SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 TELEDYNE TECHNOLOGIES LOGO Teledyne Technologies Incorporated 2049 Century Park East, Suite 1500 Los Angeles, CA 90067-3101 April 5, 2000 Dear Stockholder: We are pleased to invite you to attend the 2000 Annual Meeting of Stockholders of Teledyne Technologies Incorporated. The meeting will be held on June 1, 2000, at the Century Plaza Hotel, 2025 Avenue of the Stars, Los Angeles, California 90067. This booklet includes the notice of meeting as well as the Company's Proxy Statement. Enclosed with this booklet are the following: - Proxy or voting instruction card (including instructions for telephone and Internet voting). - Proxy or voting instruction card return envelope (postage paid if mailed in the U.S.). If you are a stockholder of record, you will also receive an admission ticket request card. A copy of the Company's Annual Report for 1999 has been mailed separately to you. Please read the Proxy Statement and vote your shares as soon as possible. We encourage you to take advantage of voting by telephone or Internet as explained on the enclosed proxy or voting instruction card. Or, you may vote by completing, signing and returning your proxy or voting instruction card in the enclosed postage-paid envelope. It is important that you vote, whether you own a few or many shares and whether or not you plan to attend the meeting. If you are a stockholder of record and plan to attend the meeting, please return the enclosed postage-paid admission ticket request card so that we can send your admission ticket to you before the meeting. Thank you for your investment in our Company. We look forward to seeing you at the 2000 Annual Meeting. Sincerely, /s/ Robert Mehrabian Robert Mehrabian President and Chief Executive Officer /s/ Thomas A. Corcoran Thomas A. Corcoran Chairman of the Board 3 TELEDYNE TECHNOLOGIES LOGO TELEDYNE TECHNOLOGIES INCORPORATED NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MEETING DATE: June 1, 2000 TIME: 9:00 a.m. (Pacific Daylight Time) PLACE: The Century Plaza Hotel Pacific Palisades Room 2025 Avenue of the Stars Los Angeles, California 90067-4696 RECORD DATE: April 3, 2000 AGENDA 1) Election of a class of three directors for a three-year term; 2) Approval of the Teledyne Technologies Incorporated 1999 Incentive Plan, as amended; 3) Ratification of the appointment of Ernst & Young LLP as the Company's independent auditors for 2000; and 4) Transaction of any other business properly brought before the meeting. STOCKHOLDER LIST A list of stockholders entitled to vote will be available during business hours for 10 days prior to the meeting at the Company's executive offices, 2049 Century Park East, Suite 1500, Los Angeles, California 90067, for examination by any stockholder for any legally valid purpose. ADMISSION TO THE MEETING Teledyne Technology stockholders or their authorized representatives by proxy may attend the meeting. If you are a stockholder of record and you plan to attend the meeting, please complete and promptly return the enclosed postage-paid ticket request card so that an admission ticket can be mailed to you. If your shares are held through an intermediary, such as a broker or a bank, you should present proof of your ownership at the meeting. Proof of ownership could include a proxy from your bank or broker or a copy of your account statement. By Order of the Board of Directors, /s/ John T. Kuelbs John T. Kuelbs Senior Vice President, General Counsel and Secretary April 5, 2000 4 PROXY STATEMENT TABLE OF CONTENTS ------------------------ PAGE ---- Voting Procedures........................................... 2 Board Composition and Practices............................. 3 Item A on Proxy Card -- Election of Directors............... 4 Committees of our Board of Directors........................ 7 Director Compensation....................................... 9 Item B on Proxy Card -- Approval of 1999 Incentive Plan..... 10 Item C on Proxy Card -- Ratification of Independent Auditors.................................................. 19 Other Business.............................................. 19 Stock Ownership Information................................. 20 Section 16(a) Beneficial Ownership Reporting Compliance... 20 Five Percent Owners of Common Stock....................... 20 Stock Ownership of Management............................. 21 1999 Report on Executive Compensation....................... 22 Executive Compensation...................................... 27 Summary Compensation Table................................ 27 Option Grants in Last Fiscal Year......................... 29 ATI Performance Share Program Awards...................... 30 Pension Plan.............................................. 31 Employment/Change in Control Agreements................... 32 Certain Transactions........................................ 33 Cumulative Total Stockholder Return......................... 34 Other Information........................................... 35 Annual Report on Form 10-K................................ 35 2001 Annual Meeting and Stockholder Proposals............. 35 Proxy Solicitation........................................ 35 Annex A - 1999 Incentive Plan YOUR VOTE IS IMPORTANT Please vote as soon as possible. You can help Teledyne Technologies reduce expenses by voting your shares by telephone or Internet; your proxy card contains the instructions. Or, complete, sign and date your proxy card and return it as soon as possible in the enclosed postage-paid envelope. DEFINED TERMS In this Proxy Statement, Teledyne Technologies Incorporated is sometimes referred to as the "Company", "Teledyne Technologies" or "TDY". References to "ATI" mean Allegheny Technologies Incorporated, formerly known as Allegheny Teledyne Incorporated, the company from which we were spun off on November 29, 1999. 5 PROXY STATEMENT FOR 2000 ANNUAL MEETING OF STOCKHOLDERS VOTING PROCEDURES WHO MAY VOTE If you were a stockholder on the books of the Company at the close of business on April 3, 2000 you may vote at the Annual Meeting. On that day, there were 26,760,927 shares of our Common Stock outstanding. Each share is entitled to one vote. In order to vote, you must either designate a proxy to vote on your behalf or attend the meeting and vote your shares in person. The Board of Directors requests your proxy so that your shares will count toward a quorum and be voted at the meeting. METHODS OF VOTING All stockholders may transmit their proxy votes by mail. Stockholders of record can also vote by telephone or Internet. Stockholders who hold their shares through a bank or broker can vote by telephone or Internet if their bank or broker offers those options. - By Mail. Stockholders may complete, sign, date and return their proxy cards in the postage-paid envelope provided. If you sign, date and return your proxy card without indicating how you want to vote, your proxy will be voted as recommended by the Board of Directors. - By Telephone or Internet. Stockholders of record may vote by using the toll-free number or Internet website address listed on the proxy card. Participants who hold stock in Company employee benefit plans also may vote by telephone or the Internet. Your proxy card contains a Control Number that will identify you as a stockholder when you vote by telephone or Internet. You may use the telephone and Internet procedures to vote your shares and to confirm that your votes were properly recorded. Please see your proxy card for specific instructions. REVOKING YOUR PROXY You may change your mind and revoke your proxy at any time before it is voted at the meeting by: - sending a written notice to revoke your proxy to the Secretary of the Company; - transmitting a proxy at a later date than your prior proxy either by mail, telephone or Internet; - attending the Annual Meeting and voting in person or by proxy (except for shares held in the employee plans described below). VOTING BY EMPLOYEE BENEFIT PLAN PARTICIPANTS Participants who hold Common Stock in the Company's defined contribution savings plan may tell the plan trustee how to vote the shares of Common Stock allocated to their accounts. You may either sign and return the voting instruction card provided by the plan or transmit your instructions by telephone or Internet. If you do not transmit instructions, your shares will be voted as the plan administrator directs or as otherwise provided in the plan. VOTING SHARES HELD BY BROKERS, BANKS AND OTHER NOMINEES If you hold your shares in a broker, bank or other nominee account, you are a "beneficial owner" of TDY Common Stock. In order to vote your shares, you must give voting instructions to your bank, broker or other intermediary who is the "nominee holder" of your shares. The Company asks brokers, banks and other nominee holders to obtain voting instructions from the beneficial owners of shares that are registered in the nominee's name. Proxies that are transmitted by nominee holders on behalf of beneficial owners will count toward a quorum and, except 2 6 as otherwise provided below, will be voted as instructed by the nominee holder. CONFIDENTIAL VOTING POLICY The Company maintains a policy of keeping stockholder votes confidential. BOARD COMPOSITION AND PRACTICES INFORMATION AND MEETINGS The Board of Directors directs the management of the business and affairs of the Company as provided in the Amended and Restated By-laws of the Company and by the laws of the State of Delaware. The Board is not involved in day-to-day operations. Members of the Board keep informed about the Company's business through discussions with the senior management and other officers and managers of the Company and its subsidiaries, by reviewing analyses and reports sent to them, and by participating in Board and committee meetings. Since we were spun off from Allegheny Technologies Incorporated (formerly known as Allegheny Teledyne Incorporated) and became a public company on November 29, 1999, there has been one regular meeting of the Board in 1999. Special meetings are scheduled when required; none were held since November 29, 1999, although our Board acted by unanimous written consent in lieu of holding a meeting on one occasion. In 1999, attendance at Board and committee meetings was unanimous. NUMBER OF DIRECTORS The Board of Directors determines the number of directors. The Board currently consists of eight members. DIRECTOR TERMS The directors are divided into three classes and the directors in each class serve for a three-year term. The term of one class of directors expires each year at the Annual Meeting of Stockholders. The Board may fill a vacancy by electing a new director to the same class as the director being replaced. The Board may also create a new director position in any class and elect a director to hold the newly created position until the term of the class expires. SPIN-OFF REQUIREMENTS In connection with our spin-off from ATI, we agreed (and our Amended and Restated Bylaws provide) that until our Annual Meeting of Stockholders in 2002, at least a majority of our Board of Directors must also be directors of ATI. The Separation and Distribution Agreement that we entered into with ATI in connection with the spin-off also provides that we will nominate Thomas A. Corcoran, Diane C. Creel and C. Fred Fetterolf (or, if any such director is unable or unwilling to serve, such other candidates as Robert P. Bozzone, Frank V. Cahouet and Charles J. Queenan, Jr. or the survivor of them may designate) for reelection as a Class I director at this Annual Meeting. 3 7 ITEM A ON PROXY CARD -- ELECTION OF DIRECTORS The Board of Directors has nominated for election this year the class of three incumbent directors whose terms expire at the 2000 Annual Meeting. This nomination is in accordance with the Separation and Distribution Agreement that we entered into with ATI in connection with the spin-off. The three-year term of the class of directors nominated this year will expire at the 2003 Annual Meeting. The three individuals who receive the highest number of votes cast will be elected. Broker non-votes are not counted as votes cast. If you sign and return your proxy card, the individuals named as proxies in the card will vote your shares for the election of the three named nominees, unless you provide other instructions. You may withhold authority for the proxies to vote your shares on any or all of the nominees by following the instructions on your proxy card. If a nominee becomes unable to serve, the proxies will vote for a Board-designated substitute or the Board may reduce the number of directors. The Board of Directors has no reason to believe that any nominee will be unable to serve. Background information about the nominees and continuing directors follows. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE THREE NOMINEES. NOMINEES -- TERMS EXPIRE AT THE 2003 ANNUAL MEETING (CLASS I) Thomas A. Corcoran Thomas A. Corcoran has been the Chairman of the President and Chief Executive Board of the Company since the spin-off. He has Officer of Allegheny Technologies been the President and Chief Executive Officer of Incorporated ATI since October 1999. He served as the Director since 1999 President and Chief Operating Officer of the Age: 55 Electronics Sector of Lockheed Martin Corporation from March 1995 through October 1998 and he was President and Chief Operating Officer of the Lockheed Martin Space Sector from October 1998 through September 1999. Previously, he was President of Martin Marietta Corporation's Elec- tronics Group beginning in 1993, and prior to that, he was a Vice President of General Electric. Mr. Corcoran is also a director of ATI, L-3 Communications Holdings, Inc., Lincoln Electric Holdings, Inc. and REMEC, Inc. Mr. Corcoran is a member of our Governance Committee. Diane C. Creel Diane C. Creel is Chief Executive Officer and President and President of Earth Tech, an international Chief Executive Officer of Earth Tech consulting engineering firm. Ms. Creel is also a Director since 1999 director of ATI and The B.F. Goodrich Company and Age: 51 a member of the Boards of the Corporations and Trusts that comprise the Fixed Income funds of the American Funds Group. Ms. Creel is a member of our Personnel and Compensation Committee and Chair of its Stock Incentive Award Subcommittee. 