-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KsLCARte/L/svNLNBnMWSfaKuPUGob5WfyC3YBnFZjEnq8VAakXefm5CFq1R75ig xbOrHG5bBSjoRSS+NpIADA== 0000950152-97-005620.txt : 19970807 0000950152-97-005620.hdr.sgml : 19970807 ACCESSION NUMBER: 0000950152-97-005620 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970806 SROS: CBOE SROS: NYSE SROS: PHLX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRW INC CENTRAL INDEX KEY: 0000100030 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 340575430 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02384 FILM NUMBER: 97652151 BUSINESS ADDRESS: STREET 1: 1900 RICHMOND RD CITY: CLEVELAND STATE: OH ZIP: 44124 BUSINESS PHONE: 2162917000 MAIL ADDRESS: STREET 1: 1900 RICHMOND ROAD CITY: CLEVELAND STATE: OH ZIP: 44124 10-Q 1 TRW INC. 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to ____________________ Commission file number 1-2384 -------------------------------- TRW Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Ohio 34-0575430 - --------------------------------------- --------------------------- (State or other jurisdiction of (I.R.S.Employer incorporation or organization) Identification No.) 1900 Richmond Road, Cleveland, Ohio 44124 ----------------------------------------- (Address of principal executive offices) (Zip Code) (216) 291-7000 ---------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of August 1, 1997, there were 123,234,716 shares of TRW Common Stock, $0.625 par value, outstanding. 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements
Statements of Earnings (unaudited) TRW Inc. and subsidiaries - -------------------------------------------------------------------------------------------------------------- Second quarter ended Six months ended June 30 June 30 In millions except per share data 1997 1996 1997 1996 - -------------------------------------------------------------------------------------------------------------- Sales $2,852 $2,572 $5,512 $5,086 Cost of sales 2,318 2,093 4,496 4,144 - --------------------------------------------------------------------------------------------------------------- Gross profit 534 479 1,016 942 Administrative and selling expenses 177 167 336 330 Research and development expenses 117 105 223 205 Interest expense 17 20 37 39 Other (income)expense-net 4 (1) 6 15 - --------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before income taxes 219 188 414 353 Income taxes 84 71 160 133 - --------------------------------------------------------------------------------------------------------------- Earnings from continuing operations 135 117 254 220 Discontinued operations - 13 - 27 - --------------------------------------------------------------------------------------------------------------- Net earnings $ 135 $ 130 $ 254 $ 247 - --------------------------------------------------------------------------------------------------------------- PER SHARE OF COMMON STOCK Fully diluted Continuing operations $ 1.05 $ .87 $ 1.97 $ 1.63 Discontinued operations - .11 - .21 - --------------------------------------------------------------------------------------------------------------- Net earnings per share $ 1.05 $ .98 $ 1.97 $ 1.84 - --------------------------------------------------------------------------------------------------------------- Primary Continuing operations $ 1.06 $ .88 $ 1.99 $ 1.64 Discontinued operations - .10 - .21 - --------------------------------------------------------------------------------------------------------------- Net earnings per share $ 1.06 $ .98 $ 1.99 $ 1.85 - --------------------------------------------------------------------------------------------------------------- Shares used in computing per share amounts Fully diluted 128.6 133.8 129.0 134.7 Primary 126.7 132.9 127.5 133.6 - --------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------- Dividends declared $ .31 $ .275 $ .31 $ .275 - ---------------------------------------------------------------------------------------------------------------
3 Balance Sheets (unaudited) TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------- June 30 December In millions 1997 1996 - ------------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents $ 83 $ 386 Accounts receivable 1,606 1,378 Inventories 525 524 Prepaid expenses 80 69 Deferred income taxes 284 424 - ------------------------------------------------------------------------------- Total current assets 2,578 2,781 Property, plant and equipment-on the basis of cost 6,116 5,880 Less accumulated depreciation and amortization 3,498 3,400 - ------------------------------------------------------------------------------- Total property, plant and equipment-net 2,618 2,480 Intangible assets Intangibles arising from acquisitions 517 258 Other 51 31 - ------------------------------------------------------------------------------- 568 289 Less accumulated amortization 87 78 - ------------------------------------------------------------------------------- Total intangible assets-net 481 211 Other assets 468 427 - ------------------------------------------------------------------------------- $ 6,145 $ 5,899 - ------------------------------------------------------------------------------- Liabilities and shareholders' investment Current liabilities Short-term debt $ 285 $ 52 Accounts payable 802 781 Current portion of long-term debt 79 72 Other current liabilities 1,257 1,252 - ------------------------------------------------------------------------------- Total current liabilities 2,423 2,157 Long-term liabilities 776 767 Long-term debt 498 458 Deferred income taxes 154 272 Minority interests in subsidiaries 106 56 Capital stock 77 81 Other capital 448 437 Retained earnings 2,193 1,978 Cumulative translation adjustments (22) 47 Treasury shares-cost in excess of par value (508) (354) - ------------------------------------------------------------------------------- Total shareholders' investment 2,188 2,189 - ------------------------------------------------------------------------------- $ 6,145 $ 5,899 - -------------------------------------------------------------------------------
4 Statements of Cash Flows (unaudited) TRW Inc. and subsidiaries
- ------------------------------------------------------------------------------- Six months ended June 30 In millions 1997 1996 - ------------------------------------------------------------------------------- Operating activities Net earnings $ 254 $ 247 Adjustments to reconcile net earnings to net cash provided by operating activities: Discontinued operations - (11) Depreciation and amortization 247 221 Deferred income taxes 17 (5) Other-net 7 4 Changes in assets and liabilities, net of effects of businesses acquired or sold: Accounts receivable (164) (154) Inventories and prepaid expenses 26 (2) Accounts payable and other accruals (19) 12 Other-net (10) (6) - ------------------------------------------------------------------------------- Net cash provided by operating activities 358 306 - ------------------------------------------------------------------------------- Investing activities Capital expenditures (228) (176) Acquisitions, net of cash acquired (415) - Other-net (7) - - ------------------------------------------------------------------------------- Net cash used in investing activities (650) (176) - ------------------------------------------------------------------------------- Financing activities Increase in short-term debt 178 91 Proceeds from debt in excess of 90 days 67 21 Principal payments on debt in excess of 90 days (24) (44) Reacquisition of common stock (179) (155) Dividends paid (78) (73) Other-net 29 34 - ------------------------------------------------------------------------------- Net cash used in financing activities (7) (126) - ------------------------------------------------------------------------------- Effect of exchange rate changes on cash (4) 1 - ------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (303) 5 Cash and cash equivalents at beginning of period 386 59 - ------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 83 $ 64 - -------------------------------------------------------------------------------
5 Results by Business Segments (unaudited) TRW Inc. and subsidiaries
- --------------------------------------------------------------------------------------------------------------------- Second quarter ended Six months ended June 30 June 30 In millions 1997 1996 1997 1996 - --------------------------------------------------------------------------------------------------------------------- Sales Automotive $ 1,876 $ 1,700 $ 3,669 $ 3,381 Space & Defense 976 872 1,843 1,705 - --------------------------------------------------------------------------------------------------------------------- Sales $ 2,852 $ 2,572 $ 5,512 $ 5,086 - --------------------------------------------------------------------------------------------------------------------- Operating profit Automotive $ 181 $ 170 $ 348 $ 310 Space & Defense 82 64 159 124 - --------------------------------------------------------------------------------------------------------------------- Operating profit 263 234 507 434 Company Staff and other (24) (25) (48) (36) Minority interest in earnings of (11) consolidated subsidiaries (5) (3) (6) Interest expense (17) (20) (37) (39) Earnings from affiliates 2 2 3 - - --------------------------------------------------------------------------------------------------------------------- Earnings from continuing operations before income taxes $ 219 $ 188 $ 414 $ 353 - ---------------------------------------------------------------------------------------------------------------------
6 NOTES TO FINANCIAL STATEMENTS (unaudited) Principles of Consolidation - --------------------------- The financial statements include the accounts of the Company and its subsidiaries except for two insurance subsidiaries. The wholly-owned insurance subsidiaries and the majority of investments in affiliated companies, which are not significant individually or in the aggregate, are accounted for by the equity method. Environmental Costs - ------------------- During the first quarter of 1997, the Company adopted the provisions of AICPA Statement of Position (SOP) 96-1, "Environmental Remediation Liabilities". There was no financial statement effect of the adoption as the Company's previous method of accounting for environmental costs was in accordance with SOP 96-1. Discontinued Operations - ----------------------- In September 1996, the Company sold substantially all of the businesses of its Information Systems and Services segment. The financial statements for the first six months of 1996 reflect as discontinued operations that segment's operating results of $27 million. Sales of the discontinued operations were $313 million for the first six months of 1996. Acquisition - ----------- In February 1997, the Company completed its purchase of an eighty percent equity interest in the air bag and steering wheel business of Magna International. The purchase price of approximately $450 million has been tentatively allocated to the net assets acquired based on their fair values. Inventories - ----------- Inventories consist of the following: (In millions)
June 30 December 31 1997 1996 ------ ----- Finished products and work in process $280 $295 Raw materials and supplies 245 229 --- --- $525 $524 ==== ====
7 Long-Term Liabilities - --------------------- Long-term liabilities at June 30, 1997 and December 31, 1996, include $692 million and $681 million, respectively, relating to postretirement benefits other than pensions. Other (Income)Expense-Net - ------------------------- Other (income)expense included the following: (In millions)
Second quarter ended Six months ended June 30 June 30 1997 1996 1997 1996 ---------------------------------- ------------------------ Other income $ (12) $ (12) $ (28) $ (18) Other expense 14 10 30 30 Foreign currency translation 2 1 4 3 ---- ---- --- ---- $ 4 $ (1) $ 6 $ 15 ==== ====== ==== =====
Earnings Per Share - ------------------ Fully diluted earnings per share have been computed based on the weighted average number of shares of Common Stock outstanding during each period, including common stock equivalents and assuming the conversion of the Serial Preference Stock II--Series 1 and 3. Primary earnings per share have been computed based on the weighted average number of shares of Common Stock outstanding during each period including common stock equivalents. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact is expected to result in a $.03 and $.02 per share increase in primary earnings per share for the second quarter ended June 30, 1997 and June 30, 1996, respectively. There is an immaterial impact of Statement No. 128 on the calculation of fully diluted earnings per share for these quarters. In April 1997, the number of authorized shares of TRW Common Stock was increased from 250,000,000 to 500,000,000 shares. 8 Supplemental Cash Flow Information - ----------------------------------
Six months ended (In millions) June 30 -------------------------------------- 1997 1996 ---- ---- Interest paid (net of amount capitalized) $ 36 $ 30 Income taxes paid (net of refunds) $(22) $136
