<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549-1004
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 1-977
-----
WESTINGHOUSE ELECTRIC CORPORATION
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0877540
------------ ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
Westinghouse Building, 11 Stanwix Street, Pittsburgh, Pa. 15222-1384
----------------------------------------------------------------------
(Address of principal executive offices, zip code)
(412) 244-2000
----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Common stock 420,803,641 shares outstanding at July 31, 1996
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<PAGE> 2
WESTINGHOUSE ELECTRIC CORPORATION
INDEX
---------------------------------
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Income 3
Condensed Consolidated Balance Sheet 4
Condensed Consolidated Statement of Cash Flows 5
Notes to the Condensed Consolidated
Financial Statements 6-13
Item 2. Management's Discussion and Analysis
of Financial Condition and
Results of Operations 13-27
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 27-28
Item 4. Submission of Matters to a Vote of
Security Holders 28-29
Item 6. Exhibits and Reports on Form 8-K 29-31
SIGNATURE 32
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
------------------------------------------
(in millions except per share amounts) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1996 1995 1996 1995
---- ---- ----- ----
<S> <C> <C> <C> <C>
Sales of products and services $ 2,224 $ 1,445 $ 4,180 $ 2,647
Costs of products and services (1,442) (1,014) (2,957) (1,876)
Restructuring, litigation and other
matters (notes 2, 3, and 10) (175) (6) (870) (6)
Marketing, administration, and general
expenses (637) (337) (1,239) (643)
------- ------- ------- -------
Operating profit (loss) (30) 88 (886) 122
Other income (expenses), net (note 4) 7 1 (139) (1)
Interest expense (109) (47) (255) (95)
------- ------- ------- -------
Income (loss) from Continuing Operations
before income taxes and minority
interest in income of consolidated
subsidiaries (132) 42 (1,280) 26
Income tax benefit (expense) 44 (14) 429 (5)
Minority interest in income of
consolidated subsidiaries (1) (3) (2) (5)
------- ------- ------- -------
Income (loss) from Continuing Operations (89) 25 (853) 16
------- ------- ------- -------
Discontinued Operations, net of
income taxes (note 9):
Income (loss) from
Discontinued Operations - 34 (10) 58
Estimated net gain on disposal of
Discontinued Operations - - 1,018 -
------- ------ ------- -------
Income from Discontinued Operations - 34 1,008 58
Extraordinary item:
Loss on early extinguishment of debt
(note 5) - - (63) -
------- ------- ------- -------
Net income (loss) $ (89) $ 59 $ 92 $ 74
======= ======= ======= =======
Earnings (loss) per common share:
Continuing Operations $ (0.20) $ 0.03 $ (1.94) $ (0.02)
Discontinued Operations - 0.09 2.29 0.14
Extraordinary item - - (0.14) -
------- ------- ------- -------
Earnings (loss) per common share $ (0.20) $ 0.12 $ 0.21 $ 0.12
======= ======= ======= =======
Cash dividends per common share $ 0.05 $ 0.05 $ 0.10 $ 0.10
======= ======= ======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 4
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
------------------------------------
(in millions)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
ASSETS (unaudited)
- ------
<S> <C>
Cash and cash equivalents $ 157 $ 196
Customer receivables 1,511 1,494
Inventories (note 6) 811 852
Uncompleted contracts costs over related billings 699 584
Program rights 314 301
Deferred income taxes 656 547
Prepaid and other current assets 251 261
------ -------
Total current assets 4,399 4,235
Plant and equipment, net 1,850 1,924
Intangible and other noncurrent assets (note 7) 9,053 8,827
Net assets of Discontinued Operations (note 9) - 1,669
------- -------
Total assets $15,302 $16,655
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Revolving credit borrowings and
other short-term debt $ 1,768 $ 309
Current maturities of long-term debt 26 330
Accounts payable 582 829
Uncompleted contracts billings over related costs 383 322
Other current liabilities (note 8) 2,036 2,123
------- -------
Total current liabilities 4,795 3,913
Long-term debt 3,649 7,226
Net liabilities of Discontinued Operations
(note 9) 64 -
Other noncurrent liabilities (note 8) 5,007 3,997
------- -------
Total liabilities 13,515 15,136
------- -------
Contingent liabilities and commitments (note 10)
Minority interest in equity of consolidated
subsidiaries 12 11
Shareholders' equity (note 11):
Preferred stock, $1.00 par value (25 million
shares authorized):
Series A preferred (no shares issued) - -
Series C conversion preferred (4 million
shares issued) 4 4
Common stock, $1.00 par value (630 million
shares authorized, 426 million shares issued) 426 426
Capital in excess of par value 1,820 1,848
Common stock held in treasury (625) (720)
Minimum pension liability adjustment (1,050) (1,220)
Cumulative foreign currency translation
adjustments (10) (11)
Retained earnings 1,210 1,181
------- -------
Total shareholders' equity 1,775 1,508
------- -------
Total liabilities and shareholders' equity $15,302 $16,655
======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 5
WESTINGHOUSE ELECTRIC CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------------
(in millions) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1996 1995
---- ----
<S> <C> <C>
Cash used for operating activities
of Continuing Operations $ (657) $ (196)
Cash provided (used) for operating activities
of Discontinued Operations (349) 56
Cash flows from investing activities:
Business acquisitions (101) (37)
Business divestitures 3,570 65
Liquidation of assets of Discontinued Operations 49 159
Capital expenditures (94) (97)
Liquidations of trust investments - 239
------- -------
Cash provided by investing activities 3,424 329
------- -------
Cash flows from financing activities:
Bank revolver borrowings 4,689 508
Bank revolver repayments (3,210) (460)
Net change in other short-term debt (371) (16)
Repayments of long-term debt (3,580) (39)
Treasury stock reissued 67 33
Dividends paid (63) (84)
Other (10) (6)
------- -------
Cash used for financing activities (2,478) (64)
------- -------
Increase (decrease) in cash and cash equivalents (60) 125
Cash and cash equivalents at beginning of period 226 344
------- -------
Cash and cash equivalents at end of period $ 166 $ 469
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid:
Continuing Operations $ 266 $ 85
Discontinued Operations 35 77
------- -------
Total interest paid $ 301 $ 162
======= =======
Income taxes paid $ 64 $ 47
======= =======
</TABLE>
See Notes to the Condensed Consolidated Financial Statements
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<PAGE> 6
WESTINGHOUSE ELECTRIC CORPORATION
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------
1. GENERAL
The condensed consolidated financial statements include the accounts of
Westinghouse Electric Corporation (Westinghouse) and its subsidiary companies
(together, the Corporation) after elimination of intercompany accounts and
transactions.
When reading the financial information contained in this Quarterly Report,
reference should be made to the financial statements, schedules and notes
contained in the Corporation's Annual Report on Form 10-K for the year ended
December 31, 1995 and the Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996. Certain amounts pertaining to the six months ended June 30,
1995 and the year ended December 31, 1995 have been restated or reclassified
for comparative purposes. Reference also should be made to the Corporation's
Current Report on Form 8-K dated May 2, 1996 containing certain restated
financial information.
In March 1996, the Corporation adopted a plan to exit its environmental
services line of business that was previously reported as part of the
Government & Environmental Services business segment in Continuing Operations.
As a result, financial information previously issued has been restated to give
effect to the classification of the environmental services business as a
Discontinued Operation in accordance with Accounting Principles Board Opinion
No. 30, "Reporting the Results of Operations--Reporting the Effects of Disposal
of a Segment of a Business and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" (APB 30). See note 9 to the financial
statements. The Corporation previously classified as Discontinued Operations,
WCI Communities, Inc. (WCI), The Knoll Group (Knoll), the defense and
electronic systems business, the Distribution and Control Business Unit (DCBU),
Westinghouse Electric Supply Company (WESCO), and the financial services
business.
In the opinion of management, the Condensed Consolidated Financial Statements
include all material adjustments necessary to present fairly the Corporation's
financial position, results of operations and cash flows. Such adjustments are
of a normal recurring nature. The results for this interim period are not
necessarily indicative of results for the entire year or any other interim
period.
2. RESTRUCTURING, LITIGATION, AND OTHER MATTERS
During the second quarter of 1996, the Corporation completed a comprehensive
review of its environmental remediation obligations and recorded a charge to
operating profit of $175 million. See note 10.
During the first quarter of 1996, the Corporation took several actions to
streamline its businesses and reduce the future financial impact of certain
matters. Certain of these actions resulted in the recognition of charges to
operating profit. Costs for new restructuring projects of $125 million were
recognized primarily for consolidation of facilities and the separation of
employees. A charge of $486 million was recognized for pending litigation
matters. As discussed in note 3, impairment of $54 million was recognized based
on a modification of the projected recoverability of certain long-lived assets.
Other costs of $30 million recognized in the first quarter generally relate to
previously divested businesses.
3. IMPAIRMENT OF LONG-LIVED ASSETS
During the first quarter of 1996, the Corporation adopted 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." SFAS No. 121
requires that long-lived assets, including related goodwill, be reviewed for
impairment and written down to their estimated fair value whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable.
The adoption of SFAS No. 121 resulted in an impairment charge included in
operating profit of $54 million.
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<PAGE> 7
4. OTHER INCOME AND EXPENSES, NET (in millions) (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net gain (loss) on disposition of assets $ 1 $ - $ (150) $ (5)
Miscellaneous, net 6 1 11 4
----- ----- ------ ------
Other income (expenses), net $ 7 $ 1 $ (139) $ (1)
===== ===== ====== ======
</TABLE>
The net loss on disposition of assets for the six months ended June 30, 1996,
includes an estimated loss of $152 million resulting from a decision to sell
certain miscellaneous non-strategic assets.
5. EXTRAORDINARY ITEM
On March 1, 1996, the Corporation extinguished prior to its maturity $3,565
million of debt under the $7.5 billion credit agreement. Term Loan I was repaid
in full and $1,065 million of Term Loan II was repaid. As a result of the early
extinguishment of debt and the writeoff of related debt issue costs in the
first quarter, the Corporation incurred an extraordinary loss of $63 million,
net of a tax benefit of $41 million.
6. INVENTORIES (in millions)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(unaudited)
<S> <C> <C>
Raw materials $ 94 $ 88
Work in process 513 446
Finished goods 132 122
----- ------
739 656
Long-term contracts in process 831 1,002
Progress payments to subcontractors 49 21
Recoverable engineering and development costs 85 60
Less: Inventoried costs related to contracts
with progress billing terms (893) (887)
----- ------
Inventories, net $ 811 $ 852
===== ======
</TABLE>
7. INTANGIBLE AND OTHER NONCURRENT ASSETS (in millions)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(unaudited)
<S> <C> <C>
Deferred income taxes $1,268 $1,209
Goodwill 5,251 5,303
FCC licenses 1,248 1,242
Other intangible assets 159 162
Intangible pension asset 54 63
Deferred charges 251 353
Joint ventures and affiliates 82 70
Noncurrent receivables 392 172
Program rights 135 21
Other 213 232
------ ------
Total intangible and other noncurrent assets $9,053 $8,827
====== ======
</TABLE>
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<PAGE> 8
8. OTHER CURRENT AND NONCURRENT LIABILITIES (in millions)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995*
------------- -----------------
(unaudited)
<S> <C> <C>
Other current liabilities:
- -------------------------
Accrued employee compensation $ 188 $ 215
Income taxes currently payable 148 182
Liabilities for talent and program rights 211 254
Accrued product warranty 56 58
Accrued taxes, interest, and insurance 216 190
Accrued restructuring costs 159 153
Liability for asset dispositions 111 93
Accrued expenses 732 802
Environmental liabilities 55 47
Other 160 129
------ ------
Total other current liabilities $2,036 $2,123
====== ======
Other noncurrent liabilities:
- ----------------------------
Postretirement and postemployment benefits $1,307 $1,311
Pension liability 1,563 1,426
Accrued restructuring 75 8
Liability for asset dispositions 99 19
Liabilities for talent and program rights 51 47
Accrued expenses 883 661
Environmental liabilities 432 238
Other 597 287
------ ------
Total other noncurrent liabilities $5,007 $3,997
====== ======
</TABLE>
*Certain amounts have been reclassified for comparative purposes.
9. DISCONTINUED OPERATIONS
During the first quarter of 1996, the Corporation completed the sales of both
Knoll and the defense and electronic systems business. These sales resulted in
a combined after-tax gain of $1.2 billion. The net proceeds from these
transactions were used to repay a significant portion of the debt incurred to
finance the acquisition of CBS, all of which was classified as debt of
Continuing Operations.
In March 1996, the Corporation adopted a plan to exit its environmental
services line of business included in its former Government & Environmental
Services segment. The Corporation recorded an after-tax charge for the
estimated loss on disposal of $146 million.
During the third quarter of 1995, the Corporation exited its land development
business segment by selling WCI. The proceeds were used to repay debt of
Discontinued Operations.
In November 1992, the Corporation announced a plan that included exiting
Financial Services through the disposition of its $9 billion asset portfolios
and selling DCBU and WESCO. The Corporation has since completed the sales of
DCBU and WESCO and liquidated substantially all of Financial Services real
estate and corporate portfolios. The liquidation of Financial Services leasing
portfolio is expected to occur over a longer period of time in accordance with
its contractual terms.
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<PAGE> 9
The operating results for Discontinued Operations for the six months ended June
30, 1996 and 1995 are grouped by measurement date as follows:
<TABLE>
<CAPTION>
Discontinued Operation Measurement Date
- --------------------------------------------------------------------------------
<S> <C>
Environmental Services March 1996
Defense and Electronic Systems December 1995
Knoll December 1995
WCI July 1995
Financial Services November 1992
</TABLE>
Operating results for a discontinued operation subsequent to its measurement
date are recorded directly to the liability for estimated loss on disposal.
OPERATING RESULTS OF DISCONTINUED OPERATIONS
(in millions) (unaudited)
For the six months ended June 30, 1996
<TABLE>
<CAPTION>
Measurement Date
----------------------------------------
1996 1995 1992 Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Sales of products and services $ 114 $ 352 $ 13 $ 479
Loss before income taxes (15) (15)
Income tax benefit 5 5
Net loss prior to measurement date (10) (10)
Operating losses after measurement date
charged to liability for estimated
loss on disposal (32) (14) (11) (57)
</TABLE>
For the six months ended June 30, 1995
<TABLE>
<CAPTION>
Measurement Date
----------------------------------------
1996 1995 1992 Total
---- ---- ---- -----
<S> <C> <C> <C> <C>
Sales of products and services $ 146 $1,528 $ 17 $1,691
Income (loss) before income taxes (6) 108 102
Income tax benefit (expense) 2 (46) (44)
Net income (loss) prior to measurement
date (4) 62 58
Operating losses after measurement date
charged to liability for estimated
loss on disposal (35) (35)
</TABLE>
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<PAGE> 10
The assets and liabilities of Discontinued Operations have been separately
classified on the consolidated balance sheet as net assets (liabilities) of
Discontinued Operations. A summary of these assets and liabilities follows:
NET ASSETS (LIABILITIES) OF DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
(in millions) June 30, 1996 December 31, 1995
------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 9 $ 30
Receivables 46 448
Inventories 9 283
Portfolio investments 887 901
Other investments 184 212
Other assets 237 1,200
Deferred income taxes - 432
------ ------
Total assets -- Discontinued Operations 1,372 3,506
------ ------
LIABILITIES:
Revolving credit facility borrowings 257 81
Current maturities of long-term debt 42 265
Liability for estimated loss on disposal 660 212
Long-term debt 154 157
Other liabilities 306 1,122
Deferred income taxes 17 -
------ ------
Total liabilities -- Discontinued Operations 1,436 1,837
------ ------
Net assets (liabilities) of
Discontinued Operations $ (64) $1,669
====== ======
</TABLE>
Portfolio investments consist primarily of receivables related to the leasing
portfolio of Financial Services. Also included are real estate properties and
investments in leasing partnerships.
The leasing portfolio is expected to liquidate through 2015 in accordance with
contractual terms. Leasing receivables consist of direct financing and
leveraged leases. At June 30, 1996 and December 31, 1995, 83% and 84%,
respectively, related to aircraft and 17% and 16%, respectively, related to
cogeneration facilities.
Other investments include mortgage receivables and other notes or securities
acquired or retained in divestiture transactions. Other assets of Discontinued
Operations relate primarily to the environmental services businesses, which are
in the process of being divested.
10. CONTINGENT LIABILITIES AND COMMITMENTS
Litigation
- ----------
Steam Generators
The Corporation has been defending various lawsuits brought by utilities
claiming a substantial amount of damages in connection with alleged tube
degradation in steam generators sold by the Corporation as components of
nuclear steam supply systems. Since 1993, settlement agreements have been
entered resolving nine litigation claims. These agreements generally require
the Corporation to provide certain products and services at prices discounted
at varying rates. Two cases were resolved in favor of the Corporation after
trial or arbitration. Two active steam generator lawsuits remain.
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<PAGE> 11
The Corporation is also a party to five tolling agreements with utilities or
utility plant owners' groups which have asserted steam generator claims. The
tolling agreements delay initiation of any litigation for various specified
periods of time and permit the parties time to engage in discussion.
Securities Class Actions - Financial Services
The Corporation is defending derivative and class action lawsuits alleging
federal securities law and common law violations arising out of purported
misstatements or omissions contained in the Corporation's public filings
concerning the financial condition of the Corporation and certain of its former
subsidiaries in connection with charges to earnings of $975 million in 1990 and
$1,680 million in 1991 and a public offering of Westinghouse common stock in
1991. The court dismissed both the derivative claim and the class action claims
in their entirety. These dismissals were appealed. In July 1996, the United
States Court of Appeals for the Third Circuit (the Circuit Court) affirmed the
court's dismissal of the derivative claim. In addition, the Circuit Court
affirmed in part and reversed in part the class action claims. Those portions
of the class action claims which were reversed have been remanded to the
Western District of Pennsylvania for further proceedings.
Asbestos
The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products, generally in
the pre-1970 time period. Typically, these lawsuits are brought against
multiple defendants. The Corporation was neither a manufacturer nor a producer
of asbestos and is oftentimes dismissed from these lawsuits on the basis that
the Corporation has no relationship to the products in question or the claimant
did not have exposure to the Corporation's product. On May 2, 1996, 15,000
claims pending in a multidistrict litigation in the Eastern District of
Pennsylvania were dismissed. Plaintiffs may appeal this dismissal. At June 30,
1996, the Corporation has approximately 90,000 claims outstanding against it.
In court actions which have been resolved, the Corporation has prevailed in the
majority of the asbestos claims and has resolved others through settlement.
Furthermore, the Corporation has brought suit against certain of its insurance
carriers with respect to these asbestos claims. Under the terms of a settlement
agreement resulting from this suit, carriers that have agreed to the settlement
are now reimbursing the Corporation for a substantial portion of its current
costs and settlements associated with asbestos claims.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in the steam generator claims, the securities class action
and certain groupings of asbestos claims and, although management believes a
significant adverse judgment is unlikely, any such judgment could have a
material adverse effect on the Corporation's results of operations for a
quarter or a year. However, based on its understanding and evaluation of the
relevant facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described above and that the Corporation
has adequately provided for costs arising from potential settlement of these
matters when in the best interest of the Corporation. Management believes that
the litigation should not have a material adverse effect on the financial
condition of the Corporation.
Environmental Matters
- ---------------------
Compliance with federal, state, and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations and technology, the adequacy of
information available for individual sites, the extended time periods over
which site remediation occurs, and the identification of new sites. The
Corporation has, however, recognized an estimated liability, measured in
current dollars, for those sites where it is
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<PAGE> 12
probable that a loss has been incurred and the amount of the loss can be
reasonably estimated. The Corporation recognizes changes in estimates as new
remediation requirements are defined or as more information becomes available.
With regard to remedial actions under federal and state Superfund laws, the
Corporation has been named a potentially responsible party (PRP) at numerous
sites located throughout the country. At many of these sites, the Corporation is
either not a responsible party or its site involvement is very limited or de
minimis. However, the Corporation may have varying degrees of cleanup
responsibilities at approximately 85 sites, including the sites located in
Bloomington, Indiana. The Corporation believes that any liability incurred for
cleanup at these sites will be satisfied over a number of years and, in many
cases, the costs will be shared with other responsible parties. These sites
include certain sites for which the Corporation, as part of an agreement for
sale, has retained obligations for remediation of environmental contamination
and for other Comprehensive Environmental Response Compensation and Liability
Act (CERCLA) issues.