4 8 C. Fred Fetterolf C. Fred Fetterolf was President and Chief Retired President and Operating Officer of Alcoa, Inc. prior to his Chief Operating Officer of Alcoa, Inc. retirement in 1991. He is also a director of ATI, Director since 1999 Commonwealth Industries, Dentsply International Age: 71 Inc., Union Carbide Corporation and Praxair, Inc. Mr. Fetterolf is a member of our Personnel and Compensation Committee and its Stock Incentive Award Subcommittee. He is Chair of our Governance Committee. CONTINUING DIRECTORS -- TERMS EXPIRE AT 2001 ANNUAL MEETING (CLASS II) Paul S. Brentlinger Paul S. Brentlinger is a Partner of Morgenthaler Partner, Ventures, a venture capital group located in Morganthaler Ventures Cleveland, Ohio and Menlo Park, California. He Director since 1999 led Morganthaler's investment in such companies Age: 72 such as Microchip Technology, Inc. and Dispatch Communications (now part of Nextel Communications, Inc.). Prior to joining Morgan- thaler, he was Senior Vice President -- Finance of Harris Corporation, a manufacturer of communications equipment. Mr. Brentlinger is also a director of ATI. Mr. Brentlinger is a member of our Audit Committee. Robert Mehrabian Robert Mehrabian has been the President and Chief President and Executive Officer of TDY since its formation. Chief Executive Officer of the Company Prior to the spin-off, Dr. Mehrabian was the Director since 1999 President and Chief Executive Officer of ATI's Age: 58 Aerospace and Electronics segment since July 1999 and had served ATI in various senior executive capacities since July 1997. Before joining ATI, Dr. Mehrabian served as President of Carnegie Mellon University. He is also a director of Mellon Financial Corporation and PPG Industries, Inc. 5 9 CONTINUING DIRECTORS -- TERMS EXPIRE AT 2002 ANNUAL MEETING (CLASS III) Robert P. Bozzone Robert P. Bozzone has been Vice Chairman of the Vice Chairman of the Board of Board of ATI since August 1996. He had served as Allegheny Technologies Incorporated Vice Chairman of Allegheny Ludlum Corporation, a Director since 1999 subsidiary of ATI, since August 1994 and Age: 66 previously was President and Chief Executive Officer of Allegheny Ludlum. He is also a director of ATI, Water Pik Technologies, Inc. and DQE, Inc., whose principal subsidiary is Duquesne Light Company. Mr. Bozzone is a member of our Audit Committee. Frank V. Cahouet Frank V. Cahouet served as the Chairman, Retired Chairman and Chief Executive President and Chief Executive Officer of Mellon Officer of Mellon Financial Corporation Financial Corporation, a bank holding company, Director since 1999 and Mellon Bank, N.A., prior to his retirement on Age: 67 December 31, 1998. He is also a director of Avery Dennison Corporation, Mellon Financial Corporation and Saint-Gobain Corporation. Mr. Cahouet is Chair of our Audit Committee and a member of our Governance Committee. Charles J. Queenan, Jr. Charles J. Queenan, Jr. is Senior Counsel to Senior Counsel, Kirkpatrick & Lockhart LLP, attorneys-at-law. Kirkpatrick & Lockhart LLP Prior to January 1996, he was a partner of that Director since 1999 firm. He is also a director of ATI, Water Pik Age: 69 Technologies, Inc. and Crane Co. Mr. Queenan is Chair of our Personnel and Compensation Committee. 6 10 COMMITTEES OF OUR BOARD OF DIRECTORS Our Board of Directors has established an Audit Committee, a Governance Committee, a Personnel and Compensation Committee and a Stock Incentive Award Subcommittee. From time to time, our Board of Directors may establish other committees. AUDIT COMMITTEE The members of the Audit Committee are: Frank V. Cahouet, Chair Robert P. Bozzone Paul S. Brentlinger The Audit Committee did not meet in 1999. The primary responsibility of the Audit Committee is to assist the Board in monitoring the integrity of our financial statements and the independence of our external auditors. In carrying out its responsibility, the Audit Committee undertakes to do many things, including: - Making recommendations to the Board of Directors regarding the appointment of the independent auditor to audit the books, records and accounts of the Company. - Evaluating the performance of the independent auditor. - Receiving written periodic reports from the independent auditor delineating all relationships between the independent auditor and the Company. - Reviewing with the independent auditor any problems or difficulties the auditor may have encountered and any management letter provided by the auditor and the Company's response to that letter. - Reviewing the Company's annual audited financial statements and the report thereon with the independent auditor and management prior to publication of such statements. - Reviewing with management and the independent auditor the Company's quarterly financial statements prior to the release of quarterly earnings. - Reviewing major changes to the Company's auditing and accounting principles and practices as suggested by the independent auditor, internal auditors or management. - Meeting periodically with management to review the Company's financial risk exposures and the steps management has taken to monitor and control such exposures. - Reviewing with the Company's General Counsel legal matters that may have a material impact on the financial statements, the Company's compliance policies and any material reports or inquiries received from regulators or governmental agencies. The Audit Committee meets the size, independence and experience requirements of the New York Stock Exchange. GOVERNANCE COMMITTEE The members of the Governance Committee are: C. Fred Fetterolf, Chair Frank V. Cahouet Thomas A. Corcoran Diane C. Creel The Governance Committee did not meet in 1999. The Governance Committee undertakes to: - Make recommendations to the Board of Directors with respect to candidates for nomination as new Board members and with respect to incumbent directors for nomination as continuing board members. - Make recommendations to the Board of Directors concerning the memberships of committees of the Board and the Chairpersons of the respective committees. - Make recommendations to the Board of Directors with respect to the remuneration paid and 7 11 benefits provided to members of the Board in connection with their service on the Board and its committees. - Administer our formal compensation programs for directors, including the Teledyne Technologies Incorporated 1999 Non-Employee Director Stock Compensation Plan. - Make recommendations to the Board of Directors concerning the composition, organization and operations of the Board of Directors, including the orientation of new members and the flow of information. - Evaluate Board tenure policies as well as policies covering the retirement or resignation of incumbent directors. PERSONNEL AND COMPENSATION COMMITTEE The members of the Personnel and Compensation Committee are: Charles J. Queenan, Jr., Chair Diane C. Creel C. Fred Fetterolf The Personnel and Compensation Committee held one meeting in 1999. The Personnel and Compensation Committee's principal responsibilities include: - Making recommendations to the Board of Directors concerning general executive management organizational matters. - Making recommendations to the Board of Directors concerning compensation and benefits for employees who are also our directors, consult with our Chief Executive Officer on compensation and benefit matters relating to other executive officers who are required to file reports under Section 16 of the Securities Exchange Act of 1934, as amended (except to the extent such matters relate to the stock-based compensation of our executive officers, which are within the powers and authority of the Stock Incentive Award Subcommittee), and make recommendations to the Board of Directors concerning compensation policies and procedures relating to our executive officers. - Making recommendations to the Board of Directors concerning policy matters relating to employee benefits and employee benefit plans. - Administering our formal incentive compensation plans. STOCK INCENTIVE AWARD SUBCOMMITTEE The members of the Stock Incentive Award Subcommittee are: Diane C. Creel, Chair C. Fred Fetterolf The Stock Incentive Award Subcommittee held one meeting in 1999. The Stock Incentive Award Subcommittee is responsible for administering and making awards under our stock-based incentive compensation programs for our executive officers, who are required to file reports under Section 16 of the Securities Exchange Act of 1934, as amended. None of the subcommittee members is an employee of Teledyne Technologies. Each member is a "non-employee director" for the purposes of Rule 16b-3 of the Securities and Exchange Commission and an "outside director" for the purposes of the compensation provisions of the Internal Revenue Code. 8 12 DIRECTOR COMPENSATION Directors who are not our employees are paid an annual retainer fee of $24,000. The non-executive chairman of the Board of Directors is paid an additional annual retainer fee of $25,000. Directors are also paid $1,200 for each Board meeting and $1,000 for each committee meeting attended, although the Chairman of the Board of Directors does not receive any compensation for attending Board meetings. Each non-employee chair of a committee is paid an annual fee of $2,500. Directors who are our employees do not receive any compensation for their services on our Board or its committees. Annual retainer and chair fees were prorated in 1999 to cover the period from November 12, 1999 through December 31, 1999. Excluding meeting attendance fees paid, the average fee of a non-employee director was $3,892. The non-employee directors also participate in the 1999 Non-Employee Director Stock Compensation Plan (the "Director Stock Plan"). The purpose of the Director Stock Plan is to provide non-employee directors with an increased personal interest in our performance. Under the Director Stock Plan, options to purchase 2,000 shares of our Common Stock were granted to non-employee directors on the date of our spin-off from ATI. Under the Director Stock Plan, options to purchase 2,000 shares of our Common Stock are granted at the conclusion of each Annual Meeting of Stockholders. If a non-employee director first becomes a director on a date other than an Annual Meeting date, an option covering 2,000 shares of our Common Stock will be granted to such non-employee director on his or her first date of Board service. The purchase price of our Common Stock covered by these options is the fair market value of our Common Stock on the date the option is granted. The Director Stock Plan also provides that each non-employee director will receive at least 25% of the annual retainer fee in the form of our Common Stock and/or options to acquire our Common Stock. Each director may elect a greater percentage. Options granted under this part of the Director Stock Plan are intended to provide each electing director with options having an exercise value on the date of grant equal to the foregone fees; that is, the difference between the exercise price and the market price of the underlying shares of Common Stock on the date of grant is intended to be equal to the foregone fees. In order to continue to attract and retain non-employee directors of exceptional ability and experience, we also maintain a Fee Continuation Plan for Non-Employee Directors. Under the plan, benefits will be payable to a person who serves as a non-employee director for at least five years. The annual benefit will equal the annual retainer fee in effect when the director retires from the Board. Benefits will be paid for each year of the participant's credited service as a director up to a maximum of 10 years. 9 13 ITEM B ON PROXY CARD -- APPROVAL OF 1999 INCENTIVE PLAN Our Board of Directors has adopted and approved a compensation plan sponsored and maintained by the Company, namely the Teledyne Technologies Incorporated 1999 Incentive Plan, as amended (the "Incentive Plan"). The continued effectiveness of the Incentive Plan after the date of the Annual Meeting is subject to the approval of the Incentive Plan by our stockholders. Stockholder approval of the Incentive Plan is desired, among other reasons, to ensure the tax deductibility by the Company of awards under the Incentive Plan under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Approval of the Incentive Plan by the stockholders requires the affirmative vote of at least a majority of the shares present in person or by proxy at the meeting and entitled to vote on the proposal. If you sign and return your proxy card, your shares will be voted (unless you indicate to the contrary) to approve the Incentive Plan. If you abstain from voting on the proposal, your shares will, in effect, be voted against the proposal. Broker non-votes will not be counted as being entitled to vote on the proposal and will not affect the outcome of the vote. Brokers will not have any discretionary voting privilege with respect to this proposal. The following summary of the Incentive Plan is qualified in its entirety by reference to the complete text of such plan, which appears as Annex A to this Proxy Statement. 