The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Other Contingencies - ------------------- During 1996, the Company was advised by the Department of Justice ("DOJ") that it had been named as a defendant in two lawsuits brought by a former employee and filed under seal in 1994 and 1995, respectively, in the United States District Court for the Central District of California under the QUI TAM provisions of the civil False Claims Act. The Act permits an individual to bring suit in the name of the United States and share in any recovery. The allegations in the lawsuit relate to the classification of costs incurred by the Company that were charged to certain of its federal contracts. Under the law, the government must investigate the allegations and determine whether it wishes to intervene and take responsibility for the lawsuits. The actions remain under seal until the government completes its investigations and determines whether to intervene. However, permission from the court has been obtained by the Company to make the disclosures contained herein. The Company is cooperating with the DOJ's investigation and is engaged in ongoing discussions with them regarding the allegations. The Company cannot presently predict the outcome of these matters, although management believes that the Company would have meritorious defenses if either the government decides to pursue the lawsuits or the former employee decides to do so without government participation. Interim Statements - ------------------ The financial statements are based in part on approximations and are subject to adjustments that may develop, such as unsettled contract and renegotiation matters and matters that arise in connection with the annual audit of the financial statements; however, in the opinion of management, all adjustments (which consist of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented have been included. Results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. 9 Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations --------------------- RESULTS OF OPERATIONS (In millions except per share data)
Six Months Ended Second Quarter June 30 --------------------------------------- ---------------------------------------- Percent Percent 1997 1996 Inc (Dec) 1997 1996 Inc (Dec) ---- ---- --------- ---- ---- --------- Sales $2,852 $2,572 11% $5,512 $5,086 8% Operating Profit $ 263 $ 234 12% $ 507 $ 434 17% Earnings from Continuing Operations $ 135 $ 117 15% $ 254 $ 220 15% Fully Diluted Earnings Per Share - Continuing Operations $ 1.05 $ .87 21% $ 1.97 $ 1.63 21% Effective Tax Rate 38.7% 37.8% 38.7% 37.8%
The increase in sales for the second quarter and first six months of 1997 was primarily due to the sales contribution from the acquisitions of air bag and steering wheel operations, and from higher volume in the Automotive and Space and Defense segments. The sales increase was moderated by the effect of a strong U.S. dollar. The higher operating profit was due to the acquisitions, continued cost-reduction efforts, and profit from the higher sales volume in the Automotive and Space and Defense segments, partially offset by the effect of lower pricing in the Automotive segment. Operating profit for the first six months of 1996 included a $15 million before tax charge related to the initial application of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Net earnings for the first six months of 1996 included a $12 million benefit from an insurance claim settlement primarily related to previously divested businesses, offset by a $13 million noncash charge related to the initial application of SFAS No. 121. Interest expense was $37 million for the first six months of 1997 compared to $39 million for the first half of 1996. The decrease in interest expense was primarily due to lower foreign debt levels. 10 Automotive (In millions)
Six Months Ended Second Quarter June 30 --------------------------------------------- ---------------------------------------------- Percent Percent 1997 1996 Inc (Dec) 1997 1996 Inc (Dec) ---- ---- --------- ---- ---- --------- Sales $1,876 $1,700 10% $3,669 $3,381 9% Operating Profit $ 181 $ 170 6% $ 348 $ 310 12%
The increase in sales for the second quarter and first six months of 1997 was primarily due to the sales contribution from the acquisitions of air bag and steering wheel operations, and from higher volume in the air bag, seat belt, and steering and engine component businesses. The sales increase was moderated by the effect of a strong U.S. dollar, as well as lower pricing, principally in the North American air bag business. The higher operating profit for the second quarter and first six months of 1997 resulted from the acquisitions, higher sales volume, and continued cost-reduction efforts, partially offset by the effect of lower pricing. Operating profit for the first six months of 1996 included a $15 million before tax charge related to the initial adoption of SFAS No. 121. Space & Defense (In millions)
Six Months Ended Second Quarter June 30 --------------------------------------------- --------------------------------------------- Percent Percent 1997 1996 Inc (Dec) 1997 1996 Inc (Dec) ---- ---- --------- ---- ---- --------- Sales $976 $872 12% $1,843 $1,705 8% Operating Profit $ 82 $ 64 28% $ 159 $ 124 28%
Sales and operating profit for the second quarter and first six months of 1997 increased primarily due to the successful conversion of recent contract awards into revenue growth as well as strong ongoing program performance. LIQUIDITY AND FINANCIAL POSITION In the first six months of 1997, cash flow provided by operating activities of $358 million, a net increase in debt of $221 million, and a net increase of $18 million in other items were used to fund business acquisitions of $415 million, capital expenditures of $228 million, reacquisition of common stock of $179 million, and dividend payments of $78 million. As a result, cash and cash equivalents decreased by $303 million. 11 Net debt (short-term debt, the current portion of long-term debt and long-term debt less cash and cash equivalents) was $779 million at June 30, 1997, compared to $196 million at December 31, 1996. The ratio of net debt to total capital (net debt, minority interests and shareholders' investment) at June 30, 1997 was 25 percent compared to 8 percent at December 31, 1996. During July 1997, the Company issued $30 million in medium-term notes under its shelf registration statements. The notes were used to refinance short-term debt. After this issuance, $420 million remains available for borrowing under the Company's shelf registration statements. During the second quarter of 1997, the company requested an amendment of the terms of its U.S. and multicurrency revolving credit agreements to extend the expiration date of the agreements from July 1, 2001 to July 1, 2002. Also, one additional bank will join the bank group providing the U.S revolving credit agreement and one additional bank will join the bank group providing the multicurrency revolving credit agreement. The amendment is expected to be executed in August 1997. During the first six months of 1997, 3,529,133 shares of TRW Common Stock were repurchased for approximately $184 million, of which approximately $5 million was settled in July. Management believes that funds generated from operations and existing borrowing capacity will be adequate to fund the Company's current share repurchase program and to support and finance planned growth, capital expenditures, company-sponsored research and development programs and dividends payments to shareholders. OTHER MATTERS During 1996, the Company was advised by the Department of Justice that it had been named as a defendant in two lawsuits brought by a former employee and filed under seal under the QUI TAM provisions of the civil False Claims Act. See "Other Contingencies" note in the Notes to Financial Statements for further information. FORWARD-LOOKING STATEMENTS Statements in this filing that are not historical facts are forward-looking statements, which involve risks and uncertainties that could affect the Company's actual results. Information regarding the important factors that could cause TRW's actual results to differ materially from the forward-looking statements contained in this filing can be found in TRW's reports filed with the Securities and Exchange Commission, including TRW's Form 8-K filed on May 20, 1997. 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings. ------------------ The United States Environmental Protection Agency has issued a notice of violation to the Company under the Clean Air Act with respect to air emissions at the former Izumi Industries, Corporation, Inc. facility in Yaphank, New York, which TRW acquired in November, 1996. The New York State Department of Environmental Conservation has informed TRW that it may initiate administrative proceedings against the Company under the New York Environmental Conservation Law with respect to such emissions. TRW could be liable for civil penalties and fines and other relief with respect to such matters which, if imposed, are not expected to have a material effect on TRW's financial position. Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- (a) The Company held its 1997 Annual Meeting of Shareholders on April 30, 1997. (b) Proxies for the Annual Meeting of Shareholders were solicited pursuant to Regulation 14 under the Act; there was no solicitation in opposition to management's nominees as listed in the proxy statement; and all of such nominees were elected. (c) J. T. Gorman was elected a Director of the Company with 113,750,268 votes for election, 842,557 votes withheld from voting and 11,135,498 shares not voted, including broker non-votes. P. S. Hellman was elected a Director of the Company with 113,840,404 votes for election, 752,421 votes withheld from voting and 11,135,498 shares not voted, including broker non-votes. K. N. Horn was elected a Director of the Company with 113,816,175 votes for election, 776,650 votes withheld from voting and 11,135,498 shares not voted, including broker non-votes. W. S. Kiser was elected a Director of the Company with 113,772,188 votes for election, 820,637 votes withheld from voting and 11,135,498 shares not voted, including broker non-votes. L. M. Martin was elected a Director of the Company with 113,783,860 votes for election, 808,965 votes withheld from voting and 11,135,498 shares not voted, including broker non-votes. 13 A proposed amendment to the Amended Articles of Incorporation of the Company to increase the authorized number of shares of common stock was approved, with 99,967,773 votes for, 13,919,109 votes against, 705,943 votes abstaining and 11,135,498 shares not voted, including broker non-votes. The shareholders approved adoption of the 1997 TRW Long-Term Incentive Plan with 107,323,712 votes for, 6,453,659 votes against, 815,454 votes abstaining and 11,135,498 shares not voted, including broker non-votes. The shareholders ratified the appointment of Ernst & Young LLP as the Company's independent auditors for the 1997 fiscal year with 113,945,826 votes for, 271,090 votes against, 375,909 votes abstaining and 11,135,498 shares not voted, including broker non-votes. (d) None. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- (a) Exhibits: 10(a) Letter Agreement dated February 25, 1997 between TRW Inc. and M. A. Coyle. 10(b) Amendment to Letter Agreement dated April 21, 1997 between TRW Inc. and M. A. Coyle. 10(c) Consulting Agreement dated February 25,1997 between TRW Inc. and M. A. Coyle. 10(d) Deferred Compensation Plan for Non-Employee Directors of TRW Inc. dated July 1, 1997. 11 Computation of Earnings Per Share -- Unaudited. 27 Financial Data Schedule. 99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited (Supplement to Exhibit 12 of the following Form S-3 Registration Statements of the Company: No. 33-61711, filed August 10, 1995, and No. 33-42870, filed September 20, 1991). (b) Reports on Form 8-K: Current Report on Form 8-K dated May 20, 1997 as to forward-looking statements. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TRW Inc. Date: August 6, 1997 By: /s/ William B. Lawrence ------------------------------ William B. Lawrence Executive Vice President and Secretary Date: August 6, 1997 By: /s/ Carl G. Miller ------------------------------ Carl G. Miller Executive Vice President and Chief Financial Officer 15 FORM 10-Q Quarterly Report for Quarter Ended June 30, 1997 EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION 10(a) Letter Agreement dated February 25, 1997 between TRW Inc. and M. A. Coyle. 10(b) Amendment to Letter Agreement dated April 21, 1997 between TRW Inc. and M. A. Coyle. 10(c) Consulting Agreement dated February 25, 1997 between TRW Inc. and M. A. Coyle. 10(d) Deferred Compensation Plan for Non-Employee Directors of TRW Inc. dated July 1, 1997. 11 Computation of Earnings Per Share --Unaudited. 27 Financial Data Schedule. 