In the second quarter of 1996, the Corporation and its external consultants
completed a study to evaluate the Corporation's environmental remediation
strategies. Based on the costs associated with the most probable alternative
remediation strategy for the above mentioned sites, including Bloomington, the
Corporation has an accrued liability of $487 million, including $175 million
that was recognized in the second quarter of 1996. Depending on the remediation
alternatives ultimately selected, the costs related to these sites could differ
from the amounts currently accrued. The accrued liability includes $361 million
for site investigation and remediation, and $126 million for post closure and
monitoring activities. Management anticipates that the majority of expenditures
for site investigation and remediation will occur during the next 5 - 10 years.
Expenditures for post closure and monitoring activities will be made over
periods up to 30 years.
Commitments -- Continuing Operations
- ------------------------------------
In the ordinary course of business, standby letters of credit are issued by
commercial banks on behalf of the Corporation related to performance
obligations primarily under contracts with customers.
The Corporation routinely enters into commitments to purchase the rights to
broadcast programs, including feature films and sporting events. These
contracts permit the broadcast of such properties for various periods ending no
later than April 2002. As of June 30, 1996, the Corporation was committed to
make payments totalling $3,497 million under such broadcasting contracts.
Commitments -- Discontinued Operations
- --------------------------------------
Financial Services commitments with off-balance-sheet credit risk represent
financing commitments to provide funds, including loan or investment
commitments, guarantees, standby letters of credit and standby commitments,
generally in exchange for fees. The remaining commitments have fixed expiration
dates from 1996 through 2002. At June 30, 1996, commitments totalled $40
million compared to $45 million at year-end 1995. Management expects these
commitments to expire unfunded or be funded with the resulting assets being
sold shortly after funding.
11. SHAREHOLDERS' EQUITY
As a result of the first quarter 1996 sale of the defense and electronic
systems business and the buyer's assumption of certain pension obligations, the
Corporation's unfunded accumulated benefit obligation was reduced by
approximately $400 million. This decrease in the unfunded pension liability
increased shareholders' equity by $170 million by reducing the amount of
minimum pension liability required to be recognized.
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<PAGE> 13
The Corporation's Series C Conversion Preferred Stock will automatically
convert into 36,000,000 shares of common stock on June 1, 1997 unless called on
May 30, 1997 by the Corporation or converted at any time prior to June 1, 1997
by the holder. In accordance with prevalent practice at the time of sale, these
shares were treated as outstanding common stock for the calculation of earnings
per share. If the Series C Preferred had been treated as common stock
equivalents for the calculation of earnings per share, the Corporation's
earnings per share for the three months and six months ended June 30, 1996
would have been a loss of 25 cents and income of 17 cents compared to income
for the same periods last year of 10 cents and 7 cents.
On June 20, 1996, the Corporation announced a definitive merger agreement with
Infinity Broadcasting Corporation (Infinity) under which Infinity shareholders
will receive 1.71 shares of Westinghouse common stock in exchange for each
share of Infinity stock. This transaction involves the issuance by the
Corporation of approximately 205 million additional shares assuming the
exercise of all existing Infinity options and warrants. The consummation of the
merger is contingent on various approvals, including the Federal Communications
Commission and certain shareholder actions of both Westinghouse and Infinity.
Closing could occur as early as the end of 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
Progress continued in the Corporation's strategic redirection of its business
portfolio. The continued strength of the radio group's performance reinforced
the decision to focus on this core business as a growth vehicle. During the
second quarter of 1996, the Corporation announced a definitive merger agreement
with Infinity Broadcasting Corporation (Infinity). Following the acquisition of
Infinity, the Corporation will have established the preeminent radio
broadcasting group in the United States.
After concluding the previously disclosed review of its environmental
remediation activities, the Corporation recognized a charge to operating profit
of $175 million, or $0.26 per share.
During the first quarter of 1996, the Corporation completed the sales of its
defense and electronic systems business and The Knoll Group (Knoll), its office
furnishings unit, and recorded a combined after-tax gain of $1.2 billion. The
cash proceeds from these divestitures, which totalled nearly $3.6 billion, were
used to repay ahead of schedule a significant portion of the debt incurred to
finance the CBS acquisition.
The Corporation further streamlined its businesses and reduced the future
financial impact of legacies in the first quarter of 1996. Management adopted a
plan to exit its environmental services line of business resulting in the
transfer of the environmental services businesses to Discontinued Operations
and the recognition of an estimated loss on disposal. The Corporation
recognized costs associated with additional restructuring actions and
outstanding litigation matters. The Corporation also recognized impairment of
assets that will continue to be used in the business as well as certain assets
that have been identified for sale, and modified its application of contract
accounting principles. The
-13-
<PAGE> 14
special items included in the Corporation's results for the first six months of
1996 are summarized below:
SPECIAL ITEMS INCLUDED IN RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 (in millions except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Pre-Tax After-Tax Per-Share
Amount Amount Impact
------- --------- ---------
<S> <C> <C> <C>
Continuing Operations:
Operating Profit:
Restructuring $ (125)
Litigation matters (486)
Impairment of assets (54)
Environmental remediation activities (175)
Contract accounting adjustments (128)
Other (30)
------
Total impact on operating profit (998) $(663)
Other income and expense:
Loss on assets held for sale (152) (101)
------ -----
Total impact on Continuing Operations (1,150) (764) $(1.74)
Discontinued Operations:
Estimated loss on disposal of
environmental services business (146)
Gain on disposal of the defense and
electronic systems business and Knoll 1,164
-----
Net gain on disposal of businesses 1,018 2.32
Extraordinary Item:
Loss on early extinguishment of debt (63) (0.14)
----- -----
Net amount of special items $ 191 $0.44
===== =====
</TABLE>
Net income for the second quarter of 1996 was a loss of $89 million, or $0.20
per share, compared to income of $59 million, or $0.12 per share for the 1995
second quarter. Income from Continuing Operations for the 1996 second quarter
was a loss of $89 million, or $0.20 per share, compared to income of $25
million or $0.03 per share in the 1995 second quarter. Excluding the special
items, Income from Continuing Operations was $27 million, or $0.06 per share,
compared to $29 million, or $0.04 per share for the 1995 second quarter.
Amounts for 1995 were adjusted for a $6 million restructuring charge ($4
million after tax or $0.01 per share).
Net income for the six months ended June 30, 1996 was $92 million, or $0.21 per
share, compared to $74 million, or $0.12 per share for the 1995 period.
Continuing Operations reported a loss of $853 million for the first six months
of 1996, compared to income of $16 million for the 1995 period. Excluding
special items, Continuing Operations' loss was $89 million, compared to income
of $20 million for the first six months of 1996 and 1995. On a per share basis,
excluding special items, Continuing Operations reported a loss of $0.20 per
share compared to a loss of $0.01 per share for the same period last year. The
calculation of the per share amounts for the 1995 period includes a reduction
for dividends on the Series B Preferred stock, which converted to common stock
on September 1, 1995.
-14-
<PAGE> 15
Interest expense was significantly higher in the 1996 periods reflecting the
cost of the debt that was incurred to finance the CBS acquisition, although the
repayment of a significant portion of that debt in March 1996 reduced the
magnitude of the increase in interest costs. In addition, higher amortization
of intangible assets, principally FCC licenses and goodwill acquired with CBS,
have and will continue to impact earnings.
RECENT DEVELOPMENTS
On June 20, 1996, the Corporation announced a definitive merger agreement with
Infinity under which Infinity shareholders will receive 1.71 shares of
Westinghouse common stock in exchange for each share of Infinity stock. This
transaction involves the issuance by the Corporation of approximately 205
million additional shares assuming the exercise of all existing Infinity options
and warrants. The consummation of the merger is contingent on various approvals,
including the Federal Communications Commission and certain shareholder actions
of both Westinghouse and Infinity. Closing could occur as early as the end of
1996.
In light of the Corporation's dramatic portfolio shift in the past year, the
Corporation recently announced that it is considering actions to separate its
broadcasting and industrial businesses. The Corporation expects to conclude its
assessment of the legal, financial, tax and human resources issues and announce
its strategy in the fourth quarter of 1996.
The Corporation expects that the 1996 third quarter results compared to the
second quarter will be down due to anticipated weakness at the CBS Network
reflecting the costs of covering the presidential conventions and lower ratings
and pricing due to competition from the Olympics broadcast. In addition,
softness in the demand for outage services in Energy Systems is expected to
continue and adversely affect profitability.
-15-
<PAGE> 16
RESULTS OF OPERATIONS
The following represents the segment results for the Corporation's Continuing
Operations for the three months and six months ended June 30, 1996 and 1995.
Segment Results ($ in millions)(unaudited)
------------------------------------------
<TABLE>
<CAPTION>
Operating Profit
(Loss)
Sales of Products Operating Profit Excluding
& Services (Loss) Special Charges
----------------- ---------------- ----------------
Three Months Ended
June 30 1996 1995 1996 1995 1996 1995
------------------ ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Broadcasting:
Television $ 226 $ 90 $ 90 $ 42 $ 90 $ 42
Network 681 0 87 0 87 0
Radio 145 50 47 16 47 16
Other Broadcasting 48 43 (32) 5 (32) 5
------ ------ ------ ------ ------ ------
Total Broadcasting 1,100 183 192 63 192 63
Power Systems:
Energy Systems 304 332 2 27 13 33
Power Generation 465 440 (20) (13) (20) (13)
Other Power Systems (37) (28) (17) (17) (17) (17)
------ ------ ------ ------ ------ ------
Total Power Systems 732 744 (35) (3) (24) 3
Thermo King 265 284 46 47 46 47
Government Operations 26 34 13 19 13 19
Communication &
Information Systems 86 81 0 (1) 0 (1)
Corporate & Other 34 139 (246) (37) (82) (37)
Intersegment sales (19) (20) - - - -
------ ------ ------ ------ ------ ------
Total $2,224 $1,445 $ (30) $ 88 $ 145 $ 94
====== ====== ====== ====== ====== ======
</TABLE>
-16-
<PAGE> 17
Segment Results ($ in millions)(unaudited)
------------------------------------------
<TABLE>
<CAPTION>
Operating Profit
(Loss)
Sales of Products Operating Profit Excluding
& Services (Loss) Special Charges
----------------- ---------------- ----------------
Six Months Ended
June 30 1996 1995 1996 1995 1996 1995
---------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Broadcasting:
Television $ 414 $ 164 $ 144 $ 68 $ 144 $ 68
Network 1,447 0 87 0 87 0
Radio 266 93 67 23 67 23
Other Broadcasting 91 77 (104) 5 (63) 5
------ ------ ------ ------ ------ ------
Total Broadcasting 2,218 334 194 96 235 96
Power Systems:
Energy Systems 535 616 (24) 33 8 39
Power Generation* 742 762 (245) (44) (62) (44)
Other Power Systems (87) (65) (323) (31) (34) (31)
------ ------ ------ ------ ------ ------
Total Power Systems* 1,190 1,313 (592) (42) (88) (36)
Thermo King 522 557 91 91 91 91
Government Operations 51 61 31 34 31 34
Communication &
Information Systems 168 151 (42) 1 (1) 1
Corporate & Other 67 272 (568) (58) (156) (58)
Intersegment sales (36) (41) - - - -
------ ------ ------ ------ ------ ------
Total* $4,180 $2,647 $ (886) $ 122 $ 112 $ 128
====== ====== ====== ====== ====== ======
</TABLE>
*First quarter 1996 sales were reduced by a $180 million one-time adjustment
to previous accounting for certain long-term contracts.
The Corporation's reported sales increased $779 million, or 54%, for the
second quarter of 1996 compared to the 1995 second quarter and $1,533
million, or 58% for the first six months of 1996 compared to the same period
of 1995. Excluding the effects of the CBS acquisition and the special
one-time accounting adjustment at Power Generation, sales were down slightly
for the quarter and flat for the six month period. The improvements achieved
by certain businesses, including Power Generation and Broadcasting, were
essentially offset by the loss of sales from Energy Systems, Thermo King, and
certain miscellaneous businesses that were divested in 1995, including MICROS
Systems, Inc. (MICROS).
Generally, operating profits for many of the Corporation's major businesses
were consistent with the prior-year results. The radio group of the
Broadcasting segment reported very strong results for the second quarter and
first six months of 1996 with operating profit up significantly over the 1995
periods. However, reduced profitability for the Power Systems segment for the
quarter and six months continued to reflect the difficult market conditions
under which these businesses are operating. The Corporation's continuing
pension obligation for retired individuals who were part of the defense and
electronic systems business sold in March 1996 contributed, in part, to the
decrease in operating profit for the quarter and six months.
-17-
<PAGE> 18
Broadcasting
Due to the acquisition of CBS in November 1995, the results for Broadcasting
for the second quarter and first six months of 1996 include CBS financial data,
while the 1995 periods do not. Where appropriate, the discussion below provides
a comparison of the actual results for the second quarter and first six months
of 1996 with the combined Group W and CBS actual results for the second quarter
and first six months of 1995.
Reported revenues for the television group reflect the ownership of 15
television stations during the second quarter and first six months of 1996
compared to five stations during the same periods last year. On a comparable
basis, revenues for the stations fell slightly due to lower network ratings and
affiliation changes at certain stations. Operating profit on a comparable basis
also declined reflecting the lower revenues and affiliation changes, although
cost improvements at the stations helped lessen the impact. On July 1, 1996,
WPRI, the Providence, Rhode Island, television station acquired with CBS was
sold. No gain or loss will be reported on this sale.
The network, which was acquired with CBS, experienced increased revenues of 3%
and 6%, respectively, for the second quarter and first six months of 1996
compared to the same periods last year. Higher prices, increased syndication
revenues and the addition of college football were the primary driving factors.
Operating profit also increased as the favorable effects of higher prices and
increased syndication revenues offset lower ratings and increased programming
and affiliate compensation costs.
The reported results for the radio group included 39 radio stations for the
1996 periods, including two Chicago radio stations acquired January 2, 1996,
compared to 16 stations for the 1995 periods. On a comparable basis, revenues
grew approximately 10% for the second quarter and first six months of 1996
compared to last year. Operating profit increased 47% and 40% for the same
periods on the higher revenues and benefits from cost reductions.
Other Broadcasting includes operating results for Group W Satellite
Communications (GWSC) and Eyemark Entertainment, costs for the Broadcasting
group's headquarters, and amortization of all goodwill arising from the CBS
acquisition. Eyemark combines the activities of Group W Productions, and Maxam,
a production company acquired in February 1996. For the first quarter of 1996,
Other Broadcasting also included a $41 million restructuring charge for Group
W's actions to obtain operational synergies between CBS and Group W. The cost
of the CBS actions was recognized on the CBS opening balance sheet at the date
of the acquisition. Revenues and operating profit for GWSC showed strong
increases over the prior-year periods due to certain cable channel and network
services acquired from CBS coupled with improved advertising revenues and
delayed marketing expenditures. Results for production operations were down
compared to the prior year due to absorbing the MAXAM operations. Goodwill
amortization totalled $30 million for the second quarter and $60 million for
the first six months of 1996.
For the entire Broadcasting group, earnings before interest, taxes,
depreciation, and amortization (EBITDA) and excluding the restructuring charge
totalled $267 million for the second quarter of 1996 and $377 million for the
first six months of 1996. On a combined basis, EBITDA for the 1995 periods was
$209 million and $310 million. EBITDA differs from operating cash flows for the
group primarily because it does not consider certain changes in assets and
liabilities from period to period and it includes reversal of reserves of $42
million and $104 million for the second quarter and first six months of 1996
arising from purchase accounting adjustments related to program rights.
Power Systems
Power Systems includes results for the Energy Systems and Power Generation
business units.
Energy Systems sales and operating profit decreased for the second quarter and
first six months of 1996 compared to the same periods last year. Sales
decreased $28 million in the second quarter and $81 million for the first six
months of 1996, primarily due to reduced outage work as well as a reduced scope
of outage
-18
<PAGE> 19
services for utility customers. The reduced scope of outage services to be
performed this year generally results from fewer major repair initiatives at
power plants.
Included in operating profit for the second quarter of 1996 is a charge of $11
million for environmental remediation activities. As a result of ongoing
efforts to reduce costs, a restructuring charge of $21 million was recognized
in the first quarter of 1996. A restructuring charge of $6 million was recorded
in the second quarter of 1995. Excluding these special items, operating profit
for the second quarter and first six months of 1996 decreased $20 million and
$31 million, respectively, compared to the same periods last year, primarily as
a result of the lower revenues.
Power Generation's orders for the second quarter and first six months of 1996
increased $341 million and $250 million compared to the prior-year periods
reflecting major international orders. Sales increased $25 million compared to
the second quarter of 1995 as a result of revenues from previous orders for new
apparatus and major projects. The operating loss increased by $7 million,
however, as the lower margins from new apparatus business replaced higher
margins from the operating plant and service business.
In light of changing market conditions and pricing pressures in the Power
Generation business, the business unit modified its application of contract
accounting principles to reflect a more conservative approach. Accordingly,
during the first quarter of 1996, a one-time accounting adjustment was made to
reduce sales by $180 million and operating profit by $128 million. Application
of the new approach is not expected to have a material effect on any individual
quarter's results. Also during the first quarter, a $50 million restructuring
charge, required primarily as a result of a decision to close the Pensacola,
Florida manufacturing facility, was recognized. Excluding these special items,
during the first six months of 1996 sales increased $160 million and the
operating loss increased $18 million compared to the prior year. The favorable
impact of the higher revenues was more than offset by erosion of product margins
and mix.
The operating loss for the second quarter of 1996 for Other Power Systems,
which primarily reflects discounts on prior litigation settlements, was flat
compared to the second quarter of 1995. A $289 million charge for litigation
and other matters was recognized in the first quarter of 1996. Excluding this
charge, the operating loss for the first six months of 1996 was consistent with
the same period of 1995.
Thermo King
Orders and revenues for the second quarter and first six months of 1996
declined compared to the same periods in 1995 primarily as a result of a
slowdown in the United States truck and trailer market and reduced container
volume. Operating profit for the same periods remained flat, however, as higher
margins on service parts sales, factory productivity improvements, and other
product cost improvements mitigated the effects of the lower volume.
Government Operations
Sales for the second quarter and first six months of 1996 decreased compared to
the same periods of 1995 primarily due to the loss of a Navy contract in late
1995. Operating profit declined for the same periods resulting from the lower
revenues, timing of fees from performance based indicators, increased bid and
proposal cost, and sales mix for the radioactive waste container business.
On August 6, 1996, the Corporation announced that a Westinghouse-led team had
been awarded a five-year contract for managing the Department of Energy's (DOE)
Savannah River Site. Also, on August 6, 1996, the DOE announced the award of
the former Westinghouse Hanford contract to Fluor Daniel Hanford, Inc. The
result of these two actions is not expected to impact operating profit for
1996, although the loss of the Hanford contract will unfavorably affect future
profits.
-19-
<PAGE> 20
Communication & Information Systems
Sales increased 6% and 11% for the second quarter and first six months of 1996
compared to the same periods last year due primarily to increased revenues in
the residential security and wireless communications business. Operating
profit, excluding a first quarter 1996 charge of $41 million for restructuring
and asset impairment, was flat for the quarter and the first six months
compared to last year as additional strategic spending for sales branches,
primarily residential security, offset the higher volume.
Corporate & Other
Revenues declined in the second quarter and first six months of 1996 compared
to last year as non-strategic businesses, including MICROS, were sold in the
second half of 1995. The operating loss for the second quarter of 1996 included
a $164 million charge for environmental remediation obligations related
primarily to businesses previously divested. The operating loss for the first
quarter of 1996 included $248 million of special charges for restructuring,
litigation contingencies, and asset impairment. Corporate costs also include
costs associated with retiree pension obligations retained in certain recent
divestitures.
