-----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, TtyYdy/kUIlNgu2hd7LU558+rIsB7O7E2I5EkUNRrMFpWecsJjzHqIfmXwr8BeEs XzrtxxxWmk25GH+9Hxat0w== 0000950128-96-000216.txt : 19960314 0000950128-96-000216.hdr.sgml : 19960314 ACCESSION NUMBER: 0000950128-96-000216 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960313 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTINGHOUSE ELECTRIC CORP CENTRAL INDEX KEY: 0000106413 STANDARD INDUSTRIAL CLASSIFICATION: AIR COND & WARM AIR HEATING EQUIP & COMM & INDL REFRIG EQUIP [3585] IRS NUMBER: 250877540 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-00977 FILM NUMBER: 96534438 BUSINESS ADDRESS: STREET 1: WESTINGHOUSE BLDG STREET 2: 11 STANWIX STREET CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4122442000 FORMER COMPANY: FORMER CONFORMED NAME: WESTINGHOUSE ELECTRIC & MANUFACTURING CO DATE OF NAME CHANGE: 19710510 10-K 1 WESTINGHOUSE ELEC. 1 1995 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549-1004 FORM 10-K (MARK ONE) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO ------------ ------------ COMMISSION FILE NUMBER 1-977 ----- WESTINGHOUSE ELECTRIC CORPORATION --------------------------------- (Exact name of registrant as specified in its charter) PENNSYLVANIA 25-0877540 ------------ ---------- (State of Incorporation) (I.R.S. Employer Identification No.) WESTINGHOUSE BUILDING, 11 STANWIX STREET, PITTSBURGH, PENNSYLVANIA 15222-1384 ----------------------------------------------------------------------------- (Address of principal executive offices) (412) 244-2000 -------------- (Telephone No.) SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NAME OF EACH EXCHANGE ON TITLE OF EACH CLASS WHICH REGISTERED - ------------------- ------------------------ Common Stock, par value $1.00 per Share New York Stock Exchange Pacific Stock Exchange Chicago Stock Exchange Boston Stock Exchange Philadelphia Stock Exchange 7 3/4% Notes due April 15, 1996 New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None 2 Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ______ Westinghouse Electric Corporation had 417,177,880 shares of common stock outstanding at January 31, 1996. As of that date, the aggregate market value of common stock held by non-affiliates was $8.1 billion. DOCUMENT INCORPORATED BY REFERENCE INTO THE PARTS OF THIS REPORT INDICATED: 1. Portions of Westinghouse Electric Corporation's Notice of 1996 Annual Meeting and Proxy Statement filed with the Commission pursuant to Regulation 14A of the Securities and Exchange Act of 1934 (the Proxy Statement). (Parts I and III). 2 3 The terms "Westinghouse" and "Company" as used in this Report on Form 10-K refer to Westinghouse Electric Corporation and its consolidated subsidiaries unless the context indicates otherwise. PART I ITEM 1. BUSINESS GENERAL Westinghouse Electric Corporation was founded in 1886 and operates under a corporate charter granted by the Commonwealth of Pennsylvania in 1872. Today, Westinghouse is a diversified, global company which engages in a wide variety of businesses through its Westinghouse/CBS Group and its Industries & Technology Group. The Westinghouse/CBS Group combines the broadcasting operations of CBS Inc. (CBS), which the Company acquired in 1995, and Group W Broadcasting. The Industries & Technology Group provides services, fuel, and equipment for the nuclear energy market, services and equipment for the power generation market, transport refrigeration services, environmental services and management services at government-owned facilities, and communication and information systems. The Company dramatically redefined its business portfolio and future direction by acquiring CBS in November 1995. As a result, Westinghouse became the largest television and radio broadcaster in the United States, with 15 television stations and 39 radio stations. As part of this strategic redirection, in December 1995, management announced plans to divest the Company's defense and electronic systems business and The Knoll Group (Knoll), its office furniture unit. The sales of Knoll and the defense and electronic systems business were completed in February and March 1996, respectively. WCI Communities, Inc. (WCI), the Company's land development business, was sold in July 1995. In accordance with a November 1992 plan, the Company previously liquidated the majority of its Financial Services business, as well as divested its Distribution and Control Business Unit (DCBU) and Westinghouse Electric Supply Company (WESCO). Financial results for 1995 and prior years include all of these divested businesses as Discontinued Operations. For information about principal acquisitions and divestitures see notes 2 and 3 to the financial statements included in Part II, Item 8 of this report. Other divestitures in 1995 included Aptus, Inc., an environmental subsidiary, and the Company's 62% interest in MICROS Systems, Inc. For financial reporting purposes, the Company's Continuing Operations are aligned into six segments: Broadcasting, Power Systems, Thermo King, Government & Environmental Services, Communication & Information Systems, and Other Businesses. Except for Broadcasting, all of these reporting segments operate as part of the Industries & Technology Group. Results of international manufacturing entities, export sales, and foreign licensee income are included in the financial information of the segment that has operating responsibility. Financial and other information by segment and geographic area is included in note 21 to the financial statements included in Part II, Item 8 of this report. During 1995, the largest single customer of Westinghouse was the United States Government and its agencies, whose purchases accounted for 6% of 1995 consolidated sales of products and services of Continuing Operations. In addition, the United States Government and its agencies was the largest single customer of the defense and electronic systems business, which was divested March 1, 1996. Although revenues may fluctuate from quarter to quarter, no material portion of the Company's business was seasonal in nature. 3 4 OPERATING SEGMENTS WESTINGHOUSE/CBS GROUP The Westinghouse/CBS Group combines the operations of CBS and Group W Broadcasting. Its principal businesses include the furnishing of network television services to affiliated television stations primarily throughout the United States, the production of news, sports and entertainment programming, and the operation, under licenses from the Federal Communications Commission (FCC), of 15 television broadcast stations and 39 radio stations. The approval by the FCC of the Company's acquisition of CBS contained a number of temporary waivers of the FCC's television and radio ownership rules. The recently enacted Telecommunications Act of 1996 (the Act) deregulates some of these rules and makes certain, but not all, of the waivers unnecessary. Generally, where waivers continue to be required, the Company intends to file applications with the FCC seeking permanent waivers. Other group owners have been granted similar waivers in recent years. Based on current FCC policy and precedent, the Company believes the FCC will grant these waivers. If these permanent waivers are not granted, the Company would be required to divest certain of its television and radio properties. The Westinghouse/CBS Group includes the CBS Network; CBS Entertainment, News and Sports; the CBS Station Group; CBS Production and Distribution; and Group W Satellite Communications. Through the CBS Network, the Westinghouse/CBS Group distributes a comprehensive schedule of news and public affairs broadcasts, entertainment and sports programming and feature films to over 200 independently-owned affiliated stations and its 15 owned and operated television stations, which in the aggregate serve the 50 states and the District of Columbia, and to certain overseas affiliated stations. The CBS Network is responsible for sales of advertising time for the CBS Network broadcasts and related merchandising and sales promotion activities. This division is also responsible for managing the full range of ongoing activities and areas of mutual concern between the television network and the independently-owned affiliated stations. The CBS Entertainment division produces and otherwise acquires entertainment series and other programs for all time periods, and acquires feature films for distribution by the CBS Network for broadcast. The CBS News division operates a worldwide news organization which produces regularly scheduled news and public affairs broadcasts and special reports for the CBS Television and Radio Station Groups. This division also produces certain news-oriented programming for broadcast in the early morning daypart and in designated hours during primetime. A unit of the CBS News division produces documentaries for sale to other media outlets. The CBS Sports division produces and otherwise acquires sports programs for distribution by the television network for broadcast. The CBS Station Group includes the CBS Television Station and the CBS Radio Station Groups. The Television Station Group operates and serves as national sales representative for the 15 owned television stations. The larger markets served by the owned television stations include New York, Los Angeles, Chicago, Philadelphia, San Francisco, and Boston. The CBS Radio Station Group operates 18 owned AM radio stations and 21 owned FM radio stations. The division also serves as broadcast sales representative for independently-owned AM and FM radio stations and operates the CBS Radio Network, which serves approximately 585 affiliated stations nationwide. CBS Production and Distribution produces and distributes syndicated and off-network programming for the domestic and international marketplace. At year-end 1995, CBS agreed to acquire MAXAM Entertainment, a programmer and distributor. 4 5 Group W Satellite Communications (GWSC) is Westinghouse/CBS Group's cable television programming, satellite distribution and new media division. GWSC provides sports programming and the marketing and advertising for two country music entertainment channels. The network broadcast environment is highly competitive. The Telecommunications Act of 1996 provides both new opportunities and potential new competition for the Westinghouse/CBS Group. By deregulating station ownership limits, the Act will allow the Company to pursue strategic growth in its Radio and Television Station Groups. The entry of telephone companies into the video programming and distribution businesses will mean new competition in program sales, but will also provide new opportunities for the distribution of CBS programming. The CBS Network and the CBS Television Station Group compete for audiences with other television networks and television stations, as well as with other video media, including cable television, satellite television services and videocassettes. In the sale of advertising, the CBS Network and the CBS Television Station Group compete with other broadcast networks, other television stations, cable television systems, and other advertising media. The CBS Network and the CBS Television Station Group also compete with other video media for distribution rights to television programming. In addition, the CBS Network competes with other television networks to secure affiliations with independently-owned television stations in markets across the country, which are necessary to ensure the effective distribution of network programming to a nationwide audience. In recent years, competition among the networks for affiliates has intensified. Current and future technological developments may affect competition within the television field. Developments in advanced digital technology may enable competitors to provide "high definition" pictures and sound qualitatively superior to what television stations now provide. Development of the technology to compress digital signals may also permit the same broadcast or cable channel or satellite transponder to carry multiple video and data services, and could result in an expanded field of competing services. The CBS Radio Station Group competes with other radio networks, independent radio stations, suppliers of radio programming, and other advertising media. Developments in radio technology could affect competition in the radio field. New radio technology, known as "digital audio broadcasting," can provide sound of the quality of compact discs, which is significantly higher than that now provided by radio networks and stations using analog technology. INDUSTRIES & TECHNOLOGY GROUP The Industries & Technology Group consists of the following businesses: Power Systems, Thermo King, Government & Environmental Services, Communication & Information Systems, and Other Businesses. Power Systems The Power Systems segment consists of the Energy Systems and Power Generation Business Units which together serve the worldwide market for electrical power generation. The Energy Systems Business Unit primarily serves the worldwide nuclear energy market through three major areas: operating plant, process control, and new plant. About 40% of the world's operating commercial nuclear power plants incorporate Westinghouse technology. The business unit supplies a wide range of operating plant services, ranging from performance-based maintenance programs to new products and 5 6 services that enhance plant performance. It also has complete capabilities for supplying customers with nuclear fuel for pressurized water reactors. The annual market for operating plant services and fuel is over $10 billion in the United States and $30 billion globally. The business unit designs and develops process control systems for nuclear as well as fossil-fueled power plants and industrial facilities. The business unit is actively marketing new nuclear power plants and components for new plants to the worldwide market. The business unit is also working with government agencies and industry leaders to revitalize the nuclear energy option, and is developing a simplified nuclear power plant design that incorporates passive safety systems. The Power Generation Business Unit designs, manufactures and services steam turbine-generators for nuclear and fossil-fueled power plants, combustion turbine-generators for natural gas and oil-fired power plants, and constructs turnkey power plants worldwide. In addition to serving the electric utility industry, the business unit supplies, services and operates power plants for independent power producers and supplies power generation equipment and services to other non-utility customers. Growing demand for electrical energy has contributed to the business unit's growth. In 1995, the business unit was awarded orders for approximately 7,000 megawatts of new power generating capacity. The domestic market for new generating equipment over the next ten years is expected to be nearly 80 gigawatts; the international market is expected to be over 10 times the size of the domestic market. Manufacturing joint ventures between subsidiaries of the Company and Shanghai Electric Corporation (SEC) in the People's Republic of China received final government approvals in 1995. Westinghouse holds ownership positions varying between 30 and 40 percent in these ventures. SEC is China's largest domestic supplier of turbine generators. The Power Generation Business Unit is a participant in the development of emerging technologies which could impact the future power generation business. The United States electric utility industry is restructuring in response to a new competitive environment brought on by regulatory changes. Power Systems has a number of domestic and foreign competitors in the power generation industry where Westinghouse is recognized as a significant supplier. Positive factors with respect to competitive position are technology, product reliability, service capability, and worldwide presence. Negative factors include reduced opportunities for operating fleet products and services, continued softness in the domestic electric utility sector, and intense competition for new unit sales worldwide. In addition, the worldwide nuclear industry is a mature business with intense competition. The principal methods of competition are technology, product development and performance, responsiveness, customer service, pricing, and financing. Thermo King Thermo King Company (Thermo King) manufactures a complete line of transport temperature control equipment, including units for trucks, trailers, container ships, buses and railway cars, as well as service parts to support these units, and it supplies mapping software for the truck industry through its Innovating Computing Corporation subsidiary. The transport refrigeration units are powered by diesel fuel, gasoline, propane, or electricity. Thermo King maintains five domestic facilities and has international manufacturing plants in Ireland, Brazil, Spain, Puerto Rico, the United Kingdom, the Czech Republic, and the People's Republic of China. It sells products principally through dealerships located around the world, and its equipment is used in virtually every country. 6 7 Thermo King is subject to competition worldwide for all of its products. Its products compete on the basis of reliability, service, technology, warranty, product performance, and cost. In addition, Thermo King's customers and end users are concerned about environmental issues, especially chlorofluorocarbons, noise pollution, and engine emissions. Thermo King designs its products to meet or exceed all environmental requirements. Government & Environmental Services The Westinghouse Government & Environmental Services Company includes Environmental Services and the management of certain government-owned facilities and the U.S. naval nuclear reactors programs. Environmental Services provides a variety of environmental remediation and toxic, hazardous and radioactive waste treatment services and municipal solid waste incineration services. Westinghouse Remediation Services, Inc. provides comprehensive toxic and hazardous waste remediation services, including mobile, on-site environmental treatment technologies. The Scientific Ecology Group, Inc. offers a broad range of on- and off-site services to manage radioactive materials and mixed wastes, including the only commercially-licensed radioactive waste incinerator and the only recycling facility for radioactively contaminated metals in the United States. Resource Energy Systems operates power plants that provide municipal incinerator services. In March 1995, the Company sold Aptus, Inc., which provided toxic and hazardous waste incineration, treatment, transportation, storage, and analysis services. The Company continues to review its portfolio of environmental businesses to determine how best to focus its efforts. Through the following subsidiaries and divisions of Westinghouse Government & Environmental Services Company, the Company manages four government-owned facilities under contracts with the United States Department of Energy (DOE): Westinghouse Savannah River Company, Inc., Westinghouse Hanford Company, West Valley Nuclear Services, Inc., and the Waste Isolation Division. In addition, the Company was awarded a major five year subcontract at the DOE Rocky Flats facility in May 1995. The principal mission at these sites is cleanup, waste management and the safe management of the nation's nuclear materials inventory. In March 1996, the Company was awarded a nine-year Department of Defense (DoD) contract to destroy chemical weapons at the Anniston Army Depot in Anniston, Alabama. The federal government reserves the right to terminate these contracts for convenience. The government-funded U.S. naval nuclear reactors programs consist of the Company's Navy nuclear and technical support businesses. These businesses include the Bettis Atomic Power Laboratory, the Plant Apparatus Division, the Machinery Apparatus Operation, and the Machinery Technology Division, which provides technical engineering services to the Naval Sea Systems Command. In December 1995, Westinghouse announced the closing of the Machinery Technology Division due to the loss of the prime contract with the Navy. Competition for services provided by businesses in the Government & Environmental Services segment is based on price, technology preference, environmental experience, performance reputation and, with respect to certain businesses, availability of permitted treatment or disposal facilities. Communication & Information Systems The Communication and Information Systems Company (CISCO) was formed in November 1995 to focus attention on a number of smaller, yet high potential businesses. CISCO includes businesses that previously resided in various larger divisions within the Company. This segment is grouped around three businesses: security, network communications and wireless communications. 7 8 The security business is a leading, national provider of monitored home and vehicle security products and services. It provides electronic access control systems to commercial customers and integrated surveillance equipment to federal, state and local law enforcement agencies around the world. Network communications provides voice, data, video and network communication services to small and medium sized customers. CISCO provides these services through its network infrastructure as well as through purchase resale. Wireless communications consists of a number of businesses ranging from satellite ground station networks to mobile satellite terminals to wireless mobile services. Many of the businesses' core skills and capabilities were derived from Westinghouse's experience in the defense electronics arena. CISCO is subject to a wide range of both domestic and international competition for many of its products and services including major long distance providers and smaller purchase/resellers. Its products compete on the bases of product features, reliability, technology, product performance, customer service, and cost. Other Businesses These businesses generally were deemed non-strategic. The divestitures of these businesses are essentially complete. DISCONTINUED OPERATIONS During 1995, Discontinued Operations consisted of Knoll, the defense and electronic systems business, Financial Services and WCI. Knoll and the defense and electronic systems business were part of a plan adopted in December 1995; these divestitures were completed in the first quarter of 1996. The disposal of WCI was included in a July 1995 plan. During 1995, the Company continued to liquidate Financial Services. The remaining assets consist of the leasing portfolio and are expected to liquidate in accordance with contractual terms. RAW MATERIALS The Company has experienced no significant difficulty with respect to sources and availability of raw materials essential to its businesses. PATENTS Westinghouse owns or is licensed under a large number of patents and patent applications in the United States and other countries that, taken together, are of material importance to its businesses. Such patent rights are, in the judgment of the Company, adequate for the conduct of its business. None of its important products, however, are covered by exclusive controlling patent rights that preclude the manufacture of competitive products by others. BACKLOG The backlog of firm orders of the Company's Continuing Operations, excluding amounts associated with litigation settlements, was $6,682 million and $6,580 million at December 31, 1995 and 1994, respectively. Of the 1995 backlog, $4,319 million is expected to be liquidated after 1996. In addition to the reported backlog, the Company provides certain non-Westinghouse products primarily for nuclear steam supply customers. 8 9 Backlog for the Company is as follows: Power Systems backlog at year-end 1995 and 1994 was $5,698 million and $5,305 million, respectively. Energy Systems backlog at year-end 1995 and 1994 was $2,592 million and $2,623 million, respectively. Power Generation backlog at year-end 1995 and 1994 was $3,106 million and $2,682 million, respectively. Backlog of $3,639 million is expected to be liquidated after 1996. Thermo King backlog at year-end 1995 and 1994 was $174 million and $280 million, respectively. Backlog of $67 million is expected to be liquidated after 1996. Government and Environmental Services backlog at year-end 1995 and 1994 was $674 million and $718 million, respectively. Backlog of $582 million is expected to be liquidated after 1996. Communication and Information Systems backlog at year-end 1995 and 1994 was $97 million and $154 million, respectively. Backlog of $19 million is expected to be liquidated after 1996. Other Businesses backlog at year-end 1995 and 1994 was $8 million and $65 million, respectively. Backlog of $2 million is expected to be liquidated after 1996. Also included in backlog at year-end 1995 and 1994 was $31 million and $58 million, respectively, attributable to Corporate and Other, of which $10 million is expected to be liquidated after 1996. This backlog primarily relates to research activities for outside customers. ENVIRONMENTAL MATTERS Information with respect to Environmental Matters is incorporated herein by reference to Management's Discussion and Analysis -- Environmental Matters included in Part II, Item 7 and in note 17 to the financial statements included in Part II, Item 8 of this report. RESEARCH AND DEVELOPMENT Data with respect to research and development is incorporated herein by reference to note 21 to the financial statements included in Part II, Item 8 of this report. EMPLOYEE RELATIONS During 1995, Westinghouse employed an average of 77,813 people, of whom approximately 64,000 were located in the United States. Included in the 1995 average employees were 26,290 employees associated with government-owned facilities and the U.S. naval nuclear reactors programs and 17,533 employees in Discontinued Operations. During the same period, approximately 8,800 domestic employees were represented in collective bargaining by 21 labor organizations. Of these employees, 36% were represented by unions that are affiliated with, and/or bargain in conjunction with, one of three national unions, namely, the International Brotherhood of Electrical Workers; the International Union of Electronic, Electrical, Salaried, Machine and Furniture Workers; and the Federation of Independent Salaried Unions. 9 10 In August 1994, the Company negotiated four-year agreements with these unions, currently representing about 6,300 employees. The basic agreements provided lump sum wage increases of $1,000 in 1994 and $500 in 1995 and wage increases of 2.5% each in August 1995 and 1996, and 3% in August 1997. In addition, there are seven potential cost-of-living increases. The agreements also included major restructuring of the health care delivery system introducing new managed care networks; restructuring of the employee security and protection plan; and a restructured pension plan to enable the Company to address issues related to underfunding. Management believes that the 1994 labor agreements represent a balanced and competitive package of pay and benefits particularly well suited for Westinghouse and its employees. FOREIGN AND DOMESTIC OPERATIONS Information with respect to foreign and domestic operations and export sales is incorporated herein by reference to note 21 to the financial statements included in Part II, Item 8 of this report. ITEM 2. PROPERTIES. At December 31, 1995, the Company's Continuing Operations owned or leased 697 locations totalling more than 30 million square feet of floor area in the United States and 38 foreign countries. Domestic locations of Continuing Operations comprised approximately 86% of the total space. Facilities leased in the United States accounted for approximately 23% of the total space occupied by Continuing Operations and facilities leased in foreign countries accounted for approximately 5% of the total space occupied by Continuing Operations. No individual lease was material. A number of manufacturing plants and other facilities formerly used in operations are either vacant, partially utilized, or leased to others. All of these plants are expected to be sold, leased, or otherwise utilized. Except for these facilities, the Company's physical properties are adequate and suitable, with an appropriate level of utilization, for the conduct of its business in the future. ITEM 3. LEGAL PROCEEDINGS (a) In October 1990, Houston Lighting and Power Company and its co-owners filed a lawsuit against the Company and two individual defendants (one current and one retired employee of the Company) in the District Court of Matagorda County, Texas, relating to the Company's supply of nuclear steam supply systems for the South Texas Project. Trial commenced in this action on July 5, 1995. On December 7, 1995, the parties reached an agreement resolving all claims asserted in this matter. (b) In October 1990, Commonwealth Edison Company (Commonwealth Edison) filed a lawsuit against the Company in the Circuit Court in Cook County, Illinois, for an unspecified amount of damages, including treble and punitive damages, based on the Company's supply of nuclear steam supply systems for Commonwealth Edison's Zion, Byron, and Braidwood plants. Commonwealth Edison's Second Amended Complaint sets forth counts of common law fraud, violation of the Illinois Consumer Fraud and Deceptive Practices Act, and violations of the Federal Racketeer Influenced and Corrupt Organization Act (RICO) statute. Subsequently, Commonwealth Edison disclosed that it was seeking approximately $1.2 billion of damages. A trial date is scheduled for July 1996. 10 11 (c) In February 1993, Portland General Electric Company (Portland) filed a lawsuit against the Company in the United States District Court (USDC) for the Western District of Pennsylvania seeking unspecified damages based on claims for breach of contract, negligence, fraud, negligent misrepresentation, and violations of the federal RICO statute and the Oregon RICO statute, relating to the Company's design, manufacture and installation of steam generators at the Trojan Nuclear Plant, an electric generating facility located in Ranier, Oregon. Also in February 1993, the Eugene Water & Electric Board (the Board), a 30% owner of the Trojan Nuclear Plant, filed a suit containing essentially the same allegations and seeking unspecified damages. A declaratory judgment that the steam generators are defective and the Company is liable for expenses, including replacement power, incurred as a result of the alleged defects, was also sought in both cases. Although the Board's suit was filed in the USDC for the District of Oregon, its motion to change the venue to the USDC for the Western District of Pennsylvania was granted. In April 1993, on Portland's motion, the Board's case was consolidated with the Portland case. The consolidated claims sought total damages of approximately $350 million. In June 1993, the court granted the Company's motion to dismiss plaintiffs' claims for negligence and negligent misrepresentation. The court also dismissed, in part, the plaintiffs' claims under Section 1962(b) of the federal RICO statute relating to the Trojan project enterprise. On May 17, 1995, the USDC dismissed the Board's claims after the Company and the Board agreed on a settlement. The claims of Portland are scheduled for trial in 1996. (d) In July 1993, Northern States Power Company (NSP) filed a lawsuit against the Company in the USDC for the District of Minnesota for an unspecified amount of damages, including treble and punitive damages, based on the Company's supply of steam generators at NSP's Prairie Island Nuclear Plant. The complaint sets forth counts for breach of contract, fraud, negligent misrepresentation, violations of the RICO statute and violations of the Minnesota Prevention of Consumer Fraud Act. Subsequently, NSP disclosed that it is seeking approximately $317 million of damages. This case is scheduled for trial in March 1996. (e) On February 27, 1996, suit was brought against the Company in the USDC for the District of New Jersey by Public Service Electric & Gas Company, PECO Energy Company, Atlantic City Electric Company, and Delaware Power & Light Company, the owners of the Salem Generating Station. The suit alleges counts under the RICO statute, for fraud and for negligent misrepresentation and for breach of contract in connection with the Company's supply of steam generators and for service orders in 1993 and 1995 related to these steam generators. (f) In August 1988, the Pennsylvania Department of Environmental Resources (PDER) filed a complaint against the Company alleging violations of the Pennsylvania Clean Streams Law at the Company's Gettysburg, Pennsylvania, elevator plant. The PDER requested that the Environmental Hearing Board assess a penalty in the amount of $9 million. The Company has denied these allegations. The parties completed discovery and a portion of the hearing on the complaint began in 1991. The hearing resumed in 1992 and concluded in February 1993. All post-trial briefs have been filed and the parties await a decision. (g) In March 1993, the Pennsylvania Department of Environmental Resources (PDER) filed a complaint against CBS with the Pennsylvania Environmental Hearing Board, seeking the imposition of penalties for violations of the Clean Streams Law and the Solid Waste Management Act. The complaint alleged that the violations occurred in the toy manufacturing plant located in East Lampeter Township, Lancaster County, Pennsylvania. The PDER sought penalties of $6 million. In February 1996, PDER and CBS reached an agreement to settle this enforcement action. Under the terms of the agreement, CBS will pay a penalty in the amount of $150,000, and provide $300,000 to PDER in order to enable it to fund community environmental improvement projects. 11 12 (h) The Company has been defending, in the USDC for the Western District of Pennsylvania (the District Court), consolidated class and derivative actions and an individual lawsuit brought by shareholders of the Company against the Company, Westinghouse Financial Services, Inc. (WFSI) and Westinghouse Credit Corporation (WCC), previously subsidiaries of the Company, and/or certain present and former directors and officers of the Company, as well as other unrelated parties. Together, these actions allege various federal securities law and common law violations arising out of alleged misstatements or omissions contained in the Company's public filings concerning the financial condition of the Company, WFSI and WCC in connection with a $975 million charge to earnings announced on February 27, 1991, a public offering of Westinghouse common stock in May 1991, a $1,680 million charge to earnings announced on October 7, 1991, and alleged misrepresentations regarding the adequacy of internal controls at the Company, WFSI and WCC. In July 1993, the court dismissed in its entirety the derivative claim and dismissed most of the class action claims, with leave to replead certain claims in both actions. Both actions were subsequently repled. On January 20, 1995, the court again dismissed the derivative complaint in its entirety with prejudice. On February 8, 1995, this dismissal was appealed. Also on January 20, 1995, the court dismissed the class action claims, but granted plaintiffs the right to replead certain of the class action claims. Plaintiffs, in the class action, did not replead the claims and on February 28, 1995, the court dismissed these claims in their entirety. Plaintiffs in both the derivative and class action suits appealed the rulings and dismissals of their claims by the District Court. Oral arguments were made before the United States Court of Appeals for the Third Circuit on November 2, 1995 and the parties await a decision. (i) In February 1993, the Company was sued by 108 former employees who were laid off subsequent to the cancellation by the federal government of all contracts pertaining to the carrier-based A-12 aircraft program. The complaint alleges age discrimination on the part of the Company. The suit was filed in the USDC for the District of Maryland. The plaintiffs seek back pay with benefits and reinstatement of jobs or front pay. In April 1993, the Equal Employment Opportunity Commission (EEOC) filed a class-action, age discrimination suit against Westinghouse in the USDC for the District of Maryland on behalf of 388 former Westinghouse employees (which includes the aforementioned 108 employees) who were laid off or involuntarily terminated from employment subsequent to the federal government's cancellation of all contracts pertaining to the carrier-based A-12 aircraft program. The suit alleges age discrimination and discriminatory employment practices. The suit seeks back pay, interest, liquidated damages, reinstatement of jobs, court costs and other appropriate relief. In May 1993, these two cases were consolidated by the court. The court has adopted a trial structure which contemplates separate trials for plaintiffs in each of the 10 business segments within the Electronic Systems Group (ESG) at the time of the February 1991 reduction-in-force. The first of these trials is expected to begin some time during the second quarter of 1996; additional trials have not yet been scheduled. In preparation for the first trial, the parties have engaged in extensive discovery, which was largely concluded in June 1995. Approximately 125 plaintiffs have been dismissed with prejudice from the action. (j) The Company is a defendant in numerous lawsuits claiming various asbestos-related personal injuries, which allegedly occurred from use or inclusion of asbestos in certain of the Company's products, generally in the pre-1970 time period. Typically, these lawsuits are brought against multiple defendants. The Company was neither a manufacturer nor a producer of asbestos and is often-times dismissed from these lawsuits on the basis that the Company has no relationship to the products in question or the claimant did not have exposure to the Company's product. At December 31, 1995, the Company had approximately 75,000 claims outstanding against it. In court actions which have been resolved, the Company has prevailed in the vast majority of the asbestos claims and has resolved others through settlement. Furthermore, the Company has brought suit against certain of 12 13 its insurance carriers with respect to these asbestos claims. Under the terms of a settlement agreement resulting from this suit, carriers which have agreed to the settlement are now reimbursing the Company for a substantial portion of its current costs and settlements associated with asbestos claims. A number of the asbestos-related cases pending against the Company, including those pending in Mississippi, Baltimore and West Virginia, are consolidated cases. In consolidated cases, the claims of a group of plaintiffs are tried together, and oftentimes limited findings with respect to common issues of fact and punitive damages are decided with respect to a representative grouping of plaintiffs and then applied to other individuals in the group. However, for the Company to be liable for damages to any particular claimant, that individual claimant must prove that he developed an asbestos-related disease, that he was exposed to a Westinghouse product, and that this exposure was a substantial factor in the development of the disease. (k) In August of 1993, the bankruptcy Trustee for the Bonneville Pacific Corporation (Bonneville) sued over 70 defendants, including Westinghouse, in federal district court in Salt Lake City, Utah. The Trustee's claims against the group of defendants, including Westinghouse; Deloitte & Touche; Mayer, Brown & Platt; Piper Jaffray, Inc.; and Kidder Peabody and Company, are numerous, but consist primarily of common law fraud and aiding and abetting in breaches of fiduciary duty on the part of former officers and directors of Bonneville. There are also claims by the Trustee for the tort of conspiracy and civil RICO violations. Westinghouse has filed numerous motions seeking dismissal of the claims and has filed a denial of the allegations. The Company's involvement with Bonneville consisted of four sale- leaseback transactions in co-generation projects through its former subsidiary, WCC. On October 6, 1994, the Trustee filed its preliminary damage calculation which totalled $647 million against a group of defendants, including Westinghouse, on a theory of joint and several liability. The Trustee is also seeking treble damages based upon the Trustee's position that a violation of civil RICO has occurred. Westinghouse continues to reject the validity of the claims and believes that the preliminary damage calculations are without merit. At this time, the parties are engaged in discovery. (l) A description of the derivative litigation involving certain of the Company's current and past directors is incorporated herein by reference to "Litigation Involving Derivative Claims Against Directors" in the Proxy Statement. (m) The Company was one of several defendants in a fraudulent conveyance action filed on August 16, 1994 by the unsecured creditors committee of Phar-Mor, Inc. seeking return of the proceeds of an August 1991, Phar-Mor tender offer in which the Company received about $30 million, and an additional $20 million from the tender of Phar-Mor stock by the DeBartolo Family Limited Partnership (DeBartolo) pursuant to a Westinghouse loan to DeBartolo secured by DeBartolo's Phar-Mor holdings. The fraudulent conveyance action was transferred from bankruptcy court in Cleveland to the Western District of Pennsylvania and consolidated with other Phar-Mor litigation. A defense motion for summary judgment in the fraudulent conveyance action was granted on August 22, 1995, and the unsecured creditors have appealed. Included in the consolidated cases pending in the Western District of Pennsylvania is an action by the Company seeking damages in connection with loans to, and equity investments in, Phar-Mor. On May 2, 1995, the Company concluded a settlement in this litigation with Phar-Mor's chief executive officer and controlling shareholder and certain other parties which resulted in the dismissal of all cross-claims and third-party complaints between the Company and these parties. Remaining were the Company's claims against Coopers & Lybrand (Coopers), Phar-Mor's former accountants, for securities violations, fraud, negligent misrepresentation, and breach of contracts to which the Company was a third-party beneficiary. Coopers 13 14 obtained a summary judgment on the negligent misrepresentation claim, and on certain of the breach of contract claims. Trial commenced on September 27, 1995, and on February 14, 1996, a federal jury found Coopers liable for violations of securities laws and common law fraud. The damage portion of the trial is expected to commence in April 1996. Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in each of the foregoing matters and although management believes a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on the Company's results of operations for a quarter or a year. However, based on its understanding and evaluation of the relevant facts and circumstances, management believes that the Company has meritorious defenses to the litigation described in items (b) through (l) above, and management believes that the litigation should not have a material adverse effect on the financial condition of the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None during the fourth quarter of 1995. EXECUTIVE OFFICERS The names, offices, and positions held during the past five years by each of the executive officers of the Company as of March 1, 1996 are listed below. Officers are elected annually. There are no family relationships among any of the executive officers of the Company.
AGE AT NAME, OFFICES, AND POSITIONS MARCH 1, 1996 - ---------------------------- ------------- Michael H. Jordan - Chairman and Chief Executive Officer 59 since June 30, 1993; Partner with Clayton, Dublier & Rice, Inc. from September 1992 to June 1993; Chairman of PepsiCo International Foods and Beverages Division from December 1990 to September 1992. Prior to December 1990, Mr. Jordan held numerous other management positions of increasing responsibility at PepsiCo International. Gary M. Clark - President since June 30, 1993; President and 60 Acting Chief Executive Officer from January 27, 1993 to June 30, 1993; Member of President's Office from January 1, 1993 to January 27, 1993; Executive Vice President, Industries and Corporate Resources from December 1990 to January 1993; Executive Vice President, Industries from January 1989 to December 1990. Frank R. Bakos - President, Power Generation since August 1994; 58 Vice President and General Manager, Power Generation from January 1989 to August 1994. Louis J. Briskman - Senior Vice President and General Counsel 47 since January 1994; Senior Vice President, Secretary and General Counsel from January 1993 to January 1994; Deputy General Counsel from January 1989 to January 1993.
14 15 Francis J. Harvey - Executive Vice President and Chief Operating 52 Officer, Industry & Technology Group since March 1, 1996; President, Electronic Systems from March 1, 1995 to February 29, 1996; President, Westinghouse Government and Environmental Services Co. from January 1994 to March 1, 1995; Vice President, Science and Technology from July 1993 to January 1994; General Manager, Marine Division from July 1986 to July 1993. Peter A. Lund - Chief Executive Officer and President of CBS Inc. since 55 November 28, 1995; President, CBS/Broadcast Group, from February 1995 to November 27, 1995; President, CBS Television Network, from March 1994 to February 1995; Executive Vice President of CBS/Broadcast Group, from October 1990 to March 1994. James S. Moore - President, Westinghouse Government & Environmental 59 Services Company since March 1, 1995; Senior Vice President, Corporate Human Resources and Total Quality from January 1993 to March 1, 1995; Vice President of Executive Resources and Development from July 1991 to January 1993; President, Westinghouse Savannah River Company from September 1988 to July 1991. Fredric G. Reynolds - Executive Vice President and Chief Financial 45 Officer since March 1994; Senior Vice President, Finance, and Chief Financial Officer, PepsiCo International Foods from December 1990 to March 1994; Senior Vice President, Finance, and Chief Financial Officer, Frito-Lay from May 1989 to December 1990. James F. Watson, Jr. - President, Thermo King since February 1993; 58 Vice President and General Manager, North American Division of Thermo King from October 1983 to February 1993. Nathaniel D. Woodson - President, Energy Systems since August 1994; 54 Vice President and General Manager, Energy Systems from November 1990 to August 1994; President, International from March 1989 to November 1990.
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The principal markets for the Company's common stock are identified on page 1 of this report. The remaining information required by this item appears on page 58 of this report and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The information required by this item appears on page 58 of this report and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this item appears on pages 17 through 29 of this report and is incorporated herein by reference. 15 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item, together with the report of Price Waterhouse LLP dated February 12, 1996, appears on pages 30 through 58 of this report and is incorporated herein by reference.
PAGE Report of Management 30 Report of Independent Accountants 30 Consolidated Statement of Income for each of the three years in the 31 period ended December 31, 1995 Consolidated Balance Sheet at December 31, 1995 and 1994 32 Consolidated Statement of Cash Flows for each of the three years in the 33 period ended December 31, 1995 Notes to the Financial Statements 34 Quarterly Financial Information (unaudited) 57 Five-Year Summary Selected Financial and Statistical Data (unaudited) 58
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 16 17 MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW During 1995, the Corporation made a dramatic shift in its business portfolio and future direction. This transformation was hallmarked by the $5.4 billion acquisition of CBS Inc. (CBS) in November 1995. As a result, Westinghouse became the largest television and radio broadcaster in the country, with 15 television stations reaching 33% of U.S. households and 39 radio stations covering 35% of the nation. The CBS Television Network is a long-standing, branded consumer trademark with a strong heritage and worldwide recognition. To finance the acquisition of CBS and replace existing credit facilities, the Corporation successfully obtained new credit facilities under a credit agreement with a commitment level of $7.5 billion in September 1995. This financing was substantially oversubscribed by lenders. As part of this strategic redirection, in December 1995, the Corporation announced a plan to divest its defense and electronic systems business and The Knoll Group (Knoll), its office furnishings unit. Proceeds from the sales of these units will be used to repay approximately 65% of the debt incurred to finance the CBS acquisition. This action will provide added financial flexibility to invest in broadening the scope and global reach of the Corporation's media and other businesses. In December 1995, the Corporation reached a definitive agreement to sell Knoll for $565 million of cash. In January 1996, an agreement was executed for the sale of the Corporation's defense and electronic systems business for $3 billion of cash, and the assumption of approximately $500 million of pension and postretirement benefit liabilities associated with active employees of the business. The substantial turnaround of Knoll's operations in 1995 and the strategic technology and defense programs of the defense and electronic systems business, coupled with strong operating performance, enabled management to obtain attractive values for these businesses. These transactions are expected to be completed during the first quarter of 1996. During 1995, the Corporation made substantial progress in paying down non-acquisition debt. In total, more than $1.4 billion of assets were monetized, enabling the Corporation to exceed its $1 billion debt repayment target established a year ago. During 1995, the Corporation sold: - - WCI Communities, Inc. (WCI) for $430 million of cash and retained approximately $125 million of mortgage notes receivable and securities, - - the majority of the remaining real estate portfolio investments of Financial Services generating cash proceeds of more than $360 million, - - investments held in two trusts established to fund non-qualified executive benefit plans for proceeds of $305 million, and - - other non-strategic businesses for proceeds approximating $300 million of cash. These strategic changes and debt reduction activities affected the presentation of the Corporation's financial information included in this report as follows: - - results for CBS are included in the Corporation's financial statements subsequent to the acquisition date of November 24, 1995, - - the operating results for the defense and electronic systems business, Knoll and WCI are presented as Discontinued Operations separately from Continuing Operations for all periods, and - - all of the Corporation's debt is included in Continuing Operations except for the remaining Financial Services debt that is expected to be repaid through the liquidation of the leasing portfolio. However, in connection with the transfer of the defense and electronic systems business and Knoll to Discontinued Operations, interest expense was allocated to Discontinued Operations for all periods. See note 3 to the financial statements. The Corporation reported net income of $15 million in 1995 and $77 million in 1994 and a loss of $326 million in 1993. Net income (loss) includes results from Continuing Operations, Discontinued Operations, and the cumulative effect of a change in an accounting principle as presented below: Components of Net Income (Loss) (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ------------------------------------------------------------ Loss from Continuing Operations $(44) $(13) $(246) Income (loss) from Discontinued Operations 59 90 (24) Cumulative effect of change in accounting principle - - (56) - ------------------------------------------------------------ Net income (loss) $ 15 $ 77 $(326) - ------------------------------------------------------------
Included in 1995 results for Continuing Operations were pre-tax provisions of $86 million ($53 million after tax) for restructuring activities, $236 million ($147 million after tax) related to the Philippines and steam generator litigation matters, and a gain from the sale of MICROS Systems, Inc. (MICROS) of $115 million ($66 million after tax). Included in the 1995 results of Discontinued Operations were after-tax charges of $30 million for additional restructuring and $76 million for the estimated loss on the disposal of WCI. 17 18 Included in 1994 results were pre-tax provisions related to Continuing Operations of $23 million ($14 million after tax) for additional restructuring activities and $308 million ($195 million after tax) for the settlement of a portion of the Corporation's pension obligation. In 1994, the results of Discontinued Operations included an after-tax charge of $37 million related to restructuring activities. The 1993 results included pre-tax provisions related to Continuing Operations of $249 million ($162 million after tax) for restructuring and $400 million ($265 million after tax) for the disposition of non-strategic businesses and costs for certain litigation and environmental contingencies. The 1993 results of Discontinued Operations included after-tax provisions of $66 million for restructuring and $95 million for estimated disposal costs of Discontinued Operations. The 1993 results also included an after-tax charge of $56 million for the adoption of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits." See the notes to the financial statements for further discussion of these matters. Excluding the after-tax effect of certain special charges described above, income from Continuing Operations was $90 million for 1995 compared to $196 million for 1994 and $181 million for 1993. Excluding all of the special charges described above, net income was $255 million for 1995 compared to $323 million for 1994 and $318 million for 1993. Earnings per share data appear below. The computation of fully diluted earnings per share assumes that the conversion of the Series B Conversion Preferred Stock (Series B Preferred), which converted to common stock on September 1, 1995, occurred at the beginning of the year. See note 15 to the financial statements. Earnings (loss) Per Common Share
YEAR ENDED DECEMBER 31 1995 1994 1993 - ------------------------------------------------------------------------------------ Primary earnings (loss) per common share: Continuing Operations $(.19) $(.16) $ (.84) Discontinued Operations .14 .23 (.07) Cumulative effect of change in accounting principle - - (.16) - ------------------------------------------------------------------------------------ Primary earnings (loss) per common share $(.05) $ .07 $(1.07) - ------------------------------------------------------------------------------------ Fully diluted earnings (loss) per common share: Continuing Operations $(.10) $(.16) $ (.84) Discontinued Operations .13 .23 (.07) Cumulative effect of change in accounting principle - - (.16) - ------------------------------------------------------------------------------------ Fully diluted earnings (loss) per common share $ .03 $ .07 $(1.07) - ------------------------------------------------------------------------------------
RESULTS OF OPERATIONS-CONTINUING OPERATIONS RESULTS OF OPERATIONS-CONTINUING OPERATIONS (in millions)
Operating Profit (Loss) Sales of Products and Services Operating Profit (Loss) Excluding Special Charges - ----------------------------------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------------------- Broadcasting: Television $ 691 $ 379 $ 335 $ 161 $ 130 $ 92 $ 161 $ 130 $ 92 Radio 251 208 215 55 47 44 55 47 44 Other Broadcasting 166 155 155 (4) 20 3 (4) 18 15 - ----------------------------------------------------------------------------------------------------------------------------------- Total Broadcasting 1,108 742 705 212 197 139 212 195 151 - ----------------------------------------------------------------------------------------------------------------------------------- Power Systems: Energy Systems 1,369 1,364 1,420 114 114 164 130 140 209 Power Generation 1,769 1,715 1,786 (16) 130 (2) 12 125 124 Other Power Systems (138) (149) (123) (305) (79) (201) (69) (79) (76) - ----------------------------------------------------------------------------------------------------------------------------------- Total Power Systems 3,000 2,930 3,083 (207) 165 (39) 73 186 257 - ----------------------------------------------------------------------------------------------------------------------------------- Thermo King 1,065 877 719 176 135 113 176 135 113 - ----------------------------------------------------------------------------------------------------------------------------------- Government & Environmental Services: Government Operations 144 116 104 86 76 71 86 76 71 Environmental Services 302 341 313 (62) (18) (43) (62) (14) (11) - ----------------------------------------------------------------------------------------------------------------------------------- Total Government & Environmental Services 446 457 417 24 58 28 24 62 60 - ----------------------------------------------------------------------------------------------------------------------------------- Communication & Information Systems 361 312 279 (1) 7 (3) 2 7 8 Other Businesses 305 524 533 9 2 (38) 9 2 (33) Corporate and Other 90 153 155 (169) (159) (234) (130) (159) (136) Intersegment Sales (79) (106) (112) - - - - - - - ----------------------------------------------------------------------------------------------------------------------------------- Total $6,296 $5,889 $5,779 $ 44 $ 405 $ (34) $ 366 $ 428 $ 420 - -----------------------------------------------------------------------------------------------------------------------------------
18 19 With the strategic redirection of the Corporation and the shift in the Corporation's business portfolio, management realigned the business segments for financial reporting purposes. In 1995, a new segment, Communication & Information Systems, was created that includes Westinghouse Communications, formerly a part of the Broadcasting segment, and the communication and information systems divisions of the former Electronic Systems segment. In addition, Resource Energy Systems, previously included in the Other Businesses segment, has been included in the Government & Environmental Services segment. Corporate overhead costs, which were formerly allocated to the individual segments, are now included in Corporate and Other. Segment information for 1994 and 1993 has been restated to reflect these changes. The Corporation's consolidated revenues from sales of products and services increased $407 million in 1995 compared to 1994 primarily due to the acquisition of CBS and increased volume at Thermo King, offset partially by the divestiture of non-strategic businesses. The Corporation's consolidated revenues were essentially flat in 1994 compared to 1993, totalling approximately $5.8 billion. Operating profit for each of the last three years included special charges related to restructuring activities, which totalled $86 million in 1995, $23 million in 1994, and $249 million in 1993. Other special charges of $236 million for litigation matters were included in operating profit in 1995. In 1993, other special charges included in operating profit were $125 million for litigation costs, $60 million for Corporate environmental costs and $20 million for asset writeoffs associated with projects that were discontinued. The improvements in 1995 segment operating profit resulting from Thermo King's increased volume and reduced corporate overhead costs were more than offset by the decline in profitability of the Power Systems segment. The recognition of higher costs for disposal of secondary waste in the Environmental Services unit also contributed to the decline in profits in 1995. Results for the Corporation continue to be affected by higher pension costs resulting from unfunded pension obligations and by the costs associated with litigation matters. Although the Corporation's objective is to reduce these earnings constraints over the next few years, management expects that they will continue to negatively affect operating results in 1996. Broadcasting The results for CBS subsequent to the completion of the acquisition on November 24, 1995 are included in the results for the Broadcasting segment. Sales and operating profit for CBS for this 37-day period totalled $303 million and $9 million, respectively. The results for television include those for 15 television stations, as well as the CBS Television Network. The reported results for television and radio include depreciation and amortization of specifically identifiable assets based on their fair values when acquired. Amortization of goodwill arising from the CBS acquisition is not readily separable among the CBS operations. As a result, all of the amortization of this goodwill, which approximates $120 million per year, is included in the results for "Other Broadcasting." The approval by the Federal Communications Commission (FCC) of the Corporation's acquisition of CBS contained a number of temporary waivers of the FCC's television and radio ownership rules. The recently enacted Telecommunications Act of 1996 deregulates some of these rules and makes certain, but not all of the waivers unnecessary. Generally, where waivers continue to be required, the Corporation intends to file applications with the FCC seeking permanent waivers. Other group owners have been granted similar waivers in recent years. Based on current FCC policy and precedent, the Corporation believes the FCC will grant these waivers. If these permanent waivers are not granted, the Corporation would be required to divest certain of its television and radio properties. Performance for the year for Broadcasting excluding CBS was strong. Revenues increased 8% from 1994 to $805 million. Operating profit, excluding a $2 million adjustment for restructuring costs in 1994, increased 4% to $203 million. For the year, strong performances from radio and television operations and Group W Satellite Communications were partially offset by additional program development costs at the production company. However, during the fourth quarter of 1995, a weak advertising market, driven by a lack of political campaign advertising and lower ratings, caused television profits to decline slightly. Revenues for Broadcasting increased 5% to $742 million in 1994 compared to $705 million in 1993 reflecting growth in advertising revenues, particularly in television. The 1994 Olympics and political campaigns contributed to the increased advertising revenues. Group W Satellite Communications (GWSC) also reported higher revenues. 19 20 Included in 1993 operating profit was $12 million for restructuring costs, of which $2 million was subsequently not required and adjusted in 1994. Excluding restructuring amounts, operating profit increased 29% to $195 million in 1994 compared to $151 million in 1993 due to the increased advertising revenues and improvements in productivity resulting from cost-reduction programs. The future operating results of Broadcasting depend on realization of post-acquisition benefits from combined operations, demand for television advertising, competitive changes in media businesses, and the television network's audience share in all dayparts. Earnings before interest expense, income taxes, depreciation, amortization, and special charges totalled $269 million for 1995, $226 million for 1994, and $183 million for 1993. Power Systems Power Systems consists of Energy Systems and Power Generation, the Corporation's nuclear and fossil-fueled power generation businesses. The results for the Power Systems segment in total reflect the impact of discounts on goods and services provided to customers under litigation settlements. However, the results for Energy Systems and Power Generation are presented as if the sales had been made at normal commercial rates. The impact of these discounts is presented in "Other Power Systems." Sales for Power Systems remained relatively stable over the last three years. Operating profit, however, declined substantially in 1995 compared to 1994 because of the recognition of costs for litigation matters, lower profitability for the Power Generation business unit, and restructuring costs. Sales for Energy Systems in 1995 were consistent with the prior year. Revenues in 1994 decreased 4% to $1,364 million due to reduced licensee income and the favorable 1993 effect of a change in accounting for nuclear fuel revenues. Included in 1995 operating profit was $16 million for restructuring activities related to the separation of approximately 200 employees. Operating profit for 1994 included $26 million for restructuring activities related to the separation of approximately 400 employees in late 1994. Included in the 1993 operating profit was $45 million for restructuring. Excluding special charges in all years, operating profit decreased 7% to $130 million in 1995 compared to 1994 and 33% to $140 million in 1994 compared to 1993. The decreases in operating profit in 1995 and 1994 were attributable primarily to lower licensee income. Operating profit for 1994 also reflected the change in accounting for nuclear fuel revenues in 1993. Cost savings from restructuring activities have been essentially offset by price compression. Revenues for Power Generation in 1995 increased 3% to $1,769 million compared to 1994. Revenues decreased 4% or $71 million in 1994 compared to 1993. Higher field service revenues and new apparatus sales offset decreased revenues from major factory repair and service activities. The operating loss for 1995 included $28 million for the separation of approximately 550 employees. The operating loss in 1993 included $126 million for restructuring activities, of which $5 million was redeployed in 1994 to other businesses. Excluding the impact of restructuring in all years, operating profit in 1995 decreased $113 million to $12 million after remaining flat in 1994 and 1993. The shift from high-margin service, which has declined due to a combination of improved equipment reliability and deferral of maintenance by utilities, to lower margin new apparatus business has more than offset cost improvements from restructuring activities. In 1995, orders of $2.4 billion, although strong, were down 5% from 1994 reflecting increased competitive pressures. Approximately 55% of the orders were from customers outside the United States reflecting Power Generation's focus on international opportunities. Other Power Systems includes eliminations of sales between Energy Systems and Power Generation, as well as activities related to uranium, steam generator and Philippines litigation matters, including legal fees incurred, estimated losses for settlements, and discounts. In 1995, a special charge of $236 million was recognized for steam generator matters and the settlement of the Philippines litigation. The operating loss for 1993 included a special charge of $125 million for litigation matters. Excluding the special charges, the operating loss, which represents discounts from commercial prices on goods and services supplied under previous settlement arrangements, was relatively flat. Thermo King Excellent results were reported by Thermo King for 1995. Sales increased 21% driven by strong international demand, particularly in Europe. Operating profit increased 30% as a result of the higher volume and benefits from product cost improvement programs. International orders accounted for nearly 50% of Thermo King's total orders in 1995. The slowdown in North American truck and trailer business, which began in the third quarter of 1995, caused orders to decline late in the year, although total-year orders were slightly ahead of 1994. 20 21 Revenues for Thermo King increased 22% to $877 million in 1994 due to volume increases in both the domestic and international truck and trailer product lines, as well as service parts and seagoing container product lines. Operating profit increased 19% to $135 million in 1994 compared to 1993 primarily as a result of the increased volume. Government & Environmental Services Sales and operating profits for the management of government sites were strong for 1995 with sales up 24% and operating profit up 13% compared to 1994. Benefits from the U. S. Department of Energy's (DOE) new performance based contracts were partially offset by the loss of a management contract at a DOE facility in Idaho. Sales and operating profit in 1994 were up 12% and 7%, respectively, compared to 1993, as a result of higher award fees at several DOE sites and increased work scope and fees for the naval nuclear program. The DOE is continuing to open for bid certain of its operating and maintenance contracts as they expire. The Corporation intends to pursue vigorously the retention of its current contracts and selectively bid on sites not currently managed by the Corporation. The environmental services business reported a decrease in sales for 1995 of $39 million, primarily as a result of the sale of Aptus in March 1995. Revenues in 1994 increased $28 million compared to 1993 due to increased volume in hazardous waste remediation services and radioactive waste incineration. Included in 1994 and 1993 operating losses were charges of $4 million and $32 million, respectively, for restructuring activities and other actions. Excluding special charges, the operating loss of the environmental services business increased $48 million in 1995 compared to 1994 and $3 million in 1994 compared to 1993. In addition to the special charges described above, the operating loss in 1995 was unfavorably affected by a one-time charge of $30 million to recognize higher costs for disposal of secondary waste at the Corporation's low-level radioactive waste treatment business. The operating loss in 1994 increased primarily due to price compression in the hazardous waste remediation and incineration markets. The Corporation continues to review its portfolio of environmental businesses to determine how best to focus its efforts. Communication & Information Systems This newly created segment includes Westinghouse Communications, formerly a part of the Broadcasting segment, and the communication and information systems divisions of the former Electronic Systems segment. Sales in 1995 increased 16% compared to 1994, while sales in 1994 increased 12% compared to the prior year. The operating loss for 1995 included $3 million for restructuring activities, while the operating loss in 1993 included $11 million for restructuring. Excluding special charges in all years, operating profit declined $5 million in 1995 and was essentially flat in 1994 compared to the prior year. The decrease in operating profit in 1995 is attributable primarily to reduced margins on wireless communications contracts. Other Businesses During the year, the Corporation completed divestitures of several businesses included in its former Industrial Products and Services business unit, and its majority interest in MICROS. In addition, the Corporation closed a plant in Abingdon, Virginia. Controlmatic and Gladwin were divested in 1994. The decline in revenues and the fluctuations in operating profits for this segment reflect these divestitures. Divestitures of most of the non-strategic businesses were essentially complete by year-end 1995. RESTRUCTURING OF OPERATIONS The Corporation is committed to strengthening its businesses and improving its profitability through restructuring actions ranging from changes in business and product-line strategies to downsizing for process reengineering and productivity improvements. To the extent possible, the Corporation is committed to reducing its workforce through normal attrition. See note 20 to the financial statements. During the last three years, the Corporation has undertaken restructuring programs at its corporate headquarters as well as at several of its major businesses. In particular, Power Systems has identified initiatives at both its Power Generation and Energy Systems business units in an effort to remain competitive in light of a reduction in the demand for services and intense pricing pressures. Restructuring actions for Continuing Operations, including corporate headquarters, have resulted in the recognition of restructuring costs totalling $86 million in 1995, $23 million in 1994 and $249 million in 1993. 21 22 The most significant cost component of the Corporation's restructuring plans generally involves the elimination of positions and the separation of employees. Approximately 3,850 positions were eliminated from Continuing Operations during the last three years resulting in employee separation costs totalling $293 million, including pension curtailment costs. Other cost elements of these plans consist of asset write-downs of $38 million and costs for facility closure or rationalization of $27 million. Included in these amounts are cash expenditures totalling $298 million, consisting of $134 million in 1994, $100 million in 1995, $56 million in 1996, and $8 million in 1997. Employee separation costs generally are paid over a period of up to two years following the separation. The annual savings expected from these restructuring initiatives approximates $40 million for the 1995 plan, $35 million for the 1994 plan, and $65 million for the 1993 plan. Based on the timing of implementation of the initiatives, actual savings approximated $100 million in 1995 and $50 million in 1994. Competitive pressures causing price compression in certain of the Corporation's markets have absorbed a significant portion of the savings achieved through restructuring actions. Restructuring actions for the Corporation's Discontinued Operations, principally the defense and electronic systems business and Knoll, resulted in additional costs totalling $49 million in 1995, $48 million in 1994 and $101 million in 1993. These actions involved the separation of nearly 3,000 employees and the exiting of various product lines and facilities. In conjunction with the CBS acquisition, a plan was developed to integrate the infrastructure of the CBS headquarters and the radio and television operations with those of the Corporation. The estimated cost for restructuring the CBS organization, including separating employees and closing facilities, is $100 million of which $3 million had been spent as of year-end 1995. The consolidation plan as it relates to the Corporation's existing operations was not yet finalized at December 31, 1995. Therefore, the costs associated with this aspect of the plan are expected to be recognized when the plan is adopted in early 1996. Cost-reduction initiatives are undertaken when the resulting benefits are substantial in relation to the cost of the programs and are realizable in the near term. The Corporation expects to continue to implement restructuring initiatives as competitive conditions dictate in an ongoing effort to reduce its overall cost structure and improve its competitiveness. 1994 PENSION SETTLEMENT The Corporation's restructuring activities contributed to a high level of lump-sum cash distributions from the Corporation's pension fund during 1994. The magnitude of these cash distributions required that the Corporation apply the provisions of SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and recognize a settlement loss of $308 million. This noncash charge to income represents the pro rata portion of unrecognized losses associated with the pension obligation that was settled. The settlement loss did not affect shareholders' equity because the decrease resulting from the income statement provision was fully offset by a reduction in the charge to shareholders' equity related to the minimum pension liability. See note 4 to the financial statements. OTHER INCOME AND EXPENSES Other income for 1995 of $149 million included a pre-tax gain of $115 million from the sale of the Corporation's 62% interest in MICROS and a $13 million gain from the sale of an equity investment. The Corporation recorded an additional $7 million provision for the estimated loss on disposition of non-strategic businesses related to the disposition of Aptus. For 1994, other income and expense, which was a net expense of $288 million, consisted primarily of a $308 million charge for the settlement of a portion of the Corporation's pension obligation. The Corporation recorded an additional $17 million provision for the estimated loss on disposition of non-strategic businesses to reflect actual sales experience and revised estimates of proceeds and selling costs for the remaining businesses to be sold. These charges were partially offset by a gain of $32 million from the sale of two radio stations. For 1993, other income and expense, which was a net expense of $154 million, consisted primarily of a $195 million provision for the estimated loss on disposition of non-strategic businesses, most of which have since been completed. This charge was offset by a $21 million gain on the sale of an equity participation in a production company. INTEREST EXPENSE Interest expense attributable to Continuing Operations increased $99 million to $233 million in 1995 because of two primary factors. At year-end 1994, $625 million of debt was transferred to Continuing Operations from Discontinued Operations, causing an increase in interest expense for 1995 of approximately $40 million. Additional interest expense from CBS acquisition debt totalled $59 million. 22 23 To a lesser degree, interest expense in 1995 was affected by an increase in average short-term interest rates. In addition, in conjunction with the transfer of Knoll and the Corporation's defense and electronic systems business to Discontinued Operations, interest expense totalling $48 million in 1995, $37 million in 1994 and $46 million in 1993 was allocated to Discontinued Operations. See note 3 to the financial statements. Interest expense decreased $31 million to $134 million in 1994 compared to $165 million in 1993 primarily due to lower average outstanding short-term debt. Average outstanding short-term debt of Continuing Operations decreased $782 million in 1994 compared to 1993. See note 11 to the financial statements. INCOME TAXES The Corporation's 1995 provision for income taxes in total was 62.7% of the income before taxes and minority interest. The 1995 net provision totalled $44 million, consisting of a $7 million benefit from Continuing Operations and a $51 million expense from Discontinued Operations. The Corporation's 1994 provision for income taxes in total was 45.2% of the income before taxes and minority interest. The 1994 net provision totalled $71 million, consisting of a $13 million benefit from Continuing Operations and a $84 million expense from Discontinued Operations. The Corporation's 1993 benefit for income taxes in total was 32.6% of the losses from all sources. The 1993 benefit totalled $153 million, consisting of $116 million from Continuing Operations, $7 million from Discontinued Operations and $30 million from the cumulative effect of the change in accounting principle. The Corporation's effective tax rate has fluctuated dramatically depending on the specific dollar amounts of permanent tax differences and the relationship of those differences to income before income taxes and minority interest. Numerous items have caused the effective tax rates to differ from the U.S. statutory income tax rate of 35% for 1995, 1994 and 1993. An analysis of these items related to Continuing Operations is set forth in note 6 to the financial statements. The net deferred tax asset at December 31, 1995 totalled $2,188 million for Continuing and Discontinued Operations. The temporary differences that give rise to deferred income taxes are shown in the Consolidated Deferred Income Tax Sources table in note 6 to the financial statements. The three significant components of the deferred tax asset balance are: (i) the tax effect of net operating loss carryforwards of $3,229 million, of which $416 million will expire by the year 2007, $2,462 million by the year 2008 and the balance by 2010, (ii) the tax effect of cumulative net temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes of $2,128 million representing future net income tax deductions, and (iii) alternative minimum tax credit carryforwards of $211 million that have no expiration date. Of the net temporary difference of $2,128 million, approximately $1,410 million represents a net pension obligation and $1,265 million represents an obligation for postretirement and postemployment benefits. These are partially offset by CBS temporary differences of approximately $872 million related primarily to FCC licenses. Management believes that the Corporation will have sufficient future taxable income to make it more likely than not that the net deferred tax asset will be realized. In making this assessment, management considered the net losses generated in 1992 and 1993 as aberrations caused in part by the liquidation of a substantial portion of Financial Services assets and by restructuring and other unusual actions. Further, the expected 1996 sale of Knoll and the defense and electronic systems business will substantially reduce the deferred tax asset through the realization of reversing temporary differences and net operating losses. The reversal of temporary differences may cause tax losses in future years. Each tax-loss year would receive a new 15-year carryforward period. Under a conservative assumption that all net cumulative temporary differences other than net operating loss carryforwards had reversed in 1995, the Corporation would have through the year 2010 to recover the tax asset. This would require the Corporation to generate average annual taxable income of at least $200 million assuming completion of the 1996 sales of Knoll and the Corporation's defense and electronic systems business. Management believes that average annual future taxable income will exceed this minimum amount. In addition, there are certain tax planning strategies that could be employed to utilize a net operating loss carryforward that would otherwise expire. Some of the strategies that would be most feasible are sale and leaseback of facilities and change in the method of tax depreciation. 23 24 The following table shows a reconciliation of income or loss from Continuing Operations before income taxes to taxable income from Continuing Operations: RECONCILIATION OF INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES TO U.S. FEDERAL TAXABLE INCOME (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - -------------------------------------------------------------------------- Loss from Continuing Operations $ (40) $ (17) $(353) Permanent differences: Foreign and Puerto Rico (168) (136) (101) State income tax 5 6 (26) Goodwill 26 15 34 Other 18 (25) 49 - -------------------------------------------------------------------------- Net permanent differences (119) (140) (44) - -------------------------------------------------------------------------- Temporary differences: Pensions (121) 272 12 Long-term contracts 72 (57) 34 Depreciation 29 7 20 Provision for restructuring and other actions (43) (87) 616 Other (30) 148 120 - -------------------------------------------------------------------------- Net temporary differences (93) 283 802 - -------------------------------------------------------------------------- Taxable income (loss) $ (252) $ 126 $ 405 - --------------------------------------------------------------------------