99 Computation of Ratio of Earnings to Fixed Charges -- Unaudited (Supplement to Exhibit 12 of the following Form S-3 Registration Statements of the Company: No. 33-61711, filed August 10, 1995, and No. 33-42870, filed September 20, 1991). EX-10.A 2 EXHIBIT 10(A) 1 Exhibit 10(a) February 25, 1997 Martin A. Coyle 1900 Richmond Road Cleveland, Ohio 44124 Dear Marty: This letter sets forth our agreement regarding your change in status and ultimate retirement from TRW and details the terms and conditions of your termination of employment. Please review it carefully to make sure we are in complete agreement. EMPLOYMENT Your employment with TRW will terminate upon your retirement on March 1, 1999, or such earlier date (first day of a month) as you may choose pursuant to the section entitled "Early Retirement" hereunder (referred to in this letter variously as your "termination of employment," the "date of termination," or the "date your employment terminates"). You will remain in your current position as Executive Vice President, General Counsel and Secretary until May 31, 1997. During that time, you will continue to have active responsibility for all current assignments (primarily Law Department, Environmental Control and Investment Management), and will cooperate with Bill Lawrence so that he is ready to undertake the responsibilities of Executive Vice President and General Counsel by May 1, 1997. You will continue to serve and be elected as an elected Executive Vice President from June 1, 1997 until termination of employment. During that period, you (1) will make yourself available for consultation and advice to the Executive Vice President and General Counsel; (2) will serve as Chairman of the TRW Investment Management Company; (3) will continue to be responsible for the Environmental Control function; and (4) will make yourself available for special projects assigned by the Chairman and Chief Executive Officer. After June 1, 1997, you 2 Martin A. Coyle February 25, 1997 Page 2 may, however, without otherwise affecting the terms of this agreement, eliminate any or all of the responsibilities set forth in the foregoing sentence, and such elimination will be effective upon your giving notice of same to me. SALARY AND INCENTIVES You will continue to receive an amount equivalent to your current base salary at the current annual rate of Three Hundred Forty-Five Thousand Dollars ($345,000.00), in semi-monthly payments through February 28, 1999. You will receive Operational Incentive Plan (OIP) bonus payments of $172,500.00 for 1997 and 1998, said payments to be payable in February of 1998 and February of 1999, respectively. You will be deemed to be an OIP 1 or equivalent if such designation is changed. You will not be eligible to receive any incentive payment with respect to 1999 or any year thereafter. You will also receive a payment equivalent to the Strategic Incentive Plan (SIP) bonus with respect to 1997, said payment to be payable in February of 1998. You will not be eligible to receive any SIP payment with respect to 1998 or any year thereafter. CONSULTING AGREEMENT If you retire on or after March 1, 1999, you may (if you choose) serve as a Consultant to TRW, subject to the terms of the Consulting Agreement attached hereto as Exhibit 1, a copy of which I have executed and delivered to you on behalf of TRW. OFFICER/DIRECTOR STATUS Although your benefits and perquisites shall continue until termination of employment as though you were a member of the Management Committee of TRW Inc., your membership (for purpose of attendance at business meetings and listing of members) in such committee will terminate effective June 1, 1997. Effective June 1, 1997, you will cease to be an officer within the definition of Rule 16a-1(f) under the Securities Exchange Act of 1934; however, a former officer continues to be subject to Section 16 for up to six months following termination of officer status, and certain post-termination filing requirements 3 Martin A. Coyle February 25, 1997 Page 3 also exist. Please contact Kathleen Weigand if you have any questions concerning Section 16. In addition, for a period of six (6) months from the date of termination, you should continue to contact Kathleen Weigand promptly following any transaction with regard to TRW stock or stock options. After your date of termination, you will not have, nor will you hold yourself out as having, authority to bind TRW in any manner. EMPLOYMENT CONTINUATION AGREEMENT Schedule A to your Amended and Restated Employment Continuation Agreement dated February 7, 1996, is hereby amended as set forth on Exhibit 2 hereto effective June 1, 1997. Your Employment Continuation Agreement will otherwise remain in full force and effect until termination of employment. TRW agrees that since you could add significant value to TRW in the event there is a change-in-control or a public threat thereof, if such a change-in-control (as that term is defined in your Employment Continuation Agreement) or a public threat thereof should occur on or before the termination of your employment, then your agreement to retire will be null and void and you will remain an elected officer and employee of TRW until the threat is eliminated or until a change-in-control occurs. During such time, your employment with TRW will not be deemed to have terminated. When such threat is eliminated other than through a change-in-control, you agree to retire on the later of March 1, 1999 or the first day of the month after such threat is eliminated. Upon a change-in-control (which may occur after March 1, 1999 if the public threat thereof occurs before such date), your Employment Continuation Agreement shall become operative. Your compensation after March 1, 1999 until the threat is eliminated or a change-in-control occurs shall be $1,000 per month. Solely for purposes of your Employment Continuation Agreement (i) no payment hereunder shall be deemed a "severance payment"; (ii) your rate of base pay immediately prior to the change-in-control shall be deemed to be $345,000; (iii) the aggregate incentive pay for the year preceding the change-in-control shall be deemed to be $172,500 unless the change-in-control occurs prior to January 1, 1998, in which case the 4 Martin A. Coyle February 25, 1997 Page 4 amount shall be deemed to be $240,000; (iv) TRW will not utilize any provision of this agreement to deny any benefits under your Employment Continuation Agreement; (v) you will not be required to devote substantially all your time to the business and affairs of TRW as otherwise required by Section 2(a) of your Employment Continuation Agreement, but you will be available for consultation; and (vi) your employment with TRW would be deemed to have continued until you attained age 65. TRW will not take any action to terminate your Employment Continuation Agreement prior to your termination of employment. To the extent any part of this section entitled EMPLOYMENT CONTINUATION AGREEMENT is inconsistent with your Employment Continuation Agreement, your Employment Continuation Agreement is deemed to be amended. If prior to your termination of employment, Employment Continuation Agreements with a majority of officers are amended to provide additional benefits to such officers, your Employment Continuation Agreement will also be so amended. BENEFITS Until the date of termination of your employment, all benefits and perquisites you currently have shall continue. Although you will not receive any new stock-related grants, you shall receive the benefits of any amendments or changes made in any existing benefits or perquisites generally applicable to Company Staff Department Heads to the extent such amendments or changes are made effective prior to termination of employment. Without limiting the foregoing, you will have the following benefits until termination of employment: VACATION You will continue to accrue vacation until termination of employment, at the OIP 1 level. You will not be paid for any accrued but unused vacation. 5 Martin A. Coyle February 25, 1997 Page 5 MEDICAL COVERAGE You will continue to be a participant in the TRW Executive Health Care Plan during your employment, (providing medical coverage for you and your family in accordance with the terms of such Plan) provided that you continue to make the contributions in accordance with the Plan. Under the provisions of the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), you may elect within sixty (60) days of your termination of employment to continue benefit coverage for a period of up to eighteen (18) months based on either the TRW Executive Health Care Plan or any TRW ChoicePlus medical plan provisions. All other rights you or your dependents would have with respect to the duration of your group health plan benefits will be governed by COBRA. If you elect to retire (i.e., immediately commence to receive your retirement benefit from the TRW Salaried Pension Plan (SPP) on the first day of the month following your termination of employment, you will be eligible to enroll in the TRW Retirement Medical Plan, with coverage effective as of your retirement date, in which case you will have no rights to COBRA. Your coverage under that plan will be at the Retirement Medical Plan rates in effect from time to time. If you fail to elect the TRW Retirement Medical Plan upon your retirement, you may not thereafter elect the TRW Retirement Medical Plan, but you may continue COBRA coverage to the extent permitted under COBRA or the terms described in the foregoing paragraph. LIFE INSURANCE You will participate in TRW's Business Travel Accident Insurance and Accidental Death Insurance until the date your employment terminates. Upon termination of employment, you will no longer be covered by TRW's Business Travel Accident Insurance or Accidental Death Insurance. You will have thirty-one (31) days from the date your employment terminates to convert your TRW-paid life insurance to an individual policy (currently through Prudential); if you retire, you will be eligible for a retiree life insurance policy not to exceed Five Thousand Dollars ($5000.00). If you are participating in the optional group 6 Martin A. Coyle February 25, 1997 Page 6 universal life insurance program (currently administered by Aetna), at the time your employment terminates, you should automatically receive notification regarding the requirements for continuation of your policy once payroll deductions cease. Your split dollar life insurance arrangement shall continue in accordance with the terms thereof. If you die before termination of employment you will receive all death benefits under all benefit plans applicable to you. LONG-TERM DISABILITY Your eligibility to qualify for long-term disability benefits will cease upon the termination of your employment with TRW. COMPANY CAR You will remain on the Company Staff Automobile Program until termination of employment. Upon termination of employment, you may purchase your company car in accordance with our standard lease buyout practices, understanding, however, that you will receive one additional year of automobile depreciation in determining the buyout price. FINANCIAL COUNSELING You will continue to be entitled to receive personal financial counseling with the provider of the company's financial counseling plan (currently the Ayco Corporation). Upon termination of your employment with TRW, you will receive, at TRW's cost, (subject to tax imputation) one additional year of personal financial counseling with the provider of the company's financial counseling plan at that time. DEFERRED COMPENSATION PLAN You will continue to be eligible to participate in the Nonqualified TRW Deferred Compensation Plan until your employment terminates. Your accounts under the Deferred Compensation 7 Martin A. Coyle February 25, 1997 Page 7 plan will be paid out to you in accordance with the provisions of the Plan. OFFICE SUPPORT You will continue in your current office with a full time secretary through May 31, 1997. Thereafter, you will receive an equivalent office and a full-time secretary until termination of employment. The secretary is authorized to assist on personal matters. CREDIT CARDS You agree to return your telephone credit card and your American Express and other corporate credit cards, if any, to TRW upon termination of your employment. EXPENSES During your employment with TRW, the company will continue to reimburse you for reasonable travel and entertainment expenses, including dues and charges for clubs and organizations currently being reimbursed and those relating to those professional organizations in which you are currently a member. STOCK OPTIONS You will continue to earn out stock options during your employment. Once your employment terminates, your options will cease to earn out. Your rights to exercise your earned out stock options are controlled by the terms of the option agreements. You will no longer be eligible to receive new stock option grants. If you have any questions regarding your stock options, please contact Kathleen Weigand. PENSION You will be credited with benefit service under the qualified SPP and the nonqualified Supplementary Retirement Income Plan (SRIP) and Benefits Equalization Plan (BEP), as provided below. If you elect to retire, you will be eligible for an early retirement 8 Martin A. Coyle February 25, 1997 Page 8 benefit under the terms of the SPP and the nonqualified SRIP or the BEP, based upon your service and compensation. For purposes of determining the benefit(s) payable to you, the following rules will apply: (i) For purposes of determining the benefit that will be paid from the SPP, you will be credited with benefit service to the earliest of the date you retire OR the date you die. (ii) For purposes of determining the benefit that will be paid from the SPP upon your retirement, your pensionable earnings (subject to Internal Revenue Code ss.401(a)(17) limits) through the earliest of the date you retire, the date you die, or the last day of the month of your termination of employment will be taken into account in determining your highest consecutive five year average earnings; if your termination of employment is before June 30 of the year of your termination, then your pensionable earnings through the earliest of the date you retire or the date you die, or December 31 of the year preceding the year of your termination will be taken into account in determining your highest consecutive five year average earnings. (iii) For purposes of determining the nonqualified plan benefit under the SRIP and the BEP, you will be credited with benefit service through the earliest of the end of the month immediately preceding your elected retirement date or the date you die. (iv) For purposes of determining the nonqualified plan benefit under the