RESTRUCTURING AND OTHER ACTIONS
In recent years, the Corporation has restructured many businesses and its
corporate headquarters in an effort to reduce costs and remain competitive in
its markets. Restructuring activities primarily involve the separation of
employees, the closing of facilities, the termination of leases, and the
exiting of product lines. Costs for restructuring activities are limited to
incremental costs that directly result from the restructuring activities and
that provide no future benefit to the Corporation.
During the first quarter of 1996, management approved new restructuring
projects with costs totalling $125 million primarily for consolidation of
facilities and the separation of employees. As of June 30, 1996, $9 million had
been expended on the 1996 programs, $5 million of which is cash. Cash
expenditures, which are primarily tied to announced facility consolidations,
are estimated to approximate $25 million for the remainder of 1996, $44 million
for 1997, and $32 million for 1998 and beyond.
In addition to the reserve established in the first quarter of 1996,
restructuring reserves were also established in each of the years 1993 through
1995. The employee separations included in the plans for the years 1993 and
1994 are complete. Remaining costs under those plans of approximately $9
million represent 1996 cash expenditures for exit costs. The employee
separations included in the 1995 plan are 85% complete with the remainder of
separations to occur during 1996. Remaining total costs under this plan of
approximately $17 million represent cash expenditures, the majority of which
will occur in 1996. Implementation of the CBS restructuring plan is expected
to continue over the next two years.
Annualized savings from the 1993, 1994, and 1995 restructuring programs other
than the CBS plan are estimated to total approximately $140 million; however,
competitive pressures causing price compression in certain of the Corporation's
markets have absorbed a significant portion of the savings achieved through
restructuring actions. Annualized savings from the 1996 plan, which generally
will not be realized in the near term, are estimated at $50 million.
The Corporation expects to continue to identify restructuring initiatives at
its business units and its Corporate headquarters in an ongoing effort to
reduce its overall cost structure and improve competitiveness.
-20-
<PAGE> 21
DISCONTINUED OPERATIONS
The reshaping of the Corporation's portfolio of businesses has resulted in a
number of disposals of business segments in recent years. In November 1992, the
Corporation announced a plan that included exiting the financial services
business and selling both the Distribution and Control Business Unit (DCBU) and
Westinghouse Electric Supply Company (WESCO). The portfolio investments of
Financial Services have decreased from $8,967 million at year-end 1992, to $887
million at June 30, 1996, a decrease of $8,080 million. The remaining assets,
consisting primarily of the leasing portfolio, are expected to liquidate
through 2015 in accordance with their contractual terms. The Corporation
completed the sales of DCBU and WESCO in 1994. Under a July 1995 plan, the
Corporation sold WCI Communities, Inc. (WCI), its land development subsidiary,
in 1995.
During the first quarter of 1996, the Corporation completed the sales of Knoll
and the defense and electronic systems business in accordance with a December
1995 plan and recognized a combined after-tax gain of $1,164 million. The
Corporation also adopted a plan to exit its environmental services line of
business and recorded a $146 million after-tax provision for the estimated loss
on disposal of these businesses. This estimate was based on management's
preliminary estimates of proceeds, results of operations through the disposal
date, and other relevant factors. The divestiture process is continuing
although performance of certain environmental services businesses in recent
periods is below expectations.
The liability for the estimated loss on the disposal of Discontinued
Operations, totalling $660 million at June 30, 1996, represents amounts
necessary to cover remaining costs and obligations associated with the 1992,
1995 and 1996 plans. Remaining costs include interest on debt, estimated
credit losses on the portfolio investments of financial services, and future
disposition costs and obligations relating to the environmental services
businesses, Knoll, the defense and electronic systems business, DCBU and WESCO.
These costs and related items include purchase price adjustments, transaction
costs, insurance liabilities, and potential environmental remediation costs.
Management believes that the total liability for the estimated loss on disposal
of Discontinued Operations is adequate. Any variances from estimates which may
occur for one component will be considered in conjunction with other components
in determining whether an adjustment of the total liability is necessary. The
adequacy of the liability is evaluated each quarter.
The Corporation believes that the debt of Discontinued Operations at June 30,
1996 is supportable by the assets of Discontinued Operations and can be repaid
as the portfolio liquidates over its contractual terms.
OTHER INCOME AND EXPENSES
Other income and expenses generated income of $7 million in the second quarter
of 1996 and a loss of $139 million for the first six months of 1996 compared to
income of $1 million and a loss of $1 million for the same periods of 1995.
During the first quarter of 1996, a comprehensive review was undertaken by the
Corporation to identify for sale a variety of non-strategic assets. A charge of
$152 million was recognized during the quarter for losses expected upon sale of
those assets.
INTEREST EXPENSE
Interest expense for Continuing Operations for the second quarter and first
half of 1996 was $109 million and $255 million, respectively, compared to $47
million and $95 million for the same periods of 1995. The increase in interest
expense is primarily a result of $5.4 billion of debt incurred for the
acquisition of CBS in the fourth quarter of 1995. The Corporation repaid $3,565
million of this debt in the first quarter of 1996 through proceeds from the
divestitures of Knoll and the defense and electronic systems business. This
decrease in debt was offset somewhat by additional borrowings to cover working
capital requirements.
-21-
<PAGE> 22
INCOME TAXES
The Corporation's effective income tax rate for the second quarter and first
six months of 1996 was a benefit of 33% and 34%, respectively, compared to tax
expense of 32% and 17% for the same periods of 1995. Because of the
amortization of non-deductible goodwill for CBS and the impact of special
transactions, these rates can vary dramatically depending on the Corporation's
income or loss levels.
At June 30, 1996, the Corporation had recorded net deferred income tax benefits
totalling $1,907 million compared to $2,188 million at December 31, 1995. As a
result of these net deferred income tax benefits, cash payments for federal
income taxes are minimal. Management believes that the Corporation will have
sufficient future taxable income to make it more likely than not that the net
deferred tax asset will be realized.
LIQUIDITY AND CAPITAL RESOURCES
Overview
The Corporation manages its liquidity as a consolidated enterprise without
regard to whether assets or debt are classified for balance sheet purposes as
part of Continuing Operations or Discontinued Operations. As a result, the
discussion below focuses on the Corporation's consolidated cash flows and
capital structure.
Late in 1995, the Corporation acquired CBS for $5.4 billion and financed the
entire purchase price with debt. In the first quarter of 1996, the Corporation
completed the sales of Knoll and the defense and electronic systems business
and repaid approximately 65% of the acquisition debt.
In an effort to continue to improve liquidity, the Corporation has and will
continue to monetize non-strategic assets. In March 1996, the Corporation
adopted a plan to sell its environmental services businesses. The Corporation
also completed a comprehensive review and identified additional non-strategic
assets for sale. In total, sales of various non-strategic assets are expected
to generate cash proceeds of $300 million to $500 million.
Operating activities of Continuing Operations required substantial cash
outflows in the first six months of 1996. Management is focusing significant
attention on minimizing working capital requirements and improving cost
structures.
Management expects that it will have sufficient liquidity to meet ordinary
future business needs. Sources of liquidity generally available to the
Corporation include cash from operations, availability under its credit
facilities, cash and cash equivalents, proceeds from sales of non-strategic
assets, borrowings from other sources, including funds from the capital
markets, and the issuance of additional capital stock.
-22-
<PAGE> 23
Operating Activities
The following table provides a reconciliation of net income to cash provided by
operating activities of Continuing Operations for the six months ended June 30,
1996 and 1995:
CASH FLOWS FROM OPERATING ACTIVITIES OF CONTINUING OPERATIONS
(in millions) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
------------------------
1996 1995
---- ----
<S> <C> <C>
Net income (loss) from Continuing Operations $(853) $ 16
Adjustments to reconcile net income (loss) from
Continuing Operations to net cash used for
operating activities:
Depreciation and amortization 229 93
Losses on asset dispositions 150 5
Noncash restructuring charges 30 -
Other noncash provisions and accounting
adjustments 182 -
Changes in assets and liabilities, net of effects
of acquisitions and divestitures of businesses:
Receivables, current and noncurrent 36 18
Inventories (89) (3)
Progress payments net of costs on
uncompleted contracts (54) (217)
Accounts payable (250) (80)
Deferred and current income taxes (213) (108)
Program rights (61) -
Other assets and liabilities 236 80
----- -----
Cash used for operating activities
of Continuing Operations $(657) $(196)
===== =====
</TABLE>
The operating activities of Continuing Operations used $657 million of cash
during the first six months of 1996, an increase of $461 million from the
amount used during the first six months of 1995. Major factors contributing to
the additional use of cash were higher interest payments, certain contractual
prepayments for program rights and program development, and higher levels of
working capital for the businesses.
Interest payments for Continuing Operations during the first six months of 1996
were $266 million compared to $85 million during the same period of 1995. This
increase in interest payments was primarily attributable to the higher debt
associated with the CBS acquisition.
During the first six months of 1996, the Broadcasting business segment, in its
drive to improve CBS programming and ratings, successfully negotiated certain
long-term contracts requiring the Corporation to make prepayments for future
program rights and program development.
Working capital levels increased for the businesses relative to the first six
months of 1995. An increase in inventory and a significant reduction in
accounts payable were the major contributors to the higher working capital.
No contributions were made to the Corporation's pension plans during the first
six months of 1996 or 1995. The Corporation's contribution level for 1996 is
expected to be $200 million to $250 million, which is consistent with the
Corporation's goal to fully fund its qualified plans over the next several
years.
The operating activities of Discontinued Operations used $349 million of cash
during the first six months of 1996 and generated $56 million of cash for the
same period of 1995. The increase in the use of cash during 1996 primarily
related to the divestiture costs of Knoll and the defense and electronic
systems
-23-
<PAGE> 24
business as well as the cash used in the operations of these businesses and in
the operations of the environmental services business.
Future cash requirements of Discontinued Operations will consist primarily of
interest costs on debt, remaining costs associated with the completed
divestitures, and operating and disposal costs associated with the
Corporation's environmental services business.
Investing Activities
Investing activities provided $3.4 billion of cash during the first six months
of 1996 compared to $329 million of cash provided during the same period of
1995. In the first six months of 1996, the Corporation completed the sales of
Knoll and its defense and electronic systems business, generating $3.6 billion
of cash. Asset liquidations of Discontinued Operations generated additional
cash proceeds of $49 million. Investing activities in the first six months of
1996 included the purchase of two Chicago radio stations and a Spanish-language
24-hour news service, TeleNoticias, as well as investments in several joint
ventures, primarily in China.
In the first six months of 1995, the Corporation completed the sale of Aptus,
Inc., an environmental services subsidiary, and the transfer of its 75 percent
interest in the Westinghouse Motor Company. A significant portion of the
proceeds for these transactions consisted of notes. Also, asset liquidations of
Discontinued Operations generated cash proceeds of $159 million. The
Corporation purchased the Plant Services Division of Vectra Technologies, Inc.
a provider of chemical decontamination and cleaning services and made an
additional payment in connection with the 1994 acquisition of Norden Systems
during this time period. Also, during the second quarter of 1995, the
Corporation received cash proceeds of $239 million from the sale of investments
held in two trusts established to fund employee benefit plans and replaced the
trust investments with Westinghouse common stock.
Capital expenditures were $94 million for the first six months of 1996, a
decrease of $3 million from the same period of 1995. Capital spending in 1996
is expected to be at or slightly below the spending levels of 1995.
Financing Activities
Cash used by financing activities during the first six months of 1996 totalled
$2.5 billion compared to cash used of $64 million during the same period of
1995. The increase in the financing cash outflows was primarily attributable to
the early extinguishment of $3,565 million of the term loans under the $7.5
billion credit agreement and the repayment of various medium term notes and
debentures. Short-term net borrowings increased $1,431 million compared to the
same period of 1995. Total debt for the Corporation was $5.9 billion at June
30, 1996, a decrease of $2.5 billion from December 31, 1995.
Total borrowings under the Corporation's $2.5 billion revolving credit facility
were $1,914 million at June 30, 1996 (see Revolving Credit Facilities). These
borrowings carried a composite interest rate of 6.6% at June 30, 1996 which was
based on the London Interbank Offer Rate (LIBOR), plus a margin based on the
Corporation's senior unsecured debt rating and leverage.
Dividends paid in the first six months of 1996 included approximately $23
million for Series C preferred stock, with the remaining $40 million
representing common stock dividends. Dividends paid in the first six months of
1995 included approximately $23 million for Series C preferred stock, $25
million for Series B preferred shares, which converted to common shares in the
third quarter of 1995, and approximately $36 million representing common stock
dividends.
At June 30, 1996, the Corporation had a shelf registration statement for debt
securities with an unused amount of $400 million.
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<PAGE> 25
Revolving Credit Facilities
In September 1995, the Corporation entered into three new bank facilities under
a credit agreement with a total commitment level of $7.5 billion. These credit
facilities included two term loans of $2.5 billion each, the first of which was
totally prepaid in March 1996. The second term loan, of which approximately $1
billion was prepaid in March 1996, is payable in quarterly installments
beginning in August 1998 through November 2002. This term loan is subject to
certain mandatory prepayment provisions. Amounts repaid under both term loans
may not be reborrowed. In addition to these term loans, the credit agreement
includes a $2.5 billion revolving credit facility with a seven-year maturity.
The unused capacity under the revolving credit facility equalled $586 million
as of June 30, 1996. Borrowing availability under the revolver is subject to
compliance with certain covenants, representations and warranties, including a
no material adverse change provision with respect to the Corporation taken as a
whole, restrictions on the incurrence of liens, a maximum leverage ratio,
minimum interest coverage ratio, and minimum consolidated net worth. Certain of
these covenants become more restrictive over the term of the agreement. At June
30, 1996, the Corporation was in compliance with these covenants.
The Corporation is currently pursuing a new revolving credit facility to replace
its existing credit agreement. In addition to replacing borrowings under the
current agreement, the new facility will refinance the existing Infinity debt
and will provide funds for general corporate purposes. The new credit facility
is expected to have more favorable terms, covenants, and rates than the existing
agreement and is anticipated to be in place by the end of the third quarter of
1996. Upon completion of the new credit facility, the Corporation will write off
the remaining unamortized deferred financing fees associated with the existing
credit facility, which approximate $50 million at June 30, 1996.
Hedging Activities
The Corporation has entered into interest rate exchange agreements to manage
the interest rate risk associated with various debt instruments. No
transactions were speculative or leveraged. Given their nature, these
agreements have been accounted for as hedging transactions. The notional amount
of interest rate exchange agreements outstanding at June 30, 1996 was $1,132
million, all of which was associated with long-term debt of Continuing
Operations. The average remaining maturity of interest rate exchange agreements
was 9 months at June 30, 1996.
The total notional amount outstanding at June 30, 1996 relates to interest rate
exchange agreements with rate and maturity characteristics set forth in the
table below:
CONTRACTUAL MATURITIES OF INTEREST RATE EXCHANGE AGREEMENTS
(in millions)(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30 Total 1996 1997 1998 1999 2000
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Notional amount $1,132 $1,002 $ - $ 50 $ 55 $ 25
Wtd. avg. fixed rate paid 5.79% 5.39% - 8.73% 8.86% 9.36%
</TABLE>
Under the majority of the exchange agreements, the floating rate received is
based on 30-day LIBOR for the relevant periods indicated in the agreements.
This rate was 5.50% on June 30, 1996.
The Corporation's credit exposure under these agreements is limited to the cost
of replacing an agreement in the event of non-performance by its counterparty.
To minimize this risk, the Corporation has selected high credit quality
counterparties. As of June 30, 1996, the Corporation had no net credit exposure
under its interest rate exchange agreements.
For the six months ended June 30, 1996, outstanding interest rate exchange
agreements resulted in a net increase in interest expense of Continuing
Operations of approximately $2 million with a de minimus impact on the average
borrowing rate.
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<PAGE> 26
The Corporation continually monitors its economic exposure to changes in
foreign exchange rates and enters into foreign exchange forward or option
contracts to hedge its transaction exposure when appropriate. As a result, the
Corporation's unhedged foreign exchange exposure is not significant.
Furthermore, changes in foreign exchange rates whether favorable or unfavorable
are not expected to have a significant impact on the Corporation's financial
results or operating activities.
With respect to the Corporation's operations in highly inflationary and
unstable economies that are accounted for in accordance with SFAS No. 52,
"Foreign Currency Translation," the combined total sales for those operations
were less than 0.5% of the Corporation's sales for the first six months of
1996.
OTHER MATTERS
Environmental Matters
Compliance with federal, state, and local laws and regulations relating to the
discharge of pollutants into the environment, the disposal of hazardous wastes
and other related activities affecting the environment have had and will
continue to have an impact on the Corporation. It is difficult to estimate the
timing and ultimate costs to be incurred in the future due to uncertainties
about the status of laws, regulations and technology, the adequacy of
information available for individual sites, the extended time periods over
which site remediation occurs, and the identification of new sites.
In the second quarter of 1996, the Corporation and its external consultants
completed a study to evaluate the Corporation's environmental remediation
strategies. Based on the costs associated with the most probable alternative
remediation strategy for each of its 85 sites, including the sites located in
Bloomington, Indiana, the Corporation has an accrued liability of $487 million.
This amount includes $175 million that was recognized in the second quarter of
1996. Depending on the remediation alternatives ultimately selected, the costs
related to these sites could differ from the amounts currently accrued. The
accrued liability, measured in current dollars, includes $361 million for site
investigation and remediation, and $126 million for post closure and monitoring
activities. Management anticipates that the majority of expenditures for site
investigation and remediation will occur during the next 5 - 10 years.
Expenditures for post closure and monitoring activities will be made over
periods up to 30 years. The Corporation recognizes changes in estimates as new
remediation requirements are defined or as more information becomes
available.
The Corporation has and expects to continue to fund these environmental
remediation expenditures from cash flows generated from operations.
Legal Matters
The Corporation is defending a number of lawsuits on various matters. See note
10 to the financial statements. In the first quarter of 1996, the Corporation
recognized $486 million of costs for potential settlements of outstanding
litigation matters.
Since 1993, the Corporation has entered into agreements to resolve nine
litigation claims in connection with alleged tube degradation in steam
generators sold by the Corporation as components for nuclear steam supply
systems. These agreements generally require the Corporation to provide certain
products and services at prices discounted at varying rates. The future impact
of these discounts on operating results will be incurred over the next 15 years
with the greatest impact occurring during the next nine years.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in certain of the Corporation's pending cases and although
management believes a significant adverse judgment is unlikely, any such
judgment could have a material adverse effect on the Corporation's results of
operations for a quarter or a year. However, based on its understanding and
evaluation of the relevant facts and circumstances, management believes that
the Corporation
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<PAGE> 27
has meritorious defenses to the litigation referenced in note 10 and
that the Corporation has adequately provided for costs arising from potential
settlement of these matters when in the best interest of the Corporation.
Management believes that the litigation should not have a material adverse
effect on the financial condition of the Corporation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(a) The Corporation has been defending, in the United States District Court
for the Western District of Pennsylvania (the District Court), consolidated
class and derivative actions and an individual lawsuit brought by shareholders
of the Corporation against the Corporation, Westinghouse Financial Services,
Inc. (WFSI) and Westinghouse Credit Corporation (WCC), previously subsidiaries
of the Corporation, and/or certain present and former directors and officers of
the Corporation, as well as other unrelated parties. Together, these actions
allege various federal securities law and common law violations arising out of
alleged misstatements or omissions contained in the Corporation's public
filings concerning the financial condition of the Corporation, WFSI and WCC in
connection with a $975 million charge to earnings announced on February 27,
1991, a public offering of Westinghouse common stock in May 1991, a $1,680
million charge to earnings announced on October 7, 1991, and alleged
misrepresentations regarding the adequacy of internal controls at the
Corporation, WFSI and WCC. In July 1993, the District Court dismissed in its
entirety the derivative claim and dismissed most of the class action claims,
with leave to replead certain claims in both actions. Both actions were
subsequently repled. On January 20, 1995, the District Court again dismissed
the derivative complaint in its entirety with prejudice. On February 28, 1995,
the District Court dismissed the class action claims in their entirety.
