<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-2384
TRW INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 34-0575430
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1900 RICHMOND ROAD, CLEVELAND, OHIO 44124
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(216) 291-7000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
---------------------------------------- ---------------------------
Common Stock, par value $0.625 per share New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
Rights to Purchase Cumulative Redeemable New York Stock Exchange
Serial Preference Stock II, Series 4 Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
Cumulative Serial Preference Stock II, New York Stock Exchange
$4.40 Convertible Series 1
Cumulative Serial Preference Stock II, New York Stock Exchange
$4.50 Convertible Series 3
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the registrant's voting stock held by
non-affiliates was $6,376,542,513.50 as of February 28, 1997. This amount was
computed on the basis of the closing price of the registrant's voting securities
included in the NYSE-Composite Transactions report for such date, as published
in the Midwest edition of The Wall Street Journal or, in the case of the
registrant's voting cumulative preference stock, for the date of the most recent
trade, as reported in the Dow Jones News Retrieval Service.
As of February 28, 1997 there were 125,664,076 shares of TRW Common Stock,
$0.625 par value, outstanding.
The following documents have been incorporated herein by reference to the extent
indicated herein:
TRW Proxy Statement dated March 12, 1997 Part III
TRW Annual Report to Security Holders for the year
ended December 31, 1996 Parts I, II and IV
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TRW INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
FOR YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PART I PAGE
----
<S> <C>
Item 1. Business............................................................ 1
Item 2. Properties.......................................................... 5
Item 3. Legal Proceedings................................................... 5
Item 4. Submission of Matters to a Vote of Security Holders................. 6
Executive Officers of the Registrant.......................................... 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters............................................................ 7
Item 6. Selected Financial Data............................................. 8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 8
Item 8. Financial Statements and Supplementary Data......................... 8
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................... 8
PART III
Item 10. Directors and Executive Officers of the Registrant................. 8
Item 11. Executive Compensation............................................. 9
Item 12. Security Ownership of Certain Beneficial Owners and Management..... 9
Item 13. Certain Relationships and Related Transactions..................... 9
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K... 9
</TABLE>
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PART I
ITEM 1. BUSINESS
INDUSTRY SEGMENTS AND PRODUCT CLASSIFICATIONS
TRW is an international company that provides advanced technology products
and services. The principal businesses of TRW and its subsidiaries are the
design, manufacture and sale of products and the performance of systems
engineering, research and technical services for industry and the United States
Government in two industry segments: Automotive and Space & Defense. TRW's
principal products and services include automotive systems and components;
spacecraft; software and systems engineering support services; and electronic
systems, equipment and services. TRW was incorporated under the laws of Ohio on
June 17, 1916. As used herein the terms "TRW" and the "Company" refer to TRW
Inc. or to TRW Inc. and its subsidiaries or to a subsidiary of TRW Inc.
In 1996, the Company completed the sale of substantially all the businesses
comprising its Information Systems & Services segment. The Company's financial
statements and related notes reflect as discontinued operations for all periods
presented the operating results and net assets, as well as the related
transaction gain, of this segment. Financial information herein has been
restated to reflect only continuing operations. Reference is made to the
information related to the divestiture presented under the note entitled
"Discontinued operations" in the Notes to Financial Statements on page 27 of the
TRW Annual Report to Security Holders for the year ended December 31, 1996 (the
"TRW 1996 Annual Report"), which information is incorporated herein by
reference.
AUTOMOTIVE
TRW's Automotive segment designs, manufactures and sells a broad range of
steering, suspension, engine, safety, engineered fastening, electronic,
electromechanical and other components and systems for passenger cars and
commercial vehicles, including trucks, buses, farm machinery and off-highway
vehicles. These products include occupant safety systems such as seat belt
systems and inflatable restraint systems, steering wheels, manual and power
steering gears, engine valves and valve train components, suspension components,
electronic monitoring and control systems, electromechanical assemblies,
fasteners, stud welding systems and other components.
The products included in this industry segment are sold primarily to
automotive original equipment manufacturers. In addition, TRW sells its
automotive components for use as aftermarket parts to automotive original
equipment manufacturers and others for resale through their own independent
distribution networks.
In February 1997, TRW purchased from Magna International Inc. an 80 percent
equity interest in MST Automotive GmbH Automobil-Sicherheitstechnik and Temic
Bayern-Chemie Airbag GmbH for a cost of approximately U.S. $450 million. The
Company and Magna also formed a strategic alliance for the design, development
and production of automotive products for the global market.
SPACE & DEFENSE
TRW's Space & Defense segment includes spacecraft, software and systems
engineering support services and electronic systems, equipment and services.
The Company's spacecraft activities include the design and manufacture of
spacecraft equipment, propulsion subsystems, electro-optical and instrument
systems, spacecraft payloads, high-energy lasers and laser technology and other
high-reliability components. TRW's software and systems engineering support
services are in the fields of command and control, security for defense and
nondefense applications, counterterrorism, undersea surveillance, antisubmarine
warfare and other high-technology space and defense mission support systems,
management of radioactive waste, automated fingerprint matching, upgrading of
the nation's air traffic control program and other civilian applications. The
Company's electronic systems, equipment and services include the design and
manufacture of communications systems, avionics systems and other electronic
technologies for space and defense applications.
Products and services in this industry segment are sold and distributed
principally to the United States Government. TRW's spacecraft business involves
the sale to the United States Government of subsystems and components for space
propulsion and unmanned spacecraft for defense, scientific research and
communications purposes. TRW is currently participating in a number of
spacecraft programs. Software and systems engineering and integration support
services are sold primarily to the United States Government defense agencies and
to Federal civilian and other state and local governmental agencies. These
services include a wide variety of computer software systems and analytical
services for space and defense, air traffic control, and advanced communication
and data retrieval applications. Sales to the United States Government of
electronic systems, equipment and services consist of systems and subsystems for
defense and space
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applications, including communications, command and control, guidance,
navigation, electric power, sensing and electronic display equipment. While
classified projects are not discussed herein, the operating results relating to
classified projects are included in the Company's consolidated financial
statements, and the business risks associated with such projects do not differ
materially from those of other projects for the United States Government.
TRW also performs diverse testing and general research projects in many of
the technical disciplines related to its Space & Defense products and services
under both private and United States Government contracts, including several
advanced defense system projects.
RESULTS BY INDUSTRY SEGMENT
Reference is made to the information relating to the Company's industry
segments, including sales, operating profit and identifiable assets attributable
to each segment for each of the years 1994 through 1996, presented under the
note entitled "Industry segments" in the Notes to Financial Statements on page
35 of the TRW 1996 Annual Report. Such information is incorporated herein by
reference.
FOREIGN AND DOMESTIC OPERATIONS
TRW manufactures products or has facilities in 26 countries throughout the
world. TRW's operations outside the United States are in Argentina, Australia,
Austria, Brazil, Canada, China, the Czech Republic, France, Germany, Hong Kong,
India, Italy, Japan, Malaysia, Mexico, the Netherlands, Poland, Saudi Arabia,
South Africa, South Korea, Spain, Taiwan, Thailand, Turkey, and the United
Kingdom. TRW also exports products manufactured by it in the United States. Such
export sales accounted for 8% of total sales during 1996, 8% of total sales
during 1995 and 7% of total sales during 1994, or $764 million, $813 million and
$595 million, respectively.
TRW's foreign operations are subject to the usual risks that may affect
such operations. These include, among other things, customary exchange controls
and currency restrictions, currency fluctuations, changes in local economic
conditions, exposure to possible expropriation or other government actions,
unsettled political conditions and foreign government-sponsored boycotts of the
Company's products or services for noncommercial reasons. Most of the
identifiable assets associated with TRW's foreign operations are located in
countries where the Company believes such risks to be minimal.
Reference is made to the information relating to the dollar amounts of
sales, operating profit and identifiable assets by geographic area for each of
the years 1994 through 1996 presented under the note entitled "Geographic
segments" in the Notes to Financial Statements on page 36 of the TRW 1996 Annual
Report. Such information is incorporated herein by reference.
GENERAL
COMPETITION
TRW encounters intense competition in substantially all segments of its
business. The Company's competitive position varies for its different products
and services. However, TRW believes that it is a significant supplier of many of
the products it manufactures and of many of the services it provides.
In the Automotive segment, competitors include independent suppliers of
parts and components as well as the Company's original equipment customers, many
of whom are integrated manufacturers who produce or could produce substantial
portions of their requirements for parts and components internally. Depending on
the particular product, the number of the Company's competitors may vary
significantly and many of the products have high capital requirements and
require high engineering content. In the Automotive segment, the principal
methods of competition are price, engineering excellence, product quality,
customer service, delivery time and proprietary position.
TRW competes for contracts covering a variety of United States Government
projects and programs, principally in the Space & Defense segment of its
business. Such competition is based primarily on technical ability, product
quality and price. TRW's competitors for United States Government contracts
typically are large, technically-competent firms with substantial assets, some
of which have become considerably larger through the ongoing industrial
consolidation process.
CUSTOMERS
Sales, directly and indirectly, to the United States Government, including
the Department of Defense, the National Aeronautics and Space Administration and
other agencies, constituted 32% of TRW's total sales for 1996, 30% for 1995
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and 30% for 1994, or $3,121 million, $2,890 million and $2,533 million,
respectively. Sales to the United States Government represented 93% of the sales
of the Space & Defense segment in 1996, 93% in 1995 and 90% in 1994, or $3,120
million, $2,887 million and $2,528 million, respectively.
Companies engaged in United States Government contracting are subject to
certain unique business risks, including dependence on Congressional
appropriations and administrative allotment of funds, changes in Government
policies that may reflect military and political developments, time required for
design and development, significant changes in contract scheduling, complexity
of designs and the rapidity with which they become obsolete, necessity of design
improvements, difficulty in forecasting costs and schedules when bidding on
developmental and highly sophisticated technical work and other factors
characteristic of the industry.
United States Government contracting laws also provide that the Government
is to do business only with responsible contractors. In this regard, the United
States Department of Defense and other federal agencies have the authority,
under certain circumstances, to suspend or debar a contractor or organizational
parts of a contractor from further Government contracting for a certain period
"to protect the Government's interest." Such action may be taken for, among
other reasons, commission of fraud or a criminal offense in connection with a
United States Government contract. A suspension may also be imposed if a
contractor is indicted for such matters. In the event of any suspension or
debarment, the Company's existing contracts would continue unless terminated or
canceled by the United States Government under applicable contract provisions.
Other than the United States Government, TRW's largest customers
(determined by including sales to their affiliates throughout the world but
excluding sales to such customers or their affiliates that ultimately result in
sales to the United States Government) are Ford Motor Company, Volkswagen AG and
Chrysler Corporation. Such sales by TRW's Automotive segment to Ford, Volkswagen
and Chrysler, and their respective subsidiaries, during 1996 accounted for 23%,
10% and 10%, respectively, of sales of the Automotive segment, compared to 23%,
10% and 9%, respectively, during 1995 and 24%, 9% and 10%, respectively, during
1994. Such sales by TRW's Automotive segment to Ford and its subsidiaries
accounted for 15% of TRW's total sales for 1996, 15% for 1995 and 16% for 1994,
or $1,470 million, $1,474 million and $1,363 million, respectively.
BACKLOG
The backlog of orders for TRW's domestic operations, without options, at
December 31, 1996 and December 31, 1995 is estimated to have been approximately
$5,285 million and $5,105 million, respectively, of which it is estimated that,
directly or indirectly, United States Government business accounted for
approximately $4,631 million and $4,464 million, respectively. Reported backlog
at the end of 1996 does not include approximately $2.9 billion of negotiated and
priced, but unexercised, options for defense and non-defense programs.
Unexercised options at the end of 1995 were valued at $2.6 billion. The exercise
of options is at the discretion of the customer, and as in the case of
Government contracts generally, dependent on future government funding. Of the
total domestic backlog at December 31, 1996 and at December 31, 1995, 95% was
attributable to the Space & Defense segment, and virtually all of the backlog
attributable to United States Government business related to that segment.
The determination of TRW's backlog involves substantial estimating,
particularly with respect to customer requirements contracts and long-term
contracts of a cost-reimbursement or incentive nature. A substantial portion of
the variations in TRW's estimated backlog in recent years is attributable to the
timing of the award and performance of United States Government and certain
other contracts. Subject to various qualifications, including those set forth
herein, and assuming no terminations, cancellations or changes and completion of
orders in the normal course, TRW has estimated that approximately 51% of the
December 31, 1996 backlog will be delivered in 1997, 19% in 1998 and 30%
thereafter.
United States Government contracts and related customer orders generally
are subject to termination in whole or in part at the convenience of the
Government whenever the Government believes that such termination would be in
its best interest. Multi-year Government contracts and related orders are
subject to cancellation if funds for contract performance for any subsequent
contract year become unavailable. If any of its Government contracts were to be
terminated or canceled under these circumstances, TRW generally would be
entitled to receive payment for work completed and allowable termination or
cancellation costs. Whether the occurrence of any such termination or
cancellation would have an adverse effect on TRW would depend upon the
particular contract and the circumstances of the termination or cancellation.
Backlog data and comparisons thereof as of different dates may not be
reliable indicators of either future sales or the ratio of future direct and
indirect United States Government sales to other sales.
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INTELLECTUAL PROPERTY
TRW owns significant intellectual property, including a large number of
patents, copyrights and trade secrets, and is involved in numerous licensing
arrangements. Although TRW's intellectual property plays an important role in
maintaining TRW's competitive position in a number of the markets that it
serves, no single patent, copyright, trade secret or license, or group of
related patents, copyrights, trade secrets or licenses, is, in the opinion of
management, of such value to TRW that the business of TRW or of any industry
segment of TRW would be materially affected by the expiration or termination
thereof. TRW's general policy is to apply for patents on an ongoing basis in the
United States and appropriate other countries on its significant patentable
developments.
TRW also views its name and mark as significant to its business as a whole.
In addition, TRW owns a number of other trade names and marks applicable to
certain of its businesses and products that it views as important to such
businesses and products.
RESEARCH AND DEVELOPMENT
Research and development costs totaled $1,981 million, $1,882 million and
$1,655 million in 1996, 1995 and 1994, respectively, of which customer-funded
research and development was $1,425 million in 1996, $1,360 million in 1995 and
$1,157 million in 1994. Company-funded research and development costs, which
included research and development for commercial products, independent research
and development and bid and proposal work related to government products and
services, totaled $412 million in 1996, $392 million in 1995 and $390 million in
1994. A portion of the cost incurred for independent research and development
and bid and proposal work is recoverable through overhead charged to government
contracts. Company-funded product development costs, including engineering and
field support for new customer requirements, were $144 million in 1996, $130
million in 1995 and $108 million in 1994.
EMPLOYEES
At December 31, 1996, TRW had approximately 65,200 employees, of whom
approximately 34,100 were employed in the United States.
RAW MATERIALS AND SUPPLIES
Materials used by TRW include or contain steel, stainless steel, pig iron,
ferro-chrome, aluminum, brass, copper, tin, platinum, special alloys, sodium
azide, glass, ceramics, plastic powders and laminations, carbon and plastic
materials, synthetic rubber, paper, and gold, silver, nickel, zinc and copper
plating materials. TRW also purchases from suppliers various types of equipment
and component parts that may include such materials. TRW's operations are
dependent upon the ability of its suppliers of materials, equipment and
component parts to meet performance and quality specifications and delivery
schedules. In some cases, there is only a limited number of suppliers for a
material or product due to the specialized nature of the item. Shortages of
certain raw materials, equipment and component parts have existed in the past
and may exist again in the future. TRW has taken a number of steps to protect
against and to minimize the effect of such shortages. However, any future
inability of TRW to obtain raw materials, equipment or component parts could
have a material adverse effect on the Company. TRW's operations also are
dependent on adequate supplies of energy. TRW has continued its programs to
conserve energy used in its operations and has made available alternative
sources of energy.
ENVIRONMENTAL REGULATIONS
Federal, state and local requirements relating to the discharge of
materials into the environment, or otherwise relating to the protection of the
environment, have had and will continue to have an effect on TRW and its
operations. The Company has made and continues to make expenditures for projects
relating to the environment, including pollution control devices for new and
existing facilities. The Company is conducting a number of environmental
investigations and remedial actions at current and former Company locations to
comply with various federal, state and local laws and, along with other
companies, has been named a potentially responsible party for certain waste
management sites. Each of these matters is subject to various uncertainties, and
some of these matters may be resolved unfavorably to the Company. A reserve
estimate reflecting cost ranges is established using standard engineering cost
estimating techniques for each matter for which sufficient information is
available. In the determination of cost ranges, consideration is given to the
professional judgment of the Company's environmental engineers in consultation
with outside environmental specialists, when necessary. At multi-party sites,
the reserve estimate also reflects the expected allocation of total project
costs among the various potentially responsible parties. At December 31, 1996,
the Company had reserves for environmental matters of $77 million, including $7
million of accruals recorded during the year. The Company aggressively pursues
reimbursement for environmental costs from its insurance carriers. Insurance
recoveries are recorded as a reduction of environmental costs when fixed and
determinable. The Company does not believe that compliance with environmental
protection laws
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and regulations will have a material effect upon its capital expenditures or
competitive position, and TRW's capital expenditures for environmental control
facilities during 1997 and 1998 are not expected to be material to the Company.
The Company believes that any liability that may result from the resolution of
environmental matters for which sufficient information is available to support
cost estimates will not have a material adverse effect on the Company's
earnings. However, the Company cannot predict the effect on future earnings of
expenditures for aspects of certain matters for which there is insufficient
information. In addition, the Company cannot predict the effect on future
earnings of compliance with environmental laws and regulations with respect to
currently unknown environmental matters or the possible effect on future
earnings of compliance with environmental requirements imposed in the future.
CAPITAL EXPENDITURES
During the five years ended December 31, 1996, TRW's capital expenditures
and the net book value of its assets retired or sold were:
<TABLE>
<CAPTION>
(IN MILLIONS)
--------------------------------------------------------
CAPITAL EXPENDITURES
-------------------------------------
LAND, NET BOOK
BUILDINGS MACHINERY VALUE OF
YEAR ENDED AND LEASEHOLD AND ASSETS RETIRED
DECEMBER 31, IMPROVEMENTS EQUIPMENT TOTAL OR SOLD
---------------- ------------- --------- ----- --------------
<S> <C> <C> <C> <C>
1996... $ 76 $ 424 $500 $ 29
1995... 74 392 466 21
1994... 92 396 488 19
1993... 73 386 459 47
1992... 94 419 513 62
</TABLE>
On an industry segment basis, capital expenditures during 1996 and 1995
were as follows: Automotive, $342 million and $314 million, respectively; and
Space & Defense, $157 million and $114 million, respectively. Of total capital
expenditures, 59% in 1996 and 66% in 1995 were invested in the United States.
ITEM 2. PROPERTIES
TRW's operations include numerous manufacturing, research and development
and warehousing facilities. TRW owns or leases principal facilities located in
21 states in the United States and in 25 other countries. Approximately 59% of
the principal domestic facilities are used by the Automotive segment and 41% are
used by the Space & Defense segment. Substantially all of the foreign facilities
are used by the Automotive segment.
The Company also owns or leases certain smaller research and development
properties and administrative, marketing, sales and office facilities throughout
the United States and in various parts of the world. In addition, TRW operates
facilities on property owned directly or indirectly by the United States
Government. The Company owns its world headquarters in Lyndhurst, Ohio and its
regional headquarters for its Space & Defense segment in Redondo Beach,
California.
In the opinion of management, the Company's facilities are generally well
maintained and are suitable and adequate for their intended use.
Reference is made to the information concerning long-term rental
obligations under operating leases presented under the note entitled "Lease
commitments" in the Notes to Financial Statements on page 33 of the TRW 1996
Annual Report. Such information is incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
On December 15, 1987, the Commissioner of the Indiana Department of
Environmental Management issued an Order to TRW and several other respondents
relating to alleged contamination of the public water supply in Shelbyville,
Indiana by, among other sources, two closed facilities that were formerly
operated by TRW's Connectors Division. The Order requires the respondents to
fund the relocation of the main well field for Shelbyville to a location that
can provide a safe source of potable water and to perform a remedial
investigation of the source and extent of contamination within a one-mile radius
of the well field. The Order also requires the respondents to pay civil
penalties of $25,000 per day for
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violations of law which allegedly occurred prior to issuance of the Order. TRW
has filed a petition for review of the Order. The Order is not expected to have
a material effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None during the fourth quarter of 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of, and the positions and offices held by, each person
designated an executive officer of the Company as of March 20, 1997, together
with the offices held by each such person during the last five years, are listed
below. For purposes hereof, the term "executive officer" includes the Chairman
of the Board, the President, each Vice President in charge of a principal
business function and any other officer who performs a policy-making function
for the Company. Each executive officer is elected annually and, unless the
executive officer resigns or terminates employment with the Company or is
removed from office by action of the Company's Directors, will hold office for
the ensuing year or until a successor is elected in accordance with the
Company's Regulations. It is expected that on or about June 1, 1997 W. B.
Lawrence will assume the responsibilities of General Counsel and Secretary from
M. A. Coyle. None of the Company's executive officers has a family relationship
to any other executive officer.
<TABLE>
<CAPTION>
POSITIONS AND BUSINESS EXPERIENCE
NAME AGE DURING THE PAST FIVE YEARS
- --------------- --- -------------------------------------------------------
<S> <C> <C>
B. Blankenstein 58 Executive Vice President and General Manager, TRW
Steering, Suspension & Engine Group (1996 to the
present)
Managing Director, TRW Deutschland GmbH (1995 - 1996)
Vice President and General Manager, TRW's Global Engine
Components business (1994 - 1996)
Managing Director, TRW Motorkomponenten GmbH & Co. KG
(1991 - 1995)
M. A. Coyle 55 Executive Vice President (1989 to the present), General
Counsel (1980 to the present) and Secretary (1976 to
the present)
J. T. Gorman 59 Chairman of the Board and Chief Executive Officer (1988
to the present) and Director (1984 to the present)
T. W. Hannemann 54 Executive Vice President and General Manager, TRW Space
& Electronics Group (1993 to the present)
Executive Vice President and General Manager, TRW Space
& Defense Sector (1991 - 1992)
P. S. Hellman 47 President, Chief Operating Officer and Director (1995
to the present)
Executive Vice President and Assistant President (1994)
Executive Vice President, Chief Financial Officer and
Assistant President (1994)
Executive Vice President and Chief Financial Officer
(1991 - 1994)
H. V. Knicely 61 Executive Vice President, Human Resources and
Communications (1995 to the present)
Executive Vice President, Human Resources,
Communications & Information Resources (1989 - 1994)
W. B. Lawrence 52 Executive Vice President, Planning, Development &
Government Affairs (1989 to the present)
C. G. Miller 54 Executive Vice President and Chief Financial Officer
(1996 to the present)
Executive Vice President, Chief Financial Officer and
Controller (1996)
Vice President and Controller (1990 - 1996)
</TABLE>
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<TABLE>
<CAPTION>
POSITIONS AND BUSINESS EXPERIENCE
NAME AGE DURING THE PAST FIVE YEARS
- --------------- --- -------------------------------------------------------
<S> <C> <C>
J. S. Remick 58 Executive Vice President and General Manager, TRW
Occupant Restraint Systems Group (1996 to the
present)
Executive Vice President and General Manager, TRW
Steering, Suspension & Engine Group (1995 - 1996)
Vice President and Deputy General Manager, Automotive
(1995)
Vice President and General Manager, TRW Steering &
Suspension Systems, North and South America
(1991 - 1995)
P. Staudhammer 63 Vice President, Science & Technology (1993 to the
present)
Vice President and Director of the Center for
Automotive Technology (1990 - 1993)
J. P. Stenbit 56 Executive Vice President and General Manager, TRW
Systems Integration Group (1994 to the present)
Vice President and General Manager, TRW Systems
Integration Group (1990 - 1994)
R. D. Sugar 48 Executive Vice President and General Manager, TRW
Automotive Electronics Group (1996 to the present)
Executive Vice President and Chief Financial Officer
(1994 - 1996)
Vice President, Group Development, TRW Space &
Electronics Group (1992 - 1994)
Vice President, Strategic Business Development, TRW
Space & Defense Sector (1992)
Vice President and General Manager, TRW Space
Communications Division (1987 - 1992)
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------- ---------------------------------------------------------------------
Reference is made to the information set forth in the table presented under
"Stock prices and dividends (unaudited)" on page 37 of the TRW 1996 Annual
Report and to the information presented under the note entitled "Debt and credit
agreements" in the Notes to Financial Statements on page 32 of the TRW 1996
Annual Report. The information contained in such table and the information
contained in the next-to-last paragraph of text in such note to financial
statements are incorporated herein by reference.
The Company's Common Stock is traded principally on the New York Stock
Exchange and is also traded on the Chicago, Pacific, Philadelphia, London and
Frankfurt exchanges.
On February 28, 1997, there were 26,404 shareholders of record of the
Company's Common Stock.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
----------------------------------------------------------
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Sales........................................... $9,857 $9,568 $8,491 $7,330 $7,557
Earnings from continuing operations before
cumulative effect of accounting changes....... 182 395 277 177 154
Per share of Common Stock:
Fully diluted earnings -- continuing
operations................................. 1.37 2.93 2.09 1.35 1.23
Primary earnings -- continuing operations..... 1.38 2.96 2.10 1.36 1.23
Cash dividends declared....................... 1.17 1.05 0.985 0.94 0.92
Total assets.................................... 5,899 5,670 5,435 5,042 5,158
Long-term debt.................................. 458 539 693 868 938
Shares used in computing per share amounts:
Fully diluted................................. 133.2 134.8 132.9 131.5 124.6
Primary....................................... 131.7 133.2 131.6 129.5 124.6
</TABLE>
In 1996, the Company recorded charges of $314 million ($202 million after
tax, or $1.52 per share) primarily for actions taken, in part, to enhance the
Company's competitiveness. As a result of these actions, several manufacturing
facilities throughout the world will be closed or consolidated and employment
Company-wide will be reduced by approximately 2,500 people. Also during 1996,
the Company applied the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," resulting in the recognition of $71
million ($50 million after tax, or $0.37 per share) of impairment losses. The
losses were primarily a result of technological changes and the decision to
close certain facilities in the Automotive segment.
On October 23, 1996, the Company's Board of Directors authorized a
two-for-one stock split effected in the form of a stock dividend. Accordingly,
all references to the number of shares and per share amounts have been restated
to give retroactive recognition to the stock dividend.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Reference is made to the information presented under the heading
"Management's Discussion and Analysis of the Results of Operations and Financial
Condition" on pages 17 through 20 of the TRW 1996 Annual Report. Such
information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the financial statements headed "Statements of
Earnings," "Balance Sheets," "Statements of Cash Flows" and "Statements of
Changes in Shareholders' Investment," and the accompanying notes thereto, on
pages 21 through 36 of the TRW 1996 Annual Report. Reference is also made to the
information included in the table presented under the heading "Quarterly
financial information (unaudited)" on page 36 of such report. Such statements,
the accompanying notes and such table are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the information relating to TRW's Directors which is
presented under the heading "Election of Directors" on pages 1 through 5 of the
TRW Proxy Statement dated March 12, 1997, as filed with the Securities and
Exchange Commission (the "TRW Proxy Statement"). Such information, beginning
with the third paragraph on page 1 and ending with the second paragraph on
page 5, is incorporated herein by reference.
8
<PAGE> 11
See the information presented in Part I of this Report under the heading
"Executive Officers of the Registrant" for information relating to TRW's
executive officers.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the information presented under the heading
"Compensation of Executive Officers" on pages 12 through 20 of the TRW Proxy
Statement. Reference is also made to the information presented under the heading
"Director Compensation" on page 7 of the TRW Proxy Statement. Such information
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the information presented under the heading "Ownership
of Shares" on page 6 of the TRW Proxy Statement. Reference is also made to the
information presented under the heading "Outstanding Securities" on pages 21 and
22 of the TRW Proxy Statement. Such information is incorporated herein by
reference.
There are no agreements or arrangements known to TRW that might, at a
subsequent date, result in a change in control of TRW.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS AND SCHEDULES
(1) FINANCIAL STATEMENTS
The following financial statements of the registrant and its
subsidiaries included in the TRW 1996 Annual Report are incorporated
herein by reference:
Statements of Earnings -- Years ended December 31, 1996, 1995 and 1994
(page 21)
Balance Sheets -- December 31, 1996 and 1995 (pages 22 and 23)
Statements of Cash Flows -- Years ended December 31, 1996, 1995 and
1994 (page 24)
Statements of Changes in Shareholders' Investment -- Years ended
December 31, 1996, 1995 and 1994 (page 25)
Notes to Financial Statements -- (pages 26 - 36)
(2) FINANCIAL STATEMENT SCHEDULES
All Schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are not applicable and,
therefore, have been omitted.
Financial statements and summarized financial information of
unconsolidated subsidiaries and 50% or less owned persons accounted for
by the equity method have been omitted because such subsidiaries and
persons, considered individually or in the aggregate, do not constitute
a significant subsidiary.
9
<PAGE> 12
(3) EXHIBITS
<TABLE>
<S> <C>
2(a) Recapitalization Agreement, dated as of February 9, 1996, among IS&S
Acquisition Corp., and TRW Inc., TRW IS&S International, Inc.,
Information Systems and Services, Inc. (f/k/a TRW Environmental
Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and
IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.)
(Exhibit 2.1 to TRW Form 8-K Current Report dated October 4, 1996 is
incorporated herein by reference).
2(b) Amendment No. 1, dated June 17, 1996 to Recapitalization Agreement,
dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW
Inc., TRW IS&S International, Inc., Information Systems and Services,
Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company
Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target
Marketing Services, Inc.) (Exhibit 2.2 to TRW Form 8-K Current Report
dated October 4, 1996 is incorporated herein by reference).
2(c) Amendment No. 2, dated August 13, 1996 to Recapitalization Agreement,
dated as of February 9, 1996, among IS&S Acquisition Corp., and TRW
Inc., TRW IS&S International, Inc., Information Systems and Services,
Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company
Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target
Marketing Services, Inc.) (Exhibit 2.3 to TRW Form 8-K Current Report
dated October 4, 1996 is incorporated herein by reference).
2(d) Amendment No. 3, dated September 18, 1996 to Recapitalization
Agreement, dated as of February 9, 1996, among IS&S Acquisition Corp.,
and TRW Inc., TRW IS&S International, Inc., Information Systems and
Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel
Company Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW
Target Marketing Services, Inc.) (Exhibit 2.4 to TRW Form 8-K Current
Report dated October 4, 1996 is incorporated herein by reference).
3(a) Amended Articles of Incorporation as amended April 24, 1996 (Exhibit
3(a) to TRW Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996 is incorporated herein by reference).
3(b) Regulations as amended April 30, 1980 (Exhibit 3(b) to TRW Annual
Report on Form 10-K for the year ended December 31, 1980 is
incorporated herein by reference).
4(a) Rights Agreement dated as of April 24, 1996 between TRW Inc. and
National City Bank, as Rights Agent (Exhibit 1 to TRW Form 8-A
Registration Statement dated April 25, 1996 is incorporated herein by
reference).
4(b) Indenture between TRW Inc. and The Chase Manhattan Bank (National
Association), as successor Trustee, dated as of May 1, 1986 (Exhibit 2
to TRW Form 8-A Registration Statement dated July 3, 1986 is
incorporated herein by reference).
4(c) First Supplemental Indenture between TRW Inc. and The Chase Manhattan
Bank (National Association), as successor Trustee, dated as of July 26,
1989 (Exhibit 4(b) to TRW Form S-3 Registration Statement, File
No. 33-30350, is incorporated herein by reference).
*10(a) 1979 Stock Option Plan as amended April 28, 1982 (Exhibit A to TRW
Proxy Statement dated March 18, 1982 is incorporated herein by
reference).
*10(b) TRW Operational Incentive Plan (Exhibit 10(b) to TRW Annual Report on
Form 10-K for the year ended December 31, 1989 is incorporated herein
by reference).
*10(c) TRW Executive Health Care Plan as amended and restated effective
August 1, 1995 (Exhibit 10(c) to TRW Annual Report on Form 10-K for
the year ended December 31, 1995 is incorporated herein by reference).
*10(d) 1984 Stock Option Plan (Exhibit A to TRW Proxy Statement dated March 19,
1984 is incorporated herein by reference).
*10(e) 1989 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement
dated March 17, 1989 is incorporated herein by reference).
*10(f) 1994 TRW Long-Term Incentive Plan as amended and restated effective
February 4, 1997.
*10(g) 1997 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement
dated March 12, 1997 is incorporated herein by reference).
*10(h) Form of Strategic Incentive Grant.
*10(i) Form of U.S. Nonqualified Stock Option Agreement.
</TABLE>
10
<PAGE> 13
<TABLE>
<S> <C>
*10(j) Form of U.S. Transferable Nonqualified Stock Option Agreement.
*10(k) Form of Director Transferable Nonqualified Stock Option Agreement.
*10(l) Deferred Compensation Plan for Non-Employee Directors of TRW Inc.
reflecting amendments effective August 1, 1990 (Exhibit 10(k) to TRW
Annual Report on Form 10-K for the year ended December 31, 1990 is
incorporated herein by reference).
*10(m) Deferred Compensation Plan for Non-Employee Directors of TRW Inc.
dated July 1, 1997.
*10(n) TRW Directors' Pension Plan as amended and restated effective August 1,
1990 (Exhibit 10(l) to TRW Annual Report on Form 10-K for the year
ended December 31, 1990 is incorporated herein by reference).
*10(o) Form of Amended and Restated Employment Continuation Agreements with
executive officers (Exhibit 10(k) to TRW Annual Report on Form 10-K
for the year ended December 31, 1995 is incorporated herein by
reference).
*10(p) TRW Inc. Deferred Compensation Plan as amended and restated effective
February 4, 1997.
*10(q) TRW Benefits Equalization Plan (as Amended and Restated, effective
August 1, 1996) (Exhibit 10(a) to TRW Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996 is incorporated herein by
reference).
*10(r) TRW Supplementary Retirement Income Plan (as Amended and Restated,
effective August 1, 1996) (Exhibit 10(b) to TRW Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996 is incorporated herein
by reference).
*10(s) TRW Inc. Key Executive Life Insurance Plan dated as of February 7,
1996 (Exhibit 10(v) to TRW Annual Report on Form 10-K for the year
ended December 31, 1995 is incorporated herein by reference).
*10(t) TRW Inc. Financial Counseling Program (Exhibit 10(w) to TRW Annual
Report on Form 10-K for the year ended December 31, 1995 is
incorporated herein by reference).
10(u) Three Year Revolving Credit Agreement dated July 1, 1992 among TRW
Inc. and various financial institutions (Exhibit 19.1 to TRW Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992 is
incorporated herein by reference).
10(v) Amendment dated June 30, 1993 to Three Year Revolving Credit Agreement
dated July 1, 1992 among TRW Inc. and various financial institutions
(Exhibit 10.1 to TRW Quarterly Report on Form 10-Q for the quarter
ended June 30, 1993 is incorporated herein by reference).
10(w) Amendment dated as of March 1, 1994 to Three Year Revolving Credit
Agreement dated July 1, 1992 among TRW Inc. and various financial
institutions (Exhibit 10(cc) to TRW Annual Report on Form 10-K for the
year ended December 31, 1993 is incorporated herein by reference).
10(x) Amendment dated February 28, 1995 to Multi-Year Revolving Credit
Agreement (formerly entitled Three Year Revolving Credit Agreement)
dated July 1, 1992 among TRW Inc. and various financial institutions
(Exhibit 10(u) to TRW Annual Report on Form 10-K for the year ended
December 31, 1994 is incorporated herein by reference).
10(y) Amendment dated May 8, 1996 to Multi-Year Revolving Credit Agreement
(formerly entitled Three Year Revolving Credit Agreement) dated July 1,
1992 among TRW Inc. and various financial institutions.
*10(z) TRW Inc. Stock Plan for Non-Employee Directors (as Amended and
Restated, effective August 1, 1995) (Exhibit 10.1 to TRW Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 is
incorporated herein by reference).
11 Computation of Earnings per Share.
12 Computation of Ratio of Earnings to Fixed Charges -- Unaudited
(Supplement to Exhibit 12 of the following Form S-3 Registration
Statement of the Company: No. 33-61711, filed August 10, 1995).
13 Portions of the TRW Annual Report to Security Holders for the year
ended December 31, 1996 incorporated herein by reference.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Auditors.
23(b) Consent of Independent Auditors (with respect to financial statements
of The TRW Canada Stock Savings Plan).
</TABLE>
11
<PAGE> 14
<TABLE>
<C> <S>
24(a) Power of Attorney.
24(b) Certified Resolutions.
27 Financial Data Schedule.
99(a) Financial Statements of The TRW Employee Stock Ownership and Stock
Savings Plan for the year ended December 31, 1996.
99(b) Financial Statements of The TRW Canada Stock Savings Plan for the year
ended December 31, 1996.
</TABLE>
Certain instruments with respect to long-term debt have not been
filed as exhibits as the total amount of securities authorized under any
one of such instruments does not exceed 10% of the total assets of the
registrant and its subsidiaries on a consolidated basis. The registrant
agrees to furnish to the Commission a copy of each such instrument upon
request.
* Management contract, compensatory plan or arrangement required to
be filed as an exhibit pursuant to Item 14(c) of this report.
(b) REPORTS ON FORM 8-K
Current Report on Form 8-K dated October 4, 1996 as to Information
Systems & Services divestiture, including pro forma financial
information.
Current Report on Form 8-K dated October 23, 1996 as to stock dividend.
Current Report on Form 8-K dated December 20, 1996 as to Magna
International acquisition.
12
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
TRW Inc.
Date: March 20, 1997
By /s/ M. A. COYLE
----------------------------------
MARTIN A. COYLE,
EXECUTIVE VICE PRESIDENT AND
SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
J. T. GORMAN* Chairman of the Board, March 20, 1997
Chief Executive Officer
and Director
P. S. HELLMAN* President, Chief Operating Officer and March 20, 1997
Director
C. G. MILLER* Executive Vice President and March 20, 1997
Chief Financial Officer
T. A. CONNELL* Vice President and Controller March 20, 1997
M. H. ARMACOST Director March 20, 1997
M. FELDSTEIN* Director March 20, 1997
R. M. GATES* Director March 20, 1997
C. H. HAHN* Director March 20, 1997
G. H. HEILMEIER* Director March 20, 1997
K. N. HORN* Director March 20, 1997
E. B. JONES* Director March 20, 1997
W. S. KISER* Director March 20, 1997
D. B. LEWIS* Director March 20, 1997
J. T. LYNN* Director March 20, 1997
L. M. MARTIN* Director March 20, 1997
J. D. ONG* Director March 20, 1997
R. W. POGUE* Director March 20, 1997
</TABLE>
MARTIN A. COYLE, by signing his name hereto, does hereby sign and execute
this report on behalf of each of the above-named officers and Directors of TRW
Inc., pursuant to a power of attorney executed by each of such officers and
Directors and filed with the Securities and Exchange Commission as an exhibit to
this report.
March 20, 1997
*By /s/ M. A. COYLE
-------------------------------
MARTIN A. COYLE,
ATTORNEY-IN-FACT
13
<PAGE> 16
REPORT OF INDEPENDENT AUDITORS
Shareholders and Directors
TRW Inc.
We have audited the consolidated financial statements of TRW Inc. and
subsidiaries listed in Item 14(a)(1) of the annual report on Form 10-K of TRW
Inc. for the year ended December 31, 1996. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of TRW Inc. and
subsidiaries at December 31, 1996 and 1995, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
January 20, 1997
F-1
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
2(a) Recapitalization Agreement, dated as of February 9, 1996, among IS&S Acquisition
Corp., and TRW Inc., TRW IS&S International, Inc., Information Systems and
Services, Inc. (f/k/a TRW Environmental Management Company), TRW Hotel Company
Inc., TRW Microwave Inc. and IS&S Holdings, Inc. (f/k/a TRW Target Marketing
Services, Inc.) (Exhibit 2.1 to TRW Form 8-K Current Report dated October 4, 1996
is incorporated herein by reference).
2(b) Amendment No. 1, dated June 17, 1996 to Recapitalization Agreement, dated as of
February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S
International, Inc., Information Systems and Services, Inc. (f/k/a TRW
Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and
IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.2 to
TRW Form 8-K Current Report dated October 4, 1996 is incorporated herein by
reference).
2(c) Amendment No. 2, dated August 13, 1996 to Recapitalization Agreement, dated as of
February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S
International, Inc., Information Systems and Services, Inc. (f/k/a TRW
Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and
IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.3 to
TRW Form 8-K Current Report dated October 4, 1996 is incorporated herein by
reference).
2(d) Amendment No. 3, dated September 18, 1996 to Recapitalization Agreement, dated as
of February 9, 1996, among IS&S Acquisition Corp., and TRW Inc., TRW IS&S
International, Inc., Information Systems and Services, Inc. (f/k/a TRW
Environmental Management Company), TRW Hotel Company Inc., TRW Microwave Inc. and
IS&S Holdings, Inc. (f/k/a TRW Target Marketing Services, Inc.) (Exhibit 2.4 to
TRW Form 8-K Current Report dated October 4, 1996 is incorporated herein by
reference).
3(a) Amended Articles of Incorporation as amended April 24, 1996 (Exhibit 3(a) to TRW
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996 is
incorporated herein by reference).
3(b) Regulations as amended April 30, 1980 (Exhibit 3(b) to TRW Annual Report on Form
10-K for the year ended December 31, 1980 is incorporated herein by reference).
4(a) Rights Agreement dated as of April 24, 1996 between TRW Inc. and National City
Bank, as Rights Agent (Exhibit 1 to TRW Form 8-A Registration Statement dated
April 25, 1996 is incorporated herein by reference).
4(b) Indenture between TRW Inc. and The Chase Manhattan Bank (National Association),
as successor Trustee, dated as of May 1, 1986 (Exhibit 2 to TRW Form 8-A
Registration Statement dated July 3, 1986 is incorporated herein by reference).
4(c) First Supplemental Indenture between TRW Inc. and The Chase Manhattan Bank
(National Association), as successor Trustee, dated as of July 26, 1989 (Exhibit
4(b) to TRW Form S-3 Registration Statement, File No. 33-30350, is incorporated
herein by reference).
*10(a) 1979 Stock Option Plan as amended April 28, 1982 (Exhibit A to TRW Proxy
Statement dated March 18, 1982 is incorporated herein by reference).
*10(b) TRW Operational Incentive Plan (Exhibit 10(b) to TRW Annual Report on Form 10-K
for the year ended December 31, 1989 is incorporated herein by reference).
*10(c) TRW Executive Health Care Plan as amended and restated effective August 1, 1995
(Exhibit 10(c) to TRW Annual Report on Form 10-K for the year ended December 31,
1995 is incorporated herein by reference).
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
*10(d) 1984 Stock Option Plan (Exhibit A to TRW Proxy Statement dated March 19, 1984 is
incorporated herein by reference).
*10(e) 1989 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement dated March
17, 1989 is incorporated herein by reference).
*10(f) 1994 TRW Long-Term Incentive Plan as amended and restated effective February 4,
1997.
*10(g) 1997 TRW Long-Term Incentive Plan (Exhibit A to TRW Proxy Statement dated March
12, 1997 is incorporated herein by reference).
*10(h) Form of Strategic Incentive Grant.
*10(i) Form of U.S. Nonqualified Stock Option Agreement.
*10(j) Form of U.S. Transferable Nonqualified Stock Option Agreement.
*10(k) Form of Director Transferable Nonqualified Stock Option Agreement.
*10(l) Deferred Compensation Plan for Non-Employee Directors of TRW Inc.
reflecting amendments effective August 1, 1990 (Exhibit 10(k) to TRW
Annual Report on Form 10-K for the year ended December 31, 1990 is
incorporated herein by reference).
*10(m) Deferred Compensation Plan for Non-Employee Directors of TRW Inc. dated
July 1, 1997.
*10(n) TRW Directors' Pension Plan as amended and restated effective August 1, 1990
(Exhibit 10(l) to TRW Annual Report on Form 10-K for the year ended December 31,
1990 is incorporated herein by reference).
*10(o) Form of Amended and Restated Employment Continuation Agreements with executive
officers (Exhibit 10(k) to TRW Annual Report on Form 10-K for the year ended
December 31, 1995 is incorporated herein by reference).
*10(p) TRW Inc. Deferred Compensation Plan as amended and restated effective February 4, 1997.
*10(q) TRW Benefits Equalization Plan (as Amended and Restated, effective August 1,
1996) (Exhibit 10(a) to TRW Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996 is incorporated herein by reference).
*10(r) TRW Supplementary Retirement Income Plan (as Amended and Restated, effective
August 1, 1996) (Exhibit 10(b) to TRW Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 is incorporated herein by reference).
*10(s) TRW Inc. Key Executive Life Insurance Plan dated as of February 7, 1996 (Exhibit
10(v) to TRW Annual Report on Form 10-K for the year ended December 31, 1995 is
incorporated herein by reference).
*10(t) TRW Inc. Financial Counseling Program (Exhibit 10(w) to TRW Annual Report on Form
10-K for the year ended December 31, 1995 is incorporated herein by reference).
10(u) Three Year Revolving Credit Agreement dated July 1, 1992 among TRW Inc. and
various financial institutions (Exhibit 19.1 to TRW Quarterly Report on Form 10-Q
for the quarter ended June 30, 1992 is incorporated herein by reference).
10(v) Amendment dated June 30, 1993 to Three Year Revolving Credit Agreement dated July
1, 1992 among TRW Inc. and various financial institutions. (Exhibit 10.1 to TRW
Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 is incorporated
herein by reference).
10(w) Amendment dated as of March 1, 1994 to Three Year Revolving Credit Agreement
dated July 1, 1992 among TRW Inc. and various financial institutions. (Exhibit
10(cc) to TRW Annual Report on Form 10-K for the year ended December 31, 1993 is
incorporated herein by reference).
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<S> <C>
10(x) Amendment dated February 28, 1995 to Multi-Year Revolving Credit Agreement (for-
merly entitled Three Year Revolving Credit Agreement) dated July 1, 1992 among
TRW Inc. and various financial institutions (Exhibit 10(u) to TRW Annual Report
on Form 10-K for the year ended December 31, 1994 is incorporated herein by
reference).
10(y) Amendment dated May 8, 1996 to Multi-Year Revolving Credit Agreement (formerly
entitled Three Year Revolving Credit Agreement) dated July 1, 1992 among TRW Inc.
and various financial institutions.
*10(z) TRW Inc. Stock Plan for Non-Employee Directors (as Amended and Restated,
effective August 1, 1995) (Exhibit 10.1 to TRW Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 is incorporated herein by reference).
11 Computation of Earnings per Share.
12 Computation of Ratio of Earnings to Fixed Charges -- Unaudited.
13 Portions of the TRW Annual Report to Security Holders for the year ended December 31,
1996 incorporated herein by reference.
21 Subsidiaries of the Registrant.
23(a) Consent of Independent Auditors.
23(b) Consent of Independent Auditors (with respect to financial statements of The TRW
Canada Stock Savings Plan).
24(a) Power of Attorney.
24(b) Certified Resolutions.
27 Financial Data Schedule.
99(a) Financial Statements of The TRW Employee Stock Ownership and Stock Savings Plan
for the year ended December 31, 1996.
99(b) Financial Statements of The TRW Canada Stock Savings Plan for the year ended
December 31, 1996.
</TABLE>
Certain instruments with respect to long-term debt have not been filed as
exhibits as the total amount of securities authorized under any one of such
instruments does not exceed 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis. The registrant agrees to furnish to the
Commission a copy of each such instrument upon request.
* Management contract, compensatory plan or arrangement required to be filed as
an exhibit pursuant to Item 14(c) of this report.
<PAGE> 1
Exhibit 10(f)
1994 TRW LONG-TERM INCENTIVE PLAN
as amended and restated effective February 4, 1997
1. Purpose. The purpose of the 1994 TRW Long-Term Incentive Plan is to
enhance the long-term profitability of TRW for the benefit of its
shareholders by offering incentives to key employees of the Company,
thus assisting in attracting, retaining and rewarding the performance
of key personnel.
2. Definitions. In this Plan, except where the context otherwise
indicates, the following definitions apply:
(a) Committee. A Committee of at least three Directors, appointed
by the Directors from among their members to take action under
this Plan. The Directors may appoint one or more persons as
alternate members of the Committee, who may take the place of
any absent member or members at any meeting of such Committee.