SRIP and the BEP, your pensionable earnings through the earliest of the date you retire or the date you die, will be taken into account in determining your five highest consecutive years of average earnings. TRW will withhold such amounts as are required by any applicable Qualified Domestic Relations Orders. In no event will your benefit service under the qualified SPP or under the nonqualified plans extend beyond the last day of the month that is one year from your termination of employment. By 9 Martin A. Coyle February 25, 1997 Page 9 signing this agreement, you are expressly waiving any right to having compensation after the last day of the month of your termination of employment included for the determination of benefits payable under the SPP. If you are eligible and do not elect to retire on or before the first day of the month following one year from your termination of employment, you will be placed in deferred retirement status until the earlier of your elected retirement date or the first of April following the year in which you reach age 70-1/2. In that event, however, you will not be eligible to elect the lump sum option from the SPP, nor will you be able to elect to be covered by the TRW Retirement Medical Plan. STOCK SAVINGS PLAN AND BENEFITS EQUALIZATION PLAN You may continue to make contributions to The TRW Employee Stock Ownership and Stock Savings Plan ("SSP") until the earlier of February 28, 1999, or the termination of your employment, and you may continue to make contributions to the BEP and to be credited with TRW matching contributions pursuant to the BEP. At such date, the options available to you will be as governed by the SSP or the BEP, as the case may be. We suggest that you seek the advice of your tax counsel regarding the advisability and effect of deferring the receipt of any payments under the SSP and the timing of any election to defer. EARLY RETIREMENT If you choose to retire before December 31, 1997, you may do so, and in such event you will be paid in cash within 10 days thereafter, a sum equal to (a) $1,035,000 less any payments made after March 1, 1997 for base and OIP, and (b) a cash payment equal to 20,000 (as adjusted) times the average of the high and low price of TRW stock on the last trading day prior to retirement, in lieu of the SIP payment due with regard to 1997. Should you choose to retire between December 31, 1997 and February 28, 1999, you may do so, and in such event you will be paid in cash a sum equal to $1,035,000 less any base or OIP 10 Martin A. Coyle February 25, 1997 Page 10 payments made after March 1, 1997, it being assumed that you will have received your SIP payment with respect to 1997. Your estate or designated beneficiary would be entitled to any such payments (determined as though you retired on the first day of the month following death; said day to be considered "termination of employment" for purposes of this agreement but not for purposes of any TRW benefit plans), should you die before March 1, 1999. CONFIDENTIALITY; COOPERATION In consideration of TRW's agreement to provide the compensation, benefits and payments set forth in this letter agreement: (a) You acknowledge that as an employee of TRW you possess confidential and proprietary information owned by TRW and you agree not to use this information or reveal it to any other person or corporation. You will not remove from TRW facilities any materials which contain TRW confidential or proprietary information. (b) You agree not to assist any party other than TRW in any litigation or investigation against TRW or its affiliates, successors, assigns, officers, directors, employees or agents, except as required by law. You further agree that if you believe any such action is required by law, you will first afford TRW the opportunity to raise and obtain a ruling on any claim of attorney-client, work product, or other privilege or any other contractual or other defense that may be applicable. (c) You agree to provide your reasonable cooperation to TRW in any future lawsuit, administrative proceeding or other judicial, administrative or legislative matter in which your assistance may be desired by TRW. (d) Until termination of your employment, you agree that you (i) shall refrain from accepting work, engagements, or appointments from any third party which would conflict with the protection of TRW confidential or proprietary information 11 Martin A. Coyle February 25, 1997 Page 11 and (ii) shall not, directly or indirectly, as owner, manager, officer, director, employee, consultant or in any other capacity, become financially interested in or otherwise connected with a third party which engages in business activity which is materially competitive (more that 25% overlap in both companies) with the business activities of TRW; provided, however, this limitation shall not preclude you from being otherwise employed or making an equity investment in a firm whose stock is listed on a national securities exchange or NASDAQ. RELEASE In consideration for TRW's agreement to provide the compensation, benefits and payments set forth in this letter agreement: (a) You agree for yourself, your heirs, executors, administrators, successors and assigns to release and discharge forever TRW, its affiliates and insurers, their successors and assigns, officers, directors, employees and agents from any and all claims, demands, causes of action, losses and expenses of every nature whatsoever, whether known or unknown, arising out of or in connection with your employment by TRW or the termination thereof, including but not limited to, breach of contract (express or implied), wrongful discharge, intentional infliction of emotional harm, defamation, libel, slander, or other tort, or violation of any federal, state or municipal statute or ordinance relating to discrimination in employment, including but not limited to Title VII of the Civil Rights Act of 1964 (42 U.S.C. Section 2000(e) et seq.) and Ohio Revised Code Section 4112 et seq. In signing this Agreement, you agree to waive any rights you would have to pursue any of the claims described herein against TRW through the company's Alternative Dispute Resolution (ADR) process, or through any court or administrative agency; and further agree not to bring any suit or action in any court or administrative agency against any of the beneficiaries of this release arising out of or relating to the subject matter of this release. 12 Martin A. Coyle February 25, 1997 Page 12 (b) YOU AGREE THAT BY SIGNING THIS LETTER, YOU ARE ALSO KNOWINGLY AND VOLUNTARILY WAIVING ANY AND ALL CLAIMS OR CAUSES OF ACTION YOU MAY HAVE UNDER THE FEDERAL AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (29 U.S.C. SECTION 621, ET SEQ.), AS AMENDED. TRW agrees to release you, your successors and assigns from any and all claims, demands, causes of action, losses and expenses of every nature whatsoever, whether known or unknown, arising out of or in connection with your employment by TRW, or the termination thereof. MISCELLANEOUS (a) It is important that you understand that the continued availability, after the date of this letter, of the benefits specified above is subject to (i) the continued existence of the applicable TRW benefit plans, (ii) the retention of IRS-qualified status for those plans which are currently so qualified, (iii) terms of all applicable TRW benefit plans as such terms and conditions are in effect from time to time in the future and (iv) changes in governing laws and regulations applicable to benefit plans. If such benefits terminate or are reduced you will receive any substitute program given to other Department Heads. (b) You and TRW acknowledge and agree that: (i) only a significant material breach of your obligations specified under "Confidentiality; Cooperation" above, will constitute grounds for TRW to terminate any payments or benefits to be made or provided to you hereunder; (ii) certain of TRW's obligations to pay money pursuant to this letter agreement are merely those of an unfunded and unsecured promise to pay money in the future, and any and all of TRW's assets will remain the general, unpledged and unrestricted assets of TRW; and 13 Martin A. Coyle February 25, 1997 Page 13 (iii) you may not borrow against TRW's obligations to pay money to you pursuant to this agreement, nor may you assign or otherwise transfer TRW's obligations hereunder, (except upon death) or any interest in them, and any attempt to do so will be ineffective. (c) Upon retirement, you will receive all benefits generally made available to OIP I retirees in good standing. (d) In no case will your termination of employment be deemed or referred to as being for cause (under any benefit plan or otherwise). (e) All reference checks should be directed to Joe Gorman, Bill Lawrence or me. TRW will assure that Joe, Bill and I will limit our responses thereto to your positive accomplishments as General Counsel or before, and the value you added to the company during your tenure as General Counsel. (f) TRW acknowledges that after June 1, 1997, your physical presence at TRW on a day-to-day basis is not required and that nothing herein will preclude you from assuming responsibilities or employment outside of TRW, as long as you (1) do not violate "Confidentiality; Cooperation" provision; and (2) that you have eliminated inconsistent obligations under the Employment Section herein. (g) It is understood that the terms of this letter agreement will be governed by the laws of the State of Ohio regardless of where either party may be domiciled. (h) Any payments made by TRW hereunder are subject to applicable federal, state and local tax withholding. (i) In the event that any portion of this letter agreement shall be held to be void, voidable or unenforceable, the remaining portions hereof shall remain in full force and effect. 14 Martin A. Coyle February 25, 1997 Page 14 (j) You may wish to consult with your financial or tax advisor with regard to the tax implication of any benefits, including nonqualified benefit payments and deferrals, described in this agreement. You acknowledge and agree that no representations or warranties have been made to you with respect to the tax consequences of any payment provided for under this letter agreement. (k) The release set forth under "Release" does not constitute a release as to any liability for a breach or default of this letter agreement. (l) This agreement (other than this paragraph and the third paragraph under "Opportunity to Revoke" below, which are binding on the parties upon their respective execution) is contingent upon approval by the Compensation and Stock Option Committee of the Directors of TRW Inc. TRW Management agrees to present this Agreement, and recommend approval of same (without limitation or restriction) on or before April 30, 1997. Until such approval is given, or in the event approval is denied, you shall continue as Executive Vice President, General Counsel and Secretary with the compensation, benefits and perquisites you currently have. ENTIRE AGREEMENT With the sole exception of the Consulting Agreement attached hereto as Exhibit 1, you and TRW agree that this letter agreement constitutes the entire agreement and supersedes all prior agreements and understandings, whether oral or written, between you and TRW with respect to the subject matter of this agreement. You agree that the obligations (other than the non-compete) of the paragraphs relating to "Confidentiality; Cooperation" and "Release" have been separately negotiated and shall survive the expiration or termination of this letter agreement. 15 Martin A. Coyle February 25, 1997 Page 15 ATTORNEY Each party understands and acknowledges that each has the right to consult an attorney (at their personal expense) regarding the terms of this agreement prior to signing this letter, that each has been given ample time to do so, and that whether or not each has done so is totally his or its choice. The role of the TRW Law Department personnel in this arrangement has been to formalize the understanding between the parties (expressed through an outline) and not to give legal advice to either party. In the event either you or TRW breaches this agreement and the other party brings an action to enforce the agreement in a court of competent jurisdiction, the party who is finally adjudged to be prevailing shall be entitled to reasonable attorneys' fees. OPPORTUNITY TO REVOKE You acknowledge that you were given this letter on February 25, 1997, that you have reviewed it, and, if you so choose, you have 21 days from that date to consider it prior to executing it. If, after thoughtful consideration, you are in full agreement with and understand the terms and conditions contained in this letter agreement (including the release of all claims contained in the section entitled "Release"), if you agree that you will be bound by it, and if you agree that it represents your free will and choice, please indicate such agreement by signing this letter, dating it, and returning it to me. Please keep a copy of the signed letter for your files. I will hold the executed agreement for seven days following your return of the executed letter to me, during which time you may revoke it by notifying me in writing. TRW shall not revoke or amend its offer as represented by this letter agreement without your approval during the 21-day period set forth above. 