Plaintiffs in both the derivative and class action suits appealed the rulings
and dismissal of their claims by the District Court. In July, 1996, the United
States Court of Appeals for the Third Circuit (the Circuit Court) affirmed the
District Court's dismissal of the derivative claim. In addition, the Circuit
Court affirmed in part and reversed in part the class action claims. Those
portions of the class action claims which were reversed have been remanded to
the District Court for further proceedings.
(b) The Corporation is a defendant in numerous lawsuits claiming various
asbestos-related personal injuries, which allegedly occurred from use or
inclusion of asbestos in certain of the Corporation's products, generally in
the pre-1970 time period. Typically, these lawsuits are brought against
multiple defendants. The Corporation was neither a manufacturer nor a producer
of asbestos and is oftentimes dismissed from these lawsuits on the basis that
the Corporation has no relationship to the products in question or the claimant
did not have exposure to the Corporation's product. On May 2, 1996, 15,000
claims pending in the Multidistrict Litigation No. 875 in the United States
District Court for the Eastern District of Pennsylvania were dismissed.
Plaintiffs may appeal this dismissal. At June 30, 1996, the Corporation had
approximately 90,000 claims outstanding against it. In court actions which have
been resolved, the Corporation has prevailed in the majority of the asbestos
claims and has resolved others through settlement. Furthermore, the Corporation
has brought suit against certain of its insurance carriers with respect to
these asbestos claims. Under the terms of a settlement agreement resulting from
this suit, carriers which have agreed to the settlement are now reimbursing the
Corporation for a substantial portion of its current costs and settlements
associated with asbestos claims.
A number of the asbestos-related cases pending against the Corporation,
including those pending in Mississippi, Baltimore and West Virginia, are
consolidated cases. In consolidated cases, the claims of a group of plaintiffs
are tried together, and oftentimes limited findings with respect to common
issues of fact and punitive damages are decided with respect to a
representative grouping of plaintiffs and then applied to other individuals in
the group. However, for the Corporation to be liable for damages to any
particular claimant, that individual claimant must thereafter prove that he
developed an asbestos-related disease, that he was exposed to a Westinghouse
product, and that this exposure was a substantial factor in the development of
the disease.
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<PAGE> 28
(c) The Corporation was one of several defendants in a fraudulent conveyance
action filed on August 16, 1994 by the unsecured creditors committee of
Phar-Mor, Inc. seeking return of the proceeds of an August 1991, Phar-Mor
tender offer in which the Corporation received about $30 million, and an
additional $20 million from the tender of Phar-Mor stock by the DeBartolo
Family Limited Partnership (DeBartolo) pursuant to a Westinghouse loan to
DeBartolo secured by DeBartolo's Phar-Mor holdings. The fraudulent conveyance
action was transferred from bankruptcy court in Cleveland to the Western
District of Pennsylvania and consolidated with other Phar-Mor litigation. A
defense motion for summary judgment in the fraudulent conveyance action was
granted on August 22, 1995, and the unsecured creditors have appealed.
Included in the consolidated cases pending in the Western District of
Pennsylvania is an action by the Corporation seeking damages in connection with
loans to, and equity investments in, Phar-Mor. On May 2, 1995, the Corporation
concluded a settlement in this litigation with Phar-Mor's chief executive
officer and controlling shareholder and certain other parties which resulted in
the dismissal of all cross-claims and third-party complaints between the
Corporation and these parties. Remaining were the Corporation's claims against
Coopers & Lybrand (Coopers), Phar-Mor's former accountants, for securities
violations, fraud, negligent misrepresentation, and breach of contracts to
which the Corporation was a third-party beneficiary. Coopers obtained a summary
judgment on the negligent misrepresentation claim, and on certain of the breach
of contract claims. Trial commenced on September 27, 1995, and on February 14,
1996, a federal jury found Coopers liable for violations of securities laws and
common law fraud. In July 1996, the Corporation and Coopers reached an
agreement resolving all claims asserted between them in this matter.
Litigation is inherently uncertain and always difficult to predict. Substantial
damages are sought in each of the foregoing matters and although management
believes a significant adverse judgment is unlikely, any such judgment could
have a material adverse effect on the Corporation's results of operations for a
quarter or a year. However, based on its understanding and evaluation of the
relevant facts and circumstances, management believes that the Corporation has
meritorious defenses to the litigation described above, and management believes
that the litigation should not have a material adverse effect on the financial
condition of the Corporation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders of the Corporation was held on
April 24, 1996.
(b) The following matters were submitted to a vote of the shareholders
at the annual meeting:
(i) In connection with the election of eleven directors, the
following votes were cast for or withheld from the following
candidates:
<TABLE>
<CAPTION>
FOR WITHHELD
<S> <C> <C>
Frank C. Carlucci 330,895,766 7,650,216
Robert E. Cawthorn 332,677,691 5,868,291
Gary M. Clark 332,592,812 5,953,170
George H. Conrades 332,635,614 5,910,368
William H. Gray III 331,820,395 6,725,587
Michael H. Jordan 332,393,804 6,152,178
David K. P. Li 332,526,507 6,019,475
David T. McLaughlin 332,009,043 6,536,939
Richard R. Pivirotto 331,696,582 6,849,400
Paula Stern 332,346,525 6,199,457
Robert D. Walter 332,751,040 5,794,942
</TABLE>
(ii) A management proposal regarding the election of Price
Waterhouse as independent accountants was presented at the
meeting and 333,896,496 shares of common stock were voted
for, 2,871,403
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<PAGE> 29
shares were voted against, and 1,778,083 shares abstained in
connection with the adoption of this resolution, the text of which
is set forth on page 31 of the Corporation's Proxy Statement dated
March 12, 1996, and incorporated herein by reference.
(iii) A management proposal concerning approval of an amendment to the
Corporation's Deferred Compensation and Stock Plan for Directors was
presented at the meeting, and 313,134,895 shares of common stock were
voted for, 20,248,728 shares were voted against, and 5,162,359 shares
abstained, in connection with the adoption of this proposal, the text
of which is set forth on pages 32 through 38 of the Corporation's
Proxy Statement dated March 12, 1996 and incorporated herein by
reference.
(iv) A shareholder's resolution concerning non-employee director nominee
stock ownership was presented at the meeting and 31,042,789 shares of
common stock were voted for, 210,836,273 shares were voted against,
7,782,717 shares abstained, and there were 88,884,203 broker
non-votes in connection with this resolution, the text of which is
set forth on pages 38 through 40 of the Corporation's Proxy Statement
dated March 12, 1996, and incorporated herein by reference.
(v) A shareholder's resolution concerning the number of boards on which
directors serve was presented at the meeting and 34,374,256 shares of
common stock were voted for, 207,028,991 were voted against,
8,280,529 shares abstained, and there were 88,862,206 broker
non-votes in connection with this resolution, the text of which is
set forth on pages 40 through 42 of the Corporation's Proxy Statement
dated March 12, 1996, and incorporated herein by reference.
(vi) A shareholder's resolution concerning base salary tied to stock
value/bonuses was presented at the meeting and 37,326,896 shares of
common stock were voted for, 206,148,794 were voted against,
6,188,085 shares abstained, and there were 88,882,207 broker non-
votes in connection with this resolution, the text of which is set
forth on pages 42 and 43 of the Corporation's Proxy Statement dated
March 12, 1996, and incorporated herein by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
(3) ARTICLES OF INCORPORATION AND BYLAWS
(a) The Restated Articles of the Corporation as amended to
January 8, 1996 are incorporated herein by reference to
Exhibit 3(a) to Form 10-K for the year ended December 31,
1995.
(b) The Bylaws of the Corporation, as amended to December 28,
1995, are incorporated herein by reference to Exhibit 3(c) to
Form 10-K for the year ended December 31, 1995.
(4) RIGHTS OF SECURITY HOLDERS
(a) Except as set forth below, there are no instruments with respect to
long-term debt of the Corporation that involve securities
authorized thereunder exceeding 10% of the total assets of the
Corporation and its subsidiaries on a consolidated basis. The
Corporation agrees to provide to the Securities and Exchange
Commission, upon request, a copy of instruments defining the rights
of holders of long-term debt of the Corporation and its
subsidiaries.
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<PAGE> 30
(1) Form of Senior Indenture, dated as of November 1, 1990,
between the Corporation and Citibank, N.A. is incorporated
herein by reference to Exhibit 4.1 to the Corporation's
Registration Statement No. 33-41417.
(b) Rights Agreement is incorporated herein by reference to Exhibit 1
to Form 8-A filed with the Securities and Exchange Commission on
January 9, 1996.
(10) MATERIAL CONTRACTS
(a*) The Annual Performance Plan is incorporated herein by reference to
Exhibit 10(a) to Form 10-K/A for the year ended December 31, 1992.
(b*) The 1993 Long-Term Incentive Plan, as amended, is incorporated herein
by reference to Exhibit 10(b) to Form 10-K for the year ended
December 31, 1995.
(c*) The 1984 Long-Term Incentive Plan, as amended, is incorporated herein
by reference to Exhibit 10 (c) to Form 10-Q for the first quarter
ended March 31, 1996.
(d*) The Westinghouse Executive Pension Plan, as amended, is
incorporated herein by reference to Exhibit 10(d) to Form 10-K for
the year ended December 31, 1994.
(e*) The Deferred Compensation and Stock Plan for Directors, as amended,
dated April 24, 1996.
(f*) The Advisory Director's Plan, as amended, dated April 30, 1996.
(g) The Director's Charitable Giving Program, as amended, dated April 30,
1996.
(h*) The 1991 Long-Term Incentive Plan, as amended, is incorporated herein
by reference to Exhibit 10(h) to Form 10-K for the year ended
December 31, 1995.
(i*) Advisory Director's Plan Termination Fee Deferral Terms and
Conditions, dated April 30, 1996.
(j*) Employment Agreement between the Corporation and Michael H. Jordan is
hereby incorporated by reference to Exhibit 10 to the Corporation's
Form 8-K, dated September 1, 1993.
(k*) Employment Agreement between the Corporation and Fredric G. Reynolds
is incorporated herein by reference to Exhibit 10(j) to Form 10-K
for the year ended December 31, 1994.
(l) $7.5 billion Credit Agreement among Westinghouse Electric Corporation,
the Lenders, Morgan Guaranty Trust Company of New York, and Chemical
Bank, dated September 12, 1995, is incorporated herein by reference
to Exhibit 10(n) to Form 10-Q for the quarter ended September 30,
1995.
(m*) Employment Agreement between CBS Inc. and Peter Lund, dated as of
November 28, 1995, is hereby incorporated by reference to Exhibit
10(l) to Form 10-Q for the quarter ended March 31, 1996.
(n*) Employment Agreement between the Corporation and F. J. Harvey, dated
as of April 30, 1996.
(o) Agreement and Plan of Merger dated as of June 20, 1996 among the
Corporation, R Acquisition Corp., and Infinity Broadcasting
Corporation is hereby incorporated by reference to Schedule 13-D,
filed by the Corporation on June 28, 1996.
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<PAGE> 31
(p) Stockholder Agreement dated as of June 20, 1996, among the
Corporation and certain shareholders of Infinity Broadcasting
Corporation is hereby incorporated by reference to Schedule 13-D
filed by the Corporation on June 28, 1996.
* Identifies management contract or compensatory plan or arrangement.
(11) Computation of Per Share Earnings
(12)(a) Computation of Ratio of Earnings to Fixed Charges
(12)(b) Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Dividends
(27) Financial Data Schedule
B) REPORTS ON FORM 8-K:
A Current Report on Form 8-K (Items 5 and 7) dated April 19, 1996
filing a press release announcing certain financial actions.
A Current Report on Form 8-K (Items 5 and 7) dated May 2, 1996 filing
a press release concerning the Corporation's earnings for the quarter
ended March 31, 1996 and realigned segment financial results and a
restated condensed consolidated statement of income.
A Current Report on Form 8-K (Items 4 and 7) dated June 5, 1996 to
report a change in the Corporation's independent accountants.
A Current Report on Form 8-K (Items 5 and 7) dated June 10, 1996
filing a press release announcing the Corporation's consideration of
alternatives to separate its broadcasting and industrial businesses.
A Current Report on Form 8-K (Items 5 and 7) dated June 20, 1996
filing a press release announcing the execution by the Corporation, a
wholly-owned subsidiary of the Corporation, and Infinity Broadcasting
Corporation of a merger agreement.
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<PAGE> 32
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 14th day of August 1996.
WESTINGHOUSE ELECTRIC CORPORATION
/s/ CAROL V. SAVAGE
---------------------------------
Vice President and
Chief Accounting Officer
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<PAGE> 1
Exhibit 10.E
DEFERRED COMPENSATION AND STOCK PLAN
FOR DIRECTORS
(as amended as of April 24, 1996)
SECTION 1. INTRODUCTION
1.1 Establishment. Westinghouse Electric Corporation, a Pennsylvania
corporation (the "Company"), has established the Deferred Compensation and
Stock Plan for Directors as amended as of April 24, 1996 (the "Plan") for those
directors of the Company who are neither officers nor employees of the Company.
The Plan provides, among other things, for the payment of specified portions of
the Annual Director's Fee in the form of Stock Options and Restricted Stock and
for the payment of the Annual Committee Chair's Fee in the form of Restricted
Stock, and the opportunity for the Directors to defer receipt of all or a part
of their cash compensation. Unless otherwise provided for herein, the term
Company includes Westinghouse Electric Corporation and its subsidiaries.
1.2 Purposes. The purposes of the Plan are to encourage the Directors to
own shares of the Company's stock and thereby to align their interests more
closely with the interests of the other shareholders of the Company, to
encourage the highest level of Director performance, and to provide a financial
incentive that will help attract and retain the most qualified Directors.
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<PAGE> 2
SECTION 2. DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth
below:
(a) "Annual Committee Chair's Fee" means the annual amount established
from time to time by the Board as the annual fee to be paid to Directors for
their services as chairs of standing committees of the Board.
(b) "Annual Director's Fee" means the annual amount (which may be
prorated for a Director serving less than a full calendar year, as in the case
of a Director who will be retiring or not standing for reelection at the annual
meeting of shareholders or a Director joining the Board after the beginning of
the year) established from time to time by the Board as the annual fee to be
paid to Directors for their services as directors.
-2-
<PAGE> 3
(c) "Attendance Percentage" for a Director with respect to a
particular Grant Year means the percentage of the aggregate of all meetings of
the Board and committees of which the Director was a member held during the
Grant Year (or, for Directors who are elected after the beginning of the Grant
Year, Directors who retire at the annual meeting of shareholders (as described
in the Company's By-laws) held during the Grant Year, Directors who do not
stand for reelection at the annual meeting of shareholders held during the
Grant Year, or Directors who die during the Grant Year, the aggregate of all
such meetings held for the portion of the Grant Year during which the Director
served as a director), excluding any meeting not attended because of illness,
which were attended by the Director. In the event that a Director ceases to be
a director at any time during the Grant Year for any reason other than
retirement at the annual meeting of shareholders, not standing for reelection
at the annual meeting of shareholders, or death, all meetings held during the
Grant Year of the Board and committees of which he was a member at the time of
termination of service will continue to be included as meetings when
calculating the Attendance Percentage.
(d) "Board" means the Board of Directors of the Company.
-3-
<PAGE> 4
(e) "Cash Account" means the account established by the Company in
respect of each Director pursuant to Section 6.3 hereof and to which deferred
cash compensation has been or will be credited pursuant to the Plan.
(f) "Cause" means any act of (a) fraud or intentional
misrepresentation or (b) embezzlement, misappropriation or conversion of assets
or opportunities of the Company or any of its direct or indirect majority-
owned subsidiaries.
(g) "Change in Control" shall have the meaning assigned to it in
Section 9.2 hereof.
(h) "Committee" means the Compensation Committee of the Board or any
successor established by the Board.
(i) "Common Stock Equivalent" means a hypothetical share of Stock
which shall have a value on any date equal to the mean of the high and low
prices of the Stock as reported by the composite tape of the New York Stock
Exchange on that date, except as otherwise provided under Section 9.1.
(j) "Common Stock Equivalent Award" means an award of Common Stock
Equivalents granted to a Director pursuant to Section 5 of the Plan prior to
its amendment as of April 26, 1995.
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<PAGE> 5
(k) "Debenture" means a hypothetical debenture of the Company that has
a face value of $100, bears interest at a rate equal to the ten-year U.S.
Treasury Bond rate (prior to January 1, 1995, the seven-year U.S. Treasury Bond
rate) in effect the week prior to the regular January meeting of the Board (or,
if no such meeting is held, the week prior to the first trading day of the New
York Stock Exchange in February) in the year in respect of which deferred
amounts are earned, and is convertible into Stock at a conversion rate
determined by dividing $100 by the mean of the high and low prices of the Stock
as reported by the composite tape of the New York Stock Exchange on the date
the Debenture is credited to the Deferred Debenture Account pursuant to Section
6.3 hereof.
(l) "Deferred Debenture Account" means the account established by the
Company in respect of each Director pursuant to Section 6.3 hereof and to which
has been or will be credited Debentures and other amounts pursuant to the Plan.
(m) "Deferred Stock Account" means the account established by the
Company in respect of each Director pursuant to Section 5.2 hereof and to which
has been or will be credited Common Stock Equivalents pursuant to the Plan.
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<PAGE> 6
(n) "Director" means a member of the Board who is neither an officer
nor an employee of the Company. For purposes of the Plan, an employee is an
individual whose wages are subject to the withholding of federal income tax
under Section 3401 of the Internal Revenue Code, and an officer is an
individual elected or appointed by the Board or chosen in such other manner as
may be prescribed in the By-laws of the Company to serve as such.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(p) "Fair Market Value" means the mean of the high and low prices of
the Stock as reported by the composite tape of the New York Stock Exchange (or
such successor reporting system as shall be selected by the Committee) on the
relevant date or, if no sale of the Stock shall have been reported for that
day, the average of such prices on the next preceding day and the next
following day for which there were reported sales.
(q) "Grant Date" means, as to a Stock Option Award, the date of grant
pursuant to Section 7.1 and as to a Restricted Stock Award, the date of grant
pursuant to Section 8.1.
(r) "Grant Year" means, as to a particular award, the calendar year in
which the award was granted.
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<PAGE> 7
(s) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time.
(t) "Restricted Stock" means shares of Stock awarded to a Director
pursuant to Section 8 and subject to certain restrictions in accordance with
the Plan.
(u) "Restricted Stock Award" means an award of shares of Restricted
Stock granted to a Director pursuant to Section 8 of the Plan.
(v) "Stock" means the common stock, $1.00 par value, of the Company.
(w) "Stock Option" means a non-statutory stock option to purchase
shares of Stock for a purchase price per share equal to the Exercise Price (as
defined in Section 7.2(a)) in accordance with the provisions of the Plan.
(x) "Stock Option Award" means an award of Stock Options granted to a
Director pursuant to Section 7 of the Plan.
(y) "Stock Option Value" means the value of a Stock Option for one
share of Stock on the relevant date as determined by an outside firm selected
by the Company.
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<PAGE> 8
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition of
any term herein in the singular shall also include the plural.
SECTION 3. PLAN ADMINISTRATION
(a) The Plan shall be administered by the Committee. The members of
the Committee shall be members of the Board appointed by the Board, and any
vacancy on the Committee shall be filled by the Board.
The Committee shall keep minutes of its meetings and of any action taken
by it without a meeting. A majority of the Committee shall constitute a quorum,
and the acts of a majority of the members present at any meeting at which a
quorum is present shall be the acts of the Committee. Any action that may be
taken at a meeting of the Committee may be taken without a meeting if a consent
or consents in writing setting forth the action so taken shall be signed by all
of the members of the Committee. The Committee shall make appropriate reports
to the Board concerning the operations of the Plan.
