<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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
incorporation or organization) Identification No.)
1900 Richmond Road, Cleveland, Ohio 44124
-----------------------------------------
(Address of principal executive offices)
(Zip Code)
(216) 291-7000
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(Registrant's telephone number, including area code)
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
--- ---
As of August 1, 1997, there were 123,234,716 shares of
TRW Common Stock, $0.625 par value, outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
Statements of Earnings (unaudited)
TRW Inc. and subsidiaries
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Second quarter ended Six months ended
June 30 June 30
In millions except per share data 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Sales $2,852 $2,572 $5,512 $5,086
Cost of sales 2,318 2,093 4,496 4,144
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Gross profit 534 479 1,016 942
Administrative and selling expenses 177 167 336 330
Research and development expenses 117 105 223 205
Interest expense 17 20 37 39
Other (income)expense-net 4 (1) 6 15
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Earnings from continuing operations
before income taxes 219 188 414 353
Income taxes 84 71 160 133
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Earnings from continuing operations 135 117 254 220
Discontinued operations - 13 - 27
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Net earnings $ 135 $ 130 $ 254 $ 247
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PER SHARE OF COMMON STOCK
Fully diluted
Continuing operations $ 1.05 $ .87 $ 1.97 $ 1.63
Discontinued operations - .11 - .21
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Net earnings per share $ 1.05 $ .98 $ 1.97 $ 1.84
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Primary
Continuing operations $ 1.06 $ .88 $ 1.99 $ 1.64
Discontinued operations - .10 - .21
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Net earnings per share $ 1.06 $ .98 $ 1.99 $ 1.85
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Shares used in computing per share
amounts
Fully diluted 128.6 133.8 129.0 134.7
Primary 126.7 132.9 127.5 133.6
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- ---------------------------------------------------------------------------------------------------------------
Dividends declared $ .31 $ .275 $ .31 $ .275
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</TABLE>
<PAGE> 3
Balance Sheets (unaudited)
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
June 30 December
In millions 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 83 $ 386
Accounts receivable 1,606 1,378
Inventories 525 524
Prepaid expenses 80 69
Deferred income taxes 284 424
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Total current assets 2,578 2,781
Property, plant and equipment-on the basis of cost 6,116 5,880
Less accumulated depreciation and amortization 3,498 3,400
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Total property, plant and equipment-net 2,618 2,480
Intangible assets
Intangibles arising from acquisitions 517 258
Other 51 31
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568 289
Less accumulated amortization 87 78
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Total intangible assets-net 481 211
Other assets 468 427
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$ 6,145 $ 5,899
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Liabilities and shareholders' investment
Current liabilities
Short-term debt $ 285 $ 52
Accounts payable 802 781
Current portion of long-term debt 79 72
Other current liabilities 1,257 1,252
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Total current liabilities 2,423 2,157
Long-term liabilities 776 767
Long-term debt 498 458
Deferred income taxes 154 272
Minority interests in subsidiaries 106 56
Capital stock 77 81
Other capital 448 437
Retained earnings 2,193 1,978
Cumulative translation adjustments (22) 47
Treasury shares-cost in excess of par value (508) (354)
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Total shareholders' investment 2,188 2,189
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$ 6,145 $ 5,899
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</TABLE>
<PAGE> 4
Statements of Cash Flows (unaudited)
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
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Six months ended
June 30
In millions 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Operating activities
Net earnings $ 254 $ 247
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Discontinued operations - (11)
Depreciation and amortization 247 221
Deferred income taxes 17 (5)
Other-net 7 4
Changes in assets and liabilities, net of effects of
businesses acquired or sold:
Accounts receivable (164) (154)
Inventories and prepaid expenses 26 (2)
Accounts payable and other accruals (19) 12
Other-net (10) (6)
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Net cash provided by operating activities 358 306
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Investing activities
Capital expenditures (228) (176)
Acquisitions, net of cash acquired (415) -
Other-net (7) -
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Net cash used in investing activities (650) (176)
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Financing activities
Increase in short-term debt 178 91
Proceeds from debt in excess of 90 days 67 21
Principal payments on debt in excess of 90 days (24) (44)
Reacquisition of common stock (179) (155)
Dividends paid (78) (73)
Other-net 29 34
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Net cash used in financing activities (7) (126)
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Effect of exchange rate changes on cash (4) 1
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Increase (decrease) in cash and cash equivalents (303) 5
Cash and cash equivalents at beginning of period 386 59
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Cash and cash equivalents at end of period $ 83 $ 64
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</TABLE>
<PAGE> 5
Results by Business Segments (unaudited)
TRW Inc. and subsidiaries
<TABLE>
<CAPTION>
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Second quarter ended Six months ended
June 30 June 30
In millions 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Sales
Automotive $ 1,876 $ 1,700 $ 3,669 $ 3,381
Space & Defense 976 872 1,843 1,705
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Sales $ 2,852 $ 2,572 $ 5,512 $ 5,086
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Operating profit
Automotive $ 181 $ 170 $ 348 $ 310
Space & Defense 82 64 159 124
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Operating profit 263 234 507 434
Company Staff and other (24) (25) (48) (36)
Minority interest in earnings of (11)
consolidated subsidiaries (5) (3) (6)
Interest expense (17) (20) (37) (39)
Earnings from affiliates 2 2 3 -
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Earnings from continuing operations before income
taxes $ 219 $ 188 $ 414 $ 353
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</TABLE>
<PAGE> 6
NOTES TO FINANCIAL STATEMENTS
(unaudited)
Principles of Consolidation
- ---------------------------
The financial statements include the accounts of the Company and its
subsidiaries except for two insurance subsidiaries. The wholly-owned insurance
subsidiaries and the majority of investments in affiliated companies, which are
not significant individually or in the aggregate, are accounted for by the
equity method.
Environmental Costs
- -------------------
During the first quarter of 1997, the Company adopted the provisions of AICPA
Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities". There
was no financial statement effect of the adoption as the Company's previous
method of accounting for environmental costs was in accordance with SOP 96-1.
Discontinued Operations
- -----------------------
In September 1996, the Company sold substantially all of the businesses of its
Information Systems and Services segment. The financial statements for the first
six months of 1996 reflect as discontinued operations that segment's operating
results of $27 million. Sales of the discontinued operations were $313 million
for the first six months of 1996.
Acquisition
- -----------
In February 1997, the Company completed its purchase of an eighty percent equity
interest in the air bag and steering wheel business of Magna International. The
purchase price of approximately $450 million has been tentatively allocated to
the net assets acquired based on their fair values.
Inventories
- -----------
Inventories consist of the following:
(In millions)
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
------ -----
<S> <C> <C>
Finished products and work in process $280 $295
Raw materials and supplies 245 229
--- ---
$525 $524
==== ====
</TABLE>
<PAGE> 7
Long-Term Liabilities
- ---------------------
Long-term liabilities at June 30, 1997 and December 31, 1996, include $692
million and $681 million, respectively, relating to postretirement benefits
other than pensions.
Other (Income)Expense-Net
- -------------------------
Other (income)expense included the following:
(In millions)
<TABLE>
<CAPTION>
Second quarter ended Six months ended
June 30 June 30
1997 1996 1997 1996
---------------------------------- ------------------------
<S> <C> <C> <C> <C>
Other income $ (12) $ (12) $ (28) $ (18)
Other expense 14 10 30 30
Foreign currency translation 2 1 4 3
---- ---- --- ----
$ 4 $ (1) $ 6 $ 15
==== ====== ==== =====
</TABLE>
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 period,
including common stock equivalents 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 period including common stock equivalents.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings per Share", which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact is expected to result in a $.03 and
$.02 per share increase in primary earnings per share for the second quarter
ended June 30, 1997 and June 30, 1996, respectively. There is an immaterial
impact of Statement No. 128 on the calculation of fully diluted earnings per
share for these quarters.
In April 1997, the number of authorized shares of TRW Common Stock was increased
from 250,000,000 to 500,000,000 shares.
<PAGE> 8
Supplemental Cash Flow Information
- ----------------------------------
<TABLE>
<CAPTION>
Six months ended
(In millions) June 30
--------------------------------------
1997 1996
---- ----
<S> <C> <C>
Interest paid (net of amount capitalized) $ 36 $ 30
Income taxes paid (net of refunds) $(22) $136
</TABLE>
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents.
Other Contingencies
- -------------------
During 1996, the Company was advised by the Department of Justice ("DOJ") that
it had been named as a defendant in two lawsuits brought by a former employee
and filed under seal in 1994 and 1995, respectively, in the United States
District Court for the Central District of California under the QUI TAM
provisions of the civil False Claims Act. The Act permits an individual to bring
suit in the name of the United States and share in any recovery. The allegations
in the lawsuit relate to the classification of costs incurred by the Company
that were charged to certain of its federal contracts. Under the law, the
government must investigate the allegations and determine whether it wishes to
intervene and take responsibility for the lawsuits. The actions remain under
seal until the government completes its investigations and determines whether to
intervene. However, permission from the court has been obtained by the Company
to make the disclosures contained herein. The Company is cooperating with the
DOJ's investigation and is engaged in ongoing discussions with them regarding
the allegations. The Company cannot presently predict the outcome of these
matters, although management believes that the Company would have meritorious
defenses if either the government decides to pursue the lawsuits or the former
employee decides to do so without government participation.
Interim Statements
- ------------------
The financial statements are based in part on approximations and are subject to
adjustments that may develop, such as unsettled contract and renegotiation
matters and matters that arise in connection with the annual audit of the
financial statements; however, in the opinion of management, all adjustments
(which consist of normal recurring accruals) necessary for a fair presentation
of the results of operations for the periods presented have been included.
Results of operations for any interim period are not necessarily indicative of
the results to be expected for the full year.
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
RESULTS OF OPERATIONS
(In millions except per share data)
<TABLE>
<CAPTION>
Six Months Ended
Second Quarter June 30
--------------------------------------- ----------------------------------------
Percent Percent
1997 1996 Inc (Dec) 1997 1996 Inc (Dec)
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales $2,852 $2,572 11% $5,512 $5,086 8%
Operating Profit $ 263 $ 234 12% $ 507 $ 434 17%
Earnings from Continuing Operations $ 135 $ 117 15% $ 254 $ 220 15%
Fully Diluted Earnings
Per Share -
Continuing Operations $ 1.05 $ .87 21% $ 1.97 $ 1.63 21%
Effective Tax Rate 38.7% 37.8% 38.7% 37.8%
</TABLE>
The increase in sales for the second quarter and first six months of 1997 was
primarily due to the sales contribution from the acquisitions of air bag and
steering wheel operations, and from higher volume in the Automotive and Space
and Defense segments. The sales increase was moderated by the effect of a strong
U.S. dollar.