16 Martin A. Coyle February 25, 1997 Page 16 IMPLEMENTATION You should address any questions about the implementation of this agreement directly to me. Sincerely, TRW Inc. By /s/ Howard V. Knicely ----------------------------------- Howard V. Knicely Executive Vice President ACCEPTED AND AGREED TO this 3rd day of March , 1997. ------- ------------------ /s/ Martin A. Coyle - ---------------------------------- Martin A. Coyle Approved and agreed to this 30th day of April , 1997 --------- ----------------------- Compensation and Stock Option Committee By /s/ William S. Kiser --------------------------------- Chairman 17 Exhibit 1 February 25, 1997 Martin A. Coyle 1900 Richmond Road Cleveland, Ohio 44124 Dear Marty: This letter agreement confirms our understanding relating to the engagement by TRW Inc. ("TRW") of Martin A. Coyle ("Consultant") as a consultant to TRW to provide the services described in paragraph 1 below. The terms and conditions that follow constitute the entire agreement between TRW and Consultant and shall not be modified in any way except by a written document executed by both parties. 1. Term and Termination -------------------- If Consultant retires from TRW on or after March 1, 1999, this letter agreement shall commence on such date and will continue for a period of two years. 2. Statement of Work ----------------- Consultant shall perform work on special projects as assigned by the Executive Vice President and General Counsel at such time(s) and place(s) as mutually agreed upon; said work not to exceed ten percent of Consultant's time on a yearly basis. 3. Compensation ------------ As sole compensation for Consultant's services hereunder, TRW shall pay Consultant an annual fee of One Hundred Thousand Dollars ($100,000.00) per year. In addition, TRW shall reimburse Consultant for all reasonable travel, long-distance telephone and other out-of-pocket expenses incurred by Consultant in performing work hereunder upon receipt of Consultant's correct invoices therefor. All costs must be substantiated by receipts or other written verification. Any unusual or significant expenses must be approved in advance by the Chairman and Chief Executive Officer. 18 Martin A. Coyle February 25, 1997 Page 2 4. Confidential Information ------------------------ The term "TRW Confidential Information" refers to all data, reports, drawings, tapes, formulas, interpretations, forecasts, business plans and analyses, records, trade secrets, customer lists, documents, proposals, information regarding products, pricing, terms of sale, processes, research and development, apparatus and application methods and all other information reflecting upon or concerning TRW that are not openly communicated or made accessible by TRW to third parties and that Consultant obtains from TRW, its employees, subsidiaries and affiliates, or that Consultant otherwise acquires while engaged hereunder, including information of a third party as to which TRW has a nondisclosure obligation. Additionally, TRW Confidential Information shall include any and all reports to TRW made by Consultant hereunder or the contents thereof. In view of the sensitive information to which Consultant may have access during its engagement hereunder, any information reflecting upon or concerning TRW and known, communicated or accessible to Consultant shall also be deemed to be TRW Confidential Information unless such information has been published by TRW in publicly available documents. Consultant: (a) agrees that TRW Confidential Information is the sole property of TRW and that such TRW Confidential Information shall be used only in providing consulting services hereunder for TRW; (b) shall hold the TRW Confidential Information in confidence and not disclose it in any manner whatsoever, in whole or in part, to any person except to employees of TRW, or to employees of Consultant who need to know in order to perform their duties and who agree in writing to use the TRW Confidential Information only to assist Consultant in performance of Consultant's duties hereunder; (c) shall take or cause to be taken all reasonable precautions to prevent the disclosure or communication of TRW Confidential Information to third parties; (d) agrees that each reproduction, duplication, or copy of any portion of TRW Confidential Information shall be deemed TRW Confidential Information for all purposes hereunder; and Initialed ____ 19 Martin A. Coyle February 25, 1997 Page 3 (e) shall, upon expiration or termination of this letter agreement, discontinue all use of TRW Confidential Information and return all documents containing TRW Confidential Information to TRW. 5. Inventions ---------- Consultant shall disclose promptly to TRW all technical innovations that were or are conceived or first reduced to practice by Consultant, whether solely or jointly with others, in the course of performing work hereunder or as a result of knowledge acquired while performing services hereunder. For purposes of this letter agreement, the term "technical innovation" includes, but is not limited to, any idea, invention, discovery, improvement, any new and useful art, method, process, use, apparatus, composition of matter, design, computer program, algorithm, programmable process, process of which any computer program constitutes a part, or configuration of any kind, whether patentable or not. Consultant agrees that all technical innovations shall be the sole property of TRW. During or subsequent to the term of this letter agreement, Consultant agrees without further consideration promptly to execute and deliver to TRW all documents and take such other action as may be reasonably required by TRW to assist TRW in obtaining patents in the United States and foreign countries for the technical innovations and to vest title thereto in TRW and/or the successors, assigns or designees of TRW. At TRW's request and expense, Consultant shall cooperate with TRW and do all things reasonably and lawfully appropriate to assist TRW, or its successors, assigns and nominees, to obtain and enforce patents relating to such technical innovations. 6. Copyrights ---------- Neither Consultant nor any of Consultant's employees or independent contractors shall knowingly incorporate in any work prepared hereunder any copyrighted or proprietary material of TRW or any other person. Further, any work of authorship created hereunder shall constitute a "work made for hire," when so defined by the Copyright Act, and as to any work not so defined, Consultant hereby transfers to TRW any and all right, title and interest Consultant may have in and to the copyright in such work for the entire term of the copyright. No rights are reserved to Consultant in any work prepared hereunder. Initialed ___ 20 Martin A. Coyle February 25, 1997 Page 4 7. License ------- Consultant hereby grants to TRW a fully paid-up, nonexclusive and perpetual right and license to use any and all of Consultant's know-how and trade secrets that are necessary to the implementation of work by TRW pursuant to the reports and recommendations made by Consultant. 8. Security -------- TRW shall advise Consultant which information or items provided to Consultant constitute classified material, and Consultant shall comply with all security requirements imposed by TRW. If it becomes necessary for Consultant to store classified material at Consultant's place of work, other than TRW premises, a facility clearance shall be required. In that event, Consultant shall enter into a security agreement with the applicable Government agency and maintain a system of security controls in accordance with such security agreement. All such classified material shall be promptly returned to TRW on request or upon termination of the security agreement or this Agreement, whichever first occurs. 9. No Conflict ----------- Except with the prior written approval of TRW after full disclosure of all relevant facts, Consultant shall refrain from accepting work, engagements or appointments from any third party that could conflict with, or impede an unbiased performance of, Consultant's work hereunder or the protection of TRW Confidential Information. 10. Compliance ---------- Consultant warrants that Consultant has the right to enter into this letter agreement and that performance of the work specified herein shall not cause Consultant to be in violation of any federal, state or local law or regulation, or any contractual agreement entered into by Consultant. Consultant shall comply with TRW's policies, directives and standards, including, without limitation, TRW's Code of Initialed ___ 21 Martin A. Coyle February 25, 1997 Page 5 Conduct (a copy of which Consultant acknowledges having received), and with all applicable federal, state and local laws and regulations. 11. Force Majeure ------------- Neither party shall incur liability to the other party on account of any loss or damage resulting from any delay or failure to perform any part of their obligations hereunder where such delay or failure was caused in whole or in part by events, occurrences, or causes beyond the reasonable control of such party. 12. Independent Contractor ---------------------- Consultant agrees that in its performance of this letter agreement, Consultant shall act as an independent contractor, and not as an employee of TRW, and all of Consultant's agents and employees shall be subject solely to the control, supervision and authority of Consultant. Consultant understands and agrees that TRW will not cover Consultant or Consultant's employees or agents with workers' compensation, unemployment insurance, state disability insurance, public liability insurance or other benefits that may be available to employees of TRW. Consultant shall refrain from any representation that Consultant is an employee, agent or legal representative of TRW, or from incurring liabilities or obligations of any kind in the name, or on behalf, of TRW. It is agreed that (a) Consultant shall be responsible for Social Security taxes, if any, which may be applicable and for any other applicable fees or taxes (federal, state or local) which may be required or levied upon any payment made to or on behalf of Consultant hereunder; and (b) Consultant and Consultant's employees, agents, heirs, successors and assigns shall not be entitled, by virtue of any work done under this letter agreement, to any benefits under any medical or travel accident insurance, pension, sick leave, life insurance, vacation, or disability, or other employees' benefit plan or plans maintained by TRW for its employees. 13. Publicity --------- Except as TRW grants prior written approval, Consultant shall not publicize the work performed under this letter agreement. Initialed ___ 22 Martin A. Coyle February 25, 1997 Page 6 14. Assignment ---------- This letter agreement shall not be assignable by Consultant without the prior written consent of TRW. TRW may assign all or parts of its rights or delegate all or parts of its duties under this letter agreement upon giving written notice to Consultant. 15. Entire Agreement ---------------- With the sole exception of the severance agreement between Martin A. Coyle dated February 25, 1997, and the reference therein to the instant Consulting Agreement, this letter agreement sets forth the entire understanding between the parties relating to consulting services to be performed by Coyle between March 1, 1999 and March 1, 2001, and merges all prior discussions between them regarding such subject. Neither TRW nor Consultant shall be bound by any condition, warranty, or representation other than as expressly stated herein or as subsequently set forth in writing signed by the parties. 16. Indemnification and Limitation of Liability ------------------------------------------- Consultant shall indemnify TRW in respect of and hold TRW harmless from and against (i) all expenses, claims, losses, damages and liability, however caused, arising from any acts or omissions of Consultant in the course of performing work under this letter agreement or the acts or omissions of Consultant's employees, agents, subcontractors, suppliers or other third parties utilized in connection with Consultant's performance; and (ii) any and all claims by third parties that Consultant misrepresented its authority or made any unfactual or other commitment not specifically authorized under this letter agreement. TRW's sole financial obligation under this letter agreement shall be the payment of compensation as provided for herein. In no event shall TRW be liable to Consultant for any loss of profits or incidental, indirect or consequential damages, however caused, whether by TRW's sole or concurrent negligence or otherwise. Initialed ___ 23 Martin A. Coyle February 25, 1997 Page 7 17. Survival -------- The parties' obligations contained in paragraphs 4, 5, 6, 7, 12, 16 and 18 shall be permanent and survive the termination of this letter agreement. 18. Governing Laws -------------- All questions concerning the validity and operation of this letter agreement and the performance of the obligations imposed upon the parties hereunder shall be governed by the substantive laws of the State of Ohio, applicable to agreements made and to be performed wholly within such jurisdiction. If you agree with the terms of this letter agreement, please sign and date the enclosed copy, initial each page and return the signed copy to me. Sincerely, TRW Inc. By - ------------------------------------ Howard V. Knicely Executive Vice President ACCEPTED AND AGREED TO this day of , 1997 ----------- ---------------------- - -------------------------------------------- Martin A. Coyle Initialed ___ 24 Exhibit 2 AMENDMENT TO EMPLOYMENT CONTINUATION AGREEMENT EFFECTIVE JUNE 1, 1997 FOR MARTIN A. COYLE Executive Vice President of the Company, responsible worldwide for directing all the employment benefit investment and environmental control activities of TRW Inc. and its subsidiaries, including management responsibilities for TRW Investment Management Company (serving as Chairman thereof). EX-10.B 3 EXHIBIT 10(B) 1 Exhibit 10(b) April 21, 1997 Martin A. Coyle 1900 Richmond Road Cleveland, Ohio 44124 Dear Marty, The following will confirm the changes we have agreed to in the severance agreement dated February 25, 1997, which you signed on March 3, 1997 (hereinafter referred to as "the Agreement"): 1. The first sentence of the paragraph entitled "Benefits," on page 4 of the Agreement is amended as follows: "Until the date of termination of your employment, all benefits and perquisites you currently have shall continue, except that at such time as you discontinue providing services to TRW or one of its subsidiaries, you will participate in non-qualified SRIP and BEP. Continuing as Chairman of TRW Investment Management Company and assuming the responsibilities thereunder shall be deemed `providing services'." 