(b) Subject to the limitations of the Plan, the Committee shall have
the sole and complete authority: (i) to impose such limitations, restrictions
and conditions upon such
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awards as it shall deem appropriate; (ii) to interpret the Plan and to adopt,
amend and rescind administrative guidelines and other rules and regulations
relating to the Plan; and (iii) to make all other determinations and to take
all other actions necessary or advisable for the implementation and
administration of the Plan. Notwithstanding the foregoing, the Committee shall
have no authority, discretion or power to select the Directors who will receive
awards pursuant to the Plan, determine the awards to be granted pursuant to the
Plan, the number of shares of Stock to be issued thereunder or the price
thereof or the time at which such awards are to be granted, establish the
duration and nature of awards or alter any other terms or conditions specified
in the Plan, except in the sense of administering the Plan subject to the
provisions of the Plan. The Committee's determinations on matters within its
authority shall be conclusive and binding upon the Company and all other
persons. The Plan shall be interpreted and implemented in a manner so that
Directors will not fail, by reason of the Plan or its implementation, to be
"disinterested persons" within the meaning of Rule 16b-3 under Section 16 of
the Exchange Act, as such rule may be amended, or any successor rule.
(c) The Company shall be the sponsor of the Plan. All expenses associated
with the Plan shall be borne by the Company.
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SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. 600,000 shares of Stock are authorized for issuance
under the Plan in accordance with the provisions of the Plan, subject to
adjustment and substitution as set forth in this Section 4. This authorization
may be increased from time to time by approval of the Board and, if such
approval is required, by the shareholders of the Company. The Company shall at
all times during the term of the Plan retain as authorized and unissued Stock
at least the number of shares from time to time required under the provisions
of the Plan, or otherwise assure itself of its ability to perform its
obligations hereunder.
4.2 Other Shares of Stock. Any shares of Stock that are subject to a
Common Stock Equivalent Award, a Stock Option Award, a Restricted Stock Award
or a Debenture and which are forfeited, any shares of Stock that for any other
reason are not issued to a Director, and any shares of Stock tendered by a
Director to pay the Exercise Price of a Stock Option shall automatically become
available again for use under the Plan if Rule 16b-3 under the Exchange Act, as
such rule may be amended, or any successor rule, and interpretations thereof by
the Securities and Exchange Commission or its staff permit such share
replenishment.
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4.3 Adjustments Upon Changes in Stock. If there shall be any change in the
Stock of the Company, through merger, consolidation, division, share exchange,
combination, reorganization, recapitalization, stock dividend, stock split,
spinoff, split up, dividend in kind or other change in the corporate structure
or distribution to the shareholders, appropriate adjustments may be made by the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) in the
aggregate number and kind of shares subject to the Plan, and the number and
kind of shares which may be issued under the Plan. Appropriate adjustments may
also be made by the Committee in the terms of any awards or Debentures under
the Plan to reflect such changes and to modify any other terms of outstanding
awards on an equitable basis as the Committee in its discretion determines.
SECTION 5. COMMON STOCK EQUIVALENT AWARDS
5.1 Grants of Common Stock Equivalent Awards. Common Stock Equivalents
equal to a fixed number of shares of Stock were granted automatically to
Directors on a formula basis under Section 5.1 of the Plan prior to its
amendment as of April 26, 1995. All Common Stock Equivalents granted pursuant
to Section 5.1 prior to its amendment as of April 26, 1995 shall be subject to
adjustment as provided in Section 4.3.
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5.2 Deferred Stock Account. A Deferred Stock Account has been established
for each Director elected prior to the annual meeting of shareholders held in
1995. The Deferred Stock Account shall consist of compensation in the form of
Common Stock Equivalents which have been awarded to the Director hereunder by
the Company plus Common Stock Equivalents credited to the Deferred Stock
Account in respect of dividends and other distributions on the Stock pursuant
to Sections 5.3 and 5.4.
5.3 Hypothetical Investment. Compensation awarded hereunder in the form of
Common Stock Equivalents is assumed to be a hypothetical investment in shares
of Stock, and will be subject to adjustment to reflect stock dividends, splits
and reclassifications and as otherwise set forth in Section 4.3.
5.4 Hypothetical Dividends. Dividends and other distributions on Common
Stock Equivalents shall be deemed to have been paid as if such Common Stock
Equivalents were actual shares of Stock issued and outstanding on the
respective record or distribution dates. Common Stock Equivalents shall be
credited to the Deferred Stock Account in respect of cash dividends and any
other securities or property issued on the Stock in connection with
reclassifications, spinoffs and the like on the basis of the value of the
dividend or other asset distributed and the value of the Common Stock
Equivalents on the date of the announcement of the dividend or asset
distribution, all at the
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same time and in the same amount as dividends or other distributions are paid
or issued on the Stock. Such Common Stock Equivalents shall be subject to
adjustment as provided in Section 4.3. Fractional shares shall be credited to a
Director's Deferred Stock Account cumulatively but the balance of shares of
Common Stock Equivalents in a Director's Deferred Stock Account shall be
rounded to the next highest whole share for any payment to such Director
pursuant to Section 5.6.
5.5 Statement of Account. A statement will be sent to each Director as to
the balance of his Deferred Stock Account at least once each calendar year.
5.6 Payment of Deferred Stock. Upon termination of services as a Director,
the balance of the Director's Deferred Stock Account shall be paid to such
Director in Stock in January of the year following the year of termination of
services as a director on the basis of one share of Stock for each Common Stock
Equivalent in such Director's Deferred Stock Account.
5.7 Payments to a Deceased Director's Estate. In the event of a Director's
death before the balance of his Deferred Stock Account is fully paid to him,
payment of the balance of the Director's Deferred Stock Account shall then be
made to the beneficiary designated by the Director pursuant to Section 5.8, or
to his estate in the absence of such a beneficiary
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designation, in the time and manner selected by the Committee. The
Committee may take into account the application of any duly appointed
administrator or executor of a Director's estate and direct that the balance of
the Director's Deferred Stock Account be paid to his estate in the manner
requested by such application.
5.8 Designation of Beneficiary. A Director may designate a beneficiary in
a form approved by the Committee.
SECTION 6. DEFERRAL OF COMPENSATION
6.1 Amount of Deferral. A Director may elect to defer receipt of all or a
specified portion of the cash compensation otherwise payable to the Director
for services rendered to the Company as a director.
6.2 Manner of Electing Deferral. A Director shall make elections permitted
hereunder by giving written notice to the Company in a form approved by the
Committee. The notice shall include: (i) the percentage of cash compensation to
be deferred; which amount must be stated in whole increments of five percent;
and (ii) the time as of which deferral is to commence.
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6.3 Accounts. A Cash Account and a Deferred Debenture Account has been or
shall be established for each Director electing to defer hereunder. Each Cash
Account shall be credited with the amounts deferred on the date such
compensation is otherwise payable and shall be debited with the amount of any
such compensation forfeited in accordance with applicable Board policy. Such
deferred amounts shall accrue interest from time to time at a rate equal to the
ten-year U.S. Treasury Bond rate (prior to January 1, 1995, the seven-year U.S.
Treasury Bond rate) in effect the week prior to the regular January meeting of
the Board (or, if no such meeting is held, the week prior to the first trading
day of the New York Stock Exchange in February) in the year in respect of which
such deferred amounts are earned until the last trading day of the New York
Stock Exchange prior to the regular January meeting of the Board (or, if no
such meeting is held, until the first trading day of February) in the year
following the year in respect of which deferred amounts are earned, at which
time such deferred amounts, including interest, shall be invested in Debentures
and credited to the Deferred Debenture Account. Deferred amounts shall be
credited to the Deferred Debenture Account only in $100 amounts. Fractional
amounts of $100 shall remain in the Cash Account and continue to accrue
interest.
6.4 Time for Electing Deferral. Any election to (i) defer cash
compensation, (ii) alter the portion of such amounts
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deferred, or (iii) revoke an election to defer such amounts, must be made no
later than six months prior to the time such compensation is earned by the
Director or, if permitted by the rules under Section 16 of the Exchange Act, no
later than six months prior to the time such deferred compensation is invested
in Debentures and credited to the Deferred Debenture Account pursuant to
Section 6.3. An election to commence a deferral may be made at any time in
accordance with the procedures set forth in Section 6.2. Any election so made
shall remain in effect beginning six months from the date of election until the
Director ceases to be a director or six months from the date the Director
elects in writing to change his election.
6.5 Payment of Deferred Amounts. Payments from a Deferred Debenture
Account shall be made in five consecutive annual installments beginning in the
January following the Director's termination of service. Payments from a
Deferred Debenture Account shall consist of accumulated interest on the
Debentures (which amount shall only be payable in cash) plus the greater value
of (i) the face value of the Debentures or (ii) the shares of Stock into which
the Debentures are convertible. In the event the value of the payment is
determined by the amount referred to in clause (i), payment shall be made in
cash. In the event such value is determined by clause (ii), such payment shall
be made in Stock, other than the value of fractional shares which will be paid
in cash.
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6.6 Payments to a Deceased Director's Estate. In the event of a Director's
death before the balance of his Cash Account or Deferred Debenture Account is
fully paid to him, payment of the balance of the Cash Account or Deferred
Debenture Account shall then be made to the beneficiary designated by the
Director pursuant to Section 6.7, or to his estate in the absence of such
beneficiary designation, in the time and manner selected by the Committee. The
Committee may take into account the application of any duly appointed
administrator or executor of a Director's estate and direct that the balance of
the Director's Cash Account or Deferred Debenture Account be paid to his estate
in the manner requested by such application.
6.7 Designation of Beneficiary. A Director may designate a beneficiary in
a form approved by the Committee.
SECTION 7. STOCK OPTION AWARDS
7.1 Grants of Stock Option Awards.
(a) Stock Options for a fixed number of shares of Stock were granted
automatically to Directors on a formula basis under Section 7.1(a) of the Plan
prior to its amendment as of April 24, 1996.
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(b) Prior to the amendment of the Plan as of April 24, 1996, Stock
Options for a fixed number of shares of Stock were granted automatically on a
formula basis under Section 7.1(b) of the Plan to Directors serving as chairs
of standing committees of the Board.
(c) Beginning with the calendar year 1996, each Director will receive
one-fourth of the value of his Annual Director's Fee in the form of a Stock
Option Award. Such Stock Options shall be granted automatically each year on
the last Wednesday in January of such year to each Director in office on such
Grant Date. If a person is elected to the Board at any time after the last
Wednesday in January of a given calendar year (beginning with 1996) but before
the end of that calendar year, whether by action of the shareholders of the
Company or the Board, such person upon becoming a Director shall be granted
automatically one-fourth of the value of his Annual Director's Fee for that
calendar year in the form of a Stock Option Award on the last Wednesday of the
calendar month in which such person becomes a Director (or in the next
following calendar month if such election occurs after the last Wednesday of
the month). The total number of shares of Stock subject to any such Stock
Option Award will be the number of shares determined by dividing the amount of
the Annual Director's Fee to be paid in the form of a Stock Option Award by the
Stock Option Value on the Grant Date, rounded up to the nearest whole share.
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(d) All Stock Options granted pursuant to Section 7.1 (whether before
or after amendment of the Plan as of April 24, 1996) shall be subject to
adjustment as provided in Section 4.3.
7.2 Terms and Conditions of Stock Options. Stock Options granted under the
Plan shall be subject to the following terms and conditions:
(a) EXERCISE PRICE. The purchase price per share at which a Stock
Option may be exercised ("Exercise Price") shall be determined as follows: on
any Grant Date, (1) Stock Options for two-thirds of the option shares granted
on the Grant Date shall have an Exercise Price per share equal to 100% of Fair
Market Value on the Grant Date, and (2) Stock Options for the remaining
one-third of the option shares granted on the Grant Date shall have an Exercise
Price per share equal to 125% of Fair Market Value on the Grant Date.
(b) EXERCISABILITY. Subject to the terms and conditions of the Plan
and of the agreement referred to in Section 7.2(j), a Stock Option may be
exercised in whole or in part upon notice of exercise to the Company, (1) as to
any Stock Option granted on or prior to January 1, 1996, commencing on the
first day after the Grant Date and until it terminates, and (2)
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as to any Stock Option granted after January 1, 1996 that vests as provided in
Section 7.2(c), commencing on January 1 of the calendar year next following the
Grant Year. During a Director's lifetime, a Stock Option may be exercised only
by the Director or the Director's guardian or legal representative.
(c) VESTING OF STOCK OPTION AWARDS. Stock Options granted on or prior
to January 1, 1996 vest immediately on grant. Stock Options granted after
January 1, 1996 will vest on January 1 of the calendar year next following the
Grant Year (the "Option Vesting Date") if the Director has an Attendance
Percentage of at least seventy-five percent (75%) for the Grant Year. In the
event that a Director has an Attendance Percentage of less than seventy-five
percent (75%) for a Grant Year, Stock Options granted in that Grant Year for a
number of shares equal to the Director's Attendance Percentage for that year
multiplied by the total number of option shares granted for that year (rounded
up to the nearest whole share) will vest on the Option Vesting Date, and Stock
Options granted in that Grant Year as to the remaining option shares will be
forfeited and will terminate as of the Option Vesting Date. Notwithstanding
anything to the contrary herein, (1) in the event that a director is removed
from office for Cause, all outstanding Stock Options will be forfeited
immediately as of the time the grantee is so removed from office, and (2) upon
the occurrence of a Change in Control, all outstanding Stock Options will vest
and become immediately
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exercisable.
(d) MANDATORY HOLDING OF STOCK. Except as otherwise provided in
Section 7.5 or Section 10, any Stock acquired on exercise of a Stock Option
must be held by the grantee for a minimum of (1) three years from the date of
exercise, (2) two years from the date the grantee ceases to be a director of
the Company, or (3) until the occurrence of a Change in Control, whichever
first occurs (the "Option Shares Holding Period").
(e) OPTION TERM. The term of a Stock Option (the "Option Term") shall
be the period of (1) ten years from its Grant Date, or (2) until the Option
Vesting Date for a Stock Option that does not vest as provided in Section
7.2(c), or (3) until the time the Stock Option is forfeited as provided in
Section 7.2(c)(1) in the event a director is removed from office for Cause, or
(4) until the date the Stock Option ceases to be exercisable as provided in
Section 7.2(h), whichever is earlier.
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(f) PAYMENT OF EXERCISE PRICE. Stock purchased on exercise of a Stock
Option must be paid for as follows: (1) in cash or by check (acceptable to the
Company), bank draft or money order payable to the order of the Company, (2)
through the delivery of shares of Stock which are then outstanding and which
have a Fair Market Value on the date of exercise equal to the Exercise Price
per share multiplied by the number of shares as to which the Stock Option is
being exercised (the "Aggregate Exercise Price"); (3) by delivery of an
unconditional and irrevocable undertaking by a broker to deliver promptly to
the Company sufficient funds to pay the Aggregate Exercise Price, or (4) by a
combination of the permissible forms of payment; provided, however, that any
portion of the Exercise Price representing a fraction of a share must be paid
in cash and no share of Stock held for less than six months may be delivered in
payment of the Aggregate Exercise Price.
(g) RIGHTS AS A SHAREHOLDER. The holder of a Stock Option will not
have any of the rights of a shareholder with respect to any shares of Stock
subject to the Stock Option until such shares are issued by the Company
following the exercise of the Stock Option.
(h) TERMINATION OF ELIGIBILITY. If a grantee ceases to be a Director
for any reason, any outstanding Stock Options shall be exercisable according to
the following provisions:
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(1) If a grantee ceases to be a director for any reason other than
removal for Cause or death, any outstanding Stock Options held by such grantee
which are vested or which thereafter vest shall be exercisable by the grantee
in accordance with their terms at any time prior to the expiration of the
Option Term;
(2) If a grantee is removed from office as a director of the Company
for Cause, any outstanding vested Stock Options held by such grantee shall be
exercisable by the grantee in accordance with their terms at any time prior to
the earlier of (a) the time the grantee is so removed from office and (b) the
expiration of the Option Term; and
(3) Following the death of a grantee while a director or after the
grantee ceased to be a director for any reason other than removal for Cause,
any Stock Options that are outstanding and exercisable by such grantee at the
time of death or which thereafter vest shall be exercisable in accordance with
their terms by the person or persons entitled to do so under the grantee's
will, by a properly designated beneficiary in the event of death, or by the
person or persons entitled to do so under the applicable laws of descent and
distribution at any time prior to the earlier of (a) the expiration of the
Option Term and (b) two years after the date of death.
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(i) TERMINATION OF STOCK OPTION. A Stock Option shall terminate on the
earlier of (1) exercise of the Stock Option in accordance with the terms of the
Plan, and (2) expiration of the Option Term as specified in Sections 7.2(e) and
7.2(h).
(j) STOCK OPTION AGREEMENT. All Stock Options will be confirmed by an
agreement, or an amendment thereto, which shall be executed on behalf of the
Company by the Chief Executive Officer, the President or any Vice President and
by the grantee.
(k) GENERAL RESTRICTIONS.
(1) The obligation of the Company to issue Stock pursuant to Stock
Options under the Plan shall be subject to the condition that, if at any time
the Company shall determine that (a) the listing, registration or qualification
of shares of Stock upon any securities exchange or under any state or federal
law, or (b) the consent or approval of any government or regulatory body is
necessary or desirable, then such Stock shall not be issued unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained free from any conditions not acceptable to the Company.
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(2) Shares of Stock for use under the provisions of this Section 7
shall not be issued until they have been duly listed, upon official notice of
issuance, upon the New York Stock Exchange and such other exchanges, if any, as
the Board shall determine, and a registration statement under the Securities
Act of 1933 with respect to such shares shall have become, and be, effective.
Subject to the foregoing provisions of this Section 7.2 and the other
provisions of the Plan, any Stock Option granted under the Plan shall be
subject to such restrictions and other terms and conditions, if any, as shall
be determined by the Committee, in its discretion, and set forth in the
agreement referred to in Section 7.2(j), or an amendment thereto; provided,
however, that in no event shall the Committee or the Board have any power or
authority which would cause the Directors to cease to be "disinterested
persons" or would cause transactions pursuant to the Plan to cease to be exempt
from the provisions of Section 16(b) of the Exchange Act pursuant to Rule
16b-3, as such rule may be amended, or any successor rule.
7.3 Annual Statement. A statement will be sent to each Director as to
the status of his Stock Options at least once each calendar year.
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7.4 Designation of a Beneficiary. A Director may designate a
beneficiary to hold and exercise outstanding Stock Options in accordance with
the Plan in the event of the Director's death.
7.5 Holding Period Applicable to a Deceased Grantee's Estate. As long
as at least six months have elapsed since the Grant Date, a properly designated
beneficiary, or a person holding a Stock Option under a deceased grantee's will
or under the applicable laws of descent or distribution, exercising a Stock
Option in accordance with Section 7.2(h) will not be subject to the Holding
Period with respect to shares of Stock received on exercise of a Stock Option.
SECTION 8. RESTRICTED STOCK AWARDS.
8.1 Grants of Restricted Stock Awards.
(a) Beginning with the calendar year 1996, each Director will receive
one-fourth of the value of his Annual Director's Fee in the form of a
Restricted Stock Award. Such Restricted Stock shall be granted automatically
each year to each Director in office on such Grant Date. If a person is elected
to the Board at any time after the last Wednesday in January of a given
calendar year (beginning with 1996) but before the end of that calendar year,
whether by action of the shareholders of the Company or the Board, such person
upon becoming a Director shall be granted automatically one-fourth of the value
of his Annual
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Director's Fee for that calendar year in the form of a Restricted Stock Award
on the last Wednesday in the calendar month in which such person becomes a
Director (or in the next following calendar month if said election occurs after
the last Wednesday of the month).
(b) Beginning with the calendar year 1996, each Director who is the
chair of a standing committee of the Board will receive the full value of his
Annual Committee Chair's Fee in the form of a Restricted Stock Award. Such
Restricted Stock shall be granted automatically each year immediately following
the annual meeting of shareholders and the organization meeting of the Board
related to such annual meeting of shareholders, beginning with the annual
meeting of shareholders and related organization meeting held in 1996, to each
Director who is elected at such organization meeting to serve as the chair of a
standing committee of the Board.
(c) The total number of shares of Stock representing any such
Restricted Stock Award will be the number of shares determined by dividing the
amount of the Annual Director's Fee or the Annual Committee Chair's Fee, as the
case may be, to be paid in the form of a Restricted Stock Award by the Fair
Market Value of a share of Stock on the Grant Date, rounded up to the nearest
whole share.
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(d) Restricted Stock granted pursuant to Section 8.1 shall be subject
to adjustment as provided in Section 4.3.