1999 INCENTIVE PLAN ADMINISTRATION. The Incentive Plan is administered by the Personnel and Compensation Committee of the Board of Directors of the Company (the "Committee"). The Committee has sole discretion to interpret the Incentive Plan, establish and modify administrative rules, impose conditions and restrictions on awards, issue new options in substitution for previously granted options, and take such other actions as it deems necessary or advisable. With respect to participants who are not subject to Section 16 of the Securities Exchange Act of 1934, as amended, the Committee may delegate its authority under the Incentive Plan to one or more officers or employees of the Company. AMOUNT OF STOCK. The Incentive Plan provides for awards of up to 4,000,000 shares of TDY Common Stock, 2,650,000 of which may be allocated to awards of incentive stock options as defined in Section 422 of the Code ("incentive stock options"). If the number of shares of Common Stock issued and outstanding is increased after January 26, 2000, the number of shares available for issuance under the Incentive Plan will be increased by an amount equal to 10% of the increase. The number of shares available for issuance under the Incentive Plan is subject to anti-dilution adjustments upon the occurrence of significant corporate events. The shares of Common Stock offered under the Incentive Plan will be either authorized and unissued shares or issued shares which have been reacquired by the Company. Shares underlying awards that are terminated, canceled or forfeited may be subject to new awards under the Incentive Plan. ELIGIBILITY AND PARTICIPATION. All officers and key employees of the Company or any of its subsidiaries are eligible to participate, including officers who are also directors of the Company or its subsidiaries. The Committee may also grant awards to non-employees who, in the judgment of the Committee, render significant service to the Company or any of its subsidiaries. No participant can receive awards under the Incentive Plan in any calendar year in respect of more than 750,000 shares of our Common Stock and $3 million in cash. At March 15, 2000, approximately 200 employees participated in one or more programs under the Incentive Plan. ASSUMPTION OF ATI AWARDS. The Company has reserved shares of Common Stock for issuance under the Incentive Plan that may be issued with respect to the assumption by the Company of stock awards previously issued by ATI under an Employee Benefits Agreement entered into in connection with the spin-off of the Company by ATI on November 29, 1999. 10 14 In accordance with the Employee Benefits Agreement, outstanding options to acquire ATI common stock issued under ATI benefit plans and held by our employees at the time of the spin-off were converted into options to purchase shares of TDY Common Stock. The number of shares the option holder is able to purchase and the exercise price of the options were adjusted in the conversion based on the relationship of the ATI stock price at the close of business on November 29, 1999 (the distribution date) ($14.3125) and the TDY stock price at the opening of business on November 30, 1999 (the first day of "regular way" trading of TDY Common Stock on the New York Stock Exchange) ($9.375). While the shares underlying the converted options will be issued under the Incentive Plan, the converted options otherwise continue to be and become exercisable on the terms and conditions set forth in the original ATI benefit plans. The following table describes options to purchase our Common Stock issued as a result of such conversion and otherwise granted after the spin-off under the Incentive Plan as of March 15, 2000. As a point of reference, the closing price of TDY Common Stock as reported by the New York Stock Exchange on April 3, 2000 was $15.8125 per share. 11 15 OUTSTANDING OPTIONS UNDER THE 1999 INCENTIVE PLAN NUMBER OF SHARES UNDERLYING OPTIONS EXERCISE PRICE NAME GRANTED ($/SHARE) EXPIRATION DATE ---- ---------- -------------- ------------------ Robert Mehrabian......................... 1,527 $13.59 August 16, 2006 1,487 $ 9.41 December 12, 2006 7,031 $ 9.96 January 2, 2007 1,527 $17.60 May 1, 2007 1,652 $11.50 January 2, 2008 30,534 $16.95 February 11, 2008 30,534 $13.35 December 17, 2008 300,000 $ 8.94 November 30, 2009 60,000 $ 9.67 January 25, 2010 Stefan C. Riesenfeld..................... 75,000 $ 8.94 November 30, 2009 20,000 $ 9.67 January 25, 2010 John T. Kuelbs........................... 70,000 $ 8.94 November 30, 2009 20,000 $ 9.67 January 25, 2010 Nicholas L. Blauwiekel................... 20,000 $ 8.81 March 9, 2010 Dale A. Schnittjer....................... 14,695 $ 8.42 June 29, 2005 11,450 $16.95 February 11, 2008 11,450 $13.35 December 17, 2008 10,000 $ 9.67 January 25, 2010 Executive Group (5 persons).............. 686,887 (a) (b) Non-Executive Officer Employee Group (197 persons)............................... 2,020,686 (c) (d) ------------------------- (a) Exercise prices range from $8.42 per share to $17.60 per share. (b) Expiration dates range from June 29, 2005 to March 9, 2010. (c) Exercise prices range from $5.57 per share to $16.95 per share. (d) Expiration dates range from May 1, 2000 to March 9, 2010. 12 16 In addition, as a result of the spin-off and in accordance with the Employee Benefits Agreement, the three-year award period under the ATI Performance Share Program (the "ATI PSP") established in 1998 was terminated and the award period shortened to cover the two-year period of January 1, 1998 through December 31, 1999. Shares of TDY Common Stock were issued under the Incentive Plan with respect to the first installment of the terminated and shortened ATI PSP award, effective February 22, 2000, as follows: NUMBER OF SHARES POTENTIALLY ISSUABLE NUMBER OF (REMAINING NAME SHARES ISSUED INSTALLMENTS) ---- ------------- ------------- Robert Mehrabian......... 7,646 15,291 Dale A. Schnittjer....... 1,807 3,612 Executive Group (2 persons)............... 9,453 19,533 Non-Executive Officer Employee Group (17 persons)............... 32,258 69,048 See also the table entitled "ATI Performance Share Program Awards" at page 30. As a result of the spin-off, in accordance with the Employee Benefits Agreement and the ATI Stock Acquisition and Retention Program, 24,921 restricted shares were issued under the Incentive Plan to Dr. Mehrabian and an aggregate of 71,167 shares to six other TDY employees who had been participants in the ATI Stock Acquisition and Retention Program. AMENDMENT OR TERMINATION. The Incentive Plan has no fixed expiration date. The Committee establishes expiration and exercise dates on an award-by-award basis. However, for the purpose of awarding incentive stock options, the Incentive Plan will expire 10 years from its effective date. The Board of Directors of the Company has the power to amend or terminate the Incentive Plan at any time. However, the Board will seek stockholder approval of any amendment requiring such approval and no amendment or termination of the Incentive Plan will, without the applicable participant's consent, adversely affect an award under the Incentive Plan. STOCK OPTIONS. The Committee may grant to a participant incentive stock options, options which do not qualify as incentive stock options ("non-qualified stock options") or a combination of incentive and non-qualified stock options. The terms and conditions of stock option grants, including the quantity, price, waiting periods, and other conditions on exercise, are determined by the Committee. Incentive stock option grants are to be made in accordance with Section 422 of the Code. The exercise price for stock options is determined by the Committee at its discretion, provided that the exercise price per share for each incentive stock option must be at least equal to 100% of the fair market value of one share of Common Stock on the date when the stock option is granted. Restoration options may be granted in connection with the exercise of non-qualified stock options which a participant exercises by delivering shares of Common Stock or by having withheld shares from those otherwise issuable upon the exercise of non-qualified stock option, or with respect to which the participant's tax withholding liability is met by delivering shares or having shares withheld. In general, a restoration option entitles the holder to purchase a number of shares of Common Stock equal to the number of shares so delivered or withheld upon exercise of the original option. A restoration option will have a per share exercise price of not less than the fair market value of the underlying shares of Common Stock on the date of grant of the restoration option and have a term equal to the remaining term of the original option at the time that the original option is exercised. Generally, the Committee has discretion to establish in each award agreement under the Incentive Plan the circumstances in which a participant's termination of employment with the Company or one of its subsidiaries will affect the participant's options. Currently, it is anticipated that the following rules will apply to the treatment of options upon a termination of employment. Except as described below, if an option holder's employment ends, any options that are not then vested will terminate immediately. Any 13 17 options that are then vested will terminate on the earlier of: - The scheduled expiration date set forth in the award agreement under which the options were granted; or - Whichever of the following dates is applicable to the option holder: - Death -- options vest in full and are exercisable by the option holder's beneficiary for one year after the date of death. - Retirement or Disability -- options will continue to vest and become exercisable in accordance with the stock option agreement for the remaining term of the option. - Any Reason Other than Death, Disability or Retirement -- vested options will continue to be exercisable for 30 days after the date the option holder's employment ends. Subject to the Committee's discretion, payment for Common Stock on the exercise of stock options may be made in cash, Common Stock, a combination of cash and Common Stock or in any other form of consideration acceptable to the Committee (including one or more "cashless" exercise forms). STOCK APPRECIATION RIGHTS. Stock appreciation rights ("SARs") may be granted by the Committee to a participant either separate from or in tandem with non-qualified stock options or incentive stock options. SARs may be granted at the time of the stock option grant or, with respect to non-qualified stock options, at any time prior to the exercise of the stock option. SARs entitle a participant to receive, upon exercise of the SAR, a payment equal to (i) the excess of the fair market value of a share of Common Stock on the exercise date over the SAR exercise price, multiplied by (ii) the number of shares of Common Stock with respect to which the SAR is exercised. Upon exercise of SARs issued in tandem with stock options, the number of shares of Common Stock covered by the SAR's related stock option, if any, are correspondingly reduced. SARs granted in tandem with options are generally governed by the same terms and conditions as govern the related stock option and may only be exercised to the extent the related stock option is exercisable. The exercise prices of SARs are determined by the Committee, but in the case of SARs granted in tandem with stock options, may not be less than the exercise price of the related stock option. Upon exercise of SARs, payment is made in cash or in shares of Common Stock, or a combination of cash and shares of Common Stock, as determined at the discretion of the Committee. RESTRICTED SHARES. The Committee may award to a participant shares of Common Stock subject to specified restrictions ("Restricted Shares"). The Restricted Shares are subject to forfeiture if the participant does not meet certain conditions such as continued employment over a specified forfeiture period (the "Forfeiture Period") and/or the attainment of specified performance targets over the Forfeiture Period. The Committee determines the terms and conditions of Restricted Share awards. Participants who have been awarded Restricted Shares will have all of the rights of a holder of outstanding Common Stock, including the right to vote such shares and to receive dividends. During the Forfeiture Period, the Restricted Shares are nontransferable and may be held in custody by the Company or its designated agent, or if the certificate contains a proper restrictive legend, by the participant. Upon the lapse or release of all restrictions, an unrestricted certificate will be provided to the participant. The Committee, in its sole discretion, may waive all restrictions with respect to a Restricted Share award under certain circumstances (including the death, disability, or retirement of a participant, or a material change in circumstances arising after the date of grant) subject to such terms and conditions as it deems appropriate. In or about mid-2000, we contemplate establishing a Restricted Share Program under the Incentive Plan to replace the ATI Stock Acquisition and Retention Program. 