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SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF
[ X ] Definitive Proxy Statement THE COMMISSION ONLY (AS PERMITTED
[ ] Definitive Additional Materials BY RULE 14A-6(E)(2))
[ ] Soliciting Material Pursuant to
Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
WESTINGHOUSE ELECTRIC CORPORATION
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
WESTINGHOUSE ELECTRIC CORPORATION
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
-------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------------
5) Total fee Paid:
-------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE> 2
DEAR FELLOW SHAREHOLDER:
It is my pleasure to invite you to attend Westinghouse Electric
Corporation's 1996 Annual Meeting of Shareholders. The meeting will be held at
the Kansas City Marriott Downtown, Kansas City, Missouri on Wednesday, April 24,
1996, beginning at 10:30 a.m., Central Time. The Notice of Annual Meeting and
Proxy Statement accompanying this letter describes the business to be transacted
at the meeting.
At the meeting, I will report on the activities of the Company. We will
then take action on the matters described in the proxy statement. The meeting
will conclude with a question and answer period.
Regardless of the number of shares you own, it is important that your
shares be represented at the meeting. Whether or not you plan to attend,
please complete, sign, date and return your proxy card as soon as possible.
Your vote is important to the Board of Directors. We appreciate your time
and attention to the accompanying proxy statement.
I look forward to seeing you at the meeting.
Sincerely,
/s/ MICHAEL H. JORDAN
Michael H. Jordan
Chairman of the Board and
Chief Executive Officer
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WESTINGHOUSE ELECTRIC CORPORATION
NOTICE OF ANNUAL MEETING
The 1996 Annual Meeting of Shareholders of Westinghouse Electric
Corporation will be held at the Kansas City Marriott Downtown, 200 W. 12th
Street, Kansas City, Missouri on Wednesday, April 24, 1996, beginning at 10:30
a.m., Central Time. The purposes of the meeting are to consider and act upon:
(1) the election of eleven directors, each for a term of one year;
(2) the election of independent accountants;
(3) a proposal to amend the Deferred Compensation and Stock Plan for
Directors;
(4) if properly presented, the shareholder proposals contained herein;
and
(5) such other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on March 1, 1996 as
the record date for determining the shareholders entitled to notice of and to
vote at the meeting and any adjournment thereof.
The vote of each shareholder is important. In order to obtain the maximum
representation, we urge you to complete, sign, date and return your proxy card
as promptly as possible. In this way, if you are unable to attend, your shares
can nevertheless be voted at the meeting. A return envelope is enclosed for your
convenience. Your proxy may be revoked by delivering written notice of
revocation to the Corporate Secretary prior to the time voting is declared
closed or by attending the meeting and voting your shares in person.
YOUR COOPERATION IS APPRECIATED SINCE A MAJORITY OF THE OUTSTANDING SHARES
OF COMMON STOCK MUST BE REPRESENTED, EITHER IN PERSON OR BY PROXY, TO CONSTITUTE
A QUORUM FOR PURPOSES OF CONDUCTING BUSINESS.
IF YOU PLAN TO ATTEND THE MEETING, PLEASE KEEP THE ADMISSION TICKET THAT IS
ATTACHED TO THE PROXY CARD ACCOMPANYING THIS NOTICE OF ANNUAL MEETING AND PROXY
STATEMENT, AND ALSO CHECK THE APPROPRIATE BOX ON YOUR PROXY CARD. YOUR NAME WILL
THEN BE PLACED ON AN ADMISSION LIST HELD AT THE ENTRANCE TO THE MEETING.
SHAREHOLDERS WHO OWN SHARES THROUGH BANKS OR BROKERS AND WHO PLAN TO ATTEND MAY
HAVE THEIR NAMES ADDED TO THE ADMISSION LIST BY SENDING A WRITTEN NOTIFICATION,
ALONG WITH PROOF OF OWNERSHIP (SUCH AS A BANK OR BROKERAGE FIRM ACCOUNT
STATEMENT), TO THE CORPORATE SECRETARY'S OFFICE, 11 STANWIX STREET, PITTSBURGH,
PENNSYLVANIA 15222-1384. PLEASE NOTE THAT THIS IS A CHANGE IN THE ADMISSION
PROCEDURE FROM PRIOR MEETINGS.
On Behalf of the Board of Directors,
/s/ ANGELINE C. STRAKA
Angeline C. Straka
Vice President, Secretary
and Associate General Counsel
Pittsburgh, Pennsylvania
March 12, 1996
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TABLE OF CONTENTS
Election of Directors .................................................... 4
The Board of Directors and its Committees ................................ 10
Director Compensation .................................................... 12
Transactions Involving Directors and Executive Officers .................. 13
Litigation Involving Derivative Claims Against Directors ................. 14
Security Ownership ....................................................... 15
Executive Compensation ................................................... 18
Option Grants ............................................................ 20
Option Exercises and Fiscal Year-End Values .............................. 22
Pension Benefits ......................................................... 23
Compensation and Severance Arrangements .................................. 24
Compensation Committee Report on Executive Compensation .................. 25
Compensation Committee Interlocks and Insider Participation .............. 29
Shareholder Return Performance Presentation .............................. 29
Election of Independent Accountants ...................................... 31
Proposal to Amend the Deferred Compensation and Stock Plan for Directors . 32
Shareholder Proposal: Non-Employee Director Nominee Stock Ownership ...... 38
Shareholder Proposal: Number of Boards on Which Directors Serve .......... 40
Shareholder Proposal: Base Salary Tied to Stock Value/Bonuses ............ 42
Voting Information ....................................................... 44
Shareholder Proposal Submissions ......................................... 44
Solicitation of Proxies .................................................. 45
Deferred Compensation and Stock Plan for Directors, as Amended ........... 46
3
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 24, 1996
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Westinghouse Electric Corporation ("Westinghouse" or
the "Company") of proxies for the 1996 Annual Meeting of Shareholders to be held
on April 24, 1996, and all adjournments thereof. This proxy statement and the
accompanying proxy card are first being sent to shareholders on or about March
12, 1996. Only the holders of record of common stock at the close of business on
March 1, 1996 are entitled to vote at the meeting. On that date, 418,119,975
shares of common stock were outstanding, each of which entitles the holder to
one vote on each matter to come before the meeting.
The by-laws of the Company provide that proxies, ballots and voting
tabulations that identify individual shareholders will be kept confidential
except as may be necessary to meet applicable legal requirements. Information
that identifies individual shareholders is available for examination only by the
judge of election and persons associated with an independent third-party
tabulator.
The principal executive offices of the Company are in the Westinghouse
Building, 11 Stanwix Street, Pittsburgh, Pennsylvania 15222-1384.
1. ELECTION OF DIRECTORS
(Item 1 on proxy card)
At the 1996 Annual Meeting of Shareholders, eleven directors are to be
elected to hold office until the 1997 Annual Meeting of Shareholders and until
their successors have been elected and qualified. The Board presently consists
of twelve members. In accordance with the Company's retirement policy for
non-employee directors, Richard M. Morrow will retire from the Board at the 1996
Annual Meeting of Shareholders. As a result, the Board has determined to reduce
the size of the Board, effective at the 1996 Annual Meeting of Shareholders, to
eleven members. The Board of Directors proposes for election Frank C. Carlucci,
Robert E. Cawthorn, Gary M. Clark, George H. Conrades, William H. Gray III,
Michael H. Jordan, David K. P. Li, David T. McLaughlin, Richard R. Pivirotto,
Paula Stern and Robert D. Walter, all of whom are now directors of the Company.
Information about the nominees is set forth on pages 5 through 10.
The persons named in the enclosed proxy card (Messrs. Jordan, Clark and
Briskman) have advised that, unless a contrary direction is indicated on the
proxy card, they intend to vote for the election of the proposed nominees. They
have also advised that in the event any of the eleven nominees shall not be
available for election, they will vote for the election of such substitute
nominee or nominees, if any, as the Board may propose, or, in lieu thereof, the
Board may reduce the number of directors in accordance with the by-laws of the
Company.
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NOMINEES PROPOSED BY THE BOARD OF DIRECTORS
- - -------------------------------------------
FRANK C. CARLUCCI, 65
Chairman
Picture The Carlyle Group (merchant banking)
Washington, D.C.
In 1989, Mr. Carlucci joined The Carlyle Group, a Washington-based merchant
bank, as vice chairman and became its chairman in 1993. He served the United
States government in various capacities, including Secretary of Defense from
1987 to 1989 and Assistant to the President for National Security Affairs from
1986 to 1987. Mr. Carlucci is a director of Ashland Oil, Inc., BDM
International, Inc., Bell Atlantic Corporation, CB Commercial Real Estate
Group, Inc., Kaman Corporation, Neurogen Corporation, Quaker Oats Company,
Northern Telecom, Ltd., Pharmacia & Upjohn Inc., General Dynamics Corporation,
SunResorts Ltd., N.V., and Texas Biotechnology Corporation. Mr. Carlucci was
first elected to the Westinghouse Board in 1989.
ROBERT E. CAWTHORN, 60
Chairman
Picture Rhone-Poulenc Rorer Inc. (pharmaceuticals)
Collegeville, Pennsylvania
Mr. Cawthorn joined Rorer Group Inc. (now Rhone-Poulenc Rorer Inc.) in 1982
as executive vice president and president of Rorer's International Division.
He became president of Rorer Group in 1984, chief executive officer in 1985,
and chairman in 1986. Mr. Cawthorn is also chairman of Fisons plc and a
director of Rhone-Poulenc Rorer Inc., Sun Company, and the Vanguard Group of
Investment Companies. Mr. Cawthorn was first elected to the Westinghouse
Board in 1995.
5
<PAGE> 7
GARY M. CLARK, 60
President
Picture Westinghouse Electric Corporation
Pittsburgh, Pennsylvania
Mr. Clark, who joined Westinghouse in 1957, has served as president of
Westinghouse and a director since 1993. From January 1993 to June 1993, Mr.
Clark also served as interim chief executive officer. After holding various
management posts with Westinghouse, he was named executive vice president of
the industries group in 1988 and appointed executive vice president of
industries and corporate resources in 1991. Mr. Clark is a director of The
Western Pennsylvania Healthcare Systems, Inc., the Manufacturers' Alliance for
Productivity and Innovation, Inc. and the National Association of
Manufacturers.
GEORGE H. CONRADES, 57
Chairman of the Board and Chief Executive Officer
Picture BBN Corporation (high technology)
Cambridge, Massachusetts
Mr. Conrades joined International Business Machines (IBM) in 1961 and held a
number of management positions in the United States and Asia. At the time of
his retirement from IBM in 1992, he was senior vice president, corporate
marketing and services. In 1992, he became a partner in Conrades/Reilly
Associates, a business consulting company. In 1994, he was named president and
chief executive officer of Bolt Beranek & Newman, Inc. (now BBN Corporation), a
provider of inter-networking services, products and application solutions. In
1995, he was appointed chairman of the board. Mr. Conrades is a director of BBN
Corporation, Pioneer Companies, Inc. and CRA Managed Care, Inc. Mr. Conrades
was first elected to the Westinghouse Board in 1994.
6
<PAGE> 8
WILLIAM H. GRAY III, 54
President and Chief Executive Officer
Picture The College Fund/UNCF (non-profit fund-raising)
Fairfax, Virginia
Mr. Gray has been president and chief executive officer of The College
Fund/UNCF since 1991. From 1979 until 1991, he was a member of the United
States House of Representatives and served as house majority whip. Mr. Gray is
a director of The College Fund/UNCF, Warner-Lambert Company, The Prudential
Insurance Company of America, Union Pacific Corporation, MBIA, Inc., Rockwell
International, and The Chase Manhattan Bank, N.A. Mr. Gray was first elected to
the Westinghouse Board in 1991.
MICHAEL H. JORDAN, 59
Chairman and Chief Executive Officer
Picture Westinghouse Electric Corporation
Pittsburgh, Pennsylvania
Mr. Jordan was elected chairman and chief executive officer of Westinghouse, and
a member of the Board, in 1993. From 1974 to 1992, Mr. Jordan held various
management positions with PepsiCo, Inc., a beverage, snack food and restaurant
company, retiring as chairman of the PepsiCo International Foods and Beverages
Division in 1992. From 1992 until June 1993, he was a partner with Clayton,
Dubilier & Rice, Inc., a private investment firm. Mr. Jordan is a director of
Rhone-Poulenc Rorer Inc., Melville Corporation, Dell Computer Corporation, The
College Fund/UNCF, and Aetna Life and Casualty Company. He also serves as a
member of President Clinton's Export Council.