The higher operating profit was due to the acquisitions, continued
cost-reduction efforts, and profit from the higher sales volume in the
Automotive and Space and Defense segments, partially offset by the effect of
lower pricing in the Automotive segment. Operating profit for the first six
months of 1996 included a $15 million before tax charge related to the initial
application of Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of."
Net earnings for the first six months of 1996 included a $12 million benefit
from an insurance claim settlement primarily related to previously divested
businesses, offset by a $13 million noncash charge related to the initial
application of SFAS No. 121.
Interest expense was $37 million for the first six months of 1997 compared to
$39 million for the first half of 1996. The decrease in interest expense was
primarily due to lower foreign debt levels.
<PAGE> 10
Automotive
(In millions)
<TABLE>
<CAPTION>
Six Months Ended
Second Quarter June 30
--------------------------------------------- ----------------------------------------------
Percent Percent
1997 1996 Inc (Dec) 1997 1996 Inc (Dec)
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales $1,876 $1,700 10% $3,669 $3,381 9%
Operating Profit $ 181 $ 170 6% $ 348 $ 310 12%
</TABLE>
The increase in sales for the second quarter and first six months of 1997 was
primarily due to the sales contribution from the acquisitions of air bag and
steering wheel operations, and from higher volume in the air bag, seat belt, and
steering and engine component businesses. The sales increase was moderated by
the effect of a strong U.S. dollar, as well as lower pricing, principally in the
North American air bag business.
The higher operating profit for the second quarter and first six months of 1997
resulted from the acquisitions, higher sales volume, and continued
cost-reduction efforts, partially offset by the effect of lower pricing.
Operating profit for the first six months of 1996 included a $15 million before
tax charge related to the initial adoption of SFAS No. 121.
Space & Defense
(In millions)
<TABLE>
<CAPTION>
Six Months Ended
Second Quarter June 30
--------------------------------------------- ---------------------------------------------
Percent Percent
1997 1996 Inc (Dec) 1997 1996 Inc (Dec)
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales $976 $872 12% $1,843 $1,705 8%
Operating Profit $ 82 $ 64 28% $ 159 $ 124 28%
</TABLE>
Sales and operating profit for the second quarter and first six months of 1997
increased primarily due to the successful conversion of recent contract awards
into revenue growth as well as strong ongoing program performance.
LIQUIDITY AND FINANCIAL POSITION
In the first six months of 1997, cash flow provided by operating activities of
$358 million, a net increase in debt of $221 million, and a net increase of $18
million in other items were used to fund business acquisitions of $415 million,
capital expenditures of $228 million, reacquisition of common stock of $179
million, and dividend payments of $78 million. As a result, cash and cash
equivalents decreased by $303 million.
<PAGE> 11
Net debt (short-term debt, the current portion of long-term debt and long-term
debt less cash and cash equivalents) was $779 million at June 30, 1997, compared
to $196 million at December 31, 1996. The ratio of net debt to total capital
(net debt, minority interests and shareholders' investment) at June 30, 1997 was
25 percent compared to 8 percent at December 31, 1996.
During July 1997, the Company issued $30 million in medium-term notes under its
shelf registration statements. The notes were used to refinance short-term debt.
After this issuance, $420 million remains available for borrowing under the
Company's shelf registration statements.
During the second quarter of 1997, the company requested an amendment of the
terms of its U.S. and multicurrency revolving credit agreements to extend the
expiration date of the agreements from July 1, 2001 to July 1, 2002. Also, one
additional bank will join the bank group providing the U.S revolving credit
agreement and one additional bank will join the bank group providing the
multicurrency revolving credit agreement. The amendment is expected to be
executed in August 1997.
During the first six months of 1997, 3,529,133 shares of TRW Common Stock were
repurchased for approximately $184 million, of which approximately $5 million
was settled in July.
Management believes that funds generated from operations and existing borrowing
capacity will be adequate to fund the Company's current share repurchase program
and to support and finance planned growth, capital expenditures,
company-sponsored research and development programs and dividends payments to
shareholders.
OTHER MATTERS
During 1996, the Company was advised by the Department of Justice that it had
been named as a defendant in two lawsuits brought by a former employee and filed
under seal under the QUI TAM provisions of the civil False Claims Act. See
"Other Contingencies" note in the Notes to Financial Statements for further
information.
FORWARD-LOOKING STATEMENTS
Statements in this filing that are not historical facts are forward-looking
statements, which involve risks and uncertainties that could affect the
Company's actual results. Information regarding the important factors that could
cause TRW's actual results to differ materially from the forward-looking
statements contained in this filing can be found in TRW's reports filed with the
Securities and Exchange Commission, including TRW's Form 8-K filed on May 20,
1997.
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
The United States Environmental Protection Agency has issued a notice
of violation to the Company under the Clean Air Act with respect to air
emissions at the former Izumi Industries, Corporation, Inc. facility in Yaphank,
New York, which TRW acquired in November, 1996. The New York State Department of
Environmental Conservation has informed TRW that it may initiate administrative
proceedings against the Company under the New York Environmental Conservation
Law with respect to such emissions. TRW could be liable for civil penalties and
fines and other relief with respect to such matters which, if imposed, are not
expected to have a material effect on TRW's financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
(a) The Company held its 1997 Annual Meeting of Shareholders on April 30,
1997.
(b) Proxies for the Annual Meeting of Shareholders were solicited pursuant
to Regulation 14 under the Act; there was no solicitation in opposition
to management's nominees as listed in the proxy statement; and all of
such nominees were elected.
(c) J. T. Gorman was elected a Director of the Company with 113,750,268
votes for election, 842,557 votes withheld from voting and 11,135,498
shares not voted, including broker non-votes.
P. S. Hellman was elected a Director of the Company with 113,840,404
votes for election, 752,421 votes withheld from voting and 11,135,498
shares not voted, including broker non-votes.
K. N. Horn was elected a Director of the Company with 113,816,175 votes
for election, 776,650 votes withheld from voting and 11,135,498 shares
not voted, including broker non-votes.
W. S. Kiser was elected a Director of the Company with 113,772,188
votes for election, 820,637 votes withheld from voting and 11,135,498
shares not voted, including broker non-votes.
L. M. Martin was elected a Director of the Company with 113,783,860
votes for election, 808,965 votes withheld from voting and 11,135,498
shares not voted, including broker non-votes.
<PAGE> 13
A proposed amendment to the Amended Articles of Incorporation of the
Company to increase the authorized number of shares of common stock was
approved, with 99,967,773 votes for, 13,919,109 votes against, 705,943
votes abstaining and 11,135,498 shares not voted, including broker
non-votes.
The shareholders approved adoption of the 1997 TRW Long-Term Incentive
Plan with 107,323,712 votes for, 6,453,659 votes against, 815,454 votes
abstaining and 11,135,498 shares not voted, including broker non-votes.
The shareholders ratified the appointment of Ernst & Young LLP as the
Company's independent auditors for the 1997 fiscal year with
113,945,826 votes for, 271,090 votes against, 375,909 votes abstaining
and 11,135,498 shares not voted, including broker non-votes.
(d) None.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits:
10(a) Letter Agreement dated February 25, 1997 between TRW Inc. and
M. A. Coyle.
10(b) Amendment to Letter Agreement dated April 21, 1997 between TRW
Inc. and M. A. Coyle.
10(c) Consulting Agreement dated February 25,1997 between TRW Inc.
and M. A. Coyle.
10(d) Deferred Compensation Plan for Non-Employee Directors of TRW
Inc. dated July 1, 1997.
11 Computation of Earnings Per Share -- Unaudited.
27 Financial Data Schedule.
99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited
(Supplement to Exhibit 12 of the following Form S-3
Registration Statements of the Company: No. 33-61711, filed
August 10, 1995, and No. 33-42870, filed September 20, 1991).
(b) Reports on Form 8-K:
Current Report on Form 8-K dated May 20, 1997 as to forward-looking
statements.
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRW Inc.
Date: August 6, 1997 By: /s/ William B. Lawrence
------------------------------
William B. Lawrence
Executive Vice President and
Secretary
Date: August 6, 1997 By: /s/ Carl G. Miller
------------------------------
Carl G. Miller
Executive Vice President
and Chief Financial Officer
<PAGE> 15
FORM 10-Q
Quarterly Report for Quarter Ended June 30, 1997
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
10(a) Letter Agreement dated February 25, 1997 between TRW Inc.
and M. A. Coyle.
10(b) Amendment to Letter Agreement dated April 21, 1997 between
TRW Inc. and M. A. Coyle.
10(c) Consulting Agreement dated February 25, 1997 between TRW
Inc. and M. A. Coyle.
10(d) Deferred Compensation Plan for Non-Employee Directors of
TRW Inc. dated July 1, 1997.
11 Computation of Earnings Per Share --Unaudited.
27 Financial Data Schedule.
99 Computation of Ratio of Earnings to Fixed Charges --
Unaudited (Supplement to Exhibit 12 of the following Form
S-3 Registration Statements of the Company: No. 33-61711,
filed August 10, 1995, and No. 33-42870, filed September
20, 1991).
<PAGE> 1
Exhibit 10(a)
February 25, 1997
Martin A. Coyle
1900 Richmond Road
Cleveland, Ohio 44124
Dear Marty:
This letter sets forth our agreement regarding your change in status and
ultimate retirement from TRW and details the terms and conditions of your
termination of employment. Please review it carefully to make sure we are in
complete agreement.
EMPLOYMENT
Your employment with TRW will terminate upon your retirement on March 1,
1999, or such earlier date (first day of a month) as you may choose pursuant
to the section entitled "Early Retirement" hereunder (referred to in this
letter variously as your "termination of employment," the "date of
termination," or the "date your employment terminates").
You will remain in your current position as Executive Vice President, General
Counsel and Secretary until May 31, 1997. During that time, you will continue
to have active responsibility for all current assignments (primarily Law
Department, Environmental Control and Investment Management), and will
cooperate with Bill Lawrence so that he is ready to undertake the
responsibilities of Executive Vice President and General Counsel by May 1,
1997.