14 18 PERFORMANCE AWARDS. The Committee may grant performance awards to participants under such terms and conditions as the Committee deems appropriate. A performance award entitles a participant to receive a payment from the Company, the amount of which is based upon the attainment of predetermined performance targets over a specified award period. Performance awards may be paid in cash, Common Stock or a combination thereof, as determined by the Committee. Award periods will be established at the discretion of the Committee. The performance targets will also be determined by the Committee and may, but need not, include specified levels of earnings per share, return on investment, return on stockholders' equity and/or such other goals related to the Company's or the individual's performance as are deemed appropriate by the Committee. When circumstances occur which cause predetermined performance targets to be an inappropriate measure of achievement, the Committee, in its discretion, may adjust the performance targets. If a participant terminates employment prior to the end of an award period, the participant generally will forfeit all rights to any performance award, unless otherwise provided by the Committee. The Committee, in its discretion, may determine to pay all or any portion of a performance award to a participant who has terminated employment prior to the end of an award period under certain circumstances (including death, disability, retirement or a material change in circumstances arising after the date of grant). In January 2000, the Committee established a three-year award performance cycle commencing January 1, 2000. There are 31 participants in the Performance Share Program for this cycle. The following table sets forth for the 2000-2003 award period. The amounts included in the Estimated Future Payout columns represent the potential payments of Common Stock and cash to the named officers depending on the level of achievement (i.e., threshold, target or maximum) of the performance goals for the three-year award period. Participants will not receive any payment of Common Stock or cash under the program if TDY and/or the designated business unit do not achieve the threshold level of performance objectives during the award period. 15 19 PERFORMANCE SHARE PROGRAM -- ESTIMATED POTENTIAL PAYOUTS NUMBER OF ESTIMATED FUTURE PAYOUTS UNDER SHARES, NON-STOCK PRICE-BASED PLANS UNITS OR PERFORMANCE OR OTHER ----------------------------------- OTHER PERIOD UNTIL MATURATION THRESHOLD TARGET MAXIMUM NAME RIGHTS (#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #) ---- ------------- ------------------------- --------- ---------- ---------- Robert Mehrabian..... * 2000-2002 award period $ 62,500 $ 250,000 $ 500,000 (2003-2005 payout period) 12,940 51,760 103,520 Stefan C. Riesenfeld......... * 2000-2002 award period $ 31,250 $ 125,000 $ 250,000 (2003-2005 payout period) 6,470 25,880 51,760 John T. Kuelbs....... * 2000-2002 award period $ 28,646 $ 114,583 $ 229,167 (2003-2005 payout period) 5,931 23,723 47,447 Nicholas L. Blauwiekel......... * 2000-2002 award period $ 21,875 $ 87,500 $ 175,000 (2003-2005 payout period) 4,529 18,116 36,232 Dale A. Schnittjer... * 2000-2002 award period $ 13,750 $ 55,000 $ 110,000 (2003-2005 payout period) 2,847 11,387 22,774 Executive Group...... * 2000-2002 award period $158,021 $ 632,083 $1,264,167 (5 persons) (2003-2005 payout period) 32,717 130,866 261,732 Non-Executive Officer............ * 2000-2002 award period $279,341 $1,117,364 $2,234,727 Group (26 persons) (2003-2005 payout period) 57,835 231,338 462,676 ------------------------- * The amount of the award is based on the base salary at the beginning of the award period. Two-thirds of the award is to be paid in TDY Common Stock, with the number of shares based on the average of the high and low sale prices of a share of Common Stock on the New York Stock Exchange on the date the Committee approved the award period (January 25, 2000). One-third of the award is to be paid in cash. OTHER AWARDS. The Committee is authorized to grant any stock purchase rights (with or without loans to participants by the Company) or any other cash awards, Common Stock awards or other types of awards which are valued in whole or in part by reference to the value of Common Stock. The Committee at its discretion will determine the terms and conditions of such awards and the participants eligible for such awards. SHORT-TERM CASH AWARDS. The Incentive Plan authorizes performance-based annual cash incentive compensation to be paid to covered employees subject to Section 162(m) of the Code. The material terms of the annual incentive compensation feature of the Incentive Plan are as follows: - The class of persons covered consists of those senior executives of the Company who are from time to time determined by the Committee to be subject to Section 162(m) of the Code. - The targets for annual incentive payments to "covered employees" (as defined in Section 162(m) of the Code), will consist only of the performance targets discussed under the section titled "Performance Awards" above. Use of any other target will require ratification by the stockholders if failure to obtain such approval would jeopardize tax deductibility of future incentive payments. Such performance targets will be established by the Committee on a timely basis to ensure that the targets are considered "preestablished" for purposes of Section 162(m) of the Code. - In administering the incentive program and determining incentive awards, the Committee will not have the flexibility to pay a covered 16 20 executive more than the incentive amount indicated by his or her attainment under the applicable payment schedule. The Committee will have the flexibility, based on its business judgment, to reduce this amount. - The annual incentive award feature of the Incentive Plan will not be operational until fiscal year 2000. CHANGE IN CONTROL. In general, events that constitute a change in control include: - acquisition by a person, other than the Company, one of its subsidiaries or a Company benefit plan, of 25% or more of the outstanding Common Stock; - the individuals who constitute the Board as of the effective date of the Incentive Plan (the "Incumbent Board") no longer constitute at least two-thirds of the Board without prior approval by a majority vote of the Incumbent Board; - approval by the stockholders of the Company of a reorganization, merger or consolidation; or - approval by the stockholders of the Company of a complete liquidation or dissolution of the Company or sale or other disposition of substantially all of the assets of the Company. In the event of a change in control, stock options and SARs immediately become exercisable, the restrictions on all Restricted Shares lapse and all performance awards immediately become payable. TAX CONSEQUENCES. The following is a summary of the principal federal income tax consequences of Incentive Plan benefits under present tax law. The summary is not intended to be exhaustive. It does not describe state, local or foreign tax consequences. STOCK OPTIONS. The participant incurs no tax, and no amount is deductible by the Company, upon the grant of a stock option. At the time of exercise of a non-qualified stock option, the difference between the exercise price and the fair market value of Common Stock will constitute ordinary income to the participant. The Company will be allowed a deduction equal to the amount of ordinary income recognized by the participant as a result of the exercise of the option. In the case of incentive stock options, although no income is recognized upon exercise and the Company is not entitled to a deduction, the excess of the fair market value of Common Stock on the date of exercise over the exercise price is counted in determining the participant's alternative minimum taxable income. If the participant does not dispose of the shares acquired on the exercise of an incentive stock option within one year after their receipt and within two years after the grant of the incentive stock option, gain or loss recognized on the disposition of the shares will be treated as long-term capital gain or loss. In the event of an earlier disposition of shares acquired upon the exercise of an incentive stock option, the participant may recognize ordinary income, to the extent of the excess of the fair market value of Common Stock on the date of exercise over the exercise price, and capital gain, to the extent of the excess of the amount realized on the sale of the Common Stock over the optionee's basis in the Common Stock (generally, the exercise price plus any ordinary income paid with respect to such earlier disposition) and the Company will be entitled to a deduction, equal to the amount of ordinary income recognized by the participant, when recognized by the participant. Whether the capital gain recognized is long-term or short-term will depend upon whether the one-year capital gain holding period has been met. SARs. A participant will not recognize any income at the time of grant of SARs. Upon the exercise of SARs, the cash and the value of any Common Stock received will constitute ordinary income to the participant. The Company will be entitled to a deduction in the amount of such income at the time of exercise. RESTRICTED SHARES. A participant will normally not recognize taxable income upon an award of Restricted Shares, and the Company will not be entitled to a deduction, until the lapse of the applicable restrictions. Upon the lapse of the restrictions, the participant will recognize 17 21 ordinary taxable income in an amount equal to the fair market value of Common Stock as to which the restrictions have lapsed, and the Company will be entitled to a deduction in the same amount. However, a participant may elect under Section 83(b) of the Code to recognize taxable ordinary income in the year the Restricted Shares are awarded in an amount equal to the fair market value of the shares at that time, determined without regard to the restrictions. In that event, the Company will then be entitled to a deduction in the same amount. Any gain or loss subsequently recognized by the participant will be a capital gain or loss. If, after making a Section 83(b) election, any Restricted Shares are forfeited, or if the fair market value at vesting is lower than the amount on which the participant was taxed, the participant cannot then claim a tax deduction for the loss. PERFORMANCE AWARDS AND OTHER AWARDS. Normally, a participant will not recognize taxable income upon the award of such grants. Subsequently, when the conditions and requirements for the grants have been satisfied and the payment determined, any cash received and the fair market value of any Common Stock received will constitute ordinary income to the participant. The Company will also then be entitled to a deduction in the same amount. DISCRETIONARY GROSS-UP FOR TAXES. The Committee has discretion as to any award under the Incentive Plan to grant a participant a separate cash amount at exercise, vesting or lapse of restrictions to meet mandatory tax withholding obligations or reimburse a participant for any individual taxes paid. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE 1999 INCENTIVE PLAN. 18 22 ITEM C ON PROXY CARD -- RATIFICATION OF INDEPENDENT AUDITORS Ernst & Young LLP has served as independent auditors for the Company since the November 29, 1999 spin-off. Ernst & Young LLP had served as independent auditors for ATI since August 15, 1996, when Allegheny Ludlum Corporation combined with Teledyne, Inc. Prior to the combination, it had served as independent auditors of Allegheny Ludlum Corporation since 1980. The Board of Directors believes that Ernst & Young LLP is knowledgeable about the Company's operations and accounting practices and is well qualified to act in the capacity of independent auditors. The proposal to ratify the selection of Ernst & Young LLP will be approved by the stockholders if it receives the affirmative vote of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. If you sign and return your proxy card, your shares will be voted (unless you indicate to the contrary) to ratify the selection of Ernst & Young LLP as independent auditors for 2000. If you specifically abstain from voting on the proposal, your shares will, in effect, be voted against the proposal. Broker non-votes will not be counted as being entitled to vote on the proposal and will not affect the outcome of the vote. If the stockholders do not ratify the selection of Ernst & Young LLP, the Board will reconsider the appointment of independent auditors. It is expected that representatives of Ernst & Young LLP will be present at the meeting and will have an opportunity to make a statement and respond to appropriate questions. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE SELECTION OF THE INDEPENDENT AUDITORS. OTHER BUSINESS The Company knows of no business that may be presented for consideration at the meeting other than the three action items indicated in the Notice of Annual Meeting. If other matters are properly presented at the meeting, the persons designated as proxies in your proxy card may vote at their discretion. Following adjournment of the formal business meeting, Dr. Robert Mehrabian, President and Chief Executive Officer of TDY, will address the meeting and will hold a general discussion period during which the stockholders will have an opportunity to ask questions about the Company and its business. 19 23 STOCK OWNERSHIP INFORMATION SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE The rules of the Securities and Exchange Commission require that Teledyne Technologies disclose late filings of reports of stock ownership (and changes in stock ownership) by its directors and statutory insiders. To the best of the Company's knowledge, all of the filings for the Company's directors and statutory insiders were made on a timely basis in 1999. FIVE PERCENT OWNERS OF COMMON STOCK As of February 15, 2000, the Company had received notice that the individuals and entities listed in the following table are beneficial owners of five percent or more of TDY Common Stock. In general, "beneficial ownership" includes those shares a person has the power to vote or transfer, and options to acquire Common Stock that are exercisable currently or within 60 days. AMOUNT AND NATURE OF PERCENT NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS ------------------------------------ -------------------- -------- Richard P. Simmons(1)................................... 