continue as an
officer or employee of the Company during the remainder of the Period of
Employment or (ii) as a result of the amendment or termination of any such
Employee Benefit, the Company shall itself pay or provide for the payment of
such Employee Benefits to the Executive, his dependents and beneficiaries.
Without otherwise limiting the purposes or effect of Section 7 hereof, Employee
Benefits payable to the Executive (including his dependents and beneficiaries)
pursuant to this Section 5(a)(iii) by reason of any "welfare benefit plan" of
the Company (as the term "welfare benefit plan" is defined in Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended) shall be
reduced to the extent comparable welfare benefits are actually received by the
Executive (including his dependents and beneficiaries) from another employer
during such period, and any such benefits actually received by the Executive
shall be reported by the Executive to the Company.
(b) Any Incentive Pay that is payable to the Executive with respect
to a period that is less than a full calendar year (a "partial calendar year")
shall be prorated by multiplying (i) the Incentive Pay that would have been
payable to the Executive with respect to the
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entire calendar year had the Executive's employment with the Company continued
until the end of such year by (ii) a fraction, the numerator of which equals the
number of days in the partial calendar year and the denominator of which equals
365.
(c) There shall be no right of set-off or counterclaim in respect
of any claim, debt or obligation against any payment to or benefit for the
Executive provided for in this Agreement.
(d) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest equal
to the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Northeast Edition of THE WALL STREET JOURNAL, plus three
percent. Such interest will be payable as it accrues on demand. Any change in
such prime rate will be effective on and as of the date of such change.
(e) In the event a Change in Control occurs, the Company shall
deposit in trust, pursuant to certain trust agreements to which the Company
shall be a party, cash or other property in such an amount as necessary to
assure the payment of the amounts due to the Executive under this Agreement.
Any failure by the Company to satisfy any of its obligations under this
Section 5(e) shall not limit the rights of the Executive hereunder.
Notwithstanding the foregoing, the Executive shall have the status of a general
unsecured creditor of the Company and shall have no right to, or security
interest in, any assets of the Company.
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6. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that this Agreement shall become operative and it shall be determined
(as hereafter provided) that any payment or distribution by the Company to or
for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 (or any
successor thereto) of the Code, or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment or payments (collectively, a
"Gross-Up Payment"); provided, however, that no Gross-Up Payment shall be made
with respect to the Excise Tax, if any, attributable to (i) any incentive stock
option, as defined by Section 422 of the Code ("ISO") granted prior to the
execution of this Agreement, or (ii) any stock appreciation or similar right,
whether or not limited, granted in tandem with any ISO described in clause (i).
The Gross-Up Payment shall be in an amount such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payment.
(b) Subject to the provisions of Section 6(e) hereof, all
determinations required to be made under this Section 6, including whether an
Excise Tax is payable by the Executive and the amount of
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such Excise Tax and whether a Gross-Up Payment is required and the amount of
such Gross-Up Payment, shall be made by a nationally recognized firm of
certified public accountants (the "Accounting Firm") selected by the Executive
in his sole discretion. The Executive shall direct the Accounting Firm to
submit its determination and detailed supporting calculations to both the
Company and the Executive within 15 calendar days after the Termination Date, if
applicable, or such earlier time or times as may be requested by the Company or
the Executive. If the Accounting Firm determines that any Excise Tax is payable
by the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of the aforesaid determination
and calculations. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Executive with an opinion that he has substantial
authority not to report any Excise Tax on his federal income tax return. Any
determination by the Accounting Firm as to the amount of the Gross-Up Payment to
be paid by the Company within such 15 calendar-day period shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 (or any successor thereto) of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 6(e) thereof and the Executive thereafter is required to make a payment
of any Excise Tax,
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the Executive shall direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive within three calendar days after receipt of such
determination and calculations.
(c) The Company and the Executive shall each cooperate with the
Accounting Firm in connection with the preparation and issuance of the
determination provided for in Section 6(b) hereof. Such cooperation shall
include without limitation providing the Accounting Firm access to and copies of
any books, records and documents in the possession of the Company or the
Executive, as the case may be, that are reasonably requested by the Accounting
Firm.
(d) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations provided for in Section
6(b) hereof shall be paid by the Executive. The Company shall reimburse the
Executive for his payment of such costs and expenses within five business days
after receipt from the Executive of a statement therefor and evidence of his
payment thereof.
(e) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Executive receives
notice of such claim and shall apprise the Company of the nature of such claim
and the date on which
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such claim is requested to be paid. The Executive shall not pay such claim
prior to the earlier of (i) the expiration of the 30 calendar-day period
following the date on which it gives such notice to the Company or (ii) the date
that any payment of taxes with respect to such claim is due. If the Company
notifies the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 6(e), the Company shall control all proceedings taken in
connection with such contest
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and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conference with the taxing authority in
respect of such claim (but the Executive may participate therein at his own cost
and expense) and may, at its sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which the contested amount
is claimed to be due is limited solely to such contested amount. Furthermore,
the Company's control of such contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder, and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(f) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(e) hereof, the Execu-
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<PAGE>
tive receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 6(e)
hereof) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 6(e) hereof, a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial or refund
prior to the expiration of 30 calendar days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
7. No Mitigation Obligation. The Company hereby acknowledges that it
will be difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Termination Date. In addition, the Company
acknowledges that its severance pay plans and policies applicable in general to
its salaried employees do not provide for mitigation, offset or reduction of any
severance payment received thereunder. Accordingly, the parties hereto
expressly agree that the payment of the severance compensation by the Company to
the Executive in accordance with the terms of this Agreement shall be liquidated
damages and that the Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall any profits, income, earnings or other benefits from any
source whatsoever create any miti-
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<PAGE>
gation, offset, reduction or any other obligation on the part of the Executive
hereunder or otherwise, except as expressly provided in Section 5(a)(iv) hereof.
8. Successors and Binding Agreement.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement and each of the Company's obligations
hereunder. This Agreement shall be binding upon and inure to the benefit of the
Company and any successor of or to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business and/or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the "Company" for the purposes of this Agreement), but shall not
otherwise be assignable or delegable by the Company.
(b) This Agreement shall insure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Section 8(a) hereof. Without limiting the generality of the
foregoing, the Executive's right to receive payments hereunder shall not be
assignable or transferable, whether by
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<PAGE>
pledge, creation of a security interest or otherwise, other than by a transfer
by his will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 8(c), the Company
shall have no liability to pay to the purported assignee or transferee any
amount so attempted to be assigned or transferred.
(d) The Company and the Executive recognize that each party will
have no adequate remedy at law for any material breach by the other of any of
the agreements contained herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent that the other shall be
entitled to a decree of specific performance, mandamus or other appropriate
remedy to enforce performance of this Agreement.
9. Notice. For all purposes of this Agreement, all communications
provided for herein shall be in writing and shall be deemed to have been duly
given when delivered or five business days after having been mailed by United
States registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company (to the attention of the Secretary of the Company) at
its principal executive office and to the Executive at his principal residence,
or to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
10. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
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<PAGE>
the State of Ohio, without giving effect to the principles of conflict of laws
of such State.
11. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance with
any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, expressed or implied with respect to the subject matter
hereof have been made by either party which are not set forth expressly in this
Agreement.
12. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same agreement.
14. Employment Rights. Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or the Executive to
have the Executive continue as an officer or assistant officer of the Company or
to remain in the employment of the Company prior to any Change in Control;
provided, however, that any termination of employment of the Executive or
removal of the Executive as an
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<PAGE>
elected officer or assistant officer of the Company following the commencement
of any discussion with or communication from a third person that ultimately
results in a Change in Control shall be deemed to be a termination or removal of
the Executive after a Change in Control for purposes of this Agreement.
15. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
16. Competitive Activity. For purposes of this Agreement, the term
"Competitive Activity" shall mean the Executive's participation, without the
written consent of an officer of the Company, in the management of any business
enterprise if such enterprise engages in substantial and direct competition with
the Company and such enterprise's sales of any product or service competitive
with any product or service of the Company amounted to 25% of such enterprise's
net sales for its most recently completed fiscal year and if the Company's net
sales of said product or service amounted to 25% of the Company's net sales for
its most recently completed fiscal year. "Competitive Activity" shall not
include (i) the mere ownership of securities in any enterprise and exercise of
rights appurtenant thereto or (ii) participation in management of any enterprise
or business operation thereof other than in connection with the competitive
operation of such enterprise.
17. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur the expenses associated with the enforcement
of his rights under this Agreement by litigation or
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<PAGE>
other legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to the Executive hereunder.
Accordingly, if it should appear to the Executive that the Company has failed to
comply with any of its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare the Agreement void or
unenforceable or institutes any litigation designed to deny, or to recover from
the Executive the benefits intended to be provided to the Executive hereunder,
the Company irrevocably authorizes the Executive from time to time to retain
counsel of his choice, at the expense of the Company as hereafter provided, to
represent the Executive in connection with the initiation or defense of any
litigation or other legal action relating thereto, whether by or against the
Company or any Director, officer, shareholder or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and any such counsel, the
Company irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist between the
Executive and such counsel. The Company shall pay or cause to be paid and be
solely responsible for any and all attorneys' and related fees and expenses
incurred by the Executive (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or any
person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
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<PAGE>
18. Prior Agreement. This Agreement amends and restates in its entirety
the Employment Continuation Agreement, dated _____________, 19__ between the
Company and the Executive.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first set forth above.
TRW INC.
By _____________________________
William S. Kiser
Chairman of the Compensation
and Stock Option Committee of
the Directors of TRW Inc.
__________________________________
Executive
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<PAGE>
<PAGE>
EXHIBIT 10(l)
December 11, 1995
Mr. Chester O. Macey
2155 Edgeview
Hudson, Ohio 44236
Dear Ches:
This letter will confirm our understanding relating to your consulting agreement
with TRW. The attached terms and conditions, together with this letter,
constitute our "Agreement."
We will request your consulting services and advice primarily for the Steering,
Suspension & Engine Group, with special emphasis on Project ELITE. The timing
and extent of your activities will be flexible; however, you will not be
obligated to devote more than 25 percent of your time in any year to such
services. Your consulting services will be rendered at such times and places as
are mutually satisfactory and TRW will have no control over any reasonable
manner or methods used by you in rendering such services.
Our arrangement will become effective on January 1, 1996 and will continue for
two years, terminating on December 31, 1997. The Agreement may be terminated by
either of us in accordance with the terms and conditions set forth in the
attached Exhibit A.
As compensation for your services as a Consultant, TRW will pay to you $100,000
per year, to be paid in January of each year.
TRW will also reimburse you for first-class airfare and all other reasonable
out-of-pocket travel, entertainment, telephone and other business expenses
incurred by you in performing your duties. Receipts for such expenses,
accompanied by an expense report substantially the same as the TRW expense
report form with which you are familiar should be submitted to me for processing
and approval. For the convenience of TRW, during the term of this Agreement, we
will also provide or reimburse you for required secretarial and other
appropriate services.
-1-
<PAGE>
If you agree to be bound by the terms of this Agreement, please sign at the
bottom of this letter and initial each page of the attached terms and conditions
and return them to me. Please keep a copy of the letter and the terms and
conditions for your records.
Sincerely,
/s/ Peter S. Hellman
- -----------------------
Peter S. Hellman
ACCEPTED AND AGREED:
/s/ Chester O. Macey
- ------------------------
Chester O. Macey
Date: December 18, 1995
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<PAGE>
EXHIBIT A
TERMS AND CONDITIONS
I. CONFIDENTIAL INFORMATION
The term "TRW Confidential Information" refers to all data, reports,
drawings, tapes, formulas, interpretations, forecasts, business plans and
analyses, records, trade secrets, customer lists, documents, proposals,
information regarding products, pricing, terms of sale, processes, research and
development, apparatus and application methods and all other information
reflecting upon or concerning TRW Inc., its subsidiaries or affiliates
(hereinafter referred to as "TRW") that TRW protects against unrestricted
disclosure to others, are not openly communicated or made accessible by TRW to
third parties and that Consultant obtains from TRW, its employees, subsidiaries
or affiliates, or otherwise acquires while engaged hereunder, including
information of a third party as to which TRW has a nondisclosure obligation.
Additionally, TRW Confidential Information will include any and all reports to
TRW made by Contractor hereunder or the contents thereof. In view of the
sensitive information to which Consultant will have access during Consultant's
engagement hereunder, any information reflecting upon or concerning TRW and
known, communicated or accessible to Consultant shall be deemed to be TRW
Confidential Information unless such information has been published by TRW in
publicly available documents.
Such TRW Confidential Information includes, but is not limited to, secret
or confidential matters (a) of a technical nature, (b) of a business nature and
(c) of either nature pertaining to future development. Consultant:
(a) agrees that TRW Confidential Information is the sole property of TRW
and that such TRW Confidential Information shall be used only in
providing consulting services hereunder for TRW;
(b) will hold the TRW Confidential Information in confidence and not
disclose it in any manner whatsoever, in whole or in part, to any
person except to employees of TRW, or to employees, subcontractors or
representatives of Consultant who need to know in order to perform
their duties and who agree in writing to use the Confidential
Information only to assist Consultant in performance of Consultant's
duties hereunder;
(c) will take or cause to be taken all reasonable precautions to prevent
the disclosure or communication of TRW Confidential Information to
third parties;
Initialed PSH/COM
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<PAGE>
(d) agrees that each reproduction, duplication, or copy of any portion of
TRW Confidential Information will be deemed TRW Confidential
Information for all purposes hereunder; and
(e) will, upon expiration or termination of the Agreement, discontinue all
use of TRW Confidential Information and return all documents
containing TRW Confidential Information to TRW.
In the event that Consultant or its employees, subcontractors, or
representatives receives a request to disclose all or any part of the TRW
Confidential Information under the terms of a valid and effective subpoena or
order issued by a court of competent jurisdiction or by a governmental body,
Consultant shall
1. As soon as possible upon receipt, notify TRW of the existence, terms
and circumstances surrounding such a request, so that it may seek an
appropriate protective order and/or waive Consultant's compliance with
the provisions of this Agreement; and
2. If disclosure of such TRW Confidential Information is required in the
opinion of Consultant's counsel, cooperate with TRW in obtaining
reliable assurances that confidential treatment will be accorded to
the disclosed TRW Confidential Information.
II. INVENTIONS
Consultant shall disclose promptly to TRW all ideas, inventions,
discoveries or improvements, whether or not patentable, which were or are
conceived or first reduced to practice by Consultant, whether solely or jointly
with employees of TRW, its subsidiaries or affiliates, in the course of
performing work hereunder or as a result of knowledge acquired while performing
services under this Agreement ("TRW Inventions"). Consultant agrees that all
TRW Inventions shall be the sole property of TRW. During and subsequent to the
term of this Agreement, Consultant will execute and deliver to TRW all documents
and take such other action as may be reasonably required by TRW to assist TRW in
obtaining patents in the United States and foreign countries and in vesting
title thereto in TRW for said TRW Inventions. At TRW's request and expense,
Consultant shall cooperate with TRW and do all things reasonably and lawfully
appropriate to assist TRW, or its successors, assigns and nominees, to obtain
and enforce patents relating to such TRW Inventions.
Initialed PSH/COM
-4-
<PAGE>
III. COPYRIGHTS
Neither Consultant nor any of Consultant's employees or independent
contractors shall knowingly incorporate in any work prepared under this
Agreement any copyrighted or proprietary material of TRW or any other person.
Further, any work of authorship created under this Agreement shall constitute a
"work made for hire", when so defined by the Copyright Act, and as to any work
not so defined, Consultant hereby transfers, and shall cause its employees to
transfer, to TRW any and all right, title and interest Consultant may have in
and to the copyright in such work for the entire term of the copyright. No
rights are reserved to Consultant in any work prepared under this Agreement.
IV. LICENSE
Consultant hereby grants to TRW a fully paid-up, nonexclusive and perpetual
right and license to use any and all of Consultant's know-how and trade secrets
which are necessary to the implementation of work by TRW pursuant to the reports
and recommendations made by Consultant.
V. CLASSIFIED MATERIAL
TRW shall advise Consultant which information or items provided to
Consultant constitute classified material, and Consultant shall comply with all
security requirements imposed by the United States Government or TRW. If it
becomes necessary for Consultant to store classified material at Consultant's
place of work, other than TRW premises, a facility clearance shall be required.
In that event, Consultant shall enter into a security agreement with the
applicable Government agency and maintain a system of security controls in
accordance with such security agreement. All such classified material shall be
promptly returned to TRW on request or upon termination of the security
agreement or this Agreement, whichever first occurs.
VI. NO CONFLICT
Except with the prior written approval of TRW after full disclosure of all
relevant facts, Consultant shall refrain from accepting work, engagements or
appointments from any third party which could conflict with, or impede an
unbiased performance of, Consultant's work hereunder or the protection of TRW
Confidential Information.
VII. COMPLIANCE
Consultant warrants that Consultant has the right to enter into this
Agreement and that performance of the work specified shall not cause Consultant
to be in violation of any federal, state or local law or regulation, or any
Intitaled PSH/COM
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<PAGE>
contractual agreement entered into by the Consultant. Consultant shall comply
with TRW's policies, directives and standards, including without limitation
TRW's standards regarding legal and ethical conduct and government contracting
and with all applicable federal, state and local laws and regulations.
Consultant shall file all tax returns and reports required to be filed pursuant
to law.
VIII. TERMINATION
This Agreement may be terminated by TRW or Consultant in whole or in part
upon 15 days' prior written notice. This Agreement will terminate forthwith
upon receipt of written notice from TRW if Consultant is unable to perform
Consultant's duties hereunder for a period of thirty consecutive days. Payment
shall be made for services and expenses rendered or incurred through the date of
termination. Advance payments shall be prorated through the termination date.
The covenants set forth in these Terms and Conditions shall survive the
termination of this Agreement.
IX. FORCE MAJEURE
Neither party shall incur liability to the other party on account of any
loss or damage resulting from any delay or failure to perform any part of this
Agreement where such delay or failure was caused in whole or in part by events,
occurrences or causes beyond the reasonable control of such party.
X. RECORDS
Consultant shall maintain a written record of all work performed and data
generated in the course of performance under this Agreement and shall prepare a
written summary of all work performed hereunder. Such written material shall be
the sole property of TRW and shall be made available on request. TRW shall have
the right to request preliminary reports from Consultant which represent the
findings and conclusions of Consultant based on the information which exists at
that time. Upon completion of each specific project or termination of this
Agreement, Consultant shall, if requested by TRW, promptly furnish TRW a
complete report, together with all supporting contract data.
XI. CHANGES
TRW may order changes in the description of services to be performed by
Consultant. If Consultant believes that any change requested will require
additional compensation to Consultant or will adversely affect the schedule for
rendering services, before proceeding with any work on the change, Consultant
will so advise TRW and thereafter Consultant will not proceed with any such
change until Consultant has received written authorization from TRW to do so.
Initialed PSH/COM
-6-
<PAGE>
This Agreement may not be amended, modified or otherwise changed except by an
instrument in writing signed by TRW and Consultant.
XII. INDEPENDENT CONTRACTOR
Consultant agrees that in the performance of this Agreement, Consultant
shall act as an independent contractor, and not as an employee of TRW, and all
of Consultant's agents and employees shall be subject solely to the control,
supervision and authority of Consultant. Consultant understands and agrees that
TRW will not cover Consultant or Consultant's employees or agents with Worker's
Compensation, Unemployment Insurance, State Disability Insurance, public
liability insurance or other benefits that may be available to employees of TRW.
Consultant shall refrain from any representation that Consultant is an employee,
agent or legal representative of TRW, or from incurring liabilities or
obligations of any kind in the name, or on behalf, of TRW.
It is agreed that (a) Consultant shall be responsible for Social Security
taxes, if any, which may be applicable and for any other applicable fees or
taxes (federal, state or local) which may be required; and (b) Consultant and
Consultant's employees, agents, heirs, successors and assigns shall not be
entitled, by virtue of any work done under this Agreement, to any benefits under
any medical or travel accident insurance, pension, sick leave, life insurance,
vacation, or disability, or other employees' benefit plan or plans maintained by
TRW for its employees.
XIII. INDEMNIFICATION
TRW agrees to indemnify and hold Consultant harmless from and against any
losses, claims, damages, liabilities, or actions related to or arising out of
this engagement and Consultant's role in connection therewith, and will
reimburse Consultant for all expenses (including reasonable counsel fees)
incurred by Consultant in connection with investigating, preparing or defending
any such action or claim, whether or not in connection with pending or
threatened litigation in which Consultant is a party, if Consultant acted in
good faith and in a manner Consultant reasonably believed to be in or not
opposed to the best interests of TRW and, with respect to any criminal action or
proceeding, had no reasonable cause to believe Consultant's conduct was
unlawful.
If any action or proceeding is brought against Consultant in respect of
which indemnity may be sought against TRW pursuant hereto, Consultant shall
promptly notify TRW in writing of the commencement of such action or proceeding,
but the omission so to notify TRW shall not relieve TRW from any other
obligation or liability which TRW may have to Consultant otherwise than under
this Agreement or with respect to any other action or proceeding. In case any
such action or proceeding shall be brought against Consultant, TRW shall be
entitled to participate in such action or proceeding, and, after a written
notice from TRW to Consultant, to assume the defense of such action or
proceeding
Initialed PSH/COM
-7-
<PAGE>
with counsel of TRW's choice at its expense (in which case TRW shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by Consultant); provided, however, that such counsel shall be
reasonably satisfactory to Consultant in the exercise of Consultant's reasonable
judgment.
Notwithstanding TRW's election to assume the defense of such action or
proceeding, Consultant shall have the right to employ separate counsel and to
participate in the defense of such action or proceeding. TRW shall bear the
reasonable fees, costs and expenses of one such separate counsel (and shall pay
such fees, costs and expenses at least quarterly) if TRW approves in advance the
separate counsel selected by Consultant and if: (i) the use of counsel chosen
by TRW to represent Consultant would present such counsel with a conflict of
interest; (ii) the defendants in, or targets of, any such action or proceeding
include both Consultant and TRW, and, upon advice of counsel, Consultant shall
have reasonably concluded that there may be legal defenses available to
Consultant which are materially different from those available to TRW (in which
case TRW shall not have the right to direct the defense of such action or
proceeding on behalf of Consultant); (iii) TRW shall not have employed counsel
reasonably satisfactory to Consultant in the exercise of reasonable judgment to
represent Consultant within a reasonable time after notice of the institution of
such action or proceeding; or (iv) TRW shall authorize Consultant to employ
separate counsel at TRW's expense.
TRW and Consultant understand that the indemnity provisions contained in
this Agreement shall be in addition to any and all other rights and remedies
which the parties may have at law or in equity or otherwise, including, but not
limited to, any right of contribution.
Notwithstanding anything contained herein to the contrary, it is the
intention of TRW and Consultant that the indemnification provided herein by TRW
to Consultant shall not be more than that provided to a presently serving
elected officer of TRW Inc.
Consultant hereby agrees to indemnify, defend and save TRW, its officers,
directors, employees and agents harmless from and against any expense, claim,
action, loss or liability to any third party that results from or is caused by,
directly or indirectly, Consultant's bad faith, willful misconduct, recklessness
or unlawful conduct or the bad faith, willful misconduct, recklessness or
unlawful conduct of Consultant's employees, agents, subcontractors, suppliers or
other third parties utilized in connection with Consultant's performance. In
agreeing to indemnify TRW under this section, Consultant expressly waives any
immunity from liability Consultant may be entitled to under Section 35, Article
II of the Ohio Constitution and Ohio Revised Code Section 4123.74 which provides
immunity to complying employers from actions for damages by employees injured in
the course of or arising out of their employment. Nothing in this
indemnification shall limit the protection otherwise available to TRW employees
or other persons performing
Initialed PSH/COM
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<PAGE>
emergency first-aid services under Ohio Revised Code Sections 2305.23 and
4731.90.
XIV. NONDISCRIMINATION
Consultant: (a) will not discriminate against any applicant for employment
on the basis of race, color, non-job related handicap, veteran status, religion,
sex, national origin or age; (b) will take affirmative action to ensure that
applicants are employed and employees are treated during employment without
regard to their race, color, religion, sex, national origin, veteran status or
non-job related handicap; and (c) will otherwise at all times comply with all
applicable federal, state and local laws, rules, regulations, orders and
ordinances relating to equal employment opportunity. Without limiting the
generality of the foregoing, Consultant shall at all times comply fully with the
provisions of the following regulations and Executive Orders, as the same may be
amended or modified from time to time, and all rules and regulations promulgated
thereunder or relating thereto or to such Executive Orders, as so amended or
modified, such rules and regulations being herein incorporated by this
reference: (i) Executive Order 11246, as amended by Executive Order 11375
(relating to nondiscrimination in employment by Government contracts and trade
contractors); (ii) Executive Order 11625 (relating to utilization of minority
business enterprises); (iii) Executive Order 11701 and 41 CFR 60-250 (relating
to employment of certain veterans); (iv) Executive Order 11758 and 41 CFR 60-
741:4 (relating to employment of handicapped persons); and (v) Executive
Order 11141 (relating to nondiscrimination on the basis of age). Consultant
shall, upon request of TRW, provide TRW with such certifications and undertake
such other actions as TRW may deem appropriate to verify and assure Consultant's
compliance with such Executive Orders and regulations.
XV. PUBLICITY
Notwithstanding any provision to the contrary herein or otherwise, except
as TRW grants prior written approval, Consultant shall not publicize the
existence or terms of, or work performed under, this Agreement.
XVI. ASSIGNMENT
This Agreement shall not be assignable by either party without the prior
written consent of the other party, except that TRW may assign this Agreement
without such consent with respect to any corporate reorganization, merger,
transfer of assets or similar transactions pursuant to which all of TRW's rights
and obligations hereunder are transferred by operation of law or otherwise.
Initialed PSH/COM
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<PAGE>
XVII. ENTIRE AGREEMENT
This Agreement, including the engagement letter and these terms and
conditions, sets forth the entire understanding between the parties relating to
the subject matter contained herein and merges all prior discussions between
them. Neither party shall be bound by any condition, warranty, or
representation other than as expressly stated in this Agreement or as
subsequently set forth in writing signed by the parties. If prior agreements,
letters or proposals relating to the subject matter of this Agreement are
inconsistent with the terms and conditions of the Agreement, this Agreement
shall govern.