You will continue to serve and be elected as an elected Executive Vice
President from June 1, 1997 until termination of employment. During that
period, you (1) will make yourself available for consultation and advice to
the Executive Vice President and General Counsel; (2) will serve as Chairman
of the TRW Investment Management Company; (3) will continue to be responsible
for the Environmental Control function; and (4) will make yourself available
for special projects assigned by the Chairman and Chief Executive Officer.
After June 1, 1997, you
<PAGE> 2
Martin A. Coyle
February 25, 1997
Page 2
may, however, without otherwise affecting the terms of this agreement,
eliminate any or all of the responsibilities set forth in the foregoing
sentence, and such elimination will be effective upon your giving notice of
same to me.
SALARY AND INCENTIVES
You will continue to receive an amount equivalent to your current base salary
at the current annual rate of Three Hundred Forty-Five Thousand Dollars
($345,000.00), in semi-monthly payments through February 28, 1999. You will
receive Operational Incentive Plan (OIP) bonus payments of $172,500.00 for
1997 and 1998, said payments to be payable in February of 1998 and February
of 1999, respectively. You will be deemed to be an OIP 1 or equivalent if
such designation is changed. You will not be eligible to receive any
incentive payment with respect to 1999 or any year thereafter. You will also
receive a payment equivalent to the Strategic Incentive Plan (SIP) bonus with
respect to 1997, said payment to be payable in February of 1998. You will not
be eligible to receive any SIP payment with respect to 1998 or any year
thereafter.
CONSULTING AGREEMENT
If you retire on or after March 1, 1999, you may (if you choose) serve as a
Consultant to TRW, subject to the terms of the Consulting Agreement attached
hereto as Exhibit 1, a copy of which I have executed and delivered to you on
behalf of TRW.
OFFICER/DIRECTOR STATUS
Although your benefits and perquisites shall continue until termination of
employment as though you were a member of the Management Committee of TRW
Inc., your membership (for purpose of attendance at business meetings and
listing of members) in such committee will terminate effective June 1, 1997.
Effective June 1, 1997, you will cease to be an officer within the definition
of Rule 16a-1(f) under the Securities Exchange Act of 1934; however, a former
officer continues to be subject to Section 16 for up to six months following
termination of officer status, and certain post-termination filing
requirements
<PAGE> 3
Martin A. Coyle
February 25, 1997
Page 3
also exist. Please contact Kathleen Weigand if you have any questions
concerning Section 16. In addition, for a period of six (6) months from the
date of termination, you should continue to contact Kathleen Weigand promptly
following any transaction with regard to TRW stock or stock options. After
your date of termination, you will not have, nor will you hold yourself out
as having, authority to bind TRW in any manner.
EMPLOYMENT CONTINUATION AGREEMENT
Schedule A to your Amended and Restated Employment Continuation Agreement
dated February 7, 1996, is hereby amended as set forth on Exhibit 2 hereto
effective June 1, 1997. Your Employment Continuation Agreement will otherwise
remain in full force and effect until termination of employment.
TRW agrees that since you could add significant value to TRW in the event
there is a change-in-control or a public threat thereof, if such a
change-in-control (as that term is defined in your Employment Continuation
Agreement) or a public threat thereof should occur on or before the
termination of your employment, then your agreement to retire will be null
and void and you will remain an elected officer and employee of TRW until the
threat is eliminated or until a change-in-control occurs. During such time,
your employment with TRW will not be deemed to have terminated. When such
threat is eliminated other than through a change-in-control, you agree to
retire on the later of March 1, 1999 or the first day of the month after such
threat is eliminated.
Upon a change-in-control (which may occur after March 1, 1999 if the public
threat thereof occurs before such date), your Employment Continuation
Agreement shall become operative. Your compensation after March 1, 1999 until
the threat is eliminated or a change-in-control occurs shall be $1,000 per
month. Solely for purposes of your Employment Continuation Agreement (i) no
payment hereunder shall be deemed a "severance payment"; (ii) your rate of
base pay immediately prior to the change-in-control shall be deemed to be
$345,000; (iii) the aggregate incentive pay for the year preceding the
change-in-control shall be deemed to be $172,500 unless the change-in-control
occurs prior to January 1, 1998, in which case the
<PAGE> 4
Martin A. Coyle
February 25, 1997
Page 4
amount shall be deemed to be $240,000; (iv) TRW will not utilize any
provision of this agreement to deny any benefits under your Employment
Continuation Agreement; (v) you will not be required to devote substantially
all your time to the business and affairs of TRW as otherwise required by
Section 2(a) of your Employment Continuation Agreement, but you will be
available for consultation; and (vi) your employment with TRW would be deemed
to have continued until you attained age 65. TRW will not take any action to
terminate your Employment Continuation Agreement prior to your termination of
employment. To the extent any part of this section entitled EMPLOYMENT
CONTINUATION AGREEMENT is inconsistent with your Employment Continuation
Agreement, your Employment Continuation Agreement is deemed to be amended. If
prior to your termination of employment, Employment Continuation Agreements
with a majority of officers are amended to provide additional benefits to
such officers, your Employment Continuation Agreement will also be so
amended.
BENEFITS
Until the date of termination of your employment, all benefits and
perquisites you currently have shall continue. Although you will not receive
any new stock-related grants, you shall receive the benefits of any
amendments or changes made in any existing benefits or perquisites generally
applicable to Company Staff Department Heads to the extent such amendments or
changes are made effective prior to termination of employment. Without
limiting the foregoing, you will have the following benefits until
termination of employment:
VACATION
You will continue to accrue vacation until termination of employment, at the
OIP 1 level. You will not be paid for any accrued but unused vacation.
<PAGE> 5
Martin A. Coyle
February 25, 1997
Page 5
MEDICAL COVERAGE
You will continue to be a participant in the TRW Executive Health Care Plan
during your employment, (providing medical coverage for you and your family
in accordance with the terms of such Plan) provided that you continue to make
the contributions in accordance with the Plan. Under the provisions of the
Consolidated Omnibus Budget Reconciliation Act ("COBRA"), you may elect
within sixty (60) days of your termination of employment to continue benefit
coverage for a period of up to eighteen (18) months based on either the TRW
Executive Health Care Plan or any TRW ChoicePlus medical plan provisions. All
other rights you or your dependents would have with respect to the duration
of your group health plan benefits will be governed by COBRA.
If you elect to retire (i.e., immediately commence to receive your retirement
benefit from the TRW Salaried Pension Plan (SPP) on the first day of the
month following your termination of employment, you will be eligible to
enroll in the TRW Retirement Medical Plan, with coverage effective as of your
retirement date, in which case you will have no rights to COBRA. Your
coverage under that plan will be at the Retirement Medical Plan rates in
effect from time to time. If you fail to elect the TRW Retirement Medical
Plan upon your retirement, you may not thereafter elect the TRW Retirement
Medical Plan, but you may continue COBRA coverage to the extent permitted
under COBRA or the terms described in the foregoing paragraph.
LIFE INSURANCE
You will participate in TRW's Business Travel Accident Insurance and
Accidental Death Insurance until the date your employment terminates. Upon
termination of employment, you will no longer be covered by TRW's Business
Travel Accident Insurance or Accidental Death Insurance. You will have
thirty-one (31) days from the date your employment terminates to convert your
TRW-paid life insurance to an individual policy (currently through
Prudential); if you retire, you will be eligible for a retiree life insurance
policy not to exceed Five Thousand Dollars ($5000.00). If you are
participating in the optional group
<PAGE> 6
Martin A. Coyle
February 25, 1997
Page 6
universal life insurance program (currently administered by Aetna), at the
time your employment terminates, you should automatically receive
notification regarding the requirements for continuation of your policy once
payroll deductions cease.
Your split dollar life insurance arrangement shall continue in accordance
with the terms thereof.
If you die before termination of employment you will receive all death
benefits under all benefit plans applicable to you.
LONG-TERM DISABILITY
Your eligibility to qualify for long-term disability benefits will cease upon
the termination of your employment with TRW.
COMPANY CAR
You will remain on the Company Staff Automobile Program until termination of
employment. Upon termination of employment, you may purchase your company car
in accordance with our standard lease buyout practices, understanding,
however, that you will receive one additional year of automobile depreciation
in determining the buyout price.
FINANCIAL COUNSELING
You will continue to be entitled to receive personal financial counseling
with the provider of the company's financial counseling plan (currently the
Ayco Corporation). Upon termination of your employment with TRW, you will
receive, at TRW's cost, (subject to tax imputation) one additional year of
personal financial counseling with the provider of the company's financial
counseling plan at that time.
DEFERRED COMPENSATION PLAN
You will continue to be eligible to participate in the Nonqualified TRW
Deferred Compensation Plan until your employment terminates. Your accounts
under the Deferred Compensation
<PAGE> 7
Martin A. Coyle
February 25, 1997
Page 7
plan will be paid out to you in accordance with the provisions of the Plan.
OFFICE SUPPORT
You will continue in your current office with a full time secretary through
May 31, 1997. Thereafter, you will receive an equivalent office and a
full-time secretary until termination of employment. The secretary is
authorized to assist on personal matters.
CREDIT CARDS
You agree to return your telephone credit card and your American Express and
other corporate credit cards, if any, to TRW upon termination of your
employment.
EXPENSES
During your employment with TRW, the company will continue to reimburse you
for reasonable travel and entertainment expenses, including dues and charges
for clubs and organizations currently being reimbursed and those relating to
those professional organizations in which you are currently a member.
STOCK OPTIONS
You will continue to earn out stock options during your employment. Once your
employment terminates, your options will cease to earn out. Your rights to
exercise your earned out stock options are controlled by the terms of the
option agreements. You will no longer be eligible to receive new stock option
grants. If you have any questions regarding your stock options, please
contact Kathleen Weigand.
PENSION
You will be credited with benefit service under the qualified SPP and the
nonqualified Supplementary Retirement Income Plan (SRIP) and Benefits
Equalization Plan (BEP), as provided below. If you elect to retire, you will
be eligible for an early retirement
<PAGE> 8
Martin A. Coyle
February 25, 1997
Page 8
benefit under the terms of the SPP and the nonqualified SRIP or the BEP,
based upon your service and compensation. For purposes of determining the
benefit(s) payable to you, the following rules will apply:
(i) For purposes of determining the benefit that will be paid from the
SPP, you will be credited with benefit service to the earliest of
the date you retire OR the date you die.