7
<PAGE> 9
DAVID K. P. LI, 56
Deputy Chairman and Chief Executive
Picture The Bank of East Asia, Limited (banking)
Hong Kong
Dr. Li joined The Bank of East Asia, Limited in 1969 as chief accountant. He
held a number of management positions and was appointed chief executive in
1981. In January 1995, Dr. Li was named deputy chairman and chief executive.
Dr. Li is a director of The Bank of East Asia, Limited, Campbell Soup Company,
Dow Jones & Company, Inc., Hong Kong Telecommunications Limited, South China
Morning Post (Holdings) Limited, and Sime Darby Berhad. Dr. Li was elected to
the Westinghouse Board in July 1995.
DAVID T. McLAUGHLIN, 63
President and Chief Executive Officer
Picture The Aspen Institute (leadership enhancement)
Queenstown, Maryland
In 1987, Mr. McLaughlin became chairman of The Aspen Institute and in 1988 was
appointed president and chief executive officer. From 1970 to 1981, Mr.
McLaughlin served in various management roles at The Toro Company, being named
chairman and chief executive officer in 1977. From 1981 to 1987, he was
president of Dartmouth College. Mr. McLaughlin is a director of Atlantic
Richfield Company, The Chase Manhattan Corporation and its subsidiary, The
Chase Manhattan Bank, N.A., PartnerRe Services, Ltd., Standard Fusee
Corporation and Atlas Air Inc. Mr. McLaughlin was first elected to the
Westinghouse Board in 1979.
8
<PAGE> 10
RICHARD R. PIVIROTTO, 65
President
Picture Richard R. Pivirotto Co., Inc. (management consulting)
Greenwich, Connecticut
Mr. Pivirotto is president of Richard R. Pivirotto Co., Inc., a management
consulting firm. Mr. Pivirotto served as chairman of Associated Dry Goods
Corporation from 1976 until his retirement in 1981. He continued to serve on
the board of Associated Dry Goods until its acquisition by May Department
Stores in 1986. Mr. Pivirotto is a director of General American Investors
Company, Inc., The Gillette Company, New York Life Insurance Company,
Immunomedics, Inc., and the General Theological Seminary. He is also a trustee
emeritus of Princeton University and a trustee and past chairman of the
Greenwich Hospital Association. Mr. Pivirotto was first elected to the
Westinghouse Board in 1973.
PAULA STERN, 50
President
Picture The Stern Group, Inc. (economic analysis and
trade advisory services)
Washington, D.C.
Since 1988, Dr. Stern has been president of The Stern Group, Inc., a
Washington-based trade and international economic advisory firm. From 1972 to
1988, Dr. Stern held various positions with the United States government,
including commissioner and then chairwoman of the U.S. International Trade
Commission. She is a director of Harcourt General, Duracell International,
Inc., Dynatech Corporation and Wal-Mart Stores, Inc. Dr. Stern was first
elected to the Westinghouse Board in 1992.
9
<PAGE> 11
ROBERT D. WALTER, 50
Chairman and Chief Executive Officer
Picture Cardinal Health, Inc. (wholesale pharmaceutical
distributor)
Dublin, Ohio
Mr. Walter is the founder, chairman and chief executive officer of Cardinal
Health, Inc. Since 1970, through internal growth and acquisitions,
he has built Cardinal into one of the nation's largest wholesalers of
pharmaceutical and related health care products with annual sales in 1995 of
$7.8 billion. Mr. Walter is a director of Cardinal Health, Inc., Banc One
Corporation and Columbia/HCA Healthcare Corporation. Mr. Walter was first
elected to the Westinghouse Board in 1994.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
In 1995, there were fourteen meetings of the Board. Each director attended
at least 80% of all meetings of the Board and its committees on which the
director served. Consistent with Westinghouse's long-standing practice and its
by-laws, a majority of the members of the Board are independent as defined under
the Company's by-laws. At the present time, there are twelve members of the
Board. Mr. Morrow will retire from the Board at the 1996 Annual Meeting of
Shareholders.
Westinghouse has four standing Board committees: the Audit Review
Committee, the Committee on Environment and Health, the Compensation Committee,
and the Nominating and Governance Committee. All members of these committees are
independent directors.
The Audit Review Committee assists the Board in fulfilling its
responsibilities concerning the Company's accounting and financial reporting
practices and the ethical conduct of the Company and its employees. This
committee makes recommendations to the Board regarding the selection, retention
or termination of the Company's independent accountants and reviews the
professional services, proposed fees and independence of such accountants. This
committee also reviews with management and the independent accountants both the
controls established to protect the integrity of the quarterly reporting process
and the Company's annual financial statements. Mr. Pivirotto is chair of this
committee, and directors Carlucci, Cawthorn, Gray, McLaughlin, Morrow and Stern
are members. This committee held three meetings in 1995.
The Committee on Environment and Health oversees the Company's environment
and health policies. This committee reviews with management the Company's
policies and plans concerning activities which affect the environment, reviews
health and safety issues affecting employees and the general public, and reviews
the Company's
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compliance with laws and regulations relating to the environment and
health and safety issues. Mr. Morrow is chair of this committee, and directors
Carlucci, Gray, Pivirotto and Stern are members. This committee held one
meeting in 1995.
The Compensation Committee assists the Board in the establishment of
appropriate compensation and benefits for the Company's directors, officers and
employees. This committee's general responsibilities include advising the Board
on certain compensation matters, evaluating and approving the chief executive
officer's compensation, reporting to shareholders on executive compensation, and
evaluating new and existing executive compensation and benefit programs. This
committee also reviews and makes recommendations concerning outside director
compensation and administers annual incentives for key employees and the
Company's long-term incentive plans. During 1995, this committee engaged an
independent compensation consultant as an advisor. Mr. Conrades is chair of
this committee, and directors McLaughlin, Morrow, Pivirotto and Walter are
members. This committee held five meetings in 1995.
The Nominating and Governance Committee makes recommendations to the Board
concerning the recruitment and selection of the chief executive officer and
Board candidates. This committee also reviews the Company's position on all
significant corporate governance issues and recommends appropriate changes to
the Board. In addition, this committee assesses the performance of the Board,
reviews the size and composition of the Board and makes appropriate
recommendations. Mr. McLaughlin is chair of this committee, and directors
Conrades, Gray, Morrow and Pivirotto are members. This committee held four
meetings in 1995.
Any shareholder desiring to recommend a Board candidate for consideration
by the Nominating and Governance Committee should furnish to the Corporate
Secretary a resume of the experience and qualifications of the proposed nominee
and a written statement signed by the proposed nominee consenting to be
nominated to the Board and to serve if elected. Any shareholder wishing to
nominate a candidate at the 1997 Annual Meeting of Shareholders must, pursuant
to the Company's by-laws, send a notice to the Corporate Secretary at the
principal executive offices of Westinghouse on or before January 30, 1997
setting forth the information required by the by-laws. A candidate for director
should be highly experienced, have knowledge and a background that will be
useful to the Company and the ability to exercise sound business judgment. The
candidate must also be willing and able to commit the time and effort needed to
be an effective director.
In 1994, the Board reviewed its corporate governance policies. After
completing this review, the Board issued guidelines, identifying its policies
with respect to significant corporate governance matters. These guidelines
include a statement of the mission of the Board of Directors and the structure
by which it will operate. They also outline responsibilities of the Board in
such areas as selection and evaluation of the chairman and the chief executive
officer and assessment of Board performance. If you would like to have a copy of
these guidelines, please contact the Corporate Secretary's Office and a copy
will be sent to you.
11
<PAGE> 13
DIRECTOR COMPENSATION
1995 COMPENSATION
Directors who are employees of the Company are not compensated for service
on the Board. For 1995, non-employee directors received: an annual cash retainer
of $22,000; $1,200 for each Board and committee meeting attended; and a stock
option grant for 3,000 shares of common stock. Directors who served on the Board
for less than a full year received a pro rata portion of this compensation. For
special services outside the scope of normal Board and committee activities,
non-employee directors were also entitled to receive a $1,200 per diem fee. No
such fees were paid in 1995. Non-employee directors serving as committee chairs
additionally received a $2,000 annual cash retainer and a stock option grant for
750 shares of common stock. Non-employee directors were able to defer all or a
portion of their retainer and fees on terms similar to the terms for deferral of
annual incentive awards described on page 19, including valuation of shares upon
a change in control. Upon termination of service as a director, deferred amounts
will be received in five annual installments.
Under the Advisory Director's Plan, a non-employee director who retires at
age 70 and has completed at least five years of Board service receives a
post-retirement annual payment (up to a maximum of ten payments) equal to 100%
of the annual retainer in effect at the time of the director's retirement. In
the event of a change in control of the Company, such benefits vest immediately
and the value of unpaid benefits are paid on such terms as the committee
administering this plan may prescribe. The Board has determined to eliminate
this benefit as to future retirees in connection with the proposed changes being
made in the area of director compensation. These proposed changes are described
in more detail on pages 32 through 38.
Non-employee directors with at least one year of Board service and the
Chairman participate in the Director's Charitable Giving Program. Upon the death
of an eligible director, the Company will make a donation of $500,000 to a
single qualifying charitable or other non-profit organization, or a donation of
$250,000 to each of two such organizations, selected by that director. The
donations are funded with the proceeds of life insurance maintained on the
directors. Individual directors derive no financial benefit from this program
since all charitable deductions accrue solely to the Company. In the event of a
change in control of the Company, donations may be made as of the date of such
change in control and paid on such basis and in such form as the committee
administering this program may prescribe. The Board has determined to eliminate
this benefit for future directors in connection with the proposed changes being
made in the area of director compensation.
The Company also provides each non-employee director with accidental death
and dismemberment insurance in the principal amount of $500,000. Benefits will
generally be paid under this insurance if a covered event occurs while the
director is on Westinghouse business. The total annual cost to the Company of
this insurance for all directors in 1995 was approximately $15,000.
12
<PAGE> 14
The Company also maintains a gift matching program for directors. Under
this program, the Company will match personal contributions made to eligible
charitable or educational institutions. The maximum match per year is $2,000 to
eligible colleges or universities and $1,000 to eligible charitable
organizations.
1996 PROPOSED COMPENSATION
In 1995, the Compensation Committee recommended and the Board approved
changes to director compensation for 1996. One of the primary goals of these
changes was to increase the stock-based components of director compensation. The
stock-based components of these changes, which further align director and
shareholder interests, are being voted on by shareholders at the 1996 Annual
Meeting of Shareholders. If these changes are adopted, for 1996, non-employee
directors will receive an annual director's fee of $60,000 paid as follows:
one-half in the form of cash; one-fourth in the form of shares of the Company's
common stock; and one-fourth in the form of stock options. The annual director's
fee is subject to forfeiture on a pro rata basis in the event an attendance
requirement is not met. The stock-based portion of the annual director's fee has
a mandatory holding period and the exercise price on one-third of the stock
options is set at 125% of the fair market value of the common stock on the grant
date, with the remainder set at 100% of such market value. Committee chairs,
upon election in April 1996, will also receive a committee chair's fee of $5,000
paid in the form of shares of common stock. Non-employee directors may also
receive a $1,200 per diem fee in cash for special services outside the scope of
normal Board and committee activities.
Current non-employee directors and the Chairman will continue to
participate in the Director's Charitable Giving Program. New directors will not
participate in this program. Non-employee directors will be provided with
accidental death and dismemberment insurance and will be eligible to participate
in the deferral and gift matching programs. The prior arrangement of receiving
an annual cash retainer and meeting fees will be eliminated. For more
information on changes to director compensation, see pages 32 through 38.
TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
During 1995, the Company and its subsidiaries engaged in various
transactions in the ordinary course of business with unaffiliated corporations
of which certain of the non-employee directors are executive officers. The
Company does not consider the amounts involved in any of these transactions to
be material.
In the normal course of its business, the Company paid approximately
$110,000 during 1995 to Newmyer Associates, Incorporated, a firm that offers
companies newsletters and monitoring and reporting services on congressional and
executive branch developments. Mr. Carlucci is chairman and a 10% shareholder of
Newmyer. The Company expects to continue to use the services of Newmyer in 1996.