The Directors may appoint a separate Committee consisting of
three or more Directors to take action under the Plan with
respect to Grants to Eligible Employees who are also
Directors. Any Committee Members or Alternatives must be
"Outside Directors" for the purposes of Section 162(m) of
the Internal Revenue Code of 1986, which section was adopted
as part of the Omnibus Budget Reconciliation Act of 1993, and
the related Conference Committee Report, or any successor
provision.
(b) Company and TRW. TRW Inc., an Ohio corporation, and its
subsidiaries and affiliated companies.
(c) Directors. The Directors of TRW Inc.
(d) Eligible Employee. Any key employee of the Company, including
employees who are also Directors.
(e) Fair Market Value. Such value of a Share as reported for
stock exchange transactions and determined in accordance with
any applicable resolutions or regulations of the Committee in
effect at the relevant time.
(f) Grant. A grant made under the Plan by the Committee to an
Eligible Employee in the form of an Option, Stock Appreciation
Right, Performance Share, Other Stock-Based Grant or any
combination of such Grants.
(g) Option. A Grant made by the Committee in the form of an
option to purchase Shares pursuant to Section 7.
<PAGE> 2
(h) Other Stock-Based Grant. A Grant made pursuant to Section 10
that is valued in whole or in part by reference to, or is
otherwise based on, Shares.
(i) Participant. Any Eligible Employee of the Company to whom a
Grant is made, including any former Eligible Employee who
still holds a Grant.
(j) Performance Period. The period specified by the terms of the
Grant of a Performance Share during which specified
performance criteria are to be measured.
(k) Performance Share. A Share (or right related to Shares)
granted pursuant to Section 9.
(l) Plan. The 1994 TRW Long-Term Incentive Plan.
(m) Share. A share of Common Stock of TRW issued and reacquired
by TRW or previously authorized but unissued.
(n) Stock Appreciation Right. A right granted by the Committee to
an Eligible Employee (i) in conjunction with all or any part
of any Option granted under the Plan which entitles the
Participant, upon exercise of such right, to surrender such
Option, or any part thereof, and to receive a payment equal
to the excess of the Fair Market Value, on the date of such
exercise, of the Shares covered by such Option, or part
thereof, over the purchase price of such Shares pursuant to
the Option (a Tandem Stock Appreciation Right) or (ii)
separate and apart from any Option, which entitles the
Participant, upon exercise of such right, to receive a
payment measured by the increase in the Fair Market Value of
a number of Shares designated by such right from the date of
grant of such right to the date on which the Participant
exercises such right (a Freestanding Stock Appreciation
Right). For purposes of Section 4, the number of Shares
subject to the Grant of a Tandem Stock Appreciation Right
and related Option shall only be the number of Shares
subject to the Option. For a Freestanding Stock Appreciation
Right, the number of Shares subject to the Grant shall be
(i) zero if such right is payable only in cash and (ii) the
number of Shares designated in the right if such right is
payable in Shares.
3. Plan Administration. The Committee shall determine in its sole
discretion the Eligible Employees to whom Grants are to be made, the
number of Options, Stock Appreciation Rights, Performance Shares, or
other Stock-Based Grants to be subject to each Grant and the terms and
conditions of each Grant and of any amendments to such Grants, which
need not be the same with respect to each Participant. The Committee
shall administer the Plan, and its decisions and interpretations with
respect to the Plan shall be final and conclusive. The Committee may
act by
<PAGE> 3
act by resolution, through the adoption of regulations or in any other
manner permitted by law.
4. Grants Available. The aggregate of (a) the number of outstanding
Shares delivered by the Company in payment and upon exercise of Grants
and (b) the number of Shares subject to outstanding Grants under which
Shares may be issued under the Plan shall not exceed 3,145,000 Shares
at any one time, subject to adjustments authorized by Section 6 of the
Plan. Consistent with the foregoing limitations, the following Shares
shall be available for future Grants: (i) Shares subject to a Grant to
the extent such Grant has expired or is surrendered, canceled or
terminated and (ii) Shares issued pursuant to a Grant if such Shares
are surrendered or forfeited to the Company. Shares available for
Grants may consist, in whole or in part, of authorized and unissued
Shares or treasury Shares.
5. Transfer. No Grant may be assigned, pledged or transferred other than
by will or by the laws of descent and distribution, unless otherwise
provided in any Grant agreement approved by the Committee.
6. Adjustments. The Committee may make or provide for such adjustments in
the number or kind of Shares or other securities available for or
covered by Grants, and the purchase price per Share, if any, under such
Grants, as the Committee, in its sole discretion, may determine is
equitably required as the result of (a) any change in the number or
kind of outstanding Shares or of other securities into which such
Shares shall have been changed or for which they shall have been
exchanged, (b) any reorganization or change in the capital structure of
TRW, or (c) any other corporate transaction or event having an effect
similar to any of the foregoing.
7. Options. Options may be granted by the Committee from time to time to
any Eligible Employee as incentive stock options (as defined in Section
422A of the Internal Revenue Code or any successor provision) or
nonqualified stock options, to purchase Shares on terms and conditions
determined by the Committee, including the following:
(a) The purchase price shall be not less than the Fair Market
Value of the Shares covered by the Option on the date the
Option is granted.
(b) Each Option may provide for related Stock Appreciation Rights.
(c) The Committee shall, in its sole discretion, determine the
form of consideration (including, without limitation, cash,
Shares or other securities or other property, or any
combination thereof) which may be accepted in payment of the
purchase price of any Option or portion thereof. The value of
any Share delivered in payment of the purchase price shall be
its Fair Market Value on the date the Option is exercised.
<PAGE> 4
(d) The maximum number of shares underlying Options that may be
granted to any Eligible Employee under the Plan during any
four calendar year period is 500,000, subject to the
adjustments authorized by Section 6 of the Plan.
8. Stock Appreciation Rights.
(a) The Committee may grant to any Eligible Employee Tandem Stock
Appreciation Rights either at the time of grant of an Option
or at any time thereafter during the term of an Option on
terms and conditions determined by the Committee.
(b) The Committee may grant, from time to time to any Eligible
Employee, Freestanding Stock Appreciation Rights on terms and
conditions determined by the Committee.
(c) The payment to which the grantee of a Stock Appreciation Right
is entitled upon exercise thereof may be made in Shares valued
at Fair Market Value on the date of exercise, or in cash or
partly in cash and partly in Shares, as the Committee may
determine.
9. Performance Shares. The committee may grant, from time to time to any
Eligible Employee, Performance Shares, for no cash consideration, if
permitted by applicable law, or for such other consideration as may be
determined by the Committee and specified in the Grant. The performance
criteria to be achieved during any Performance Period, the formula for
valuing the Grant, if any, the maximum value, if any, and the length of
the Performance Period shall be determined by the Committee and
specified in the Grant. The terms and conditions of Grants of
Performance Shares shall be determined by the Committee.
Performance Shares may be paid in Shares or other consideration related
to Shares as determined by the Committee. The extent to which
performance criteria have been achieved shall be conclusively
determined by the Committee. Performance Shares may be payable in a
single payment or in installments as specified by the Grant and may be
payable upon attaining performance criteria or deferred to such later
date or dates as are determined by the Committee and specified by the
Grant.
10. Other Stock-Based Grants. The Committee may grant, from time to time
to any Eligible Employee, Other Stock-Based Grants, for no cash
consideration, if permitted by applicable law, or for such other
consideration as may be determined by the Committee and specified in
the Grant. Such Grants may include restricted shares but only to the
extent that such restricted shares have performance-related criteria
to payout. The Committee may specify such criteria or periods or goals
for payment to the Participant as it shall determine and the extent to
which such criteria or periods or goals have been met shall be
conclusively
<PAGE> 5
determined by the Committee. Other Stock-Based Grants may
be paid in Shares, or other consideration related to Shares, in a
single payment or in installments as specified by the Grant and may be
payable on such dates as determined by the committee and specified by
the Grant. The terms and conditions of Other Stock-Based Grants shall
be determined by the Committee.
11. Amendments to the Plan. The Committee may from time to time amend this
Plan, or any provision hereof, as permitted by applicable law, rule or
regulation; provided, however, that except for adjustments under
Section 6 above, shareholder approval is required to amend the Plan to:
(a) increase the maximum number of Shares that may be issued under
the Plan; or
(b) grant Options at a purchase price below Fair Market Value on
the date of grant.
12. Amendments to Outstanding Grants. The Committee shall have the
authority to amend any terms and conditions applicable to outstanding
Grants, provided that no amendment shall contain terms and conditions
inconsistent with the provisions of this Plan and provided further
that, except for adjustments under Section 6 above, no such action
shall cancel or modify in a manner adverse to the Participant a Grant
theretofore made except as provided for or contemplated in the terms of
the Grant or as approved by the Participant.
13. Withholding Taxes. TRW shall have the right to deduct from any cash
payment made under this Plan any Federal, state or local income or
other taxes required by law to be withheld with respect to such
payment. It shall be a condition to the obligation of TRW to deliver
Shares or securities of TRW upon exercise of an Option or Stock
Appreciation Right, upon delivery of Performance Shares or upon
exercise or settlement of any Other Stock-Based Grant under this Plan,
that the Participant pay to TRW such amount as may be requested by TRW
for the purpose of satisfying any liability for such withholding taxes.
Any Option, Stock Appreciation Right, Performance Share or Other
Stock-Based Grant under the Plan may provide that the Participant may
elect, in accordance with any applicable regulations of the Committee,
to pay a portion or all of the amount of such minimum required or
additional permitted withholding taxes in Shares.
<PAGE> 1
Exhibit 10(h)
STRATEGIC INCENTIVE GRANT
To: Date of Grant:
----------------------------------------
Unit:
----------------------------------------
As a key employee of TRW Inc. ("TRW"), you are hereby granted the right (the
"Right") to receive _____ (or up to 200 percent thereof in certain
circumstances) performance units subject to the terms and conditions below. Each
performance unit will have a value equivalent to the value of one share of TRW
Common Stock. This performance unit right is granted to you pursuant to the 1994
TRW Long-Term Incentive Plan approved by the shareholders of TRW in April 1994.
TRW INC.
By:_________________________________________
Secretary
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS
1. THE RIGHT
This Right entitles you to receive performance units in the event that certain
improvements in return on assets employed ("ROAE") for TRW are achieved with
respect to the calendar years 1994 through 1997 (the "Performance Period").
2. PERFORMANCE CRITERIA
The definition of ROAE, for purposes of this Right, is set forth in Exhibit A.
The inclusion of the effects of acquisitions, divestitures and similar unusual
items in the calculation of ROAE shall be at the complete discretion of the
Compensation and Stock Option Committee of the Directors of TRW (the
"Committee").
A TRW matrix which consists of various ROAE figures for TRW for each year of the
Performance Period and percentage award levels related to each of those figures
is set forth in Exhibit B.
3. PAYMENT
Promptly following the availability of year-end financial information for TRW
for each year in the Performance Period, a firm of certified public accountants
chosen by TRW will certify to TRW the ROAE of TRW for each such year. That
number of performance units determined by multiplying the target grant listed on
Exhibit B by the applicable percentage shown next to the ROAE figure (pro rata
between ROAE figures shown) certified as described above for the applicable
calendar year will be issued to you as TRW Common Stock as soon as practicable
thereafter. In the event you are entitled to receive for any applicable calendar
year a number of units greater than that number of units determined by
multiplying the target percentage for such year times your target grant, you
will be paid the cash equivalent for such excess units unless the Committee
determines in its sole discretion to issue shares in lieu of cash. Such excess
units will be valued based on the average of the high and low sales prices of a
share of TRW Common on the New York Stock Exchange Composite Transactions
Listing on the day immediately prior to the date of payment. If you elect to
defer all or a portion of your performance unit payments they will be valued as
cash equivalents and paid out of the deferred compensation plan in cash in
accordance with the provisions of that plan.
4. TAXES
Upon any payment pursuant to this Right, TRW shall deduct any withholding or
other taxes due or withhold delivery of stock certificates issued until you make
arrangements satisfactory to TRW to pay any withholding, transfer or other taxes
due as a result of such issuance. You may elect, in accordance with applicable
regulations of the Committee, to pay a portion or all of the amount of required
withholding taxes in shares of TRW Common, either by delivering to TRW
previously held shares of TRW Common or by having shares of TRW Common withheld
from the shares issued to you hereunder.
5. SECURITIES LAWS
Shares of TRW Common shall not be issued hereunder if such issuance would
violate any Federal or state securities law. TRW will use its best efforts to
make such filings and initiate such proceedings as may be necessary to prevent
such violations unless the Directors of TRW determine, in their sole discretion,
that such filings or proceedings would result in undue expense or hardship for
TRW. TRW may place appropriate legends on the certificates for the shares issued
hereunder, give stop-transfer instructions to its transfer agents or take any
other action to achieve compliance with those laws in connection with any
issuance of shares hereunder or your resale of such shares.
6. TRANSFERABILITY
This Right is not transferable other than by will or the laws of descent and
distribution.
7. DEATH
In the event of your death, your estate or those so designated by will or the
laws of descent and distribution will be entitled to receive, at such times as
you would have received payment, such payment as would have been paid to you
hereunder if you had remained employed throughout the entire year in which your
death occurred and the following year of the Performance Period, if any.
8. TERMINATION OF EMPLOYMENT
This Right shall terminate on the date of your termination of employment and you
shall not be entitled to any additional payments hereunder except for any
payments with respect to calendar years prior to your termination. However, if
your employment is terminated during the last
<PAGE> 2
half of a calendar year, and if the Committee gives written consent on or
prior to the date on which payments are to be made pursuant to this Right with
respect to such year, you will be entitled to receive such payments as would
have been issued to you hereunder if you remained employed through the end of
the calendar year during which your employment terminated multiplied by the
fraction representing the number of months employed during such year.
9. DISABILITY
Notwithstanding the foregoing, if your termination of employment is due to
disability for a period of more than twelve months (as determined in accordance
with the TRW Long-Term Disability Plan), you will be entitled to receive such
payment as would have been issued to you hereunder if you had remained employed
for the entire year in which the disability occurred and the following year of
the Performance Period, if any.
10. ADJUSTMENTS
The Committee shall make such adjustments in the number and kind of securities
issuable pursuant hereto as it may determine are equitably required to prevent
dilution or enlargement of your rights that would otherwise result from any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of TRW, merger, consolidation, reorganization,
partial or complete liquidation or other corporate transaction or event having
an effect similar to any of the foregoing.
11. AMENDMENTS
In addition to the authority to make adjustments as provided in Section 10, the
Committee shall have the authority, until such time as a Change in Control as
defined in Section 12 occurs, to amend otherwise this grant provided that no
amendment shall contain terms and conditions inconsistent with the provisions of
the 1994 TRW Long-Term Incentive Plan. Notwithstanding the foregoing, if you
transfer positions or change responsibilities within TRW, the Committee may
amend this Right to reflect such changed circumstances; provided, however, that
any such amendment after a Change in Control occurs shall not reduce the value
of this Right to you.
12. CHANGE IN CONTROL
In the event of a Change in Control of TRW, this Right will remain in effect so
long as you continue to be employed by TRW. For purposes of this Right, the
definition of Change in Control is the same as the definition contained in
resolutions adopted by the Committee on July 26, 1989. Such resolutions, in
summary, provide that a Change in Control is a change occurring (a) by virtue of
TRW's merger, consolidation or reorganization into or with, or transfer of
assets to, another corporation or (b) by virtue of a change in the majority of
the Directors during any two-year period unless the election of each new
Director was approved by a two-thirds vote of the Directors in office at the
beginning of such period or (c) through the acquisition of shares representing
20 percent or more of the voting power of TRW or (d) through any other change in
control reported in any filing with the Securities and Exchange Commission,
excluding, however, the acquisition of shares, or any report of such
acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored employee benefit
plan. The language in the resolutions controls over this summary language.
If a Change in Control occurs after June 30, 1994, you will be entitled to
receive any payment issuable to you but not yet issued with respect to the
calendar year preceding the Change in Control. In addition, with respect to
remaining years in the Performance Period, you will be entitled to receive
payment equal to the greater of (a) such number of units as shall be determined
by the Committee, prior to the Change in Control, to be appropriate and
consistent with this Right after taking into account prior performance, trends
in performance and anticipated future performance based on information available
at the time of the Committee's determination and (b) a minimum number of units
as follows:
The minimum number of units would be based on the 12-month ROAE for TRW
(calculated by determining the ROAE for TRW for the first 12 months of the
15-month period ending on the last day of the month immediately preceding
the month in which the Change in Control occurred). The number of units for
the year in which the Change in Control occurred would be determined by
applying such 12-month ROAE figure to the column of the TRW matrix relating
to the year in which the Change in Control occurred. The number of units
for each subsequent year of the Performance Period would be determined by
using, in that year's TRW matrix column, the ROAE appearing in the same row
(or, using an arithmetic interpolation, the same position between rows) of
the TRW matrix as was used to determine the payout for the year in which
the Change in Control occurred. For example, if the 12-month ROAE figure
were two rows below the target level on the TRW matrix for the calendar
year in which the Change in Control occurred, it would be assumed that the
ROAE for any additional years remaining in the Performance Period would be
two rows below the target level for those years. The aggregate number of
units payable with respect to the year of the Change in Control and
subsequent years in the Performance Period, determined as set forth above,
would be issued to you promptly following the Change in Control.
If you continue employment with TRW after the Change in Control, performance
units will be issued to you in accordance with this Right provided that the
number of units that you are entitled to receive with respect to a calendar year
will be reduced by the number of units previously issued to you with respect to
such year in accordance with the foregoing paragraph.
13. MISCELLANEOUS
This Right shall not be construed as giving you any right to continue in the
employ of TRW and is subject to the terms and conditions of the 1994 TRW
Long-Term Incentive Plan. Subject to the requirements and limitations in
Sections 10, 11 and 12 above, the Committee has authority to interpret and
construe any provision of this grant and any such interpretation and
construction shall be binding and conclusive. Except as provided in Section 12
above, no rights hereunder shall accrue to you with respect to any year in the
Performance Period until such year is completed and the ROAE for TRW for such
year has been certified to TRW as provided in Section 3 above. Thereafter your
rights will be limited to those expressly given by this Right. Any reference in
this grant to the Directors of TRW includes the Executive Committee of the
Directors.
14. ENTIRE AGREEMENT
This Right sets forth the entire understanding between you and TRW with respect
to the subject matter hereof and supersedes all prior agreements and
understandings, whether oral or written, relating hereto.
<PAGE> 1
Exhibit 10(i)
TRW
U.S NONQUALIFIED STOCK OPTION AGREEMENT
TERMS AND CONDITIONS
1. PURCHASE RIGHTS
This option cannot be exercised before the first anniversary of the date of
grant. After that you will be entitled to purchase up to 33-1/3% of the shares
covered by this option, rounded down to the nearest whole share for each of the
first two years, for each full year of your continuous employment with TRW after
the date of grant. The purchase rights accumulate as shown in the following
table.
<TABLE>
<CAPTION>
Cumulative Maximum
Number of Full Years Percentage of
of Continuous Service Optioned Shares That
After Date of Grant May Be Purchased
- ----------------------------------------------------------
<S> <C> <C>
1 33-1/3%
2 66-2/3%
3 100%
</TABLE>
Notwithstanding the foregoing, in the event of the termination of your
employment due to your death or to your disability for a period of more than
twelve months (as determined in accordance with the TRW Long-Term Disability
Plan), or in the event of a change in control of TRW, this option will
immediately become exercisable in respect of all of the shares covered by this
grant. For purposes of this agreement, a change in control is defined in
resolutions adopted by the Compensation and Stock Option Committee of the
Directors of TRW on July 26, 1989, which, in summary, provide that a change in
control is a change occurring (a) by virtue of TRW's merger, consolidation or
reorganization into or with, or transfer of assets to, another corporation or
(b) by virtue of a change in the majority of the Directors of TRW during any
two-year period unless the election of each new Director was approved by a
two-thirds vote of the Directors in office at the beginning of such period or
(c) through the acquisition of shares representing 20% or more of the voting
power of TRW or (d) through any other change in control reported in any filing
with the Securities and Exchange Commission; provided, however, that no change
in control is deemed to have occurred by the acquisition of shares, or any
report of such acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored
employee benefit plan. The language of the resolutions controls over this
summary language.
2. EXERCISE IN WHOLE OR PART
To the extent this option has become exercisable, you may purchase on any date
or dates all or any part of the shares which you are then entitled to purchase.
However, no fractional shares may be purchased.
3. TERM OF OPTION
To the extent this option has become exercisable in accordance with paragraph 1
above, it may be exercised by you at any time during the 10-year period
beginning on the date of grant. To the extent this option remains unexercised at
the end of the 10-year period, your unexercised purchase rights will terminate.
To the extent unexercised, this stock option will terminate before the end of
such 10-year period in the following cases:
(a) If your employment with TRW terminates before you reach age 55, your
unexercised purchase rights will terminate three months after the date your
employment terminates.
(b) If the Directors of TRW shall find that you intentionally committed an act
materially inimical to the interests of TRW or a subsidiary, your unexercised
purchase rights will terminate as of the time you committed such act, as
determined by the Directors.
If your employment is terminated by your death or by your disability for a
period of more than twelve months (as determined in accordance with the TRW
Long-Term Disability Plan), your purchase rights will not be subject to
termination under clause (a) above and will continue for the entire 10-year
period. In the event of a change in control of TRW (as defined herein), your
purchase rights will not under any circumstances be subject to termination
before the end of the 10-year period beginning on the date of grant. Nothing
contained in this option shall extend this option beyond a 10-year period
beginning on the date of grant or shall limit whatever right TRW or a subsidiary
might otherwise have to terminate your employment at any time.
4. PAYMENT OF OPTION PRICE
The option price shall be payable at the time of exercise. The option price
shall be paid at the Office of Secretary at TRW's corporate headquarters or at
any other place designated by the Secretary. The option price may be paid in
cash, in full shares of TRW Common, or in a combination of both, in accordance
with such procedures and subject to such further conditions as the Secretary of
TRW may establish from time to time. Notwithstanding the foregoing, the
<PAGE> 2
Compensation and Stock Option Committee of TRW at any time may suspend or
terminate your right to pay any or all of the option price in shares of TRW.
Common or cash payments shall be made in United States dollars, except that, if
at the time of exercise you are employed by or on assignment for TRW or a
subsidiary at a location outside the United States, a cash payment may, with the
prior approval of the Secretary of TRW, be made in the official currency used at
such location in an amount specified by the Secretary as equivalent to the same
amount in United States dollars.
Shares delivered in payment of the option price shall be valued at their fair
market value on the date of exercise. For purposes of this option, "fair market
value" is the average of the high and low sales prices of a share of TRW Common
on the date of exercise on the New York Stock Exchange Composite Transactions
Listing as reported in the Midwest edition of The Wall Street Journal (or if
there are no sales on such date, then the closing sale price on such Listing on
the nearest date before the date of exercise) or such other method or procedure
for determining fair market value as the Compensation and Stock Option Committee
of TRW in its sole discretion may determine. For purposes of this option, the
"date of exercise" is the date on which written notice, accompanied by the
option price, is received by the Secretary of TRW or his designee that you have
elected to exercise all or part of this option.
5. TAXES
Upon any exercise of this option, TRW may withhold delivery of certificates for
the purchased shares until you make arrangements satisfactory to TRW to pay any
withholding, transfer or other taxes due as a result of such exercise. You may
elect, in accordance with applicable regulations of the Compensation and Stock
Option Committee of TRW, to pay a portion or all of the amount of required
withholding taxes in shares of TRW Common, either by delivering to TRW
previously held shares of TRW Common or by having shares of TRW Common withheld
from the shares purchased hereunder.
6. SECURITIES LAWS
This option shall not be exercisable if such exercise would violate any Federal
or state securities law. TRW will use its best efforts to make such filings and
initiate such proceedings as may be necessary to prevent such violations unless
the Directors of TRW determine, in their sole discretion, that such filings or
proceedings would result in undue expense or hardship for TRW. TRW may place
appropriate legends on the certificates for the optioned shares, give
stop-transfer instructions to its transfer agents or take any other action to
achieve compliance with those laws in connection with any exercise of this
option or your resale of the optioned shares.
7. TRANSFERABILITY
This option is not transferable other than by will or the laws of descent and
distribution and shall be exercisable during your lifetime only by you or your
guardian or legal representative.
8. LEAVES OF ABSENCE
If you take a leave of absence for illness, military or governmental service or
other reasons, and such leave has been specifically approved by the Chairman of
the Board or the President of TRW for purposes of this option, then such leave
will not be treated as an interruption of your employment.
9. ADJUSTMENTS
The Compensation and Stock Option Committee of TRW may make such adjustments in
the option price and in the number or kind of shares of TRW Common or other
securities covered by this option as it in its sole discretion may determine are
equitably required to prevent dilution or enlargement of your rights that would
otherwise result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of TRW, merger,
consolidation, reorganization, partial or complete liquidation or other
corporate transaction or event having an effect similar to any of the foregoing.
10. CERTAIN DEFINITIONS
For purposes of this option, employment with a subsidiary will be treated as
equivalent to employment with TRW itself, and your continuous employment will
not be deemed to be interrupted by reason of your transfer among TRW and its
subsidiaries. "Subsidiary" means a corporation or other entity in an unbroken
chain of entities beginning with TRW if each of the entities other than the last
entity in the unbroken chain owns stock or other ownership interests possessing
50% or more of the total outstanding combined voting power of all classes of
stock or other interests in the next entity in the chain.
11. MISCELLANEOUS
This stock option is subject to all the terms and conditions of the TRW plan
pursuant to which it is granted. The Compensation and Stock Option Committee of
TRW has authority to interpret and construe any provision of this instrument and
the TRW plan pursuant to which this stock option is granted, and any such
interpretation and construction shall be binding and conclusive. Any reference
in this option to the Directors of TRW includes the Executive Committee of the
Directors.
<PAGE> 1
Exhibit 10(j)
TRW
U.S. TRANSFERABLE NONQUALIFIED
STOCK OPTION AGREEMENT
TERMS AND CONDITIONS
1. PURCHASE RIGHTS
This option cannot be exercised before the first anniversary of the date of
grant. After that you will be entitled to purchase up to 33-1/3% of the shares
covered by this option, rounded down to the nearest whole share for each of the
first two years, for each full year of your continuous employment with TRW after
the date of grant. The purchase rights accumulate as shown in the following
table.
<TABLE>
<CAPTION>
Cumulative Maximum
Number of Full Years Percentage of
of Continuous Service Optioned Shares That
After Date of Grant May Be Purchased
- ----------------------------------------------------------
<S> <C>
1 33-1/3%
2 66-2/3%
3 100%
</TABLE>
Notwithstanding the foregoing, in the event of the termination of your
employment due to your death or to your disability for a period of more than
twelve months (as determined in accordance with the TRW Long-Term Disability
Plan), or in the event of a change in control of TRW, this option will
immediately become exercisable in respect of all of the shares covered by this
grant. For purposes of this agreement, a change in control is defined in
resolutions adopted by the Compensation and Stock Option Committee of the
Directors of TRW on July 26, 1989, which, in summary, provide that a change in
control is a change occurring (a) by virtue of TRW's merger, consolidation or
reorganization into or with, or transfer of assets to, another corporation or
(b) by virtue of a change in the majority of the Directors of TRW during any
two-year period unless the election of each new Director was approved by a
two-thirds vote of the Directors in office at the beginning of such period or
(c) through the acquisition of shares representing 20% or more of the voting
power of TRW or (d) through any other change in control reported in any filing
with the Securities and Exchange Commission; provided, however, that no change
in control is deemed to have occurred by the acquisition of shares, or any
report of such acquisition, by TRW, a subsidiary of TRW or a TRW-sponsored
employee benefit plan. The language of the resolutions controls over this
summary language.
2. EXERCISE IN WHOLE OR PART
To the extent this option has become exercisable, you may purchase on any date
or dates all or any part of the shares which you are then entitled to purchase.
However, no fractional shares may be purchased.
3. TERM OF OPTION
To the extent this option has become exercisable in accordance with paragraph 1
above, it may be exercised by you at any time during the 10-year period
beginning on the date of grant. To the extent this option remains unexercised at
the end of the 10-year period, your unexercised purchase rights will terminate.
To the extent unexercised, this stock option will terminate before the end of
such 10-year period in the following cases:
(a) If your employment with TRW terminates before you reach age 55, your
unexercised purchase rights will terminate three months after the date your
employment terminates.
(b) If the Directors of TRW shall find that you intentionally committed an act
materially inimical to the interests of TRW or a subsidiary, your unexercised
purchase rights will terminate as of the time you committed such act, as
determined by the Directors.
If your employment is terminated by your death or by your disability for a
period of more than twelve months (as determined in accordance with the TRW
Long-Term Disability Plan), your purchase rights will not be subject to
termination under clause (a) above and will continue for the entire 10-year
period. In the event of a change in control of TRW (as defined herein), your
purchase rights will not under any circumstances be subject to termination
before the end of the 10-year period beginning on the date of grant. Nothing
contained in this option shall extend this option beyond a 10-year period
beginning on the date of grant or shall limit whatever right TRW or a subsidiary
might otherwise have to terminate your employment at any time.
4. PAYMENT OF OPTION PRICE
The option price shall be payable at the time of exercise. The option price
shall be paid at the Office of Secretary at TRW's corporate headquarters or at
any other place designated by the Secretary. The option price may be paid in
cash, in full shares of TRW Common, or in a combination of both, in accordance
with such procedures and subject to such further conditions as the Secretary of
TRW may establish from time to time. Notwithstanding the foregoing, the
Compensation and Stock Option Committee of TRW at any time may suspend or
terminate your right to pay any or all of the option price in shares of TRW
Common.
<PAGE> 2
Cash payments shall be made in United States dollars, except that, if at the
time of exercise you are employed by or on assignment for TRW or a subsidiary at
a location outside the United States, a cash payment may, with the prior
approval of the Secretary of TRW, be made in the official currency used at such
location in an amount specified by the Secretary as equivalent to the same
amount in United States dollars.
Shares delivered in payment of the option price shall be valued at their fair
market value on the date of exercise. For purposes of this option, "fair market
value" is the average of the high and low sales prices of a share of TRW Common
on the date of exercise on the New York Stock Exchange Composite Transactions
Listing as reported in the Midwest edition of The Wall Street Journal (or if
there are no sales on such date, then the closing sale price on such Listing on
the nearest date before the date of exercise) or such other method or procedure
for determining fair market value as the Compensation and Stock Option Committee
of TRW in its sole discretion may determine. For purposes of this option, the
"date of exercise" is the date on which written notice, accompanied by the
option price, is received by the Secretary of TRW or his designee that you have
elected to exercise all or part of this option.
5. TAXES
Upon any exercise of this option, TRW may withhold delivery of certificates for
the purchased shares until you make arrangements satisfactory to TRW to pay any
withholding, transfer or other taxes due as a result of such exercise. You may
elect, in accordance with applicable regulations of the Compensation and Stock
Option Committee of TRW, to pay a portion or all of the amount of required
withholding taxes in shares of TRW Common, either by delivering to TRW
previously held shares of TRW Common or by having shares of TRW Common withheld
from the shares purchased hereunder.
6. SECURITIES LAWS
This option shall not be exercisable if such exercise would violate any Federal
or state securities law. TRW will use its best efforts to make such filings and
initiate such proceedings as may be necessary to prevent such violations unless
the Directors of TRW determine, in their sole discretion, that such filings or
proceedings would result in undue expense or hardship for TRW. TRW may place
appropriate legends on the certificates for the optioned shares, give
stop-transfer instructions to its transfer agents or take any other action to
achieve compliance with those laws in connection with any exercise of this
option or your resale of the optioned shares.
7. TRANSFERABILITY
This option is not transferable except (a) by will or the laws of descent and
distribution, or (b) by gift to any member of your immediate family, to a trust
for the benefit of an immediate family member, or to a partnership whose
beneficiaries are members of your immediate family; provided, however, that
there may be no consideration for any such transfer. For purposes of this
agreement, "immediate family member" shall mean your spouse, children and
grandchildren. Notwithstanding any transfer of this option pursuant to clause
(b) of this Section 7, you will continue to be solely responsible for the taxes
described in Section 5 of this agreement. Any option transferred pursuant to the
terms of this Section 7 shall continue to be subject to the same terms and
conditions as were applicable immediately prior to the transfer.
8. LEAVES OF ABSENCE
If you take a leave of absence for illness, military or governmental service or
other reasons, and such leave has been specifically approved by the Chairman of
the Board or the President of TRW for purposes of this option, then such leave
will not be treated as an interruption of your employment.
9. ADJUSTMENTS
The Compensation and Stock Option Committee of TRW may make such adjustments in
the option price and in the number or kind of shares of TRW Common or other
securities covered by this option as it in its sole discretion may determine are
equitably required to prevent dilution or enlargement of your rights that would
otherwise result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of TRW, merger,
consolidation, reorganization, partial or complete liquidation or other
corporate transaction or event having an effect similar to any of the foregoing.
10. CERTAIN DEFINITIONS
For purposes of this option, employment with a subsidiary will be treated as
equivalent to employment with TRW itself, and your continuous employment will
not be deemed to be interrupted by reason of your transfer among TRW and its
subsidiaries. "Subsidiary" means a corporation or other entity in an unbroken
chain of entities beginning with TRW if each of the entities other than the last
entity in the unbroken chain owns stock or other ownership interests possessing
50% or more of the total outstanding combined voting power of all classes of
stock or other interests in the next entity in the chain.
11. MISCELLANEOUS
This stock option is subject to all the terms and conditions of the TRW plan
pursuant to which it is granted. The Compensation and Stock Option Committee of
TRW has authority to interpret and construe any provision of this instrument and
the TRW plan pursuant to which this stock option is granted, and any such
interpretation and construction shall be binding and conclusive. Any reference
in this option to the Directors of TRW includes the Executive Committee of the
Directors.
<PAGE> 1
Exhibit 10(k)
[TRW LOGO]
DIRECTOR
TRANSFERABLE
NONQUALIFIED
STOCK OPTION
AGREEMENT
To: Date of Grant:
------------------------
------------------------
(Social Security Number)
There hereby is granted to you, as a Director of TRW Inc. ("TRW") , an option to
purchase ______ shares of Common Stock, par value $0.625 each, of TRW ("TRW
Common") at an option price of $_____ per share. This option is granted to you
pursuant to the 1997 Long-Term Incentive Plan and is subject to the terms and
conditions set forth below.
This option is not intended to be an incentive stock option as defined in
Section 422A of the Internal Revenue Code.
TRW INC.
By:_________________________________________
Authorized Officer
- -------------------------------------------------------------------------------
TERMS AND CONDITIONS
1. PURCHASE RIGHTS.
This option cannot be exercised before the first anniversary of the date of
grant. After that you will be entitled to purchase all of the shares covered by
this option.
Notwithstanding the foregoing, in the event of the termination of your service
as a Director due to your death or permanent disability, or in the event of a
change in control of TRW, this option will immediately become exercisable in
respect of all of the shares covered by this grant. For purposes of this
agreement, a change in control is defined in resolutions adopted by the
Compensation and Stock Option Committee of the Directors of TRW on July 26,
1989, which, in summary, provide that a change in control is a change occurring
(a) by virtue of TRW's merger, consolidation or reorganization into or with, or
transfer of assets to, another corporation or (b) by virtue of a change in the
majority of the Directors of TRW during any two-year period unless the election
of each new Director was approved by a two-thirds vote of the Directors in
office at the beginning of such period or (c) through the acquisition of shares
representing 20% or more of the voting power of TRW or (d) through any other
change in control reported in any filing with the Securities and Exchange
Commission; provided that no change in control is deemed to have occurred by the
acquisition of shares, or any report of such acquisition, by TRW, a subsidiary
of TRW or a TRW-sponsored employee benefit plan. The language of the resolutions
controls over this summary language.
2. EXERCISE IN WHOLE OR PART.
To the extent this option has become exercisable, you may purchase on any date
or dates all or any part of the shares which you are then entitled to purchase.
However, no fractional shares may be purchased.
3. TERM OF OPTION.
To the extent this option has become exercisable in accordance with paragraph 1
above, it may be exercised by you at any time during the 10-year period
beginning on the date of grant. To the extent this option remains unexercised at
the end of the 10-year period, your unexercised purchase rights will terminate.
4. PAYMENT OF OPTION PRICE.
The option price shall be payable at the time of exercise. The option price
shall be paid at the Office of Secretary at TRW's corporate headquarters or at
any other place designated by the Secretary. The option price may be paid in
cash, in full shares of TRW Common, or in a combination of both, in accordance
with such procedures and subject to such further conditions as the Secretary of
TRW may establish from time to time. Notwithstanding the foregoing, the
Compensation and Stock Option Committee of TRW at any time may suspend or
terminate your right to pay any or all of the option price in shares of TRW
Common. Cash payments shall be made in United States dollars.
<PAGE> 2
Shares delivered in payment of the option price shall be valued at their fair
market value on the date of exercise. For purposes of this option, "fair market
value" is the mean of the high and low sales prices of a share of TRW Common on
the date of exercise on the New York Stock Exchange Composite Transactions
Listing as reported in the Midwest edition of The Wall Street Journal (or if
there are no sales on such date, then the closing sale price on such Listing on
the nearest date before the date of exercise) or such other method or procedure
for determining fair market value as the Compensation and Stock Option Committee
of TRW in its sole discretion may determine. For purposes of this option, the
"date of exercise" is the date on which written notice, accompanied by the
option price, is received by the Secretary of TRW or his designee that you have
elected to exercise all or part of this option.
5. TAXES.
Upon any exercise of this option, TRW may withhold delivery of certificates for
the purchased shares until you make arrangements satisfactory to TRW to pay any
withholding, transfer or other taxes due as a result of such exercise. You may
elect, in accordance with applicable regulations of the Compensation and Stock
Option Committee of TRW, to pay a portion or all of the amount of required
withholding taxes in shares of TRW Common, either by delivering to TRW
previously held shares of TRW Common or by having shares of TRW Common withheld
from the shares purchased hereunder.
6. SECURITIES LAWS.
This option shall not be exercisable if such exercise would violate any Federal
or state securities law. TRW will use its best efforts to make such filings and
initiate such proceedings as may be necessary to prevent such violations unless
the Directors of TRW determine, in their sole discretion, that such filings or
proceedings would result in undue expense or hardship for TRW. TRW may place
appropriate legends on the certificates for the optioned shares, give
stop-transfer instructions to its transfer agents or take any other action to
achieve compliance with those laws in connection with any exercise of this
option or your resale of the optioned shares.
7. TRANSFERABILITY.
This option is not transferable except (a) by will or the laws of descent and
distribution, or (b) by gift to any member of your immediate family, to a trust
for the benefit of an immediate family member, or to a partnership whose
beneficiaries are members of your immediate family; provided that, there may be
no consideration for any such transfer. For purposes of this agreement,
"immediate family member" shall mean your spouse, children and grandchildren.
Notwithstanding any transfer of this option, you will continue to be solely
responsible for the taxes described in Section 5 of this agreement. Any option
transferred pursuant to the terms of this Section 7 shall continue to be subject
to the same terms and conditions as were applicable immediately prior to the
transfer.
8. ADJUSTMENTS.
The Compensation and Stock Option Committee of TRW may make such adjustments in
the option price and in the number or kind of shares of TRW Common or other
securities covered by this option as it in its sole discretion may determine are
equitably required to prevent dilution or enlargement of your rights that would
otherwise result from any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of TRW, merger,
consolidation, reorganization, partial or complete liquidation or other
corporate transaction or event having an effect similar to any of the foregoing.
9. MISCELLANEOUS.
This stock option is subject to all the terms and conditions of the TRW plan
pursuant to which it is granted. The Compensation and Stock Option Committee of
TRW has authority to interpret and construe any provision of this instrument and
the TRW plan pursuant to which this stock option is granted, and any such
interpretation and construction shall be binding and conclusive. Any reference
in this option to the Directors of TRW includes the Executive Committee of the
Directors.
<PAGE> 1
Exhibit 10(m)
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
Page
----
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. Deferred Compensation Account.................. 3
Section 7. Hypothetical Investments....................... 3
Section 8. Value of Deferred Compensation Accounts........ 4
Section 9. Effect of Deferral Elections................... 5
Section 10. Distribution of Account Funds.................. 5
Section 11. Acceleration of Account Distribution
Due to Unforeseeable Emergency................. 6
Section 12. Death of Eligible Director;
Distribution of Account Balance................ 7
Section 13. Eligible Directors' Rights Unsecured........... 7
Section 14. Assignability.................................. 7
Section 15. Amendment...................................... 8
<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 of 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
<PAGE> 4
to (i) determine all questions of fact or interpretation regarding Plan
provisions; (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 (the "Automatic Deferral") under the Plan.
(b) Elective Deferral. In addition to the Automatic Deferral described
above, an Eligible Director may elect to defer (the "Elective Deferral") all or
a portion of the remaining 50 percent of his or her Base Annual Retainer,
expressed either as a dollar amount or as a percentage, and any retainer that he
or she may receive for chairing one of the Commitees of the Directors of the
Company (together, the "Available Retainer").
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 by June 30, 1997. 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
-2-
<PAGE> 5
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.
Section 6. Deferred Compensation Account.
- ---------- ------------------------------
The Company shall establish a deferred compensation account (the
"Account") for each Eligible Director that will set forth both the value of the
Automatic Deferral and the Elective Deferral, if any. As of the date
compensation would have been paid to the Eligible Director if it had not been
either automatically or electively deferred, the Company shall credit his or her
Account with the dollar amount of the deferred compensation.
Section 7. Hypothetical Investments.
- ---------- -------------------------
The Automatic Deferral portion of the Eligible Director's Account will
be credited with the amount that portion of the Account would have earned based
on the performance of the TRW Stock Fund of The TRW Employee Stock Ownership and
Stock Savings Plan (the "Stock Savings Plan"), had that portion of the Account
actually been invested in the TRW Stock Fund.
The Elective Deferral portion of the Eligible Director's Account will
be credited with the amount that portion of the Account would have earned based
on the Eligible Director's election to allocate his or her Elective Deferral
portion to one or more of the following funds established under the Stock
Savings Plan:
(a) Bond Index Fund;
(b) Equity Fund;
(c) Insured Return Fund;
-3-
<PAGE> 6
(d) Small Company Equity Fund; or
(e) TRW Stock Fund.
Allocation of the Elective Deferral portion of the Eligible Director's Account
to any of the investment funds set forth above must be made in increments of 25
percent. The Eligible Director's allocation choices shall be implemented as soon
as administratively feasible, 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.
Notwithstanding the foregoing provisions of this Section, the Committee
shall have the right to substitute from time to time, without adversely
affecting existing accruals in the Eligible Directors' Accounts, other fund
choices for the Elective Deferral portion of the Accounts.
Hypothetical investment earnings shall continue to accrue until the
Eligible Director's Account is fully distributed.
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.
-4-
<PAGE> 7
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. 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 10. Distribution of Account Funds.
- ----------- ------------------------------
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 the
relevant hypothetical investment earnings 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 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 may
choose to take distribution of this portion of his or her Account as follows:
(1) as a single payment, with any fractional shares being paid in
cash; or
(2) in regular installments (monthly, quarterly or annually)
payable over a period not to exceed 10 years, with fractional
shares paid in cash at the time of the final installment
payment.
(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
-5-
<PAGE> 8
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 Account funds may be made as a single payment or in regular
installments (monthly, quarterly or annually) over a period of not more than 10
years. The Eligible Director may change his or her Elective Deferral
distribution instructions by subsequent written notice to the Secretary.
Distribution of amounts allocated to the TRW Stock Fund will be paid 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. Fractional shares, also valued on
the date of distribution, will be paid in cash.
If an Eligible Director should fail to give the Secretary instructions
as to the type of distribution preferred, his or her Account funds 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.
Section 11. Acceleration of Account Distribution Due to Unforeseeable
- ----------- ---------------------------------------------------------
Emergency.
----------
An Eligible Director will be permitted to receive distribution of all
or a portion of his or her Account funds 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 portion
of his or her
-6-
<PAGE> 9
Account funds were not approved. Any distribution approved under this
provision shall be limited to the amount deemed necessary to meet the emergency.
Section 12. 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 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 Account funds 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.
-7-
<PAGE> 10
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
existing accruals in an Eligible Director's Account, without his or her consent.
-8-
<PAGE> 1
Exhibit 10(p)
TRW INC.
DEFERRED COMPENSATION PLAN
THIS AMENDED AND RESTATED PLAN, established by TRW Inc. ("TRW")
effective July 28, 1993, and as amended from time to time, including this
amendment and restatement effective February 4, 1997, is for the benefit of
certain employees of the Corporation in executive, managerial or professional
capacities so as to enhance the Corporation's ability to attract and retain
outstanding employees who are expected to contribute to its success. It shall
remain in effect, as it may be amended from time to time, until termination as
provided in Article VII of the Plan.
ARTICLE I
DEFINITIONS
For the purposes of the Plan, the following words and phrases shall mean:
1.1 ACCOUNT. The bookkeeping or accounting records maintained (having and
requiring no segregation or holding of any assets) by TRW pursuant to Article IV
with respect to and resulting from a Participant's Deferral Election.
1.2 AFFILIATE.
(a) Any corporation incorporated under the laws of one of the
United States of America of which TRW owns, directly or indirectly, in
excess of 50% of the combined voting power of all classes of stock or
in excess of 50% of the total value of the shares of all classes of
stock (all within the meaning of Section 1563 of the Code);
(b) any partnership or other business entity organized under
such laws, in which TRW owns, directly or indirectly, (i) in excess of
50% of the total capital or profits interest of such partnership, or
(ii) in excess of 50% or more of the total value of such other business
entity (all within the meaning of Section 414(c) of the Code); and
(c) any other company designated as an Affiliate by the
Committee.
1.3 BENEFICIARY. The person, persons or entity entitled under Article VI to
receive any Plan Benefits payable after a Participant's death.
-1-
<PAGE> 2
1.4 CODE. The Internal Revenue Code of 1986, as amended. References in
the Plan to Sections of the Code are to such Sections as in effect on the
Effective Date or any successor provision.
1.5 COMMITTEE. The Compensation and Stock Option Committee of the
Directors.
1.6 CORPORATION. TRW or an Affiliate of TRW.
1.7 DATE OF DEPOSIT. The Determination Date immediately preceding the
date that, but for the Deferral Election, the Incentive Compensation would be
paid.
1.8 DEFERRAL ELECTION. An election pursuant to Article III by an
Eligible Employee to defer receipt of all or part of his Incentive Compensation.
1.9 DEFERRED COMPENSATION. The portion of Incentive Compensation which an
Eligible Employee elects to defer pursuant to a Participation Agreement.
1.10 DETERMINATION DATE. The last day of each calendar month.
1.11 DIRECTORS. The Directors of TRW.
1.12 EFFECTIVE DATE. July 28, 1993, the effective date of the establishment
of the Plan.
1.13 ELIGIBLE EMPLOYEE. A person (who must be a U.S. citizen or a U.S.
resident alien) in the full-time active salary employ of the Corporation
who is employed at Operational Incentive Plan Level III or above at the end of
the year for which a Deferral Election applies, or who retires or is terminated
due to a divestiture after executing a valid Deferral Election in the year the
retirement is effective.
1.14 EXECUTIVE OFFICER. Any Eligible Employee who is an "executive
officer" of TRW for the purposes of Rule 3b-7 under the Securities Exchange Act
of 1934.
1.15 FINANCIAL HARDSHIP. A severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent (as defined in ss.152(a) of the Code) of the Participant, loss of
the Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstance arising as a result of events beyond the control of
the Participant. In case of the Participant's death, the word "Beneficiary or
other person or entity entitled to receive a Plan Benefit" shall be substituted
for the word "Participant" wherever the latter appears in this Section 1.15.
1.16 HIGHLY-PAID EMPLOYEE. A person in the full-time active salary employ of
the Corporation who (i) will earn, in salary and in bonus (assuming full year
employment and no deferral of compensation), at least $150,000 (or such greater
sum (effective January 1, 1997, $160,000) if the qualified benefit plan
limitation is increased by the Internal Revenue Service) in the year of the
Deferral Election or
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(ii) is already a participant in TRW's supplemental nonqualified benefit plans
or (iii) is a U.S. citizen or U.S. resident alien who is Operational Incentive
Plan Level III or above and is employed by either TRW Overseas Inc. or TRW
Systems Overseas Inc.