DISCONTINUED OPERATIONS In recent years, the Corporation has adopted several plans to dispose of major segments of its business. Knoll and the defense and electronic systems business were part of a plan adopted in December 1995. The disposal of WCI was included in a July 1995 plan. Financial Services, DCBU, and WESCO were part of a plan adopted in November 1992. These businesses have been accounted for as discontinued operations in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" (APB 30). In December 1995, the Corporation adopted a plan to reduce debt incurred for the acquisition of CBS through proceeds from the sale of its office furniture and defense and electronic systems businesses. In December 1995, a definitive agreement was reached to sell Knoll to Warburg, Pincus Ventures, L.P., an affiliate of E. M. Warburg, Pincus & Company, for $565 million of cash. In January 1996, an agreement was executed with Northrop Grumman Corporation for the sale of the defense and electronic systems business for $3 billion of cash. In addition, Northrop Grumman will assume approximately $500 million of pension and postretirement liabilities associated with the active employees of the business. These transactions, which are expected to result in an after-tax gain ranging from $1.2 to 1.4 billion, are expected to be completed during the first quarter of 1996. The net proceeds from these transactions will be used to repay debt of Continuing Operations. In July 1995, the Corporation sold WCI for $430 million of cash and retained approximately $125 million of mortgage notes receivable with maturities through 1997 and other securities. In addition, the buyer assumed $19 million of debt. Concurrently, the Corporation invested $48 million for a 24% equity interest in the new business. The Corporation is actively pursuing the divestiture of this investment. The net cash proceeds from the divestiture of WCI were used to repay debt of Discontinued Operations. A net loss of $76 million was recognized on the disposal. In November 1992, the Corporation announced a plan that included exiting Financial Services through the disposition of its $9 billion asset portfolios and the sales of the Corporation's Distribution and Control Business Unit (DCBU) and Westinghouse Electric Supply Company (WESCO). The disposition of Financial Services assets involved the sale of the real estate and corporate finance portfolios over a three-year period and the liquidation of the leasing portfolio over a longer period of time in accordance with contractual terms. Based on its quarterly review of the assumptions used in determining the estimated loss from Discontinued Operations that was recorded in 1992, the Corporation recorded an additional pre-tax provision for loss on disposal of Discontinued Operations of $148 million in 1993. On January 31, 1994, the Corporation completed the sale of DCBU, excluding its Australian subsidiary, to Eaton Corporation for a purchase price of $1.1 billion of cash and the assumption by the buyer of certain liabilities. The sale of the Australian subsidiary was completed in March 1994. On February 28, 1994, the Corporation completed the sale of WESCO to an affiliate of Clayton, Dubilier & Rice, Inc., a private investment firm, for a purchase price of approximately $340 million. The proceeds consisted of approximately $275 million of cash, approximately $50 million of first mortgage notes, and the remainder of stock and options of the new company. The real estate and corporate portfolio investments of Financial Services essentially have been liquidated. The leasing portfolio, which totalled $865 million at December 31, 1995, is expected to continue to liquidate through 2015 in accordance with contractual terms. 24 25 The net assets of Discontinued Operations totalled $1.4 billion at December 31, 1995. Following completion of the divestitures of Knoll and the defense and electronic systems business in early 1996, the assets of Discontinued Operations will consist primarily of the remaining leasing portfolio of Financial Services and the remaining mortgage notes and securities of WCI. Liabilities will consist primarily of short-term and long-term debt, deferred income taxes related to the leveraged leases, and the liability for estimated loss on disposal of Discontinued Operations. In 1995, the Corporation reduced the debt of Discontinued Operations to that amount which is supportable by the leasing portfolio and other miscellaneous assets. The debt is expected to be repaid as the leasing portfolio liquidates over its contractual term and through sales of such miscellaneous assets. To match the maturities of assets and debt, the Corporation may from time to time exchange debt obligations between Continuing and Discontinued Operations. The remaining liability for the estimated loss on disposal of Discontinued Operations at December 31, 1995 totalled $134 million. Management believes that this liability is adequate to cover the future operating costs and estimated credit losses related to Financial Services and the remaining costs associated with WCI, DCBU and WESCO. The following table presents sales and operating profit (loss) for Discontinued Operations for each of the three years in the period ended December 31, 1995: RESULTS OF OPERATIONS (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ------------------------------------------------------------------- Sales of products and services: DCBU and WESCO $ - $ 319 $2,384 Financial Services 31 41 305 WCI 108 248 253 Defense and Electronic Systems 2,549 2,189 2,361 Knoll 621 562 510 Operating profit (loss): DCBU and WESCO - 4 68 Financial Services (52) (204) (212) WCI 29 69 61 Defense and Electronic Systems 195 207 150 Knoll 60 (61) (31) - -------------------------------------------------------------------
DCBU and WESCO Operating results for the year ended December 31, 1994 include the operating results of DCBU for the month ended January 31, 1994 and of WESCO for the two months ended February 28, 1994, their respective dates of sale. Financial Services During 1995, the Corporation continued to liquidate Financial Services, reducing both assets and debt. Financial Services revenues of $31 million for 1995 decreased $10 million compared to 1994, reflecting the reduction in assets through dispositions during 1995 and 1994. Revenues of $41 million for 1994 decreased $264 million compared to 1993 due primarily to a reduction of assets through dispositions. At December 31, 1995, Financial Services portfolio investments totalled $901 million, a decrease of $329 million from $1,230 million at year-end 1994. Portfolio investments at December 31, 1995 and 1994, included $822 million and $913 million, respectively, of receivables, and $79 million and $317 million, respectively, of other portfolio investments. The receivables at year-end 1995 and 1994 consisted primarily of leasing receivables, while other portfolio investments included real estate properties and investments in leasing and real estate partnerships. Leasing receivables consist of direct financing and leveraged leases. At December 31, 1995 and 1994, 84% and 81%, respectively, related to aircraft, and 16% and 18%, respectively, related to cogeneration facilities. WCI In 1995, revenues for WCI, until its sale in July 1995, were $108 million. Operating profit for the same period was $29 million. Revenues for WCI decreased slightly to $248 million in 1994 compared to 1993 due to the continued weak real estate markets in California. These depressed markets were partially offset by strong land and condominium sales in Coral Springs and Naples, Florida. Included in 1994 operating profit was a $3 million reduction of a $10 million restructuring charge taken in 1992. Included in 1993 operating profit was a restructuring charge of $4 million. Excluding the impact of restructuring, operating profit was flat at $65 million in 1994 compared to 1993. Defense and Electronic Systems Revenues for the defense and electronic systems business increased 16% to $2,549 million in 1995 compared to 1994 and decreased 7% to $2,189 million in 1994 compared to 1993. In 1995, increased volume from the defense electronics operations, including the Norden acquisition, air traffic control, and mail processing systems, drove higher revenues. Lower revenues from Department of Defense (DoD) contracts in 1994 were the primary cause of the decreased revenues in that year. 25 26 Operating profit reflected restructuring charges of $49 million, $11 million and $91 million in 1995, 1994 and 1993, respectively. Excluding these charges in each of the three years, operating profit increased 12% in 1995 as a result of the higher revenues. Operating profit decreased 10% to $218 million in 1994 compared to $241 million in 1993, primarily as a result of lower DoD revenues, which were partially offset by savings from cost-reduction programs. Knoll In 1995, revenues for Knoll increased 10% to $621 million compared to 1994. Increases in Knoll North America orders were the primary force behind the increased revenues. Revenues for Knoll increased 10% to $562 million in 1994 compared to 1993 due to both market and market share growth in North America. Knoll's operating profit of $60 million for 1995 represented a dramatic turnaround of this business. A major restructuring program, resulting in restructuring charges totalling $40 million in 1994 and $6 million in 1993, was implemented beginning in mid-1994 and was substantially completed in 1995. The results of this program were evident in both the North American and European results for 1995. Excluding restructuring charges in all years, Knoll's operating profit increased $81 million in 1995 compared to 1994 and the operating loss for 1994 decreased $4 million compared to 1993. New products, strong sales across all product lines and quick delivery programs contributed to the dramatic improvement in operating profit in 1995. LIQUIDITY AND CAPITAL RESOURCES Overview The Corporation manages its liquidity as a consolidated enterprise without regard to whether assets or debt are classified for balance sheet purposes as part of Continuing Operations or Discontinued Operations. As a result, the discussion below focuses on the Corporation's consolidated cash flows and capital structure. During 1994, the Corporation took several actions to reduce its leverage and rebuild its capital structure, including the continued liquidations of assets of Discontinued Operations, the issuance of preferred stock and the reduction of the common stock dividend. As a result, net debt (total debt less cash and cash equivalents) was reduced by $1.7 billion. Because of those actions taken in 1994 and the continued monetization in 1995 of non-strategic assets, the Corporation was able to embark on a major transformation of its business portfolio. The Corporation acquired CBS for $5.4 billion and announced divestitures of its defense and electronic systems business and Knoll for $3.6 billion of cash plus the assumption by one of the buyers of employee benefit liabilities approximating $500 million. This major portfolio shift to focus on broadcasting operations is expected to impact the nature of the Corporation's cash flows in future periods. To complete the CBS acquisition, the Corporation negotiated a new credit agreement to finance the entire purchase price of CBS, including transaction fees, and to replace borrowings under the then existing revolving credit agreements of both Westinghouse and CBS. In the first quarter of 1996, the Corporation expects to complete the divestitures of both the defense and electronic systems business and Knoll and to repay approximately 65% of the acquisition debt. Management believes that the higher financial leverage following the portfolio transformation is supportable by the level of cash flows expected to be generated by the Corporation's Continuing Operations. The Corporation made substantial progress during 1995 in repaying non-acquisition debt, exceeding the $1 billion target established a year ago. The monetization of approximately $1.4 billion of non-strategic assets produced cash proceeds of $430 million from WCI, more than $360 million from the majority of the remaining real estate portfolio investments of Financial Services, $305 million from investments held in two trusts that funded non-qualified executive benefit plans, and approximately $300 million from other non-strategic businesses. Management expects that cash from Continuing Operations and availability under its $2.5 billion revolving credit facility will continue to be sufficient to meet future business needs. Other sources of liquidity generally available to the Corporation include cash and cash equivalents, proceeds from sales of non-strategic assets and borrowings from other sources, including funds from the capital markets. Operating Activities The operating activities of Continuing Operations provided $435 million of cash during 1995, an increase of $412 million from the amount provided in 1994. Major factors contributing to this increase were reduced levels of receivables and inventories, lower income tax payments and lower cash restructuring expenditures. Results of the Corporation's efforts to improve working capital turnover are becoming evident in certain areas. Collections of receivables and reductions of inventories provided $243 million of operating cash flows during 1995 compared to uses of cash of $237 million in 1994 and $185 million in 1993. 26 27 Customers continue to demand more favorable payment terms under major contracts, particularly in the power generation business. As a result, a significant use of operating cash in both 1995 and 1994 involved an increase in the Corporation's investment in long-term contracts. Income tax payments and cash restructuring expenditures were lower in 1995 than in the prior year. Accrued restructuring costs totalled $161 million at year-end 1995 compared to $85 million at year-end 1994 and $227 million at year-end 1993. Although restructuring initiatives are expected to continue, these programs are not implemented unless the savings are substantial in relation to the cost and are realizable in the near term. In general, savings from restructuring programs implemented in recent years are beginning to surpass the expenditures. Cash contributions to the Corporation's pension plans totalled $315 million in 1995, which is consistent with the 1994 cash contribution level. In 1993, however, the contribution consisted primarily of assets of Discontinued Operations. The Corporation's contribution level for 1996 is expected to be in the $200 million to $300 million range following the divestitures of Knoll and the defense and electronic systems business. This contribution level is consistent with the Corporation's goal to fully fund its qualified pension plans over the next several years. The operating activities of Discontinued Operations provided $258 million of cash during 1995, used $77 million during 1994, and provided $444 million during 1993. These cash"flows consist primarily of cash provided by the operations of the defense and electronic systems business, Knoll, and WCI, offset by cash used in the operations of Financial Services and for activities related to the divestitures of DCBU and WESCO. The use of cash in 1994 resulted primarily from significantly higher levels of interest and from DCBU and WESCO divestiture costs. Following the completion of the divestitures of the defense and electronic systems business and Knoll in early 1996, operating cash requirements of Discontinued Operations will consist primarily of interest costs on debt, which has decreased substantially, and remaining costs associated with the completed divestitures. Investing Activities Investing activities used $4.3 billion of cash during 1995 after providing $1.4 billion of cash in 1994 and $2.7 billion in 1993. The completion of the CBS acquisition in November 1995 for $5.4 billion of cash caused this significant change. Acquisitions in 1994 included Norden Systems, a defense electronics company; the KPIX-AM and FM radio stations in San Francisco; and a minority interest in Group W radio for total cash expenditures of $109 million. The Corporation completed the sales of several non-strategic businesses in 1995, generating cash proceeds of $683 million. Divestitures included the sale of its WCI segment, as well as its interest in MICROS, Aptus, Inc., and several smaller businesses. Noncash proceeds of approximately $100 million, consisting primarily of notes, also were received in certain sales. During 1994, the Corporation sold DCBU and WESCO for cash proceeds of approximately $1.4 billion. In addition, the sale of two radio stations and two non-strategic businesses (Gladwin Corporation and Controlmatic) generated cash proceeds of $68 million. The Corporation generated $362 million of cash in 1995 through the continued liquidation of assets of Financial Services representing the majority of the remaining real estate portfolio investments. Cash proceeds from portfolio investment liquidations in 1994 totalled $323 million. In 1993, the early success of the liquidation plan for Financial Services assets resulted in the generation of $4.9 billion of cash, which was partially offset by required fundings of $2 billion. The Corporation's total capital expenditures remained relatively stable over the three-year period at approximately $250 million to $300 million. Capital expenditures for Continuing Operations approximated $200 million per year. In 1995, the Corporation generated $305 million of cash through the sales of investments held in two trusts that were established to fund executive benefit plans. The trust investments were replaced with the Corporation's common stock. The Corporation expects to continue to liquidate assets of Discontinued Operations as well as its non-strategic assets. This includes completion of the announced divestitures of the defense and electronic systems business and Knoll for combined cash proceeds of $3.6 billion. Future acquisitions are expected to be focused primarily in the broadcasting area. Financing Activities Cash provided by financing activities during 1995 totalled $3.5 billion compared to cash used of $2.2 billion in 1994 and $3.8 billion in 1993. The major fluctuation in 1995 was caused by the borrowings required to finance the CBS acquisition. As a result, the Corporation's total debt increased $4.7 billion to $8.4 billion at December 31, 1995, from $3.7 billion at December 31, 1994. 27 28 In September 1995, the Corporation entered into three new bank facilities under a credit agreement with a commitment level of $7.5 billion (see Credit Facilities). Borrowings under the facilities, which occurred upon completion of the CBS acquisition, were used to finance the purchase of CBS, including transaction fees, and replace borrowings under existing revolvers. Total borrowings under the new credit agreement were $5.1 billion at December 31, 1995. In March 1994, the Corporation sold in a private placement depository shares representing 3,600,000 shares of Series C preferred stock for net proceeds of $505 million. These shares will convert to common shares in June 1997. The Series B preferred stock, sold in June 1992, converted to 32,890,000 shares of common stock on September 1, 1995. At the beginning of 1994, the Corporation reduced its common stock dividend from $.40 per share to $.20 per share. This reduction resulted in annual cash savings to the Corporation of approximately $70 million. Dividends paid include those for the Series C preferred stock issued in March 1994 and those for the Series B preferred shares through their conversion date. In 1992, the Corporation filed a registration statement on Form S-3 for the issuance of up to $1 billion of debt securities. At December 31, 1995, $400 million of this shelf registration remained unused. Credit Facilities In September 1995, the Corporation entered into three new bank facilities under a credit agreement with a commitment level of $7.5 billion. These credit facilities include two term loans of $2.5 billion each. The first term loan is payable in two installments: $2 billion in November 1997 and $500 million in May 1998. The second term loan is payable in quarterly installments beginning in August 1998 through November 2002. Both term loans are subject to certain mandatory prepayment provisions. Amounts repaid under both term loans may not be reborrowed. In addition to these term loans, the credit agreement includes a $2.5 billion revolving credit facility with a seven-year maturity that replaced the Corporation's existing revolving credit facility as well as that of CBS. Funds from these facilities have been used to finance the purchase of CBS, pay certain transaction fees and replace borrowings under existing revolvers. The interest rates for borrowings under the facilities are determined at the time of each borrowing and are based on a floating rate index plus a margin based on the Corporation's senior unsecured debt rating and leverage. See note 11 to the financial statements. The unused capacity under revolvers equalled $2,395 million and $1,581 million at December 31, 1995 and 1994, respectively. Borrowing availability under the revolving credit facility is subject to compliance with certain covenants, representations and warranties, including a no material adverse change provision with respect to the Corporation taken as a whole, restrictions on the incurrence of liens, a maximum leverage ratio, minimum interest coverage ratio, and minimum consolidated net worth. Certain of these covenants become more restrictive over the term of the agreement. At December 31, 1995, the Corporation was in compliance with these covenants. Hedging Activities The Corporation has entered into interest rate and currency exchange agreements to manage the interest rate and currency risk associated with various debt instruments. No transactions were speculative or leveraged. Given their nature, these agreements have been accounted for as hedging transactions. The Corporation's credit exposure under these agreements is limited to the cost of replacing an agreement in the event of non-performance by its counterparty. To minimize this risk, the Corporation has selected high credit quality counterparties. At December 31, 1995, the aggregate credit exposure to counterparties totalled approximately $72 million. This exposure resulted primarily from an interest rate and currency swap with an A-rated counterparty. The contract matured in February 1996. In 1995, outstanding interest rate exchange agreements resulted in a net increase in the average borrowing rate for Continuing Operations of 0.2% and a net decrease in the average borrowing rate of Discontinued Operations of 0.2%. Corresponding interest expense increased by approximately $6 million for Continuing Operations and decreased by approximately $1 million for Discontinued Operations. The Corporation continually monitors its economic exposure to changes in foreign exchange rates and enters into foreign exchange forward or option contracts to hedge its transaction exposure when appropriate. As a result, the Corporation's unhedged foreign exchange exposure is not significant. Furthermore, changes in foreign exchange rates whether favorable or unfavorable are not expected to have a significant impact on the Corporation's financial results or operating activities. 28 29 With respect to the Corporation's operations in highly inflationary and unstable economies that are accounted for in accordance with SFAS No. 52, "Foreign Currency Translation," the combined total sales for those operations were less than 0.5% of the Corporation's sales for 1995. ENVIRONMENTAL MATTERS Compliance with federal, state and local laws and regulations relating to the discharge of pollutants into the environment, the disposal of hazardous wastes and other related activities affecting the environment have had and will continue to have an impact on the Corporation. While it is difficult to estimate the timing and ultimate costs to be incurred in the future due to uncertainties about the status of laws, regulations, technology, and information available for individual sites, management has made estimates of the probable and reasonably possible remediation costs that could be incurred by the Corporation based on the facts and circumstances currently known. See note 17 to the financial statements. At December 31, 1995, the Corporation had accrued liabilities totalling $166 million for sites where it has been either named a potentially responsible party (PRP) or has other remedial responsibilities, $28 million for sites that have been divested and the Corporation has remedial or compliance obligations, $61 million for the Bloomington sites and $30 million for environmental closure activities at facilities where the Corporation has ongoing operations. Also, in conjunction with its Discontinued Operations, the Corporation has provided for remediation costs related to past operations of certain sites. Annual environmental costs include approximately $6 million for estimated future environmental closure costs at operating sites and approximately $31 million related to current management of hazardous waste and pollutants. Capital expenditures for environmental compliance, which totalled $6 million in 1995, may vary from year to year. Management believes, based on its best estimate, that the Corporation has adequately provided for its present environmental obligations and that complying with existing government regulations will not materially impact the Corporation's financial position, liquidity or results of operations. LEGAL MATTERS The Corporation is defending a number of lawsuits on various matters. See note 17 to the financial statements. Costs to defend these lawsuits are charged to operations in the period in which the services are rendered. Since 1993, the Corporation has entered into agreements to resolve seven litigation claims in connection with alleged tube degradation in steam generators sold by the Corporation as components for nuclear steam supply systems. These agreements generally require the Corporation to provide certain products and services at prices discounted at varying rates. The future impact of these discounts on operating results will be incurred over the next 15 years with the greatest impact occurring during the next nine years. Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in certain of the Corporation's pending cases and, although management believes a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on the Corporation's results of operations for a quarter or a year. However, based on its understanding and evaluation of the relevant facts and circumstances, management believes that the Corporation has meritorious defenses to the litigation referenced above, and management believes that the litigation should not have a material adverse effect on the financial condition of the Corporation. INSURANCE RECOVERIES Prior to 1995, the Corporation filed actions against more than 100 of its insurance carriers seeking recovery for environmental, product and property damage liabilities, and certain other matters. The Corporation has settled with the majority of these carriers and has received recoveries related to these actions. The Corporation has not accrued for any future insurance recoveries. OTHER In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used, and for long-lived assets and certain identifiable intangibles to be disposed of. This statement is effective beginning in 1996. Although the Corporation has not yet completed its evaluation of the effect that implementation of this new standard will have on its results of operations and financial position, management believes that a charge to operations upon adoption is reasonably possible. In 1996, the Corporation also plans to adopt the pro forma disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." See note 1 to the financial statements. 29 30 REPORT OF MANAGEMENT The Corporation has prepared the consolidated financial statements and related financial information included in this report. Management has the primary responsibility for the financial statements and other financial information and for ascertaining that the data fairly reflect the financial position, results of operations and cash flows of the Corporation. The financial statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances, and necessarily include amounts that are based on best estimates and judgments with appropriate consideration given to materiality. Financial information included elsewhere in this report is presented on a basis consistent with the financial statements. The Corporation maintains a system of internal accounting controls, supported by adequate documentation, to provide reasonable assurance that assets are safeguarded and that the books and records reflect the authorized transactions of the Corporation. Limitations exist in any system of internal accounting controls based on the recognition that the cost of the system should not exceed the benefits derived. Westinghouse believes its system of internal accounting controls, augmented by its corporate auditing function, appropriately balances the cost/benefit relationship. The independent accountants provide an objective assessment of the degree to which management meets its responsibility for fair financial reporting. They regularly evaluate elements of the internal control structure and perform such tests and procedures as they deem necessary to express an opinion on the fairness of the financial statements. The Board of Directors pursues its responsibility for the Corporation's financial statements through its Audit Review Committee composed of directors who are not officers or employees of the Corporation. The Audit Review Committee meets regularly with the independent accountants, management and the corporate auditors. The independent accountants and the corporate auditors have direct access to the Audit Review Committee, with and without the presence of management representatives, to discuss the scope and results of their audit work and their comments on the adequacy of internal accounting controls and the quality of financial reporting. We believe that the Corporation's policies and procedures, including its system of internal accounting controls, provide reasonable assurance that the financial statements are prepared in accordance with the applicable securities laws and with a corresponding standard of business conduct. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Westinghouse Electric Corporation In our opinion, the accompanying consolidated financial statements appearing on pages 47 through 72 of this Annual Report present fairly, in all material respects, the financial position of Westinghouse Electric Corporation and its subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in note 1 to these financial statements, the Corporation adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits," in 1993. /s/ PRICE WATERHOUSE LLP Price Waterhouse LLP 600 Grant Street Pittsburgh, Pennsylvania 15219-9954 February 12, 1996 30 31 CONSOLIDATED STATEMENT OF INCOME (in millions except per share amounts)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ------------------------------------------------------------------------------------------------------ Product sales $ 3,355 $ 3,298 $ 3,236 Service sales 2,941 2,591 2,543 - ------------------------------------------------------------------------------------------------------ Sales of products and services 6,296 5,889 5,779 - ------------------------------------------------------------------------------------------------------ Cost of products sold (2,549) (2,523) (2,508) Cost of services sold (1,931) (1,754) (1,743) - ------------------------------------------------------------------------------------------------------ Costs of products and services sold (4,480) (4,277) (4,251) Provision for restructuring (note 20) (86) (23) (249) Marketing, administration and general expenses (1,686) (1,184) (1,313) Other income and expenses, net (note 19) 149 (288) (154) Interest expense (233) (134) (165) - ------------------------------------------------------------------------------------------------------ Loss from Continuing Operations before income taxes and minority interest in income of consolidated subsidiaries (40) (17) (353) Income taxes (note 6) 7 13 116 Minority interest in income of consolidated subsidiaries (11) (9) (9) - ------------------------------------------------------------------------------------------------------ Loss from Continuing Operations (44) (13) (246) - ------------------------------------------------------------------------------------------------------ Discontinued Operations, net of income taxes (notes 1 and 3): Income from operations 135 90 71 Estimated loss on disposal of Discontinued Operations (76) - (95) - ------------------------------------------------------------------------------------------------------ Income (loss) from Discontinued Operations 59 90 (24) - ------------------------------------------------------------------------------------------------------ Income (loss) before cumulative effect of change in accounting principle 15 77 (270) Cumulative effect of change in accounting principle- Postemployment benefits (notes 1 and 5) - - (56) - ------------------------------------------------------------------------------------------------------ Net income (loss) $ 15 $ 77 $ (326) - ------------------------------------------------------------------------------------------------------ Primary earnings (loss) per common share (note 15): Continuing Operations $ (.19) $ (.16) $ (.84) Discontinued Operations .14 .23 (.07) Cumulative effect of change in accounting principle - - (.16) - ------------------------------------------------------------------------------------------------------ Primary earnings (loss) per common share $ (.05) $ .07 $ (1.07) - ------------------------------------------------------------------------------------------------------ Fully diluted earnings (loss) per common share (note 15): Continuing Operations $ (.10) $ (.16) $ (.84) Discontinued Operations .13 .23 (.07) Cumulative effect of change in accounting principle - - (.16) - ------------------------------------------------------------------------------------------------------ Fully diluted earnings (loss) per common share $ .03 $ .07 $ (1.07) - ------------------------------------------------------------------------------------------------------ Cash dividends per common share $ .20 $ .20 $ .40 - ------------------------------------------------------------------------------------------------------
The Notes to the Financial Statements are an integral part of these financial statements. 31 32 CONSOLIDATED BALANCE SHEET (in millions)
AT DECEMBER 31 1995 1994 - ------------------------------------------------------------------------------------------ ASSETS: Cash and cash equivalents (note 1) $ 213 $ 329 Customer receivables (note 7) 1,545 1,194 Inventories (note 8) 867 942 Uncompleted contracts costs over related billings (note 8) 582 351 Program rights 301 - Deferred income taxes (note 6) 547 432 Prepaid and other current assets 251 150 - ------------------------------------------------------------------------------------------ Total current assets 4,306 3,398 Plant and equipment, net (note 9) 2,027 1,282 Intangible and other noncurrent assets (note 10) 8,977 2,785 Net assets of Discontinued Operations (note 3) 1,442 1,705 - ------------------------------------------------------------------------------------------ Total assets $16,752 $9,170 - ------------------------------------------------------------------------------------------ LIABILITIES AND SHAREHOLDERS' EQUITY: Revolving credit borrowings and other short-term debt (note 11) $ 309 $ 634 Current maturities of long-term debt (note 13) 330 7 Accounts payable 846 688 Uncompleted contracts billings over related costs (note 8) 324 402 Other current liabilities (note 12) 2,124 1,181 - ------------------------------------------------------------------------------------------ Total current liabilities 3,933 2,912 Long-term debt (note 13) 7,226 1,865 Other noncurrent liabilities (note 14) 4,074 2,548 - ------------------------------------------------------------------------------------------ Total liabilities 15,233 7,325 - ------------------------------------------------------------------------------------------ Contingent liabilities and commitments (note 17) Minority interest in equity of consolidated subsidiaries 11 30 Shareholders' equity (note 15): Preferred stock, $1.00 par value (25 million shares authorized): Series A preferred (no shares issued) - - Series B conversion preferred (no shares and 8 million shares issued) - 8 Series C conversion preferred (4 million shares issued) 4 4 Common stock, $1.00 par value (630 million shares authorized, 426 million and 393 million shares issued) 426 393 Capital in excess of par value 1,848 1,932 Common stock held in treasury (720) (870) Minimum pension liability adjustment (note 4) (1,220) (962) Cumulative foreign currency translation adjustments (11) (15) Retained earnings 1,181 1,325 - ------------------------------------------------------------------------------------------ Total shareholders' equity 1,508 1,815 - ------------------------------------------------------------------------------------------ Total liabilities and shareholders' equity $16,752 $9,170 - ------------------------------------------------------------------------------------------
The Notes to the Financial Statements are an integral part of these financial statements. 32 33 CONSOLIDATED STATEMENT OF CASH FLOWS (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - --------------------------------------------------------------------------------------------------------------- Cash flows from operating activities of Continuing Operations: Loss from Continuing Operations $ (44) $ (13) $ (246) Adjustments to reconcile loss from Continuing Operations to net cash provided by operating activities: Depreciation and amortization 218 214 212 Pension settlement loss - 308 - Noncash restructuring charges 6 2 52 Losses (gains) on asset dispositions (125) (10) 175 Provision for environmental and litigation expenses 236 - 205 Changes in assets and liabilities, net of effects of acquisitions and divestitures of businesses: Receivables, current and noncurrent 209 (177) (124) Inventories 34 (60) (61) Progress payments net of costs on uncompleted contracts (309) (253) (122) Accounts payable 110 133 108 Deferred and current income taxes (10) (196) (333) Accrued taxes, interest and insurance (91) 24 34 Accrued restructuring costs (23) (95) 197 Accrued employee compensation 103 (60) (25) Other assets and liabilities 121 206 264 - --------------------------------------------------------------------------------------------------------------- Cash provided by operating activities of Continuing Operations 435 23 336 - --------------------------------------------------------------------------------------------------------------- Cash provided (used) by operating activities of Discontinued Operations 258 (77) 444 - --------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Business acquisitions (5,411) (109) - Business divestitures 683 1,462 - Liquidation of assets of Financial Services 362 323 4,882 Asset fundings of Financial Services - (86) (2,015) Capital expenditures (note 21) (290) (259) (272) Asset liquidations of trust investments 305 - - Other 15 22 73 - --------------------------------------------------------------------------------------------------------------- Cash provided (used) by investing activities (4,336) 1,353 2,668 - --------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Short-term bank borrowings 7,480 9,143 12,935 Short-term bank repayments (8,294) (11,079) (15,575) Net reduction in other short-term debt (416) (599) (532) Repayments of long-term debt (9) (81) (1,037) Long-term borrowings 5,009 16 603 Sale of equity securities - 505 - Treasury stock reissued 89 58 81 Debt issue costs (176) (15) (37) Dividends paid (159) (153) (190) Other 1 2 (2) - --------------------------------------------------------------------------------------------------------------- Cash provided (used) by financing activities 3,525 (2,203) (3,754) - --------------------------------------------------------------------------------------------------------------- Decrease in cash and cash equivalents (118) (904) (306) Cash and cash equivalents at beginning of period (note 1) 344 1,248 1,554 - --------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period (note 1) $ 226 $ 344 $ 1,248 - --------------------------------------------------------------------------------------------------------------- Supplemental disclosure of cash flow information: Interest paid-Continuing Operations $ 214 $ 134 $ 163 Interest paid-Discontinued Operations 139 259 475 Income taxes paid 61 123 75 - ---------------------------------------------------------------------------------------------------------------
The Notes to the Financial Statements are an integral part of these financial statements and include descriptions of noncash transactions. 33 34 NOTES TO THE FINANCIAL STATEMENTS NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include the accounts of Westinghouse Electric Corporation (Westinghouse) and its subsidiary companies (together, the Corporation) after elimination of intercompany accounts and transactions. Investments in joint ventures and other companies in which the Corporation does not control but has the ability to exercise significant management influence over operating and financial policies are accounted for by the equity method. Certain previously reported amounts have been reclassified to conform to the 1995 presentation. DISCONTINUED OPERATIONS In December 1995, the Corporation announced a plan to divest its defense and electronic systems business and The Knoll Group (Knoll), its office furniture unit. In July 1995, the Corporation sold WCI Communities, Inc. (WCI), its land development subsidiary. The Corporation's defense and electronic systems business represented a separate major line of business that comprised approximately 90% of the former Electronic Systems segment. Knoll and WCI were previously reported as separate industry segments in Continuing Operations. As a result, certain financial information previously issued has been restated to give effect to the classification of these businesses as discontinued operations in accordance with Accounting Principles Board Opinion No. 30, "Reporting the Effects of Disposal of a Segment of a Business and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" (APB 30). See note 3 to the financial statements. The Corporation previously classified as Discontinued Operations its Distribution and Control Business Unit (DCBU), Westinghouse Electric Supply Company (WESCO) and its Financial Services businesses in conjunction with a 1992 plan to exit these businesses. REVENUE RECOGNITION Sales are recorded primarily as products are shipped and services are rendered. The percentage-of-completion method of accounting is used for major power generation systems with a cycle time in excess of one year and major nuclear fuel and related equipment orders. AMORTIZATION OF INTANGIBLE ASSETS Identifiable intangible assets related to the Corporation's broadcasting business primarily include Federal Communications Commission (FCC) licenses, which are limited as to availability and have historically appreciated in value with the passage of time. These identifiable intangible assets and goodwill are amortized using the straight-line method over their estimated lives but not in excess of 40 years. For the Corporation's industry and technology businesses, goodwill and other acquired intangible assets are amortized using the straight-line method over their estimated lives but not in excess of 40 years for assets acquired prior to January 1, 1994 and not in excess of 15 years for assets acquired after December 31, 1993. Subsequent to the acquisition of an intangible asset, the Corporation continually evaluates whether later events and circumstances indicate the remaining estimated useful life of an intangible asset may warrant revision or that the remaining balance of such an asset may not be recoverable. When factors indicate that an intangible asset should be evaluated for possible impairment, the Corporation uses an estimate of the related business' undiscounted future cash flows over the remaining life of the asset in measuring whether the intangible asset is recoverable. If such an analysis indicates that impairment has in fact occurred, the Corporation writes down the book value of the intangible asset to its fair market value. CASH AND CASH EQUIVALENTS The Corporation considers all investment securities with a maturity of three months or less when acquired to be cash equivalents. All cash and temporary investments are placed with high-credit quality financial institutions, and the amount of credit exposure to any one financial institution is limited. At December 31, 1995 and 1994, cash and cash equivalents included restricted funds of $42 million and $61 million, respectively. INVENTORIES Inventories are stated at the lower of standard cost, which approximates actual cost on a first-in, first-out (FIFO) basis, or market. The elements of cost included in inventories are direct labor, direct material and certain overheads including factory depreciation. Long-term contracts in process include costs incurred plus estimated profits on contracts accounted for using the percentage-of-completion method. 34 35 PLANT AND EQUIPMENT Plant and equipment assets are recorded at cost and depreciated generally using the straight-line method over their estimated useful lives. Depreciation is generally computed on the straight-line method based on useful lives of 27.5-60 years for buildings, 20 years for land improvements, 3-10 years for office equipment, and 3-12 years for machinery and transportation equipment. Leasehold improvements are amortized over the terms of the respective leases. Expenditures for additions and improvements are capitalized, and costs for repairs and maintenance are charged to operations as incurred. The Corporation limits capitalization of newly acquired assets to those assets with cost in excess of $1,500. PROGRAM RIGHTS Costs incurred in connection with the production of, or the purchase of rights to, programs to be broadcast within one year are classified as current assets while costs of those programs to be broadcast subsequently are considered noncurrent. Program costs are charged to expense as the respective programs are broadcast. ENVIRONMENTAL COSTS The Corporation expenses or capitalizes, if appropriate under the Corporation's capitalization policy, environmental expenditures that relate to current operations. Expenditures that relate to an existing condition caused by past operations and that do not contribute to current or future revenue generation are expensed. The Corporation records liabilities when environmental assessments or remedial efforts are probable, and the costs can be reasonably estimated. Such estimates are adjusted if necessary based on the completion of a formal study or the Corporation's commitment to a formal plan of action. The Corporation accrues over their estimated remaining useful lives the anticipated future costs of environmental closure activities, such as dismantling incinerators and decommissioning nuclear licensed sites. OFF-BALANCE-SHEET HEDGING Debt Instruments The Corporation has entered into interest rate and currency exchange agreements to manage exposure to fluctuations in interest and foreign exchange rates. Interest rate exchange agreements generally involve the exchange of interest payments without exchange of the underlying principal amounts. The Corporation does not enter into speculative or leveraged derivative transactions. The differentials paid or received on interest rate swap agreements are accrued and recognized as adjustments to interest expense; gains and losses realized upon early settlement of these agreements are deferred and amortized to interest expense over the term of the original agreement if the underlying hedged debt instrument remains owtstanding or expensed immediately if the underlying hedged instrument is settled. At December 31, 1995 and 1994, the Corporation had no deferred gains or losses from terminated interest rate swaps recorded on its balance sheet. Foreign Exchange The Corporation's foreign exchange policy includes matching purchases and sales in national currencies when possible and hedging unmatched transactions in excess of $250,000. In accordance with this policy, the Corporation has entered into various foreign exchange agreements in which it sells a currency forward to hedge a receivable or purchases a currency forward to hedge a payable. Gains and losses on foreign currency contracts offset gains and losses resulting from currency fluctuations inherent in the underlying transactions. Gains and losses on contracts that hedge specific foreign currency commitments are deferred and recognized in net income in the period in which the transaction is consummated. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to litigation and environmental liabilities, based on currently available information. Changes in facts and circumstances may result in revised estimates. CHANGES IN ACCOUNTING PRINCIPLES In December 1993, the Corporation adopted, retroactive to January 1, 1993, Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits." This statement requires employers to adopt accrual accounting for workers' compensation, salary continuation, medical and life insurance continuation, severance benefits and disability benefits provided to former or inactive employees after employment but before retirement. The Corporation's previous practice was to expense these costs as incurred. See note 5 to the financial statements. 35 36 In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. This statement requires that those assets to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and those assets to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. This statement is effective beginning in 1996. The Corporation is currently evaluating the effect that implementation of this new standard will have on its results of operations and financial position. In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," which establishes financial accounting and reporting standards for stock-based employee compensation plans. The statement defines a fair value based method of accounting for an employee stock option and allows companies to continue to measure compensation cost for such plans using the intrinsic value based method of accounting prescribed in APB Opinion No. 25, "Accounting for Stock Issued to Employees." Beginning in 1996, companies electing to remain with accounting under APB 25 must make pro forma disclosures of net income and earnings per share as if the fair value based method of accounting had been applied. The Corporation plans to continue accounting for its stock-based employee compensation plans under APB 25 and will present the pro forma disclosures required under this statement in 1996. NOTE 2: CBS ACQUISITION On November 24, 1995, pursuant to the terms of a merger agreement, the Corporation acquired CBS Inc. (CBS) for a purchase price of approximately $5.4 billion. The acquisition was financed by borrowings under a $7.5 billion credit agreement executed in September 1995. The acquisition has been accounted for by the purchase method. Accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition. The excess of the consideration paid over the estimated fair value of net assets acquired, totalling $4.8 billion, has been recorded as goodwill and is being amortized on a straight-line basis over 40 years. The estimated fair values of assets acquired and liabilities assumed are summarized in the table below: FAIR VALUES OF ASSETS ACQUIRED AND LIABILITIES ASSUMED (in millions)
AT NOVEMBER 24 1995 - ---------------------------------------------------------- Receivables $ 643 Program rights 301 Investments 233 Plant and equipment 777 Identifiable intangible assets: FCC licenses 994 Film library and other 162 Goodwill 4,794 Other assets 25 Liabilities for talent, program rights and similar contracts (716) Debt (850) Deferred income taxes (270) Pension, postretirement and postemployment benefits (244) Accrued restructuring costs (100) Other liabilities (398) - ---------------------------------------------------------- Total purchase price $5,351 - ----------------------------------------------------------
The Corporation's Consolidated Statement of Income for the year ended December 31, 1995 includes the operating results of CBS from the acquisition date. The following unaudited pro forma information combines the consolidated results of operations of the Corporation with those of CBS as if the acquisition had occurred at the beginning of 1995 and 1994, after giving effect to certain purchase accounting adjustments, including additional depreciation expense resulting from a step-up in basis of fixed assets, additional amortization expense from goodwill and other identified intangible assets, increased interest expense from acquisition debt and related income tax effects. PRO FORMA RESULTS (UNAUDITED) (in millions except per share amounts)
YEAR ENDED DECEMBER 31 1995 1994 - ---------------------------------------------------------------------------- Sales $9,326 $9,601 Interest expense (706) (529) Loss from Continuing Operations (527) (108) Primary loss per common share- Continuing Operations (1.37) (.41) Fully diluted loss per common share- Continuing Operations (1.22) (.41) - ---------------------------------------------------------------------------
This pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the operating results that actually would have occurred had the CBS acquisition been consummated on January 1, 1995 or 1994. In addition, these results are not intended to be a projection of future results and do not reflect any synergies that might be achieved from combined operations. 36 37 NOTE 3: DISCONTINUED OPERATIONS In December 1995, the Corporation adopted a plan to reduce debt incurred for the acquisition of CBS through the sale of Knoll and its defense and electronic systems business. In December 1995, a definitive agreement was reached to sell Knoll to Warburg, Pincus Ventures, L.P., an affiliate of E. M. Warburg, Pincus & Company, for $565 million of cash. In January 1996, an agreement was executed with Northrop Grumman Corporation for the sale of the defense and electronic systems business for $3 billion of cash. In addition, Northrop Grumman will assume approximately $500 million of pension and postretirement benefit liabilities associated with the active employees of the business. These transactions, which are expected to result in a combined after-tax gain ranging from $1.2 to $1.4 billion, are expected to be completed during the first quarter of 1996. The gain will be recognized when realized. The net proceeds from these transactions will be used to repay debt of Continuing Operations. In July 1995, the Corporation sold WCI for $430 million of cash and retained approximately $125 million of mortgage notes receivable with maturities through 1997 and other securities. In addition, the buyer assumed $19 million of debt. Concurrently, the Corporation invested $48 million for a 24% equity interest in the new business. The Corporation is actively pursuing the divestiture of this investment. The net cash proceeds from the divestiture of WCI were used to repay debt of Discontinued Operations. A net loss of $76 million was recognized on the disposal. In November 1992, the Corporation announced a plan that included exiting Financial Services through the disposition of its $9 billion asset portfolios and the sales of DCBU and WESCO. The disposition of Financial Services assets involved the sale of the real estate and corporate finance portfolios over a three-year period and the liquidation of the leasing portfolio over a longer period of time in accordance with contractual terms. Based on its quarterly review of the assumptions used in determining the estimated loss from Discontinued Operations that was recorded in 1992, the Corporation recorded an additional pre-tax provision for loss on disposal of Discontinued Operations of $148 million in 1993. This change in the estimated loss resulted from a reduction of the expected selling prices of WESCO and an Australian subsidiary of DCBU; a decision to sell in bulk a Financial Services residential development that the Corporation, upon adoption of the Plan, had intended to develop; and a revision to the estimated interest costs expected to be incurred by the Discontinued Operations during the disposal period. During the first quarter of 1994, the Corporation completed the sales of DCBU and WESCO for proceeds in excess of $1.1 billion and approximately $340 million, respectively. The assets and liabilities of Discontinued Operations have been separately classified on the balance sheet as net assets of Discontinued Operations. A summary of these assets and liabilities follows: NET ASSETS OF DISCONTINUED OPERATIONS (in millions)
AT DECEMBER 31 1995 1994 - -------------------------------------------------------------------------- ASSETS: Cash and cash equivalents $ 13 $ 15 Customer receivables 397 361 Inventories 239 612 Uncompleted contracts costs over related billings 152 205 Plant and equipment 558 616 Portfolio investments 901 1,230 Deferred income taxes (note 6) 410 439 Land not developed - 244 Other assets 634 651 - -------------------------------------------------------------------------- Total assets-Discontinued Operations 3,304 4,373 - -------------------------------------------------------------------------- LIABILITIES: Accounts payable 156 153 Uncompleted contracts billings over related costs 119 69 Other current liabilities 430 586 Short-term debt (note 11) 81 402 Current maturities of long-term debt (note 13) 265 240 Liability for estimated loss on disposal 134 145 Postretirement benefits liability (note 5) 108 111 Pension liability (note 4) 398 333 Other noncurrent liabilities 14 40 Long-term debt (note 13) 157 589 - -------------------------------------------------------------------------- Total liabilities-Discontinued Operations 1,862 2,668 - -------------------------------------------------------------------------- Net assets of Discontinued Operations $1,442 $1,705 - --------------------------------------------------------------------------
In 1995, the Corporation reduced the debt of Discontinued Operations to that amount which it believes is supportable by the leasing portfolio and other miscellaneous assets. The debt is expected to be repaid as the leasing portfolio liquidates over its contractual term and through sales of such miscellaneous assets. Management believes that the net proceeds anticipated from the continued liquidation of assets of Discontinued Operations will be sufficient to fund Discontinued Operations. Management further believes that the liability for the estimated loss on disposal of Discontinued Operations is adequate to cover future operating costs and estimated credit losses related to Financial Services and the remaining costs associated with WCI, DCBU and WESCO. The adequacy of this liability is evaluated each quarter. 37 38 INVENTORIES Inventories of Discontinued Operations consisted of the following: INVENTORIES (in millions)
AT DECEMBER 31 1995 1994 - ----------------------------------------------------------------- Raw materials $ 47 $ 60 Work in process 284 671 Finished goods 3 4 - ----------------------------------------------------------------- 334 735 Long-term contracts in process 260 394 Progress payments to subcontractors 53 58 Recoverable engineering and development costs 198 291 - ----------------------------------------------------------------- 845 1,478 Inventoried costs related to contracts with progress billing terms (606) (866) - ----------------------------------------------------------------- Inventories $ 239 $ 612 - -----------------------------------------------------------------
COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS (in millions)
AT DECEMBER 31 1995 1994 - ----------------------------------------------------------------- Costs included in inventories $ 555 $ 795 Progress billings on contracts (403) (590) - ----------------------------------------------------------------- Uncompleted contracts costs over related billings $ 152 $ 205 - ----------------------------------------------------------------- Progress billings on contracts $ 170 $ 140 Costs included in inventories (51) (71) - ----------------------------------------------------------------- Uncompleted contracts billings over related costs $ 119 $ 69 - -----------------------------------------------------------------
Substantially all inventories at December 31, 1995 related to long-term contracts. Inventoried costs do not exceed realizable values. PORTFOLIO INVESTMENTS Portfolio investments by category of investment and financing at December 31, 1995 and 1994 are summarized in the table below: PORTFOLIO INVESTMENTS (in millions)
Real Estate Leasing & Corporate Total - ------------------------------------------------------------------- AT DECEMBER 31, 1995 Receivables $820 $ 2 $ 822 Other portfolio investments 45 34 79 - ------------------------------------------------------------------- Portfolio investments $865 $ 36 $ 901 - ------------------------------------------------------------------- AT DECEMBER 31, 1994 Receivables $886 $ 27 $ 913 Other portfolio investments 38 279 317 - ------------------------------------------------------------------- Portfolio investments $924 $306 $1,230 - -------------------------------------------------------------------
Other portfolio investments remaining at December 31, 1995 consisted of real estate properties and investments in leasing partnerships. The leasing portfolio is expected to liquidate through 2015 in accordance with contractual terms. Leasing receivables consist of direct financing and leveraged leases. At December 31, 1995 and 1994, 84% and 81%, respectively, related to aircraft, and 16% and 18%, respectively, related to cogeneration facilities. The components of the Corporation's net investment in leases at December 31, 1995 and 1994 are as follows: NET INVESTMENT IN LEASES (in millions)
AT DECEMBER 31 1995 1994 - ---------------------------------------------------------------- Rentals receivable (net of principal and interest on nonrecourse loans) $ 775 $ 864 Estimated residual value of leased assets 373 389 Unearned and deferred income (328) (367) - ---------------------------------------------------------------- Investment in leases 820 886 Deferred taxes and deferred investment tax credits arising from leases (584) (610) - ---------------------------------------------------------------- Investment in leases, net $ 236 $ 276 - ----------------------------------------------------------------
At December 31, 1995 and 1994, deferred investment tax credits totalled $23 million and $25 million, respectively. These deferred investment tax credits are recognized as income over the contractual terms of the respective leases. Contractual maturities for the Corporation's leasing receivables at December 31, 1995 are as follows: CONTRACTUAL MATURITIES FOR LEASING RECEIVABLES (in millions)
AT DECEMBER 31, 1995 YEAR OF MATURITY - -------------------------------------------------------------- AFTER Total 1996 1997 1998 1999 2000 2000 - -------------------------------------------------------------- Leasing $820 $29 $23 $22 $24 $31 $691 - --------------------------------------------------------------
In accordance with APB 30, the consolidated financial statements reflect the operating results of Discontinued Operations separately from Continuing Operations. Interest expense totalling $48 million, $37 million and $46 million for 1995, 1994 and 1993, respectively, has been allocated to Discontinued Operations based on the ratio of the net assets of Knoll and the defense and electronic systems business to the sum of total consolidated net assets plus consolidated debt. Summarized operating results of Discontinued Operations follow: 38 39 OPERATING RESULTS OF DISCONTINUED OPERATIONS- 1995 MEASUREMENT DATES (in millions)
Defense and Electronic WCI Systems Knoll Total - ------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1995 Sales of products and services $108 $2,549 $621 $3,278 Income before income taxes 23 163 30 216 Income taxes (8) (57) (16) (81) Net income 15 106 14 135 YEAR ENDED DECEMBER 31, 1994 Sales of products and services $248 $2,189 $562 $2,999 Income (loss) before income taxes 71 187 (84) 174 Income taxes (26) (68) 10 (84) Net income (loss) 45 119 (74) 90 YEAR ENDED DECEMBER 31, 1993 Sales of products and services $253 $2,361 $510 $3,124 Income (loss) before income taxes 57 115 (55) 117 Income taxes (19) (44) 17 (46) Net income (loss) 38 71 (38) 71 - -------------------------------------------------------------------------------
OPERATING RESULTS OF DISCONTINUED OPERATIONS- NOVEMBER 1992 MEASUREMENT DATE (in millions)
Financial DCBU & Services WESCO Total - -------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1995 Sales of products and services $ 31 $ - $ 31 Net loss (52) - (52) YEAR ENDED DECEMBER 31, 1994 Sales of products and services $ 41 $ 319 $ 360 Net earnings (losses) (204) 4 (200) YEAR ENDED DECEMBER 31, 1993 Sales of products and services $ 305 $2,384 $2,689 Net earnings (losses) (212) 66 (146) - -------------------------------------------------------------------------------
NOTE 4: PENSIONS The Corporation has a number of defined benefit pension plans covering substantially all employees. Most plan benefits are based on either years of service and compensation levels at the time of retirement or a formula based on career earnings. Pension benefits are paid primarily from trusts funded by the Corporation and employee contributions. The Corporation funds its qualified U.S. pension plans at amounts equal to or greater than the minimum funding requirements of the Employee Retirement Income Security Act of 1974. Substantially all plan assets are invested in stocks, fixed income securities, and real estate investments. The Corporation also participates in various multi-employer, union-administered defined benefit plans that cover certain broadcast employees as a result of the acquisition of CBS. Pension expense related to these plans for 1995 was not material. NET PERIODIC PENSION COSTS (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ---------------------------------------------------------------------------- Service cost $ 53 $ 79 $ 65 Interest cost on projected benefit obligation 391 404 426 Amortization of unrecognized net obligation 35 36 41 Amortization of unrecognized prior service cost (benefit) (11) 6 5 Amortization of unrecognized net loss 68 112 48 - ---------------------------------------------------------------------------- 536 637 585 - ---------------------------------------------------------------------------- Return on plan assets: Actual return on plan assets (584) (18) (414) Deferred gain (loss) 245 (385) (40) - ---------------------------------------------------------------------------- Recognized return on plan assets (339) (403) (454) - ---------------------------------------------------------------------------- Net periodic pension cost $ 197 $ 234 $ 131 - ----------------------------------------------------------------------------
The Corporation's restructuring activities contributed to a high level of lump-sum cash distributions from the Corporation's pension fund during 1994. The magnitude of these cash distributions required that the Corporation apply the provisions of SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and recognize a settlement loss of $308 million in 1994. This noncash charge to income represents the pro rata portion of unrecognized losses associated with the pension obligation that was settled. The recognition of this settlement loss in 1994 reduced the amortization of unrecognized net loss included in net periodic pension cost for 1995. A curtailment charge of $22 million related to the 1993 restructuring activities was included in the loss from Continuing Operations for the year ended December 31, 1993. See note 20 to the financial statements. SIGNIFICANT PENSION PLAN ASSUMPTIONS
AT DECEMBER 31 1995 1994 1993 - --------------------------------------------------------------------------- Discount rate 6.75% 8.5% 7.25% Compensation increase rate 4% 4% 4% Long-term rate of return on plan assets 9.75% 9.75% 9.75% - ---------------------------------------------------------------------------
The requirement of SFAS No. 87 to adjust the discount rate to reflect current and expected-to-be available interest rates on high quality fixed income investments resulted in a decrease in the Corporation's assumed discount rate from 8.5% at December 31, 1994 to 6.75% at December 31, 1995. Net periodic pension cost is determined using the assumptions as of the beginning of the year. The funded status is determined using the assumptions as of the end of the year. 39 40 The following table sets forth the funded status of the defined benefit plans and amounts recognized in the Corporation's balance sheet at December 31, 1995 and 1994: FUNDED STATUS-PENSION PLANS (in millions)
AT DECEMBER 31 1995 1994 - -------------------------------------------------------------------------- Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Exceed Accumulated Exceed Benefits Assets Benefits Assets - -------------------------------------------------------------------------- Actuarial present value of benefit obligation: Vested $(561) $(4,944) - $(4,412) Nonvested (31) (328) - (319) - -------------------------------------------------------------------------- Accumulated benefit obligation (592) (5,272) - (4,731) Effect of projected future compensation levels (122) (261) - (273) - -------------------------------------------------------------------------- Projected benefit obligation for service rendered to date (714) (5,533) - (5,004) Plan assets at fair value 730 3,407 - 3,557 - -------------------------------------------------------------------------- Projected benefit obligation in excess of plan assets 16 (2,126) - (1,447) Unrecognized net loss 25 2,120 - 1,736 Prior service benefit not yet recognized in net periodic pension cost - (95) - (136) Unrecognized net transition obligation - 161 - 250 - -------------------------------------------------------------------------- Prepaid pension cost 41 60 - 403 Minimum pension liability - (1,925) - (1,577) - -------------------------------------------------------------------------- Pension asset (liability) included in consolidated balance sheet $ 41 $(1,865) - $(1,174) - --------------------------------------------------------------------------
Included in plan assets at December 31, 1995 are 5,612,600 shares of the Corporation's common stock having a market value of approximately $92 million. Dividends paid by the Corporation during 1995 on shares held by the pension fund totalled approximately $1 million. During 1995 and 1994, respectively, the Corporation contributed $315 million and $310 million of cash to its pension plans. The accumulated benefit obligation in excess of assets at December 31, 1995 increased $691 million compared to December 31, 1994. This increase represents the net effect of numerous factors but was driven primarily by the change in the discount rate assumption from 8.5% to 6.75%. The Corporation sponsors various non-qualified supplemental pension plans that provide additional benefits to certain employees and are paid from the Corporation's assets held in rabbi trusts. The unfunded accumulated benefit obligation under these plans at December 31, 1995 included in the table above was $286 million. The pending first quarter 1996 sale of the Corporation's defense and electronic systems business is expected to reduce the Corporation's unfunded accumulated benefit obligation by $398 million as certain pension obligations are being assumed by the buyer. At December 31, 1995 and 1994, included in the balance sheet of Continuing and Discontinued Operations are the following pension assets and liabilities: BALANCE SHEET STATUS (in millions)
AT DECEMBER 31 1995 1994 - -------------------------------------------------------------------------- Net Net Pension Intangible Pension Intangible Liability Asset Liability Asset - -------------------------------------------------------------------------- Continuing Operations $(1,426) $63 $ (841) $ 97 - -------------------------------------------------------------------------- Discontinued Operations (398) 3 (333) 17 - -------------------------------------------------------------------------- Total $(1,824) $66 $(1,174) $114 - --------------------------------------------------------------------------
For financial reporting purposes, a pension plan is considered unfunded when the fair value of plan assets is less than the accumulated benefit obligation. When that is the case, a minimum pension liability is recognized for the sum of the unfunded amount plus any prepaid pension cost. In recognizing such a liability, an intangible asset is usually recorded up to the sum of the prior service cost not yet recognized and the unrecognized transition obligation. When the liability to be recognized is greater than the intangible asset limit, a charge is made to shareholders' equity for the difference, net of any tax effects. At December 31, 1995, a minimum pension liability of $1,925 million was recognized for the sum of the unfunded amount of $1,865 million plus the prepaid pension cost of $60 million. An intangible asset of $66 million and a charge to shareholders' equity of $1,859 million, which was reduced to $1,220 million due to deferred tax effects of $639 million, offset the pension liability. As a result of this remeasurement, year-end 1995 shareholders' equity was decreased by $258 million from December 31, 1994. At December 31, 1994, a minimum pension liability of $1,577 million was recognized for the sum of the unfunded amount of $1,174 million plus the prepaid pension cost of $403 million. An intangible asset of $114 million and a charge to shareholders' equity of $1,463 million, which was reduced to $962 million due to deferred tax effects of $501 million, offset the pension liability. As a result of this remeasurement, year-end 1994 shareholders' equity was increased by $253 million from December 31, 1993. 40 41 NOTE 5: POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND POSTEMPLOYMENT BENEFITS The Corporation has defined benefit postretirement plans that provide medical, dental and life insurance for eligible retirees and dependents. The components of net periodic postretirement benefit cost follow: NET PERIODIC POSTRETIREMENT BENEFIT COST (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Service cost, benefits attributed to employee service during the year $ 13 $ 20 $ 15 Interest cost on accumulated postretirement benefit obligation 100 93 96 Amortization of unrecognized net (gain) loss (4) 4 - Recognized return on plan assets (1) (1) - - ----------------------------------------------------------------------- Net periodic postretirement benefit cost $108 $116 $111 - -----------------------------------------------------------------------
The assumptions used to develop the net periodic postretirement benefit cost and the present value of benefit obligations are shown below: SIGNIFICANT POSTRETIREMENT BENEFIT PLAN ASSUMPTIONS
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Discount rate 6.75% 8.5% 7.25% Health care cost trend rates 10.5%* 11%* 12%* Compensation increase rate 4% 4% 4% Long-term rate of return on plan assets 7% 7% 9.75% - ----------------------------------------------------------------------- * From December 31, 1995, the rate was assumed to decrease ratably to 5% in 2006, decrease to 4.75% in 2007 and remain at that level thereafter. From December 31, 1994 and 1993, the rate was assumed to decrease ratably to 6.5% and 7%, respectively, and remain at that level thereafter.