(ii) For purposes of determining the benefit that will be paid from the
SPP upon your retirement, your pensionable earnings (subject to
Internal Revenue Code ss.401(a)(17) limits) through the earliest of
the date you retire, the date you die, or the last day of the month
of your termination of employment will be taken into account in
determining your highest consecutive five year average earnings; if
your termination of employment is before June 30 of the year of your
termination, then your pensionable earnings through the earliest of
the date you retire or the date you die, or December 31 of the year
preceding the year of your termination will be taken into account in
determining your highest consecutive five year average earnings.
(iii) For purposes of determining the nonqualified plan benefit under the
SRIP and the BEP, you will be credited with benefit service through
the earliest of the end of the month immediately preceding your
elected retirement date or the date you die.
(iv) For purposes of determining the nonqualified plan benefit under the
SRIP and the BEP, your pensionable earnings through the earliest of
the date you retire or the date you die, will be taken into account
in determining your five highest consecutive years of average
earnings.
TRW will withhold such amounts as are required by any applicable Qualified
Domestic Relations Orders.
In no event will your benefit service under the qualified SPP or under the
nonqualified plans extend beyond the last day of the month that is one
year from your termination of employment. By
<PAGE> 9
Martin A. Coyle
February 25, 1997
Page 9
signing this agreement, you are expressly waiving any right to having
compensation after the last day of the month of your termination of
employment included for the determination of benefits payable under the SPP.
If you are eligible and do not elect to retire on or before the first day of
the month following one year from your termination of employment, you will be
placed in deferred retirement status until the earlier of your elected
retirement date or the first of April following the year in which you reach
age 70-1/2. In that event, however, you will not be eligible to elect the
lump sum option from the SPP, nor will you be able to elect to be covered by
the TRW Retirement Medical Plan.
STOCK SAVINGS PLAN AND BENEFITS EQUALIZATION PLAN
You may continue to make contributions to The TRW Employee Stock Ownership
and Stock Savings Plan ("SSP") until the earlier of February 28, 1999, or the
termination of your employment, and you may continue to make contributions to
the BEP and to be credited with TRW matching contributions pursuant to the
BEP. At such date, the options available to you will be as governed by the
SSP or the BEP, as the case may be.
We suggest that you seek the advice of your tax counsel regarding the
advisability and effect of deferring the receipt of any payments under the
SSP and the timing of any election to defer.
EARLY RETIREMENT
If you choose to retire before December 31, 1997, you may do so, and in such
event you will be paid in cash within 10 days thereafter, a sum equal to (a)
$1,035,000 less any payments made after March 1, 1997 for base and OIP, and
(b) a cash payment equal to 20,000 (as adjusted) times the average of the
high and low price of TRW stock on the last trading day prior to retirement,
in lieu of the SIP payment due with regard to 1997. Should you choose to
retire between December 31, 1997 and February 28, 1999, you may do so, and in
such event you will be paid in cash a sum equal to $1,035,000 less any base
or OIP
<PAGE> 10
Martin A. Coyle
February 25, 1997
Page 10
payments made after March 1, 1997, it being assumed that you will have
received your SIP payment with respect to 1997. Your estate or designated
beneficiary would be entitled to any such payments (determined as though you
retired on the first day of the month following death; said day to be
considered "termination of employment" for purposes of this agreement but not
for purposes of any TRW benefit plans), should you die before March 1, 1999.
CONFIDENTIALITY; COOPERATION
In consideration of TRW's agreement to provide the compensation, benefits and
payments set forth in this letter agreement:
(a) You acknowledge that as an employee of TRW you possess confidential and
proprietary information owned by TRW and you agree not to use this
information or reveal it to any other person or corporation. You will
not remove from TRW facilities any materials which contain TRW
confidential or proprietary information.
(b) You agree not to assist any party other than TRW in any litigation or
investigation against TRW or its affiliates, successors, assigns,
officers, directors, employees or agents, except as required by law.
You further agree that if you believe any such action is required by
law, you will first afford TRW the opportunity to raise and obtain a
ruling on any claim of attorney-client, work product, or other
privilege or any other contractual or other defense that may be
applicable.
(c) You agree to provide your reasonable cooperation to TRW in any future
lawsuit, administrative proceeding or other judicial, administrative or
legislative matter in which your assistance may be desired by TRW.
(d) Until termination of your employment, you agree that you (i) shall
refrain from accepting work, engagements, or appointments from any
third party which would conflict with the protection of TRW
confidential or proprietary information
<PAGE> 11
Martin A. Coyle
February 25, 1997
Page 11
and (ii) shall not, directly or indirectly, as owner, manager, officer,
director, employee, consultant or in any other capacity, become
financially interested in or otherwise connected with a third party
which engages in business activity which is materially competitive
(more that 25% overlap in both companies) with the business activities
of TRW; provided, however, this limitation shall not preclude you from
being otherwise employed or making an equity investment in a firm whose
stock is listed on a national securities exchange or NASDAQ.
RELEASE
In consideration for TRW's agreement to provide the compensation, benefits
and payments set forth in this letter agreement:
(a) You agree for yourself, your heirs, executors, administrators,
successors and assigns to release and discharge forever TRW, its
affiliates and insurers, their successors and assigns, officers,
directors, employees and agents from any and all claims, demands,
causes of action, losses and expenses of every nature whatsoever,
whether known or unknown, arising out of or in connection with your
employment by TRW or the termination thereof, including but not
limited to, breach of contract (express or implied), wrongful
discharge, intentional infliction of emotional harm, defamation,
libel, slander, or other tort, or violation of any federal, state or
municipal statute or ordinance relating to discrimination in
employment, including but not limited to Title VII of the Civil Rights
Act of 1964 (42 U.S.C. Section 2000(e) et seq.) and Ohio Revised Code
Section 4112 et seq. In signing this Agreement, you agree to waive any
rights you would have to pursue any of the claims described herein
against TRW through the company's Alternative Dispute Resolution (ADR)
process, or through any court or administrative agency; and further
agree not to bring any suit or action in any court or administrative
agency against any of the beneficiaries of this release arising out of
or relating to the subject matter of this release.
<PAGE> 12
Martin A. Coyle
February 25, 1997
Page 12
(b) YOU AGREE THAT BY SIGNING THIS LETTER, YOU ARE ALSO KNOWINGLY AND
VOLUNTARILY WAIVING ANY AND ALL CLAIMS OR CAUSES OF ACTION YOU MAY HAVE
UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (29
U.S.C. SECTION 621, ET SEQ.), AS AMENDED.
TRW agrees to release you, your successors and assigns from any and all
claims, demands, causes of action, losses and expenses of every nature
whatsoever, whether known or unknown, arising out of or in connection with
your employment by TRW, or the termination thereof.
MISCELLANEOUS
(a) It is important that you understand that the continued availability,
after the date of this letter, of the benefits specified above is
subject to (i) the continued existence of the applicable TRW benefit
plans, (ii) the retention of IRS-qualified status for those plans
which are currently so qualified, (iii) terms of all applicable TRW
benefit plans as such terms and conditions are in effect from time to
time in the future and (iv) changes in governing laws and regulations
applicable to benefit plans. If such benefits terminate or are reduced
you will receive any substitute program given to other Department
Heads.
(b) You and TRW acknowledge and agree that:
(i) only a significant material breach of your obligations specified
under "Confidentiality; Cooperation" above, will constitute
grounds for TRW to terminate any payments or benefits to be made
or provided to you hereunder;
(ii) certain of TRW's obligations to pay money pursuant to this
letter agreement are merely those of an unfunded and unsecured
promise to pay money in the future, and any and all of TRW's
assets will remain the general, unpledged and unrestricted
assets of TRW; and
<PAGE> 13
Martin A. Coyle
February 25, 1997
Page 13
(iii) you may not borrow against TRW's obligations to pay money to you
pursuant to this agreement, nor may you assign or otherwise
transfer TRW's obligations hereunder, (except upon death) or any
interest in them, and any attempt to do so will be ineffective.
(c) Upon retirement, you will receive all benefits generally made available
to OIP I retirees in good standing.
(d) In no case will your termination of employment be deemed or referred to
as being for cause (under any benefit plan or otherwise).
(e) All reference checks should be directed to Joe Gorman, Bill Lawrence or
me. TRW will assure that Joe, Bill and I will limit our responses
thereto to your positive accomplishments as General Counsel or before,
and the value you added to the company during your tenure as General
Counsel.
(f) TRW acknowledges that after June 1, 1997, your physical presence at TRW
on a day-to-day basis is not required and that nothing herein will
preclude you from assuming responsibilities or employment outside of
TRW, as long as you (1) do not violate "Confidentiality; Cooperation"
provision; and (2) that you have eliminated inconsistent obligations
under the Employment Section herein.
(g) It is understood that the terms of this letter agreement will be
governed by the laws of the State of Ohio regardless of where either
party may be domiciled.
(h) Any payments made by TRW hereunder are subject to applicable federal,
state and local tax withholding.
(i) In the event that any portion of this letter agreement shall be held to
be void, voidable or unenforceable, the remaining portions hereof shall
remain in full force and effect.
<PAGE> 14
Martin A. Coyle
February 25, 1997
Page 14
(j) You may wish to consult with your financial or tax advisor with regard
to the tax implication of any benefits, including nonqualified benefit
payments and deferrals, described in this agreement. You acknowledge
and agree that no representations or warranties have been made to you
with respect to the tax consequences of any payment provided for under
this letter agreement.
(k) The release set forth under "Release" does not constitute a release as
to any liability for a breach or default of this letter agreement.
(l) This agreement (other than this paragraph and the third paragraph
under "Opportunity to Revoke" below, which are binding on the parties
upon their respective execution) is contingent upon approval by the
Compensation and Stock Option Committee of the Directors of TRW Inc.
TRW Management agrees to present this Agreement, and recommend
approval of same (without limitation or restriction) on or before
April 30, 1997. Until such approval is given, or in the event approval
is denied, you shall continue as Executive Vice President, General
Counsel and Secretary with the compensation, benefits and perquisites
you currently have.