1.17 INCENTIVE BONUS. A cash award payable to an Eligible Employee under
TRW's Operational Incentive Plan (or similar compensation program that
replaces the Operational Incentive Plan).
1.18 INCENTIVE COMPENSATION. Any cash award payable to an Eligible Employee
as an Incentive Bonus or, if applicable, a Strategic Grant that, but for a
Deferral Election under the Plan, would be paid to the Eligible Employee and
considered to be "wages" for purposes of United States federal income tax
withholding (or other appropriate jurisdiction).
1.19 INTEREST RATE OR INTEREST. One-twelfth of the annual interest rate,
equal to 110% of the applicable long-term federal rate as published by the
Internal Revenue Service pursuant to Code Section 1274(d) or any successor
provision and in effect on the first business day of each calendar month.
1.20 INVESTMENT FUND RETURNS. The gains or losses in one or more of the
investment funds offered to participants under the TRW Employee Stock Ownership
and Savings Plan, any of which shall be available to any Participant for
purposes of having such investment fund results credited to his Account under
this Plan.
1.21 PARTICIPANT. An Eligible Employee who has elected to participate in the
Plan and has executed and filed with TRW a Participation Agreement as provided
in Article III; provided, however, that such term shall include a person who no
longer has an effective Deferral Election so long as he retains, under the Plan,
an interest in an Account under the Plan.
1.22 PARTICIPANT AGREEMENT. An agreement between TRW and a Participant
setting forth the Participant's Deferral Election.
1.23 PLAN. This Deferred Compensation Plan, as it may be amended from time
to time.
1.24 PLAN BENEFIT. The benefit payable to a Participant in accordance with
Article V hereof.
1.25 PLAN YEAR. Each of the twelve-month periods ending December 31 and
occurring while the Plan remains in effect. The term "Plan Year" shall also
include the period beginning on the Effective Date and ending December 31, 1993,
and any period of less than twelve months beginning January 1 and ending on the
date the Plan is terminated.
1.26 PRE-RETIREMENT PAYMENT SUB-ACCOUNT. A Sub-Account of a Participant's
Account, established pursuant to Section 4.3, to which there shall be
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credited Deferred Compensation under a single Deferral Election, and all
interest accrued thereon, as to which the Participant has elected payment of his
Plan Benefit in either five years or ten years from the Date of Deposit.
1.27 RETIREMENT PAYMENT SUB-ACCOUNT. A Sub-Account of a Participant's Account,
established pursuant to Section 4.3, to which there shall be credited Deferred
Compensation under all Deferral Elections, and all interest accrued thereon, as
to which the Plan Benefit is intended to be payable following retirement of the
Participant from the Corporation.
1.28 SPECIAL COMMITTEE. The committee composed of the head of Human Resources,
the General Counsel and the Chief Financial Officer of TRW, which committee
reviews and acts upon the requests of Participants (other than Participants who
are Executive Officers, whose requests are acted upon by the Committee) to
receive early payout as a result of a Financial Hardship or to change payout
upon retirement.
1.29 STRATEGIC GRANT. A cash award and/or performance unit payable to an
Eligible Employee pursuant to TRW's Strategic Incentive Program (or similar
long-term compensation plan that replaces or augments the Strategic Incentive
Program).
1.30 SUB-ACCOUNT. A Pre-Retirement Payment Sub-Account or a Retirement
Payment Sub-Account.
1.31 TERMINATION OF EMPLOYMENT. Any severance of a Participant from full-time
active salaried employment by the Corporation for any reason (other than a
transfer of employment from TRW to an Affiliate, from an Affiliate to another
Affiliate or from an Affiliate to TRW).
1.32 TRW. TRW Inc., an Ohio corporation.
ARTICLE II
ADMINISTRATION
2.1 ADMINISTRATORS. The Plan shall be administered by the Committee and the
Special Committee, and certain decisions concerning Financial Hardship and
change in payment upon retirement may be made by the Special Committee. Except
as otherwise provided herein, decisions of the Committee or the Special
Committee shall be final and binding on all parties.
2.2 COMMITTEE. The Committee shall have the authority (a) to make, amend,
interpret and enforce all rules and regulations for the administration of the
Plan and (b) to decide all questions, including interpretation of the Plan as
may arise in connection with the Plan insofar as it is applicable to
Participants (i) who are Executive Officers or (ii) with respect to whom
questions are referred to the Committee by the head of Human Resources. A
majority of the members of the Committee shall constitute a quorum. The
Committee may act by a vote of a
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majority of a quorum at a meeting or by a writing signed by a majority of the
members of the Committee.
2.3 HUMAN RESOURCES. The head of Human Resources shall administer the Plan in
accordance with the terms of the Plan and the rules and regulations of the Plan
as established by the Committee. Consistent with the authorized precedents and
the rules and regulations authorized by the Committee, the head of Human
Resources shall have the authority to decide all questions, including
interpretations of the Plan, as may arise in connection with the Plan insofar as
it is applicable to Participants other than Executive Officers.
2.4 SPECIAL COMMITTEE. With regard to all Participants, other than
Participants who are Executive Officers, the Special Committee shall act
upon (i) written requests of Participants concerning early payout of some or all
of the Participant's Account balances as a result of Financial Hardship and (ii)
written requests of Participants to change the payout of a Participant's
Retirement Payment Sub-Account as provided by Section 5.1(b). The Special
Committee may act by a vote of the majority at a meeting or by a writing signed
by a majority of the members of the Special Committee.
2.5 FINANCIAL HARDSHIP AND RETIREMENT PAYOUT CHANGE REQUESTS. In order for a
request to be considered by the Special Committee (or, in the case of a request
as set forth in clauses (i) or (ii) of Section 2.4 by an Executive Officer, the
Committee), the requests must (i) be in writing and delivered to the head of
Human Resources, (ii) set forth whether the Participant is requesting an early
payout because of a Financial Hardship or a change of payout upon retirement,
(iii) set forth the reasons for such request, including in detail the Financial
Hardship or the circumstances that necessitate the change of payout upon
retirement, (iv) in the case of a request as a result of a Financial Hardship
set forth the amount of such Participant's Account that the Participant wishes
to be paid and the Sub-Accounts from which such early payout shall be made and
(v) in the case of a change of payout at retirement set forth the manner in
which the Participant wishes to receive payout (e.g., single sum or in five
annual installments). Compliance with the petition procedures set forth in this
Section 2.5 does not insure that the request will be granted by the Special
Committee (or the Committee).
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ARTICLE III
PARTICIPATION
3.1 PARTICIPATION.
(a) Subject to the limitations set forth in this Article III,
any person who is an Eligible Employee in the year for which the
Incentive Compensation deferred under a Deferral Election under this
Section 3.1 is payable may participate in the Plan by executing and
filing with the head of Human Resources a Participation Agreement;
provided, however, the election to defer Incentive Bonus will not be
effective unless the Eligible Employee is also a Highly-Paid Employee.
The head of Human Resources shall determine, in his sole discretion,
which Eligible Employees are likely to be Highly-Paid Employees during
the year in which the Deferral Election is made. The head of Human
Resources shall then notify Eligible Employees whether their elections
to defer Incentive Bonuses are effective.
(b) In each Participation Agreement, the Eligible
Employee shall specify:
(i) the percentage or dollar amount of
Incentive Bonus and the percentage or the dollar
amount of Strategic Grant in respect of a specified TRW fiscal
year to be deferred;
(ii) the Investment Fund Returns and/or Interest
Rate to be credited to the Participant's entire Account;
(iii) subject to the limitations of Section 5.1,
the form of Plan Benefit (i.e., whether such benefits are
intended to be paid following retirement or five or ten years
from the Date of Deposit).
If the Eligible Employee chooses to defer a dollar amount of the
Incentive Bonus or the Strategic Grant and to the extent that dollar
amount specified exceeds the eligible amount of the Incentive Bonus or
the Strategic Grant, as applicable, the amount actually deferred shall
be the eligible amount of the Incentive Bonus or the Strategic Grant,
as applicable. If the Eligible Employee has chosen to have Deferred
Compensation paid five or ten years from the Date of Deposit, such
payments shall be made as provided in Section 5.1(d) below.
(c) Before September 30 of each Plan Year, each Eligible
Employee who elects to become a Participant shall file with the head of
Human Resources a Participation Agreement specifying the items
identified in paragraph (b) above.
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3.2 DEFERRAL ELECTIONS. Subject to the restrictions concerning deferral of
Incentive Bonus set forth in Section 3.1(a), any Eligible Employee may elect to
defer any percentage or dollar amount (but not both a percentage and dollar
amount, but an Eligible Employee can defer a specified dollar amount of one of
his Incentive Bonus and Strategic Grant and a percentage of the other) of each
of his Strategic Grant and his Incentive Bonus; provided, however, that, to the
extent that the Eligible Employee chooses to defer a percentage of his Incentive
Bonus and/or Strategic Bonus, each Deferral Election, to be effective, must
result in deferral of a minimum of 10% of the Eligible Employee's Incentive
Bonus and/or Strategic Grant (provided that an Eligible Employee may elect to
defer a portion of his Incentive Bonus and none of his Strategic Grant and vice
versa) and the Deferral Elections must be in increments of 5% for each of the
Strategic Grant and Incentive Bonus, which election percentages do not need to
be identical; further, provided, however, that, to the extent that the Eligible
Employee chooses to defer a specified amount of his Incentive Bonus and/or
Strategic Bonus, each Deferral Election, to be effective, must result in
deferral of a minimum of $10,000 of the Eligible Employee's Incentive Bonus
and/or Strategic Grant (provided that an Eligible Employee may elect to defer a
portion of his Incentive Bonus and none of his Strategic Grant and vice versa)
and the Deferral Elections must be in increments of $1,000 for each of the
Strategic Grant and Incentive Bonus, which election amounts do not need to be
identical.
3.3 MODIFICATION OF DEFERRAL ELECTION. By written notice to TRW, a Deferral
Election filed in any Plan Year may be modified or revoked at any time prior to
October 1 of such Plan Year. Thereafter, a Deferral Election specified in a
Participation Agreement shall be irrevocable, except that the Committee or the
Special Committee, as appropriate under Article II, may permit a Participant at
any time prior to the actual deferral of the Incentive Compensation to reduce
the designated percentage to be deferred upon a finding, based upon uniform
standards established by the Committee, that the Participant has suffered a
Financial Hardship.
ARTICLE IV
DEFERRED COMPENSATION
4.1 DEFERRED COMPENSATION. The amount of Incentive Compensation deferred
pursuant to a Deferral Election shall be withheld in a single sum at the time
such Incentive Compensation, but for a Deferral Election, would be paid.
4.2 WITHHOLDING OF TAXES AND SSP/BEP CONTRIBUTIONS. Any withholding of taxes
or other amounts which is required by any federal, state, or local law shall be
withheld from the Participant's remaining undeferred Incentive Compensation, if
any. If necessary in order to comply with any federal, state or local law, the
amount of Incentive Compensation deferred may be reduced by an amount equal to
any required withholding. Otherwise, such withholding may be made from any of
the Participant's other compensation payable by the Corporation, or, at the
election of the head of Human Resources, a Participant may be permitted to pay
to the Corporation the amount of any such required withholding at or prior to
the
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time such withholding would otherwise be required to be made. In addition,
the amount of Incentive Compensation deferred shall be reduced by the amount of
TRW Stock Savings Plan and Benefits Equalization Plan contributions to be made
by the Eligible Employee on account of such Incentive Compensation.
4.3 ACCOUNTS. For recordkeeping purposes only, a separate Account shall be
established and maintained by TRW for each Participant to which his Deferred
Compensation and Investment Fund Returns or Interest accrued thereon pursuant to
Section 4.4 shall be credited (or charged). Each such Account shall be divided
into the following Sub-Accounts for purposes of Section 5.1: (i) a Retirement
Payment Sub-Account to which there shall be credited all Incentive Compensation
deferred (and all Investment Fund Returns or Interest thereon) pursuant to all
Deferral Elections under which a Plan Benefit is payable the year following
retirement; and (ii) a separate Pre-Retirement Payment Sub-Account for each
Deferral Election under which the Participant has elected that his Plan Benefit
be payable five or ten years from the Date of Deposit, to which the Incentive
Compensation deferred (and all Investment Fund Returns or Interest thereon)
pursuant to such Deferral Election shall be credited.
4.4 DETERMINATION OF ACCOUNT. The value of each Participant's Account as of
each Determination Date shall be the total of the Participant's Retirement
Payment and Pre-Retirement Payment Sub-Accounts. The value of each such
Sub-Account shall consist of (i) the balance of such Sub-Account as of the last
preceding Determination Date plus (ii) any Deferred Compensation credited to
such Sub-Account since the last preceding Determination Date, (iii) adjusted for
Investment Fund Returns or Interest since the last preceding Determination Date
based upon the Investment Fund Returns or Interest Rate selected by the
Participant under this Plan, less (iv) the amount of all Plan Benefits, if any,
paid during the period since the last preceding Determination Date.
4.5 STATEMENT OF ACCOUNTS. TRW shall submit to each Participant, within 120
days after the close of each Plan Year and at such other times as determined by
the Committee, a statement setting forth the total balance of the Participant's
Account, and the balance of each Sub-Account thereof, as of the last day of such
Plan Year and as of the last day of the immediately preceding Plan Year, the
Deferred Compensation and Investment Fund Returns credited or charged, or
Interest accrued thereon, to each Sub-Account during the Plan Year and the
payments of the Plan Benefits from each Sub-Account during the Plan Year.
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ARTICLE V
PLAN BENEFITS
5.1 PLAN BENEFITS PAYABLE ON TERMINATION OF EMPLOYMENT, FIVE YEARS FROM DATE
OF DEPOSIT OR TEN YEARS FROM DATE OF DEPOSIT.
(a) Subject to the provisions of Section 5.1(b) and except as
otherwise provided below, upon Termination of Employment a Participant
shall receive a Plan Benefit equal to the balance of his Account as of
the Determination Date immediately preceding such Termination of
Employment, plus the amount of any Deferred Compensation credited his
Account after such Determination Date. Such Plan Benefit shall be
payable as a single sum during the January following such Termination
of Employment. In addition, the Participant's Account shall be credited
with gains or losses on the balance of his Account for the period from
such Determination Date to the date of payment based upon the
applicable Investment Fund Returns or Interest Rate. However, in the
event that the Termination of Employment is the result of a divestiture
of the unit or operations of the Corporation where the Participant
worked prior to Termination of Employment and the Participant obtains
employment with the entity that acquired such unit or operations, then
the balance of such Participant's Account shall not be payable until
such Participant's termination of employment from such entity (or its
successor) and the balance of such Participant's Pre-Retirement Payment
Sub-Account shall not be payable until such time as the Participant
would have received payment in accordance with the original Deferral
Election had the Participant's employment with the Corporation not been
terminated. At such time, the amounts in such Participant's Account
shall be paid as set forth in Sections 5.1(b) and 5.1(e). Such
Participant's Account shall continue to be credited or charged with
Investment Fund Returns or accrued Interest following such
Participant's Termination of Employment through payment in full of his
or her Account.
(b) In the event that a Participant's Termination of
Employment occurs as a result of his retirement, the Participant shall
receive the Plan Benefit payable in respect of his Retirement Payment
Sub-Account in ten annual installments commencing in the year following
the year that Termination of Employment occurred; provided, however,
that the Participant can petition the Special Committee (or the
Committee in the case of an Executive Officer) at any time at least six
months prior to retirement to change such payment into five annual
installments or a single sum; further provided, that any such payment
change approved by the Special Committee (or the Committee) shall not
be effective until the calendar year following the date of the payment
change. In the event that payment shall be made in a single sum, such
payment shall be in accordance with the procedures set forth in Section
5.1(a) above, but in
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no event in the same calendar year as the year of any requested
change and no earlier than January 1 of the calendar year
following the year that Termination of Employment occurred. In the
event that the payment shall be made in installments, such payments
shall be made in accordance with Section 5.1(e) below. If, at the time
of retirement, the Participant has a credit in a Pre-Retirement Payment
Sub-Account, such Sub-Account balances shall be paid in a single sum
following retirement in accordance with the procedures set forth in
Section 5.1(a) above.
(c) In the event that a Participant's Termination of
Employment occurs because of his death, his Beneficiary or, if no
designated Beneficiary shall survive him, his estate shall receive the
Plan Benefit in the manner provided in Section 5.1(a); provided,
however, that if the Participant's Beneficiary designation shall result
in all or any part of his Plan Benefit passing to his surviving spouse
or to an entity for the benefit of his surviving spouse in such a way
as to qualify for the marital deduction under Section 2056 of the
Code, and at the time of his death the Participant was eligible to
retire and had elected to receive his Plan Benefits in his Retirement
Payment Sub-Account in installments pursuant to Section 5.1(b),
payments from his Retirement Payment Sub-Account shall be made to such
surviving spouse or to such entity for the benefit of such surviving
spouse, as the case may be, in the manner provided in Section 5.1(b).
Notwithstanding the foregoing, if such surviving spouse shall die
prior to complete distribution of all Plan Benefits, the balance then
remaining in such Retirement Payment Sub-Account shall be paid to the
estate of such surviving spouse or to such entity for the benefit of
such surviving spouse, as the case may be, in a single sum the January
following such spouse's death.
(d) If the Participant has chosen in his Deferral Election to
receive payouts either five or ten years from the Date of Deposit (as
opposed to upon retirement from the Corporation), payments shall be
made in a single sum form from each Pre-Retirement Payment Sub-Account
of the Participant on or before February 15 of the year either five or
ten years (depending upon the applicable Deferral Election) following
the applicable Date of Deposit; provided, however, that if Termination
of Employment has occurred prior to payment, payment of the
Participant's Plan Benefits shall be made as provided in Section
5.1(a).
(e) If the payments from the Participant's Retirement Payment
Sub-Account are to be paid in installment form, such installments shall
be paid in either five or ten annual installments between February 1
and February 15 of each year in which an installment is to be made;
provided, however, that the initial installment payment will be made a
reasonable time following Termination of Employment (but no earlier
than February 1 of the calendar year following the year that
Termination of Employment occurred). Installment payments will commence
in the year following the Participant's Termination of Employment. If
annual installments are paid, the balance of the Account shall continue
to be credited or charged with
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Investment Fund Returns or Interest as previously elected by the
Participant in accordance with Section 3.1(b).
5.2 WITHDRAWAL OF PLAN BENEFIT. No Plan Benefit shall be payable prior to the
Participant's Termination of Employment other than in the form determined
pursuant to Section 5.1(d), except that the Committee or the Special Committee,
as appropriate under Article II, may permit a Participant or, after a
Participant's death, a Participant's Beneficiary or other person or entity
entitled to receive such Plan Benefit, to withdraw from the Participant's
Account an amount necessary to meet a Financial Hardship.
5.3 WITHHOLDING; PAYROLL TAXES. TRW shall withhold from Plan Benefits payable
under the Plan any taxes required to be withheld from an employee's wages for
the federal or any state or local governments.
5.4 FULL PAYMENT OF BENEFITS. Notwithstanding any other provision of the
Plan, all Plan Benefits shall be paid to the Participant no later than the
January 5 next preceding the Participant's 80th birthday.
ARTICLE VI
BENEFICIARY DESIGNATION
6.1 BENEFICIARY DESIGNATION. Each Participant shall have the right, at any
time, to designate any person or persons as his Beneficiary (both principal as
well as contingent) to whom payment under the Plan shall be made in the
event of his death prior to complete distribution of all Plan Benefits due him
under the Plan. Any Beneficiary designation shall be made in writing on a form
prescribed by the Committee and shall become effective only when filed with the
head of Human Resources.
6.2 AMENDMENTS. Subject to the limitations of Section 6.1 of the Plan, any
Beneficiary designation may be changed by a Participant only by written notice
of such change to the head of Human Resources on a form prescribed by the
Committee. The filing of a new Beneficiary designation form will cancel all
prior Beneficiary designations.
6.3 ABSENCE OF EFFECTIVE BENEFICIARY DESIGNATION. If a Participant fails to
designate a Beneficiary as provided above or if all designated Beneficiaries
predecease the Participant or die prior to complete distribution of the
Participant's Plan Benefit, the Participant's remaining Plan Benefit shall be
paid to his estate.
6.4 EFFECT OF PAYMENT. Payment to the Beneficiary designated pursuant to
Sections 6.1 and 6.2 or to the Participant's estate pursuant to Section 6.3
shall completely discharge TRW's obligations under the Plan.
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ARTICLE VII
AMENDMENT AND TERMINATION OF PLAN
7.1 TERMINATION. The Committee shall have the power in its sole discretion to
suspend or terminate the Plan at any time, except that no such action shall
adversely affect rights with respect to any Account without the consent of the
person affected.
7.2 AMENDMENT. The Committee can amend any part of this Plan (including,
without limitation, changing the Interest Rate or Investment Fund Returns to be
paid to current and future Participants or changing who can become Participants)
in its sole discretion without notice to Participants.
ARTICLE VIII
MISCELLANEOUS
8.1 UNFUNDED PLAN. The Plan is an unfunded plan maintained by TRW primarily
to provide Deferred Compensation benefits for a select group of executive,
managerial or professional employees of the Corporation.
8.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries,
estates, heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of TRW. Such assets of TRW
shall not be held under any trust or in any other way as collateral security for
the fulfillment of the obligations of TRW under the Plan. Any and all of TRW's
assets shall be, and remain, the general, unpledged, unrestricted assets of TRW.
TRW's sole obligation under the Plan shall be merely that of an unfunded and
unsecured promise of TRW to pay money in the future.
8.3 NONASSIGNABILITY. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate or convey, in advance of actual
receipt, any Plan Benefit. Plan Benefits and all rights to Plan Benefits are and
shall be nonassignable and nontransferable prior to actual payment as provided
by the Plan. Any such attempted assignment or transfer shall be ineffective;
TRW's sole obligation shall be to pay Plan Benefits to the Participant, his
Beneficiary or his estate as appropriate. No part of any Plan Benefit shall,
prior to actual payment as provided by the Plan, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person; nor shall any Plan
Benefit be transferable by operation of law in the event of a Participant's or
any other person's bankruptcy or insolvency, except as required by law.
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8.4 NOT A CONTRACT OF EMPLOYMENT. Neither the terms and conditions of the Plan
nor those of any Participation Agreement shall be deemed to constitute a
contract of employment between the Corporation and the Participant, and neither
the Participant, his Beneficiary nor his estate shall have any rights against
TRW under the Plan except as may otherwise be specifically provided in the Plan.
Moreover, nothing in the Plan shall be deemed to give a Participant the right to
be retained in the service of the Corporation or to interfere with the right of
the Corporation to discipline, discharge or change the status of a Participant
at any time. Further, nothing in the Plan shall be deemed to give a Participant
a right to receive any Incentive Compensation.
8.5 PROTECTIVE PROVISIONS. A Participant will cooperate with TRW by furnishing
any and all information requested by TRW in order to facilitate the payment of
Plan Benefits under the Plan, and by taking such other action as may be
reasonably requested by TRW.
8.6 TERMS. Whenever any words are used in the Plan in the masculine, they
shall be construed as though they were used in the feminine in all cases where
they would so apply; and wherever any words are used in the Plan in the singular
or in the plural, they shall be construed as though they were used in the
plural or singular, as the case may be, in all cases where they would so apply.
8.7 CAPTIONS. The captions of the articles and sections of the Plan are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
8.8. GOVERNING LAW. The provisions of the Plan shall be construed and
interpreted according to the laws of the State of Ohio.
8.9 VALIDITY. In case any provision of the Plan shall be held illegal or
invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions of the Plan, and the Plan shall be construed and enforced
as if such illegal or invalid provision were not included in the Plan.
8.10 NOTICE OR FILING. Any notice or filing required or permitted to be given
to TRW or a Participant under the Plan shall be sufficient if in writing and
hand delivered, or sent by regular mail or by registered or certified mail, to
the principal office of TRW or to the last known address of the
Participant, as the case may be. Such notice or filing shall be deemed given or
made (i) when hand delivered to the residence or offices of the recipient, (ii)
as of five days after the date of mailing if delivery is made by regular mail,
or, (iii) as of five days after the date shown on the postmark on the receipt
for registration or certification provided to the sender at the time of mailing,
if by registered or certified mail.
8.11 SUCCESSORS. The provisions of the Plan shall bind and obligate TRW and
any successors. The term "successors" as used in this Section 8.11 shall include
any corporate or other business entity which shall, whether by merger,
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consolidation, purchase or otherwise acquire all or substantially all of the
business and assets of TRW and successors of any such corporation or other
business entity.
8.12 EXPENSES AND COSTS. TRW shall bear all expenses and costs in connection
with the operation of the Plan.
8.13 RELIANCE ON CERTIFIED PUBLIC ACCOUNTANTS. TRW, the Directors, the
Committee, the Special Committee, the head of Human Resources and any employee
of TRW or the Corporation shall be fully protected for actions taken in good
faith based on the computations and reports made pursuant to or in connection
with the Plan by the independent certified public accountants who audit TRW's
accounts.
ARTICLE IX
CLAIMS PROCEDURE
9.1 CLAIM. Any person claiming a Plan Benefit, requesting an interpretation
or ruling under the Plan (other than a ruling under Section 2.5 above or the
determination as to whether an Eligible Employee is a Highly Paid Employee), or
requesting information under the Plan shall present the request in writing to
the head of Human Resources who (a) shall respond in writing within 90 days
following his receipt of the request or (b) in the case of a claimant who is an
Executive Officer, shall refer the claim with his recommended response to the
Committee, which shall respond in writing within 120 days following the receipt
of the request by the head of Human Resources.
9.2 DENIAL OF CLAIM. If the claim or request is denied, the written notice of
denial shall state (i) the reasons for denial; (ii) a description of any
additional material or information required and an explanation of why it is
necessary; and (iii) an explanation of the Plan's claim review procedure.
9.3 REVIEW OF CLAIM. Any person whose claim or request is denied may make a
second request for review by notice given in writing to the head of Human
Resources. The claim or request shall be reviewed further by the head of Human
Resources or the Committee, as appropriate, and he or it may, but shall not be
required to, grant the claimant a hearing.
9.4 FINAL DECISION. A decision on such second request shall normally be made
within 60 days after the date of the second request. If an extension of time is
required for a hearing or other special circumstances, the claimant shall be
notified and the time limit shall be 120 days from the date of the second
request. The decision shall be in writing and, whether made by the head of Human
Resources or the Committee, shall be final and bind all parties concerned.
-14-
<PAGE> 15
PARTICIPATION AGREEMENT
The undersigned hereby agrees to participate in the TRW Inc. Deferred
Compensation Plan (the "Plan") for the following Incentive Compensation received
by the undersigned on account of the year 19__. The undersigned acknowledges
that if in accordance with the Plan the undersigned is not a Highly Paid
Employee under the Plan, the undersigned's election to defer the Incentive
Compensation will become invalid. The undersigned agrees that he/she has read
the Plan and agrees that the following elections are governed by the Plan.
DEFERRAL PERCENTAGES OR AMOUNTS (Percentage elections must be in increments of
5%, with a 10% minimum election, and dollar elections must be in increments of
$1,000, with a $10,000 minimum election; elections for OIP bonus and strategic
incentive grant need not be the same; you cannot elect both a percentage and a
dollar amount for the same payment source):
OIP Bonus ______% or $_______
Strategic Incentive Grant ______% or $_______
ELECTION OPTIONS (Choose only one):
___ Paid in lump sum five years from the Date of Deposit
___ Paid in lump sum ten years from the Date of Deposit
___ Paid following retirement in ten annual installments unless a
change has been approved in accordance with Section 2.5 of
the Plan
In order for the above elections to be effective, this form must be
fully completed and returned to the head of Human Resources no later than
September 30, 19__.
Unless the undersigned has a Beneficiary Designation Form on file for this Plan
with Human Resources, this Participation Agreement must be accompanied by an
executed Beneficiary Designation Form.
--------------------------- --------------------------------
Signature of Participant Participant's Full Name
--------------------------- ----------------------------------
Date Participant's Social Security #
-15-
<PAGE> 1
Exhibit 10(y)
AMENDMENT TO
MULTI-YEAR REVOLVING CREDIT AGREEMENT
This Amendment to Multi-Year Revolving Credit Agreement, dated as of May 8,
1996 (this "Amendment"), is among TRW Inc., an Ohio corporation (the "Company")
and the financial institutions listed on the signature pages hereof together
with their successors or assigns (collectively, the "Banks" and individually, a
"Bank").
W I T N E S S E T H:
--------------------
WHEREAS, on July 1, 1992, the Company and the Banks entered into the
Three-Year Revolving Credit Agreement (as it was then titled), which agreement
was amended on June 30, 1993, on March 1, 1994 and on February 28, 1995 (the
agreement as amended is known hereinafter as the "Agreement"); and
WHEREAS, the Company and the Banks have agreed to make such changes to the
Agreement as are reflected in this Amendment;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
SECTION 1 THE AMENDMENTS
1.1 AMENDMENT OF "COMMITMENT". Section 1.1 of the Agreement shall be
amended to read in its entirety as set forth below:
1.1 COMMITMENT. Subject to the terms and conditions of this Agreement,
each of the Banks, severally and for itself alone, agrees to make loans
(collectively, the "Loans" and individually, a "Loan") to the Company and,
as provided in Section 1.8, to any Designated Subsidiary on a revolving
basis from time to time before the Termination Date, as it may be extended
from time to time pursuant to Section 1.2, in such aggregate amounts as the
Company or any Designated Subsidiary may from time to time request from
such Bank; provided, however, that the aggregate principal amount of Loans
that any Bank shall be committed to have outstanding to the Company and the
Designated Subsidiaries shall not at any one time exceed the amount set
forth opposite such Bank's signature hereto, or any subsequent amendment
hereto (except to the extent provided in Section 1.9 hereof). The foregoing
commitment of each Bank to make Loans as reduced from time to time in
accordance with the terms hereof is herein called such Bank's "Commitment"
and the commitments of all Banks are herein sometimes collectively called
the "Commitments."
-1-
<PAGE> 2
1.2 DELETION OF "TERMINATION OF COMMITMENT". Section 1.9 of the Agreement
shall be deleted in its entirety.
1.3 RENUMBERING OF "LOANS OUTSTANDING UNDER PRIOR FACILITY". Section 1.10
of the Agreement shall be renumbered to now be Section 1.9.
1.4 AMENDMENT OF "COMMITMENT FEE". Section 4.1 of the Agreement shall be
amended to delete references to Section 1.9 of the Agreement and, as amended,
shall read in its entirety as set forth below:
4.1 COMMITMENT FEE. The Company agrees to pay to each Bank a commitment
fee, for the period from and including the date of this Agreement to the
Termination Date on the daily average of the Unused Amount of such Bank's
Commitment hereunder equal to the Applicable Commitment Fee in effect from
time to time multiplied by the Unused Amount. Such commitment fee shall be
payable quarterly in arrears on the tenth day of each April, July, October,
and January (the first such payment to be made on October 10, 1992) for the
quarterly period ended on the last day of the preceding month and on the
Termination Date. The Company may make such payments according to the
Electronic Payment Instructions.
1.5 DELETION OF "UTILIZATION FEE". Section 4.2 of the Agreement shall be
deleted in its entirety.
1.6 RENUMBERING OF "COMPUTATION OF FEES". Section 4.3 of the Agreement
shall be renumbered to now be Section 4.2.
1.7 AMENDMENT OF "MANDATORY PREPAYMENT". Section 5.3 of the Agreement shall
be amended to read in its entirety as set forth below:
5.3 MANDATORY PREPAYMENT. On each day on which the aggregate
outstanding principal amount of Loans owing to any Bank on such day exceeds
(whether as a result of currency fluctuations or otherwise) such Bank's
Commitment hereunder, the Company shall pay to such Bank on demand a
mandatory prepayment in the amount of such excess. Mandatory prepayments
required by this Section 5.3 shall be applied first to Base Rate Loans
until paid in full and then, at the Company's election and in the order
specified by the Company, to Fixed Rate Loans.
1.8 AMENDMENT OF "NET WORTH". Section 9.2 of the Agreement shall be amended
to read in its entirety as set forth below:
-2-
<PAGE> 3
9.2 NET WORTH. The Company will not permit Consolidated Net Worth to be
less than 1,600,000,000 U.S. Dollars less an amount equal to the lesser of
(i) the aggregate amount expended by the Company subsequent to December 31,
1995 for the repurchase of its common stock and (ii) 600,000,000 U.S.
Dollars.
1.9 AMENDMENT OF "APPLICABLE COMMITMENT FEE" DEFINITION. The definition to
"Applicable Commitment Fee" set forth in Section 13 shall be amended to read in
its entirety as follows:
"APPLICABLE COMMITMENT FEE" means the percentage in effect from time to
time as set forth in the following table opposite the highest of the
then-current rating assigned to the Company's senior unsecured long-term
debt by Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's
Ratings Group ("S&P"):
<TABLE>
<CAPTION>
Rating Applicable
(Moody's/S&P) Commitment Fee
------------- --------------
<S> <C>
higher than A1/A+ 0.060%
A1/A+ 0.070%
A2/A 0.080%
A3/A- 0.090%
Baa1/BBB+ 0.100%
Baa2/BBB 0.125%
Baa3/BBB- 0.150%
lower than Baa3/BBB- 0.175%
</TABLE>
1.10 AMENDMENT OF "APPLICABLE MARGIN" DEFINITION. The definition to
"Applicable Margin" set forth in Section 13 shall be amended to read in its
entirety as follows:
"APPLICABLE MARGIN" means, at any time, the percentage set forth in the
following table opposite the highest of the then-current rating assigned to
the Company's senior unsecured long-term debt by Moody's or S&P:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Rating Domestic CD Eurocurrency
(Moody's/S&P) Loans Loans
- --------------------------------------------------------------------------------
<S> <C> <C>
higher than A1/A+ 0.275% 0.175%
A1/A+ 0.300% 0.200%
A2/A 0.325% 0.225%
A3/A- 0.350% 0.250%
Baa1/BBB+ 0.400% 0.300%
Baa2/BBB 0.475% 0.375%
</TABLE>
-3-
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
Baa3/BBB- 0.550% 0.450%
lower than Baa3/BBB- 0.600% 0.500%
</TABLE>
1.11 REPLACEMENT OF "CONSOLIDATED TANGIBLE NET WORTH" DEFINITION. The
definition of "Consolidated Tangible Net Worth" set forth in Section 13 shall be
deleted and replaced by the defined term "Consolidated Net Worth" which shall
read in its entirety as follows:
"CONSOLIDATED NET WORTH" means at any date the sum of the consolidated
shareholders' investment and minority interests of the Company and its
Consolidated Subsidiaries determined as of such date. Consolidated
shareholders' investment and minority interests shall be as included in the
annual and quarterly financial statements of the Company, as applicable.
1.12 AMENDMENT OF "ELECTRONIC PAYMENT INSTRUCTIONS" DEFINITION. The
definition of "Electronic Payment Instructions" set forth in Section 13 shall be
amended to read in its entirety as follows:
"ELECTRONIC PAYMENT INSTRUCTIONS" means the Bank Routing and account
number information identifying the account of each Bank to receive the ACH
payment of Commitment Fees. Such Electronic Payment Instructions for each
Bank are set forth below the signature block of such Bank to the Amendment
dated as of May 8, 1996 to the Agreement and may be changed at any time by
written notice by such Bank to the Company.
1.13 AMENDMENT OF "INTEREST PERIOD" DEFINITION. The definition of "Interest
Period" set forth in Section 13 shall be amended to read in its entirety as
follows:
"INTEREST PERIOD" means, with respect to any Fixed Rate Loan, the
period commencing on the date such Loan was made, or on the date such Loan
was Converted from a Loan of a different type, or on the date of expiration
of the immediately preceding Interest Period for such Loan, and (i) ending
30, 60, 90, 120, 150, 180 days, or, if available, more than 180 days up to
and including 360 days, thereafter in the case of a Domestic CD Loan, or
(ii) ending one, two, three, or six months, or, if available, more than six
months up to and including twelve months, thereafter in the case of a
Eurocurrency Loan, all as the Company or any Designated Subsidiary may
specify pursuant to Section 1.4, 1.5, or 3.3; the Interest Period for any
Negotiated Loan or any Local Currency Loan shall be as agreed by the
Company or any Designated Subsidiary and the Relevant Bank pursuant to
Section 1.6 or 1.7 . Each Interest Period for a Fixed Rate Loan that would
otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (unless such next succeeding Business Day is the
first Business Day of a calendar month, in which case with respect to a
Eurocurrency Loan such Interest Period shall end on the next preceding
Business Day).
-4-
<PAGE> 5
1.14 DELETION OF "NET WORTH" DEFINITION. The definition of "Net Worth" set
forth in Section 13 shall be deleted in its entirety.
1.15 AMENDMENT OF "PERCENTAGE" DEFINITION. The definition of "Percentage"
set forth in Section 13 shall be amended to read in its entirety as follows:
"PERCENTAGE" means as to any Bank the percentage of such Bank's share
of the total Commitments of all Banks.
1.16 AMENDMENT OF "TERMINATION DATE" DEFINITION. The definition of
"Termination Date" set forth in Section 13 shall be amended to read in its
entirety as follows:
"TERMINATION DATE" means the earlier to occur of (a) July 1, 2001,
subject to extension for one or more successive one-year periods as to any
Bank or Banks pursuant to Section 1.2, or (b) such other date on which the
Commitments shall terminate pursuant to Section 11.2.
1.17 AMENDMENT OF "COMPUTATIONS". Section 14.4 of the Agreement shall be
amended to delete references to certain calculations and, as amended, shall read
in its entirety as set forth below:
14.4 COMPUTATIONS. Where the character or amount of any asset or
liability or item of income or expense is required to be determined, or any
consolidation or other accounting computation is required to be made, for
the purpose of this Agreement, such determination or calculation shall, to
the extent applicable and except as otherwise specified in this Agreement,
be made in accordance with the Company's then current method of accounting,
which method must be in accordance with GAAP; provided, however, if any
changes in accounting principles from those used in the preparation of the
financial statements referred to in Section 8.4 hereafter occasioned by the
promulgation of rules, regulations, pronouncements, and opinions by or
required by the Financial Accounting Standards Board or the American
Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions) result in a change in the method of
calculation of the financial covenants, standards, or terms found in
Section 9.2 hereof, the parties hereto agree to enter into negotiations to
amend such provisions so as equitably to reflect such changes with the
desired result that the criteria for evaluating the Company's financial
condition shall be the same after such changes as if such changes had not
been made.
-5-
<PAGE> 6
SECTION 2 GENERAL.
2.1 RESTATEMENT OF AGREEMENT. The Three-Year Revolving Credit Agreement
dated as of July 1, 1992 has been restated to incorporate all changes contained
in this and all prior Amendments and is attached as Exhibit I.
2.2 REISSUANCE OF NOTES. In connection with the effectiveness of this
Amendment, the Company shall issue to each of the Banks a Note in the principal
amounts set forth next to such Bank's name in the signature blocks below.
Contemporaneously with the issuance of such Notes, the Notes dated February 28,
1995 currently pertaining to the Agreement shall be deemed null and void and
each Bank shall cancel and return to the Company such Note pertaining to the
Agreement currently in such Bank's possession.
2.3 EFFECTIVENESS OF FEE CHANGES. All fee and interest rate changes set
forth in this Amendment shall be effective only on a prospective basis from the
date hereof.
2.4 OTHER TERMS AND CONDITIONS. Unless amended hereby, all other terms and
conditions of the Agreement shall remain in full force and effect without change
and are hereby ratified and confirmed in all respects.
2.5 GOVERNING LAW. This Amendment and each Note issued pursuant hereto
shall be a contract made under and governed by the internal laws of the State of
Ohio. Wherever possible each provision of this Amendment shall be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Amendment shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Amendment. All obligations of the Company and
rights of the Banks and any other holders of the Notes expressed herein or in
the Notes shall be in addition to and not in limitation of those provided by
applicable law.
2.6 COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Amendment. When counterparts executed
by all the parties shall have been lodged with the Company (or, in the case of
any Bank as to which an executed counterpart shall not have been so lodged, the
Company shall have received telegraphic, telex, or other written confirmation
from such Bank of execution of a counterpart hereof by such Bank), this
Amendment shall become effective as of the date hereof.
-6-
<PAGE> 7
2.7 CAPTIONS. Section captions used in this Amendment are for convenience
only, and shall not affect the construction of this Amendment.
Delivered at Cleveland, Ohio, as of the day and year first above written.
TRW INC.
By /s/ W.C. Seeger, Jr.
----------------------------
William C. Seeger, Jr.
Vice President and Treasurer
1900 Richmond Road
Cleveland, Ohio 44124
Telephone 216/291-7540
Facsimile: 216/291-7831
-7-
<PAGE> 8
BANKS:
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Bank of America National Trust
----- and Savings Association
By: /s/ Deborah Graziano
-----------------------
Name: Deborah Graziano
Title: Vice President
DOMESTIC OFFICE
Bank of America NT & SA
1850 Gateway Boulevard
Concord, California 94520
Telephone: (510) 675-7485
---------------
Facsimile: (510) 675-7531
---------------
Attention: Selina Button
EUROCURRENCY OFFICE
Bank of America NT & SA
1850 Gateway Boulevard
Concord, California 94520
Telephone: (510) 675-7485
---------------
Facsimile: (510) 675-7531
---------------
Attention: Selina Button
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Bank of America
---------------
ABA Routing No.: 121000358
---------------
Account No.: 12331-83980
---------------
Account Name: Incoming Money Transfer
-----------------------
Reference No.: TRW Commitment Fee
------------------
-8-
<PAGE> 9
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Barclays Bank PLC
-----
By: /s/ L. Peter Yetman
-----------------------
Name: L. Peter Yetman
Title: Associate Director
DOMESTIC OFFICE
Barclays Bank PLC
222 Broadway
New York, New York 10038
Telephone: (212) 412-1196
-----------------
Facsimile: (212) 412-1099
-----------------
EUROCURRENCY OFFICE
Barclays Nassau, Bahamas Branch
c/o Barclays Bank PLC
222 Broadway
New York, New York 10038
Telephone: (212) 412-1196
-----------------
Facsimile: (212) 412-1099
-----------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Barclays Bank PLC - New York
----------------------------
ABA Routing No.: 026-002--574
---------------
Account No.: 050-019-104
----------------------
Account Name: TRW
----------------------
Reference No.: TRW Commitment Fee; N. Sangle
------------------------------
-9-
<PAGE> 10
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % The Chase Manhattan Bank, N.A.
-----
By: /s/ Joan F. Garvin
-----------------------
Name: Joan F. Garvin
Title: Vice President
DOMESTIC OFFICE
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
Fifth Floor
New York, New York 10081
Telephone: (212) 552-2722
--------------
Facsimile: (212) 552-1372
--------------
EUROCURRENCY OFFICE
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
Fifth Floor
New York, New York 10081
Telephone:
-------------
Facsimile:
-------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Chase Manhattan Bank
----------------------
ABA Routing No.: 021-000021
----------------------
Account No.: 900-9-000036
----------------------
Account Name: Commercial Loan Opns.
----------------------
Reference No.: TRW Commitment Fee
----------------------
-10-
<PAGE> 11
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Citibank, N.A.
-----
By: /s/ Marjorie Futornick
-----------------------
Name: Marjorie Futornick
Title: Vice President
DOMESTIC OFFICE
Citibank, N.A.
c/o Citicorp N.A., Inc.
200 S. Wacker Dr.
Chicago, IL 60606
Telephone: 312-993-3871
Facsimile: 312-993-6840
EUROCURRENCY OFFICE
Citibank, N.A.
c/o Citicorp N.A., Inc.
200 S. Wacker Dr.
Chicago, IL 60606
Telephone: 312-993-3871
Facsimile: 312-993-6840
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Citibank, N.A., New York
ABA Routing No.: 021000089
Account No.: 38483095
Account Name: Chicago NEO Loan Acct.
-------------------------
Reference No.: TRW Commitment Fee
-11-
<PAGE> 12
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Morgan Guaranty Trust Company
--- of New York
By: /s/ J.M. Mikolay
--------------------------
Name: John M. Mikolay
Title: Vice President
DOMESTIC OFFICE
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260-0060
Telephone: (302) 634-1800
--------------
Facsimile: (302) 634-1094
--------------
EUROCURRENCY OFFICE
Morgan Guaranty Trust Company
of New York
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
Euro-Loan Servicing Unit
902 Market Street
Wilmington, Delaware 19801
Telephone: (302) 634-1800
--------------
Facsimile: (302) 634-1094
--------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Morgan Guaranty Trust
---------------------
ABA Routing No.: 021000238
---------------------
Account No.: 999-99-090
---------------------
Account Name: Loan Department
---------------------
Reference No.: TRW Com. Fee
---------------------
Corp. Proc. Module 30
-12-
<PAGE> 13
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % National City Bank
-----
By: /s/ Davis R. Bonner
-------------------------
Name: Davis R. Bonner
Title: Vice President
DOMESTIC OFFICE
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
Telephone: (216) 575-3285
--------------
Facsimile: (216) 575-9396
--------------
EUROCURRENCY OFFICE
National City Bank
National City Center
P.O. Box 5756
Cleveland, Ohio 44101-0756
Telephone: (216) 575-3285
--------------
Facsimile: (216) 575-9396
--------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: National City Bank
------------------
ABA Routing No.: 041000124
------------------
Account No.: 2537557
------------------
Account Name:
------------------
Reference No.: TRW Commitment Fee
------------------
-13-
<PAGE> 14
Amount of Percentage of
Commitment Commitments
$60,000,000 8 % The Sumitomo Bank, Limited
-----
By: /s/ H. Iwami
----------------------------
Name: Hiroyuki Iwami
Title: Joint General Manager
DOMESTIC OFFICE
The Sumitomo Bank, Limited
Chicago Branch
Sears Tower
233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone: (312) 876-6431
--------------
Facsimile: (312) 876-6436
--------------
EUROCURRENCY OFFICE
The Sumitomo Bank, Limited
Chicago Branch
Sears Tower
233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone: (312) 876-6431
--------------
Facsimile: (312) 876-6436
--------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: FNB of Chicago
------------------
ABA Routing No.: 071000013
------------------
Account No.: 15-01208
------------------
Account Name: Sumitomo Bank Ltd.,
Chicago Branch
------------------
Reference No.: TRW Commitment Fee
------------------
-14-
<PAGE> 15
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % Banque Nationale De Paris
-----
By: /s/
-------------------------
Name:
Title:
DOMESTIC OFFICE
Banque Nationale De Paris
Chicago Branch
Rookery Building
209 South LaSalle, 5th Floor
Chicago, Illinois 60604
Telephone: (312) 977-2200
-------------------
Facsimile: (312) 977-1380
-------------------
EUROCURRENCY OFFICE
Banque Nationale De Paris
Chicago Branch
Rookery Building
209 South LaSalle, 5th Floor
Chicago, Illinois 60604
Telephone: (312) 977-2200
-------------------
Facsimile: (312) 977-1380
-------------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Banque Nationale de
Paris, New York
Branch
-------------------
ABA Routing No.: 026007689
-------------------
Account No.: 14119400189
-------------------
Account Name: BNP, Chicago Branch
-------------------
Reference No.: TRW Commitment Fee
-------------------
-15-
<PAGE> 16
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % Dresdner Bank AG
-----
By: /s/ D. Slusarczyk
-----------------------------
Name: Deborah Slusarczyk
Title: Vice President
By: /s/ Robert Grella
-----------------------------
Name: Robert Grella
Title: Vice President
DOMESTIC OFFICE
Dresdner Bank AG New York Branch
75 Wall Street
New York, New York 10005
Telephone: (212) 429-2244
-----------------------
Facsimile: (212) 429-2524
-----------------------
EUROCURRENCY OFFICE
Dresdner Bank AG Grand Cayman
Branch
c/o Dresdner Bank AG New York Branch
75 Wall Street
New York, New York 10005
Telephone: (212) 429-2244
-----------------------
Facsimile: (212) 429-2524
-----------------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Chase Manhattan (NY,NY)
-----------------------
ABA Routing No.: 021-000-021
-----------------------
Account No.: 920-1-059-079
-----------------------
Account Name: Dresdner Bank AG,
New York Branch
-----------------------
Reference No.: TRW Commitment Fee
-----------------------
-16-
<PAGE> 17
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % NBD Bank
------
By: /s/ Andrew W. Strait
---------------------------
Name: Andrew W. Strait
Title: Vice President
DOMESTIC OFFICE
NBD Bank
Attention: Mid-Corporate Banking
611 Woodward
Detroit, Michigan 48226
Telephone: (313) 225-3300
--------------------
Facsimile: (313) 225-3269
--------------------
EUROCURRENCY OFFICE
NBD Bank, N.A.