2,529,667 shs. 9.5% 1000 Six PPG Place Pittsburgh, PA 15222 Caroline W. Singleton(2)................................ 1,999,900 shs. 7.5% Sole Trustee of the Singleton Family Trust 335 North Maple Drive, Suite 177 Beverly Hills, CA 90210 ------------------------- (1) Mr. Simmons filed an amendment to his Schedule 13G on February 14, 2000. Mr. Simmons has the sole power to direct the voting of 2,495,682 shares, and sole power to direct the disposition of 1,341,198 of these shares. Mrs. Richard P. Simmons has the sole power to direct the disposition of 1,154,484 of these shares. Mr. Simmons disclaims beneficial ownership of 33,985 shares, shown in the table, that are owned by R.P. Simmons Family Foundation, a private charitable foundation with respect to which Mr. Simmons serves as trustee. (2) Caroline W. Singleton, as sole trustee of the Singleton Family Trust, filed a Schedule 13G dated February 10, 2000. Mrs. Singleton has the sole voting power to direct the voting of, and the sole power to direct the disposition of, all 1,999,900 shares. 20 24 STOCK OWNERSHIP OF MANAGEMENT The following table shows the shares of Common Stock reported to the Company as beneficially owned as of February 15, 2000 by the nominees for director, the continuing directors and other statutory insiders of the Company. SHARES SHARES THAT TOTAL SHARES BENEFICIALLY MAY BE ACQUIRED PERCENTAGE IF 1% OR MORE BENEFICIAL OWNER OWNED WITHIN 60 DAYS OF SHARES OUTSTANDING ---------------- ------------ --------------- ------------------------- Robert Mehrabian................... 47,464(a) 36,112 * Stefan C. Riesenfeld............... 19,500 0 * John T. Kuelbs..................... 20,000 0 * Nicholas L. Blauwiekel............. 0 0 * Dale A. Schnittjer................. 175 26,143 * Robert P. Bozzone (b).............. 759,525 0 2.8% Paul S. Brentlinger (b)............ 8,076 0 * Frank V. Cahouet................... 527(c) 0 * Thomas A. Corcoran................. 22,569 0 * Diane C. Creel..................... 648 0 * C. Fred Fetterolf (b).............. 3,244 0 * Charles J. Queenan, Jr. (b)........ 109,544 0 * All directors and executive officers as a group (12 persons)......................... 991,272 62,255 3.9% ------------------------- (a) This amount includes 7,646 shares of TDY Common Stock issued to Dr. Mehrabian on February 22, 2000 in connection with the first installment paid under the terminated and shorted ATI PSP. (b) The amounts shown include shares to which beneficial ownership is disclaimed as follows: 34,285 shares owned by Mr. Bozzone's wife; 28 shares held by Mr. Brentlinger's wife; 371 shares owned by the Fetterolf Family Foundation; and 12,428 shares owned by Mr. Queenan's wife. (c) The amount includes 500 shares of TDY Common Stock purchased on March 14, 2000. 21 25 1999 REPORT ON EXECUTIVE COMPENSATION This report on executive compensation is furnished by the Personnel and Compensation Committee and the Stock Incentive Award Subcommittee (together, the "Committee") of the Board of Directors of Teledyne Technologies Incorporated ("TDY" or the "Company"). In some discussions of the stock awards to the named officers in the Summary Compensation Table, the term "Committee" refers to the Stock Incentive Award Subcommittee. This report is not incorporated by reference into any of the Company's registration statements filed under the Securities Act of 1933. Effective November 29, 1999, the Company was spun-off from Allegheny Teledyne Incorporated, now known as Allegheny Technologies Incorporated ("ATI"). In connection with the spin-off, TDY's executive compensation program was established, having its genesis in the program established by ATI. Pursuant to the Employee Benefits Agreement dated November 29, 1999, between the Company and ATI executed in connection with the spin-off (the "Employee Benefits Agreement"), the Company was contractually required to take various actions with respect to certain executive benefit plans and programs. Since the spin-off, the Committee has recognized that the Company may need to modify, and has begun to modify, its executive compensation program to be more competitive and aligned with high technology businesses (as compared to specialty metals), which in turn it believes would better assure attraction and retention of quality management. The Committee did not engage any outside executive compensation consultant with respect to TDY's current executive compensation program. The Committee has considered publicly available market and other data on executive compensation matters. EXECUTIVE COMPENSATION PHILOSOPHY The Committee has determined that total compensation for TDY executives would be comprised of three general characteristics: - It will be competitive in the aggregate, using a set of business and labor market competitors (by industry segment, as appropriate) to gauge the competitive market place. - It will be performance oriented, with a substantial portion of the total compensation tied to internal and external measures of company performance. - It will promote long-term careers at TDY. Consistent with these characteristics, the Committee adopted the following policy for base salaries, short-term incentives and long-term incentives. - Base Salary: Base salary for all management positions will be at the unit's industry/market median for comparable positions unless there are sound reasons, such as competitive factors, for varying significantly from industry medians. "Judgment" will always be the guiding factor in base salary determinations, as well as any other compensation issue. No system should be so rigid that it prevents the use of judgment. - Short-Term Incentives: Annual Incentive Plan ("AIP") awards will allow for competitive cash compensation, based on the achievement of predefined performance measures, with up to 200 percent of the target award paid in the case of significant over-achievement. The majority of the award will be based on financial performance achievement, with a smaller portion tied to the achievement of pre-established individual goals. Commencing with the AIP for 2000, 40 percent of the award will be tied to the achievement of predetermined levels of operating profit, 25 percent to the achievement of predetermined levels of revenue, 15 percent to the achievement of predetermined levels of managed working capital and 20 percent to the achievement of specific individual performance objectives. A discretionary adjustment of +/- 20 percent will be allowed, though aggregate adjustments will not exceed +5 percent. All awards will be paid from a pool equal to 7.5 percent of operating profit, subject to modification by the Committee. No AIP bonus, however, will be 22 26 earned unless the operating profit is positive, after accruing for bonus payments and that operating profit is at least 75 percent of the operating plan, subject in each case to modification by the Committee. - Long-Term Incentives: Long-term incentives will consist of three components: - Stock options, which will be awarded annually to all key employees who are nominated by management to receive an award and approved by the Committee. In practice, the amount of the award generally will depend on the executive's salary grade and position. - A three-year Performance Share Program ("PSP") opportunity, with a new "cycle" beginning every three years for selected officers and key executives. The PSP provides grants of performance share units which key Company officers and executives may earn if specified performance objectives are met over a three-year period. Beginning with the three-year award period commencing January 1, 2000, 40 percent of the PSP award will be based on the achievement of specified levels of operating profit, 30 percent on the achievement of specified levels of revenue and 30 percent on the achievement of specified levels of return to shareholders. For the three-year aggregate return to shareholders performance measure, the S&P SmallCap 600 Index (on which TDY is included) is the benchmark. No awards will be made if the three-year aggregate operating profit is less than 75 percent of target. A maximum of 200 percent for each component can be earned if 120 percent of target is achieved. Awards will generally be paid to the participants in three annual installments after the conclusion of the performance cycle so long as they remain employed by TDY (with exceptions for retirement, disability and death). If the units are earned, two-thirds will be paid in TDY Common Stock and one-third will be paid in cash. - A Restricted Stock Plan opportunity, which will be granted to selected officers and key executives. The Committee expects to implement the Restricted Stock Plan by mid-2000. It will replace the Stock Acquisition and Retention Program established by ATI. 1999 COMPENSATION Short-Term Incentives Annual Incentive Plan. In 1999, awards under the AIP ranged from zero to 189 percent of the target incentives because the targets and levels of achievement varied by business unit. For 1999, 40 percent of the award was based on the achievement of predetermined levels of operating income, 40 percent was based on the achievement of predetermined levels of return on capital employed and 20 percent was tied to the achievement of specific individual objectives. The bonus column of the Summary Compensation Table contains the award for 1999 for each of the named officers. Long-Term Incentives Stock Options. ATI made one annual award of stock options at the beginning of 1999. At the time of the spin-off, under the Employee Benefits Agreement, outstanding options to acquire ATI common stock issued under ATI benefit plans and held by TDY employees were converted into options to purchase shares of TDY Common Stock. The number of shares the option holder is able to purchase and the exercise price of the options were adjusted in the conversion based on the relationship of ATI stock price at the close of business on November 29, 1999 (the distribution date) ($14.3125) and the TDY stock price at the opening of business on November 30, 1999 (its first day of "regular way" trading on the New York Stock Exchange) ($9.375). In connection with the spin-off, stock options were granted under the Teledyne Technologies Incorporated 1999 Incentive Plan (the "1999 Incentive Plan") to Robert Mehrabian (300,000 shares), Stefan C. Riesenfeld (75,000 shares), John T. Kuelbs (70,000 shares) and selected other members of executive manage- 23 27 ment, primarily as part of recruitment and retention initiatives. Performance Share Program. As a result of the spin-off and in accordance with the Employee Benefits Agreement, the three-year award period under the ATI Performance Share Program ("ATI PSP") established in 1998 was terminated and the award period shortened to cover the two-year period of January 1, 1998 through December 31, 1999, with targets based on the 1998 and 1999 business plans. The award was based on achievement of specified levels of revenue, earnings and return on capital employed during the two-year period. Awards ranged from 72.6 percent to 154.5 percent of the target incentives because the targets and levels of achievement varied by business unit. Under the circumstances and in accordance with the plan, the Committee changed the manner of calculating the stock portion of the award, determining that the stock price to be used for the stock portion of the award would be based on the average of the high and low stock prices of TDY's Common Stock on January 25, 2000. Of the named officers in the Summary Compensation Table, only Dr. Mehrabian and Mr. Schnittjer participated in the ATI PSP. ATI Stock Acquisition and Retention Program (the "ATI SARP"). As a result of the spin-off, under the Employee Benefits Agreement, participants employed by TDY who had purchased or designated shares of ATI stock received distributions of common stock of TDY and Water Pik Technologies, Inc. on the purchased or designated ATI shares. The shares they received in the spin-off as well as the original ATI shares continue to be held as collateral for loans for the purchased shares, all of which were retained by ATI, until the loans are fully paid. Restricted shares issued under the ATI SARP to TDY employees were converted into shares of TDY Common Stock and continue to bear the restrictions set forth in the original ATI SARP. CHANGE IN CONTROL SEVERANCE AGREEMENTS After the spin-off, the Committee recommended and the Board of Directors approved Change in Control Severance Agreements for the named officers and selected other key executives. In entering into the Agreements, the Committee desired to assure that TDY will have the continued dedication of certain executives and the availability of their advice and counsel, notwithstanding the possibility of a change in control, and to induce such executives to remain in the employ of the Company. The Committee believes that, should the possibility of a change in control arise, it imperative that TDY be able to receive and rely upon its executives' advice, if requested, as to the best interests of the Company and its stockholders without the concern that he or she might be distracted by the personal uncertainties and risks created by the possibility of a change in control. The Committee also considered arrangements offered to similarly situated executives of comparable companies. The Agreements have a three-year, automatically renewing term. The executive is entitled to severance benefits if (1) there is a change in control of the Company and (2) within three months before or 24 months after the