Net periodic postretirement benefit cost is determined using the assumptions as of the beginning of the year. The funded status is determined using the assumptions as of the end of the year. The funded status and amounts recognized in the Corporation's balance sheet at December 31, 1995 and 1994 were as follows: FUNDED STATUS-POSTRETIREMENT BENEFITS (in millions)
AT DECEMBER 31 1995 1994 - ---------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $(1,215) $ (893) Fully eligible, active plan participants (40) (32) Other active plan participants (352) (253) - ---------------------------------------------------------------- Total accumulated postretirement benefit obligation (1,607) (1,178) Unrecognized net loss 257 36 Unrecognized prior service benefit (45) (58) Plan assets at fair value 72 12 - ---------------------------------------------------------------- Accrued postretirement benefit cost $(1,323) $(1,188) - ----------------------------------------------------------------
The accrued postretirement benefit cost for Discontinued Operations at December 31, 1995 and 1994 was $108 million and $111 million, respectively, which is included in the net assets of Discontinued Operations. These liabilities are being assumed by the buyers of the Corporation's defense and electronic systems business and Knoll. The funded assets consist primarily of interest bearing securities. The effect of a 1% annual increase in the assumed health care cost trend rates would increase the accumulated postretirement benefit obligation by approximately $95 million and would increase net periodic postretirement benefit cost by approximately $8 million. Certain of the Corporation's non-U.S. subsidiaries have private and government-sponsored plans for retirees. The cost for these plans is not significant to the Corporation. The Corporation provides certain postemployment benefits to former or inactive employees and their dependents during the time period following employment but before retirement. In December 1993, the Corporation adopted retroactive to January 1, 1993, SFAS No. 112, "Employers' Accounting for Postemployment Benefits." Prior to 1993, postemployment benefits were recognized primarily as they were paid. The Corporation's charge for adoption of SFAS No. 112 at January 1, 1993 was $56 million, net of $30 million of deferred taxes, and was immediately recognized as the cumulative effect of a change in accounting for postemployment benefits. At December 31, 1995 and 1994, the Corporation's liability for postemployment benefits totalled $98 million and $77 million, respectively. The liability for postemployment benefits included in the net assets of Discontinued Operations was $2 million at both December 31, 1995 and 1994. 41 42 NOTE 6: INCOME TAXES Income tax expense (benefit) included in the consolidated financial statements follows: COMPONENTS OF CONSOLIDATED INCOME TAXES (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Continuing Operations $(7) $(13) $(116) Discontinued Operations 51 84 (7) Cumulative effect of change in accounting principle for postemployment benefits - - (30) - ----------------------------------------------------------------------- Income taxes (benefit) $44 $71 $(153) - -----------------------------------------------------------------------
INCOME TAXES FROM CONTINUING OPERATIONS (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Current: Federal $(22) $(77) $ 84 State (2) 6 10 Foreign 22 28 21 - ----------------------------------------------------------------------- Total income taxes current (2) (43) 115 - ----------------------------------------------------------------------- Deferred: Federal (18) 53 (199) State (3) (11) 16 Foreign 16 (12) (48) - ----------------------------------------------------------------------- Total income taxes deferred (5) 30 (231) - ----------------------------------------------------------------------- Income taxes (benefit) $ (7) $(13) $(116) - -----------------------------------------------------------------------
CONSOLIDATED INCOME TAXES (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Current: Federal $ 18 $ 18 $ 138 State 7 24 19 Foreign 27 28 23 - ----------------------------------------------------------------------- Total income taxes current 52 70 180 - ----------------------------------------------------------------------- Deferred: Federal (21) 28 (294) State (2) (13) 14 Foreign 15 (14) (53) - ----------------------------------------------------------------------- Total income taxes deferred (8) 1 (333) - ----------------------------------------------------------------------- Income taxes (benefit) $ 44 $ 71 $(153) - -----------------------------------------------------------------------
Deferred federal income taxes for 1993 include a benefit of $62 million resulting from the enactment of an increase in the statutory federal income tax rate from 34% to 35%. In addition to the amounts in the tables above, during 1995, 1994 and 1993, $138 million of income tax benefit, $132 million of income tax expense and $378 million of income tax benefit, respectively, were recorded in shareholders' equity as part of the pension liability adjustment. See note 4 to the financial statements. The foreign portion of income or loss before income taxes and minority interest in income of consolidated subsidiaries included in the consolidated statement of income was income of $128 million in 1995 and losses of $34 million in 1994 and $6 million in 1993. Such income or loss consisted of profits and losses generated from foreign operations (both Continuing and Discontinued) that can be subject to both U.S. and foreign income taxes. Deferred federal income taxes have not been provided on cumulative undistributed earnings from foreign subsidiaries totalling $432 million at December 31, 1995 in which the earnings have been reinvested for an indefinite time. It is not practicable to determine the income tax liability that would result were such earnings repatriated. Income from Continuing Operations includes income of certain manufacturing operations in Puerto Rico, which are eligible for tax credits against U.S. federal income tax and partially exempt from Puerto Rican income tax under grants of industrial tax exemptions. These tax exemptions provided net tax benefits of $17 million in 1995, $14 million in 1994 and $17 million in 1993. The exemptions will expire at various dates from 2002 through 2007. Deferred income taxes result from temporary differences in the financial bases and tax bases of assets and liabilities. The types of differences that give rise to significant portions of deferred income tax liabilities or assets are shown in the accompanying table: CONSOLIDATED DEFERRED INCOME TAX SOURCES (in millions)
AT DECEMBER 31 1995 1994 - ---------------------------------------------------------------- Provisions for expenses and losses $1,133 $ 812 Accumulated depreciation and amortization (814) (163) Long-term contracts in process 41 81 Leasing activities (584) (583) Minimum pension liabilities 474 403 Operating losses and credit carryforwards 1,405 1,360 Postretirement and postemployment benefits 590 477 Other deferred tax assets 170 184 Other deferred tax liabilities (129) (90) Valuation allowance for deferred taxes (98) (101) - ---------------------------------------------------------------- Deferred income taxes, net asset $2,188 $2,380 - ----------------------------------------------------------------
The valuation allowance for deferred taxes represents foreign tax credits not anticipated to be utilized and operating loss carryforwards of certain foreign subsidiaries. The net balance of deferred income taxes is intended to offset income taxes on future taxable income expected to be earned by the Corporation's Continuing Operations. 42 43 At December 31, 1995, for federal income tax purposes, there were regular tax net operating loss carryforwards of $416 million which expire by the year 2007, $2,462 million which expire by the year 2008, and $351 million which expire by the year 2010. At December 31, 1995, for alternative minimum tax purposes, there were loss carryforwards of $151 million which expire by the year 2007, $2,390 million which expire by the year 2008, $38 million which expire by the year 2010 and alternative minimum tax credit carryforwards of $211 million which have no expiration date. At December 31, 1995, there were $172 million of net operating loss carryforwards attributable to foreign subsidiaries. Of this total, approximately $41 million has no expiration date. The remaining amount will expire not later than 2002. A valuation allowance has been established for $58 million of the deferred tax benefit related to those loss carryforwards for which it is considered likely that the benefit will not be realized. EFFECTIVE TAX (BENEFIT) RATE FOR CONTINUING OPERATIONS
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Federal statutory income tax (benefit) rate (35.0)% (35.0)% (35.0)% Increase (decrease) in the tax (benefit) rate resulting from: Adjustment of deferred tax asset for increase in federal income tax rate - - (15.5) Income taxes of prior years 28.1 33.5 14.1 Writeoff of intangible assets 23.8 34.7 3.3 Interest on prior years' federal income tax, net of federal effect - (67.6) 4.2 State income tax, net of federal effect (7.7) (24.1) 4.7 Lower tax rate on income of foreign sales corporations (8.3) (27.7) (3.6) Lower tax rate on net income of Puerto Rican operations (42.4) (82.1) (4.8) Gain on sale of stock of subsidiary and affiliate 30.6 - - Valuation allowance for deferred taxes (4.8) (23.7) (2.1) Adjustment of deferred tax asset included in equity for change in federal income tax rate - 17.4 - Loss of foreign tax credit 7.5 46.2 3.1 Foreign rate differential (24.9) (45.7) (1.9) Nondeductible expenses 14.3 35.3 0.6 Income from equity investments (2.0) 5.2 0.1 Dividends from foreign subsidiaries 4.5 42.2 1.4 Other 0.3 15.6 (1.4) - ----------------------------------------------------------------------- Effective tax (benefit) rate for Continuing Operations (16.0)% (75.8)% (32.8)% - -----------------------------------------------------------------------
The federal income tax returns of the Corporation and its wholly owned subsidiaries are settled through the year ended December 31, 1989. The Corporation has reached an agreement with the Internal Revenue Service regarding intercompany pricing adjustments applicable to operations in Puerto Rico for the years 1990 through 1992 and a tentative agreement for 1993. Management believes that adequate provisions for taxes have been made through December 31, 1995. NOTE 7: CUSTOMER RECEIVABLES Customer receivables at December 31, 1995 included $133 million, which represented the sales value of material shipped under long-term contracts but not billed to the customer. Billings will occur upon shipment of major components of the contract. Collection of these receivables is expected to be substantially completed within one year. Allowances for doubtful accounts of $39 million and $52 million at December 31, 1995 and 1994, respectively, were deducted from customer receivables. The Corporation performs ongoing credit evaluations of its customers and generally does not require collateral. NOTE 8: INVENTORIES AND COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS INVENTORIES (in millions)
AT DECEMBER 31 1995 1994 - --------------------------------------------------------------- Raw materials $ 88 $ 102 Work in process 449 395 Finished goods 123 163 - --------------------------------------------------------------- 660 660 Long-term contracts in process 1,005 472 Progress payments to subcontractors 21 38 Recoverable engineering and development costs 68 155 - --------------------------------------------------------------- 1,754 1,325 Inventoried costs related to contracts with progress billing terms (887) (383) - --------------------------------------------------------------- Inventories $ 867 $ 942 - ---------------------------------------------------------------
COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS (in millions)
AT DECEMBER 31 1995 1994 - --------------------------------------------------------------- Costs included in inventories $ 747 $ 347 Progress billings on contracts (165) 4 - --------------------------------------------------------------- Uncompleted contracts costs over related billings $ 582 $ 351 - --------------------------------------------------------------- Progress billings on contracts $ 464 $ 438 Costs included in inventories (140) (36) - --------------------------------------------------------------- Uncompleted contracts billings over related costs $ 324 $ 402 - ---------------------------------------------------------------
43 44 Raw materials, work in process, and finished goods included contract-related costs of approximately $405 million at December 31, 1995, and $418 million at December 31, 1994. Substantially all costs in long-term contracts in process, progress payments to subcontractors, and recoverable engineering and development costs were contract-related. Inventories other than those related to long-term contracts are generally realized within one year. Inventoried costs do not exceed realizable values. NOTE 9: PLANT AND EQUIPMENT PLANT AND EQUIPMENT (in millions)
AT DECEMBER 31 1995 1994 - ---------------------------------------------------------------- Land and buildings $ 938 $ 554 Machinery and equipment 2,514 2,260 Construction in progress 201 151 - ---------------------------------------------------------------- Plant and equipment, at cost 3,653 2,965 Accumulated depreciation (1,626) (1,683) - ---------------------------------------------------------------- Plant and equipment, net $ 2,027 $ 1,282 - ----------------------------------------------------------------
For the years ended December 31, 1995 and 1994, depreciation expense totalled $175 million and $182 million, respectively. Of these amounts, $125 million and $129 million, respectively, is included in costs of products and services, and $50 million and $53 million, respectively, is included in marketing, administration and general expenses. NOTE 10: INTANGIBLE AND OTHER NONCURRENT ASSETS INTANGIBLE AND OTHER NONCURRENT ASSETS (in millions)
AT DECEMBER 31 1995 1994 - --------------------------------------------------------------- Deferred income taxes (note 6) $1,231 $1,509 Goodwill 5,379 550 FCC licenses 1,242 100 Other intangible assets 198 89 Intangible pension asset (note 4) 63 97 Deferred charges 353 110 Joint ventures and other affiliates 70 83 Noncurrent receivables 172 115 Other 269 132 - --------------------------------------------------------------- Intangible and other noncurrent assets $8,977 $2,785 - ---------------------------------------------------------------
Goodwill and other acquired intangible assets are shown net of accumulated amortization of $154 million and $116 million at December 31, 1995 and 1994, respectively. Included in deferred charges are unamortized debt issue costs of $162 million and $2 million at December 31, 1995 and 1994, respectively, which are amortized to expense on a straight-line basis over the term of the related indebtedness. Joint ventures and other affiliates include investments in companies over which the Corporation exercises significant influence but does not control. NOTE 11: SHORT-TERM DEBT In September 1995, the Corporation entered into three new bank facilities under a credit agreement with a commitment level of $7.5 billion. These credit facilities include two term loans of $2.5 billion each. The first term loan is payable in two installments: $2 billion in November 1997 and $500 million in May 1998. The second term loan is payable in quarterly installments from August 1998 through November 2002. See note 13 to the financial statements. In addition to these term loans, the credit agreement includes a $2.5 billion revolving credit facility with a seven-year maturity. Funds from these facilities have been used to finance the purchase of CBS, pay certain transaction fees, and replace borrowings under the previous revolvers. Availability under the revolving credit facility is subject to compliance with certain covenants, representations and warranties, including a no material adverse change provision with respect to the Corporation taken as a whole, restrictions on the incurrence of liens, a maximum leverage ratio, minimum interest coverage ratio and minimum consolidated net worth. Certain of these covenants become more restrictive over the terms of the facilities. At December 31, 1995, the Corporation was in compliance with these covenants. Interest rates for borrowings under the facilities are determined at the time of each borrowing and are based generally on a floating rate index, the London Interbank Offer Rate (LIBOR), plus a margin based on the Corporation's senior unsecured debt rating and leverage. The cost of the facilities includes commitment fees, which are based on the unutilized facilities and vary with the Corporation's debt ratings and leverage. There are no compensating balance requirements under the facilities. 44 45 SHORT-TERM DEBT-CONTINUING OPERATIONS (in millions)
AT DECEMBER 31 DURING THE YEAR - -------------------------------------------------------------------------------- Composite Max. Out- Avg. Out- Wtd. Avg. Balance Rate standing standing Rate - -------------------------------------------------------------------------------- 1995 Credit facilities $185 7.0% $1,039 $600 6.8% Short-term foreign bank loans 20 6.9% 103 76 6.0% Other 104 7.1% 178 41 6.0% - -------------------------------------------------------------------------------- Short-term debt $309 - -------------------------------------------------------------------------------- 1994 Credit facilities $545 6.7% $ 545 $113 4.3% Short-term foreign bank loans 88 6.3% 277 133 5.2% Other 1 - -------------------------------------------------------------------------------- Short-term debt $634 - --------------------------------------------------------------------------------
Average outstanding borrowings for Continuing Operations were determined based on daily amounts outstanding for the credit facilities and on monthly balances outstanding for short-term foreign bank loans. SHORT-TERM DEBT-DISCONTINUED OPERATIONS (in millions)
AT DECEMBER 31 DURING THE YEAR - -------------------------------------------------------------------------------- Composite Max. Out- Avg. Out- Wtd. Avg. Balance Rate standing standing Rate - -------------------------------------------------------------------------------- 1995 Credit facilities $ 78 7.6% $ 331 $209 6.8% Other 3 - -------------------------------------------------------------------------------- Short-term debt $ 81 - -------------------------------------------------------------------------------- 1994 Credit facilities $374 6.7% $2,355 $955 4.8% Other 28 8.1% 36 31 8.2% - -------------------------------------------------------------------------------- Short-term debt $402 - --------------------------------------------------------------------------------
Average outstanding borrowings for Discontinued Operations were determined based on daily amounts outstanding for credit facilities. To manage interest costs on its short-term and long-term debt, the Corporation has entered into various types of interest rate and currency exchange agreements. A summary of notional amounts outstanding at December 31, 1995 and 1994 is presented in the table below: INTEREST RATE AND CURRENCY EXCHANGE AGREEMENTS NOTIONAL AMOUNTS OUTSTANDING (in millions)
Short-Term Long-Term Debt Debt Total - ---------------------------------------------------------------------------- AT DECEMBER 31, 1995 Continuing Operations $ - $3,208 $3,208 Discontinued Operations - 74 74 - ---------------------------------------------------------------------------- Notional amounts $ - $3,282 $3,282 - ---------------------------------------------------------------------------- AT DECEMBER 31, 1994 Continuing Operations $272 $ - $ 272 Discontinued Operations 25 374 399 Notional amounts $297 $ 374 $ 671 - ----------------------------------------------------------------------------
The average remaining maturity of interest rate and currency exchange agreements was 0.8 years and 1.5 years at December 31, 1995 and 1994, respectively. At year-end 1995, $3,208 million relates to interest rate swaps with rate and maturity characteristics set forth in the table below: CONTRACTUAL MATURITIES OF INTEREST RATE SWAPS (in millions)
AT DECEMBER 31, 1995 Year of Maturity - ----------------------------------------------------------------------------- Total 1996 1997 1998 1999 2000 - ----------------------------------------------------------------------------- Fixed rate swaps (pay fixed): Notional amount $3,208 $3,078 - $50 $55 $25 Wtd. avg. fixed rate paid 5.68% 5.54% - 8.73% 8.86% 9.36% - -----------------------------------------------------------------------------
The $74 million notional amount outstanding for Discontinued Operations at December 31, 1995 represents an interest rate and currency swap which matures in February 1996. At December 31, 1994, interest rate swap agreements in which the Corporation paid a fixed interest rate totalled $272 million and had a weighted average rate of 8.8% with an average maturity of 1.8 years. In addition to the fixed interest rate swaps, the Corporation had a $150 million floating rate swap on which it received a rate of 8.7%. The remaining $249 million notional amount outstanding at December 31, 1994 consisted of a $25 million forward interest rate swap agreement, a $150 million interest rate floor agreement and a $74 million interest rate and currency swap. 45 46 NOTE 12: OTHER CURRENT LIABILITIES OTHER CURRENT LIABILITIES (in millions)
AT DECEMBER 31 1995 1994 - --------------------------------------------------------------- Accrued employee compensation $ 218 $ 118 Income taxes currently payable 158 129 Liabilities for talent and program rights 254 - Accrued product warranty 59 60 Accrued restructuring costs 153 77 Liability for business dispositions 46 90 Accrued taxes, interest and insurance 221 312 Accrued expenses 706 224 Environmental liabilities 47 40 Other 262 131 - --------------------------------------------------------------- Other current liabilities $2,124 $1,181 - ---------------------------------------------------------------
NOTE 13: LONG-TERM DEBT LONG-TERM DEBT-CONTINUING OPERATIONS (in millions)
AT DECEMBER 31 1995 1994 - --------------------------------------------------------------- Term loans I & II $5,000 $ - 8-3/8% notes due 2002 348 348 7-7/8% debentures due 2023 325 325 7-3/4% notes due 1996 300 300 6-7/8% notes due 2003 275 275 8-5/8% debentures due 2012 273 273 8-7/8% notes due 2001 250 250 8-7/8% notes due 2014 150 - 7-5/8% notes due 2002 150 - 7-3/4% notes due 1999 125 - 7-1/8% notes due 2023 97 - 8-7/8% debentures due 2022 92 - Medium-term notes due through 2001 92 95 Other 79 6 - --------------------------------------------------------------- 7,556 1,872 Current maturities (330) (7) - --------------------------------------------------------------- Long-term debt $7,226 $1,865 - ---------------------------------------------------------------
Included in the table above is $491 million of senior debt previously issued by CBS. At December 31, 1995, interest rates on this debt ranged from 7.13% to 9.03% with maturities from 1998 to 2023. The CBS 8-7/8% debentures due 2022 may be redeemed after June 1, 2002 at specified redemption prices. Except for term loans I and II, none of the remaining long-term debt outstanding at December 31, 1995 may be redeemed prior to maturity. At December 31, 1995, medium-term notes of Continuing Operations had interest rates ranging from 8.5% to 9.4%, with an average interest rate of 8.9% and an average remaining maturity of 2.6 years. During 1995, Discontinued Operations exchanged $150 million of 8-7/8% notes due 2014 (redeemable by holders in 1999) for $150 million of short-term borrowings of Continuing Operations to better match the monetization of assets with the maturities of debt. The Corporation maintains a $1 billion shelf registration, of which $400 million was unused as of December 31, 1995. The scheduled maturities of Continuing Operation's long-term debt outstanding at December 31, 1995 for each of the next five years are as follows: 1996-$330 million; 1997-$2,006 million; 1998-$823 million; 1999-$686 million; and 2000-$675 million. LONG-TERM DEBT-DISCONTINUED OPERATIONS (in millions)
AT DECEMBER 31 1995 1994 - --------------------------------------------------------------- Medium-term notes due through 2001 $ 344 $ 424 8-7/8% notes due 2014 - 150 8-7/8% notes due 1995 - 150 Other 78 105 - --------------------------------------------------------------- 422 829 Current maturities (265) (240) - --------------------------------------------------------------- Long-term debt $ 157 $ 589 - ---------------------------------------------------------------
At December 31, 1995, medium-term notes of Discontinued Operations had interest rates ranging from 7.9% to 9.4%, with an average interest rate of 8.9% and an average remaining maturity of 1.6 years. The scheduled maturities of Discontinued Operation's long-term debt outstanding at December 31, 1995 for each of the next five years are as follows: 1996-$265 million; 1997-$2 million; 1998-$96 million; 1999-$46 million; and 2000-$11 million. NOTE 14: OTHER NONCURRENT LIABILITIES OTHER NONCURRENT LIABILITIES (in millions)
AT DECEMBER 31 1995 1994 - --------------------------------------------------------------- Postretirement benefits (note 5) $1,215 $1,077 Postemployment benefits (note 5) 96 75 Pension liability (note 4) 1,426 841 Accrued restructuring costs 8 8 Liability for business dispositions 94 75 Liabilities for talent and program rights 47 - Accrued expenses 650 148 Environmental liabilities 239 157 Other 299 167 - --------------------------------------------------------------- Other noncurrent liabilities $4,074 $2,548 - ---------------------------------------------------------------
46 47 NOTE 15: SHAREHOLDERS' EQUITY SHAREHOLDERS' EQUITY (in millions)
1995 1994 1993 - ----------------------------------------------------------------------------- Preferred stock: Balance at January 1 $ 12 $ 8 $ 8 Series B preferred shares converted (8) - - Series C preferred shares issued - 4 - - ----------------------------------------------------------------------------- Balance at December 31 $ 4 $ 12 $ 8 - ----------------------------------------------------------------------------- Common stock: Balance at January 1 393 393 393 Shares issued 33 - - - ----------------------------------------------------------------------------- Balance at December 31 $ 426 $ 393 $ 393 - ----------------------------------------------------------------------------- Capital in excess of par value: Balance at January 1 $ 1,932 $ 1,475 $ 1,523 Series B preferred shares converted (25) - - Series C preferred shares issued - 501 - Shares issued under various compensation and benefit plans (55) (37) (37) Shares issued under dividend reinvestment plan (4) (7) (11) - ----------------------------------------------------------------------------- Balance at December 31 $ 1,848 $ 1,932 $ 1,475 - ----------------------------------------------------------------------------- Common stock held in treasury: Balance at January 1 $ (870) $ (972) $(1,102) Shares issued under various compensation and benefit plans 139 87 104 Shares issued under dividend reinvestment plan 11 15 26 - ----------------------------------------------------------------------------- Balance at December 31 $ (720) $ (870) $ (972) - ----------------------------------------------------------------------------- Minimum pension liability: Balance at January 1 $ (962) $(1,215) $ (496) Pension liability adjustments, net of deferred taxes (note 4) (258) 253 (719) - ----------------------------------------------------------------------------- Balance at December 31 $(1,220) $ (962) $(1,215) - ----------------------------------------------------------------------------- Cumulative foreign currency translation adjustments: Balance at January 1 $ (15) $ (28) $ (8) Currency translation activity 4 13 (20) - ----------------------------------------------------------------------------- Balance at December 31 $ (11) $ (15) $ (28) - ----------------------------------------------------------------------------- Retained earnings: Balance at January 1 $ 1,325 $ 1,401 $ 1,917 Net income (loss) 15 77 (326) Dividends paid (159) (153) (190) - ----------------------------------------------------------------------------- Balance at December 31 $ 1,181 $ 1,325 $ 1,401 - ----------------------------------------------------------------------------- Shareholders' equity $ 1,508 $ 1,815 $ 1,062 - -----------------------------------------------------------------------------
In March 1994, the Corporation sold, in a private placement, 36,000,000 depository shares (the $1.30 Depository Shares) at $14.44 per share. Each of the $1.30 Depository Shares represents ownership of one-tenth of a share of the Corporation's $1.00 par value Series C Conversion Preferred Stock (Series C Preferred) and entitles the owner to all of the proportionate rights, preferences and privileges of the Series C Preferred. A total of 3,600,000 Series C Preferred shares was deposited, all of which were outstanding at December 31, 1995 and 1994. The net proceeds to the Corporation, after commissions, fees and out-of-pocket expenses, totalled $505 million. As a result, the par value of Series C Preferred was established for $4 million, and capital in excess of par was increased by $501 million. The annual dividend rate for each $1.30 Depository Share is $1.30 (equivalent to $13.00 for each Series C Preferred), payable quarterly in arrears on the first day of March, June, September and December. Dividends are cumulative and must be declared by the Board of Directors to be payable. Payments commenced on June 1, 1994. Each $1.30 Depository Share will automatically convert into one share of common stock on June 1, 1997 unless called on May 30, 1997 by the Corporation or converted at any time prior to June 1, 1997 by the holder. Conversion will also occur upon certain mergers, consolidations or similar extraordinary transactions involving the Corporation or in certain other events. On September 1, 1995, the Corporation's 8,222,500 shares of Series B Conversion Preferred Stock (Series B Preferred), outstanding since 1992, mandatorily converted into 32,890,000 shares of common stock. COMMON SHARES (shares in thousands)
In Out- Issued Treasury standing - ------------------------------------------------------------------------------ Balance at January 1, 1993 392,998 46,556 346,442 Shares issued for dividend reinvestment plan - (1,112) 1,112 Shares issued for employee plans - (4,540) 4,540 Other 82 - 82 - ------------------------------------------------------------------------------ Balance at December 31, 1993 393,080 40,904 352,176 Shares issued for dividend reinvestment plan - (621) 621 Shares issued for employee plans - (3,975) 3,975 Other - (20) 20 - ------------------------------------------------------------------------------ Balance at December 31, 1994 393,080 36,288 356,792 Shares issued for dividend reinvestment plan - (450) 450 Shares issued for employee plans - (5,886) 5,886 Shares issued for conversion of Series B Preferred 32,890 - 32,890 - ------------------------------------------------------------------------------ Balance at December 31, 1995 425,970 29,952 396,018 - ------------------------------------------------------------------------------
Of the common stock held in treasury at December 31, 1995, 21,132,376 shares were held by the Corporation's rabbi trusts for the payment of benefits under executive benefit plans. 47 48 Earnings (loss) per common share was computed by dividing income or loss available to common shareholders by the weighted average number of common shares outstanding during the year plus the weighted average common stock equivalents. Common stock equivalents consist of shares subject to stock options, shares potentially issuable under deferred compensation programs, and as discussed below, the Series B Preferred. For this computation, net income or loss was adjusted for the after-tax interest expense applicable to the deferred compensation programs. The Series B Preferred were considered common stock equivalents at a rate of four Series B Preferred to one common share. Because such treatment has an anti-dilutive effect on earnings per share for 1995, 1994 and 1993, these common stock equivalent shares were excluded from weighted average shares outstanding, and the dividend requirement was deducted from net income in computing earnings available to common shareholders. For the calculation of primary earnings per share, the common shares issued upon conversion of the Series B Preferred were included in weighted average shares outstanding from the conversion date, September 1, 1995. For the calculation of fully diluted earnings per share, the Series B Preferred were treated as common shares outstanding from January 1, 1995, the first day of the period of conversion. Consistent with prevalent practice at the time of issuance, the Series C Preferred were considered outstanding common stock at a rate of ten Series C Preferred to one common share for both primary and fully diluted earnings per share. If the Series C Preferred had been treated as common stock equivalents for the calculation of net income per share, the Corporation's 1995 and 1994 primary per share results would have been a loss of $.18 and $.02, respectively. Fully diluted per share results would have been a loss of $.08 for 1995 and $.02 for 1994. The weighted average number of common shares used for computing primary earnings or loss per share was 410,138,000 in 1995, 383,736,000 in 1994, and 352,902,000 in 1993. The weighted average number of common shares used for computing fully diluted earnings or loss per share was 433,191,000 in 1995, 383,790,000 in 1994, and 355,358,000 in 1993. On December 29, 1995, the Board of Directors adopted a shareholder rights plan providing for the distribution of one right for each share of common stock outstanding on January 9, 1996. The rights become exercisable only in the event, with certain exceptions, an acquiring party accumulates 15% or more of the Corporation's voting stock or a party announces an offer to acquire 30% or more of the voting stock. The rights have an exercise price of $64 per share and expire on January 9, 2006. Upon the occurrence of certain events, holders of the rights will be entitled to purchase either Westinghouse preferred shares or shares in an acquiring entity at half of market value. The Corporation is entitled to redeem the rights at a value of $.01 per right at any time until the tenth day following the acquisition of a 15% position in its voting stock. NOTE 16: STOCK OPTIONS The 1993 and 1991 Long-Term Incentive Plans provide for the granting of stock options and other performance awards to employees of the Corporation. At December 31, 1995 and 1994, approximately 11.1 million and 7.5 million shares, respectively, had been authorized for awards under the 1993 Plan. Shares available for stock options and other awards under the 1993 Plan at December 31, 1995 and 1994 totalled 3,249,228 and 3,435,107, respectively. At December 31, 1995 and 1994, a total of 16.5 million and 9 million shares, respectively, had been authorized for awards under the 1991 Plan. Shares available for stock options and other awards under the 1991 Plan at December 31, 1995 and 1994 totalled 3,407,931 and 775,671, respectively. Stock options are also outstanding under the 1984 Long-Term Incentive Plan; however, no additional grants are permitted under that plan. The option price under the Plans may not be less than the fair market value of the shares on the grant date. The options were granted for terms of 10 years or less and generally become exercisable in whole or in part after the commencement of the second year of the term. Generally, options outstanding under the 1993, 1991 and 1984 Plans, except those granted during 1995, were exercisable at December 31, 1995. Options granted during 1995 under the 1993 and 1991 Plans generally will not be exercisable until 1996. Outstanding options have expiration dates ranging from 1996 through 2005. 48 49 Of the options granted by the Corporation in 1995, 2,423,060 were performance stock options. The vesting of these options is contingent on attainment of specific performance targets. If the targets are not met, the options terminate; if they are met, the options become exercisable. One-half of these options lapsed in January 1996 because the stretch performance targets for 1995 were not met. The remaining performance options are contingent on 1996 performance. STOCK OPTION INFORMATION (shares in thousands)
1995 1994 1993 - ------------------------------------------------------------------------- Shares subject to option: Balance at January 1 20,504 16,082 11,675 Options granted 8,945 5,079 5,230 Options exercised (481) (24) (67) Options terminated (584) (633) (756) - ------------------------------------------------------------------------- Balance at December 31 28,384 20,504 16,082 - ------------------------------------------------------------------------- Weighted average option price in dollars: At January 1 $ 18.66 $ 20.70 $ 22.81 Options granted 14.17 11.89 15.90 Options exercised 11.75 10.40 12.37 Options terminated 16.15 16.59 20.84 At December 31 17.41 18.66 20.70 - -------------------------------------------------------------------------
In 1995, the shareholders approved stock options for non-employee directors. The Deferred Compensation and Stock Plan for Directors generally provides for an annual grant of 3,000 options to each non-employee director and an additional grant of 750 options to committee chairs. For each of the grants, two-thirds of the options have an exercise price equal to the fair market value of the common stock on the grant date. The remaining one-third of the options have an exercise price equal to 125% of the fair market value on the grant date. These options may be exercised by each of the directors immediately following the grant date. NOTE 17: CONTINGENT LIABILITIES AND COMMITMENTS URANIUM SETTLEMENTS In the late seventies, the Corporation provided for the estimated future costs for the resolution of all uranium supply contract suits and related litigation. The remaining uranium reserve balance includes assets required for certain settlement obligations and reserves for estimated future costs. The reserve balance at December 31, 1995, is deemed adequate considering all facts and circumstances known to management. The future obligations require providing the remainder of the fuel deliveries running through 2013. The supply of equipment and services is essentially complete. Variances from estimates which may occur are considered in determining if an adjustment of the liability is necessary. LITIGATION Steam Generators The Corporation has been defending various lawsuits brought by utilities claiming a substantial amount of damages in connection with alleged tube degradation in steam generators sold by the Corporation as components of nuclear steam supply systems. Since 1993, settlement agreements have been entered resolving seven litigation claims. These agreements generally require the Corporation to provide certain products and services at prices discounted at varying rates. Two cases were resolved in favor of the Corporation after trial or arbitration. Four steam generator lawsuits remain. The Corporation is also a party to five tolling agreements with utilities or utility plant owners' groups which have asserted steam generator claims. The tolling agreements delay initiation of any litigation for various specified periods of time and permit the parties time to engage in discussions. Securities Class Actions-Financial Services The Corporation is defending derivative and class action lawsuits alleging federal securities law and common law violations arising out of purported misstatements or omissions contained in the Corporation's public filings concerning the financial condition of the Corporation and certain of its former subsidiaries in connection with charges to earnings of $975 million in 1990 and $1,680 million in 1991 and a public offering of Westinghouse common stock in 1991. The court dismissed both the derivative claim and the class action claims in their entirety. These dismissals have been appealed. Asbestos The Corporation is a defendant in numerous lawsuits claiming various asbestos-related personal injuries, which allegedly occurred from use or inclusion of asbestos in certain of the Corporation's products, generally in the pre-1970 time period. Typically, these lawsuits are brought against multiple defendants. The Corporation was neither a manufacturer nor a producer of asbestos and is oftentimes dismissed from these lawsuits on the basis that the Corporation has no relationship to the products in question or the claimant did not have exposure to the Corporation's product. At December 31, 1995, the Corporation had approximately 75,000 claims outstanding against it. 49 50 In court actions which have been resolved, the Corporation has prevailed in the vast majority of the asbestos claims and has resolved others through settlement. Furthermore, the Corporation has brought suit against certain of its insurance carriers with respect to these asbestos claims. Under the terms of a settlement agreement resulting from this suit, carriers which have agreed to the settlement are now reimbursing the Corporation for a substantial portion of its current costs and settlements associated with asbestos claims. Litigation is inherently uncertain and always difficult to predict. Substantial damages are sought in the steam generator claims, the securities class action and certain groupings of asbestos claims and, although management believes a significant adverse judgment is unlikely, any such judgment could have a material adverse effect on the Corporation's results of operations for a quarter or a year. However, based on its understanding and evaluation of the relevant facts and circumstances, management believes that the Corporation has meritorious defenses to the litigation described above, and management believes that the litigation should not have a material adverse effect on the financial condition of the Corporation. ENVIRONMENTAL MATTERS Compliance with federal, state and local laws and regulations relating to the discharge of pollutants into the environment, the disposal of hazardous wastes, and other related activities affecting the environment have had and will continue to have an impact on the Corporation. While it is difficult to estimate the timing and ultimate costs to be incurred in the future due to uncertainties about the status of laws, regulations, technology and information available for individual sites, management has estimated the probable and reasonably possible remediation costs that could be incurred by the Corporation based on the facts and circumstances currently known. PRP Sites and Other Remedial Activities With regard to remedial actions under federal and state Superfund laws, the Corporation has been named a potentially responsible party (PRP) at numerous sites located throughout the country. At many of these sites, the Corporation is either not a responsible party or its site involvement is very limited or de minimis. However, the Corporation may have varying degrees of cleanup responsibilities at 73 sites, including 18 CBS sites. With regard to cleanup costs at these sites, in many cases the Corporation will share these costs with other responsible parties, and the Corporation believes that any liability incurred will be satisfied over a number of years. Management believes that the Corporation's total remaining probable cost for remedial actions of these sites as of December 31, 1995 is approximately $166 million, all of which has been accrued. As part of the agreements for the sale of certain of its businesses or sites, the Corporation has agreed to retain obligations for remediation of contamination existing at these sites, other Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) issues, and compliance matters. Management believes that the total cost for these obligations is approximately $28 million, all of which has been accrued. In addition, the Corporation has accrued for the estimated remediation costs associated with Discontinued Operations. Bloomington Sites The Corporation is a party to a 1985 Consent Decree relating to remediation of six sites in Bloomington, Indiana. In the Consent Decree, the Corporation agreed to construct and operate an incinerator, which would be permitted under federal and state law, to burn excavated material. On February 8, 1994, the Consent Decree parties filed with the court a status report advising of the parties' intention to investigate alternatives. The Corporation believes it is probable that the Consent Decree will be modified to an alternative remedial action, which could include a combination of containment, treatment, remediation and monitoring. The parties also recognize that the Consent Decree shall remain in full force during this process. One of the six sites covered by the Consent Decree has been remediated. The Corporation estimates that its total cost to implement the most reasonable alternative for the five remaining sites covered by the Consent Decree is approximately $61 million, all of which has been accrued. Included in this amount is approximately $43 million for site construction and other related costs valued as of the year of expenditure. The remaining $18 million is the present value, assuming a 5% discount rate, of approximately $46 million of operating and maintenance costs that will be incurred during a 30-year period. Other reasonable remediation alternatives, while considered less likely, could cause the total costs to be as much as $115 million. 50 51 Other The Corporation is involved with several administrative actions alleging violations of federal, state or local environmental regulations. For these matters, the Corporation has estimated its remaining reasonably possible costs and determined them to be immaterial. The Corporation currently manages under contract several government-owned facilities, which among other things are engaged in the remediation of hazardous and nuclear wastes. To date, under the terms of the contracts, the Corporation is not responsible for costs associated with environmental liabilities, including environmental cleanup costs, except under certain circumstances associated with the willful misconduct or lack of good faith of its managers or their failure to exercise prudent business judgment. There are currently no material claims for which the Corporation believes it is responsible. The Corporation has or will have responsibilities for environmental closure activities, such as dismantling incinerators or decommissioning nuclear licensed sites. The Corporation has estimated the total potential cost to be incurred for these actions to approximate $135 million, of which $30 million had been accrued at December 31, 1995. The Corporation's policy is to accrue these costs over the estimated life of the individual facilities, which in most cases is approximately 20 years. The anticipated annual costs currently being accrued are $6 million. Capital expenditures related to environmental compliance in 1995 and 1994 totalled $6 million and $8 million, respectively. Operating expenses which are recurring and associated with managing hazardous waste and pollutants in ongoing operations in 1995 and 1994 totalled $31 million and $23 million, respectively. Management believes, based on its best estimate, that the Corporation has adequately provided for its present environmental obligations and that complying with existing government regulations will not materially impact the Corporation's financial position, liquidity or results of operations. INSURANCE RECOVERIES Prior to 1995, the Corporation filed actions against more than 100 of its insurance carriers seeking recovery for environmental, product and property damage liabilities, and certain other matters. The Corporation has settled with the majority of these carriers and has received recoveries related to these actions. The Corporation has not accrued for any future insurance recoveries. FINANCING COMMITMENTS Continuing Operations In the ordinary course of business, standby letters of credit are issued by commercial banks on behalf of the Corporation related to performance obligations primarily under contracts with customers. The Corporation routinely enters into commitments to purchase the rights to broadcast programs, including feature films and sports events. These contracts permit the broadcast of such properties for various periods ending no later than April 2002. As of December 31, 1995, the Corporation was committed to make payments of $3,412 million under such broadcasting contracts. The Corporation's other commitments consist primarily of those for the purchase of plant and equipment totalling approximately $40 million at December 31, 1995. Discontinued Operations Financial Services commitments with off-balance-sheet credit risk represent financing commitments to provide funds, including loan or investment commitments, guarantees, standby letters of credit and standby commitments, generally in exchange for fees. The remaining commitments have fixed expiration dates from 1996 through 2002. At December 31, 1995, Financial Services commitments, consisting of guarantees, credit enhancements, other standby agreements and commitments to extend credit totalled $45 million compared to $80 million at year-end 1994. Management expects the remaining commitments to expire unfunded or be funded with the resulting assets being sold shortly after funding. The defense and electronic systems business provides guarantees to customers in the form of standby letters of credit for bids, advance payments and performance of contractual obligations. Such guarantees are supported by the Corporation's lines of credit. At December 31, 1995, approximately $202 million of guarantees were outstanding. The cost for the lines of credit that support the guarantees is inventoried if specifically related to an ongoing contract or otherwise expensed as incurred. 51 52 NOTE 18: LEASES The Corporation has commitments under operating leases for certain machinery and equipment and facilities used in various operations. Rental expense for Continuing Operations in 1995, 1994 and 1993 was $132 million, $138 million and $165 million, respectively. These amounts include immaterial amounts for contingent rentals. Rental expense included sublease income totalling $17 million, $16 million and $5 million for 1995, 1994 and 1993, respectively. MINIMUM RENTAL PAYMENTS-CONTINUING OPERATIONS (in millions)
AT DECEMBER 31 1995 - ------------------------------------ 1996 $ 138 1997 118 1998 106 1999 95 2000 97 Subsequent years 750 - ------------------------------------ Minimum rental payments $1,304 - ------------------------------------
NOTE 19: OTHER INCOME AND EXPENSES, NET OTHER INCOME AND EXPENSES, NET (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Interest on securities $ 12 $ 13 $ 18 Miscellaneous interest income 7 3 6 Gain (loss) on disposition of other assets 132 27 20 Operating results-non-consolidated affiliates 1 (4) (4) Foreign currency transaction and high-inflation translation effect (8) (6) 4 Estimated loss on disposition of non-strategic businesses (7) (17) (195) Pension settlement loss (note 4) - (308) - Other 12 4 (3) - ----------------------------------------------------------------------- Other income and expenses, net $149 $(288) $(154) - -----------------------------------------------------------------------
The gain on disposition of other assets for 1995 includes a gain of $115 million from the sale of the Corporation's 62% interest in MICROS Systems, Inc. and $13 million from the sale of an equity investment. The gain on disposition of other assets for 1994 includes a gain of $32 million from the sale of two Sacramento, California radio stations. The 1993 gain on disposition of other assets includes $21 million from the sale of an equity participavion in a production company. NOTE 20: RESTRUCTURING In recent years, the Corporation has restructured many of its businesses and its corporate headquarters in an effort to reduce its cost structure and remain competitive in its markets. Restructuring activities primarily involve the separation of employees, the closing of facilities, the termination of leases, and the exiting of product lines. Costs for restructuring activities are limited to incremental costs that directly result from the restructuring activities and that provide no future benefit to the Corporation. A summary of restructuring charges by business segment follows: RESTRUCTURING COSTS (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Broadcasting $ - $(2) $ 12 Power Systems 44 21 171 Government & Environmental Services - 4 12 Communication & Information Systems 3 - 11 Other Businesses - - 5 Corporate and Other 39 - 38 - ----------------------------------------------------------------------- Total $86 $23 $249 - -----------------------------------------------------------------------
Generally, separated employees receive benefits under the Corporation's Employee Security and Protection Plan or similar arrangement, including permanent job separation benefits, retraining, and outplacement assistance. The amount included for these benefits in the restructuring charge represents the incremental cost of such benefits over those amounts previously accrued under SFAS No. 112. Based on the Corporation's current estimates, summarized below are the restructuring costs for Continuing Operations: RESTRUCTURING COSTS BY CATEGORY OF EXPENDITURE (dollars in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Number of involuntary separations 1,091 541 2,217 - ----------------------------------------------------------------------- Employee separation costs $77 $ 39 $155 Pension curtailment costs - - 22 Asset write-downs 6 2 30 Facility closure/rationalization costs 3 - 24 Adjustments - (18) 18 - ----------------------------------------------------------------------- Total charge to operations $86 $ 23 $249 - -----------------------------------------------------------------------
Of the 3,849 employee separations over the three-year period, 90% were completed at December 31, 1995. The remaining separations are expected to be completed in early 1996. Employee separation costs generally are paid over a period of up to two years following the separation. 52 53 In connection with the acquisition of CBS, the Corporation developed a restructuring plan to integrate the operations of CBS with those of the Corporation, and eliminate duplicate facilities and functions. The cost of that plan, which is estimated to total approximately $100 million, was recorded in connection with the purchase. The following is a reconciliation of the restructuring liability for Continuing Operations: RECONCILIATION OF RESTRUCTURING LIABILITY (in millions) - --------------------------------------------------- Balance at January 1, 1993 $ - Provision for restructuring 249 Noncash expenditures (22) - --------------------------------------------------- Balance at December 31, 1993 227 - --------------------------------------------------- Provision for restructuring 23 Cash expenditures (134) Noncash expenditures (31) - --------------------------------------------------- Balance at December 31, 1994 85 - --------------------------------------------------- Provision for restructuring 86 CBS acquisition plan 100 Cash expenditures (103) Noncash expenditures (7) - --------------------------------------------------- Balance at December 31, 1995 $ 161 - ---------------------------------------------------
Additional restructuring costs totalling $49 million in 1995, $48 million in 1994, and $101 million in 1993, were included in the results of Discontinued Operations primarily for the separation of approximately 3,000 employees and the exiting of various product lines and facilities. NOTE 21: SEGMENT INFORMATION Westinghouse is a diversified, global, technology-based corporation operating in the principal business areas of television and radio broadcasting, communications, environmental services, transport refrigeration and the electric utility markets. The Corporation's continuing businesses are aligned for reporting purposes into the following six segments: Broadcasting, Power Systems, Thermo King, Government & Environmental Services, Communication & Information Systems, and Other Businesses. Results of international manufacturing entities, export sales and foreign licensee income are included in the financial information of the segment that has operating responsibility. Broadcasting provides a variety of communications services consisting primarily of commercial broadcasting, program production, and distribution. It operates the CBS Television Network, a programming provider for more than 200 affiliates. It sells advertising time to radio, television and cable advertisers through national and local sales organizations. Broadcasting currently owns and operates 15 television broadcasting stations and 39 radio stations. Broadcasting also provides programming and distribution services to the cable television industry. Group W Satellite Communications (GWSC) provides sports programming and the marketing and advertising for two country music entertainment channels. The Power Systems segment designs, develops, manufactures and services nuclear and fossil-fueled power generation systems and is a leading supplier of reload nuclear fuel to the global electric utility market. Thermo King is a leading supplier of mobile temperature control equipment for trucks, trailers and seagoing containers, as well as air conditioning for buses and rail cars. The Government & Environmental Services segment combines the Corporation's toxic, hazardous and radioactive waste services, the management and operation of several government-owned facilities and the U.S. naval nuclear reactors program. The Communication & Information Systems segment's primary businesses include long-distance telephone network management, network infrastructure development for providers of mobile satellite services and personal communications services, and residential and commercial security. The Other Businesses segment consists of businesses deemed to be non-strategic that are expected to be sold. The Corporate and Other segment includes corporate activities that are managed for the benefit of the entire Corporation. Segment sales of products and services include products that are transferred between segments, generally at inventory cost plus a margin. Segment operating profit or loss consists of sales of products and services less segment operating expenses, which include costs of products and services, marketing, administration and general expenses, depreciation and amortization, and restructuring costs. Segment operating profit for 1995, 1994, and 1993 includes special charges consisting of costs for restructuring (note 20), litigation matters, and environmental matters as follows: SPECIAL CHARGES INCLUDED IN SEGMENT OPERATING PROFIT (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ------------------------------------------------------------------------ Broadcasting $ - $(2) $ 12 Power Systems 280 21 296 Thermo King - - - Government & Environmental Services - 4 32 Communication & Information Systems 3 - 11 Other Businesses - - 5 Corporate and Other 39 - 98 - ------------------------------------------------------------------------ Total $322 $23 $454 - ------------------------------------------------------------------------
53 54 SALES OF PRODUCTS AND SERVICES AND SEGMENT OPERATING PROFIT FROM CONTINUING OPERATIONS (in millions)
Sales of Products and Services Segment Operating Profit (Loss) - ----------------------------------------------------------------------------------------------------- Year ended December 31 1995 1994 1993 1995 1994 1993 - ----------------------------------------------------------------------------------------------------- Broadcasting $1,108 $ 742 $ 705 $ 212 $ 197 $ 139 Power Systems 3,000 2,930 3,083 (207) 165 (39) Thermo King 1,065 877 719 176 135 113 Government & Environmental Services 446 457 417 24 58 28 Communication & Information Systems 361 312 279 (1) 7 (3) Other Businesses 305 524 533 9 2 (38) Corporate and Other 90 153 155 (169) (159) (234) Intersegment Sales (79) (106) (112) - - - - ----------------------------------------------------------------------------------------------------- Total $6,296 $5,889 $5,779 $ 44 $ 405 $ (34) - -----------------------------------------------------------------------------------------------------
OTHER FINANCIAL INFORMATION (in millions)
Identifiable Assets Depreciation and Amortization Capital Expenditures - ----------------------------------------------------------------------------------------------------------------------- AT AND FOR THE YEAR ENDED DECEMBER 31 1995 1994 1993 1995 1994 1993 1995 1994 1993 - ----------------------------------------------------------------------------------------------------------------------- Broadcasting $ 8,889 $ 794 $ 789 $ 57 $ 31 $ 32 $ 32 $ 35 $ 22 Power Systems 2,120 2,136 1,985 93 95 96 101 87 80 Thermo King 379 351 297 15 13 12 23 19 15 Government & Environmental Services 393 535 519 17 25 20 35 23 33 Communication & Information Systems 300 258 253 11 10 11 5 5 3 Other Businesses 73 383 390 6 11 14 2 2 12 Corporate and Other 3,156 3,008 3,485 19 29 27 18 20 16 - ----------------------------------------------------------------------------------------------------------------------- Continuing Operations 15,310 7,465 7,718 218 214 212 216 191 181 - ----------------------------------------------------------------------------------------------------------------------- Discontinued Operations 3,304 4,373 6,803 99 106 99 74 68 91 - ----------------------------------------------------------------------------------------------------------------------- Total $18,614 $11,838 $14,521 $317 $320 $311 $290 $259 $272 - -----------------------------------------------------------------------------------------------------------------------
Assets not identified to segments in the table above principally include cash and marketable securities, deferred income taxes, prepaid pension cost, and the intangible pension asset. Included in income from Continuing Operations is income of subsidiaries located outside the United States. These subsidiaries reported income of $81 million in 1995, $15 million in 1994, and a loss of $1 million in 1993. Subsidiaries located outside the United States comprised 5% of total assets of Continuing Operations in 1995, 11% in 1994, and 10% in 1993. Subsidiaries located outside the United States comprised 2% of total liabilities of Continuing Operations in 1995 and 5% in 1994 and 1993. The increase in assets and liabilities of Continwing Operations in 1995 reflects the acquisition of CBS. FINANCIAL INFORMATION BY GEOGRAPHIC AREA (in millions)
AT AND FOR THE YEAR ENDED DECEMBER 31 1995 1994 1993 - ----------------------------------------------------------------------- Sales of products and services from Continuing Operations: U.S. $ 5,364 $5,068 $4,940 Outside the U.S. 932 821 839 - ----------------------------------------------------------------------- Sales of products and services $ 6,296 $5,889 $5,779 - ----------------------------------------------------------------------- Operating profit (loss) from Continuing Operations: U.S. $ (72) $ 355 $ (43) Outside the U.S. 116 50 9 - ----------------------------------------------------------------------- Operating profit (loss) $ 44 $ 405 $ (34) - ----------------------------------------------------------------------- Segment identifiable assets of Continuing Operations: U.S. $14,475 $6,655 $6,922 Outside the U.S. 835 810 796 - ----------------------------------------------------------------------- Segment identifiable assets $15,310 $7,465 $7,718 - -----------------------------------------------------------------------
54 55 The Corporation sells products manufactured domestically to customers throughout the world using domestic divisions and subsidiaries doing business primarily outside the United States. Generally, products manufactured outside the United States are sold outside the United States. SALES FROM PRODUCTS AND SERVICES SOLD OUTSIDE THE U.S. FROM CONTINUING OPERATIONS (in millions)
YEAR ENDED December 31 1995 1994 1993 - ------------------------------------------------------------------------------- % of % of % of Amount Sales Amount Sales Amount Sales - -------------------------------------------------------------------------------- Subsidiaries outside the U.S.: Europe, Africa, Middle East $ 585 9.3% $ 493 8.4% $537 9.3% Canada 256 4.1% 234 4.0% 240 4.2% All other 91 1.4% 94 1.5% 62 1.0% - ------------------------------------------------------------------------------- Total $ 932 14.8% $ 821 13.9% $839 14.5% - ------------------------------------------------------------------------------- U.S. exports: Europe, Africa, Middle East $ 331 5.3% $ 414 7.0% $299 5.2% Asia-Pacific 806 12.8% 508 8.6% 317 5.5% All other 174 2.7% 218 3.7% 357 6.1% - ------------------------------------------------------------------------------- Total $1,311 20.8% $1,140 19.3% $973 16.8% - -------------------------------------------------------------------------------
Purchases by the U.S. Government and its agencies accounted for 6% of sales of products and services from Continuing Operations for the years 1993 through 1995. Sales to the utility segment accounted for 32% of sales of products and services from Continuing Operations during 1995, 36% in 1994, and 37% in 1993. No one customer made purchases totalling 10% or more of sales of products and services. RESEARCH AND DEVELOPMENT FROM CONTINUING OPERATIONS (in millions)
YEAR ENDED DECEMBER 31 1995 1994 1993 - ---------------------------------------------------------------------- Westinghouse-sponsored: Power Systems $ 40 $ 66 $ 59 Other 14 22 31 Customer-sponsored: Power Systems 66 47 52 Other 46 52 50 - ---------------------------------------------------------------------- Total research and development expenditures $166 $187 $192 - ----------------------------------------------------------------------
NOTE 22: FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of financial instruments has been determined by the Corporation using the best available market information and appropriate valuation methodologies. However, considerable judgment is necessary in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Corporation could realize in a current market exchange or the value that ultimately will be realized by the Corporation upon maturity or disposition. Additionally, because of the variety of valuation techniques permitted under SFAS No. 107, "Disclosures about Fair Values of Financial Instruments," comparability of fair values among entities may not be meaningful. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. FAIR VALUE OF FINANCIAL INSTRUMENTS- CONTINUING OPERATIONS (in millions)
AT DECEMBER 31 1995 1994 - -------------------------------------------------------------------------------- Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value - -------------------------------------------------------------------------------- ASSETS: Cash and cash equivalents $ 213 $ 213 $ 329 $ 329 Investments in marketable securities 55 55 - - Noncurrent customer and other receivables 172 161 115 102 LIABILITIES: Short-term debt 309 309 634 634 Current maturities of long-term debt 330 330 7 7 Long-term debt 7,226 7,239 1,865 1,701 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS-GAINS (LOSSES): Interest rate swap agreements - (14) - (4) Foreign currency exchange contracts - 4 - (6) - -------------------------------------------------------------------------------
55 56 FAIR VALUE OF FINANCIAL INSTRUMENTS- DISCONTINUED OPERATIONS (in millions)
AT DECEMBER 31 1995 1994 - -------------------------------------------------------------------------------- Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value - -------------------------------------------------------------------------------- ASSETS: Cash and cash equivalents $ 13 $ 13 $ 15 $ 15 Noncurrent customer and other receivables 98 97 122 121 Portfolio investments: Real estate 35 16 297 326 Corporate 1 (1) 9 1 LIABILITIES: Short-term debt 81 81 402 402 Current maturities of long-term debt 265 341 240 238 Long-term debt 157 164 589 660 OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS-GAINS (LOSSES): Interest rate and currency exchange agreements: Unrealized gains - 72 - 82 Unrealized losses - - - (5) Financing commitments - - - - - -------------------------------------------------------------------------------
The following methods and assumptions were used to estimate the fair value of financial instruments for which it was practicable to estimate that value. Cash and cash equivalents The carrying amount for cash and cash equivalents approximates fair value. Investments in marketable securities The fair value of investments in marketable securities is based on quoted market prices. Noncurrent customer and other receivables The fair value of noncurrent customer and other receivables is estimated by discounting the expected future cash flows at interest rates commensurate with the creditworthiness of the customers and other third parties. Portfolio investments At December 31, 1995 and 1994, the fair value of portfolio investments was determined using financial information prepared by independent third parties, discounted cash flow projections, financial statements for investee companies and letters of intent or other asset sale agreements. Short-term debt The carrying amount of the Corporation's borrowings under credit facilities and other arrangements approximate fair value. Long-term debt The fair value of long-term debt has been estimated using quoted market prices or discounted cash flow methods based on the Corporation's current borrowing rates for similar types of borrowing arrangements with comparable terms and maturities. Interest rate and currency exchange agreements The fair value of interest rate and currency exchange agreements is the amount that the Corporation would receive or pay to terminate the agreements, based on quoted market prices or discounted cash flow methods, considering current interest rates, currency exchange rates and remaining maturities. Financing commitments Most of the unfunded commitments relate to, and are inseparable from, specific portfolio investments. When establishing the fair value for those portfolio investments, consideration was given to the related financing commitments. Foreign currency exchange contracts The fair value of foreign exchange contracts is based on quoted market prices to terminate the contracts. 56 57 QUARTERLY FINANCIAL INFORMATION (Unaudited, in millions except per share amounts)