Initialed PSH/COM
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<PAGE>
EXHIBIT 10(m)
January 16, 1996
Gordon Williams
Dear Gordon:
This letter agreement confirms our understanding relating to your
engagement by TRW Inc. as a consultant to TRW to provide the
services described in paragraph 1 below. The terms and
conditions that follow constitute the entire agreement between
you and TRW and are not to be modified in any way except by a
written document executed by both parties.
1. STATEMENT OF WORK
You will act as a Consultant to assist the EAS/EPHS team in
the development of the EAS/EPHS business strategy. You will
report directly to George Thomas, Vice President and General
Manager of Passenger Car Steering Systems.
2. COMPENSATION
As sole compensation for your services hereunder, TRW will
pay you a fee of U.S.$1,000 per day. Partial days will be
compensated on a pro rata basis. You will invoice TRW for such
fees on a monthly basis.
TRW will reimburse you for all normal travel (first class),
food, lodging and other incidental expenses incurred in
performing your work hereunder upon receipt by my office of
standard TRW expense report forms and other documentation as
required by TRW's expense reimbursement policy.
All travel, including but not limited to airline travel and
car rentals, is to be arranged through TRW's Travel Services
Department. You will be required to adhere to TRW's travel
policy, a copy of which has been provided to you.
Initialed RGW
----
<PAGE>
Consultant Agreement
January 16, 1996
Page 2
3. TERM AND TERMINATION
The term of this agreement will commence as of January 8,
1996, and may be terminated by TRW at any time by written notice
to you. This agreement shall also terminate immediately upon
your death. Payment shall be made by TRW for services and
expenses rendered or incurred through the date of termination.
4. CONFIDENTIAL INFORMATION
The term "TRW Confidential Information" refers to all data,
reports, drawings, tapes, formulas, interpretations, forecasts,
business plans and analyses, records, trade secrets, customer
lists, documents, proposals, information regarding products,
pricing, terms of sale, processes, research and development,
apparatus and application methods and all other information
reflecting upon or concerning TRW that are not openly
communicated or made accessible by TRW to third parties and that
you obtain from TRW, its employees, subsidiaries and affiliates,
or that you otherwise acquire while engaged hereunder, including
information of a third party as to which TRW has a nondisclosure
obligation. Additionally, TRW Confidential Information shall
include any and all reports to TRW made by you hereunder or the
contents thereof. In view of the sensitive information to which
you will have access during your engagement hereunder, any
information reflecting upon or concerning TRW and known,
communicated or accessible to you will also be deemed to be TRW
Confidential Information unless such information has been
published by TRW in publicly available documents.
You:
(a) agree that TRW Confidential Information is the sole property
of TRW and that such TRW Confidential Information will be used
only in providing consulting services hereunder for TRW;
(b) will hold the TRW Confidential Information in confidence and
not disclose it in any manner whatsoever, in whole or in part,
to any person except to employees of TRW;
(c) will take or cause to be taken all reasonable precautions to
prevent the disclosure or communication of TRW Confidential
Information to third parties;
Initialed RGW
----
<PAGE>
Consultant Agreement
January 16, 1996
Page 3
(d) agree that each reproduction, duplication, or copy of any
portion of TRW Confidential Information shall be deemed TRW
Confidential Information for all purposes hereunder; and
(e) will, upon expiration or termination of this letter
agreement, discontinue all use of TRW Confidential
Information and return all documents containing TRW
Confidential Information to TRW.
5. NO CONFLICT
Except with the prior written approval of TRW after full
disclosure of all relevant facts, you will refrain from accepting
work, engagements or appointments from any third party that could
conflict with, or impede an unbiased performance of, your work
hereunder or the protection of TRW Confidential Information.
6. COMPLIANCE
You warrant that you have the right to enter into this
letter agreement and that performance of the work specified
herein will not cause you to be in violation of any federal,
state or local law or regulation, or any contractual agreement
entered into by you. You will comply with TRW's policies,
directives and standards and with all applicable federal, state
and local laws and regulations.
7. FORCE MAJEURE
Neither party will incur liability to the other party on
account of any loss or damage resulting from any delay or failure
to perform any part of their obligations hereunder where such
delay or failure was caused in whole or in part by events,
occurrences, or causes beyond the reasonable control of such
party.
8. INDEPENDENT CONTRACTOR
You agree that in your performance of this letter agreement
you will act as an independent contractor, and not as an employee
of TRW. You understand and agree that TRW will not cover you
with workers' compensation, unemployment insurance, state
disability insurance, public liability insurance
Initialed RGW
----
<PAGE>
Consultant Agreement
January 16, 1996
Page 4
or other benefits that may be available to employees of TRW. You will
refrain from any representation that you are an employee of TRW, and
from incurring liabilities or obligations of any kind in the name, or
on behalf, of TRW.
It is agreed that (a) you will be responsible for Social
Security taxes, if any, which may be applicable and for any other
applicable fees or taxes (federal, state or local) which may be
required or levied upon any payment made to or on behalf of you
hereunder; and (b) you and your heirs shall not be entitled, by
virtue of any work done under this letter agreement, to any
benefits under any medical or travel accident insurance, pension,
sick leave, life insurance, vacation, or disability, or other
employees' benefit plan or plans maintained by TRW for its
employees.
9. PUBLICITY
Except as TRW grants prior written approval, you will not
publicize the existence or terms of, or work performed under,
this letter agreement.
10. ASSIGNMENT
Neither this letter agreement or any of the rights under the
agreement is assignable by you or TRW.
11. ENTIRE AGREEMENT
This letter agreement states the entire understanding
between you and TRW relating to the subject matter of the
agreement. Neither you nor TRW shall be bound by any condition,
warranty, or representation other than as expressly stated herein
or as subsequently stated in a writing signed by the parties.
Any prior agreements (whether oral or written), letters or
proposals relating to the same subject matter are hereby merged
into this letter agreement and the rights and obligations of the
parties, wherever and however arising, will be determined solely
under the terms of this letter agreement.
12. LIMITATION OF LIABILITY
TRW's sole financial obligation under this letter agreement
shall be the payment of compensation and expense reimbursements
as provided for herein. In no event will TRW be liable to you
for any loss of profits or incidental or
Initialed RGW
----
<PAGE>
Consultant Agreement
January 16, 1996
Page 5
consequential damages, however caused, whether by TRW's sole or
concurrent negligence or otherwise.
13. SURVIVAL
The parties' obligations contained in paragraphs 4, 9, 12
and 13 hereof are permanent and survive the termination of this
letter agreement.
14. GOVERNING LAWS
All questions concerning the validity and operation of this
letter agreement and the performance of the obligations imposed
upon the parties hereunder will be governed by the substantive
laws of the State of Ohio, U.S.A., applicable to agreements made
and to be performed wholly within such jurisdiction.
Please confirm your agreement to the terms stated above by
signing and dating each duplicate original of this letter
agreement and returning a signed copy to me.
Sincerely,
TRW INC.
By: /s/ James S. Remick
---------------------
James S. Remick
Executive Vice President
Confirmed and agreed this 17th day
of January, 1996
/s/ Gordon Williams
----------------
Gordon Williams
Initialed RGW
----
<PAGE>
EXHIBIT 10(s)
AMENDED AND RESTATED DECEMBER 13, 1995
TRW INC.
DEFERRED COMPENSATION PLAN
THIS AMENDED AND RESTATED PLAN is established by TRW Inc. ("TRW") effective
July 28, 1993, and as amended effective August 1, 1994 and August 1, 1995, for
the benefit of certain employees of the Corporation in executive, managerial or
professional capacities so as to enhance the Corporation's ability to attract
and retain outstanding employees who are expected to contribute to its success.
It shall remain in effect, as it may be amended from time to time, until
termination as provided in Article VII of the Plan.
ARTICLE I
DEFINITIONS
For the purposes of the Plan, the following words and phrases shall mean:
1.1 ACCOUNT. The bookkeeping or accounting records maintained (having and
requiring no segregation or holding of any assets) by TRW pursuant to Article IV
with respect to and resulting from a Participant's Deferral Election.
1.2 AFFILIATE.
(a) Any corporation incorporated under the laws of one of the United
States of America of which TRW owns, directly or indirectly, in excess of
fifty percent (50%) of the combined voting power of all classes of stock or
in excess of fifty percent (50%) of the total value of the shares of all
classes of stock (all within the meaning of Section 1563 of the Code);
(b) any partnership or other business entity organized under such
laws, in which TRW owns, directly or indirectly, (i) in excess of fifty
percent (50%) of the total capital or profits interest of such partnership,
or (ii) in excess of fifty percent (50%) or more of the total value of such
other business entity (all within the meaning of Section 414(c) of the
Code); and
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(c) any other company designated as an Affiliate by the Committee.
1.3 BENEFICIARY. The person, persons or entity entitled under Article VI
to receive any Plan Benefits payable after a Participant's death.
1.4 CODE. The Internal Revenue Code of 1986, as amended. References in
the Plan to Sections of the Code are to such Sections as in effect on the
Effective Date.
1.5 COMMITTEE. The Compensation and Stock Option Committee of the
Directors.
1.6 CORPORATION. TRW or an Affiliate of TRW.
1.7 DATE OF DEPOSIT. The Determination Date immediately preceding the
date that, but for the Deferral Election, the Incentive Compensation would be
paid.
1.8 DEFERRAL ELECTION. An election pursuant to Article III by an Eligible
Employee to defer receipt of all or part of his Incentive Compensation.
1.9 DEFERRED COMPENSATION. The portion of Incentive Compensation which an
Eligible Employee elects to defer pursuant to a Participation Agreement.
1.10 DETERMINATION DATE. The last day of each calendar quarter; that is
March 31, June 30, September 30 and December 31.
1.11 DIRECTORS. The Directors of TRW.
1.12 EFFECTIVE DATE. July 28, 1993, the effective date of the
establishment of the Plan.
1.13 ELIGIBLE EMPLOYEE. A person (who must be a U.S. citizen or a U.S.
resident alien) in the full time active salary employ of the Corporation who is
employed at Operational Incentive Plan Level III or above at the end of the year
for which a Deferral Election applies, or who retires after executing a valid
deferral election in the year the retirement is effective.
1.14 EXECUTIVE OFFICER. Any Eligible Employee who is an "executive
officer" of TRW for the purposes of Rule 3b-7 under the Securities Exchange Act
of 1934.
1.15 FINANCIAL HARDSHIP. A severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
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of a dependent (as defined in Section 152(a) of the Code) of the Participant,
loss of the Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstance arising as a result of events
beyond the control of the Participant. In case of the Participant's death, the
word "Beneficiary or other person or entity entitled to receive a Plan Benefit"
shall be substituted for the word "Participant" wherever the latter appears in
this Section 1.15.
1.16 HIGHLY PAID EMPLOYEE. A person in the full time active salary employ
of the Corporation who (i) will earn, in salary and in bonus (assuming full year
employment and no deferral of compensation), at least $150,000 (or such greater
sum if the qualified benefit plan limitation is increased by the Internal
Revenue Service) in the year of the Deferral Election or (ii) is already a
participant in TRW's supplemental nonqualified benefit plans or (iii) is a U.S.
citizen or U.S. resident alien who is Operational Incentive Plan Level III or
above and is employed by either TRW Overseas Inc. or TRW Systems Overseas Inc.
1.17 INCENTIVE BONUS. A cash award payable to an Eligible Employee
under TRW's Operational Incentive Plan (or similar compensation program that
replaces the Operational Incentive Plan).
1.18 INCENTIVE COMPENSATION. Any cash award payable to an Eligible
Employee as an Incentive Bonus or, if applicable, a Strategic Grant that, but
for a Deferral Election under the Plan, would be paid to the Eligible Employee
and considered to be "wages" for purposes of United States federal income tax
withholding (or other appropriate jurisdiction).
1.19 INTEREST RATE. One-quarter of the annual interest rate, equal to 110%
of the applicable long-term federal rate as published by the Internal Revenue
Service pursuant to Code Section 1274(d) and in effect on the first business day
of each calendar quarter.
1.20 PARTICIPANT. An Eligible Employee who has elected to participate in
the Plan and has executed and filed with TRW a Participation Agreement as
provided in Article III; provided, however, that such term shall include a
person who no longer has an effective Deferral Election so long as he retains,
under the Plan, an interest in an Account under the Plan.
1.21 PARTICIPANT AGREEMENT. An agreement between TRW and a Participant
setting forth the Participant's Deferral Election.
1.22 PLAN. This Deferred Compensation Plan, as it may be amended from time
to time.
1.23 PLAN BENEFIT. The benefit payable to a Participant in accordance with
Article V hereof.
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1.24 PLAN YEAR. Each of the twelve (12) month periods ending December 31
and occurring while the Plan remains in effect. The term "Plan Year" shall
also include the period beginning on the Effective Date and ending December 31,
1993, and any period of less than twelve (12) months beginning January 1 and
ending on the date the Plan is terminated.
1.25 PRE-RETIREMENT PAYMENT SUB-ACCOUNT. A Sub-Account of a Participant's
Account, established pursuant to Section 4.3, to which there shall be credited
Deferred Compensation under a single Deferral Election, and all interest accrued
thereon, as to which the Participant has elected payment of his Plan Benefit in
either five years or ten years from the Date of Deposit.
1.26 RETIREMENT PAYMENT SUB-ACCOUNT. A Sub-Account of a Participant's
Account, established pursuant to Section 4.3, to which there shall be credited
Deferred Compensation under all Deferral Elections, and all interest accrued
thereon, as to which the Plan Benefit is intended to be payable following
retirement of the Participant from the Corporation.
1.27 SPECIAL COMMITTEE. The committee composed of the head of Human
Resources, the General Counsel and the Chief Financial Officer of TRW, which
committee reviews and acts upon the requests of Participants (other than
Participants who are Executive Officers, whose requests are acted upon by the
Committee) to receive early payout as a result of a Financial Hardship or to
change payout upon retirement.
1.28 STRATEGIC GRANT. A cash award payable to an Eligible Employee
pursuant to TRW's Strategic Incentive Program (or similar long-term compensation
plan that replaces the Strategic Incentive Program).
1.29 SUB-ACCOUNT. A Pre-Retirement Payment Sub-Account or a Retirement
Payment Sub-Account.
1.30 TERMINATION OF EMPLOYMENT. Any severance of a Participant from full-
time active salaried employment by the Corporation for any reason (other than a
transfer of employment from TRW to an Affiliate, from an Affiliate to another
Affiliate or from an Affiliate to TRW).
1.31 TRW. TRW Inc., an Ohio corporation.
ARTICLE II
ADMINISTRATION
2.1 ADMINISTRATORS. The Plan shall be administered by the Committee, the
Special Committee and the head of Human Resources, and certain decisions
concerning Financial Hardship and change in payment upon
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retirement may be made by the Special Committee. Except as otherwise provided
herein, decisions of the Committee, the head of Human Resources or the Special
Committee shall be final and binding on all parties.
2.2 COMMITTEE. The Committee shall have the authority (a) to make, amend,
interpret and enforce all rules and regulations for the administration of the
Plan and (b) to decide all questions, including interpretation of the Plan as
may arise in connection with the Plan insofar as it is applicable to
Participants (i) who are Executive Officers or (ii) with respect to whom
questions are referred to the Committee by the head of Human Resources. A
majority of the members of the Committee shall constitute a quorum. The
Committee may act by a vote of a majority of a quorum at a meeting or by a
writing signed by a majority of the members of the Committee.
2.3 HUMAN RESOURCES. The head of Human Resources shall administer the
Plan in accordance with the terms of the Plan and the rules and regulations of
the Plan as established by the Committee. Consistent with the authorized
precedents and the rules and regulations authorized by the Committee, the head
of Human Resources shall have the authority to decide all questions, including
interpretations of the Plan, as may arise in connection with the Plan insofar as
it is applicable to Participants other than Executive Officers.
2.4 SPECIAL COMMITTEE. With regard to all Participants, other than
Participants who are Executive Officers, the Special Committee shall act upon
(i) written requests of Participants concerning early payout of some or all of
the Participant's Account balances as a result of Financial Hardship and (ii)
written requests of Participants to change the payout of a Participant's
Retirement Payment Sub-Account as provided by Section 5.1(b). The Special
Committee may act by a vote of the majority at a meeting or by a writing signed
by a majority of the members of the Special Committee.
2.5 FINANCIAL HARDSHIP AND RETIREMENT PAYOUT CHANGE REQUESTS. In order
for a request to be considered by the Special Committee (or, in the case of a
request as set forth in clauses (i) or (ii) of Section 2.4 by an Executive
Officer, the Committee), the requests must (i) be in writing and delivered to
the head of Human Resources, (ii) set forth whether the Participant is
requesting an early payout because of a Financial Hardship or a change of payout
upon retirement, (iii) set forth the reasons for such request, including in
detail the Financial Hardship or the circumstances that necessitate the change
of payout upon retirement, (iv) in the case of a request as a result of a
Financial Hardship set forth the amount of such Participant's Account that the
Participant wishes to be paid and the Sub-Accounts from which such early payout
shall be made and (v) in the case of a change of payout at retirement set forth
the manner in which the Participant wishes to receive payout (e.g., single sum
or in five annual installments). Compliance with the petition procedures set
forth in this Section
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2.5 does not insure that the request will be granted by the Special Committee
(or the Committee).
ARTICLE III
PARTICIPATION
3.1 PARTICIPATION.
(a) Subject to the limitations set forth in this Article III, any
person who is an Eligible Employee in the year for which the Incentive
Compensation deferred under a Deferral Elections under this Section 3.1 is
payable may participate in the Plan by executing and filing with the head
of Human Resources a Participation Agreement; provided, however, the
election to defer Incentive Bonus will not be effective unless the Eligible
Employee is also a Highly Paid Employee. The head of Human Resources shall
determine, in his sole discretion, which Eligible Employees are likely to
be Highly Paid Employees during the year in which the Deferral Election is
made. The head of Human Resources shall then notify Eligible Employees
whether their elections to defer Incentive Bonuses are effective.
(b) In each Participation Agreement, the Eligible Employee shall
specify the percentage or dollar amount of Incentive Bonus and the
percentage or the dollar amount of Strategic Grant in respect of a
specified TRW fiscal year to be deferred and the Eligible Employee shall
specify, subject to the limitations of Section 5.1, the form of Plan
Benefit (i.e., whether such benefits are intended to be paid following
retirement or five or ten years from the Date of Deposit). If the Eligible
Employee chooses to defer a dollar amount of the Incentive Bonus or the
Strategic Grant and to the extent that dollar amount specified exceeds the
eligible amount of the Incentive Bonus or the Strategic Grant, as
applicable, the amount actually deferred shall be eligible amount of the
Incentive Bonus or the Strategic Grant, as applicable. If the Eligible
Employee has chosen to have Deferred Compensation paid five or ten years
from the Date of Deposit, such payments shall be made as provided in
Section 5.1(d) below.
(c) Before September 30, 1993 with respect to 1993, and September 30
of each subsequent Plan Year with respect to each Plan Year thereafter,
each Eligible Employee who elects to become a Participant shall file with
the head of Human Resources a Participation Agreement specifying his
Deferral Election for any Incentive Compensation payable in respect of that
Plan Year and whether such Deferred Compensation is intended to be payable
the year following retirement or five or ten years from the Date of
Deposit.
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3.2 DEFERRAL ELECTIONS. Subject to the restrictions concerning deferral
of Incentive Bonus set forth in Section 3.1(a), any Eligible Employee may elect
to defer any percentage or dollar amount (but not both a percentage and dollar
amount, but an Eligible Employee can defer a specified dollar amount of one of
his Incentive Bonus and Strategic Grant and a percentage of the other) of each
of his Strategic Grant and his Incentive Bonus; provided, however, that, to the
extent that the Eligible Employee chooses to defer a percentage of his Incentive
Bonus and/or Strategic Bonus, each Deferral Election, to be effective, must
result in deferral of a minimum of 10% of the Eligible Employee's Incentive
Bonus and/or Strategic Grant (provided that an Eligible Employee may elect to
defer a portion of his Incentive Bonus and none of his Strategic Grant and vice
versa) and the Deferral Elections must be in increments of 5% for each of the
Strategic Grant and Incentive Bonus, which election percentages do not need to
be identical; further, provided, however, that, to the extent that the Eligible
Employee chooses to defer a specified amount of his Incentive Bonus and/or
Strategic Bonus, each Deferral Election, to be effective, must result in
deferral of a minimum of $10,000 of the Eligible Employee's Incentive Bonus
and/or Strategic Grant (provided that an Eligible Employee may elect to defer a
portion of his Incentive Bonus and none of his Strategic Grant and vice versa)
and the Deferral Elections must be in increments of $1,000 for each of the
Strategic Grant and Incentive Bonus, which election amounts do not need to be
identical.
3.3 MODIFICATION OF DEFERRAL ELECTION. By written notice to TRW, a
Deferral Election filed in any Plan Year may be modified or revoked at any time
prior to October 1 of such Plan Year. Thereafter, a Deferral Election specified
in a Participation Agreement shall be irrevocable, except that the Committee or
the Special Committee, as appropriate under Article II, may permit a Participant
at any time prior to the actual deferral of the Incentive Compensation to reduce
the designated percentage to be deferred upon a finding, based upon uniform
standards established by the Committee, that the Participant has suffered a
Financial Hardship.
ARTICLE IV
DEFERRED COMPENSATION
4.1 DEFERRED COMPENSATION. The amount of Incentive Compensation deferred
pursuant to a Deferral Election shall be withheld in a single sum at the time
such Incentive Compensation, but for a Deferral Election, would be paid.
4.2 WITHHOLDING OF TAXES AND SSP/BEP CONTRIBUTIONS. Any withholding of
taxes or other amounts which is required by any federal, state, or local law
shall be withheld from the Participant's remaining undeferred Incentive
Compensation, if any. If necessary in order to comply with any federal, state
or
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local law, the amount of Incentive Compensation deferred may be reduced by an
amount equal to any required withholding. Otherwise, such withholding may be
made from any of the Participant's other compensation payable by the
Corporation, or, at the election of the head of Human Resources, a Participant
may be permitted to pay to the Corporation the amount of any such required
withholding at or prior to the time such withholding would otherwise be required
to be made. In addition, the amount of Incentive Compensation deferred shall be
reduced by the amount of TRW Stock Savings Plan and Benefits Equalization Plan
contributions to be made by the Eligible Employee on account of such Incentive
Compensation.
4.3 ACCOUNTS. For recordkeeping purposes only, a separate Account shall
be established and maintained by TRW for each Participant to which his Deferred
Compensation and interest accrued thereon pursuant to Section 4.4 shall be
credited. Each such Account shall be divided into the following Sub-Accounts
for purposes of Section 5.1: (i) a Retirement Payment Sub-Account to which
there shall be credited all Incentive Compensation deferred (and all interest
thereon) pursuant to all Deferral Elections under which a Plan Benefit is
payable the year following retirement; and (ii) a separate Pre-Retirement
Payment Sub-Account for each Deferral Election under which the Participant has
elected that his Plan Benefit be payable five or ten years from the Date of
Deposit, to which the Incentive Compensation deferred (and all interest thereon)
pursuant to such Deferral Election shall be credited.
4.4 DETERMINATION OF ACCOUNT. The value of each Participant's Account as
of each Determination Date shall be the total of the Participant's Retirement
Payment and Pre-Retirement Payment Sub-Accounts. The value of each such Sub-
Account shall consist of (i) the balance of such Sub-Account as of the last
preceding Determination Date plus (ii) any Deferred Compensation credited to
such Sub-Account since the last preceding Determination Date, plus (iii)
interest in the amount determined by multiplying the average daily balance of
such Sub-Account during the three calendar months since the last preceding
Determination Date by the Interest Rate applicable to such three-month period,
less (iv) the amount of all Plan Benefits, if any, paid during the period since
the last preceding Determination Date. Interest, determined as provided in
(iii) above, shall be credited to each such Sub-Account as of the Determination
Date as of which such Sub-Account is valued.
4.5 STATEMENT OF ACCOUNTS. TRW shall submit to each Participant, within
one hundred twenty (120) days after the close of each Plan Year and at such
other times as determined by the Committee, a statement setting forth the total
balance of the Participant's Account, and the balance of each Sub-Account
thereof, as of the last day of such Plan Year and as of the last day of the
immediately preceding Plan Year, the Deferred Compensation and interest credited
to each Sub-Account during the Plan Year and the payments of the Plan Benefits
from each Sub-Account during the Plan Year.
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ARTICLE V
PLAN BENEFITS
5.1 PLAN BENEFITS PAYABLE ON TERMINATION OF EMPLOYMENT, FIVE YEARS FROM
DATE OF DEPOSIT OR TEN YEARS FROM DATE OF DEPOSIT.
(a) Subject to the provisions of Section 5.1(b) and except as
otherwise provided below, upon Termination of Employment a Participant
shall receive a Plan Benefit equal to the balance of his Account as of the
Determination Date immediately preceding such Termination of Employment,
plus the amount of any Deferred Compensation credited his Account after
such Determination Date. Such Plan Benefit shall be payable as a single
sum within a reasonable time following such Termination of Employment. In
addition, the Participant shall receive interest on the balance of his
Account for the period from such Determination Date to the date of payment
at a daily simple interest rate equivalent to the Interest Rate then in
effect. However, in the event that the Termination of Employment is the
result of a divestiture of the unit or operations of the Corporation where
the Participant worked prior to Termination of Employment and the
Participant obtains employment with the entity that acquired such unit or
operations, then the balance of such Participant's Retirement Payment Sub-
Account shall not be payable until such Participant commences receiving
retirement benefits from the Corporation and the balance of such
Participant's Pre-Retirement Payment Sub-Account shall not be payable until
such time as the Participant would have received payment in accordance with
the original Deferral Election had the Participant's employment with the
Corporation not been terminated. At such time, the amounts in such
Participant's Account shall be paid as set forth in Sections 5.1(b) and
5.1(e). Interest shall continue to be earned on such Participant's Account
following such Participant's Termination of Employment through payment in
full of the his or her Account.