13
<PAGE> 15
LITIGATION INVOLVING DERIVATIVE CLAIMS AGAINST DIRECTORS
In December 1988, a derivative action was filed in the United States
District Court, District of New Jersey, against the Company and certain of its
previous directors and current directors McLaughlin, Morrow and Pivirotto
seeking disqualification of such persons from continuing to serve as directors
and other legal, equitable or declaratory relief as the court deems proper plus
costs and attorneys' fees. This action alleged violations by the directors of
certain provisions of the federal securities laws and asserted state law breach
of fiduciary duty claims arising from the procurement of a contract to construct
a nuclear power plant (the "power plant contract") in the Republic of the
Philippines. In January 1994, the parties submitted to the District Court a
stipulation which resulted in an order dismissing the derivative action. In the
stipulation, plaintiffs reserved the right to reinstate the action under certain
circumstances. In October 1995, the Company reached a settlement with the
Republic of the Philippines of a lawsuit filed in connection with the power
plant contract. Although the Company does not believe that the plaintiffs in the
derivative action have any right to reinstate their action as a result of such
settlement, the plaintiffs have indicated that they may seek to reinstate such
action.
In April and December 1991, derivative actions were filed in the United
States District Court, Western District of Pennsylvania, against the Company and
certain of its previous directors and current directors Carlucci, McLaughlin,
Morrow and Pivirotto alleging violation of the directors' common law fiduciary
duties in connection with the operation of Westinghouse Financial Services, Inc.
and Westinghouse Credit Corporation, former subsidiaries of the Company. After
consolidation of the actions, the derivative suit was amended in June 1992 to
allege violations of the federal securities laws. The suit was dismissed in its
entirety in July 1993, although plaintiffs had the right to refile their
complaint with respect to certain claims. Plaintiffs subsequently refiled the
action and defendants moved to dismiss the refiled complaint. In September 1993,
the directors were dismissed from the suit by stipulation of the parties without
prejudice. On January 20, 1995, the District Court again dismissed the suit in
its entirety. However, the plaintiffs appealed this ruling on February 8, 1995.
The United States Court of Appeals for the Third Circuit heard arguments on
November 2, 1995, and the parties are currently awaiting a ruling from this
Court.
Westinghouse and the individual director defendants believe that these
actions are without merit and intend to continue to defend the suits vigorously.
In accordance with its by-laws, Westinghouse intends to indemnify the
director defendants against reasonable expenses and any liability or amounts
paid in settlement or incurred by them in connection with the foregoing to the
extent not prohibited by law. In addition, Westinghouse maintains policies of
insurance under which its directors are insured, subject to specified
exclusions, deductibles and maximum amounts, against loss arising from any civil
claim or claims which may be made against any director by reason of any breach
of duty, neglect, error, misstatement, misleading statement, omission or other
act done or wrongfully attempted as a director.
14
<PAGE> 16
SECURITY OWNERSHIP
The following table sets forth the number of shares of common stock
beneficially owned on January 5, 1996 (except as otherwise noted) by each
director, by each of the named executive officers and by the directors and
executive officers of the Company as a group as reported by each such person. On
that date, all such persons as a group beneficially owned less than one percent
of the outstanding common stock of the Company. Each person has sole voting and
investment power over the shares reported, except as noted. No other equity
securities of the Company or its subsidiaries were beneficially owned, directly
or indirectly, by any director, named executive officer or other executive
officer on January 5, 1996.
<TABLE>
<CAPTION>
Amount and Nature of
Name Beneficial Ownership
- - ---------------------------------------------------------------------------------------------
<S> <C>
F. C. Carlucci 11,864 shares(1)(2)(3)(4)(5)
R. E. Cawthorn 13,730 shares(3)(4)
G. M. Clark 778,346 shares(6)
G. H. Conrades 16,905 shares(1)(2)(3)(4)
W. H. Gray 10,419 shares(1)(2)(3)(4)
F. J. Harvey 177,656 shares(6)
M. H. Jordan 1,092,888 shares(6)
W. C. Korn 264,588 shares(6)
D. K. P. Li 8,230 shares(3)(4)
D. T. McLaughlin 24,304 shares(1)(2)(3)(4)
R. M. Morrow 30,155 shares(1)(2)(3)(4)
R. R. Pivirotto 9,078 shares(1)(2)(3)(4)
F. G. Reynolds 395,500 shares(6)
P. Stern 8,999 shares(1)(2)(3)(4)
R. D. Walter 58,832 shares(1)(3)(4)
All directors and executive officers as a group 4,125,332 shares(1)(2)(3)(5)(6)(7)
- - ---------------------------------------------------------------------------------------------
<FN>
(1) Includes the following common stock equivalents owned by the indicated
directors under the Company's Deferred Compensation and Stock Plan for
Directors: Carlucci 2,444; Conrades 410; Gray 1,489; McLaughlin 3,141;
Morrow 3,141; Pivirotto 3,141; Stern 1,159 and Walter 102.
(2) The indicated directors have deferred all or part of their annual
retainer or fees. As a result of these deferrals, at a future date,
these directors will be entitled to receive the following number of
shares, which are reflected in the table, or cash for all or part
thereof: Carlucci 2,690; Conrades 3,015; Gray 4,300; McLaughlin 12,939;
Morrow 21,620; Pivirotto 1,057 and Stern 2,810.
</TABLE>
15
<PAGE> 17
(3) Includes the following shares not owned by the indicated directors on
January 5, 1996, but with respect to which they had the right to acquire
beneficial ownership within 60 calendar days through the exercise of
stock options: Carlucci 3,000; Cawthorn 3,000; Conrades 3,750; Gray
3,000; Li 1,500; McLaughlin 3,750; Morrow 3,750; Pivirotto 3,750; Stern
3,000 and Walter 3,000.
(4) Includes 244 restricted shares granted to director Morrow and 730
restricted shares granted to each other director on January 31, 1996.
These grants were made under the Deferred Compensation and Stock Plan
for Directors as amended and are subject to shareholder approval of the
amendment.
(5) Includes 3,000 shares over which Mr. Carlucci shares voting and
investment power.
(6) Includes the following shares not owned by the indicated executive
officers on January 5, 1996, but with respect to which they have the
right to acquire beneficial ownership within 60 calendar days through
the exercise of stock options: Clark 718,666; Harvey 177,500; Jordan
1,060,862; Korn 253,500 and Reynolds 387,500.
(7) Includes 3,806,621 shares not owned by directors and executive officers
on January 5, 1996, but with respect to which they have the right to
acquire beneficial ownership within 60 calendar days through the
exercise of stock options.
Except as set forth below, Westinghouse does not know of any person who
beneficially owns more than five percent of the Company's common stock.
<TABLE>
<CAPTION>
Shares of
Name and Address Common Stock Percent
Beneficial Owner Beneficially Owned of Class
- - ---------------- ------------------ --------
<S> <C> <C>
Bankers Trust New York Corporation(1) 28,458,764(1) 6.8%(1)
280 Park Avenue
New York, NY 10017
WPIC Corporation(2) 25,494,976(3) 6.1%(3)
11 Stanwix Street
Pittsburgh, PA 15222-1384
</TABLE>
16
<PAGE> 18
(1) Bankers Trust New York Corporation, Bankers Trust Company, BT Variable,
Inc., Bankers Trust International PLC and BT Australia Limited
(collectively the "Bankers Trust entities") have filed a Schedule 13G
stating that as of December 31, 1995, they beneficially owned 11,720,374
shares, or 2.8%, of the Company's common stock. The Schedule 13G also
states that as of such date, Bankers Trust Company was the record owner
of 16,738,390 shares, or 4%, of the Company's common stock that it holds
as trustee for the Westinghouse Savings Program. The Bankers Trust
entities disclaim beneficial ownership of the 16,738,390 shares in the
Savings Program.
(2) WPIC Corporation is a wholly-owned subsidiary of the Company which
provides investment management services for the assets of employee
benefit plans of Westinghouse and certain of its subsidiaries.
(3) As of March 1, 1996, WPIC Corporation had sole voting and investment
power with respect to 25,494,976 shares of the Company's common stock,
which constituted approximately 6.1% of the shares of common stock
outstanding as of such date. 5,612,600 of these shares are included in
the plan assets of the Westinghouse Master Trust Fund for the
Westinghouse Pension Plan. The remaining shares are held in two trusts
for the payment of benefits under certain executive benefit plans of
Westinghouse. Although the shares held in the two trusts for the
executive benefit plans are outstanding for voting purposes, such shares
are treated as treasury shares for financial statement presentation
purposes as long as they remain in the trusts, and therefore are not
considered outstanding in calculating Westinghouse's earnings per share.
Louis J. Valerio, a former executive officer of the Company, inadvertently
omitted to file a Form 4 on a timely basis to report one transaction involving
the sale of 1,000 shares of Westinghouse common stock. George H. Conrades, a
director of the Company, also inadvertently omitted to file a Form 4 on a timely
basis to report two transactions involving the purchase of a total of 4,000
shares of Westinghouse common stock. Messrs. Valerio and Conrades promptly
reported the transactions upon learning that filings were required.
17
<PAGE> 19
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
for services to the Company and its subsidiaries in 1993, 1994 and 1995 of the
chief executive officer and each of the other four most highly compensated
executive officers of the Company at the end of 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
All Other
Annual Compensation Long-Term Compensation Compensation
----------------------------------------- ----------------------------- ------------
Awards Payouts
----------- ----------
Securities
Name and Underlying
Principal Options/ LTIP
Position Year Salary Bonus SARs Payouts
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M. H. Jordan 1995 $1,000,000 $1,500,000 (1) 360,000 (2) 0 $ 18,610 (3)
Chairman 1994 $1,000,000 $ 356,554 (4) 85,862 (4) $ 185,000 $ 24,173
and Chief 1993 $ 503,799 $ 400,000 1,000,000 N/A $ 7,075
Executive
Officer
G. M. Clark 1995 $ 580,821 $ 500,000 (1) 244,514 (2) 0 $ 53,555 (3)
President 1994 $ 532,068 $ 281,291 (4) 197,268 (4) $ 133,200 $ 40,653
1993 $ 481,742 $ 400,000 130,000 $ 136,800 $ 33,865
W. C. Korn 1995 $ 485,750 $ 600,000 (1) 162,000 (2) 0 $ 4,500 (3)
Executive VP 1994 $ 417,917 $ 500,000 70,000 $ 74,000 $ 4,500
CBS and 1993 $ 395,004 $ 325,000 58,000 $ 370,000 $ 7,075
President
CBS Station
Group
F. G. Reynolds 1995 $ 379,162 $ 650,000 (1) 160,000 (2) 0 $ 6,613 (3)
Executive VP 1994 $ 291,660 $ 177,750 (4) 287,500 (4) 0 $ 96,000
and Chief 1993 N/A N/A N/A N/A N/A
Financial Officer
F. J. Harvey(5) 1995 $ 300,000 $ 400,000 (1) 112,000 (2) 0 $139,721 (3)
Executive VP 1994 $ 235,000 $ 170,000 70,000 $ 22,940 $ 4,500
and Chief 1993 N/A N/A N/A N/A N/A
Operating Officer
of Industries and
Technology Group
</TABLE>
18
<PAGE> 20
(1) Represents incentive compensation awarded for 1995. Up to 100% of these
awards may be deferred, to be paid either (i) in one installment in any
future year not later than the year of normal retirement, or (ii) in a
lump sum or annual installments after termination of service. The
deferred amount is treated as if it were invested in putative
convertible debentures with a fixed interest rate, compounded annually,
equal to the ten-year U.S. Treasury Bond rate for the week preceding the
regular January Board meeting. Each debenture is deemed to have a face
value of $100 and is deemed to be convertible into shares of
Westinghouse common stock at a conversion rate determined by dividing
$100 by the mean of the high and low prices of Westinghouse common stock
as reported by the composite tape of the New York Stock Exchange
("NYSE") on the last trading day preceding the regular January Board
meeting. At the time a deferred installment is paid, the employee
receives the greater value of (i) the cash amount equal to the face
value of such debentures due for such installment, plus cash equal to
accrued interest on such installment, or (ii) shares of common stock
equaling the number of shares into which the debentures due for such
installment are convertible at the above conversion rate, plus cash
equal to accrued interest on such installment. In the event of a change
in control of the Company, shares are valued based upon the highest
price of the common stock during the 30 days preceding such change in
control of the Company. A participant who has deferred compensation
until after termination of service may elect, after attaining age 57 1/2
and prior to ceasing to be an employee, to establish the ultimate
payable value of each putative debenture based on the fair market value
of the Company's common stock as of the day on which notice of the
election is received by the Company.