1995 Quarter Ended 1994 Quarter Ended - ------------------------------------------------------------------------------------------------------ Dec. 31 Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30 March 31 - ------------------------------------------------------------------------------------------------------ Sales of products and services $ 2,093 $ 1,378 $ 1,531 $ 1,294 $ 1,752 $ 1,469 $ 1,475 $ 1,193 Gross profit 639 382 443 352 562 374 398 278 Income (loss) from Continuing Operations (78) 22 23 (11) (118) 46 41 18 Income (loss) from Discontinued Operations 71 (74) 36 26 11 27 34 18 Net income (loss) (7) (52) 59 15 (107) 73 75 36 Primary earnings (loss) per common share: Continuing Operations (.18) .03 .03 (.06) (.33) .08 .07 .02 Discontinued Operations .16 (.18) .09 .07 .03 .07 .09 .05 Earnings (loss) per common share (.02) (.15) .12 .01 (.30) .15 .16 .07 Fully diluted earnings (loss) per common share: Continuing Operations (.18) .05 .03 (.06) (.33) .08 .07 .02 Discontinued Operations .16 (.17) .09 .07 .03 .07 .09 .05 Earnings (loss) per common share (.02) (.12) .12 .01 (.30) .15 .16 .07 Dividends paid .05 .05 .05 .05 .05 .05 .05 .05 New York Stock Exchange market price per share: High 17-7/8 15-1/2 16-3/8 16 14-5/8 14-3/8 13-1/4 15-1/4 Low 13-3/8 12-5/8 13-7/8 12-1/8 11-3/4 11-1/2 10-7/8 11-1/2 - ------------------------------------------------------------------------------------------------------
57 58 FIVE-YEAR SUMMARY SELECTED FINANCIAL AND STATISTICAL DATA (Unaudited, in millions except per share amounts)
1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------ Sales of products and services $ 6,296 $ 5,889 $ 5,779 $ 5,800 $ 5,681 Other income and expenses, net 149 (288) (154) (37) (6) Interest expense (233) (134) (165) (169) (176) Income (loss) from Continuing Operations before income taxes and minority interest (40) (17) (353) 275 193 Income taxes 7 13 116 (84) (50) Income (loss) from Continuing Operations (44) (13) (246) 186 141 Income (loss) from Discontinued Operations 59 90 (24) (1,242) (1,227) Cumulative effect of changes in accounting principles - - (56) (338) - Net income (loss) 15 77 (326) (1,394) (1,086) - ------------------------------------------------------------------------------------------------------------------------------ Primary earnings (loss) per common share: Continuing Operations $ (.19) $ (.16) $ (.84) $ .46 $ .45 Discontinued Operations .14 .23 (.07) (3.59) (3.91) Cumulative effect of changes in accounting principles - - (.16) (.98) - Earnings (loss) per common share (.05) .07 (1.07) (4.11) (3.46) Fully diluted earnings (loss) per common share: Continuing Operations $ (.10) $ (.16) $ (.84) $ .46 $ .45 Discontinued Operations .13 .23 (.07) (3.59) (3.91) Cumulative effect of changes in accounting principles - - (.16) (.98) - Earnings (loss) per common share .03 .07 (1.07) (4.11) (3.46) Dividends per common share .20 .20 .40 .72 1.40 - ------------------------------------------------------------------------------------------------------------------------------ Total assets-Continuing Operations $ 15,310 $ 7,465 $ 7,718 $ 6,864 $ 6,298 Total assets-Discontinued Operations 3,304 4,373 6,803 11,061 13,620 Total assets 18,614 11,838 14,521 17,925 19,918 Long-term debt-Continuing Operations 7,226 1,865 1,870 1,316 1,252 Long-term debt-Discontinued Operations 157 589 662 1,627 2,482 Total debt-Continuing Operations 7,865 2,506 2,509 2,803 3,807 Total debt-Discontinued Operations 503 1,231 3,841 7,130 7,349 Shareholders' equity 1,508 1,815 1,062 2,235 3,748 - ------------------------------------------------------------------------------------------------------------------------------ Average common and common equivalent shares outstanding 410,137,941 383,736,249 352,901,670 346,103,408 313,984,242 Market price range per share $17-7/8-12-1/8 $15-1/4-10-7/8 $17-1/8-12-3/4 $20-7/8-9-3/4 $ 31-13-3/4 Market price at year end 16-3/8 12-1/4 14-1/8 13-3/8 18 Common shareholders at year end 125,962 125,376 125,806 127,559 120,833 Average number of employees 77,813 84,399 103,063 109,050 113,664 - ------------------------------------------------------------------------------------------------------------------------------
Previously reported amounts have been restated to segregate the results of Discontinued Operations from Continuing Operations. 58 59 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Part of the information concerning executive officers required by this item is set forth in Part I pursuant to General Instruction G to Form 10-K and part is incorporated herein by reference to "Security Ownership" in the Proxy Statement. The information as to directors is incorporated herein by reference to "Election of Directors" in the Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item is incorporated herein by reference to "Executive Compensation" in the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is incorporated herein by reference to "Security Ownership" in the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is incorporated herein by reference to "Transactions Involving Directors and Executive Officers" in the Proxy Statement. 59 60 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) FINANCIAL STATEMENTS The financial statements required by this item are listed under Part II, Item 8, which list is incorporated herein by reference. (a)(2) FINANCIAL STATEMENT SCHEDULES The following financial statement schedule for Westinghouse Electric Corporation and the Report of Independent Accountants thereon are included in Part IV of this report:
PAGE ---- Report of Independent Accountants on Financial Statement Schedules 63 For the three years ended December 31, 1995: Schedule VIII -- Valuation and Qualifying Accounts 64
Other schedules are omitted because they are not applicable or because the required information is included in the financial statements or notes thereto. (A) EXHIBITS (3) ARTICLES OF INCORPORATION AND BYLAWS (a) The Restated Articles of the Company as amended to January 8, 1996. (b) Amendments to Restated Articles (c) The Bylaws of the Company, as amended to December 28, 1995. (d) Amendments to Bylaws (4) RIGHTS OF SECURITY HOLDERS Except as set forth below, there are no instruments with respect to long-term debt of the Company that involve securities authorized thereunder exceeding 10% of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to provide to the Securities and Exchange Commission, upon request, a copy of instruments defining the rights of holders of long-term debt of the Company and its subsidiaries. (a) Form of Senior Indenture, dated as of November 1, 1990, between the Company and Citibank, N.A. is incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement No. 33-41417. (b) Rights Agreement is incorporated herein by reference to Exhibit 1 to Form 8-A filed with the Securities and Exchange Commission on January 9, 1996. 60 61 (10) MATERIAL CONTRACTS (a*) The Annual Performance Plan is incorporated herein by reference to Exhibit 10(a) to Form 10-K/A for the year ended December 31, 1992. (b*) The 1993 Long-Term Incentive Plan, as amended to February 28, 1996. (c*) The 1984 Long-Term Incentive Plan, as amended to February 28, 1996. (d*) The Westinghouse Executive Pension Plan, as amended, is incorporated herein by reference to Exhibit 10(d) to Form 10-K for the year ended December 31, 1994. (e*) The Deferred Compensation and Stock Plan for Directors, as amended, is incorporated herein by reference to Exhibit 10(e) to Form 10-Q for the quarter ended March 31, 1995. (f*) The Advisory Director's Plan, as amended to April 26, 1989. (g) The Director's Charitable Giving Program is incorporated herein by reference to Exhibit 10(g) to Form 10-K for the year ended December 31, 1994. (h*) The 1991 Long-Term Incentive Plan, as amended to February 28, 1996. (i*) Employment Agreement between the Company and Michael H. Jordan is hereby incorporated by reference to Exhibit 10 to the Company's Form 8-K, dated September 1, 1993. (j*) Employment Agreement between the Company and Fredric G. Reynolds is incorporated herein by reference to Exhibit 10(j) to Form 10-K for the year ended December 31, 1994. (k) $7.5 billion Credit Agreement among Westinghouse Electric Corporation, the Lenders, Morgan Guaranty Trust Company of New York, and Chemical Bank, dated September 12, 1995, is incorporated herein by reference to Exhibit 10(n) to Form 10-Q for the quarter ended September 30, 1995. * Identifies management contract or compensatory plan or arrangement. (11) Computation of Per Share Earnings (12)(a) Computation of Ratio of Earnings to Fixed Charges (12)(b) Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends (21) Subsidiaries of the Registrant (23) Consent of Independent Accountants (24) Powers of Attorney and Extract of Resolution of Board of Directors (27) Financial Data Schedule 61 62 (b) REPORTS ON FORM 8-K: A Current Report on Form 8-K (Items 5 and 7) dated November 24, 1995 to report a press release announcing the completion of the acquisition of CBS Inc. A Current Report on Form 8-K (Items 5 and 7) dated December 29, 1995 to report a press release announcing the adoption of a shareholder rights plan. A Current Report on Form 8-K (Item 7) dated January 9, 1996 filing a Rights Agreement by and between Westinghouse Electric Corporation and First Chicago Trust Company of New York dated December 28, 1995. A Current Report on Form 8-K/A (Item 7) dated February 6, 1996, amending Item 7(b) of the Current Report on Form 8-K filed November 24, 1995. A Current Report on Form 8-K (Items 5 and 7) dated February 8, 1996, filing financial information for the redefined reporting segments of the Company. 62 63 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES To the Board of Directors of Westinghouse Electric Corporation Our audits of the consolidated financial statements referred to in our report dated February 12, 1996 appearing on page 30 of this Form 10-K of Westinghouse Electric Corporation (which report and consolidated financial statements are included in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /s/ PRICE WATERHOUSE LLP Price Waterhouse LLP 600 Grant Street Pittsburgh, Pennsylvania 15219-9954 February 12, 1996 63 64 SCHEDULE VIII VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31 ------------------------------- 1995 1994 1993 (IN MILLIONS) ---- ---- ---- Customer receivables from Continuing Operations -- allowance for doubtful accounts: Balance at beginning of year.................... $ 52 $ 50 $ 44 Charged to costs and expenses................... 13 11 11 Charged to the allowance........................ (31) (9) (5) Other........................................... 5 - - ---- ---- ---- Balance at end of year (a)................... $ 39 $ 52 $ 50 ==== ==== ==== Deferred income taxes -- valuation allowance: Balance at beginning of year.................... $101 $ 90 $ 94 Charged (credited) to costs and expenses........ (3) 11 (4) ---- ---- ---- Balance at end of year....................... $ 98 $101 $ 90 ==== ==== ==== (a) At December 31, 1995, 1994 and 1993, all amounts were classified as current.
64 65 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 13th day of March, 1996. WESTINGHOUSE ELECTRIC CORPORATION /s/ FREDRIC G. REYNOLDS By:-------------------------------- Fredric G. Reynolds Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature and Title ------------------- Frank C. Carlucci, Director Robert E. Cawthorn, Director Gary M. Clark, President and Director George H. Conrades, Director William H. Gray, III, Director Michael H. Jordan, Chairman and Chief Executive Officer (principal executive officer) and Director Dr. David K.P. Li, Director David T. McLaughlin, Director Richard M. Morrow, Director By: /s/ FREDRIC G. REYNOLDS Richard R. Pivirotto, Director ------------------------- Dr. Paula Stern, Director Fredric G. Reynolds Fredric G. Reynolds, Executive Vice President Attorney-In-Fact and Chief Financial Officer March 13, 1996 (principal financial officer) Robert D. Walter, Director Original powers of attorney authorizing Michael H. Jordan and Fredric G. Reynolds, individually, to sign this report on behalf of the listed directors and officers of the Company and a certified copy of a resolution of the Board of Directors of the Company authorizing each of said persons to sign on behalf of the Company have been filed with the Securities and Exchange Commission and are included as Exhibit 24 to this report. 65 66 EXHIBITS INDEX (3) ARTICLES OF INCORPORATION AND BYLAWS (a) The Restated Articles of the Company as amended to January 8, 1996. (b) Amendments to Restated Articles (c) The Bylaws of the Company, as amended to December 28, 1995. (d) Amendments to Bylaws (4) RIGHTS OF SECURITY HOLDERS Except as set forth below, there are no instruments with respect to long-term debt of the Company that involve securities authorized thereunder exceeding 10% of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to provide to the Securities and Exchange Commission, upon request, a copy of instruments defining the rights of holders of long-term debt of the Company and its subsidiaries. *(a) Form of Senior Indenture, dated as of November 1, 1990, between the Company and Citibank, N.A. is incorporated herein by reference to Exhibit 4.1 to the Company's Registration Statement No. 33-41417. *(b) Rights Agreement is incorporated herein by reference to Exhibit 1 to Form 8-A filed with the Securities and Exchange Commission on January 9, 1996. (10) MATERIAL CONTRACTS *(a) The Annual Performance Plan is incorporated herein by reference to Exhibit 10(a) to Form 10-K/A for the year ended December 31, 1992. (b) The 1993 Long-Term Incentive Plan, as amended to February 28, 1996. (c) The 1984 Long-Term Incentive Plan, as amended to February 28, 1996. *(d) The Westinghouse Executive Pension Plan, as amended, is incorporated herein by reference to Exhibit 10(d) to Form 10-K for the year ended December 31, 1994. *(e) The Deferred Compensation and Stock Plan for Directors, as amended, is incorporated herein by reference to Exhibit 10(e) to Form 10-Q for the quarter ended March 31, 1995. *(f) The Advisory Director's Plan, as amended to April 26, 1989. *(g) The Director's Charitable Giving Program is incorporated herein by reference to Exhibit 10(g) to Form 10-K for the year ended December 31, 1994. (h) The 1991 Long-Term Incentive Plan, as amended to February 28, 1996. *(i) Employment Agreement between the Company and Michael H. Jordan is hereby incorporated by reference to Exhibit 10 to the Company's Form 8-K, dated September 1, 1993. *(j) Employment Agreement between the Company and Fredric G. Reynolds is incorporated herein by reference to Exhibit 10(j) to Form 10-K for the year ended December 31, 1994. *(k) $7.5 billion Credit Agreement among Westinghouse Electric Corporation, the Lenders, Morgan Guaranty Trust Company of New York, and Chemical Bank, dated September 12, 1995, is incorporated herein by reference to Exhibit 10(n) to Form 10-Q for the quarter ended September 30, 1995. (11) Computation of Per Share Earnings (12)(a) Computation of Ratio of Earnings to Fixed Charges (12)(b) Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends (21) Subsidiaries of the Registrant (23) Consent of Independent Accountants (24) Powers of Attorney and Extract of Resolution of Board of Directors (27) Financial Data Schedule * Incorporated by reference 66 EX-3.A 2 WESTINGHOUSE ELEC. 1 Exhibit 3(a) RESTATED ARTICLES OF WESTINGHOUSE ELECTRIC CORPORATION (As amended to January 8, 1996) FIRST: The name of the corporation (hereinafter called the "Company") is WESTINGHOUSE ELECTRIC CORPORATION. SECOND: The location and post office address of the current registered office of the Company in the Commonwealth of Pennsylvania is Westinghouse Building, Gateway Center, Pittsburgh, Allegheny County, Pennsylvania 15222. THIRD: The Company is subject to the Act of the General Assembly of the Commonwealth of Pennsylvania, known as the "Business Corporation Law," approved May 5, 1933, and any act amendatory thereof, supplementary thereto or substituted therefor, and the purposes for which the Company is organized are: (1) To develop, build, manufacture, process and otherwise produce, to purchase, lease, exchange and otherwise acquire, and to hold, own, use, operate, repair, sell, lease, assign, distribute and otherwise deal in and dispose of structures, machinery, equipment, apparatus, appliances, devices, products, materials, articles, processes and systems for any application or purpose, whether for use for industrial, utility, transportation, broadcasting, communication, home, defense, consumer or other purposes or applications, or combinations thereof, whatsoever, including but not limited to the following: for the generation, conversion, transmission, utilization, storage and control of any form of energy whatsoever (including but not limited to electrical, mechanical, chemical, atomic, nuclear, steam, thermal, mineral, gas, water and solar); for the handling, conditioning, heating, cooling, treatment, application or use of air and other gases, liquids and solids; for aerial, nautical, terrestrial, spatial or celestial operations, applications or navigation; for radio, television and all other forms of transmission, reception or communication; and for incorporation into or use in, on or about any establishment, building or structure of any kind or nature whatsoever; and any and all related engines, turbines, motors, parts, tools, accessories and improvements thereof and supplies or materials pertaining or incidental to any of the above structures, machinery, equipment, apparatus, appliances, devices, products, materials, articles, processes and systems, of any kind or nature whatsoever. LAW2:7499 -1- 2 (2) To develop, build, manufacture, process and otherwise produce, to purchase, lease, exchange and otherwise acquire, and to hold, own, use, operate, repair, sell, lease, assign, distribute and otherwise deal in and dispose of structures, machinery, equipment, apparatus, appliances, devices, products, materials, articles, processes, systems, goods, wares and merchandise of every kind, nature and description, and to engage in any industrial, manufacturing, mining, mercantile, broadcasting, trading or other lawful business of any kind or character whatsoever. (3) To conduct and carry on research work in, and to engage in any activity pertaining or incidental to, any scientific, technical or other field or fields, and to render services of a scientific, technical or other nature to any person, association, firm, corporation, country, state, municipality or other governmental division or subdivision. (4) To purchase, lease, exchange and otherwise acquire all, or any part of, or any interest in, the properties, assets, business and goodwill of any one or more persons, associations, firms or corporations; to pay for the same in cash, property or its own or other securities; to hold, own, use, operate, reorganize and otherwise manage such properties, assets, business and goodwill; to sell, lease, assign, distribute, liquidate and otherwise deal in and dispose of the whole or any part thereof; and in connection therewith, to assume or guarantee performance of any liabilities, obligations or contracts of such persons, associations, firms or corporations. (5) To develop, apply for, register, take licenses in respect of, purchase, lease, exchange and otherwise acquire, and to hold, own, use, operate, sell, lease, assign, grant licenses in respect of, manufacture under, exercise and otherwise deal in and dispose of any and all inventions, devices, formulae, technical or business information, including trade secrets, know-how, processes, improvements and modifications thereof, letters patent and all rights connected therewith or appertaining thereto, copyrights, trademarks, trade names, trade symbols and other indications of origin and ownership, franchises, licenses, concessions or other rights granted by or recognized under the laws of any country, state, municipality or other governmental division or subdivision. (6) To purchase, exchange and otherwise acquire, and to hold, own, sell, assign, transfer, reissue, cancel and otherwise deal in and dispose of its own shares and securities, to such extent and in such manner and upon such terms as it may determine; provided that the Company shall not use its funds or property for the purchase of its own shares when such purchase shall be prohibited by law; and LAW2:7499 -2- 3 provided that shares of its capital stock which belong to the Company shall not be voted directly or indirectly. (7) To enter into, make, perform and carry out contracts and agreements of every kind and description which may be necessary, appropriate, convenient or advisable in carrying out the purposes of the Company, with any person, association, firm, corporation, country, state, municipality or other governmental division or subdivision. (8) To carry out any of or all the foregoing purposes as principal or agent and alone or with associates; and to execute from time to time such general or special powers of attorney to such person or persons as it may determine, granting to such person or persons such powers as it may deem proper, and to revoke such powers of attorney as and when it may desire; and to conduct its business in any and all of its branches at one or more offices in the Commonwealth of Pennsylvania and elsewhere. (9) To do everything necessary, suitable, convenient or proper for, or in connection with, or incident to, the accomplishment of any of the purposes herein enumerated, or which shall at any time appear conducive to or expedient for the accomplishment of any of such purposes, not inconsistent with the laws of the Commonwealth of Pennsylvania. Except as otherwise expressly provided in this Article THIRD, none of the purposes set forth above in this Article THIRD shall be in any way limited or restricted by reference to, or inference from, any other of the purposes therein set forth, and each of said purposes shall be regarded as a separate and independent purpose. The purposes set forth above shall be construed as powers as well as purposes; but the enumeration herein of certain powers is not intended to be exclusive of, or a waiver of, but shall be in addition to, the powers, rights or privileges granted or conferred by said "Business Corporation Law" and any other laws of the Commonwealth of Pennsylvania applicable to the Company that may now or hereafter be in force. Without limiting the generality of the foregoing, the Company shall have and may exercise the general powers which are now or may hereafter be enumerated in Section 302 of said "Business Corporation Law," or any act amendatory thereof, supplemental thereto or substituted therefor, to the same extent as if such powers were set forth in full herein. Except as otherwise provided by law or these Restated Articles of Incorporation or the By-laws, the powers of the Company shall be exercised by its Board of Directors. Nothing herein contained shall authorize or be construed as intended to authorize the Company to carry on any business or exercise any powers in any commonwealth, state, territory, or country which a business corporation organized under the laws of such commonwealth, state, territory or country could not carry on or exercise, except to the extent permitted or authorized by the laws of such commonwealth, state, territory or LAW2:7499 -3- 4 country; and notwithstanding any provision herein, the Company shall not be deemed to have the power to carry on or exercise within the Commonwealth of Pennsylvania any business whatsoever the carrying on or exercising of which would prevent the Company from being classified as a business corporation under said "Business Corporation Law," or any act amendatory thereof, supplemental thereto or substituted therefor. FOURTH: The term of existence of Company shall be perpetual. FIFTH: A. The total number of shares of all classes of stock which the Company shall have authority to issue is 655 million consisting of (1) 25 million shares of Preferred Stock, par value $1.00 per share ("Preferred Stock"), and (2) 630 million shares of Common Stock, par value $1.00 per share ("Common Stock"). B. The Board of Directors is hereby expressly authorized to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock. Before any share of any such series is issued, the Board shall fix, and hereby is expressly empowered to fix, the following provisions of the shares thereof: (1) the terms of such series, the number of shares to constitute such series and the stated value thereof if different from the par value thereof; (2) whether the shares of such series shall have voting rights in addition to any voting rights provided by law and, if so, the terms of such voting rights, which may be general or limited; (3) the dividends, if any, payable on such series, whether any such dividends shall be cumulative and, if so, from what dates, the conditions and dates upon which such dividends shall be payable, the preference or relation which such dividends shall bear to the dividends payable on any shares of stock of any other class or any other series of Preferred Stock; (4) whether the shares of such series shall be subject to redemption at the election of the Company or the holders of such series and, if so, the times, prices and other conditions of such redemption; (5) the amount or amounts payable upon shares of such series upon, and the rights of the holders of such series in the event of, voluntary or involuntary liquidation, dissolution or winding up, or upon any distribution of the assets of the Company; (6) whether the shares of such series shall be subject to the operation of a retirement or sinking fund and, if so, the extent to and manner in which any such retirement or sinking fund shall be applied to the purchase or redemption of the shares of such series for retirement or other LAW2:7499 -4- 5 corporate purposes and the terms and provisions relative to the operation thereof; (7) whether the shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or any other series of Preferred Stock or any other securities and, if so, the price or prices or the rate or rates of conversion or exchange and the method, if any, of adjusting the same, and any other terms and conditions of conversion or exchange; (8) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or the making of other distributions on, or upon the purchase, redemption or other acquisition by the Company of, the Common Stock or shares of stock of any other class or any other series of Preferred Stock; (9) the conditions or restrictions, if any, upon the creation of indebtedness of the Company or upon the issue of any additional stock, including additional shares of any other series of Preferred Stock or of any other class of stock; and (10) any other powers, preferences and relative, participating, optional and other special rights, and any qualifications, limitations and restrictions thereof. C. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series of Preferred Stock at any time outstanding. All shares of any one series of Preferred Stock shall be identical in all respects with all other shares of such series, except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative. D. Subject to the provisions of this Article FIFTH and actions taken by the Board of Directors pursuant to this Article FIFTH: (1) such dividends (whether in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time in accordance with the laws of the Commonwealth of Pennsylvania; and the holders of the Preferred Stock shall not be entitled to participate in any such dividends whether payable in cash, stock or otherwise; (2) voting power shall be exclusively vested in the Common Stock; (3) dividends upon shares of any class of the Company shall be payable only out of assets legally available for the payment of such dividends, and the rights of the holders of the Preferred Stock of all series and of the holders of the Common Stock in respect of dividends shall at all times LAW2:7499 -5- 6 be subject to the power of the Board of Directors, which is hereby expressly vested in said Board, from time to time to set aside such reserves and to make such other provisions, if any, as said Board shall deem to be necessary or advisable for working capital, for additions, improvements and betterments to plant and equipment, for expansion of the Company's business (including the acquisition of real and personal property for that purpose), for plans for maintaining employment at the plants of the Company and also for other plans for the benefit of employees generally, and for any other purposes of the Company whether or not similar to those herein mentioned; (4) holders of Preferred Stock and holders of Common Stock shall not have any preemptive, preferential or other right to subscribe for or purchase or acquire any shares of any class or any other securities of the Company, whether now or hereafter authorized, and whether or not convertible into, or evidencing or carrying the right to purchase, shares of any class or any other securities now or hereafter authorized, and whether the same shall be issued for cash, services or property, or by way of dividend or otherwise, other than such right, if any, as the Board of Directors in its discretion from time to time may determine. If the Board of Directors shall offer to the holders of the Preferred Stock or the holders of the Common Stock, or any of them, any such shares or other securities of the Company, such offer shall not in any way constitute a waiver or release of the right of the Board of Directors subsequently to dispose of other portions of said shares or securities without so offering the same to said holders. (5) the shares of Preferred Stock and the shares of Common Stock may be issued for such consideration and for such corporate purposes as the Board of Directors may from time to time determine; (6) subject to the provisions of the By-laws of the Company as from time to time amended, with respect to the closing of the transfer books or the fixing of a record date for the determination of shareholders entitled to vote, each holder of record of shares of any class of the Company shall be entitled to one vote, on each matter submitted to a vote at a meeting of shareholders and in respect of which shares of such class shall be entitled to be voted, for every share of such class standing in his name on the books of the Company; (7) in each election of directors no shareholder shall have any right to cumulate his votes and cast them for one candidate or distribute them among two or more candidates. E. 1. DESIGNATION AND AMOUNT. The shares of this series shall be designated as "Series A Participating Preferred Stock" (the "Series A Preferred Stock"). The par value of each share of Series A Preferred Stock shall be $1.00. The number of LAW2:7499 -6- 7 shares constituting the Series A Preferred Stock initially shall be 5,000,000; provided, however, that, if more than a total of 5,000,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of December 28, 1995, between the Company and First Chicago Trust Company of New York, as Rights Agent (as such agreement may be amended from time to time, the "Rights Agreement"), the Board of Directors of the Company, pursuant to Section 1914(c) and/or Section 1522(b) of the Pennsylvania Business Corporation Law of 1988, as amended (the "Pennsylvania BCL"), and in accordance with the provisions of Article FIFTH of the Restated Articles of Incorporation, shall adopt a resolution or resolutions increasing the previously determined total number of shares of Series A Preferred Stock authorized to be issued (to the extent that the Restated Articles of Incorporation then permit) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights and directing that a statement or articles of amendment with respect to such increase in authorized shares for the Series A Preferred Stock be executed and filed with the Department of State of the Commonwealth of Pennsylvania. 2. DIVIDENDS AND DISTRIBUTIONS. (a) Subject to the provisions for adjustment hereinafter set forth, the holders of outstanding shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, (i) a cash dividend in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate per share amount of each cash dividend declared or paid on the Common Stock, $1.00 par value per share, of the Company (the "Common Stock") and any other security ranking junior to the Series A Preferred Stock, and (ii) a preferential cash dividend (the "Preferential Dividends"), if any, in preference to the holders of Common Stock and any other security ranking junior to the Series A Preferred Stock, on the first day of March, June, September and December of each year (each a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, payable in an amount (except in the case of the first Quarterly Dividend Payment if the date of the first issuance of Series A Preferred Stock is a date other than a Quarterly Dividend Payment date, in which case such payment shall be a prorated amount of such amount) equal to $1.00 per share of Series A Preferred Stock less the per share amount of all cash dividends declared on the Series A Preferred Stock pursuant to clause (i) of this sentence since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In addition, in the event the Company shall, at any time after the issuance of any share or fraction of a share of Series A Preferred Stock, pay any dividend or make any distribution on the LAW2:7499 -7- 8 shares of Common Stock of the Company, whether by way of a dividend or a reclassification of stock, a recapitalization, reorganization or partial liquidation of the Company or otherwise, which is payable in cash or any debt security, debt instrument, real or personal property or any other property (other than (x) cash dividends subject to the immediately preceding sentence, (y) a distribution of shares of Common Stock or other capital stock of the Company or (z) a distribution of rights or warrants to acquire any such shares, including as such a right any debt security convertible into or exchangeable for any such shares, at a price less than the Fair Market Value (as hereinafter defined) of such shares on the date of issuance of such rights or warrants), then, and in each such event, the Company shall simultaneously pay on each then outstanding share of Series A Preferred Stock a distribution, in like kind, of 100 times such distribution paid on a share of Common Stock (subject to the provisions for adjustment hereinafter set forth). The dividends and distributions on the Series A Preferred Stock to which holders thereof are entitled pursuant to clause (i) of the first sentence of this paragraph and pursuant to the second sentence of this paragraph are hereinafter referred to as "Dividends" and the multiple of such cash and non-cash dividends and distributions on the Common Stock applicable to the determination of the Dividends, which shall be 100 initially but shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Dividend Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend or make any distribution on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Dividend Multiple thereafter applicable to the determination of the amount of Dividends which holders of shares of Series A Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Company shall declare each Dividend at the same time it declares any cash or non-cash dividend or distribution on the Common Stock in respect of which a Dividend is required to be paid. No cash or non-cash dividend or distribution on the Common Stock in respect of which a Dividend is required to be paid shall be paid or set aside for payment on the Common Stock unless a Dividend in respect of such dividend or distribution on the Common Stock shall be simultaneously paid, or set aside for payment, on the Series A Preferred Stock. (c) Preferential Dividends shall begin to accrue on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issuance of such LAW2:7499 -8- 9 shares of Series A Preferred Stock. Accrued but unpaid Preferential Dividends shall cumulate but shall not bear interest. (d) Any dividend payment made on shares of the Series A Preferred Stock shall first be credited against the earliest accrued but unpaid Preferential Dividend due with respect to shares of the Series A Preferred Stock. (e) All dividends paid with respect to shares of the Series A Preferred Stock pursuant to this paragraph 2 shall be paid pro rata on a share-by-share basis to the holders entitled thereto. (f) The holders of shares of Series A Preferred Stock shall not be entitled to receive any dividends or distributions except as provided herein. 3. VOTING RIGHTS. The holders of record of outstanding shares of Series A Preferred Stock shall have the following voting rights: (a) Subject to the provisions for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the holders of the Common Stock. The number of votes which a holder of a share of Series A Preferred Stock is entitled to cast, as the same may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend on Common Stock, payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series A Preferred Stock shall be entitled after such event shall be the Vote Multiple immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein, in the Restated Articles of Incorporation, in the By-laws, or as otherwise provided by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Company. (c) In the event that the Preferential Dividends payable to the holders of Series A Preferred Stock are in arrears and unpaid for the equivalent of six quarterly periods, the Board of Directors will be increased by two directors and the holders of Series A Preferred Stock, together with the holders of all other outstanding series of LAW2:7499 -9- 10 the Preferred Stock in respect of which such a default in payment of dividends as described hereinabove exists and is entitled to vote thereon, voting as a single class without regard to series, will be entitled to elect two directors of the expanded Board of Directors. Such entitlement shall continue until such time as all dividends in arrears on all of the Series A Preferred Stock at the time outstanding have been paid or declared and set aside for payment, whereupon such voting rights of the holders of the Series A Preferred Stock shall cease (and, unless holders of shares of other series of Preferred Stock shall still have the right to elect such directors, the respective terms of the two additional directors shall thereupon expire and the number of directors constituting the full board be decreased by two) subject to being again revived from time to time upon the reoccurrence of the conditions described in this paragraph (3)(c) as giving rise thereto. At any time when the rights of holders of Series A Preferred Stock to elect two additional directors shall have so vested, the Company shall, upon the written request of the holders of record of not less than 10% of the Series A Preferred Stock then outstanding (or 10% of all of the shares of Preferred Stock having the right to vote for such directors in case holders of shares of other series of Preferred Stock shall also have the right to elect directors in such circumstances), call a special meeting of holders of the Series A Preferred Stock (and other series of Preferred Stock, if applicable) for the election of directors. In the case of a written request, the special meeting shall be held within 60 days after the delivery of the request, upon the notice provided by law and in the By-laws of the Company; except that the Company shall not be required to call such a special meeting if the request is received less than 120 days before the date fixed for the next ensuing annual meeting of shareholders of the Company. Whenever the number of directors of the Company shall have been increased by two as provided in this paragraph (3)(c), the number as so increased may thereafter be further increased or decreased in such manner as may be permitted by the By-laws and without the vote of the holders of Series A Preferred Stock. No such action shall impair the right of the holders of Series A Preferred Stock to elect and to be represented by two directors as provided in this paragraph (3)(c). The two directors elected as provided in this paragraph (3)(c) shall serve until the next annual meeting of shareholders of the Company and until their respective successors shall be elected and qualified or the earlier expiration of their terms as provided in this paragraph (3)(c). No such director may be removed without the vote of holders of a majority of shares of Series A Preferred Stock (or holders of a majority of shares of Preferred Stock LAW2:7499 -10- 11 having the right to vote in the election of such director in case holders of shares of other series of Preferred Stock shall also have the right to elect such director). If, prior to the expiration of the term of any such director, a vacancy in the office of such director shall occur, such vacancy shall, until the expiration of such term, in each case be filled by the remaining director elected as provided in this paragraph (3)(c) or, if none remains in office, by vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock (or holders of a majority of shares of Preferred Stock who are then entitled to participate in the election of such directors in case holders of shares of other series of Preferred Stock shall also have the right to elect such director). (d) Except as otherwise required by the Articles of Incorporation or By-laws or set forth in this paragraph 3 or in paragraph 13 or as otherwise provided by law, holders of Series A Preferred Stock shall have no other special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate action. 4. CERTAIN RESTRICTIONS. (a) Whenever Preferential Dividends or Dividends are in arrears or the Company shall be in default of payment thereof, thereafter and until all accrued and unpaid Preferential Dividends and Dividends, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid or set irrevocably aside for payment in full, and in addition to any and all other rights which any holder of shares of Series A Preferred Stock may have in such circumstances, the Company shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity as to dividends with the Series A Preferred Stock, unless dividends are paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled if the full dividends accrued thereon were to be paid; (iii) except as permitted by subparagraph (iv) of this paragraph 4(a), redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (both as LAW2:7499 -11- 12 to dividends and upon liquidation, dissolution or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock (either as to dividends or upon liquidation, dissolution or winding up), except as permitted by subparagraph (iii) of this paragraph 4(a) or in accordance with a purchase offer made to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Company shall not permit any Subsidiary (as hereinafter defined) of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under subparagraph (a) of this paragraph 4, purchase or otherwise acquire such shares at such time and in such manner. A "Subsidiary" of the Company shall mean any corporation or other entity of which securities or other ownership interests entitled to cast at least a majority of the votes that would be entitled to be cast in an election of the board of directors of such corporation or other entity or other persons performing similar functions are beneficially owned, directly or indirectly, by the Company or by any corporation or other entity that is otherwise controlled by the Company. (c) The Company shall not issue any shares of Series A Preferred Stock except upon exercise of Rights issued pursuant to the Rights Agreement, a copy of which is on file with the Secretary of the Company at its principal executive office and shall be made available to shareholders of record without charge upon written request therefor addressed to said Secretary. Notwithstanding the foregoing sentence, nothing contained in the provisions of this Article FIFTH (E) shall prohibit or restrict the Company from issuing for any purpose any series of Preferred Stock with rights and privileges similar to, different from, or greater than, those of the Series A Preferred Stock or, subject to the limitations set forth in paragraph 13, from creating other securities senior to, junior to or on a parity with the Series A Preferred Stock. 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares upon their retirement and cancellation shall become authorized but unissued shares of Preferred Stock, without designation as to series, and such shares may be redesignated and reissued as part of any series of the Preferred Stock. LAW2:7499 -12- 13 6. LIQUIDATION, DISSOLUTION OR WINDING UP; FAIR VALUE FOR PURPOSES OF PENNSYLVANIA ANTI-TAKEOVER STATUTE. (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless the holders of shares of Series A Preferred Stock outstanding shall have received out of the assets of the Company available for distribution to its shareholders after payment or provision for payment of any securities ranking senior to the Series A Preferred Stock, for each share of Series A Preferred Stock, subject to adjustment as hereinafter provided, (A) $100.00 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment or, (B) if greater than the amount specified in clause (i)(A) of this sentence, an amount equal to 100 times the aggregate amount to be distributed per share to holders of Common Stock, as the same may be adjusted as hereinafter provided, and (ii) to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Series A Preferred Stock, unless simultaneously therewith distributions are made ratably on the Series A Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Series A Preferred Stock are entitled under clause (i)(A) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up. The amount to which holders of Series A Preferred Stock may be entitled upon liquidation, dissolution or winding up of the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter referred to as the "Participating Liquidation Amount" and the multiple of the amount to be distributed to holders of shares of Common Stock upon the liquidation, dissolution or winding up of the Company applicable pursuant to said clause to the determination of the Participating Liquidation Amount, as said multiple may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Liquidation Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, in each such case, the Liquidation Multiple thereafter applicable to the determination of the Participating Liquidation Amount to which holders of Series A Preferred Stock shall be entitled after such event shall be the Liquidation Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Except as provided in this paragraph 6(a), holders of LAW2:7499 -13- 14 Series A Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the Company. (b) For the purposes of this paragraph 6, none of the following shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company: (i) the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company; (ii) the consolidation or merger of the Company with or into one or more other corporations or other associations; (iii) the consolidation or merger of one or more corporations or other associations with or into the Company; (iv) the participation by the Company in a share exchange; (v) the division of the Company pursuant to sections 1951 through 1957 of the Pennsylvania BCL; (vi) the conversion of the Company pursuant to sections 1961 through 1966 of the Pennsylvania BCL; (c) Notwithstanding anything to the contrary in this Article FIFTH (E), in case any Controlling Person or Group (as defined from time to time in Section 2543 of the Pennsylvania BCL) shall be required to purchase any shares of Series A Preferred Stock pursuant to Sections 2541 through 2548 of the Pennsylvania BCL, as in effect from time to time, the amount that is determined to represent the "fair value" (as that term is used in such Section 2542 of the Pennsylvania BCL) of such shares shall be an amount per share equal to the Liquidation Multiple then in effect times the aggregate amount per share that such Controlling Person or Group is required to pay to purchase any share of Common Stock pursuant to such Sections 2541 through 2548 of the Pennsylvania BCL. 7. CERTAIN RECLASSIFICATIONS AND OTHER EVENTS. (a) In the event that holders of shares of Common Stock of the Company receive after January 9, 1996 in respect of their shares of Common Stock any share of capital stock of the Company (other than any share of Common Stock of the Company), whether by way of reclassification, recapitalization, reorganization, dividend or other distribution or otherwise (a "Transaction"), then, and in each such event, the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall be adjusted so that after such event the holders of Series A Preferred Stock shall be entitled, in respect of each share of Series A Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such adjustment, to (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such Transaction multiplied by the additional dividends which the holder of a share of Common Stock shall be entitled to receive by virtue of the receipt in the Transaction of such capital stock, LAW2:7499 -14- 15 (ii) such additional voting rights as equal the Vote Multiple in effect immediately prior to such Transaction multiplied by the additional voting rights to which the holder of a share of Common Stock shall be entitled by virtue of the receipt in the Transaction of such capital stock and (iii) such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such Transaction multiplied by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company by virtue of the receipt in the Transaction of such capital stock, as the case may be, all as provided by the terms of such capital stock. (b) In the event that holders of shares of Common Stock of the Company receive after January 9, 1996 in respect of their shares of Common Stock any right or warrant to purchase Common Stock (including as such a right, for all purposes of this paragraph 7(b), any security convertible into or exchangeable for Common Stock) at a purchase price per share less than the Fair Market Value of a share of Common Stock on the date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall each be adjusted so that after such event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple shall each be the product of the Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the case may be, in effect immediately prior to such event multiplied by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the maximum number of shares of Common Stock which could be acquired upon exercise in full of all such rights or warrants and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the number of shares of Common Stock which could be purchased, at the Fair Market Value of the Common Stock at the time of such issuance, by the maximum aggregate consideration payable upon exercise in full of all such rights or warrants. (c) In the event that holders of shares of Common Stock of the Company receive after January 9, 1996 in respect of their shares of Common Stock any right or warrant to purchase capital stock of the Company (other than shares of Common Stock), including as such a right, for all purposes of this paragraph 7(c), any security convertible into or exchangeable for capital stock of the Company (other than Common Stock), at a purchase price per share less than the Fair Market Value of a share of such capital stock on the date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights and rights upon liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall each be adjusted so that after such event each holder of a share of LAW2:7499 -15- 16 Series A Preferred Stock shall be entitled, in respect of each share of Series A Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such event, to receive (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such event multiplied, first, by the additional dividends to which the holder of a share of Common Stock shall be entitled upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise, and multiplied again by the Discount Fraction (as hereinafter defined), (ii) such additional voting rights as equal the Vote Multiple in effect immediately prior to such event multiplied, first, by the additional voting rights to which the holder of a share of Common Stock shall be entitled upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise, and multiplied again by the Discount Fraction and (iii) such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such event multiplied, first, by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise, and multiplied again by the Discount Fraction. For purposes of this paragraph, the "Discount Fraction" shall be a fraction the numerator of which shall be the difference between the Fair Market Value of a share of the capital stock subject to a right or warrant distributed to holders of shares of Common Stock of the Company as contemplated by this paragraph 7(c) immediately after the distribution thereof and the purchase price per share for such share of capital stock pursuant to such right or warrant and the denominator of which shall be the Fair Market Value of a share of such capital stock immediately after the distribution of such right or warrant. (d) For purposes of this Article FIFTH (E), the "Fair Market Value" of a share of capital stock of the Company (including a share of Common Stock) on any date shall be deemed to be the average of the daily closing price per share thereof over the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that such Fair Market Value of any such share of capital stock is determined during a period which includes any date that is within 30 Trading Days after (i) the ex-dividend date for a dividend or distribution on stock payable in shares of such stock or securities convertible into shares of such stock, or (ii) the effective date of any subdivision, split, combination, consolidation, reverse stock split or reclassification of such stock or division of the Company pursuant to Sections 1951 through 1957 of the Pennsylvania BCL, then, and in each such case, the Fair Market Value shall be appropriately adjusted by the Board of Directors of the Company LAW2:7499 -16- 17 to take into account ex-dividend or post-effective date trading. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way (in either case, as reported in the applicable transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange), or, if the shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the applicable transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares are listed or admitted to trading or, if the shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by The Nasdaq Stock Market or such other system then in use, or if on any such date the shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the shares selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares are listed or admitted to trading is open for the transaction of business or, if the shares are not listed or admitted to trading on any national securities exchange, on which the New York Stock Exchange or such other national securities exchange as may be selected by the Board of Directors of the Company is open. If the shares are not publicly held or not so listed or traded on any day within the period of 30 Trading Days applicable to the determination of Fair Market Value thereof as aforesaid, "Fair Market Value" shall mean the fair market value thereof per share as determined in good faith by the Board of Directors of the Company. In either case referred to in the foregoing sentence, the determination of Fair Market Value shall be described in a statement filed with the Secretary of the Company. 8. CONSOLIDATION, MERGER, ETC. In case the Company shall enter into any consolidation, merger, division, share exchange, combination, sale of all or substantially all of the Company's assets, or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of Series A Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed or exchanged multiplied by the highest of the Vote Multiple, the Dividend Multiple or the Liquidation Multiple in effect immediately prior to such event; provided, however, no fractional share or scrip representing fractional shares of any other stock or securities shall be issued. Instead of any fractional interest in a share of such other stock or securities which would otherwise be LAW2:7499 -17- 18 deliverable pursuant to this paragraph 8, the Company will pay to the holder thereof an amount in cash (computed to the nearest cent) equal to the same fraction of the Fair Market Value of a share of such other stock or security. 9. EFFECTIVE TIME OF ADJUSTMENTS. (a) Adjustments to the Series A Preferred Stock required by the provisions hereof shall be effective as of the time at which the event requiring such adjustments occurs. (b) The Company shall give prompt written notice to each holder of a share of outstanding Series A Preferred Stock of the effect of any adjustment to the voting rights, dividend rights or rights upon liquidation, dissolution or winding up of the Company of such shares required by the provisions hereof. Notwithstanding the foregoing sentence, the failure of the Company to give such notice shall not affect the validity of or the force or effect of or the requirement for such adjustment. 10. NO REDEMPTION. The shares of Series A Preferred Stock shall not be redeemable at the option of the Company or any holder thereof. Notwithstanding the foregoing sentence of this paragraph, the Company may acquire shares of Series A Preferred Stock in any other manner permitted by law, the provisions hereof and the Restated Articles of Incorporation. 11. RANKING. The Series A Preferred Stock shall rank senior to the Common Stock and, unless otherwise provided in a Statement with Respect to Shares or an amendment to the Restated Articles of Incorporation relating to the determination of a subsequent series of preferred stock of the Company, the Series A Preferred Stock shall rank junior to all other series of the Company's preferred stock, including the Series C Conversion Preferred Stock, as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up. 12. LIMITATIONS. Except as may otherwise be required by law, the shares of Series A Preferred Stock shall not have any powers, preferences or relative, participating, optional or other special rights other than those specifically set forth in this Article FIFTH (E) (as such may be amended from time to time) or otherwise in the Restated Articles of Incorporation. 13. AMENDMENT. So long as any shares of the Series A Preferred Stock are outstanding, the Company shall not amend this Article FIFTH (E) or the Restated Articles of Incorporation in any manner which would alter or change the rights, preferences or limitations of the Series A Preferred Stock so as to affect such rights, preferences or limitations in any material respect prejudicial to the holders of the Series A Preferred Stock without, in addition to any other vote of shareholders required by law, the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A Preferred Stock, voting together as a single class; provided, however, that the creation of another series of the Preferred Stock ranking senior to or on a parity with the Series A Preferred Stock as to the payment of dividends or the distribution of assets or liquidation, dissolution or winding up shall not be deemed to be prejudicial LAW2:7499 -18- 19 to the holders of the Series A Preferred Stock for the purposes of this paragraph 13. F. 1. DESIGNATION AND AMOUNT. The shares of this series shall be designated as "Series C Conversion Preferred Stock" (the "Series C Preferred Stock") consisting of 3,795,000 shares. 2. RANK. The Series C Preferred Stock shall, with respect to dividend rights and rights upon liquidation, dissolution and winding up, rank prior to the Common Stock, par value $1.00 per share (the "Common Stock"), and the Series A Participating Preferred Stock, par value $1.00 per share (the "Series A Preferred Stock"), of the Company. All equity securities of the Company to which the Series C Preferred Stock ranks prior, whether with respect to dividends or upon liquidation, dissolution, winding up or otherwise, including the Common Stock and the Series A Preferred Stock, are collectively referred to herein as the "Junior Securities;" all equity securities of the Company with which the Series C Preferred Stock ranks on a parity are collectively referred to herein as the "Parity Securities;" and all equity securities of the Company (other than convertible debt securities) to which the Series C Preferred Stock ranks junior are collectively referred to herein as the "Senior Securities." The Series C Preferred Stock shall be subject to the creation of Junior Securities, Parity Securities and Senior Securities, subject to the limitations thereon provided for in paragraphs (6)(c) and (6)(d). 3. DIVIDENDS. (a) The holders of outstanding shares of the Series C Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors, out of funds legally available for the payment of dividends, cumulative preferential cash dividends accruing at the per share rate of $3.25 per quarter and no more, payable in arrears on the first day of each March, June, September and December, respectively (each such date being hereinafter referred to as a "Dividend Payment Date"), commencing on June 1, 1994. If any Dividend Payment Date is not a business day (as defined in paragraph (4)(h)(i)), then the Dividend Payment Date shall be on the next succeeding day that is a business day. Each such dividend will be payable to holders of record as they appear on the stock books of the Company on such record dates, not less than 10 nor more than 90 days preceding the payment dates thereof, as shall be fixed by the Board of Directors, except that no such record date shall be declared for the final dividend payable on June 1, 1997 and holders of shares of Series C Preferred Stock will receive such final dividend only upon surrender of their share certificates. Dividends on a share of Series C Preferred Stock shall accrue (whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends and whether or not such dividends are declared) on a daily basis from the previous Dividend Payment Date, except that the first dividend shall LAW2:7499 -19- 20 accrue from the date of issuance of such share of Series C Preferred Stock. Accrued and unpaid dividends shall not bear interest. Dividends will cease to accrue in respect of the Series C Preferred Stock on the Mandatory Conversion Date (as defined in paragraph (4)(a)) or on the Settlement Date (as defined in paragraph (4)(h)(v)), in the event of their earlier conversion pursuant to paragraph (4)(n), upon the effective date of such conversion, and will cease to accrue on the date of their earlier redemption pursuant to paragraph (4)(c) unless the Company shall default in delivering the shares of Common Stock and cash, if any, payable by the Company upon such redemption. Dividends (or cash amounts equal to accrued and unpaid dividends) payable on the Series C Preferred Stock for any period shorter than a quarterly dividend period shall be computed on the basis of a 360-day year of twelve 30-day months and, for purposes of calculating the accrual of dividends, dividends will accrue to, but not including, the date fixed for payment. (b) Unless full cumulative dividends, if any, accrued on the Series C Preferred Stock have been or contemporaneously are declared and paid or declared and a sum set apart sufficient for such payment through the most recent Dividend Payment Date (or the obligations of the Company with respect to the payment of such dividends are satisfied as contemplated by paragraphs (4)(a), (b) or (c)), then, whether or not the Mandatory Conversion Date has occurred, (i) no full cash dividend shall be declared by the Board of Directors or paid or set apart for payment by the Company or other distribution declared or made on any Parity Securities, (ii) no dividend shall be declared or paid or set aside for payment or other distribution declared or made upon the Common Stock, the Series A Preferred Stock or upon any other Junior Securities (other than a dividend or distribution paid in shares of, or warrants, rights or options exercisable for or convertible into, Common Stock, the Series A Preferred Stock or any other Junior Securities) and (iii) no Common Stock, Series A Preferred Stock or any other Junior Securities shall be redeemed, purchased or otherwise acquired for any consideration, nor shall any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such series or class by the Company, except by conversion into or in exchange for Junior Securities. If any dividends are not paid or set apart in full, as aforesaid, with respect to the Series C Preferred Stock and any Parity Securities, all dividends declared with respect to the Series C Preferred Stock and any Parity Securities shall be declared pro rata so that the amount of dividends declared per share on the Series C Preferred Stock and such Parity Securities shall in all cases bear to each other the same ratio that accrued dividends per share on the Series C Preferred Stock and such Parity Securities bear to each other. Holders of the shares of the Series C Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends as provided in paragraph (3)(a). LAW2:7499 -20- 21 (c) Subject to the foregoing provisions of this paragraph (3) and paragraph (4)(d), the Board of Directors may declare and the Company may pay or set apart for payment dividends and other distributions on any of the Junior Securities or Parity Securities, and may redeem, purchase or otherwise retire any Junior Securities or Parity Securities, and the holders of the shares of the Series C Preferred Stock shall not be entitled to share therein. (d) Any dividend payment made on shares of the Series C Preferred Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to shares of the Series C Preferred Stock. (e) All dividends paid with respect to shares of the Series C Preferred Stock pursuant to this paragraph (3) shall be paid pro rata to the holders entitled thereto. (f) Holders of shares of the Series C Preferred Stock shall be entitled to receive the dividends provided for in this paragraph (3) in preference to and in priority over any dividends upon any of the Junior Securities. 