change in control, either the Company terminates the executive's employment for reasons other than cause or the executive terminates the employment for good reason. "Severance benefits" consist of: - A cash payment equal to three times (in the case of Dr. Mehrabian and Messrs. Riesenfeld and Kuelbs and three other executives) or two times (in the case of eight other executives) the sum of (i) the executive's highest annual base salary within the year preceding the change in control and (ii) the AIP bonus target for the year in which the change in control occurs or the year immediately preceding the change in control, whichever is higher. - A cash payment for the current AIP bonus based on the fraction of the year worked times the AIP target objectives at 120 percent (with payment of the prior year bonus if not yet paid). - Payment in cash for unpaid PSP awards, assuming applicable goals are met at 120 percent of performance. - Continued equivalent health and welfare (e.g., medical, dental, vision, life insurance and disability) benefits at TDY's expense for a 24 28 period of 36 months after termination (with the executive bearing any portion of the cost the executive bore prior to the change in control); provided, however, such benefits would be discontinued to the extent the executive receives similar benefits from a subsequent employer. - Immediate vesting of all stock options, with options being exercisable for the full remaining term. - Removal of restrictions on restricted stock issued by the Company under any Stock Acquisition and Retention Program or any replacement plans (i.e. the Restricted Stock Plan). - Full vesting under the Company's pension plans (within legal parameters). - Up to $25,000 reimbursement for actual professional outplacement services. COMPENSATION OF CHIEF EXECUTIVE OFFICER The Committee determined the 1999 compensation of Robert Mehrabian, President and Chief Executive Officer, in accordance with the general compensation philosophy described above. The Committee recommended and the Board of Directors approved an Employment Agreement dated as of December 21, 1999 (the "Employment Agreement") between the Company and Dr. Mehrabian, which provides that the Company shall employ him as the President and Chief Executive Officer and which supplements his Change in Control Severance Agreement of the same date. The Employment Agreement memorializes arrangements arising out of a pre-spin-off letter agreement made by Richard Simmons, Chairman of ATI, when Dr. Mehrabian first joined ATI. The Employment Agreement terminates on December 31, 2000, but effective November 1, 2000, it may be extended annually unless either party gives the other written notice prior to October 31 of such term that it will not be extended. In setting Dr. Mehrabian's base salary of $500,000, the Committee considered base salaries of comparably situated executives, finding that Dr. Mehrabian's base salary was within the median range. Dr. Mehrabian received an award of $450,000 under the Annual Incentive Plan for 1999. In determining the AIP award to Dr. Mehrabian, the Committee acknowledged and commended the efforts and leadership of Dr. Mehrabian and the manner in which he handled the multitude of difficult issues associated with the spin-off transaction. The Committee reviewed the AIP award paid by ATI to Dr. Mehrabian in 1998. The Committee also determined that while the spin-off occurred on November 29, 1999, Dr. Mehrabian had in effect acted as the chief executive officer of the Company since July 1999. Consequently, the Committee determined as permitted by the plan that Dr. Mehrabian's AIP bonus should be calculated using the 80 percent factor applicable to the chief executive officer for the five-month period from August 1999 through December 1999. In arriving at the award amount, the Committee considered Dr. Mehrabian's performance in light of the Company's performance against targeted levels of operating profit and return on capital employed. The Committee noted that: - the Company's operating profit was 95.8 percent of plan. - the Company's return on capital employed was 102.3 percent of plan; and - Dr. Mehrabian had achieved 120 percent of his individual goals. Hence, the Committee approved an award of $401,721. The full Board of Directors, recognizing Dr. Mehrabian's exemplary service during the spin-off transition and for his recruitment efforts, increased the amount paid to $450,000. Under the shortened ATI PSP, the Committee determined Dr. Mehrabian had achieved 113.5 percent of the target incentives. As a result, Dr. Mehrabian will receive $110,899 in cash and 22,937 shares of TDY Common Stock, each payable in one-third increments over the next three years. 25 29 As a result of the spin-off, in accordance with the Employee Benefits Agreement and under the ATI SARP, Dr. Mehrabian holds 24,921 restricted shares of TDY Common Stock. In connection with the spin-off, and in accordance with his Employment Agreement, the Committee granted Dr. Mehrabian stock options for 300,000 shares of TDY Common Stock, with an exercise price of $8.94, exercisable in one-third increments commencing November 30, 2000 and having a 10-year term. The Employment Agreement provides Dr. Mehrabian with a non-qualified pension arrangement, continuing his agreement with ATI. The Company has agreed to pay Dr. Mehrabian following his retirement, as payments supplemental to any accrued pension under the Company's qualified pension plan, an annual amount equal to 50 percent of his base compensation as in effect at retirement. The number of years for which such annual amount shall be paid will be equal to the number of years of his service to TDY (including service to ATI), but not more than 10 years. DEDUCTIBILITY OF EXECUTIVE COMPENSATION Section 162(m) of the Internal Revenue Code imposes limits on tax deductions for annual compensation paid to a chief executive officer and other highly compensated officers unless the compensation qualifies as "performance-based" or is otherwise exempt under the law. The 1999 Incentive Plan is intended to meet the deductibility requirements of the regulations promulgated under Section 162(m). However, the Committee may determine in any year that it would be in the best interests of the Company for awards to be paid under the 1999 Incentive Plan that would not satisfy the requirements of Section 162(m). Submitted by: The Personnel and Compensation Committee Charles J. Queenan, Jr., Chair Diane C. Creel C. Fred Fetterolf The Stock Incentive Award Subcommittee Diane C. Creel, Chair C. Fred Fetterolf Dated: February 16, 2000 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No member of the Personnel and Compensation Committee or Stock Incentive Award Subcommittee is an officer or employee of the Company. Mr. Queenan serves as senior counsel to a law firm that provided services to the Company during 1999 and 2000. Mr. Queenan does not participate in the firm's earnings or profits. No other member of the Committee has a current or prior relationship, and no officer who is a statutory insider of the Company has a relationship to any other company, that is required to be described under the Securities and Exchange Commission rules relating to disclosure of executive compensation. 26 30 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following Summary Compensation Table sets forth information about the compensation paid by TDY and, pre-spin-off, by ATI to our President and Chief Executive Officer for fiscal 1999, 1998 and 1997. It also sets forth information about compensation paid to each officer of the Company required to file reports under Section 16 of the Securities Exchange Act of 1934 (the "named officers") for fiscal 1999. Dr. Mehrabian, our President and Chief Executive Officer, is the only executive officer who was employed as an executive officer by ATI during fiscal 1997 and 1998. Mr. Riesenfeld and Mr. Kuelbs joined ATI in anticipation of the spin-off on July 26, 1999 and October 18, 1999, respectively. Mr. Schnittjer became an executive officer of TDY on November 29, 1999, in connection with the spin-off. LONG-TERM COMPENSATION ANNUAL COMPENSATION ----------------------- ----------------------------------------- RESTRICTED OPTIONS NAME AND FISCAL OTHER ANNUAL STOCK (SHARES) ALL OTHER PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARDS($)(2) (3) COMPENSATION($) ------------------ ---------- --------- -------- ------------------ ------------ -------- --------------- Robert Mehrabian......... 1999 408,334 450,000 359,508(4) 166,566 300,000 740,421(5) President and 1998 370,833 501,120 6,171 170,991 61,068 226,492(6) Chief Executive Officer 1997 145,833 160,000 0 0 0 9,696 (5 months) Stefan C. Riesenfeld..... 1999 $130,769 78,852 0 0 75,000 $87,663(7) Executive Vice President and Chief Financial Officer John T. Kuelbs........... 1999 92,497 34,498 0 0 70,000 0 Senior Vice President, General Counsel and Secretary Dale A. Schnittjer....... 1999 144,655 65,113 0 0 0 14,309(8) Controller ------------------------- (1) In accordance with applicable regulations, the amounts do not include perquisites and other personal benefits received by the named officers because the aggregate value of such benefits did not exceed the lesser of $50,000 or 10 percent of the total salary and bonus for the named officers. (2) Represents the closing market price on the award date of ATI restricted stock awarded to Dr. Mehrabian under the ATI Stock Acquisition and Retention Program. Such shares were converted into shares of TDY Common Stock in connection with the spin-off. ATI had paid dividends on the restricted shares. On December 31, 1999, the number of shares (and closing price of such shares, if unrestricted) held by Dr. Mehrabian under the Program were: 24,921 shares ($235,192). Prior to 1998, Dr. Mehrabian was not eligible to participate in the Program. (3) Reflects options granted under ATI's Incentive Plan as converted into options to purchase shares of TDY Common Stock in connection with the spin-off. Does not include options awarded to Dr. Mehrabian in 1998 under ATI's Non-Employee Director Stock Compensation Plan for his service as a director of ATI before becoming an employee of ATI. (4) Includes one-time tax reimbursement of $353,658 relating to the ATI Stock Acquisition and Retention Program. 27 31 (5) Includes annual accruals for possible future payments to Dr. Mehrabian under the ATI Supplemental Pension Plan in the amount of $314,846, company contributions pursuant to the retirement portion of the ATI Retirement Savings Plan in the amount of $10,400, company contributions to the ATI Benefit Restoration Plan in the amount of $46,003, the dollar value of the benefits to Dr. Mehrabian of company paid premiums of split dollar life insurance in the amount of $11,960 and one-time non-cash imputed income of $357,212 arising in connection with the ATI Stock Acquisition and Retention Program. (6) Includes annual accruals for possible future payments to Dr. Mehrabian under the ATI Supplemental Pension Plan in the amount of $182,068, company contributions pursuant to the retirement portion of the ATI Retirement Savings Plan in the amount of $10,920, company contributions to the ATI Benefit Restoration Plan in the amount of $24,104, and the dollar value of the benefit to Dr. Mehrabian of the remainder of company-paid premiums for split-dollar life insurance in the amount of $9,400. (7) Reflects aggregate relocation expenses paid on behalf of Mr. Riesenfeld. (8) Includes company contributions pursuant to the retirement portion of the ATI Retirement Savings Plan of $10,400 and company contributions to the ATI Benefit Restoration Plan in the amount of $3,908.83. 28 32 OPTION GRANTS IN LAST FISCAL YEAR Shown below is information on grants to Messrs. Mehrabian, Riesenfeld and Kuelbs of options to purchase TDY Common Stock pursuant to the 1999 Incentive Plan during the fiscal year ended January 2, 2000, which are reflected in the Summary Compensation Table. No options were granted to Mr. Schnittjer during such year. POTENTIAL REALIZABLE VALUE AT NUMBER OF % OF TOTAL ASSUMED RATES OF STOCK PRICE SECURITIES OPTIONS EXERCISE APPRECIATION FOR OPTION TERM(1) UNDERLYING GRANTED TO OR BASE --------------------------------- OPTIONS EMPLOYEES IN PRICE EXPIRATION 0% 5% 10% NAME GRANTED FISCAL YEAR ($/SHARE) DATE $ $ $ ---- ---------- ------------ --------- ---------- ----- ----------- ----------- Robert Mehrabian....... 300,000 61.5 8.94 11/30/2009 0 1,686,695 4,274,417 Stefan C. Riesenfeld... 75,000 15.4 8.94 11/30/2009 0 421,674 1,068,604 John T. Kuelbs......... 70,000 14.4 8.94 11/30/2009 0 393,562 997,364 All Optionees (6 11/30/2009 - persons)............. 487,500 100% 8.58-8.94 12/21/2009 0 2,740,880 6,945,928 ------------------------- (1) No gain to the optionee is possible without stock price appreciation, which will benefit all stockholders commensurately. The assumed "potential realizable values" are mathematically derived from certain prescribed rates of stock price appreciation. The actual value of these option grants depends on the future performance of TDY Common Stock and overall stock market condition. There is no assurance that the values reflected in this table will be realized. Under the Employee Benefits Agreement, at the time of the spin-off of TDY from ATI, options to purchase shares of ATI common stock that were held by Dr. Mehrabian and other TDY employees were converted into options to purchase shares of TDY Common Stock. See the subsection entitled "Assumption of ATI Awards" and the table captioned "Outstanding Options under the 1999 Incentive Plan" under "Item B on Proxy Card -- Approval of the 1999 Incentive Plan -- 1999 Incentive Plan" at page 10. 