(2) Represents grants of standard non-qualified stock options and a grant of
performance stock options. The standard non-qualified stock option
grants were 225,000; 166,514; 120,000; 100,000 and 70,000 for Messrs.
Jordan, Clark, Korn, Reynolds and Dr. Harvey, respectively. The
remaining options represent those stock options which are exercisable
only if and when the Company attains specific performance targets and
are described further on page 21.
(3) The amounts shown in this column consist of (i) contributions by the
Company to the account of the named executive officer pursuant to the
contributory provisions of the Westinghouse Savings Program; (ii) moving
and relocation expenses of $135,221 for Dr. Harvey; and (iii) $14,110;
$49,055 and $2,113 in interest earned during 1995 on deferred amounts of
long term incentive compensation for Messrs. Jordan, Clark and Reynolds,
respectively.
(4) Messrs. Jordan, Clark and Reynolds received 1994 bonuses of $700,000,
$550,000 and $300,000, respectively. In lieu of receiving the full
amount in cash, Messrs. Jordan, Clark and Reynolds received 85,862,
67,268 and 37,500 stock options, respectively. These stock options were
included in the Securities Underlying Options/SARs column for 1994.
(5) During 1995, Dr. Harvey acted as President of the Electronic Systems
business unit.
19
<PAGE> 21
OPTION GRANTS
The following table shows all grants in 1995 of stock options to the
executive officers named in the summary compensation table on page 18.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Options
Granted to
Employees Exercise Grant Date
Options in Fiscal or Base Expiration Present Value(2)
Name Granted(1) Year Price Date Per Share Total
- - -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M. H. Jordan 225,000 2.5% $13.81 1/25/05 $6.46 $1,453,500
135,000 (3) 1.5% $13.81 1/25/05 $3.23 $ 436,050
85,862 (4) 1.0% $13.81 1/25/05 $6.46 $ 554,668
G. M. Clark 130,000 1.5% $13.81 1/25/05 $6.46 $ 839,800
78,000 (3) 0.9% $13.81 1/25/05 $3.23 $ 251,940
67,268 (4) 0.8% $13.81 1/25/05 $6.46 $ 434,551
36,514 (5) 0.4% $14.94 4/26/04 $6.70 $ 244,644
W. C. Korn 70,000 0.8% $13.81 1/25/05 $6.46 $ 452,200
42,000 (3) 0.5% $13.81 1/25/05 $3.23 $ 135,660
50,000 (6) 0.6% $16.75 12/6/05 $7.83 $ 391,500
F. G. Reynolds 100,000 1.1% $13.81 1/25/05 $6.46 $ 646,000
60,000 (3) 0.7% $13.81 1/25/05 $3.23 $ 193,800
37,500 (4) 0.4% $13.81 1/25/05 $6.46 $ 242,250
F. J. Harvey 70,000 0.8% $13.81 1/25/05 $6.46 $ 452,200
42,000 (3) 0.5% $13.81 1/25/05 $3.23 $ 135,660
</TABLE>
(1) Except where noted, these stock options were granted to the named
executive officers on January 25, 1995. These stock options were granted
in tandem with limited rights. Options granted are for a term of ten
years from the date of award, or such lesser term as may be determined
by the Compensation Committee. The
20
<PAGE> 22
exercise price under each option may not be less than the fair market
value of the stock on the option date. Except in the event of a change
in control of the Company, generally an option is exercisable in whole
or in part after the commencement of the second year of its term and
until the option terminates. Limited rights are exercisable only in the
event of a change in control of the Company and during the 30 days
immediately following such change. When a limited right is exercised,
the employee is entitled to receive the difference between the exercise
price of the related option and the greater of (i) the highest sales
price of the common stock during the 60 days prior to exercise, or (ii)
the highest price paid for the common stock in the change in control
transaction during such period. Reload options are granted to employees
at the time of an exercise of a stock option through a stock swap
(payment of the exercise price by surrender of previously owned shares
of common stock), unless the Compensation Committee cancels the reload
feature before such exercise. The reload option is granted for the
number of shares the employee tenders to pay the exercise price of the
related option.
(2) These values were derived using the following common assumptions: stock
price volatility .3034; dividend yield 1.35%; interest rate 6.81%, and
for each option, its full term and exercise price. The values for
options contingent upon performance targets used the same common
assumptions, plus a probability of achievement factor of 50%. There were
no adjustments made for non-transferability or risk of forfeiture except
where noted. The values and assumptions presented here were provided by
Frederic W. Cook & Co., Inc. and were based on the Black-Scholes option
pricing model. The actual value, if any, that an executive officer may
realize from his or her stock options (assuming that they are exercised)
will depend solely on the gain in stock price over the exercise price
when the shares are sold.
(3) The vesting of these stock options is contingent on attainment of
specific performance targets designated by the Compensation Committee.
If the targets are not met, the options terminate; if they are met, the
options become exercisable. One-half of these options have lapsed as
they were contingent on attainment of a stretch performance target for
1995 which was not met. The remaining performance stock options are
contingent on 1996 performance.
(4) In lieu of receiving their full 1994 bonuses in cash, Messrs. Jordan,
Clark and Reynolds received a portion in the form of stock options,
which were exercisable immediately.
(5) These stock options are grants of reload options resulting from the
exercise of an initial option containing a reload option feature through
a stock swap. Such reload options may be exercised immediately (i) for
the number of shares of common stock shown, (ii) at the fair market
value of such shares on the date of the stock swap, and (iii) then only
for the remaining term of the original option. Reload options are also
subject to early termination if the shares acquired on exercise of the
original option are sold within the first year.
(6) A special grant of 50,000 stock options was made on December 6, 1995 to
Mr. Korn in connection with his new responsibilities with CBS Inc.
("CBS").
21
<PAGE> 23
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information as to stock options to purchase
the Company's common stock exercised during 1995 by the named executive
officers, the unexercised options to purchase the Company's common stock granted
in 1995 and prior years to the named executive officers and the value of options
held by them at year-end.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised Options at
On Exercise Realized Options at Fiscal Year-End Fiscal Year-End (1)
----------- -------- -------------------------- -------------------
Name Exercisable Unexercisable (2)(3) Exercisable Unexercisable (2)(3)
- - --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M. H. Jordan 0 0 835,862 610,000 $923,146 $922,500
G. M. Clark 46,918 $155,416 588,666 208,000 $780,753 $533,000
W. C. Korn 0 0 183,500 162,000 $401,094 $287,000
F. G. Reynolds 0 0 287,500 160,000 $880,469 $410,000
F. J. Harvey 0 0 107,500 112,000 $354,850 $287,000
<FN>
(1) Based on the closing price of the Company's common stock as reported on
the NYSE composite tape on December 29, 1995 ($16.375).
(2) These options are unexercisable because they have not vested under their
terms.
(3) This column includes the following stock options and values, all of
which were contingent on attaining a 1995 stretch performance target:
Jordan 67,500 for $172,969; Clark 39,000 for $99,937; Korn 21,000 for
$53,812; Reynolds 30,000 for $76,875; and Harvey 21,000 for $53,812. The
1995 stretch performance target was not met and these options have since
lapsed.
</TABLE>
22
<PAGE> 24
PENSION BENEFITS
All of the individuals named in the summary compensation table on page 18
are participants in the Westinghouse Pension Plan (the "Pension Plan"), which is
a defined benefit plan. The Pension Plan is designed to provide retirement
income related to an employee's salary and years of active service. The cost of
the Pension Plan is paid by both Westinghouse and employee contributions. All
Westinghouse contributions are actuarially determined. The Company's
contributions to the Pension Plan with respect to the individuals named in the
summary compensation table cannot readily be separately or individually
calculated by the actuaries for the Pension Plan. As of December 31, 1995, the
individuals named in the summary compensation table had the following credited
full years of service under the Pension Plan: Mr. Jordan, 2 years; Mr. Clark, 38
years; Mr. Korn, 5 years; Mr. Reynolds, 1 year; and Dr. Harvey, 26 years.
In addition to the benefits provided by the Pension Plan, the Westinghouse
Executive Pension Plan (the "Executive Pension Plan") provides for supplemental
pension payments to a group of executives, including those named in the summary
compensation table. Upon retirement, such individuals who have at least five
continuous years of service as an executive immediately prior to retirement,
meet the age and service requirements for retirement under the Pension Plan, and
contribute to the Pension Plan are entitled to receive supplemental payments
under the Executive Pension Plan which, when added to their pensions under the
Pension Plan, result in a total annual pension equal to 1.47% for each year of
service multiplied by their average annual compensation as defined by the
Executive Pension Plan. Average annual compensation is equal to the sum of the
average of the five highest annualized December base salaries and the average of
the five highest annual incentive awards, each in the last ten years of
employment. In the event of retirement prior to age 60, the total annual pension
will be reduced by an amount equal to the reduction in the benefits payable
under the Pension Plan. Participants become vested in the event of a change in
control of the Company and benefits under the Executive Pension Plan may be paid
on a present value or other basis.
For purposes of illustration, the following table indicates the approximate
amounts of annual retirement income that would be payable at the present time
under various assumptions as to average annual compensation and years of service
to employees who participate in the Pension Plan and are eligible for
supplemental payments pursuant to the Executive Pension Plan. The amounts
presented in the table are based upon straight life annuity amounts and are not
subject to any reduction for Social Security benefits or other offset amounts.
23
<PAGE> 25
<TABLE>
<CAPTION>
Five-year average Estimated annual pension for
annual compensation specified years of credited service
including incentive ----------------------------------------------------------------------------------------
award 15 20 25 30 35 40
- - ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 100,000 $ 22,050 $ 29,400 $ 36,750 $ 44,100 $ 51,450 $ 58,800
300,000 66,150 88,200 110,250 132,300 154,350 176,400
500,000 110,250 147,000 183,750 220,500 257,250 294,000
700,000 154,350 205,800 257,250 308,700 360,150 411,600
900,000 198,450 264,600 330,750 396,900 463,050 529,200
1,100,000 242,550 323,400 404,250 485,100 565,950 646,800
1,500,000 330,750 441,000 551,250 661,500 771,750 882,000
2,000,000 441,000 588,000 735,000 882,000 1,029,000 1,176,000
</TABLE>
COMPENSATION AND SEVERANCE ARRANGEMENTS
MICHAEL H. JORDAN
In June 1993, the Company retained the services of Michael H. Jordan as
chairman and chief executive officer of the Company. Under the executory
provisions of Mr. Jordan's employment agreement, he participates in the
Executive Pension Plan. The agreement modifies the executive pension requirement
that he complete five years of continuous service immediately prior to
retirement and provides that there will be no actuarial reduction for
commencement of supplemental pension benefits prior to age 65. Such benefits are
contingent upon Mr. Jordan's contribution of the maximum possible amounts to the
Pension Plan during his employment.
Mr. Jordan's employment agreement extends until he attains age 65 or until
terminated in accordance with the terms of the agreement, whichever is earlier.
In the event of termination by the Company without cause, Mr. Jordan is entitled
to a lump-sum payment equal to two times his highest base salary plus the
greater of (i) the sum of his two most recent actual annual incentive awards or
(ii) two times his highest annual incentive target award opportunity. He would
also receive prorated incentive payments and other specified benefits.
FREDRIC G. REYNOLDS
Early in 1994, the Company retained the services of Fredric G. Reynolds as
executive vice president and chief financial officer of the Company. Under the
executory provisions of his compensation arrangement, Mr. Reynolds is entitled
to a minimum annual incentive award of $150,000 for 1995. In the event of
termination by the Company without cause, Mr. Reynolds is entitled to receive
each month after termination, for a period of twelve months, an amount equal to
his then applicable monthly base salary, which will be in lieu of any other
salary continuation programs.
24
<PAGE> 26
W. C. KORN
In connection with the Company's acquisition of CBS, in November 1995, CBS
entered into a four-year employment contract with Mr. Korn as Executive Vice
President of CBS and President of the CBS Station Group. In light of his new
responsibilities, Mr. Korn's annual base salary was reevaluated and set at
$750,000 for the first year of the contract (November 1995 to November 1996),
subject to annual review thereafter. Mr. Korn received a special grant of
options to purchase 50,000 shares of common stock of the Company at an exercise
price of $16.75 per share (the fair market value on the grant date), as set
forth in the table on page 20. In the event of termination by CBS (other than
for cause or incapacity), Mr. Korn is entitled to receive severance pay in
accordance with the policy in effect at the time of termination but in no event
less than an amount equal to one year's base salary.