4. REDEMPTIONS OR CONVERSIONS. (a) AUTOMATIC CONVERSION ON MANDATORY CONVERSION DATE. Unless earlier called for redemption by the Company or converted in accordance with the provisions hereof, on June 1, 1997 (the "Mandatory Conversion Date"), each outstanding share of the Series C Preferred Stock shall automatically convert into: (i) shares of Common Stock at the Common Equivalent Rate (determined as provided in paragraph (4)(d)) in effect on the Mandatory Conversion Date; and (ii) the right to receive an amount in cash equal to all accrued and unpaid dividends on such share of Series C Preferred Stock to the Mandatory Conversion Date, whether or not declared, out of funds legally available for the payment of dividends (and dividends shall cease to accrue on such share as of the Mandatory Conversion Date). The Company shall at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock and/or its Common Stock held in its treasury for the purpose of effecting any conversion of the Series C Preferred Stock, either pursuant to this paragraph (4)(a) ("Mandatory Conversion") or pursuant to paragraphs (4)(b), (c) or (n) the full number of shares of Common Stock then deliverable upon any conversion of all outstanding shares of Series C Preferred Stock. The right to receive an amount in cash equal to all accrued and unpaid dividends on such shares of Series C Preferred Stock (the "Accrued Dividend Amount") will occur upon Mandatory Conversion whether or not the Company has earnings and whether or not such dividends are declared; provided, however, that to the extent that funds are not legally available for the payment of the Accrued Dividend Amount upon Mandatory Conversion, the holders of Series C Preferred Stock shall be entitled to receive, and the Company shall distribute to such holders, on the fifth LAW2:7499 -21- 22 business day next succeeding the Mandatory Conversion Date, in lieu of payment in cash of the Accrued Dividend Amount, a number of shares of Common Stock equal to 110% of the Accrued Dividend Amount divided by the Current Market Price (as defined in paragraph (4)(d)(vii)) of the Common Stock determined as of the second Trading Date (as defined in paragraph (4)(h)(vi)) prior to the Mandatory Conversion Date, except that (i) no such distribution shall be made by the Company if, prior to the date on which the Company is required to make such distribution, the Company shall have made payment in full of the Accrued Dividend Amount in cash and (ii) if the Company does not have a sufficient number of authorized but unissued shares of Common Stock and shares of Common Stock held in its treasury not reserved for other corporate purposes to make such distribution in full, the Company shall make such distribution to the fullest extent possible, pro rata to the holders of Series C Preferred Stock entitled thereto (as nearly as may be practicable without creating fractional shares), and the holders of Series C Preferred Stock shall thereafter have the right to receive, and the Company shall pay to such holders as promptly as possible, the remainder in cash or shares of Common Stock or a combination thereof, on the same terms set forth in this paragraph (4)(a) for the payment in cash of amounts equal to accrued and unpaid dividends and for the distribution of shares of Common Stock in lieu of payment of such amounts in cash. (b) AUTOMATIC CONVERSION UPON THE OCCURRENCE OF CERTAIN EVENTS. Immediately prior to the effectiveness of an amendment of the articles, merger, consolidation, share exchange, division or conversion of the Company or similar extraordinary transaction that results in the conversion or exchange of Common Stock into, or the right of the holders thereof to receive, in lieu of or in addition to their shares of Common Stock, other securities or other property (whether of the Company or any other entity) (any such amendment, merger, consolidation, share exchange, division or conversion or similar extraordinary transaction being referred to herein as a "Fundamental Transaction") each outstanding share of the Series C Preferred Stock shall automatically convert, on the Settlement Date, as defined in paragraph (4)(h)(v) into: (A) shares of Common Stock at the same rate as would have been the case if the Series C Preferred Stock had been called for redemption on the business day immediately preceding the Mandatory Conversion Date (with a Current Market Price determined as of the second Trading Date prior to the Settlement Date) but in no case greater than the Common Equivalent Rate; plus (B) the right to receive an amount in cash equal to all accrued and unpaid dividends on such share of the Series C Preferred Stock to and including the Settlement Date, whether or not declared, out of funds legally available for the payment of dividends (and dividends shall cease to accrue on such share after the Settlement Date); plus LAW2:7499 -22- 23 (C) the right to receive an amount of cash initially equal to $34.90, declining by $0.03056 on each day following the date of issuance of the Series C Preferred Stock (computed on the basis of a 360-day year of twelve 30-day months) to $0.00 on June 1, 1997, in each case determined with reference to the Settlement Date, out of funds legally available therefor. At the option of the Company, it may deliver on the Settlement Date in lieu of some or all of the cash consideration described in clauses (B) and (C) above, pro rata to the holders of Series C Preferred Stock entitled thereto, a number of shares of Common Stock to be determined by dividing the amount of cash consideration that the Company has elected to pay in Common Stock by the Current Market Price (as defined in paragraph (4)(d)(vii)) of the Common Stock determined, in the case of a Fundamental Transaction, as of the second Trading Date prior to the Settlement Date. (c) OPTIONAL REDEMPTION. The Company shall have the right to call, in whole or in part, the outstanding shares of the Series C Preferred Stock for redemption on the business day immediately preceding the Mandatory Conversion Date. On the redemption date, the Company shall deliver to the holders thereof in exchange for each such share called for redemption the greater of (i) a number of shares of Common Stock equal to the Call Price (as defined in paragraph (4)(h)(ii)) divided by the Current Market Price of the Common Stock determined as of the second Trading Date immediately preceding the Notice Date (as defined in paragraph 4(h)(iv)) and (ii) 8.85 shares of Common Stock (subject to adjustment in the same manner as the Common Equivalent Rate, as described in paragraph 4(d)). Accrued and unpaid dividends on shares of Series C Preferred Stock so redeemed will be paid in cash on the date fixed for their redemption, whether or not declared, out of funds legally available for the payment of dividends (and dividends shall cease to accrue on such share as of such date). If fewer than all the outstanding shares of Series C Preferred Stock are to be called for redemption, shares to be redeemed shall be selected by the Company from outstanding shares of Series C Preferred Stock by lot or pro rata (as nearly as may be practicable without creating fractional shares) or by any other method determined by the Board of Directors of the Company in its sole discretion to be equitable. (d) COMMON EQUIVALENT RATE ADJUSTMENTS. The Common Equivalent Rate to be used to determine the number of shares of Common Stock to be delivered on the conversion of the Series C Preferred Stock into shares of Common Stock pursuant to paragraphs (4)(a) or (b) shall be initially ten shares of Common Stock for each share of Series C Preferred Stock; provided, however, that such Common Equivalent Rate shall be subject to adjustment from time to time as provided below in this paragraph (4)(d). All adjustments to the Common Equivalent Rate shall be calculated to the nearest 1/100th of a share of Common Stock (or, if there is not a nearest 1/100th of a share, to the next lower LAW2:7499 -23- 24 1/100th of a share). No adjustment will be required unless such adjustment would require an increase or decrease of at least one percent therein; provided, however, that any adjustments which, by reason of the foregoing, are not required to be made will be carried forward and taken into account in any subsequent adjustment. Such rate in effect at any time is herein called the "Common Equivalent Rate." (i) If the Company shall: (A) pay a dividend or make a distribution with respect to Common Stock in shares of Common Stock, (B) subdivide or split its outstanding shares of Common Stock into a greater number of shares, (C) combine its outstanding shares of Common Stock into a smaller number of shares, or (D) issue by reclassification of its shares of Common Stock any shares of Common Stock of the Company other than in a Fundamental Transaction described in paragraph (4)(b), then, in any such event, the Common Equivalent Rate in effect immediately prior thereto shall be adjusted so that the holder of a share of the Series C Preferred Stock shall be entitled to receive on the conversion of such share of the Series C Preferred Stock, the number of shares of Common Stock which such holder would have owned or been entitled to receive after the happening of any of the events described above had such share of the Series C Preferred Stock been converted at the Common Equivalent Rate in effect immediately prior to such event or any record date with respect thereto. Such adjustment shall become effective at the opening of business on the business date next following the record date for determination of shareholders entitled to receive such dividend or distribution in the case of a dividend or distribution, and shall become effective immediately after the effective date in case of a subdivision, split, combination or reclassification; and any shares of Common Stock issuable in payment of a dividend shall be deemed to have been issued immediately prior to the close of business on the record date for such dividend for purposes of calculating the number of outstanding shares of Common Stock under clauses (ii) and (iii) below. Such adjustments shall be made successively. (ii) If the Company shall, after the date hereof, issue rights or warrants to all holders of its Common Stock entitling them (for a period not exceeding 45 days from the date of such issuance) to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price of the Common Stock (determined pursuant to paragraph (4)(d)(vii)) on the record date for the determination of shareholders entitled to receive such rights or warrants, then in each case the Common Equivalent Rate shall be adjusted by multiplying the Common Equivalent Rate in effect immediately prior to the date of issuance of such rights or warrants by a fraction, of which the numerator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, LAW2:7499 -24- 25 immediately prior to such issuance, plus the number of additional shares of Common Stock offered for subscription or purchase pursuant to such rights or warrants, and of which the denominator shall be the number of shares of Common Stock outstanding on the date of issuance of such rights or warrants, immediately prior to such issuance, plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered for subscription or purchase pursuant to such rights or warrants would purchase at such Current Market Price (determined by multiplying such total number of shares by the exercise price of such rights or warrants and dividing the product so obtained by such Current Market Price). Such adjustment shall become effective at the opening of business on the business day next following the record date for the determination of shareholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered after the expiration of such rights or warrants, the Common Equivalent Rate shall be readjusted to the Common Equivalent Rate which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock actually delivered. Such adjustments shall be made successively. (iii) If the Company shall pay a dividend or make a distribution to all holders of its Common Stock of evidence of its indebtedness or other assets (including shares of capital stock of the Company (other than Common Stock) but excluding any distributions and dividends referred to in clause (i) above or any cash dividends), or shall issue to all holders of its Common Stock rights or warrants to subscribe for or purchase any of its securities (other than those referred to in clause (ii) above), then in each such case, the Common Equivalent Rate shall be adjusted by multiplying the Common Equivalent Rate in effect on the record date mentioned below by a fraction, of which the numerator shall be the Current Market Price of the Common Stock (determined pursuant to paragraph (4)(d)(vii)) on the record date for the determination of shareholders entitled to receive such dividend or distribution, and of which the denominator shall be such Current Market Price per share of Common Stock less the fair value (as determined by the Board of Directors of the Company, whose determination shall be conclusive) as of such record date of the portion of the assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, applicable to one share of Common Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of shareholders entitled to receive such dividend or distribution. (iv) In case the Company shall, by dividend or otherwise, at any time distribute to all holders of its Common Stock cash (excluding (a) any cash dividends on the Common Stock to the extent that the aggregate cash dividends per share of Common Stock in any consecutive 12-month period do not exceed the LAW2:7499 -25- 26 greater of (x) the amount per share of Common Stock of the cash dividends paid on the Common Stock in the next preceding 12-month period, to the extent that such dividends for the preceding 12-month period did not require an adjustment to the Common Equivalent Rate pursuant to this paragraph (as adjusted to reflect subdivisions or combinations of the Common Stock) and (y) 15 percent of the average daily Closing Prices (as defined in paragraph (4)(h)(iii)) of the Common Stock for the ten consecutive Trading Days immediately prior to the date of declaration of such distribution and (b) any dividend or distribution in connection with the liquidation, dissolution or winding up of the Company, whether voluntary or involuntary), then, in each such case, unless the Company elects to reserve such an amount of cash for distribution to the holders of the Series C Preferred Stock so that any such shares will receive upon conversion, in addition to the shares of the Common Stock to which such holder is entitled, the amount of cash (to the extent not excluded as provided above) which such holder would have received if such holder had, immediately prior to the record date for such distribution of cash, converted its shares of Series C Preferred Stock into Common Stock, the Common Equivalent Rate shall be increased so that the same shall equal the rate determined by multiplying the Common Equivalent Rate in effect at the close of business on such record date by a fraction of which the numerator shall be the Closing Price of the Common Stock on such record date and the denominator shall be the Closing Price of the Common Stock less the amount of cash so distributed (to the extent not excluded as provided above) applicable to one share of Common Stock, such increase to become effective immediately prior to the opening of business on the day following such record date; provided, however, that in the event the portion of the cash so distributed applicable to one share of Common Stock is equal to or greater than the Closing Price of the Common Stock on such record date, in lieu of the foregoing adjustment, adequate provision shall be made so that each holder of shares of Series C Preferred Stock shall thereafter have the right to receive upon conversion the amount of cash (to the extent not excluded as provided above) such holder would have received had such holder converted each share of Series C Preferred Stock on such record date. If any adjustment is required to be made as set forth in this paragraph (4)(d)(iv) as a result of a distribution which is a dividend described in subclause (a) of this paragraph, such adjustment shall be based upon the amount by which such distribution exceeds the amount of the dividend permitted to be excluded pursuant to such subclause (a) of this paragraph. If an adjustment is required to be made pursuant to this paragraph as a result of a distribution which is not such a dividend, such adjustment shall be based upon the full amount of such distribution. (v) In case of the consummation of a tender or exchange offer (other than an odd-lot tender offer) made by the Company or any subsidiary of the Company for all or any portion of the LAW2:7499 -26- 27 Common Stock to the extent that the cash and value of any other consideration included in such payment per share of Common Stock exceeds 110% of the first reported sales price per share of Common Stock on the Trading Day next succeeding the Expiration Time (as defined below), the Common Equivalent Rate shall be increased so that the same shall equal the rate determined by multiplying the Common Equivalent Rate in effect immediately prior to the last time tenders or exchanges may be made pursuant to such tender or exchange offer (the "Expiration Time") by a fraction of which the denominator shall be the number of shares of Common Stock outstanding (including any tendered or exchanged shares) on the Expiration Time multiplied by the first reported sales price of the Common Stock on the Trading Day next succeeding the Expiration Time, and the numerator shall be the sum of (A) the fair market value (determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) of the aggregate consideration payable to shareholders based on the acceptance (up to any maximum specified in the terms of the tender or exchange offer) of all shares validly tendered or exchanged and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (B) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) on the Expiration Time and the first reported sales price of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction to become effective immediately prior to the opening of business on the day following the Expiration Time. (vi) Anything in this paragraph (4) notwithstanding, the Company shall be entitled to make such upward adjustments in the Common Equivalent Rate, in addition to those required by this paragraph (4), as the Company in its sole discretion may determine to be advisable, in order that any stock dividends, subdivisions of shares, distributions of rights to purchase stock or securities, or distributions of securities convertible into or exchangeable for stock (or any transaction which could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made by the Company to its shareholders shall not be taxable. If the Company determines that an adjustment to the Common Equivalent Rate should be made, an adjustment shall be made effective as of such date as is determined by the Board of Directors of the Company. The determination of the Board of Directors of the Company as to whether an adjustment to the Common Equivalent Rate should be made pursuant to the foregoing provisions of this paragraph (4)(d)(vi), and, if so, as to what adjustment should be made and when, shall be conclusive, final and binding on the Company and all shareholders of the Company. (vii) As used in this paragraph (4), the "Current Market Price" of the Common Stock on any date shall be the average of the daily Closing Prices (as defined in paragraph (4)(h)(iii)) for the five consecutive Trading Dates ending on and LAW2:7499 -27- 28 including the date of determination of the Current Market Price; provided, however, that if the Closing Price for the Trading Date next following such five-day period (the "next-day closing price") is less than 95% of such average, then the Current Market Price per share of Common Stock on such date of determination shall be the next-day Closing Price; and provided, further, that, if any event that results in an adjustment of the Common Equivalent Rate occurs during such five-day period or, for the purposes of calculating the Current Market Price in connection with any redemption or conversion of Series C Preferred Stock or any determination of an amount in cash payable in lieu of a fraction of a share of Common Stock, if any event that results in an adjustment of the Common Equivalent Rate occurs during the period beginning on the first day of such five-day period and ending on the applicable redemption or conversion date, the Current Market Price as determined pursuant to the foregoing will be appropriately adjusted to reflect the occurrence of such event. (viii) In any case in which paragraph (4)(d) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date and the date fixed for conversion or redemption pursuant to paragraphs (4)(a), (b), (c) or (n) occurs after such record date, but before the occurrence of such event the Company may in its sole discretion elect to defer the following until after the occurrence of such event: (A) issuing to the holder of any converted or redeemed shares of the Series C Preferred Stock the additional shares of Common Stock issuable upon such conversion or redemption before giving effect to such adjustment and (B) paying to such holder any amount in cash in lieu of a fractional share of Common Stock pursuant to paragraph (4)(f). (e) NOTICE OF ADJUSTMENTS. Whenever the Common Equivalent Rate or Optional Conversion Rate is adjusted as herein provided, the Company shall: (i) forthwith compute the adjusted Common Equivalent Rate and the adjusted Optional Conversion Rate (as defined in paragraph 4(n)) in accordance with this paragraph (4) and prepare a certificate signed by the Chief Financial Officer, any Vice President, the Treasurer or Controller of the Company setting forth the adjusted Common Equivalent Rate, the adjusted Optional Conversion Rate, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based, which certificate shall be conclusive, final and binding evidence of the correctness of the adjustment, and file such certificate forthwith with the transfer agent or agents for the Series C Preferred Stock and the Common Stock; and (ii) mail a notice stating that the Common Equivalent Rate and the Optional Conversion Rate have been adjusted, the facts requiring such adjustment and the facts upon which LAW2:7499 -28- 29 such adjustment is based and setting forth the adjusted Common Equivalent Rate and the adjusted Optional Conversion Rate to the holder of record of the outstanding shares of the Series C Preferred Stock at or prior to the time the Company mails an interim statement to its shareholders covering the fiscal quarter during which the facts requiring such adjustment occurred, but in any event within 45 days of the end of such fiscal quarter. (f) NO FRACTIONAL SHARES. No fractional share or scrip representing fractional shares of Common Stock shall be issued upon the redemption or conversion of any shares of Series C Preferred Stock. Instead of any fractional interest in a share of Common Stock which would otherwise be deliverable upon the redemption or conversion of a share of Series C Preferred Stock, the Company shall pay to the holder of such share an amount in cash (computed to the nearest cent) equal to the same fraction of the (i) Current Market Price of the Common Stock determined as of the second Trading Date immediately preceding the Notice Date, in the case of redemption pursuant to paragraph 4(c), (ii) Closing Price (as defined in paragraph 4(h)(iii) of the Common Stock determined (A) as of the fifth Trading Date immediately preceding the Mandatory Conversion Date, in the case of a Mandatory Conversion, or (B) as of the second Trading Date immediately preceding the date of conversion in the case of any optional conversion pursuant to paragraph 4(n), or (iii) the Settlement Date, in the case of a Fundamental Transaction. If more than one share shall be surrendered for conversion at one time by the same holder, the number of full shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series C Preferred Stock so surrendered. (g) CANCELLATION. Shares of Series C Preferred Stock that have been issued and reacquired in any manner, including shares purchased, exchanged, redeemed or converted, shall not be reissued as part of the Series C Preferred Stock and shall (upon compliance with any applicable provisions of the laws of the Commonwealth of Pennsylvania) have the status of authorized and unissued shares of the class of Preferred Stock undesignated as to series and may be redesignated and reissued as part of any series of the Preferred Stock. (h) Definitions. As used in this paragraph (4): (i) the term "business day" shall mean any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York or the Commonwealth of Pennsylvania are authorized or obligated by law or executive order to close or are closed because of a banking moratorium or otherwise; (ii) the term "Call Price" shall mean $131.25 per share; (iii) the term "Closing Price" on any day shall mean the closing sale price regular way on such day or, in case no such sale takes place on such day, the reported closing LAW2:7499 -29- 30 bid price regular way, in each case on the New York Stock Exchange or, if the Common Stock is not listed or admitted to trading on such Exchange, then on the principal national securities exchange on which the Common Stock is listed or admitted to trading (which shall be the national securities exchange on which the greatest number of shares of Common Stock has been traded during the five consecutive Trading Dates ending on and including the date of determination of the Current Market Price), or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the closing bid price of the Common Stock on the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated, or a similarly generally accepted reporting service, or if not so available as determined in good faith by the Board of Directors, on the basis of such relevant factors as it in good faith considers, in the reasonable judgement of the Board of Directors, appropriate; (iv) the term "Notice Date" with respect to any notice given by the Company in connection with the Series C Preferred Stock shall be the earlier of the public announcement with respect to any matter or the commencement of the mailing of such notice to the holders of the Series C Preferred Stock in accordance with paragraph (4)(i); (v) the term "Settlement Date" shall mean the business day immediately prior to the effective date of a Fundamental Transaction; (vi) the term "Trading Date" shall mean a date on which the New York Stock Exchange (or any successor thereto) is open for the transaction of business. (i) NOTICE OF REDEMPTION OR AUTOMATIC CONVERSION. The Company will provide notice of any redemption or automatic conversion (including any potential conversion upon the effectiveness of a Fundamental Transaction but excluding any conversion pursuant to paragraphs (4)(a) or (n)) of shares of Series C Preferred Stock to holders of record of the Series C Preferred Stock to be called or converted not less than 15 nor more than 60 days prior to the date fixed for such redemption or conversion, as the case may be; provided, however, that if the timing of a Fundamental Transaction makes it impracticable to provide at least 15 days notice, the Company shall provide such notice as soon as is practicable. Such notice shall be provided by mailing notice of such redemption or conversion first class postage prepaid, to each holder of record of the Series C Preferred Stock to be redeemed or converted, at such holder's address as it appears on the stock register of the Company; provided, however, that no failure to give such notice nor any defect therein shall affect the validity of the proceeding for the redemption or conversion of any shares of Series C Preferred Stock to be redeemed or converted, except as to the holder to whom the Company has failed to give such notice or whose notice LAW2:7499 -30- 31 was defective. Each such notice shall state, as appropriate, the following: (i) the redemption or automatic conversion date; (ii) that all outstanding shares of Series C Preferred Stock are to be redeemed or converted or, in the case of a call for redemption pursuant to paragraph (4)(c) of fewer than all outstanding shares of Series C Preferred Stock, the number of such shares held by such holder to be redeemed; (iii) in the case of a call for redemption pursuant to paragraph (4)(c), the Call Price, the number of shares of Common Stock deliverable upon redemption of each share of Series C Preferred Stock to be redeemed and, if applicable, the Current Market Price used to calculate such number of shares of Common Stock subject to any subsequent adjustments pursuant to paragraph (4)(d); (iv) whether the Company is delivering shares of Common Stock in lieu of cash (in the case of a conversion pursuant to paragraphs (4)(a) or (4)(b)), the Current Market Price to be used to calculate the number of such shares of Common Stock and, if the Company is delivering shares in respect of less than all the cash that would otherwise be deliverable by the Company upon such conversion, the portion of such cash in lieu of which Common Stock will be delivered; (v) the place or places where certificates for such shares are to be surrendered for redemption or conversion; and (vi) that dividends on the shares of Series C Preferred Stock to be redeemed or converted will cease to accrue on such redemption or automatic conversion date or, in the case of a conversion pursuant to paragraph (4)(b), on the related Settlement Date, unless, in the case of a redemption pursuant to paragraph (4)(c), the Company shall default in delivering the shares of Common Stock and cash, if any, payable by the Company at the time and place specified in such notice. (j) DEPOSIT OF SHARES AND FUNDS. The Company's obligation to deliver shares of Common Stock and provide funds in accordance with this paragraph (4) shall be deemed fulfilled if, on or before a redemption or conversion date or Settlement Date, the Company shall deposit, with a bank or trust company, or an affiliate of a bank or trust company, having an office or agency in New York city and having a capital and surplus of at least $50,000,000, such number of shares of Common Stock as are required to be delivered by the Company pursuant to this paragraph (4) upon the occurrence of the related redemption or conversion (including any payment of cash in lieu of the issuance of fractional share amounts pursuant to paragraph (4)(f)), together with funds (or, in the case of a conversion pursuant to paragraphs (4)(a) or (4)(b), shares of Common Stock and/or funds) sufficient to pay all accrued and unpaid dividends on the shares to be redeemed or converted as required by this paragraph (4), in trust for the account of the holders of the shares to be redeemed LAW2:7499 -31- 32 or converted (and so as to be and continue to be available thereto), with irrevocable instructions and authority to such bank or trust company that such shares and funds be delivered upon redemption or conversion of the shares of Series C Preferred Stock so called for redemption or converted. Any interest accrued on such funds shall be paid to the Company from time to time. Any shares of Common Stock or funds so deposited and unclaimed at the end of two years from such redemption or conversion date shall be repaid and released to the Company, after which the holder or holders of such shares of Series C Preferred Stock so called for redemption or converted shall look only to the Company for delivery of such shares of Common Stock or funds. (k) SURRENDER OF CERTIFICATES; STATUS. Each holder of shares of Series C Preferred Stock to be redeemed or converted shall surrender the certificates evidencing such shares (properly endorsed or assigned for transfer, unless any notice shall state otherwise) to the Company at the place designated in the notice of such redemption or conversion and shall thereupon be entitled to receive certificates evidencing shares of Common Stock and to receive any funds payable pursuant to this paragraph (4) following such surrender and following the date of such redemption or conversion. In case fewer than all the shares represented by any such surrendered certificate are called for redemption, a new certificate shall be issued at the expense of the Company representing the unredeemed shares. If such notice of redemption or conversion shall have been given, and if on the date fixed for redemption or conversion (or on the Mandatory Conversion Date) shares of Common Stock and funds necessary for the redemption or conversion shall have been either set aside by the Company separate and apart from its other funds or assets in trust for the account of the holders of the shares to be redeemed or converted (and so as to be and continue to be available therefor) or deposited with a bank or trust company or affiliate thereof as provided in paragraph (4)(j), or the circumstances described in clause (ii) to the proviso appearing in the third full paragraph of paragraph (4)(a) are in effect, then, notwithstanding that the certificates evidencing any shares of Series C Preferred Stock so called for redemption or subject to conversion shall not have been surrendered, the shares represented thereby so called for redemption or subject to conversion shall be deemed no longer outstanding, dividends with respect to the shares so called for redemption or subject to conversion shall cease to accrue after the date fixed for redemption or conversion or, in the case of a conversion pursuant to paragraph (4)(b), on the related Settlement Date, and all rights with respect to the shares so called for redemption or subject to conversion shall forthwith after such date cease and terminate, except for the right of the holders to receive the shares of Common Stock and funds, if any, payable pursuant to this paragraph (4) without interest upon surrender of their certificates therefor. LAW2:7499 -32- 33 (l) DIVIDEND PAYMENTS. Holders of shares of Series C Preferred Stock at the close of business on a record date for any payment of declared dividends will be entitled to receive the dividend payable on such shares of Series C Preferred Stock on the corresponding Dividend Payment Date notwithstanding the optional conversion of such shares of Series C Preferred Stock following such record date and before such Dividend Payment Date. However, shares of Series C Preferred Stock surrendered for optional conversion pursuant to paragraph 4(n) after the close of business on a record date for any payment of declared dividends and before the opening of business on the next succeeding Dividend Payment Date must be accompanied by payment in cash of an amount equal to the dividend attributable to the current quarterly dividend period payable on such date. Notwithstanding the foregoing, holders of Series C Preferred Stock who convert pursuant to paragraph 4(n) their Series C Preferred Stock at any time after such Series C Preferred Stock have been called for redemption, will be entitled to receive, in addition to shares of Common Stock issuable upon conversion, cash payment of dividends accrued and unpaid to the date of such conversion. Except as set forth in the preceding sentence, upon any optional conversion pursuant to paragraph 4(n) of shares of Series C Preferred Stock, the Company will make no payment of or allowance for accrued and unpaid dividends, whether or not in arrears, on such shares of Series C Preferred Stock, or for previously declared dividends or distributions on the shares of Common Stock issued upon such conversion. (m) PAYMENT OF TAXES. The Company will pay any and all documentary, stamp or similar issue or transfer taxes payable in respect of the issue or delivery of shares of Common Stock on the redemption or conversion of shares of Series C Preferred Stock pursuant to this paragraph (4); provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any registration of transfer involved in the issue or delivery of shares of Common Stock in a name other than that of the registered holder of Series C Preferred Stock redeemed or converted or to be redeemed or converted, and no such issue or delivery shall be made unless and until the person requesting such issue has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid. (n) CONVERSION AT THE OPTION OF THE HOLDER. After 40 days following the latest date of original issuance of the Series C Preferred Stock, the shares of the Series C Preferred Stock are convertible, in whole or in part, at the option of the holders thereof, at any time before the Mandatory Conversion Date, unless previously redeemed, into shares of Common Stock at a rate of 8.85 shares of Common Stock for each share of Series C Preferred Stock (the "Optional Conversion Rate"). The Optional Conversion Rate is subject to adjustment in the same manner as the Common Equivalent Rate, as described in paragraph (4)(d). The right to convert shares of Series C Preferred Stock called for redemption LAW2:7499 -33- 34 will terminate immediately before the close of business on the redemption date with respect to such shares. Conversion of shares of Series C Preferred Stock at the option of the holder may be effected by delivering certificates evidencing such shares of Series C Preferred Stock, together with written notice of conversion and a proper assignment of such certificates to the Company or in blank (and, if applicable, cash payment of an amount equal to the dividend attributable to the current quarterly dividend period payable on such shares), to the office of the transfer agent for Series C Preferred Stock or to any other office or agency maintained by the Company for that purpose and otherwise in accordance with conversion procedures established by the Company. Each optional conversion will be deemed to have been effected immediately before the close of business on the date on which the foregoing requirements have been satisfied. The conversion will be at the Optional Conversion Rate in effect at such time and on such date. 5. LIQUIDATION PREFERENCES. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the holders of shares of Series C Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its shareholders, after payment or provision for payment of any Senior Securities, an amount per share of Series C Preferred Stock in cash equal to the sum of (i) $144.40 plus (ii) all accrued and unpaid dividends thereon to the date of liquidation, dissolution or winding up, before any payment shall be made or any assets distributed to the holders of any of the Junior Securities. If the assets of the Company are not sufficient to pay in full the liquidation payments payable to the holders of outstanding shares of the Series C Preferred Stock and any Parity Securities, then the holders of all such shares shall share ratably in such distribution of assets in accordance with the amount which would be payable on such distribution if the amounts to which the holders of outstanding shares of Series C Preferred Stock and the holders of outstanding shares of such Parity Securities are entitled were paid in full. Except as provided in this paragraph (5)(a), holders of Series C Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Company. (b) For the purposes of this paragraph (5), none of the following shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company: (i) the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company; (ii) the consolidation or merger of the Company with or into one or more other corporations or other associations; (iii) the consolidation or merger of one or more corporations or other associations with or into the Company; LAW2:7499 -34- 35 (iv) the participation by the Company in a share exchange; (v) the division of the Company pursuant to 15 Pa.C.S. Subch. 19D; (vi) the conversion of the Company pursuant to 15 Pa.C.S. Subch. 19E. 6. VOTING RIGHTS. (a) The holders of record of shares of Series C Preferred Stock shall not be entitled to any voting rights except as hereinafter provided in this paragraph (6) or as otherwise provided by law. (b) In the event that dividends payable to the holders of Series C Preferred Stock are in arrears and unpaid for the equivalent of six quarterly periods, the Board of Directors will be increased by two directors and the holders of Series C Preferred Stock, together with the holders of all other outstanding series of the Preferred Stock in respect of which such a default in payment of dividends as described hereinabove exists and is entitled to vote thereon, voting as a single class without regard to series, will be entitled to elect two directors of the expanded Board of Directors. Such entitlement shall continue until such time as all dividends in arrears on all of the Series C Preferred Stock at the time outstanding have been paid or declared and set aside for payment, whereupon such voting rights of the holders of the Series C Preferred Stock shall cease (and the respective terms of the two additional directors shall thereupon expire and the number of directors constituting the full board be decreased by two) subject to being again revived from time to time upon the reoccurrence of the conditions described in this paragraph (6)(b) as giving rise thereto. At any time when the rights of holders of Series C Preferred Stock to elect two additional directors shall have so vested, the Company shall, upon the written request of the holders of record of not less than 10% of the Series C Preferred Stock then outstanding (or 10% of all of the shares of Preferred Stock having the right to vote for such directors in case holders of shares of other series of Preferred Stock shall also have the right to elect directors in such circumstances), call a special meeting of holders of the Series C Preferred Stock (and other series of Preferred Stock, if applicable) for the election of directors. In the case of a written request, the special meeting shall be held within 60 days after the delivery of the request, upon the notice provided by law and in the By-laws of the Company; except that the Company shall not be required to call such a special meeting if the request is received less than 120 days before the date fixed for the next ensuing annual meeting of shareholders of the Company. Whenever the number of directors of the Company shall have been increased by two as provided in this paragraph (6)(b), the number as so increased may thereafter be further increased or decreased in such manner as may be permitted by the By-laws and without the vote of the holders of Series C Preferred Stock. LAW2:7499 -35- 36 No such action shall impair the right of the holders of Series C Preferred Stock to elect and to be represented by two directors as provided in this paragraph (6)(b). The two directors elected as provided in this paragraph (6)(b) shall serve until the next annual meeting of shareholders of the Company and until their respective successors shall be elected and qualified or the earlier expiration of their terms as provided in this paragraph (6)(b). No such director may be removed without the vote of holders of a majority of the shares of Series C Preferred Stock (or holders of a majority of shares of Preferred Stock having the right to vote in the election of such director in case holders of shares of other series of Preferred Stock shall also have the right to elect such director). If, prior to the expiration of the term of any such director, a vacancy in the office of such director shall occur, such vacancy shall, until the expiration of such term, in each case be filled by the remaining director elected as provided in this paragraph (6)(b) or, if none remains in office, by vote of the holders of record of a majority of the outstanding shares of Series C Preferred Stock (or holders of a majority of shares of Preferred Stock who are then entitled to participate in the election of such directors in case holders of shares of other series of Preferred Stock shall also have the right to elect such director). (c) So long as any shares of the Series C Preferred Stock are outstanding (except when notice of the redemption or conversion of all outstanding shares of Series C Preferred Stock has been given pursuant to paragraph (4)(i) and shares of Common Stock and any necessary funds have been deposited in trust for such redemption or conversion pursuant to paragraph (4)(j)), the Company shall not, without the affirmative vote of the holders of at least 66-2/3% of the shares of Series C Preferred Stock and any other series of Preferred Stock entitled to vote thereon at the time outstanding, voting together as one class without regard to series, in person or by proxy, or by resolution adopted at an annual or special meeting called for the purpose, amend pursuant to the provisions of 15 Pa.C.S. Subchapter 19B or in the context of any other type of Fundamental Transaction any of the provisions of the Company's Restated Articles of Incorporation which would either (i) authorize any new class of Senior Securities or (ii) alter or change the rights, preferences or limitations of the Series C Preferred Stock so as to affect such rights, preferences or limitations in any material respect prejudicial to the holders of the Series C Preferred Stock. (d) So long as any shares of the Series C Preferred Stock are outstanding (except when notice of the redemption or conversion of all outstanding shares of Series C Preferred Stock has been given pursuant to paragraph (4)(i) and shares of Common Stock and any necessary funds have been deposited in trust for such redemption or conversion pursuant to paragraph (4)(j)), the Company shall not, without the affirmative vote of the holders of at least a majority of the shares of Series C Preferred Stock and LAW2:7499 -36- 37 any other series of Preferred Stock entitled to vote thereon at the time outstanding voting or consenting, as the case may be, voting together as one class without regard to series, given in person or by proxy, either in writing or by resolution adopted at an annual or special meeting called for the purpose, amend pursuant to the provisions of 15 Pa.C.S. Subchapter 19B or in the context of any other type of Fundamental Transaction any of the provisions of the Company's Restated Articles of Incorporation which would either (i) increase the total number of authorized shares of Preferred Stock or (ii) authorize or create any class of Parity Securities. 7. INCREASE IN SHARES. The number of shares of Series C Preferred Stock may, to the extent of the Company's authorized and unissued Preferred Stock, be increased by further resolution duly adopted by the Board of Directors and the filing of a statement with respect to shares with the Department of State of the Commonwealth of Pennsylvania. 8. LIMITATIONS. Except as may otherwise be required by law, the shares of Series C Preferred Stock shall not have any powers, preferences or relative, participating, optional or other special rights other than those specifically set forth in this Article FIFTH (F) (as such Article FIFTH (F) may be amended from time to time) or otherwise in the Restated Articles of Incorporation of the Company. SIXTH: A. A higher than majority shareholder vote for certain Business Combinations (as defined below) shall be required as follows: (1) In addition to any affirmative vote required by law or these Restated Articles of Incorporation or the terms of any series of Preferred Stock or any other securities of the Company and except as otherwise expressly provided in Section B. of this Article SIXTH: (a) any merger or consolidation of the Company or any Subsidiary with (i) any Interested Stockholder or with (ii) any other corporation (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Stockholder; (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions whether or not related) to an Interested Stockholder (or an Affiliate or Associate of an Interested Stockholder) of any assets of the Company or of a Subsidiary having an aggregate Fair Market Value of $10,000,000 or more; (c) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions whether or not related) to or with the Company or a Subsidiary of any assets of an Interested Stockholder (or an Affiliate or Associate of LAW2:7499 -37- 38 an Interested Stockholder) having an aggregate Fair Market Value of $10,000,000 or more; (d) the issuance or sale by the Company or any Subsidiary (in one transaction or a series of transactions whether or not related) of any securities of the Company or of any Subsidiary to any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder in exchange for cash, securities or other consideration (or a combination thereof) having an aggregate Fair Market Value of $10,000,000 or more except an issuance of securities upon conversion of convertible securities of the Company or of a Subsidiary which were not acquired by such Interested Stockholder (or such Affiliate or Associate) from the Company or a Subsidiary; (e) the adoption of any plan or proposal for the liquidation or dissolution of the Company proposed by or on behalf of any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; or (f) any reclassification of securities (including any reverse stock split), or recapitalization of the Company, or any merger or consolidation of the Company with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Stockholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity securities or securities convertible into equity securities of the Company or any Subsidiary which is directly or indirectly owned by any Interested Stockholder or any Affiliate or Associate of any Interested Stockholder; shall require the affirmative vote of (i) the holders of at least eighty percent (80%) of the combined voting power of the then outstanding shares of capital stock of the Company entitled to vote generally in an annual election of directors (the "Voting Stock") and (ii) the holders of at least a majority of the combined voting power of the then outstanding Voting Stock held by Disinterested Stockholders, in each case voting together as a single class. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law, by any other provisions of these Restated Articles of Incorporation or by the terms of any series of Preferred Stock or any other securities of the Company; (2) The term "Business Combination" as used in this Article SIXTH shall mean any transaction which is referred to in any one or more of clauses (a) through (f) of paragraph (1) of Section A. of this Article SIXTH. LAW2:7499 -38- 39 B. The provisions of Section A. of this Article SIXTH shall not be applicable to any Business Combination, and such Business Combination shall require only such affirmative vote (if any) as is required by law, any other provision of these Restated Articles of Incorporation or the terms of any class or series of capital stock of the Company entitled to a preference over the Common Stock as to dividends or upon liquidation, or the terms of any other securities of the Company, if all of the conditions specified in either of the following paragraphs (1) or (2) are met: (1) The Business Combination shall have been approved by a majority of the Disinterested Directors or (2) All the following six conditions shall have been met - (a) The transaction constituting the Business Combination shall provide for a consideration to be received by holders of Common Stock in exchange for their Common Stock, and the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the highest of the following: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Stockholder which were acquired (x) within the two-year period immediately prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or (y) in the transaction in which it became an Interested Stockholder, whichever is higher; (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"), whichever is higher; and (iii) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to clause (ii) immediately preceding, multiplied by the ratio of (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of Common Stock beneficially owned by the Interested Stockholder which were acquired within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of Common Stock on the first day in such two-year period on which the Interested LAW2:7499 -39- 40 Stockholder beneficially owned any shares of Common Stock, whether or not such Stockholder was an Interested Stockholder on that day. (b) If the transaction constituting the Business Combination shall provide for a consideration to be received by holders of any class of outstanding Voting Stock other than Common Stock, the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of such Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this clause (2)(b) shall be required to be met with respect to every class of outstanding Voting Stock other than Institutional Voting Stock, whether or not the Interested Stockholder beneficially owns any shares of a particular class of Voting Stock): (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of such class of Voting Stock beneficially owned by the Interested Stockholder which were acquired (x) within the two-year period immediately prior to the Announcement Date or (y) in the transaction in which it became an Interested Stockholder, whichever is higher; (ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company; (iii) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and (iv) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant to clause (iii) immediately preceding, multiplied by the ratio of (x) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid in order to acquire any shares of such class of Voting Stock beneficially owned by the Interested Stockholder which were acquired within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of such class of Voting Stock on the first day in such two-year period on which the LAW2:7499 -40- 41 Interested Stockholder beneficially owned any shares of such class of Voting Stock, whether or not such Stockholder was an Interested Stockholder on that day. (c) The consideration to be received by holders of a particular class of Voting Stock (including Common Stock) shall be in cash or in the same form as was previously paid in order to acquire shares of such class of Voting Stock which are beneficially owned by the Interested Stockholder and, if the Interested Stockholder beneficially owns shares of any class of Voting Stock which were acquired with varying forms of consideration, the form of consideration to be received by holders of such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock beneficially owned by it. The prices determined in accordance with clauses (a) and (b) of paragraph (2) of this Section B. shall be subject to an appropriate adjustment in the event of any stock dividend, stock split, subdivision, combination of shares or similar event. (d) After such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (i) except as approved by a majority of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock or other capital stock entitled to a preference over the Common Stock as to dividends or upon liquidation; (ii) except as approved by a majority of the Disinterested Directors, there shall have been (x) no reduction in the annual amount of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock) and (y) no failure to increase the annual amount of dividends as necessary to prevent any such reduction in the event of any reclassification (including any reverse stock split), recapitalization, reorganization or similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock; (iii) such Interested Stockholder shall not have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction in which it became an Interested Stockholder; and (iv) there shall have always been at least three Disinterested Directors on the Board of Directors. LAW2:7499 -41- 42 (e) After such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Company, whether in anticipation of or in connection with such Business Combination or otherwise. (f) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to shareholders at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). C. For the purposes of this Article SIXTH: (1) A "person" shall mean any individual, a partnership, a corporation, an association, a trust or other entity. (2) "Interested Stockholder" at any particular time shall mean any person (other than the Company or any Subsidiary) who or which: (a) is at such time the beneficial owner, directly or indirectly, of five percent (5%) or more of the voting power of the Voting Stock; (b) is an Affiliate of the Company and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of five percent (5%) or more of the voting power of the Voting Stock; or (c) is at such time an assignee of or has otherwise succeeded to the beneficial ownership of any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Stockholder (as defined in C.(2)(a) and (b) above), if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (3) "Disinterested Stockholder" shall mean a shareholder of the Company who is not an Interested Stockholder or an Affiliate or an Associate of an Interested Stockholder. LAW2:7499 -42- 43 (4) A person shall be a "beneficial owner" of any shares of Voting Stock: (a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether or not such right is exercisable immediately) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (c) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. (5) For the purpose of determining whether a person is an Interested Stockholder pursuant to paragraph (2) of this Section C., the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned by an Interested Stockholder through application of paragraph (4) of this Section C. but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise. (6) "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on December 31, 1984 (the term "registrant" in such Rule 12b-2 meaning in this case the Company). (7) "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Company; provided, however, that for the purposes of the definition of Interested Stockholder set forth in paragraph (2) of this Section C. the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the Company. (8) "Disinterested Director" means any member of the Board of Directors who is unaffiliated with, and not a representative or nominee of, an Interested Stockholder and (a) was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, or (b) recommended to succeed a LAW2:7499 -43- 44 Disinterested Director by a majority of the Disinterested Directors then on the Board. (9) "Fair Market Value" means: (a) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotation System or any other system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Disinterested Directors in good faith; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by a majority of the Disinterested Directors in good faith. (10) In the event of any Business Combination in which the Company survives, the phrase "consideration other than cash to be received" as used in paragraph (2) of Section B. of this Article SIXTH shall include the shares of Common Stock and the shares of any other class of outstanding Voting Stock retained by the holders of such shares. (11) The term "class" of Voting Stock shall be deemed to refer to a series of Voting Stock where more than one series of Voting Stock is outstanding within a class of Voting Stock. (12) "Institutional Voting Stock" shall mean any class of Voting Stock which was issued to and continues to be held solely by one or more insurance companies, pension funds, commercial banks, savings banks or similar financial institutions or institutional investors. D. A majority of the Disinterested Directors of the Company shall have the power and duty to determine for the purposes of this Article SIXTH, on the basis of information known to them after reasonable inquiry, (1) whether a person is an Interested Stockholder, (2) the number of shares of Voting Stock beneficially owned by any person, (3) whether a person is an Affiliate or Associate of another, (4) whether the requirements of Section B. of this Article SIXTH have been met with respect to any Business Combination, (5) whether a class of Voting Stock is Institutional Voting Stock and (6) whether the assets which are LAW2:7499 -44- 45 subject to any Business Combination have, or the consideration to be received for the issuance or transfer of securities by this Company or any subsidiary in any Business Combination has, an aggregate Fair Market Value of $10,000,000 or more. Any such determination made in good faith shall be binding and conclusive on all parties. E. Nothing contained in this Article SIXTH shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. F. In addition to any requirements of law and any other provisions of these Restated Articles of Incorporation or the terms of any class or series of capital stock of the Company entitled to a preference over the Common Stock as to dividends or upon liquidation, or the terms of any other securities of the Company (and notwithstanding the fact that a lesser percentage may be specified by law, these Restated Articles of Incorporation or any such terms), the affirmative vote of (1) the holders of eighty percent (80%) or more of the combined voting power of the Voting Stock, voting together as a single class, and (2) a majority of the combined voting power of the Voting Stock held by the Disinterested Stockholders, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision inconsistent with, this Article SIXTH. SEVENTH: A. Except as otherwise fixed by or pursuant to the terms of any class or series of capital stock of the Company entitled to a preference over the Common Stock as to dividends or upon liquidation, the number, qualification, terms of office, manner of election, time and place of meeting, compensation, powers and duties of the directors shall be fixed from time to time by or pursuant to the By-laws. B. If the By-laws so provide, the members of the Board (other than those who may be elected by the holders of any class or series of capital stock having a preference over the Common Stock as to dividends or upon liquidation pursuant to the terms of these Restated Articles of Incorporation or of such class or series of stock) shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, having such terms and being elected in such manner as shall be specified in the By-laws. EIGHTH: In furtherance and not in limitation of the powers conferred upon it by law, the Board of Directors is expressly authorized to: (1) adopt any By-laws a majority of the entire Board of Directors may deem necessary or desirable for the efficient conduct of the affairs of the Company, including, but not LAW2:7499 -45- 46 limited to, provisions governing the conduct of, and the matters which may properly be brought before, meetings of the shareholders and provisions specifying the manner and extent to which prior notice shall be given of the submission of proposals to be considered at any such meeting or of nominations for the election of directors to be held at any such meeting; and (2) repeal, alter or amend the By-laws by the vote of a majority of the entire Board of Directors. NINTH: In addition to any requirements of law and any other provisions of these Restated Articles of Incorporation or the terms of any series of Preferred Stock or any other securities of the Company (and notwithstanding the fact that a lesser percentage may be specified by law, these Restated Articles of Incorporation or any such terms), the affirmative vote of the holders of eighty percent (80%) or more of the combined voting power of the then outstanding shares of capital stock of the Company entitled to vote generally in an annual election (the "Voting Stock"), voting together as a single class, shall be required to: (1) remove a director without cause (For purposes of this Article (NINTH) "cause" shall mean the willful and continuous failure of a director to substantially perform such director's duties to the Company, other than any such failure resulting from incapacity due to physical or mental illness, or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Company); (2) adopt, amend, alter or repeal any provision of the By-laws, except that By-law XVI may be amended or altered by a majority vote of the Voting Stock if the majority of the entire Board of Directors has first recommended the amendment or alteration for approval by the shareholders; (3) amend, alter or repeal or adopt any provision inconsistent with, Articles SEVENTH or EIGHTH or this Article NINTH; and (4) amend, alter or repeal or adopt any provisions inconsistent with any provision, other than Articles SIXTH, SEVENTH or EIGHTH or this Article NINTH, contained in these Restated Articles of Incorporation, unless otherwise first recommended and approved by a majority of the entire Board of Directors or, if there is an Interested Stockholder (as defined in Article SIXTH), by a majority of the Disinterested Directors (as defined in Article SIXTH), in which cases a majority vote of the Voting Stock is required to amend, alter or repeal such other provisions of these Restated Articles of Incorporation. TENTH: To the fullest extent that the law of the Commonwealth of Pennsylvania, as it exists on January 27, 1987, or as it may thereafter be amended, permits the elimination of LAW2:7499 -46- 47 the liability of directors, no director of the corporation shall be liable for monetary damages for any action taken, or any failure to take any action. This Article TENTH shall not apply to any breach of performance of duty or any failure of performance of duty by any director occurring prior to January 27, 1987. No amendment to or repeal of this Article TENTH shall apply to or have any effect on the liability or alleged liability of any director of the Company for or with respect to any act or failure to act on the part of such director occurring prior to such amendment or repeal. ELEVENTH: The Company may, to the fullest extent permitted by applicable law as then in effect, indemnify any person who is or was a director, officer, employee or agent of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) and may take such steps as may be deemed appropriate by the Company, including purchasing and maintaining insurance, entering in to contracts (including, without limitation, contracts of indemnification between the Company and its directors and officers), creating a trust fund, granting security interests or using other means (including, without limitation, a letter of credit) to insure the payment of such amount as may be necessary to effect such indemnification. This Article shall apply to any action taken, or any failure to take any action, on or after January 27, 1987. LAW2:7499 -47- EX-3.B 3 WESTINGHOUSE ELEC. 1 Exhibit 3(b) E. 1. DESIGNATION AND AMOUNT. The shares of this series shall be designated as "Series A Participating Preferred Stock" (the "Series A Preferred Stock"). The par value of each share of Series A Preferred Stock shall be $1.00. The number of shares constituting the Series A Preferred Stock initially shall be 5,000,000; provided, however, that, if more than a total of 5,000,000 shares of Series A Preferred Stock shall be issuable upon the exercise of Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of December 28, 1995, between the Company and First Chicago Trust Company of New York, as Rights Agent (as such agreement may be amended from time to time, the "Rights Agreement"), the Board of Directors of the Company, pursuant to Section 1914(c) and/or Section 1522(b) of the Pennsylvania Business Corporation Law of 1988, as amended (the "Pennsylvania BCL"), and in accordance with the provisions of Article FIFTH of the Restated Articles of Incorporation, shall adopt a resolution or resolutions increasing the previously determined total number of shares of Series A Preferred Stock authorized to be issued (to the extent that the Restated Articles of Incorporation then permit) to the largest number of whole shares (rounded up to the nearest whole number) issuable upon exercise of such Rights and directing that a statement or articles of amendment with respect to such increase in authorized shares for the Series A Preferred Stock be executed and filed with the Department of State of the Commonwealth of Pennsylvania. 2. DIVIDENDS AND DISTRIBUTIONS. (a) Subject to the provisions for adjustment hereinafter set forth, the holders of outstanding shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, (i) a cash dividend in an amount per share (rounded to the nearest cent) equal to 100 times the aggregate per share amount of each cash dividend declared or paid on the Common Stock, $1.00 par value per share, of the Company (the "Common Stock") and any other security ranking junior to the Series A Preferred Stock, and (ii) a preferential cash dividend (the "Preferential Dividends"), if any, in preference to the holders of Common Stock and any other security ranking junior to the Series A Preferred Stock, on the first day of March, June, September and December of each year (each a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, payable in an amount (except in the case of the first Quarterly Dividend Payment if the date of the first issuance of Series A Preferred Stock is a date other than a Quarterly Dividend Payment date, in which case such payment shall be a prorated amount of such amount) equal to $1.00 per share of Series A Preferred Stock less the per share amount of all cash dividends declared on the Series A Preferred Stock pursuant to clause (i) of this sentence since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In addition, in the event the Company shall, at any time after the issuance of any share or fraction of a share of Series A Preferred Stock, pay any dividend or make any distribution on the LAW2:7499 -7- 2 shares of Common Stock of the Company, whether by way of a dividend or a reclassification of stock, a recapitalization, reorganization or partial liquidation of the Company or otherwise, which is payable in cash or any debt security, debt instrument, real or personal property or any other property (other than (x) cash dividends subject to the immediately preceding sentence, (y) a distribution of shares of Common Stock or other capital stock of the Company or (z) a distribution of rights or warrants to acquire any such shares, including as such a right any debt security convertible into or exchangeable for any such shares, at a price less than the Fair Market Value (as hereinafter defined) of such shares on the date of issuance of such rights or warrants), then, and in each such event, the Company shall simultaneously pay on each then outstanding share of Series A Preferred Stock a distribution, in like kind, of 100 times such distribution paid on a share of Common Stock (subject to the provisions for adjustment hereinafter set forth). The dividends and distributions on the Series A Preferred Stock to which holders thereof are entitled pursuant to clause (i) of the first sentence of this paragraph and pursuant to the second sentence of this paragraph are hereinafter referred to as "Dividends" and the multiple of such cash and non-cash dividends and distributions on the Common Stock applicable to the determination of the Dividends, which shall be 100 initially but shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Dividend Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend or make any distribution on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Dividend Multiple thereafter applicable to the determination of the amount of Dividends which holders of shares of Series A Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) The Company shall declare each Dividend at the same time it declares any cash or non-cash dividend or distribution on the Common Stock in respect of which a Dividend is required to be paid. No cash or non-cash dividend or distribution on the Common Stock in respect of which a Dividend is required to be paid shall be paid or set aside for payment on the Common Stock unless a Dividend in respect of such dividend or distribution on the Common Stock shall be simultaneously paid, or set aside for payment, on the Series A Preferred Stock. (c) Preferential Dividends shall begin to accrue on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issuance of such LAW2:7499 -8- 3 shares of Series A Preferred Stock. Accrued but unpaid Preferential Dividends shall cumulate but shall not bear interest. (d) Any dividend payment made on shares of the Series A Preferred Stock shall first be credited against the earliest accrued but unpaid Preferential Dividend due with respect to shares of the Series A Preferred Stock. (e) All dividends paid with respect to shares of the Series A Preferred Stock pursuant to this paragraph 2 shall be paid pro rata on a share-by-share basis to the holders entitled thereto. (f) The holders of shares of Series A Preferred Stock shall not be entitled to receive any dividends or distributions except as provided herein. 3. VOTING RIGHTS. The holders of record of outstanding shares of Series A Preferred Stock shall have the following voting rights: (a) Subject to the provisions for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the holders of the Common Stock. The number of votes which a holder of a share of Series A Preferred Stock is entitled to cast, as the same may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Vote Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend on Common Stock, payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series A Preferred Stock shall be entitled after such event shall be the Vote Multiple immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (b) Except as otherwise provided herein, in the Restated Articles of Incorporation, in the By-laws, or as otherwise provided by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of shareholders of the Company. (c) In the event that the Preferential Dividends payable to the holders of Series A Preferred Stock are in arrears and unpaid for the equivalent of six quarterly periods, the Board of Directors will be increased by two directors and the holders of Series A Preferred Stock, together with the holders of all other outstanding series of LAW2:7499 -9- 4 the Preferred Stock in respect of which such a default in payment of dividends as described hereinabove exists and is entitled to vote thereon, voting as a single class without regard to series, will be entitled to elect two directors of the expanded Board of Directors. Such entitlement shall continue until such time as all dividends in arrears on all of the Series A Preferred Stock at the time outstanding have been paid or declared and set aside for payment, whereupon such voting rights of the holders of the Series A Preferred Stock shall cease (and, unless holders of shares of other series of Preferred Stock shall still have the right to elect such directors, the respective terms of the two additional directors shall thereupon expire and the number of directors constituting the full board be decreased by two) subject to being again revived from time to time upon the reoccurrence of the conditions described in this paragraph (3)(c) as giving rise thereto. At any time when the rights of holders of Series A Preferred Stock to elect two additional directors shall have so vested, the Company shall, upon the written request of the holders of record of not less than 10% of the Series A Preferred Stock then outstanding (or 10% of all of the shares of Preferred Stock having the right to vote for such directors in case holders of shares of other series of Preferred Stock shall also have the right to elect directors in such circumstances), call a special meeting of holders of the Series A Preferred Stock (and other series of Preferred Stock, if applicable) for the election of directors. In the case of a written request, the special meeting shall be held within 60 days after the delivery of the request, upon the notice provided by law and in the By-laws of the Company; except that the Company shall not be required to call such a special meeting if the request is received less than 120 days before the date fixed for the next ensuing annual meeting of shareholders of the Company. Whenever the number of directors of the Company shall have been increased by two as provided in this paragraph (3)(c), the number as so increased may thereafter be further increased or decreased in such manner as may be permitted by the By-laws and without the vote of the holders of Series A Preferred Stock. No such action shall impair the right of the holders of Series A Preferred Stock to elect and to be represented by two directors as provided in this paragraph (3)(c). The two directors elected as provided in this paragraph (3)(c) shall serve until the next annual meeting of shareholders of the Company and until their respective successors shall be elected and qualified or the earlier expiration of their terms as provided in this paragraph (3)(c). No such director may be removed without the vote of holders of a majority of shares of Series A Preferred Stock (or holders of a majority of shares of Preferred Stock LAW2:7499 -10- 5 having the right to vote in the election of such director in case holders of shares of other series of Preferred Stock shall also have the right to elect such director). If, prior to the expiration of the term of any such director, a vacancy in the office of such director shall occur, such vacancy shall, until the expiration of such term, in each case be filled by the remaining director elected as provided in this paragraph (3)(c) or, if none remains in office, by vote of the holders of record of a majority of the outstanding shares of Series A Preferred Stock (or holders of a majority of shares of Preferred Stock who are then entitled to participate in the election of such directors in case holders of shares of other series of Preferred Stock shall also have the right to elect such director). (d) Except as otherwise required by the Articles of Incorporation or By-laws or set forth in this paragraph 3 or in paragraph 13 or as otherwise provided by law, holders of Series A Preferred Stock shall have no other special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for the taking of any corporate action. 