ENTIRE AGREEMENT
With the sole exception of the Consulting Agreement attached hereto as
Exhibit 1, you and TRW agree that this letter agreement constitutes the
entire agreement and supersedes all prior agreements and understandings,
whether oral or written, between you and TRW with respect to the subject
matter of this agreement. You agree that the obligations (other than the
non-compete) of the paragraphs relating to "Confidentiality; Cooperation" and
"Release" have been separately negotiated and shall survive the expiration or
termination of this letter agreement.
<PAGE> 15
Martin A. Coyle
February 25, 1997
Page 15
ATTORNEY
Each party understands and acknowledges that each has the right to consult an
attorney (at their personal expense) regarding the terms of this agreement
prior to signing this letter, that each has been given ample time to do so,
and that whether or not each has done so is totally his or its choice. The
role of the TRW Law Department personnel in this arrangement has been to
formalize the understanding between the parties (expressed through an
outline) and not to give legal advice to either party.
In the event either you or TRW breaches this agreement and the other party
brings an action to enforce the agreement in a court of competent
jurisdiction, the party who is finally adjudged to be prevailing shall be
entitled to reasonable attorneys' fees.
OPPORTUNITY TO REVOKE
You acknowledge that you were given this letter on February 25, 1997, that
you have reviewed it, and, if you so choose, you have 21 days from that date
to consider it prior to executing it. If, after thoughtful consideration, you
are in full agreement with and understand the terms and conditions contained
in this letter agreement (including the release of all claims contained in
the section entitled "Release"), if you agree that you will be bound by it,
and if you agree that it represents your free will and choice, please
indicate such agreement by signing this letter, dating it, and returning it
to me. Please keep a copy of the signed letter for your files.
I will hold the executed agreement for seven days following your return of
the executed letter to me, during which time you may revoke it by notifying
me in writing.
TRW shall not revoke or amend its offer as represented by this letter
agreement without your approval during the 21-day period set forth above.
<PAGE> 16
Martin A. Coyle
February 25, 1997
Page 16
IMPLEMENTATION
You should address any questions about the implementation of this agreement
directly to me.
Sincerely,
TRW Inc.
By /s/ Howard V. Knicely
-----------------------------------
Howard V. Knicely
Executive Vice President
ACCEPTED AND AGREED TO
this 3rd day of March , 1997.
------- ------------------
/s/ Martin A. Coyle
- ----------------------------------
Martin A. Coyle
Approved and agreed to this 30th day of April , 1997
--------- -----------------------
Compensation and Stock Option Committee
By /s/ William S. Kiser
---------------------------------
Chairman
<PAGE> 17
Exhibit 1
February 25, 1997
Martin A. Coyle
1900 Richmond Road
Cleveland, Ohio 44124
Dear Marty:
This letter agreement confirms our understanding relating to the
engagement by TRW Inc. ("TRW") of Martin A. Coyle ("Consultant") 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 TRW and
Consultant and shall not be modified in any way except by a written document
executed by both parties.
1. Term and Termination
--------------------
If Consultant retires from TRW on or after March 1, 1999, this letter
agreement shall commence on such date and will continue for a period of two
years.
2. Statement of Work
-----------------
Consultant shall perform work on special projects as assigned by the
Executive Vice President and General Counsel at such time(s) and place(s) as
mutually agreed upon; said work not to exceed ten percent of Consultant's time
on a yearly basis.
3. Compensation
------------
As sole compensation for Consultant's services hereunder, TRW shall pay
Consultant an annual fee of One Hundred Thousand Dollars ($100,000.00) per year.
In addition, TRW shall reimburse Consultant for all reasonable travel,
long-distance telephone and other out-of-pocket expenses incurred by Consultant
in performing work hereunder upon receipt of Consultant's correct invoices
therefor. All costs must be substantiated by receipts or other written
verification. Any unusual or significant expenses must be approved in advance by
the Chairman and Chief Executive Officer.
<PAGE> 18
Martin A. Coyle
February 25, 1997
Page 2
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 Consultant obtains from TRW, its
employees, subsidiaries and affiliates, or that Consultant otherwise acquires
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 Consultant hereunder or the contents
thereof. In view of the sensitive information to which Consultant may have
access during its engagement hereunder, any information reflecting upon or
concerning TRW and known, communicated or accessible to Consultant shall also be
deemed to be TRW Confidential Information unless such information has been
published by TRW in publicly available documents.
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) shall 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 of Consultant who need to know in order
to perform their duties and who agree in writing to use the TRW
Confidential Information only to assist Consultant in performance of
Consultant's duties hereunder;
(c) shall take or cause to be taken all reasonable precautions to prevent the
disclosure or communication of TRW Confidential Information to third
parties;
(d) agrees that each reproduction, duplication, or copy of any portion of TRW
Confidential Information shall be deemed TRW Confidential Information for
all purposes hereunder; and
Initialed ____
<PAGE> 19
Martin A. Coyle
February 25, 1997
Page 3
(e) shall, 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. Inventions
----------
Consultant shall disclose promptly to TRW all technical innovations
that were or are conceived or first reduced to practice by Consultant, whether
solely or jointly with others, in the course of performing work hereunder or as
a result of knowledge acquired while performing services hereunder. For purposes
of this letter agreement, the term "technical innovation" includes, but is not
limited to, any idea, invention, discovery, improvement, any new and useful art,
method, process, use, apparatus, composition of matter, design, computer
program, algorithm, programmable process, process of which any computer program
constitutes a part, or configuration of any kind, whether patentable or not.
Consultant agrees that all technical innovations shall be the sole property of
TRW. During or subsequent to the term of this letter agreement, Consultant
agrees without further consideration promptly to 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 for
the technical innovations and to vest title thereto in TRW and/or the
successors, assigns or designees of TRW. 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 technical innovations.
6. Copyrights
----------
Neither Consultant nor any of Consultant's employees or independent
contractors shall knowingly incorporate in any work prepared hereunder any
copyrighted or proprietary material of TRW or any other person. Further, any
work of authorship created hereunder 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 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
hereunder.
Initialed ___
<PAGE> 20
Martin A. Coyle
February 25, 1997
Page 4
7. 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 that are necessary to the implementation of work by TRW pursuant
to the reports and recommendations made by Consultant.
8. Security
--------
TRW shall advise Consultant which information or items provided to
Consultant constitute classified material, and Consultant shall comply with all
security requirements imposed by 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.
9. 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 that could conflict with, or impede an
unbiased performance of, Consultant's work hereunder or the protection of TRW
Confidential Information.
10. Compliance
----------
Consultant warrants that Consultant has the right to enter into this
letter agreement and that performance of the work specified herein shall not
cause Consultant to be in violation of any federal, state or local law or
regulation, or any contractual agreement entered into by Consultant. Consultant
shall comply with TRW's policies, directives and standards, including, without
limitation, TRW's Code of
Initialed ___
<PAGE> 21
Martin A. Coyle
February 25, 1997
Page 5
Conduct (a copy of which Consultant acknowledges having received), and with all
applicable federal, state and local laws and regulations.
11. 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
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.
12. Independent Contractor
----------------------
Consultant agrees that in its performance of this letter 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 workers' 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 or levied upon any
payment made to or on behalf of Consultant hereunder; and (b) Consultant and
Consultant's employees, agents, heirs, successors and assigns 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.
13. Publicity
---------
Except as TRW grants prior written approval, Consultant shall not
publicize the work performed under this letter agreement.
Initialed ___
<PAGE> 22
Martin A. Coyle
February 25, 1997
Page 6
14. Assignment
----------
This letter agreement shall not be assignable by Consultant without the
prior written consent of TRW. TRW may assign all or parts of its rights or
delegate all or parts of its duties under this letter agreement upon giving
written notice to Consultant.
15. Entire Agreement
----------------
With the sole exception of the severance agreement between Martin A.
Coyle dated February 25, 1997, and the reference therein to the instant
Consulting Agreement, this letter agreement sets forth the entire understanding
between the parties relating to consulting services to be performed by Coyle
between March 1, 1999 and March 1, 2001, and merges all prior discussions
between them regarding such subject. Neither TRW nor Consultant shall be bound
by any condition, warranty, or representation other than as expressly stated
herein or as subsequently set forth in writing signed by the parties.
16. Indemnification and Limitation of Liability
-------------------------------------------
Consultant shall indemnify TRW in respect of and hold TRW harmless from
and against (i) all expenses, claims, losses, damages and liability, however
caused, arising from any acts or omissions of Consultant in the course of
performing work under this letter agreement or the acts or omissions of
Consultant's employees, agents, subcontractors, suppliers or other third parties
utilized in connection with Consultant's performance; and (ii) any and all
claims by third parties that Consultant misrepresented its authority or made any
unfactual or other commitment not specifically authorized under this letter
agreement.
TRW's sole financial obligation under this letter agreement shall be
the payment of compensation as provided for herein. In no event shall TRW be
liable to Consultant for any loss of profits or incidental, indirect or
consequential damages, however caused, whether by TRW's sole or concurrent
negligence or otherwise.
Initialed ___
<PAGE> 23
Martin A. Coyle
February 25, 1997
Page 7
17. Survival
--------
The parties' obligations contained in paragraphs 4, 5, 6, 7, 12, 16 and
18 shall be permanent and survive the termination of this letter agreement.
18. Governing Laws
--------------
All questions concerning the validity and operation of this letter
agreement and the performance of the obligations imposed upon the parties
hereunder shall be governed by the substantive laws of the State of Ohio,
applicable to agreements made and to be performed wholly within such
jurisdiction.
If you agree with the terms of this letter agreement, please sign and
date the enclosed copy, initial each page and return the signed copy to me.
Sincerely,
TRW Inc.
By
- ------------------------------------
Howard V. Knicely
Executive Vice President
ACCEPTED AND AGREED TO
this day of , 1997
----------- ----------------------
- --------------------------------------------
Martin A. Coyle
Initialed ___
<PAGE> 24
Exhibit 2
AMENDMENT TO EMPLOYMENT CONTINUATION AGREEMENT
EFFECTIVE JUNE 1, 1997
FOR MARTIN A. COYLE
Executive Vice President of the Company, responsible worldwide for directing all
the employment benefit investment and environmental control activities of TRW
Inc. and its subsidiaries, including management responsibilities for TRW
Investment Management Company (serving as Chairman thereof).