OTHER COMPENSATION
The Board has determined that employees receiving payments pursuant to
provisions of certain compensation or other employee benefit plans relating to a
change in control of the Company should not be adversely affected by any tax
imposed on such payments by reason of Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), and has authorized the Company to make
additional payments in an amount sufficient to satisfy any such tax liability.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which is composed entirely of outside
independent directors, reviews, evaluates and approves the design and
implementation of the Company's compensation system for executive officers. The
Compensation Committee also determines the form and amount of compensation for
the chief executive officer. For purposes of making compensation determinations,
the Compensation Committee uses broad-based industry surveys of what executives
with comparable responsibilities are paid and evaluates individual performance.
In 1995, the Compensation Committee retained the services of Independent
Consulting Resources Inc., a compensation consulting firm, to provide advice to
the committee from time to time on executive compensation matters.
THE WESTINGHOUSE EXECUTIVE COMPENSATION PROGRAM
The Westinghouse executive compensation program is a pay-for-performance
compensation system consisting of base salaries and incentives (annual and
long-term) that pay executives for the achievement of levels of performance
designed to increase shareholder value of the Company. The system also enables
the Company to hire, retain and motivate high-quality globally-oriented
executives who successfully meet the immediate business challenges and improve
the long-term performance of the Company and is designed to pay base salaries
and provide total compensation opportunities which are competitive as measured
against industry norms.
25
<PAGE> 27
For purposes of measuring competitive base salary and annual incentive
opportunities, the Compensation Committee uses the Towers Perrin Entertainment
Industry Survey for executives in the broadcasting business unit and a
manufacturing industry survey (the "industry survey") prepared by Management
Compensation Services, a division of Hewitt Associates, for all other
executives. The industry survey provides information on base salaries and annual
incentives paid to executives of 339 companies which derive over 50% of their
revenue from manufacturing operations. The data is segregated by industry
classification, assigned responsibilities and size of business as measured by
sales revenue. For both broadcasting and other Westinghouse executives, the
Compensation Committee targets the median or 50th percentile for comparable
company size and scope of responsibilities of the appropriate database for
purposes of establishing base salary and annual incentive opportunities, except
where a higher percentile is justified by business need.
For purposes of measuring competitive long-term incentive opportunities,
the Compensation Committee uses a survey conducted by Frederic W. Cook & Co.,
Inc. on behalf of 33 multibillion dollar revenue companies. This survey uses a
consistent methodology for converting all forms of actual long-term incentive
grants into competitive long-term incentive values and equivalent annual stock
option grants. The Compensation Committee targets the median or 50th percentile
of this survey for the purposes of making competitive long-term incentive
grants.
In addition to the above, Towers Perrin survey data is used as a
supplemental information source for base salary, annual incentive and long-term
incentive opportunities.
BASE SALARIES
Each executive officer position is assigned a grade and a salary range
which takes into consideration the level of responsibility involved, the
knowledge and skill required, and competitive levels as determined from the
survey data. Each year, the executive's performance is evaluated and any base
salary increase is based on an evaluation of individual performance and
contribution. Each year, the chief executive officer makes recommendations with
respect to salary adjustments for all executives, which are reviewed, modified
where appropriate, and approved by the Compensation Committee.
ANNUAL INCENTIVES
The Compensation Committee administers various incentive plans under which
annual incentive compensation may be paid to key employees of the Company. Under
these plans, for the entire Company and for each individual business unit, the
Compensation Committee established a range of 1995 financial objectives and
approved strategic and organizational development objectives ("strategic
initiatives"). Awards for executive officers not associated with a business unit
were measured 50% on the basis of the Company's financial performance against
the predetermined objective, with the remainder based on performance against
specific strategic initiatives. Awards for executive officers associated with a
specific business unit were weighted 75% on the financial and strategic
initiative performance of their business unit and 25% on the basis of the
Company's financial performance.
26
<PAGE> 28
Performance on 1995 corporate strategic initiatives together with the
Company's financial performance for 1995, adjusted to exclude the impact of
certain special events, such as divestitures and restructuring charges, resulted
in performance slightly above the target objective. Business unit strategic and
financial performance varied. After reviewing the relevant financial
performance, performance on strategic initiatives and individual performance,
the chief executive officer made recommendations with respect to incentive
awards. These recommendations were reviewed with and, to the extent determined
appropriate, approved by the Compensation Committee. In terms of the competitive
targeted compensation, this results in the executives being paid, on average, at
the 50th percentile. Approved annual incentives were awarded in cash, subject to
deferral at the executive's election under the program described on page 19.
LONG-TERM INCENTIVES
Long-term incentive opportunities were granted to executive officers during
1995 in the form of non-qualified stock option grants. These stock option grants
were made to provide a performance-based incentive that rewards executives when
shareholder value increases. This long-term incentive opportunity is also
intended to promote a sense of ownership on the part of executives and to
establish a community of interest with shareholders. Option grants for 1995 were
made to executives based on their level of responsibility and a subjective
evaluation of individual performance using the 50th percentile of data from the
Frederic W. Cook & Co., Inc. survey referenced earlier. In determining the grant
level, principal emphasis was placed on the preceding factors and on the
executive's potential role in increasing shareholder value. The number of shares
currently owned directly and through various deferral arrangements by an
executive was not considered in making these award grants. All stock option
grants to executive officers in 1995 had an exercise price per share equal to
the fair market value of the Company's common stock on the grant date.
As part of the 1995 grants, the Compensation Committee granted stock
options which are exercisable only if and when the Company attains specific
performance targets designated by the committee. If the targets are not met, the
options terminate; if they are met, the options become exercisable. One-half of
these stock options were contingent on attainment of a stretch performance
target for 1995. As the stretch target for 1995 was not met, these options have
lapsed. The remaining performance stock options are contingent on 1996
performance.
1995 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Individual Performance and Contribution. Total compensation (consisting of
base salary, annual incentive and long term incentives) for Michael H. Jordan,
the Chairman and Chief Executive Officer of the Company, is based on a variety
of factors depending on the type of compensation involved as discussed below. A
significant factor which was taken into account by the Compensation Committee in
each case, however, was the Board's evaluation of Mr. Jordan's performance as
chief executive officer and his contribution to the Company.
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<PAGE> 29
Mr. Jordan's total compensation reflects the positive, strategic leadership
he has shown in addressing the needs of a widely diverse and complex business
since he joined the Company in June of 1993. During that period, the Company has
been successfully engaged in a challenging and comprehensive restructuring,
positioning Westinghouse strategically for future growth. The result of this
restructuring has been the emergence of Westinghouse as a much stronger company:
one with a business portfolio offering high-growth, a coherent strategy and an
excellent management team, and one well-positioned for profitable growth and
increased shareholder value. The restructuring has included major divestitures;
the redeployment of assets into areas, such as broadcasting, with higher margins
and strong growth potential; agreements to sell the defense and electronic
systems business and the Knoll Group more quickly and for higher value than
expected; substantial reductions in corporate debt (down $7.5 billion or 76%
since 1992, excluding CBS); process reengineering and reductions in the
Company's overhead structure that significantly improved productivity and
efficiency; decisive actions addressing non-operating items that have negatively
affected earnings; international growth initiatives; and a strengthening and
rebuilding of the management team through the hiring and promotion of highly
qualified leaders and professionals.
Base Salary. Base salary for 1995 for Mr. Jordan was $1,000,000. After
evaluation of Mr. Jordan's performance and contribution, the Compensation
Committee determined that this base salary was competitive.
Annual Incentive. As an annual incentive for 1995, the Compensation
Committee awarded Mr. Jordan a bonus of $1,500,000, all of which was deferred.
The Compensation Committee based this award on Mr. Jordan's strategic leadership
in the acquisition of CBS and on the following factors: (i) Mr. Jordan's
performance on specific strategic initiatives, including cost reductions, debt
reduction, implementation of a strategy to address the negative impact of
certain non-operating items, development of the top leadership group, and
improving stock value; (ii) the Company's financial performance; (iii)
judgmental evaluation by the Compensation Committee of Mr. Jordan's individual
performance and contribution; and (iv) competitive data from the surveys
previously mentioned.
Long-term Incentives. Long-term incentives for Mr. Jordan during 1995
consisted of a grant of standard options for 225,000 shares of common stock and
also a grant of options for 67,500 shares of common stock contingent on 1995
corporate performance and options for an additional 67,500 shares of common
stock contingent on 1996 corporate performance. His grant level was established
considering his level of responsibility, previously discussed competitive data
and the Compensation Committee's subjective evaluation of Mr. Jordan's 1994
performance and his potential role in increasing shareholder value. The options
contingent on 1995 corporate performance terminated as the stretch performance
target was not met. The 1996 performance options remain subject to performance
for 1996.
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POLICY ON DEDUCTIBILITY OF COMPENSATION
Beginning in 1994, compensation for certain individual executive officers
is not deductible under the federal tax laws to the extent that the officer's
compensation for that year exceeds $1,000,000. With the current structure of
compensation and the availability of deferral opportunities, the Compensation
Committee believes the Company will not be denied any significant tax deductions
for 1995. The Compensation Committee has reviewed and will continue to review
tax consequences as well as other relevant considerations when making
compensation decisions. Qualifying performance-based compensation will be
excluded from the $1,000,000 cap, and the Compensation Committee believes, based
on information currently available, that the Company's stock options to its
executive officers will qualify for this exclusion.
COMPENSATION COMMITTEE
George H. Conrades, Chair
David T. McLaughlin
Richard M. Morrow
Richard R. Pivirotto
Robert D. Walter
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, Messrs. Conrades, McLaughlin, Morrow and Pivirotto served as
members of the Compensation Committee, with Messrs. Carlucci and McPherson
serving on the committee until April 1995 and Mr. Walter joining the committee
at that time. Mr. Carlucci is chairman and a 10% shareholder of Newmyer
Associates, Incorporated, a firm that offers companies newsletters and
monitoring and reporting services on congressional and executive branch
developments. In the normal course of its business, the Company paid Newmyer
approximately $110,000 during 1995 for such services, and expects to continue to
use such services in 1996.
In addition, during 1995, Mr. Jordan, Chairman and Chief Executive Officer
of the Company, served as a director and member of the compensation committee of
the board of directors of Rhone-Poulenc Rorer Inc., of which Mr. Cawthorn is the
chairman and also served as chief executive officer until April 25, 1995. Mr.
Cawthorn does not serve on the Compensation Committee of the Company.
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth on the following page is a line graph comparing the total returns
(assuming reinvestment of dividends) of the Company's common stock, the Standard
& Poor's 500 Index ("S&P 500R") and the Dow Jones Electrical Components &
Equipment Index ("Dow Electrical"). The graph assumes $100 invested on December
31, 1990 in Westinghouse common stock and each of the indices.
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<PAGE> 31
COMPARISON OF FIVE-YEAR TOTAL RETURN*
WESTINGHOUSE COMMON, S&P 500(R) AND DOW ELECTRICAL INDICES
<TABLE>
<CAPTION>
DEC-90 DEC-91 DEC-92 DEC-93 DEC-94 DEC-95
<S> <C> <C> <C> <C> <C> <C>
Westinghouse Common $100 $ 67 $ 52 $ 56 $ 50 $ 67
- - -----------------------------------------------------------------------------------------------------
S&P 500(R) $100 $130 $140 $155 $157 $215
- - -----------------------------------------------------------------------------------------------------
Dow Jones Electrical $100 $126 $126 $137 $143 $187
Components & Equipment Index
- - -----------------------------------------------------------------------------------------------------
</TABLE>
The total percentage return for the Westinghouse common stock for the
period from January 1, 1995 to December 31, 1995 was approximately 35.6%. This
compares with the total percentage return for such period of the Dow Electrical,
which was approximately 30.8%, and the S&P 500(R), which was approximately
37.6%. These percentages assume that all dividends were reinvested.
* Assumes that the value of the investment in Westinghouse common stock and
in each index was $100 on December 31, 1990 and that all dividends were
reinvested.