2. In the Pension section, the first sentence in the last partial paragraph on page 8 of the Agreement is amended as follows: "In no event will your benefit service under the qualified SSP or under the nonqualified plans extend beyond your retirement date." 3. Notwithstanding anything else in the Agreement, if you choose to retire earlier than March 1, 1999 or if you accept full-time employment (not meant to include voluntary or consulting efforts) outside of TRW prior to March 1, 1999, the following provisions will apply: a. If you accept employment elsewhere, you must retire on the first day of the month following your first day of employment elsewhere (the "Early Retirement Date"). 2 Martin A. Coyle April 21, 1997 Page 2 b. If you choose to retire earlier than March 1, 1999 (without employment elsewhere), you must retire on the first day of the month following your written notice to TRW indicating your desire to retire (this date shall also be deemed the "Early Retirement Date"). Your Early Retirement Date shall be deemed your "termination of employment" under the Agreement. c. If your Early Retirement Date occurs before March 1, 1999, you will immediately receive in a lump sum (with appropriate withholding) the base salary, OIP bonuses (at target) and SIP payment you would otherwise had received if you had remained employed until March 1, 1999, with the salary and bonuses you would have received between (i) the later of June 1, 1998, and your Early Retirement Date and (ii) March 1, 1999, offset by the base salary and bonus, if any, you would expect to receive from your new employer during such period. For purposes hereof the SIP payment is equal to a cash payment of 20,000 shares (as adjusted) times the average of the high and low price of TRW stock on the last trading day prior to your Early Retirement Date. d. In addition, if you retire on or before February 1, 1998, you will receive a payment of $800,000 (subject to withholding) and if you retire on or before February 1, 1999, such payment will be $400,000 (subject to withholding). e. If you die before your Retirement Date, your executor or designated beneficiary shall receive the payment described in (c) above as though you had remained alive and retired on the first day of the month following your death. For purposes of TRW's benefit plans you shall have been deemed to die while employed. f. Upon your Early Retirement Date, you will receive one additional full calendar year of Ayco services (unless provided by the new employer) and 60 days of office and secretarial services. 3 Martin A. Coyle April 21, 1997 Page 3 g. The section entitled "Early Retirement" on pages 9 and 10 of the Agreement is hereby deleted. 4. Notwithstanding anything in the Agreement, when you retire, you may purchase your Company Car for $1.00. You understand that the difference between the car's fair market value and $1.00 shall be deemed imputed taxable income to you. If this represents the agreement between TRW and you, please indicate by signing below. Sincerely, TRW INC. by /s/ Howard V. Knicely ---------------------------- Howard V. Knicely Executive Vice President Accepted and agreed to this 22nd day of April 1997 /s/ Martin A. Coyle - ---------------------------- Martin A. Coyle Approved and agreed to this 30th day of April, 1997 Compensation and Stock Option Committee by /s/ William S. Kiser -------------------------- Chairman EX-10.C 4 EXHIBIT 10(C) 1 Exhibit 10(c) February 25, 1997 Martin A. Coyle 1900 Richmond Road Cleveland, Ohio 44124 Dear Marty: This letter agreement confirms our understanding relating to the engagement by TRW Inc. ("TRW") of Martin A. Coyle ("Consultant") as a consultant to TRW to provide the services described in paragraph 1 below. The terms and conditions that follow constitute the entire agreement between TRW and Consultant and shall not be modified in any way except by a written document executed by both parties. 1. Term and Termination -------------------- If Consultant retires from TRW on or after March 1, 1999, this letter agreement shall commence on such date and will continue for a period of two years. 2. Statement of Work ----------------- Consultant shall perform work on special projects as assigned by the Executive Vice President and General Counsel at such time(s) and place(s) as mutually agreed upon; said work not to exceed ten percent of Consultant's time on a yearly basis. 3. Compensation ------------ As sole compensation for Consultant's services hereunder, TRW shall pay Consultant an annual fee of One Hundred Thousand Dollars ($100,000.00) per year. In addition, TRW shall reimburse Consultant for all reasonable travel, long-distance telephone and other out-of-pocket expenses incurred by Consultant in performing work hereunder upon receipt of Consultant's correct invoices therefor. All costs must be substantiated by receipts or other written verification. Any unusual or significant expenses must be approved in advance by the Chairman and Chief Executive Officer. 2 Martin A. Coyle February 25, 1997 Page 2 4. Confidential Information ------------------------ The term "TRW Confidential Information" refers to all data, reports, drawings, tapes, formulas, interpretations, forecasts, business plans and analyses, records, trade secrets, customer lists, documents, proposals, information regarding products, pricing, terms of sale, processes, research and development, apparatus and application methods and all other information reflecting upon or concerning TRW that are not openly communicated or made accessible by TRW to third parties and that Consultant obtains from TRW, its employees, subsidiaries and affiliates, or that Consultant otherwise acquires while engaged hereunder, including information of a third party as to which TRW has a nondisclosure obligation. Additionally, TRW Confidential Information shall include any and all reports to TRW made by Consultant hereunder or the contents thereof. In view of the sensitive information to which Consultant may have access during its engagement hereunder, any information reflecting upon or concerning TRW and known, communicated or accessible to Consultant shall also be deemed to be TRW Confidential Information unless such information has been published by TRW in publicly available documents. Consultant: (a) agrees that TRW Confidential Information is the sole property of TRW and that such TRW Confidential Information shall be used only in providing consulting services hereunder for TRW; (b) shall hold the TRW Confidential Information in confidence and not disclose it in any manner whatsoever, in whole or in part, to any person except to employees of TRW, or to employees of Consultant who need to know in order to perform their duties and who agree in writing to use the TRW Confidential Information only to assist Consultant in performance of Consultant's duties hereunder; (c) shall take or cause to be taken all reasonable precautions to prevent the disclosure or communication of TRW Confidential Information to third parties; (d) agrees that each reproduction, duplication, or copy of any portion of TRW Confidential Information shall be deemed TRW Confidential Information for all purposes hereunder; and Initialed ___ 3 Martin A. Coyle February 25, 1997 Page 3 (e) shall, upon expiration or termination of this letter agreement, discontinue all use of TRW Confidential Information and return all documents containing TRW Confidential Information to TRW. 5. Inventions ---------- Consultant shall disclose promptly to TRW all technical innovations that were or are conceived or first reduced to practice by Consultant, whether solely or jointly with others, in the course of performing work hereunder or as a result of knowledge acquired while performing services hereunder. For purposes of this letter agreement, the term "technical innovation" includes, but is not limited to, any idea, invention, discovery, improvement, any new and useful art, method, process, use, apparatus, composition of matter, design, computer program, algorithm, programmable process, process of which any computer program constitutes a part, or configuration of any kind, whether patentable or not. Consultant agrees that all technical innovations shall be the sole property of TRW. During or subsequent to the term of this letter agreement, Consultant agrees without further consideration promptly to execute and deliver to TRW all documents and take such other action as may be reasonably required by TRW to assist TRW in obtaining patents in the United States and foreign countries for the technical innovations and to vest title thereto in TRW and/or the successors, assigns or designees of TRW. At TRW's request and expense, Consultant shall cooperate with TRW and do all things reasonably and lawfully appropriate to assist TRW, or its successors, assigns and nominees, to obtain and enforce patents relating to such technical innovations. 6. Copyrights ---------- Neither Consultant nor any of Consultant's employees or independent contractors shall knowingly incorporate in any work prepared hereunder any copyrighted or proprietary material of TRW or any other person. Further, any work of authorship created hereunder shall constitute a "work made for hire," when so defined by the Copyright Act, and as to any work not so defined, Consultant hereby transfers to TRW any and all right, title and interest Consultant may have in and to the copyright in such work for the entire term of the copyright. No rights are reserved to Consultant in any work prepared hereunder. Initialed ___ 4 Martin A. Coyle February 25, 1997 Page 4 7. License ------- Consultant hereby grants to TRW a fully paid-up, nonexclusive and perpetual right and license to use any and all of Consultant's know-how and trade secrets that are necessary to the implementation of work by TRW pursuant to the reports and recommendations made by Consultant. 8. Security -------- TRW shall advise Consultant which information or items provided to Consultant constitute classified material, and Consultant shall comply with all security requirements imposed by TRW. If it becomes necessary for Consultant to store classified material at Consultant's place of work, other than TRW premises, a facility clearance shall be required. In that event, Consultant shall enter into a security agreement with the applicable Government agency and maintain a system of security controls in accordance with such security agreement. All such classified material shall be promptly returned to TRW on request or upon termination of the security agreement or this Agreement, whichever first occurs. 9. No Conflict ----------- Except with the prior written approval of TRW after full disclosure of all relevant facts, Consultant shall refrain from accepting work, engagements or appointments from any third party that could conflict with, or impede an unbiased performance of, Consultant's work hereunder or the protection of TRW Confidential Information. 10. Compliance ---------- Consultant warrants that Consultant has the right to enter into this letter agreement and that performance of the work specified herein shall not cause Consultant to be in violation of any federal, state or local law or regulation, or any contractual agreement entered into by Consultant. Consultant shall comply with TRW's policies, directives and standards, including, without limitation, TRW's Code of Initialed ___ 5 Martin A. Coyle February 25, 1997 Page 5 Conduct (a copy of which Consultant acknowledges having received), and with all applicable federal, state and local laws and regulations. 11. Force Majeure ------------- Neither party shall incur liability to the other party on account of any loss or damage resulting from any delay or failure to perform any part of their obligations hereunder where such delay or failure was caused in whole or in part by events, occurrences, or causes beyond the reasonable control of such party. 12. Independent Contractor ---------------------- Consultant agrees that in its performance of this letter agreement, Consultant shall act as an independent contractor, and not as an employee of TRW, and all of Consultant's agents and employees shall be subject solely to the control, supervision and authority of Consultant. Consultant understands and agrees that TRW will not cover Consultant or Consultant's employees or agents with workers' compensation, unemployment insurance, state disability insurance, public liability insurance or other benefits that may be available to employees of TRW. Consultant shall refrain from any representation that Consultant is an employee, agent or legal representative of TRW, or from incurring liabilities or obligations of any kind in the name, or on behalf, of TRW. It is agreed that (a) Consultant shall be responsible for Social Security taxes, if any, which may be applicable and for any other applicable fees or taxes (federal, state or local) which may be required or levied upon any payment made to or on behalf of Consultant hereunder; and (b) Consultant and Consultant's employees, agents, heirs, successors and assigns shall not be entitled, by virtue of any work done under this letter agreement, to any benefits under any medical or travel accident insurance, pension, sick leave, life insurance, vacation, or disability, or other employees' benefit plan or plans maintained by TRW for its employees. 