<PAGE> 1
Exhibit 10(b)
April 21, 1997
Martin A. Coyle
1900 Richmond Road
Cleveland, Ohio 44124
Dear Marty,
The following will confirm the changes we have agreed to in the severance
agreement dated February 25, 1997, which you signed on March 3, 1997
(hereinafter referred to as "the Agreement"):
1. The first sentence of the paragraph entitled "Benefits," on page 4 of
the Agreement is amended as follows:
"Until the date of termination of your employment, all benefits and
perquisites you currently have shall continue, except that at such time
as you discontinue providing services to TRW or one of its
subsidiaries, you will participate in non-qualified SRIP and BEP.
Continuing as Chairman of TRW Investment Management Company and
assuming the responsibilities thereunder shall be deemed `providing
services'."
2. In the Pension section, the first sentence in the last partial
paragraph on page 8 of the Agreement is amended as follows:
"In no event will your benefit service under the qualified SSP or under
the nonqualified plans extend beyond your retirement date."
3. Notwithstanding anything else in the Agreement, if you choose to retire
earlier than March 1, 1999 or if you accept full-time employment (not
meant to include voluntary or consulting efforts) outside of TRW prior
to March 1, 1999, the following provisions will apply:
a. If you accept employment elsewhere, you must retire on the
first day of the month following your first day of employment
elsewhere (the "Early Retirement Date").
<PAGE> 2
Martin A. Coyle
April 21, 1997
Page 2
b. If you choose to retire earlier than March 1, 1999 (without
employment elsewhere), you must retire on the first day of the
month following your written notice to TRW indicating your
desire to retire (this date shall also be deemed the "Early
Retirement Date"). Your Early Retirement Date shall be deemed
your "termination of employment" under the Agreement.
c. If your Early Retirement Date occurs before March 1, 1999, you
will immediately receive in a lump sum (with appropriate
withholding) the base salary, OIP bonuses (at target) and SIP
payment you would otherwise had received if you had remained
employed until March 1, 1999, with the salary and bonuses you
would have received between (i) the later of June 1, 1998, and
your Early Retirement Date and (ii) March 1, 1999, offset by
the base salary and bonus, if any, you would expect to receive
from your new employer during such period. For purposes hereof
the SIP payment is equal to a cash payment of 20,000 shares
(as adjusted) times the average of the high and low price of
TRW stock on the last trading day prior to your Early
Retirement Date.
d. In addition, if you retire on or before February 1, 1998, you
will receive a payment of $800,000 (subject to withholding)
and if you retire on or before February 1, 1999, such payment
will be $400,000 (subject to withholding).
e. If you die before your Retirement Date, your executor or
designated beneficiary shall receive the payment described in
(c) above as though you had remained alive and retired on the
first day of the month following your death. For purposes of
TRW's benefit plans you shall have been deemed to die while
employed.
f. Upon your Early Retirement Date, you will receive one
additional full calendar year of Ayco services (unless
provided by the new employer) and 60 days of office and
secretarial services.
<PAGE> 3
Martin A. Coyle
April 21, 1997
Page 3
g. The section entitled "Early Retirement" on pages 9 and 10 of
the Agreement is hereby deleted.
4. Notwithstanding anything in the Agreement, when you retire, you may
purchase your Company Car for $1.00. You understand that the difference
between the car's fair market value and $1.00 shall be deemed imputed
taxable income to you.
If this represents the agreement between TRW and you, please indicate by signing
below.
Sincerely,
TRW INC.
by /s/ Howard V. Knicely
----------------------------
Howard V. Knicely
Executive Vice President
Accepted and agreed to this 22nd day of April 1997
/s/ Martin A. Coyle
- ----------------------------
Martin A. Coyle
Approved and agreed to this 30th day of April, 1997
Compensation and Stock Option Committee
by /s/ William S. Kiser
--------------------------
Chairman
<PAGE> 1
Exhibit 10(c)
February 25, 1997
Martin A. Coyle
1900 Richmond Road
Cleveland, Ohio 44124
Dear Marty:
This letter agreement confirms our understanding relating to the
engagement by TRW Inc. ("TRW") of Martin A. Coyle ("Consultant") 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 TRW and
Consultant and shall not be modified in any way except by a written document
executed by both parties.
1. Term and Termination
--------------------
If Consultant retires from TRW on or after March 1, 1999, this letter
agreement shall commence on such date and will continue for a period of two
years.
2. Statement of Work
-----------------
Consultant shall perform work on special projects as assigned by the
Executive Vice President and General Counsel at such time(s) and place(s) as
mutually agreed upon; said work not to exceed ten percent of Consultant's time
on a yearly basis.
3. Compensation
------------
As sole compensation for Consultant's services hereunder, TRW shall pay
Consultant an annual fee of One Hundred Thousand Dollars ($100,000.00) per year.
In addition, TRW shall reimburse Consultant for all reasonable travel,
long-distance telephone and other out-of-pocket expenses incurred by Consultant
in performing work hereunder upon receipt of Consultant's correct invoices
therefor. All costs must be substantiated by receipts or other written
verification. Any unusual or significant expenses must be approved in advance by
the Chairman and Chief Executive Officer.
<PAGE> 2
Martin A. Coyle
February 25, 1997
Page 2
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 Consultant obtains from TRW, its
employees, subsidiaries and affiliates, or that Consultant otherwise acquires
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 Consultant hereunder or the contents
thereof. In view of the sensitive information to which Consultant may have
access during its engagement hereunder, any information reflecting upon or
concerning TRW and known, communicated or accessible to Consultant shall also be
deemed to be TRW Confidential Information unless such information has been
published by TRW in publicly available documents.
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) shall 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 of
Consultant who need to know in order to perform their duties
and who agree in writing to use the TRW Confidential
Information only to assist Consultant in performance of
Consultant's duties hereunder;
(c) shall take or cause to be taken all reasonable precautions to
prevent the disclosure or communication of TRW Confidential
Information to third parties;
(d) agrees that each reproduction, duplication, or copy of any
portion of TRW Confidential Information shall be deemed TRW
Confidential Information for all purposes hereunder; and
Initialed ___
<PAGE> 3
Martin A. Coyle
February 25, 1997
Page 3
(e) shall, 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. Inventions
----------
Consultant shall disclose promptly to TRW all technical innovations
that were or are conceived or first reduced to practice by Consultant, whether
solely or jointly with others, in the course of performing work hereunder or as
a result of knowledge acquired while performing services hereunder. For purposes
of this letter agreement, the term "technical innovation" includes, but is not
limited to, any idea, invention, discovery, improvement, any new and useful art,
method, process, use, apparatus, composition of matter, design, computer
program, algorithm, programmable process, process of which any computer program
constitutes a part, or configuration of any kind, whether patentable or not.
Consultant agrees that all technical innovations shall be the sole property of
TRW. During or subsequent to the term of this letter agreement, Consultant
agrees without further consideration promptly to 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 for
the technical innovations and to vest title thereto in TRW and/or the
successors, assigns or designees of TRW. 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 technical innovations.
6. Copyrights
----------
Neither Consultant nor any of Consultant's employees or independent
contractors shall knowingly incorporate in any work prepared hereunder any
copyrighted or proprietary material of TRW or any other person. Further, any
work of authorship created hereunder 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 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
hereunder.
Initialed ___
<PAGE> 4
Martin A. Coyle
February 25, 1997
Page 4
7. 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 that are necessary to the implementation of work by TRW pursuant
to the reports and recommendations made by Consultant.
8. Security
--------
TRW shall advise Consultant which information or items provided to
Consultant constitute classified material, and Consultant shall comply with all
security requirements imposed by 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.
9. 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 that could conflict with, or impede an
unbiased performance of, Consultant's work hereunder or the protection of TRW
Confidential Information.
10. Compliance
----------
Consultant warrants that Consultant has the right to enter into this
letter agreement and that performance of the work specified herein shall not
cause Consultant to be in violation of any federal, state or local law or
regulation, or any contractual agreement entered into by Consultant. Consultant
shall comply with TRW's policies, directives and standards, including, without
limitation, TRW's Code of
Initialed ___
<PAGE> 5
Martin A. Coyle
February 25, 1997
Page 5
Conduct (a copy of which Consultant acknowledges having received), and with all
applicable federal, state and local laws and regulations.
11. 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
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.
12. Independent Contractor
----------------------
Consultant agrees that in its performance of this letter 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 workers' 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 or levied upon any
payment made to or on behalf of Consultant hereunder; and (b) Consultant and
Consultant's employees, agents, heirs, successors and assigns 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.
13. Publicity
---------
Except as TRW grants prior written approval, Consultant shall not
publicize the work performed under this letter agreement.
Initialed ___
<PAGE> 6
Martin A. Coyle
February 25, 1997
Page 6
14. Assignment
----------
This letter agreement shall not be assignable by Consultant without the
prior written consent of TRW. TRW may assign all or parts of its rights or
delegate all or parts of its duties under this letter agreement upon giving
written notice to Consultant.
15. Entire Agreement
----------------
With the sole exception of the severance agreement between Martin A.
Coyle dated February 25, 1997, and the reference therein to the instant
Consulting Agreement, this letter agreement sets forth the entire understanding
between the parties relating to consulting services to be performed by Coyle
between March 1, 1999 and March 1, 2001, and merges all prior discussions
between them regarding such subject. Neither TRW nor Consultant shall be bound
by any condition, warranty, or representation other than as expressly stated
herein or as subsequently set forth in writing signed by the parties.
16. Indemnification and Limitation of Liability
-------------------------------------------
Consultant shall indemnify TRW in respect of and hold TRW harmless from
and against (i) all expenses, claims, losses, damages and liability, however
caused, arising from any acts or omissions of Consultant in the course of
performing work under this letter agreement or the acts or omissions of
Consultant's employees, agents, subcontractors, suppliers or other third parties
utilized in connection with Consultant's performance; and (ii) any and all
claims by third parties that Consultant misrepresented its authority or made any
unfactual or other commitment not specifically authorized under this letter
agreement.
TRW's sole financial obligation under this letter agreement shall be
the payment of compensation as provided for herein. In no event shall TRW be
liable to Consultant for any loss of profits or incidental, indirect or
consequential damages, however caused, whether by TRW's sole or concurrent
negligence or otherwise.
Initialed ___
<PAGE> 7
Martin A. Coyle
February 25, 1997
Page 7
17. Survival
--------
The parties' obligations contained in paragraphs 4, 5, 6, 7, 12, 16 and
18 shall be permanent and survive the termination of this letter agreement.