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2. ELECTION OF INDEPENDENT ACCOUNTANTS
(Item 2 on proxy card)
Independent accountants are to be elected to audit and express an opinion
on the Company's financial statements for 1996. During the year ended December
31, 1995, Price Waterhouse LLP ("Price Waterhouse") served as the principal
independent accounting firm for the Company. During such period, the Company and
its consolidated subsidiaries paid Price Waterhouse approximately $11,000,000
for various audit and non-audit services.
The Audit Review Committee of the Board has the responsibility to recommend
to the Board annually, and at other appropriate times, the selection, retention,
or termination of the Company's independent accountants. The Audit Review
Committee has nominated Price Waterhouse, and this firm has advised the Company
that it is willing to serve. The Board has approved this nomination. If Price
Waterhouse is not elected, or, if elected, it should subsequently decline to
serve, or its engagement by the Company is terminated, the Board, in conjunction
with the Audit Review Committee, will appoint other independent accountants. In
view of the substantial portfolio restructuring which recently occurred at the
Company and the refocusing of auditing resources that will be required to
complete the 1996 audit, the Company intends to enter into discussions with and
seek competitive bids from Price Waterhouse and the other "big six" accounting
firms for the Company's 1996 audit. Should Price Waterhouse not be selected, the
Board of Directors will appoint another "big six" accounting firm for the 1996
audit.
Price Waterhouse is named as a defendant in a class action brought by
present and former shareholders of the Company against the Company and others.
These actions allege federal securities law and common law violations. The
claims against Price Waterhouse relate to the audits of the Westinghouse
consolidated financial statements for the years 1989 and 1990 and the reports
rendered thereon. In July 1993, all claims against Price Waterhouse were
dismissed. Plaintiffs refiled the claims and on January 20, 1995, these claims
were again dismissed. An appeal of this dismissal is pending.
A representative of Price Waterhouse will be present at the 1996 Annual
Meeting of Shareholders and will have an opportunity to make a statement. He or
she will also respond to any appropriate questions.
The persons named in the enclosed proxy card (Messrs. Jordan, Clark and
Briskman) have advised that they intend to vote for the election of Price
Waterhouse unless a contrary direction is indicated on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS.
The favorable vote of a majority of the votes cast on this proposal is
required for passage.
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<PAGE> 33
3. PROPOSAL TO AMEND THE DEFERRED COMPENSATION AND STOCK PLAN FOR DIRECTORS
(Item 3 on proxy card)
GENERAL INFORMATION
During 1995, the Compensation Committee and the Board undertook a
comprehensive review of director compensation, including competitive data from
independent surveys, with the objective of increasing the stock-based components
of total compensation. The Compensation Committee and the Board believe that
increasing the stock-based components of director compensation serves to
encourage stock ownership by directors and to further align the interests of
directors and shareholders.
Based on this review, the Compensation Committee recommended and the Board
approved a change in director compensation. Beginning in 1996, the Company will
compensate non-employee directors by delivering a total annual value of $60,000
(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), subject to review and adjustment by the Board from time
to time. Subject to approval of this proposed amendment to the Deferred
Compensation and Stock Plan for Directors (the "Directors Plan") by
shareholders, one-fourth of this total annual value would be delivered in stock
options and one-fourth would be delivered in shares of common stock of the
Company, with the remainder being paid in cash.
Two-thirds of the stock options would have an exercise price equal to the
fair market value of the common stock on the grant date (the last Wednesday in
January) and the remaining one-third would have an exercise price of 125% of
such market value (for January 1996, $20.5625 and $25.7031, respectively). An
additional annual fee, which is $5,000 beginning in 1996, subject to review and
adjustment by the Board from time to time, will be paid to committee chairs
after the annual organization meeting which follows the annual meeting of
shareholders and will be paid in shares of common stock. Directors would be
required to hold both the shares of common stock received and any additional
shares they receive when an option is exercised for a designated period of time.
Both the stock options and the shares, other than the committee chair fee shares
(as well as the cash portion of the annual director's fee) would be subject to
forfeiture on a pro rata basis if the director does not attend an aggregate of
at least 75% of all Board and committee meetings of which he or she is a member
during the year (excluding non-attendance due to illness). This annual
compensation will replace the former annual retainer, meeting fees, committee
chair retainer and automatic annual stock option grants described on page 12.
As part of this new focus, the Board also terminated the Advisory
Director's Plan, beginning at the end of April 1996, as to all then current
non-employee directors, and provided for a termination payment (based on the
present value of payment after age 70 of the 1995 annual retainer amount of
$22,000 for a number of years, not to exceed ten, equal to accrued full years of
service as a director at the plan termination date) to the then current
non-employee directors at the time the plan terminates in settlement of any
obligation with respect to their accrued
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years of service. All these amounts will be deferred, on terms substantially the
same as other director deferrals, and will be paid in cash installments after
the director leaves the Board. The Board also terminated the Director's
Charitable Giving Program for any director who does not have at least one full
year of service as of the end of July 1996, after reducing the years of service
eligibility requirement to one year.
The remainder of the director compensation program, including the
availability of deferral for cash compensation, cash per diem fees for special
services, the gift matching program and director's accidental death and
dismemberment insurance, remains unchanged from 1995. Although only a specific
portion of this overall revised director compensation program is subject to
shareholder approval, the Board has determined that all of the changes are
subject to reconsideration if the proposed amendment to the Directors Plan is
not approved.
PROPOSED AMENDMENT
The Board proposes to implement changes in the form of delivery of annual
director's fees and annual committee chair's fees, together with the elimination
of the current automatic annual stock option grants, by amendment to the
existing Directors Plan, which was last approved by shareholders in April 1995.
The proposed amendment also includes an increase in shares available under the
Directors Plan from 500,000 to 600,000 shares of common stock in order to
accommodate the proposed increase in delivery of stock-based compensation and to
provide for ongoing plan needs.
Because each of the non-employee director nominees, if elected, will
participate in the Directors Plan, as amended (the "Amended Directors Plan"),
and will benefit from the proposed amendment, each of them has a personal
interest in the adoption of this proposal.
SUMMARY
The following is a general description of the principal features of the
Amended Directors Plan. It is qualified in its entirety by reference to the
complete text of the Amended Directors Plan, which is attached to this proxy
statement as Exhibit A and is incorporated herein by reference.
The Amended Directors Plan is available only to directors of the Company
who are not employees or officers of the Company or its subsidiaries and is
administered by the Compensation Committee. The number of participants will vary
with the number of non-employee directors. Current non-employee directors as a
group were granted 6,814 shares of restricted stock and stock options for 13,720
shares of common stock for 1996 under the Amended Directors Plan, all subject to
shareholder approval of the proposed amendment. If the amendment is approved,
committee chairs will also each receive shares of common stock valued at $5,000
for 1996 upon their election as committee chairs. Also, if the proposed
amendment is approved, the current automatic annual fixed grants of stock
options for 3,000 shares of common stock to each non-employee director elected
at this meeting and of stock options for 750 shares to each committee chair will
not be made.
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<PAGE> 35
There will be 600,000 shares of common stock authorized for issuance under
the Amended Directors Plan if shareholder approval of the proposed amendment is
obtained. Any shares subject to an award or a deferral under the Amended
Directors Plan which are forfeited or for any other reason are not issued to a
director and any shares tendered to pay the exercise price of a stock option
will automatically be available again for use under the Amended Directors Plan
as long as such share replenishment is permitted under Rule 16b-3 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor rule, and interpretations thereof by the Securities and Exchange
Commission (the "SEC") or its staff.
The Amended Directors Plan continues the current plan feature that permits
a non-employee director to elect to defer all or a portion of the cash
compensation otherwise payable to the director for services rendered to the
Company as a director, with a deferred amount being treated as if it were a
convertible debenture. Common Stock Equivalent grants were discontinued in April
1995, but Common Stock Equivalents already credited to directors' accounts
continue to earn and reinvest hypothetical dividends until they are paid out
after the director leaves the Board. However, the proposed amendment will
discontinue the current automatic annual grant of options for 3,000 shares of
common stock to each non-employee director and for 750 shares of common stock to
each committee chair.
Under the proposed amendment, each year on the last Wednesday of January,
beginning with 1996, each non-employee director will automatically receive
one-fourth of the value of his or her annual director's fee, as determined from
time to time by the Board, in the form of a grant of non-statutory stock options
(the "Stock Options"). The number of Stock Options received will be based on the
option value as determined by an outside firm selected by the Company. Another
one-fourth of the value of each non-employee director's annual fee will be
automatically received, on the same day, in the form of a grant of restricted
shares of common stock (the "Restricted Stock"), the number of shares being
based on the fair market value of the common stock on that day. In addition,
each year after the annual meeting of shareholders and related organization
meeting, non-employee directors who are elected as committee chairs will receive
the full value of their annual committee chair's fee, as determined from time to
time by the Board, in shares of Restricted Stock based on the fair market value
of the common stock on that day. For 1996, Stock Options and Restricted Stock
were automatically granted to current non-employee directors on this basis with
respect to their annual directors' fees, subject to shareholder approval of the
proposed amendment.
Stock Options will include the following terms:
Exercise Price. For each grant of Stock Options, two-thirds of such options
will have an exercise price equal to 100% of the fair market value of the
common stock (defined as the mean of the high and low prices of the common
stock as reported by the NYSE composite tape, or, if no sales are reported
on the relevant date, the average of such prices on the next preceding and
next following days with reported sales) on the grant date and the
remaining one-third of such options will have an exercise price equal to
125% of the fair market value of the common stock on the grant date. As of
March 1, 1996, the closing price of the Company's common stock as reported
on the NYSE composite tape was $18.75.
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<PAGE> 36
Exercisability; Vesting; Forfeitures. Vested Stock Options will be
exercisable by the director in whole or in part at any time beginning on
January 1 of the calendar year following the grant year. Stock Options will
vest as of the January 1 date described in the preceding sentence if the
director has attended an aggregate of at least 75% of all meetings of the
Board and committees of which he or she was a member during the grant year
(or, for new directors, directors who do not stand for reelection or retire
at the annual meeting of shareholders, or directors who die during the
grant year, for the portion of the year during which he or she served as a
director), excluding non-attendance due to illness (the "Attendance
Requirement"). In the event that a director ceases to be a director prior
to such date for any reason other than retirement or not standing for
reelection at the annual meeting of shareholders or death, the Attendance
Requirement will continue to apply to all meetings during the grant year of
the Board and committees of which he or she was a member at the time of
termination. If the director has not met the Attendance Requirement, a pro
rata portion of the Stock Options will be forfeited and the remainder will
vest. In the event a director is removed from office for cause (as defined
in the Amended Directors Plan), all outstanding Stock Options will be
forfeited. In the event of a change in control of the Company (as defined
in the Amended Directors Plan), all Stock Options will vest and become
immediately exercisable.
Transfer Restrictions; Mandatory Holding of Common Stock. Stock Options are
not transferable, with limited exceptions in the event of death or certain
domestic relations orders. Once a director exercises a Stock Option, he or
she must hold the common stock so acquired until the earlier of (i) three
years from the exercise date, (ii) two years after he or she ceases to be a
director, or (iii) the occurrence of a change in control of the Company (as
defined in the Amended Directors Plan). Generally, this mandatory holding
period will not apply to a director's estate.
Option Term and Early Termination. Generally, a Stock Option will have a
ten-year term. However, after the death of a director, an outstanding Stock
Option can only be exercised by the person the director designated as his
or her beneficiary or by those entitled to do so under the director's will
or the applicable laws of descent or distribution, and then only for two
years after the director's death (or until the expiration of the ten-year
term, if earlier). Also, if a director is removed from office for cause (as
defined in the Amended Directors Plan), his or her outstanding Stock
Options will cease to be exercisable as of the time the director is so
removed.
Payment of Exercise Price. The exercise price of a Stock Option can be paid
in cash, by check or money order, through the delivery of shares of common
stock held at least six months with a fair market value on the date of
exercise equal to the exercise price (a stock swap), by delivery of an
unconditional, irrevocable undertaking by a broker to deliver the necessary
funds to the Company, or by a combination of any of these methods. Reload
options are not available under the Amended Directors Plan.
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<PAGE> 37
Restricted Stock awards will include the following terms:
Restriction Period. Restricted Stock will be subject to a Restriction
Period beginning on the grant date and continuing through December 31 of
the grant year.
Vesting. Except as set forth below, a director's right to ownership in
shares of Restricted Stock will vest on the January 1 date immediately
following the expiration of the Restriction Period if the director has met
the Attendance Requirement, provided that the Attendance Requirement will
not apply to shares received in payment of an annual committee chair's fee.