(b) In the event that a Participant's Termination of Employment
occurs as a result of his retirement, the Participant shall receive the
Plan Benefit payable in respect of his Retirement Payment Sub-Accounts in
ten annual installments commencing in the year following the year that
Termination of Employment occurred; provided, however, that the Participant
can petition the Special Committee (or the Committee in the case of an
Executive Officer) at any time at least six months prior to retirement to
change such payment into five annual installments or a single sum; further
provided, that any such payment change approved by
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the Special Committee (or the Committee) shall not be effective until the
calendar year following the date of the payment change. In the event that
payment shall be made in a single sum, such payment shall be in accordance
with the procedures set forth in Section 5.1(a) above, but in no event in
the same calendar year as the year of any requested change and no earlier
than January 1 of the calendar year following the year that Termination of
Employment occurred. In the event that the payment shall be made in
installments, such payments shall be made in accordance with Section
5.1(e) below. If, at the time of retirement, the Participant has a credit
in a Pre-Retirement Payment Sub-Account, such Sub-Account balances shall be
paid in a single sum following retirement in accordance with the procedures
set forth in Section 5.1(a) above.
(c) In the event that a Participant's Termination of Employment
occurs because of his death, his Beneficiary or, if no designated
Beneficiary shall survive him, his estate shall receive the Plan Benefit in
the manner provided in Section 5.1(a); provided, however, that if the
Participant's Beneficiary designation shall result in all or any part of
his Plan Benefit passing to his surviving spouse or to an entity for the
benefit of his surviving spouse in such a way as to qualify for the marital
deduction under Section 2056 of the Code, and at the time of his death the
Participant was eligible to retire and had elected to receive his Plan
Benefits in his Retirement Payment Sub-Account in installments pursuant to
Section 5.1(b), payments from his Retirement Payment Sub-Account shall be
made to such surviving spouse or to such entity for the benefit of such
surviving spouse, as the case may be, in the manner provided in Section
5.1(b). Notwithstanding the foregoing, if such surviving spouse shall die
prior to complete distribution of all Plan Benefits, the balance then
remaining in such Retirement Payment Sub-Account shall be paid to the
estate of such surviving spouse or to such entity for the benefit of such
surviving spouse, as the case may be, in a single sum within a reasonable
time following such spouse's death.
(d) If the Participant has chosen in his Deferral Election to receive
payouts either five or ten years from the Date of Deposit (as opposed to
upon retirement from the Corporation), payments shall be made in a single
sum form from each Pre-Retirement Payment Sub-Account of the Participant on
or before February 15 of the year either five or ten years (depending upon
the applicable Deferral Election) following the applicable Date of Deposit;
provided, however, that if Termination of Employment has occurred prior to
payment, payment of the Participant's Plan Benefits shall be made as
provided in Section 5.1(a).
(e) If the payments from the Participant's Retirement Payment Sub-
Account are to be paid in installment form, such installments shall be paid
in either five or ten annual installments between February 1 and
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February 15 of each year in which an installment is to be made; provided,
however, that the initial installment payment will be made a reasonable
time following Termination of Employment (but no earlier than February 1 of
the calendar year following the year that Termination of Employment
occurred). Installment payments will commence in the year following the
Participant's Termination of Employment. The five year installment
payments shall be made as follows: in the first year in which a payment is
to be made, an amount equal to one-fifth of the balance of the Sub-Account
on December 31 immediately preceding the first payment shall be paid; in
the second year in which a payment is to be made, an amount equal to one-
fourth of the balance of the Sub-Account on December 31 immediately
preceding the second payment shall be paid; in the third year in which a
payment is to be made, an amount equal to one-third of the balance of the
Sub-Account on December 31 immediately preceding the third payment shall be
paid; in the fourth year in which a payment is to be made, an amount equal
to one-half of the balance of the Sub-Account on December 31 immediately
preceding the fourth payment shall be paid; and in the fifth year in which
a payment is to be made, an amount equal to the remaining balance of the
Sub-Account on December 31 immediately preceding the fifth payment shall be
paid. The ten installment payments shall be made as follows: in the first
year in which a payment is to be made, an amount equal to one-tenth of the
balance of the Sub-Account on the December 31 immediately preceding the
first payment shall be paid; in the second year in which a payment is to be
made, an amount equal to one-ninth of the balance of the Sub-Account on the
December 31 immediately preceding the second payment shall be paid; in the
third year in which a payment is to be made, an amount equal to one-eighth
of the balance of the Sub-Account on the December 31 immediately preceding
the third payment shall be paid; in the fourth year in which a payment is
to be made, an amount equal to one-seventh of the balance of the Sub-
Account on the December 31 immediately preceding the fourth payment shall
be paid; in the fifth year in which a payment is to be made, an amount
equal to one-sixth of the balance of the Sub-Account on the December 31
immediately preceding the fifth payment shall be paid; in the sixth year in
which a payment is to be made, an amount equal to one-fifth of the balance
of the Sub-Account on the December 31 immediately preceding the sixth
payment shall be paid; in the seventh year in which a payment is to be
made, an amount equal to one-fourth of the balance of the Sub-Account on
the December 31 immediately preceding the seventh payment shall be paid; in
the eighth year in which a payment is to be made, an amount equal to one-
third of the balance of the Sub-Account on the December 31 immediately
preceding the eighth payment shall be paid; in the ninth year in which a
payment is to be made, an amount equal to one-half of the balance of the
Sub-Account on the December 31 immediately preceding the ninth payment
shall be paid; and in the tenth year in which a payment is to be made, the
balance of the Sub-Account
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remaining on the December 31 immediately preceding the tenth payment shall
be paid. Interest on Retirement Payment Sub-Account from which installment
payments are made shall accrue until the December 31 immediately preceding
the payment of the tenth installment.
5.2 WITHDRAWAL OF PLAN BENEFIT. No Plan Benefit shall be payable prior to
the Participant's Termination of Employment other than in the form determined
pursuant to Section 5.1(d), except that the Committee or the Special Committee,
as appropriate under Article II, may permit a Participant or, after a
Participant's death, a Participant's Beneficiary or other person or entity
entitled to receive such Plan Benefit, to withdraw from the Participant's
Account an amount necessary to meet a Financial Hardship.
5.3 WITHHOLDING; PAYROLL TAXES. TRW shall withhold from Plan Benefits
payable under the Plan any taxes required to be withheld from an employee's
wages for the federal or any state or local governments.
5.4 FULL PAYMENT OF BENEFITS. Notwithstanding any other provision of the
Plan, all Plan Benefits shall be paid to the Participant no later than the
January 5 next preceding the Participant's eightieth (80th) birthday.
ARTICLE VI
BENEFICIARY DESIGNATION
6.1 BENEFICIARY DESIGNATION. Each Participant shall have the right, at
any time, to designate any person or persons as his Beneficiary (both principal
as well as contingent) to whom payment under the Plan shall be made in the event
of his death prior to complete distribution of all Plan Benefits due him under
the Plan. Any Beneficiary designation shall be made in writing on a form
prescribed by the Committee and shall become effective only when filed with the
head of Human Resources.
6.2 AMENDMENTS. Subject to the limitations of Section 6.1 of the Plan,
any Beneficiary designation may be changed by a Participant only by written
notice of such change to the head of Human Resources on a form prescribed by the
Committee. The filing of a new Beneficiary designation form will cancel all
prior Beneficiary designations.
6.3 ABSENCE OF EFFECTIVE BENEFICIARY DESIGNATION. If a Participant fails
to designate a Beneficiary as provided above or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of the
Participant's Plan Benefit, the Participant's remaining Plan Benefit shall be
paid to his estate.
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6.4 EFFECT OF PAYMENT. Payment to the Beneficiary designated pursuant to
Sections 6.1 and 6.2 or to the Participant's estate pursuant to Section 6.3
shall completely discharge TRW's obligations under the Plan.
ARTICLE VII
AMENDMENT AND TERMINATION OF PLAN
7.1 TERMINATION. The Committee shall have the power in its sole
discretion to suspend or terminate the Plan at any time, except that no such
action shall adversely affect rights with respect to any Account without the
consent of the person affected.
7.2 AMENDMENT. The Committee can amend any part of this Plan (including,
without limitation, changing the interest rate to be paid to current and future
Participants or changing who can become Participants) in its sole discretion
without notice to Participants.
ARTICLE VIII
MISCELLANEOUS
8.1 UNFUNDED PLAN. The Plan is an unfunded plan maintained by TRW
primarily to provide Deferred Compensation benefits for a select group of
executive, managerial or professional employees of the Corporation.
8.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
estates, heirs, successors and assigns shall have no legal or equitable rights,
interest or claims in any property or assets of TRW. Such assets of TRW shall
not be held under any trust or in any other way as collateral security for the
fulfillment of the obligations of TRW under the Plan. Any and all of TRW's
assets shall be, and remain, the general, unpledged, unrestricted assets of TRW.
TRW's sole obligation under the Plan shall be merely that of an unfunded and
unsecured promise of TRW to pay money in the future.
8.3 NONASSIGNABILITY. Neither a Participant nor any other person shall
have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate or convey, in advance of actual
receipt, any Plan Benefit. Plan Benefits and all rights to Plan Benefits are
and shall be nonassignable and nontransferable prior to actual payment as
provided by the Plan. Any such attempted assignment or transfer shall be
ineffective; TRW's sole obligation shall be to pay Plan Benefits to the
Participant, his Beneficiary or his estate as appropriate. No part of any Plan
Benefit shall, prior to actual payment as provided by the Plan, be subject to
seizure or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by a Participant or any other person; nor shall any
Plan Benefit be transferable
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by operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency, except as required by law.
8.4 NOT A CONTRACT OF EMPLOYMENT. Neither the terms and conditions of the
Plan nor those of any Participation Agreement shall be deemed to constitute a
contract of employment between the Corporation and the Participant, and neither
the Participant, his Beneficiary nor his estate shall have any rights against
TRW under the Plan except as may otherwise be specifically provided in the Plan.
Moreover, nothing in the Plan shall be deemed to give a Participant the right to
be retained in the service of the Corporation or to interfere with the right of
the Corporation to discipline, discharge or change the status of a Participant
at any time. Further, nothing in the Plan shall be deemed to give a Participant
a right to receive any Incentive Compensation.
8.5 PROTECTIVE PROVISIONS. A Participant will cooperate with TRW by
furnishing any and all information requested by TRW in order to facilitate the
payment of Plan Benefits under the Plan, and by taking such other action as may
be reasonably requested by TRW.
8.6 TERMS. Whenever any words are used in the Plan in the masculine, they
shall be construed as though they were used in the feminine in all cases where
they would so apply; and wherever any words are used in the Plan in the singular
or in the plural, they shall be construed as though they were used in the plural
or singular, as the case may be, in all cases where they would so apply.
8.7 CAPTIONS. The captions of the articles and sections of the Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.
8.8. GOVERNING LAW. The provisions of the Plan shall be construed and
interpreted according to the laws of the State of Ohio.
8.9 VALIDITY. In case any provision of the Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of the Plan, and the Plan shall be construed and enforced
as if such illegal or invalid provision were not included in the Plan.
8.10 NOTICE OR FILING. Any notice or filing required or permitted to be
given to TRW or a Participant under the Plan shall be sufficient if in writing
and hand delivered, or sent by regular mail or by registered or certified mail,
to the principal office of TRW or to the last known address of the Participant,
as the case may be. Such notice or filing shall be deemed given or made (i)
when hand delivered to the residence or offices of the recipient, (ii) as of
five (5) days after the date of mailing if delivery is made by regular mail, or,
(iii) as of five (5) days after the date shown on the postmark on the receipt
for registration or
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certification provided to the sender at the time of mailing, if by registered or
certified mail.
8.11 SUCCESSORS. The provisions of the Plan shall bind and obligate TRW
and any successors. The term "successors" as used in this Section 8.11 shall
include any corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise acquire all or substantially all of the
business and assets of TRW and successors of any such corporation or other
business entity.
8.12 EXPENSES AND COSTS. TRW shall bear all expenses and costs in
connection with the operation of the Plan.
8.13 RELIANCE ON CERTIFIED PUBLIC ACCOUNTANTS. TRW, the Directors, the
Committee, the Special Committee, the head of Human Resources and any employee
of TRW or the Corporation shall be fully protected for actions taken in good
faith based on the computations and reports made pursuant to or in connection
with the Plan by the independent certified public accountants who audit TRW's
accounts.
8.14 PRONOUN REFERENCES. References to "he," "his" or "him" in the Plan
are used in the generic sense and shall apply to all Participants without
reference to the gender of the Participant.
ARTICLE IV
CLAIMS PROCEDURE
9.1 CLAIM. Any person claiming a Plan Benefit, requesting an
interpretation or ruling under the Plan (other than a ruling under Section 2.5
above or the determination as to whether an Eligible Employee is a Highly Paid
Employee), or requesting information under the Plan shall present the request in
writing to the head of Human Resources who (a) shall respond in writing within
ninety (90) days following his receipt of the request or (b) in the case of a
claimant who is an Executive Officer, shall refer the claim with his recommended
response to the Committee, which shall respond in writing within one hundred
twenty (120) days following the receipt of the request by the head of Human
Resources.
9.2 DENIAL OF CLAIM. If the claim or request is denied, the written
notice of denial shall state (i) the reasons for denial; (ii) a description of
any additional material or information required and an explanation of why it is
necessary; and (iii) an explanation of the Plan's claim review procedure.
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9.3 REVIEW OF CLAIM. Any person whose claim or request is denied may make
a second request for review by notice given in writing to the head of Human
Resources. The claim or request shall be reviewed further by the head of Human
Resources or the Committee, as appropriate, and he or it may, but shall not be
required to, grant the claimant a hearing.
9.4 FINAL DECISION. A decision on such second request shall normally be
made within sixty (60) days after the date of the second request. If an
extension of time is required for a hearing or other special circumstances, the
claimant shall be notified and the time limit shall be one hundred twenty (120)
days from the date of the second request. The decision shall be in writing and,
whether made by the head of Human Resources or the Committee, shall be final and
bind all parties concerned.
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PARTICIPATION AGREEMENT
The undersigned hereby agrees to participate in the TRW Inc. Deferred
Compensation Plan (the "Plan") for the following Incentive Compensation received
by the undersigned on account of the year 19__. The undersigned acknowledges
that if in accordance with the Plan the undersigned is not a Highly Paid
Employee under the Plan, the undersigned's election to defer the Incentive
Compensation will become invalid. The undersigned agrees that he/she has read
the Plan and agrees that the following elections are governed by the Plan.
Deferral Percentages or Amounts (Percentage elections must be in increments of
5%, with a 10% minimum election, and dollar elections must be in increments of
$1,000, with a $10,000 minimum election; elections for OIP bonus and strategic
incentive grant need not be the same; you cannot elect both a percentage and a
dollar amount for the same payment source):
OIP Bonus ______% or $_______
Strategic Incentive Grant (to extent applicable) ______% or $_______
Election Options (Choose only one):
___ Paid in lump sum five years from the Date of Deposit
___ Paid in lump sum ten years from the Date of Deposit
___ Paid following retirement in ten annual installments unless a change
has been approved in accordance with Section 2.5 of the Plan
In order for the above elections to be effective, this form must be fully
completed and returned to the head of Human Resources no later than
September 30, 19__.
Unless the undersigned has a Beneficiary Designation Form on file for this Plan
with Human Resources, this Participation Agreement must be accompanied by an
executed Beneficiary Designation Form.
___________________________ _________________________
Signature of Participant Participant's Full Name
___________________________ ___________________________
Date Participant's Social Security #
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EXHIBIT 10(v)
TRW INC.
KEY EXECUTIVE LIFE INSURANCE PLAN
1. PURPOSE
The purpose of the TRW Inc. Key Executive Life Insurance Plan (the
"Plan") is to create a plan under which TRW Inc. ("TRW") can assist
certain of its Executives and those of its subsidiaries and affiliates
in acquiring life insurance coverage.
2. DEFINITIONS
For purposes of this Plan, the following terms have the meanings set
forth below:
2.01 AGREEMENT means the Agreement executed by a Participant
implementing the terms of this Plan.
2.02 ALTERNATIVE DEATH BENEFIT AMOUNT means, with respect to a
Participant, an amount which, after subtracting any TRW federal,
state, and local income tax savings resulting from the
deductibility of the payment for corporate tax purposes, is equal
to the Participant's Coverage Amount. The Alternative Death
Benefit Amount shall be determined at the time the payment is to
be made, based on TRW's federal, state and local income tax rate
(calculated at the highest marginal tax rate then applicable to
TRW but net of any federal deduction for state and local taxes)
at the time of the payment, and shall be determined by TRW.
2.03 ASSIGNEE means that person or entity to whom the Participant has
assigned his interest in the Policy by designating such Assignee
on forms provided by TRW. If the Participant's Policy is a
Survivorship Policy and if the Participant has not specifically
designated an Assignee, then, after the Participant's death, if
the Co-insured survives, the Assignee shall be that person or
entity who succeeds to the Participant's interest in the
Participant's Policy after the death of the Participant.
2.04 CHANGE IN CONTROL means a Change in Control of TRW, as such term
is defined from time to time in the Amended and Restated
Employment Continuation Agreement between TRW and its Chief
Executive Officer.
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2.05 CO-INSURED means the individual designated by the Participant
pursuant to Section 4 as a co-insured under a Survivorship Policy
issued pursuant to the Plan.
2.06 COMMITTEE means the Compensation and Stock Option Committee of
the Directors of TRW.
2.07 COVERAGE AMOUNT means the insurance death benefit amount
indicated in the Participant's Agreement.
2.08 EFFECTIVE DATE means February 7, 1996.
2.09 ELIGIBLE POSITION means a position reporting directly to the
Chief Executive Officer or a position designated as an Eligible
Position by the Chairman of TRW.
2.10 EXECUTIVE means an employee of TRW (or of any subsidiary or
affiliate of TRW which is designated by the Plan Administrator to
participate in this Plan) who the Plan Administrator determines
is eligible to participate in the Plan.
2.11 INSURER means, with respect to a Participant's Policy, the
insurance company issuing the Policy on the Participant's life
(or on the lives of the Participant and a Co-insured, if a
Survivorship Policy is used) pursuant to the provisions of the
Plan.
2.12 PARTICIPANT means an eligible Executive who elects to participate
in the Plan.
2.13 PERMANENT POLICY means a Participant's Policy which is projected
to have Policy cash values at least equal to the Participant's
Coverage Amount when the Participant reaches age 95 or, in the
case of a Survivorship policy, the younger insured reaches age
100 (the Maturity Date), and Policy death benefits equal to at
least 175% of the Participant's Coverage Amount at all times to
the Maturity Date, considering premiums paid prior to the time
the determination is made, as well as future projected premiums.
The determination shall be made by TRW based on projections
provided by the Insurer or its agent. Projections shall be based
on then current mortality charges and the lower of: (i) the
dividend or interest crediting rate applicable to the Policy at
the
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time the determination is made, or (ii) the monthly average of
the applicable Policy dividend or interest crediting rate for the
thirty-six (36) months immediately preceding the time of
determination (or the monthly average for such shorter period as
data is available, if it is not available for the full thirty-six
(36) months).
2.14 PLAN ADMINISTRATOR means with respect to a member of the
Management Committee of TRW, the Committee. For all other
Executives, the Plan Administrator means the Chief Executive
Officer of TRW.
2.15 POLICY means the life insurance coverage acquired on the life of
the Participant (or on the lives of the Participant and a Co-
insured, in the case of a Survivorship Policy) by the owner of
the Policy.
2.16 POLICY SURRENDER VALUE means, with respect to a Participant's
Policy, the actual cash surrender value of the Policy, net of any
applicable surrender charges, which would be available upon a
complete surrender of the Policy.
2.17 PREMIUM means, with respect to a Participant's Policy, the amount
paid to the Insurer with respect to a Participant's Policy.
2.18 SURVIVORSHIP POLICY means a Policy insuring the lives of the
Participant and a Co-insured, with the death benefit payable at
the death of the last survivor of the Participant and the Co-
insured.
2.19 TERMINATED FOR CAUSE means a determination made by the Directors
of TRW, at a hearing which the Participant may attend, that a
Participant has been terminated for cause, as that term is
defined in any written employment agreement existing between TRW
(or any subsidiary or affiliate of TRW) and the Participant;
absent any such agreement, or absent a definition of the term in
the agreement, the term shall mean the termination of the
Participant's employment with TRW (or any subsidiary or affiliate
of TRW) due to: (i) fraud, misappropriation or intentional
material damage to the property or business of TRW (or any
subsidiary or affiliate of TRW); (ii) commission of a felony; or
(iii) continuance of either willful and repeated failure or
grossly negligent and repeated failure by the Participant to
perform his duties.
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2.20 VESTED EXECUTIVE means an Executive who is age 55 or older, who
has five or more Years of Service and who has been in an Eligible
Position for at least three years; provided, that in the sole
discretion of, and by written action of, the Plan Administrator,
an Executive who is not age 55, who has fewer than five Years of
Service and/or who has not been in an Eligible Position for at
least three years may be designated a Vested Executive for the
limited purpose of this Plan. Notwithstanding the foregoing, an
Executive will not be treated as a Vested Executive if the
Executive is Terminated for Cause.
2.21 YEAR OF SERVICE shall have the definition specified in the TRW
Salaried Pension Plan, but shall in any case include any period
of time during which a Participant is receiving benefits under
TRW's Long Term Disability Plan or is on an approved medical
leave.
3. ELIGIBILITY AND COVERAGE AMOUNT
The eligibility of an Executive, as well as the applicable Coverage
Amount, will be determined by the Plan Administrator.
If, during the insurance application and underwriting process, it is
determined that the Executive's health is such that the cost of the
insurance would be prohibitive, the Plan Administrator may, in its
sole discretion, determine that the Executive will not be eligible to
participate in the Plan, provide a reduced Coverage Amount, or take
any other action it deems appropriate.
4. TYPE OF COVERAGE
A Participant may elect single life coverage on the Participant's
life, or survivorship coverage on the joint lives of the Participant
and any other person (subject to any requirements imposed by the
Insurer with respect to the person(s) who may be designated as a Co-
Insured). Once elected by the Participant, the type of coverage and
the Co-Insured cannot be changed without the consent of the Plan
Administrator.
5. PAYMENT OF PREMIUMS
5.01 TRW PAYMENTS. Subject to Sections 7.01, 7.02, 12.01 and 12.02,
TRW shall pay all Policy Premiums necessary to maintain the
Policy death benefit at a level at least equal to the
Participant's Coverage Amount.
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5.02 PARTICIPANT PAYMENTS. Unless otherwise provided in a
Participant's Agreement, a Participant shall not be required to
pay any portion of the Premium due on the Participant's Policy.
6. POLICY OWNERSHIP
6.01 OWNERSHIP. TRW shall be the owner of a Participant's Policy and
shall be entitled to exercise the rights of ownership, except
that the following rights shall be exercisable by the Participant
(or Assignee): (i) the right to designate the beneficiary or
beneficiaries to receive payment of the portion of the death
benefit under the Participant's Policy equal to the Coverage
Amount; and (ii) the right to assign any part or all of the
Participant's rights under the Policy to any person, entity or
trust by the execution of a written instrument prescribed by TRW
which is delivered to TRW. Also, except as provided in
Section 7, TRW shall not borrow from, hypothecate, surrender in
whole or in part, cancel, or in any other manner encumber a
Participant's Policy without the prior written consent of the
Participant's Assignee or, if there is no Assignee, the
Participant.
6.02 POSSESSION OF POLICY. TRW shall keep possession of the Policy.
TRW agrees to make the Policy available to the Participant (or
Assignee) or to the Insurer at such times as, and on such terms
as, TRW determines for the sole purposes of endorsing or filing
any change of beneficiary or assignment on the Policy.
7. TERMINATION EVENTS
7.01 TERMINATION EVENTS. Except as provided in Section 7.02, TRW's
obligation to pay Premiums with respect to a Participant's Policy
shall terminate:
a. Automatically upon the death of the Participant (or the
death of the last survivor of the Participant and the
Co-insured, if the Policy is a Survivorship Policy).
b. Automatically upon a Participant's Termination for Cause.
c. Upon the written action of the Plan Administrator, if the
Participant terminates employment with TRW (or any
subsidiary or affiliate of TRW) and such termination is not
a Termination for Cause.
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d. Automatically should a Participant provide services above a
de minimis level and without TRW's consent to an entity
deemed a competitor of TRW's at any time following three
years within the Participant's termination of employment.
For purposes of this subsection, an entity will be deemed a
competitor if that entity and TRW could not have
interlocking directors under 15 U.S.C. Section 19, as the
same may be amended from time to time.
e. Upon the mutual agreement of TRW and the Participant's
Assignee (or the Participant, if there is no Assignee).
7.02 IRREVOCABLE OBLIGATION. Notwithstanding any other provision of
the Plan, (i) TRW's obligation to pay Policy Premiums for a
Participant who meets the requirements for a Vested Executive
shall be irrevocable while such person is employed by TRW and
shall remain irrevocable thereafter, unless such Participant
fails to meet the definition of Vested Executive as a result of
his being Terminated for Cause or unless the provisions of
Section 7.01 (d) apply; and (ii) TRW's obligation to pay Policy
Premiums for a Participant who obtains an irrevocable right
pursuant to the provisions of Section 9 hereof relating to Change
in Control shall thereafter be irrevocable.
7.03 ALLOCATION OF DEATH BENEFIT. In the event of a termination due
to the death of the Participant (or the death of the last
survivor of the Participant and the Participant's Co-insured, if
the Policy is a Survivorship Policy), the death benefit under the
Participant's Policy shall be divided as follows:
a. The beneficiary or beneficiaries of the Participant (or
Assignee) shall be entitled to receive an amount equal to
the Coverage Amount.
b. TRW shall be entitled to receive the excess of the death
benefit.
TRW agrees to execute an endorsement to the Policy issued to it
by the Insurer providing for the division of the death benefit in
accordance with the provisions of this Section.
Notwithstanding the provisions of this Section, if the Policy
death benefit becomes payable while there is an Alternative Death
Benefit Election in
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effect for the Participant pursuant to Section 8, then the entire
Policy death benefit shall be paid to TRW.
7.04 DISPOSITION OF POLICY. If a Participant's Agreement terminates
under Section 7.01(c) or (e), the Participant's Assignee (or the
Participant, if there is no Assignee) may acquire the
Participant's Policy from TRW by paying TRW an amount equal to
the Policy Surrender Value (or any lesser amount determined by
the Plan Administrator). In order to exercise this right, the
person entitled to exercise the right shall notify TRW, in
writing, of the intention to exercise the option to purchase the
policy within sixty (60) days following the event of termination.