13. Publicity --------- Except as TRW grants prior written approval, Consultant shall not publicize the work performed under this letter agreement. Initialed ___ 6 Martin A. Coyle February 25, 1997 Page 6 14. Assignment ---------- This letter agreement shall not be assignable by Consultant without the prior written consent of TRW. TRW may assign all or parts of its rights or delegate all or parts of its duties under this letter agreement upon giving written notice to Consultant. 15. Entire Agreement ---------------- With the sole exception of the severance agreement between Martin A. Coyle dated February 25, 1997, and the reference therein to the instant Consulting Agreement, this letter agreement sets forth the entire understanding between the parties relating to consulting services to be performed by Coyle between March 1, 1999 and March 1, 2001, and merges all prior discussions between them regarding such subject. Neither TRW nor Consultant shall be bound by any condition, warranty, or representation other than as expressly stated herein or as subsequently set forth in writing signed by the parties. 16. Indemnification and Limitation of Liability ------------------------------------------- Consultant shall indemnify TRW in respect of and hold TRW harmless from and against (i) all expenses, claims, losses, damages and liability, however caused, arising from any acts or omissions of Consultant in the course of performing work under this letter agreement or the acts or omissions of Consultant's employees, agents, subcontractors, suppliers or other third parties utilized in connection with Consultant's performance; and (ii) any and all claims by third parties that Consultant misrepresented its authority or made any unfactual or other commitment not specifically authorized under this letter agreement. TRW's sole financial obligation under this letter agreement shall be the payment of compensation as provided for herein. In no event shall TRW be liable to Consultant for any loss of profits or incidental, indirect or consequential damages, however caused, whether by TRW's sole or concurrent negligence or otherwise. Initialed ___ 7 Martin A. Coyle February 25, 1997 Page 7 17. Survival -------- The parties' obligations contained in paragraphs 4, 5, 6, 7, 12, 16 and 18 shall be permanent and survive the termination of this letter agreement. 18. Governing Laws -------------- All questions concerning the validity and operation of this letter agreement and the performance of the obligations imposed upon the parties hereunder shall be governed by the substantive laws of the State of Ohio, applicable to agreements made and to be performed wholly within such jurisdiction. If you agree with the terms of this letter agreement, please sign and date the enclosed copy, initial each page and return the signed copy to me. Sincerely, TRW Inc. By /s/ Howard V. Knicely ------------------------------------- Howard V. Knicely Executive Vice President ACCEPTED AND AGREED TO this 3rd day of March , 1997 ---------- --------------- /s/ Martin A. Coyle - ----------------------------------- Martin A. Coyle Initialed ____ EX-10.D 5 EXHIBIT 10(D) 1 Exhibit 10(d) DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF TRW INC. JULY 1, 1997 2 DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF TRW INC. -------------------------------------- TABLE OF CONTENTS
Page ---- Section 1. Effective Date........................................................ 1 Section 2. Purpose............................................................... 1 Section 3. Eligibility........................................................... 1 Section 4. Administration........................................................ 1 Section 5. Deferral of Compensation.............................................. 2 Section 6. Effect of Deferral Elections.......................................... 3 Section 7. Deferred Compensation Account......................................... 3 Section 8. Value of Deferred Compensation Accounts............................... 5 Section 9. Distribution of Account............................................... 5 Section 10. Acceleration of Account Distribution Due to Unforeseeable Emergency........................................ 7 Section 11. Death of Eligible Director; Distribution of Account Balance....................................... 7 Section 12. Acceleration of Account Distribution Due to Change in Control.............................................. 7 Section 13. Eligible Directors' Rights Unsecured.................................. 9 Section 14. Assignability......................................................... 9 Section 15. Amendment............................................................. 10
3 Section 1. Effective Date. - ---------- --------------- The effective date of the Deferred Compensation Plan for Non-Employee Directors of TRW Inc. (the "Plan") is July 1, 1997 (the "Effective Date"). Section 2. Purpose. - ---------- -------- The purposes of the Plan are to align a significant portion of Director compensation with creating and sustaining shareholder value and to attract and retain a diverse and truly superior Board of Directors. The Plan is intended to serve as the mechanism that will allow each eligible Director to defer all or a portion of the compensation otherwise payable to him or her for his or her services to TRW Inc. (the "Company"). Section 3. Eligibility. - ---------- ------------ Each Director of the Company who is not an employee of the Company or of one of its subsidiaries shall be eligible to, and shall participate in, the Plan (the "Eligible Director"). Following the Effective Date of the Plan, (i) a non-employee Director will be deemed an Eligible Director as of the effective date of his or her election as a Director of the Company, and (ii) an employee Director will be deemed an Eligible Director as of the date he or she ceases to be an employee of the Company or of one of its subsidiaries but continues to be a Director, in accordance with the provisions of the Directors' retirement policy as amended from time to time. Eligibility to receive and defer compensation pursuant to this Plan will cease upon the earlier of the Eligible Director's termination of service as a Director of the Company or upon his or her death. Section 4. Administration. - ---------- --------------- The Plan shall be administered by a committee (the "Committee") consisting of the following three officers of the Company: the Executive Vice President and Chief Financial Officer, the Executive Vice President and General Counsel, and the Executive Vice President of Human Resources. The Committee shall have the power to (i) determine all questions of fact or interpretation regarding Plan provisions; 1 4 (ii) adopt rules, regulations and procedures deemed necessary and appropriate to carry out the Plan's operation; and (iii) maintain or cause to be maintained necessary and appropriate records. The Committee's determinations on questions of fact or interpretation of Plan provisions will be binding on all parties. The Committee may delegate its authority to carry out specific responsibilities given to it under the Plan. Section 5. Deferral of Compensation. - ---------- ------------------------- (a) Automatic Deferral. One-half (50 percent) of the annual retainer, exclusive of any retainer paid for chairing a Committee of the Directors, (the "Base Annual Retainer") otherwise payable by the Company to an Eligible Director for his or her services to the Company on or after the Effective Date, will be automatically deferred in equivalent shares of TRW Common Stock (the "Automatic Deferral") under the Plan. The shares will be held in trust for the Eligible Director's benefit. (b) Elective Deferral. In addition to the Automatic Deferral described above, an Eligible Director may elect to defer all or a portion of the remaining 50 percent of his or her Base Annual Retainer (the "Elective Deferral"), expressed either as a dollar amount or as a percentage, and any retainer that he or she may receive for chairing one of the Committees of the Directors of the Company (together, the "Available Retainer"). With respect to the initial elections under the Plan for 1997, an Eligible Director may elect to defer all or any portion of the Available Retainer for services to be performed on or after the Effective Date, by completing a deferral election form prescribed by the Secretary of the Company (the "Secretary") and returning it to the Secretary with the following effect: (i) on or before June 13, 1997 for effect as of July 1; (ii) on or before July 15, 1997 for effect by August 1; and (iii) on or before July 31, 1997 for effect September 1. -2- 5 An Eligible Director who (i) is elected a Director of the Company following the Effective Date of the Plan or (ii) ceases to be an employee of the Company or one of its subsidiaries but continues to be a Director may choose to defer all or any portion of the Available Retainer for his or her subsequent services to the Company, provided that the prescribed deferral election form is delivered to the Secretary within 30 days after the effective date of the Eligible Director's (i) election as a Director of the Company or (ii) change in employment status. For years subsequent to 1997, an Eligible Director who elects to defer all or a portion of the Available Retainer must execute the prescribed election form and deliver it to the Secretary prior to the first day of the calendar year for which the election is to be effective. If the Director becomes eligible to participate in the Plan during the calendar year, the prescribed deferral election form must be delivered to the Secretary within 30 days after the effective date of the Eligible Director's (i) election as a Director of the Company or (ii) change in employment status. Section 6. Effect of Deferral Elections. - ---------- ----------------------------- Deferral elections, expressed either as a dollar amount or as a percentage, made under this Plan with respect to any calendar year may not be amended or revoked after the beginning of the calendar year with respect to compensation to be received for services performed during that calendar year. Section 7. Deferred Compensation Account. - ---------- ------------------------------ As of the Effective Date of the Plan, or the effective date of the Director's eligibility, as appropriate, the Company shall establish an unfunded deferred compensation account (the "Account") for each Eligible Director consisting of an Automatic Deferral portion and an Elective Deferral portion, if any. (a) Automatic Deferral Portion. The Company will establish a trust account for the benefit of the Eligible Directors. On the first business day of each month, the Company will transfer to the trustee of the trust account one-twelfth (1/12) of the amount of each Eligible Director's Automatic Deferral, to be used by the -3- 6 trustee to purchase equivalent shares of TRW Common Stock that will be held in the trust account. The trustee will participate in the Company's Dividend Reinvestment Plan, and all cash dividends will be reinvested in TRW Common Stock for the Eligible Directors' benefit. (b) Elective Deferral Portion. This portion of the Eligible Director's Account will consist of (i) amounts rolled over from the Eligible Director's Account under the former Deferred Compensation Plan for Non-Employee Directors of TRW Inc., if applicable, and (ii) any portion of the Available Retainer that the Eligible Director elects to defer. These amounts will be held in phantom accounts and indexed to the performance of one or more investment funds established under The TRW Employee Stock Ownership and Stock Savings Plan (the "Stock Savings Plan"). Allocation of the Elective Deferral portion of the Eligible Director's Account to any of the available investment funds must be made in increments of 25 percent. The Eligible Director's allocation choices shall be implemented as soon as practicable, in the sole discretion of the Committee. Subject to any restrictions imposed by Section 16(b) of the Securities Exchange Act of 1934, the Eligible Director may, at any time, (i) change his or her allocation choices with respect to future Elective Deferrals or (ii) reallocate the hypothetical investment earnings in the existing Elective Deferral portion of his or her Account. Changes or reallocations so made must also be in increments of 25 percent. The Committee shall have the right to substitute investment fund choices for the Elective Deferral portion of the Accounts from time to time, without adversely affecting existing accruals in the Eligible Directors' Accounts. Hypothetical investment earnings shall continue to accrue until the Eligible Director's Account is fully distributed. -4- 7 Section 8. Value of Deferred Compensation Accounts. - ---------- ---------------------------------------- The value of each Eligible Director's Account shall reflect all