8.2 Terms and Conditions of Restricted Stock. Restricted Stock granted
under the Plan shall be subject to the following terms and conditions:
(a) RESTRICTION PERIOD. Restricted Stock will be subject to a
Restriction Period ("Restriction Period") beginning on the Grant Date and
continuing through December 31 of the Grant Year.
(b) VESTING.
(1) Except as set forth in Section 8.2(b)(3), a Director's right to
ownership in shares of Restricted Stock granted to a Director pursuant to
Section 8.1(a) will vest on the January 1 immediately following the expiration
of the Restriction Period for such shares (the "Restricted Stock Vesting Date")
if the Director has an Attendance Percentage of at least seventy-five percent
(75%) for the Grant Year. In the event that a Director has an Attendance
Percentage of less than seventy-five percent (75%) for a Grant Year, a number
of shares of Restricted Stock equal to the Director's Attendance Percentage for
the Grant Year multiplied by the total number of shares of Restricted Stock
granted pursuant to Section 8.1(a) during the Grant Year (rounded
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up to the nearest whole share) will vest on the Restricted Stock Vesting Date
and the remaining shares of Restricted Stock granted pursuant to Section 8.1(a)
during the Grant Year will be forfeited as of the Restricted Stock Vesting
Date.
(2) Except as set forth in Section 8.2(b)(3) below, a Director's right
to ownership in shares of Restricted Stock granted to a committee chair
pursuant to Section 8.1(b) will vest on the Restricted Stock Vesting Date.
(3) Notwithstanding anything to the contrary herein, (i) in the event
that a director is removed from office for Cause prior to the Restricted Stock
Vesting Date, all of said Director's shares of Restricted Stock that have not
yet vested will be forfeited immediately as of the time the grantee is so
removed from office and the Company will have the right to complete the blank
stock power described below with respect to such shares, and (ii) upon the
occurrence of a Change in Control, all shares of Restricted Stock that have not
yet vested will immediately vest.
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(c) ISSUANCE OF SHARES. On the Grant Date, a certificate representing
the shares of Restricted Stock will be registered in the Director's name and
deposited by the Director, together with a stock power endorsed in blank, with
the Company. Subject to the transfer restrictions set forth in Section 8.2(d)
and to the last sentence of this Section 8.2(c), the Director as owner of
shares of Restricted Stock will have the rights of the holder of such
Restricted Stock during the Restriction Period. Following expiration of the
Restriction Period, on the Restricted Stock Vesting Date, vested shares of
Restricted Stock will be redelivered by the Company to the Director and
non-vested shares of Restricted Stock will be forfeited and the Company will
have the right to complete the blank stock power with respect to such shares.
For shares of Restricted Stock granted prior to the effective date of the Plan
as set forth in Section 14, no certificate will be issued, such shares will not
be issued and outstanding, and the Director will not have any of the rights of
an owner of the shares until such effective date has occurred.
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(d) TRANSFER RESTRICTIONS; MANDATORY HOLDING OF STOCK. Except as
otherwise provided in Section 8.5 or Section 10, shares of Restricted Stock are
not transferable during the Restriction Period. Once the Restriction Period
lapses and shares vest, except as otherwise provided in Section 8.5 or Section
10, shares acquired as a Restricted Stock Award must be held by the grantee for
a minimum of: (1) three years from the Grant Date, (2) two years from the date
the grantee ceases to be a director of the Company, or (3) until the occurrence
of a Change of Control, whichever first occurs (the "Restricted Shares Holding
Period").
(e) RESTRICTED STOCK AGREEMENT. All Restricted Stock Awards will be
confirmed by an agreement, or an amendment thereto, which will be executed on
behalf of the Company by the Chief Executive Officer, the President or any Vice
President and by the grantee.
(f) GENERAL RESTRICTION.
(1) The obligation of the Company to issue shares of Restricted Stock
under the Plan shall be subject to the condition that, if at any time the
Committee shall determine that (a) the listing, registration or qualification
of shares of Restricted Stock upon any securities exchange or under any state
or federal law, or (b) the consent or approval of any government or regulatory
body is necessary or desirable, then such Restricted
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Stock shall not be issued unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free from any
conditions not acceptable to the Company.
(2) Shares of Stock for use under the provisions of this Section 8
shall not be issued until they have been duly listed, upon official notice of
issuance, upon the New York Stock Exchange and such other exchanges, if any, as
the Board shall determine, and a registration statement under the Securities
Act of 1933 with respect to such shares shall have become, and be, effective.
Subject to the foregoing provisions of this Section 8.2 and the other
provisions of the Plan, any shares of Restricted Stock granted under the Plan
shall be subject to such restrictions and other terms and conditions, if any,
as shall be determined by the Committee, in its discretion, and set forth in
the agreement referred to in Section 8.2(e), or an amendment thereto; provided,
however, that in no event shall the Committee or the Board have any power or
authority which would cause the Directors to cease to be "disinterested
persons" or would cause transactions pursuant to the Plan to cease to be exempt
from the provisions of Section 16(b) of the Exchange Act under Rule 16b-3, as
such rule may be amended, or any successor rule.
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8.3 Annual Statement. A statement will be sent to each Director as to
the status of his Restricted Stock at least once each calendar year.
8.4 Designation of a Beneficiary. A Director may designate a
beneficiary to hold shares of Restricted Stock in accordance with the Plan in
the event of the Director's death.
8.5 Holding Period Applicable to a Deceased Grantee's Estate. As long
as at least six months have elapsed since the Grant Date, a properly designated
beneficiary, or a person holding shares of Restricted Stock under a deceased
grantee's will or under the applicable laws of descent or distribution, will
not be subject to the Restricted Shares Holding Period with respect to such
shares of Restricted Stock.
SECTION 9. CHANGE IN CONTROL
9.1 Settlement of Compensation. In the event of a Change in Control of
the Company as defined herein, (a) to the extent not already vested, all Stock
Option Awards, Restricted Stock Awards and other benefits hereunder shall be
vested immediately; and (b) the value of all unpaid benefits and deferred
amounts shall be paid in cash to PNC Bank, National Association, the trustee
pursuant to a trust agreement dated as of June 22, 1995, as amended from time
to time, or any successor trustee, or otherwise on such terms as the Committee
may prescribe or permit.
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For purposes of this Section 9.1, the value of deferred amounts shall
be equal to the sum of (i) the value of all Common Stock Equivalent Awards then
held in such Director's Deferred Stock Account (the value of which shall be
based upon the highest price of the Stock as reported by the composite tape of
the New York Stock Exchange during the 30 days immediately preceding the Change
in Control), (ii) the value of the Director's Cash Account, and (iii) the
greater value of (x) the cash amount equal to the face value of the Debentures
plus cash equal to accrued interest or (y) the number of shares of Stock into
which the Debentures are convertible (the value of which shall be based upon
the highest price of the Stock as reported by the composite tape of the New
York Stock Exchange during the 30 days immediately preceding the Change in
Control), plus cash equal to accrued interest.
9.2 Definition of Change in Control. A Change in Control shall mean the
occurrence of one or more of the following events:
(a) there shall be consummated (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation or
pursuant to which shares of the Company's Stock would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of the Company's Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
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<PAGE> 35
corporation immediately after the merger, or (ii) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; or
(b) the shareholders of the Company shall approve of any plan or
proposal for the liquidation or dissolution of the Company, or
(c) (i) any person (as such term is defined in Section 13(d) of the
Exchange Act), corporation or other entity shall purchase any Stock of the
Company (or securities convertible into the Company's Stock) for cash,
securities or any other consideration pursuant to a tender offer or exchange
offer, unless, prior to the making of such purchase of Stock (or securities
convertible into Stock), the Board shall determine that the making of such
purchase shall not constitute a Change in Control, or (ii) any person (as such
term is defined in Section 13(d) of the Exchange Act), corporation or other
entity (other than the Company or any benefit plan sponsored by the Company or
any of its subsidiaries) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent or more of the combined
voting power of the Company's then outstanding securities ordinarily (and apart
from any rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in Rule 13d-3(d) in the
case of rights to acquire any such securities), unless, prior to such
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<PAGE> 36
person so becoming such beneficial owner, the Board shall determine that such
person so becoming such beneficial owner shall not constitute a Change in
Control, or
(d) at any time during any period of two consecutive years,
individuals who at the beginning of such period constituted the entire Board
shall cease for any reason to constitute at least a majority thereof, unless
the election or nomination for election of each new director during such
two-year period is approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such two-year
period.
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SECTION 10. ASSIGNABILITY
The right to receive payments or distributions hereunder (including
any "derivative security" issued pursuant to the Plan, as such term is defined
by the rules promulgated under Section 16 of the Exchange Act), any shares of
Restricted Stock granted hereunder during the Restriction Period, and any Stock
Options granted hereunder shall not be transferable or assignable by a Director
other than by will, by the laws of descent and distribution, to a properly
designated beneficiary in the event of death, or pursuant to a domestic
relations order as defined by Section 414(p)(1)(B) of the Internal Revenue Code
or the rules thereunder that satisfies Section 414(p)(1)(A) of the Internal
Revenue Code or the rules thereunder. In addition, Stock acquired on exercise
of a Stock Option shall not be transferable prior to the end of the applicable
Option Shares Holding Period, if any, set forth in Sections 7.2(d) and 7.5, and
Stock acquired as Restricted Stock shall not be transferable prior to the end
of the applicable Restricted Shares Holding Period, if any, set forth in
Sections 8.2(d) and 8.5, in either case other than by will, by transfer to a
properly designated beneficiary in the event of death, by the applicable laws
of descent and distribution or pursuant to a domestic relations order as
defined by Section 414(p)(1)(B) of the Internal Revenue Code or the rules
thereunder that satisfies Section 414(p)(1)(A) of the Internal Revenue Code or
the rules thereunder.
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SECTION 11. RETENTION; WITHHOLDING OF TAX
11.1 Retention. Nothing contained in the Plan or in any Stock Option
Award or Restricted Stock Award granted under the Plan shall interfere with or
limit in any way the right of the Company to remove any Director from the Board
pursuant to the Restated Articles of Incorporation and the By-laws of the
Company, nor confer upon any Director any right to continue in the service of
the Company.
11.2 Withholding of Tax. To the extent required by applicable law and
regulation, each Director must arrange with the Company for the payment of any
federal, state or local income or other tax applicable to any payment or any
delivery of Stock hereunder before the Company shall be required to make such
payment or issue (or, in the case of Restricted Stock, deliver) such shares
under the Plan.
SECTION 12. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time to time may amend
or modify the Plan, provided, however, that no amendment or modification may
become effective without approval of the amendment or modification by the
shareholders if shareholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements and provided further, that,
unless otherwise permitted by the rules under
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Section 16 of the Exchange Act, no amendment or modification shall be made more
than once every six months that would change the amount, price, or timing of
the Common Stock Equivalent Awards, Stock Option Awards or Restricted Stock
Awards hereunder, other than to comport with changes in the Internal Revenue
Code, the Employment Retirement Income Security Act of 1974, as amended, or the
rules promulgated thereunder.
SECTION 13. REQUIREMENTS OF LAW
13.1 Federal Securities Law Requirements. Implementation and
interpretations of, transactions pursuant to, the Plan shall be subject to all
conditions required under Rule 16b-3, as such rule may be amended, or any
successor rule, to qualify such transactions for any exemption from the
provisions of Section 16(b) of the Exchange Act available under that rule, or
any successor rule, and to permit the Directors to be "disinterested persons"
within the meaning of that rule, or any successor rule, insofar as the Plan or
its implementation shall impact such disinterested status.
13.2 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania.
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SECTION 14. EFFECTIVE DATE OF AMENDMENT.
This Plan shall be effective on the date on which the amendment to the
Deferred Compensation and Stock Plan for Directors is approved by the common
shareholders of the Company. Automatic grants of Stock Options and Restricted
Stock to Directors for Annual Director's Fees will begin on January 31, 1996
but are subject to such shareholder approval, and, in the case of Restricted
Stock Awards, said shares shall not be issued and outstanding until such
approval is obtained. In the event that the amendment is not so approved, the
Deferred Compensation and Stock Plan for Directors as in effect prior to the
amendment shall remain in full force and effect, and the automatic grants made
on January 31, 1996 shall be null and void.
This Plan shall not preclude the adoption by appropriate means of any
other compensation or deferral plan for directors.
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<PAGE> 1
Exhibit 10.F
ADVISORY DIRECTOR'S PLAN
As amended
Effective April 30, 1996
<PAGE> 2
ADVISORY DIRECTOR'S PLAN
1. PURPOSE
The purpose of the Advisory Director's Plan, as amended as of
April 30, 1996 (the "Plan"), for non-employee members of the Board
of Directors of the Westinghouse Electric Corporation (the
"Company") is to provide additional income to certain eligible
directors upon their retirement from the Board of Directors of the
Company (the "Board").
2. ADMINISTRATION
The Plan shall be administered by an Advisory Director's Plan
Committee of the Company consisting of the Chief Executive Officer
of the Company, the Chief Financial Officer of the Company and the
Vice President and General Counsel of the Company (the "Advisory
Director's Plan Committee").
The Advisory Director's Plan Committee shall have full power and
authority to adopt, alter and repeal any administrative rules,
regulations and practices governing the operation of the Plan as it
shall deem advisable and to interpret the terms and provisions of
the Plan. All decisions, interpretations or resolutions of the
Advisory Director's Plan Committee shall be conclusive and binding
on all interested parties.
3. ELIGIBILITY REQUIREMENTS
A. In order to qualify for receipt of an Advisory Director's Fee
under Section 4(A) hereof ("Advisory Director's Fee"), a
director must comply with Section 7 hereof and must meet the
following eligibility requirements:
(i) the director shall have been a non-employee member of
the Board for period of at least five years;
(ii) the director shall have reached the mandatory
retirement age of 70, unless retirement at an earlier
age has been approved by the Advisory Director's Plan
Committee; and
(iii) the director shall have retired from the Board before
April 30, 1996.
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<PAGE> 3
B. In no event shall Advisory Director's Fees be paid to any
person who is still a director on, or becomes a director of
the Company after, April 30, 1996.
C. Persons who are non-employee directors of the Company in
office and with at least one full year of service as a
director of the Company on April 30, 1996 shall be entitled
to receive termination fees as provided under Section 4(B)
hereof ("Termination Fees").
4. PLAN PAYMENT PROVISIONS
A. ADVISORY DIRECTOR'S FEE PAYMENTS
A director will be credited with one "full year of Board
service" for each complete year that the director was a
member of the Board.
Effective on or after May 1, 1988, the amount of the payments
hereunder shall be computed by multiplying the director's
annual cash retainer (as from time to time defined by the
Advisory Director's Plan Committee and approved by the Board)
in effect at the time of retirement (for directors retiring
between January 1 and April 30, 1996, the director's annual
cash retainer for 1995) by 100 percent and will be paid for
the number of full years of the director's Board service but
not more than 10 years. Payments will be made annually
during the month of June.
In the event of a director's death before any or all of the
payments due hereunder are fully paid, payment of such
amounts shall then be made to the beneficiary designated by
the director in a form approved by the Advisory Director's
Plan Committee and filed with the Secretary of the Company,
or to the director's estate in the absence of such a
beneficiary designation, in the time and manner selected by
the Advisory Director's Plan Committee. The Advisory
Director's Plan Committee may take into account the
application of any duly appointed administrator or executor
of a director's estate and direct any such payment be paid to
the director's estate in the manner requested by such
application.
B. TERMINATION FEE
Each non-employee director of the Company in office and
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<PAGE> 4
with at least one full year of service as a director of the
Company on April 30, 1996 shall be entitled to receive a
Termination Fee, to be paid on a deferred, cash basis, in the
amount set forth on a schedule maintained by the Secretary of
the Company. The terms of the mandatory deferral and payment
of the Termination Fee shall be as set forth in the Company's
Advisory Director's Plan Termination Fee Deferral Terms and
Conditions, a copy of which is maintained by the Secretary of
the Company.
5. TRANSFERABILITY
Payments hereunder shall be made from the general assets of the
Company and the director's rights and interests herein may not be
anticipated, assigned, encumbered or transferred in any manner
whatsoever.
6. AMENDMENT AND DISCONTINUANCE
The Company may at any time amend, suspend, or discontinue the
Plan, but may not, without the consent of former directors affected
thereby, amend or modify any provisions for a former director
already receiving payments hereunder.
7. CONSULTATION
Under the terms of the Plan, directors in receipt of Advisory
Director's Fees shall be available for consultation at the request
of the Board. Any incidental expenses associated with such
required consultation will be fully reimbursed.
8. CHANGE IN CONTROL
In the event of a Change in Control as defined herein:
(a) payments as to a period of time less than a full year may
be made as the Advisory Director's Plan Committee may
determine as of the date of such Change in Control and then
paid on such basis and in such form as the Advisory
Director's Plan Committee may prescribe; and
(b) the value of all unpaid benefits shall be paid in cash to
PNC Bank, National Association, the trustee for this Plan
pursuant to a trust agreement dated June 22, 1995, as amended
from time to time, or any successor trustee, or otherwise on
such terms as the Advisory Director's Plan Committee may
prescribe or permit.
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<PAGE> 5
A Change in Control shall mean the occurrence of one or more of the
following events:
(a) there shall be consummated (i) any consolidation or
merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into
cash, securities or other property, other than a merger of
the Company in which the holders of the Company's Common
Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (ii) any sale,
lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all,
of the assets of the Company;
(b) the shareholders of the Company shall approve of any plan
or proposal for the liquidation or dissolution of the
Company;
(c) (i) any person (as such term is defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), corporation or other entity shall purchase
any Common Stock of the Company (or securities convertible
into the Company's Common Stock) for cash, securities or any
other consideration pursuant to a tender offer or exchange
offer, unless, prior to the making of such purchase of Common
Stock of the Company (or securities convertible into Common
Stock of the Company), the Board shall determine that the
making of such purchase shall not constitute a Change in
Control, or (ii) any person (as such term is defined in
Section 13(d) of the Exchange Act), corporation or other
entity (other than the Company or any benefit plan sponsored
by the Company or any of its subsidiaries) shall become the
"beneficial owner" (as such term is defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent or more
of the combined voting power of the Company's then
outstanding securities ordinarily (and apart from any rights
accruing under special circumstances) having the right to
vote in the election of directors (calculated as provided in
Rule 13d-3(d) under the Exchange Act in the case of rights to
acquire any such securities), unless, prior to such person so
becoming such beneficial owner, the Board shall determine
that such person so becoming such beneficial owner shall not
constitute a Change in Control; or
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<PAGE> 6
(d) at any time during any period of two consecutive years,
individuals who at the beginning of such period constituted
the entire Board shall cease for any reason to constitute at
least a majority thereof, unless the election or nomination
for election of each new director during such two-year period
as approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of
such two-year period.
9. EFFECTIVE DATE
This restatement of the Plan shall be effective as of April 30,
1996.
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Exhibit 10.G
DIRECTOR'S CHARITABLE GIVING PROGRAM
As Amended
Effective April 30, 1996
<PAGE> 2
DIRECTOR'S CHARITABLE GIVING PROGRAM
1. PURPOSE
The purpose of the Director's Charitable Giving Program, as amended
as of April 30, 1996 (the "Program"), is to provide a unique
opportunity for Westinghouse Electric Corporation (the "Company") and
certain of its directors to jointly participate in a program of
charitable giving.
2. ADMINISTRATION
The Program shall be administered by a Committee of the Company
consisting of the Chief Operating Officer, the Chief Financial
Officer and the Chief Legal Officer of the Company (the "Program
Committee").
The Program Committee shall have full power and authority to adopt,
alter and repeal any administrative rules, regulations and
practices governing the operation of the Program as it shall deem
advisable and to interpret the terms and provisions of the Program.
All decisions, interpretations or resolutions of the Program
Committee shall be conclusive and binding on all interested
parties.