29 33 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES As shown in the table below, no options were exercised by Messrs. Mehrabian, Riesenfeld, Kuelbs or Schnittjer during fiscal 1999. NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY -------------------------------------------- VALUE OF UNEXERCISED SHARES UNEXERCISED OPTIONS AT OPTIONS AT FISCAL ACQUIRED ON VALUE FISCAL YEAR END(#) YEAR END($)(2) NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE ---- ----------- ----------- ------------------------- ------------------------- Robert Mehrabian(1).............. 0 0 33,580/340,712 45/150,000 Stefan C. Riesenfeld............. 0 0 0/75,000 */37,500 John T. Kuelbs................... 0 0 0/70,000 */35,000 Dale A. Schnittjer............... 0 0 22,327/15,268 14,989/* ------------------------- (1) Includes options to purchase shares of TDY Common Stock converted from options to purchase ATI common stock in connection with the spin-off under the Employee Benefits Agreement, which included options granted to Dr. Mehrabian under ATI's Non-Employee Director Stock Compensation Plan with respect to his service as a non-employee director of ATI. (2) The "value of unexercised in-the-money options" is calculated by subtracting the exercise price per share from $9.44, which was the average of the high and low sale prices of a share of TDY Common Stock on the New York Stock Exchange on December 31, 1999. The "*" denotes that the relevant options were "out-of-the-money" at December 31, 1999, meaning the exercise price per share was greater than $9.44. ATI PERFORMANCE SHARE PROGRAM AWARDS The following table sets forth information about awards for the three-year award period made in 1998 under the ATI Performance Share Program, which, as a result of the spin-off and in accordance with the Employee Benefits Agreement, was terminated and the award period shortened to cover the two-year period of January 1, 1998 through December 31, 1999. The amounts included in the Estimated Future Payouts columns represent the potential payment of TDY Common Stock and cash to the named officers depending on whether they remain employed by TDY (with exceptions for retirement, death and disability). The 2000 payout has been made. NUMBER OF ESTIMATED FUTURE PAYOUTS UNDER SHARES, PERFORMANCE NON-STOCK PRICE-BASED PLANS UNITS OR OR OTHER PERIOD --------------------------------------- OTHER UNTIL MATURATION 2000 PAYOUT 2001 PAYOUT 2002 PAYOUT NAME RIGHTS(#) OR PAYOUT ($ OR #) ($ OR #) ($ OR #) ---- --------- ------------------------- ----------- ----------- ----------- Robert Mehrabian............. * 1998-1999 award period 7,646 shs. 7,646 shs. 7,645 shs. (2000-2002 payout period) $ 36,967 $ 36,966 $ 36,966 Dale A. Schnittjer........... * 1998-1999 award period 1,807 shs. 1,806 shs. 1,806 shs. (2000-2002 payout period) $ 8,733 $ 8,733 $ 8,732 ------------------------- * The amount of the award is based on base salary at the beginning of the award period. Two-thirds of the award is to be paid in TDY Common Stock, with the number of shares based on the average of the high and low sale prices of a share of TDY Common Stock on the New York Stock Exchange on January 25, 2000 ($9.67). One-third of the award is to be paid in cash. 30 34 PENSION PLAN In connection with the spin-off, we adopted the Teledyne Technologies Incorporated Pension Plan on terms substantially similar to the parts of the ATI Pension Plan applicable to all of our employees, both active and inactive at our operations which perform government contract work and for our active employees at our operations which do not perform government contract work. The annual benefits payable under these parts of the pension plans to participating salaried employees retiring at or after age 65 is calculated under a formula which takes into account the participant's compensation and years of service. The Code limits the amounts payable to participants under a qualified pension plan. We have also adopted a Pension Equalization/Benefit Restoration Plan, which is designed to restore benefits which would be payable under the pension plan provisions but for the limits imposed by the Code, to the levels calculated pursuant to the formulas contained in the pension plan provisions. The following table illustrates the approximate annual pension that may become payable to a Teledyne Technologies employee in the higher salary classifications under our regular and supplemental pension plans. ESTIMATED ANNUAL PENSIONS(1) AVERAGE PAY IN HIGHEST YEARS OF SERVICE(3) 60 MONTHS OF LAST 120 ------------------------------ MONTHS OF EMPLOYMENT(2) 15 20 30 ----------------------- -------- -------- -------- $ 200,000...................................... $ 46,277 $ 61,702 $ 92,553 300,000..................................... 71,027 94,702 142,053 400,000..................................... 95,777 127,702 191,553 500,000..................................... 120,527 160,702 241,053 600,000..................................... 145,277 193,702 290,553 700,000..................................... 170,027 226,702 340,053 800,000..................................... 194,777 259,702 389,553 1,000,000..................................... 244,277 325,702 488,553 ------------------------- (1) The estimated amounts assume retirement at age 65 (normal retirement age) with a straight-life annuity without reduction for a survivor annuity or for optional benefits. They are not subject to deduction for Social Security benefits. (2) For the period through December 31, 1994, for TDY employees who are in the higher salary classifications, compensation for the purposes of the plan was limited to an individual's base salary. Thereafter, plan compensation for those employees includes base salary and up to five annual incentive payments received on and after January 1, 1995. (3) The maximum amount of service credited under the pension provisions applicable to our employees is 30 years of credited service. 31 35 EMPLOYMENT/CHANGE IN CONTROL AGREEMENTS The Company has an Employment Agreement with Dr. Mehrabian, which provides that the Company shall employ him as the President and Chief Executive Officer. The agreement terminates on December 31, 2000, but effective November 1, 2000 will be extended annually unless either party gives the other written notice prior to October 31 of each year of such term that it will not be extended. The agreement provides for a base salary of $500,000 and entitles Dr. Mehrabian to participate in Teledyne Technologies' annual incentive bonus plan and other executive compensation and benefit programs. The agreement provides Dr. Mehrabian with a non-qualified pension arrangement, under which the Company will pay Dr. Mehrabian following his retirement, as payments supplemental to any accrued pension under our qualified pension plan, an amount equal to 50 percent of his base compensation as in effect at retirement. The number of years for which such annual amount shall be paid will be equal to the number of years of his service to TDY (including service to ATI), but not more than 10 years. Messrs. Riesenfeld, Kuelbs and Blauwiekel were retained at annual base salaries of $300,000, $275,000 and $210,000, respectively, and are entitled to certain additional payments. Each of them is also entitled to participate in Teledyne Technologies' annual incentive bonus plan. In addition, at the spin-off date, Messrs. Riesenfeld and Kuelbs received options to purchase 75,000 shares and 70,000 shares, respectively, of TDY Common Stock. The Company has entered into Change in Control Severance Agreements with Dr. Mehrabian, each of the other named executive officers and 11 other key employees. The agreements have a three-year, automatically renewing term. Under the agreements, the executive is entitled to severance benefits if (1) there is a change in control of the Company and (2) within three months before or 24 months after the change in control, either the Company terminates the executive's employment for reasons other than for cause or the executive terminates the employment for good reason. "Severance benefits" consist of: - A cash payment equal to three times (in the case of Messrs. Mehrabian, Riesenfeld, Kuelbs and Blauwiekel and three other executives) or two times (in the case of eight other executives) the sum of (i) the executive's highest annual base salary within the year preceding the change in control and (ii) the Annual Incentive Plan ("AIP") bonus target for the year in which the change in control occurs or the year immediately preceding the change in control, whichever is higher. - A cash payment for the current AIP bonus based on the fraction of the year worked times the AIP target objectives at 120 percent (with payment of the prior year bonus if not yet paid). - Payment in cash for unpaid PSP awards, assuming applicable goals are met at 120 percent of performance. - Continued equivalent health and welfare (e.g., medical, dental, vision, life insurance and disability) benefits at TDY's expense for a period of 36 months after termination (with the executive bearing any portion of the cost the executive bore prior to the change in control); provided, however, such benefits would be discontinued to the extent the executive receives similar benefits from a subsequent employer. - Immediate vesting of all stock options, with options being exercisable for the full remaining term. - Removal of restrictions on restricted stock issued by the Company under any Stock Acquisition and Retention Program or any replacement plans (i.e. the Restricted Stock Plan). - Full vesting under the Company's pension plans (within legal parameters). - Up to $25,000 reimbursement for actual professional outplacement services. 32 36 CERTAIN TRANSACTIONS SPIN-OFF AGREEMENTS We entered into several agreements with ATI in connection with the spin-off under which we have continuing obligations, some of which are described below and elsewhere in this Proxy Statement. These agreements are being described because seven of our eight directors are also directors of ATI. Our non-executive Chairman is also the President and Chief Executive Officer of ATI. SEPARATION AND DISTRIBUTION AGREEMENT. The Separation and Distribution Agreement provided for the principal corporate transactions required to effect the separation of our businesses from ATI, the spin-off and certain other matters governing the relationship among us following the spin-off. The agreement requires that we initiate a public offering of our Common Stock within eight months following the spin-off and complete the public offering within one year following the spin-off. It also requires that we use proceeds of the offering as contemplated by the tax-ruling request. In addition, it provides that until the third Annual Meeting of our stockholders held following the spin-off, at least a majority of our directors will also be members of the Board of Directors of ATI. EMPLOYEE BENEFITS AGREEMENT. The Employee Benefit Agreement contains various agreements between ATI and us concerning employees, pension and employee benefit plans and other compensation arrangements for current and former employees of our businesses. Under the terms of the ATI SARP, Dr. Robert Mehrabian had delivered promissory notes, payable to ATI, as payment for the purchase price of ATI common stock purchased under the program. Under the Employee Benefits Agreement, notwithstanding the conversion of the restricted ATI shares into restricted TDY Common Stock, the loans evidenced by the promissory notes remain payable to ATI. On December 22, 1999, ATI reduced the total amount of the loans payable by Dr. Mehrabian by $357,211.97. As of December 31, 1999, after this reduction, Dr. Mehrabian was indebted to ATI under this program in the amount of $403,010.62. TAX SHARING AND INDEMNIFICATION AGREEMENT. The Tax Sharing and Indemnification Agreement allocates certain federal, state, local and foreign tax responsibilities and liabilities between ATI and us. This agreement provides that we will indemnify ATI and its directors, officers, employees, agents and representatives for any taxes imposed on, or other amounts paid by, them, or ATI's stockholders, if we take actions or fail to take actions (such as completing the public offering) that result in the spin-off not qualifying as a tax-free distribution. INTERIM SERVICES AGREEMENT. Under the Interim Services Agreement, ATI provides us with transitional administration and support services for a period of time not expected to exceed 12 months. The Interim Services Agreement provides that we pay ATI a fee approximating ATI's cost for such services plus 10 percent. TRADEMARK LICENSE AGREEMENT. Pursuant to the Trademark License Agreement, an affiliate of ATI granted us an exclusive license to use the "Teledyne" name and related logos, symbols and marks in connection with our operations. We pay an annual fee of $100,000 for this license and on November 24, 2004 have an option to purchase all rights and interests in the Teledyne marks for $412,000. OTHER RELATIONSHIPS KIRKPATRICK & LOCKHART LLP. We retained the law firm of Kirkpatrick & Lockhart LLP to perform services for the Company during 1999 and 2000. Charles J. Queenan, Jr., a member of the Company's Board of Directors, is Senior Counsel to that law firm. See "Compensation Committee Interlocks and Insider Participation" on page 26. MELLON BANK. Mr. Cahouet is a director of Mellon Financial Corporation. He had served as 33 37 Chairman, President and Chief Executive Officer of Mellon Financial Corporation and Mellon Bank, N.A., having retired on December 31, 1998. We maintain various arms-length banking relationships with Mellon Bank, N.A. Mellon Bank, N.A. is one of nine lenders under our $200 million credit facility, having committed to lend up to $33,750,000 under the facility. Mellon Bank, N.A. also serves as trustee under the Teledyne Technologies Incorporated Pension Plan. ChaseMellon Shareholder Services L.L.C. serves as the transfer agent and registrar. Notwithstanding these relationships, our Board of Directors has determined that Mr. Cahouet is "independent," within the meaning of the rules of the New York Stock Exchange, to serve on the Audit Committee of the Board of Directors. AHERF BANKRUPTCY. On January 5, 1998, as a consequence of assuming a position as the Chairman of the Board of Trustees of Allegheny General Hospital ("AGH"), Mr. Cahouet became a Trustee of AGH's parent entity, the Allegheny County Health Education and Research Foundation ("AHERF"). AHERF filed for bankruptcy in July 1998. AGH has not filed for bankruptcy. Several civil suits have been filed against the former officers and trustees of AHERF, including Mr. Cahouet, in connection with its bankruptcy. CUMULATIVE TOTAL STOCKHOLDER RETURN The graph set forth below shows the cumulative total stockholder return (i.e., price change plus reinvestment of dividends) on the Common Stock from November 30, 1999, the first day of "regular way" trading in the Common Stock following the spin-off through December 31, 1999, as compared to the Standard & Poor's 500 Composite Index, the Standard & Poor's SmallCap 600 Index and the Dow Jones Aerospace & Defense Index. The graph assumes that $100 was invested on November 30, 1999. [GRAPH] NOVEMBER 30, 1999 DECEMBER 31, 1999 ----------------- ----------------- Teledyne Technologies $100 $102.03 Standard & Poor's 500 Composite Index $100 $104.46 Standard & Poor's SmallCap 600 Index $100 $107.75 Dow Jones Aerospace & Defense Index $100 $103.38 In accordance with the rules of the Securities and Exchange Commission, this presentation is not incorporated by reference into any of the Company's registration statements under the Securities Act of 1933. 