Attention: Mid-Corporate Banking
611 Woodward
Detroit, Michigan 48226
Telephone: (313) 225-3300
--------------------
Facsimile: (313) 225-3269
--------------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: NBD Bank
--------------------
ABA Routing No.: 072000326
--------------------
Account No.: 1424183
--------------------
Account Name: Commercial Loans
--------------------
Reference No.: TRW Commitment Fee
--------------------
-17-
<PAGE> 18
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % Royal Bank of Canada
-----
By: /s/ P. Shields
----------------------------
Name: Patrick Shields
Title: Manager, Corporate Banking
DOMESTIC OFFICE
Royal Bank of Canada
New York Branch
c/o Financial Square, 23rd Floor
New York, New York 10005
Telephone: (212) 428-6323
---------------------
Facsimile: (212) 428-2372
---------------------
EUROCURRENCY OFFICE
Royal Band of Canada
New York Branch
c/o Financial Square, 23rd Floor
New York, New York 10005
Telephone: (212) 428-6323
---------------------
Facsimile: (212) 428-2372
---------------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Chase Manhattan, NY
--------------------
ABA Routing No.: 021000021
--------------------
Account No.: 9201033363
--------------------
Account Name: Royal Bank
--------------------
Reference No.: TRW Commitment Fee
--------------------
-18-
<PAGE> 19
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % The Sakura Bank, Limited
-----
By: /s/ Hajime Miyagi
-------------------------
Name: Hajime Miyagi
Title: Joint General Manager
DOMESTIC OFFICE
The Sakura Bank, Limited
Chicago Branch
227 West Monroe Street
Suite 4700
Chicago, Illinois 60606
Telephone: (312) 580-3276
---------------------
Facsimile: (312) 332-5345
---------------------
EUROCURRENCY OFFICE
The Sakura Bank, Limited
Chicago Branch
227 West Monroe Street
Suite 4700
Chicago, Illinois 60606
Telephone: (312) 580-3276
---------------------
Facsimile: (312) 332-5345
---------------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: FNB of Chicago
---------------------
ABA Routing No.: 071000013
---------------------
Account No.: 1512951
---------------------
Account Name: Sakura Bank Chicago
---------------------
Reference No.: TRW Commitment Fee
---------------------
-19-
<PAGE> 20
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % Society National Bank
-----
By: /s/ Marianne Meil
--------------------------
Name: Marianne Meil
Title: Assistant Vice President
DOMESTIC OFFICE
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Telephone: (216) 689-4450
---------------------
Facsimile: (216) 689-4981
---------------------
EUROCURRENCY OFFICE
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Telephone: (216) 689-4450
---------------------
Facsimile: (216) 689-4981
---------------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: Society National Bank
---------------------
ABA Routing No.: 041001039
---------------------
Account No.: 00100-39140
---------------------
Account Name: Commercial Loan Opns
---------------------
Reference No.: TRW Commitment Fee
---------------------
-20-
<PAGE> 21
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % The Tokai Bank, Limited
-----
By: /s/ Tatsuo Ito
-----------------------------
Name: Tatsuo Ito
Title: Joint General Manager
DOMESTIC OFFICE
The Tokai Bank, Limited
Chicago Branch
Attention: Corporate Finance
181 West Madison Street, Suite 3600
Chicago, Illinois 60602
Telephone: (312) 456-3427
----------------------
Facsimile: (312) 977-0003
----------------------
EUROCURRENCY OFFICE
The Tokai Bank, Limited
Chicago Branch
Attention: Corporate Finance
181 West Madison Street, Suite 3600
Chicago, Illinois 60602
Telephone:
----------------------
Facsimile:
----------------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: FNB of Chicago
----------------------
ABA Routing No.: 071000013
----------------------
Account No.: 15-08997
----------------------
Account Name: Tokai Bank, Chicago
Branch
----------------------
Reference No.: TRW Commitment Fee
----------------------
Loan Administration
-21-
<PAGE> 22
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % Union Bank of Switzerland
-----
By: /s/ S. M. Dadmun /s/ E. P. Weinheimer
--------------------------------------
Name: Steven M. Dadmun/
Eric P. Weinheimer
Title: Vice President/
Lending Officer
DOMESTIC OFFICE
Union Bank of Switzerland
Chicago Branch
30 South Wacker Drive, Suite 40
Chicago, Illinois 60606
Telephone: (312) 993-5471
-----------------------
Facsimile: (312) 993-5530
-----------------------
EUROCURRENCY OFFICE
Union Bank of Switzerland
Chicago Branch
30 South Wacker Drive, Suite 40
Chicago, Illinois 60606
Telephone: (312) 993-5471
-----------------------
Facsimile: (312) 993-5530
-----------------------
ELECTRONIC PAYMENT
INSTRUCTIONS
Receiving Bank: FNB of Chicago
-----------------------
ABA Routing No.: 071000013
-----------------------
Account No.: 15-12188
-----------------------
Account Name: UBS, Chicago Branch
-----------------------
Reference No.: TRW Commitment Fee
-----------------------
-22-
<PAGE> 23
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % Wells Fargo Bank, N.A.
-----
By: /s/ Peter G. Olson
-------------------------
Name: Peter G. Olson
Title: SVP
By: /s/ Lancy Gin
-------------------------
Name: Lancy Gin
Title: AVP
DOMESTIC OFFICE
Wells Fargo Bank, N.A.
Special Loan Processing
18700 NW Walker Road, Bldg. 92
Beaverton, OR 97006
Telephone: (503) 614-6436
Facsimile: (503) 614-5878
EUROCURRENCY OFFICE
Wells Fargo Bank, N.A.
Special Loan Processing
18700 NW Walker Road, Bldg. 92
Beaverton, OR 97006
Telephone: (503) 614-6436
Facsimile: (503) 614-5878
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: First Interstate Bank of California
ABA Routing No.: 122000218
Account No.: 3030-98989
Account Name: Special Loan Processing
Reference No.: TRW
- ------------ ----
$750,000,000 100% Total
-23-
<PAGE> 24
Exhibit I
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MULTI-YEAR REVOLVING CREDIT AGREEMENT
AS AMENDED AND RESTATED
as of May 8, 1996
among
TRW INC.
and
THE FINANCIAL INSTITUTIONS
LISTED ON THE SIGNATURE
PAGES HEREOF
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PREAMBLE......................................................................................... 1
SECTION 1 COMMITMENT OF THE BANKS; TYPES
OF LOANS; PROCEDURES FOR BORROWING
OR CONVERTING................................................................ 1
1.1 Commitment................................................................... 1
1.2 Extension of Commitment...................................................... 1
1.3 Various Types of Loans....................................................... 2
1.4 Notice of Borrowing, Continuation, or
Conversion.............................................................. 2
1.5 Conversion and Continuation Procedures....................................... 3
1.6 Negotiated Loans............................................................. 3
1.7 Local Currency Loans......................................................... 3
1.8 Loans to Designated Subsidiaries............................................. 4
1.9 Loans Outstanding Under Prior Facility....................................... 4
SECTION 2 REPAYMENT OF LOANS; NOTES EVIDENCING LOANS................................... 4
2.1 Repayment of Loans........................................................... 4
2.2 Notes........................................................................ 4
2.3 Other Provisions of the Notes................................................ 4
2.4 Recordkeeping................................................................ 5
SECTION 3 INTEREST..................................................................... 5
3.1 Interest Rates............................................................... 5
3.2 Interest Payment Dates....................................................... 5
3.3 Interest Periods for Fixed Rate Loans........................................ 6
3.4 Setting and Notice of Rates.................................................. 6
3.5 Computation of Interest...................................................... 6
SECTION 4 FEES ........................................................................ 6
4.1 Commitment Fee............................................................... 6
4.2 Computation of Fees.......................................................... 7
SECTION 5 REDUCTION OR TERMINATION OF THE
COMMITMENTS; PREPAYMENT................................................. 7
5.1 Reduction or Termination of the Commitments.................................. 7
</TABLE>
(i)
<PAGE> 26
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
5.2 Optional Prepayment.......................................................... 7
5.3 Mandatory Prepayment......................................................... 7
SECTION 6 MAKING AND APPLICATION OF PAYMENTS........................................... 7
6.1 Making of Payments........................................................... 7
6.2 Application of Certain Payments.............................................. 7
6.3 Due Date Extension........................................................... 8
SECTION 7 INCREASED COSTS AND TAXES.................................................... 8
7.1 Increased Capital............................................................ 8
7.2 Increased Costs.............................................................. 9
7.3 Basis for Determining Interest Rate Inadequate............................... 9
7.4 Changes in Law Rendering Certain Loans Unlawful.............................. 10
7.5 Funding Losses............................................................... 10
7.6 Currency Indemnity........................................................... 10
7.7 Increased Tax Costs.......................................................... 11
SECTION 8 WARRANTIES................................................................... 12
8.1 Corporate Organization....................................................... 12
8.2 Authorization; No Conflict................................................... 12
8.3 Validity and Binding Nature.................................................. 12
8.4 Financial Statements......................................................... 12
8.5 Litigation................................................................... 12
8.6 Compliance with ERISA........................................................ 13
8.7 Environmental Matters........................................................ 13
8.8 Taxes........................................................................ 13
8.9 Government Regulation........................................................ 13
SECTION 9 COVENANTS.................................................................... 14
9.1 Reports, Certificates and Other Information.................................. 14
9.1.1 Audit Report.......................................................... 14
9.1.2 Quarterly Reports..................................................... 14
9.1.3 Compliance Certificates............................................... 14
9.1.4 Current Reports....................................................... 14
9.1.5 Other Information..................................................... 14
9.2 Net Worth .................................................................. 14
9.3 Liens........................................................................ 15
9.4 Sale and Leaseback........................................................... 16
9.5 Mergers, Consolidations, Sales............................................... 17
SECTION 10 CONDITIONS OF LENDING........................................................ 17
10.1 Initial Loan to the Company.................................................. 17
10.1.1 Note.............................................................. 17
</TABLE>
(ii)
<PAGE> 27
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.1.2 Resolutions....................................................... 17
10.1.3 Incumbency and Signatures......................................... 18
10.1.4 Opinion of Counsel................................................ 18
10.2 Loans to Designated Subsidiaries............................................. 18
10.2.1 Resolutions....................................................... 18
10.2.2 Acceptance of this Agreement...................................... 18
10.2.3 Incumbency and Signatures......................................... 18
10.3 All Loans .................................................................. 18
10.4 Conversions.................................................................. 19
SECTION 11 EVENTS OF DEFAULT AND THEIR EFFECT........................................... 19
11.1 Events of Default............................................................ 19
11.1.1 Nonpayment of Notes or Fees....................................... 19
11.1.2 Nonpayment of Other Indebtedness for
Borrowed Money.................................................. 19
11.1.3 Bankruptcy or Insolvency.......................................... 19
11.1.4 Noncompliance with Other Provisions............................... 19
11.1.5 Warranties........................................................ 20
11.1.6 Judgments......................................................... 20
11.2 Effect of Event of Default................................................... 20
SECTION 12 GUARANTY .................................................................. 21
SECTION 13 CERTAIN DEFINITIONS.......................................................... 21
SECTION 14 GENERAL .................................................................. 30
14.1 Waiver; Amendments........................................................... 30
14.2 Confirmations................................................................ 31
14.3 Notices .................................................................. 31
14.4 Computations................................................................. 32
14.5 Confidentiality.............................................................. 32
14.6 Assignments and Participations............................................... 33
14.6.1 Assignments....................................................... 33
14.6.2 Participations.................................................... 33
14.6.3 Disclosure of Information......................................... 33
14.7 Securities Laws.............................................................. 34
14.8 Costs and Expenses........................................................... 34
14.9 Governing Law................................................................ 34
14.10 Counterparts................................................................. 34
14.11 Captions .................................................................. 34
14.12 Successors and Assigns....................................................... 34
14.13 Entire Agreement............................................................. 35
14.14 Appointment of Administrator................................................. 35
14.15 Non-U.S. Bank Tax Information................................................ 35
14.16 Regulation U................................................................. 35
</TABLE>
(iii)
<PAGE> 28
EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Form of Compliance Certificate
EXHIBIT C Form of Opinion of Counsel to the Company
SCHEDULES
SCHEDULE 1.10 Prior Facilities Pursuant to Section 1.10
SCHEDULE 8.5 Undisclosed Material Legal Proceedings
(iv)
<PAGE> 29
MULTI-YEAR REVOLVING CREDIT AGREEMENT
This Multi-Year Revolving Credit Agreement, dated as of July 1, 1992, as
amended pursuant to Agreements dated as of June 30, 1993, March 1, 1994 and
February 28, 1995 and as amended and restated pursuant to an Agreement dated as
of May 8, 1996 (this "Agreement"), is among TRW Inc., an Ohio corporation (the
"Company") and the financial institutions listed on the signature pages hereof
together with their successors or assigns (collectively, the "Banks" and
individually, a "Bank"). Certain terms being used in this Agreement are
hereinafter defined in Section 13.
W I T N E S S E T H:
--------------------
WHEREAS, the Company has requested the Banks to make certain unsecured
loans to the Company and certain Subsidiaries of the Company designated by the
Company for general corporate purposes, including without limitation for working
capital, capital expenditures, acquisitions (directly or indirectly) of assets,
stock or other ownership interests, and repurchases or redemptions of
securities; and
WHEREAS, the Banks have agreed to make such loans on the terms and subject
to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
SECTION 1 COMMITMENT OF THE BANKS; TYPES OF LOANS;
PROCEDURES FOR BORROWING OR CONVERTING.
1.1 COMMITMENT. Subject to the terms and conditions of this Agreement, each
of the Banks, severally and for itself alone, agrees to make loans
(collectively, the "Loans" and individually, a "Loan") to the Company and, as
provided in Section 1.8, to any Designated Subsidiary on a revolving basis from
time to time before the Termination Date, as it may be extended from time to
time pursuant to Section 1.2, in such aggregate amounts as the Company or any
Designated Subsidiary may from time to time request from such Bank; provided,
however, that the aggregate principal amount of Loans that any Bank shall be
committed to have outstanding to the Company and the Designated Subsidiaries
shall not at any one time exceed the amount set forth opposite such Bank's
signature hereto, or any subsequent amendment hereto (except to the extent
provided in Section 1.9 hereof). The foregoing commitment of each Bank to make
Loans as reduced from time to time in accordance with the terms hereof is herein
called such Bank's "Commitment" and the commitments of all Banks are herein
sometimes collectively called the "Commitments."
1.2 EXTENSION OF COMMITMENT. No later than 90 days prior to the Termination
Date then in effect, the Company may request, by written notice, that any one or
more of the Banks extend the Termination Date as to that Bank's Commitment for a
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<PAGE> 30
period of one year commencing on the Termination Date then in effect. Each Bank
receiving such an extension request from the Company shall notify the Company in
writing no later than 45 days prior to the Termination Date then in effect of
such Bank's determination to extend or not to extend the Termination Date. A
notice given by a Bank to extend the Termination Date pursuant to this Section
1.2 shall be irrevocable (subject to Section 11.2). Any Bank that fails to
respond to the Company's request to extend the Termination Date within such time
period shall be deemed to have given notice to the Company that such Bank does
not desire to extend the Termination Date.
1.3 VARIOUS TYPES OF LOANS. Each Loan shall be either a Base Rate Loan, a
Domestic CD Loan, a Eurocurrency Loan, a Local Currency Loan, or a Negotiated
Loan (each herein called a "type" of Loan), as the Company shall specify in the
related notice of borrowing, Continuation, or Conversion pursuant to Section 1.4
or 1.5. Domestic CD Loans, Eurocurrency Loans, Local Currency Loans, and
Negotiated Loans bearing interest at a fixed rate for a fixed period of time are
sometimes collectively called "Fixed Rate Loans." Each Loan shall be made in
U.S. Dollars or such other currency as is requested by the Company and shall be
available at the time and for the period requested by the Company. Each Loan
shall bear interest at the rate specified in Section 3.1 and shall mature on and
be due and payable in full on the earliest of (i) the Termination Date, (ii) the
end of an Interest Period (unless the Loan is Continued or Converted) or (iii)
such other date as the Company and the Relevant Bank shall otherwise agree in
writing. The Eurocurrency specified in any notice of borrowing, Continuation, or
Conversion given by the Company pursuant to Section 1.4 or 1.5 shall be deemed
to be available for purposes of this Agreement, unless the Relevant Bank gives
the Company notice (which may be by telephone) no later than the earlier of (a)
12:00 noon, Cleveland time, on the second Business Day prior to the proposed
date making the Eurocurrency Loan, or (b) one hour after the Relevant Bank has
received the notice of borrowing, Continuation, or Conversion, as applicable.
The Relevant Bank's determination in good faith that a proposed Eurocurrency is
or is not available shall be final.
1.4 NOTICE OF BORROWING. CONTINUATION. OR CONVERSION. The Company, through
an Authorized Person, shall give written or telephonic notice to the Relevant
Bank of each proposed borrowing from such Bank, or Conversion or Continuation of
Loans made by such Bank, by 11:00 a.m., Cleveland time, (a) on the proposed date
of such borrowing, Conversion, or Continuation if such borrowing, Conversion, or
Continuation is comprised of Base Rate Loans, Domestic CD Loans, or Negotiated
Loans, (b) at least two Business Days prior to the proposed date of such
borrowing, Conversion, or Continuation if such borrowing, Conversion, or
Continuation is comprised of Eurocurrency Loans (provided that at least one
Business Day prior to such written or telephonic notice of proposed nondollar
denominated Eurocurrency Loan borrowing, Continuation or Conversion, the
Company, through an Authorized Person, shall give written or telephonic notice
to the Relevant Bank of the Company's intention to request a Eurocurrency Loan),
and (c) with respect to Local Currency Loans, at least two Business Days prior
to the proposed date of such borrowing, Conversion, or
-2-
<PAGE> 31
Continuation or such other period of time as is customary for the particular
Local Currency. Each such notice shall be effective upon receipt by the Relevant
Bank and shall specify the date, amount, currency, and type of borrowing and, in
the case of a borrowing comprising Fixed Rate Loans, the initial Interest Period
for such borrowing. Each notice of a Conversion or Continuation of Loans shall
specify the date and amount of such Conversion or Continuation, the Loans to be
so Converted or Continued, the type and currency of Loans to be Converted into
or Continued, and, in the case of a Conversion into or Continuation of Fixed
Rate Loans, the initial or succeeding Interest Period, as the case may be. Each
borrowing shall be on a Business Day and shall be in an aggregate amount of not
less than 1,000,000 U.S. Dollars for Base Rate Loans and not less than 5,000,000
U.S. Dollars (or the Eurocurrency Equivalent Amount) for any other type of Loan,
other than Local Currency Loans (which shall be as agreed between the Company
and the Relevant Bank).
1.5 CONVERSION AND CONTINUATION PROCEDURES. The Company may convert all or
part of any outstanding Loans to Loans of a different type, or may elect to
continue any Fixed Rate Loans for an additional Interest Period, by giving
notice to the Relevant Bank of such Conversion or Continuation within the time
periods specified in Section 1.4. If, with respect to any Fixed Rate Loan, the
Company shall not either repay the Loan in full by 2:00 p.m., Cleveland time, on
the last day of the Interest Period applicable thereto or give notice of its
intention to Convert or Continue such Fixed Rate Loan within the time periods
specified in Section 1.4, then the Company shall be deemed to have requested
that such Loan automatically be converted into a Base Rate Loan at the end of
such Interest Period (and such Loan shall automatically so Convert into a Base
Rate Loan at the end of such Interest Period). Except as provided in Section
7.4, no Fixed Rate Loans shall be Converted on any day other than the last day
of the current Interest Period relating to such Loans.
1.6 NEGOTIATED LOANS. From time to time, the Company may request, through
an Authorized Person, and a Bank may, but shall not be obligated to, agree to
make, a Loan in U.S. Dollars bearing interest at a rate per annum, and for a
fixed period, agreed to by the Relevant Bank and the Company (each, a
"Negotiated Loan" and collectively, the "Negotiated Loans").
1.7 LOCAL CURRENCY LOANS. From time to time, the Company may request,
through an Authorized Person, and a Bank may, but shall not be obligated to,
agree to make a Loan in a Local Currency specified by the Company bearing
interest at a rate per annum agreed to by the Bank and the Company (each, a
"Local Currency Loan" and collectively, the "Local Currency Loans"). Repayments
of principal of and interest on Local Currency Loans shall be made in the
currency borrowed and shall be paid to the local office of the Relevant Bank
which made the Loan. The local office may request additional documentation of
the indebtedness if customary at the place of business of the branch; provided,
however, that the terms and conditions of that documentation shall be consistent
with those set forth in this Agreement unless unlawful or ineffective under
local law.
-3-
<PAGE> 32
1.8 LOANS TO DESIGNATED SUBSIDIARIES. Each Designated Subsidiary may
request, through an Authorized Person, Local Currency Loans or Eurocurrency
Loans and Convert or Continue such Loans, and shall repay the principal of and
accrued interest on such Loans, all as though the Designated Subsidiaries were
parties to this Agreement and references to the "Company" in Sections 1.3, 1.4,
1.5, 1.7, 2.1, 3.1, 3.4, 3.5, 5.2 and 6.1 shall mean and include the Designated
Subsidiaries. The Relevant Bank may request additional documentation of the
indebtedness if customary at the place of business of the Relevant Bank;
provided, however, that the terms and conditions of that documentation shall be
consistent with those set forth in this Agreement unless unlawful or ineffective
under local law.
1.9 LOANS OUTSTANDING UNDER PRIOR FACILITY. Effective as of the date on
which the conditions of lending set forth in Section 10.1 and 10.3 are
satisfied, (i) the facility under this Agreement shall replace the facilities
under the credit agreements set forth on Schedule 1.10 (the "Prior Facilities'),
(ii) all loans outstanding under the Prior Facilities shall be and shall be
deemed to be outstanding under this Agreement (with all such loans retaining the
interest rate, maturity, interest period and similar terms as existed
immediately prior to the termination of the Prior Facilities; provided, however,
that if any such loan under the Prior Facilities exceeds the Bank's Commitment
hereunder and if such Bank's commitment under the Prior Facilities exceeds such
Bank's Commitment hereunder, then such Bank's commitment under the Prior
Facilities will be deemed such Bank's Commitment hereunder until such loan that
previously existed under the Prior Facilities has been repaid according to its
original terms) and (iii) the obligations of the banks under the Prior
Facilities shall terminate and be discharged.
SECTION 2 REPAYMENT OF LOANS; NOTES EVIDENCING LOANS.
2.1 REPAYMENT OF LOANS. The Company hereby promises to pay to each Bank the
aggregate unpaid principal amount of such Bank's Loans on the earliest of (i)
the Termination Date, (ii) the end of the applicable Interest Period for such
Loan (unless the Loan is Continued or Converted) or (iii) such other date as the
Company and the Relevant Bank may agree in writing. Repayment of any
Eurocurrency Loan shall be in the same currency in which such Loan was advanced.
2.2 NOTES. The Loans of each Bank shall be evidenced by a promissory note
(individually, a "Note", and collectively for all Banks, the "Notes")
substantially in the form set forth in Exhibit A, with appropriate insertions,
dated the date of the initial Loan (or such earlier date as shall be
satisfactory to the Relevant Bank), payable to the order of such Bank in the
principal amount of such Bank's Commitment (or, if less, in the aggregate unpaid
principal amount of all of such Bank's Loans hereunder).
2.3 OTHER PROVISIONS OF THE NOTES. Each Note shall provide for the payment
of interest as provided in Section 3.
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<PAGE> 33
2.4 RECORDKEEPING. Each Bank shall record in its records, or at its option
on the schedule attached to its Note, the date, amount, and type of each Loan
made by such Bank, each repayment, Continuation, or Conversion thereof, and the
dates on which each Interest Period for each Fixed Rate Loan shall begin and
end. The aggregate unpaid principal amount so recorded shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on such Note. The
failure so to record any such amount or any error in so recording any such
amount, however, shall not limit or otherwise affect the obligations of the
Company hereunder or under any Note to repay the principal amount of the Loans,
together with all interest accruing thereon.
SECTION 3 INTEREST.
3.1 INTEREST RATES. With respect to each Loan, the Company hereby promises
to pay interest on the unpaid principal amount thereof for the period commencing
on the date of such Loan until such Loan is paid in full, as follows:
(a) At all times while such Loan is a Base Rate Loan, at a rate per annum
equal to the Base Rate from time to time in effect;
(b) At all times while such Loan is a Domestic CD Loan, during each
Interest Period, at a rate per annum equal to the Domestic CD Rate
(Adjusted) applicable to such Interest Period, plus the Applicable
Margin;
(c) At all times while such Loan is a Eurocurrency Loan, during each
Interest Period, at a rate per annum equal to the Eurocurrency Rate
(Reserve Adjusted) applicable to such Interest Period, plus the
Applicable Margin; and
(d) At all times while such Loan is a Negotiated Loan or a Local Currency
Loan, at the rate per annum agreed to by the Company and the Relevant
Bank pursuant to Section 1.6 or 1.7, as applicable.
Notwithstanding the provisions of the preceding clauses (a), (b), (c) or
(d) and subject to Section 1.5, in the event that any principal of any Loan is
not paid when due (whether by acceleration or otherwise), after the due date of
such principal until such principal is paid, the unpaid principal amount of, and
accrued but unpaid interest on, Revolving Loan shall bear interest at a rate per
annum equal to the higher of the rate borne by such Loan or the Relevant Bank's
Base Rate from time to time in effect, plus 1% per annum, subject to the maximum
applicable legal rate.
3.2 INTEREST PAYMENT DATES. Accrued interest on each Base Rate Loan
outstanding for 45 days or more shall be payable (i) quarterly in arrears on the
tenth day of each April, July, October, and January for the quarterly period
ended on the last day of the preceding month, and (ii) at maturity, commencing
with the earlier of such dates to occur after the date hereof. Accrued interest
on each Base Rate Loan outstanding for less than 45 days shall be payable in
full on the date
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<PAGE> 34
such Base Rate Loan is paid in full. Except as otherwise agreed by the Relevant
Bank, accrued interest on each Fixed Rate Loan shall be payable on the last day
of the Interest Period of each such Loan (or, in the case of a Domestic CD Loan
or Negotiated Rate Loan with an Interest Period of 90 days or longer or a
Eurocurrency Loan with an Interest Period of three months or longer, accrued
interest shall be payable quarterly in arrears on the tenth day of each April,
July, October and January and on the last day of each such Interest Period).
After maturity, accrued interest on all Loans shall be payable on demand.
Interest on any Eurocurrency Loan shall be paid in the same currency in which
such Loan was advanced.
3.3 INTEREST PERIODS FOR FIXED RATE LOANS. Prior to each borrowing,
Continuation, or Conversion of Fixed Rate Loans, the Company shall specify, in
the related notice of borrowing, Continuation, or Conversion pursuant to
Sections 1.4 or 1.5, the duration of the Interest Period for such Fixed Rate
Loans. Each notice to the Relevant Bank of an Interest Period shall be in
writing or by telephone and shall be given by an Authorized Person.
3.4 SETTING AND NOTICE OF RATES. For each Loan made hereunder, the
applicable interest rate for each Interest Period or other period shall be the
rate quoted by the Relevant Bank to the Company for that particular type of
Loan. The Relevant Bank shall, upon written request of the Company, deliver to
the Company a statement showing the calculation of (i) any applicable Domestic
CD Rate (Adjusted), (ii) any applicable Eurocurrency Rate (Reserve Adjusted) or
(iii) the rate of interest per annum applicable to Negotiated Loans or Local
Currency Loans hereunder.
3.5 COMPUTATION OF INTEREST. Interest shall be computed for the actual
number of days elapsed (with interest accruing on the first day, but not the
last day, of such Loan) on the basis of (a) with respect to Domestic CD Loans
and Eurocurrency Loans, a 360 day year, (b) with respect to Base Rate Loans, a
365 or 366 day year, as the case may be, (c) with respect to Negotiated Loans, a
365 or 366 day year, as the case may be, or such other basis as is agreed to by
the Company and the Relevant Bank, and (d) with respect to Local Currency Loans,
on a basis consistent with local customs that is agreed to by the Relevant Bank
and the Company.
SECTION 4 FEES.
4.1 COMMITMENT FEE. The Company agrees to pay to each Bank a commitment
fee, for the period from and including the date of this Agreement to the
Termination Date, on the daily average of the Unused Amount of such Bank's
Commitment hereunder equal to the Applicable Commitment Fee in effect from time
to time times the Unused Amount. Such commitment fee shall be payable quarterly
in arrears on the tenth day of each April, July, October, and January (the first
such payment to be made on October 10, 1992) for the quarterly period ended on
the last day of the preceding month and on the Termination Date. The
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<PAGE> 35
Company may make such payments according to the Electronic Payment Instructions.
4.2 COMPUTATION OF FEES. Fees shall be computed for the actual number of
days elapsed on the basis of a 365 or 366 day year, as the case may be.
SECTION 5 REDUCTION OR TERMINATION OF THE COMMITMENTS;
PREPAYMENT.
5.1 REDUCTION OR TERMINATION OF THE COMMITMENTS. The Company may from time
to time prior to the Termination Date on at least three Business Days' prior
written notice given by an Authorized Person to any Bank permanently reduce the
amount of such Bank's Commitment to an amount not less than the aggregate unpaid
principal amount of the Loans made by such Bank then outstanding. Any such
reduction shall be in an aggregate amount of not less than 1,000,000 U.S.
Dollars, or such lesser amount of such Bank's Unused Amount then remaining.
5.2 OPTIONAL PREPAYMENT. The Company may from time to time prepay the Loans
in whole or in part, provided that (a) an Authorized Person shall give the
Relevant Bank not less than three Business Days' prior notice thereof,
specifying the Loans to be prepaid, and the date and amount of prepayment and
(b) each partial prepayment shall be in the principal amount of 1,000,000 U.S.
Dollars (or the Eurocurrency or Local Equivalent Amount thereof) or such lesser
amount as is then outstanding on the Loan being prepaid.
5.3 MANDATORY PREPAYMENT. On each day on which the aggregate outstanding
principal amount of Loans owing to any Bank on such day exceeds (whether as a
result of currency fluctuations or otherwise) such Bank's Commitment hereunder,
the Company shall pay to such Bank on demand a mandatory prepayment in the
amount of such excess. Mandatory prepayments required by this Section 5.3 shall
be applied first to Base Rate Loans until paid in full and then, at the
Company's election and in the order specified by the Company, to Fixed Rate
Loans.
SECTION 6 MAKING AND APPLICATION OF PAYMENTS.
6.1 MAKING OF PAYMENTS. Except as otherwise provided in Section 11.2
hereof, all payments (including those made pursuant to Section 5) of principal
of, or interest on, the Loans shall be made by the Company to the Relevant Bank
in immediately available funds in the Obligation Currency.
6.2 APPLICATION OF CERTAIN PAYMENTS. Each payment of principal on any Loan
shall be applied first to Base Rate Loans and then to such of the other Loans as
the Company shall direct by written or telephonic notice given by an Authorized
Person to the Relevant Bank on or before the date of such payment, or in the
absence of such notice, as the Relevant Bank shall determine in its discretion.
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6.3 DUE DATE EXTENSION. If any payment of principal or interest with
respect to any of the Loans or Notes falls due on a Saturday, Sunday, or other
day which is not a Business Day, then such due date shall be extended to the
next following Business Day (except as provided in the last sentence of the
definition of Interest Period), and additional interest shall accrue and be
payable for the period of such extension.
SECTION 7 INCREASED COSTS AND TAXES.
7.1 Increased Capital.
-----------------
(a) If, after the date of this Agreement, the adoption of any applicable
law, rule, or regulation regarding capital adequacy, or any change
therein, or change in the interpretation or administration thereof by
any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or
compliance by any Bank with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
authority, central bank, or comparable agency, has the effect of
reducing the rate of return on such Bank's capital as a consequence
of its obligations hereunder to a level below that which such Bank
would have achieved but for such adoption, change, or compliance
(taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material,
then from time to time within 15 days after demand by such Bank, the
Company shall pay to such Bank such additional amount or amounts as
will compensate such Bank for such reduction; provided, that, no Bank
shall request, and the Company shall not be obligated to pay, any
amounts in excess of the amounts charged by such Bank to similarly
situated borrowers of such Bank under revolving credit facilities
similar to the one provided herein. Notwithstanding the foregoing, a
Bank shall not be entitled to compensation from the Company for any
such additional amounts incurred more than 30 days before the date on
which the Bank notifies the Company of any event which would entitle
the Bank to compensation pursuant to this Section 7.1.
(b) Each Bank will promptly notify the Company of any event of which it
has knowledge that will entitle such Bank to compensation pursuant to
this Section 7.1, together with a certificate signed by an authorized
officer of the Bank setting forth the basis of such demand and
certifying that the amounts demanded hereunder are not in excess of
the amounts charged by such Bank to similarly situated borrowers of
such Bank under revolving credit facilities similar to the one
provided herein. The Bank will designate a different lending office
if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the reasonable judgment of such
Bank, be otherwise disadvantageous to such Bank or contrary to its
stated policies. The Bank's certification of the additional
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amount or amounts to be paid to it hereunder shall be conclusive in
the absence of demonstrable error. In determining such amount, such
Bank may use reasonable averaging and attribution methods.
7.2 INCREASED COSTS. If, after the date hereof, the adoption of any
applicable law, rule, or regulation or any change therein, or any change in the
interpretation or administration thereof, or compliance by any Bank with any
request, or directive (whether or not having the force of law) of any such
authority, central bank, or comparable agency,
(a) shall subject any Bank to any tax, duty, or other charge with respect
to its Fixed Rate Loans, its Notes or its obligation to make Fixed
Rate Loans, or shall change the basis of taxation of payments to any
Bank of the principal of or interest on its Fixed Rate Loans or any
other amounts due under this Agreement in respect of its Fixed Rate
Loans or its obligation to make Fixed Rate Loans (except for the
imposition of any tax or changes in the rate of tax imposed on the
overall income of such Bank); or
(b) shall impose, modify, or deem applicable any reserve (including,
without limitation, any reserve imposed by the Board of Governors of
the Federal Reserve System, but excluding any reserve included in the
determination of interest rates pursuant to Section 3), special
deposit, or similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Bank;
and as a result of any of the foregoing the cost to such Bank of making or
maintaining any Fixed Rate Loan is increased (or a cost is imposed on such
Bank), or the amount of any sum received or receivable by such Bank under this
Agreement or under its Notes with respect thereto is reduced, then within 15
days after demand by such Bank (which demand shall be accompanied by a statement
setting forth the basis of such demand), the Company shall pay directly to such
Bank such additional amount or amounts as will compensate such Bank for such
increased cost or such reduction. Notwithstanding the foregoing, a Bank shall
not be entitled to any compensation from the Company for any such increased cost
or such reduction attributable to any period that is more than 30 days before
the date on which the Bank notifies the Company of any event which would entitle
the Bank to compensation pursuant to this Section 7.2. No Bank is entitled to
reimbursement for any amounts paid as a result of taxes currently imposed on
such Bank.
7.3 BASIS FOR DETERMINING INTEREST RATE INADEQUATE. If with respect to any
Interest Period:
(a) a Bank reasonably determines that deposits in a requested
Eurocurrency (in the applicable amounts) are not being offered to the
Bank in the relevant market for such Interest Period requested by the
Company, or a Bank otherwise reasonably determines (which
determination shall be binding and conclusive on all parties) that by
reason of circumstances affecting the interbank eurocurrency market
adequate and reasonable
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means do not exist for ascertaining the applicable Eurocurrency Rate
(Reserve Adjusted); or
(b) a Bank advises the Company that the making or funding of Eurocurrency
Loans has become impracticable as a result of an event occurring
after the date of this Agreement which in the opinion of such Bank
materially affects Eurocurrency Loans,
then: (i) the affected Bank shall promptly notify the Company of such
circumstance, (ii) so long as such circumstances shall continue the affected
Bank shall not be under any obligation to make, Continue, or Convert Loans into
Eurocurrency Loans, and (iii) on the last day of the then current Interest
Period for Eurocurrency Loans, such Eurocurrency Loans shall, unless then repaid
in full or Converted into a Loan of a different type pursuant to Section 1.5,
automatically Convert to Base Rate Loans.
7.4 CHANGES IN LAW RENDERING CERTAIN LOANS UNLAWFUL. In the event that
there occurs after the date hereof any change in applicable laws or regulations
(including the adoption of any new laws), or any change in the interpretation of
applicable laws or regulations by any governmental or other regulatory body
charged with the administration thereof, that makes it unlawful for a Bank to
make, maintain, or fund a type of Fixed Rate Loans, then (a) such Bank shall
promptly notify the Company of such circumstance, (b) the obligation of such
Bank to make, Continue, or Convert Loans into the type of Fixed Rate Loans made
unlawful for that Bank shall, upon the effectiveness of such event, be suspended
for the duration of such unlawfulness, and (c) on the last day of the current
Interest Period for Fixed Rate Loans of such type (or, in any event, if the Bank
affected by such change so requests, on such earlier date as may be required by
the relevant law, regulation, or interpretation), the Fixed Rate Loans of such
type made by such Bank shall, unless then repaid in full or Converted into a
Loan of a different type pursuant to Section 1.5, automatically Convert to Base
Rate Loans.
7.5 FUNDING LOSSES. The Company hereby agrees that upon demand by any Bank
(which demand shall be accompanied by a statement setting forth the basis for
the calculations of the amount being claimed), the Company will indemnify such
Bank against any net loss or expense which such Bank sustains or incurs
(including, without limitation, any net loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such Bank
to fund or maintain Fixed Rate Loans), as reasonably determined by such Bank, as
a result of (a) any payment or prepayment or Conversion of any Fixed Rate Loan
of such Bank on a date other than the last day of an Interest Period for such
Loan, or (b) any failure of the Company to borrow, Continue, or Convert any
Loans on a date specified therefor in a notice of borrowing (which shall not
include the Company's notice of intention to request a Eurocurrency Loan),
Continuation, or Conversion pursuant to this Agreement.
7.6 CURRENCY INDEMNITY.
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(a) The obligation of the Company under this Agreement and the Notes
to make payments in Dollars or in any Eurocurrency or Local
Currency in which the Loans or any portion thereof are outstanding
(the "Obligation Currency") shall not be discharged or satisfied
by any tender or recovery pursuant to any judgment expressed in or
converted into any currency other than the Obligation Currency,
except to the extent to which such tender or recovery shall result
in the effective receipt by the Banks of the full amount of the
Obligation Currency expressed to be payable under this Agreement
or the Notes. If, for the purpose of obtaining or enforcing
judgment against the Company in any court or in any jurisdiction,
it becomes necessary to convert into any currency other than the
Obligation Currency (such other currency being hereinafter
referred to as the "Judgment Currency") an amount due in the
Obligation Currency under the Notes, the conversion shall be made,
at the option of the Relevant Bank, at the rate of exchange
prevailing on the Business Day immediately preceding the day on
which the judgment is given (such Business Day as the case may be,
being hereinafter in this Section 7.6 referred to as the "Judgment
Currency Conversion Date").
(b) If there is a change in the rate of exchange prevailing between
the Judgment Currency Conversion Date and the date of actual
payment of the amount due, the Company agrees to pay such
additional amounts as may be necessary to ensure that the amount
paid in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the
amount of the Obligation Currency which could have been purchased
with the amount of Judgment Currency stipulated in the judgment or
judicial award at the rate of exchange prevailing on the Judgment
Currency Conversion Date.
(c) Any amount due from the Company under the foregoing subparagraph
will be due as a separate debt and shall not be affected by
judgment being obtained for any other sums due otherwise
hereunder.
7.7 INCREASED TAX COSTS. The Company agrees to make all payments or
reimbursements under this Agreement free and clear of, and without deduction
for, any future taxes (including withholding taxes) imposed (except for any tax
or changes in the rate of tax imposed on overall income of any Bank) on payments
of principal, interest and fees or charges under the Agreement which are
attributable to, or represent, the application of any such tax for any time
period after the Company has received notice of such tax from such Bank. Such
Bank will use its reasonable efforts to minimize any taxes and will designate a
different lending office if such designation will avoid the need for, or reduce
the amount of, such tax(es) and will not, in the reasonable judgment of such
Bank, be otherwise disadvantageous to such Bank or contrary to its stated
policies. In the event that the Company is required to directly pay any such
taxes, the Company agrees to furnish such Bank with official tax receipts
evidencing payment of such taxes within forty-five (45) days after the due date
for each such payment. Each Bank agrees that in the event that any such
additional amount paid or reimbursed by the
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Company to or for such Bank in respect of any taxes be recovered, in whole or in
part, by such Bank (by credit, offset, deduction or otherwise), against or in
computing any income, franchise or other taxes, such Bank will promptly
reimburse the Company the amount of such recovery. A transferee of any interest
in the Agreement or the Notes shall not be entitled to the benefits of this
Section 7.7 with respect to any taxes which would not have been incurred if
there had been no transfer.
SECTION 8 WARRANTIES.
The Company warrants to the Banks as of the date of this Agreement that:
8.1 CORPORATE ORGANIZATION. The Company is a corporation duly incorporated
and in good standing under the laws of the State of Ohio and the Company is duly
qualified and in good standing as a foreign corporation authorized to do
business in each jurisdiction of the United States where, because of the nature
of its activities or properties, such qualification is required and where the
failure to be so qualified would materially and adversely affect the
consolidated financial condition of the Company and its Consolidated
Subsidiaries taken as a whole.
8.2 AUTHORIZATION; NO CONFLICT. The execution, delivery, and performance by
the Company of this Agreement and the Notes are within the Company's corporate
powers, have been duly authorized by all necessary corporate action, and do not
and will not contravene or conflict with any provision of applicable law in
effect on the date hereof or of the Amended Articles of Incorporation or
Regulations of the Company or of any agreement for borrowed money or other
material agreement binding upon the Company. The Company has duly executed and
delivered this Agreement.
8.3 VALIDITY AND BINDING NATURE. This Agreement is, and the Notes when duly
executed and delivered will be, legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their respective
terms.
8.4 FINANCIAL STATEMENTS. The Company's audited consolidated financial
statements as at December 31, 1991 and its unaudited consolidated financial
statements as at March 31, 1992, copies of which have been furnished to each
Bank, have been prepared in accordance with GAAP, applied on a basis consistent
with that of the preceding fiscal year, and fairly present in all material
respects the consolidated financial condition and results of operations of the
Company and its Consolidated Subsidiaries as of the dates and for the periods
indicated, as applicable, and since the dates thereof until the date of this
Agreement there has been no material adverse change in the consolidated
financial condition of the Company and its Consolidated Subsidiaries taken as a
whole.
8.5 LITIGATION. Except as set forth in Schedule 8.5, there are no material
legal proceedings, other than ordinary routine litigation incidental to the
business, to
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which the Company or any of its Consolidated Subsidiaries is a party or to which
any of their respective properties is subject that are required to be disclosed
in the Company's periodic reports under the Securities Exchange Act of 1934 and
that have not been so disclosed.
8.6 COMPLIANCE WITH ERISA. Each member of the controlled group of
corporations (as defined in Section 414(b) of the Internal Revenue Code of
1986), which includes the Company (the "TRW Group"), has (i) fulfilled its
obligations under the minimum funding standards of Part 3 of Title I of the
Employee Retirement Income Security Act of 1974 ("ERISA") and Section 412 of the
Internal Revenue Code of 1986 ("Code") with respect to each defined benefit plan
(as defined in Section 3 (35) of ERISA) maintained by a member of the TRW Group
("Plan") and (ii) is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code with respect to each such Plan. No
member of the TRW Group has (x) sought a waiver of the minimum funding standard
under Section 412 of the Code in respect of any Plan, (y) failed to make any
contribution or payment required to be made to a Plan or to any multi-employer
plan (as defined in Section 3 (37)(A) of ERISA) or made any amendment to any
Plan which has resulted or could result in the imposition of a lien or the
posting of a bond or other security under ERISA or the Code or (z) incurred any
liability under Title IV of ERISA other than the liability to the Pension
Benefit Guaranty Corporation for premiums under Section 4007 of ERISA.
8.7 ENVIRONMENTAL MATTERS. The Company has conducted periodic reviews of
the effect of compliance with federal, state and local requirements relating to
the discharge of materials into the environment, in the course of which it has
identified and evaluated potential liabilities and costs. The Company has
established accruals for matters that are probable and reasonably estimable as
required by FASB Statement No. 5, "Accounting for Contingencies." To the
Company's knowledge, any liability that may result from the resolution of known
environmental matters in excess of amounts accrued therefor will not have a
material adverse effect on the financial position of the Company.
8.8 TAXES. The Company and its Consolidated Subsidiaries have filed all
United States federal income tax returns and all other material tax returns
which are required to have been filed by them (subject to any available
extensions) and have paid all taxes indicated as due on such returns. The
Company has made adequate and reasonable provision for all material taxes not
yet due and payable, if any, and all material assessments, if any.
8.9 GOVERNMENT REGULATION. Neither the Company nor any of its Consolidated
Subsidiaries is registered as a public utility under the Public Utility Holding
Company Act of 1935 or as an investment company under the Investment Company Act
of 1940.
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SECTION 9 COVENANTS.
Until the later of (i) the expiration or termination of the Commitments and
(ii) all obligations of the Company hereunder and under the Notes are paid in
full, the Company agrees that, unless at any time the Majority Banks shall
otherwise expressly consent in writing:
9.1 REPORTS. CERTIFICATES AND OTHER INFORMATION.
9.1.1 AUDIT REPORT. Within 120 days after each fiscal year of the
Company, the Company will provide to each Bank a copy of the Company's Annual
Report to Shareholders and its Annual Report on Form 10-K for the year then
ended, as filed with the Securities and Exchange Commission and which will
include an annual audit report of the Company, prepared on a consolidated basis
and in accordance with the Company's then current method of accounting, which
methods must be in accordance with GAAP, duly certified by independent certified
public accountants of nationally recognized standing selected by the Company.
9.1.2 QUARTERLY REPORTS. Within 60 days after each quarter (except
the last quarter) of each fiscal year of the Company, the Company will provide
to each Bank a copy of the Company's Quarterly Report on Form 10-Q for the
quarter then ended, as filed with the Securities and Exchange Commission.
9.1.3 COMPLIANCE CERTIFICATES. Contemporaneously with the
furnishing of a copy of each Annual Report on Form 10-K provided for in Section
9.1.1 and of each Quarterly Report on Form 10-Q provided for in Section 9.1.2,
the Company will provide to each Bank a duly completed certificate in the form
of Exhibit B with appropriate insertions (each such certificate called a
"Compliance Certificate"), dated not more than 10 days prior to the date
furnished, signed by an officer of the Company, showing compliance with the
Consolidated Net Worth covenant set forth in Section 9.2, and to the effect that
no Event of Default or Unmatured Event of Default has occurred and is continuing
or, if there is any such an event, describing it and the steps, if any, being
taken to cure it.
9.1.4 CURRENT REPORTS. The Company will provide to each Bank
copies of each Current Report on Form 8-K filed by the Company with the
Securities and Exchange Commission, promptly upon the filing thereof.
9.1.5 OTHER INFORMATION. The Company will provide to a Bank such
other information concerning the Company as such Bank may reasonably request
from time to time.
9.2 NET WORTH. The Company will not permit Consolidated Net Worth to be
less than 1,600,000,000 U.S. Dollars less an amount equal to the lesser of (i)
the aggregate amount expended by the Company subsequent to December 31, 1995 for
the repurchase of its common stock and (ii) 600,000,000 U.S. Dollars.
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9.3 LIENS.