18. Governing Laws
--------------
All questions concerning the validity and operation of this letter
agreement and the performance of the obligations imposed upon the parties
hereunder shall be governed by the substantive laws of the State of Ohio,
applicable to agreements made and to be performed wholly within such
jurisdiction.
If you agree with the terms of this letter agreement, please sign and
date the enclosed copy, initial each page and return the signed copy to me.
Sincerely,
TRW Inc.
By /s/ Howard V. Knicely
-------------------------------------
Howard V. Knicely
Executive Vice President
ACCEPTED AND AGREED TO
this 3rd day of March , 1997
---------- ---------------
/s/ Martin A. Coyle
- -----------------------------------
Martin A. Coyle
Initialed ____
<PAGE> 1
Exhibit 10(d)
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS OF TRW INC.
JULY 1, 1997
<PAGE> 2
DEFERRED COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS OF TRW INC.
--------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
Section 1. Effective Date........................................................ 1
Section 2. Purpose............................................................... 1
Section 3. Eligibility........................................................... 1
Section 4. Administration........................................................ 1
Section 5. Deferral of Compensation.............................................. 2
Section 6. Effect of Deferral Elections.......................................... 3
Section 7. Deferred Compensation Account......................................... 3
Section 8. Value of Deferred Compensation Accounts............................... 5
Section 9. Distribution of Account............................................... 5
Section 10. Acceleration of Account Distribution
Due to Unforeseeable Emergency........................................ 7
Section 11. Death of Eligible Director;
Distribution of Account Balance....................................... 7
Section 12. Acceleration of Account Distribution
Due to Change in Control.............................................. 7
Section 13. Eligible Directors' Rights Unsecured.................................. 9
Section 14. Assignability......................................................... 9
Section 15. Amendment............................................................. 10
</TABLE>
<PAGE> 3
Section 1. Effective Date.
- ---------- ---------------
The effective date of the Deferred Compensation Plan for Non-Employee
Directors of TRW Inc. (the "Plan") is July 1, 1997 (the "Effective Date").
Section 2. Purpose.
- ---------- --------
The purposes of the Plan are to align a significant portion of Director
compensation with creating and sustaining shareholder value and to attract and
retain a diverse and truly superior Board of Directors. The Plan is intended to
serve as the mechanism that will allow each eligible Director to defer all or a
portion of the compensation otherwise payable to him or her for his or her
services to TRW Inc. (the "Company").
Section 3. Eligibility.
- ---------- ------------
Each Director of the Company who is not an employee of the Company or
of one of its subsidiaries shall be eligible to, and shall participate in, the
Plan (the "Eligible Director"). Following the Effective Date of the Plan, (i) a
non-employee Director will be deemed an Eligible Director as of the effective
date of his or her election as a Director of the Company, and (ii) an employee
Director will be deemed an Eligible Director as of the date he or she ceases to
be an employee of the Company or of one of its subsidiaries but continues to be
a Director, in accordance with the provisions of the Directors' retirement
policy as amended from time to time. Eligibility to receive and defer
compensation pursuant to this Plan will cease upon the earlier of the Eligible
Director's termination of service as a Director of the Company or upon his or
her death.
Section 4. Administration.
- ---------- ---------------
The Plan shall be administered by a committee (the "Committee")
consisting of the following three officers of the Company: the Executive Vice
President and Chief Financial Officer, the Executive Vice President and General
Counsel, and the Executive Vice President of Human Resources. The Committee
shall have the power to (i) determine all questions of fact or interpretation
regarding Plan provisions;
1
<PAGE> 4
(ii) adopt rules, regulations and procedures deemed
necessary and appropriate to carry out the Plan's operation; and (iii) maintain
or cause to be maintained necessary and appropriate records. The Committee's
determinations on questions of fact or interpretation of Plan provisions will be
binding on all parties.
The Committee may delegate its authority to carry out specific
responsibilities given to it under the Plan.
Section 5. Deferral of Compensation.
- ---------- -------------------------
(a) Automatic Deferral. One-half (50 percent) of the annual retainer,
exclusive of any retainer paid for chairing a Committee of the Directors, (the
"Base Annual Retainer") otherwise payable by the Company to an Eligible Director
for his or her services to the Company on or after the Effective Date, will be
automatically deferred in equivalent shares of TRW Common Stock (the "Automatic
Deferral") under the Plan. The shares will be held in trust for the Eligible
Director's benefit.
(b) Elective Deferral. In addition to the Automatic Deferral described
above, an Eligible Director may elect to defer all or a portion of the remaining
50 percent of his or her Base Annual Retainer (the "Elective Deferral"),
expressed either as a dollar amount or as a percentage, and any retainer that he
or she may receive for chairing one of the Committees of the Directors of the
Company (together, the "Available Retainer").
With respect to the initial elections under the Plan for 1997, an
Eligible Director may elect to defer all or any portion of the Available
Retainer for services to be performed on or after the Effective Date, by
completing a deferral election form prescribed by the Secretary of the Company
(the "Secretary") and returning it to the Secretary with the following effect:
(i) on or before June 13, 1997 for effect as of July 1; (ii) on or before July
15, 1997 for effect by August 1; and (iii) on or before July 31, 1997 for effect
September 1.
-2-
<PAGE> 5
An Eligible Director who (i) is elected a Director of the Company
following the Effective Date of the Plan or (ii) ceases to be an employee of the
Company or one of its subsidiaries but continues to be a Director may choose to
defer all or any portion of the Available Retainer for his or her subsequent
services to the Company, provided that the prescribed deferral election form is
delivered to the Secretary within 30 days after the effective date of the
Eligible Director's (i) election as a Director of the Company or (ii) change in
employment status.
For years subsequent to 1997, an Eligible Director who elects to defer
all or a portion of the Available Retainer must execute the prescribed election
form and deliver it to the Secretary prior to the first day of the calendar year
for which the election is to be effective. If the Director becomes eligible to
participate in the Plan during the calendar year, the prescribed deferral
election form must be delivered to the Secretary within 30 days after the
effective date of the Eligible Director's (i) election as a Director of the
Company or (ii) change in employment status.
Section 6. Effect of Deferral Elections.
- ---------- -----------------------------
Deferral elections, expressed either as a dollar amount or as a
percentage, made under this Plan with respect to any calendar year may not be
amended or revoked after the beginning of the calendar year with respect to
compensation to be received for services performed during that calendar year.
Section 7. Deferred Compensation Account.
- ---------- ------------------------------
As of the Effective Date of the Plan, or the effective date of the
Director's eligibility, as appropriate, the Company shall establish an unfunded
deferred compensation account (the "Account") for each Eligible Director
consisting of an Automatic Deferral portion and an Elective Deferral portion, if
any.
(a) Automatic Deferral Portion. The Company will establish a trust
account for the benefit of the Eligible Directors. On the first business day of
each month, the Company will transfer to the trustee of the trust account
one-twelfth (1/12) of the amount of each Eligible Director's Automatic Deferral,
to be used by the
-3-
<PAGE> 6
trustee to purchase equivalent shares of TRW Common Stock that will be held in
the trust account. The trustee will participate in the Company's Dividend
Reinvestment Plan, and all cash dividends will be reinvested in TRW Common Stock
for the Eligible Directors' benefit.
(b) Elective Deferral Portion. This portion of the Eligible Director's
Account will consist of (i) amounts rolled over from the Eligible Director's
Account under the former Deferred Compensation Plan for Non-Employee Directors
of TRW Inc., if applicable, and (ii) any portion of the Available Retainer that
the Eligible Director elects to defer. These amounts will be held in phantom
accounts and indexed to the performance of one or more investment funds
established under The TRW Employee Stock Ownership and Stock Savings Plan (the
"Stock Savings Plan").
Allocation of the Elective Deferral portion of the Eligible Director's
Account to any of the available investment funds must be made in increments of
25 percent. The Eligible Director's allocation choices shall be implemented as
soon as practicable, in the sole discretion of the Committee.
Subject to any restrictions imposed by Section 16(b) of the Securities
Exchange Act of 1934, the Eligible Director may, at any time, (i) change his or
her allocation choices with respect to future Elective Deferrals or (ii)
reallocate the hypothetical investment earnings in the existing Elective
Deferral portion of his or her Account. Changes or reallocations so made must
also be in increments of 25 percent.
The Committee shall have the right to substitute investment fund
choices for the Elective Deferral portion of the Accounts from time to time,
without adversely affecting existing accruals in the Eligible Directors'
Accounts.
Hypothetical investment earnings shall continue to accrue until the
Eligible Director's Account is fully distributed.
-4-
<PAGE> 7
Section 8. Value of Deferred Compensation Accounts.
- ---------- ----------------------------------------
The value of each Eligible Director's Account shall reflect all amounts
deferred, including gains and losses from the hypothetical investments, and
shall be determined on the last day of each month (the "Valuation Date"). The
value of hypothetical investments in the Stock Savings Plan shall be based upon
the valuation date under the Stock Savings Plan coincident with or immediately
preceding such Valuation Dates.
The amount in an Eligible Director's Account as of each Valuation Date
that has not been previously deemed invested shall be deemed invested in a
hypothetical investment on such date, based on the value of the hypothetical
investment on such date.
Section 9. Distribution of Account.
- ---------- ------------------------
No distributions may be made from an Eligible Director's Account,
except as provided in this Section and Sections 11 and 12.
(a) Automatic Deferral Portion. Automatic Deferral amounts and earnings
from the Company's Dividend Reinvestment Plan credited to an Account shall be
distributed, beginning as soon as practicable, after the Eligible Director
ceases to hold office as a Director of the Company. The distribution shall be
made in whole shares of TRW Common Stock, valued at the fair market value of a
share of TRW Common Stock on the date of distribution. The Eligible Director
shall specify, at the time set forth in Section 5 for making Elective Deferrals,
how distribution is to be made with respect to this portion of his or her
Account:
(1) as a single payment, with any fractional shares being paid
in cash; or
(2) in regular annual installments payable over a period not to
exceed 10 years, with fractional shares paid in cash at the
time of the final installment payment.