If TRW is so notified, TRW shall, within thirty (30) days after
being notified, provide a written notice to the Assignee (or
Participant, if there is no Assignee) indicating the payment
amount required. Within thirty (30) days after receiving such
notice from TRW, the Assignee (or Participant, if there is no
Assignee) shall make the required payment to TRW. If the payment
is not made within the required time, the right to acquire the
Policy shall terminate. If the required payment is received on a
timely basis, TRW shall submit to the Insurer, within ten (10)
business days after receiving the payment, the forms required to
transfer the Policy ownership to the Assignee (or Participant, if
there is no Assignee). If the Assignee (or Participant, if there
is no Assignee) does not exercise his or her rights to acquire
the Participant's Policy, the Assignee's (or Participant's)
rights under the Plan shall terminate, and TRW may, thereafter,
take any action it deems appropriate with respect to the
Participant's Policy, free from any restrictions or limitations
imposed by the Plan.
8. ALTERNATIVE DEATH BENEFIT ELECTION
A Participant (or the Participant's Assignee, if the Participant has
assigned his or her Policy interest) may elect to receive an
Alternative Death Benefit in lieu of the insurance benefit provided
under the Plan. The Alternative Death Benefit shall be paid by TRW
from the general funds of TRW, and shall not constitute an insurance
benefit. It shall be paid by TRW to the Participant's (or Assignee's)
beneficiary at the time the Participant's insurance benefit would have
been paid (at the Participant's death for single life coverage, or at
the death of the survivor of the Participant and the Participant's Co-
Insured for survivorship coverage). The amount of the payment shall
be equal to the Alternative Death Benefit
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<PAGE>
Amount. As long as an Alternative Death Benefit Election is in
effect, the beneficiary or beneficiaries of the Participant (or
Assignee) shall receive the Alternative Death Benefit only, and shall
not be entitled to receive any portion of any death benefits which
become payable under the Participant's Policy, and the Participant (or
Assignee) shall cooperate with TRW in effecting a change of
beneficiary of the Participant's Policy to achieve such result.
An election under this Section may be revoked. Any election (or
revocation of an election) shall be in writing and shall be effective
when received by TRW. A Participant (or Assignee) shall not be
limited in the number of times an Alternative Death Benefit Election
can be made (or revoked).
9. CHANGE IN CONTROL
If there is a Change in Control:
a. the Plan and TRW's obligation to pay Policy Premiums hereunder
shall become irrevocable for all Participants in the Plan at the
time of the Change in Control;
b. TRW shall immediately transfer the ownership of all Participants'
Policies to an irrevocable trust to: 1) pay any premiums
projected to be payable on all Participants' Policies after the
Change in Control, in order to qualify each Participant's Policy
as a Permanent Policy, and 2) pay any Alternative Death Benefit
which becomes payable under Section 8 of this Plan; and
c. TRW shall immediately fund such irrevocable trust with an amount
sufficient to pay all necessary projected future premiums for all
Participants' Policies in order to qualify each Participant's
Policy as a Permanent Policy.
Notwithstanding the creation and funding of an irrevocable trust in
accordance with the provisions of this Section, TRW, or its successor,
shall continue to be responsible for the premium costs associated with
the Participants' Policies and any Alternative Death Benefits payable
under Section 8 if such amounts are not paid by the trust for any
reason, or if the trust's assets become insufficient to pay any
required amounts.
-8-
<PAGE>
10. GOVERNING LAWS & NOTICES
10.01 GOVERNING LAW. This Plan shall be governed by and construed
in accordance with the substantive law of the State of Ohio
without giving effect to the choice of law rules of the
State of Ohio.
10.02 NOTICES. All notices hereunder shall be in writing and sent
by first class mail with postage prepaid. Any notice to TRW
shall be addressed to the Attention of the Secretary at TRW
Inc., 1900 Richmond Road, Lyndhurst, Ohio 44124. Any
notice to the Participant (or Assignee) shall be addressed
to the Participant (or Assignee) at the address following
such party's signature on his Agreement. Any party may
change the address for such party herein set forth by giving
written notice of such change to the other parties pursuant
to this Section.
11. MISCELLANEOUS PROVISIONS
11.01 This Plan and any Agreement executed hereunder shall not be
deemed to constitute a contract of employment between an
Executive and TRW or a Participant and TRW, nor shall any
provision restrict the right of TRW to discharge an
Executive or Participant, or restrict the right of an
Executive or Participant to terminate employment.
11.02 The masculine pronoun includes the feminine and the singular
includes the plural where appropriate.
11.03 In order to be eligible to participate in this Plan, the
Participant and any person proposed as a Co-Insured shall
cooperate with the Insurer by furnishing any and all
information requested by the Insurer in order to facilitate
the issuance of the Policy, including furnishing such
medical information and taking such physical examinations as
the Insurer may deem necessary. In the absence of such
cooperation, TRW shall have no further obligation to the
Participant to allow him to begin participation in the Plan.
11.04 If a Participant (or a Co-insured, if the Participant's
Policy is a Survivorship Policy) commits suicide within two
years of the Participant Policy's issue, or if the
Participant (or Co-insured, if the Participant's Policy is
a Survivorship Policy) makes any material misstatement of
-9-
<PAGE>
information or nondisclosure of medical history and dies
within two years of the Participant's Policy's issue, then
no benefits will be payable to the beneficiary of such
Participant (or of the Participant's Assignee, where
applicable).
12. AMENDMENT, TERMINATION, ADMINISTRATION, AND SUCCESSORS
12.01 AMENDMENT. This Plan may be modified or amended by TRW at
any time, but an amendment which affects the rights,
benefits or obligations of a Participant (or his Assignee)
for whom TRW's obligation to pay premiums has become
irrevocable under Section 7.02 will not apply to such
Participant (or his Assignee) unless such Participant (or
his Assignee) consents, in writing, to the amendment.
12.02 TERMINATION. The Directors of TRW may terminate the Plan at
any time, but no such termination shall affect the rights,
benefits or obligations of a Participant (or his Assignee)
for whom TRW's obligation to pay premiums has become
irrevocable under Section 7.02 unless such Participant (or
his Assignee) consents, in writing, to such termination.
12.03 ADMINISTRATION. This is a life insurance plan maintained
for the benefit of selected employees of TRW Inc., 1900
Richmond Rd., Lyndhurst, Ohio 44124 and any of its
subsidiaries or affiliates as determined by the Plan
Administrator. TRW's Employer Identification Number is
34-0575430 and the plan number of this Plan is 552. This
Plan shall be administered by the Plan Administrator, whose
address is TRW Inc., 1900 Richmond Rd., Lyndhurst, Ohio
44124, Attention: Secretary. The Plan Administrator shall
have the authority to make, amend, interpret, and enforce
all rules and regulations for the administration of the Plan
and decide or resolve any and all questions, including
interpretations of the Plan, as may arise in connection with
the Plan in the Plan Administrator's sole discretion. In
the administration of this Plan, the Plan Administrator may,
from time to time, employ agents and delegate to them or to
others (including Executives) such administrative duties as
it sees fit. The Plan Administrator may from time to time
consult with counsel, who may be counsel to TRW. The
decision or action of the Plan Administrator (or its
designee) with respect to any question arising out of or in
-10-
<PAGE>
connection with the administration, interpretation and
application of this Plan shall be final and conclusive and
binding upon all persons having any interest in the Plan.
TRW shall indemnify and hold harmless the Plan Administrator
and any Executives to whom administrative duties under this
Plan are delegated, against any and all claims, loss,
damage, expense or liability arising from any action or
failure to act with respect to this Plan, except in the case
of gross negligence or willful misconduct by the Plan
Administrator.
12.04 SUCCESSORS. The terms and conditions of this Plan shall
inure to the benefit of and bind TRW and the Participant and
their successors, assignees, and representatives.
13. CLAIMS PROCEDURE; PLAN INFORMATION
13.01 NAMED FIDUCIARY. The Plan Administrator is hereby
designated as the named fiduciary under this Plan. The
named fiduciary shall have authority to control and manage
the operation and administration of this Plan.
13.02 CLAIMS PROCEDURES. Any controversy or claim arising out of
or relating to this Plan shall be filed with the Plan
Administrator, TRW Inc., 1900 Richmond Rd., Lyndhurst, OH.
44124, Attention: Secretary. The Plan Administrator shall
make all determinations concerning such claim. Any decision
by the Plan Administrator denying such claim shall be in
writing and shall be delivered to all parties in interest in
accordance with the notice provisions of Section 10.02
hereof. Such decision shall set forth the reasons for
denial in plain language. Pertinent provisions of the Plan
shall be cited and, where appropriate, an explanation as to
how the claimant can perfect the claim will be provided.
This notice of denial of benefits will be provided within 90
days of the Plan Administrator's receipt of the claimant's
claim for benefits. If the Plan Administrator fails to
notify the claimant of its decision regarding the claim, the
claim shall be considered denied, and the claimant shall
then be permitted to proceed with the appeal as provided in
this Section.
A claimant who has been completely or partially denied a
benefit shall be entitled to appeal this denial of his/her
claim by filing a written
-11-
<PAGE>
statement of his/her position with the Plan Administrator no
later than sixty (60) days after receipt of the written
notification of such claim denial. The Plan Administrator
shall schedule an opportunity for a full and fair review of
the issue within thirty (30) days of receipt of the appeal.
The decision on review shall set forth specific reasons for
the decision, and shall cite specific references to the
pertinent Plan provisions on which the decision is based.
Following the review of any additional information submitted
by the claimant, either through the hearing process or
otherwise, the Plan Administrator shall render a decision on
the review of the denied claim in the following manner:
a. The Plan Administrator shall make its decision
regarding the merits of the denied claim within 60 days
following receipt of the request for review (or within
120 days after such receipt, in a case where there are
special circumstances requiring extension of time for
reviewing the appealed claim). The Plan Administrator
shall deliver the decision to the claimant in writing.
If an extension of time for reviewing the appealed
claim is required because of special circumstances,
written notice of the extension shall be furnished to
the claimant prior to the commencement of the
extension. If the decision on review is not furnished
within the prescribed time, the claim shall be deemed
denied on review.
b. The decision on review shall set forth specific reasons
for the decision, and shall cite specific references to
the pertinent Plan provisions on which the decision is
based.
13.03 AGENT FOR SERVICE OF PROCESS. The agent for service of
process on the Plan shall be the Secretary, TRW Inc., 1900
Richmond Rd., Lyndhurst, Ohio 44124. Service of legal
process may also be made upon the Plan Administrator at the
same address.
13.04 PLAN YEAR. The plan year of the Plan shall be the calendar
year.
13.05 ERISA RIGHTS. As a participant in the Plan, you are entitled
to examine, without charge at the Plan Administrator's
office, all Plan documents filed for the Plan with the U. S.
Department of Labor, such
-12-
<PAGE>
as annual reports, and obtain copies of all Plan documents
and other Plan information upon written request to the Plan
Administrator. The Plan Administrator may make a reasonable
charge for the copies. You are entitled to receive a
summary of the Plan's annual financial report. The Plan
Administrator is required by law to furnish each Participant
with a copy of this summary annual report. In addition to
creating rights for Plan Participants, ERISA imposes
obligations upon the persons who are responsible for the
operation of the employee benefit plan. These persons are
referred to as "fiduciaries" in the law. Fiduciaries must
act in the interest of the Plan Participants and do so
prudently. Fiduciaries who violate ERISA may be removed and
required to make good any losses they have caused the Plan.
Your employer may not fire you or discriminate against you
to prevent you from obtaining a benefit or exercising your
rights under ERISA. If you are improperly denied a benefit
in full or in part, you have a right to file suit in a
federal or state court. You may also file suit in federal
court if any Plan documents or any other materials you
requested are not received within 30 days of your written
request, and the court may require the Plan Administrator to
pay up to $100 for each day's delay until the materials are
received, unless the failure was beyond the control of the
Plan Administrator. If Plan fiduciaries are misusing the
plan's money, or if you are discriminated against for
asserting your rights, you have the right to file suit in
federal court or request assistance from the U. S.
Department of Labor. The court will decide who should pay
court costs and legal fees. If you are successful in your
lawsuit, the court may, if it so decides, require the other
party to pay your legal costs, including attorney's fees.
If you lose, the court may order you to pay these costs and
fees if, for example, it finds your claim is frivolous. If
you have any questions about this statement or your rights
under ERISA, you should contact the Plan Administrator or
the nearest Area Office of the U. S. Labor-Management
Service Administration, Department of Labor.
<PAGE>
EXHIBIT 10(w)
THE TRW FINANCIAL COUNSELING PROGRAM
The TRW Financial Counseling Program was introduced because the complexity of
the tax laws and investment opportunities indicated a need for a capable
specialist to review the personal financial program of executives to assure
there is congruence with Company compensation programs. Eligibility to
participate in the TRW Financial Counseling Program is limited to OIP I
participants. Participation must be approved by a member of the Chief Executive
Office (CEO).
- --The program is comprehensive in scope and includes the following services:
- --Analysis of TRW compensation and benefit programs
- --Development of a financial and estate plan
- --Cash flow analysis
- --Insurance analysis
- --Tax strategy
- --Annual tax preparation
The Ayco Corporation is the financial counseling organization selected by TRW to
provide these services. However, participants may elect to use any financial
counselor or tax preparer of their choice.
TRW will pay 100% of the cost of the Ayco counseling and tax preparation fee up
to a maximum amount determined annually. For those who elect to use a financial
counselor other than Ayco, an annual maximum fee reimbursement schedule will be
determined annually. Expenses up to the annual maximum will be charged to each
participant's budget. Participants will be responsible for fees in excess of
the annual maximum.
Under applicable tax law, the portion of the fee paid by the Company is
considered income to the participant and will be included as imputed income on
the participant's W-2. The Company Director of Employee Benefits will notify
participants of the annual reimbursement maximum.
Participation in the Program will end if membership is canceled by the CEO, with
termination of employment, or if the Program is canceled. Participation will
continue for one year following retirement under the TRW Salaried Pension Plan.
Any exceptions must have the approval of the CEO.
<PAGE>
Exhibit 11
TRW INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Years ended December 31
-----------------------------------
PRIMARY 1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Net earnings before cumulative effect $446.2 $332.7 $220.1
of accounting change
Less preference dividend requirements 0.8 0.7 0.8
------ ----- -----
445.4 332.0 219.3
Cumulative effect of accounting change -- -- (24.7)
------ ----- -----
Net earnings applicable to common shares
and common share equivalents $445.4 $332.0 $194.6
------ ----- -----
------ ----- -----
Average common shares outstanding 65.3 64.6 63.5
Stock options and performance share rights,
based on the treasury stock method using
average market price 1.3 1.2 1.2
------ ----- -----
Average common shares and common share
equivalents 66.6 65.8 64.7
------ ----- -----
------ ----- -----
Primary earnings per share before cumulative
effect of accounting change $6.69 $5.05 $3.39
Cumulative effect of accounting change -- -- (0.38)
------ ----- ------
Primary earnings per share $6.69 $5.05 $3.01
------ ----- ------
------ ----- ------
FULLY DILUTED
Net earnings before cumulative effect
of accounting change applicable to common
shares and common share equivalents $445.4 $332.0 $219.3
Dividends assuming conversion of other
dilutive securities: (A)
Dilutive preference dividends 0.8 0.7 0.8
------ ----- -----
446.2 332.7 220.1
Cumulative effect of accounting change -- -- (24.7)
------ ----- -----
Net earnings applicable to fully diluted shares $446.2 $332.7 $195.4
------ ----- -----
------ ----- -----
Average common shares outstanding 65.3 64.6 63.5
Common shares assuming conversion of
other dilutive securities: (A)
Dilutive preference shares 0.6 0.6 0.7
Stock options and performance share rights,
based on the treasury stock method using
closing market price if higher than
average market price 1.5 1.2 1.5
------ ----- -----
Average fully diluted shares 67.4 66.4 65.7
------ ----- -----
------ ----- -----
Fully diluted earnings per share before cumulative
effect of accounting change $6.62 $5.01 $3.35
Cumulative effect of accounting change -- -- (0.38)
------ ----- ------
Fully diluted earnings per share $6.62 $5.01 $2.97
------ ----- ------
------ ----- ------
</TABLE>
(A) Assuming the conversion of the Serial Preference Stock II Series 1 and
Series 3.
<PAGE>
Exhibit 12
TRW Inc. and Subsidiaries
Computation of Ratio of Earnings
to Fixed Charges - Unaudited
(In millions except ratio data)
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings(loss) before
income taxes and
cumulative effect of
accounting changes $708.2 $534.5 $359.1 $347.6 $(129.4)(A)
Unconsolidated affiliates 2.3 (0.6) 0.7 (0.9) (1.0)
Minority earnings 13.8 5.2 5.7 2.6 (7.8)
Fixed charges excluding
capitalized interest 155.6 160.9 194.0 227.1 254.3
----- ----- ----- ----- -----
Earnings $879.9 $700.0 $559.5 $576.4 $116.1
----- ----- ----- ----- -----
Fixed Charges:
Interest expense $ 94.9 $104.8 $137.8 $162.9 $189.6
Capitalized interest 5.1 6.6 7.9 12.7 10.1
Portion of rents representa-
tive of interest factor 59.6 54.7 54.0 64.0 64.4
Interest expense of uncon-
solidated affiliates 1.1 1.4 2.2 0.2 0.3
----- ----- ----- ----- -----
Total fixed charges $160.7 $167.5 $201.9 $239.8 $264.4
----- ----- ----- ----- -----
Ratio of earnings to fixed
charges 5.5x 4.2x 2.8x 2.4x 0.4x(A)
----- ----- ----- ----- -----
</TABLE>
(A) The 1991 loss before income taxes of $129.4 million includes a charge of
$343 million to cover costs associated with divestment and restructuring
activities. Excluding this charge, the ratio of earnings to fixed charges
would have been 1.7x.
<PAGE>
<TABLE>
<CAPTION>
Ten-Year Summary of Operations
TRW Inc. and subsidiaries
In millions except per share data
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings data
Sales $10,172 $9,087 $7,948 $8,311 $7,913 $8,169 $7,340 $6,982 $6,821 $6,036
Gross profit 1,982 1,817 1,580 1,694 1,606 1,722 1,561 1,417 1,531 1,358
Interest expense 95 105 138 163 190 187 138 130 126 96
Earnings(loss) before
income taxes and
cumulative effect of
accounting changes 708 535 359 348 (129) 343 399 420 415 370
Percent of sales 7% 6% 5% 4% (2%) 4% 5% 6% 6% 6%
Income taxes $ 262 $ 202 $ 139 $ 154 $ 11 $ 135 $ 136 $ 159 $ 172 $ 152
Earnings(loss) before
cumulative effect of
accounting changes 446 333 220 194 (140) 208 263 261 243 218
Percent of sales 4% 4% 3% 2% (2%) 3% 4% 4% 4% 4%
Net earnings(loss) (A) $ 446 $ 333 $ 195 $ (156) $ (140) $ 208 $ 263 $ 261 $ 243 $ 218
International sales $3,953 $3,151 $2,463 $2,702 $2,501 $2,574 $2,060 $1,961 $1,792 $1,581
Percent of sales 39% 35% 31% 33% 32% 32% 28% 28% 26% 26%
U.S. Government sales $2,899 $2,545 $2,708 $2,851 $2,959 $3,231 $3,080 $3,096 $3,081 $2,697
Percent of sales 28% 28% 34% 34% 37% 40% 42% 44% 45% 45%
Per share of common stock
Fully diluted earnings
(loss) (A) $ 6.62 $ 5.01 $ 2.97 $(2.51) $(2.30) $ 3.36 $ 4.25 $ 4.23 $ 3.95 $ 3.55
Cash dividends paid 2.05 1.94 1.88 1.82 1.80 1.74 1.72 1.63 1.60 1.525
Cash dividends declared 2.10 1.97 1.88 1.84 1.80 1.76 1.72 1.66 1.60 1.55
Book value per share 32.97 27.91 23.77 22.31 27.12 31.11 28.60 25.70 23.41 19.93
Balance sheet data
Current assets $2,336 $2,215 $1,994 $2,116 $2,262 $2,237 $2,295 $ 2,105 $1,986 $1,749
Current liabilities 2,012 1,986 1,826 2,012 1,982 1,947 1,794 1,396 1,496 1,352
Working capital 324 229 168 104 280 290 501 709 490 397
Total assets 5,890 5,636 5,336 5,458 5,635 5,555 5,259 4,442 4,378 3,909
Long-term debt 541 694 870 941 1,213 1,042 1,063 863 870 786
Shareholders' investment 2,172 1,822 1,534 1,416 1,685 1,907 1,749 1,566 1,417 1,198
Other data
Capital expenditures $ 485 $ 506 $ 482 $ 530 $ 537 $ 587 $ 452 $ 417 $ 452 $ 431
Depreciation and
amortization of property,
plant and equipment 433 402 388 392 392 381 349 324 306 260
Common stock outstanding
at year-end 65.6 64.9 64.1 62.9 61.6 60.8 60.6 60.2 59.7 58.9
Shares used in computing
per share amounts
Fully diluted 67.4 66.4 65.7 62.3 61.2 61.9 61.9 61.6 61.6 61.3
Primary 66.6 65.8 64.7 62.3 61.2 61.0 60.8 60.5 60.3 59.6
In thousands
Number of employees 66.5 64.2 61.2 64.1 71.3 75.6 74.3 73.2 77.9 78.6
Number of common
shareholders 27.2 31.3 30.1 32.8 34.1 34.9 37.1 38.2 36.1 37.7
</TABLE>
(A) 1993 and 1992 amounts include cumulative effect of accounting changes.
18 TRW INC.
<PAGE>
Management's Discussion and Analysis of the Results of Operations and Financial
Condition
Results of Operations
Record sales in 1995 resulted in the company reporting the highest net earnings
and earnings per share in its history. Underscoring the strength of the year
were the record-breaking performances achieved in each of 1995's quarters.
Consolidated sales in 1995 of $10.2 billion rose 12 percent over 1994 sales of
$9.1 billion and 28 percent over 1993 sales of $7.9 billion. Net earnings in
1995 increased to $446 million from $333 million in 1994 and $195 million in
1993. Fully diluted earnings per share were $6.62 in 1995, $5.01 in 1994 and
$2.97 in 1993.
This year marked the second consecutive year that we achieved record levels of
sales, net earnings and earnings per share. Sales in 1995 surpassed the $10
billion mark for the first time in our 95-year history. Our record results were
broadly based, led by record performance in automotive and impressive growth in
space and defense. Automotive unit volumes continued to expand at a rate
exceeding global automotive growth, as the number of air bag modules sold
increased by 29 percent and the number of power rack and pinion steering gears
produced increased by 12 percent. Space and defense results reflect our strong
market position as evidenced by the level of new contracts awarded during 1995.
New contract awards totaled $3.8 billion, with an additional $1.8 billion in
options. Increased productivity from all our employees also contributed
significantly to the successful year.
Operating profit in 1995 was $886 million, a 19 percent increase over 1994
operating profit of $747 million and a 51 percent increase over 1993 operating
profit of $587 million, excluding restructuring. A detailed discussion of the
operating results of each industry segment is presented below.
Interest expense in 1995 was $95 million compared to $105 million in 1994 and
$138 million in 1993. The lower interest expense in 1995 was due to lower
average debt levels partially offset by higher U.S. interest rates. The decrease
in interest expense from 1993 to 1994 was due to the reduction of our
Brazilian debt and lower average debt levels as well as lower foreign interest
rates.
The effective tax rate in 1995 was 37.0 percent, compared to 37.8 percent in
1994, and 38.7 percent in 1993. The lower effective tax rate in 1995 was
primarily attributable to prior year U.S. tax adjustments partially offset by
increased U.S. state and local income taxes.
In 1993, the company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits," and took a one-time
noncash charge of $25 million, or $.38 per share, for the prior years'
cumulative
<PAGE>
effect of the accounting change. Earnings before the cumulative effect of the
accounting change were $220 million or $3.35 per share.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." Statement No. 121
establishes accounting standards for determining the impairment of long-lived
assets to be held and used, certain identifiable intangibles, and goodwill
related to those assets and for long-lived assets and certain identifiable
intangibles to be disposed of. The company is required to adopt Statement No.
121 during the first quarter of 1996. The financial statement effect of adoption
has not yet been determined.
Automotive
Driven by growth in key product lines worldwide, 1995 was an outstanding year
for the automotive segment. Record sales of $6.5 billion in 1995 represented a
14 percent increase over 1994 sales of $5.7 billion. Operating profit in 1995
increased 28 percent to a record $607 million from the $476 million reported
in 1994. The increase in sales and operating profit was the result of higher
volume in the North American air bag and steering systems businesses and all
European automotive businesses, primarily in air bag and steering systems.
Favorable exchange rates also contributed to the sales increase.
Sales in 1994 rose to $5.7 billion, up 25 percent from 1993 sales of $4.5
billion. Operating profit in 1994 increased 56 percent to $476 million from the
$304 million reported in 1993, excluding restructuring. The increase in sales
was due to higher volume in the North American and European occupant restraint,
steering systems and automotive electronics businesses. The operating profit
increase was due to the higher volume in the North American and European
occupant restraint and steering systems businesses.
TRW INC. 19
<PAGE>
Management's Discussion and Analysis of the Results of Operations and Financial
Condition
Results of Operations (continued)
The company has and expects to continue to invest in areas of significant future
growth, such as air bag systems, power rack and pinion steering and advanced
electronic components. In addition, TRW will continue to take advantage of the
increasing opportunities in the emerging markets of the world, including India,
the People's Republic of China and others, through internal growth and strategic
alliances.
TRW provides automotive systems and components with substantial value-added
content to the worldwide automotive industry. The company anticipates that 1996
North American automotive and light truck production will approximate 1995
levels. We foresee continued modest production growth in Western Europe, and
strong growth in the emerging markets of Eastern Europe and Asia. The diversity
of our customers, markets and products, in conjunction with increased
application rates in key product lines, will allow for continued growth
throughout the world. We are dedicated to technological leadership, continuous
improvement, reducing costs and break-even points, and focusing on consistent
achievement of high quality in all of our products and services in order to
strengthen our competitive position on a worldwide basis.