34 38 OTHER INFORMATION ANNUAL REPORT ON FORM 10-K Copies of the Company's Annual Report on Form 10-K, without exhibits, can be obtained without charge from the Senior Vice President, General Counsel and Secretary, at Teledyne Technologies Incorporated, 2049 Century Park East, Suite 1500, Los Angeles, CA 90067, or (310)551-4302. 2001 ANNUAL MEETING AND STOCKHOLDER PROPOSALS Under Rule 14a-8 of the Securities and Exchange Commission, proposals of stockholders intended to be presented at the 2001 Annual Meeting of Stockholders must be received no later than December 9, 2000 for inclusion in the proxy statement and proxy card for that meeting. In addition, the Company's Restated Certificate of Incorporation provides that in order for nominations or other business to be properly brought before an Annual Meeting by a stockholder, the stockholder must give timely notice thereof in writing to the Corporate Secretary. To be timely, a stockholder's notice must be delivered to the Secretary not less than 75 days and not more than 90 days prior to the first anniversary of the preceding year's Annual Meeting which, in the case of the 2001 Annual Meeting of Stockholders, would be no earlier than March 2, 2001 and no later than March 17, 2001. If, however, the date of the Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, to be timely, notice by the stockholder must be so delivered not earlier than the 90th day prior to such Annual Meeting and not later than the later of the 60th day prior to such Annual Meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. The Company's Restated Certificate of Incorporation also requires that such notice contain certain additional information. Copies of the Restated Certificate of Incorporation can be obtained without charge from the Senior Vice President, General Counsel and Secretary. PROXY SOLICITATION The Company pays the cost of preparing, assembling and mailing this proxy-soliciting material. We will reimburse banks, brokers and other nominee holders for reasonable expenses they incur in sending these proxy materials to our beneficial stockholders whose stock is registered in the nominee's name. The Company has engaged Morrow & Co. to help solicit proxies from brokers, banks and other nominee holders of the Common Stock at a cost of $8,000, plus expenses. Our employees may also solicit proxies for no additional compensation. By Order of the Board of Directors, /s/ John T. Kuelbs John T. Kuelbs Senior Vice President, General Counsel and Secretary April 5, 2000 35 39 ANNEX A TELEDYNE TECHNOLOGIES INCORPORATED 1999 INCENTIVE PLAN (AS AMENDED THROUGH JANUARY 26, 2000) ARTICLE I PURPOSE AND ADOPTION OF THE PLAN 1.01. PURPOSE. The purpose of the Teledyne Technologies Incorporated 1999 Incentive Plan (hereinafter referred to as the "Plan") is to assist in attracting and retaining highly competent employees, to act as an incentive in motivating selected officers and other key employees of Teledyne Technologies Incorporated and its Subsidiaries to achieve long-term corporate objectives and to enable cash incentive awards to qualify as performance-based for purposes of the tax deduction limitations under Section 162(m) of the Code. 1.02. ADOPTION AND TERM. The Plan has been approved by the Board of Directors of Teledyne Technologies Incorporated, to be effective as of the effective date of the distribution by Allegheny Teledyne Incorporated to its stockholders of Teledyne Technologies Incorporated Common Stock (the "Effective Date"), but is subject to the approval of the stockholders of the Company. The Plan shall remain in effect until terminated by action of the Board; provided, however, that no Incentive Stock Option may be granted hereunder after the tenth anniversary of the Effective Date and the provisions of Articles VII, VIII, IX and X with respect to performance-based awards to "covered employees" under Section 162(m) of the Code shall expire as of the fifth anniversary of the Effective Date. ARTICLE II DEFINITIONS For the purpose of this Plan, capitalized terms shall have the following meanings: 2.01. AWARD means any one or a combination of Non-Qualified Stock Options or Incentive Stock Options described in Article VI, Stock Appreciation Rights described in Article VI, Restricted Shares described in Article VII, Performance Awards described in Article VIII, Awards of cash or any other Award made under the terms of the Plan. 2.02. AWARD AGREEMENT means a written agreement between the Company and a Participant or a written acknowledgment from the Company to a Participant specifically setting forth the terms and conditions of an Award granted under the Plan. 2.03. AWARD PERIOD means, with respect to an Award, the period of time set forth in the Award Agreement during which specified target performance goals must be achieved or other conditions set forth in the Award Agreement must be satisfied. 2.04. BENEFICIARY means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company or by operation of law, succeeds to the rights and obligations of the Participant under the Plan and the Award Agreement upon the Participant's death. 2.05. BOARD means the Board of Directors of the Company. A-1 40 2.06. CHANGE IN CONTROL means, and shall be deemed to have occurred upon the occurrence of, any one of the following events: (a) The acquisition in one or more transactions, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of Company Voting Securities in excess of 25% of the Company Voting Securities unless such acquisition has been approved by the Board; (b) Any election has occurred of persons to the Board that causes two-thirds of the Board to consist of persons other than (i) persons who were members of the Board on the Effective Date and (ii) persons who were nominated for elections as members of the Board at a time when two-thirds of the Board consisted of persons who were members of the Board on the Effective Date, provided, however, that any person nominated for election by a Board at least two-thirds of whom constituted persons described in clauses (i) and/or (ii) or by persons who were themselves nominated by such Board shall, for this purpose, be deemed to have been nominated by a Board composed of persons described in clause (i); (c) Approval by the stockholders of the Company of a reorganization, merger or consolidation, unless, following such reorganization, merger or consolidation, all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Common Stock and Company Voting Securities immediately prior to such reorganization, merger or consolidation, following such reorganization, merger or consolidation beneficially own, directly or indirectly, more than seventy five (75%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity resulting from such reorganization, merger or consolidation in substantially the same proportion as their ownership of the Outstanding Common Stock and Company Voting Securities immediately prior to such reorganization, merger or consolidation, as the case may be; or (d) Approval by the stockholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) a sale or other disposition of all or substantially all the assets of the Company. 2.07. CODE means the Internal Revenue Code of 1986, as amended. References to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section. 2.08. COMMITTEE means the Committee defined in Section 3.01. 2.09. COMPANY means Teledyne Technologies Incorporated, a Delaware corporation, and its successors. 2.10. COMMON STOCK means Common Stock of the Company, par value $0.01 per share. 2.11. COMPANY VOTING SECURITIES means the combined voting power of all outstanding voting securities of the Company entitled to vote generally in the election of directors to the Board. 2.12. DATE OF GRANT means the date designated by the Committee as the date as of which it grants an Award, which shall not be earlier than the date on which the Committee approves the granting of such Award. A-2 41 2.13. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. 2.14. EXERCISE PRICE means, with respect to a Stock Appreciation Right, the amount established by the Committee in the Award Agreement which is to be subtracted from the Fair Market Value on the date of exercise in order to determine the amount of the payment to be made to the Participant, as further described in Section 6.02(b). 2.15. FAIR MARKET VALUE means, on any date, the average of the high and low quoted sales prices of a share of Common Stock, as reported on the Composite Tape for New York Stock Exchange Listed Companies on such date or, if there were no sales on such date, on the last date preceding such date on which a sale was reported. 2.16. INCENTIVE STOCK OPTION means a stock option within the meaning of Section 422 of the Code. 2.17. MERGER means any merger, reorganization, consolidation, exchange, transfer of assets or other transaction having similar effect involving the Company. 2.18. NON-QUALIFIED STOCK OPTION means a stock option which is not an Incentive Stock Option. 2.19. OPTIONS means all Non-Qualified Stock Options and Incentive Stock Options granted at any time under the Plan. 2.20. OUTSTANDING COMMON STOCK means, at any time, the issued and outstanding shares of Common Stock. 2.21. PARTICIPANT means a person designated to receive an Award under the Plan in accordance with Section 5.01. 2.22. PERFORMANCE AWARDS means Awards granted in accordance with Article VIII. 2.23. PERFORMANCE GOALS means operating income, operating profit (earnings from continuing operations before interest and taxes), earnings per share, return on investment or working capital, return on stockholders' equity, economic value added (the amount, if any, by which net operating profit after tax exceeds a reference cost of capital), reductions in inventory, inventory turns and on-time delivery performance, any one of which may be measured with respect to the Company or any one or more of its Subsidiaries and divisions and either in absolute terms or as compared to another company or companies, and quantifiable, objective measures of individual performance relevant to the particular individual's job responsibilities. 2.24. PLAN means the Teledyne Technologies Incorporated 1999 Incentive Plan as described herein, as the same may be amended from time to time. 2.25. PURCHASE PRICE, with respect to Options, shall have the meaning set forth in Section 6.01(b). 2.26. RESTORATION OPTION means a Non-Qualified Stock Option granted pursuant to Section 6.01(f). 2.27. RESTRICTED SHARES means Common Stock subject to restrictions imposed in connection with Awards granted under Article VII. A-3 42 2.28. RETIREMENT means early or normal retirement under a pension plan or arrangement of the Company or one of its Subsidiaries in which the Participant participates. 2.29. RULE 16b-3 means Rule 16b-3 promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act, as the same may be amended from time to time, and any successor rule. 2.30. STOCK APPRECIATION RIGHTS means Awards granted in accordance with Article VI. 2.31. SUBSIDIARY means a subsidiary of the Company within the meaning of Section 424(f) of the Code. 2.32. TERMINATION OF EMPLOYMENT means the voluntary or involuntary termination of a Participant's employment with the Company or a Subsidiary for any reason, including death, disability, retirement or as the result of the divestiture of the Participant's employer or any similar transaction in which the Participant's employer ceases to be the Company or one of its Subsidiaries. Whether entering military or other government service shall constitute Termination of Employment, or whether a Termination of Employment shall occur as a result of disability, shall be determined in each case by the Committee in its sole discretion. ARTICLE III ADMINISTRATION 3.01. COMMITTEE. The Plan shall be administered by a committee of the Board ("Committee") comprised of