(a) The Company will not, and will not permit any Domestic Subsidiary
to, directly or indirectly, create or assume any mortgage,
encumbrance, lien, pledge, charge, or security interest of any
kind (collectively and individually, a "mortgage" or "lien") upon
or in any of its interests in any Principal Property or upon or in
any shares of capital stock or indebtedness of any Domestic
Subsidiary, whether such interest, capital stock or indebtedness
is now owned or hereafter acquired, if such mortgage secures or is
intended to secure, directly or indirectly, the payment of any
indebtedness for money borrowed evidenced by notes, bonds,
debentures, or other written evidences of indebtedness (such
indebtedness for money borrowed being hereafter in Sections 9.3
and 9.4 collectively called "Debt") without making effective
provision, and the Company in such case will make or cause to be
made effective provision, whereby all of the Loans shall be
secured by such mortgage equally and ratably with any other Debt
thereby secured; excluding, however, from the operation of this
Section 9.3:
(i) mortgages on any Principal Property acquired, constructed,
or improved by the Company or any Domestic Subsidiary after
July 1, 1992 which are created or assumed contemporaneously
with, or within 120 days after, such acquisition or
completion of such construction or improvement to secure or
provide for the payment of any part of the purchase price of
such Principal Property or the cost of such construction or
improvement incurred after July 1, 1992, or, in addition to
mortgages contemplated by clauses (ii) and (iii) below,
mortgages on any such Principal Property existing at the
time or placed thereon at the time of acquisition or leasing
thereof by the Company or any Domestic Subsidiary, or
conditional sales agreements or other title retention
agreements with respect to any Principal Property now owned
or leased or hereafter acquired or leased by the Company or
a Domestic Subsidiary;
(ii) mortgages on property (including shares of capital stock or
indebtedness of a corporation) of a corporation existing at
the time such corporation becomes a Domestic Subsidiary or
is merged or consolidated with the Company or a Domestic
Subsidiary or existing at the time of a sale, lease, or
other disposition of the properties of such corporation (or
a division thereof) or other Person as an entirety or
substantially as an entirety (which includes the sale,
lease, or other disposition of all or substantially all the
assets thereof) to the Company or a Domestic Subsidiary,
provided that no such mortgage shall extend to any other
Principal Property of the Company or any Domestic Subsidiary
or to any shares of capital stock or any indebtedness of any
Domestic Subsidiary;
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(iii) mortgages created by the Company or a Domestic Subsidiary to
secure indebtedness of the Company or a Domestic Subsidiary
to the Company or to a Wholly Owned Domestic Subsidiary;
(iv) mortgages in favor of the United States of America or any
State, territory or possession thereof, or any foreign
country or any department, agency, instrumentality, or
political subdivision of any of such domestic or foreign
jurisdictions to secure partial, progress, advance, or other
payments pursuant to any contract or statute or to secure
any debt incurred for the purpose of financing all or any
part of the purchase price of, or the cost of constructing,
the property subject to such mortgages; and
(v) mortgages for the sole purpose of extending, renewing, or
replacing (or successively extending, renewing, or
replacing) in whole or in part any mortgage existing on July
1, 1992 or referred to in the foregoing clauses (i) to (iv)
inclusive or of any debt secured thereby; provided, however,
that the principal amount of indebtedness secured thereby
shall not exceed the principal amount of indebtedness so
secured at the time of such extension, renewal, or
replacement, and that such extension, renewal, or
replacement mortgage shall be limited to all or a part of
the property which secured the mortgage so extended,
renewed, or replaced (plus improvements on such property).
(b) Notwithstanding the provisions of paragraph (a) of this Section
9.3, the Company or any Domestic Subsidiary may, without equally
and ratably securing all the Loans, create or assume mortgages
which would otherwise be subject to the foregoing restrictions if
at the time of such creation or assumption, and after giving
effect thereto, Exempted Indebtedness does not exceed 15% of
Consolidated Net Tangible Assets determined as of a date not more
than 90 days prior thereto.
9.4 SALE AND LEASEBACK.
(a) The Company will not, and will not permit any Domestic Subsidiary
to, sell, lease or transfer any Principal Property owned by the
Company or a Domestic Subsidiary as an entirety, or any
substantial portion thereof, to anyone other than a Wholly Owned
Domestic Subsidiary (or the Company or a Wholly Owned Domestic
Subsidiary in the case of a Domestic Subsidiary) with the
intention of taking back a lease of such property (herein referred
to as a "Sale and Leaseback Transaction") except a lease for a
period of not more than 36 months by the end of which it is
intended that the use of such property by the lessee will be
discontinued; provided, that, notwithstanding the foregoing, the
Company or any Domestic Subsidiary may sell any such property and
lease it back if the net proceeds of such sale are at least equal
to the fair value (as determined by resolution adopted by the
Board of Directors of the
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Company) of such property, and (i) the Company or such Domestic
Subsidiary would be entitled pursuant to paragraph (a) of Section
9.3 to create Debt secured by a mortgage on the property to be
leased in an amount equal to the Attributable Debt with respect to
such Sale and Leaseback Transaction without equally and ratably
securing all the Loans, or (ii) if such sale or transfer does not
come within the exception provided by the preceding clause (i),
the net proceeds of such sale shall, and in any such case the
Company covenants that they will, within 120 days after such sale,
be applied (to the greatest extent possible) either to the
repayment of the Loans then outstanding when due (whereupon the
Commitments hereunder shall be reduced, on a pro rata basis, to
the extent that such net proceeds are so applied) or to the
retirement of other Consolidated Funded Debt of the Company
ranking at least on a parity with the Loans, or in part to one or
more of such alternatives and in part to another.
(b) Notwithstanding the provisions of paragraph (a) of this Section
9.4, the Company or any Domestic Subsidiary may enter into Sale
and Leaseback Transactions if, at the time of such entering into,
and after giving effect thereto, Exempted Indebtedness does not
exceed 15% of Consolidated Net Tangible Assets determined as of a
date not more than 90 days prior thereto.
9.5 MERGERS, CONSOLIDATIONS, SALES. The Company shall not consolidate with,
or sell or convey all or substantially all its assets to, or merge into, any
other Person, unless (a) the Company is the surviving corporation of such
transaction; or (b) the Company is the nonsurviving party to a merger or
consolidation, the primary purpose of which is to effect a reincorporation of
the Company under the laws of another state.
SECTION 10 CONDITIONS OF LENDING.
The obligation of each Bank to make its Loans is subject to the following
conditions precedent:
10.1 INITIAL LOAN TO THE COMPANY. The obligation of each Bank to make its
initial Loan to the Company is, in addition to the conditions precedent
specified in Section 10.3, subject to the condition precedent that such Bank
shall have received all of the following, each duly executed and dated the date
of such Loan (or such earlier date as shall be satisfactory to such Bank), in
form and substance satisfactory to such Bank:
10.1.1 NOTE. The Note of the Company payable to the order of such
Bank, substantially in the form of Exhibit A.
10.1.2 RESOLUTIONS. Certified copies of resolutions of the Board
of Directors of the Company authorizing the Company to obtain Loans
hereunder.
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10.1.3 INCUMBENCY AND SIGNATURES. A certificate of the Secretary
or an Assistant Secretary of the Company certifying the names of the
officer or officers of the Company who have signed or will sign this
Agreement, the Notes, and other documents provided for in this Agreement to
be executed by the Company, together with a sample of the true signature of
each such officer, and a certificate of authorization setting forth each
Person who is authorized to effect Loans and other transactions hereunder,
together with a sample of the true signature of each such Authorized
Person. Each Bank may conclusively rely on such certificates until it shall
have received notice to the contrary.
10.1.4 OPINION OF COUNSEL. The opinion of counsel to the Company,
substantially in the form of Exhibit C.
10.2 LOANS TO DESIGNATED SUBSIDIARIES. The obligation of each Bank to make
any Loans to any Designated Subsidiary is subject to the condition precedent
that such Bank shall have received the following:
10.2.1 RESOLUTIONS. A certified copy of the resolutions of the
appropriate governing body of the Designated Subsidiary that requested the
Loan authorizing it to obtain Loans hereunder or such other evidence of
corporate authority as is customary in the country of domicile of the
Designated Subsidiary.
10.2.2 ACCEPTANCE OF THIS AGREEMENT. A letter signed by an
authorized officer of such Designated Subsidiary evidencing its agreement
to be bound by the terms of this Agreement with respect to each Loan made
to it hereunder.
10.2.3 INCUMBENCY AND SIGNATURES. A certificate of the Secretary
or an Assistant Secretary of the Designated Subsidiary certifying the name
and signature of the officer or officers of the Designated Subsidiary who
have signed or will sign the letter referenced in Section 10.2.2, together
with a sample of the true signature of each such officer, and a certificate
of authorization setting forth each Person who is authorized to effect
Loans and other transactions hereunder, together with a sample of the true
signature of each such Authorized Person. Each Bank may conclusively rely
on such certificates until it shall have received notice to the contrary.
10.3 ALL LOANS. The obligation of each Bank to make any Loan hereunder is
subject to the further conditions precedent that: (a) No Event of Default or
Unmatured Event of Default has occurred and is continuing or will result from
the making of such Loan, and (b) the warranties of the Company contained in
Sections 8.1, 8.2, and 8.3, are true and correct as of the date of such
requested Loan, with the same effect as though made on the date of such Loan.
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10.4 CONVERSIONS. Except for Section 10.3(a), the conditions set forth in
Sections 10.1, 10.2, and 10.3 shall not apply to the Conversion of Loans from
one type to another type or Continuation of Loans.
SECTION 11 EVENTS OF DEFAULT AND THEIR EFFECT.
11.1 EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
11.1.1 NONPAYMENT OF NOTES OR FEES. Default in the payment when
due of any principal of any Note or default in the payment when due of
interest on any Note or fees payable by the Company hereunder and
continuance of such failure to pay interest or fees for five Business Days
after written notice thereof to the Company from the Bank to which such
amounts are owed.
11.1.2 NONPAYMENT OF OTHER INDEBTEDNESS FOR BORROWED MONEY.
Default in the payment when due at maturity (subject to any applicable
grace period) or by acceleration of any other indebtedness for borrowed
money having a principal amount in excess of 50,000,000 U.S. Dollars of, or
guaranteed by, the Company, or default in the performance or observance of
any obligation or condition with respect to any such other indebtedness if
such default results in the acceleration of the maturity of any such
indebtedness; provided, that, if such default shall subsequently be
remedied, cured, or waived prior to either the termination of Commitments
or the declaration that all Loans are immediately due and payable, in each
case pursuant to Section 11.2 hereof, and as a result the payment of such
indebtedness is no longer due, the Event of Default existing hereunder by
reason thereof shall likewise be deemed thereupon to be remedied, cured, or
waived and no longer in existence, all without any further action by the
parties hereto.
11.1.3 BANKRUPTCY OR INSOLVENCY. The Company generally fails to
pay, or admits in writing its inability to pay, debts as they become due;
or the Company applies for, consents to, or acquiesces in the appointment
of, a trustee, receiver, or other custodian for the Company or for a
substantial part of the property thereof, or makes a general assignment for
the benefit of creditors; or, in the absence of such application, consent
or acquiescence, a trustee, receiver, or other custodian is appointed for
the Company or for a substantial part of the property of the Company; or
any bankruptcy, reorganization, debt arrangement, or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding is commenced in respect of the Company and if such
case or proceeding is not commenced by the Company, it is consented to or
acquiesced in by the Company or remains for 90 consecutive days undismissed
or unstayed; or the Company takes any corporate action to authorize any of
the foregoing.
11.1.4 NONCOMPLIANCE WITH OTHER PROVISIONS. Failure by the Company
to comply with or to perform in any material respect any other
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<PAGE> 48
provision of this Agreement (and not constituting an Event of Default under
any of the preceding provisions of this Section 11.1) and continuance of
such failure for 30 days after written notice thereof to the Company from
the Majority Banks.
11.1.5 WARRANTIES. Any warranty made by the Company in Sections 8
or 14.16 of this Agreement is breached or is incorrect when made in any
material respect and the Company shall fail to take corrective actions
reasonably satisfactory to the Majority Banks within 30 days after written
notice thereof to the Company from the Majority Banks, except only in the
case of a breach of the warranties contained in Section 8 or 14.16 made on
the date of this Agreement, in which case there shall be no opportunity to
take corrective actions.
11.1.6 JUDGMENTS. Any final and unappealable judgment or order
from a judicial or administrative body (which order or judgment is fully
enforceable against the Company or any of its Consolidated Subsidiaries in
courts of the United States of America or any state thereof) for the
payment of money in excess of 50,000,000 U.S. Dollars (after adjustments to
reflect reductions for credits and set-offs asserted in good faith by the
Company) shall be rendered against the Company, shall not have been
discharged or vacated and shall have been in effect, in its final and
unappealable form, for a period of 30 consecutive days.
11.2 EFFECT OF EVENT OF DEFAULT. If any Event of Default described in
Section 11.1.3 shall occur, the Commitments (if they have not theretofore
terminated) shall immediately terminate and all Loans and Notes shall
automatically become immediately due and payable, all without notice of any
kind; and, in the case of any other Event of Default, the Majority Banks may
declare the Commitments (if they have not theretofore terminated) to be
terminated and the Outstanding Majority Banks may declare that all Loans and
Notes shall become immediately due and payable. The Majority Banks and the
Outstanding Majority Banks shall promptly advise the Company in writing of any
such declaration. Following the declaration that all Loans and Notes are
immediately due and payable, all payments made by the Company on account of the
Loans and Notes shall be made to the Administrator, which shall distribute such
payments on a pro rata basis (in relation to the amounts of outstanding Loans)
to Banks with outstanding Loans. Following such declaration, if any Bank
receives a payment that is not on a pro rata basis, such Bank will remit to the
Administrator any amount in excess of its pro rata portion. Upon receipt of any
such remittance, the Administrator will distribute such amount to the Banks with
outstanding Loans in order that all distributions will be pro rata. The effect
as an Event of Default of any event described in Section 11.1.1 or Section
11.1.3 may be waived only by the written concurrence of the holders of 100% of
the aggregate unpaid principal amount of the Notes and the Majority Banks, and
the effect as an Event of Default of any other event described in this Section
11 may be waived by the written concurrence of the Majority Banks and the
Outstanding Majority Banks.
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SECTION 12 GUARANTY.
The Company hereby unconditionally, absolutely and irrevocably guarantees,
as primary obligor and not merely as surety, the repayment to each Relevant
Bank, when due pursuant to the terms and conditions of this Agreement, of the
amount of any Loan made pursuant to this Agreement to a Designated Subsidiary,
together with accrued interest on such Loan; provided, however, that before any
amount shall be deemed due and payable pursuant to this Section 12, the Relevant
Bank must first give notice to the Company of the nonpayment by the Designated
Subsidiary, and the Company shall have five Business Days from the receipt of
such notice to cure or cause to be cured any and all such nonpayments. The
Company's obligations hereunder constitute a guaranty of payment and not of
collection merely. The Company hereby waives notice of, and consents to, any
extensions of time of payment, renewals, compromises, settlements, releases or
other indulgences from time to time granted by the Relevant Bank in respect of
Loans made to Designated Subsidiaries. Except as otherwise provided in this
Section 12, the Company hereby waives presentment, protest, demand of payment,
notice of dishonor and all notices and demands whatsoever. The obligations of
the Company hereunder shall not be released, discharged or otherwise affected by
(i) any change in the corporate existence or constitution, structure or
ownership of any Designated Subsidiary or the Company, (ii) any insolvency,
bankruptcy, reorganization or similar proceeding affecting the Designated
Subsidiary or its assets or the Company or (iii) the existence of any claim,
set-off or other rights which the Company may have at any time against the
Relevant Bank or any other person. If at any time any payment of any obligation
guaranteed hereunder is rescinded or must otherwise be restored or returned upon
the insolvency, bankruptcy or reorganization of a Designated Subsidiary or
otherwise, the Company's obligations under this Section 12 with respect to such
payment shall be reinstated at such time as though such payment had not been
made. The Company shall not exercise any of its subrogation rights with respect
to amounts paid to a Relevant Bank pursuant to this Section 12 until all amounts
guaranteed hereunder payable to such Relevant Bank have been paid in full.
Following such payment in full with regard to a Relevant Bank, the Company shall
be entitled to subrogation in the Relevant Bank's rights and, upon the
reasonable request of the Company, the Relevant Bank agrees to cooperate with
the Company in enforcement of the Company's subrogation rights, including the
transfer and delivery by the Relevant Bank to the Company of any and all
evidence of indebtedness relating to such Loan within the possession or control
of the Relevant Bank.
SECTION 13 CERTAIN DEFINITIONS.
When used herein the following terms shall have the following meaning:
"AFFILIATE" means, with respect to a particular Person, any Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. For purposes of this definition, control of a Person shall
mean the power to
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direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"AGREEMENT" means this Agreement, as it may be amended, modified, or
supplemented and in effect from time to time.
"APPLICABLE COMMITMENT FEE" means the percentage in effect from time to
time as set forth in the following table opposite the highest of the
then-current rating assigned to the Company's senior unsecured long-term debt by
Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P"):
<TABLE>
<CAPTION>
Rating Applicable
(Moody's/S&P) Commitment Fee
------------- --------------
<S> <C>
higher than A1/A+ 0.060%
A1/A+ 0.070%
A2/A 0.080%
A3/A- 0.090%
Baa1/BBB+ 0.100%
Baa2/BBB 0.125%
Baa3/BBB- 0.150%
lower than Baa3/BBB- 0.175%
</TABLE>
"APPLICABLE MARGIN" means, at any time, the percentage set forth in the
following table opposite the highest of the then-current rating assigned to the
Company's senior unsecured long-term debt by Moody's or S&P:
<TABLE>
<CAPTION>
Applicable Applicable
Margin for Margin for
Rating Domestic CD Eurocurrency
(Moody's/S&P) Loans Loans
- -------------------------------------------------------------------------------
<S> <C> <C>
higher than A1/A+ 0.275% 0.175%
A1/A+ 0.300% 0.200%
A2/A 0.325% 0.225%
A3/A- 0.350% 0.250%
Baa1/BBB+ 0.400% 0.300%
Baa2/BBB 0.475% 0.375%
Baa3/BBB- 0.550% 0.450%
lower than Baa3/BBB- 0.600% 0.500%
</TABLE>
"ASSESSMENT RATE" means, for any Domestic CD Loan (and for the purpose of
computing the Domestic CD Rate (Adjusted)), the annual assessment rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) applicable to the Relevant
Bank on its insured deposits under the Federal Deposit Insurance Act, determined
by annualizing the most recent assessment levied on the Relevant
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Bank by the Federal Deposit Insurance Corporation (the "FDIC") with respect to
such deposits, after giving effect to the most recent rebate granted to the
Relevant Bank by the FDIC with respect to deposit insurance as well as the loss
to the Relevant Bank (determined in the good faith judgment of the Relevant
Bank) of the use of such rebate prior to the date credit is taken by the
Relevant Bank with respect to such rebate.
"ATTRIBUTABLE DEBT" means, as to any particular lease under which any
Person is liable at the time and at any date as of which the amount thereof is
to be determined, the lesser of (a) the fair value of the property subject to
such lease (as determined by the Directors of the Company) or (b) the total net
amount of rent required to be paid by such Person under such lease during the
remaining term thereof, discounted from the respective due dates thereof to such
date at the actual interest factor included in such rent. The net amount of rent
required to be paid under any such lease for any such period shall be the
aggregate amount of the rent payable by the lessee with respect to such period
after excluding amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, water rates and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, such net amount shall also include the amount of such penalty, but no
rent shall be considered as required to be paid under such lease subsequent to
the first date upon which it may be so terminated.
"AUTHORIZED PERSON" means, as to the Company, any person designated as such
in a certificate signed by the Chief Financial Officer, Treasurer, or Assistant
Treasurer of the Company, and, as to any Designated Subsidiary, means any person
designated as such in a certificate signed by one or more officers of the
Designated Subsidiary, as authorized by resolution of the Designated Subsidiary
or otherwise by law.
"BANKS" or "BANK" - see Preamble.
"BASE RATE" means the higher of (i) the rate of interest per annum publicly
announced and in effect from time to time by the Relevant Bank at its Domestic
Office identified on the signature pages hereto as its prime, base or reference
rate for U.S. Dollar Loans or (ii) the Federal Funds Rate plus the Applicable
Margin for Eurocurrency Loans. The Base Rate shall change simultaneously with
each change in such announced prime, base or reference rate and Federal Funds
Rate, as applicable. The Base Rate may not be the lowest rate charged by the
Relevant Bank for commercial or other extensions of credit.
"BASE RATE LOAN" means any Loan of U.S. Dollars that bears interest at or
by reference to the Relevant Bank' s Base Rate.
"BUSINESS DAY" means (i) in the case of a Business Day that relates to a
Eurocurrency Loan, any day of the year on which banks are open for business in
both New York and, with regard to any such Bank only, the city in which the
applicable Eurocurrency Office of such Bank is located and on which dealings are
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<PAGE> 52
carried on in the interbank eurocurrency market; (ii) in the case of a Business
Day that relates to a Base Rate Loan, a Domestic CD Loan, or a Negotiated Loan,
any day of the year on which banks are open for business in both New York and,
with regard to any such Bank only, the city in which the applicable Domestic
Office of such Bank is located; and (iii) in the case of a Business Day that
relates to a Local Currency Loan, any day of the year on which the local office
of the Relevant Bank in that locality is open for business.
"COMMITMENT(S)" means the commitments of the Banks to make Loans hereunder;
and Commitment as to any Bank shall mean the commitment of such Bank to make
Loans hereunder in an aggregate amount not to exceed the U.S. Dollar amount set
forth opposite its signature hereto or any subsequent amendment hereto.
"COMPANY" - see Preamble.
"COMPLIANCE CERTIFICATE" - see Section 9.1.3 and Exhibit B.
"CONSOLIDATED FUNDED DEBT" means the Funded Debt of the Company and its
Consolidated Subsidiaries consolidated in accordance with GAAP.
"CONSOLIDATED NET TANGIBLE ASSETS" means the total of all assets of the
Company and its Consolidated Subsidiaries appearing on a consolidated balance
sheet prepared in accordance with GAAP, including the equity in and the net
amount of advances to other Subsidiaries, after deducting therefrom (without
duplication of deductions) as shown on such balance sheet, the sum of:
(i) intangible assets, including goodwill, cost of acquired businesses in
excess of recorded net assets at acquisition dates, patents,
licenses, trademarks, trade names, copyrights, unamortized debt
discount and expense less unamortized debt premium, and corporate
organization expense (but excluding deferred charges and prepaid
expense);
(ii) any write-up of the book value of any assets (other than equity in
Subsidiaries which are not Consolidated Subsidiaries and other than
as a result of currency revaluations) resulting from the revaluation
thereof subsequent to March 31, 1992;
(iii) all liabilities of the Company and its Consolidated Subsidiaries
other than: Funded Debt; capital stock; surplus; surplus reserves;
reserves for deferred Federal income taxes arising from accelerated
depreciation, investment and other tax credits, and similar
provisions; and contingency reserves not allocated for any particular
purpose;
(iv) reserves for depreciation and amortization and other reserves (other
than the reserves referred to in the preceding clause(iii) ); and
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(v) any minority interest in the shares of stock and surplus of any
Consolidated Subsidiary.
"CONSOLIDATED NET WORTH" means at any date the sum of the consolidated
shareholders' investment and minority interests of the Company and its
Consolidated Subsidiaries determined as of such date. Consolidated shareholders'
investment and minority interests of the Company shall be as included in the
annual and quarterly financial statements of the Company, as applicable.
"CONSOLIDATED SUBSIDIARY" means each Subsidiary other than (a) any
Subsidiary the accounts of which (i) are not required by GAAP to be consolidated
with those of the Company for financial reporting purposes and (ii) were not
consolidated with those of the Company in the Company's then most recent Annual
Report to Shareholders and are not intended by the Company to be consolidated
with those of the Company in its next Annual Report to Shareholders, or (b) any
Subsidiary the primary business of which consists of financing the sale or lease
of merchandise, equipment or services by the Company or any Subsidiary or
owning, leasing, dealing in or developing real property, or providing services
directly related thereto, or which is otherwise primarily engaged in the
business of a finance or real estate company.
"CONTINUE," "CONTINUATION" AND "CONTINUED" shall refer to a continuation of
Loans pursuant to Section 1.5.
"CONVERT," "CONVERSION" AND "CONVERTED" shall refer to a conversion of
Loans pursuant to Sections 1.5, 3.3, 7.3, or 7.4.
"DEBT" - see SECTION 9.3.
"DESIGNATED SUBSIDIARY" means any Subsidiary of the Company which (i) the
Company from time to time designates in writing signed by the Chief Financial
Officer, Treasurer, or Assistant Treasurer of the Company as a Designated
Subsidiary entitled to receive Eurocurrency and Local Currency Loans hereunder
and (ii) the Relevant Bank has not objected in writing to such designation of a
Designated Subsidiary within thirty (30) days of the Relevant Bank's receipt of
the Company's designation. Such designation shall contain the address of the
Subsidiary which shall be used to give notice to the Subsidiary pursuant to
Section 14.3.
"DOMESTIC CD LOAN" shall mean any Loan of U. S. Dollars that bears
interest at a rate determined by reference to the Relevant Bank's Domestic CD
Rate (Adjusted).
"DOMESTIC CD RATE" means, with respect to any Interest Period for any
Domestic CD Loan, the rate of interest determined by the Relevant Bank to be the
average (rounded upward, if necessary, to the nearest 1/100 of 1%) of the rates
quoted to the Relevant Bank on the first day of such Interest Period by two
certificate of
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<PAGE> 54
deposit dealers in New York of recognized standing selected by the Relevant Bank
for the purchase from the Relevant Bank or major commercial banks at face value
of certificates of deposit issued by the Relevant Bank in an amount equal or
comparable to the amount of the Domestic CD Loan and having a maturity equal to
such Interest Period; provided, that, if such quotations from such dealers are
not available to the Relevant Bank, it shall determine a reasonably equivalent
rate on the basis of another source or sources selected by it.
"DOMESTIC CD RATE (ADJUSTED)" means, with respect to any Interest Period
for any Domestic CD Loan, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined pursuant to the following formula:
Domestic CD
Domestic CD = Rate + Assessment
Rate (Adjusted) --------------- Rate
(1 - Reserve
Requirement)
"DOMESTIC OFFICE" means, with respect to any Bank, the office of such Bank
or Affiliate of such Bank, designated as such under such Bank's signature
hereto, or such other office of such Bank or Affiliate of such Bank, as such
Bank may hereafter from time to time designate as its Domestic Office.
"DOMESTIC SUBSIDIARY" means each Consolidated Subsidiary other than: (a)
any Consolidated Subsidiary which the Directors of the Company reasonably
determine not to be material to the business or financial condition of the
Company; (b) any Consolidated Subsidiary the major portion of the assets of
which are located, or the major portion of the business of which is carried on,
outside the United States of America, its territories and possessions; (c) any
Consolidated Subsidiary which, during the 12 most recent calendar months (or
such shorter period as shall have elapsed since its organization) derived the
major portion of its gross revenues from sources outside the United States of
America; (d) any Consolidated Subsidiary the major portion of the assets of
which consists of securities or obligations, or both, of one or more
corporations (whether or not Consolidated Subsidiaries) of the types described
in the preceding clauses (b) and (c); and (e) any Consolidated Subsidiary
organized after March 31, 1992 which the Company intends shall be operated in
such manner as to come within one or more of the preceding clauses (b), (c) and
(d).
"ELECTRONIC PAYMENT INSTRUCTIONS" means the Bank Routing and account number
information identifying the account of each Bank to receive the ACH payment of
Commitment Fees. Such Electronic Payment Instructions for each Bank are set
forth below the signature block of such Bank to the Amendment dated as of May 8,
1996 to the Agreement and may be changed at any time by written notice by such
Bank to the Company.
"EUROCURRENCY" means any freely transferable and convertible currency on
deposit outside the country of issuance.
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<PAGE> 55
"EUROCURRENCY LOAN" means any Loan of a Eurocurrency that bears interest at
a rate determined by reference to the Relevant Bank's Eurocurrency Rate (Reserve
Adjusted).
"EUROCURRENCY OFFICE" means, with respect to any Bank, the office of such
Bank or Affiliate of such Bank, designated as such under such Bank's signature
hereto, or such other office of such Bank or Affiliate of such Bank, as such
Bank may hereafter from time to time designate as its Eurocurrency Office. A
Eurocurrency Office may be, at the option of such Bank, either a domestic or
foreign office of such Bank or a domestic or foreign office of an affiliate of
such Bank.
"EUROCURRENCY OR LOCAL CURRENCY EQUIVALENT AMOUNT" means, in the case of a
Eurocurrency or Local Currency, on any Business Day, the amount of such currency
which would be freely converted into a specified amount of U.S. Dollars,
computed at the spot buying rate for dollars of the Relevant Bank at the close
of business on such day.
"EUROCURRENCY RATE" means, with respect to any Eurocurrency Loan for any
Interest Period, the rate per annum equal to the rate per annum at which
deposits of the currency of the Loan in immediately available funds are offered
by the Eurocurrency Office of the Relevant Bank two Business Days prior to the
beginning of such Interest Period to major banks in the interbank eurocurrency
market of such Eurocurrency Office for delivery on the first day of such
Interest Period and for the number of days comprised therein and in an amount
equal or comparable to the amount of the Eurocurrency Loan of the Relevant Bank
for such Interest Period.
"EUROCURRENCY RATE (RESERVE ADJUSTED)" means, with respect to any
Eurocurrency Loan for any Interest Period, a rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) determined pursuant to the following
formula:
Eurocurrency Rate = Eurocurrency Rate
(Reserve Adjusted) -----------------
l-Eurocurrency Reserve
Percentage
"EUROCURRENCY RESERVE PERCENTAGE" means, with respect to each Interest
Period, that percentage (expressed as a decimal) prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining
reserve requirements applicable to "Eurocurrency Liabilities" pursuant to
Regulation D or any other then applicable regulation of the Board of Governors
that prescribes reserve requirements applicable to "Eurocurrency Liabilities" as
presently defined in Regulation D.
"EVENT OF DEFAULT" means any of the events described in Section 11.1.
"EXEMPTED INDEBTEDNESS" means, as of any particular time, the sum of (i)
the aggregate principal amount of all then outstanding indebtedness for borrowed
money of the Company and Domestic Subsidiaries incurred after July 1, 1992 and
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secured by any mortgage, security interest, pledge or lien other than those
permitted by paragraph (a) of Section 9.3 and (ii) all Attributable Debt
pursuant to Sale and Leaseback Transactions (as defined in Section 9.4) incurred
by the Company and Domestic Subsidiaries after July 1, 1992 at such time
outstanding other than that which is not prohibited by or is permitted pursuant
to paragraph (a) of Section 9.4.
"FEDERAL FUNDS RATE" means, for any Interest Period selected by the
Company, the average of rates for Federal funds for the Interest Period quoted
to the Relevant Bank by two leading brokers of Federal funds transactions in New
York City.
"FIXED RATE LOAN(S)" - see Section 1.3.
"FUNDED DEBT" means all indebtedness for money borrowed having a maturity
of more than 12 months from the date such indebtedness was incurred or having a
maturity of 12 months or less but by its terms being renewable or extendable
beyond 12 months from the date such indebtedness was incurred at the option of
the borrower.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time.
"INTEREST PERIOD" means, with respect to any Fixed Rate Loan, the period
commencing on the date such Loan was made, or on the date such Loan was
Converted from a Loan of a different type, or on the date of expiration of the
immediately preceding Interest Period for such Loan, and (i) ending 30, 60, 90,
120, 150, 180 days, or, if available, more than 180 days up to and including 360
days, thereafter in the case of a Domestic CD Loan, or (ii) ending one, two,
three, or six months, or, if available, more than six months up to and including
twelve months, thereafter in the case of a Eurocurrency Loan, all as the Company
or any Designated Subsidiary may specify pursuant to Section 1.4, 1.5, or 3.3;
the Interest Period for any Negotiated Loan or any Local Currency Loan shall be
as agreed by the Company or any Designated Subsidiary and the Relevant Bank
pursuant to Section 1.6 or 1.7. Each Interest Period for a Fixed Rate Loan that
would otherwise end on a day that is not a Business Day shall end on the next
succeeding Business Day (unless such next succeeding Business Day is the first
Business Day of a calendar month, in which case with respect to a Eurocurrency
Loan such Interest Period shall end on the next preceding Business Day).
"JUDGMENT CURRENCY" - see Section 7.6.
"JUDGMENT CURRENCY CONVERSION DATE" - see Section 7.6.
"LIEN" or "MORTGAGE" - see Section 9.3.
"LOCAL CURRENCY" means, with respect to any Local Currency Loan, any legal
currency of the nation where the Local Currency Loan is being funded.
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<PAGE> 57
"LOCAL CURRENCY LOAN(S)" - see Section 1.7.
"LOANS" or "LOAN" - see Section 1.1.
"MAJORITY BANKS" means Banks having an aggregate Percentage of 66-2/3% or
more.
"NEGOTIATED LOAN(S)" - see Section 1.6.
"NOTE(S)" - see Section 2.2 and Exhibit A.
"OBLIGATION CURRENCY" - see Section 7.6.
"OUTSTANDING MAJORITY BANKS" means Banks having 66-2/3% or more of the
aggregate principal amount of Loans outstanding.
"PERCENTAGE" means as to any Bank the percentage of such Bank's share of
the total Commitments of all Banks.
"PERSON" shall mean an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof), or other entity of
any kind.
"PRINCIPAL PROPERTY" means any single manufacturing plant, engineering
facility or research facility owned or leased by the Company or a Domestic
Subsidiary other than any such plant or facility or portion thereof which the
Board of Directors reasonably determines not to be of material importance to the
Company and its Subsidiaries taken as a whole.
"PROPRIETARY INFORMATION" - see Section 14.5.
"RELEVANT BANK" means, with respect to any Loan, the Bank that made the
Loan, and, prior to the making of such Loan or requested Loan, any Bank that has
been requested to make such Loan.
"RESERVE REQUIREMENT" means, with respect to each Interest Period, a
percentage (expressed as a decimal) equal to the daily average during such
Interest Period of the aggregate reserve requirement (including all basic,
supplemental, marginal, and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements
during such Interest Period) specified under Regulation D of the Board of
Governors of the Federal Reserve System, or any other regulation of the Board of
Governors which prescribes reserve requirements applicable to nonpersonal time
deposits as presently defined in Regulation D, as then in effect, as applicable
to the class of banks of which the Relevant Bank is a member, on deposits of the
type used as a reference in determining the Domestic CD Rate and having a
maturity approximately equal to such Interest Period.
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"SALE AND LEASEBACK TRANSACTION" - see Section 9.4.
"SUBSIDIARY" means a corporation of which the Company and/or its other
Subsidiaries own, directly or indirectly, such number of outstanding shares as
have more than 50% of the ordinary voting power for the election of directors.
"TERMINATION DATE" means the earlier to occur of (a) July 1, 2001, subject
to extension for one or more successive one-year periods as to any Bank or Banks
pursuant to Section 1.2, or (b) such other date on which the Commitments shall
terminate pursuant to Section 11.2.
"TYPE OF LOAN OR BORROWING" - see Section 1.3. The various types of Loans
or borrowings available under this Agreement are as follows: Base Rate Loans or
borrowings and Fixed Rate Loans or borrowings. Fixed Rate Loans or borrowings
consist of Domestic CD Loans or borrowings, Eurocurrency Loans or borrowings,
Negotiated Loans or borrowings, and Local Currency Loans or borrowings.
"U.S. DOLLAR(S)" and the sign "$" shall mean lawful money of the United
States of America.
"UNMATURED EVENT OF DEFAULT" means any event that if it continues uncured
will, with lapse of time or notice or lapse of time and notice, constitute an
Event of Default.
"UNUSED AMOUNT" means the amount of the Commitment of the Relevant Bank
less any outstanding Loans made by such Bank. Loans in an Obligation Currency
other than U.S. Dollars will be translated into U.S. Dollars for purposes of
this calculation at the spot rate for dollars published in THE WALL STREET
JOURNAL on each day in which such Loan is outstanding (provided, that if such
day is not a Business Day, the applicable spot rate for such day should be the
spot rate on the Business Day immediately prior to such day).
"WHOLLY OWNED DOMESTIC SUBSIDIARY" means each Domestic Subsidiary all the
outstanding shares of which, other than directors' qualifying shares, shall at
the time be owned by the Company, or by the Company and one or more Wholly Owned
Domestic Subsidiaries, or by one or more Wholly Owned Domestic Subsidiaries.
SECTION 14 GENERAL.
14.1 WAIVER; AMENDMENTS. No delay on the part of any Bank or the holder of
any Note in the exercise of any right, power, or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise by any of them of any
right, power, or remedy preclude other or further exercise thereof, or the
exercise of any other right, power, or remedy. No amendment, modification, or
waiver of, or consent with respect to, any provision of this Agreement or the
Notes shall in any event be
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<PAGE> 59
effective unless the same shall be in writing and signed and delivered by Banks
having an aggregate Percentage of not less than the aggregate Percentage
expressly designated herein with respect thereto (or in the case of the
Outstanding Majority Banks, the aggregate principal amount outstanding) or, in
the absence of such designation as to any provision of this Agreement or the
Notes, by the Majority Banks, and then any such amendment, modification, waiver,
or consent shall be effective only in the specific instance and for the specific
purpose for which given. No amendment, modification, waiver, or consent (i)
shall extend or increase the amount of the Commitments, the maturity of the
Notes or reduce the fees hereunder or the rate of interest payable with respect
to the Notes or reduce the aggregate Percentage required to effect an amendment,
modification, waiver, or consent or eliminate the guaranty set forth in Section
12 hereof without the written consent of all of the Banks or (ii) shall extend
the maturity or reduce the principal amount of, or rate of interest on, any Note
without the written consent of the holder of such Note. Notwithstanding the
foregoing, the Company may add one or more financial institutions as Bank
parties to this Agreement, from time to time and without the consent of the
then-current Bank parties to this Agreement; provided, that in no event will the
aggregate amount of the Commitments of the new financial institutions exceed 125
million U.S. Dollars in excess of the Commitments as of the date hereof. Each
such addition of a Bank shall be effective upon such Bank's written agreement to
become a Bank party hereto and to be bound by the terms of this Agreement
applicable to "Banks." The Company shall give the then-current Bank parties to
this Agreement prompt notice of any change to the Bank's respective Percentages
and Commitments resulting from the addition of any Bank as a party to, or the
reduction of any Bank's Commitment under, this Agreement.
14.2 CONFIRMATIONS. The Company and each holder of a Loan agree from time
to time, upon written request received by it from the other, to confirm to the
other in writing the aggregate unpaid principal amount of Loans then outstanding
to such holder.
14.3 NOTICES. Except as otherwise provided in Sections 1.3, 1.4, 1.5, 3.3,
and 6.2, all notices hereunder shall be in writing. Notices given by mail shall
be deemed to have been given three days after the date sent if sent by
registered or certified mail, postage prepaid, and:
(i) if to the Company, addressed to the Company at its address shown
below its signature hereto;
(ii) if to any Designated Subsidiary, addressed to it at the address given
by the Company pursuant to its designation of such Subsidiary as a
Designated Subsidiary entitled to receive Loans hereunder; or
(iii) if to any Bank, addressed to such Bank at the address shown below its
signature as its Domestic Office address; or
in the case of each party, such other address as such party may, by written
notice to the other parties to this Agreement, have designated as its address
for notices.
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<PAGE> 60
Notices given by facsimile, telegram, or telex shall be deemed to have been
given when sent, if properly addressed to the party to whom sent, at its
address, as aforesaid.
Each Bank shall be entitled to rely upon all telephonic notices given by an
Authorized Person pursuant to Sections 1.3, 1.4, 1.5, 3.3, or 6.2, and the
Company shall hold each Bank harmless from any loss, cost, or expense ensuing
from any such reliance, except for such loss, cost or expenses as a result of
the Bank's gross negligence or willful misconduct. All notices, waivers, or
consents given to, or any requests made upon, the Company by any Bank or holder
of any Note shall be promptly notified to all other parties to this Agreement.
Whenever a notice, declaration, or other action is required to be taken, given,
or made by the Majority Banks or the Outstanding Majority Banks, such notice,
declaration, or action shall be in writing and shall be signed by, as the case
may be, Banks having an aggregate Percentage of 66-2/3% or more or Banks having
66-2/3% or more of the aggregate principal amount of Loans outstanding.
14.4 COMPUTATIONS. Where the character or amount of any asset or liability
or item of income or expense is required to be determined, or any consolidation
or other accounting computation is required to be made, for the purpose of this
Agreement, such determination or calculation shall, to the extent applicable and
except as otherwise specified in this Agreement, be made in accordance with the
Company's then current method of accounting, which method must be in accordance
with GAAP; provided, however, if any changes in accounting principles from those
used in the preparation of the financial statements referred to in Section 8.4
hereafter occasioned by the promulgation of rules, regulations, pronouncements,
and opinions by or required by the Financial Accounting Standards Board or the
American Institute of Certified Public Accountants (or successors thereto or
agencies with similar functions) result in a change in the method of calculation
of the financial covenants, standards, or terms found in Section 9.2 hereof, the
parties hereto agree to enter into negotiations to amend such provisions so as
equitably to reflect such changes with the desired result that the criteria for
evaluating the Company's financial condition shall be the same after such
changes as if such changes had not been made.
14.5 CONFIDENTIALITY. Unless the Company otherwise agrees in writing, each
Bank hereby agrees to keep all Proprietary Information (as defined below)
confidential and not to disclose or reveal any Proprietary Information to any
Person other than the Bank's directors, officers, employees, Affiliates, and
agents, and then only on a confidential basis; provided, however, that a Bank
may disclose Proprietary Information (a) as required by law, rule, regulation,
or judicial process, (b) to its attorneys and accountants, (c) as requested or
required by any state, federal, or foreign authority or examiner regulating
banks or banking, or (d) to actual or potential assignees or participants as
permitted by Section 14.6.3. For purposes of this Agreement, the term
"Proprietary Information" shall include all information about the Company, any
Subsidiary, or any of their respective Affiliates which has been furnished by
the Company, any Subsidiary, or any of their respective Affiliates, whether
furnished before or after the date hereof, and
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<PAGE> 61
regardless of the manner furnished; provided, however, that Proprietary
Information shall not include information which (x) is or becomes generally
available to the public other than as a result of a disclosure by a Bank not
permitted by this Agreement, (y) was available to a Bank on a nonconfidential
basis prior to its disclosure to such Bank by the Company, any Subsidiary, or
any of their respective Affiliates, or (z) becomes available to a Bank on a
nonconfidential basis from a Person other than the Company, any Subsidiary, or
any of their respective Affiliates who, to the best knowledge of such Bank, is
not otherwise bound by a confidentiality agreement with the Company, any
Subsidiary, or any of their respective Affiliates, or, to the best knowledge of
such Bank, is not otherwise prohibited from transmitting the information to such
Bank.
14.6 Assignments and Participations.
------------------------------
14.6.1 ASSIGNMENTS. Unless the Company otherwise consents in
writing, which consent shall not be unreasonably withheld, no holder of any
Note (including any Bank) shall assign or transfer such Note or any
interest therein to any other Person, except as otherwise permitted under
Section 14.6. Except as otherwise expressly agreed in writing by the
Company, no Bank shall, by reason of the assignment or transfer of any Note
or otherwise, be relieved of any of its obligations hereunder. Each
transferee of any Note shall take such Note subject to the provisions of
this Agreement and to any request made, waiver or consent given, or other
action taken hereunder, prior to such transfer, by each previous holder of
such Note; and the Company shall be entitled to conclusively assume that
the transferee shall thereafter be vested with all rights and powers under
this Agreement of the Bank named as the payee of the Note which is the
subject of such transfer. Nothing herein shall prohibit any Bank from
pledging or assigning any Note to any Federal Reserve Bank pursuant to
applicable law.
14.6.2 PARTICIPATIONS. Any Bank may grant participations in or to
all or any part of any Loan or Loans then owing to such Bank and the Notes
held by such Bank without the consent of the Company. Except as otherwise
expressly agreed in writing by the Company, no grant of a participation
shall relieve any Bank of its obligations hereunder, the Company shall be
entitled to deal solely with the Banks (and their respective assignees) for
all purposes of this Agreement and the Notes, and no holder of a
participation in all or any part of the Loans or the Notes shall have any
rights under this Agreement, except that the holder of a participation
shall be entitled to the benefits of Section 7 hereunder (but the dollar
amount of such Section 7 benefits shall not exceed those benefits that the
assigning Bank would have otherwise received).
14.6.3 DISCLOSURE OF INFORMATION. The Company hereby consents to
the disclosure of any information obtained in connection herewith by any
Bank to any Person which is an assignee or potential assignee or a
participant or potential participant pursuant to Section 14.6.1 or 14.6.2,
it being understood that such Bank shall advise any such actual or
potential assignee or participant of its obligation to keep confidential
any nonpublic information disclosed to it
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<PAGE> 62
pursuant to this Section 14.6.3 and, prior to the disclosure of such
information, shall cause each such actual or potential assignee or
participant to execute a confidentiality agreement containing the
confidentiality provisions set forth in Section 14.5.
14.7 SECURITIES LAWS. Each Bank represents that it is the present intention
of such Bank to acquire each Note drawn to its order for its own account and not
with a view to the distribution or sale thereof, subject, nevertheless, to the
necessity that such Bank remain in control at all times of the disposition of
the property held by it for its own account, it being understood that the
foregoing representation shall not affect the character of the Loans as
commercial lending transactions.
14.8 COSTS AND EXPENSES. The Company agrees to pay on demand all reasonable
out-of-pocket costs and expenses of the Banks (including the reasonable fees and
out-of-pocket expenses of counsel for the Banks and reasonable allocated costs
of in-house counsel for the Banks) in connection with the enforcement of this
Agreement, the Notes, and any other instruments or documents executed in
connection herewith.
14.9 GOVERNING LAW. This Agreement and each Note shall be a contract made
under and governed by the internal laws of the State of Ohio. Wherever possible
each provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement. All obligations of the Company and rights of the Banks and any other
holders of the Notes expressed herein or in the Notes shall be in addition to
and not in limitation of those provided by applicable law.
14.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Agreement. When counterparts executed
by all the parties shall have been lodged with the Company (or, in the case of
any Bank as to which an executed counterpart shall not have been so lodged, the
Company shall have received telegraphic, telex, or other written confirmation
from such Bank of execution of a counterpart hereof by such Bank), this
Agreement shall become effective as of the date hereof.
14.11 CAPTIONS. Section captions used in this Agreement are for convenience
only, and shall not affect the construction of this Agreement.
14.12 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company, each Bank, and their respective successors and assigns, and shall inure
to the sole benefit of the Company, each Bank, and their respective successors
and assigns.
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<PAGE> 63
14.13 ENTIRE AGREEMENT. This Agreement supersedes any prior agreement or
understanding of the parties hereto, and contains the entire agreement of the
parties hereto, with respect to the matters covered hereby.
14.14 APPOINTMENT OF ADMINISTRATOR. TRW hereby appoints National City Bank
to serve as administrator (the "Administrator") to coordinate any votes that may
be taken under this Agreement and to distribute payments, if any, required to be
made to the Banks on a pro rata basis as provided in Section 11.2. In the event
that National City Bank is unable or unwilling to act as Administrator, TRW
shall appoint a successor, subject to the approval of the Majority Banks, which
shall not be unreasonably withheld. Except as otherwise specifically provided
herein, borrowing, repayment and fee procedures set forth in this Agreement
shall not be affected by the appointment of the Administrator.
14.15 NON-U.S. BANK TAX INFORMATION. Upon the request of the Company, any
Bank that is not organized under the laws of the United States of America or any
state thereof will (i) deliver to the Company accurate and complete signed
copies of Forms 1001 and 4224 (or such additional or successor forms) and any
amendments or modifications thereto and (ii) inform the Company if the Company
can no longer rely upon such forms.
14.16 REGULATION U. The Company hereby represents and warrants that neither
the Company nor any of its Consolidated Subsidiaries is principally engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System) and covenants that the Company's use of
proceeds of any borrowings under this Agreement will not cause a violation of
Regulation U. Each of the Banks hereby represents and warrants to the Company
that it is not relying and will not rely on any margin stock (as described
above) in determining whether to extend or maintain credit under this Agreement.
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<PAGE> 64
SIGNATURE PAGES TO MULTI-YEAR REVOLVING CREDIT AGREEMENT, DATED AS OF
---------------------------------------------------------------------
JULY 1, 1992, AS AMENDED PURSUANT TO AGREEMENTS DATED AS OF JUNE 30,
--------------------------------------------------------------------
1993, MARCH 1, 1994 AND FEBRUARY 28, 1995 AND AS AMENDED AND RESTATED
---------------------------------------------------------------------
AS OF MAY 8, 1996
-----------------
Delivered at Cleveland, Ohio, as of the day and year first above written.
TRW INC.
/s/ William C. Seeger Jr.
By William C. Seeger Jr.