Space and Defense
Strong financial performance in space and defense was highlighted by an
outstanding year for new program awards. Sales in 1995 increased 10 percent to
$3.1 billion from the $2.8 billion reported in 1994. Operating profit of $192
million was 10 percent higher than 1994's operating profit of $175 million. The
strong sales growth resulting from new contract awards and existing business
more than offset the effect of contracts nearing completion. The increase in
operating profit resulted primarily from the absence of investments for new
business initiatives partially offset by lower fee accruals during the early
period of new programs and the net effect of program reserves.
Sales in 1994 of $2.81 billion increased from the 1993 sales of $2.79 billion.
Operating profit of $175 million was 14 percent lower than the operating profit
of $205 million reported in 1993, excluding restructuring. The sales increase
was due to higher volume in space and electronics, tactical reconnaissance
systems, and systems engineering programs. Partially offsetting the sales
increase was the effect of several contract completions and terminations. The
operating profit resulting from the higher volume and the absence of 1993
reserves for certain programs was more than offset by investments for new
business opportunities and the establishment of a contract reserve in 1994.
Continuing pressure on the Department of Defense, NASA and other U.S. Government
agency budgets could affect the level of future revenues and operating profits.
However, budgets were considerably more stable in 1995 than in recent years, and
we believe that this trend will continue in 1996 and the foreseeable future. We
feel strongly that the company is well positioned for growth in our traditional
U.S. government markets, state and municipal governments, as well as commercial
and international markets.
Backlog estimates at the end of 1995 totaled a record $4.87 billion, up 18
percent from the $4.12 billion reported at the end of 1994. Reported backlog at
the end of 1995 does not include approximately $2.6 billion of negotiated and
priced, but unexercised, options for defense and non-defense programs.
Unexercised options at the end of 1994 were valued at $1.0 billion. The
exercise of options is at the discretion of the customer, and, as in the case
of Government contracts generally, dependent on future government funding. The
impressive backlog growth was driven by a number of key program wins in 1995
that are of national importance and reflects a strong and healthy business that
is poised to deliver quality products and services for years to come.
Information Systems and Services
Sales in 1995 were $604 million compared to $596 million in 1994. The sales
increase resulted primarily from higher volume in the Information Services
business partially offset by lower volume in the Information Systems business.
Operating profit of $87 million in 1995 represented a 10 percent decline from
the $96 million reported in 1994. The decline in operating profit resulted
primarily from the net effect of certain contract reserves in Information
Systems.
The operating profit of $96 million in 1994 represented a 24 percent increase
over 1993 operating profit of $78 million, excluding restructuring. Revenues of
$596 million declined 4 percent from the $618 million reported in 1993. The
revenue
20 TRW INC.
<PAGE>
Management's Discussion and Analysis of the Results of Operations and Financial
Condition
Results of Operations (continued)
decline resulted from the absence of sales from a previously divested business.
Higher volume in the Information Services business combined with continued cost
controls contributed to the increase in operating profit. Operating profit in
1994 also includes a gain on the sale of a product line partially offset by the
establishment of certain contract reserves in the Information Systems business.
The level of revenue and operating profit will remain sensitive to several key
U.S. economic variables including interest rates, consumer spending on durable
goods and housing activities. However, we believe revenue and operating profit
margins will continue to grow through new product offerings.
In February 1996, the company entered into an agreement to sell substantially
all of the businesses in the Information Systems and Services segment.
Management intends to use the net proceeds from the sale for general corporate
purposes, including working capital requirements, capital expenditures, business
expansion transactions, and the repurchase of securities of the company. As the
impact of the proposed divestiture has not been fully determined, forward
looking discussions in this report do not reflect the above-mentioned sale.
International operations
International sales were $3.9 billion, or 39 percent of TRW sales in 1995; $3.1
billion, or 35 percent of sales in 1994; and $2.5 billion, or 31 percent of
sales in 1993. U.S. export sales included in those amounts were $842 million in
1995, $638 million in 1994 and $438 million in 1993. Most of TRW's non-U.S.
operations are included in the Automotive segment and are located in Europe,
Canada, Brazil and the Pacific Basin. TRW's non-U.S. operations are subject to
the usual risks that may affect such operations; however, most of the assets of
its non-U.S. operations are in countries where the company believes such risks
to be minimal.
Liquidity and financial position
Cash flow from operations in 1995 of $869 million was used primarily for
capital expenditures, the repayment of debt and dividend payments to
shareholders. Debt at December 31, 1995 was $754 million compared to $973
million at the end of 1994. The ratio of total debt (short-term debt, current
portion of long-term debt and long-term debt) to total capital (total debt,
minority interests and shareholders' investment) was 25 percent at December 31,
1995 compared to 34 percent at December 31, 1994. The percentage of fixed-rate
debt to total debt, after the effect of interest rate swap agreements, was 77
percent at the end of 1995.
TRW's non-U.S. operations are generally financed by borrowings from banks or
through intercompany loans in the local currency of the borrower. There are no
significant restrictions on the remittance of funds by the company's non-U.S.
subsidiaries to the United States. A discussion of TRW's credit facilities is
contained in the "Debt and credit agreements" footnote in the Notes to Financial
Statements.
The company is subject to inherent risks attributed to operating in a global
economy. It is the company's policy to utilize derivative financial instruments
to manage its interest rate and foreign currency exchange risks. The company
uses derivatives to hedge its exposure to short-term interest rate changes as a
lower cost substitute for the issuance of fixed-rate debt after taking into
consideration account-related counterparty risk. The company manages cash flow
transactional foreign exchange risk pursuant to a written corporate policy.
Forward contracts and to a lesser extent options are utilized to protect the
company's cash flow from adverse movements in exchange rates. The company is
exposed to credit loss in the event of nonperformance by the counterparties to
the derivative financial instruments. The company diversifies the counterparties
used as a means to limit this exposure and anticipates that the counterparties
will fully satisfy their obligations under the contracts. Derivative financial
instruments are viewed by the company as a risk management tool and are not
used for speculative or trading purposes. The effect of derivative transactions
on the company's net earnings for each of the three years in the period ended
December 31, 1995 is not material.
Capital expenditures were $485 million in 1995, $506 million in 1994 and $482
million in 1993. The company will maintain a capital program with estimated
capital expenditures for 1996 totaling about $565 million. Approximately 70
percent of these expenditures will be invested in the Automotive segment, 26
percent in the Space and Defense segment and 4 percent in the Information
Systems and Services segment. The company will continue to invest in its
automotive growth businesses, including air bag systems, power rack and
TRW INC. 21
<PAGE>
Management's Discussion and Analysis of the Results of Operations and Financial
Condition
Results of Operations (continued)
pinion steering and automotive electronic technologies. The balance of the
capital expenditures will be used to acquire equipment to support our existing
customer base, develop advanced and next generation technologies, acquire data
processing hardware and expand our communications infrastructure.
On February 7, 1996, the Board of Directors authorized the company to repurchase
up to 10 million shares of TRW common stock on the open market. The repurchase
will be funded primarily from the proceeds from the sale of the businesses in
the Information Systems and Services segment, cash flow from operations and the
issuance of debt. The company plans to purchase the shares from time to time,
depending on market conditions. The shares repurchased will be used to satisfy
the obligations of the company's various employee benefit plans and other
proper corporate purposes.
We believe the company's current financing arrangements allow flexibility in
worldwide financing activities and permit us to respond to changing conditions
in credit markets. The existing arrangements are not indicative of the company's
potential borrowing capacity. We believe that funds generated from operations
and existing borrowing capacity are adequate to support and finance planned
growth, capital expenditures, company-sponsored research and development
programs and dividend payments to shareholders.
Other matters
Federal, state and local requirements relating to the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, have had and will continue to have an effect on TRW and its
operations. The company is conducting a number of environmental investigations
and remedial actions at current and former company locations and, along with
other companies, has been named a potentially responsible party for certain
waste management sites. Each of these matters is subject to various
uncertainties, and it is possible that some of these matters may be resolved
unfavorably to the company. A reserve estimate for each matter is established
using standard engineering cost estimating techniques. In the determination of
such costs, consideration is given to the professional judgment of company
environmental engineers in consultation with outside environmental specialists
when necessary. At multi-party sites, the reserve estimate also reflects the
expected allocation of total project costs among the various potentially
responsible parties. At December 31, 1995, the company had reserves for
environmental matters of $84 million, including $7 million of additional
accruals recorded during the year. The company aggressively pursues
reimbursement for environmental costs from its insurance carriers. However,
insurance recoveries are not recorded as a reduction of environmental costs
until they are fixed and determinable. At December 31, 1995, the "Other assets"
caption on the balance sheet includes $30 million of insurance recoveries
related to environmental matters. The company believes that any liability that
may result from the resolution of environmental matters for which sufficient
information is available to support these cost estimates will not have a
material adverse effect on the company's future results of operations and
cash flows. However, the company cannot predict the effect on the company's
future results of operations and cash flows of expenditures for aspects of
certain matters for which there is insufficient information. In addition, the
company cannot predict the effect of compliance with environmental laws and
regulations with respect to unknown environmental matters on the company's
future results of operations and cash flows or the possible effect of
compliance with environmental requirements imposed in the future.
As of December 31, 1995, the company reduced the discount rate used to measure
the obligations for its pension and other postretirement benefit plans from
8-1/2 percent to 7 percent, in recognition of lower prevailing long-term
interest rates. The effect of the discount rate change on 1996 pension and other
postretirement benefit costs is not expected to be material. The determination
of pension and other postretirement benefit costs beyond 1996 will depend on
various factors, including long-term interest rates, investment returns, health
care cost trend rates, other actuarial assumptions, benefit levels, and
demographic changes.
22 TRW INC.
<PAGE>
Financial Statements
Statements of Earnings
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
In millions except per share data
Years ended December 31 1995 1994 1993
<S> <C> <C> <C>
Sales $ 10,172 $ 9,087 $ 7,948
Cost of sales 8,190 7,270 6,368
Gross profit 1,982 1,817 1,580
Administrative and selling expenses 747 756 707
Research and development expenses 422 412 378
Restructuring expense - - 7
Interest expense 95 105 138
Other expense(income)-net 10 9 (9)
Earnings before income taxes and
cumulative effect of accounting change 708 535 359
Income taxes 262 202 139
Earnings before cumulative effect
of accounting change 446 333 220
Cumulative effect as of January 1, 1993
of change in accounting for
postemployment benefits
(net of income taxes of $16 million) - - (25)
Net earnings $ 446 $ 333 $ 195
Per share of common stock
Fully diluted
Before cumulative effect of
accounting change $ 6.62 $ 5.01 $ 3.35
Cumulative effect of change
in accounting for postemployment benefits - - (.38)
Net earnings per share $ 6.62 $ 5.01 $ 2.97
Primary
Before cumulative effect of accounting change $ 6.69 $ 5.05 $ 3.39
Cumulative effect of change in accounting
for postemployment benefits - - (.38)
Net earnings per share $ 6.69 $ 5.05 $ 3.01
</TABLE>
See notes to financial statements.
TRW INC. 23
<PAGE>
Financial Statements
Balance Sheets
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
In millions
December 31 1995 1994
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 59 $ 109
Accounts receivable, net of allowances of
$21 million and $23 million 1,428 1,338
Inventories
Finished products and work in process 298 246
Raw materials and supplies 236 224
Total inventories 534 470
Prepaid expenses 78 59
Deferred income taxes 237 239
Total current assets 2,336 2,215
Property, plant and equipment-on the basis of cost
Land 109 104
Buildings 1,573 1,527
Machinery and equipment 4,184 3,925
5,866 5,556
Less accumulated depreciation and amortization 3,303 3,067
Total property, plant and equipment-net 2,563 2,489
Intangible assets
Intangibles arising from acquisitions 483 477
Capitalized data files 488 441
Other 92 69
1,063 987
Less accumulated amortization 405 331
Total intangible assets-net 658 656
Other assets 333 276
$ 5,890 $ 5,636
</TABLE>
24 TRW INC.
<PAGE>
Balance Sheets (continued)
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
In millions
December 31 1995 1994
<S> <C> <C>
Liabilities and shareholders' investment
Current liabilities
Short-term debt $ 133 $ 122
Accrued compensation 385 346
Trade accounts payable 807 737
Other accruals 545 541
Dividends payable 36 33
Income taxes 26 50
Current portion of long-term debt 80 157
Total current liabilities 2,012 1,986
Long-term liabilities 779 796
Long-term debt 541 694
Deferred income taxes 313 269
Minority interests in subsidiaries 73 69
Shareholders' investment
Serial Preference Stock II
(involuntary liquidation
$9 million and $10 million) 1 1
Common stock (shares outstanding
65.6 million and 64.9 million) 40 40
Other capital 398 354
Retained earnings 1,688 1,383
Cumulative translation adjustments 76 66
Treasury shares -- cost in excess of par value (31) (22)
Total shareholders' investment 2,172 1,822
$ 5,890 $ 5,636
</TABLE>
See notes to financial statements.
TRW INC. 25
<PAGE>
Financial Statements
Statements of Cash Flows
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
In millions
Years ended December 31 1995 1994 1993
<S> <C> <C> <C>
Operating activities
Net earnings $ 446 $ 333 $ 195
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Cumulative effect of accounting
change, net of taxes - - 25
Depreciation and amortization 510 476 458
Restructuring - (23) (61)
Deferred income taxes 46 8 49
Other-net 33 26 18
Changes in assets and liabilities, net of effects
of businesses acquired or sold:
Accounts receivable (75) (112) (46)
Inventories and prepaid expenses (71) (33) (5)
Accounts payable and other accruals 31 262 (107)
Other-net (51) 35 (30)
Net cash provided by operating activities 869 972 496
Investing activities
Capital expenditures (485) (506) (482)
Proceeds from divestitures 9 22 97
Investments in other assets (78) (81) (51)
Proceeds from sales of property,
plant and equipment 20 16 24
Other-net (12) 7 (11)
Net cash used in investing activities (546) (542) (423)
Financing activities
Increase(decrease) in short-term debt (47) (270) 104
Proceeds from debt in excess of 90 days 36 176 255
Principal payments on debt in excess of 90 days (207) (154) (344)
Dividends paid (134) (126) (120)
Other-net 9 9 27
Net cash used in financing activities (343) (365) (78)
Effect of exchange rate changes on cash (30) (35) 18
Increase(decrease) in cash and cash equivalents (50) 30 13
Cash and cash equivalents at beginning of year 109 79 66
Cash and cash equivalents at end of year $ 59 $ 109 $ 79
Supplemental Cash Flow Information:
Interest paid (net of amount capitalized) $ 88 $ 112 $ 174
Income taxes paid (net of refunds) $ 239 $ 93 $ 96
</TABLE>
For purposes of the statements of cash flows, the company considers all highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents.
See notes to financial statements.
26 TRW INC.
<PAGE>
Statements of Changes in Shareholders' Investment
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
In millions
Years ended December 31 1995 1994 1993
Shares Dollars Shares Dollars Shares Dollars
<S> <C> <C> <C> <C> <C> <C>
Serial Preference Stock II
Series 1
Balance at January 1 and December 31 .1 $ - .1 $ - .1 $ -
Series 3
Balance at January 1 and December 31 .1 1 .1 1 .1 1
Common stock
Balance at January 1 64.9 40 64.1 40 62.9 39
Sale of stock and other .7 - .8 - 1.2 1
Balance at December 31 65.6 40 64.9 40 64.1 40
Other capital
Balance at January 1 354 293 222
Sale of stock and other 44 61 71
Balance at December 31 398 354 293
Retained earnings
Balance at January 1 1,383 1,178 1,105
Net earnings 446 333 195
Other (3) - (1)
Dividends declared
Preference stock (1) (1) (1)
Common stock
($2.10, $1.97 and $1.88 per share) (137) (127) (120)
Balance at December 31 1,688 1,383 1,178
Cumulative translation adjustments
Balance at January 1 66 36 53
Translation adjustments 10 30 (17)
Balance at December 31 76 66 36
Treasury shares-cost in excess of par value
Balance at January 1 (22) (14) (4)
ESOP funding 17 - -
Purchase of shares (26) (8) (10)
Balance at December 31 (31) (22) (14)
Total shareholders' investment $2,172 $1,822 $1,534
</TABLE>
See notes to financial statements.
TRW INC. 27
<PAGE>
Notes to Financial Statements
Summary of significant accounting policies
Principles of consolidation -- The financial statements include the accounts of
the company and its subsidiaries except for an insurance subsidiary. The wholly-
owned insurance subsidiary and the majority of investments in affiliated
companies, which are not significant individually or in the aggregate, are
accounted for by the equity method.
Use of estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of December 31, 1995 and
1994, respectively, and reported amounts of revenues and expenses for the years
ended December 31, 1995, 1994 and 1993, respectively. Actual results could
differ from those estimates.
Long-term contracts -- The percentage-of-completion (cost-to-cost) method is
used to estimate sales under fixed-price and fixed-price incentive contracts.
Sales under cost-reimbursement contracts are recorded as costs are incurred.
Fees based on cost, award fees and incentive fees are included in sales at the
time such amounts are reasonably estimable. Losses on contracts are recognized
when determinable.
Accounts receivable -- Accounts receivable at December 31, 1995 and 1994
included $507 million and $492 million, respectively, related to long-term
contracts, of which $253 million and $269 million, respectively, were unbilled.
Unbilled costs, fees and claims represent revenues earned and billable in the
following month as well as revenues earned but not billable under terms of the
contracts. A substantial portion of such amounts are expected to be billed
during the following year. Retainage receivables and receivables subject to
negotiation are not significant.
Inventories -- Inventories are stated at the lower of cost, principally the
first-in, first-out (FIFO) method, or market. Inventories applicable to long-
term contracts are not significant.
Depreciation -- Depreciation is computed over the assets estimated useful lives
using the straight-line method for the majority of the company's depreciable
assets. The remaining assets are depreciated using accelerated methods.
Intangible assets -- Intangible assets are stated on the basis of cost.
Intangibles arising from acquisitions prior to 1971 ($75 million) are not being
amortized because there is no indication of diminished value. Intangibles
arising from acquisitions after 1970 are being amortized by the straight-line
method principally over 40 years. Capitalized data files are amortized by the
straight-line method over periods not exceeding 15 years. The carrying value of
intangible assets is assessed for impairment on a quarterly basis.
Forward exchange contracts -- The company enters into forward exchange contracts
the majority of which hedge firm foreign currency commitments and certain
intercompany transactions. At December 31, 1995, the company had contracts
outstanding amounting to approximately $219 million denominated in the German
mark, the Italian lira, the British pound, the U.S. dollar and the French franc,
maturing at various dates through March 1997. Changes in market value of the
contracts are included in the basis of the transactions. The company is exposed
to credit loss in the event of nonperformance by the counterparties to the
foreign exchange contracts. No collateral is held in relation to the contracts
and the company anticipates that the counterparties will satisfy their
obligations under the contracts.
<TABLE>
<CAPTION>
Fair values of financial instruments
In millions 1995 1994
Carrying Value Fair Value Carrying Value Fair Value
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 59 $ 59 $109 $ 109
Short-term debt 133 133 122 122
Floating rate long-term debt 74 74 171 171
Fixed rate long-term debt 547 632 680 673
Interest rate swaps - (liability) - (2) - (5)
Forward currency exchange
contracts - asset - 1 - -
</TABLE>
28 TRW INC.
<PAGE>
Summary of significant accounting policies (continued)
The fair value of long-term debt was estimated using discounted cash flow
analysis, based on the company's current borrowing rates for similar types of
borrowing arrangements. The fair value of interest rate and forward currency
exchange contracts is estimated based on quoted market prices of offsetting
contracts.
Environmental costs -- TRW participates in environmental assessments and
remedial efforts at operating facilities, previously owned or operated
facilities, and Superfund or other waste sites. Costs related to these locations
are accrued when it is probable that a liability has been incurred and the
amount of that liability can be reasonably estimated. Estimated costs are
recorded at undiscounted amounts based on experience and assessments, and are
regularly evaluated as efforts proceed. Insurance recoveries are recorded as a
reduction of environmental costs when fixed and determinable.
Earnings per share -- Fully diluted earnings per share have been computed based
on the weighted average number of shares of common stock outstanding during each
year, including common stock equivalents (stock options) and assuming the
conversion of the Serial Preference Stock II - Series 1 and 3. Primary earnings
per share have been computed based on the weighted average number of shares of
common stock outstanding during each year including common stock equivalents.
Accounting change -- Effective January 1, 1993, the company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." The company recognized the cumulative effect of this
accounting change as of January 1, 1993, resulting in a one-time charge of $25
million (after a reduction for income taxes of $16 million).
Research and development
<TABLE>
<CAPTION>
In millions 1995 1994 1993
<S> <C> <C> <C>
Customer-funded $ 1,387 $ 1,157 $ 1,223
Company-funded
Research and development 422 412 378
Product development 154 140 136
576 552 514
$ 1,963 $ 1,709 $ 1,737
</TABLE>
Company-funded research and development programs include research and
development for commercial products and independent research and development and
bid and proposal work related to government products and services. A portion of
the cost incurred for independent research and development and bid and proposal
work is recoverable through overhead charged to government contracts. Product
development costs include engineering and field support for new customer
requirements.
Restructuring
For balance sheet purposes, other accruals in 1995 and 1994 include $16 million
and $33 million, respectively, relating to restructuring reserves. The decline
in the reserve during 1995 resulted principally from the downsizing and
streamlining of certain businesses in the Automotive segment.
Restructuring expense in 1993 consists of restructuring charges of $23 million,
principally in the Automotive segment, resulting from additional management
decisions reduced by gains of $16 million from the sales of certain businesses
in the Automotive segment.
TRW INC. 29
<PAGE>
Notes to Financial Statements
Other expenses (income)-net
<TABLE>
<CAPTION>
In millions 1995 1994 1993
<S> <C> <C> <C>
Other income $ (42) $ (66) $ (69)
Other expense 47 60 42
Gain on sale of assets (5) (28) (4)
Foreign currency translation 10 43 22
$ 10 $ 9 $ (9)
</TABLE>
Gain on sale of assets in 1994 includes a gain on the sale of a product line in
the Information Systems and Services segment.
Income taxes
Earnings before income taxes and cumulative effect of accounting change
<TABLE>
<CAPTION>
In millions 1995 1994 1993
<S> <C> <C> <C>
U.S. $ 511 $ 387 $ 362
Non-U.S. 197 148 (3)
$ 708 $ 535 $ 359
<CAPTION>
Provision for income taxes
In millions 1995 1994 1993
<S> <C> <C> <C>
Current
U.S. federal $ 119 $ 106 $ 34
Non-U.S. 57 40 24
U.S. state and local 19 24 (1)
195 170 57
Deferred
U.S. federal 32 28 78
Non-U.S. 14 5 (10)
U.S. state and local 21 (1) 14
67 32 82
$ 262 $ 202 $ 139
<CAPTION>
Effective income tax rate
1995 1994 1993
<S> <C> <C> <C>
U.S. statutory income tax rate 35.0% 35.0% 35.0%
Restructuring benefits - - (2.8)
Non-deductible expenses 1.3 1.6 .4
U.S. state and local income taxes
net of U.S. federal tax benefit 3.7 2.7 2.4
Non-U.S. tax rate variances net
of foreign tax credits (.1) (.4) 4.3
Prior year adjustments (2.7) - -
Other (.2) (1.1) (.6)
Effective income tax rate 37.0% 37.8% 38.7%
</TABLE>
30 TRW INC.
<PAGE>
Income taxes (continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1995 and
1994, the company had unused tax benefits of $33 million and $40 million,
respectively, related to non-U.S. net operating loss carryforwards for income
tax purposes, of which $16 million and $23 million can be carried forward
indefinitely and the balance expires at various dates through 2000. A valuation
allowance at December 31, 1995 and 1994 of $27 million and $26 million,
respectively, has been recognized to offset the related deferred tax assets due
to the uncertainty of realizing the benefit of the loss carryforwards.
It is the company's intention to reinvest undistributed earnings of certain of
its non-U.S. subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, deferred income taxes have not been provided for accumulated
undistributed earnings of $325 million at December 31, 1995.
<TABLE>
<CAPTION>
Deferred tax assets Deferred tax liabilities
In millions 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Pensions and postretirement benefits
other than pensions $ 263 $ 259 $ 38 $ 43
Completed contract method of accounting for
long-term contracts 52 50 425 414
State and local taxes 22 29 9 9
Reserves and accruals 79 107 - -
Depreciation and amortization 16 19 153 130
Insurance accruals 26 28 - -
Non-U.S. net operating loss carryforwards 33 40 - -
Other 133 109 48 49
624 641 673 645
Valuation allowance for deferred tax assets (27) (26) - -
Total $ 597 $ 615 $ 673 $ 645
</TABLE>
Notes to Financial Statements
Pension plans
The company has defined benefit pension plans (generally noncontributory except
for those in the United Kingdom) for substantially all employees. Plans for most
salaried employees provide pay-related benefits based on years of service. Plans
for hourly employees generally provide benefits based on flat-dollar amounts and
years of service.
Under the company's funding policy, annual contributions are made to fund the
plans during the participants' working lifetimes, except for unfunded plans in
Germany and certain non-qualified plans in the U.S. which are funded as benefits
are paid to participants. Annual contributions to funded plans have met or
exceeded ERISA's minimum funding requirements or amounts required by local law
or custom.
The company sponsors a contributory stock savings plan for which a majority of
its U.S. employees are eligible. The company matches employee contributions up
to 3 percent of the participant's qualified compensation. The company
contributions are held in an unleveraged employee stock ownership plan. The
company also sponsors other defined contribution pension plans covering
employees at some of its operations.
TRW INC. 31
<PAGE>
Notes to Financial Statements
Pension plans (continued)
<TABLE>
<CAPTION>
In millions 1995 1994 1993
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
<S> <C> <C> <C> <C> <C> <C>
Defined benefit plans
Service cost -- benefits earned
during the year $ 55 $ 15 $ 60 $ 13 $ 52 $ 12
Interest cost on projected
benefit obligation 157 27 149 24 150 23
Actual (return)loss on
plan assets (521) (38) 40 11 (319) (51)
Net amortization and deferral 314 19 (237) (28) 126 35
Total pension cost of
benefit plans 5 23 12 20 9 19
Defined contribution plans 1 5 1 3 1 2
Stock savings plan 38 - 36 - 36 -
$ 44 $ 28 $ 49 $ 23 $ 46 $ 21
<CAPTION>
In millions 1995 1994
U.S. Non-U.S. U.S. Non-U.S.