In the event that a director ceases to be a director prior to the
expiration of the Restriction Period for any reason other than retirement
or not standing for reelection at the annual meeting of shareholders or
death, the Attendance Requirement will continue to apply to all meetings
during the grant year of the Board and committees of which he or she was a
member at the time of termination. If the director has not met the
Attendance Requirement, upon expiration of the Restriction Period a
prorated portion of shares of the Restricted Stock award will be forfeited
and, except as set forth below, the remainder will vest. In the event a
director is removed from office for cause (as defined in the Amended
Directors Plan) prior to the expiration of the Restriction Period, all
unvested Restricted Stock will be forfeited as of the time the director is
so removed. In the event of a change in control of the Company (as defined
in the Amended Directors Plan), all Restricted Stock will immediately vest.
Issuance of Shares. At the grant date, a certificate representing the
shares of Restricted Stock will be registered in the director's name but
deposited with the Company along with a stock power endorsed in blank.
Subject to the transfer restrictions described below, the director will
have the rights of an owner of the shares during the Restriction Period.
Following expiration of the Restriction Period, vested deposited shares are
redelivered to the director and non-vested shares are forfeited to the
Company. For 1996 only, because the award is subject to shareholder
approval of the proposed amendment to the Directors Plan, the certificate
will not be issued and the director will not have the rights of an owner of
the shares until the proposed amendment is so approved.
Transfer Restrictions; Mandatory Holding of Common Stock. Shares of
Restricted Stock are not transferable during the Restriction Period, with
limited exceptions in the event of death or certain domestic relations
orders. Once the restrictions lapse, a director must continue to hold those
shares of common stock until the earlier of (i) three years from the grant
date, (ii) two years after he or she ceases to be a director, or (iii) the
occurrence of a change in control of the Company (as defined in the Amended
Directors Plan). Generally, this holding period will not apply to a
director's estate once the Restriction Period has expired.
Federal Income Tax Consequences. The federal income taxation under the
provisions of the Code and regulations promulgated thereunder of the Stock
Options and Restricted Stock is generally as follows:
Stock Options. No taxable income will be recognized by a director upon the
granting of a Stock Option. Upon the exercise of a Stock Option, however,
the director will recognize taxable income in the year of exercise in an
amount equal to the difference between the option exercise price and the
fair market value of the common
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<PAGE> 38
stock received on the date of exercise. The director's tax basis in these
shares will be the sum of the option exercise price plus any income
recognized upon exercise.
At the time of any subsequent sale or other disposition of the shares, the
director will realize capital gain (or loss) equal to the difference
between the amount received for the shares and his or her tax basis in such
shares. The capital gain or loss will be long-term or short-term, depending
on the director's tax holding period for such shares.
If a director uses previously owned shares to exercise Stock Options, no
additional income results unless other property, including money, is
received by the director in the exchange. Assuming no gain or loss is
recognized, the director's tax basis and holding period of the previously
owned shares will be carried over to the equivalent number of shares
received on exercise. Any additional shares received upon exercise will
result in the director recognizing taxable income equal to the fair market
value of the shares on the date of exercise. The tax basis of the
additional shares will be equal, in the aggregate, to the taxable income
recognized by the director plus any cash paid. The tax holding period will
begin on the day after the tax basis of the shares is determined. However,
if the previously owned shares had been acquired on the exercise of an
incentive stock option and the tax holding period requirement for those
shares was not satisfied at the time they were used to exercise this Stock
Option, such use would constitute a disposition of such previously owned
shares resulting in the recognition of ordinary income.
Restricted Stock. When the restrictions on ownership and transferability
(other than the mandatory holding period) lapse and the shares of
Restricted Stock vest (or, in the case of shares received in payment of an
annual committee chair's fee, when the shares are granted), the director
will recognize taxable income in an amount equal to the fair market value
of the Restricted Stock on that date. However, a director may make an
election within 30 days of the grant date (or within 30 days of shareholder
approval of the Amended Directors Plan for shares granted subject to such
approval) under Section 83(b) of the Code to recognize the fair market
value of the Restricted Stock as taxable income at the time of grant. If,
however, the restrictions on ownership and transferability are not
satisfied and the shares are forfeited, no taxable loss will be recognized.
The director's tax basis in these shares will be the amount of income
recognized. Dividends paid to a director on Restricted Stock prior to
vesting are taxable income in the year received.
At the time of any subsequent sale or other disposition of the shares, the
director will realize capital gain (or loss) equal to the difference
between the amount received for the shares and his or her tax basis in such
shares. The capital gain or loss will be long-term or short-term, depending
on the director's tax holding period for such shares.
Ordinary Income Versus Capital Gains. The value of gains that are received
from Stock Options and Restricted Stock are classified as either ordinary
income or capital gains for federal income tax purposes. The Omnibus Budget
Reconciliation Act of 1993 increased the individual top marginal income tax
rate while the capital
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<PAGE> 39
gains rate remained at 28%, with the limited exception for gains on
qualified small business stock. Therefore, different tax rates apply to
capital gains versus ordinary income (28% versus 39.6%).
Westinghouse Tax Deduction. The Company will be entitled to a deduction for
federal income tax purposes at the same time the director recognizes
ordinary income under the rules described above.
The foregoing is a summary only and applies only to United States federal
income taxes. The law on which the above discussion is based is subject to
change at any time.
Other Provisions. The Amended Directors Plan also provides that Stock
Options, Restricted Stock prior to the expiration of the Restriction Period, and
rights to receive payments or distributions under the Amended Directors Plan are
not assignable or transferable by a director, other than pursuant to certain
domestic relations orders and certain limited transfers on a director's death.
Stock acquired from exercising a Stock Option and shares of Restricted Stock
after the lapse of the Restriction Period are also nontransferable prior to the
end of the applicable mandatory holding period, with limited exceptions for
domestic relations orders and death. The shares available under the Amended
Directors Plan and the terms of awards and deferrals are subject to adjustment
to reflect certain changes in the Company's common stock. The Amended Directors
Plan can be terminated by the Board at any time and can be amended by the Board
subject to certain timing and shareholder approval requirements stated in the
plan.
The Amended Directors Plan will be effective on the date on which it is
approved by the holders of the Company's common stock. If the Amended Directors
Plan is not approved, the current Directors Plan, without the amendment, will
remain in effect.
The persons named in the enclosed proxy card (Messrs. Jordan, Clark and
Briskman) have advised that they intend to vote to approve the amendment unless
a contrary direction is indicated on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO THE DEFERRED COMPENSATION AND STOCK PLAN FOR DIRECTORS.
The favorable vote of a majority of the shares of common stock present,
either in person or by proxy, and entitled to vote on the matter at the Annual
Meeting of Shareholders, is required to amend the Directors Plan.
4. SHAREHOLDER PROPOSAL: NON-EMPLOYEE DIRECTOR NOMINEE STOCK OWNERSHIP
(Item 4 on proxy card)
Westinghouse has been advised that M. Robert Paglee, the beneficial owner
of 200 shares of common stock, residing at 863 Golf View Road, Moorestown, New
Jersey 08057, will submit the following proposal at the meeting:
WHEREAS A TRUSTEE of a public corporation must be capable of exercising
sound judgment when creating or approving policies, strategies, and investments
critical to the success of the enterprise, and is often entrusted with
sensitive, privileged information restricted only to the highest levels of
management, a total commitment in faith, interest and loyalty is absolutely
essential.
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ACCORDINGLY, IT IS RECOMMENDED that the Board of Directors take the
necessary steps to assure that any future candidate for nomination as a
non-employee Director (following the 1996 Annual Meeting) would be the
beneficial owner of at least one share of Westinghouse common stock (preferably
more, depending on means) at the time when the individual shareholdings of all
Director-nominees are reported in the Notice of Annual Meeting, and said
nominees are being submitted for approval or disapproval by the voting
shareholders.
Statement of Proponent Supporting this Recommendation:
The bottom-line measure of an individual's judgment, interest in a company
and faith in its future is clearly evidenced by investment in its stock. This
has not always been the case for Westinghouse Director-nominees in the recent
past, particularly in 1995. Purchasing a single share, (even less than most
shareholders have done using their own hard-earned savings), should not
represent an unacceptable risk or financial hardship, and if the nominee has
sufficient means, purchasing one or more "round lots" would be even more
desirable.
But it is not the purpose of this proposal to establish an "investment
quota"; it is the principle that matters, far more than the amount. How can a
Director-nominee represent the best interests of shareholders if he/she is
apparently so insensitive and indifferent toward our corporation as to be
unwilling to bother to purchase a single share even when the suggested candidacy
for nomination is being discussed, offered and accepted? Surely there is
sufficient time between acceptance and the printing of said Notice to permit
such a purchase by a truly interested and enthusiastic nominee.
If you, my fellow shareholders, believe that all our Director-nominees
should show a modicum of interest by having at least a small measure of their
own personal savings at risk, just as our own savings are at risk, then please
vote in favor of this common-sense proposal.
THE RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board believes that a person who has the qualifications and
characteristics necessary to be an effective director should be eligible for
nomination to the Board regardless of whether the nominee owns Westinghouse
stock prior to being elected. The interests of the Company and its shareholders
are not served by excluding qualified candidates who do not own shares of
Westinghouse stock. In considering candidates for nomination, the Board
evaluates an individual's judgment, experience, knowledge, background, and
willingness to commit the time and effort needed to be an effective director.
The Board does not believe that such qualities are a function of an individual's
shareholdings prior to joining the Board.
It is also the Company's general experience that persons nominated to the
Board own substantially more than one share of Westinghouse stock or acquire
well in excess of one share of stock within a few months of being elected to the
Board. Furthermore, under the proposed amendment to the Deferred Compensation
and Stock Plan for Directors outlined in this proxy statement, all of the
non-employee directors of the Company would receive one-half of their annual
compensation in the form of equity of the Company. This change would increase
the
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equity interests of all directors in the Company and thereby further align the
interests of directors and shareholders. The Board thus believes that this
shareholder proposal would impose an unnecessary requirement on director
nominees.
The persons named in the enclosed proxy card (Messrs. Jordan, Clark and
Briskman) have advised that they intend to vote against the proposed resolution
unless a contrary direction is indicated on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE
PROPOSED RESOLUTION.
The favorable vote of a majority of the votes cast on this proposal is
required for passage.
5. SHAREHOLDER PROPOSAL: NUMBER OF BOARDS ON WHICH DIRECTORS SERVE
(Item 5 on proxy card)
Westinghouse has been advised that Harold and Sheila Kurte, residing at
2701 Edgewater Court, Fort Lauderdale, Florida 33332, the beneficial owners of
1,600 shares of common stock, will submit the following proposal at the meeting:
Whereas We Believe:
The responsible governance of a corporation is directly related to the
amount of time and attention that its directors devote to their duties.
Shareholder interest is best served by a board whose directors can give
fully of both their time and talents to the management of this corporation.
The independence of the board of directors is open to question when its
directors hold too many outside directorships and are constrained in their
ability to fully contribute to the affairs of the Westinghouse Electric
Corporation.
And Whereas:
At present there exists at this corporation the condition where certain
directors are obviously constrained in their ability to contribute their full
and undivided attention to the duties entrusted to them by the shareholders of
the corporation.
In fact according to the 1995 Westinghouse Notice of Annual Meeting and
Proxy Statement, one director of the corporation at present serves as a director
of no less than twelve (12) other for profit corporations.
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Hereby Be It Resolved:
No member of the Westinghouse Board of Directors may serve on the board of
more than five (5) other for profit corporations. All directors who serve on the
board of more than five (5) other for profit corporations have until the 1997
annual meeting to resign from whichever board(s) they see fit. Failing to do so,
a director is hereby declared ineligible to serve as a director of the
corporation.
Supporting Statement
We invite the company and its shareholders to endorse this proposal at the
1996 annual meeting. We feel that the adoption of this proposal will eliminate
any conflicts, divided loyalties, etc. any director may have.
We believe given the number of board and committee meetings held by a
corporation, it does not behoove the best interests of either the company or its
shareholders if its directors serve on the boards of more than a total of 6 for
profit corporations.
We also believe that this proposal will provide the nominating and
governance committee of the board of directors increased powers to seek more
independent nominees as potential candidates. Given the disappointing
performance of the company in the past, these nominees will bring fresh insight
to the running of the company and contribute to its future success.