Vice President and Treasurer
1900 Richmond Road
Cleveland, Ohio 44124
Telephone: 216/291-7540
Facsimile: 216/291-7831
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<PAGE> 65
BANKS:
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Bank of America National Trust
----- and Savings Association
By Deborah Graziano
Title: Vice President
DOMESTIC OFFICE
Bank of America NT & SA
1850 Gateway Boulevard
Concord, California 94520
Telephone: (510) 675-7485
Facsimile: (510) 675-7531
Attention: Selina Button
EUROCURRENCY OFFICE
Bank of America NT & SA
1850 Gateway Boulevard
Concord, California 94520
Telephone: (510) 675-7485
Facsimile: (510) 675-7531
Attention: Selina Button
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Bank of America
ABA Routing No.: 121000358
Account No.: 12331-83980
Account Name: Incoming Money Transfer
Reference No.: TRW Commitment Fee
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<PAGE> 66
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Barclays Bank PLC
-----
By
DOMESTIC OFFICE
Barclays Bank PLC
222 Broadway
New York, New York 10038
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Barclays Nassau, Bahamas Branch
c/o Barclays Bank PLC
222 Broadway
New York, New York 10038
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Barclays Bank PLC-New York
ABA Routing No.: 026-002-574
Account No.: 050-019-104
Account Name: TRW
Reference No.: TRW Commitment Fee;
N. SANGLE
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<PAGE> 67
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % The Chase Manhattan Bank, N.A.
-----
By
DOMESTIC OFFICE
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
Fifth Floor
New York, New York 10081
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
Fifth Floor
New York, New York 10081
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Chase Manhattan Bank
ABA Routing No.: 021-000021
Account No.: 900-9-000036
Account Name: Commercial Loan Opns.
Reference No.: TRW Commitment Fee
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<PAGE> 68
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Citibank, N.A.
-----
By
DOMESTIC OFFICE
Citibank, N.A.
c/o Citicorp Securities, Inc.
200 S. Wacker Dr.
Chicago, IL 60606
Telephone: 312-993-3871
Facsimile: 312-993-6840
EUROCURRENCY OFFICE
Citibank, N.A.
c/o Citicorp Securities, Inc.
200 S. Wacker Dr.
Chicago, IL 60606
Telephone: 312-993-3871
Facsimile: 312-993-6840
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Citibank, N.A., New York
ABA Routing No.: 021000089
Account No.: 38483095
Account Name: Chicago NEO Loan Acct.
Reference No.: TRW Commitment Fee
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<PAGE> 69
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % Morgan Guaranty Trust Company
----- of New York
By
DOMESTIC OFFICE
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260-0060
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Morgan Guaranty Trust Company
of New York
Nassau, Bahamas Office
c/o J.P. Morgan Services Inc.
Euro-Loan Servicing Unit
902 Market Street
Wilmington, Delaware 19801
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Morgan Guaranty Trust
ABA Routing No.: 021000238
Account No.: 999-99-090
Account Name: _____________
Reference No.: TRW Com. Fee
Corp. Proc. Module 30
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<PAGE> 70
Amount of Percentage of
Commitment Commitments
$60,000,000 8 % National City Bank
-----
By
DOMESTIC OFFICE
National City Bank
National City Center
P. O. Box 5756
Cleveland, Ohio 44101-0756
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
National City Bank
National City Center
P. O. Box 5756
Cleveland, Ohio 44101-0756
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: National City Bank
ABA Routing No.: 041000124
Account No.: 2537557
Account Name: _____________
Reference No.: TRW Commitment Fee
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<PAGE> 71
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$60,000,000 8 % The Sumitomo Bank, Limited
-----
By
DOMESTIC OFFICE
The Sumitomo Bank, Limited
Chicago Branch
Sears Tower
233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone: (312) 876-6431
Facsimile: (312) 876-6436
EUROCURRENCY OFFICE
The Sumitomo Bank, Limited
Chicago Branch
Sears Tower
233 South Wacker Drive, Suite 4800
Chicago, Illinois 60606-6448
Telephone: (312) 876-6431
Facsimile: (312) 876-6436
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: FNB of Chicago
ABA Routing No.: 071000013
Account No.: 15-01208
Account Name: Sumitomo Bank Ltd,
Chicago Branch
Reference No.: TRW Commitment Fee
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<PAGE> 72
Amount of Percentage of
Commitment Commitments
- ---------- -------------
$45,000,000 6 % Banque Nationale de Paris
-----
By
DOMESTIC OFFICE
Banque Nationale de Paris
Chicago Branch
Rookery Building
209 South LaSalle, 5th Floor
Chicago, Illinois 60604
Telephone: (312) 977-2200
Facsimile: (312) 977-1380
EUROCURRENCY OFFICE
Banque Nationale de Paris
Chicago Branch
Rookery Building
209 South LaSalle, 5th Floor
Chicago, Illinois 60604
Telephone: (312) 977-2200
Facsimile: (312) 977-1380
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Banque Nationale de
Paris,
New York Branch
ABA Routing No.: 026007689
Account No.: 14119400189
Account Name: BNP, Chicago Branch
Reference No.: TRW Commitment Fee
-44-
<PAGE> 73
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % Dresdner Bank AG
-----
By
By
DOMESTIC OFFICE
Dresdner Bank AG New York Branch
75 Wall Street
New York, New York 10005
Telephone: (212) 429-2244
Facsimile: (212) 429-2524
EUROCURRENCY OFFICE
Dresdner Bank AG Grand Cayman Branch
c/o Dresdner Bank AG New York Branch
75 Wall Street
New York, New York 10005
Telephone: (212) 429-2244
Facsimile: (212) 429-2524
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Chase Manhattan (NY,NY)
ABA Routing No.: 021-000-021
Account No.: 920-1-059-079
Account Name: Dresdner Bank AG,
New York Branch
Reference No.: TRW Commitment Fee
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<PAGE> 74
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$45,000,000 6 % NBD Bank
-----
By Andrew W. Strait
Title: Vice President
DOMESTIC OFFICE
NBD Bank
Attention: Mid-Corporate Banking
611 Woodward
Detroit, Michigan 48226
Telephone: (313) 225-3300
Facsimile: (313) 225-3269
EUROCURRENCY OFFICE
NBD Bank, N.A.
Attention: Mid-Corporate Banking
611 Woodward
Detroit, Michigan 48226
Telephone: (313) 225-3300
Facsimile: (313) 225-3269
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: NBD Bank
ABA Routing No.: 072000326
Account No.: 1424183
Account Name: Commercial Loans
Reference No.: TRW Commitment Fee
-46-
<PAGE> 75
Amount of Percentage of
Commitment Commitments
$45,000,000 6 % Royal Bank of Canada
-----
By Patrick Shields
Title: Manager, Corporate Banking
DOMESTIC OFFICE
Royal Bank of Canada
New York Branch
c/o Financial Square, 23rd Floor
New York, New York 10005
Telephone: (212) 428-6323
Facsimile: (212) 428-2372
EUROCURRENCY OFFICE
Royal Bank of Canada
New York Branch
c/o Financial Square, 23rd Floor
New York, New York 10005
Telephone: (212) 428-6323
Facsimile: (212) 428-2372
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Chase Manhattan, NY
ABA Routing No.: 021000021
Account No.: 9201033363
Account Name: Royal Bank
Reference No.: TRW Commitment Fee
-47-
<PAGE> 76
Amount of Percentage of
Commitment Commitments
$30,000,000 4 % The Sakura Bank, Limited
-----
By
DOMESTIC OFFICE
The Sakura Bank, Limited
Chicago Branch
227 West Monroe Street
Suite 4700
Chicago, Illinois 60606
Telephone: (312) 580-3276
Facsimile: (312) 332-5345
EUROCURRENCY OFFICE
The Sakura Bank, Limited
Chicago Branch
227 West Monroe Street
Suite 4700
Chicago, Illinois 60606
Telephone: (312) 580-3276
Facsimile: (312) 332-5345
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: FNB of Chicago
ABA Routing No.: 071000013
Account No.: 1512951
Account Name: Sakura Bank, Chicago
Reference No.: TRW Commitment Fee
-48-
<PAGE> 77
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % Society National Bank
-----
By
DOMESTIC OFFICE
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Society National Bank
127 Public Square
Cleveland, Ohio 44114
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: Society National Bank
ABA Routing No.: 041001039
Account No.: 00100-39140
Account Name: Commercial Loan Opns
Reference No.: TRW Commitment Fee
-49-
<PAGE> 78
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % The Tokai Bank, Limited
-----
By
DOMESTIC OFFICE
The Tokai Bank, Limited
Chicago Branch
Attention: Corporate Finance
181 West Madison Street, Suite 3600
Chicago, Illinois 60602
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
The Tokai Bank, Limited
Chicago Branch
Attention: Corporate Finance
181 West Madison Street, Suite 3600
Chicago, Illinois 60602
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: FNB of Chicago
ABA Routing No.: 071000013
Account No.: 15-08997
Account Name: Tokai Bank, Chicago Branch
Reference No.: TRW Commitment Fee
Loan Administration
-50-
<PAGE> 79
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % Union Bank of Switzerland
-----
By
DOMESTIC OFFICE
Union Bank of Switzerland
Chicago Branch
30 South Wacker Drive, Suite 40
Chicago, Illinois 60606
Telephone: _____________
Facsimile: _____________
EUROCURRENCY OFFICE
Union Bank of Switzerland
Chicago Branch
30 South Wacker Drive, Suite 40
Chicago, Illinois 60606
Telephone: _____________
Facsimile: _____________
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: FNB of Chicago
ABA Routing No.: 071000013
Account No.: 15-12188
Account Name: UBS, Chicago Branch
Reference No.: TRW Commitment Fee
-51-
<PAGE> 80
Amount of Percentage of
Commitment Commitments
- ---------- -----------
$30,000,000 4 % Wells Fargo Bank, N.A.
-----
By
By
DOMESTIC OFFICE
Wells Fargo Bank, N.A.
Special Loan Processing
18700 NW Walker Road, Bldg. 92
Beaverton, OR 97006
Telephone: (503) 614-6436
Facsimile: (503) 614-5878
EUROCURRENCY OFFICE
Wells Fargo Bank, N.A.
Special Loan Processing
18700 NW Walker Road, Bldg. 92
Beaverton, OR 97006
Telephone: (503) 614-6436
Facsimile: (503) 614-5878
ELECTRONIC PAYMENT INSTRUCTIONS
Receiving Bank: First Interstate Bank of California
ABA Routing No.: 122000218
Account No.: 3030-98989
Account Name: Special Loan Processing
Reference No.: TRW
- ------------ ----
$750,000,000 100% Total
-52-
<PAGE> 81
EXHIBIT A
to
Multi-Year Revolving
Credit Agreement
REVOLVING NOTE
Up to a maximum of
$---------------
(or the Eurocurrency or Dated: _____________, 1996
Local Currency equivalent Cleveland, Ohio
hereof)
FOR VALUE RECEIVED, the undersigned hereby promises to pay to the order
of ___________________ (the "Bank") for the account of its Domestic or
Eurocurrency Office, as applicable (capitalized terms used herein but not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement referred to below), the outstanding principal amount of the
Loans made by the Bank to the undersigned pursuant to the Credit Agreement. The
principal amount of each Loan evidenced hereby shall be payable on the earliest
of (i) the Termination Date, (ii) the end of the Interest Period with respect to
such Loan (unless such Loan is Continued or Converted) or (iii) such other date
as the Company and the Relevant Bank may agree in writing.
The undersigned promises to pay interest on the unpaid principal amount
of each Loan evidenced hereby from the date such Loan is made until the
principal amount of such Loan is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Both principal of, and interest on, any Loan are payable in immediately
available funds in the currency of such Loan to the Bank at its Domestic or
Eurodollar Office that made the Loan. The Loans made by the Bank to the
undersigned, and all payments made on account of principal thereof, shall be
recorded by the Bank and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Note.
This Note is one of the Notes referred to in, and is entitled to the
benefits of, the Multi-Year Revolving Credit Agreement dated as of July 1, 1992,
as amended and restated as of May 8, 1996, among the undersigned, the Bank, and
the other bank parties named therein, as Banks (as the same may be amended,
modified, or supplemented and in effect from time to time, the "Credit
Agreement"). The Credit Agreement, among other things, (i) provides for the
making of Loans by the Bank to the undersigned from time to time in an aggregate
principal amount not to exceed at any time the dollar amount first mentioned
above and the indebtedness of the undersigned resulting from each such Loan
being evidenced by this Note, and (ii)
<PAGE> 82
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for payments on account of the principal
hereof prior to the maturity hereof upon the terms and conditions and in
accordance with the provisions therein specified. Reference is hereby made to
the Credit Agreement for a statement of said terms and provisions.
In addition to, and not in limitation of, the foregoing and the
provisions of the Credit Agreement hereinabove referred to, the undersigned
further agrees, subject only to any limitation imposed by applicable law, to pay
all expenses, including reasonable attorneys' fees and expenses, incurred by the
holder of this Note in seeking to collect any amounts payable hereunder which
are not paid when due, whether by acceleration or otherwise.
DEMAND, PRESENTMENT, PROTEST, AND NOTICE OF NON-PAYMENT ARE HEREBY
WAIVED BY THE UNDERSIGNED.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF
LAWS PROVISIONS) OF THE STATE OF OHIO.
TRW INC.
By:
-----------------------------
William C. Seeger Jr.
Vice President and Treasurer
<PAGE> 83
Schedule Attached to Revolving Note dated ___________, 1996 of TRW Inc. payable
to the order of ____________________________________
BASE RATE BORROWINGS
Unpaid
Date and Date and Amount Principal
Amount of of Repayment Balance of
Base Rate of Base Rate Base Rate Notation
Borrowing Borrowing Borrowings Made by
- --------- --------- ---------- -------
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<PAGE> 84
Schedule Attached to Revolving Note dated _______________, 1996 of TRW Inc.
payable to the order of _____________________________________________________
FIXED RATE BORROWINGS
Date, Amount, Date and Unpaid
and Type of Interest Amount of Principal Notation
Borrowing Period Repayment Balance Made by
- --------- ------ --------- ------- -------
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<PAGE> 85
EXHIBlT B
to
Multi-Year Revolving
Credit Agreement
COMPLIANCE CERTIFICATE
To: Each of the Bank Parties to the Credit Agreement referred to below
Reference is made to our Multi-Year Revolving Credit Agreement dated as
of July 1, 1992, as amended and restated as of May 8, 1996 (herein as amended,
modified or supplemented and in effect from time to time called the "CREDIT
AGREEMENT") with you. Terms used but not otherwise defined herein are used
herein as defined in the Credit Agreement.
The Company hereby certifies and warrants to you that the following is
a true and correct computation as at ______________19__ (the "Computation Date")
of Consolidated Net Worth contained in Section 9.2 of the Credit Agreement:
<TABLE>
<CAPTION>
Minimum Consolidated Net Worth
- ------------------------------
Required Under Section 3.2
--------------------------
<S> <C> <C>
$1,600,000,000
LESS: The lesser of (i) the aggregate amount
expended by the Company subsequent
to December 31, 1995 for repurchase of
its Common Stock and (ii) $600,000,000 $
------------------- $
-------------
CONSOLIDATED NET WORTH
OF THE COMPANY
Consolidated shareholders'
investment $
-------------------
PLUS: Minority interests $
------------------- $
--------------
</TABLE>
The Company hereby further certifies and warrants to you that no Event
of Default or Unmatured Event of Default has occurred and is continuing.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
executed and delivered by its duly authorized officer this ____day of
______________, 19__.
TRW INC.
By
----------------------
Its
---------------------
<PAGE> 86
EXHIBIT C
to
Multi-Year Revolving
Credit Agreement
___________________, 1992
To: Each of the Banks party to the
Credit Agreements referred to
below
Ladies and Gentlemen:
I am General Counsel of TRW Inc., an Ohio corporation (the "Company"), and have
acted in such capacity in connection with the Three-Year Revolving Credit
Agreement and the 364-Day Revolving Credit Agreement, each dated as of
July 1, 1992 (the "Credit Agreements") among the Company and each of the
financial institutions listed on the signature pages thereof. Capitalized
terms used but not otherwise defined are used herein as defined in the Credit
Agreements.
In connection with the opinions expressed below, I have examined or caused to be
examined by members of the TRW Law Department a copy of the Credit Agreements
and the Notes thereunder; and I have also made or caused to be made such other
examinations and inquiries as I have deemed necessary to enable me to give the
opinions hereinafter expressed. However, as to each of the opinions set forth
below which is limited to my knowledge, you should be aware that I have neither
made nor caused to be made any independent review for purposes of rendering this
opinion, although in the regular course of advising the Company I have reviewed
or caused to be reviewed various documents, records and matters of law.
Based upon the foregoing, I am of the opinion that:
<PAGE> 87
___________________, 1992
Page 2
1. The Company is a corporation duly incorporated and in good standing
under the laws of the State of Ohio.
2. The Company has full power to execute, deliver, and perform each of the
Credit Agreements and to borrow moneys thereunder and to execute,
deliver, and perform its obligations under the Notes.
3. The execution and delivery of the Credit Agreements and the Notes, the
borrowings under the Credit Agreements, and the performance by the
Company of its obligations under the Credit Agreements and the Notes,
have been duly authorized by all necessary corporate action, and do not
and will not contravene or conflict with any material provision of
applicable law now in effect or of the Amended Articles of
Incorporation or Regulations of the Company or, to my knowledge, of any
agreement for borrowed money or other material agreement binding upon
the Company.
4. The Credit Agreements and the Notes have been duly executed and
delivered by the Company and are the legal, valid, and binding
obligations of the Company, enforceable in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium laws or debtor relief proceedings or any
similar laws or proceedings affecting creditors' rights generally or by
general principles of equity.
I am a member of the bar of the State of Ohio and do not purport to be an expert
on, generally familiar with or qualified to express legal conclusions based on
laws other than the laws of the State of Ohio and the United States of America.
This opinion is being delivered to you solely for your benefit as creditor under
the Credit Agreements and may be relied upon only by you for such purpose.
Very truly yours,
Martin A. Coyle
General Counsel
<PAGE> 88
SCHEDULE 1.10
PRIOR FACILITIES
Bank of America National Trust and Savings Association
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and Bank of America
National Trust and Savings Association
Barclays Bank PLC
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and Barclays Bank
PLC
Banque Nationale de Paris
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and Banque
Nationale de Paris
The Chase Manhattan Bank N.A.
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and The Chase
Manhattan Bank N.A.
Citibank, N.A.
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and Citibank, N.A.
Dresdner Bank AG
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and Dresdner Bank
AG
<PAGE> 89
First Interstate Bank of California
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and First
Interstate Bank of California
Morgan Guaranty Trust Company of New York
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and Morgan Guaranty
Trust Company of New York
NBD Bank, N.A.
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and NBD Bank, N.A.
National City Bank
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and National City
Bank
Royal Bank of Canada
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and Royal Bank of
Canada
Society National Bank
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and Society
National Bank
The Sumitomo Bank, Limited
Credit Agreement dated as of January 1, 1985, as amended as of
September 3, 1985 and July 1, 1991 between TRW Inc. and The Sumitomo
Bank, Limited
-2-
<PAGE> 90
The Sakura Bank, Limited
Credit Agreement dated as of July 1, 1988, as amended as of July 1,
1991 between TRW Inc. and The Sakura Bank, Limited
The Tokai Bank, Limited
Credit Agreement dated as of July 1, 1988, as amended as of August 16,
1991 between TRW Inc. and The Tokai Bank, Limited
Credit Lyonnais
Credit Agreement dated as of January 10, 1992 between TRW Inc. and
Credit Lyonnais
Union Bank of Switzerland
Credit Agreement dated as of January 10, 1992 between TRW Inc. and
Union Bank of Switzerland
-3-
<PAGE> 91
SCHEDULE 8.5
UNDISCLOSED MATERIAL LEGAL PROCEEDINGS
None
<PAGE> 1
Exhibit 11
<TABLE>
<CAPTION>
TRW INC. AND SUBSIDIARIES
-------------------------
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(In Millions Except Per Share Amounts)
Years ended December 31
-----------------------
PRIMARY (A) 1996 1995 1994
- ----------- ---- ---- ----
<S> <C> <C> <C>
Earnings from continuing operations $ 182.4 $ 395.4 $ 277.1
Less preference dividend requirements 0.8 0.8 0.7
------- ------- -------
Earnings applicable to common shares
and common share equivalents 181.6 394.6 276.4
Earnings from discontinued operations 37.9 50.8 55.7
Gain on disposal of discontinued operations 259.8 n/a n/a
------- ------- -------
Net earnings applicable to common shares
and common share equivalents $ 479.3 $ 445.4 $ 332.1
======= ======= =======
Average common shares outstanding 128.7 130.6 129.2
Stock options and performance share rights, based on
the treasury stock method using average market price 3.0 2.6 2.4
------- ------- -------
Average common shares and common share
equivalents 131.7 133.2 131.6
===== ===== ======
Primary earnings per share from continuing operations $ 1.38 $ 2.96 $ 2.10
Primary earnings per share from discontinued operations 0.29 0.38 0.42
Primary earnings per share from gain on disposal of
discontinued operations 1.97 n/a n/a
------- ------- -------
Primary earnings per share $ 3.64 $ 3.34 $ 2.52
======= ====== =======
FULLY DILUTED (A)
- -----------------
Earnings from continuing operations applicable
to common shares and common share equivalents $ 181.6 $ 394.6 $ 276.4
Dividends assuming conversion of other
dilutive securities: (B)
Dilutive preference dividends 0.8 0.8 0.7
------- ------- -------
Earnings from continuing operations applicable
to fully diluted shares 182.4 395.4 277.1
Earnings from discontinued operations 37.9 50.8 55.7
Gain on disposal of discontinued operations 259.8 n/a n/a
------- ------- -------
Net earnings applicable to fully diluted shares $ 480.1 $ 446.2 $ 332.8
======= ======= =======
Average common shares outstanding 128.7 130.6 129.2
Common shares assuming conversion of
other dilutive securities: (B)
Dilutive preference shares 1.1 1.2 1.3
Stock options and performance share rights,
based on the treasury stock method using
closing market price if higher than
average market price 3.4 3.0 2.4
------- ------- -------
Average fully diluted shares 133.2 134.8 132.9
===== ===== =======
Fully diluted earnings per share from continuing operations $ 1.37 $ 2.93 $ 2.09
Fully diluted earnings per share from discontinued operations 0.28 0.38 0.41
Fully diluted earnings per share from gain on disposal
of discontinued operations 1.95 n/a n/a
------- ------- -------
Fully diluted earnings per share $ 3.60 $ 3.31 $ 2.50
====== ====== =======
<FN>
(A) The shares and per share amounts reflect a two-for-one stock split (in the form of a 100% stock dividend)
of the company's common stock which was effective as of November 8, 1996.
(B) Assuming the conversion of the Serial Preference Stock II - Series 1 and Series 3.
</TABLE>
<PAGE> 1
Exhibit 12
<TABLE>
<CAPTION>
TRW Inc. and Subsidiaries
Computation of Ratio of Earnings
to Fixed Charges - Unaudited
(In millions except ratio data)
Years Ended December 31
-----------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings from continuing
operations before income
taxes $302.2(A) $625.5 $435.5 $289.2 $276.4
Unconsolidated affiliates 1.4 1.3 (0.6) 0.7 (0.9)
Minority earnings 11.5 10.8 7.7 1.4 0.1
Fixed charges excluding
capitalized interest 129.0 137.2 145.3 177.5 208.1
------ ------ ------ ------ ------
Earnings $444.1 $774.8 $587.9 $468.8 $483.7
------ ------ ------ ------ ------
Fixed Charges:
Interest expense $84.2 $94.7 $104.7 $137.4 $162.1
Capitalized interest 3.5 5.1 6.6 7.9 12.7
Portion of rents representa-
tive of interest factor 43.2 41.4 39.2 37.9 45.8
Interest expense of uncon-
solidated affiliates 1.6 1.1 1.4 2.2 0.2
--- --- --- --- ---
Total fixed charges $132.5 $142.3 $151.9 $185.4 $220.8
------ ------ ------ ------ ------
Ratio of earnings to fixed 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. See "Special charges"
footnote in the Notes to Financial Statements.
</TABLE>
<PAGE> 1
Exhibit 13
Management's Discussion and Analysis of the
Results of Operations and Financial Condition TRW Inc.
RESULTS OF OPERATIONS
Record sales in 1996 resulted in the company reporting the highest net earnings
in its history, exceeding the previous records achieved in 1995. In addition,
the company's liquidity and financial condition improved significantly
during 1996, positioning the company to achieve strong future growth.
Consolidated sales in 1996 of $9.9 billion represented a 3 percent increase
over 1995 sales of $9.6 billion. Compared to 1994 sales of $8.5 billion, 1996
sales increased 16 percent. Net earnings in 1996 of $480 million exceeded
earnings of $446 million in 1995 and $333 million in 1994. Fully diluted
earnings per share were $3.60 in 1996, $3.31 in 1995 and $2.50 in 1994. The
earnings per share amounts have been restated to reflect the company's stock
dividend.
<TABLE>
<CAPTION>
CONSOLIDATED SALES IN BILLIONS
- ------------------------------
<S> <C>
94 $8.5
95 $9.6
96 $9.9
NET EARNINGS IN MILLIONS
- ------------------------
94 $333
95 $446
96 $480
FULLY DILUTED EARNINGS PER SHARE
- --------------------------------
94 $2.50
95 $3.31
96 $3.60
</TABLE>
The 1996 results included three special items. First, the company sold its
information services business for proceeds of $1.1 billion resulting in a gain
of $484 million ($260 million after tax, or $1.95 per share). Second, the
company recorded charges of $314 million ($202 million after tax, or $1.52 per
share) primarily for actions taken, in part, to enhance the company's
competitiveness. And third, the company applied the provisions 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," resulting in the
recognition of $71 million ($50 million after tax, or $.37 per share) of
impairment losses. The losses were primarily a result of technological changes
and the decision to close certain facilities in the Automotive segment.
Automotive Segment
Sales in 1996 rose to a record $6.49 billion from the 1995 sales level of $6.47
billion. The increase in sales resulted primarily from higher volume in
virtually all product lines partially offset by lower pricing and the effect of
unfavorable exchange rates. Operating profit in 1996 was $319 million compared
to $607 million in 1995. Included in 1996 operating profit was $290 million of
charges relating to asset impairments and writedowns, consolidation of
manufacturing plants, severance costs and litigation and warranty expenses.
Excluding these charges, operating profit in 1996 was $609 million. The increase
in operating profit was primarily due to the effect of aggressive cost
reductions and the introduction of new inflator technologies which more than
offset the effects of lower pricing and new product development costs.
<TABLE>
<CAPTION>
SALES IN BILLIONS
- -----------------------
<S> <C>
94 $5.68
95 $6.47
96 $6.49
</TABLE>
Sales of $6.47 billion in 1995 represented a 14 percent increase over 1994 sales
of $5.68 billion. Operating profit in 1995 increased 28 percent to $607 million
from the $476 million reported in 1994. The increase in sales and operating
profit was the result of higher volume in the North American air bag and
steering systems businesses and all European automotive businesses, primarily in
air bag and steering systems. Favorable exchange rates also contributed to the
sales increase.
<TABLE>
<CAPTION>
OPERATING PROFIT IN MILLIONS
- ----------------------------
<S> <C>
94 $476
95 $607
96 $319
</TABLE>
The company has invested and expects to continue to invest in areas of
significant potential growth, such as smart restraint systems, side-impact air
bags, power rack and pinion steering, electrically assisted steering and
advanced electronic components. TRW will continue to take advantage of
opportunities to enhance its global
17
<PAGE> 2
Management's Discussion and Analysis
of the Results of Operations and Financial Condition TRW Inc.
RESULTS OF OPERATIONS (CONTINUED)
competitiveness through internal growth and strategic alliances. Examples of the
progress made during 1996 include the formation of 10 alliances, joint ventures
and acquisitions in 7 countries and the acquisition of a producer of steering
wheel systems. In addition, we completed in February 1997, the acquisition of an
eighty percent equity interest in the air bag and steering wheel businesses of
Magna International. These operations supply air bag modules, inflators,
propellants, steering wheels and other related automotive components. TRW and
Magna also agreed to form a strategic alliance for the design, development and
production of automotive products for the global market. Under this alliance,
TRW will lead development efforts in occupant restraint systems, including air
bags, seatbelts, inflators, sensors and steering wheels.
The company anticipates that 1997 North American automotive and light truck
production will be stable with the 1996 levels. We foresee modest production
growth in Western Europe and strong growth in the emerging markets of Eastern
Europe and Asia. Strong price pressure is expected to continue across all
product lines. Productivity improvements, material cost reductions and the
introduction of new, lower cost technologies will be the main initiatives taken
to mitigate the price pressure.
Space and Defense Segment
Driven by new contract awards, sales in 1996 increased 9 percent to $3.36
billion compared to $3.10 billion in 1995 and was the third consecutive year of
sales growth. Operating profit in 1996 was $157 million compared to $192 million
in 1995. The lower operating profit was due primarily to the effect of program
reserves more than offsetting the profit from the higher sales volume. Included
in 1996 and 1995 operating profit were $90 million and $30 million,
respectively, of charges related primarily to contract reserves.
<TABLE>
<CAPTION>
SALES IN BILLIONS
- -------------------------
<S> <C>
94 $2.81
95 $3.10
96 $3.36
</TABLE>
Sales in 1995 increased 10 percent to $3.10 billion from the $2.81 billion
reported in 1994. Operating profit of $192 million was 10 percent higher than
1994's operating profit of $175 million. The strong sales growth resulting from
new contract awards and existing business more than offset the effect of
contracts nearing completion. The increase in operating profit resulted
primarily from the absence of investments for new business initiatives partially
offset by lower fee accruals during the early period of new programs and the net
effect of program reserves.
<TABLE>
<CAPTION>
OPERATING PROFIT IN MILLIONS
- ----------------------------
<S> <C>
94 $175
95 $192
96 $157
</TABLE>
Continuing pressure on the Department of Defense, NASA and other U.S. Government
agency budgets could affect the level of future revenues and operating profits.
However, government funding for all major TRW contracts appears to be stable,
and the company does not anticipate any unfavorable effect on operations
relating to program terminations or budget reallocations. The diversity of our
programs helps insulate the company from funding fluctuations on any given
contract. We feel that our business is well positioned for growth in our
traditional federal government markets, as well as our targeted commercial and
international markets. We remain focused on bidding and winning new contracts
and on continuing to provide outstanding products and services to our customers.
Backlog estimates at the end of 1996 totaled a record $5.30 billion, up 4
percent from $5.12 billion at the end of 1995. The backlog growth was driven by
a number of key program awards in both defense and non-defense related
markets. Furthermore, our reported backlog has grown by 29 percent since 1994,
an impressive statistic considering the reduction in total defense outlays that
has occurred during this period. Reported backlog at the end of 1996 does not
include $2.9 billion of negotiated and priced, but not exercised, options for
defense and non-defense programs. The exercise of the options is at the
discretion of the customer and, as in the case of Government contracts
generally, dependent on future government funding.
Special Items
During 1996, the company recorded charges totaling $314 million ($202
million after tax, or $1.52 per share). The charges were taken primarily for
actions to enhance the company's competitiveness. The company believes these
actions will provide for a strong future with solid growth. As a result of these
actions, several manufacturing facilities located throughout the world will be
closed or consolidated, and employment company-wide will be
18
<PAGE> 3
Management's Discussion and Analysis of the Results
of Operations and Financial Condition TRW Inc.
RESULTS OF OPERATIONS (CONTINUED)
reduced by approximately 2,500 people. Refer to the "Special charges" footnote
in the Notes to Financial Statements for further discussion.
Discontinued Operations
During 1996, the company sold its information services business receiving
proceeds of $1.1 billion. This sale resulted in a gain of $484 million ($260
million after tax, or $1.95 per share). The proceeds from the sale were used to
repay debt, to fund investment opportunities and to repurchase the company's
Common Stock. The operating results of the information services business and the
related transaction gain are reflected as discontinued operations for all
periods presented in the financial statements.
Interest Expense
Interest expense in 1996 was $84 million compared to $95 million in 1995
and $105 million in 1994. The decrease in interest expense in 1996 was
primarily due to lower average debt levels. The decrease in interest expense
from 1994 to 1995 was due to lower average debt levels partially offset by
higher U.S. interest rates.
Income Taxes
The effective tax rate on continuing operations was 39.6 percent compared to
36.8 percent in 1995 and 36.4 percent in 1994. The higher effective tax rate in
1996 was primarily due to the absence of a current tax benefit for certain of
the special charges taken during 1996.
Shareholders' Investment
On October 23, 1996, the company's Board of Directors authorized a two-for-one
stock split effected in the form of a stock dividend. Accordingly, all
references to the number of shares and per share amounts have been restated to
give retroactive recognition to the stock dividend.
International Operations
International sales were $3.94 billion, or 40 percent of TRW sales in 1996;
$3.92 billion, or 41 percent of sales in 1995; and $3.11 billion, or 37 percent
of sales in 1994. U.S. export sales included in those amounts were $764 million
in 1996, $813 million in 1995 and $595 million in 1994. Most of TRW's non-U.S.
operations are included in the Automotive segment and are located in Europe,
Canada, Brazil and the Pacific Basin. TRW's non-U.S. operations are subject to
the usual risks that may affect such operations; however, most of the assets of
its non-U.S. operations are in countries where the company believes such risks
to be minimal.
Liquidity and Financial Position
Cash flow from operations in 1996 of $711 million and net divestiture proceeds
of $789 million were used primarily for capital expenditures of $500 million,
reacquisition of common stock of $361 million, dividend payments of $148 million
and the repayment of debt of $167 million. Net debt at December 31, 1996, was
$196 million compared to $692 million at the end of 1995. The ratio of net debt
(short-term debt, current portion of long-term debt and long-term debt less cash
and cash equivalents) to total capital (net debt, minority interests and
shareholders' investment) was 8 percent at December 31, 1996, compared to 24
percent at December 31, 1995. The percentage of fixed-rate debt to total debt
was 86 percent at the end of 1996.
During 1996, 7.9 million shares of TRW Common Stock were repurchased for
approximately $366 million, of which $5 million was settled in January 1997.
Pursuant to a Board of Directors authorization, the company may repurchase up to
an additional 12 million shares of TRW Common Stock. The company plans to
purchase the additional shares from time to time, depending on market
conditions.
TRW's non-U.S. operations are generally financed by borrowings from banks or
through intercompany loans in the local currency of the borrower and by equity
capital invested by TRW and minority shareholders. There are no significant
restrictions on the remittance of funds by the company's non-U.S. subsidiaries
to the United States. A discussion of TRW's credit facilities is contained in
the "Debt and credit agreements" footnote in the Notes to Financial Statements.
The company is subject to inherent risks attributed to operating in a global
economy. It is the company's policy to utilize derivative financial instruments
to manage its interest rate and foreign currency exchange risks. The company
uses derivatives to hedge its exposure to short-term interest rate changes as a
lower cost substitute for the issuance of fixed-rate debt after taking into
consideration account-related counterparty risk. The company manages cash flow
transactional foreign exchange risk pursuant to a written corporate policy.
Forward contracts and to a lesser extent options are utilized to protect the
company's cash flow from adverse movements in exchange rates. The company is
exposed to credit loss in the event of nonperformance by the counterparties to
the derivative financial instruments. The company diversifies the counterparties
used and has minimum credit standards for counterparties as a means
19
<PAGE> 4
Management's Discussion and Analysis of the
Results of Operations and Financial Condition TRW Inc.
RESULTS OF OPERATIONS (CONTINUED)
to limit this exposure and anticipates that the counterparties will fully
satisfy their obligations under the contracts. Derivative financial instruments
are viewed by the company as a risk management tool and are not used for
speculative or trading purposes. The effect of derivative transactions on the
company's net earnings for each of the three years in the period ended December
31, 1996, is not material.
Capital expenditures were $500 million in 1996, $466 million in 1995 and
$488 million in 1994. The company will maintain a capital program with estimated
capital expenditures for 1997 totaling about $475 million. Approximately
two-thirds of these expenditures will be invested in the Automotive segment and
one-third in the Space and Defense segment. The company will continue to invest
in its automotive growth businesses, including air bag systems, power rack and
pinion steering and automotive electronics technology. Space and defense
expenditures will be used to support major new contract awards and our existing
business base as well as to support research and development of next generation
technologies.
In addition to the planned level of 1997 capital expenditures discussed above,
the company plans to invest in new investment opportunities. These investment
opportunities currently include the acquisition of the Magna International
businesses, with a cost of approximately $450 million. In addition, we expect to
continue our involvement in Odyssey, a venture for which TRW is building a
satellite-based personal communications system. In January 1997, Odyssey entered
into a memorandum of understanding with ChinaSat, a wholly-owned subsidiary of
China's Ministry of Post and Telecommunications. The agreement gives ChinaSat
exclusive rights to distribute Odyssey satellite-based cellular phone, fax and
data services in the People's Republic of China. The level of TRW's investment
in Odyssey will be determined during 1997.
We believe the company's current financial position and financing arrangements
allow flexibility in worldwide financing activities and permit us to respond to
changing conditions in credit markets. The existing arrangements are not
indicative of the company's potential borrowing capacity. We believe that funds
generated from operations and existing borrowing capacity are adequate to fund
the current share repurchase program and support and finance planned growth,
capital expenditures, company-sponsored research and development programs and
dividend payments to shareholders.
Other Matters
Federal, state and local requirements relating to the discharge of materials
into the environment, or otherwise relating to the protection of the
environment, have had and will continue to have an effect on TRW and its
operations. The company is conducting a number of environmental investigations
and remedial actions at current and former company locations and, along with
other companies, has been named a potentially responsible party for certain
waste management sites. Each of these matters is subject to various
uncertainties, and it is possible that some of these matters may be resolved
unfavorably to the company. A reserve estimate for each matter is established
using standard engineering cost estimating techniques. In the determination of
such costs, consideration is given to professional judgment of company
environmental engineers in consultation with outside environmental specialists
when necessary. At multi-party sites, the reserve estimate also reflects the
expected allocation of total project costs among the various potentially
responsible parties. At December 31, 1996, the company had reserves for
environmental matters of $77 million, including $7 million of additional
accruals recorded during the year. The company aggressively pursues
reimbursement for environmental costs from its insurance carriers. However,
insurance recoveries are not recorded as a reduction of environmental costs
until they are fixed and determinable. At December 31, 1996, the "Other assets"
caption on the balance sheet includes $36 million of insurance recoveries
related to environmental matters. The company believes that any liability that
may result from the resolution of environmental matters for which sufficient
information is available to support these cost estimates will not have a
material adverse effect on the company's future results of operations and cash
flows. However, the company cannot predict the effect on the company's future
results of operations and cash flows of expenditures for aspects of certain
matters for which there is insufficient information. In addition, the company
cannot predict the effect of compliance with environmental laws and regulations
with respect to unknown environmental matters on the company's future results of
operations and cash flows or the possible effect of compliance with
environmental requirements imposed in the future.
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. Refer to
the "Contingencies" footnote in the Notes to Financial Statements for further
discussion.
20
<PAGE> 5
Financial Statements TRW Inc.
<TABLE>
<CAPTION>
STATEMENTS OF EARNINGS
- -----------------------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
- -----------------------------------------------------------------------------------------------------
In millions except per share data
- ---------------------------------------------------------------------------------------------------
Years ended December 31 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $9,857 $9,568 $8,491
Cost of sales 8,376 7,857 6,936
- -----------------------------------------------------------------------------------------------------
Gross profit 1,481 1,711 1,555
Administrative and selling expenses 613 592 597
Research and development expenses 412 392 390
Interest expense 84 95 105
Other expense(income)-net 70 7 27
- ----------------------------------------------------------------------------------------------------
Earnings from continuing operations
before income taxes 302 625 436
Income taxes 120 230 159
- ----------------------------------------------------------------------------------------------------
Earnings from continuing operations 182 395 277
Discontinued operations:
Earnings from operations 38 51 56
Gain on disposal 260 - -
- ----------------------------------------------------------------------------------------------------
Net earnings $ 480 $ 446 $ 333
- -----------------------------------------------------------------------------------------------------
Per share of common stock
Fully diluted
Continuing operations $1.37 $ 2.93 $ 2.09
Discontinued operations:
Earnings from operations .28 .38 .41
Gain on disposal 1.95 - -
- ----------------------------------------------------------------------------------------------------
Net earnings per share $3.60 $ 3.31 $ 2.50
- ----------------------------------------------------------------------------------------------------
Primary
Continuing operations $1.38 $ 2.96 $ 2.10
Discontinued operations:
Earnings from operations .29 .38 .42
Gain on disposal 1.97 - -
- ----------------------------------------------------------------------------------------------------
Net earnings per share $3.64 $ 3.34 $ 2.52
- ----------------------------------------------------------------------------------------------------
<FN>
See notes to financial statements.
</TABLE>
21
<PAGE> 6
Financial Statements TRW Inc.
<TABLE>
<CAPTION>
BALANCE SHEETS
- --------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------------
In millions
- ------------------------------------------------------------------------------------
December 31 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 386 $ 59
Accounts receivable, net of allowances of
$18 million and $16 million 1,378 1,327
Inventories
Finished products and work in process 295 294
Raw materials and supplies 229 236
- ------------------------------------------------------------------------------------
Total inventories 524 530
Prepaid expenses 69 67
Deferred income taxes 424 217
- ------------------------------------------------------------------------------------
Total current assets 2,781 2,200
Property, plant and equipment-on the basis of cost
Land 108 108
Buildings 1,584 1,553
Machinery and equipment 4,188 4,049
- ------------------------------------------------------------------------------------
5,880 5,710
Less accumulated depreciation and amortization 3,400 3,199
- ------------------------------------------------------------------------------------
Total property, plant and equipment-net 2,480 2,511
Intangible assets
Intangibles arising from acquisitions 258 245
Other 31 36
- ------------------------------------------------------------------------------------
289 281
Less accumulated amortization 78 78
- -----------------------------------------------------------------------------------
Total intangible assets-net 211 203
Other assets 427 317
Net assets of discontinued operations - 439
- ------------------------------------------------------------------------------------
$5,899 $5,670
- ------------------------------------------------------------------------------------
</TABLE>
22
<PAGE> 7
Financial Statements TRW Inc.
<TABLE>
<CAPTION>
Balance Sheets (continued)
- --------------------------------------------------------------------------------
TRW Inc. and subsidiaries
- --------------------------------------------------------------------------------
In millions
- --------------------------------------------------------------------------------
December 31 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and shareholders' investment
Current liabilities
Short-term debt $ 52 $ 133
Accrued compensation 386 349
Trade accounts payable 781 776
Other accruals 775 484
Dividends payable 39 36
Income taxes 52 26
Current portion of long-term debt 72 79
- -------------------------------------------------------------------------------
Total current liabilities 2,157 1,883
Long-term liabilities 767 779
Long-term debt 458 539
Deferred income taxes 272 250
Minority interests in subsidiaries 56 47
Shareholders' investment
Serial Preference Stock II (involuntary
liquidation $8 million and $9 million) 1 1
Common stock (shares outstanding 126.1 million
and 131.2 million) 80 40
Other capital 437 398
Retained earnings 1,978 1,688
Cumulative translation adjustments 47 76
Treasury shares - cost in excess of par value (354) (31)
- ---------------------------------------------------------------------------------
Total shareholders' investment 2,189 2,172
- ---------------------------------------------------------------------------------
$5,899 $5,670
- ---------------------------------------------------------------------------------
<FN>
See notes to financial statements.
</TABLE>
23
<PAGE> 8
Financial Statements TRW Inc.
<TABLE>
<CAPTION>
Statements of Cash Flows
- -----------------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
- -----------------------------------------------------------------------------------------------
In millions
- ------------------------------------------------------------------------------------------------
Years ended December 31 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net earnings $ 480 $ 446 $ 333
Adjustments to reconcile net earnings to
net cash provided by continuing operations:
Discontinued operations (298) (51) (56)
Depreciation and amortization 452 424 391
Deferred income taxes (182) 45 16
Other-net 23 29 22
Changes in assets and liabilities, net of
effects of businesses acquired or sold:
Accounts receivable (46) (61) (110)
Inventories and prepaid expenses 8 (68) (36)
Accounts payable and other accruals 298 28 268
Other-net (24) (44) 38
- ------------------------------------------------------------------------------------------------
Net cash provided by operating activities
of continuing operations 711 748 866
Net cash provided by discontinued operations - 28 87
- ------------------------------------------------------------------------------------------------
Net cash provided by operating activities 711 776 953
Investing activities
Capital expenditures (500) (466) (488)
Net proceeds from divestitures 789 9 12
Other-net (42) 4 (31)
- ------------------------------------------------------------------------------------------------
Net cash provided by(used in) investing activities 247 (453) (507)
Financing activities
Decrease in short-term debt (127) (47) (270)
Proceeds from debt in excess of 90 days 51 36 174
Principal payments on debt in excess of 90 days (91) (207) (151)
Dividends paid (148) (134) (126)
Reacquisition of common stock (361) (16) -
Other-net 51 25 8
- ------------------------------------------------------------------------------------------------
Net cash used in financing activities (625) (343) (365)
Effect of exchange rate changes on cash (6) (30) (35)
- ------------------------------------------------------------------------------------------------
Increase(decrease) in cash and cash equivalents 327 (50) 46
Cash and cash equivalents at beginning of year 59 109 63
- ------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 386 $ 59 $ 109
- ------------------------------------------------------------------------------------------------
Supplemental Cash Flow Information
Interest paid (net of amount capitalized) $ 89 $ 88 $ 112
Income taxes paid (net of refunds) $ 615 $ 239 $ 93
- ------------------------------------------------------------------------------------------------
<FN>
For purposes of the statements of cash flows, the company considers all
highly liquid investments purchased with a maturity of three months or less
to be cash equivalents.
See notes to financial statements.
</TABLE>
24
<PAGE> 9
Financial Statements TRW Inc.
<TABLE>
<CAPTION>
Statements of Changes in Shareholders' Investment
- ------------------------------------------------------------------------------------------------------
TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------------------------------
In millions
- ------------------------------------------------------------------------------------------------------
Years ended December 31 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Serial Preference Stock II
Series 1
Balance at January 1 and December 31 $ - $ - $ -
- ------------------------------------------------------------------------------------------------------
Series 3
Balance at January 1 and December 31 1 1 1
- ------------------------------------------------------------------------------------------------------
Common stock
Balance at January 1 40 40 40
Stock dividend 42 - -
Purchase of shares and other (2) - -
- ------------------------------------------------------------------------------------------------------
Balance at December 31 80 40 40
- ------------------------------------------------------------------------------------------------------
Other capital
Balance at January 1 398 354 293
Sale of stock and other 39 44 61
- ------------------------------------------------------------------------------------------------------
Balance at December 31 437 398 354
- ------------------------------------------------------------------------------------------------------
Retained earnings
Balance at January 1 1,688 1,383 1,178
Net earnings 480 446 333
Stock dividend and other (39) (3) -
Dividends declared
Preference stock (1) (1) (1)
Common stock ($1.17, $1.05 and $.985 per share) (150) (137) (127)
- ------------------------------------------------------------------------------------------------------
Balance at December 31 1,978 1,688 1,383
- ------------------------------------------------------------------------------------------------------
Cumulative translation adjustments
Balance at January 1 76 66 36
Translation adjustments (29) 10 30
- ------------------------------------------------------------------------------------------------------
Balance at December 31 47 76 66
- ------------------------------------------------------------------------------------------------------
Treasury shares-cost in excess of par value
Balance at January 1 (31) (22) (14)
ESOP funding 17 17 -
Purchase of shares (372) (26) (8)
Sold under stock options 32 - -
- ------------------------------------------------------------------------------------------------------
Balance at December 31 (354) (31) (22)
- ------------------------------------------------------------------------------------------------------
Total shareholders' investment $2,189 $2,172 $1,822
- ------------------------------------------------------------------------------------------------------
<FN>
See notes to financial statements.
</TABLE>
25
<PAGE> 10
Notes to Financial Statements TRW Inc.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Use of estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities as of December 31, 1996 and
1995, respectively, and reported amounts of sales and expenses for the years
ended December 31, 1996, 1995 and 1994, respectively. Actual results could
differ from those estimates.
Long-term contracts -- The percentage-of-completion (cost-to-cost) method
is used to estimate sales under fixed-price and fixed-price incentive
contracts. Sales under cost-reimbursement contracts are recorded as costs are
incurred. Fees based on cost, award fees and incentive fees are included in
sales at the time such amounts are reasonably estimable. Losses on contracts
are recognized when determinable.