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation $1,961 $ 328 $1,546 $275
Overfunded plans $1,995 $ 208 $1,565 $182
Underfunded plans 128 136 110 100
Total accumulated benefit obligation $2,123 $ 344 $1,675 $282
Projected benefit obligation $2,367 $ 378 $1,810 $311
Overfunded plans $2,508 $ 249 $2,142 $220
Underfunded plans 78 28 65 25
Total plan assets at fair value
(primarily listed stocks and bonds) 2,586 277 2,207 245
Plan assets in excess of (less than)
projected benefit obligation 219 (101) 397 (66)
Unrecognized net gain (35) (18) (218) (26)
Unrecognized net assets from January 1, 1986
(January 1, 1989 for non-U.S. plans) (59) (5) (77) (6)
Unrecognized prior service cost 30 9 42 9
Additional minimum liability (26) (8) (18) (6)
Net pension asset(liability) recognized in
the balance sheet $ 129 $(123) $ 126 $(95)
<CAPTION>
Actuarial Assumptions: 1995 1994
U.S. Non-U.S. U.S. Non-U.S.
<S> <C> <C> <C> <C>
Discount rate 7.0% 7.0 to 8.5% 8.5% 8.0 to 8.75%
Rate of increase in compensation levels 3.0% 4.5 to 5.0% 3.0% 5.0 to 5.75%
Long-term rate of return on plan assets 9.0% 7.0 to 9.5% 9.0% 6.0 to 9.50%
</TABLE>
32 TRW INC.
<PAGE>
Postretirement benefits other than pensions
The company provides health care and life insurance benefits for a majority of
its retired employees in the United States and Canada. The health care plans
provide for cost sharing, in the form of employee contributions, deductibles,
and coinsurance, between the company and its retirees. The postretirement health
care plan covering a majority of employees who retired since August 1, 1988
limits the annual increase in the company's contribution toward the plan's cost
to a maximum of the lesser of 50 percent of medical inflation or 4 percent. Life
insurance benefits are generally noncontributory. The company's policy is to
fund the cost of postretirement health care and life insurance benefits in
amounts determined at the discretion of management. Retirees in certain other
countries are provided similar benefits by plans sponsored by their governments.
<TABLE>
<CAPTION>
In millions 1995 1994
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 508 $ 420
Fully eligible active participants 38 37
Other active participants 232 194
778 651
Plan assets at fair value
(primarily listed stocks and bonds) 61 32
Accumulated postretirement benefit obligation
in excess of plan assets (717) (619)
Unrecognized prior service cost (7) (7)
Unrecognized net (gain)loss 7 (89)
Net liability recognized in the balance sheet $(717) $(715)
<CAPTION>
In millions 1995 1994 1993
<S> <C> <C> <C>
Service cost $ 10 $ 13 $ 13
Interest cost 55 53 59
Actual return on plan assets (9) - (1)
Net amortization and deferral 4 (3) (1)
Net periodic postretirement benefit cost $ 60 $ 63 $ 70
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation as of December 31, 1995 and 1994 was 7 percent and 8-1/2 percent,
respectively. At December 31, 1995, the 1996 annual rate of increase in the per
capita cost of covered health care benefits was assumed to be 10 percent for
participants under age 65 and 9 percent for participants age 65 or older. The
rates were assumed to decrease gradually to 6 percent and 5 percent,
respectively, in the year 2009 and remain at that level thereafter. At December
31, 1994, the 1995 annual rate of increase in the per capita cost of covered
health care benefits was assumed to be 10 percent for participants under age 65
and 9 percent for participants age 65 or older. The rates were assumed to
decrease gradually to 6 percent and 5 percent, respectively, in the year 2021
and remain at that level thereafter. A one percent annual increase in these
assumed cost trend rates would increase the accumulated postretirement benefit
obligation at December 31, 1995 by approximately 8 percent, and the aggregate
of the service and interest cost components of net periodic postretirement
benefit cost for 1995 by approximately 9 percent. The weighted average expected
long-term rate of return on plan assets was 8 percent for 1995 and 9 percent
for 1994. The trust holding the majority of the plan assets is not subject to
federal income taxes.
TRW INC. 33
<PAGE>
Notes to Financial Statements
Debt and credit agreements
<TABLE>
<CAPTION>
Short-term debt
In millions 1995 1994
<S> <C> <C>
U.S. borrowings $ 13 $ -
Non-U.S. borrowings 120 122
$133 $122
<CAPTION>
Long-term debt
In millions 1995 1994
<S> <C> <C>
U.S. borrowings $ - $ 26
Non-U.S. borrowings 85 148
7.3% ESOP obligations due 1997 60 95
Medium-term notes:
9.35% Notes due 2020 (due 2000 at option of note holder) 100 100
9 3/8% Notes due 2021 100 100
Other medium-term notes 234 309
Other 42 73
Total long-term debt 621 851
Less current portion 80 157
$541 $694
</TABLE>
TRW maintains a committed U.S. revolving credit agreement with 17 banks. The
agreement allows the company to borrow up to $550 million and extends through
February 2000. The interest rate under the agreement is either a negotiated
rate, the banks' prime rates, a rate based upon the banks' costs of funds in the
secondary certificate of deposit market or a rate based upon an Interbank
Offered Rate. TRW's commercial paper borrowings are supported by this agreement.
At December 31, 1995, there were no outstanding borrowings under the U.S.
revolving credit agreement. The weighted average interest rate on short-term
borrowings outstanding at December 31, 1995 and 1994 is 7.6 and 7.2 percent,
respectively.
The company also maintains a committed multi-currency revolving credit
agreement with 13 banks. The agreement allows the company to borrow up to $200
million and extends through February 2000. The interest rate under the
agreement is based on various interest rate indices. At December 31, 1995,
there were no outstanding borrowings under the multi-currency credit agreement.
At December 31, 1995, $41 million of short-term non-U.S. borrowings have been
reclassified to long-term non-U.S. borrowings because the company intends to
refinance these borrowings on a long-term basis and has the ability to do so
under its multi-currency revolving credit agreement.
As of December 31, 1995, the company has interest rate swap agreements for
notional borrowings of $135 million in which the company pays a fixed rate and
receives a floating rate. The weighted average pay rate and receive rate under
these agreements is 8.1 percent and 5.4 percent, respectively. These agreements
mature at various dates through 1998.
The floating rates under the interest rate swap agreements are both based on
commercial paper and LIBOR rates and have been calculated using these rates at
December 31, 1995. Net payments or receipts under the agreements are recognized
as an adjustment to interest expense. The company is exposed to credit loss in
the event of nonperformance by the counterparties to the interest rate swap
agreements. No collateral is held in relation to the agreements and the company
anticipates that the counterparties will satisfy their obligations under the
agreements.
The other medium-term notes bear interest at rates ranging from 5.98 percent to
9.25 percent and mature at various dates through 2020.
Non-U.S. borrowings bear interest, stated in terms of the local currency
borrowing, at rates ranging from 2.13 percent to 12.5 percent at December 31,
1995 and mature at various dates through 2004.
34 TRW INC.
<PAGE>
Debt and credit agreements (continued)
The maturities of long-term debt are, in millions: 1996-$80; 1997-$76; 1998-$16;
1999-$16; 2000-$52; and $381 thereafter.
The indentures and other debt agreements impose, among other covenants,
restrictions on funded debt and maintenance of minimum tangible net worth. Under
the most restrictive interpretation of these covenants, the payment of dividends
was limited to approximately $1,273 million at December 31, 1995.
Compensating balance arrangements and commitment fees were not material.
Lease commitments
TRW leases certain offices, manufacturing and research buildings, machinery,
automobiles and data processing and other equipment. Such leases, some of which
are noncancelable and in many cases include renewals, expire at various dates.
The company pays most maintenance, insurance and tax expenses relating to leased
assets. Rental expense for operating leases was $179 million for 1995, $164
million for 1994 and $162 million for 1993.
At December 31, 1995, future minimum lease payments for noncancelable operating
leases totaled $388 million and are payable as follows: 1996-$98; 1997-$78;
1998-$52; 1999-$35; 2000-$28; and $97 thereafter.
Capital stock
Serial Preference Stock II -- cumulative - stated at $2.75 a share; 5 million
shares authorized.
Series 1 -- each share convertible into 4.4 shares of common; redeemable at $104
per share; involuntary liquidation price $104 per share; dividend rate of $4.40
per annum.
Series 3 -- each share convertible into 3.724 shares of common; redeemable at
$100 per share; involuntary liquidation price $40 per share; dividend rate of
$4.50 per annum.
Series 4 -- not convertible into common shares; redemption price and involuntary
liquidation price of $125 per one one-hundredth of a share; annual dividend rate
per one one-hundredth of a share of the lesser of $4.00 or the current dividend
on common stock; no shares outstanding at December 31, 1995.
Common stock -- $0.625 par value; authorized 250 million shares; shares
outstanding were reduced by treasury shares of .6 million in 1995 and .4 million
in 1994.
TRW has a shareholder purchase rights plan under which each shareholder of
record as of January 6, 1989 received one right for each TRW common share held.
Each right entitles the holder, upon the occurrence of certain events, to buy
one one-hundredth of a share of Cumulative Redeemable Serial Preference Stock
II, Series 4, at a price of $125. Should certain additional events occur, each
right allows the shareholder to purchase $250 of the surviving entity's common
shares at a 50 percent discount. The company may redeem these rights at its
option at one cent per right under certain circumstances.
At December 31, 1995, 6.8 million shares of common stock were reserved for the
exercise and issuance of stock options and conversion of the Serial Preference
Stock II, Series 1 and 3. There were .7 million shares of Cumulative Redeemable
Serial Preference Stock II, Series 4, reserved for the shareholder purchase
rights plan.
Stock options
TRW has granted incentive and nonqualified stock options to certain employees to
purchase the company's common stock at the market price on the date of grant.
TRW accounts for stock options in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Subject to certain exceptions,
incentive stock options become exercisable to the extent of one-half of the
optioned shares for each full year of employment following the date of grant,
and
TRW INC. 35
<PAGE>
Notes to Financial Statements
Stock Options (continued)
nonqualified stock options granted prior to 1987 become exercisable to the
extent of one-fourth of the optioned shares for each full year of employment
following the date of grant. Nonqualified stock options granted after 1986
become exercisable to the extent of one-third of the optioned shares for each
full year of employment following the date of grant. Generally, both incentive
and nonqualified stock options expire 10 years after the date of grant.
<TABLE>
<CAPTION>
1995 1994
Millions Millions
of shares Option price of shares Option price
<S> <C> <C> <C> <C>
Outstanding at
beginning of year 4.7 $39.285 to $65.75 4.5 $31.44 to $64.07
Granted .7 64.63 .9 65.75
Became exercisable .3 44.125 to 65.75 .6 39.75 to 64.07
Exercised .7 39.285 to 65.75 .6 31.44 to 56.94
Canceled, expired or
terminated .1 39.285 to 65.75 .1 31.44 to 65.75
Outstanding at end
of year 4.6 39.75 to 65.75 4.7 39.285 to 65.75
Exercisable 3.3 39.75 to 65.75 3.8 39.285 to 64.07
</TABLE>
At December 31, 1995, approximately 800 employees were participants in the
plans. As of that date, the average exercise price of options outstanding was
$52.89 per share and the expiration dates ranged from July 1996 to February
2005. The Company is currently planning to adopt the disclosure provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" in 1996.
TRW grants performance share rights to certain employees under which the
employees are entitled to receive shares of the company's common stock based on
the achievement of a certain return on assets employed. The rights specify a
target number of shares which the employee would receive for each year that
goals for returns on assets employed are met. If the goals are exceeded, the
employee could receive up to 200 percent of the target shares, with the excess
over 100 percent payable in cash (unless the Compensation and Stock Option
Committee of the Board of Directors determines to pay the excess in shares). If
the goals are not met, the employee would receive fewer than the target shares
or no shares. At December 31, 1995 and 1994, the target number of performance
share rights granted to employees and still outstanding were .2 million and .4
million, respectively.
Contingencies
The company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. In addition, the company is conducting a number of
environmental investigations and remedial actions at current and former company
locations and, along with other companies, has been named a potentially
responsible party for certain waste management sites. Each of these matters is
subject to various uncertainties, and some of these matters may be resolved
unfavorably to the company. The company has established accruals for matters
that are probable and reasonably estimable including $84 million for
environmental matters at December 31, 1995. The company believes that any
liability that may result from the resolution of environmental matters for
which sufficient information is available to support cost estimates will not
have a material adverse effect on the company's financial position. However,
the company cannot predict the effect on the company's financial position of
expenditures for aspects of certain matters for which there is insufficient
information. In addition, the company cannot predict the effect of compliance
with environmental laws and regulations with respect to unknown environmental
matters or the possible effect of compliance with environmental requirements
imposed in the future.
Further, product liability claims may be asserted in the future for events not
currently known by management. Although the ultimate liability from these
potential claims cannot be ascertained at December 31, 1995, management does not
anticipate that any related liability, after consideration of insurance
recovery, would have a material adverse effect on the company's financial
position.
36 TRW INC.
<PAGE>
Industry segments
TRW Inc. is a global manufacturing and service company based in the United
States. It is strategically focused on providing products and services in the
automotive, space and defense, and information systems and services markets. The
principal markets for the company's automotive products are North American,
European and Asian original equipment manufacturers and independent
distributors. Space and defense primarily provides products and services to the
United States government, agencies of the United States government and
commercial customers. Information systems and services provides information and
services to businesses, credit-granting organizations, financial institutions,
and individual consumers.
Automotive -- Occupant restraint systems, including sensors, air bag and seat
belt systems; electrical and electronic controls. Steering systems, including
power and manual rack and pinion steering for light vehicles, hydraulic steering
systems for commercial truck and off-highway vehicles and suspension components.
Engine valves and valve train parts, pistons, engineered fasteners, stud welding
and control systems.
Space & Defense -- Spacecraft, including the design and manufacture of military
and civilian spacecraft equipment, propulsion subsystems, electro-optical and
instrument systems, spacecraft payloads, high-energy lasers and laser
technology and other high-reliability components. Software and systems
engineering support services in the fields of military command and control,
earth observation, environmental monitoring and nuclear waste management, air
traffic control, telecommunications, security and counterterrorism, undersea
surveillance and other high-technology space, defense, and civil government
support systems. Electronic systems, equipment and services, including the
design and manufacture of space communication systems, airborne reconnaissance
systems, unmanned aerial vehicles, avionics systems and other electronic
technologies for tactical and strategic space, defense and selected commercial
applications.
Information Systems & Services -- Information systems and services, including
consumer and commercial credit information and related services, direct
marketing, real estate information and services and imaging systems engineering
and integration.
<TABLE>
<CAPTION>
Information Company
Year ended Space & Systems & Staff &
In millions December 31 Automotive Defense Services Other Total
<S> <C> <C> <C> <C> <C> <C>
Sales 1995 $6,468 $3,100 $ 604 $ - $10,172
1994 5,679 2,812 596 - 9,087
1993 4,538 2,792 618 - 7,948
Operating profit by 1995 $ 607 $ 192 $ 87 $(178) $ 708
segment (1) 1994 476 175 96 (212) 535
1993 309 199 74 (223) 359
Identifiable assets by 1995 $3,706 $1,113 $ 661 $ 410 $ 5,890
segment (2) 1994 3,481 1,111 622 422 5,636
1993 3,004 1,253 752 327 5,336
Depreciation and 1995 $ 304 $ 102 $ 18 $ 9 $ 433
amortization of property, 1994 264 111 20 7 402
plant and equipment 1993 238 116 26 8 388
Capital expenditures 1995 $ 314 $ 114 $ 19 $ 38 $ 485
1994 388 98 18 2 506
1993 367 90 23 2 482
</TABLE>
(1) The "Company Staff & Other" column includes: (a) Company Staff and other
expenses of $84, $111 and $91 million, (b) interest expense of $95, $105 and
$138 million and (c) earnings from affiliates of $1, $4 and $6 million for each
of the respective years. The total represents consolidated earnings before
income taxes and cumulative effect of accounting change.
(2) The "Company Staff & Other" column includes: (a) Company Staff assets of
$397, $380 and $317 million, (b) investment in affiliates of $49, $70 and $56
million and (c) eliminations of $(36), $(28) and $(46) million for each of the
respective years. The total represents the consolidated total assets of the
company.
TRW INC. 37
<PAGE>
Notes to Financial Statements
Industry segments (continued)
At December 31, 1995 and 1994, accounts receivable in the Automotive segment
were $869 million and $774 million, respectively, and accounts receivable in the
Space & Defense segment, principally from agencies of the U.S. Government, were
$478 million and $491 million, respectively. The company generally does not
require collateral from its customers.
Company Staff assets consist principally of cash and cash equivalents, current
deferred income taxes and administrative facilities. Intersegment sales were
not significant. Sales to agencies of the U.S. Government, primarily by the
Space & Defense segment, were $2,899 million in 1995, $2,545 million in 1994
and $2,708 million in 1993. Sales to Ford Motor Company by the Automotive
segment were $1,474 million in 1995, $1,363 million in 1994 and $1,096 million
in 1993.
Geographic segments
<TABLE>
<CAPTION>
Year ended United Other Company
In millions December 31 States Europe Areas Staff & Other Total
<S> <C> <C> <C> <C> <C> <C>
Sales 1995 $6,816 $2,525 $ 831 $ - $10,172
1994 6,290 1,965 832 - 9,087
1993 5,643 1,522 783 - 7,948
Operating profit by 1995 $ 601 $ 220 $ 65 $(178) $ 708
segment (1) 1994 528 143 76 (212) 535
1993 461 50 71 (223) 359
Identifiable assets by 1995 $3,529 $1,465 $537 $ 359 $ 5,890
segment (2) 1994 3,444 1,289 531 372 5,636
1993 3,536 1,047 461 292 5,336
</TABLE>
TRW's operations are located primarily in the United States and Europe.
Interarea sales are not significant to the total revenue of any geographic area.
(1) The "Company Staff & Other" column includes: (a) Company Staff and other
expenses of $84, $111 and $91 million, (b) interest expense of $95, $105 and
$138 million and (c) earnings from affiliates of $1, $4 and $6 million for each
of the respective years. The total represents consolidated earnings before
income taxes and cumulative effect of accounting change.
(2) The "Company Staff & Other" column includes: (a) Company Staff assets of
$397, $380 and $317 million (b) investment in affiliates of $49, $70 and $56
million and (c) eliminations of $(87), $(78) $(81) million for each of the
respective years. The total represents the consolidated total assets of the
company.
38 TRW INC.
<PAGE>
Events subsequent to date of independent auditors' report (unaudited)
In February 1996, the company entered into an agreement to sell substantially
all of the businesses in the Information Systems and Services segment. The sale,
which is expected to result in a gain, is subject to corporate and regulatory
approval and other conditions.
On February 7, 1996, the Board of Directors authorized the company to repurchase
up to 10 million shares of TRW common stock on the open market. The company
plans to purchase the shares from time to time, depending on market conditions.
Quarterly financial information (unaudited)
<TABLE>
<CAPTION>
In millions except per share data
First Second Third Fourth
1995 1994 1995 1994 1995 1994 1995 1994
(A)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $2,596 $2,159 $2,712 $2,317 $2,401 $2,165 $2,463 $2,446
Gross profit 523 439 528 471 459 451 472 456
Earnings before income taxes 190 107 197 139 143 133 178 156
Net earnings 115 64 123 87 93 82 115 100
Net earnings per share
Fully diluted 1.72 .97 1.81 1.31 1.41 1.24 1.68 1.49
Primary 1.74 .97 1.84 1.33 1.39 1.26 1.72 1.49
</TABLE>
(A) Earnings before income taxes included a $35 million gain ($23 million after
taxes, 34 cents per share) related to an insurance claim settlement and a $31
million charge ($20 million after taxes, 30 cents per share) related to certain
contract reserves.
Stock prices and dividends (unaudited)
The book value per common share at December 31, 1995 was $32.97 compared to
$27.91 at the end of 1994. Our directors declared the 230th consecutive
quarterly dividend during December 1995. Dividends declared per share in 1995
were $2.10, up 7 percent from $1.97 in 1994. The following table highlights the
market prices of our common and preference stocks and dividends paid for the
quarters of 1995 and 1994.
<TABLE>
<CAPTION>
Price of Price of Dividends
traded shares traded shares paid per share
Quarter 1995 1994 1995 1994
High Low High Low
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock 1 $70 $61-3/4 $77-1/2 $65-3/4 $ .50 $ .47
Par value $0.625 per share 2 81-3/4 67 71-1/4 61 .50 .47
3 82-5/8 71-3/8 75-1/8 63-5/8 .50 .50
4 78-5/8 64-1/8 74-3/4 62 .55 .50
Cumulative Serial 1 350 225 326 320 1.10 1.10
Preference Stock II 2 349-1/4 348 350 250 1.10 1.10
$4.40 Convertible 3 336-1/2 336-1/2 325 325 1.10 1.10
Series 1 4 325-5/8 300-5/8 316 275 1.10 1.10
Cumulative Serial 1 236 236 256-1/2 256-1/2 1.125 1.125
Preference Stock II 2 292-1/4 265 244 232 1.125 1.125
$4.50 Convertible 3 288 283 272 272 1.125 1.125
Series 3 4 290 254 238 232 1.125 1.125
</TABLE>
The $4.40 Convertible Series 1 was not actively traded during the first quarter
of 1995. The prices shown represent the range of asked(high) and bid(low)
quotations.
TRW INC. 39
<PAGE>
Management and Auditors' Report
_______________________________________________________________________________
REPORT OF MANAGEMENT
_______________________________________________________________________________
Management of TRW is responsible for the preparation of the accompanying
consolidated financial statements of the company and its subsidiaries. The
financial statements have been prepared in conformity with generally accepted
accounting principles and include the estimates and judgments of management.
The financial statements have been audited by Ernst & Young LLP, independent
auditors, whose report appears below.
Management has established and is responsible for maintaining a system of
internal accounting controls that it believes provides reasonable assurance
that assets are safeguarded and transactions are executed and recorded in
accordance with management's authorization. The system is tested and
evaluated regularly by the company's internal auditors as well as by the
independent auditors in connection with their annual audit.
TRW has an audit committee composed of four directors who are not members of
management. The committee meets regularly with management, the internal
auditors and the independent auditors in connection with its review of
matters relating to the company's financial statements, the company's
internal audit program, the company's system of internal accounting controls
and the services of the independent auditors. The committee also meets with
the internal auditors as well as the independent auditors, without management
present, to discuss appropriate matters. The committee also recommends to the
directors the designation of the independent auditors.
/s/ Joseph T. Gorman /s/ Ronald D. Sugar /s/ Carl G. Miller
Joseph T. Gorman Ronald D. Sugar Carl G. Miller
Chairman and Chief Executive Vice President Vice President and
Executive Officer and Chief Financial Officer Corporate Controller
January 23, 1996
_______________________________________________________________________________
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
_______________________________________________________________________________
Shareholders and Directors
TRW Inc.
We have audited the accompanying consolidated balance sheets of TRW Inc. and
subsidiaries as of December 31, 1995 and 1994, and the related consolidated
statements of earnings, cash flows and changes in shareholders' investment
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TRW Inc. and
subsidiaries at December 31, 1995 and 1994, and the consolidated results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
As discussed in the notes to financial statements, effective January 1, 1993,
the company changed its method of accounting for postemployment benefits.
/s/ Ernst & Young, LLP
Cleveland, Ohio
January 23, 1996
40 TRW Inc.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
TRW has no parent or parents. As of December 31, 1995, certain of its
subsidiaries, some of which also have subsidiaries, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
ORGANIZED UNDER VOTING SECURITIES
NAME THE LAWS OF OWNED (1)
---- --------------- -----------------
<S> <C> <C>
TRW U.K. Limited which owns United Kingdom 100.00%
TRW Remanufactured Steering Systems Limited United Kingdom 100.00%
TRW Steering Systems Limited United Kingdom 100.00%
TRW Ceramics Limited United Kingdom 100.00%
TRW Connectors Limited United Kingdom 100.00%
TRW Reda Pump Limited United Kingdom 100.00%
TRW Occupant Restraints Systems Limited United Kingdom 100.00%
TRW Transportation Electronics Limited United Kingdom 100.00%
TRW United-Carr Limited United Kingdom 100.00%
TRW Automotive Systems Limited United Kingdom 100.00%
TRW Vehicle Safety Systems Inc. which owns Delaware 100.00%
TRW Technar Inc. California 100.00%
TRW Safety Systems Inc. which in turn owns Delaware 100.00%
TRW Vehicle Safety Systems de Mexico, Mexico 100.00%
S.A. de C.V.
TRW Occupant Restraints
de Chihuahua S.A. de C.V. Mexico 100.00%
TRW Automotive Products Inc. which, together
with TRW International Holding Corporation,
directly or indirectly owns Delaware 100.00%
TRW GmbH fur industrielle Beteiligungen
which, in turn (in some cases together with
TRW Inc.), directly or indirectly owns Germany 100.00%
TRW Autoelektronika s.r.o. Czechoslovakia 100.00%
TRW Carr CSRS s.r.o. Czechoslovakia 100.00%
TRW-DAS, a.s. Czechoslovakia 92.40%
TRW Electro-Automation GmbH & Co. KG Germany 76.00%
TRW Fahrwerksysteme GmbH & Co. KG Germany 100.00%
TRW Fahrzeugelektrik GmbH & Co. KG Germany 100.00%
TRW FahrzeugelektrikVerwaltungs-GmbH Germany 100.00%
TRW Motorkomponenten GmbH & Co. KG Germany 100.00%
TRW Nelson Bolzenschweiss-Technik GmbH Germany 100.00%
TRW Presswerk Krefeld GmbH & Co. KG Germany 100.00%
TRW Occupant Restraints Systems GmbH Germany 100.00%
TRW United-Carr GmbH & Co. KG Germany 100.00%
TRW Steering Systems Japan Co. Ltd. Japan 100.00%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
ORGANIZED UNDER VOTING SECURITIES
NAME THE LAWS OF OWNED (1)
---- --------------- -----------------
<S> <C> <C>
TRW Canada Limited which owns Canada 100.00%
TRW Vehicle Safety Systems Limited Canada 100.00%
Quality Safety Systems Company Canada 60.00%
TRW do Brasil, S.A. Brazil 98.8%
TRW Components International Inc. Virginia 100.00%
TRW Italia S.p.A. which owns Italy 100.00%
TRW SIPEA S.p.A. Italy 100.00%
TRW France S.A. which owns France 100.00%
TRW Carr France SNC France 100.00%
TRW Koyo Steering Systems Company Tennessee 51.00%
TRW Export Sales Corporation U.S. Virgin Islands 100.00%
TRW System Services Company Delaware 100.00%
TRW Financial Systems, Inc. which owns California 100.00%
TRW Financial Systems Nederland B.V. Netherlands 100.00%
TRW Financial Systems of Norway AS Norway 100.00%
TRW Sabelt S.p.A. Italy 90.00%
TRW Air Bag Systems s.r.l. Italy 100.00%
TRW Direcciones de Vehiculos, S.A. Spain 100.00%
TRW Finance International Ireland 100.00%
TRW Module Systems S.A. France 80.00%
</TABLE>
_______________
(1) Total percentages held by TRW and/or its subsidiaries, disregarding
Directors' qualifying shares, if any.