-5-
<PAGE> 8
(b) Elective Deferral Portion. Elective Deferral amounts and the
relevant hypothetical investment earnings credited to an Account shall be
distributed in accordance with the instructions given to the Secretary by the
Eligible Director at the time of his or her election to defer all or a portion
of the Available Retainer and may begin as of:
(1) the date the Eligible Director ceases to hold office as a
Director of the Company;
(2) the date the Eligible Director reaches an age at which he or
she may earn unlimited amounts without penalty under the
Social Security Act and the regulations promulgated
thereunder; or
(3) such other date specified by the Eligible Director on the
election form (at least two years from the date deferral of
compensation begins).
Distribution of an Account may be made as a single payment or in regular annual
installments over a period of not more than 10 years.
All distributions from the Elective Deferral portion of the Account
will be made in cash, denominated and payable in United States dollars, equal to
the amounts deferred and any gains or losses on those amounts, based on the
performance of the investment funds to which the Eligible Director allocated his
or her deferred compensation.
The Eligible Director may change his or her Elective Deferral
distribution instructions by subsequent written notice to the Secretary, but any
such change will apply only to future deferrals. If an Eligible Director should
fail to give the Secretary instructions as to the type of distribution
preferred, his or her Account will be distributed as a single payment as soon as
practicable following the date on which he or she ceases to hold office as a
Director of the Company.
-6-
<PAGE> 9
Section 10. Acceleration of Account Distribution Due to Unforeseeable
- ----------- ---------------------------------------------------------
Emergency.
----------
An Eligible Director will be permitted to receive distribution of all
or a part of the Elective Deferral portion of his or her Account if the
Committee determines that an unforeseeable emergency has occurred. An
unforeseeable emergency is one that is caused by an event beyond the Eligible
Director's control and that would cause severe financial hardship to him or her
if the distribution of all or a part of the Elective Deferral portion of his or
her Account were not approved. Any distribution approved under this provision
shall be limited to the amount deemed necessary to meet the emergency.
Section 11. Death of Eligible Director; Distribution of Account Balance.
- ----------- ------------------------------------------------------------
In the event of the death of an Eligible Director before he or she has
received full distribution of his or her Account, the value of the Account
balance remaining to be distributed shall be determined as of the Valuation Date
coincident with or immediately following the Eligible Director's death. The
Account balance shall, as soon as practicable, be distributed in a single
payment to the beneficiary or beneficiaries designated by the Eligible Director.
In the event that an Eligible Director has failed to name a beneficiary, his or
her Account balance shall be distributed to his or her estate.
Section 12. Acceleration of Account Distribution Due to Change in Control.
- ----------- --------------------------------------------------------------
In the event of a change in control of the Company, an Eligible
Director's Account balance may become subject to immediate distribution in
accordance with the Eligible Director's election instructions; provided,
however, that the Eligible Director specifically stipulated on his or her
election form that such accelerated payout be made. For purposes of this Plan, a
change in control, as defined in resolutions adopted by the Compensation and
Stock Option Committee of the Directors of the Company on July 26, 1989, will be
deemed to have occurred if:
-7-
<PAGE> 10
(i) the Corporation 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
percent 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 Voting
Stock ("Voting Stock" consists of the then-outstanding
securities entitled to vote generally in the election of
Directors of the Corporation) immediately prior to such
transaction;
(ii) the Corporation sells or otherwise transfers all or
substantially all of its assets to any other corporation or
other legal person if less than 51 percent of the combined
voting power of the then-outstanding voting securities of such
corporation or person immediately after such sale or transfer is
held in the aggregate by the holders of Voting Stock 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 percent or more of the combined voting power of the Voting
Stock;
(iv) the Corporation 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
Corporation has or may have occurred or will or may occur in the
future pursuant to any then-existing contract or transaction; or
(v) during any period of two consecutive years, individuals who at
the beginning of any such period constitute the Directors of the
Corporation cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for
election by the Corporation's shareholders, of each Director of
the Corporation first elected during such period was approved by
a vote of at least two-thirds of the Directors of the
Corporation then still in office who were Directors of the
Corporation at the beginning of any such period.
-8-
<PAGE> 11
Notwithstanding the foregoing definition, a "change in control" shall
not be deemed to have occurred solely because (i) the Corporation, (ii)
an entity in which the Corporation directly or indirectly beneficially
owns more that 50 percent of the voting securities or (iii) any
employee stock ownership plan sponsored by the Corporation or any other
employee benefit plan of the Corporation, 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, whether in excess of 20 percent or
otherwise, or because the Corporation reports that a change in control
of the Corporation has or may have occurred or will or may occur in the
future by reason of such beneficial ownership...
Section 13. Eligible Directors' Rights Unsecured.
- ----------- -------------------------------------
This Plan is deemed unfunded for tax purposes and is not governed by
the Employee Retirement Income Security Act of 1974. Consequently, for purposes
of this Plan, no assets shall be segregated and placed beyond the reach of the
Company's general creditors. The right of an Eligible Director to receive future
installments under the provisions of this Plan shall be an unsecured claim
against the general assets of the Company. Accordingly, the Eligible Directors
will have the status of general unsecured creditors of the Company, and the Plan
constitutes a mere promise by the Company to make Account distributions in the
future.
Section 14. Assignability.
- ----------- --------------
The right of the Eligible Director, or of his or her beneficiary, to
receive distribution of his or her Account pursuant to the provisions of this
Plan are not subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or garnishment by creditors of the
Eligible Director, or of his or her beneficiary, except by will or by the laws
of descent and distribution.
-9-
<PAGE> 12
Section 15. Amendment.
- ----------- ----------
This Plan may at any time or from time to time be amended, modified or
terminated by the Directors or the Executive Committee of the Directors of the
Company. No amendment, modification or termination shall adversely affect an
Eligible Director's Account, without his or her consent.
-10-
<PAGE> 1
Exhibit 11
TRW Inc. and Subsidiaries
-------------------------
COMPUTATION OF EARNINGS PER SHARE - UNAUDITED
---------------------------------------------
(In Millions Except Per Share Amounts)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
PRIMARY 1997 1996
- ------- ---- ----
<S> <C> <C>
Earnings from continuing operations $ 253.6 $ 219.6
Less preference dividend requirements 0.3 0.3
-------- --------
Earnings applicable to common shares
and common share equivalents 253.3 219.3
Earnings from discontinued operations -- 27.9
-------- --------
Net earnings applicable to common shares
and common share equivalents $ 253.3 $ 247.2
======== ========
Average common shares outstanding 124.4 130.5
Stock options and performance share rights, based on
the treasury stock method using average market price 3.1 3.1
-------- --------
Average common shares and common share
equivalents 127.5 133.6
======== ========
Primary earnings per share from continuing operations $ 1.99 $ 1.64
Primary earnings per share from discontinued operations -- 0.21
-------- --------
Primary earnings per share $ 1.99 $ 1.85
======== ========
FULLY DILUTED
- -------------
Earnings from continuing operations applicable
to common shares and common share equivalents $ 253.3 $ 219.3
Dividends assuming conversion of other
dilutive securities: (A)
Dilutive preference dividends 0.3 0.3
-------- --------
Earnings from continuing operations applicable
to fully diluted shares 253.6 219.6
Earnings from discontinued operations -- 27.9
-------- --------
Net earnings applicable to fully diluted shares $ 253.6 $ 247.5
======== ========
Average common shares outstanding 124.4 130.5
Common shares assuming conversion of
other dilutive securities: (A)
Dilutive preference shares 1.0 1.1
Stock options and performance share rights, based on the treasury stock
method using closing market price if higher than
average market price 3.6 3.1
-------- --------
Average fully diluted shares 129.0 134.7
======== ========
Fully diluted earnings per share from continuing operations $ 1.97 $ 1.63
Fully diluted earnings per share from discontinued operations -- 0.21
-------- --------
Fully diluted earnings per share $ 1.97 $ 1.84
======== ========
</TABLE>
(A) Assuming the conversion of the Serial Preference Stock II - Series 1 and
Series 3.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 83
<SECURITIES> 0
<RECEIVABLES> 1,606
<ALLOWANCES> 0
<INVENTORY> 525
<CURRENT-ASSETS> 2,578
<PP&E> 6,116
<DEPRECIATION> 3,498
<TOTAL-ASSETS> 6,145
<CURRENT-LIABILITIES> 2,423
<BONDS> 498
0
0
<COMMON> 77
<OTHER-SE> 2,111
<TOTAL-LIABILITY-AND-EQUITY> 6,145
<SALES> 5,512
<TOTAL-REVENUES> 5,512
<CGS> 4,496
<TOTAL-COSTS> 4,496
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> 414
<INCOME-TAX> 160
<INCOME-CONTINUING> 254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 254
<EPS-PRIMARY> 1.99
<EPS-DILUTED> 1.97
</TABLE>
<PAGE> 1
Exhibit 99
TRW Inc. and Subsidiaries
Computation of Ratio of Earnings
to Fixed Charges - Unaudited
(In millions except ratio data)
<TABLE>
<CAPTION>
Six Months Years Ended December 31
ended ---------------------------------------------------------------------------------
June 30, 1997 1996 1995 1994 1993 1992
------------- ---------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Earnings from continuing
operations before income
taxes $414.0 $302.2(A) $625.5 $435.5 $289.2 $276.4
Unconsolidated affiliates (1.0) 1.4 1.3 (0.6) 0.7 (0.9)
Minority earnings 10.9 11.5 10.8 7.7 1.4 0.1
Fixed charges excluding
capitalized interest 61.6 129.0 137.2 145.3 177.5 208.1
---- ----- ----- ----- ----- -----
Earnings $485.5 $444.1 $774.8 $587.9 $468.8 $483.7
------ ------ ------ ------ ------ ------
Fixed Charges:
Interest expense $37.4 $84.2 $94.7 $104.7 $137.4 $162.1
Capitalized interest 2.1 3.5 5.1 6.6 7.9 12.7
Portion of rents representa-
tive of interest factor 24.1 43.2 41.4 39.2 37.9 45.8
Interest expense of uncon-
solidated affiliates 0.0 1.6 1.1 1.4 2.2 0.2
--- --- --- --- --- ---
Total fixed charges $63.6 $132.5 $142.3 $151.9 $185.4 $220.8
----- ----- ------ ------ ------ ------
Ratio of earnings to fixed 7.6x 3.4x 5.4x 3.9x 2.5x 2.2x
charges ---- ---- ---- ---- ---- ----
<FN>
(A) The 1996 earnings from continuing operations before income taxes of $302.2
million includes a charge of $384.8 million as a result of actions taken in
the automotive and space and defense businesses.
</TABLE>