amounts deferred, including gains and losses from the hypothetical investments, and shall be determined on the last day of each month (the "Valuation Date"). The value of hypothetical investments in the Stock Savings Plan shall be based upon the valuation date under the Stock Savings Plan coincident with or immediately preceding such Valuation Dates. The amount in an Eligible Director's Account as of each Valuation Date that has not been previously deemed invested shall be deemed invested in a hypothetical investment on such date, based on the value of the hypothetical investment on such date. Section 9. Distribution of Account. - ---------- ------------------------ No distributions may be made from an Eligible Director's Account, except as provided in this Section and Sections 11 and 12. (a) Automatic Deferral Portion. Automatic Deferral amounts and earnings from the Company's Dividend Reinvestment Plan credited to an Account shall be distributed, beginning as soon as practicable, after the Eligible Director ceases to hold office as a Director of the Company. The distribution shall be made in whole shares of TRW Common Stock, valued at the fair market value of a share of TRW Common Stock on the date of distribution. The Eligible Director shall specify, at the time set forth in Section 5 for making Elective Deferrals, how distribution is to be made with respect to this portion of his or her Account: (1) as a single payment, with any fractional shares being paid in cash; or (2) in regular annual installments payable over a period not to exceed 10 years, with fractional shares paid in cash at the time of the final installment payment. -5- 8 (b) Elective Deferral Portion. Elective Deferral amounts and the relevant hypothetical investment earnings credited to an Account shall be distributed in accordance with the instructions given to the Secretary by the Eligible Director at the time of his or her election to defer all or a portion of the Available Retainer and may begin as of: (1) the date the Eligible Director ceases to hold office as a Director of the Company; (2) the date the Eligible Director reaches an age at which he or she may earn unlimited amounts without penalty under the Social Security Act and the regulations promulgated thereunder; or (3) such other date specified by the Eligible Director on the election form (at least two years from the date deferral of compensation begins). Distribution of an Account may be made as a single payment or in regular annual installments over a period of not more than 10 years. All distributions from the Elective Deferral portion of the Account will be made in cash, denominated and payable in United States dollars, equal to the amounts deferred and any gains or losses on those amounts, based on the performance of the investment funds to which the Eligible Director allocated his or her deferred compensation. The Eligible Director may change his or her Elective Deferral distribution instructions by subsequent written notice to the Secretary, but any such change will apply only to future deferrals. If an Eligible Director should fail to give the Secretary instructions as to the type of distribution preferred, his or her Account will be distributed as a single payment as soon as practicable following the date on which he or she ceases to hold office as a Director of the Company. -6- 9 Section 10. Acceleration of Account Distribution Due to Unforeseeable - ----------- --------------------------------------------------------- Emergency. ---------- An Eligible Director will be permitted to receive distribution of all or a part of the Elective Deferral portion of his or her Account if the Committee determines that an unforeseeable emergency has occurred. An unforeseeable emergency is one that is caused by an event beyond the Eligible Director's control and that would cause severe financial hardship to him or her if the distribution of all or a part of the Elective Deferral portion of his or her Account were not approved. Any distribution approved under this provision shall be limited to the amount deemed necessary to meet the emergency. Section 11. Death of Eligible Director; Distribution of Account Balance. - ----------- ------------------------------------------------------------ In the event of the death of an Eligible Director before he or she has received full distribution of his or her Account, the value of the Account balance remaining to be distributed shall be determined as of the Valuation Date coincident with or immediately following the Eligible Director's death. The Account balance shall, as soon as practicable, be distributed in a single payment to the beneficiary or beneficiaries designated by the Eligible Director. In the event that an Eligible Director has failed to name a beneficiary, his or her Account balance shall be distributed to his or her estate. Section 12. Acceleration of Account Distribution Due to Change in Control. - ----------- -------------------------------------------------------------- In the event of a change in control of the Company, an Eligible Director's Account balance may become subject to immediate distribution in accordance with the Eligible Director's election instructions; provided, however, that the Eligible Director specifically stipulated on his or her election form that such accelerated payout be made. For purposes of this Plan, a change in control, as defined in resolutions adopted by the Compensation and Stock Option Committee of the Directors of the Company on July 26, 1989, will be deemed to have occurred if: -7- 10 (i) the Corporation is merged or consolidated or reorganized into or with another corporation or other legal person and as a result of such merger, consolidation or reorganization less than 51 percent of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction is held in the aggregate by the holders of Voting Stock ("Voting Stock" consists of the then-outstanding securities entitled to vote generally in the election of Directors of the Corporation) immediately prior to such transaction; (ii) the Corporation sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person if less than 51 percent of the combined voting power of the then-outstanding voting securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Voting Stock immediately prior to such sale or transfer; (iii) there is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20 percent or more of the combined voting power of the Voting Stock; (iv) the Corporation shall file a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of Schedule 14A thereunder (or any successor schedule, form or report or item therein) that a change in control of the Corporation has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or (v) during any period of two consecutive years, individuals who at the beginning of any such period constitute the Directors of the Corporation cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Corporation's shareholders, of each Director of the Corporation first elected during such period was approved by a vote of at least two-thirds of the Directors of the Corporation then still in office who were Directors of the Corporation at the beginning of any such period. -8- 11 Notwithstanding the foregoing definition, a "change in control" shall not be deemed to have occurred solely because (i) the Corporation, (ii) an entity in which the Corporation directly or indirectly beneficially owns more that 50 percent of the voting securities or (iii) any employee stock ownership plan sponsored by the Corporation or any other employee benefit plan of the Corporation, or any entity holding shares of Voting Stock for or pursuant to the terms of any such plan, either files or becomes obligated to file a report or a proxy statement under or in response to Schedule 13D, Schedule 14D-1, Item 1 of Form 8-K or Item 6(e) of Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares of Voting Stock, whether in excess of 20 percent or otherwise, or because the Corporation reports that a change in control of the Corporation has or may have occurred or will or may occur in the future by reason of such beneficial ownership... Section 13. Eligible Directors' Rights Unsecured. - ----------- ------------------------------------- This Plan is deemed unfunded for tax purposes and is not governed by the Employee Retirement Income Security Act of 1974. Consequently, for purposes of this Plan, no assets shall be segregated and placed beyond the reach of the Company's general creditors. The right of an Eligible Director to receive future installments under the provisions of this Plan shall be an unsecured claim against the general assets of the Company. Accordingly, the Eligible Directors will have the status of general unsecured creditors of the Company, and the Plan constitutes a mere promise by the Company to make Account distributions in the future. Section 14. Assignability. - ----------- -------------- The right of the Eligible Director, or of his or her beneficiary, to receive distribution of his or her Account pursuant to the provisions of this Plan are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors of the Eligible Director, or of his or her beneficiary, except by will or by the laws of descent and distribution. -9- 12 Section 15. Amendment. - ----------- ---------- This Plan may at any time or from time to time be amended, modified or terminated by the Directors or the Executive Committee of the Directors of the Company. No amendment, modification or termination shall adversely affect an Eligible Director's Account, without his or her consent. -10- EX-11 6 EXHIBIT 11 1 Exhibit 11 TRW Inc. and Subsidiaries ------------------------- COMPUTATION OF EARNINGS PER SHARE - UNAUDITED --------------------------------------------- (In Millions Except Per Share Amounts)
Six Months Ended June 30 ------------------------ PRIMARY 1997 1996 - ------- ---- ---- Earnings from continuing operations $ 253.6 $ 219.6 Less preference dividend requirements 0.3 0.3 -------- -------- Earnings applicable to common shares and common share equivalents 253.3 219.3 Earnings from discontinued operations -- 27.9 -------- -------- Net earnings applicable to common shares and common share equivalents $ 253.3 $ 247.2 ======== ======== Average common shares outstanding 124.4 130.5 Stock options and performance share rights, based on the treasury stock method using average market price 3.1 3.1 -------- -------- Average common shares and common share equivalents 127.5 133.6 ======== ======== Primary earnings per share from continuing operations $ 1.99 $ 1.64 Primary earnings per share from discontinued operations -- 0.21 -------- -------- Primary earnings per share $ 1.99 $ 1.85 ======== ======== FULLY DILUTED - ------------- Earnings from continuing operations applicable to common shares and common share equivalents $ 253.3 $ 219.3 Dividends assuming conversion of other dilutive securities: (A) Dilutive preference dividends 0.3 0.3 -------- -------- Earnings from continuing operations applicable to fully diluted shares 253.6 219.6 Earnings from discontinued operations -- 27.9 -------- -------- Net earnings applicable to fully diluted shares $ 253.6 $ 247.5 ======== ======== Average common shares outstanding 124.4 130.5 Common shares assuming conversion of other dilutive securities: (A) Dilutive preference shares 1.0 1.1 Stock options and performance share rights, based on the treasury stock method using closing market price if higher than average market price 3.6 3.1 -------- -------- Average fully diluted shares 129.0 134.7 ======== ======== Fully diluted earnings per share from continuing operations $ 1.97 $ 1.63 Fully diluted earnings per share from discontinued operations -- 0.21 -------- -------- Fully diluted earnings per share $ 1.97 $ 1.84 ======== ========
(A) Assuming the conversion of the Serial Preference Stock II - Series 1 and Series 3. EX-27 7 EXHIBIT 27
5 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 83 0 1,606 0 525 2,578 6,116 3,498 6,145 2,423 498 0 0 77 2,111 6,145 5,512 5,512 4,496 4,496 0 0 37 414 160 254 0 0 0 254 1.99 1.97
EX-99 8 EXHIBIT 99 1 Exhibit 99 TRW Inc. and Subsidiaries Computation of Ratio of Earnings to Fixed Charges - Unaudited (In millions except ratio data)
Six Months Years Ended December 31 ended --------------------------------------------------------------------------------- June 30, 1997 1996 1995 1994 1993 1992 ------------- ---------------- ------------ ----------- ----------- ------------- Earnings from continuing operations before income taxes $414.0 $302.2(A) $625.5 $435.5 $289.2 $276.4 Unconsolidated affiliates (1.0) 1.4 1.3 (0.6) 0.7 (0.9) Minority earnings 10.9 11.5 10.8 7.7 1.4 0.1 Fixed charges excluding capitalized interest 61.6 129.0 137.2 145.3 177.5 208.1 ---- ----- ----- ----- ----- ----- Earnings $485.5 $444.1 $774.8 $587.9 $468.8 $483.7 ------ ------ ------ ------ ------ ------ Fixed Charges: Interest expense $37.4 $84.2 $94.7 $104.7 $137.4 $162.1 Capitalized interest 2.1 3.5 5.1 6.6 7.9 12.7 Portion of rents representa- tive of interest factor 24.1 43.2 41.4 39.2 37.9 45.8 Interest expense of uncon- solidated affiliates 0.0 1.6 1.1 1.4 2.2 0.2 --- --- --- --- --- --- Total fixed charges $63.6 $132.5 $142.3 $151.9 $185.4 $220.8 ----- ----- ------ ------ ------ ------ Ratio of earnings to fixed 7.6x 3.4x 5.4x 3.9x 2.5x 2.2x charges ---- ---- ---- ---- ---- ---- (A) The 1996 earnings from continuing operations before income taxes of $302.2 million includes a charge of $384.8 million as a result of actions taken in the automotive and space and defense businesses.
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