The names of certain subsidiaries, which considered in the aggregate would
not constitute a "significant subsidiary" as such term is defined in the
regulations under the federal securities laws, have been omitted from the
foregoing list.
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements
Nos. 33-61711 on Form S-3, 33-42870 on Form S-3, 33-58263 on Form S-8, 33-58257
on Form S-8, 33-53503 on Form S-8, 33-29751 on Form S-8, 2-90748 on Form S-8, 2-
64035 on Form S-8, 2-47665 on Form S-8 and 2-26362 on Form S-8 of our report
dated January 23, 1996 with respect to the consolidated financial statements of
TRW Inc. included in the Annual Report (Form 10-K) for the year ended
December 31, 1995.
We also consent to the incorporation by reference in TRW Inc.'s
Registration Statement No. 33-58263 on Form S-8 pertaining to The TRW Employee
Stock Ownership and Stock Savings Plan and the related prospectus of our report
dated March 15, 1996 with respect to the financial statements of The TRW
Employee Stock Ownership and Stock Savings Plan for the fiscal year ended
December 31, 1995 included as Exhibit 99(a) to the TRW Inc. Annual Report (Form
10-K) for the year ended December 31, 1995.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
March 20, 1996
<PAGE>
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in TRW Inc.'s Registration
Statement No. 33-58257 on Form S-8 pertaining to The TRW Canada Stock Savings
Plan and the related prospectus of our report dated March 8, 1996 with respect
to the financial statements of The TRW Canada Stock Savings Plan for the year
ended December 31, 1995 included as Exhibit 99(b) to the TRW Inc. Annual Report
(Form 10-K) for the year ended December 31, 1995.
/s/ Ernst & Young
ERNST & YOUNG
Hamilton, Ontario
March 20, 1996
<PAGE>
EXHIBIT 24(a)
POWER OF ATTORNEY
Directors and Certain Officers of
TRW Inc.
THE UNDERSIGNED Directors and Officers of TRW Inc. hereby appoint M. A.
Coyle, J. C. Diggs, J. Powers, K. A. Weigand and J. L. Manning, Jr., and each of
them, as attorneys for the undersigned, with full power of substitution and
resubstitution, for and in the name, place and stead of the undersigned in the
capacity specified, to prepare or cause to be prepared, to execute and to file
with the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended (the "Act"), an Annual Report on Form 10-K for the year ended
December 31, 1995 relating to TRW Inc., such other periodic reports as may be
required pursuant to the Act, amendments and exhibits to any of the foregoing
and any and all other documents to be filed with the Securities and Exchange
Commission or elsewhere pertaining to such reports, with full power and
authority to take such other action deemed necessary or appropriate to effect
the filing of such documents.
EXECUTED the dates set forth below.
/s/ J. T. Gorman /s/ P. S. Hellman /s/ C. G. Miller
- ----------------------- ----------------------- -------------------------
J. T. Gorman, P. S. Hellman, C. G. Miller,
Chairman of the Board, President, Executive Vice President,
Chief Executive Officer Chief Operating Officer Chief Financial Officer
and Director and Director and Controller
February 7, 1996 February 7, 1996 February 7, 1996
/s/ M. H. Armacost /s/ M. Feldstein /s/ R. M. Gates
- ------------------------ ---------------------- -------------------------
M. H. Armacost, Director M. Feldstein, Director R. M. Gates, Director
February 7, 1996 February 7, 1996 February 7, 1996
/s/ C. H. Hahn /s/ G. H. Heilmeier /s/ K. N. Horn
- -------------------- ------------------------- -------------------------
C. H. Hahn, Director G. H. Heilmeier, Director K. N. Horn, Director
February 7, 1996 February 7, 1996 February 7, 1996
/s/ E. B. Jones /s/ W. S. Kiser /s/ D. B. Lewis
- --------------------- --------------------- ---------------------
E. B. Jones, Director W. S. Kiser, Director D. B. Lewis, Director
February 7, 1996 February 7, 1996 February 7, 1996
/s/ J. T. Lynn /s/ R. W. Pogue
- --------------------- ---------------------
J. T. Lynn, Director R. W. Pogue, Director
February 7, 1996 February 7, 1996
<PAGE>
EXHIBIT 24(b)
C E R T I F I C A T E
I, Jean M. Schmidt, do hereby certify that I am a duly elected, qualified
and acting Assistant Secretary of TRW Inc. ("TRW"), an Ohio corporation; that
attached hereto and marked as "Exhibit A" is a true and correct copy of
resolutions duly adopted by the Directors of TRW at a meeting thereof duly
called and held on February 7, 1996, at which meeting a quorum was present and
acting throughout; and that said resolutions have not been modified, revoked or
rescinded in any manner and are now in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and have caused the seal of
TRW to be affixed hereto at Lyndhurst, Ohio this 20th day of March, 1996.
/s/ Jean M. Schmidt
--------------------------
Assistant Secretary
<PAGE>
EXHIBIT A
RESOLVED that any officer or assistant officer of the Corporation is authorized
and empowered, for and on behalf of the Corporation, to prepare or cause to be
prepared, to execute and to file with the Securities and Exchange Commission,
Washington, D. C. (the "Commission"), the Corporation's Annual Report on
Form 10-K for the year ended December 31, 1995, such other periodic reports as
may be required pursuant to the Securities Exchange Act of 1934, as amended (the
"Act"), amendments and exhibits to any of the foregoing and any and all other
documents to be filed with the Commission or elsewhere pertaining to such
reports, and to take other action deemed necessary and appropriate to effect the
filing of all such reports under the Act, including the execution of a power of
attorney evidencing the authority set forth herein; and
FURTHER RESOLVED that James C. Diggs, Jan Powers, Kathleen A. Weigand and
J. Lawrence Manning, Jr. and each of them is appointed an attorney for the
Corporation, with full power of substitution and resubstitution, to execute and
file, for and on behalf of the Corporation, the Annual Report on Form 10-K,
other periodic reports, amendments and exhibits to any of the foregoing and any
and all other documents to be filed with the Commission or elsewhere pertaining
to such reports, with full power and authority to take or cause to be taken all
other actions deemed necessary and appropriate to effect the purposes of the
foregoing resolution.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 59
<SECURITIES> 0
<RECEIVABLES> 1,449
<ALLOWANCES> 21
<INVENTORY> 534
<CURRENT-ASSETS> 2,336
<PP&E> 5,866
<DEPRECIATION> 3,303
<TOTAL-ASSETS> 5,890
<CURRENT-LIABILITIES> 2,012
<BONDS> 541
1
0
<COMMON> 40
<OTHER-SE> 2,131
<TOTAL-LIABILITY-AND-EQUITY> 5,890
<SALES> 10,172
<TOTAL-REVENUES> 10,172
<CGS> 8,190
<TOTAL-COSTS> 8,190
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 708
<INCOME-TAX> 262
<INCOME-CONTINUING> 446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 446
<EPS-PRIMARY> 6.69
<EPS-DILUTED> 6.62
</TABLE>
<PAGE>
EXHIBIT 99(a)
Audited Financial Statements
THE TRW EMPLOYEE STOCK OWNERSHIP
AND STOCK SAVINGS PLAN
December 31, 1995 and 1994
<PAGE>
Report of Independent Auditors
Board of Administration
The TRW Employee Stock Ownership and
Stock Savings Plan
We have audited the accompanying statements of net assets available for
benefits of The TRW Employee Stock Ownership and Stock Savings Plan as of
December 31, 1995 and 1994, and the related statements of changes in net assets
available for benefits for the years then ended. These financial statements are
the responsibility of the Plan's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of The TRW
Employee Stock Ownership and Stock Savings Plan as of December 31, 1995 and
1994, and the changes in net assets available for benefits for the years then
ended, in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule
of assets held for investment purposes as of December 31, 1995, and the
schedule of reportable transactions for the year then ended are presented for
purposes of complying with the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974, and are not a required part of the basic financial statements. The Fund
Information in the statement of net assets available for benefits and the
statement of changes in net assets available for benefits is presented for
purposes of additional analysis rather than to present the net assets available
for benefits and changes in net assets available for benefits of each fund. The
supplemental schedules have been subjected to the auditing procedures applied
in our audit of the 1995 financial statements and, in our opinion, are fairly
stated in all material respects in relation to the 1995 basic financial
statements taken as a whole.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
March 15, 1996
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Net Assets Available for Benefits with Fund Information
December 31, 1995
<TABLE>
<CAPTION>
TRW Stock Fund
-------------------------------
Participant Non-Participant Equity Insured Small Company Bond
Directed Directed Fund Return Fund Equity Fund Index Fund Totals
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
TRW Inc. Common Stock $285,150,030 $539,111,372 $ 824,261,402
Guaranteed investment
contracts $512,421,483 512,421,483
Bankers Trust Pyramid
Equity Index Fund $377,675,716 377,675,716
Bankers Trust Pyramid
Russell 2500 Index
Fund $64,724,947 64,724,947
Bankers Trust Pyramid
Intermediate
Government/Corporate
Bond Index Fund $18,567,359 18,567,359
Bankers Trust Pyramid
Directed Account Cash
Fund 1,081,907 1,940,902 6,525,288 9,548,097
Receivable from TRW Inc. 47,051 84,407 56,359 61,110 24,247 5,970 279,144
Participant loans
receivable 15,864,840 15,037,019 21,275,831 4,513,551 952,282 57,643,523
Interest receivable 58,105 2,969,349 3,027,454
Receivable from other
funds 452,425 250,602 396,204 1,099,231
---------------------------------------------------------------------------------------------------------
Total assets 302,201,933 541,136,681 393,221,519 543,253,061 69,513,347 19,921,815 1,869,248,356
LIABILITIES
Payable to other funds 939,705 159,532 1,099,237
Accrued expenses 86,865 155,832 120,379 269,939 38,316 11,001 682,332
---------------------------------------------------------------------------------------------------------
Total liabilities 1,026,570 155,832 120,379 429,471 38,316 11,001 1,781,569
---------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
BENEFITS $301,175,363 $540,980,849 $393,101,140 $542,823,590 $69,475,031 $19,910,814 $1,867,466,787
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
2
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits with Fund Information
December 31, 1995
<TABLE>
<CAPTION>
TRW Stock Fund
-------------------------------
Participant Non-Participant Equity Insured Small Company Bond
Directed Directed Fund Return Fund Equity Fund Index Fund Totals
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends--TRW Inc.
Common Stock $ 7,387,251 $ 14,198,849 $ 21,586,100
Interest 168,774 324,394 $ 52,065 $ 35,421,071 $ 60 $ 16 35,966,380
---------------------------------------------------------------------------------------------------------
Investment income 7,556,025 14,523,243 52,065 35,421,071 60 16 57,552,480
Contributions from TRW
Inc. 37,648,623 37,648,623
Contributions from
participants 20,666,119 24,744,499 30,721,981 9,472,853 2,421,588 88,027,040
Net realized gain on
disposition of
investments 6,075,541 11,749,565 6,607,651 320,904 88,688 24,842,349
Unrealized appreciation
of investments 37,014,004 68,060,707 94,567,420 13,142,214 2,358,192 215,142,537
Transfers from other
funds 21,143,038 23,880,726 44,422,822 21,467,113 9,328,697 120,242,396
Interest income on
participant loans 1,205,785 1,124,659 1,729,562 293,488 72,605 4,426,099
---------------------------------------------------------------------------------------------------------
93,660,512 131,982,138 150,977,020 112,295,436 44,696,632 14,269,786 547,881,524
LESS
Withdrawals and
distributions:
Cash 1,767,498 2,128,278 16,450,704 40,077,113 3,038,017 813,435 64,275,045
TRW Inc. Common Stock
(177,354 participant
directed shares and
386,539 non-participant
directed shares) 13,223,504 27,965,611 41,189,115
---------------------------------------------------------------------------------------------------------
14,991,002 30,093,889 16,450,704 40,077,113 3,038,017 813,435 105,464,160
Distribution of dividends
on TRW Inc. Common Stock 13,785,763 13,785,763
Administrative expenses 162,070 314,430 279,200 905,400 104,300 15,100 1,780,500
Transfers to other funds 31,236,818 19,809,959 52,530,743 11,872,824 4,792,052 120,242,396
---------------------------------------------------------------------------------------------------------
46,389,890 44,194,082 36,539,863 93,513,256 15,015,141 5,620,587 241,272,819
---------------------------------------------------------------------------------------------------------
Increase in net assets
for year 47,270,622 87,788,056 114,437,157 18,782,180 29,681,491 8,649,199 306,608,705
Net assets available for
benefits at beginning
of year 253,904,741 453,192,793 278,663,983 524,041,410 39,793,540 11,261,615 1,560,858,082
---------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF YEAR $301,175,363 $540,980,849 $393,101,140 $542,823,590 $69,475,031 $19,910,814 $1,867,466,787
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
3
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Net Assets Available for Benefits with Fund Information
December 31, 1994
<TABLE>
<CAPTION>
TRW Stock Fund
-------------------------------
Participant Non-Participant Equity Insured Small Company Bond
Directed Directed Fund Return Fund Equity Fund Index Fund Totals
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
TRW Inc. Common Stock $236,101,644 $448,510,284 $ 684,611,928
Guaranteed investment
contracts $491,100,036 491,100,036
Bankers Trust Pyramid
Equity Index Fund $264,983,112 264,983,112
Bankers Trust Pyramid
Russell 2500 Index
Fund $36,216,916 36,216,916
Bankers Trust Pyramid
Directed Account Cash
Fund 2,614,228 4,660,729 7,617,449 14,892,406
Bankers Trust Pyramid
Intermediate
Government/Corporate
Bond Index Fund $10,392,015 10,392,015
Receivable from TRW Inc. 93,727 238,925 152,832 209,102 65,479 16,345 776,410
Participant loans
receivable 14,999,193 14,012,797 22,507,748 3,300,945 877,341 55,698,024
Interest receivable 55,109 2,821,391 2,876,500
Receivable from other
funds 162,638 222,199 384,837
---------------------------------------------------------------------------------------------------------
Total assets 254,026,539 453,409,938 279,148,741 524,255,726 39,805,539 11,285,701 1,561,932,184
LIABILITIES
Payable to other funds 354,256 21,270 9,311 384,837
Accrued expenses 121,798 217,145 130,502 193,046 11,999 14,775 689,265
---------------------------------------------------------------------------------------------------------
Total liabilities 121,798 217,145 484,758 214,316 11,999 24,086 1,074,102
---------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
BENEFITS $253,904,741 $453,192,793 $278,663,983 $524,041,410 $39,793,540 $11,261,615 $1,560,858,082
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
4
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits with Fund Information
December 31, 1994
<TABLE>
<CAPTION>
TRW Stock Fund
-------------------------------
Participant Non-Participant Equity Insured Small Company Bond
Directed Directed Fund Return Fund Equity Fund Index Fund Totals
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Investment income:
Dividends--TRW Inc.
Common Stock $ 6,623,835 $13,157,190 $ 19,781,025
Interest 143,815 284,454 $ 1,380 $ 33,880,102 $ 46 $ 18 34,309,815
---------------------------------------------------------------------------------------------------------
Investment income 6,767,650 13,441,644 1,380 33,880,102 46 18 54,090,840
Contributions from TRW
Inc. 36,366,932 36,366,932
Contributions from
participants 18,401,168 23,943,347 31,556,814 7,643,495 2,076,882 83,621,706
Net realized gain on
disposition of
investments 5,855,567 11,611,587 6,862,404 56,836 3,224 24,389,618
Transfers from other
funds 21,550,048 11,710,877 38,048,599 16,257,873 4,330,911 91,898,308
Interest income on
participant loans 1,080,012 1,081,952 1,680,507 234,880 63,963 4,141,314
---------------------------------------------------------------------------------------------------------
53,654,445 61,420,163 43,599,960 105,166,022 24,193,130 6,474,998 294,508,718
LESS
Withdrawals and
distributions:
Cash 2,453,169 2,461,862 14,968,131 36,371,252 2,133,545 609,362 58,997,321
TRW Inc. Common Stock
(205,837 participant
directed shares and
366,973
non-participant
directed shares) 13,703,993 26,094,278 39,798,271
---------------------------------------------------------------------------------------------------------
16,157,162 28,556,140 14,968,131 36,371,252 2,133,545 609,362 98,795,592
Distribution of dividends
on TRW Inc. Common Stock 12,766,959 12,766,959
Unrealized depreciation
of investments 16,072,679 33,249,942 3,292,084 1,025,812 375,586 54,016,103
Administrative expenses 266,507 528,993 346,800 897,500 86,500 32,618 2,158,918
Transfers to other funds 17,888,220 20,799,258 36,616,591 11,317,848 5,276,391 91,898,308
---------------------------------------------------------------------------------------------------------
50,384,568 75,102,034 39,406,273 73,885,343 14,563,705 6,293,957 259,635,880
---------------------------------------------------------------------------------------------------------
Increase (decrease) in
net assets for year 3,269,877 (13,681,871) 4,193,687 31,280,679 9,629,425 181,041 34,872,838
Net assets available for
benefits at beginning of
year 250,634,864 466,874,664 274,470,296 492,760,731 30,164,115 11,080,574 1,525,985,244
---------------------------------------------------------------------------------------------------------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF YEAR $253,904,741 $453,192,793 $278,663,983 $524,041,410 $39,793,540 $11,261,615 $1,560,858,082
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
5
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements
December 31, 1995
A. SIGNIFICANT ACCOUNTING POLICIES
Investments in the TRW Stock Fund consist primarily of TRW Inc. (TRW) common
stock which is traded on the New York Stock Exchange and valued at the last
reported sales price on the last business day of the fiscal year.
Investments in the Equity Fund are valued at the redemption price established
by the Trustee, which is based on the fair value of the Bankers Trust Pyramid
Equity Index Fund assets. This Fund is constructed and maintained with the
objective of providing investment results which approximate the overall
performance of the Standard & Poor's Composite Index of 500 stocks. Income is
accumulated and reinvested in the Fund and included in the determination of
unit values.
The Insured Return Fund consists of fully benefit responsive investment
contracts with insurance companies, banks and other financial institutions
and short term investment funds. Benefit responsive contracts provide
contract value payments for participant disbursements, loans and investment
transfers as allowed under the plan. There are exceptions for payments to
participants who, as a result of a corporate event, cease to be employed by
TRW. A corporate event includes a divestiture of an operating unit (for
example, a subsidiary or a division), a significant special early retirement
program or other corporate action that could be construed as causing
increased Plan payments to participants.
Investment contracts provide a stated rate of interest on principal for a
stated period of time. All investment contracts are accounted for at contract
value because they are fully benefit responsive. In accordance with Statement
of Position 94-4, which the Plan adopted effective January 1, 1995, contract
value equals fair value because no event has occurred that affects the value
of any contracts. The investment contracts are of three types: general
account, separate account, and synthetic investment contracts. Investment
contracts in the general account of an insurance company where assets are not
specifically identifiable have fixed rates of interest or an indexed rate of
interest for the life of the contract. Investment contracts in separate
accounts of an insurance company have underlying assets that are specifically
identifiable and held for the benefit of the Plan. Under synthetic investment
contracts, the Plan owns assets with an investment contract from an insurance
company, bank or other financial institution surrounding the asset. Both
separate account and synthetic contracts have periodic interest rate resets
(monthly, quarterly, or semi-annually) based on the performance of the
underlying assets. All separate account and synthetic contracts have a
guaranteed return of principal. As of December 31, 1995 and 1994,
approximately $159 and $223 million was invested in general account assets,
$124 and $110 million in separate account assets, and $232 and $158 million
in assets owned by the Plan, respectively.
6
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
A. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
The weighted average yield (excluding administrative expenses) for all
investment contracts was 6.95% in 1995 and 7.07% in 1994. The crediting
interest rate for all investment contracts was 7.09% at December 31, 1995 and
7.26% at December 31, 1994.
Investments in the Bond Index Fund are valued at the redemption price
established by the Trustee, which is based on the fair value of the Bankers
Trust Pyramid Intermediate Government Corporate Bond Index Fund. The Bankers
Trust Pyramid Intermediate Government Corporate Bond Index Fund is
constructed and maintained with the objective of providing investment results
which approximate the overall performance of the high quality U.S. government
and corporate bonds included in the Lehman Brothers Government/Corporate
Index. Income is accumulated and reinvested in the fund and included in the
determination of unit values.
Investments in the Small Company Equity Fund are valued at the redemption
price established by the Trustee, which is based on the fair value of the
Bankers Trust Pyramid Russell 2500 Index Fund Assets. The Small Company
Equity Fund is constructed and maintained with the objective of providing
investment results which approximate the overall performance of the 2,500
common stocks included in the Russell 2500 Equity Index. Income is
accumulated and reinvested in the Fund and included in the determination of
unit values.
The cost of securities sold is determined by the average cost method for
purposes of determining realized gains and losses.
B. DESCRIPTION OF THE PLAN
The Plan is a defined contribution plan, and is comprised of the TRW Stock
Fund, Equity Fund, Insured Return Fund, Bond Index Fund and Small Company
Equity Fund (the Funds). Participation in the Plan is available to
substantially all domestic employees of TRW who have been employed for at
least twelve months. Effective April 1, 1996, participants who have been
employed for at least three months will be eligible for
participation in the Plan. The Plan is governed by the Internal Revenue Code and
related legislation.
7
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
PARTICIPANT CONTRIBUTIONS
The Plan allows eligible employees to contribute up to 13% of qualifying
compensation on a before-tax basis by way of salary reduction; such
contributions are made in increments of one-tenth of one percent of
qualifying compensation and could not exceed $9,240 in 1995 and 1994.
Participants may also elect to contribute, in increments of one percent, up
to 10% of qualifying compensation on an after-tax basis. Participants can
make up to two contribution percentage changes per month. Annual
contributions to a participant's account (including before-tax, after-tax and
TRW matching contributions) and to any other defined contribution plan is
limited to the lesser of $30,000 or 25% of the participant's annual
compensation reduced by the amount of before-tax contributions.
Participants determine the funds in which to invest their contributions.
Employee contributions may be invested, in multiples of 10% percent, in one
or more of the five investment funds. Fund elections may be changed at any
time.
TRW CONTRIBUTIONS
TRW contributes to the Plan each month, out of current or accumulated
earnings, an amount equal to 100% of each participant's before-tax
contributions for such month without exceeding three percent of the
participant's qualifying compensation. Participants immediately vest in the
TRW contributions. All TRW matching contributions are invested in the ESOP
portion of the TRW Stock Fund. TRW contributions always remain in the TRW
Stock Fund and may not be transferred. TRW contributions may be in the form
of cash or treasury or authorized and unissued shares of TRW Common Stock.
TRW Common Stock contributed is to be valued by any reasonable method
selected by TRW.
8
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
The amount and type of TRW contributions are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
--------------------------------
<S> <C> <C>
TRW Common Stock $ 16,939,149 $ 23,398,464
Cash 20,709,474 12,968,468
--------------------------------
$ 37,648,623 $ 36,366,932
--------------------------------
--------------------------------
</TABLE>
WITHDRAWALS AND DISTRIBUTIONS
Upon termination of employment, a participant may elect to receive his or her
account, less the unpaid balance of any loan outstanding, in a single sum or
elect to defer the payment until the year following termination except a
participant whose account balance exceeds $3,500 may defer such payments
until he or she reaches age 70. Generally, distributions from the TRW Stock
Fund will be paid only in whole shares of TRW Common Stock with the balance
in cash. Participants who have less than 100 shares of TRW stock receive the
value of their shares in cash unless they elect to receive shares.
If a participant elects to defer payment of his or her account, the
undistributed account balance remains invested in the Plan. The following is
the total value of the accounts subject to deferred elections (8,243 as of
December 31, 1995 and 8,772 as of December 31, 1994) that are included in the
net assets of the funds:
<TABLE>
<CAPTION>
1995 1994
-----------------------------
<S> <C> <C>
TRW Stock Fund $ 199,229,528 $ 177,471,974
Equity Fund 87,771,442 64,261,772
Insured Return Fund 166,987,746 168,485,775
Bond Index Fund 3,233,663 2,066,316
Small Company Equity Fund 10,933,711 6,275,367
-----------------------------
$ 468,156,090 $ 418,561,204
-----------------------------
-----------------------------
</TABLE>
9
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
Effective January 1, 1988, participants who have attained age 55 as of the
end of the preceding fiscal year-end and commenced participation in the Plan
at least ten years prior may elect, within an election period during each of
the succeeding five consecutive plan years, to receive a special ESOP
distribution. The amount eligible for this special distribution is 50% of the
prior fiscal year-end value (including previous withdrawals) of TRW Common
Stock acquired for the participant's account by the ESOP since 1986, reduced
by any previous withdrawals.
PARTICIPANT LOANS
Participants can borrow from $1,000 to $50,000 (in increments of $100) of
their before-tax contributions, but such borrowings cannot exceed 50% of a
participant's total Plan balance. The interest rate is fixed (prime rate at
the end of the second to last business day of the quarter plus one percent)
and the repayment period cannot be less than one year or more than five years.