3. ELIGIBILITY
The following persons are eligible to participate in the Program:
(a) all non-employee directors who were in office on July 28, 1988;
(b) the Chairman and Chief Executive Officer of the Company as of
July 28, 1988 and his immediate predecessor;
(c) any person who became a non-employee director of the Company after
July 28, 1988 and prior to
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<PAGE> 3
July 31, 1995 and has completed or completes five years of
service as a non-employee director of the Company on or prior
to July 31, 1996;
(d) any person who is a non-employee director of the Company on
April 30, 1996 and has completed or completes one year of
service as a non-employee director of the Company on or prior
to July 31, 1996; and
(e) any person who became or becomes the Chairman and Chief
Executive Officer of the Company after July 28, 1988 and on
or before July 31, 1996.
The Program will not be available to any person who becomes a
non-employee director or the Chairman and Chief Executive Officer
of the Company after July 31, 1996 or to any then current director
who has not yet met at least one of the eligibility requirements
set forth above as of July 31, 1996.
Any director of the Company eligible to participate in the Program
as set forth in this Section 3 is hereafter referred to as a
Director.
4. CHARITABLE DONATION
The Company will make tax-deductible charitable donations in the
total amount of $500,000 on behalf of each Director after the time
of the Director's death to the eligible charitable or other
non-profit organization(s) (the "Charity" or "Charities") selected
by the Director in accordance with Section 5. Initially, to fund
such donation, the Company will purchase a life insurance policy or
policies insuring the lives of the Directors. The Company will pay
the premiums for each such life insurance policy and will be the
owner and beneficiary thereof.
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<PAGE> 4
The Company and each Director shall execute a written agreement
containing such terms and conditions as the Program Committee may
determine are necessary and appropriate in furtherance of the
Program.
5. DESIGNATION OF CHARITABLE/NON-PROFIT ORGANIZATION(S)
(a) Each Director may designate not more than two Charities as
donees of the $500,000 contribution to be made by the Company
by filing with the Secretary of the Company a written
designation in a form approved by the Program Committee,
which designation shall be confirmed in writing by the
Secretary. In the event that a Director selects two donees,
each donation will be in the amount of $250,000.
(b) Each such Charity designated as a donee in the manner
described herein must be a tax-exempt organization qualified
as such under Section 501(c)(3) of the Internal Revenue Code
of 1986, as amended.
(c) Each designated Charity will be sent a written notification
of such designation, if such notification is authorized by
the Director, in a form approved by the Program Committee.
(d) Prior to death, the designation of a Charity as a donee by a
Director as described herein may be revoked by the Director
at any time by filing a written revocation or by filing a new
written designation with the Secretary of the Company, which
designation shall be confirmed in writing by the Secretary.
6. AMENDMENT AND DISCONTINUANCE
The Company may at any time amend, suspend or discontinue the
Program.
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<PAGE> 5
7. CHANGE IN CONTROL
In the event of a Change in Control as defined herein, the
donations to Charities contemplated hereby may be made as the
Program Committee may determine as of the date of such Change in
Control and paid on such basis and in such form as the Program
Committee may prescribe.
A Change in Control shall mean the occurrence of one or more of the
following events:
(a) there shall be consummated (i) any consolidation or
merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which
shares of the Company's Common Stock would be converted into
cash, securities or other property, other than a merger of
the Company in which the holders of the Company's Common
Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (ii) any sale,
lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all,
of the assets of the Company;
(b) the shareholders of the Company shall approve of any
plan or proposal for the liquidation or dissolution of the
Company;
(c) (i) any person (as such term is defined in Section 13(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), corporation or other entity shall purchase
any Common Stock of the Company (or securities convertible
into the Company's Common Stock) for cash, securities or any
other consideration pursuant to a tender offer or exchange
offer, unless, prior to the making of such purchase of Common
Stock of the Company (or securities convertible into Common
Stock of the Company), the Board of Directors of the
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<PAGE> 6
Company shall determine that the making of such purchase
shall not constitute a Change in Control, or (ii) any person
(as such term is defined in Section 13(d) of the Exchange
Act), corporation or other entity (other than the Company or
any benefit plan sponsored by the Company or any of its
subsidiaries) shall become the "beneficial owner" (as such
term is defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company
representing twenty percent or more of the combined voting
power of the Company's then outstanding securities ordinarily
(and apart from any rights accruing under special
circumstances) having the right to vote in the election of
directors (calculated as provided in Rule 13d-3(d) under the
Exchange Act in the case of rights to acquire any such
securities), unless, prior to such person so becoming such
beneficial owner, the Board of Directors of the Company shall
determine that such person so becoming such beneficial owner
shall not constitute a Change in Control; or
(d) at any time during any period of two consecutive years,
individuals who at the beginning of such period constituted
the entire Board of Directors of the Company shall cease for
any reason to constitute at least a majority thereof, unless
the election or nomination for election of each new director
during such two-year period was approved by a vote of at
least two-thirds of the directors then still in office who
were directors at the beginning of such two-year period.
8. EFFECTIVE DATE
This restatement of the Program shall be effective as of April 30,
1996.
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Exhibit 10.I
ADVISORY DIRECTOR'S PLAN TERMINATION FEE
DEFERRAL TERMS AND CONDITIONS
Effective April 30, 1996
<PAGE> 2
ADVISORY DIRECTOR'S PLAN TERMINATION FEE
DEFERRAL TERMS AND CONDITIONS
The Board of Directors of Westinghouse Electric Corporation (the
"Company") hereby adopts the following deferral terms and conditions
(the "ADP Deferral Plan") for Termination Fees under the Company's
Advisory Director's Plan.
SECTION 1. DEFINITIONS
1.1 Definitions. The following terms shall have the meanings set
forth below:
(a) "BOARD" means the Board of Directors of the Company.
(b) "CHANGE IN CONTROL" shall have the meaning assigned to
it in Section 4.2.
(c) "COMMITTEE" means the Compensation Committee of the
Board or any successor established by the Board.
(d) "DEBENTURE" means a hypothetical debenture of the
Company that has a face value of $100, bears interest at a rate equal to
the ten-year U.S. Treasury Bond rate in effect the week prior to April
30, 1996, and would be deemed to be convertible into Stock at a
conversion rate determined by dividing $100 by the mean of the high and
low prices of the Stock as reported by the composite tape of the New
York Stock Exchange on April 30, 1996, the date the Debenture is
credited to an ADP Deferred Debenture Account pursuant to Section 3.2.
(e) "ADP DEFERRED DEBENTURE ACCOUNT" means the account
established by the Company for a Director pursuant to Section 3.2 and to
which Debentures are credited pursuant to the ADP Deferral Plan.
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<PAGE> 3
(f) "DIRECTOR" means a non-employee member of the Board who
is entitled to Termination Fees under the Company's Advisory Director's
Plan.
(g) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time.
(h) "INTERNAL REVENUE CODE" means the Internal Revenue Code
of 1986, as amended from time to time.
(i) "STOCK" means the common stock, $1.00 par value, of the
Company.
(j) "TERMINATION FEE" means a termination fee payment
pursuant to the Company's Advisory Director's Plan.
1.2 Number. Except when otherwise indicated by the context the
definition of any term herein in the singular shall also include the
plural.
SECTION 2. ADP DEFERRAL PLAN ADMINISTRATION
(a) The ADP Deferral Plan shall be administered by the
Committee. The members of the Committee shall be members of the Board
appointed by the Board, and any vacancy on the Committee shall be filled
by the Board.
The Committee shall keep minutes of its meetings and of any action taken
by it without a meeting. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present shall be the acts of the Committee. Any action that
may be taken at a meeting of the Committee may be taken without a meeting if a
consent or consents in writing setting forth the action so taken shall be
signed by all of the members of the Committee. The Committee shall make
appropriate reports to the Board concerning the operations of the ADP Deferral
Plan.
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<PAGE> 4
(b) Subject to the limitations of the ADP Deferral Plan,
the Committee shall have the sole and complete authority: (i) to impose
such limitations, restrictions and conditions on Debentures as it shall
deem appropriate; (ii) to interpret the ADP Deferral Plan and to adopt,
amend and rescind administrative guidelines and other rules and
regulations relating to the ADP Deferral Plan; and (iii) to make all
other determinations and to take all other actions necessary or
advisable for the implementation and administration of the ADP Deferral
Plan. The Committee's determinations on matters within its authority
shall be conclusive and binding upon the Company and all other persons.
(c) The Company shall be the sponsor of the ADP Deferral
Plan. All expenses associated with the ADP Deferral Plan shall be borne
by the Company.
SECTION 3. DEFERRAL OF TERMINATION FEES
3.1 Amount of Deferral. Any Termination Fee payable to a
Director under the Company's Advisory Director's Plan is subject to
mandatory deferral under the terms of the ADP Deferral Plan.
3.2 ADP Deferred Debenture Accounts. An ADP Deferred Debenture
Account has been or shall be established for each Director eligible to
receive a Termination Fee. The amount of deferred Termination Fees for
each Director on April 30, 1996, together with 1996 interest, shall be
deemed to be invested in Debentures and shall be credited to the ADP
Deferred Debenture Account for each such Director on April 30, 1996.
Deferred amounts shall be credited to the ADP Deferred Debenture Account
only in $100 amounts.
3.3 Payment of Deferred Amounts. Payments from an ADP Deferred
Debenture Account shall be made in five consecutive annual installments
beginning in the January following the Director's termination of
service. Payments from an ADP Deferred Debenture Account shall all be
made in cash and shall consist of accumulated interest on the Debentures
plus the greater value of (i) the face value of the Debentures or (ii)
the value of the
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<PAGE> 5
shares of Stock into which the Debentures would be deemed to be
convertible.
3.4 Payments to a Deceased Director's Estate. In the event of a
Director's death before the balance of the Director's ADP Deferred
Debenture Account is fully paid, payment of the balance of the
Director's ADP Deferred Debenture Account shall then be made to the
beneficiary designated by the Director pursuant to Section 3.5, or to
the Director's estate in the absence of such a beneficiary designation,
in the time and manner selected by the Committee. The Committee may
take into account the application of any duly appointed administrator or
executor of a Director's estate and direct that the balance of the
Director's ADP Deferred Debenture Account be paid to the Director's
estate in the manner requested by such application.
3.5 Designation of Beneficiary. A Director may designate a
beneficiary in a form approved by the Committee and filed with the
Secretary of the Company.
SECTION 4. CHANGE IN CONTROL
4.1 Settlement of Compensation. In the event of a Change in
Control of the Company as defined herein, the value of all unpaid
deferred amounts shall be paid in cash to PNC Bank, National
Association, the trustee pursuant to a trust agreement dated as of June
1995, as amended from time to time, or any successor trustee, or
otherwise on such terms as the Committee may prescribe or permit. For
purposes of this Section 4.1, the value of deferred amounts shall be
equal to the greater value of (a) the cash amount equal to the face
value of the Debentures plus cash equal to accrued interest or (b) the
number of shares of Stock into which the Debentures would be deemed to
be convertible (the value of which shall be based upon the highest price
of the Stock as reported by the composite tape of the New York Stock
Exchange during the thirty days immediately preceding the Change in
Control) plus cash equal to accrued interest.
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4.2 Definition of Change in Control. A Change in Control shall
mean the occurrence of one or more of the following events:
(a) there shall be consummated (i) any consolidation or
merger of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which shares of the Company's Stock
would be converted into cash, securities or other property, other than a
merger of the Company in which the holders of the Company's Stock
immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger,
or (ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of
the assets of the Company; or
(b) the shareholders of the Company shall approve of any
plan or proposal for the liquidation or dissolution of the Company; or
(c) (i) any person (as such term is defined in Section
13(d) of the Exchange Act), corporation or other entity shall purchase
any Stock of the Company (or securities convertible into the Company's
Stock) for cash, securities or any other consideration pursuant to a
tender offer or exchange offer, unless, prior to the making of such
purchase of Stock (or securities convertible into Stock), the Board
shall determine that the making of such purchase shall not constitute a
Change in Control, or (ii) any person (as such term is defined in
Section 13(d) of the Exchange Act), corporation or other entity (other
than the Company or any benefit plan sponsored by the Company or any of
its subsidiaries) shall become the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing twenty percent or more of the
combined voting power of the Company's then outstanding securities
ordinarily (and apart from any rights accruing under special
circumstances) having the right to vote in the election of directors
(calculated as provided in Rule 13d-3(d) in the case of rights to
acquire any such securities), unless, prior to such person so becoming
such beneficial owner, the Board shall determine that such person so
- 5 -
<PAGE> 7
becoming such beneficial owner shall not constitute a Change in Control;
or
(d) at any time during any period of two consecutive years
individuals who at the beginning of such period constituted the entire
Board shall cease for any reason to constitute at least a majority
thereof, unless the election or nomination for election of each new
director during such two-year period is approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of such two-year period.
SECTION 5. ASSIGNABILITY
The right to receive payments or distributions hereunder and any
Debentures granted hereunder shall not be transferable or assignable by
a Director other than by will, by the laws of descent and distribution,
to a properly designated beneficiary in the event of death, or pursuant
to a domestic relations order as defined by Section 414(p)(1)(B) of the
Internal Revenue Code or the rules thereunder that satisfies Section
414(p)(1)(A) of the Internal Revenue Code or the rules thereunder.
SECTION 6. RETENTION; WITHHOLDING OF TAX
6.1 Retention. Nothing contained in the ADP Deferral Plan shall
interfere with or limit in any way the right of the Company to remove
any Director from the Board pursuant to the Restated Articles of
Incorporation and the By-laws of the Company, nor confer upon any
Director any right to continue in the service of the Company.
6.2 Withholding of Tax. To the extent required by applicable law
and regulation, each Director must arrange with the Company for the
payment of any federal, state or local income or other tax applicable to
any payment hereunder before the Company shall be required to make such
payment under the ADP Deferral Plan.
- 6 -
<PAGE> 8
SECTION 7. ADP DEFERRAL PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may from time to time amend or modify the ADP Deferral
Plan and may at any time terminate the ADP Deferral Plan.
SECTION 8. GOVERNING LAW
The ADP Deferral Plan shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania without regard
to its conflicts of law principles.
SECTION 9. EFFECTIVE DATE
The ADP Deferral Plan shall be effective as of April 30, 1996.
The ADP Deferral Plan shall not preclude the adoption by
appropriate means of any other compensation or deferral plan for
directors.
- 7 -
<PAGE> 1
Exhibit 10.N
WESTINGHOUSE LETTERHEAD
CONFIDENTIAL
April 30, 1996
Dr. Francis J. Harvey II
Executive Vice President and
Chief Operating Officer
Industries & Technology Group
11 Stanwix Street
Pittsburgh, Pennsylvania 15222
Dear Fran:
As you know, in February of 1996, I asked you to take on the position of
Executive Vice President and Chief Operating Officer of the Industries &
Technology Group, with responsibility for the general management of that group.
As an inducement to you to take on this responsibility, we discussed providing
you with certain benefits if your employment were terminated under certain
circumstances. You assumed the title of Executive Vice President and Chief
Operating Officer of the Industries & Technology Group and assumed
responsibility for that business group on March 1, 1996, and at that time we
agreed to begin discussions in order to reach agreement on specific terms. This
letter confirms our agreement. Certain terms and phrases used in this letter
are defined in Paragraph 9 below.
1. You will be entitled to receive the benefits described in Paragraphs 2
through 7 of this letter if your employment, with the Corporation or its
successor and all of its affiliates, is terminated by a Westinghouse Company
before you reach age 60 (hereafter, a "Termination").
A Termination will not be deemed to have occurred under the above if: (i)
your employment is terminated by reason of Special Retirement or death; (ii)
you are terminated for Cause; (iii) you remain or become an employee of any
Westinghouse Company; or
<PAGE> 2
Dr. Francis J. Harvey
April 30, 1996
Page 2
(iv) you are offered another senior-level executive position by a Westinghouse
Company.
2. You will be entitled to receive each month after a Termination, for a
period of 24 months or through the end of the month in which you reach age 60,
whichever occurs first, an amount equal to your monthly base salary (as in
effect immediately prior to Termination) reduced by 1.5% (with a maximum
reduction of $2,250 per year) which, if you were an employee, would represent
your contribution to the pension plan of the appropriate Westinghouse Company.
3. In the event of a Termination:
A. You will also be entitled to receive an annual incentive award in
each of the two Februaries immediately following such Termination in
the amount of your target annual incentive opportunity for the year in
which the Termination occurs.
B. Notwithstanding anything to the contrary stated above:
(1) any annual incentive award which may otherwise be payable to you
in February of 2004, with respect to calendar year 2003 (the year in
which you reach age 60), shall be reduced on a prorated basis by
one-half (1/2); and
(2) except as set forth in Paragraph 3(B)(1) above, you will be
ineligible to receive any of the annual incentive awards referred to
in this Paragraph 3 after January 1, 2004.
C. The monthly payments referred to in Paragraph 2 and the annual
incentive awards referred to in this Paragraph 3 will be in lieu of any
other Westinghouse Company salary continuation or severance programs.
4. At the election of the Corporation, any obligation of the Corporation
to make payments to you under Paragraphs 2 and 3 above in the event of a
Termination may be satisfied by making a
<PAGE> 3
Dr. Francis J. Harvey
April 30, 1996
Page 3
single lump sum payment to you of an amount equal to the present value of those
contractual payments discounted at a rate equal to the Corporation's target
cost of capital, which is determined annually by the Corporation's Treasurer.
Any such lump sum payment will not affect the timing or the amount of any
benefits under Paragraphs 5 and 6 below.
5. At the end of the 24 month or shorter period designated in Paragraph 2
above, for purposes of the Westinghouse Executive Pension Plan only, the
Westinghouse Executive Pension Plan requirement that you satisfy the age and
service requirements for retirement eligibility of the Westinghouse Pension
Plan prior to termination of your employment will be waived and you will be
entitled to receive a pension benefit under the Westinghouse Executive Pension
Plan as then in effect ("EPP") commencing at the end of the period designated
in Paragraph 2 above with the following EPP modifications and subject to the
reductions described in Paragraph 6 below:
In calculating your Executive Pension Base under the EPP, (a) your Average
Annual Compensation, as otherwise defined in the EPP, will be calculated
using (i) the five highest of your December 1 monthly base salaries and
December 1 monthly payments under Paragraph 2 above during the 10-year
period immediately preceding the commencement of payments under this
Paragraph 5, and (ii) the five highest of your annual incentive awards
paid during the 10-year period including and immediately preceding the
time for the second annual incentive award, if any, referred to in
Paragraph 3 above, and (b) your Executive Benefit Service, as used in the
EPP, will include the time during which you receive payments (or would
have received payments had payment not been made in a lump sum at the
Corporation's election) under Paragraph 2 above. This calculation of your
Executive Pension Base, as otherwise defined under the EPP, will determine
your EPP pension benefit on a single life annuity basis. You may elect to
receive this EPP pension benefit in any form then permitted under the EPP.
<PAGE> 4
Dr. Francis J. Harvey
April 30, 1996
Page 4
6. Once you reach age 60, the single life annuity pension benefit amount
referred to in Paragraph 5 above will be reduced by the monthly amount you
would be entitled to receive at age 60 under the relevant qualified
Westinghouse Company pension plan or plans, also on a single life annuity
basis, whether or not you elect to begin receiving qualified pension plan
benefits at age 60 and whether or not you elect the single life annuity payment
option. You may elect at such time to receive this EPP pension benefit in any
form then permitted under the EPP.
7. In the event of a Termination, your then outstanding, vested
Westinghouse Company stock options will be treated as if you had terminated
employment by reason of retirement. As to any then outstanding nonvested,
regular Westinghouse Company stock options, such options will vest as of their
normal vesting date and, once vested, will be treated as if you had terminated
employment by reason of retirement. As to any then outstanding nonvested
performance Westinghouse Company stock options, a pro rata portion of such
options (based on the remaining term of the performance to be achieved) will
terminate on the date of Termination. The remaining portion of said performance
options will vest if and when the performance specified for said options is
achieved as determined by the Compensation Committee and otherwise will be
treated as if you had terminated employment by reason of retirement.