4. CERTAIN RESTRICTIONS. (a) Whenever Preferential Dividends or Dividends are in arrears or the Company shall be in default of payment thereof, thereafter and until all accrued and unpaid Preferential Dividends and Dividends, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid or set irrevocably aside for payment in full, and in addition to any and all other rights which any holder of shares of Series A Preferred Stock may have in such circumstances, the Company shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration, any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity as to dividends with the Series A Preferred Stock, unless dividends are paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled if the full dividends accrued thereon were to be paid; (iii) except as permitted by subparagraph (iv) of this paragraph 4(a), redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided that the Company may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Company ranking junior (both as LAW2:7499 -11- 6 to dividends and upon liquidation, dissolution or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, or any shares of stock ranking on a parity with the Series A Preferred Stock (either as to dividends or upon liquidation, dissolution or winding up), except as permitted by subparagraph (iii) of this paragraph 4(a) or in accordance with a purchase offer made to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (b) The Company shall not permit any Subsidiary (as hereinafter defined) of the Company to purchase or otherwise acquire for consideration any shares of stock of the Company unless the Company could, under subparagraph (a) of this paragraph 4, purchase or otherwise acquire such shares at such time and in such manner. A "Subsidiary" of the Company shall mean any corporation or other entity of which securities or other ownership interests entitled to cast at least a majority of the votes that would be entitled to be cast in an election of the board of directors of such corporation or other entity or other persons performing similar functions are beneficially owned, directly or indirectly, by the Company or by any corporation or other entity that is otherwise controlled by the Company. (c) The Company shall not issue any shares of Series A Preferred Stock except upon exercise of Rights issued pursuant to the Rights Agreement, a copy of which is on file with the Secretary of the Company at its principal executive office and shall be made available to shareholders of record without charge upon written request therefor addressed to said Secretary. Notwithstanding the foregoing sentence, nothing contained in the provisions of this Article FIFTH (E) shall prohibit or restrict the Company from issuing for any purpose any series of Preferred Stock with rights and privileges similar to, different from, or greater than, those of the Series A Preferred Stock or, subject to the limitations set forth in paragraph 13, from creating other securities senior to, junior to or on a parity with the Series A Preferred Stock. 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Company in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares upon their retirement and cancellation shall become authorized but unissued shares of Preferred Stock, without designation as to series, and such shares may be redesignated and reissued as part of any series of the Preferred Stock. LAW2:7499 -12- 7 6. LIQUIDATION, DISSOLUTION OR WINDING UP; FAIR VALUE FOR PURPOSES OF PENNSYLVANIA ANTI-TAKEOVER STATUTE. (a) Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, no distribution shall be made (i) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless the holders of shares of Series A Preferred Stock outstanding shall have received out of the assets of the Company available for distribution to its shareholders after payment or provision for payment of any securities ranking senior to the Series A Preferred Stock, for each share of Series A Preferred Stock, subject to adjustment as hereinafter provided, (A) $100.00 plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment or, (B) if greater than the amount specified in clause (i)(A) of this sentence, an amount equal to 100 times the aggregate amount to be distributed per share to holders of Common Stock, as the same may be adjusted as hereinafter provided, and (ii) to the holders of stock ranking on a parity upon liquidation, dissolution or winding up with the Series A Preferred Stock, unless simultaneously therewith distributions are made ratably on the Series A Preferred Stock and all other shares of such parity stock in proportion to the total amounts to which the holders of shares of Series A Preferred Stock are entitled under clause (i)(A) of this sentence and to which the holders of such parity shares are entitled, in each case upon such liquidation, dissolution or winding up. The amount to which holders of Series A Preferred Stock may be entitled upon liquidation, dissolution or winding up of the Company pursuant to clause (i)(B) of the foregoing sentence is hereinafter referred to as the "Participating Liquidation Amount" and the multiple of the amount to be distributed to holders of shares of Common Stock upon the liquidation, dissolution or winding up of the Company applicable pursuant to said clause to the determination of the Participating Liquidation Amount, as said multiple may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the "Liquidation Multiple." In the event the Company shall at any time after January 9, 1996 declare or pay any dividend on Common Stock payable in shares of Common Stock, or effect a subdivision or split or a combination, consolidation or reverse split of the outstanding shares of Common Stock into a greater or lesser number of shares of Common Stock, then, in each such case, the Liquidation Multiple thereafter applicable to the determination of the Participating Liquidation Amount to which holders of Series A Preferred Stock shall be entitled after such event shall be the Liquidation Multiple applicable immediately prior to such event multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Except as provided in this paragraph 6(a), holders of LAW2:7499 -13- 8 Series A Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the Company. (b) For the purposes of this paragraph 6, none of the following shall be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the Company: (i) the voluntary sale, conveyance, lease, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Company; (ii) the consolidation or merger of the Company with or into one or more other corporations or other associations; (iii) the consolidation or merger of one or more corporations or other associations with or into the Company; (iv) the participation by the Company in a share exchange; (v) the division of the Company pursuant to sections 1951 through 1957 of the Pennsylvania BCL; (vi) the conversion of the Company pursuant to sections 1961 through 1966 of the Pennsylvania BCL; (c) Notwithstanding anything to the contrary in this Article FIFTH (E), in case any Controlling Person or Group (as defined from time to time in Section 2543 of the Pennsylvania BCL) shall be required to purchase any shares of Series A Preferred Stock pursuant to Sections 2541 through 2548 of the Pennsylvania BCL, as in effect from time to time, the amount that is determined to represent the "fair value" (as that term is used in such Section 2542 of the Pennsylvania BCL) of such shares shall be an amount per share equal to the Liquidation Multiple then in effect times the aggregate amount per share that such Controlling Person or Group is required to pay to purchase any share of Common Stock pursuant to such Sections 2541 through 2548 of the Pennsylvania BCL. 7. CERTAIN RECLASSIFICATIONS AND OTHER EVENTS. (a) In the event that holders of shares of Common Stock of the Company receive after January 9, 1996 in respect of their shares of Common Stock any share of capital stock of the Company (other than any share of Common Stock of the Company), whether by way of reclassification, recapitalization, reorganization, dividend or other distribution or otherwise (a "Transaction"), then, and in each such event, the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall be adjusted so that after such event the holders of Series A Preferred Stock shall be entitled, in respect of each share of Series A Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such adjustment, to (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such Transaction multiplied by the additional dividends which the holder of a share of Common Stock shall be entitled to receive by virtue of the receipt in the Transaction of such capital stock, LAW2:7499 -14- 9 (ii) such additional voting rights as equal the Vote Multiple in effect immediately prior to such Transaction multiplied by the additional voting rights to which the holder of a share of Common Stock shall be entitled by virtue of the receipt in the Transaction of such capital stock and (iii) such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such Transaction multiplied by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company by virtue of the receipt in the Transaction of such capital stock, as the case may be, all as provided by the terms of such capital stock. (b) In the event that holders of shares of Common Stock of the Company receive after January 9, 1996 in respect of their shares of Common Stock any right or warrant to purchase Common Stock (including as such a right, for all purposes of this paragraph 7(b), any security convertible into or exchangeable for Common Stock) at a purchase price per share less than the Fair Market Value of a share of Common Stock on the date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights and rights upon the liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall each be adjusted so that after such event the Dividend Multiple, the Vote Multiple and the Liquidation Multiple shall each be the product of the Dividend Multiple, the Vote Multiple and the Liquidation Multiple, as the case may be, in effect immediately prior to such event multiplied by a fraction the numerator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the maximum number of shares of Common Stock which could be acquired upon exercise in full of all such rights or warrants and the denominator of which shall be the number of shares of Common Stock outstanding immediately before such issuance of rights or warrants plus the number of shares of Common Stock which could be purchased, at the Fair Market Value of the Common Stock at the time of such issuance, by the maximum aggregate consideration payable upon exercise in full of all such rights or warrants. (c) In the event that holders of shares of Common Stock of the Company receive after January 9, 1996 in respect of their shares of Common Stock any right or warrant to purchase capital stock of the Company (other than shares of Common Stock), including as such a right, for all purposes of this paragraph 7(c), any security convertible into or exchangeable for capital stock of the Company (other than Common Stock), at a purchase price per share less than the Fair Market Value of a share of such capital stock on the date of issuance of such right or warrant, then and in each such event the dividend rights, voting rights and rights upon liquidation, dissolution or winding up of the Company of the shares of Series A Preferred Stock shall each be adjusted so that after such event each holder of a share of LAW2:7499 -15- 10 Series A Preferred Stock shall be entitled, in respect of each share of Series A Preferred Stock held, in addition to such rights in respect thereof to which such holder was entitled immediately prior to such event, to receive (i) such additional dividends as equal the Dividend Multiple in effect immediately prior to such event multiplied, first, by the additional dividends to which the holder of a share of Common Stock shall be entitled upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise, and multiplied again by the Discount Fraction (as hereinafter defined), (ii) such additional voting rights as equal the Vote Multiple in effect immediately prior to such event multiplied, first, by the additional voting rights to which the holder of a share of Common Stock shall be entitled upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise, and multiplied again by the Discount Fraction and (iii) such additional distributions upon liquidation, dissolution or winding up of the Company as equal the Liquidation Multiple in effect immediately prior to such event multiplied, first, by the additional amount which the holder of a share of Common Stock shall be entitled to receive upon liquidation, dissolution or winding up of the Company upon exercise of such right or warrant by virtue of the capital stock which could be acquired upon such exercise, and multiplied again by the Discount Fraction. For purposes of this paragraph, the "Discount Fraction" shall be a fraction the numerator of which shall be the difference between the Fair Market Value of a share of the capital stock subject to a right or warrant distributed to holders of shares of Common Stock of the Company as contemplated by this paragraph 7(c) immediately after the distribution thereof and the purchase price per share for such share of capital stock pursuant to such right or warrant and the denominator of which shall be the Fair Market Value of a share of such capital stock immediately after the distribution of such right or warrant. (d) For purposes of this Article FIFTH (E), the "Fair Market Value" of a share of capital stock of the Company (including a share of Common Stock) on any date shall be deemed to be the average of the daily closing price per share thereof over the 30 consecutive Trading Days (as such term is hereinafter defined) immediately prior to such date; provided, however, that in the event that such Fair Market Value of any such share of capital stock is determined during a period which includes any date that is within 30 Trading Days after (i) the ex-dividend date for a dividend or distribution on stock payable in shares of such stock or securities convertible into shares of such stock, or (ii) the effective date of any subdivision, split, combination, consolidation, reverse stock split or reclassification of such stock or division of the Company pursuant to Sections 1951 through 1957 of the Pennsylvania BCL, then, and in each such case, the Fair Market Value shall be appropriately adjusted by the Board of Directors of the Company LAW2:7499 -16- 11 to take into account ex-dividend or post-effective date trading. The closing price for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way (in either case, as reported in the applicable transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange), or, if the shares are not listed or admitted to trading on the New York Stock Exchange, as reported in the applicable transaction reporting system with respect to securities listed on the principal national securities exchange on which the shares are listed or admitted to trading or, if the shares are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by The Nasdaq Stock Market or such other system then in use, or if on any such date the shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the shares selected by the Board of Directors of the Company. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the shares are listed or admitted to trading is open for the transaction of business or, if the shares are not listed or admitted to trading on any national securities exchange, on which the New York Stock Exchange or such other national securities exchange as may be selected by the Board of Directors of the Company is open. If the shares are not publicly held or not so listed or traded on any day within the period of 30 Trading Days applicable to the determination of Fair Market Value thereof as aforesaid, "Fair Market Value" shall mean the fair market value thereof per share as determined in good faith by the Board of Directors of the Company. In either case referred to in the foregoing sentence, the determination of Fair Market Value shall be described in a statement filed with the Secretary of the Company. 8. CONSOLIDATION, MERGER, ETC. In case the Company shall enter into any consolidation, merger, division, share exchange, combination, sale of all or substantially all of the Company's assets, or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each outstanding share of Series A Preferred Stock shall at the same time be similarly exchanged for or changed into the aggregate amount of stock, securities, cash and/or other property (payable in like kind), as the case may be, for which or into which each share of Common Stock is changed or exchanged multiplied by the highest of the Vote Multiple, the Dividend Multiple or the Liquidation Multiple in effect immediately prior to such event; provided, however, no fractional share or scrip representing fractional shares of any other stock or securities shall be issued. Instead of any fractional interest in a share of such other stock or securities which would otherwise be LAW2:7499 -17- 12 deliverable pursuant to this paragraph 8, the Company will pay to the holder thereof an amount in cash (computed to the nearest cent) equal to the same fraction of the Fair Market Value of a share of such other stock or security. 9. EFFECTIVE TIME OF ADJUSTMENTS. (a) Adjustments to the Series A Preferred Stock required by the provisions hereof shall be effective as of the time at which the event requiring such adjustments occurs. (b) The Company shall give prompt written notice to each holder of a share of outstanding Series A Preferred Stock of the effect of any adjustment to the voting rights, dividend rights or rights upon liquidation, dissolution or winding up of the Company of such shares required by the provisions hereof. Notwithstanding the foregoing sentence, the failure of the Company to give such notice shall not affect the validity of or the force or effect of or the requirement for such adjustment. 10. NO REDEMPTION. The shares of Series A Preferred Stock shall not be redeemable at the option of the Company or any holder thereof. Notwithstanding the foregoing sentence of this paragraph, the Company may acquire shares of Series A Preferred Stock in any other manner permitted by law, the provisions hereof and the Restated Articles of Incorporation. 11. RANKING. The Series A Preferred Stock shall rank senior to the Common Stock and, unless otherwise provided in a Statement with Respect to Shares or an amendment to the Restated Articles of Incorporation relating to the determination of a subsequent series of preferred stock of the Company, the Series A Preferred Stock shall rank junior to all other series of the Company's preferred stock, including the Series C Conversion Preferred Stock, as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up. 12. LIMITATIONS. Except as may otherwise be required by law, the shares of Series A Preferred Stock shall not have any powers, preferences or relative, participating, optional or other special rights other than those specifically set forth in this Article FIFTH (E) (as such may be amended from time to time) or otherwise in the Restated Articles of Incorporation. 13. AMENDMENT. So long as any shares of the Series A Preferred Stock are outstanding, the Company shall not amend this Article FIFTH (E) or the Restated Articles of Incorporation in any manner which would alter or change the rights, preferences or limitations of the Series A Preferred Stock so as to affect such rights, preferences or limitations in any material respect prejudicial to the holders of the Series A Preferred Stock without, in addition to any other vote of shareholders required by law, the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series A Preferred Stock, voting together as a single class; provided, however, that the creation of another series of the Preferred Stock ranking senior to or on a parity with the Series A Preferred Stock as to the payment of dividends or the distribution of assets or liquidation, dissolution or winding up shall not be deemed to be prejudicial to the holders of the Series A Preferred Stock for the purposes of this paragraph 13. LAW2:7499 -18- EX-3.C 4 WESTINGHOUSE ELEC. 1 Exhibit 3(c) BY-LAWS OF WESTINGHOUSE ELECTRIC CORPORATION ______________ AS AMENDED TO DECEMBER 28, 1995 ______________ 2 TABLE OF CONTENTS
Page ---- Article I Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 1 Article II Board of Directors - Committees - Their Powers and Duties . . . . . . . . . . . . . . . . . . . . . . . . . 7 Article III Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Article IV Election and Term of Chairman of the Board and Officers . . . . . . . . . . . . . . . . . . . . . . . . . 11 Article V Meetings of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Article VI Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Article VII President; Chief Executive Officer . . . . . . . . . . . . . . . . . . . 16 Article VIII Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Article IX Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Article X Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Article XI Assistant Secretary, Assistant Treasurer, Assistant Controller and Other Officers . . . . . . . . . . . . . . . . . 20 Article XII Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Article XIII Certificates of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Article XIV Transfers of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Article XV Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Article XVI Employees' Stock Purchases and Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Article XVII Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Article XVIII Director Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Article XIX Pennsylvania Opt Out . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Article XX Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Article XXI Confidentiality in Voting . . . . . . . . . . . . . . . . . . . . . . . . 37 Article XXII Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
-i- 3 BY-LAWS OF WESTINGHOUSE ELECTRIC CORPORATION __________ ARTICLE I. Meetings of Shareholders The annual meeting of the shareholders of the Company shall be held on such date and at such hour as the Board of Directors may designate and on any subsequent day or days to which such meeting may be adjourned, for the purpose of electing directors and for the transaction of such other business as may lawfully come before the meeting. If for any reason the annual meeting shall not have been held on the day designated by the Board or on the day specified above, the Board of Directors shall cause the annual meeting to be called and held as soon thereafter as may be convenient. Special meetings of the shareholders of the Company may be called by the Board of Directors or by the Chairman to be held on such date as the Board or the Chairman shall determine. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of the meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise brought before the meeting by -1- 4 or at the direction of the Board of Directors or (iii) brought before the meeting by a shareholder in accordance with the procedure set forth below. For business to be properly brought before an annual meeting by a shareholder, the shareholder must be entitled by Pennsylvania law to present such business and must have given written notice of such business, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Company, not later than 90 days in advance of such meeting; provided, however, that if such annual meeting of shareholders is held on a date other than the last Wednesday of April, such written notice must be given within ten days after the first public disclosure, which may include any public filing by the Company with the Securities and Exchange Commission, of the date of the annual meeting. Any such notice shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, and in the event that such business includes a proposal to amend the By-laws of the Company, the language of the proposed amendment, (b) the name and address of the shareholder proposing such business, (c) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business and (d) any material interest of any shareholder in such business. No business shall be -2- 5 conducted at an annual meeting except in accordance with this paragraph, and the chairman of any annual meeting of shareholders may refuse to permit any business to be brought before such annual meeting without compliance with the foregoing procedures. Subject to the rights of the holders of any class or series of stock having a preference over the Common Stock of the Company as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or by any shareholder entitled to vote for the election of directors. Any shareholder entitled to vote for the election of directors may nominate at a meeting persons for election as directors only if written notice of such shareholder's intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Company not later than (i) with respect to an election to be held at an annual meeting of shareholders, 90 days in advance of such meeting (provided that if such annual meeting of shareholders is held on a date other than the last Wednesday of April, such written notice must be given within ten days after the first public disclosure, which may include any public filing by the Company with the Securities and Exchange Commission, of the date of the annual meeting), and (ii) with respect to an election to be held at a special meeting of shareholders for the election of directors, the close of business on the seventh day following the date on which notice of such meeting is first -3- 6 given to shareholders. Each such notice shall set forth: (a) the name and address of the shareholder who intends to make the nomination and of each person to be nominated; (b) a representation that the shareholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice as directors; (c) a description of all arrangements or understandings between the shareholder and each proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (d) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission were such nominee to be nominated by the Board of Directors; and (e) the consent of each proposed nominee to serve as a director of the Company if so elected. The chairman of any meeting of shareholders to elect directors may refuse to permit the nomination of any person to be made without compliance with the foregoing procedure. Every meeting of the shareholders, annual or special, shall be held at such place within or without the Commonwealth of Pennsylvania as the Board of Directors may designate or, in the absence of such designation, at the registered office of the Company in the Commonwealth of Pennsylvania. -4- 7 Written notice of every meeting of the shareholders shall be given by, or at the direction of, the person authorized to call the meeting, to each shareholder of record entitled to vote at the meeting, at his address appearing on the books of the Company. The notice of every meeting of the shareholders shall specify the place, day and hour of the meeting and, in the case of a special meeting, the matter or matters to be acted upon at such meeting. Only the matter or matters specified in the notice of a special meeting shall be acted upon thereat. All notices of meetings of the shareholders shall be provided in accordance with Pennsylvania law. The notice of every meeting of the shareholders may be accompanied by a form of proxy approved by the Board of Directors in favor of such person or persons as the Board of Directors may select. Except as otherwise provided by law or by the Restated Articles of the Company, as from time to time amended, (hereinafter called the Articles of the Company) or by these By-laws, the presence in person or by proxy of shareholders entitled to cast at least a majority of the votes that all shareholders are entitled to cast on a particular matter shall constitute a quorum at the meeting of shareholders, and all questions shall be decided by a majority of the votes cast, in person or by proxy, at a duly organized meeting by the holders of shares entitled to vote thereon. The shareholders present at any duly organized meeting may continue to do business until -5- 8 adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Any meeting of the shareholders may be adjourned from time to time, without notice other than by announcement at the meeting at which such adjournment is taken, and at any such adjourned meeting at which a quorum shall be present any action may be taken that could have been taken at the meeting originally called; provided that any meeting at which directors are to be elected shall be adjourned only from day to day, or for such longer periods, not exceeding fifteen days each, as the holders of a majority of the shares present in person or by proxy shall direct, until such directors have been elected. If a meeting cannot be organized because of lack of a quorum, those present may, except as otherwise provided by law, adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of directors those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors. At each meeting, each shareholder entitled to vote may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact and filed with the Secretary of the Company. Except as otherwise provided by law or the Articles of the Company or these By-laws, each holder of record of shares of any class of the Company shall be entitled -6- 9 to one vote, on each matter submitted to a vote at a meeting of the shareholders, and in respect of which shares of such class shall be entitled to be voted, for every share of such class standing in his name on the books of the Company. ARTICLE II. Board of Directors - Committees - Their Powers and Duties The business, affairs and property of the Company shall be managed and controlled by a Board of Directors, which, except as otherwise provided by law or the Articles of the Company, shall exercise all the powers of the Company. The number, qualifications, manner of election, time and place of meeting, compensation and powers and duties of the directors of the Company shall be fixed from time to time by or pursuant to these By-laws. Nominees for election to the Board of Directors who qualify as Independent Directors on the date of their nomination shall be such that the majority of all directors holding office immediately after such nomination, assuming the election of such nominees, shall be Independent Directors. The number of directors which shall constitute the Board of Directors shall be fixed from time to time by a vote of a majority of the Board of Directors, provided, however, that the number of directors of the Company shall be not less than three nor more than twenty-four. The shareholders shall, at each -7- 10 annual meeting, elect directors, each of whom shall serve until the annual meeting of shareholders next following his election and until his successor is elected and shall qualify; provided, however, that directors with terms expiring at the annual meetings of shareholders to be held in 1994 and 1995 shall serve until the expiration of their respective terms. Each election of directors by the shareholders shall be conducted by one or three judges of election appointed by the Board of Directors in advance of the meeting to act at that meeting and at any adjournment thereof. If any or all of such appointees shall fail to appear or fail or refuse to act, the vacancy or vacancies shall be filled by the Board of Directors or the presiding officer of the meeting. No person who is a candidate for office to be filled at the meeting shall act as a judge. Except as the law may otherwise provide, the shareholders shall not remove any director from office without assigning any cause (as such term is defined in the Articles of Incorporation) prior to the expiration of the term of office unless holders of at least 80% of the shares of capital stock of the Company entitled to vote thereon, vote to remove the director from office. In case of any vacancy in the Board of Directors through death, resignation, disqualification, removal, increase in the number of directors or other cause, the remaining directors, though less than a quorum, by affirmative vote of a majority -8- 11 thereof or by a sole remaining director, may fill such vacancy to serve for the balance of the unexpired term and until his successor shall have been elected and qualified; provided, however, that any director elected to fill a vacancy for a director having a term expiring at the annual meeting of shareholders to be held in 1994 or 1995 shall serve only until the annual election of shareholders next following his election. There shall be a Compensation Committee, an Audit Review Committee, a Committee on Environment and Health, and a Nominating and Governance Committee. The Compensation Committee may determine to retain an independent compensation consultant to assist it in carrying out its duties. Each of these committees shall consist of not less than three members of the Board of Directors, at least three of whom, on the date of their appointment to the committee, are Independent Directors. All members of the Compensation Committee and the Nominating and Governance Committee must, on the date of their appointment to said committee, be Independent Directors. With respect to each such committee, the Board of Directors shall, by one or more resolutions adopted by a majority of the whole Board, determine the duties and responsibilities, determine the number of members, appoint the members and the committee chair and fill each vacancy occurring in the membership. The Board of Directors may from time to time appoint such further standing or special committees as it may deem in the best interest of the Company, but no such committee shall have -9- 12 any powers, except such as are expressly conferred upon it by the Board. Each committee referred to in this Article II shall act only as a committee and the individual members shall have no power as such. Each director shall be entitled to receive from the Company such annual and meeting fees as the Board of Directors shall from time to time determine and to be reimbursed for his reasonable expenses in connection with attendance at meetings. Nothing herein contained shall preclude any director from serving the Company or its subsidiaries in any other capacity and receiving compensation therefor. For purposes of this Article II, the term "Independent Director" shall mean a director who: (a) is not and has not been employed by the Company or a subsidiary in an executive capacity within the five years immediately prior to the annual meeting at which he will be voted upon; (b) is not an employee or five percent or more owner of an entity that is a regular advisor or consultant to the Company or its subsidiaries; (c) is not an employee or five percent or more owner of a significant customer or supplier of the Company or its subsidiaries; (d) does not have a personal services contract with the Company or its subsidiaries; (e) is not employed by a tax-exempt organization that receives significant contributions from the Company or its subsidiaries; and (f) is not a spouse, parent, sibling, child, parent-in-law, brother or sister-in-law or son or daughter-in-law of an officer of the Company. -10- 13 The Board of Directors shall have the exclusive right and power to interpret and apply the provisions of this Article II, including, without limitation, the adoption of written definitions of terms used in and guidelines for its application (any such definitions and guidelines shall be filed with the Secretary, and such definitions and guidelines as may prevail shall be made available to any shareholder upon written request). Any such definitions or guidelines and any other interpretation or application of the provisions of this Article II made in good faith shall be binding and conclusive. ARTICLE III. Contributions The Board of Directors shall have the power, at any time and from time to time, to make contributions and donations for the public welfare or for religious, charitable, scientific or educational purposes. ARTICLE IV. Election and Term of Chairman of the Board and Officers The Board of Directors shall elect a Chairman of the Board, who may be designated an officer of the Company, a President or a Chief Executive Officer or both, such Vice Presidents as may from time to time be necessary or desirable, a Secretary, a Treasurer and a Controller. There shall also be one or more -11- 14 assistant secretaries, treasurers and controllers and such other officers and assistant officers as the Board may deem appropriate. The Board of Directors shall elect and fix the compensation of all officers, except assistant officers. The term of office for all officers shall be until the organization meeting of the Board of Directors following the next annual meeting of shareholders and until their respective successors are elected or appointed and shall qualify, or until their earlier death, resignation or removal. The Chairman of the Board or any officer may be removed from office, either with or without cause, at any time by the affirmative vote of the majority of the members of the Board then in office. A vacancy in any office arising from any cause may be filled for the unexpired term by the Board. ARTICLE V. Meetings of Directors Regular meetings of the Board of Directors shall be held without notice at such place or places either within or without the Commonwealth of Pennsylvania, at such hour and on such day as may be fixed by resolution of the Board of Directors. The Board of Directors shall meet for organization at its first regular meeting after the annual meeting of shareholders or at a special meeting of the Board of Directors called after the annual meeting of shareholders and prior to said first regular meeting. If no special meeting of the Board of -12- 15 Directors for organization shall be called, all provisions of these By-laws in respect of notice of special meetings of the Board of Directors shall apply to the first regular meeting of the Board of Directors held after the annual meeting of shareholders. Special meetings of the Board of Directors shall be held, whenever called by the Chairman or by four directors or by resolution adopted by the Board of Directors, at such place or places either within or without the Commonwealth of Pennsylvania as may be stated in the notice of the meeting. Notice of the time and place of all special meetings of the Board of Directors, and notice of any change in the time or place of holding the regular meetings of the Board of Directors, shall be given to each director in person, by telephone, or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission, or by any type of electronic communication to the address (or to the telephone, telex, TWX, fax or other number or address) supplied by the director to the Corporation for the purpose of notice at least one day before the day of the meeting; provided, however, that notice of any meeting need not be given to any director if waived by such director in writing, whether before or after the time stated therein, or if such director shall be present at the beginning of such meeting and does not object to the transaction -13- 16 of business because the meeting was not lawfully called or convened. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the director when deposited in the United States mail or with a telegraph office or courier service for delivery to the director or, in the case of telex, TWX, fax or other electronic communication, it shall be deemed to have been given to the director when dispatched. In the absence of any resolution of the Board of Directors or any committee governing rules of procedure to the contrary, notice of meetings of any committee referred to or provided for in these By-laws shall follow the same procedures as those set forth in these By-laws for meetings of the Board of Directors. Except as otherwise provided in these By-laws, a majority of the directors in office shall constitute a quorum of the Board competent to transact business; but a lesser number may adjourn from day to day until a quorum is present. Except as otherwise provided in these By-laws, all questions shall be decided by a vote of a majority of the directors present. All or any number less than all of the directors may participate in a meeting of the Board of Directors or of a committee of the Board of Directors by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Each committee referred to or provided for in these By-laws shall have authority, except as may otherwise be required by law -14- 17 or by resolution of the Board of Directors, to fix its own rules of procedure and to meet where and as provided by such rules. The presence at any meeting of any such committee of a majority of the members, including alternate members thereof, shall be necessary to constitute a quorum for the transaction of business and in every case the affirmative vote of a majority of such members present at any meeting shall be necessary for the adoption of any resolution of such committee. In the absence or disqualification of any member of such committee or committees, the member or members thereof, including alternate members, present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another director to act at the meeting in the place of any such absent or disqualified member. ARTICLE VI. Chairman of the Board The Chairman of the Board shall preside at all meetings of the Board of Directors at which he is present and shall call meetings of the Board and Board Committees when he deems them necessary. Unless otherwise precluded from doing so by these By-laws, he may be a member of the committees of the Board. He shall act as chairman at all meetings of the shareholders at which he is present unless he elects that the Chief Executive Officer shall so preside. The Chairman of the Board may be designated by the Board as an officer of the Company and may be -15- 18 elected by the Board as the Chief Executive Officer. The Chairman of the Board shall perform all duties as may be assigned to him by the Board of Directors. ARTICLE VII. President; Chief Executive Officer The President shall have such powers and duties as may, from time to time, be prescribed by the Board of Directors or the Chairman of the Board. Unless the Board of Directors shall otherwise direct, the President shall be the Chief Executive Officer of the Company. In the absence of the Chairman of the Board, the President or, if none, the Chief Executive Officer shall perform the duties and have the powers of the Chairman of the Board, as determined by the Board of Directors. The Chief Executive Officer shall have general charge of the affairs of the Company, subject to the control of the Board of Directors. He may appoint all officers and employees of the Company for whose election no other provision is made in these By-laws, and may discharge or remove any officer or employee, subject to action thereon by the Board of Directors as required by these By-laws. He shall be the officer through whom the Board delegates authority to corporate management, and shall be responsible to see that all orders and resolutions of the Board are carried into effect by the proper officers or other persons. He shall also perform all duties as may be assigned to him by the Board of Directors. -16- 19 ARTICLE VIII. Secretary The Secretary shall attend meetings of the shareholders and the Board of Directors, shall keep minutes thereof in suitable books, and shall send out all notices of meetings as required by law or by these By-Laws. He shall, in general, perform all duties incident to the office of the Secretary and perform such other duties as may be assigned to him by the Board, the Chairman of the Board or the President. ARTICLE IX. Treasurer The Treasurer shall have custody of, and shall manage and invest, all moneys and securities of the Company, and shall have such powers and duties as generally pertain to the office of Treasurer. To the extent not invested, the Treasurer shall deposit all moneys in such banks or other places of deposit as the Board of Directors may from time to time designate or as may be designated by any officer or officers of the Company so authorized by resolution of the Board of Directors. Unless otherwise provided by the Board of Directors, all checks, drafts, notes and other orders for the payment of money from a disbursing account shall be signed by the Treasurer or such person or persons as may be designated by name by the Treasurer -17- 20 in writing. The Treasurer's signature and, if authorized by the Treasurer in writing, the signature of such person or persons as may be designated by the Treasurer as provided above, to a check, draft, note or other order for the payment of money from a disbursing account may be by facsimile or other means. Procedures for withdrawal of moneys from accounts other than disbursing accounts shall require the approval and signature of the Treasurer, an assistant treasurer or such person or persons as may be designated by name by the Treasurer in writing and also of the Controller, an assistant controller or such person or persons as may be designated by name by the Controller in writing. The Treasurer shall have such other powers and perform such other duties as may be assigned by the Board of Directors. The Chief Financial Officer of the Company shall have all of the powers granted to the Treasurer under these by-laws, including the power to sign any check, draft, note or other order for the payment of money from a disbursing account, including by facsimile signature or other means. ARTICLE X. Controller The Controller shall have general charge of the Accounting Department of the Company and its controlled companies. He shall prescribe and supervise a system of accounting and -18- 21 internal auditing that shall be adopted and followed by the Company and its controlled companies. He, or some other person or persons designated by him by name, in writing, shall prepare and certify all vouchers and payrolls. As provided in Article IX, procedures for withdrawal of moneys from accounts other than disbursing accounts shall require the approval and signature of the Controller, an assistant controller or such person or persons as may be designated by name by the Controller in writing. The Controller shall at the close of each month present for the information of the Board of Directors a complete statement of the Company's financial affairs and of its operations for the preceding month and for the months elapsed since the commencement of the fiscal year. He shall also present full statements of the properties owned and controlled by the Company, under appropriate headings, as the Board of Directors may at any time require. He shall carefully preserve and keep in his custody in the office of the Company, contracts, leases, assignments and other valuable instruments in writing. He shall be charged with the duty of verification of all property of the Company and of its controlled companies and the supervision of the taking of all inventories. -19- 22 ARTICLE XI. Assistant Secretary, Assistant Treasurer, Assistant Controller and Other Officers In the event of the absence or inability to serve of the Secretary, an assistant secretary shall perform all the duties of the Secretary; in the event of the absence or inability to serve of the Treasurer, an assistant treasurer shall perform all the duties of the Treasurer; and in the event of the absence or inability to serve of the Controller, an assistant controller shall perform all the duties of the Controller. The powers and duties of other officers of the Company shall be such as may, from time to time, be prescribed by the Board of Directors, the Chairman of the Board, the President or the Chief Executive Officer. In case of the absence of any officer of the Company, or for any other reason that the Board of Directors may deem sufficient, the Board, or in the absence of action by the Board, the Chief Executive Officer, or in his absence, the President, or in his absence, the Chairman of the Board, may delegate for the time being the powers and duties of any officer to any other officer or to any director. -20- 23 ARTICLE XII. Corporate Seal The Company shall have a corporate seal, which shall contain within a circle the name of the Company, together with the following: "Incorporated 1872". ARTICLE XIII. Certificates of Stock The shares of stock of the Company shall be represented by certificates of stock, signed by the President or one of the Vice Presidents or other officer designated by the Board of Directors, countersigned by the Treasurer or an assistant treasurer and sealed with the corporate seal of the Company; and if such certificates of stock are signed or countersigned by a corporate transfer agent or a corporate registrar of this Company, such signature of the President, Vice President or other officer, such counter-signature of the Treasurer or assistant treasurer, and such seal, or any of them, may be executed in facsimile, engraved or printed. ARTICLE XIV. Transfers of Stock Transfers of shares of stock of the Company shall be made on the books of the Company by the holder of record thereof or his legal representative, acting by his attorney-in-fact duly authorized by written power of attorney filed with the Secretary -21- 24 of the Company, or with one of its transfer agents, and on surrender for cancellation of the certificate or certificates for such shares. Except as otherwise provided in these By-laws, the person in whose name shares of stock stand on the books of the Company shall be deemed the owner thereof for all purposes as regards the Company. The Company may have one or more transfer offices of agencies and registrars for the transfer and registration of shares of stock of the Company. The Board of Directors may fix in advance a time, which shall not be more than ninety days prior to the date of any meeting of shareholders, or the date for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date, for the determination of the shareholders entitled to notice of, or to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of shares; and in such case only shareholders of record at the time so fixed as a record date shall be entitled to notice of, or to vote at, such meeting or to vote at any adjournment thereof, or to receive payment of such dividend or distribution, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of stock on the books of the Company after any such record date fixed as aforesaid. -22- 25 ARTICLE XV. Fiscal Year The fiscal year of the Company shall be the calendar year. ARTICLE XVI. Employees' Stock Purchases and Stock Option Plans Shares of Common Stock of the Company may be reserved, from time to time, by the Board of Directors for offering for sale, pursuant to one or more plans, to employees, including assistant officers, of the Company and to employees, including officers, of its subsidiaries, on an installment payment basis, either by deductions from pay or by direct cash payments, or otherwise. Shares so reserved may be offered for sale, from time to time, pursuant to such plan or plans, but may be issued only after completion of payment therefor. Except for shares acquired pursuant to a plan for the deferral of director fees, directors, other than employee directors, will not be eligible to purchase shares hereunder. The Board of Directors may determine, with respect to any plan, the class or classes of employees eligible to participate therein, the number of shares to be offered, the number of shares which the respective employees may elect to purchase (which may, but need not, be fixed in proportion to their compensation) and the price at which the shares will be offered for sale. The price so determined by the Board (i) may be a fixed price, or (ii) may be a price determined by the average -23- 26 market price of the shares for a designated period or periods, or (iii) may be a price less than such average market price by a fixed amount or a specified percentage thereof. In any event, the price determined by the Board shall not be less than the par value of the shares. Each such plan shall set forth the terms and conditions upon which an employee may elect to purchase shares thereunder, upon which any such election may be cancelled by the employee or terminated by the Company, and upon which funds credited to the employee's account shall be refunded to him or applied to the purchase of shares. Subject to the foregoing, the Board of Directors may prescribe the terms and conditions of each plan. Shares of Common Stock of the Company may also be reserved, from time to time, by the Board of Directors for sale upon the exercise of options granted pursuant to one or more plans to officers and other employees of the Company and its subsidiaries, but not including any director who is not also such an officer or employee. Any such plan shall be administered by a committee consisting of three or more members of the Board of Directors who are not eligible to receive options under the plan. The members of any such committee shall be appointed by the Board of Directors and shall have plenary authority to determine the individuals to whom and the time or times at which options shall be granted; to determine the number of shares to be subject to each option; to determine the -24- 27 duration of such options; to determine the purchase price of the Common Stock under any such option, which may be less than the fair market value of the stock at the time of the granting of the option and which, upon the exercise of any option, shall be paid in full with respect to the shares then purchased under such option; to determine the terms and provisions of the respective option agreements, which need not be identical, and which may include such terms and provisions as shall be necessary or desirable under tax law and to make such other determinations as shall be deemed to be necessary or advisable for the administration of such plan. Any such plan shall contain such other terms and conditions as the Board of Directors may prescribe. ARTICLE XVII. Indemnification A. Indemnification Provisions Applicable to Proceedings Not Covered by Section B. of this Article. Every person who is or was a director, officer or employee of the Company, or of any other corporation which he serves or served as such at the request of the Company, shall, in accordance with this Article XVII but not if prohibited by law, be indemnified by the Company as hereinafter provided against reasonable expense and any liability paid or incurred by him in connection with or resulting from any threatened or actual claim, action, suit or proceeding (whether brought by or in the -25- 28 right of the Company or such other corporation or otherwise), civil, criminal administrative or investigative, in which he may be involved, as a party or otherwise, by reason of his being or having been a director, officer or employee of the Company or such other corporation, whether or not he continues to be such at the time such expense or liability shall have been paid or incurred. As used in this Article XVII, the term "expense" shall mean counsel fees and disbursements and all other expenses (except any liability) relating to any such claim, action, suit or proceeding, and the term "liability" shall mean amounts of judgments, fines or penalties against, and amounts paid in settlement by, a director, officer or employee with respect to any such claim, action, suit or proceeding. Any person referred to in the first paragraph of this Article XVII who has been wholly successful, on the merits or otherwise, with respect to any claim, action, suit or proceeding of the character described in such first paragraph shall be reimbursed by the Company for his reasonable expense. Any other person claiming indemnification under the first paragraph of this Article XVII shall be reimbursed by the Company for his reasonable expense and for any liability (other than any amount paid to the Company) if a Referee shall deliver to the Company his written finding that such person acted, in good faith, in what he reasonably believed to be the best interests of the Company, and in addition with respect to any -26- 29 criminal action or proceeding, reasonably believed that his conduct was lawful. The termination of any claim, action, suit or proceeding by judgment, settlement (whether with or without court approval), adverse decision or conviction after trial or upon a plea of guilty or of nolo contendere, or its equivalent, shall not create a presumption that a director, officer or employee did not meet the foregoing standards of conduct. The person claiming indemnification shall at the request of the Referee appear before him and answer questions which the Referee deems relevant and shall be given ample opportunity to present to the Referee evidence upon which he relies for indemnification; and the Company shall, at the request of the Referee, make available to the Referee facts, opinions or other evidence in any way relevant for his finding which are within the possession or control of the Company. As used in this Article XVII, the term "Referee" shall mean independent legal counsel (who may be regular counsel of the Company), or other disinterested person or persons, selected to act as such hereunder by the Board of Directors of the Company, whether or not a disinterested quorum exists. Any expense incurred with respect to any claim, action, suit or proceeding of the character described in the first paragraph of this Article XVII may be advanced by the Company prior to the final disposition thereof upon receipt of an undertaking made by or on behalf of the recipient to repay such amount if it is -27- 30 ultimately determined that he is not indemnified under this Article XVII. The rights of indemnification provided in this Article XVII shall be in addition to any rights to which any such director, officer or employee may otherwise be entitled by contract or as a matter of law and, in the event of such person's death, such rights shall extend to his heirs and legal representatives. B. Indemnification Provisions Applicable to Proceedings Based on Acts or Omissions on or after January 27, 1987. SECTION 1. Right to Indemnification and Effect of Amendments. (a) Right to Indemnification. The Company, unless prohibited by applicable law, shall indemnify any person who is or was a director or officer of the Company and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (a Proceeding) (whether or not the indemnified liability arises or arose from any threatened, pending or completed Proceeding by or in the right of the Company) by reason of the fact that such person is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director or officer of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any -28- 31 employee benefit plan) (a Covered Entity) against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding; provided, however, that except as provided in Section 4(c) of this Article, the foregoing shall not apply to a director or officer of the Company with respect to a Proceeding that was commenced by such director or officer. Any director or officer of the Company entitled to indemnification as provided in this Section 1, is hereinafter called an "Indemnitee". Any right of an Indemnitee to indemnification shall be a contract right and shall include the right to receive, prior to the conclusion of any Proceeding, payment of any expenses incurred by the Indemnitee in connection with such Proceeding, consistent with the provisions of applicable law as then in effect and the other provisions of this Article. (b) Effect of Amendments. Neither the alteration, amendment or repeal of, nor the adoption of a provision inconsistent with, any provision of this Article (including, without limitation, this Section 1(b)) shall adversely affect the rights of any director or officer under this Article with respect to any Proceeding commenced or threatened, or any alleged act or omission, prior to such alteration, amendment, repeal or adoption of an inconsistent provision, without the written consent of such director or officer. -29- 32 SECTION 2. Insurance; Contracts and Funding. The Company may purchase and maintain insurance to protect itself and any indemnified person against any expenses, judgments, fines and amounts paid in settlement as specified in Section 1 or Section 5 of this Article or incurred by any indemnified person in connection with any Proceeding referred to in such Sections, to the fullest extent permitted by applicable law as then in effect. The Company may enter into contracts with any director, officer, employee or agent of the Company or of any Covered Entity in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to insure the payment of such amounts as may be necessary to effect indemnification as provided in this Article. SECTION 3. Indemnification and Not Exclusive Right. The right of indemnification provided in this Article shall not be exclusive of any other rights to which any indemnified person may otherwise be entitled, and the provisions of this Article shall inure to the benefit of the heirs and legal representatives of any indemnified person under this Article and shall be applicable to Proceedings arising from acts or omissions occurring on or after January 27, 1987. SECTION 4. Advancement of Expenses; Request for Indemnification; Remedies; Presumptions and Defenses. In furtherance, but not in limitation of the foregoing provisions, the following procedures, presumptions and remedies shall apply -30- 33 with respect to advancement of expenses and the right to indemnification under this Article: (a) Advancement of Expenses. All reasonable expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding (including any Proceeding commenced by the Indemnitee under Section 4(c) but excluding any other Proceeding commenced by the Indemnitee) shall be advanced to the Indemnitee by the Company within 20 days after the receipt by the Company of a statement or statements from the Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the expenses incurred by the Indemnitee and, if required by law at the time of such advance, shall include or be accompanied by an undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the Indemnitee is not entitled to be indemnified against such expenses pursuant to this Article. (b) Request for Indemnification. To obtain indemnification under this Article, an Indemnitee shall submit to the Secretary of the Company a written request, including such documentation and information as is reasonably available to the Indemnitee and reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification (the Supporting Documentation). -31- 34 (c) Remedies; Presumptions and Defenses. If (i) expenses are not advanced in full within 20 days after receipt by the Company of the statement or statements and the undertaking (if an undertaking is required by law, By-law, agreement or otherwise at the time of such advance) required by Section 4(a) of this Article, or (ii) indemnification is not paid in full within 60 days after receipt by the Company of the written request for indemnification and Supporting Documentation required by Section 4(b) of this Article, then the person claiming advancement of expenses or indemnification shall be entitled to seek judicial enforcement of the Company's obligation to pay such advancement of expenses or indemnification. It shall be a defense to any Proceeding seeking judicial enforcement of the Company's obligation to pay indemnification that the conduct of the person claiming indemnification was such that under Pennsylvania law the Company is prohibited from indemnifying such person for the amount claimed. The Company shall have the burden of proving such defense. Neither the failure of the Company (including its Board of Directors, independent legal counsel and its shareholders) to have made a determination prior to the commencement of such Proceeding that indemnification is proper in the circumstances, nor an actual determination by the Company (including its Board of Directors, independent legal counsel or its shareholders) that such indemnification is prohibited by law, shall be a defense to a Proceeding seeking enforcement of -32- 35 the provisions of this Article or create a presumption that such indemnification is prohibited by law. The only defense to any such Proceeding to receive payment of expenses in advance shall be failure to make an undertaking to reimburse, if such an undertaking is required by law, By-law, agreement or otherwise. Notwithstanding the foregoing, the Company may bring an action, in an appropriate court in the Commonwealth of Pennsylvania or any other court of competent jurisdiction, contesting the right of a person claiming advancement of expenses or indemnification to receive such advancement or indemnification hereunder because such advancement or indemnification is prohibited by law; provided, however, that in any such action the Company shall have the burden of proving that such advancement or indemnification is prohibited by law. The Company shall be precluded from asserting in any action or Proceeding commenced pursuant to this Section 4(c) that the procedure and presumptions of this Article are not valid, binding and enforceable and shall stipulate in any such court that the Company is bound by all the provisions of this Article. If the person claiming advancement of expenses or indemnification, pursuant to this Section 4(c), seeks to enforce his rights under, or to recover damages for breach of this Article, that person shall be entitled to recover from the Company, and shall be indemnified by the Company against, any expenses actually and reasonably incurred by such person if such person prevails in such Proceeding. If it shall be determined -33- 36 in such Proceeding that such person is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by such person in connection with such Proceeding shall be prorated accordingly. SECTION 5. Indemnification of Employees and Agents. Notwithstanding any other provision or provisions of this Article, the Company, unless prohibited by applicable law, may indemnify any person other than a director or officer of the Company who is or was an employee or agent of the Company and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed Proceeding by reason of the fact that such person is or was a director, officer, employee or agent of a Covered Entity against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding. The Company may also advance expenses incurred by such employee or agent in connection with any such Proceeding, consistent with the provisions of applicable law as then in effect. SECTION 6. Severability. If any provision or provisions of this Article shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Article (including, without limitation, all portions of any Section of this Article containing any such provision held to be -34- 37 invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Article (including, without limitation, all portions of any Section of this Article containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. ARTICLE XVIII. Director Liability To the fullest extent that the law of the Commonwealth of Pennsylvania, as it exists on January 27, 1987, or as it may thereafter be amended, permits the elimination of the liability of directors, no director of the Company shall be liable for monetary damages for any action taken, or any failure to take any action. This Article shall not apply to any breach of performance of duty or any failure of performance of duty by any director occurring prior to January 27, 1987. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any director of the Company for or with respect to any act or failure to act on the part of such director occurring prior to such amendment or repeal. -35- 38 ARTICLE XIX. Pennsylvania Opt Out A. "Subsections (e) through (g) of Section 1721, "Board of Directors," of Title 15 of the Pennsylvania Consolidated Statutes, or any successor subsections thereto, shall not be applicable to the Company. B. Subchapter G, "Control-Share Acquisitions," of Chapter 25, Title 15 of the Pennsylvania Consolidated Statutes, or any successor subchapter thereto, shall not be applicable to the Company. C. Subchapter H, "Disgorgement By Certain Controlling Shareholders Following Attempts to Acquire Control," of Chapter 25, Title 15 of the Pennsylvania Consolidated Statutes, or any successor subchapter thereto, shall not be applicable to the Company." ARTICLE XX. Amendments The By-laws of the Company, regardless of whether adopted by the shareholders or by the Board of Directors, may be altered, amended or repealed by the Board of Directors, to the extent permitted by applicable law, or, subject to the third paragraph of Article I hereof, by the shareholders. Such action at a meeting of the Board of Directors shall be taken by the affirmative vote of a majority of the members of the Board of Directors in office at the time; and such action by the -36- 39 shareholders shall be taken by the affirmative vote of the holders of 80% of the shares of capital stock of the Company entitled to vote thereon. These By-laws are subject to any requirements of law, any provisions of the Articles of the Company, as from time to time amended, and any terms of any series of preferred stock or any other securities of the Company. ARTICLE XXI. Confidentiality in Voting Shareholders shall be provided permanent confidentiality in all voting, except as necessary to meet applicable legal requirements. The Company shall engage the services of an independent third party to receive, inspect, count and tabulate proxies. A representative of the independent third party shall also act as a judge of election at the annual meeting of shareholders. ARTICLE XXII. Rights Those rights having the terms provided under the Rights Agreement between Westinghouse Electric Corporation and First Chicago Trust Company of New York (the "Rights Agent") dated as of December 28, 1995, as it may be amended from time to time (the "Rights" and the "Rights Agreement") and issued to or Beneficially Owned by Acquiring Persons or their Affiliates or -37- 40 Associates (as such terms are defined in the Rights Agreement) shall, under certain circumstances as provided in the Rights Agreement, be null and void and may not be transferred to any person. -38- EX-3.D 5 WESTINGHOUSE ELEC. 1 Exhibit 3(d) Notice of the time and place of all special meetings of the Board of Directors, and notice of any change in the time or place of holding the regular meetings of the Board of Directors, shall be given to each director in person, by telephone, or by sending a copy thereof by first class or express mail, postage prepaid, or by telegram (with messenger service specified), telex or TWX (with answerback received) or courier service, charges prepaid, or by facsimile transmission, or by any type of electronic communication to the address (or to the telephone, telex, TWX, fax or other number or address) supplied by the director to the Corporation for the purpose of notice at least one day before the day of the meeting; provided, however, that notice of any meeting need not be given to any director if waived by such director in writing, whether before or after the time stated therein, or if such director shall be present at the beginning of such meeting and does not object to the transaction of business because the meeting was not lawfully called or convened. If the notice is sent by mail, telegraph or courier service, it shall be deemed to have been given to the director when deposited in the United States mail or with a telegraph office or courier service for delivery to the director or, in the case of telex, TWX, fax or other electronic communication, it shall be deemed to have been given to the director when dispatched. In the absence of any resolution of the Board of Directors or any committee governing rules of procedure to the contrary, notice of meetings of any committee referred to or provided for in these By-laws shall follow the same procedures as those set forth in these By-laws for meetings of the Board of Directors. -13- 2 ARTICLE XXII. Rights Those rights having the terms provided under the Rights Agreement between Westinghouse Electric Corporation and First Chicago Trust Company of New York (the "Rights Agent") dated as of December 28, 1995, as it may be amended from time to time (the "Rights" and the "Rights Agreement") and issued to or Beneficially Owned by Acquiring Persons or their Affiliates or Associates (as such terms are defined in the Rights Agreement) shall, under certain circumstances as provided in the Rights Agreement, be null and void and may not be transferred to any person. -37- EX-10.B 6 WESTINGHOUSE ELEC. 1 Exhibit 10(b) 1993 LONG-TERM INCENTIVE PLAN (as amended as of February 28, 1996) ARTICLE I GENERAL 1.1 Purpose ------- The purposes of the 1993 Long-Term Incentive Plan ("Plan") for key personnel of Westinghouse Electric Corporation ("Corporation") and its Subsidiaries (the Corporation and its Subsidiaries severally and collectively referred to in the Plan as the "Company") are to foster and promote the long-term financial success of the Company and materially increase stockholder value by (i) attracting and retaining key personnel of outstanding ability, (ii) strengthening the Company's capability to develop, maintain and direct a competent management team, (iii) motivating key personnel, by means of performance-related incentives, to achieve long-range performance goals, (iv) providing incentive compensation opportunities competitive with those of other major companies and (v) enabling key personnel to participate in the long-term growth and financial success of the Company. 1.2 Administration -------------- (a) The Plan shall be administered by a committee of the Board of Directors of the Corporation ("Committee") which shall consist of three or more members. Each member shall be a "disinterested LAW2:11704 -1- 2/28/96 2 person," as that term is defined by Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and an "outside director," as that term is defined by Section 162(m) of the Internal Revenue Code of 1986, as amended. The members shall be appointed by the Board of Directors, and any vacancy on the Committee shall be filled by the Board of Directors. The Committee shall keep minutes of its meetings and of any action taken by it without a meeting. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present shall be the acts of the Committee. Any action that may be taken at a meeting of the Committee may be taken without a meeting if a consent or consents in writing setting forth the action so taken shall be signed by all of the members of the Committee. The Committee shall make appropriate reports to the Board of Directors concerning the operations of the Plan. (b) Subject to the limitations of the Plan, the Committee shall have the sole and complete authority: (i) to select in accordance with Section 1.3 persons who shall participate in the Plan ("Participant" or "Participants") (including the right to delegate authority to select as Participants persons who are not required to file reports with respect to securities of the Company pursuant to Section 16(a) of the Exchange Act ("Nonreporting Persons")); (ii) to make Awards and payments in LAW2:11704 -2- 2/28/96 3 such forms and amounts as it shall determine (including the right to delegate authority to make Awards to Nonreporting Persons within limits approved from time to time by the Committee); (iii) to impose such limitations, restrictions and conditions upon such Awards as the Committee, or, with respect to Awards to Nonreporting Persons, the Committee's authorized delegates, shall deem appropriate; (iv) to interpret the Plan and the terms of any document relating to the Plan and to adopt, amend and rescind administrative guidelines and other rules and regulations relating to the Plan; (v) to amend or cancel an existing Award in whole or in part (including the right to delegate authority to amend or cancel an existing Award to a Nonreporting Person in whole or in part within limits approved from time to time by the Committee), except that the Committee and its authorized delegates may not, unless otherwise provided in the Plan, or unless the Participant affected thereby consents, take any action under this clause that would adversely affect the rights of such Participant with respect to the Award, and except that the Committee and its authorized delegates may not take any action to amend any outstanding Option under the Plan in order to decrease the Option Price under such Option or to cancel and replace any such Option with an Option with a lower Option Price unless such action is approved by the common stockholders of the Corporation; and (vi) to make all other determinations and to take all other actions necessary or advisable for the interpretation, implementation and administration of the Plan. The Committee's LAW2:11704 -3- 2/28/96 4 determinations on matters within its authority shall be conclusive and binding upon the Company and all other persons. (c) The Committee shall act with respect to the Plan on behalf of the Corporation and on behalf of any subsidiary issuing stock under the Plan, subject to appropriate action by the board of directors of any such Subsidiary. All expenses associated with the Plan shall be borne by the Corporation subject to such allocation to its Subsidiaries and operating units as it deems appropriate. 1.3 Selection for Participation --------------------------- Participants selected by the Committee (or its authorized delegates) shall be Eligible Persons, as defined below, who are key employees and have the capacity to contribute to the success of the Company. "Eligible Persons" are persons who are salaried employees of the Company ("Employee" or "Employees"). In making this selection and in determining the form and amount of Awards, the Committee may give consideration to the functions and responsibilities of the Eligible Person, his or her past, present and potential contributions to the Company and other factors deemed relevant by the Committee. LAW2:11704 -4- 2/28/96 5 1.4 Types of Awards under Plan -------------------------- Awards ("Awards") under the Plan may be in the form of any one or more of the following: (i) Incentive Stock Options ("ISOs") and Non-statutory Stock options ("NSOs") (Incentive Stock Options and Non-statutory Stock Options severally and collectively referred to in the Plan as "Options"), as described in Article II, (ii) Stock Appreciation Rights ("SARs") and Limited Stock Appreciation Rights ("Limited Rights"), as described in Article III, (iii) Performance Awards ("Performance Awards") as described in Article IV, and (iv) Restricted Stock ("Restricted Stock") as described in Article V. 1.5 Shares Subject to the Plan -------------------------- Shares of stock issued under the Plan may be in whole or in part authorized and unissued or treasury shares of the Corporation's common stock, par value $1.00 ("Common Stock"), or "Formula Value Stock" as defined in Section 8.12(d) (Common Stock and Formula Value Stock severally and collectively referred to in the Plan as "Stock"). The maximum number of shares of Stock which may be issued for all purposes under the Plan shall be 4,000,000 increased on January 1 of each calendar year from and including 1994 to and including 2003 by a number of shares equal to one percent (1%) of the number of shares of Stock outstanding on December 31 of the preceding year. The maximum number of such shares which may be LAW2:11704 -5- 2/28/96 6 issued pursuant to the exercise of ISOs shall be 1,000,000 increased on January 1 of each calendar year from and including 1994 to and including 2003 by 1,000,000 shares. The maximum number of such shares subject to options to purchase Stock, SARs and Limited Rights under the Plan awarded to any one Participant in any one calendar year may not exceed 3,500,000 shares plus unused share amounts that could have been awarded to that Participant in previous calendar years. Except as otherwise provided below, any shares of Stock subject to an Option or other Award which is canceled or terminates without having been exercised shall again be available for Awards under the Plan. Shares subject to an option canceled upon the exercise of an SAR shall not again be available for Awards under the Plan except to the extent the SAR is settled in cash. To the extent that an Award is settled in cash, shares of Stock subject to that Award shall again be available for Awards. Shares of Stock tendered by a Participant or withheld by the Company to pay the exercise price of an Option or to satisfy the tax withholding obligations of the exercise or vesting of an Award shall be available again for Awards under the Plan, but only to Nonreporting Persons. Shares of Restricted Stock forfeited to the Company in accordance with the Plan and the terms of the particular Award shall be available again for Awards under the Plan unless the Participant has received the benefits of ownership (within the applicable interpretation under LAW2:11704 -6- 2/28/96 7 Rule 16b-3 under the Exchange Act), in which case such shares may only be available for Awards to Nonreporting Persons. No fractional shares shall be issued, and the Committee shall determine the manner in which fractional share value shall be treated. ARTICLE II STOCK OPTIONS 2.1 Award of Stock Options ---------------------- The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, award to any Participant ISOs and NSOs to purchase Stock. The Committee may provide with respect to any option to purchase Stock that, if the Participant, while an Eligible Person, exercises the option in whole or in part using already-owned Stock, the Participant will, subject to this Section 2.1 and such other terms and conditions as may be imposed by the Committee, receive an additional option ("Reload Option"). The Reload Option will be to purchase, at Fair Market Value as of the date the original option was exercised, a number of shares of Stock equal to the number of whole shares used by the Participant to exercise the original option. The Reload Option will be LAW2:11704 -7- 2/28/96 8 exercisable only between the date of its grant and the date of expiration of the original option. A Reload Option shall be subject to such additional terms and conditions as the Committee shall approve, which terms may provide that the Committee may cancel the Participant's right to receive the Reload Option and that the Reload Option will be granted only if the Committee has not canceled such right prior to the exercise of the original option. Such terms may also provide that, upon the exercise by a Participant of a Reload Option while an Eligible Person, an additional Reload Option will be granted with respect to the number of whole shares used to exercise the first Reload Option. 2.2 Stock Option Agreements ----------------------- The award of an option shall be evidenced by a signed written agreement ("Stock Option Agreement") containing such terms and conditions as the Committee may from time to time determine. 2.3 Option Price ------------ The purchase price of Stock under each Option ("Option Price") shall be not less than the Fair Market Value of such Stock on the date the Option is awarded. LAW2:11704 -8- 2/28/96 9 2.4 Exercise and Term of Options ---------------------------- (a) Except as otherwise provided in the Plan, Options shall become exercisable at such time or times as the Committee may specify. The Committee may at any time and from time to time accelerate the time at which all or any part of the Option may be exercised. (b) The Committee shall establish procedures governing the exercise of options and shall require that notice of exercise be given. Stock purchased on exercise of an option must be paid for as follows: (1) in cash or by check (acceptable to the Company in accordance with guidelines established for this purpose), bank draft or money order payable to the order of the Company or (2) if so provided by the Committee (not later than the time of grant, in the case of an ISO) (i) through the delivery of shares of Stock which are then outstanding and which have a Fair Market Value on the date of exercise equal to the exercise price, (ii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iii) by any combination of the permissible forms of payment. 2.5 Termination of Eligibility -------------------------- In the event the Participant is no longer an Eligible Person and ceased to be such as a result of termination of service to the Company with the consent of the Committee or as a result of LAW2:11704 -9- 2/28/96 10 his or her death, retirement or disability, each of his or her outstanding Options shall be exercisable by the Participant (or his or her legal representative or designated beneficiary), to the extent that such Option was then exercisable, at any time prior to an expiration date established by the Committee at the time of award, but in no event after such expiration date. If the Participant ceases to be an Eligible Person for any other reason, all of the Participant's then outstanding Options shall terminate immediately. ARTICLE III STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS 3.1 Award of Stock Appreciation Right --------------------------------- (a) An SAR is an Award entitling the recipient on exercise to receive an amount, in cash or Stock or a combination thereof (such form to be determined by the Committee), determined in whole or in part by reference to appreciation in Stock value. (b) In general, an SAR entitles the Participant to receive, with respect to each share of Stock as to which the SAR is exercised, the excess of the share's Fair Market Value on the date of exercise over its Fair Market Value on the date the SAR was granted. LAW2:11704 -10- 2/28/96 11 (c) SARs may be granted in tandem with options granted under the Plan ("Tandem SARS") or independently of Options ("Independent SARs"). An SAR granted in tandem with an NSO may be granted either at or after the time the option is granted. An SAR granted in tandem with an ISO may be granted only at the time the option is granted. (d) SARs awarded under the Plan shall be evidenced by either a Stock Option Agreement (when SARs are granted in tandem with an Option) or a separate agreement between the Company and the Participant. (e) Except as otherwise provided herein, a Tandem SAR shall be exercisable only at the same time and to the same extent and subject to the same conditions as the option related thereto is exercisable, and the Committee may prescribe additional conditions and limitations on the exercise of the SAR. The exercise of a Tandem SAR shall cancel the related Option. Tandem SARs may be exercised only when the Fair Market Value of Stock to which it relates exceeds the Option Price. (f) Except as otherwise provided herein, an Independent SAR will become exercisable at such time or times, and on such conditions, as the Committee may specify, and the Committee may at any time accelerate the time at which all or any part of the SAR may be exercised. LAW2:11704 -11- 2/28/96 12 The Committee may provide, under such terms and conditions as it may deem appropriate, for the automatic grant of additional SARs upon the full or partial exercise of an Independent SAR. Any exercise of an Independent SAR must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by any other documents required by the Committee. (g) Except as otherwise provided herein, all SARs shall automatically be exercised on the last trading day prior to the expiration date established by the Committee at the time of the award for the SAR, or, in the case of a Tandem SAR, for the related Option, so long as exercise on such date will result in a payment to the Participant. (h) Unless otherwise provided by the Committee, no SAR shall become exercisable or shall be automatically exercised for six months following the date on which it was granted or the effective date of the Plan, whichever is later. (i) At the time of award of an SAR, the Committee may limit the amount of the payment that may be made to a Participant upon the exercise of the SAR. The Committee may further determine that, if the amount to be received by a Participant in any year is limited pursuant to this provision, payment of all or a portion LAW2:11704 -12- 2/28/96 13 of the amount that is unpaid as a result of the limitation may be made to the Participant at a subsequent time. No such limitation shall require a Participant to return to the Company any amount theretofore received by him or her upon the exercise of an SAR. (j) Payment of the amount to which a Participant is entitled upon the exercise of an SAR shall be made in cash, Stock, or partly in cash and partly in Stock, as the Committee shall determine. To the extent that payment is made in Stock, the shares shall be valued at their Fair Market Value on the date of exercise of the SAR. (k) Each SAR shall expire on a date determined by the Committee or earlier upon the occurrence of the first of the following: (i) in the case of a Tandem SAR, termination of the related option, (ii) expiration of a period of six months after the Participant's ceasing to be an Eligible Person as a result of termination of service to the Company with the consent of the Committee or as a result of his or her death, retirement or disability, or (iii) the Participant ceasing to be an Eligible Person for any other reason. 3.2 Limited Rights -------------- (a) The Committee may award Limited Rights pursuant to the provisions of this Section 3.2 to the holder of an Option to LAW2:11704 -13- 2/28/96 14 purchase Common Stock granted under the Plan (a "Related Option") with respect to all or a portion of the shares subject to the Related Option. A Limited Right may be exercised only during the period beginning on the first day following a Change in Control, as defined in Section 7.2 of the Plan, and ending on the thirtieth day following such date. Each Limited Right shall be exercisable only to the same extent that the Related Option is exercisable, and in no event after the termination of the Related Option. In no event shall a Limited Right be exercised during the first six months after the date of grant of the Limited Right or the effective date of the Plan, whichever is later. Limited Rights shall be exercisable only when the Fair Market Value (determined as of the date of exercise of the Limited Rights) of each share of Common Stock with respect to which the Limited Rights are to be exercised shall exceed the Option Price per share of Common Stock subject to the Related option. (b) Upon the exercise of Limited Rights, the Related Option shall be considered to have been exercised to the extent of the number of shares of Common Stock with respect to which such Limited Rights are exercised. Upon the exercise or termination of the Related Option, the Limited Rights with respect to such Related Option shall be considered to have been exercised or terminated to the extent of the number of shares of Common Stock with respect to which the Related Option was so exercised or terminated. LAW2:11704 -14- 2/28/96 15 (c) The effective date of the grant of a Limited Right shall be the date on which the Committee approves the grant of such Limited Right. Each grantee of a Limited Right shall be notified promptly of the grant of the Limited Right in such manner as the Committee shall prescribe. (d) Upon the exercise of Limited Rights, the holder thereof shall receive in cash an amount equal to the product computed by multiplying (i) the excess of (a) the higher of (x) the Minimum Price Per Share (as hereinafter defined), or (y) the highest reported closing sales price of a share of Common Stock on the New York Stock Exchange at any time during the period beginning on the sixtieth day prior to the date on which such Limited Rights are exercised and ending on the date on which such Limited Rights are exercised, over (b) the Option Price per share of Common Stock subject to the Related Option, by (ii) the number of shares of Common Stock with respect to which such Limited Rights are being exercised. (e) For purposes of this Section 3.2, the term "Minimum Price Per Share" shall mean the highest gross price (before brokerage commissions and soliciting dealers' fees) paid or to be paid for a share of Common Stock (whether by way of exchange, conversion, distribution upon liquidation or otherwise) in any Change in Control which is in effect at any time during the period beginning on the sixtieth day prior to the date on which such LAW2:11704 -15- 2/28/96 16 Limited Rights are exercised and ending on the date on which such Limited Rights are exercised. For purposes of this definition, if the consideration paid or to be paid in any such Change in Control shall consist, in whole or in part, of consideration other than cash, the Board shall take such action, as in its judgement it deems appropriate, to establish the cash value of such consideration. ARTICLE IV PERFORMANCE AWARDS 4.1 Nature of Performance Awards ---------------------------- A Performance Award provides for the recipient to receive an amount in cash or Stock or a combination thereof (such form to be determined by the Committee) following the attainment of Performance Goals. Performance Goals may be related to personal performance, corporate performance (including corporate stock performance), departmental performance or any other category of performance deemed by the Committee to be important to the success of the Company. The Committee shall determine the Performance Goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. Regardless of the degree to which Performance Goals are attained, a Performance Award shall be paid only when, if and to the extent that the Committee determines to make such payment. LAW2:11704 -16- 2/28/96 17 4.2 Other Awards Subject to Performance Condition --------------------------------------------- The Committee may, at the time any Award described in this Plan is granted, impose the condition (in addition to any conditions specified or authorized in the Plan) that Performance Goals be met prior to the Participant's realization of any payment or benefit under the Award. ARTICLE V RESTRICTED STOCK 5.1 Award of Restricted Stock ------------------------- The Committee may award to any Participant shares of Stock subject to this Article V and such other terms and conditions as the Committee may prescribe, such Stock referred to herein as "Restricted Stock." Each certificate for Restricted Stock shall be registered in the name of the Participant and deposited by him or her, together with a stock power endorsed in blank, with the Corporation. 5.2 Restricted Stock Agreement -------------------------- Shares of Restricted Stock awarded under the Plan shall be evidenced by a signed written agreement containing such terms and conditions as the Committee may determine. LAW2:11704 -17- 2/28/96 18 5.3 Restriction Period ------------------ At the time of award, there shall be established for each Participant a "Restriction Period" of such length as shall be determined by the Committee. The Restriction Period may be waived by the Committee. Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as hereinafter provided, during the Restriction Period. Subject to such restriction on transfer, the Participant as owner of such shares of Restricted Stock shall have the rights of the holder of such Restricted Stock, except that the Committee may provide at the time of the Award that any dividends or other distributions paid on such Stock during the Restriction Period shall be accumulated and held by the Company and shall be subject to forfeiture under Section 5.4. Upon the expiration or waiver by the Committee of the Restriction Period, the Corporation shall redeliver to the Participant (or his or her legal representative or designated beneficiary) the shares deposited pursuant to Section 5.1. 5.4 Termination of Eligibility -------------------------- In the event the Participant is no longer an Eligible Person and ceased to be such as a result of termination of service to the Company with the consent of the Committee, or as a result of his or her death, retirement or disability, the restrictions imposed under this Article V shall lapse with respect to such LAW2:11704 -18- 2/28/96 19 number of shares theretofore awarded to him or her as shall be determined by the Committee. All other shares of Restricted Stock theretofore awarded to him or her which are still subject to restrictions, along with any dividends or other distributions thereon that have been accumulated and held by the Company, shall be forfeited, and the Corporation shall have the right to complete the blank stock power. In the event the Participant ceases to be an Eligible Person for any other reason, all shares of Restricted Stock theretofore awarded to him or her which are still subject to restrictions, along with any dividend or other distributions thereon that have been accumulated and held by the Company, shall be forfeited, and the Corporation shall have the right to complete the blank stock power. ARTICLE VI DEFERRAL OF PAYMENTS 6.1 Deferral of Amounts ------------------- If the Committee makes a determination to designate Awards or, from time to time, groups or types of Awards, eligible for deferral hereunder, a Participant may, subject to such terms and conditions and within such limits as the Committee may from time to time establish, elect to defer the receipt of amounts due to him or her under the Plan. Amounts so deferred are referred to LAW2:11704 -19- 2/28/96 20 herein as "Deferred Amounts." The Committee may also permit amounts now or hereafter deferred or available for deferral under any present or future incentive compensation program or deferral arrangement of the Company to be deemed Deferred Amounts and to become subject to the provisions of this Article. Awards which are so deferred will be deemed to have been awarded in cash and the cash deferred as Deferred Amounts. The period between the date on which the Participant's Deferred Amount would have been payable absent deferral and the final payment of such Deferred Amount shall be referred to herein as the "Deferral Period." 6.2 Investment During Deferral Period --------------------------------- Unless otherwise determined by the Committee, and subject to such changes as the Committee may determine, the Deferred Amount will be treated during the Deferral Period as if it were invested in putative convertible debentures with a fixed interest rate, compounded annually, for the entire Deferral Period. For purposes of determining the value of the Deferred Amount at the time of payment, each putative debenture will be deemed to be convertible into Common Stock at a conversion rate computed by reference to the Fair Market Value of the Common Stock on the last trading day prior to the regular January meeting of the Board of Directors on or preceding the date of deferral. Payment LAW2:11704 -20- 2/28/96 21 of Deferred Amounts may be made in cash, Stock, or partly in cash and partly in Stock, in the Committee's sole discretion. 6.3 Participant Reports ------------------- Annually, each Participant who has a Deferred Amount will receive a report setting forth all of his or her then Deferred Amounts and the yield thereon to date. 6.4 Payment of Deferred Amounts --------------------------- Payment of Deferred Amounts will be made at such time or times, and may be in cash, Stock, or partly in cash and partly in Stock, as the Committee shall from time to time determine. The limitations respecting the issuance of Stock or other limitations on aggregate awards payable contained in the Annual Performance Plan of the Corporation, Article XVI of the by-laws of the Corporation, the 1974 Stock Option Plan, the 1979 Stock Option and Long-Term Incentive Plan, the 1984 Long-Term Incentive Plan, the Plan and in any plan hereafter adopted by the stockholders shall be limitations applicable to the payment of any Deferred Amounts under this Article VI. 6.5 Alternative Valuation Election ------------------------------ Unless otherwise determined by the Committee, a Participant may, at a time established by the Committee, but prior to such Participant's ceasing to be an Eligible Person, elect to establish the ultimate payable value of each Deferred Amount by LAW2:11704 -21- 2/28/96 22 reference to the Fair Market Value of the Common Stock as of the day on which an alternate valuation election is received by the corporation in accordance with procedures established by the Committee. Notwithstanding the establishment of the ultimate payable value resulting from the alternate valuation election by the Participant, the yield will continue as though no such election had been made and will continue to be subject to the limitations set forth in Section 6.2, and Deferred Amounts and the yield thereon will be paid as otherwise provided in this Article. ARTICLE VII CHANGES IN CONTROL 7.1 Effect of Change in Control --------------------------- Notwithstanding any other provision of the Plan, upon the occurrence of a Change in Control, as defined in Section 7.2: (i) all Options and, subject to the exercise provisions of Section 3.2(a) of the Plan, Limited Rights, but not SARS, outstanding and unexercised on the date of the Change in Control shall become immediately exercisable; (ii) all Performance Awards shall be deemed to have been earned on such basis as the Committee may prescribe and then paid on such basis, at such time and in such form as the Committee may prescribe, or deferred in accordance with the elections of Participants; (iii) all LAW2:11704 -22- 2/28/96 23 Restricted Stock shall be deemed to be earned and the Restriction Period shall be deemed expired on such terms and conditions as the Committee may determine; and (iv) all amounts deferred under this Plan shall be paid to a trustee or otherwise on such terms as the Committee may prescribe or permit. 7.2 Definition of Change in Control ------------------------------- The term "Change in Control" means the occurrence of one or more of the following events: (a) there shall be consummated (i) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, or (b) the stockholders of the Corporation shall approve any plan or proposal for the liquidation or dissolution of the Corporation, or (c) (i) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity shall purchase any Common Stock of the Corporation (or securities convertible into Common Stock) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, LAW2:11704 -23- 2/28/96 24 unless, prior to the making of such purchase of Common Stock (or securities convertible into Common Stock), the Board shall determine that the making of such purchase shall not constitute a Change in Control, or (ii) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Corporation or any benefit plan sponsored by the Corporation or any of its subsidiaries) shall be the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing twenty percent or more of the combined voting power of the Corporation's then outstanding securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not constitute a Change in Control, or (d) at any time during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least a majority thereof, unless the election or nomination for election of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. LAW2:11704 -24- 2/28/96 25 ARTICLE VIII GENERAL PROVISIONS 8.1 Non-Transferability ------------------- No Option, SAR, Performance Award or share of Restricted Stock or Deferred Amount under the Plan shall be transferable by the Participant other than by will or the applicable laws of descent and distribution. All Awards and Deferred Amounts shall be exercisable or received during the Participant's lifetime only by such Participant or his or her legal representative. Any transfer contrary to this Section 8.1 will nullify the option, SAR, Performance Award or share of Restricted Stock, and any attempted transfer of a Deferred Amount contrary to this Section 8.1 will be void and of no effect. 8.2 Beneficiaries ------------- The Committee may establish procedures not inconsistent with Section 8.1 under which a Participant may designate a beneficiary or beneficiaries to receive amounts due under an Award or with respect to Deferred Amounts in the event of the Participant's death. 8.3 Adjustments Upon Changes in Stock --------------------------------- If there shall be any change in the Stock of the Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split up, dividend in kind or other LAW2:11704 -25- 2/28/96 26 change in the corporate structure or distribution to the stockholders, appropriate adjustments may be made by the Board of Directors of the Company (or if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Plan, and the number and kind of shares and the price per share subject to outstanding Options or which may be issued under outstanding Performance Awards or Awards of Restricted Stock. Appropriate adjustments may also be made by the Board of Directors or the Committee in the terms of any Awards under the Plan to reflect such changes and to modify any other terms of outstanding Awards on an equitable basis, including modifications of performance targets and changes in the length of Performance Periods. 8.4 Conditions of Awards -------------------- (a) The rights of a Participant with respect to any Award received under this Plan shall be subject to the conditions that, until the Participant has fully received all payments, transfers and other benefits under the Award, he or she shall (i) not engage, either directly or indirectly, in any manner or capacity as advisor, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any business or activity which is at the time competitive with any business or activity conducted by the Company and (ii) be available, unless he or she shall have died, at reasonable times for consultations LAW2:11704 -26- 2/28/96 27 at the request of the Company's management with respect to phases of the business with which he or she is or was actively connected during his or her employment, but such consultations shall not (except in the case of a Participant whose active service was outside the United States) be required to be performed at any place or places outside of the United States of America or during usual vacation periods or periods of illness or other incapacity. In the event that either of the above conditions is not fulfilled, the Participant shall forfeit all rights to any unexercised option or SAR, or any Performance Award or Stock held which has not yet been determined by the Committee to be payable or unrestricted (and any unpaid amounts equivalent to dividends or other distributions or amounts equivalent to interest relating thereto) as of the date of the breach of condition. Any determination by the Board of Directors of the Corporation, which shall act upon the recommendation of the Chief Executive Officer, that the Participant is, or has, engaged in a competitive business or activity as aforesaid or has not been available for consultations as aforesaid shall be conclusive. (b) This Section 8.4 shall not apply to Limited Rights. 8.5 Use of Proceeds --------------- All cash proceeds from the exercise of options shall constitute general funds of the Company. LAW2:11704 -27- 2/28/96 28 8.6 Tax Withholding --------------- The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Stock may be delivered, the Committee will have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Committee with regard to such requirements, prior to the delivery of any Stock. If and to the extent that such withholding is required, the Committee may permit the Participant or such other person to elect at such time and in such manner as the Committee provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Stock having a value calculated to satisfy the withholding requirement. In the alternative, the Committee may, at the time of grant of any such Award, require that the Company withhold from any shares to be delivered Stock with a value calculated to satisfy applicable tax withholding requirements. If at the time an ISO is exercised the Committee determines that the Company could be liable for withholding requirements with respect to a disposition of the Stock received upon exercise, the Committee may require as a condition of exercise LAW2:11704 -28- 2/28/96 29 that the person exercising the ISO agree (i) to inform the Company promptly of any disposition of Stock received upon exercise, and (ii) to give such security as the Committee deems adequate to meet the potential liability of the Company for the withholding requirements and to augment such security from time to time in any amount reasonably deemed necessary by the Committee to preserve the adequacy of such security. 8.7 Non-Uniform Determinations -------------------------- The Committee's determinations under the Plan, including without limitation, (i) the determination of the Participants to receive Awards, (ii) the form, amount, timing and payment of such Awards, (iii) the terms and provisions of such Awards and (iv) the agreements evidencing the same, need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, Awards under the Plan, whether or not such Participants are similarly situated. 8.8 Leaves of Absence; Transfers ---------------------------- The Committee shall be entitled to make such rules, regulations and determinations as it deems appropriate under the Plan in respect to any leave of absence from the Company granted to a Participant. Without limiting the generality of the foregoing, the Committee shall be entitled to determine (i) whether or not any such leave of absence shall be treated as if the Participant ceased to be an Employee and (ii) the impact, LAW2:11704 -29- 2/28/96 30 if any, of any such leave of absence on Awards under the Plan. In the event a Participant transfers within the Company, such Participant shall not be deemed to have ceased to be an Employee for purposes of the Plan. 8.9 General Restriction ------------------- (a) Each Award under the Plan shall be subject to the condition that, if at any time the Committee shall determine that (i) the listing, registration or qualification of shares of Stock upon any securities exchange or under any state or federal law, (ii) the consent or approval of any government or regulatory body or (iii) an agreement by the Participant with respect thereto, is necessary or desirable, then such Award shall not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free from any conditions not acceptable to the Committee. (b) Shares of Common Stock for use under the provisions of this Plan shall not be issued until they have been duly listed, upon official notice of issuance, upon the New York Stock Exchange and such other exchanges, if any, as the Board of Directors of the Corporation shall determine, and a registration statement under the Securities Act of 1933 with respect to such shares shall have become, and be, effective. LAW2:11704 -30- 2/28/96 31 8.10 Effective Date -------------- The Plan shall be effective on the date on which it is approved by the common stockholders of the Corporation. Grants of Awards under the Plan may be made prior to that date (but not before the date on which the Plan is adopted by the Board of Directors), subject to such approval. No Award may be granted under the Plan after May 25, 2003, but Awards previously made may extend beyond that date and Reload Options and additional Reload Options provided for with respect to original options outstanding prior to that date may continue unless the Committee otherwise provides and subject to such additional terms and conditions as the Committee may provide except that all Reload Options issued after that date shall be NSOs, and the provisions of Article VI of the Plan shall survive and remain effective as to all present and future Deferred Amounts until such later date as the Committee or the Board of Directors shall determine. The adoption of the Plan shall not preclude the adoption by appropriate means of any other stock option or other incentive plan for employees. 8.11 Amendment, Suspension and Termination of Plan --------------------------------------------- The Board of Directors may at any time or times amend the Plan for any purpose which may at the time be permitted by law, LAW2:11704 -31- 2/28/96 32 or may at any time suspend or terminate the Plan as to any further grants of Awards, provided that (except to the extent expressly required or permitted by the Plan) no such amendment shall, without the approval of the stockholders of the Corporation, effectuate a change for which stockholder approval is required in order for the Plan to continue to qualify under Rule 16b-3 promulgated under Section 16 of the Exchange Act. 8.12 Certain Definitions ------------------- (a) Unless otherwise determined by the Committee, the terms "retirement" and "disability" as used under the Plan shall be construed by reference to the provisions of the Westinghouse Pension Plan or other similar plan or program of the Company applicable to a Participant. (b) The term "Fair Market Value" as it relates to Common Stock means the mean of the high and low prices of the Common Stock as reported by the Composite Tape of the New York Stock Exchange (or such successor reporting system as shall be selected by the Committee) on the relevant date or, if no sale of the Common Stock shall have been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales. The term "Fair Market Value" as it relates to Formula Value Stock shall mean the value determined by the Committee. LAW2:11704 -32- 2/28/96 33 (c) The term "Subsidiary" shall mean, unless the context otherwise requires, any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the corporation if each of the corporations other than the last corporation in such chain owns stock possessing at least 50% of the voting power in one of the other corporations in such chain. (d) "Formula Value Stock" means shares of a class or classes of stock the value of which is derived from a formula established by the Committee which reflects such financial measures as the Committee shall determine. Such shares shall have such other characteristics as shall be determined at time of their authorization. LAW2:11704 -33- 2/28/96 EX-10.C 7 WESTINGHOUSE ELEC. 1 Exhibit 10(c) 1984 LONG-TERM INCENTIVE PLAN (as amended as of February 28, 1996) ARTICLE I GENERAL 1.1 Purpose: -------- The purpose of the 1984 Long-Term Incentive Plan (Plan) for key employees of Westinghouse Electric Corporation (Corporation) and its Subsidiaries (the Corporation, its operating units and its Subsidiaries severally and collectively referred to hereinafter as the Company) are to foster and promote the long-term financial success of the Company and materially increase stockholder value by (i) attracting and retaining executives of outstanding ability, (ii) strengthening the company's capability to develop, maintain and direct a competent management team, (iii) motivating executives, by means of performance-related incentives, to achieve long-range performance goals, (iv) providing incentive compensation opportunities competitive with those of other major companies and (v) enabling executives to participate in the long-term growth and financial success of the Company. 1.2 Administration: --------------- (a) The Plan shall be administered by a committee of the Board of Directors (Committee) which shall consist of three or more members. Each member shall be a "disinterested person", as that term is defined by Rule 16b-3(d)(3) promulgated under the -1- 2/28/96 LAW2:2339 2 Securities Exchange Act of 1934. The members shall be appointed by the Board of Directors, and any vacancy on the Committee shall be filled by the Board of Directors. The Committee shall keep minutes of its meetings and of any action taken by it without a meeting. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present shall be the acts of the Committee. Any action that may be taken at a meeting of the Committee may be taken without a meeting if a consent or consents in writing setting forth the action so taken shall be signed by all of the members of the Committee. The Committee shall make appropriate reports to the Board of Directors concerning the operations of the Plan. (b) Subject to the limitations of the Plan, the Committee shall have the sole and complete authority: (i) to select from the regular, full-time salaried employees of the Company who are exempt from the minimum wage and overtime provisions of the Fair Labor Standards Act of 1938, as amended (Employee or Employees), those who shall participate in the Plan (Participant or Participants), (ii) to make awards in such forms and amounts as it shall determine, (iii) to impose such limitations, restrictions and conditions upon such awards as it shall deem appropriate, (iv) to interpret the Plan and to adopt, amend and rescind administrative guidelines and other rules and regulations relating -2- 2/28/96 LAW2:2339 3 to the Plan and (v) to make all other determinations and to take all other actions necessary or advisable for the implementation and administration of the Plan. The Committee's determinations on matters within its authority shall be conclusive and binding upon the Company and all other persons. (c) The Committee shall act on behalf of the Corporation as sponsor of the Plan and on behalf of any subsidiary issuing stock under the Plan, subject to appropriate action by the board of directors of any such Subsidiary. All expenses associated with the Plan shall be borne by the Corporation subject to such allocation to its Subsidiaries and operating units as it deems appropriate. 1.3 Selection for Participation: ---------------------------- Participants shall be selected by the Committee from the employees who occupy responsible managerial or professional positions and who have the capacity to contribute to the success of the Company. In making this selection and in determining the form and amount of awards, the Committee may give consideration to the functions and responsibilities of the employee, his or her past, present and potential contributions to the Company's profitability and sound growth, the value of his or her services to the Company and other factors deemed relevant by the Committee. -3- 2/28/96 LAW2:2339 4 1.4 Types of Awards under Plan: --------------------------- Awards under the Plan may be in the form of any one or more of the following (i) Incentive Stock Options (ISOs) and Non-statutory Stock Options (NSOs) (options), Stock Appreciation Rights (SARs), as described in Article II, (ii) Performance Units and Performance Shares (Performance Units or Performance Shares) as described in Article III, (iii) Restricted Stock (Restricted Stock) as described in Article IV and (iv) rights to purchase Convertible Debentures (Debentures) as described in Article V. 1.5 Shares Subject to the Plan: --------------------------- Shares of stock issued under the Plan may be in whole or in part authorized and unissued or treasury shares of the Corporation's common stock, par value $1.00 (Common Stock), or Formula Value Stock, as defined in Section 7.6 (Formula Value Stock). The maximum number of shares of Common Stock and Formula Value Stock which may be issued for all purposes under the Plan shall be 13,200,000. Any shares of Stock that are used by a Participant as full or partial payment to the Corporation of the purchase price of shares of Stock acquired upon exercise of an option shall be made available for future awards under the Plan. Further, any shares of Stock subject to an option which for any reason is cancelled (excluding shares subject to an Option cancelled upon the exercise of a related SAR) or terminated without having been exercised, or any shares of Restricted Stock or Performance Shares which are forfeited, shall again be -4- 2/28/96 LAW2:2339 5 available for awards under the Plan. Shares subject to an option cancelled upon the exercise of an SAR shall not again be available for awards under the Plan. No fractional shares shall be issued, and the Committee shall determine the manner in which fractional share value shall be treated. Common Stock, Putative Common Stock, Restricted Stock, and Formula Value Stock are collectively referred to herein as "Stock". ARTICLE II STOCK OPTIONS AND STOCK APPRECIATION RIGHTS 2.1 Award of Stock Options: ----------------------- The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, award to any Participant ISOs and NSOs to purchase Common Stock or Formula Value Stock. The Committee may, effective as of the date of exercise by a Participant of all or part of an option using already-owned Common Stock, grant an additional option (reload option) to purchase at the fair market value as of the date of said exercise, the number of shares of Common Stock equal to the sum of the number of whole shares used by the Participant in payment of the purchase price. A reload option shall only be available during the period the Participant is an employee of the Company. The reload option may be exercised between the date of its grant and the date of -5- 2/28/96 LAW2:2339 6 expiration of the underlying option to which the reload option relates. The reload option shall be evidenced by an agreement containing such additional terms and conditions as the Committee shall approve, which conditions may provide that upon the exercise of any reload option, an additional reload option may be granted with respect to the number of whole shares used to exercise the reload option. 2.2 Stock Option Agreements: ------------------------ The award of an Option shall be evidenced by a signed written agreement (Stock option Agreement) containing such terms and conditions as the Committee may from time to time determine. 2.3 Option Price: ------------- Purchase price of Common Stock or Formula Value Stock under each Option (Option Price) shall be not less than the Fair Market Value of the Common Stock or Formula Value Stock, as the case may be, on the date the Option is awarded. 2.4 Exercise and Term of Options: ----------------------------- (a) Unless otherwise provided by the Committee in the Stock Option Agreement and subject to the limitations set forth in section 2.5, an option awarded under the Plan shall become exercisable in whole or in part after the commencement of the second year of its specified term and thereafter may be exercised -6- 2/28/96 LAW2:2339 7 in whole or in part at any time before it terminates under the provisions of the Plan. (b) The Committee shall establish procedures governing the exercise of options and shall require that notice of exercise be given. Stock purchased upon exercise of an option must be paid for as follows: (1) in cash or by check (acceptable to the Company in accordance with guidelines established for this purpose), bank draft or money order payable to the order of the Company or (2) if so provided by the Committee (not later than the time of grant, in the case of an ISO) (i) through the delivery of shares of Stock which are then outstanding and which have a Fair Market Value on the date of exercise equal to the exercise price, (ii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iii) by any combination of the permissible forms of payment. As soon as practicable after receipt of each notice and full payment, the Company shall deliver to the Participant a certificate or certificates representing the acquired shares of Common Stock or Formula Value Stock. The exercise of an Option shall cancel any related SAR. 2.5 Limitations on ISOs: -------------------- No Participant shall be awarded, in any one calendar year under this Plan and under all plans of the Company, ISOs covering stock with an aggregate Fair Market Value (determined as of the -7- 2/28/96 LAW2:2339 8 time the ISOs are granted) in excess of $100,000 plus any "unused limit carryover" to such year for such Participant, as provided in Section 422A of the Internal Revenue Code of 1954, as amended, or such other limit as may be imposed by law in substitution thereof. 2.6 Termination of Employment: -------------------------- In the event the Participant ceases to be an employee with the consent of the Committee or upon his death, retirement or disability, each of his outstanding Options shall be exercisable by the Participant (or his legal representative or designated beneficiary), to the extent that such option was then exercisable, at any time prior to an expiration date established by the Committee at the time of award, but in no event after its respective expiration date. If the Participant ceases to be an employee for any other reason, all of the Participant's then outstanding options shall terminate immediately. 2.7 Award of Stock Appreciation Rights: ----------------------------------- (a) At any time prior to six months before an option's expiration date, the Committee may award to the Participant an SAR related to the Option. (b) The SAR shall represent the right to receive payment of a sum not to exceed the amount, if any, by which the Fair Market Value of the Common Stock or Formula Value Stock, as the case may be, on the date of exercise of the SAR exceeds the Option Price. -8- 2/28/96 LAW2:2339 9 (c) SARs awarded under the Plan shall be evidenced by either the Stock option Agreement or a separate agreement between the Company and the Participant. (d) An SAR shall be exercisable only at the same time and to the same extent and subject to the same conditions as the Option related thereto is exercisable, except that (i) the Committee may prescribe additional conditions and limitations on the exercise of any SAR and (ii) no SAR shall be exercisable for six months after the date of award. The exercise of an SAR shall cancel the related Option. SARs may be exercised only when the Fair Market Value of a share of Common Stock or Formula Value Stock, as the case may be, exceeds the Option Price. (e) All SARs shall automatically be exercised on the last trading day prior to the expiration of the related ISO or NSO, so long as the Fair Market Value on such date exceeds the specified option Price. (f) At the time of award of an SAR, the Committee may limit the amount of the payment that may be made to a Participant upon the exercise of the SAR. The Committee may further determine that, if the amount to be received by a Participant in any year is limited pursuant to this provision, payment of all or a portion of the amount reduced may be made to the Participant at a subsequent time. No such limitation shall require a Participant to return to the Company any amount theretofore received by him upon the exercise of an SAR. -9- 2/28/96 LAW2:2339 10 (g) Payment of the amount to which a Participant is entitled upon the exercise of an SAR shall be made in cash, Stock, or partly in cash and partly in Stock, as the Committee shall determine. To the extent that payment is made in Stock, the shares shall be valued at their Fair Market Value on the date of exercise of the SAR. (h) Each SAR shall expire on a date determined by the Committee at the time of award, or earlier upon the occurrence of the first of the following: (i) termination of the related option, (ii) expiration of a period of six months after the later of either (1) the Participant ceasing to be an employee with the consent of the Committee or upon his death, retirement or disability or (2) termination of the Participant's service as a director of the corporation or (iii) the Participant ceasing to be an employee for any other reason. 2.8 Limited Stock Appreciation Rights: ---------------------------------- (a) The Committee may award limited stock appreciation rights (Limited Rights) pursuant to the provisions of this paragraph to the holder of an Option granted under the Plan (a related option) with respect to all or a portion of the shares subject to the related option. A Limited Right may be exercised only during the -10- 2/28/96 LAW2:2339 11 period beginning on the first day following a Change in Control, as defined in Section 7.6(g) of the Plan, and ending on the thirtieth day following such date. Each Limited Right shall be exercisable only to the same extent the related option is exercisable, and in no event after the determination of the related option. In no event shall a Limited Right be exercised during the first six months after the date of grant of the Limited Right. Limited Rights shall be exercisable only when the fair market value (determined as of the date of exercise of the Limited Rights) of each share of Common Stock with respect to which the Limited Rights are to be exercised shall exceed the option price per share of Common Stock subject to the related option. (b) Upon the exercise of Limited Rights, the related option shall be considered to have been exercised to the extent of the number of shares of Common Stock with respect to which such Limited Rights are exercised, and shall be considered to have been exercised to that extent for purposes of determining the number of shares of Common Stock available for the grant of options under the Plan. Upon the exercise or termination of the related option, the Limited Rights with respect to such related option shall be considered to have been exercised or terminated to the extent of the number of shares of Common Stock with respect to which the related option was so exercised or terminated. -11- 2/28/96 LAW2:2339 12 (c) Except as otherwise provided in Section 7.3, the provisions of the Plan shall also be applicable to Limited Rights unless the context otherwise requires. The effective date of the grant of a Limited Right shall be the date on which the Committee approves the grant of such Limited Right. Each grantee of a Limited Right shall be notified promptly of the grant of the Limited Right in such manner as the Committee shall prescribe. (d) Upon the exercise of Limited Rights, the holder thereof shall receive in cash an amount equal to the product computed by multiplying (i) the excess of (a) the higher of (x) the Minimum Price Per Share (as hereinafter defined), or (y) highest reported closing sales price of a share of Common Stock on the New York Stock Exchange at any time during the period beginning on the sixtieth day prior to the date on which such Limited Rights are exercised and ending on the date on which such Limited Rights are exercised, over (b) the option price per share of Common Stock subject to the related option, by (ii) the number of shares of Common Stock with respect to which such Limited Rights are being exercised. (e) For purposes of this Section 2.8, the term "Minimum Price Per Share" shall mean the highest gross price (before brokerage commissions and soliciting dealers' fees) paid or to be paid for a share of Common Stock (whether by way of exchange, conversion, distribution upon liquidation or otherwise) in any Change in -12- 2/28/96 LAW2:2339 13 Control which is in effect at any time during the period beginning on the sixtieth day prior to the date on which such Limited Rights are exercised and ending on the date on which such Limited Rights are exercised. For purposes of this definition, if the consideration paid or to be paid in any such Change in Control shall consist, in whole or in part, of consideration other than cash, the Board shall take such action, as in its judgement it deems appropriate, to establish the cash value of such consideration. ARTICLE III PERFORMANCE SHARES AND UNITS 3.1 Award of Performance Units and Performance Shares: -------------------------------------------------- The Committee may award to any Participant Performance Shares and Performance Units (Performance Award or Performance Awards). Each Performance Share shall represent, as the Committee shall determine, one Share of the Stock. Each Performance Unit shall represent the right of a Participant to receive an amount equal to the value determined in the manner established by the Committee at time of award, which value may, without limitation, be equal to the Fair Market Value of one share of Stock. 3.2 Performance Unit and Performance Share Agreements: -------------------------------------------------- Each Performance Award under the Plan shall be evidenced by a signed written agreement containing such terms and conditions as the committee may determine. -13- 2/28/96 LAW2:2339 14 3.3 Establishment of Performance Accounts: -------------------------------------- At the time of award, the Company shall establish an account (Performance Account) for each Participant. Performance Units and Performance Shares awarded to a Participant shall be credited to the Participant's Performance Account. Performance Shares in the form of Restricted Stock shall be registered in the name of the Participant and deposited, together with a stock power endorsed in blank, with the Corporation; at such time the Participant's Performance Account will be credited. 3.4 Performance Period and Targets: ------------------------------- (a) The performance period for each award of Performance Shares and Performance Units shall be of such duration as the Committee shall establish at the time of award (Performance Period). There may be more than one award in existence at any one time, and Performance Periods may differ. (b) At the time of each Performance Award, the Committee shall establish superior and satisfactory performance targets to be achieved within the Performance Period. The superior and satisfactory performance targets shall be determined by the Committee using such measures of the performance of the Company over the Performance Period as it shall select. Attainment of superior performance target in respect of a Performance Period shall earn 100% of the related Performance Award. Failure to meet the satisfactory performance target will earn no Performance -14- 2/28/96 LAW2:2339 15 Award. Performance Awards will be earned as determined by the Committee in respect of a Performance Period in relation to the degree of attainment of performance between the superior and satisfactory performance targets. 3.5 Rights and Benefits During Performance Period: ---------------------------------------------- (a) The Committee may provide that amounts equivalent to dividends paid shall be payable with respect to each Performance Share awarded, and that amounts equivalent to interest at such rates as the Committee may determine shall be payable with respect to amounts equivalent to dividends previously credited to the Participant's Performance Account. (b) The Committee may provide that amounts equivalent to interest at such rates as the Committee may determine shall be payable with respect to Performance Units. (c) All amounts payable pursuant to this section shall be credited to the Participant's Performance Account. 3.6 Payment Respecting Performance Awards: -------------------------------------- (a) Performance Awards shall be earned to the extent that the terms and conditions of the Plan are met. Notwithstanding the foregoing, Performance Shares, Performance Units and any other amounts credited to the Participant's Performance Account shall be -15- 2/28/96 LAW2:2339 16 payable to the Participant only when, if and to the extent that the Committee determines to make such payment. (b) All payment determinations shall be made by the Committee during the first four months following the end of the Performance Period. If such determinations are not made during such four-month period, the Performance Shares and Performance Units awarded in connection with that Performance Period shall terminate and be canceled and related dividends or amounts equivalent to dividends and any amounts equivalent to interest shall be forfeited. (c) The Participant may, other than with respect to those Performance Shares or Performance Units awarded in the form of Restricted Stock, elect, not later than October 31 of the last year of the Performance Period applicable to such Performance Shares or Performance Units, to defer any payment respecting an award of Performance Shares or Performance units pursuant to Article VI hereof. 3.7 Forms of Payment: ----------------- (a) Payment for Performance Shares and any related dividends, amounts equivalent to dividends and amounts equivalent to interest may be made in a lump sum or in installments, in cash, Stock, Debentures or in a combination thereof as the Committee may -16- 2/28/96 LAW2:2339 17 determine. Performance Shares paid in the form of Restricted Stock shall be redelivered to the Participant. (b) Payment for Performance Units and any related amounts equivalent to interest may be made in a lump sum or in installments, in cash, Stock, Debentures or in a combination thereof as the Committee may determine. 3.8 Termination of Employment: -------------------------- In the event the Participant ceases to be an employee before the end of any Performance Period with the consent of the committee, or upon his death, retirement or disability before the end of any Performance Period, the Committee, taking into consideration the performance of such Participant and the performance of the Company over the Performance Period, may authorize the payment to such Participant (or his legal representative or designated beneficiary) of all or a portion of the amount which would have been paid to him had he continued as an employee to the end of the Performance Period. In the event a Participant ceases to be an employee for any other reason, all Performance Shares, Performance Units and all amounts credited to his Performance Account shall be forfeited. -17- 2/28/96 LAW2:2339 18 ARTICLE IV RESTRICTED STOCK 4.1 Award of Restricted Stock: -------------------------- The Committee may award to any Participant shares of Common Stock, Putative Common Stock or Formula Value Stock subject to this Article IV and such other terms and conditions as the Committee may prescribe, such shares being herein called "Restricted Stock". Each certificate for Restricted Stock shall be registered in the name of the Participant and deposited by him, together with a stock power endorsed in blank, with the Corporation. 4.2 Restricted Stock Agreement: --------------------------- Shares of Restricted Stock awarded under the Plan shall be evidenced by a signed written agreement containing such terms and conditions as the Committee may determine. 4.3 Restriction Period: ------------------- At the time of award there shall be established for each Participant a "Restriction Period" of such length as shall be determined by the Committee. Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as hereinafter provided, during the Restriction Period. Except for such restriction on transfer, the Participant as owner -18- 2/28/96 LAW2:2339 19 of such shares of Restricted stock shall have all the rights of a holder of such Restricted Stock. At the expiration of the Restriction Period, the Corporation shall redeliver to the Participant (or his legal representative or designated beneficiary) the shares deposited pursuant to Section 4.1. 4.4 Termination of Employment: -------------------------- In the event the Participant ceases to be an employee with the consent of the Committee, or upon his death, retirement or disability, the restrictions imposed under this Article IV shall lapse with respect to such number of shares theretofore awarded to him as shall be determined by the Committee, but, in no event less than a number equal to the product of (i) a fraction the numerator of which is the number of completed months elapsed after the date of award of the Restricted Stock to the Participant to the date of termination and the denominator of which is the number of months in the Restriction Period and (ii) the number of shares of Restricted Stock. In the event the Participant ceases to be an employee for any other reason, all shares of Restricted Stock theretofore awarded to him which are still subject to restrictions shall be forfeited and the Corporation shall have the right to complete the blank stock power. -19- 2/28/96 LAW2:2339 20 ARTICLE V CONVERTIBLE DEBENTURES 5.1 Award of Rights to Purchase Convertible Debentures: --------------------------------------------------- The Committee may award to any Participant the right to purchase Convertible Debentures on such terms and conditions as the Committee shall determine. The purchase price per Debenture shall be its face amount, which shall equal its Fair Market Value. The Participant shall retain the right to purchase Debentures for such period as the Committee shall determine at the time of award, but in no event for longer than four years from date of award. 5.2 Convertible Debenture Agreements: --------------------------------- The Debentures are to be issued pursuant to a signed written agreement and any agreement supplemental thereto (collectively, a Convertible Debenture Agreement) containing such terms and conditions as the Committee may determine. The Debentures are to be issued in series; each series may be issued under a separate Convertible Debenture Agreement, or two or more series may be issued under a single Convertible Debenture Agreement. The Convertible Debenture Agreement may provide that a Participant may pledge Debentures as security to provide all or a part of the financing necessary to purchase the Debentures upon providing the Company with written notice of the pledge. The -20- 2/28/96 LAW2:2339 21 conversion privilege will not be exercisable during such times as the Debenture is pledged, and at all other times shall be exercisable only by the Participant (or his legal representative or designated beneficiary). 