This proposal does not serve to restrict the ability of the corporation's
directors of serving as trustees or directors of not for profit organizations
(i.e. charities), but hereby encourage it by recognizing the importance of
community involvement.
THE RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board does not believe that it is appropriate to establish an arbitrary
standard based on the number of for profit corporation boards on which a
director serves for determining whether a director is eligible to serve on the
Board. In evaluating a candidate for potential service as a director, the Board
examines a candidate's willingness and ability to commit the time and effort
needed to be an effective director. Each of the directors of the Company has a
proven record for meeting commitments and obligations and is fully committed to
fulfilling his or her duties to the Company and its shareholders. The record of
attendance and participation by the directors at Board and committee meetings
reflects their dedication and commitment to the Company. The Board believes that
shareholders should evaluate and vote for directors on the basis of their
qualifications and actual service to the Company, and not arbitrarily exclude a
director from service because of the number of other for profit corporation
boards on which such director serves.
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Furthermore, the Board does not agree with the claim that the number of
outside directorships affects the independence of a director or creates
conflicts of interests or divided loyalties. The Company carefully reviews the
other board memberships of its directors and, when a matter is presented to the
Board that involves a company on whose board a director of the Company also
serves, that director does not participate in any discussion or vote.
Finally, the Board believes that the experience directors gain through
service on other boards is an asset, not a liability, for the Company. By
establishing an arbitrary limit on the number of other for profit corporation
boards on which a director can serve, the proposal would limit the pool of
candidates who could serve on the Board and reduce the diversity of experience
of members of the Board. Such a requirement would also result in a loss to the
Company of the experience and knowledge of those directors who would be
ineligible to serve on the Board because they did not resign from the requisite
number of other boards.
The persons named in the enclosed proxy card (Messrs. Jordan, Clark and
Briskman) have advised that they intend to vote against the proposed resolution
unless a contrary direction is indicated on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE
PROPOSED RESOLUTION.
The favorable vote of a majority of the votes cast on this proposal is
required for passage.
6. SHAREHOLDER PROPOSAL: BASE SALARY TIED TO STOCK VALUE/BONUSES
(Item 6 on proxy card)
Westinghouse has been advised that Rollin R. Brandenburg and Elaine M.
Brandenburg, residing at 2715 Russell Road, Winthrop Harbor, Illinois
60096-1103, the beneficial owners of 3,780 shares of common stock, will submit
the following proposal at the meeting:
This year again, the Stockholders of Westinghouse Electric Corporation will
be asked to have faith and trust in the leadership of the Corporation. However,
the Stockholders are again paying for the poor management practices that have
taken place over the past decade, i.e. Stock Prices have remained virtually
stagnant for the past year and dividends are unchanged. At the same time, the
previous leaders of the Corporation have walked away with high salaries and
lavish long term bonuses that are not affected by these same poor leadership
practices.
It is time for the Board of Directors to hold themselves and Senior Level
Executives of the Corporation to the same standard that Hourly and Professional
Employees adhere to, namely that their actions must be proven to be correct
before they are rewarded for these actions. We as Stockholders have paid a
severe price for Lawsuits, Real Estate Investments and Customers replacing
equipment made by Competing Companies, while these past leaders are enjoying the
fruits of failed faith and trust.
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We recommend that:
The Board of Directors review their Executive compensation basis and
consider the Stockholders, that must bear the brunt of poor leadership while
making these decisions, similar to the following:
All Annual Base Salaries of Executives be tied to stock performance for the
previous year, e.g. an increase in stock value for the previous year warrants an
increase in base salary, while a similar decrease in stock value warrants an
equal reduction in base salary.
All bonuses to Executives be held until the basis for the bonus has proven
to be profitable, e.g. the proposed CBS purchase may or may not be profitable.
If it is, a bonus is proper, if it is not any bonus based on that decision must
be rescinded.
THE RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board believes that it is in the best interests of the Company and its
shareholders to link compensation, particularly for executives, to corporate
performance and increases in shareholder value. At the same time, the Company
must have the ability to attract, retain and motivate high-quality executives
and other employees through compensation plans that are competitive as measured
against industry norms and that reward employees for their individual job
performance. The Company believes that its compensation plans and policies
achieve these goals and that the interests of the Company and its shareholders
would be adversely affected if the Company were to operate under the standards
sought to be imposed by this proposal.
The Company's current executive compensation program was carefully
developed under the auspices of the Compensation Committee, which is comprised
exclusively of outside independent directors. Executive compensation is closely
linked to corporate and individual performance and rewards executives for the
achievement of performance goals designed to increase shareholder value. By
requiring annual base salary to be adjusted on the basis of stock performance
for the previous year and tying bonuses to a vague standard, this proposal
neglects a whole range of operational and financial goals of the Company that
could enhance shareholder value and fails to recognize significant contributions
made by executive officers.
The persons named in the enclosed proxy card (Messrs. Jordan, Clark and
Briskman) have advised that they intend to vote against the proposed resolution
unless a contrary direction is indicated on the proxy card.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE
PROPOSED RESOLUTION.
The favorable vote of a majority of the votes cast on this proposal is
required for passage.
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VOTING INFORMATION
Under Pennsylvania law and the Company's Restated Articles of Incorporation
and by-laws, the presence of a quorum is required to transact business at the
1996 Annual Meeting of Shareholders. A quorum is defined as the presence, either
in person or by proxy, of a majority of the votes that all shareholders are
entitled to cast at the meeting. Abstentions, votes withheld from director
nominees, and broker-dealer non-votes will be counted for purposes of
determining a quorum.
Assuming the presence of a quorum, (i) the eleven nominees for director
receiving the highest number of votes will be elected directors, (ii) the
affirmative vote of a majority of the common shares present, either in person or
by proxy, and entitled to vote is required to approve the amendment to the
Directors Plan, and (iii) the affirmative vote of a majority of the common
shares cast by the shareholders is required for the election of independent
accountants and for the adoption of the shareholder proposals.
Abstentions and broker-dealer non-votes are not votes "cast" in connection
with the election of independent accountants or the adoption of the shareholder
proposals. Therefore, they have the practical effect of reducing the number of
affirmative votes required to achieve a majority in each of these matters.
Abstentions are considered as present and entitled to vote in determining
the number of votes required to approve the amendment to the Directors Plan. An
affirmative vote of a majority of all shares present and entitled to vote is
required to amend the Directors Plan. Therefore, an abstention with respect to
the amendment will have the same effect as a vote against such amendment.
SHAREHOLDER PROPOSAL SUBMISSIONS
To be considered for inclusion in the proxy materials relating to the 1997
Annual Meeting of Shareholders, shareholder proposals must be received at the
principal executive offices of Westinghouse on or before November 12, 1996.
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SOLICITATION OF PROXIES
This solicitation of proxies is made on behalf of the Board of the Company.
Solicitation will be by mail, except for any personal solicitation made orally
or in writing by or under the direction of directors, officers and employees of
Westinghouse. The cost of solicitation, including the cost of any such personal
solicitation, will be paid by the Company. Westinghouse may request persons,
such as brokers, nominees and fiduciaries, holding stock in their names to
forward proxy materials to the beneficial owners and it will reimburse such
persons for their reasonable expenses incurred in doing so. In addition,
Westinghouse has retained Georgeson & Company Inc., Wall Street Plaza, New York,
New York 10005, for a fee of $12,000 plus incidental and related expenses, to
assist in providing proxy materials to brokers, nominees, fiduciaries and
individuals (other than officers of the Company) holding sizable amounts of
stock and in soliciting proxies from them.
A shareholder giving a proxy has the power to revoke the proxy by
delivering written notice of revocation to the Corporate Secretary prior to the
time voting is declared closed or by attending the meeting and voting in person.
All proxies will be voted if properly signed, received by the Corporate
Secretary prior to the time voting is declared closed, and not revoked prior to
that time.
As of the time of preparation of this proxy statement, the Board knows of
no matter, other than those described in the foregoing paragraphs, that will be
presented at the 1996 Annual Meeting of Shareholders. However, if any other
matters properly come before the meeting or any adjournment thereof, the person
or persons voting the proxies will vote them in accordance with their best
judgment.
March 12, 1996
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EXHIBIT A
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 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.
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.
(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
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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.
(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.
(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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(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.
(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.
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.
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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 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.
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.
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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.
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.
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
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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 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 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.
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
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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 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.
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 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 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.
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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.
(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 of 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.
(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) 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.
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(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 occurence of a Change in Control, all outstanding Stock Options will vest
and become immediately 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.
(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
Aggregate 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.
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(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:
(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.
(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.
(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.
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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.
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 Director's Fee for that calendar year in the form of a Restricted
Stock Award on the last Wednesday of the calendar month in which such person
becomes a Director (or of the next following calendar month if such 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.
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(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.
(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 the 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 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), 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 such 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.
(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
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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 the owner of the shares until such effective
date has occurred.
(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 in 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 RESTRICTIONS.
(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 Company
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 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 pursuant to Rule 16b-3, as such
rule may be amended, or any successor rule.
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.
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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. 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 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
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(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
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 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 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 Employee 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, and 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
The 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, such 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.
The Plan shall not preclude the adoption by appropriate means of any other
compensation or deferral plan for directors.
62
<PAGE> 64
[ X ] PLEASE MARK YOUR 4568
VOTES IN THIS
MANNER.
THE SHARES REPRESENTED BY THIS PROXY CARD WILL BE VOTED AS SPECIFIED BELOW, BUT
IF NO SPECIFICATION IS MADE THEY WILL BE VOTED FOR ITEMS 1, 2, AND 3 AND AGAINST
ITEMS 4, 5 AND 6, AND AT THE DISCRETION OF THE PROXIES ON ANY OTHER MATTER
THAT MAY PROPERLY COME BEFORE THE MEETING.
______________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, AND 3.
______________________________________________________________________________
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. The election of indepen- [ ] [ ] [ ]
Directors. dent accountants.
(see reverse)
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE(S): 3. Amendment to the [ ] [ ] [ ]
Deferred Compensation
and Stock Plan for
______________________________________________________ Directors.
</TABLE>
FOR AGAINST ABSTAIN
4. Shareholder Proposal: [ ] [ ] [ ]
Non-Employee Director
Nominee Stock Ownership.
5. Shareholder Proposal: [ ] [ ] [ ]
Number of Boards on Which
Directors Serve.
6. Shareholder Proposal: [ ] [ ] [ ]
Base Salary Tied to Stock
Value and Bonuses.
If you plan to attend the Annual Meeting, [ ]
please check this box.
If you receive more than one Annual Report [ ]
at the address set forth on this proxy card
and have no need for the extra copy, please
check the box at the right. This will not
affect the distribution of dividends or
proxy statements.
Change of Address [ ]
(on reverse).
SIGNATURE(S)___________________________________ DATE ____________________
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
- - -----------------------------------------------------------------------------
DETACH PROXY CARD HERE
<PAGE> 65
PROXY
WESTINGHOUSE ELECTRIC CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR ANNUAL MEETING OF SHAREHOLDERS,
APRIL 24, 1996
(See Proxy Statement for discussion of items.)
The undersigned hereby appoints Michael H. Jordan, Gary M. Clark and Louis J.
Briskman, and each of them, jointly and severally, with power of substitution,
to vote all shares of common stock which the undersigned is entitled to vote
on all matters which may properly come before the 1996 Annual Meeting of
Shareholders of Westinghouse Electric Corporation, or any adjournment thereof.
If you are a participant in the Westinghouse Savings Program, The Knoll Group
Retirement Savings Plan, or the Westinghouse de Puerto Rico Retirement Savings
Plan, this proxy card will also constitute voting instructions to the Trustees
under these plans.
Election of Directors. Nominees: (change of address)
Frank C. Carlucci, Robert E. Cawthorn,
Gary M. Clark, George H. Conrades, _________________________________
William H. Gray III, Michael H. Jordan, _________________________________
David K. P. Li, David T. McLaughlin, _________________________________
Richard R. Pivirotto, Paula Stern and _________________________________
Robert D. Walter. _________________________________
(If you have written in the
above space, please mark the
corresponding box on the reverse
side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES ON
THE REVERSE SIDE. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND
RETURN THIS PROXY CARD.
SEE REVERSE
SIDE
- - -------------------------------------------------------------------------------
DETACH PROXY CARD HERE