Accounts receivable -- Accounts receivable at December 31, 1996 and 1995,
included $547 million and $496 million, respectively, related to long-term
contracts, of which $257 million and $253 million, respectively, were unbilled.
Unbilled costs, fees and claims represent revenues earned and billable in
the following month as well as revenues earned but not billable under terms of
the contracts. A substantial portion of such amounts is expected to be billed
during the following year. Retainage receivables and receivables subject to
negotiation are not significant.
Inventories -- Inventories are stated at the lower of cost, principally the
first-in, first-out (FIFO) method, or market. Inventories applicable to
long-term contracts are not significant.
Depreciation -- Depreciation is computed over the asset's estimated useful lives
using the straight-line method for the majority of the company's depreciable
assets. The remaining assets are depreciated using accelerated methods.
Asset impairment -- In accordance with FASB Statement (FAS) No. 121, the
company records impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets may be impaired and the
undiscounted net cash flows estimated to be generated by those assets are less
than their carrying amounts. During 1996, the company recognized $71 million of
impairment losses, including $15 million recognized upon the initial
application of FAS 121, which are reflected primarily in the cost of sales
caption in the Statements of Earnings. The losses were primarily a result of
technological changes and the decision to close certain facilities in the
Automotive segment and were calculated using the present value of the estimated
future net cash flows as the asset's fair value.
Intangible assets -- Intangible assets are stated on the basis of cost.
Intangibles arising from acquisitions prior to 1971 ($49 million) are not
being amortized because there is no indication of diminished value. Intangibles
arising from acquisitions after 1970 are being amortized by the straight-line
method principally over 40 years. The carrying value of intangible assets is
assessed for impairment on a quarterly basis.
Forward exchange contracts -- The company enters into forward exchange
contracts the majority of which hedge firm foreign currency commitments and
certain intercompany transactions. At December 31, 1996, the company had
contracts outstanding amounting to approximately $244 million denominated in
the German mark, the U.S. dollar, the British pound and the Italian lira,
maturing at various dates through December 1997. Changes in market value of the
contracts are generally included in the basis of the transactions. The company
is exposed to credit loss in the event of nonperformance by the counterparties
to the foreign exchange contracts. No collateral is held in relation to the
contracts, and the company anticipates that the counterparties will satisfy
their obligations under the contracts.
<TABLE>
<CAPTION>
Fair values of financial instruments --
- ------------------------------------------------------------------------------------------------------
In millions 1996 1995
- ------------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
value value value value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $386 $ 386 $59 $ 59
Short-term debt 52 52 133 133
Floating rate long-term debt 31 31 73 73
Fixed rate long-term debt 499 553 545 630
Interest rate swaps - (liability) - (1) - (2)
Forward currency exchange contracts -asset(liability) - (4) - 1
- ------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 11
Notes to Financial Statements TRW Inc.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The fair value of long-term debt was estimated using a discounted cash flow
analysis, based on the company's current borrowing rates for similar types of
borrowing arrangements. The fair value of interest rate swaps and forward
currency exchange contracts is estimated based on quoted market prices of
offsetting contracts.
Environmental costs -- TRW participates in environmental assessments and
remedial efforts at operating facilities, previously owned or operated
facilities, and Superfund or other waste sites. Costs related to these locations
are accrued when it is probable that a liability has been incurred and the
amount of that liability can be reasonably estimated. Estimated costs are
recorded at undiscounted amounts based on experience and assessments, and are
regularly evaluated as efforts proceed. Insurance recoveries are recorded as a
reduction of environmental costs when fixed and determinable.
Earnings per share -- Fully diluted earnings per share have been computed based
on the weighted average number of shares of common stock outstanding during each
year, including common stock equivalents (stock options) and assuming the
conversion of the Serial Preference Stock II - Series 1 and 3. Primary earnings
per share have been computed based on the weighted average number of shares of
common stock outstanding during each year, including common stock equivalents.
On October 23, 1996, the company's Board of Directors authorized a two-for-one
stock split effected in the form of a stock dividend to shareholders of record
as of November 8, 1996. A total of 66.7 million additional common shares were
issued on December 9, 1996, in conjunction with the stock dividend. As a result,
$42 million was transferred from retained earnings to common stock. All
historical share and per share amounts have been restated to reflect
retroactively the stock dividend.
RESEARCH AND DEVELOPMENT
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
In millions 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Customer-funded $1,425 $1,360 $1,157
Company-funded
Research and development 412 392 390
Product development 144 130 108
- ----------------------------------------------------------------------------------------------------
556 522 498
- -----------------------------------------------------------------------------------------------------
$1,981 $1,882 $1,655
- -----------------------------------------------------------------------------------------------------
</TABLE>
Company-funded research and development programs include research and
development for commercial products and independent research and development and
bid and proposal work related to government products and services. A portion of
the cost incurred for independent research and development and bid and proposal
work is recoverable through overhead charged to government contracts. Product
development costs include engineering and field support for new customer
requirements.
DISCONTINUED OPERATIONS
During 1996, the company sold substantially all of the businesses in its
Information Systems and Services segment. The financial statements reflect as
discontinued operations for all periods presented that segment's net assets and
operating results, as well as the related transaction gain. Related footnotes
have been restated to reflect only continuing operations.
Net proceeds of approximately $1.1 billion in cash resulted in a gain of
$484 million ($260 million after tax, or $1.95 per share). Sales of the
discontinued operations were $453 million, $604 million, and $596 million in
1996, 1995, and 1994, respectively.
Net assets of discontinued operations of $439 million at December 31, 1995,
consisted primarily of goodwill and capitalized data files.
27
<PAGE> 12
Notes to Financial Statements TRW Inc.
SPECIAL CHARGES
During 1996, the company recorded before-tax charges of $385 million ($252
million after tax, or $1.89 per share) primarily for actions taken in the
automotive and space and defense businesses. As a result of these actions,
several manufacturing facilities throughout the world will be closed or
consolidated, and employment company-wide will be reduced by approximately 2,500
people.
The components of the charge include severance costs of $40 million,
contract reserves of $99 million, litigation and warranty expenses of $127
million, asset writedowns of $96 million, and other items of $23 million. Cash
expenditures made in 1996 for these actions were insignificant. Cash
expenditures related to the severance costs are anticipated to be substantially
completed by the end of 1997.
The charges are included in the Statements of Earnings as follows: $321 million
included in cost of sales; $18 million included in interest expense; $65 million
included in other expense(income)-net; and a reduction of $19 million included
in other captions.
For balance sheet purposes, other accruals in 1996 include $225 million relating
to these charges.
OTHER EXPENSE(INCOME)-NET
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
In millions 1996 1995 1994
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Other income $ (63) $ (33) $ (60)
Other expense 130 36 54
Gain on sale of assets (4) (6) (10)
Foreign currency translation 7 10 43
- -----------------------------------------------------------------------------------------------------
$ 70 $ 7 $ 27
- -----------------------------------------------------------------------------------------------------
<FN>
Other expense in 1996 includes $65 million of special charges. Refer to the
"Special charges" footnote.
</TABLE>
INCOME TAXES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes
- -----------------------------------------------------------------------------------------------------
In millions 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. $ 133 $ 428 $ 288
Non-U.S. 169 197 148
- -----------------------------------------------------------------------------------------------------
$ 302 $ 625 $ 436
- -----------------------------------------------------------------------------------------------------
Provision for income taxes
- -----------------------------------------------------------------------------------------------------
In millions 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
Current
U.S. federal $ 176 $ 90 $ 56
Non-U.S. 73 57 40
U.S. state and local 20 17 20
- ----------------------------------------------------------------------------------------------------
269 164 116
Deferred
U.S. federal (130) 31 38
Non-U.S. (6) 14 5
U.S. state and local (13) 21 -
- -----------------------------------------------------------------------------------------------------
(149) 66 43
- -----------------------------------------------------------------------------------------------------
$ 120 $ 230 $ 159
- -----------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 13
Notes to Financial Statements TRW Inc.
INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Effective income tax rate
- --------------------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory income tax rate 35.0% 35.0% 35.0%
Non-deductible expenses 2.4 1.3 1.8
U.S. state and local income taxes net of U.S. federal tax
benefit 3.0 3.8 2.7
Non-U.S. tax rate variances net of foreign tax credits 3.4 (.1) (.5)
Prior years adjustments (1.9) (3.0) -
Other (2.3) (.2) (2.6)
- -------------------------------------------------------------------------------------------------------
Effective income tax rate 39.6% 36.8% 36.4%
- -----------------------------------------------------------------------------------------------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1996 and
1995, the company had unused tax benefits of $23 million and $33 million,
respectively, related to non-U.S. net operating loss carryforwards for income
tax purposes, of which $18 million and $16 million can be carried forward
indefinitely and the balance expires at various dates through 2001. A valuation
allowance at December 31, 1996 and 1995, of $20 million and $27 million,
respectively, has been recognized to offset the related deferred tax assets due
to the uncertainty of realizing the benefit of the loss carryforwards.
It is the company's intention to reinvest undistributed earnings of certain of
its non-U.S. subsidiaries and thereby indefinitely postpone their remittance.
Accordingly, deferred income taxes have not been provided for accumulated
undistributed earnings of $420 million at December 31, 1996.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Deferred tax assets Deferred tax liabilities
- ------------------------------------------------------------------------------------------------------------
In millions 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pensions and postretirement benefits
other than pensions $269 $ 263 $ 23 $ 38
Completed contract method of accounting for
long-term contracts 53 52 421 425
State and local taxes 33 20 8 9
Reserves and accruals 186 69 - -
Depreciation and amortization 11 11 86 89
Insurance accruals 32 26 - -
Non-U.S. net operating loss carryforwards 23 33 - -
Other 143 129 40 48
- -------------------------------------------------------------------------------------------------------------
750 603 578 609
Valuation allowance for deferred tax assets (20) (27) - -
- ------------------------------------------------------------------------------------------------------------
Total $730 $ 576 $578 $609
- -------------------------------------------------------------------------------------------------------------
</TABLE>
PENSION PLANS
The company has defined benefit pension plans (generally noncontributory except
for those in the United Kingdom) for substantially all employees. Plans for most
salaried employees provide pay-related benefits based on years of service. Plans
for hourly employees generally provide benefits based on flat-dollar amounts and
years of service.
Under the company's funding policy, annual contributions are made to fund
the plans during the participants' working lifetimes, except for unfunded plans
in Germany and certain non-qualified plans in the U.S. which are funded as
benefits are paid to participants. Annual contributions to funded plans have met
or exceeded ERISA's minimum funding requirements or amounts required by local
law or custom.
The company sponsors a contributory stock savings plan for which a majority
of its U.S. employees are eligible. The company matches employee contributions
up to 3 percent of the participant's qualified compensation. The company
contributions are held in an unleveraged employee stock ownership plan. The
company also sponsors other defined contribution pension plans covering
employees at some of its operations.
29
<PAGE> 14
Notes to Financial Statements TRW Inc.
PENSION PLANS (CONTINUED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
In millions 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S. U.S. Non-U.S.
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Defined benefit plans
Service cost--benefits earned during the year $ 73 $ 14 $ 52 $ 15 $ 57 $ 13
Interest cost on projected benefit obligation 165 28 153 27 145 24
Actual (return) loss on plan assets (344) (23) (508) (38) 39 11
Net amortization and deferral 137 8 306 19 (231) (28)
- ---------------------------------------------------------------------------------------------------------
Total pension cost of defined benefit plans 31 27 3 23 10 20
Defined contribution plans 1 5 1 5 1 3
Stock savings plan 40 - 36 - 34 -
- ---------------------------------------------------------------------------------------------------------
$ 72 $ 32 $ 40 $ 28 $ 45 $ 23
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Pension cost for 1996 includes $7 million for special retirement incentive
benefits for U.S. employees and $2 million in curtailments and settlements of
defined benefit plans of non-U.S. operations.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
In millions 1996 1995
- --------------------------------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S.
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation $1,947 $ 368 $1,961 $328
- --------------------------------------------------------------------------------------------------------
Overfunded plans $2,050 $ 253 $1,995 $208
Underfunded plans 55 129 128 136
- -------------------------------------------------------------------------------------------------------
Total accumulated benefit obligation $2,105 $ 382 $2,123 $344
- --------------------------------------------------------------------------------------------------------
Projected benefit obligation $2,381 $ 412 $2,367 $378
- --------------------------------------------------------------------------------------------------------
Overfunded plans $2,782 $ 300 $2,508 $249
Underfunded plans 5 14 78 28
- --------------------------------------------------------------------------------------------------------
Total plan assets at fair value
(primarily listed stocks and bonds) 2,787 314 2,586 277
- --------------------------------------------------------------------------------------------------------
Plan assets in excess of(less than)
projected benefit obligation 406 (98) 219 (101)
Unrecognized net gain (253) (47) (35) (18)
Unrecognized net assets from Jan. 1, 1986
(January 1, 1989 for non-U.S. plans) (41) (11) (59) (5)
Unrecognized prior service cost 22 9 30 9
Additional minimum liability (16) (7) (26) (8)
- --------------------------------------------------------------------------------------------------------
Net pension asset(liability) recognized
in the balance sheet $ 118 $(154) $ 129 $(123)
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Actuarial Assumptions: 1996 1995
- --------------------------------------------------------------------------------------------------------
U.S. Non-U.S. U.S. Non-U.S.
- --------------------------------------------------------------------------------------------------------
Discount rate 7.5% 6 1/2 - 7 3/4% 7.0% 7.0 - 8 1/2%
Rate of increase in compensation levels 4.4% 4.0 - 5.0% 3.4% 4 1/2 - 5.0%
- --------------------------------------------------------------------------------------------------------
</TABLE>
The expected long-term rate of return on plan assets for U.S. plans was 9
percent for 1996, 1995 and 1994. For non-U.S. plans, the expected long-term rate
of return ranged from 7 percent to 9-3/4 percent in 1996, 7 percent to 9-1/2
percent in 1995 and 6 percent to 9-1/2 percent in 1994.
30
<PAGE> 15
Notes to Financial Statements TRW Inc.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company provides health care and life insurance benefits for a majority
of its retired employees in the United States and Canada. The health care plans
provide for cost sharing, in the form of employee contributions, deductibles,
and coinsurance, between the company and its retirees. The postretirement health
care plan covering a majority of employees who retired since August 1, 1988,
limits the annual increase in the company's contribution toward the plan's cost
to a maximum of the lessor of 50 percent of medical inflation or 4 percent. Life
insurance benefits are generally noncontributory. The company's policy is to
fund the cost of postretirement health care and life insurance benefits in
amounts determined at the discretion of management. Retirees in certain other
countries are provided similar benefits by plans sponsored by their governments.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
In millions 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $ 512 $ 508
Fully eligible active participants 35 38
Other active participants 213 232
- -------------------------------------------------------------------------------------------------------
760 778
Plan assets at fair value (primarily listed stocks and bonds) 83 61
- -------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation in excess of plan assets (677) (717)
Unrecognized prior service cost (6) (7)
Unrecognized net (gain)loss (35) 7
- -------------------------------------------------------------------------------------------------------
Net liability recognized in the balance sheet $(718) $(717)
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
In millions 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $13 $ 10 $ 13
Interest cost 54 54 52
Actual return on plan assets (7) (9) -
Net amortization and deferral 2 5 (3)
- -------------------------------------------------------------------------------------------------------
Net periodic postretirement benefit cost $62 $ 60 $ 62
- -------------------------------------------------------------------------------------------------------
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation as of December 31, 1996 and 1995, was 7-1/2 percent and 7
percent, respectively. At December 31, 1996, the 1997 annual rate of increase in
the per capita cost of covered health care benefits was assumed to be 9 percent
for participants under age 65 and 8 percent for participants age 65 or older.
The rates were assumed to decrease gradually to 6 percent and 5 percent,
respectively, in the year 2009 and remain at that level thereafter. At
December 31, 1995, the 1996 annual rate of increase in the per capita cost of
health care benefits was assumed to be 10 percent for participants under age 65
and 9 percent for participants age 65 and older. The rates were assumed to
decrease gradually to 6 percent and 5 percent, respectively, in the year 2009
and remain at that level thereafter. A 1 percent annual increase in these
assumed cost trend rates would increase the accumulated postretirement benefit
obligation at December 31, 1996, by approximately 12 percent and the aggregate
of the service and interest cost components of net periodic postretirement
benefit cost for 1996 by approximately 15 percent. The weighted average
expected long-term rate of return on plan assets was 8 percent for 1996 and
1995 and 9 percent for 1994. The trust holding the majority of the plan assets
is not subject to federal income taxes.
31
<PAGE> 16
Notes to Financial Statements TRW Inc.
DEBT AND CREDIT AGREEMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Short-term debt
- --------------------------------------------------------------------------------------------------------
In millions 1996 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. borrowings $ 9 $ 13
Non-U.S. borrowings 43 120
- --------------------------------------------------------------------------------------------------------
$ 52 $133
Long-term debt
- --------------------------------------------------------------------------------------------------------
In millions 1996 1995
- --------------------------------------------------------------------------------------------------------
Non-U.S. borrowings $ 44 $ 85
7.3% ESOP obligations due 1997 20 60
Medium-term notes:
9.35% Notes due 2020 (due 2000 at option of note holder) 100 100
9 3/8% Notes due 2021 100 100
Other medium-term notes 234 234
Other 32 39
- --------------------------------------------------------------------------------------------------------
Total long-term debt 530 618
Less current portion 72 79
- --------------------------------------------------------------------------------------------------------
$ 458 $539
- --------------------------------------------------------------------------------------------------------
</TABLE>
TRW maintains a committed U.S. revolving credit agreement with 16 banks. The
agreement allows the company to borrow up to $750 million and extends through
June 2001. The interest rate under the agreement is either a negotiated rate,
the banks' prime rates, a rate based upon the banks' costs of funds in the
secondary certificate of deposit market or a rate based upon an Interbank
Offered Rate. TRW's commercial paper borrowings are supported by this agreement.
At December 31, 1996, there were no outstanding borrowings under the U.S.
revolving credit agreement. The weighted average interest rate on short-term
borrowings outstanding at December 31, 1996 and 1995, is 9.9 percent and 7.6
percent, respectively.
The company also maintains a committed multi-currency revolving credit agreement
with 16 banks. The agreement allows the company to borrow up to $250 million and
extends through June 2001. The interest rate under the agreement is based on
various interest rate indices. At December 31, 1996, there were no outstanding
borrowings under the multi-currency credit agreement.
As of December 31, 1996, the company has interest rate swap agreements for
notional borrowings of $32 million in which the company pays a fixed rate and
receives a floating rate. The weighted average pay rate and receive rate under
these agreements is 6.2 percent and 3.2 percent, respectively. These agreements
mature at various dates through 1998.
The floating rates under the interest rate swap agreements are based on
LIBOR rates and have been calculated using these rates at December 31, 1996. Net
payments or receipts under the agreements are recognized as an adjustment to
interest expense. The company is exposed to credit loss in the event of
nonperformance by the counterparties to the interest rate swap agreements. No
collateral is held in relation to the agreements, and the company anticipates
that the counterparties will satisfy their obligations under the agreements.
The other medium-term notes bear interest at rates ranging from 5.98 percent to
9.25 percent and mature at various dates through 2020.
Non-U.S. borrowings bear interest, stated in terms of the local currency
borrowing, at rates ranging from 3.0 percent to 9.48 percent at December 31,
1996, and mature at various dates through 2004.
The maturities of long-term debt are, in millions: 1997-$72; 1998-$35;
1999-$18; 2000-$13; 2001-$38 and $354 thereafter.
The indentures and other debt agreements impose, among other covenants,
restrictions on funded debt and maintenance of minimum tangible net worth. Under
the most restrictive interpretation of these covenants, the payment of dividends
was limited to approximately $1,011 million at December 31, 1996.
Compensating balance arrangements and commitment fees were not material.
32
<PAGE> 17
Notes to Financial Statements TRW Inc.
LEASE COMMITMENTS
TRW leases certain offices, manufacturing and research buildings,
machinery, automobiles and data processing and other equipment. Such leases,
some of which are noncancelable and in many cases include renewals, expire at
various dates. The company pays most maintenance, insurance and tax expenses
relating to leased assets. Rental expense for operating leases was $130 million
for 1996, $124 million for 1995 and $118 million for 1994.
At December 31, 1996, future minimum lease payments for noncancelable operating
leases totaled $230 million and are payable as follows: 1997-$71; 1998-$52;
1999-$36; 2000-$21; 2001-$15 and $35 thereafter.
CAPITAL STOCK
Serial Preference Stock II -- cumulative - stated at $2.75 a share; 5 million
shares authorized.
Series 1 -- each share convertible into 8.8 shares of common; redeemable at $104
per share; involuntary liquidation price $104 per share; dividend rate of $4.40
per annum.
Series 3 -- each share convertible into 7.448 shares of common; redeemable at
$100 per share; involuntary liquidation price $40 per share; dividend rate of
$4.50 per annum.
Series 4 --not convertible into common shares; redemption price and involuntary
liquidation price of $125 per one one-hundredth of a share; annual dividend rate
per one one-hundredth of a share of the lesser of $4.00 or the current dividend
on common stock; no shares outstanding at December 31, 1996.
Common stock -- $0.625 par value; authorized 250 million shares; shares
outstanding were reduced by treasury shares of 7.2 million in 1996 and 1.2
million in 1995. Treasury share balances reflect the company's two-for-one stock
dividend.
TRW has a shareholder purchase rights plan under which each shareholder of
record as of May 17, 1996, received one-half of one right for each TRW common
share held. Each right entitles the holder, upon the occurrence of certain
events, to buy one one-hundredth of a share of Cumulative Redeemable Serial
Preference Stock II, Series 4, at a price of $300. In other events, each right
entitles the holder, other than the acquiring party, to purchase $600 of TRW
common stock or common stock of another person at a 50 percent discount. The
company may redeem these rights at its option at one cent per right under
certain circumstances. The rights outstanding under the company's former
shareholder rights plan were redeemed at one cent per right.
At December 31, 1996, 11.3 million shares of common stock were reserved for the
exercise and issuance of stock options and conversion of the Serial Preference
Stock II, Series 1 and 3. There were 1.3 million shares of Cumulative Redeemable
Serial Preference Stock II, Series 4, reserved for the shareholder purchase
rights plan.
STOCK OPTIONS
TRW has granted nonqualified stock options to certain employees to purchase
the company's common stock at the market price on the date of grant. Stock
options granted become exercisable to the extent of one-third of the optioned
shares for each full year of employment following the date of grant and expire
10 years after the date of grant. The company applies the provisions of APB
Opinion No. 25 in accounting for its employee stock options, and as such, no
compensation expense is recognized as the exercise price equals the market price
of the stock on the date of grant.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
1996 1995
- -----------------------------------------------------------------------------------------------------------------
Millions Weighted-average Millions Weighted-average
of shares exercise price of shares exercise price
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 9.2 $26.45 9.4 $ 25.09
Granted 1.7 43.98 1.4 32.32
Became exercisable 1.1 32.61 .6 32.61
Exercised 1.9 25.28 1.4 23.33
Canceled, expired or terminated .5 35.51 .2 28.23
Outstanding at end of year 8.5 29.72 9.2 26.45
Exercisable 5.6 25.18 6.6 24.07
Weighted-average fair value of options granted 9.45 8.24
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 18
Notes to Financial Statements TRW Inc.
STOCK OPTIONS (CONTINUED)
At December 31, 1996, approximately 800 employees were participants in the plan.
As of that date, the per share exercise prices of options outstanding ranged
from $19.88 to $48.00. The weighted-average remaining contractual life of those
options is approximately 6 years.
Had the compensation cost for the stock options granted in 1996 and 1995 been
determined based on the fair value at the grant date consistent with the fair
value method of FASB Statement No. 123, the company's net earnings and earnings
per share would have been reduced by $5 million ($.04 per share) in 1996 and $2
million ($.02 per share) in 1995. The effect on 1996 and 1995 net earnings may
not be representative of the effect on future years' net earnings amounts as the
compensation cost of each year's grant is recognized over the three-year vesting
period.
Fair value was estimated at the date of grant using the Black-Scholes
option pricing model and the following weighted-average assumptions for 1996 and
1995, respectively: risk-free interest rate of 5.43% and 7.44%; dividend yield
of 2.84% and 2.80%; expected volatility of 20% and 19%; and an expected option
life of 6 years for both 1996 and 1995.
TRW grants performance share rights to certain employees under which the
employees are entitled to receive shares of the company's common stock based on
the achievement of a certain return on assets employed. The rights specify a
target number of shares which the employee would receive for each year that
goals for returns on assets employed are met. If the goals are exceeded, the
employee could receive up to 200 percent of the target shares, with the excess
over 100 percent payable in cash, unless the Compensation and Stock Option
Committee of the Board of Directors determines to pay the excess in shares. If
the goals are not met, the employee would receive fewer than the target shares
or no shares. The target number of performance share rights granted to employees
and still outstanding were .4 million and .5 million at December 31, 1996 and
1995, respectively.
CONTINGENCIES
The company is subject to various investigations, claims and legal proceedings
covering a wide range of matters that arise in the ordinary course of its
business activities. In addition, the company is conducting a number of
environmental investigations and remedial actions at current and former company
locations and, along with other companies, has been named a potentially
responsible party for certain waste management sites. Each of these matters is
subject to various uncertainties, and some of these matters may be resolved
unfavorably to the company. The company has established accruals for matters
that are probable and reasonably estimable including $77 million for
environmental matters at December 31, 1996. The company believes that any
liability that may result from the resolution of environmental matters for which
sufficient information is available to support cost estimates will not have a
material adverse effect on the company's financial position. However, the
company cannot predict the effect on the company's financial position of
expenditures for aspects of certain matters for which there is insufficient
information. In addition, the company cannot predict the effect of compliance
with environmental laws and regulations with respect to unknown environmental
matters or the possible effect of compliance with environmental requirements
imposed in the future.
Further, product liability claims may be asserted in the future for events
not currently known by management. Although the ultimate liability from these
potential claims cannot be ascertained at December 31, 1996, management does not
anticipate that any related liability, after consideration of insurance
recovery, would have a material adverse effect on the company's financial
position.
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
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.
34
<PAGE> 19
Notes to Financial Statements TRW Inc.
INDUSTRY SEGMENTS
TRW Inc. is a United States-based company providing advanced technology products
and services for the automotive and space and defense markets. The principal
markets for the company's automotive products are North American, European and
Asian original equipment manufacturers and independent distributors. Space and
defense primarily provides products and services to the United States
government, agencies of the United States government and commercial customers.
Automotive -- Occupant restraint systems, including sensors, air bag and seat
belt systems. Steering systems, including power and manual rack and pinion
steering for light vehicles, hydraulic steering systems for commercial truck and
off-highway vehicles and suspension components. Electrical and electronic
controls, engineered fasteners and stud welding and control systems. Engine
valves, valve train parts and pistons.
Space & Defense -- Spacecraft, including the design and manufacture of military
and civilian spacecraft equipment, propulsion subsystems, electro-optical and
instrument systems, spacecraft payloads, high-energy lasers and laser technology
and other high-reliability components. Systems integration, systems engineering
services and software in the fields of military command and control,
intelligence collection, public safety, telecommunications, image processing,
earth observation, nuclear waste management, air traffic control, security and
counterterrorism, and other high-technology space, defense, and civil government
support systems. Electronic systems, equipment and services, including the
design and manufacture of space communication systems, airborne reconnaissance
systems, unmanned aerial vehicles, avionics systems and other electronic
technologies for tactical and strategic space, defense and selected commercial
applications.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Year ended Space & Company Staff &
In millions December 31 Automotive Defense Other Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 1996 $6,493 $3,364 $ - $9,857
1995 6,468 3,100 - 9,568
1994 5,679 2,812 - 8,491
- ----------------------------------------------------------------------------------------------------------
Operating profit by 1996 $ 319 $ 157 $ (174) $ 302
segment (1) 1995 607 192 (174) 625
1994 476 175 (215) 436
- ----------------------------------------------------------------------------------------------------------
Identifiable assets by 1996 $3,683 $1,278 $ 938 $5,899
segment (2) 1995 3,706 1,113 851 5,670
1994 3,481 1,111 843 5,435
- ----------------------------------------------------------------------------------------------------------
Depreciation and 1996 $ 321 $ 112 $ 10 $ 443
amortization of property, 1995 304 102 9 415
plant and equipment 1994 264 111 7 382
- ----------------------------------------------------------------------------------------------------------
Capital expenditures 1996 $ 342 $ 157 $ 1 $ 500
1995 314 114 38 466
1994 388 98 2 488
- ----------------------------------------------------------------------------------------------------------
<FN>
(1)The "Company Staff & Other" column includes: (a) Company Staff and other
expenses of $79, $70 and $106 million, (b) interest expense of $84, $95 and
$105 million, (c) minority earnings of $11, $11 and $8 million for each of
the respective years and (d) earnings from affiliates of $2 and $4 million in
1995 and 1994, respectively. The total represents earnings from continuing
operations before income taxes.
(2)The "Company Staff & Other" column includes: (a) eliminations of $(35), $(34)
and $(26) million, (b) Company Staff assets of $922, $398 and $383 million
and (c) investment in affiliates of $51, $48 and $70 million for each of the
respective years and (d) net assets of discontinued operations of $439 and
$416 million in 1995 and 1994, respectively. The total represents
consolidated total assets.
</TABLE>
At December 31, 1996 and 1995, accounts receivable in the Automotive segment
were $850 million and $869 million, respectively, and accounts receivable in the
Space & Defense segment, principally from agencies of the U.S. Government, were
$489 million and $478 million, respectively. The company generally does not
require collateral from its customers.
Company Staff assets consist principally of cash and cash equivalents,
current deferred income taxes and administrative facilities. Intersegment sales
were not significant. Sales to agencies of the U.S. Government, primarily by the
Space & Defense segment, were $3,121 million in 1996, $2,890 million in 1995 and
$2,533 million in 1994. Sales to Ford Motor Company by the Automotive segment
were $1,470 million in 1996, $1,474 million in 1995 and $1,363 million in 1994.
35
<PAGE> 20
Notes to Financial Statements TRW Inc.
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Year ended United Other Company Staff
In millions December 31 States Europe Areas & Other Total
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales 1996 $6,469 $2,522 $866 $ - $9,857
1995 6,212 2,525 831 - 9,568
1994 5,694 1,965 832 - 8,491
- ----------------------------------------------------------------------------------------------------------
Operating profit by 1996 $ 212 $ 224 $ 40 $(174) $ 302
segment (1) 1995 514 220 65 (174) 625
1994 432 143 76 (215) 436
- ----------------------------------------------------------------------------------------------------------
Identifiable assets by 1996 $3,056 $1,411 $590 $ 842 $5,899
segment (2) 1995 2,871 1,464 537 798 5,670
1994 2,825 1,288 531 791 5,435
- ----------------------------------------------------------------------------------------------------------
<FN>
TRW's operations are located primarily in the United States and Europe.
Interarea sales are not significant to the total revenue of any geographic area.
(1) The "Company Staff & Other" column includes: (a) Company Staff and other
expenses of $79, $70 and $106 million, (b) interest expense of $84, $95 and
$105 million, (c) minority earnings of $11, $11 and $8 million for each of
the respective years and (d) earnings from affiliates of $2 and $4 million
in 1995 and 1994. The total represents earnings from continuing operations
before income taxes.
(2) The "Company Staff & Other" column includes: (a) eliminations of $(131),
$(87) and $(78) million, (b) Company Staff assets of $922, $398 and $383
million and (c) investment in affiliates of $51, $48 and $70 million for
each of the respective years and (d) net assets of discontinued operations
of $439 and $416 million in 1995 and 1994, respectively. The total
represents consolidated total assets.
</TABLE>
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
In millions except per share data First Second Third Fourth
- ------------------------------------------------------------------------------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(A) (B) (C) (D)
Sales (E) $2,514 $2,447 $2,572 $2,561 $2,320 $2,250 $2,451 $2,310
Gross profit (E) 463 455 479 459 133 384 406 413
Earnings(loss) from continuing
operations before income taxes (E) 165 169 188 175 (218) 119 167 162
Net earnings 117 115 130 123 106 93 127 115
Net earnings per share (F)
Fully diluted .86 .86 .98 .90 .79 .71 .97 .84
Primary .87 .87 .98 .92 .81 .70 .98 .85
- ------------------------------------------------------------------------------------------------------------
<FN>
(A) Earnings from continuing operations before income taxes included a $18
million benefit ($12 million after taxes, 9 cents per share) related to an
insurance claim settlement and a $15 million non-cash charge ($13 million
after taxes, 9 cents per share) related to the initial application of FASB
Statement No. 121.
(B) Net earnings included a $243 million gain ($1.82 per share) related to the
sale of the information services business and a $233 million charge ($1.76
per share) for actions taken in the automotive and space and defense
businesses.
(C) Net earnings included a $17 million gain (13 cents per share) related to the
sale of the remaining interest in the information services business, a $10
million benefit (8 cents per share) related to the recovery of certain tax
costs and a $28 million charge (21 cents per share) related primarily to
product warranties.
(D) Earnings before income taxes included a $35 million gain ($23 million after
taxes, 17 cents per share) related to an insurance claim settlement and a
$31 million charge ($20 million after taxes, 15 cents per share) related to
certain contract reserves.
(E) Amounts have been restated to reflect the company's Information Systems and
Services segment as discontinued operations.
(F) Amonunts have been restated to give retroactive recognition to the
company's two-for-one stock dividend.
36
</TABLE>
<PAGE> 21
Notes to Financial Statements TRW Inc.
STOCK PRICES AND DIVIDENDS (UNAUDITED)
The book value per common share at December 31, 1996, was $17.30 compared
to $16.49 at the end of 1995. Our directors declared the 234th consecutive
quarterly dividend during December 1996. Dividends declared per share in 1996
were $1.17, up 11 percent from $1.05 in 1995. The following table highlights the
market prices of our common and preference stocks and dividends paid for the
quarters of 1996 and 1995.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Price of Price of Dividends
traded shares traded shares paid per share
- ---------------------------------------------------------------------------------------------------------
Quarter 1996 1995 1996 1995
- ---------------------------------------------------------------------------------------------------------
High Low High Low
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Common stock 1 $ 46-1/8 $ 37-7/16 $ 35 $ 30-7/8 $.275 $.25
Par value $0.625 per share 2 48-1/2 43-1/2 40-7/8 33-1/2 .275 .25
3 50-3/4 41-1/16 41-5/16 35-11/16 .275 .25
4 52 43-3/4 39-5/16 32-1/16 .31 .275
- ---------------------------------------------------------------------------------------------------------
Cumulative Serial 1 379 379 350 225 1.10 1.10
Preference Stock II 2 418 414 349-1/4 348 1.10 1.10
$4.40 Convertible 3 500 300 336-1/2 336-1/2 1.10 1.10
Series 1 4 427 427 325-5/8 300-5/8 1.10 1.10
- ---------------------------------------------------------------------------------------------------------
Cumulative Serial 1 332-1/2 288 236 236 1.125 1.125
Preference Stock II 2 352 350 292-1/4 265 1.125 1.125
$4.50 Convertible 3 425 250 288 283 1.125 1.125
Series 3 4 329 329 290 254 1.125 1.125
- ---------------------------------------------------------------------------------------------------------
</TABLE>
The $4.40 Convertible Series 1 was not actively traded during the third
quarter of 1996 and the first quarter of 1995. The $4.50 Convertible Series 3
was not actively traded during the third quarter of 1996. The prices shown
represent the range of asked(high) and bid(low) quotations.
Note: Amounts have been restated to give retroactive recognition to the
company's two-for-one stock dividend.
37
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
TRW has no parent or parents. As of December 31, 1996, certain of its
subsidiaries, some of which also have subsidiaries, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
ORGANIZED UNDER VOTING SECURITIES
NAME THE LAWS OF OWNED (1)
---- --------------- -----------------
<S> <C> <C>
TRW U.K. Limited which owns United Kingdom 100.00%
TRW Automotive Systems Limited United Kingdom 100.00%
TRW Ceramics Limited United Kingdom 100.00%
TRW Connectors Limited United Kingdom 100.00%
TRW Occupant Restraints Systems Limited United Kingdom 100.00%
TRW Reda Pump Limited United Kingdom 100.00%
TRW Remanufactured Steering Systems Limited United Kingdom 100.00%
TRW Steering Systems Limited United Kingdom 100.00%
TRW Transportation Electronics Limited United Kingdom 100.00%
TRW United-Carr Limited United Kingdom 100.00%
ESL Incorporated California 100.00%
TRW Vehicle Safety Systems Inc. which owns Delaware 100.00%
TRW Technar Inc. California 100.00%
TRW Safety Systems Inc. which in turn owns Delaware 100.00%
TRW Vehicle Safety Systems de Mexico, Mexico 100.00%
S.A. de C.V.
TRW Occupant Restraints
de Chihuahua S.A. de C.V. Mexico 100.00%
TRW Automotive Products Inc. which, together
with TRW International Holding Corporation,
directly or indirectly owns Delaware 100.00%
TRW Deutschland GmbH
which, in turn (in some cases together with
TRW Inc.), directly or indirectly owns Germany 100.00%
TRW Autoelektronika s.r.o. Czechoslovakia 100.00%
TRW Carr CSRS s.r.o. Czechoslovakia 100.00%
TRW-DAS, a.s. Czechoslovakia 92.40%
TRW Electro-Automation GmbH & Co. KG Germany 76.00%
TRW Fahrwerksysteme GmbH & Co. KG Germany 100.00%
TRW Fahrzeugelektrik GmbH & Co. KG Germany 100.00%
TRW FahrzeugelektrikVerwaltungs-GmbH Germany 100.00%
TRW Nelson Bolzenschweiss-Technik GmbH Germany 100.00%
TRW Occupant Restraints Systems GmbH Germany 100.00%
TRW Presswerk Krefeld GmbH & Co. KG Germany 100.00%
TRW United-Carr GmbH & Co. KG Germany 100.00%
TRW Steering Systems Japan Co. Ltd. Japan 100.00%
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
PERCENTAGE OF
ORGANIZED UNDER VOTING SECURITIES
NAME THE LAWS OF OWNED (1)
---- --------------- -----------------
<S> <C>
TRW Canada Limited which owns Canada 100.00%
TRW Vehicle Safety Systems Limited Canada 100.00%
Quality Safety Systems Company Canada 60.00%
TRW do Brasil, S.A. Brazil 98.8%
TRW Components International Inc. Virginia 100.00%
TRW Italia S.p.A. Italy 100.00%
TRW France S.A. which owns France 100.00%
TRW Carr France SNC France 100.00%
TRW Koyo Steering Systems Company Tennessee 51.00%
TRW Export Trading Corporation which owns Delaware 100.00%
TRW Export Sales Corporation U.S. Virgin Islands 100.00%
TRW System Services Company Delaware 100.00%
TRW Sabelt S.p.A. Italy 90.00%
TRW Air Bag Systems s.r.l. Italy 100.00%
TRW Direcciones de Vehiculos, S.A. Spain 100.00%
TRW Finance International Ireland 100.00%
TRW Microwave Inc. California 100.00%
TRW Steering Co. Ltd. Korea 51.00%
TRW Australia Limited which owns Australia 100.00%
TRW Carr Pty. Ltd. Australia 100.00%
TRW Australia Holdings Limited which owns Australia 62.00%
TRW Steering & Suspension Australia Limited Australia 100.00%
<FN>
- ---------------
(1) Total percentages held by TRW and/or its subsidiaries, disregarding Directors' qualifying shares, if any.
</TABLE>
The names of certain subsidiaries, which considered in the aggregate
would not constitute a "significant subsidiary" as such term is defined in the
regulations under the federal securities laws, have been omitted from the
foregoing list.
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statements
Nos. 33-61711 on Form S-3, 33-58263 on Form S-8, 33-58257 on Form S-8, 33-53503
on Form S-8, 33-29751 on Form S-8, 33-20351 on Form S-8, 2-90748 on Form S-8,
and 2-64035 on Form S-8 of our report dated January 20, 1997 with respect to the
consolidated financial statements of TRW Inc. included in the Annual Report
(Form 10-K) for the year ended December 31, 1996.
We also consent to the incorporation by reference in TRW Inc.'s
Registration Statement No. 33-58263 on Form S-8 pertaining to The TRW Employee
Stock Ownership and Stock Savings Plan and the related prospectus of our report
dated March 14, 1997 with respect to the financial statements of The TRW
Employee Stock Ownership and Stock Savings Plan for the fiscal year ended
December 31, 1996 included as Exhibit 99(a) to the TRW Inc. Annual Report (Form
10-K) for the year ended December 31, 1996.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Cleveland, Ohio
March 20, 1997
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in TRW Inc.'s Registration
Statement No. 33-58257 on Form S-8 pertaining to The TRW Canada Stock Savings
Plan and the related prospectus of our report dated March 12, 1997 with respect
to the financial statements of The TRW Canada Stock Savings Plan for the year
ended December 31, 1996 included as Exhibit 99(b) to the TRW Inc. Annual Report
(Form 10-K) for the year ended December 31, 1996.
/s/ Ernst & Young
ERNST & YOUNG
Hamilton, Ontario
March 20, 1997
<PAGE> 1
Exhibit 24(a)
POWER OF ATTORNEY
Directors and Certain Officers of
TRW Inc.
THE UNDERSIGNED Directors and Officers of TRW Inc. hereby appoint M. A.
Coyle, J. C. Diggs, W. A. Fullmer, K. A. Weigand and J. L. Manning, Jr., and
each of them, as attorneys for the undersigned, with full power of substitution
and resubstitution, for and in the name, place and stead of the undersigned in
the capacity specified, to prepare or cause to be prepared, to execute and to
file with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended (the "Act"), an annual report on Form 10-K for the year
ended December 31, 1996 relating to TRW Inc., such other periodic reports as may
be required pursuant to the Act, amendments and exhibits to any of the foregoing
and any and all other documents to be filed with the Securities and Exchange
Commission or elsewhere pertaining to such reports, with full power and
authority to take such other action which in the judgment of such person may be
necessary or appropriate to effect the filing of such documents.
EXECUTED the dates set forth below.
<TABLE>
<CAPTION>
/s/ J.T. Gorman /s/ P.S. Hellman /s/ C.G. Miller
- --------------------------------- --------------------------------- ------------------------------
<S> <C> <C>
J. T. Gorman, P. S. Hellman, C. G. Miller,
Chairman of the Board, President, Executive Vice President
Chief Executive Officer Chief Operating Officer and Chief Financial Officer
and Director and Director February 4, 1997
February 4, 1997 February 4, 1997
/s/ Thomas A. Connell /s/ M. Feldstein
- --------------------------------- --------------------------------- ------------------------------
T. A. Connell, Vice President M. H. Armacost, Director M. Feldstein, Director
and Controller February , 1997 February 4, 1997
February 4, 1997
/s/ Robert M. Gates /s/ C.H. Hahn /s/ George H. Heilmeier
- --------------------------------- --------------------------------- ------------------------------
R. M. Gates, Director C. H. Hahn, Director G. H. Heilmeier, Director
February 4, 1997 February 4, 1997 February 4, 1997
/s/ Karen N. Horn /s/ E.B. Jones /s/ William S. Kiser
- --------------------------------- --------------------------------- ------------------------------
K. N. Horn, Director E. B. Jones, Director W. S. Kiser, Director
February 4, 1997 February 4, 1997 February 4, 1997
/s/ D.B. Lewis /s/ James T. Lynn /s/ L.M. Martin
- --------------------------------- --------------------------------- ------------------------------
D. B. Lewis, Director J. T. Lynn, Director L. M. Martin, Director
February 4, 1997 February 4, 1997 February 4, 1997
/s/ J.D. Ong /s/ Richard W. Pogue
- --------------------------------- ---------------------------------
J. D. Ong, Director R. W. Pogue, Director
February 4, 1997 February 4, 1997
</TABLE>
<PAGE> 1
Exhibit 24(b)
C E R T I F I C A T E
I, Jean M. Schmidt, do hereby certify that I am a duly elected,
qualified and acting Assistant Secretary of TRW Inc. ("TRW"), an Ohio
corporation; that attached hereto and marked as "Exhibit A" is a true and
correct copy of resolutions duly adopted by the Directors of TRW at a meeting
thereof duly called and held on February 4, 1997, at which meeting a quorum was
present and acting throughout; and that said resolutions have not been modified,
revoked or rescinded in any manner and are now in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and have caused the
seal of TRW to be affixed hereto at Lyndhurst, Ohio this 18th day of March,
1997.
/s/ Jean M. Schmidt
------------------------------
Assistant Secretary
<PAGE> 2
Exhibit A
RESOLVED that any officer or assistant officer of the Corporation is authorized
and empowered, for and on behalf of the Corporation, to prepare or cause to be
prepared, to execute and to file with the Securities and Exchange Commission,
Washington, D.C. (the "Commission"), the Corporation's Annual Report on Form
10-K for the year ended December 31, 1996, such other periodic reports as may be
required pursuant to the Securities Exchange Act of 1934, as amended (the
"Act"), amendments and exhibits to any of the foregoing and any and all other
documents to be filed with the Commission or elsewhere pertaining to such
reports, and to take other action deemed necessary and appropriate to effect the
filing of all such reports under the Act, including the execution of a power of
attorney evidencing the authority set forth herein; and
FURTHER RESOLVED that Martin A. Coyle, James C. Diggs, William A. Fullmer,
Kathleen A. Weigand and J. Lawrence Manning, Jr. and each of them is appointed
an attorney for the Corporation, with full power of substitution and
resubstitution, to execute and file, for and on behalf of the
Corporation, the Annual Report on Form 10-K, other periodic reports,
amendments and exhibits to any of the foregoing and any and all other
documents to be filed with the Commission or elsewhere pertaining to such
reports, with full power and authority to take or cause to be taken all other
actions deemed necessary and appropriate to effect the purposes of the
foregoing resolution.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 386
<SECURITIES> 0
<RECEIVABLES> 1,396
<ALLOWANCES> 18
<INVENTORY> 524
<CURRENT-ASSETS> 2,781
<PP&E> 5,880
<DEPRECIATION> 3,400
<TOTAL-ASSETS> 5,899
<CURRENT-LIABILITIES> 2,157
<BONDS> 458
<COMMON> 80
1
0
<OTHER-SE> 2,108
<TOTAL-LIABILITY-AND-EQUITY> 5,899
<SALES> 9,857
<TOTAL-REVENUES> 9,857
<CGS> 8,376
<TOTAL-COSTS> 8,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84
<INCOME-PRETAX> 302
<INCOME-TAX> 120
<INCOME-CONTINUING> 182
<DISCONTINUED> 298
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 480
<EPS-PRIMARY> 3.64
<EPS-DILUTED> 3.60
</TABLE>
<PAGE> 1
Exhibit 99(a)
Audited Financial Statements
THE TRW EMPLOYEE STOCK
OWNERSHIP AND STOCK SAVINGS PLAN
December 31, 1996 and 1995
<PAGE> 2
Report of Independent Auditors
Board of Administration
The TRW Employee Stock Ownership and
Stock Savings Plan
We have audited the accompanying statements of net assets available for benefits
of The TRW Employee Stock Ownership and Stock Savings Plan as of December 31,
1996 and 1995, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of The TRW Employee
Stock Ownership and Stock Savings Plan as of December 31, 1996 and 1995, and the
changes in net assets available for benefits for the years then ended, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
assets held for investment purposes as of December 31, 1996, and the schedule of
reportable transactions for the year then ended are presented for purposes of
complying with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the basic financial statements. The Fund Information in
the statement of net assets available for benefits and the statement of changes
in net assets available for benefits is presented for purposes of additional
analysis rather than to present the net assets available for benefits and
changes in net assets available for benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in our audit of the 1996 financial statements and, in our opinion, are
fairly stated in all material respects in relation to the 1996 basic financial
statements taken as a whole.