5.3 Terms and Conditions of the Debentures: --------------------------------------- (a) Each Debenture will be due upon the earliest of (i) five years from the date of issuance, (ii) such date as the Committee shall determine at time of award or (iii) such date as the Company redeems a series of Debentures or prepays an individual Debenture (Due Date). The Committee may extend the term of a series for any period of time up to ten years without stockholder approval, as shall be set forth in the Convertible Debenture Agreement for that series. The Debentures shall be issued in denominations equal to fair market value and will accrue interest, from the date of issuance, at the rate, which may be fixed or variable, set by the Committee at the time of award. (b) Debentures will be convertible into fully paid and nonassessable shares Of Common Stock or Formula Value Stock or such other type of securities, which may immediately be convertible into Common Stock, as the Committee shall determine at time of award, at any time after one year from the date of issuance and to the extent the terms and conditions of the award and the Plan are met, but in no event later than the Due Date. The conversion rate of a Debenture shall be set by reference to -21- 2/28/96 LAW2:2339 22 the Fair Market Value of the Common Stock or Formula Value Stock on the last trading day prior to the date of issuance (and not thereafter adjusted). 5.4 Termination of Employment: -------------------------- In the event the Participant ceases to be an employee with the consent of the Committee, or upon his death, retirement or disability, the Participant (or his legal representative or designated beneficiary) may convert all or a part of the Debentures, to the extent such Debentures were then convertible, for such period as the Committee shall determine at the time of award. In the event a Debenture is not converted within the time allowed under this Section 5.4, the Company may prepay the Debenture. In the event the Participant ceases to be an employee for any other reason, all of the Participant's then outstanding conversion rights shall terminate immediately. ARTICLE VI DEFERRAL OF PAYMENTS 6.1 Election to Defer: ------------------ A Participant may elect, no later than October 31 of the last year of the Performance Period, to defer all or a portion of his Performance Award within deferral limits established by the Committee (Deferred Amount). The Committee may permit amounts now or hereafter deferred or available for deferral under any -22- 2/28/96 LAW2:2339 23 present or future incentive compensation program or deferral arrangement of the Company to be deemed Deferred Amounts and to become subject to the provisions of this Article. All Deferred Amounts will be subject to such terms and conditions as the Committee may from time to time establish. 6.2 Deferral Period: ---------------- The Participant may elect to receive payment of Deferred Amounts and any yield thereon either before or after retirement in a lump sum or in installments. Upon the death of a Participant, payment of any amounts hereunder shall be made to the Participant's designated beneficiary or estate (in the absence of a designated beneficiary) in the manner elected by the Participant or (in the event the Participant made no election) in the manner determined by the Committee. The period between the date the Participant's Deferred Amount becomes payable and the final payment of such Deferred Amount hereunder shall be known as the "Deferral Period." 6.3 Investment During Deferral Period: ---------------------------------- Unless otherwise determined by the Committee, the Deferral Amount will be treated as if it had been invested in putative debentures. Each putative debenture will be deemed to be -23- 2/28/96 LAW2:2339 24 convertible into Common Stock at a conversion rate computed by reference to the Fair Market Value of the Common Stock on the last trading day prior to the regular January meeting of the Board of Directors. The yield to be paid by the Company on Deferred Amounts, whatever the form of investment selected by the Committee, shall not exceed the higher of (i) the market rate available from time to time on such investment or (ii) the rate of return on equity of the Corporation or any relevant Subsidiary as determined by the Committee. 6.4 Participant Reports: -------------------- Annually, each Participant who has a Deferred Amount will receive a report setting forth all then Deferred Amounts and the yield thereon to date. 6.5 Payment of Deferred Amounts: ---------------------------- Unless otherwise agreed by the Company and the Participant, payment of Deferred Amounts will be made at such time or times, and may be in cash, Stock, or partly in cash and partly in Stock, as the Committee shall determine. The limitations respecting the issuance of Stock or other limitations on aggregate awards payable contained in Article XVI of the by-laws of the Corporation, in the 1974 Stock Option Plan, 1979 Stock Option and Long-Term Incentive Plan, the Plan and in any plan hereafter adopted by the stockholders shall be limitations applicable to the payment of any Deferred Amounts under this Article VI. -24- 2/28/96 LAW2:2339 25 6.6 Alternate Valuation Election: ----------------------------- A Participant may, at a time established by the Committee but prior to such Participant ceasing to be an Employee, elect to establish the ultimate payable value of each Deferred Amount by reference to the Fair Market Value of the Stock as of the day on which notice of the alternate valuation election is received by the Corporation in accordance with the procedures established by the Committee. Notwithstanding the establishment of the ultimate payable value resulting from the alternate valuation election by the Participant, the yield will continue as though no such election has been made and will continue to be subject to the limitations set forth in Section 6.3, and Deferred Amounts and the yield thereon will be paid as otherwise provided in this Article. ARTICLE VII MISCELLANEOUS PROVISIONS 7.1 Non-Transferability: -------------------- No Option, SAR, Performance Share, Performance Unit, share of Restricted Stock or Debenture award under the Plan shall be transferable by the Participant otherwise than by will or, if the Participant dies intestate, by the laws of descent and distribution. All awards shall be exercisable or received during the Participant's lifetime only by such Participant or his legal -25- 2/28/96 LAW2:2339 26 representative. Any transfer contrary to this Section 7.1 will nullify the Option, SAR, Performance Share, Performance Unit or share of Restricted Stock and will nullify the conversion right of a Debenture. 7.2 Adjustments Upon Changes in Stock: ---------------------------------- If there shall be any change in the Stock of the Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, spinoff, split up, dividend in kind or other change in the corporate structure or distribution to the stockholders, appropriate adjustments may be made by the Board of Directors of the Company (or if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Plan, and the number and kind of shares and the price per share subject to outstanding Options or which may be issued under Outstanding Performance Shares or awards of Restricted Stock. Appropriate adjustments may also be made by the Board of Directors or the Committee in the terms of any awards under the Plan to reflect such changes and to modify any other terms of outstanding awards on an equitable basis, including modifications of performance targets and changes in the length of Performance Periods. -26- 2/28/96 LAW2:2339 27 7.3 Conditions on Awards: --------------------- In the event that the employment of a Participant holding any unexercised Option or SAR, or any unearned right to purchase or conversion right under a Debenture or unearned Performance Award or Stock shall terminate with the consent of the Committee or by reason of retirement or disability, the rights of such Participant to any such Option, SAR, Debenture, Performance Award or Stock shall be subject to the conditions that until any such Option or SAR is exercised, or any such conversion right, Purchase right, Performance Award or Stock is earned, he shall (i) not engage, either directly or indirectly, in any manner or capacity as advisor, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any business or activity which is at the time competitive with any business or activity conducted by the Company and (ii) be available, unless he shall have died, at reasonable times for consultations at the request of the Company's management with respect to phases of the business with which he was actively connected during his employment, but such consultations shall not (except in the case of a Participant whose active service was outside the United States) be required to be performed at any place or places outside of the United States of America or during usual vacation periods or periods of illness or other incapacity. In the event that either of the above conditions is not fulfilled, the Participant shall forfeit all rights to any unexercised Option or SAR, or any unearned conversion right, purchase right, Performance Award or -27- 2/28/96 LAW2:2339 28 Stock held (and any unpaid amounts equivalent to dividends or amounts equivalent to interest relating thereto) as of the date of the breach of condition. Any determination by the Board of Directors of the Corporation, which shall act upon the recommendation of the Chairman, that the Participant is, or has, engaged in a competitive business or activity as aforesaid or has not been available for consultations as aforesaid shall be conclusive. 7.4 Use of Proceeds: ---------------- All cash proceeds from the exercise of options or the sale of Debentures shall constitute general funds of the Company. 7.5 Amendment, Suspension and Termination of Plan: ---------------------------------------------- (a) The Board of Directors may suspend or terminate the Plan or any portion thereof at any time and may amend it from time to time in such respects as the Board of Directors may deem advisable in order that any awards thereunder shall conform to any change in applicable laws or regulations, or to permit the Company or its employees to enjoy the benefits of any change in applicable laws or regulations, or in any other respect the Board of Directors may deem to be in the best interests of the Company; provided, however, that no such amendment shall, without stockholder approval, (i) except as provided in Section 7.2, materially increase the number of shares of Stock which may be issued under the Plan, (ii) materially modify the requirements as to -28- 2/28/96 LAW2:2339 29 eligibility for participation in the Plan, (iii) materially increase the benefits accruing to Participants under the Plan, (iv) make any other change that would disqualify the Plan for purposes of the exemption provided by Rule 16b-3(d)(3), (v) reduce the Option Price below the Fair Market Value of the Common Stock or Formula Value Stock on the day the Option is awarded, (vi) permit the award of SARs other than in tandem with an Option, (vii) permit the exercise of an SAR during the first six months of its term except as otherwise provided herein, (viii) permit the exercise of an Option or SAR without surrender of the correlative rights or (ix) extend the termination date of the Plan. However, no such amendment, suspension or termination shall, unless the Participant affected thereby consents, alter or impair any outstanding Option, SAR, share of Stock, Performance Unit, Performance Share or Debenture in any way that would adversely affect the rights of such Participant with respect to such award. (b) The Committee and its authorized delegates, acting within limits approved from time to time by the Committee, may amend or modify any outstanding Options, SARs, shares of Stock, Performance Units, Performance Shares or Debentures, in any manner to the extent that the Committee would have had the authority under the Plan to initially award such options, SARs, shares of Stock, Performance Units, Performance Shares or Debentures, as so modified or amended, including without limitation, to change the date or dates as of which such Options or SARs may be exercised, -29- 2/28/96 LAW2:2339 30 the restrictions on shares of Restricted Stock are removed or the Performance Units or Performance Shares are determined and paid, or may cancel any outstanding award, except that the Committee and its authorized delegates may not, unless the Participant affected thereby consents, take any action pursuant to this Section 7.5(b) that would adversely affect the rights of such Participant with respect to such award. 7.6 Definitions and other General Provisions: ----------------------------------------- (a) The terms "retirement" and "disability" as used under the Plan shall be construed by reference to the provisions of the Westinghouse Pension Plan or other similar plan or program of the Company applicable to a Participant. (b) The term "Fair Market Value" as it relates to Common Stock means the mean of the high and low prices of the Corporation's Common Stock as reported by the Composite Tape of the New York Stock Exchange (or such successor reporting system as shall be selected by the Committee) on the relevant date or, if no sale of the Corporation's Common Stock shall have been reported for that day, the average of such prices on the next preceding day and the next following day for which there were reported sales. The term "Fair Market Value" as it relates to Formula Value Stock and Debentures shall mean the value determined by the Committee. -30- 2/28/96 LAW2:2339 31 (c) The term "Subsidiary" shall mean, unless the context otherwise requires, any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if each of the corporations other than the last corporation in such chain owns stock possessing at least 50% of the voting power in one of the other corporations in such chain. (d) The term "Formula Value Stock" means shares of a class or classes of stock, the value of which is derived from a formula established by the Committee which reflects such financial measures as the Committee shall determine. Such Shares shall have such other characteristics as shall be determined at time of their authorization. (e) The adoption of the Plan shall not preclude the adoption by appropriate means of any other stock option or other incentive plan for employees. (f) Change in Control. Notwithstanding any other provision of the Plan, upon the occurrence of a Change in Control, as defined in Section 7.6(g), (i) all Options and Limited Rights, but not SARs, outstanding and unexercised on the date of the Change in Control shall become immediately exercisable; (ii) all Performance Shares and Performance Units shall be deemed to have been earned on such basis as the Committee may prescribe and then paid on such basis, -31- 2/28/96 LAW2:2339 32 at such time and in such form as the Committee may prescribe, or deferred in accordance with the elections of Participants; (iii) all Restricted Stock shall be deemed to be earned and the restriction period shall be deemed expired on such terms and conditions as the Committee may determine; (iv) all Convertible Debentures shall be immediately convertible on such terms and conditions as the Committee may determine; and (v) all amounts deferred under this Plan paid to a trustee or otherwise on such terms as the Committee may prescribe or permit. (g) The term 'Change in Control' means the occurrence of one or more of the following events: (a) there shall be consummated (i) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Corporation's Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of the Corporation's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, or (b) the stockholders of the Corporation shall approve any plan or proposal for the liquidation or dissolution of the Corporation, or (c) (i) any person (as such term is defined in Section 13(d) of -32- 2/28/96 LAW2:2339 33 the Securities Exchange Act of 1934, as amended) (the "Exchange Act"), corporation or other entity shall purchase any Common Stock of the Corporation (or securities convertible into the Corporation's Common Stock) for cash, securities or any other consideration pursuant to a tender offer or exchange offer, unless, prior to the making of such purchase of Common Stock (or securities convertible into Common Stock), the Board shall determine that the making of such purchase shall not constitute a Change in Control, or (ii) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Corporation or any benefit plan sponsored by the Corporation or any of its subsidiaries) shall become the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing twenty percent or more of the combined voting power of the Corporation's then outstanding securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d)) in the case of rights to acquire any such securities, unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not constitute a Change in Control, or (d) at any time during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least a majority thereof, unless the -33- 2/28/96 LAW2:2339 34 election or nomination for election of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. 7.7 Non-Uniform Determinations: --------------------------- The Committee's determinations under the Plan, including without limitation, (i) the determination of the Participants to receive awards, (ii) the form, amount and timing of such awards, (iii) the terms and provisions of such awards and (iv) the agreements evidencing the same, need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, awards under the Plan, whether or not such Participants are similarly situated. 7.8 Leaves of Absence; Transfers: ----------------------------- The Committee shall be entitled to make such rules, regulations and determinations as it deems appropriate under the Plan in respect to any leave of absence from the Company granted to a Participant. Without limiting the generality of the foregoing, the Committee shall be entitled to determine (i) whether or not any such leave of absence shall be treated as if the Participant ceased to be an Employee and (ii) the impact, if any, of any such leave of absence on awards under the Plan. In the event a Participant transfers within the Company, such -34- 2/28/96 LAW2:2339 35 Participant shall not be deemed to have ceased to be an Employee for purposes of the Plan. 7.9 General Restriction: -------------------- (a) Each award under the Plan shall be subject to the condition that, if at any time the Committee shall determine that (i) the listing, registration or qualification of the shares of Common Stock or Formula Value Stock or the Debentures subject or related thereto upon any securities exchange or under any state or federal law, (ii) the consent or approval of any government or regulatory body or (iii) an agreement by the Participant with respect thereto, is necessary or desirable, then such award shall not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free or any conditions not acceptable to the Committee. (b) Shares of Common Stock for use under the provisions of this Plan shall not be issued until they have been duly listed, upon official notice of issuance, upon the New York Stock Exchange and such other Exchanges, if any, as the Board of Directors of the Corporation shall determine, and a registration statement under the Securities Act of 1933 with respect to such shares shall have become, and be, effective. -35- 2/28/96 LAW2:2339 36 7.10 Effective Date: --------------- The Plan shall be deemed effective as of January 1, 1984 and shall terminate on December 31, 1993. Notwithstanding the foregoing, the provisions of Article VI of the Plan shall survive and remain effective as to all present and future Deferred Amounts until such date after December 31, 1993 as the Committee or the Board of Directors shall determine. -36- 2/28/96 LAW2:2339 EX-10.H 8 WESTINGHOUSE ELEC. 1 Exhibit 10(h) 1991 LONG-TERM INCENTIVE PLAN (as amended as of February 28, 1996) ARTICLE I GENERAL 1.1 Purpose ------- The purposes of the 1991 Long-Term Incentive Plan ("Plan") for eligible employees of Westinghouse Electric Corporation ("Corporation") and its Subsidiaries (the Corporation and its Subsidiaries severally and collectively referred to in the Plan as the "Company") are to foster and promote the long-term financial success of the Company and materially increase stockholder value by (i) attracting and retaining employees of outstanding ability, (ii) strengthening the Company's capability to develop, maintain and direct a high performance team, (iii) motivating employees, by means of performance-related incentives, to achieve long-range performance goals, (iv) providing incentive compensation opportunities competitive with those of other major companies and (v) enabling employees to participate in the long-term growth and financial success of the Company. 1.2 Administration -------------- (a) The Plan shall be administered by a committee of the Board of Directors of the Corporation ("Committee") which shall consist LAW2:8011 -1- 2/28/96 2 of three or more members. The members shall be appointed by the Board of Directors, and any vacancy on the Committee shall be filled by the Board of Directors. The Committee shall keep minutes of its meetings and of any action taken by it without a meeting. A majority of the Committee shall constitute a quorum, and the acts of a majority of the members present at any meeting at which a quorum is present shall be the acts of the Committee. Any action that may be taken at a meeting of the Committee may be taken without a meeting if a consent or consents in writing setting forth the action so taken shall be signed by all of the members of the Committee. The Committee shall make appropriate reports to the Board of Directors concerning the operations of the Plan. (b) Subject to the limitations of the Plan, the Committee shall have the sole and complete authority: (i) to select in accordance with Section 1.3 persons who shall participate in the Plan ("Participant" or "Participants") (including the right to delegate authority to select Participants); (ii) to make Awards and payments in such forms and amounts as it shall determine, including the right to delegate authority to make Awards within limits approved by the Committee; (iii) to impose such limitations, restrictions, terms and conditions upon such Awards as the Committee or its authorized delegates shall deem appropriate; (iv) to interpret the Plan and the terms of any document relating to the Plan and to adopt, amend and rescind LAW2:8011 -2- 2/28/96 3 administrative guidelines and other rules and regulations relating to the Plan; (v) to amend or cancel an existing Award in whole or in part (including the right to delegate authority to amend or cancel an existing Award in whole or in part within limits approved from time to time by the Committee), except that the Committee and its authorized delegates may not, unless otherwise provided in the Plan, or unless the Participant affected thereby consents, take any action under this clause that would adversely affect the rights of such Participant with respect to the Award, and except that the Committee and its authorized delegates may not take any action to amend any outstanding Option under the Plan in order to decrease the Option Price under such Option or to cancel and replace any such Option with an Option with a lower Option Price; and (vi) to make all other determinations and to take all other actions necessary or advisable for the interpretation, implementation and administration of the Plan. The Committee's determinations on matters within its authority shall be conclusive and binding upon the Company and all other persons. (c) The Committee shall act with respect to the Plan on behalf of the Corporation and on behalf of any subsidiary issuing stock under the Plan, subject to appropriate action by the board of directors of any such Subsidiary. All expenses associated with the Plan shall be borne by the Corporation subject to such allocation to its Subsidiaries and operating units as it deems appropriate. LAW2:8011 -3- 2/28/96 4 1.3 Selection for Participation --------------------------- Participants selected by the Committee or its authorized delegates shall be Eligible Persons as defined below. "Eligible Persons" are persons who are employees of the Company ("Employee" or "Employees") or, in the event of death while an Employee, his or her estate. In making this selection and in determining the form and amount of Awards, the Committee may give consideration to the functions and responsibilities of the Eligible Person, his or her past, present and potential contributions to the Company and other factors deemed relevant by the Committee. 1.4 Types of Awards under Plan -------------------------- Awards ("Awards") under the Plan may be in the form of any one or more of the following: (i) Non-statutory Stock Options ("NSOs" or "Options"), as described in Article II, (ii) Stock Appreciation Rights ("SARs") and Limited Stock Appreciation Rights ("Limited Rights"), as described in Article III, (iii) Performance Awards ("Performance Awards") as described in Article IV, and (iv) Restricted Stock ("Restricted Stock") as described in Article V. LAW2:8011 -4- 2/28/96 5 1.5 Shares Subject to the Plan -------------------------- Shares of stock issued under the Plan may be in whole or in part authorized and unissued or treasury shares of the Corporation's common stock, par value $1.00 ("Common Stock"), or "Formula Value Stock" as defined in Section 8.12(d) (Common Stock and Formula Value Stock severally and collectively referred to in the Plan as "Stock"). The maximum number of shares of Stock which may be issued for all purposes under the Plan shall be 21,500,000. Except as otherwise provided below, any shares of Stock subject to an Option or other Award which is canceled or terminates without having been exercised shall again be available for Awards under the Plan. Shares subject to an option canceled upon the exercise of an SAR shall not again be available for Awards under the Plan except to the extent the SAR is settled in cash. To the extent that an Award is settled in cash, shares of Stock subject to that Award shall again be available for Awards. Shares of Stock tendered by a Participant or withheld by the Company to pay the exercise price of an Option or to satisfy the tax withholding obligations of the exercise or vesting of an Award shall be available again for Awards under the Plan. Shares of Restricted Stock forfeited to the Company in accordance with the Plan and the terms of the particular Award shall be available again for Awards under the Plan. LAW2:8011 -5- 2/28/96 6 No fractional shares shall be issued, and the Committee shall determine the manner in which fractional share value shall be treated. ARTICLE II STOCK OPTIONS 2.1 Award of Stock Options ---------------------- The Committee may, from time to time, subject to the provisions of the Plan and such other terms and conditions as the Committee may prescribe, award to any Participant Options to purchase Stock. The Committee may provide with respect to any option to purchase Stock that, if the Participant, while an Eligible Person, exercises the option in whole or in part using already-owned Stock, the Participant will, subject to this Section 2.1 and such other terms and conditions as may be imposed by the Committee, receive an additional option ("Reload Option"). The Reload Option will be to purchase, at Fair Market Value as of the date the original option was exercised, a number of shares of Stock equal to the number of whole shares used by the Participant to exercise the original option. The Reload Option will be exercisable only between the date of its grant and the date of expiration of the original option. LAW2:8011 -6- 2/28/96 7 A Reload Option shall be subject to such additional terms and conditions as the Committee shall approve, which terms may provide that the Committee may cancel the Participant's right to receive the Reload Option and that the Reload Option will be granted only if the Committee has not canceled such right prior to the exercise of the original option. Such terms may also provide that, upon the exercise by a Participant of a Reload Option while an Eligible Person, an additional Reload Option will be granted with respect to the number of whole shares used to exercise the first Reload Option. 2.2 Stock Option Agreements ----------------------- The award of an option shall be evidenced by a written agreement ("Stock Option Agreement") in such form and containing such terms and conditions as the Committee may from time to time determine. 2.3 Option Price ------------ The purchase price of Stock under each Option ("Option Price") shall be not less than the Fair Market Value of such Stock on the date the Option is awarded. 2.4 Exercise and Term of Options ---------------------------- (a) Except as otherwise provided in the Plan, Options shall become exercisable at such time or times as the Committee may specify. The Committee may at any time and from time to time accelerate the time at which all or any part of the Option may be exercised. LAW2:8011 -7- 2/28/96 8 (b) The Committee shall establish procedures governing the exercise of options and shall require that notice of exercise be given. Stock purchased on exercise of an option must be paid for as follows: (1) in cash or by check (acceptable to the Company in accordance with guidelines established for this purpose), bank draft or money order payable to the order of the Company or (2) if so provided by the Committee (i) through the delivery of shares of Stock which are then outstanding and which have a Fair Market Value on the date of exercise equal to the exercise price, (ii) by delivery of an unconditional and irrevocable undertaking by a broker to deliver promptly to the Company sufficient funds to pay the exercise price, or (iii) by any combination of the permissible forms of payment. 2.5 Termination of Eligibility -------------------------- In the event the Participant is no longer an Eligible Person and ceased to be such as a result of termination of service to the Company with the consent of the Committee or as a result of his or her death, retirement or disability, each of his or her outstanding Options shall be exercisable by the Participant (or his or her legal representative or designated beneficiary), to the extent that such Option was then exercisable, at any time prior to an expiration date established by the Committee at the LAW2:8011 -8- 2/28/96 9 time of award, but in no event after such expiration date. In the event an Award is made to the estate of a person who died while an Employee, each outstanding Option held by such estate shall be exercisable by the estate (or the distributee of said estate) at any time prior to an expiration date established by the Committee at the time of award. If the Participant ceases to be an Eligible Person for any other reason, all of the Participant's then outstanding Options shall terminate immediately. ARTICLE III STOCK APPRECIATION RIGHTS AND LIMITED RIGHTS 3.1 Award of Stock Appreciation Right --------------------------------- (a) An SAR is an Award entitling the recipient on exercise to receive an amount, in cash or Stock or a combination thereof (such form to be determined by the Committee), determined in whole or in part by reference to appreciation in Stock value. (b) In general, an SAR entitles the Participant to receive, with respect to each share of Stock as to which the SAR is exercised, the excess of the share's Fair Market Value on the date of exercise over its Fair Market Value on the date the SAR was granted. LAW2:8011 -9- 2/28/96 10 (c) SARs may be granted in tandem with options granted under the Plan ("Tandem SARS") or independently of Options ("Independent SARs"). An SAR granted in tandem with an NSO may be granted either at or after the time the option is granted. (d) SARs awarded under the Plan shall be evidenced by either a Stock Option Agreement (when SARs are granted in tandem with an Option) or a separate agreement between the Company and the Participant. (e) Except as otherwise provided herein, a Tandem SAR shall be exercisable only at the same time and to the same extent and subject to the same conditions as the option related thereto is exercisable, and the Committee may prescribe additional conditions and limitations on the exercise of the SAR. The exercise of a Tandem SAR shall cancel the related Option. Tandem SARs may be exercised only when the Fair Market Value of Stock to which it relates exceeds the Option Price. (f) Except as otherwise provided herein, an Independent SAR will become exercisable at such time or times, and on such conditions, as the Committee may specify, and the Committee may at any time accelerate the time at which all or any part of the SAR may be exercised. LAW2:8011 -10- 2/28/96 11 The Committee may provide, under such terms and conditions as it may deem appropriate, for the automatic grant of additional SARs upon the full or partial exercise of an Independent SAR. Any exercise of an Independent SAR must be in writing, signed by the proper person and delivered or mailed to the Company, accompanied by any other documents required by the Committee. (g) Except as otherwise provided herein, all SARs shall automatically be exercised on the last trading day prior to the expiration date established by the Committee at the time of the award for the SAR, or, in the case of a Tandem SAR, for the related Option, so long as exercise on such date will result in a payment to the Participant. (h) Unless otherwise provided by the Committee, no SAR shall become exercisable or shall be automatically exercised for six months following the date on which it was granted. (i) At the time of award of an SAR, the Committee may limit the amount of the payment that may be made to a Participant upon the exercise of the SAR. The Committee may further determine that, if the amount to be received by a Participant in any year is limited pursuant to this provision, payment of all or a portion of the amount that is unpaid as a result of the limitation may be LAW2:8011 -11- 2/28/96 12 made to the Participant at a subsequent time. No such limitation shall require a Participant to return to the Company any amount theretofore received by him or her upon the exercise of an SAR. (j) Payment of the amount to which a Participant is entitled upon the exercise of an SAR shall be made in cash, Stock, or partly in cash and partly in Stock, as the Committee shall determine. To the extent that payment is made in Stock, the shares shall be valued at their Fair Market Value on the date of exercise of the SAR. (k) Each SAR shall expire on a date determined by the Committee or earlier upon the occurrence of the first of the following: (i) in the case of a Tandem SAR, termination of the related option, (ii) expiration of a period of six months after the Participant's ceasing to be an Eligible Person as a result of termination of service to the Company with the consent of the Committee or as a result of his or her death, retirement or disability, or (iii) the Participant ceasing to be an Eligible Person for any other reason. 3.2 Limited Rights -------------- (a) The Committee may award Limited Rights pursuant to the provisions of this Section 3.2 to the holder of an Option to purchase Common Stock granted under the Plan (a "Related Option") with respect to all or a portion of the shares subject to the LAW2:8011 -12- 2/28/96 13 Related Option. A Limited Right may be exercised only during the period beginning on the first day following a Change in Control, as defined in Section 7.2 of the Plan, and ending on the thirtieth day following such date. Each Limited Right shall be exercisable only to the same extent that the Related Option is exercisable, and in no event after the termination of the Related Option. In no event shall a Limited Right be exercised during the first six months after the date of grant of the Limited Right. Limited Rights shall be exercisable only when the Fair Market Value (determined as of the date of exercise of the Limited Rights) of each share of Common Stock with respect to which the Limited Rights are to be exercised shall exceed the Option Price per share of Common Stock subject to the Related option. (b) Upon the exercise of Limited Rights, the Related Option shall be considered to have been exercised to the extent of the number of shares of Common Stock with respect to which such Limited Rights are exercised. Upon the exercise or termination of the Related Option, the Limited Rights with respect to such Related Option shall be considered to have been exercised or terminated to the extent of the number of shares of Common Stock with respect to which the Related Option was so exercised or terminated. LAW2:8011 -13- 2/28/96 14 (c) The effective date of the grant of a Limited Right shall be the date on which the Committee approves the grant of such Limited Right. Each grantee of a Limited Right shall be notified promptly of the grant of the Limited Right in such manner as the Committee shall prescribe. (d) Upon the exercise of Limited Rights, the holder thereof shall receive in cash an amount equal to the product computed by multiplying (i) the excess of (a) the higher of (x) the Minimum Price Per Share (as hereinafter defined), or (y) the highest reported closing sales price of a share of Common Stock on the New York Stock Exchange at any time during the period beginning on the sixtieth day prior to the date on which such Limited Rights are exercised and ending on the date on which such Limited Rights are exercised, over (b) the Option Price per share of Common Stock subject to the Related Option, by (ii) the number of shares of Common Stock with respect to which such Limited Rights are being exercised. (e) For purposes of this Section 3.2, the term "Minimum Price Per Share" shall mean the highest gross price (before brokerage commissions and soliciting dealers' fees) paid or to be paid for a share of Common Stock (whether by way of exchange, conversion, distribution upon liquidation or otherwise) in any Change in Control which is in effect at any time during the period beginning on the sixtieth day prior to the date on which such LAW2:8011 -14- 2/28/96 15 Limited Rights are exercised and ending on the date on which such Limited Rights are exercised. For purposes of this definition, if the consideration paid or to be paid in any such Change in Control shall consist, in whole or in part, of consideration other than cash, the Board shall take such action, as in its judgement it deems appropriate, to establish the cash value of such consideration. ARTICLE IV PERFORMANCE AWARDS 4.1 Nature of Performance Awards ---------------------------- A Performance Award provides for the recipient to receive an amount in cash or Stock or a combination thereof (such form to be determined by the Committee) following the attainment of Performance Goals. Performance Goals may be related to personal performance, corporate performance (including corporate stock performance), departmental performance or any other category of performance deemed by the Committee to be important to the success of the Company. The Committee shall determine the Performance Goals, the period or periods during which performance is to be measured and all other terms and conditions applicable to the Award. Regardless of the degree to which Performance Goals are attained, a Performance Award shall be paid only when, if and to the extent that the Committee determines to make such payment. LAW2:8011 -15- 2/28/96 16 4.2 Other Awards Subject to Performance Condition --------------------------------------------- The Committee may, at the time any Award described in this Plan is granted, impose the condition (in addition to any conditions specified or authorized in the Plan) that Performance Goals be met prior to the Participant's realization of any payment or benefit under the Award. ARTICLE V RESTRICTED STOCK 5.1 Award of Restricted Stock ------------------------- The Committee may award to any Participant shares of Stock subject to this Article V and such other terms and conditions as the Committee may prescribe, such Stock referred to herein as "Restricted Stock." Each certificate for Restricted Stock shall be registered in the name of the Participant and deposited by him or her, together with a stock power endorsed in blank, with the Corporation. 5.2 Restricted Stock Agreement -------------------------- Shares of Restricted Stock awarded under the Plan shall be evidenced by a written agreement in such form and containing such terms and conditions as the Committee may determine. LAW2:8011 -16- 2/28/96 17 5.3 Restriction Period ------------------ At the time of award, there shall be established for each Participant a "Restriction Period" of such length as shall be determined by the Committee. The Restriction Period may be waived by the Committee. Shares of Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered, except as hereinafter provided, during the Restriction Period. Subject to such restriction on transfer, the Participant as owner of such shares of Restricted Stock shall have the rights of the holder of such Restricted Stock, except that the Committee may provide at the time of the Award that any dividends or other distributions paid on such Stock during the Restriction Period shall be accumulated and held by the Company and shall be subject to forfeiture under Section 5.4. Upon the expiration or waiver by the Committee of the Restriction Period, the Corporation shall redeliver to the Participant (or his or her legal representative or designated beneficiary) the shares deposited pursuant to Section 5.1. 5.4 Termination of Eligibility -------------------------- In the event the Participant is no longer an Eligible Person and ceased to be such as a result of termination of service to the Company with the consent of the Committee, or as a result of his or her death, retirement or disability, the restrictions imposed under this Article V shall lapse with respect to such LAW2:8011 -17- 2/28/96 18 number of shares theretofore awarded to him or her as shall be determined by the Committee. All other shares of Restricted Stock theretofore awarded to him or her which are still subject to restrictions, along with any dividends or other distributions thereon that have been accumulated and held by the Company, shall be forfeited, and the Corporation shall have the right to complete the blank stock power. In the event the Participant ceases to be an Eligible Person for any other reason, all shares of Restricted Stock theretofore awarded to him or her which are still subject to restrictions, along with any dividend or other distributions thereon that have been accumulated and held by the Company, shall be forfeited, and the Corporation shall have the right to complete the blank stock power. ARTICLE VI DEFERRAL OF PAYMENTS 6.1 Deferral of Amounts ------------------- If the Committee makes a determination to designate Awards or, from time to time, groups or types of Awards, eligible for deferral hereunder, a Participant may, subject to such terms and conditions and within such limits as the Committee may from time to time establish, elect to defer the receipt of amounts due to him or her under the Plan. Amounts so deferred are referred to LAW2:8011 -18- 2/28/96 19 herein as "Deferred Amounts." The Committee may also permit amounts now or hereafter deferred or available for deferral under any present or future incentive compensation program or deferral arrangement of the Company to be deemed Deferred Amounts and to become subject to the provisions of this Article. Awards which are so deferred will be deemed to have been awarded in cash and the cash deferred as Deferred Amounts. The period between the date on which the Participant's Deferred Amount would have been payable absent deferral and the final payment of such Deferred Amount shall be referred to herein as the "Deferral Period." 6.2 Investment During Deferral Period --------------------------------- Unless otherwise determined by the Committee, and subject to such changes as the Committee may determine, the Deferred Amount will be treated during the Deferral Period as if it were invested in putative convertible debentures with a fixed interest rate, compounded annually, for the entire Deferral Period. For purposes of determining the value of the Deferred Amount at the time of payment, each putative debenture will be deemed to be convertible into Common Stock at a conversion rate computed by reference to the Fair Market Value of the Common Stock on the last trading day prior to the regular January meeting of the Board of Directors on or preceding the date of deferral. Payment LAW2:8011 -19- 2/28/96 20 of Deferred Amounts may be made in cash, Stock, or partly in cash and partly in Stock, in the Committee's sole discretion. 6.3 Participant Reports ------------------- Annually, each Participant who has a Deferred Amount will receive a report setting forth all of his or her then Deferred Amounts and the yield thereon to date. 6.4 Payment of Deferred Amounts --------------------------- Payment of Deferred Amounts will be made at such time or times, and may be in cash, Stock, or partly in cash and partly in Stock, as the Committee shall from time to time determine. The limitations respecting the issuance of Stock or other limitations on aggregate awards payable contained in the Annual Performance Plan of the Corporation, Article XVI of the by-laws of the Corporation, the 1974 Stock Option Plan, the 1979 Stock Option and Long-Term Incentive Plan, the 1984 Long-Term Incentive Plan, the Plan and in any plan hereafter adopted by the stockholders shall be limitations applicable to the payment of any Deferred Amounts under this Article VI. 6.5 Alternative Valuation Election ------------------------------ Unless otherwise determined by the Committee, a Participant may, at a time established by the Committee, but prior to such Participant's ceasing to be an Eligible Person, elect to establish the ultimate payable value of each Deferred Amount by LAW2:8011 -20- 2/28/96 21 reference to the Fair Market Value of the Common Stock as of the day on which an alternate valuation election is received by the corporation in accordance with procedures established by the Committee. Notwithstanding the establishment of the ultimate payable value resulting from the alternate valuation election by the Participant, the yield will continue as though no such election had been made and will continue to be subject to the limitations set forth in Section 6.2, and Deferred Amounts and the yield thereon will be paid as otherwise provided in this Article. ARTICLE VII CHANGES IN CONTROL 7.1 Effect of Change in Control --------------------------- Notwithstanding any other provision of the Plan, upon the occurrence of a Change in Control, as defined in Section 7.2: (i) all Options and, subject to the exercise provisions of Section 3.2(a) of the Plan, Limited Rights, but not SARS, outstanding and unexercised on the date of the Change in Control shall become immediately exercisable; (ii) all Performance Awards shall be deemed to have been earned on such basis as the Committee may prescribe and then paid on such basis, at such time and in such form as the Committee may prescribe, or deferred in accordance with the elections of Participants; (iii) all LAW2:8011 -21- 2/28/96 22 Restricted Stock shall be deemed to be earned and the Restriction Period shall be deemed expired on such terms and conditions as the Committee may determine; and (iv) all amounts deferred under this Plan shall be paid to a trustee or otherwise on such terms as the Committee may prescribe or permit. 7.2 Definition of Change in Control ------------------------------- The term "Change in Control" means the occurrence of one or more of the following events: (a) there shall be consummated (i) any consolidation or merger of the Corporation in which the Corporation is not the continuing or surviving corporation or pursuant to which shares of the Common Stock would be converted into cash, securities or other property, other than a merger of the Corporation in which the holders of Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Corporation, or (b) the stockholders of the Corporation shall approve any plan or proposal for the liquidation or dissolution of the Corporation, or (c) (i) any person (as such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), corporation or other entity shall purchase any Common Stock of the Corporation (or securities convertible into Common Stock) for cash, securities or any other consideration pursuant LAW2:8011 -22- 2/28/96 23 to a tender offer or exchange offer, unless, prior to the making of such purchase of Common Stock (or securities convertible into Common Stock), the Board shall determine that the making of such purchase shall not constitute a Change in Control, or (ii) any person (as such term is defined in Section 13(d) of the Exchange Act), corporation or other entity (other than the Corporation or any benefit plan sponsored by the Corporation or any of its subsidiaries) shall be the "beneficial owner" (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing twenty percent or more of the combined voting power of the Corporation's then outstanding securities ordinarily (and apart from any rights accruing under special circumstances) having the right to vote in the election of directors (calculated as provided in Rule 13d-3(d) in the case of rights to acquire any such securities), unless, prior to such person so becoming such beneficial owner, the Board shall determine that such person so becoming such beneficial owner shall not constitute a Change in Control, or (d) at any time during any period of two consecutive years, individuals who at the beginning of such period constituted the entire Board shall cease for any reason to constitute at least a majority thereof, unless the election or nomination for election of each new director during such two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such two-year period. LAW2:8011 -23- 2/28/96 24 ARTICLE VIII GENERAL PROVISIONS 8.1 Non-Transferability ------------------- No Option, SAR, Performance Award or share of Restricted Stock or Deferred Amount under the Plan shall be transferable by the Participant other than by will or the applicable laws of descent and distribution. All Awards and Deferred Amounts shall be exercisable or received during the Participant's lifetime only by such Participant or his or her legal representative. Any transfer contrary to this Section 8.1 will nullify the option, SAR, Performance Award or share of Restricted Stock, and any attempted transfer of a Deferred Amount contrary to this Section 8.1 will be void and of no effect. 8.2 Beneficiaries ------------- The Committee may establish procedures not inconsistent with Section 8.1 under which a Participant may designate a beneficiary or beneficiaries to receive amounts due under an Award or with respect to Deferred Amounts in the event of the Participant's death. 8.3 Adjustments Upon Changes in Stock --------------------------------- If there shall be any change in the Stock of the Company, through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split up, dividend in kind or other change in the corporate structure or distribution to the LAW2:8011 -24- 2/28/96 25 stockholders, appropriate adjustments may be made by the Board of Directors of the Company (or if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) in the aggregate number and kind of shares subject to the Plan, and the number and kind of shares and the price per share subject to outstanding Options or which may be issued under outstanding Performance Awards or Awards of Restricted Stock. Appropriate adjustments may also be made by the Board of Directors or the Committee in the terms of any Awards under the Plan to reflect such changes and to modify any other terms of outstanding Awards on an equitable basis, including modifications of performance targets and changes in the length of Performance Periods. 8.4 Conditions of Awards -------------------- (a) The rights of a Participant with respect to any Award received under this Plan shall be subject to the conditions that, until the Participant has fully received all payments, transfers and other benefits under the Award, he or she shall (i) not engage, either directly or indirectly, in any manner or capacity as advisor, principal, agent, partner, officer, director, employee, member of any association or otherwise, in any business or activity which is at the time competitive with any business or activity conducted by the Company and (ii) be available, unless he or she shall have died, at reasonable times for consultations at the request of the Company's management with respect to phases LAW2:8011 -25- 2/28/96 26 of the business with which he or she is or was actively connected during his or her employment, but such consultations shall not (except in the case of a Participant whose active service was outside the United States) be required to be performed at any place or places outside of the United States of America or during usual vacation periods or periods of illness or other incapacity. In the event that either of the above conditions is not fulfilled, the Participant shall forfeit all rights to any unexercised option or SAR, or any Performance Award or Stock held which has not yet been determined by the Committee to be payable or unrestricted (and any unpaid amounts equivalent to dividends or other distributions or amounts equivalent to interest relating thereto) as of the date of the breach of condition. Any determination by the Board of Directors of the Corporation, which shall act upon the recommendation of the Chief Executive Officer, that the Participant is, or has, engaged in a competitive business or activity as aforesaid or has not been available for consultations as aforesaid shall be conclusive. (b) This Section 8.4 shall not apply to Limited Rights. 8.5 Use of Proceeds --------------- All cash proceeds from the exercise of options shall constitute general funds of the Company. LAW2:8011 -26- 2/28/96 27 8.6 Tax Withholding --------------- The Company will withhold from any cash payment made pursuant to an Award an amount sufficient to satisfy all federal, state and local withholding tax requirements (the "withholding requirements"). In the case of an Award pursuant to which Stock may be delivered, the Committee will have the right to require that the Participant or other appropriate person remit to the Company an amount sufficient to satisfy the withholding requirements, or make other arrangements satisfactory to the Committee with regard to such requirements, prior to the delivery of any Stock. If and to the extent that such withholding is required, the Committee may permit the Participant or such other person to elect at such time and in such manner as the Committee provides to have the Company hold back from the shares to be delivered, or to deliver to the Company, Stock having a value calculated to satisfy the withholding requirement. In the alternative, the Committee may, at the time of grant of any such Award, require that the Company withhold from any shares to be delivered Stock with a value calculated to satisfy applicable tax withholding requirements. 8.7 Non-Uniform Determinations -------------------------- The Committee's determinations under the Plan, including without limitation, (i) the determination of the Participants to receive Awards, (ii) the form, amount, timing and payment of such LAW2:8011 -27- 2/28/96 28 Awards, (iii) the terms and provisions of such Awards and (iv) the agreements evidencing the same, need not be uniform and may be made by it selectively among Participants who receive, or who are eligible to receive, Awards under the Plan, whether or not such Participants are similarly situated. 8.8 Leaves of Absence; Transfers ---------------------------- The Committee shall be entitled to make such rules, regulations and determinations as it deems appropriate under the Plan in respect to any leave of absence from the Company granted to a Participant. Without limiting the generality of the foregoing, the Committee shall be entitled to determine (i) whether or not any such leave of absence shall be treated as if the Participant ceased to be an Employee and (ii) the impact, if any, of any such leave of absence on Awards under the Plan. In the event a Participant transfers within the Company, such Participant shall not be deemed to have ceased to be an Employee for purposes of the Plan. 8.9 General Restriction ------------------- (a) Each Award under the Plan shall be subject to the condition that, if at any time the Committee shall determine that (i) the listing, registration or qualification of shares of Stock upon any securities exchange or under any state or federal law, (ii) the consent or approval of any government or regulatory body or (iii) an agreement by the Participant with respect thereto, is LAW2:8011 -28- 2/28/96 29 necessary or desirable, then such Award shall not be consummated in whole or in part unless such listing, registration, qualification, consent, approval or agreement shall have been effected or obtained free from any conditions not acceptable to the Committee. (b) Shares of Common Stock for use under the provisions of this Plan shall not be issued until they have been duly listed, upon official notice of issuance, upon the New York Stock Exchange and such other exchanges, if any, as the Board of Directors of the Corporation shall determine, and a registration statement under the Securities Act of 1933 with respect to such shares shall have become, and be, effective. 8.10 Effective Date -------------- The Plan shall be deemed effective as of December 4, 1991. No Award may be granted under the Plan after the Plan is terminated pursuant to Section 8.11, but Awards previously made may extend beyond that date and Reload Options and additional Reload Options provided for with respect to original options outstanding prior to that date may continue unless the Committee otherwise provides and subject to such additional terms and conditions as the Committee may provide, and the provisions of Article VI of the Plan shall survive and remain effective as to LAW2:8011 -29- 2/28/96 30 all present and future Deferred Amounts until such later date as the Committee or the Board of Directors shall determine. The adoption of the Plan shall not preclude the adoption by appropriate means of any other stock option or other incentive plan for employees. 8.11 Amendment, Suspension and Termination of Plan --------------------------------------------- The Board of Directors may at any time or times amend the Plan for any purpose which may at the time be permitted by law, or may at any time suspend or terminate the Plan as to any further grants of Awards. 8.12 Certain Definitions ------------------- (a) Unless otherwise determined by the Committee, the terms "retirement" and "disability" as used under the Plan shall be construed by reference to the provisions of the Westinghouse Pension Plan or other similar plan or program of the Company applicable to a Participant. (b) The term "Fair Market Value" as it relates to Common Stock means the mean of the high and low prices of the Common Stock as reported by the Composite Tape of the New York Stock Exchange (or such successor reporting system as shall be selected by the Committee) on the relevant date or, if no sale of the Common Stock shall have been reported for that day, the average of such LAW2:8011 -30- 2/28/96 31 prices on the next preceding day and the next following day for which there were reported sales. The term "Fair Market Value" as it relates to Formula Value Stock shall mean the value determined by the Committee. (c) The term "Subsidiary" shall mean, unless the context otherwise requires, any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the corporation if each of the corporations other than the last corporation in such chain owns stock possessing at least 50% of the voting power in one of the other corporations in such chain. (d) "Formula Value Stock" means shares of a class or classes of stock the value of which is derived from a formula established by the Committee which reflects such financial measures as the Committee shall determine. Such shares shall have such other characteristics as shall be determined at time of their authorization. LAW2:8011 -31- 2/28/96 EX-11 9 WESTINGHOUSE ELEC. 1 WESTINGHOUSE ELECTRIC CORPORATION COMPUTATION OF PER SHARE EARNINGS
EXHIBIT (11) YEAR ENDED DECEMBER 31 ------------------------------ 1995 1994 1993 ---- ---- ---- EQUIVALENT SHARES: Average shares outstanding................. 369,612,697 354,580,674 349,416,570 Additional shares due to: Stock options............................. 4,525,244 3,964,508 3,485,100 Series C Preferred Shares................. 36,000,000 25,191,067 -- ----------- ----------- ----------- Total equivalent shares - primary.......... 410,137,941 383,736,249 352,901,670 Additional Series B shares under "if converted" assumption................ 22,770,000 -- -- Other potentially issuable shares.......... 283,014 53,498 2,456,640 ----------- ----------- ----------- Total equivalent shares-fully diluted...... 433,190,955 383,789,747 355,358,310 =========== =========== =========== ADJUSTED EARNINGS (IN MILLIONS): Loss from Continuing Operations............ $ (44) $ (13) $ (246) Less: Series B preferred stock dividends... 34 50 50 ----------- ----------- ----------- Adjusted loss from Continuing Operations.................... (78) (63) (296) ----------- ----------- ----------- Income (loss) from Discontinued Operations.................. 59 90 (24) ----------- ----------- ----------- Cumulative effect of change in accounting principle..................... -- -- (56) ----------- ----------- ----------- Adjusted net income (loss) for primary earnings per share........... $ (19) $ 27 $ (376) =========== =========== =========== PRIMARY EARNINGS (LOSS) PER SHARE From Continuing Operations................. $ (0.19) $ (0.16) $ (0.84) From Discontinued Operations............... 0.14 0.23 (0.07) Cumulative effect of change in accounting principle..................... -- -- (0.16) ----------- ----------- ----------- Primary earnings (loss) per share (a)...... $ (0.05) $ 0.07 $ (1.07) =========== =========== =========== FULLY DILUTED EARNINGS (LOSS) PER SHARE: From Continuing Operations................. $ (0.10) $ (0.16) $ (0.84) From Discontinued Operations............... 0.13 0.23 (0.07) Cumulative effect of change in accounting principle..................... -- -- (0.16) ----------- ----------- ----------- Fully diluted earnings (loss) per share (a)............................ $ 0.03 $ 0.07 $ (1.07) =========== =========== ===========
(a) For earnings per share using an alternative treatment for the Series C Preferred Shares, see note 15 to the financial statements included in Part II, Item 8 of this report. EX-12.A 10 WESTINGHOUSE ELEC. 1 EXHIBIT (12)(a) WESTINGHOUSE ELECTRIC CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, ($ IN MILLIONS) 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Income (loss) before income taxes and minority interest $ (40) $ (17) $(353) $ 275 $ 193 Less: Equity in income (loss) of 50 percent or less owned affiliates 1 (4) (4) (1) (17) Add: Dividends from affiliates -- -- -- -- 2 Fixed charges excluding capitalized interest 257 161 194 205 207 ----- ----- ----- ----- ------ Earnings as adjusted $ 216 $ 148 $(155) $ 481 $ 419 ===== ===== ===== ===== ====== Fixed charges: Interest expense $ 233 $ 134 $ 165 $ 169 $ 176 Rental expense 24 27 29 36 31 Capitalized interest -- -- -- -- 6 ----- ----- ----- ----- ------ Total fixed charges $ 257 $ 161 $ 194 $ 205 $ 213 ===== ===== ===== ===== ====== Ratio of earnings to fixed charges (a) (b) (c) 2.35x 1.97x ===== ===== ===== ===== ====== (a) Additional income before income taxes and minority interest of $41 million would be necessary to attain a ratio of earnings to fixed charges of 1.00x for the year ended December 31, 1995. (b) Additional income before income taxes and minority interest of $13 million would be necessary to attain a ratio of earnings to fixed charges of 1.00x for the year ended December 31, 1994. (c) Additional income before income taxes and minority interest of $349 million would be necessary to attain a ratio of earnings to fixed charges of 1.00x for the year ended December 31, 1993.
EX-12.B 11 WESTINGHOUSE ELEC. 1 EXHIBIT (12)(b) COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
YEAR ENDED DECEMBER 31, ($ IN MILLIONS) 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Income (loss) before income taxes and minority interest $ (40) $ (17) $(353) $ 275 $ 193 Less: Equity in income (loss) of 50 percent or less owned affiliates 1 (4) (4) (1) (17) Add: Dividends from affiliates -- -- -- -- 2 Combined fixed charges and preferred dividends, excluding capitalized interst 353 511 269 245 207 ----- ----- ----- ----- ------ Earnings as adjusted $ 312 $ 498 $ (80) $ 521 $ 419 ===== ===== ===== ===== ====== Combined fixed charges and preferred dividends: Interest expense $ 233 $ 134 $ 165 $ 169 $ 176 Rental expense 24 27 29 36 31 Capitalized interest -- -- -- -- 6 Pre-tax earnings required to cover preferred dividend requirements (d) 96 350 75 40 -- ----- ----- ----- ----- ------ Total combined fixed charges and preferred dividends $ 353 $ 511 $ 269 $ 245 $ 213 ===== ===== ===== ===== ====== Ratio of earnings to combined fixed charges and preferred dividends (e) (f) (g) 2.13x 1.97x ===== ===== ===== ===== ====== (d) Dividend requirement divided by 100% minus effective income tax rate. (e) Additional income before income taxes and minority interest of $41 million would be necessary to attain a ratio of earnings to combined fixed charges and preferred dividends of 1.00x for the year ended December 31, 1995. (f) Additional income before income taxes and minority interest of $13 million would be necessary to attain a ratio of earnings to combined fixed charges and preferred dividends of 1.00x for the year ended December 31, 1994. (g) Additional income before income taxes and minority interest of $349 million would be necessary to attain a ratio of earnings to combined fixed charges and preferred dividends of 1.00x for the year ended December 31, 1993.
EX-21 12 WESTINGHOUSE ELEC. 1 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT Included in the financial statements of the Company are consolidated subsidiaries owned, directly or indirectly, more than 50% by the Company. Equity in undistributed earnings of nonconsolidated subsidiaries and affiliated companies, 20% to 50% owned, is also included in the results of operations of the Company. Listed below are certain of these subsidiaries of the Company. The remaining subsidiaries and affiliated companies not listed below, when considered in the aggregate, would not constitute a significant subsidiary. During the first quarter of 1996, The Knoll Group, Inc. and its subsidiaries, Westinghouse Norden Systems, and Westinghouse Overseas Service Corporation were divested.
INCORPORATED VOTING POWER UNDER OWNED BY NAME LAWS OF IMMEDIATE PARENT ---- ------------ ---------------- CBS Inc. New York 100% The Knoll Group, Inc. Delaware 100% Knoll North America, Inc. Delaware 100% Knoll Overseas, Inc. Delaware 100% Spinneybeck Enterprises, Inc. New York 100% Thermo King Corporation Delaware 100% Westinghouse Canada, Inc. Canada 100% Westinghouse CBS Holdings Company, Inc. Delaware 100% Westinghouse Hanford Company Delaware 100% Westinghouse Holdings Corporation Delaware 100% Westinghouse de Puerto Rico, Inc. Delaware 100% Westinghouse Electric S.A. Switzerland 100% Westinghouse International Technology Corporation Delaware 100% Westinghouse World Investment Corporation Delaware 100% Westinghouse Foreign Sales Corporation Barbados 100% Westinghouse Industry Products International Company Delaware 100% Westinghouse Norden Systems Delaware 100% Westinghouse Overseas Service Corporation Delaware 100% Westinghouse Savannah River Company, Inc. Delaware 100%
EX-23 13 WESTINGHOUSE ELEC. 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in each prospectus constituting part of the Registration Statements on Form S-3 (Nos. 33- 41417, 33-41475, and 33-51298), and on Form S-8 (Nos. 2-83376, 2-92085, 33-44044, 33-45365, 33-46051, 33-46779, 33-51445, 33-51579, 33-53815, 33-53819, 33-62043, and 33-62045) of Westinghouse Electric Corporation of our report dated February 12, 1996 appearing on page 30 of this Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on page 63 of this Form 10-K. /s/ PRICE WATERHOUSE LLP Price Waterhouse LLP 600 Grant Street Pittsburgh, Pennsylvania 15219-9954 March 13, 1996 EX-24 14 WESTINGHOUSE ELEC. 1 Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 11th day of March, 1996. /s/ ROBERT E. CAWTHORN ----------------------- LAW2:15091 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 8th day of March, 1996. /s/ FRANK C. CARLUCCI --------------------- LAW2:15091 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 11th day of March, 1996. /s/ GARY M. CLARK ----------------- LAW2:15091 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 11th day of March, 1996. /s/ DAVID K.P. LI ----------------- LAW2:15091 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 12th day of March, 1996. /s/ DAVID T. McLAUGHLIN ----------------------- LAW2:15091 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 8th day of March, 1996. /s/ RICHARD M. MORROW --------------------- LAW2:15091 7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 11th day of March, 1996. /s/ RICHARD R. PIVIROTTO ------------------------ LAW2:15091 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 8th day of March, 1996. /s/ PAULA STERN --------------- LAW2:15091 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 10th day of March, 1996. /s/ R. D. WALTER ---------------- LAW2:15091 10 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 11th day of March, 1996. /s/ FREDRIC G. REYNOLDS ----------------------- LAW2:15091 11 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 12th day of March, 1996. /s/ MICHAEL H. JORDAN --------------------- LAW2:15091 12 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 11th day of March, 1996. /s/ WILLIAM H. GRAY, III ------------------------ LAW2:15091 13 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned director and/or officer of WESTINGHOUSE ELECTRIC CORPORATION, a Pennsylvania corporation (the "Company"), which is about to file with the Securities and Exchange Commission, Washington, D.C., under the provisions of the Securities Exchange Act of 1934, as amended, its Annual Report on Form 10-K, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, for the fiscal year ended December 31, 1995, hereby constitutes and appoints Michael H. Jordan and Fredric G. Reynolds his/her true and lawful attorneys-in-fact and agents, and each of them, with full power to act without the others, for him/her and in his/her name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K and any and all amendments thereto, with power where appropriate to affix the corporate seal of said Company thereto and to attest said seal, and to file said Form 10-K and any and all other documents in connection therewith, with the Securities Exchange Commission, hereby granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform any and all acts and things requisite and necessary to be done in and about the premises as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has duly signed this Power of Attorney this 12th day of March, 1996. /s/ GEORGE H. CONRADES ---------------------- LAW2:15091 EX-27 15 WESTINGHOUSE ELEC. 10-K
5 0000106413 WESTINGHOUSE 1,000,000 12-MOS DEC-31-1995 DEC-31-1995 213 0 1,584 39 867 4,306 3,653 1,626 16,752 3,933 7,226 426 4 0 1,078 16,752 6,296 6,296 4,480 4,480 1,772 0 233 (40) (7) (44) 59 0 0 15 (.05) .03
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