8. Payment of all of the separation benefits and the stock option
treatment referred to in Paragraphs 2 through 7 above is also subject to the
following:
(a) your granting the Corporation, its Subsidiaries and its affiliates a
general release, in the form attached to this letter as Exhibit A (with
such changes, if any, as may be appropriate in light of any intervening
changes in law in order to provide the Corporation, its Subsidiaries and
its affiliates with the same level of protection as provided in the form
attached), prior to your beginning to receive those benefits;
(b) your not revoking the release referred to in Paragraph 8(a) above
within the period provided therein;
<PAGE> 5
Dr. Francis J. Harvey
April 30, 1996
Page 5
(c) the ongoing condition that:
(i) as, by reason of your position with the Corporation, you have
been and may be given access to proprietary, confidential, trade
secret, personnel, and other information not generally known to the
public, as well as information protected by the attorney/client
privilege, you agree, except as may be required under Paragraph
8(c)(iii) below, that you will continue to keep all such
information confidential, both during and after the term of this
letter agreement, that you will not disclose or use such
information for any purpose whatsoever, and that you will not
disclose any of the terms of this letter to anyone (except your
spouse and your legal, tax and financial advisors and
representatives to the extent necessary for them to render
appropriate legal, tax and financial advice);
(ii) you agree not to make any statements or to take any action
which would reflect unfavorably upon any Westinghouse Company or
which would be materially injurious to any Westinghouse Company;
(iii) in the event that you are requested or required by
interrogatories, subpoena, investigative demand or similar process
to disclose any information about anything that you have gained
knowledge about during the time you have been or are employed by a
Westinghouse Company or about the matters set forth in this letter,
you agree to promptly notify the Chief Executive Officer or General
Counsel of the Corporation to allow the Corporation to determine
whether or not any of its interests or rights are affected and, if
so, to allow the Corporation to seek, with your cooperation, a
court or administrative order protecting the Corporation's rights;
and
(iv) you agree to cooperate in all reasonable manner with the
Westinghouse Companies in the defense of any litigation or other
proceeding involving facts or circumstances which you became
<PAGE> 6
Dr. Francis J. Harvey
April 30, 1996
Page 6
aware of or may become aware of prior to a Termination, including,
without limitation, providing assistance to counsel for the
appropriate Westinghouse Company, with reimbursement of costs to be
paid by the appropriate Westinghouse Company for all reasonable and
appropriate expenses, and, if called, to testify by providing
truthful testimony in such litigation or proceeding; and
(d) the further ongoing condition that you shall not engage directly or
indirectly in any business which is competitive with any business or
part thereof, or activity conducted by any of the Westinghouse Companies
or any other corporation, partnership, joint venture or other entity of
which a Westinghouse Company directly or indirectly holds a 10% or
greater interest (together, "Westinghouse"), in the area in which such
business, or part thereof, or activity is conducted by Westinghouse,
unless such condition is specifically waived with respect to you by the
Corporation's Board of Directors. Breach of the ongoing condition
contained in the preceding sentence shall be deemed to occur immediately
upon your engaging in competitive activity. Payments suspended for
breach of the ongoing condition shall not thereafter be resumed whether
or not you terminate the competitive activity. You will be deemed to be
engaged in such a business indirectly if you are an employee, officer,
director, trustee, agent or partner of, or a consultant or advisor to or
for, a person, firm, corporation, association, trust or other entity
which is engaged in such a business or if you own, directly or
indirectly, in excess of five percent of any such firm, corporation,
association, trust or other entity.
9. These terms or phrases will have the following meanings when used in
this letter:
"A WESTINGHOUSE COMPANY" means the Corporation or its successor or any
Subsidiary or other affiliate of the Corporation.
<PAGE> 7
Dr. Francis J. Harvey
April 30, 1996
Page 7
"CAUSE" means:
(i) you are convicted of (x) a felony or (y) any lesser crime
or offense than a felony which has caused demonstrable and
serious injury to the Corporation and its affiliates, taken
as a whole, and involves the property of the Corporation or
any Subsidiary or other affiliate of the Corporation; or
(ii) you are guilty of willful gross neglect of duties or
other willful grave misconduct in carrying out your duties in
the course of your employment by a Westinghouse Company.
"CORPORATION" means Westinghouse Electric Corporation.
"SPECIAL RETIREMENT" means retirement under the Special Retirement
provisions of the Westinghouse Pension Plan or similar provisions of a
qualified pension plan of another Westinghouse Company.
"SUBSIDIARY" means any corporation or other entity of which a
Westinghouse Company directly or indirectly has the power to elect a
majority of the board of directors or other persons performing similar
functions for the entity.
10. In the event that your employment terminates and you do not meet the
criteria set forth in Paragraph 1 of this letter for a Termination, your
benefits, if any, will be those benefits applicable without regard to this
letter.
If this letter is acceptable to you, please sign the original copy of the
letter and return it to me. You should keep a copy of this letter for your
records. By signing and returning a copy of this letter, you acknowledge that
you understand and accept the terms and conditions set forth above.
Sincerely,
/s/ MICHAEL H. JORDAN
---------------------
Michael H. Jordan
<PAGE> 8
Dr. Francis J. Harvey
April 30, 1996
Page 8
ACCEPTANCE
I acknowledge that I have read, understood and agree to the terms and
conditions stated in the foregoing letter.
Dated: May 13, 1996
/s/ FRANCIS J. HARVEY II
---------------------------
Dr. Francis J. Harvey II
<PAGE> 9
EXHIBIT A
SEPARATION AND GENERAL RELEASE AGREEMENT
BY AND BETWEEN __________________ (HEREINAFTER THE
"EMPLOYEE"), AND WESTINGHOUSE ELECTRIC CORPORATION, ITS
RESPECTIVE SUBSIDIARIES AND RELATED ENTITIES (HEREINAFTER
COLLECTIVELY THE "COMPANY"),
W I T N E S S E T H:
WHEREAS, Employee was employed by the Company as a __________________ in
its __________________ Department, performing various __________________
services for its __________________ business unit located in _________________;
and
WHEREAS, Employee's employment with the Company will end effective
__________________ as a result of ________________, such termination entitling
the Employee to certain benefits under a letter agreement dated _______________,
1996 between Employee and Westinghouse Electric Corporation (the "1996 Letter
Agreement"); and
WHEREAS, the Employee has offered a General Release from all claims and
liabilities in any way arising from or related to Employee's employment with
the Company or his separation therefrom, which General Release the Company has
agreed to accept; and
WHEREAS, the parties, wishing to conclude between them all matters deemed
pertinent to the Employee's separation from employment, AGREE AS FOLLOWS:
<PAGE> 10
FIRST: NON-ADMISSION OF LIABILITY.
The Company's acceptance of the Employee's General Release and its
willingness to enter into this Agreement shall not in any way be construed as
an admission by the Company that it has acted wrongfully with respect to
Employee or any other person, or that Employee has any rights whatsoever
against the Company, its officers, directors, employees, agents, affiliates,
representatives and assigns (hereinafter "Releasees"), and further, all
Releasees specifically disclaim any liability to or wrongful acts against
Employee or any other person, on the part of the Releasees.
SECOND: NO REEMPLOYMENT.
Employee represents, understands and agrees that the Company has no
obligation to reinstate Employee or to employ him in the future and that
failure to reinstate or to employ him in the future will not subject the
Company to liability of any kind.
THIRD: NO OTHER CLAIMS.
Employee covenants and represents that he has not filed any complaints,
administrative charges of any kind or any lawsuits of any kind against any of
the Releasees with any governmental agency or any court and that he will not
file any future such charges against any Releasee at any time hereafter, nor
will he participate in the filing of any such charge, claim or complaint;
provided, however, this shall not limit Employee from pursuing claims for the
sole purpose of enforcing his rights under this Agreement, the 1996 Letter
Agreement or any other entitlements as set forth in Paragraph Ninth (b) below.
FOURTH: PAYMENT.
In consideration of the covenants herein made by the Employee, Employee
will be entitled to receive the benefits set forth in the 1996 Letter
Agreement, which the Employee agrees shall constitute good and valuable
consideration for said
2
<PAGE> 11
covenants. Said amount will be subject to all taxes and other deductions as may
be required by law.
FIFTH: TIME OF PAYMENT; REVOCATION BY EMPLOYEE.
Employee agrees that he has previously been provided this Agreement for
his review; has been informed that he may take up to forty-five (45) days to
consider this Agreement if he so desires; has had the opportunity to review it;
and enters into this Agreement voluntarily, of his own free will, without
coercion or undue influence and upon the advice of competent counsel. The
Employee understands that for a period of seven (7) days following the
execution of this Agreement, the Employee may revoke it. The payments provided
for in Paragraph Fourth above shall be payable beginning after the expiration
of the revocation period, provided the Employee has not exercised his right to
revoke this Agreement during that time.
SIXTH: RETURN OF COMPANY MATERIALS AND PROPERTY.
Employee represents that he has returned to the Company, or will promptly
do so, all Company property in his possession or control, including credit
cards, files, memoranda, records, computer records and other documents of any
type which Employee received or created while in the course of his employment
with the Company, other than personal notes, diaries, correspondence or
Rolodexes.
SEVENTH: SEVERABILITY.
The provisions of this Agreement are severable, and if any part of it is
found to be unenforceable, the other paragraphs shall remain fully valid and
enforceable. This Agreement shall survive the termination of any arrangements
contained herein.
EIGHTH: CONSULTATION WITH COUNSEL.
Employee represents and agrees that he has been encouraged by the Company
to carefully read this Agreement and to consult
3
<PAGE> 12
with legal counsel of his own choosing regarding its terms and conditions, and
that he has had full and adequate opportunity to do so.
NINTH: EMPLOYEE'S COMPLETE GENERAL RELEASE.
As a material inducement to the Company to enter into the 1996 Letter
Agreement and this Agreement, Employee hereby irrevocably and unconditionally
waives, releases, and forever discharges Releasees and their respective
successors, predecessors, subsidiaries, parents, shareholders, partners,
affiliates, employees, agents, officers, directors, representatives and
assigns, and also their attorneys and insurers, and all persons acting by,
through, or in concert with any of them, from any and all:
a. liability, claims, charges, complaints, suits in equity and actions and
causes of action at law, of any nature whatever, tort or contract, and in
any forum whatever, arising out of or in any way connected with his
employment with the Company or the termination thereof, which he has or
may have against any of them, whether such claims are known to exist or
hereafter become known, including but not limited to claims under the Age
Discrimination in Employment Act of 1967, as amended, and any other laws
or regulations, federal, state, or local. Notwithstanding the provisions
of any applicable state non-waiver statute to the contrary, and for the
purpose of implementing a full and complete release and discharge of the
Releasees, Employee expressly acknowledges that this General Release and
waiver of claims is intended to include in its effect, without limitation,
all claims which he does not know or suspect to exist in his favor at the
time of execution hereof, and that this Agreement contemplates Employee's
express waiver of any such state statute and the extinguishment of any
such claim.
4
<PAGE> 13
b. PROVIDED, HOWEVER, that this General Release shall not include any
claims for indemnification which are included within the scope of the
Westinghouse Electric Corporation By-laws regarding indemnification of
officers and employees of that corporation or any other claims for
indemnification he may have, or any claim for benefits (i) under the 1996
Letter Agreement, (ii) under any of a qualified Company pension plan, the
Westinghouse Savings Program or the Westinghouse Electric Corporation
Deferred Incentive Compensation Program in which the Employee was a
participant at the time of his separation from employment, and (iii) under
any vested, non-terminated options under a Company Long-Term Incentive
Plan which Employee holds at the time of his separation from employment.
TENTH: NO REPRESENTATIONS.
Employee represents and acknowledges that in executing this Agreement he
does not rely and has not relied upon any representation or statement not set
forth herein made by any of the Releasees or by any of the Releasees' agents,
representatives, or attorneys with regard to the subject matter, basis or
effect of this Agreement or otherwise.
ELEVENTH: COVENANT NOT TO SUE.
Employee covenants and agrees that he will not, individually or with any
person, or in any way, commence, aid, participate in, cooperate in any way in
the process, prosecution, or commencement of any claim, charge, or cause of
action based upon or connected with Employee' employment with the Company or
his separation therefrom and/or based upon or connected with the employment or
termination of any other person who was employed by the Releasees at any time
during Employee's employment with the Company or was employed at the time of
Employee's separation from the Company. Nothing herein shall prohibit Employee
from responding to any lawfully issued subpoena or from pursuing claims for the
sole
5
<PAGE> 14
purpose of enforcing his rights under this Agreement, the 1996 Letter Agreement
or any other entitlements as set forth in Paragraph Ninth (b) above.
TWELFTH: ARBITRATION.
This Agreement is made and entered into in the Commonwealth of
Pennsylvania, and shall in all respects be interpreted, enforced and governed
by and under the law of the Commonwealth of Pennsylvania without reference to
the principles of conflict of laws. Any disputes regarding any aspect of this
Agreement or the 1996 Letter Agreement or any act which allegedly has or would
violate any provision of this Agreement or the 1996 Letter Agreement
("arbitrable dispute") will be submitted to arbitration in Pennsylvania before
an experienced employment arbitrator licensed to practice law in Pennsylvania
and selected in accordance with the rules of the American Arbitration
Association, as the exclusive remedy for such claim or dispute. Should the
Employee hereafter institute any legal action or administrative proceeding
against any Releasee with respect to any claim waived by this Agreement or
pursue any arbitrable dispute by any method other than said arbitration, the
responding party shall be entitled to recover from the Employee all damages,
costs, expenses and attorneys' fees incurred as a result of such action.
THIRTEENTH: TRADE SECRETS AND CONFIDENTIAL INFORMATION.
Employee agrees that he will hold inviolate and keep secret all
confidential documents, materials, knowledge, business strategy, pricing and
cost information of the Company, and other confidential business or technical
information of the Company of any nature whatsoever disclosed to or developed
by him during the course of his employment or to which he had access as a
result of his employment, other than information that becomes generally known
to the public through no fault of the Employee. Such
6
<PAGE> 15
Confidential Information includes but is not limited to research and
development, formulas, marketing, merchandising, selling, licensing, servicing,
customer lists, records or financial information, manuals and policy documents
of any kind or Company strategy considered by the Company to be confidential in
nature, and any other confidences of the Company learned while in the Company's
employ. Employee agrees that he will not use, disclose, disseminate, publish,
reproduce or otherwise make available such Confidential Information to any
person, firm, corporation or other entity, without the express written approval
of a duly authorized agent of the Company; provided, however, he may do so when
so required by a court of law, by any governmental agency having supervisory
authority over the business of the Company, or by any administrative or
legislative body (including a committee thereof) with apparent jurisdiction to
order him to divulge, disclose or make accessible such information, provided,
however, that before Employee does so, he promptly notifies the Chief Executive
Officer or General Counsel of Westinghouse Electric Corporation so that an
appropriate protective order may be sought.
FOURTEENTH: SOLE AND ENTIRE AGREEMENT.
This Agreement and the 1996 Letter Agreement set forth the entire
agreement between the parties hereto with respect to the subject matter
thereof, and fully supersede any and all prior agreements or understandings
between the parties hereto pertaining to such subject matter.
FIFTEENTH: AGREEMENT MAY BE IN SEPARATE PARTS.
This Agreement may be executed and delivered in two or more counterparts,
each of which when so executed and delivered shall be the original, but such
counterparts together shall constitute but one and the same instrument.
7
<PAGE> 16
PLEASE READ CAREFULLY. THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS.
Executed at _______________________________________, this ____________ day
of __________________, 199_.
________________________
Employee
Executed at Pittsburgh, Pennsylvania this __________________ day of
__________________, 199_.
For: Company,
By: __________________
Date: __________________
8
<PAGE> 1
EXHIBIT (11) COMPUTATION OF PER SHARE EARNINGS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
EQUIVALENT SHARES:
Average shares outstanding 399,232,141 358,545,020 398,307,494 357,980,371
Additional Shares due to:
Stock options 7,368,773 4,619,587 6,558,043 4,488,900
Series C Preferred Shares 36,000,000 36,000,000 36,000,000 36,000,000
----------- ----------- ----------- -----------
Total equivalent shares 442,600,914 399,164,607 440,865,537 398,469,271
=========== =========== =========== ===========
ADJUSTED EARNINGS
(in millions):
Income (loss) from Continuing
Operations $ (89) $ 25 $ (853) $ 16
Less: Series B preferred
stock dividends - 12 - 25
------ ----- ------ -------
Adjusted income (loss) from
Continuing Operations $ (89) $ 13 $ (853) $ (9)
Income from Discontinued Operations - 34 1,008 58
Extraordinary item - - (63) -
------ ----- ------ ------
Adjusted net income (loss) $ (89) $ 47 $ 92 $ 49
====== ===== ====== ======
EARNINGS (LOSS) PER SHARE
From Continuing Operations $(0.20) $0.03 $(1.94) $(0.02)
From Discontinued Operations - 0.09 2.29 0.14
From Extraordinary item - - (0.14) -
------ ----- ------ ------
Earnings (loss) per share (a) $(0.20) $0.12 $ 0.21 $ 0.12
====== ===== ====== ======
</TABLE>
(a) For earnings per share using an alternative treatment for the Series C
Preferred Shares, see note 11 to the condensed consolidated financial
statements included in Part I of this report.
-33-
<PAGE> 1
EXHIBIT (12)(a) COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
----------------- ----------------
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes
and minority interest $(1,280) $ 26 $ 13
Less: Equity in income (loss) of 50 percent
or less owned affiliates 1 - 2
Add: Fixed charges excluding capitalized
interest 270 105 259
------- ----- -----
Earnings as adjusted $(1,011) $ 131 $ 270
======= ===== =====
Fixed charges:
Interest expense $ 255 $ 95 $ 237
Rental expense 15 10 22
Capitalized interest - - -
------- ----- -----
Total fixed charges $ 270 $ 105 $ 259
======= ===== =====
Ratio of earnings to fixed charges (a) 1.25x 1.04x
======= ===== =====
</TABLE>
(a) Additional income before income taxes and minority interest of $1,281
million would be necessary to attain a ratio of earnings to fixed charges
of 1.00x for the six months ended June 30, 1996.
-34-
<PAGE> 1
EXHIBIT (12)(b) COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(in millions) (unaudited)
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30 December 31
------------------ ----------------
1996 1995 1995
---- ---- ----
<S> <C> <C> <C>
Income (loss) before income taxes
and minority interest $(1,280) $ 26 $ 13
Less: Equity in income (loss) of
50 percent or less owned affiliates 1 - 2
Add: Fixed charges excluding capitalized
interest 305 180 383
------- ---- -----
Earnings as adjusted $ (976) $206 $ 394
======= ==== =====
Combined fixed charges and
preferred dividends:
Interest expense $ 255 $ 95 $ 237
Rental expense 15 10 22
Capitalized interest - - -
Pre-tax earnings required to cover
preferred dividend requirements (a) 35 75 124
------- ---- -----
Total combined fixed charges and
preferred dividends $ 305 $180 $ 383
======= ==== =====
Ratio of earnings to combined
fixed charges and preferred dividends (b) 1.14x 1.03x
====== ==== =====
</TABLE>
(a) Dividend requirement divided by 100% minus effective income tax rate.
(b) Additional income before income taxes and minority interest of $1,281
million would be necessary to attain a ratio of earnings to combined fixed
charges and preferred dividends of 1.00x for the six months ended June 30,
1996.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000106413
<NAME> WESTINGHOUSE ELEC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 157
<SECURITIES> 0
<RECEIVABLES> 1,555
<ALLOWANCES> 44
<INVENTORY> 811
<CURRENT-ASSETS> 4,399
<PP&E> 3,458
<DEPRECIATION> 1,608
<TOTAL-ASSETS> 15,302
<CURRENT-LIABILITIES> 4,795
<BONDS> 3,649
4
0
<COMMON> 426
<OTHER-SE> 1,345
<TOTAL-LIABILITY-AND-EQUITY> 15,302
<SALES> 4,180
<TOTAL-REVENUES> 4,180
<CGS> 2,957
<TOTAL-COSTS> 2,957
<OTHER-EXPENSES> 2,109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 255
<INCOME-PRETAX> (1,280)
<INCOME-TAX> (429)
<INCOME-CONTINUING> (853)
<DISCONTINUED> 1,008
<EXTRAORDINARY> (63)
<CHANGES> 0
<NET-INCOME> 92
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