/s/ Ernst & Young LLP
March 14, 1997
Cleveland, Ohio
1
<PAGE> 3
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Net Assets Available for Benefits with Fund Information
December 31, 1996
<TABLE>
<CAPTION>
TRW Stock Fund
-----------------------------------
Participant Non-Participant Equity Insured
Directed Directed Fund Return Fund
--------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments:
TRW Inc. Common Stock $ 370,742,743 $ 666,711,719
Guaranteed investment contracts $ 490,407,234
Bankers Trust Pyramid Equity Index Fund $ 462,068,568
Bankers Trust Pyramid Russell 2500 Index Fund
Bankers Trust Pyramid Intermediate
Government/Corporate Bond Index Fund
Bankers Trust Pyramid Directed Account Cash Fund 1,743,081 2,984,140 14,739,814
Receivable from TRW Inc. 35,005 59,928 53,091 70,324
Participant loans receivable 18,539,229 16,608,418 18,690,131
Receivable from investments sold 225,304
Prepaid expenses 32,117 54,985
Interest receivable 40,194 2,798,092
Receivable from other funds 114,197
--------------------------------------------------------------------
Total assets 391,246,566 669,810,772 478,955,381 526,705,595
LIABILITIES
Payable to other funds 9,673 744,540
Payable for investments acquired
Accrued expenses 36,332 280,911
--------------------------------------------------------------------
Total liabilities 46,005 1,025,451
--------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 391,246,566 $ 669,810,772 $ 478,909,376 $ 525,680,144
====================================================================
<CAPTION>
Small Company Bond
Equity Fund Index Fund Totals
------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments:
TRW Inc. Common Stock $ 1,037,454,462
Guaranteed investment contracts 490,407,234
Bankers Trust Pyramid Equity Index Fund 462,068,568
Bankers Trust Pyramid Russell 2500 Index Fund $ 96,588,565 96,588,565
Bankers Trust Pyramid Intermediate
Government/Corporate Bond Index Fund $ 20,494,132 20,494,132
Bankers Trust Pyramid Directed Account Cash Fund 19,467,035
Receivable from TRW Inc. 25,730 4,358 248,436
Participant loans receivable 5,548,400 928,693 60,314,871
Receivable from investments sold 225,304
Prepaid expenses 13,902 101,004
Interest receivable 2,838,286
Receivable from other funds 562,474 77,542 754,213
------------------------------------------------------
Total assets 102,739,071 21,504,725 2,190,962,110
LIABILITIES
Payable to other funds 754,213
Payable for investments acquired 511,352 59,948 571,300
Accrued expenses 3,099 320,342
------------------------------------------------------
Total liabilities 511,352 63,047 1,645,855
------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 102,227,719 $ 21,441,678 $ 2,189,316,255
======================================================
</TABLE>
2
See notes to financial statements.
<PAGE> 4
<TABLE>
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits with Fund Information
Year Ended December 31, 1996
<CAPTION>
TRW Stock Fund
-----------------------------------
Participant Non-Participant Equity Insured
Directed Directed Fund Return Fund
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends--TRW Inc. Common Stock $ 8,215,685 $ 15,738,158
Interest 153,951 290,907 $ 7,678 $ 33,948,650
--------------------------------------------------------------------
Investment income 8,369,636 16,029,065 7,678 33,948,650
Contributions from TRW Inc. 41,254,275
Contributions from participants 24,865,673 29,981,056 26,837,189
Net realized gain on disposition of investments 15,525,544 29,704,812 18,095,295
Unrealized appreciation of investments 64,083,341 118,056,264 69,643,225
Transfers from other funds 59,120,384 43,307,428 72,438,679
Interest income on participant loans 1,458,285 1,404,242 1,721,664
--------------------------------------------------------------------
173,422,863 205,044,416 162,438,924 134,946,182
Less:
Withdrawals and distributions:
Cash 2,848,023 2,829,660 35,444,539 56,780,139
TRW Inc. Common Stock (621,145 participant
directed shares and 1,251,970 non-participant 28,803,604 58,079,381
directed shares)
--------------------------------------------------------------------
31,651,627 60,909,041 35,444,539 56,780,139
Distribution of dividends on TRW Inc. Common Stock 14,963,225
Administrative expenses 178,273 342,227 329,400 886,500
Transfers to other funds 51,521,760 40,856,749 94,422,989
--------------------------------------------------------------------
83,351,660 76,214,493 76,630,688 152,089,628
--------------------------------------------------------------------
Increase (decrease) in net assets for year 90,071,203 128,829,923 85,808,236 (17,143,446)
Net assets available for benefits at beginning of year 301,175,363 540,980,849 393,101,140 542,823,590
--------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 391,246,566 $ 669,810,772 $ 478,909,376 $ 525,680,144
====================================================================
<CAPTION>
Small Company Bond
Equity Fund Index Fund Totals
------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends--TRW Inc. Common Stock $ 23,953,843
Interest $ 13 $ 36 34,401,235
------------------------------------------------------
Investment income 13 36 58,355,078
Contributions from TRW Inc. 41,254,275
Contributions from participants 15,142,506 3,179,242 100,005,666
Net realized gain on disposition of investments 2,436,307 503,664 66,265,622
Unrealized appreciation of investments 11,162,184 15,145 262,960,159
Transfers from other funds 39,764,356 9,620,094 224,250,941
Interest income on participant loans 452,468 84,801 5,121,460
------------------------------------------------------
68,957,834 13,402,982 758,213,201
Less:
Withdrawals and distributions:
Cash 8,310,132 2,183,439 108,395,932
TRW Inc. Common Stock (621,145 participant
directed shares and 1,251,970 non-participant 86,882,985
directed shares)
------------------------------------------------------
8,310,132 2,183,439 195,278,917
Distribution of dividends on TRW Inc. Common Stock 14,963,225
Administrative expenses 105,750 28,500 1,870,650
Transfers to other funds 27,789,264 9,660,179 224,250,941
------------------------------------------------------
36,205,146 11,872,118 436,363,733
------------------------------------------------------
Increase (decrease) in net assets for year 32,752,688 1,530,864 321,849,468
Net assets available for benefits at beginning of year 69,475,031 19,910,814 1,867,466,787
------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 102,227,719 $ 21,441,678 $ 2,189,316,255
======================================================
</TABLE>
See notes to financial statements.
3
<PAGE> 5
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Net Assets Available for Benefits with Fund Information
December 31, 1995
<TABLE>
<CAPTION>
TRW Stock Fund
-----------------------------------
Participant Non-Participant Equity Insured
Directed Directed Fund Return Fund
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Investments:
TRW Inc. Common Stock $ 285,150,030 $ 539,111,372
Guaranteed investment contracts $ 512,421,483
Bankers Trust Pyramid Equity Index Fund $ 377,675,716
Bankers Trust Pyramid Russell 2500 Index Fund
Bankers Trust Pyramid Intermediate
Government/Corporate Bond Index Fund
Bankers Trust Pyramid Directed Account Cash Fund 1,081,907 1,940,902 6,525,288
Receivable from TRW Inc. 47,051 84,407 56,359 61,110
Participant loans receivable 15,864,840 15,037,019 21,275,831
Interest receivable 58,105 2,969,349
Receivable from other funds 452,425
-------------------------------------------------------------------
Total assets 302,201,933 541,136,681 393,221,519 543,253,061
LIABILITIES
Payable to other funds 939,705 159,526
Accrued expenses 86,865 155,832 120,379 269,945
-------------------------------------------------------------------
Total liabilities 1,026,570 155,832 120,379 429,471
-------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 301,175,363 $ 540,980,849 $ 393,101,140 $ 542,823,590
===================================================================
<CAPTION>
Small Company Bond
Equity Fund Index Fund Totals
-------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Investments:
TRW Inc. Common Stock $ 824,261,402
Guaranteed investment contracts 512,421,483
Bankers Trust Pyramid Equity Index Fund 377,675,716
Bankers Trust Pyramid Russell 2500 Index Fund $ 64,724,947 64,724,947
Bankers Trust Pyramid Intermediate
Government/Corporate Bond Index Fund $ 18,567,359 18,567,359
Bankers Trust Pyramid Directed Account Cash Fund 9,548,097
Receivable from TRW Inc. 24,247 5,970 279,144
Participant loans receivable 4,513,551 952,282 57,643,523
Interest receivable 3,027,454
Receivable from other funds 250,602 396,204 1,099,231
-------------------------------------------------------
Total assets 69,513,347 19,921,815 1,869,248,356
LIABILITIES
Payable to other funds 1,099,231
Accrued expenses 38,316 11,001 682,338
-------------------------------------------------------
Total liabilities 38,316 11,001 1,781,569
-------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 69,475,031 $ 19,910,814 $ 1,867,466,787
=======================================================
</TABLE>
See notes to financial statements.
4
<PAGE> 6
<TABLE>
The TRW Employee Stock Ownership and Stock Savings Plan
Statements of Changes in Net Assets Available for Benefits with Fund Information
Year Ended December 31, 1995
<CAPTION>
TRW Stock Fund
-----------------------------------
Participant Non-Participant Equity Insured
Directed Directed Fund Return Fund
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment income:
Dividends--TRW Inc. Common Stock $ 7,387,251 $ 14,198,849
Interest 168,774 324,394 $ 52,065 $ 35,421,071
-------------------------------------------------------------------
Investment income 7,556,025 14,523,243 52,065 35,421,071
Contributions from TRW Inc. 37,648,623
Contributions from participants 20,666,119 24,744,499 30,721,981
Net realized gain on disposition of investments 6,075,541 11,749,565 6,607,651
Unrealized appreciation of investments 37,014,004 68,060,707 94,567,420
Transfers from other funds 21,143,038 23,880,726 44,422,822
Interest income on participant loans 1,205,785 1,124,659 1,729,562
-------------------------------------------------------------------
93,660,512 131,982,138 150,977,020 112,295,436
Less:
Withdrawals and distributions:
Cash 1,767,498 2,128,278 16,450,704 40,077,113
TRW Inc. Common Stock (354,708 participant
directed shares and 773,078 non-participant
directed shares) 13,223,504 27,965,611
-------------------------------------------------------------------
14,991,002 30,093,889 16,450,704 40,077,113
Distribution of dividends on TRW Inc. Common Stock 13,785,763
Administrative expenses 162,070 314,430 279,200 905,400
Transfers to other funds 31,236,818 19,809,959 52,530,743
-------------------------------------------------------------------
46,389,890 44,194,082 36,539,863 93,513,256
-------------------------------------------------------------------
Increase in net assets for year 47,270,622 87,788,056 114,437,157 18,782,180
Net assets available for benefits at beginning of year 253,904,741 453,192,793 278,663,983 524,041,410
-------------------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 301,175,363 $ 540,980,849 $ 393,101,140 $ 542,823,590
===================================================================
<CAPTION>
Small Company Bond
Equity Fund Index Fund Totals
-------------------------------------------------------
<S> <C> <C> <C>
Investment income:
Dividends--TRW Inc. Common Stock $ 21,586,100
Interest $ 60 $ 16 35,966,380
-------------------------------------------------------
Investment income 60 16 57,552,480
Contributions from TRW Inc. 37,648,623
Contributions from participants 9,472,853 2,421,588 88,027,040
Net realized gain on disposition of investments 320,904 88,688 24,842,349
Unrealized appreciation of investments 13,142,214 2,358,192 215,142,537
Transfers from other funds 21,467,113 9,328,697 120,242,396
Interest income on participant loans 293,488 72,605 4,426,099
-------------------------------------------------------
44,696,632 14,269,786 547,881,524
Less:
Withdrawals and distributions:
Cash 3,038,017 813,435 64,275,045
TRW Inc. Common Stock (354,708 participant
directed shares and 773,078 non-participant
directed shares) 41,189,115
-------------------------------------------------------
3,038,017 813,435 105,464,160
Distribution of dividends on TRW Inc. Common Stock 13,785,763
Administrative expenses 104,300 15,100 1,780,500
Transfers to other funds 11,872,824 4,792,052 120,242,396
-------------------------------------------------------
15,015,141 5,620,587 241,272,819
-------------------------------------------------------
Increase in net assets for year 29,681,491 8,649,199 306,608,705
Net assets available for benefits at beginning of year 39,793,540 11,261,615 1,560,858,082
-------------------------------------------------------
NET ASSETS AVAILABLE FOR BENEFITS AT END OF YEAR $ 69,475,031 $ 19,910,814 $ 1,867,466,787
=======================================================
</TABLE>
See notes to financial statements.
5
<PAGE> 7
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements
December 31, 1996
A. SIGNIFICANT ACCOUNTING POLICIES
Investments in the TRW Stock Fund consist primarily of TRW Inc. (TRW) common
stock, which is traded on the New York Stock Exchange and valued at the last
reported sales price on the last business day of the fiscal year.
Investments in the Equity Fund are valued at the redemption price established by
the Trustee, which is based on the fair value of the Bankers Trust Pyramid
Equity Index Fund assets. This Fund is constructed and maintained with the
objective of providing investment results which approximate the overall
performance of the Standard & Poor's Composite Index of 500 stocks. Income is
accumulated and reinvested in the Fund and included in the determination of unit
values.
The Insured Return Fund consists of fully benefit responsive investment
contracts with insurance companies, banks and other financial institutions and
short-term investment funds. Benefit responsive contracts provide contract value
payments for participant disbursements, loans and investment transfers as
allowed under the plan. There are exceptions for payments to participants who,
as a result of a corporate event, cease to be employed by TRW. A corporate event
includes a divestiture of an operating unit (for example, a subsidiary or a
division), a significant special early retirement program or other corporate
action that could be construed as causing increased Plan payments to
participants.
Investment contracts provide a stated rate of interest on principal for a stated
period of time. All investment contracts are accounted for at contract value
because they are fully benefit responsive. In accordance with Statement of
Position 94-4, which the Plan adopted effective January 1, 1995, contract value
equals fair value because no event has occurred that affects the value of any
contracts. The investment contracts are of three types: general account,
separate account, and synthetic investment contracts. Investment contracts in
the general account of an insurance company where assets are not specifically
identifiable have fixed rates of interest or an indexed rate of interest for the
life of the contract. Investment contracts in separate accounts of an insurance
company have underlying assets that are specifically identifiable and held for
the benefit of the Plan. Under synthetic investment contracts, the Plan owns
assets with an investment contract from an insurance company, bank or other
financial institution surrounding the asset. Both separate account and synthetic
contracts have periodic interest rate resets (monthly, quarterly, or
semi-annually) based on the performance of the underlying assets. All separate
account and synthetic contracts have a guaranteed return of principal. As of
December 31, 1996 and 1995, approximately $106 and $158 million was invested in
general account assets, $137 and $124 million in separate account assets, and
$247 and $230 million in assets owned by the Plan, respectively.
6
<PAGE> 8
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
A. SIGNIFICANT ACCOUNTING POLICIES--CONTINUED
The weighted average yield (excluding administrative expenses) for all
investment contracts was 6.77% in 1996 and 6.95% in 1995. The crediting interest
rate for all investment contracts was 6.79% at December 31, 1996 and 7.09% at
December 31, 1995.
Investments in the Small Company Equity Fund are valued at the redemption price
established by the Trustee, which is based on the fair value of the Bankers
Trust Pyramid Russell 2500 Index Fund assets. The Small Company Equity Fund is
constructed and maintained with the objective of providing investment results
which approximate the overall performance of the 2,500 common stocks included in
the Russell 2500 Equity Index. Income is accumulated and reinvested in the Fund
and included in the determination of unit values.
Investments in the Bond Index Fund are valued at the redemption price
established by the Trustee, which is based on the fair value of the Bankers
Trust Pyramid Intermediate Government/Corporate Bond Index Fund. The Bankers
Trust Pyramid Intermediate Government/Corporate Bond Index Fund is constructed
and maintained with the objective of providing investment results which
approximate the overall performance of the high quality U.S. government and
corporate bonds included in the Lehman Brothers Government/Corporate Index.
Income is accumulated and reinvested in the fund and included in the
determination of unit values.
The cost of securities sold is determined by the average cost method for
purposes of determining realized gains and losses.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Certain amounts in prior year financial statements have been reclassified to
conform with current year presentation.
On October 23, 1996, TRW's Board of Directors authorized a two-for-one stock
split, effected in the form of a stock dividend, to shareholders of record as of
November 8, 1996. A total of 10,463,851 additional shares were issued to the
Plan in conjunction with the stock dividend. All historical share amounts have
been restated to reflect retroactively the stock dividend.
7
<PAGE> 9
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN
The Plan is a defined contribution plan, and is comprised of the TRW Stock Fund,
Equity Fund, Insured Return Fund, Small Company Equity Fund and Bond Index Fund
(the Funds). Participation in the Plan is available to substantially all
domestic employees of TRW who have been employed for at least three months.
Prior to April 1, 1996, participants had to be employed for at least twelve
months to be eligible for participation in the Plan. The Plan is governed by the
Internal Revenue Code and related legislation.
PARTICIPANT CONTRIBUTIONS
The Plan allows eligible employees to contribute up to 13% of qualifying
compensation on a before-tax basis by way of salary reduction; such
contributions are made in increments of one-tenth of one percent of qualifying
compensation and could not exceed $9,500 in 1996 and $9,240 in 1995.
Participants may also elect to contribute, in increments of one percent, up to
10% of qualifying compensation on an after-tax basis. Participants can make up
to two contribution percentage changes per month. Annual contributions to a
participant's account (including before-tax, after-tax and TRW matching
contributions) and to any other defined contribution plan is limited to the
lesser of $30,000 or 25% of the participant's annual compensation reduced by the
amount of before-tax contributions.
Participants determine the funds in which to invest their contributions.
Employee contributions may be invested, in multiples of 10% percent, in one or
more of the five investment funds. Fund elections may be changed at any time.
TRW CONTRIBUTIONS
TRW contributes to the Plan, out of current or accumulated earnings, an amount
equal to 100% of each participant's before-tax contributions without exceeding
three percent of the participant's qualifying compensation. Participants
immediately vest in the TRW contributions. All TRW matching contributions are
invested in the ESOP portion of the TRW Stock Fund. TRW contributions always
remain in the TRW Stock Fund and may not be transferred. TRW contributions may
be in the form of cash or treasury or authorized and unissued shares of TRW
Common Stock. TRW Common Stock contributed is to be valued by any reasonable
method selected by TRW.
8
<PAGE> 10
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
The amount and type of TRW contributions are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------
<S> <C> <C>
TRW Common Stock $ 17,718,967 $ 16,939,149
Cash 23,535,308 20,709,474
---------------------------------------
$ 41,254,275 $ 37,648,623
=======================================
</TABLE>
WITHDRAWALS AND DISTRIBUTIONS
Upon termination of employment, a participant may elect to receive his or her
account, less the unpaid balance of any loan outstanding, in a single sum except
a participant whose account balance exceeds $3,500 may defer such payments until
he or she reaches age 70. Generally, distributions from the TRW Stock Fund will
be paid only in whole shares of TRW Common Stock with the balance in cash.
Participants who have less than 100 shares of TRW stock receive the value of
their shares in cash unless they elect to receive shares.
If a participant elects to defer payment of his or her account, the
undistributed account balance remains invested in the Plan. The following is the
total value of the accounts subject to deferred elections (8,144 as of December
31, 1996 and 8,243 as of December 31, 1995) that are included in the net assets
of the funds:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------
<S> <C> <C>
TRW Stock Fund $ 250,232,943 $ 199,229,528
Equity Fund 110,960,560 87,771,442
Insured Return Fund 161,701,413 166,987,746
Small Company Equity Fund 17,492,623 10,933,711
Bond Index Fund 3,692,881 3,233,663
--------------------------------------------
$ 544,080,420 $ 468,156,090
============================================
</TABLE>
9
<PAGE> 11
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
B. DESCRIPTION OF THE PLAN--CONTINUED
Effective January 1, 1988, participants who have attained age 55 as of the end
of the preceding fiscal year-end and commenced participation in the Plan at
least ten years prior may elect, within an election period during each of the
succeeding five consecutive plan years, to receive a special ESOP distribution.
The amount eligible for this special distribution is 50% of the prior fiscal
year-end value (including previous withdrawals) of TRW Common Stock acquired for
the participant's account by the ESOP since 1986, reduced by any previous
withdrawals.
PARTICIPANT LOANS
Participants can borrow from $1,000 to $50,000 (in increments of $100) of their
before-tax contributions, but such borrowings cannot exceed 50% of a
participant's total Plan balance. The interest rate is fixed (prime rate at the
end of the second to last business day of the quarter plus one percent) and the
repayment period cannot be less than one year or more than five years.
OTHER
Although it has not expressed any intent to do so, TRW reserves the right to
suspend or terminate the Plan. In the event of termination, the amount of each
participant's account may be retained in trust for the benefit of the
participant.
The above description of the Plan provides only general information.
Participants should refer to the Summary Plan Description, which is available
from the Stock Savings Plan's Participant Service Center, and annual prospectus
for a more complete description of the Plan's provisions.
10
<PAGE> 12
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
C. INVESTMENTS
The fair value of individual investments that represent 5% or more of the Plan's
total assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-------------------------------------------
<S> <C> <C>
TRW Inc. Common Stock $ 1,037,454,462 $ 824,261,402
Bankers Trust Pyramid Equity
Index Fund 462,068,568 377,675,716
</TABLE>
The net realized gain on disposition of investments is as follows:
<TABLE>
<CAPTION>
TRW STOCK FUND
1996 1995
----------------------------------------
<S> <C> <C>
Value realized $ 86,895,164 $ 41,258,096
Average cost 41,664,808 23,432,990
----------------------------------------
NET REALIZED GAIN $ 45,230,356 $ 17,825,106
========================================
EQUITY FUND
1996 1995
----------------------------------------
Value realized $ 39,585,192 $ 20,436,097
Average cost 21,489,897 13,828,446
----------------------------------------
NET REALIZED GAIN $ 18,095,295 $ 6,607,651
========================================
SMALL COMPANY EQUITY FUND
1996 1995
----------------------------------------
Value realized $ 11,390,594 $ 2,870,027
Average cost 8,954,287 2,549,123
----------------------------------------
NET REALIZED GAIN $ 2,436,307 $ 320,904
========================================
</TABLE>
11
<PAGE> 13
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
C. INVESTMENTS--CONTINUED
<TABLE>
<CAPTION>
BOND INDEX FUND
1996 1995
----------------------------------------
<S> <C> <C>
Value realized $ 5,692,322 $ 1,042,611
Average cost 5,188,658 953,923
----------------------------------------
NET REALIZED GAIN $ 503,664 $ 88,688
========================================
</TABLE>
The net unrealized appreciation of investments included in net assets is as
follows:
<TABLE>
<CAPTION>
TRW Stock Equity Small Company Bond Index
Fund Fund Equity Fund Fund
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 $ 266,008,245 $ 65,221,084 $ 521,658 $ (19,837)
Increase for the year 105,074,711 94,567,420 13,142,214 2,358,192
------------------------------------------------------------------------
Balance at December 31, 1995 371,082,956 159,788,504 13,663,872 2,338,355
Increase for the year 182,139,605 69,643,225 11,162,184 15,145
------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 $ 553,222,561 $ 229,431,729 $ 24,826,056 $ 2,353,500
========================================================================
</TABLE>
On a revalued basis, which is in accordance with Department of Labor Form 5500
requirements, the realized and unrealized gains (losses) are not available at
the date of the Report of Independent Auditors. A separate schedule will be
included in the Form 5500 when filed.
D. ADMINISTRATIVE EXPENSES
Generally, salaries and wages of the administrative staff are paid by TRW.
Expenses relating to investment advisor fees, management fees, trustee fees,
audit fees, printing and postage are paid from Plan assets. Expenses directly
attributable to any one fund are charged to that fund. Expenses not directly
attributable to any one fund are allocated to each fund in the proportion that
the market value of the assets of each fund bears to the total market value of
all Plan assets. Brokerage fees and commissions incident to the purchase or sale
of securities are paid by the fund in which they are incurred and are included
in the cost of securities purchased or sold.
12
<PAGE> 14
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
E. FEDERAL INCOME TAX STATUS OF THE PLAN
The Plan is exempt from federal income taxes as a qualified profit sharing plan.
The Plan has received a favorable determination letter from the Internal Revenue
Service as to the tax qualified status of the Plan. The Plan's Board of
Administration believes that the Plan is in operational compliance with the
Internal Revenue Code of 1986 and will remain qualified and exempt from federal
income taxes.
F. TRANSACTIONS WITH PARTIES-IN-INTEREST
Party-in-interest transactions include the purchase and sale of short-term
investments managed by the Plan's Trustee, Bankers Trust Company.
At December 31, 1996 and 1995, the Bankers Trust Pyramid Equity Index Fund holds
362,916 and 164,386 shares of TRW Inc. Common Stock having a fair value of
$17,964,342 and $12,739,915, respectively.
Bankers Trust Company managed assets of the Plan of approximately $598,618,300
and $470,516,119 at December 31, 1996 and 1995, respectively, and received in
cash trustee fees of $926,388 and $543,230 in 1996 and 1995, respectively.
There were no party-in-interest transactions which were prohibited under
Department of Labor Regulations.
G. NUMBER OF PARTICIPANTS BY FUND (UNAUDITED)
The summary below sets forth the number of contributing participants by their
current investment option(s):
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
------------------------------------
<S> <C> <C>
TRW Stock Fund 16,062 13,131
Equity Fund 16,438 13,779
Insured Return Fund 14,844 15,315
Small Company Equity Fund 10,631 6,871
Bond Index Fund 4,490 3,213
</TABLE>
The total number of participants in the Plan is less than the sum of the number
of employees shown above because many are participating in more than one fund.
13
<PAGE> 15
The TRW Employee Stock Ownership and Stock Savings Plan
Notes to Financial Statements--Continued
H. SALE OF IS&S
Effective September 19, 1996, TRW sold substantially all of the businesses in
the Information Systems and Services segment. As a result of this sale,
approximately $55.7 million was transferred to the new company's 401(k) plan on
October 4, 1996. This transfer is included with Withdrawals and Distributions in
the current year's Statements of Changes in Net Assets Available for Benefits.
14
<PAGE> 16
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
Crediting Fair Value
Shares Maturity Date Interest Rate Cost (See Note A)
- --------------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
COMMON STOCK
20,958,392 TRW Inc. $ 484,231,901 $ 1,037,454,462
-----------------------------------
TOTAL COMMON STOCK 484,231,901 1,037,454,462
SHORT-TERM INVESTMENTS
Bankers Trust Pyramid Directed Account Cash Fund 19,467,035 19,467,035
-----------------------------------
TOTAL SHORT-TERM INVESTMENTS 19,467,035 19,467,035
GUARANTEED INVESTMENT CONTRACTS
Security Backed Investments:
Bankers Trust:
Contract 93-515 ALP September 30, 2000 5.41% 49,249,926 49,249,926
People's Security Life:
Contract 00212TR-11 December 1, 2000 6.42 10,086,024 10,086,024
Provident Life & Accident:
Contract 630-05575 September 1, 2003 5.71 42,565,390 42,565,390
Transamerica Life & Annuity:
Contract 76540 November 15, 2004 6.31 21,879,408 21,879,408
-----------------------------------
123,780,748 123,780,748
Separate Account Contracts:
Aetna Life Insurance Co.:
Contract 014460 November 15, 2002 7.96 32,435,373 32,435,373
Allstate Life Ins. Co.
Contract 31053 February 15, 2002 6.57 5,070,222 5,070,222
Crown Life Insurance Co.:
Contract 9005876 March 3, 1998 8.91 3,482,755 3,482,755
John Hancock Mutual Life:
Contract 7441 May 1, 2004 6.87 24,828,421 24,828,421
Contract 7441-2 July 1, 1999 7.14 23,810,848 23,810,848
Contract 8712 June 30, 2003 6.60 5,968,343 5,968,343
</TABLE>
15
<PAGE> 17
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<TABLE>
<CAPTION>
Crediting Fair Value
Shares Maturity Date Interest Rate Cost (See Note A)
- ------------ ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS--CONTINUED
Metropolitan Life Insurance Co:
Contract 12702 January 2, 2001 6.05% 33,809,842 33,809,842
Contract 18544-B December 31, 1998 6.65 2,043,301 2,043,301
Prudential Insurance Co. of American:
Contract 6581-1 July 11, 2001 9.35 1,077,132 1,077,132
Contract 6661-2 Oct. 11, 2001 9.32 4,034,528 4,034,528
Contract 6702-3 November 15, 2000 9.00 404,464 404,464
----------------------------------
136,965,229 136,965,229
Synthetic Investment Contracts:
CDC Investment Management Corp.
Contract 115-01 April 15, 1998 6.45 5,126,054 5,126,054
Contract 115-02 April 30, 1999 7.45 6,035,985 6,035,985
Contract 115-03 August 31, 1998 7.19 5,999,960 5,999,960
Contract 115-04 Dec. 31, 1998 8.08 5,959,866 5,959,866
Contract 115-05 June 30, 2000 7.48 4,960,092 4,960,092
Contract 115-06 July 2, 2002 6.76 8,942,901 8,942,901
People Security Life:
Contract 00025TR-1 June 25, 1997 4.74 2,294,860 2,294,860
Contract 00025TR-2 April 27, 1998 5.27 4,988,867 4,988,867
Contract 00025TR-3 September 25, 1998 5.63 3,975,924 3,975,924
Contract 00025TR-4 January 15, 1998 5.42 2,451,949 2,451,949
Contract 00025TR-5 May 26, 1998 5.24 2,495,238 2,495,238
Contract 00025TR-6 May 26, 1998 5.30 4,289,272 4,289,272
Contract 00025TR-7 July 15, 1997 5.14 1,026,423 1,026,423
Contract 00025TR-8 November 15, 2000 6.51 4,841,341 4,841,341
Contract 00025TR-9 November 15, 2000 7.20 4,743,502 4,743,502
Contract 00025TR-10 May 17, 1999 7.00 9,679,880 9,679,880
Contract 00025TR-11 February 16, 1999 7.10 970,401 970,401
Contract 00025TR-12 March 25, 1999 7.54 4,867,103 4,867,103
Contract 00025TR-13 July 16, 2001 8.59 3,913,691 3,913,691
Contract 00025TR-14 June 15, 2000 7.89 6,033,697 6,033,697
Contract 00025TR-15 March 10, 2000 6.37 5,006,768 5,006,768
</TABLE>
16
<PAGE> 18
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<TABLE>
<CAPTION>
Crediting Fair Value
Shares Maturity Date Interest Rate Cost (See Note A)
- ----------- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS--CONTINUED
Provident Life & Accident:
Contract 630-05751 September 15, 2000 7.35% 14,223,477 14,223,477
Rabobank Nederland:
Contract TRW 99601 Sept. 25, 2003 7.12 5,852,450 5,852,450
Contract TRW 109501 July 2, 2001 6.20 4,975,078 4,975,078
---------------------------------
123,654,799 123,654,799
Fixed Rate and Fixed Term:
Aetna Life Insurance Company:
Contract 13822-001 April 7, 1997 9.69 17,009,110 17,009,110
Contract 13822-002 Sept. 30, 1997 9.77 8,518,069 8,518,069
Canada Life Assurance Company:
Contract 45800 June 1, 1998 5.23 5,227,075 5,227,075
Contract 45839 June 16, 1999 7.06 6,189,072 6,189,072
John Hancock Mutual Life:
Contract 5660 August 15, 1997 9.43 8,831,059 8,831,059
Contract 7314 January 14, 1999 5.40 11,676,547 11,676,547
Mass Mutual Life Insurance Company:
Contract 10062 November 3, 1997 9.70 17,561,181 17,561,181
New York Life Ins. Company:
Contract 6232 August 1, 1996 5.54 8,350,275 8,350,275
Contract GA06216 August 2, 1999 7.39 5,916,919 5,916,919
---------------------------------
89,279,307 89,279,307
Variable rate and fixed term:
John Hancock Mutual Life
Contract 7839 March 1, 2000 6.80 9,998,306 9,998,306
---------------------------------
9,998,306 9,998,306
Variable rate and term:
People Security Life:
Contract BDA0185ST March 30, 1997 5.83 6,728,845 6,728,845
---------------------------------
TOTAL GUARANTEED INVESTMENT CONTRACTS 490,407,234 490,407,234
</TABLE>
17
<PAGE> 19
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Assets Held for Investment Purposes--Continued
<TABLE>
<CAPTION>
Crediting Fair Value
Shares Maturity Date Interest Rate Cost (See Note A)
- ------------- ------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON TRUST FUNDS
271,817.384 Bankers Trust Pyramid Equity Index Fund 232,636,839 462,068,568
382,639.593 Bankers Trust Pyramid Russell 2500 Index Fund 71,762,509 96,588,565
9,307,603.212 Bankers Trust Pyramid Government/Corporate
Fixed Income Index Fund 18,140,632 20,494,132
-----------------------------------------
TOTAL COMMON TRUST FUNDS 322,539,980 579,151,265
Participant loans 9.25% 60,314,871 60,314,871
-----------------------------------------
TOTAL INVESTMENTS $ 1,376,961,021 $ 2,186,794,867
=========================================
</TABLE>
18
<PAGE> 20
The TRW Employee Stock Ownership and Stock Savings Plan
Schedule of Reportable Transactions
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Fair Value
of Asset on
Purchase Selling Cost Transaction Net Gain
Identity of Party Involved Description of Assets Price Price of Asset Date (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SINGLE TRANSACTIONS IN EXCESS OF
5% OF THE FAIR VALUE OF PLAN ASSETS
There were no single transactions in
excess of 5% of the fair value of
Plan assets.
SERIES OF TRANSACTIONS IN EXCESS OF
5% OF THE FAIR VALUE OF PLAN ASSETS
Bankers Trust: BT Pyramid Directed Account
305 Purchases Cash Fund $191,402,653 $191,402,653 $191,402,653 $ 0
92 Sales $181,483,716 181,483,716 181,483,716 0
</TABLE>
19
<PAGE> 1
Exhibit 99(b)
FINANCIAL STATEMENTS
THE TRW CANADA STOCK SAVINGS PLAN
DECEMBER 31, 1996 AND 1995
<PAGE> 2
REPORT OF INDEPENDENT AUDITORS
To the Participants and the Board of Administration of
THE TRW CANADA STOCK SAVINGS PLAN
We have audited the statements of financial condition of the TRW Stock Fund,
Pooled Money Market Fund Employees Profit Sharing Plan, Pooled Balanced Fund
Registered Retirement Savings Plan and Pooled Money Market Fund Registered
Retirement Savings Plan [constituting THE TRW CANADA STOCK SAVINGS PLAN] as at
December 31, 1996 and 1995 and the related statements of operations and changes
in fund equity for these funds for the years then ended. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the several funds of THE TRW CANADA STOCK
SAVINGS PLAN as at December 31, 1996 and 1995 and the results of their
operations and the changes in fund equity for the years then ended in accordance
with accounting principles generally accepted in Canada.
/s/ Ernst & Young LLP
Hamilton, Canada,
March 12, 1997. Chartered Accountants
<PAGE> 3
THE TRW CANADA STOCK SAVINGS PLAN
TRW STOCK FUND
STATEMENTS OF FINANCIAL CONDITION
As at December 31
<TABLE>
<CAPTION>
1996 1995
$ $
- --------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 2,080 39,477
Receivable from TRW Canada Limited 58,180 18,483
Investments at quoted market value
TRW Inc. common stock
13,254 shares [cost $791,684] in 1996 and
15,536 shares [cost $760,993] in 1995 899,151 821,155
- --------------------------------------------------------------------------------------------------
959,411 879,115
==================================================================================================
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short-term distributions 756,925 720,511
Fund equity [including net unrealized appreciation of investments] 202,486 158,604
- --------------------------------------------------------------------------------------------------
959,411 879,115
==================================================================================================
NUMBER OF SHARES OUTSTANDING AT DECEMBER 31 [note 5] 13,254 15,536
==================================================================================================
FUND EQUITY PER SHARE AT DECEMBER 31 [note 5] 15.2774 10.2088
==================================================================================================
</TABLE>
See accompanying notes
<PAGE> 4
THE TRW CANADA STOCK SAVINGS PLAN
TRW STOCK FUND
STATEMENTS OF OPERATIONS AND CHANGES IN FUND
EQUITY
Years ended December 31
<TABLE>
<CAPTION>
1996 1995
$ $
- -------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INVESTMENT INCOME
Dividends on TRW Inc. common stock 7,868 10,474
Interest 239 493
- -------------------------------------------------------------------------------------------------
8,107 10,967
- -------------------------------------------------------------------------------------------------
CONTRIBUTIONS
Participants 371,426 389,397
TRW Canada Limited
50% of total participants' contributions to all funds 363,022 362,356
- -------------------------------------------------------------------------------------------------
734,448 751,753
- -------------------------------------------------------------------------------------------------
Net realized gain on transfer
of investments to participants [note 4] 49,422 2,810
Unrealized appreciation of investments [note 4] 47,305 54,592
- -------------------------------------------------------------------------------------------------
96,727 57,402
- -------------------------------------------------------------------------------------------------
839,282 820,122
- -------------------------------------------------------------------------------------------------
Less withdrawals and terminations in respect
of the current year
Paid
Cash 3,183 2,248
TRW Inc. common stock
598 shares in 1996; 1,612 shares in 1995 35,293 82,956
- -------------------------------------------------------------------------------------------------
38,476 85,204
- -------------------------------------------------------------------------------------------------
Payable
Cash 12,448 18,913
TRW Inc. common stock
10,974 shares in 1996; 13,274 shares in 1995 744,476 701,598
- -------------------------------------------------------------------------------------------------
756,924 720,511
- -------------------------------------------------------------------------------------------------
795,400 805,715
- -------------------------------------------------------------------------------------------------
INCREASE IN FUND EQUITY 43,882 14,407
Fund equity at January 1 158,604 144,197
- -------------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 202,486 158,604
=================================================================================================
</TABLE>
See accompanying notes
<PAGE> 5
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND EMPLOYEES PROFIT SHARING PLAN
STATEMENTS OF FINANCIAL CONDITION
As at December 31
<TABLE>
<CAPTION>
1996 1995
$ $
- --------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash 10 11
Receivable from TRW Canada Limited 15,973 15,581
Interest receivable 728 1,351
Investment at market value
Royal Trust Company Classified Money Market Fund
22,388 units [cost $223,883]
in 1996 and
21,846 units [cost $218,457] in 1995 223,883 218,457
- --------------------------------------------------------------------------------------------------
240,594 235,400
==================================================================================================
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short-term distributions 205,288 201,736
Fund equity 35,306 33,664
- --------------------------------------------------------------------------------------------------
240,594 235,400
==================================================================================================
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 3,530.6 3,366.4
==================================================================================================
FUND EQUITY PER UNIT AT DECEMBER 31 10.0 10.0
==================================================================================================
</TABLE>
See accompanying notes
<PAGE> 6
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND EMPLOYEES PROFIT SHARING PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
Years ended December 31
<TABLE>
<CAPTION>
1996 1995
$ $
- -------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INTEREST INCOME 6,911 8,664
Participants' contributions 214,997 203,587
- -------------------------------------------------------------------------------------------------
221,908 212,251
- -------------------------------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid 14,978 2,536
Payable 205,288 201,736
- -------------------------------------------------------------------------------------------------
220,266 204,272
- -------------------------------------------------------------------------------------------------
INCREASE IN FUND EQUITY 1,642 7,979
Fund equity at January 1 33,664 25,685
- -------------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 35,306 33,664
=================================================================================================
</TABLE>
See accompanying notes
<PAGE> 7
THE TRW CANADA STOCK SAVINGS PLAN
POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF FINANCIAL CONDITION
As at December 31
<TABLE>
<CAPTION>
1996 1995
$ $
- -------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash -- 5
Receivable from TRW Canada Limited 8,119 6,803
Interest receivable 25,243 3,111
Investments at quoted market value
Royal Trust Company Classified Balanced Fund
26,024.6831 units [cost $321,087] in 1996 and
21,702.0528 units [cost $261,441] in 1995 384,497 283,493
- -------------------------------------------------------------------------------------------------
417,859 293,412
=================================================================================================
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short-term distributions 33,925 36
Fund equity [including net unrealized appreciation of investments] 383,934 293,376
- -------------------------------------------------------------------------------------------------
417,859 293,412
=================================================================================================
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 26,024.6831 21,702.0528
=================================================================================================
FUND EQUITY PER UNIT AT DECEMBER 31 14.753 13.518
=================================================================================================
</TABLE>
See accompanying notes
<PAGE> 8
THE TRW CANADA STOCK SAVINGS PLAN
POOLED BALANCED FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND
EQUITY
Years ended December 31
<TABLE>
<CAPTION>
1996 1995
$ $
- -------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INCOME 38,280 13,305
- -------------------------------------------------------------------------------------------------
CONTRIBUTIONS
Participants' contributions 91,655 84,084
- -------------------------------------------------------------------------------------------------
Net realized gain (loss) on disposition of investments [note 4] 316 (182)
Unrealized appreciation of investments [note 4] 41,357 23,955
- -------------------------------------------------------------------------------------------------
41,673 23,773
- -------------------------------------------------------------------------------------------------
171,608 121,162
- -------------------------------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid 47,125 26,529
Payable 33,925 36
- -------------------------------------------------------------------------------------------------
81,050 26,565
- -------------------------------------------------------------------------------------------------
INCREASE IN FUND EQUITY 90,558 94,597
Fund equity at January 1 293,376 198,779
- -------------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 383,934 293,376
=================================================================================================
</TABLE>
See accompanying notes
<PAGE> 9
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF FINANCIAL CONDITION
As at December 31
<TABLE>
<CAPTION>
1996 1995
$ $
- -------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
ASSETS
Cash -- 4
Receivable from TRW Canada Limited 3,730 3,845
Interest receivable 865 1,546
Investment at market value
Royal Trust Company Classified Pooled Money Market Fund
25,733.9 units [cost $257,339] in 1996
and 24,192.6 units [cost $241,926] in 1995 257,339 241,926
- -------------------------------------------------------------------------------------------------
261,934 247,321
=================================================================================================
LIABILITIES AND FUND EQUITY
LIABILITIES
Withdrawals, terminations and short-term distributions 11,259 1,942
Fund equity 250,675 245,379
- -------------------------------------------------------------------------------------------------
261,934 247,321
=================================================================================================
NUMBER OF UNITS OUTSTANDING AT DECEMBER 31 25,067.5 24,537.9
=================================================================================================
FUND EQUITY PER UNIT AT DECEMBER 31 10.0 10.0
=================================================================================================
</TABLE>
See accompanying notes
<PAGE> 10
THE TRW CANADA STOCK SAVINGS PLAN
POOLED MONEY MARKET FUND REGISTERED RETIREMENT SAVINGS PLAN
STATEMENTS OF OPERATIONS AND CHANGES IN FUND EQUITY
Years ended December 31
<TABLE>
<CAPTION>
1996 1995
$ $
- -------------------------------------------------------------------------------------------------
[expressed in Canadian dollars]
<S> <C> <C>
INTEREST INCOME 13,418 15,009
Participants' contributions 47,960 47,636
- -------------------------------------------------------------------------------------------------
61,378 62,645
- -------------------------------------------------------------------------------------------------
Less cash withdrawals and terminations
Paid 44,823 10,047
Payable 11,259 1,942
- -------------------------------------------------------------------------------------------------
56,082 11,989
- -------------------------------------------------------------------------------------------------
INCREASE IN FUND EQUITY 5,296 50,656
Fund equity at January 1 245,379 194,723
- -------------------------------------------------------------------------------------------------
FUND EQUITY AT DECEMBER 31 250,675 245,379
=================================================================================================
</TABLE>
See accompanying notes
<PAGE> 11
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
1. GENERAL PLAN PROVISIONS
The investment programs of the TRW Canada Stock Savings Plan [the "Plan"] are as
follows:
PARTICIPANT CONTRIBUTIONS
Upon enrollment or re-enrollment, each participant directs that his
contributions [computed in increments of one percent, from two per cent to six
per cent of qualifying compensation] are to be invested in accordance with any
of the following investment options:
[a] 100% in the TRW Stock Fund [the common stock of TRW Inc. in accordance
with the trust agreement and the Plan].
[b] 100% in the Pooled Money Market Fund Employees Profit Sharing Plan. At
present, the Trustee invests all of the Pooled Money Market Fund amounts
in the Royal Trust Company, Classified Money Market Fund in accordance
with the Trust agreement and the Plan.
[c] 100% in the Pooled Balanced Fund Registered Retirement Savings Plan. At
present, the Trustee invests all of the Pooled Balanced Fund amounts in
the Royal Trust Company, Classified Balanced Fund, in accordance with the
Trust agreement and the Plan.
[d] 100% in the Pooled Money Market Fund Registered Retirement Savings Plan.
At present, the Trustee invests all of the Pooled Money Market Fund
amounts in the Royal Trust Company, Classified Pooled Money Market Fund
in accordance with the Trust agreement and the Plan.
[e] A combination of options [a] through [d] in multiples of 25%.
Such direction may be revised on 30 days prior notice, effective January 1 of
any year.
TRW CANADA LIMITED CONTRIBUTIONS
TRW Canada Limited shall contribute to the plan for each month, out of current
or accumulated earnings, an amount equal to 50% of participant contributions for
such month. TRW Canada Limited contributions vest immediately.
All TRW Canada Limited contributions are invested in the TRW Stock Fund.
TRW Canada Limited does not charge a fee for administering the Plans.
1
<PAGE> 12
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
The number of participants in each Fund at December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
TRW Stock Fund 281 267
Pooled Money Market Fund Employees Profit Sharing Plan 114 112
Pooled Balanced Fund Registered Retirement Savings Plan 66 67
Pooled Money Market Fund Registered Retirement Savings Plan 48 49
</TABLE>
The total number of participants in the Plan is less than the sum of the number
of participants shown above because many are participating in more than one
Fund.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
principles generally accepted in Canada, and are within the framework of the
accounting policies summarized below.
GAIN AND LOSSES ON INVESTMENTS
The realized gain or loss on disposition or transfer of an investment is
determined from the market value of the investment at the date of disposition or
transfer and the average cost base of that specific pool of investments prior to
the disposition or transfer.
Unrealized gains or losses are determined as the net effect of the change in
appreciation/depreciation of the investments from January 1 to December 31,
based on market values and the average cost base of each investment at those
respective dates.
INCOME RECOGNITION
Dividends are recognized as earned.
Interest income is recognized as it is earned consistent with the accrual basis
of accounting.
2
<PAGE> 13
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
3. INCOME TAXES
The Plan is exempt from Canadian federal income taxes under provisions of the
Income Tax Act. Federal income tax consequences to the participants under the
Plan are as provided in the Income Tax Act. TRW Canada Limited contributions are
taxable to the participants as is the income and all post-1971 capital gains
less post-1971 capital losses of the Plan, all of which are allocated to the
participants by the Trustee during the year, whether or not such amounts are
paid to the participants by the Trustee during the year. In some circumstances,
the amounts taxable could exceed the amounts allocated. The amount of foreign
non-business income tax paid on foreign source income by the trusts under the
Plan for the year is allocated to and deemed to have been paid by the
participants for Canadian federal income tax purposes. Participants who are
non-resident taxpayers are subject to special rules depending on whether they
have performed duties in Canada during the year and are subject to 15%
withholding tax on amounts paid or credited to them under the Plan.
4. UNREALIZED AND REALIZED (LOSSES) GAINS
Investments are stated at their quoted market value. The net unrealized
appreciation (depreciation) of investments included in fund equity is as
follows:
<TABLE>
<CAPTION>
TRW POOLED
STOCK BALANCED
FUND FUND
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1994 5,570 (1,902)
Change for the year
Market value 54,592 23,955
- --------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 60,162 22,053
Change for the year
Market value 47,305 41,357
- --------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 107,467 63,410
==================================================================================================
</TABLE>
3
<PAGE> 14
THE TRW CANADA STOCK SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
The net realized gain on the transfer or disposition of investments is
summarized as follows:
<TABLE>
<CAPTION>
TRW STOCK FUND
--------------
1996 1995
$ $
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
AMOUNT REALIZED 756,618 720,679
Cost - average 707,196 717,869
- --------------------------------------------------------------------------------------------------
NET REALIZED GAIN 49,422 2,810
==================================================================================================
POOLED BALANCED FUND
REGISTERED RETIREMENT
SAVINGS PLAN
------------
1996 1995
$ $
- --------------------------------------------------------------------------------------------------
AMOUNT REALIZED 3,900 17,750
Cost - average 3,584 17,932
- --------------------------------------------------------------------------------------------------
NET REALIZED GAIN 316 (182)
==================================================================================================
</TABLE>
5. STOCK SPLIT
On October 23, 1996, TRW's Board of Directors authorized a two-for-one stock
split effected in the form of a stock dividend to shareholders of record as of
November 8, 1996. A total of 6,192 additional shares were issued to the Plan in
conjunction with the stock dividend. All historical share amounts have been
restated to reflect retroactively the stock dividend.
6. RELATED PARTY TRANSACTIONS
All expenses related to the TRW Canada Stock Savings Plan are paid by TRW Canada
Limited.
4