OTHER
Although it has not expressed any intent to do so, TRW reserves the right to
suspend or terminate the Plan. In the event of termination, the amount of
each participant's account may be retained in trust for the benefit of the
participant.
The above description of the Plan provides only general information.
Participants should refer to the Summary Plan Description, which is available
from the Stock Savings Plan's Participant Service Center, and annual
prospectus for a more complete description of the Plan's provisions.
The preparation of the financial statements in conformity with Generally
Accepted Accounting Principles requires the use of management's estimates.
Certain amounts in prior year financial statements have been reclassified to
conform with current year presentation.
10
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
C. INVESTMENTS
The fair value of individual investments that represent 5% or more of the
Plan's total assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
------------------------------
<S> <C> <C>
TRW Inc. Common Stock $ 824,261,402 $ 684,611,928
Bankers Trust Pyramid Equity
Index Fund 377,675,716 264,983,112
</TABLE>
The net realized gain on disposition of investments is as follows:
<TABLE>
<CAPTION>
TRW STOCK FUND
1995 1994
------------------------------
<S> <C> <C>
Value realized $ 41,258,096 $ 39,868,378
Average cost 23,432,990 22,401,224
------------------------------
NET REALIZED GAIN $ 17,825,106 $ 17,467,154
------------------------------
------------------------------
<CAPTION>
EQUITY FUND
1995 1994
------------------------------
<S> <C> <C>
Value realized $ 20,436,097 $ 29,104,446
Average cost 13,828,446 22,242,042
------------------------------
NET REALIZED GAIN $ 6,607,651 $ 6,862,404
------------------------------
------------------------------
<CAPTION>
SMALL COMPANY EQUITY FUND
1995 1994
------------------------------
<S> <C> <C>
Value realized $ 2,870,027 $ 5,248,954
Average cost 2,549,123 5,192,118
------------------------------
NET REALIZED GAIN $ 320,904 $ 56,836
------------------------------
------------------------------
11
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
C. Investments--Continued
<CAPTION>
BOND INDEX FUND
1995 1994
------------------------------
<S> <C> <C>
Value realized $ 1,042,611 $ 3,043,048
Average cost 953,923 3,039,824
------------------------------
NET REALIZED GAIN $ 88,688 $ 3,224
------------------------------
------------------------------
</TABLE>
The net unrealized appreciation of investments included in net assets is as
follows:
<TABLE>
<CAPTION>
TRW Stock Equity Small Company Bond Index
Fund Fund Equity Fund Fund
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1992 $220,270,572 $ 51,679,152 $ 0 $ 0
Increase for the year 95,060,294 16,834,016 1,547,470 355,749
-----------------------------------------------------------------
Balance at December 31, 1993 315,330,866 68,513,168 1,547,470 355,749
(Decrease) for the year (49,322,621) (3,292,084) (1,025,812) (375,586)
-----------------------------------------------------------------
Balance at December 31, 1994 266,008,245 65,221,084 521,658 (19,837)
Increase for the year 105,074,711 94,567,420 13,142,214 2,358,192
-----------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 $371,082,956 $159,788,504 $13,663,872 $2,338,355
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
On a revalued basis, which is in accordance with Department of Labor Form
5500 requirements, the realized and unrealized gains (losses) are not
available at the date of the Report of Independent Auditors. A separate
schedule will be included in the Form 5500 when filed.
D. ADMINISTRATIVE EXPENSES
Generally, salaries and wages of the administrative staff are paid by TRW.
Expenses relating to investment advisor fees, management fees, trustee fees,
audit fees, printing and postage are paid from Plan assets. Expenses directly
attributable to any one fund are charged to that fund. Expenses not directly
attributable to any one fund are allocated to each fund in the proportion
that the market value of the assets of each fund bears to the total market
value of all Plan assets. Brokerage fees and commissions incident to the
purchase or sale of securities are paid by the fund in which they are
incurred and are included in the cost of securities purchased or sold.
12
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
E. FEDERAL INCOME TAX STATUS OF THE PLAN
The Plan is exempt from federal income taxes as a qualified profit sharing
plan. The Plan has received a favorable determination letter from the
Internal Revenue Service as to the tax qualified status of the Plan. The
Plan's Board of Administration believes that the Plan is in operational
compliance with the Internal Revenue Code of 1986 and will remain qualified
and exempt from federal income taxes.
F. TRANSACTIONS WITH PARTIES-IN-INTEREST
Party-in-interest transactions include the purchase and sale of short-term
investments managed by the Plan's Trustee, Bankers Trust Company.
At December 31, 1995 and 1994, the Bankers Trust Pyramid Equity Index Fund
holds 164,386 and 193,086 shares of TRW Inc. Common Stock having a fair value
of $12,739,915 and $12,743,676, respectively.
Bankers Trust Company managed assets of the Plan of approximately
$470,516,119 and $326,484,449 at December 31, 1995 and 1994, respectively,
and received trustee fees of $543,230 and $679,021 in 1995 and 1994,
respectively.
There were no party-in-interest transactions which were prohibited under
Department of Labor Regulations.
G. NUMBER OF PARTICIPANTS (UNAUDITED)
The summary below sets forth the number of contributing participants by their
current investment option(s):
<TABLE>
<CAPTION>
DECEMBER 31
1995 1994
--------------------------
<S> <C> <C>
TRW Stock Fund 13,131 12,208
Equity Fund 13,779 13,397
Insured Return Fund 15,315 16,020
Bond Index Fund 3,213 2,631
Small Company Equity Fund 6,871 5,121
</TABLE>
13
<PAGE>
The TRW Employee Stock Ownership and
Stock Savings Plan
Notes to Financial Statements--Continued
G. NUMBER OF PARTICIPANTS (UNAUDITED)--CONTINUED
The total number of participants in the Plan is less than the sum of the
number of employees shown above because many are participating in more than
one fund.
H. SUBSEQUENT EVENT
In February 1996, TRW entered into an agreement in principle to sell
substantially all of the businesses in the Information Systems and Services
segment. The sale, which is expected to result in a gain, is subject to the
execution of a definitive agreement, corporate and regulatory approval, and
other conditions.
14
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1995
<TABLE>
<CAPTION>
Crediting
Interest Fair Value
Shares Maturity Date Rate Cost (See Note A)
- ------------ --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK
10,635,631 TRW Inc. $453,178,447 $824,261,402
-----------------------------
TOTAL COMMON STOCK 453,178,447 824,261,402
SHORT-TERM INVESTMENTS
Bankers Trust Pyramid Directed
Account Cash Fund 9,548,097 9,548,097
-----------------------------
TOTAL SHORT-TERM INVESTMENTS 9,548,097 9,548,097
GUARANTEED INVESTMENT CONTRACTS
SECURITY BACKED INVESTMENTS
Bankers Trust:
Contract 93-515 ALP September 30, 2000 5.41% 46,423,224 46,423,224
People's Security Life:
Contract 00212TR-11 December 1, 2000 6.42 10,125,197 10,125,197
Provident Life & Accident:
Contract 630-05575 September 1, 2003 5.71 40,112,493 40,112,493
Transamerica Life & Annuity:
Contract 76540 November 15, 2004 6.31 20,591,234 20,591,234
-----------------------------
117,252,148 117,252,148
SEPARATE ACCOUNT CONTRACTS
Aetna Life Insurance Co.:
Contract 014460 November 15, 2002 7.96 30,052,815 30,052,815
Crown Life Insurance Co.:
Contract 9005876 March 3, 1998 8.91 5,169,086 5,169,086
John Hancock Mutual Life:
Contract 7441 May 1, 2004 6.87 23,244,665 23,244,665
Contract 7441-2 June 30, 1998 7.14 22,946,556 22,946,556
Metropolitan Life Insurance Co:
Contract 12702 January 2, 2001 6.05 31,862,235 31,862,235
Contract 18544-B December 31, 1998 8.45 2,880,913 2,880,913
15
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<CAPTION>
Crediting
Interest Fair Value
Shares Maturity Date Rate Cost (See Note A)
- ------------ --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS--
CONTINUED
Prudential Insurance Co.
of American:
Contract 6581-1 July 11, 2001 9.35 1,971,943 1,971,943
Contract 6661-2 May 15, 2001 9.32 4,739,832 4,739,832
Contract 6702-3 November 15, 2000 9.00 846,223 846,223
-----------------------------
123,714,268 123,714,268
SYNTHETIC INVESTMENT CONTRACTS
People Security Life:
Contract 00025TR-1 June 25, 1997 4.74 5,989,883 5,989,883
Contract 00025TR-2 April 27, 1998 5.27 4,996,546 4,996,546
Contract 00025TR-3 September 25, 1998 5.63 3,969,148 3,969,148
Contract 00025TR-4 January 15, 1998 5.42 2,462,080 2,462,080
Contract 00025TR-5 May 26, 1998 5.24 2,499,406 2,499,406
Contract 00025TR-6 May 26, 1998 5.30 4,294,261 4,294,261
Contract 00025TR-7 July 15, 1997 5.14 1,033,282 1,033,282
Contract 00025TR-8 November 15, 2000 6.51 4,805,311 4,805,311
Contract 00025TR-9 November 15, 2000 7.20 4,684,272 4,684,272
Contract 00025TR-10 May 17, 1999 7.00 9,545,746 9,545,746
Contract 00025TR-11 February 16, 1999 7.10 956,826 956,826
Contract 00025TR-12 March 25, 1999 7.54 4,814,756 4,814,756
Contract 00025TR-13 July 16, 2001 8.59 3,887,713 3,887,713
Contract 00025TR-14 June 15, 2000 7.89 6,048,767 6,048,767
Contract 00025TR-15 March 10, 2000 6.37 5,014,434 5,014,434
Provident Life & Accident:
Contract 630-05751 September 15, 2000 7.35 14,222,825 14,222,825
Rabobank Nederland:
Contract TRW 109501 July 2, 2001 6.20 5,025,590 5,025,590
-----------------------------
84,250,846 84,250,846
16
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<CAPTION>
Crediting
Interest Fair Value
Shares Maturity Date Rate Cost (See Note A)
- ------------ --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS--
CONTINUED
COLLATERALIZED
CDC Investment Management Corp.:
Contract 115-01 April 15, 1998 6.45 5,126,164 5,126,164
Contract 115-02 April 30, 1999 7.14 6,036,078 6,036,078
Contract 115-03 August 31, 1998 7.19 6,000,000 6,000,000
Contract 115-04 December 31, 1998 8.08 6,078,422 6,078,422
Contract 115-05 June 30, 2000 7.48 5,971,557 5,971,557
-----------------------------
29,212,221 29,212,221
FIXED RATE AND FIXED TERM
Aetna Life Insurance Company:
Contract 13822-001 April 7, 1997 9.69 15,505,679 15,505,679
Contract 13822-002 December 5, 1997 9.77 15,516,871 15,516,871
Canada Life Assurance Company:
Contract 45800 June 1, 1998 5.23 5,226,345 5,226,345
Contract 45839 June 16, 1999 7.06 6,191,386 6,191,386
Continental Assurance Company:
Contract 12619 July 1, 1996 8.50 9,819,249 9,819,249
Contract 12619-B November 1, 1996 8.42 9,658,286 9,658,286
John Hancock Mutual Life:
Contract 5660 August 15, 1997 9.43 8,070,050 8,070,050
Contract 7314 January 14, 1999 5.40 11,074,115 11,074,115
Mass Mutual Life Insurance Company:
Contract 10062 November 3, 1997 9.70 16,008,026 16,008,026
New York Life Ins. Company:
Contract 6232 August 1, 1996 8.45 10,349,683 10,349,683
Contract GA06216 June 3, 1996 8.45 10,441,705 10,441,705
Peoples Security Life:
Contract BDA0243FR January 16, 1996 8.21 1,071,625 1,071,625
Prudential Ins. Co. of America:
Contract 6569-501 May 1, 1996 8.41 14,143,535 14,143,535
17
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<CAPTION>
Crediting
Interest Fair Value
Shares Maturity Date Rate Cost (See Note A)
- ------------ --------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS--
CONTINUED
Sun Life Ass. Canada (US):
Contract S-0882-G July 31, 1998 5.54 7,911,953 7,911,953
Contract S-0910-G August 2, 1999 7.39 5,509,748 5,509,748
--------------------------------
146,498,256 146,498,256
VARIABLE RATE AND FIXED TERM
John Hancock Mutual Life
Contract 7839 March 1, 2000 6.80 5,140,103 5,140,103
--------------------------------
5,140,103 5,140,103
VARIABLE RATE AND TERM
People Security Life:
Contract BDA0185ST March 30, 1996 6.23 6,353,641 6,353,641
--------------------------------
TOTAL GUARANTEED INVESTMENT
CONTRACTS 512,421,483 512,421,483
COMMON TRUST FUNDS
Bankers Trust Pyramid Equity
Index Fund 217,887,213 377,675,716
Bankers Trust Pyramid Russell
2,500 Index Fund 51,061,075 64,724,947
Bankers Trust Pyramid Government/
Corporate Fixed Income Index Fund 16,229,004 18,567,359
--------------------------------
TOTAL COMMON TRUST FUNDS 285,177,292 460,968,022
Participant loans 9.50 57,643,523 57,643,523
--------------------------------
TOTAL INVESTMENTS $1,317,968,842 $1,864,842,527
--------------------------------
--------------------------------
</TABLE>
18
<PAGE>
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Reportable Transactions
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Fair Value
of Asset on
Purchase Selling Cost Transaction Net Gain
Identity of Party Involved Description of Assets Price Price of Asset Date (Loss)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS IN EXCESS OF 5% OF THE FAIR VALUE
OF PLAN ASSETS
There were no single transactions in excess of 5% of the
fair value of Plan assets.
SERIES OF TRANSACTIONS IN EXCESS OF 5% OF THE FAIR VALUE
OF PLAN ASSETS
Bankers Trust: BT Pyramid Directed Account
319 Purchases Cash Fund $181,610,724 $181,610,724 $181,610,724 $0
79 Sales $186,955,034 186,955,034 186,955,034 0
</TABLE>
19
<PAGE>
Exhibit 99(b)
FINANCIAL STATEMENTS
THE TRW CANADA STOCK SAVINGS PLAN
DECEMBER 31, 1995 AND 1994
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Participants and the Board of Administration of
THE TRW CANADA STOCK SAVINGS PLAN
We have audited the statements of financial condition of the TRW Stock Fund,
Pooled Money Market Fund Employees Profit Sharing Plan, Pooled Balanced Fund
Registered Retirement Savings Plan and Pooled Money Market Fund Registered
Retirement Savings Plan [constituting THE TRW CANADA STOCK SAVINGS PLAN] as at
December 31, 1995 and 1994 and the related statements of operations and changes
in fund equity for these funds for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the several funds of THE TRW CANADA STOCK
SAVINGS PLAN as at December 31, 1995 and 1994 and the results of their
operations and the changes in fund equity for the years then ended in accordance
with accounting principles generally accepted in Canada.
/s/ Ernst & Young
ERNST & YOUNG
Hamilton, Canada, Chartered Accountants
March 8, 1996.
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
TRW STOCK FUND
STATEMENTS OF FINANCIAL CONDITION
As at December 31
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 39,477 56,984
Receivable from TRW Canada Limited 18,483 9,608
Investments at quoted market value
TRW Inc. common stock
7,768 shares [cost $760,993] in 1995 and
8,018 shares [cost $736,255] in 1994 821,155 741,825
- -------------------------------------------------------------------------------------------
879,115 808,417
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short term distributions 720,511 664,220
Fund equity [including net unrealized appreciation of investments] 158,604 144,197
- -------------------------------------------------------------------------------------------
879,115 808,417
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NUMBER OF SHARES OUTSTANDING AT DECEMBER 31 7,768 8,018
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
FUND EQUITY PER SHARE AT DECEMBER 31 20.4176 17.9842
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
TRW STOCK FUND
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
Years ended December 31
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INVESTMENT INCOME
Dividends on TRW Inc. common stock 10,474 10,458
Interest 493 159
- -------------------------------------------------------------------------------------------
10,967 10,617
- -------------------------------------------------------------------------------------------
CONTRIBUTIONS
Participants 389,397 387,848
TRW Canada Limited
50% of total participants' contributions to all funds 362,356 370,938
- -------------------------------------------------------------------------------------------
751,753 758,786
- -------------------------------------------------------------------------------------------
Net realized gain on transfer
of investments to participants [NOTE 4] 2,810 116,865
Unrealized appreciation (depreciation) of investments [NOTE 4] 54,592 (121,608)
- -------------------------------------------------------------------------------------------
57,402 (4,743)
- -------------------------------------------------------------------------------------------
820,122 764,660
- -------------------------------------------------------------------------------------------
Less withdrawals and terminations in respect
of the current year
Paid
Cash 2,248 4,025
TRW Inc. common stock
806 shares in 1995; 1,048 shares in 1994 82,956 99,083
- -------------------------------------------------------------------------------------------
85,204 103,108
- -------------------------------------------------------------------------------------------
Payable
Cash 18,913 17,330
TRW Inc. common stock
6,637 shares in 1995; 6,992 shares in 1994 701,598 646,890
- -------------------------------------------------------------------------------------------
720,511 664,220
- -------------------------------------------------------------------------------------------
805,715 767,328
- -------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND EQUITY 14,407 (2,668)
Fund equity at January 1 144,197 146,865
- -------------------------------------------------------------------------------------------
Fund equity at December 31 158,604 144,197
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND EMPLOYEES PROFIT SHARING PLAN
STATEMENTS OF FINANCIAL CONDITION
As at December 31
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 11 13,100
Receivable from TRW Canada Limited 15,581 2,339
Interest receivable 1,351 1,132
Investment at market value
Royal Trust Company Classified Money Market Fund
21,846 units [cost $218,457] in 1995 and
19,967 units [cost $199,667] in 1994 218,457 199,667
- -------------------------------------------------------------------------------------------
235,400 216,238
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short term distributions 201,736 190,553
Fund equity 33,664 25,685
- -------------------------------------------------------------------------------------------
235,400 216,238
- -------------------------------------------------------------------------------------------
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 3,366.4 2,568.5
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
FUND EQUITY PER UNIT AT DECEMBER 31 10.0 10.0
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND EMPLOYEES PROFIT SHARING PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
Years ended December 31
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
Interest income 8,664 7,018
Participants' contributions 203,587 208,002
- -------------------------------------------------------------------------------------------
212,251 215,020
- -------------------------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid 2,536 26,842
Payable 201,736 190,553
- -------------------------------------------------------------------------------------------
204,272 217,395
- -------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND EQUITY 7,979 (2,375)
Fund equity at January 1 25,685 28,060
- -------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 33,664 25,685
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF FINANCIAL CONDITION
As at December 31
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 5 4,258
Receivable from TRW Canada Limited 6,803 1,942
Interest receivable 3,111 10,095
Investments at quoted market value
Royal Trust Company Classified Balanced Fund
21,702.0528 units [cost $261,441] in 1995 and
16,966.3907 units [cost $201,864] in 1994 283,493 199,962
- -------------------------------------------------------------------------------------------
293,412 216,257
- -------------------------------------------------------------------------------------------
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short term distributions 36 17,478
Fund equity [including net unrealized appreciation of investments] 293,376 198,779
- -------------------------------------------------------------------------------------------
293,412 216,257
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 21,702.0528 16,966.3907
- -------------------------------------------------------------------------------------------
FUND EQUITY PER UNIT AT DECEMBER 31 13.518 11.716
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
Years ended December 31
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INCOME 13,305 19,205
- -------------------------------------------------------------------------------------------
CONTRIBUTIONS
Participants' contributions 84,084 90,583
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on disposition of investments [NOTE 4] (182) 2,140
Unrealized appreciation (depreciation) of investments [NOTE 4] 23,955 (22,496)
- -------------------------------------------------------------------------------------------
23,773 (20,356)
- -------------------------------------------------------------------------------------------
121,162 89,432
- -------------------------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid 26,529 72,594
Payable 36 17,478
- -------------------------------------------------------------------------------------------
26,565 90,072
- -------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND EQUITY 94,597 (640)
Fund equity at January 1 198,779 199,419
- -------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 293,376 198,779
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF FINANCIAL CONDITION
As at December 31
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 4 1,598
Receivable from TRW Canada Limited 3,845 2,470
Interest receivable 1,546 1,192
Investment at market value
Royal Trust Company Classified Pooled Money Market Fund
24,192.6 units [cost $241,926] in 1995 and 20,374.5 units
[cost $203,745] in 1994 241,926 203,745
- -------------------------------------------------------------------------------------------
247,321 209,005
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short term distributions 1,942 14,282
Fund equity 245,379 194,723
- -------------------------------------------------------------------------------------------
247,321 209,005
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 24,537.9 19,472.3
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
FUND EQUITY PER UNIT AT DECEMBER 31 10.0 10.0
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
Years ended December 31
<TABLE>
<CAPTION>
1995 1994
$ $
- --------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INTEREST INCOME 15,009 10,729
Participants' contributions 47,636 55,440
- -------------------------------------------------------------------------------------------
62,645 66,169
- -------------------------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid 10,047 52,031
Payable 1,942 14,282
- -------------------------------------------------------------------------------------------
11,989 66,313
- -------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND EQUITY 50,656 (144)
Fund equity at January 1 194,723 194,867
- -------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 245,379 194,723
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
1. GENERAL PLAN PROVISIONS
The investment programs of the TRW Canada Stock Savings Plan [the "Plan"] are as
follows:
PARTICIPANT CONTRIBUTIONS
Upon enrollment or re-enrollment, each participant directs that his
contributions [computed in increments of one percent, from two per cent to six
per cent of qualifying compensation] are to be invested in accordance with any
of the following investment options:
[a] 100% in the TRW Stock Fund [the common stock of TRW Inc. in accordance with
the trust agreement and the Plan].
[b] 100% in the Pooled Money Market Fund Employees Profit Sharing Plan. At
present, the Trustee invests all of the Pooled Money Market Fund amounts in
the Royal Trust Company, Classified Money Market Fund in accordance with
the Trust agreement and the Plan.
[c] 100% in the Pooled Balanced Fund Registered Retirement Savings Plan. At
present, the Trustee invests all of the Pooled Balanced Fund amounts in the
Royal Trust Company, Classified Balanced Fund, in accordance with the Trust
agreement and the Plan.
[d] 100% in the Pooled Money Market Fund Registered Retirement Savings Plan.
At present, the Trustee invests all of the Pooled Money Market Fund amounts
in the Royal Trust Company, Classified Pooled Money Market Fund in
accordance with the Trust agreement and the Plan.
[e] A combination of options [a] through [d] in multiples of 25%.
Such direction may be revised on 30 days prior notice, effective January 1 of
any year.
TRW CANADA LIMITED CONTRIBUTIONS
TRW Canada Limited shall contribute to the plan for each month, out of current
or accumulated earnings, an amount equal to 50% of participant contributions for
such month. TRW Canada Limited contributions vest immediately.
All TRW Canada Limited contributions are invested in the TRW Stock Fund.
TRW Canada Limited does not charge a fee for administering the Plans.
1
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
The number of participants in each Fund at December 31 is as follows:
<TABLE>
<CAPTION>
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
TRW Stock Fund 267 269
Pooled Money Market Fund Employees Profit
Sharing Plan 112 110
Pooled Balanced Fund Registered Retirement Savings
Plan 67 66
Pooled Money Market Fund Registered Retirement
Savings Plan 49 49
</TABLE>
The total number of participants in the Plan is less than the sum of the number
of participants shown above because many are participating in more than one
Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada, and are within the framework of the
accounting policies summarized below.
GAIN AND LOSSES ON INVESTMENTS
The realized gain or loss on disposition or transfer of an investment is
determined from the market value of the investment at the date of disposition or
transfer and the average cost base of that specific pool of investments prior to
the disposition or transfer.
Unrealized gains or losses are determined as the net effect of the change in
appreciation/depreciation of the investments from January 1 to December 31,
based on market values and the average cost base of each investment at those
respective dates.
INCOME RECOGNITION
Dividends are recognized as earned.
Interest income is recognized as it is earned consistent with the accrual basis
of accounting.
2
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
3. INCOME TAXES
The Plan is exempt from Canadian federal income taxes under provisions of the
Income Tax Act. Federal income tax consequences to the participants under the
Plan are as provided in the Income Tax Act. TRW Canada Limited contributions
are taxable to the participants as is the income and all post-1971 capital gains
less post-1971 capital losses of the Plan, all of which are allocated to the
participants by the Trustee during the year, whether or not such amounts are
paid to the participants by the Trustee during the year. In some circumstances,
the amounts taxable could exceed the amounts allocated. The amount of foreign
non-business income tax paid on foreign source income by the trusts under the
Plan for the year is allocated to and deemed to have been paid by the
participants for Canadian federal income tax purposes. Participants who are
non-resident taxpayers are subject to special rules depending on whether they
have performed duties in Canada during the year and are subject to 15%
withholding tax on amounts paid or credited to them under the Plan.
4. UNREALIZED AND REALIZED (LOSSES) GAINS
Investments are stated at their quoted market value. The net unrealized
appreciation (depreciation) of investments included in fund equity is as
follows:
<TABLE>
<CAPTION>
TRW POOLED
STOCK BALANCED
FUND FUND
$ $
- -------------------------------------------------------------------------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1993 127,178 20,594
Change for the year
Market value (121,608) (22,496)
- -------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 5,570 (1,902)
Change for the year
Market value 54,592 23,955
- -------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 60,162 22,053
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1995 and 1994
The net realized gain on the transfer or disposition of investments is
summarized as follows:
<TABLE>
<CAPTION>
TRW STOCK FUND
-------------------------
1995 1994
$ $
- -------------------------------------------------------------------------------
<S> <C> <C>
AMOUNT REALIZED 720,679 837,779
Cost - average 717,869 720,914
- -------------------------------------------------------------------------------
NET REALIZED GAIN 2,810 116,865
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<CAPTION>
POOLED BALANCED FUND
REGISTERED RETIREMENT
SAVINGS PLAN
-------------------------
1995 1994
$ $
- -------------------------------------------------------------------------------
<S> <C> <C>
AMOUNT REALIZED 17,750 32,470
Cost - average 17,932 30,330
- -------------------------------------------------------------------------------
NET REALIZED GAIN (182) 2,140
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
5. RELATED PARTY TRANSACTIONS
All expenses related to the TRW Canada Stock Savings Plan are paid by TRW Canada
Limited.
4
