Dear Stockholder:
We are pleased to invite you to attend the 2002 Annual Meeting of Stockholders of Teledyne Technologies Incorporated. The meeting will be held on Wednesday, April 24, 2002, at the Company's offices at 12333 West Olympic Boulevard, Los Angeles, California 90064.
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.).
The Company's 2001 Summary Annual Report and 2001 Form 10-K are also included.
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 mark the "WILL ATTEND" box on your proxy card so that you will be included on our admittance list for the meeting.
Thank you for your investment in our Company. We look forward to seeing you at the 2002 Annual Meeting.
Sincerely,
/s/ Robert Mehrabian Robert Mehrabian Chairman, President and Chief Executive Officer Teledyne Technologies Incorporated 12333 West Olympic Boulevard Los Angeles, CA 90064 |
MEETING DATE: April 24, 2002
TIME: 9:00 a.m. Pacific Time
PLACE: Teledyne Technologies Incorporated
12333 West Olympic Boulevard
Los Angeles, California 90064
RECORD DATE: March 11, 2002
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AGENDA
1) Election of a class of three directors for a three-year term;
2) Approval of the Teledyne Technologies Incorporated 2002 Stock Incentive Plan;
3) Ratification of the selection of Ernst & Young LLP as the Company's independent auditors for 2002; 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, 12333 West Olympic Boulevard, Los Angeles, California 90064, for examination by any stockholder for any legally valid purpose.
ADMISSION TO THE MEETING
Teledyne Technologies' 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 mark the "WILL ATTEND" box on your proxy card so that you will be included on our admittance list for the meeting. 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 |
March 18, 2002
PAGE
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Voting Procedures........................................... 1
Board Composition and Practices............................. 2
Item 1 on Proxy Card -- Election of Directors............... 3
Committees of our Board of Directors........................ 7
Director Compensation....................................... 9
Item 2 on Proxy Card -- Approval of 2002 Stock Incentive
Plan...................................................... 10
2002 Incentive Plan....................................... 11
1999 Incentive Plan -- As Amended by the 2002 Incentive
Plan................................................... 16
Item 3 on Proxy Card -- Ratification of Selection of
Independent Auditors...................................... 21
Audit Fees................................................ 21
Financial Information Systems Design and Implementation
Fees................................................... 21
All Other Fees............................................ 21
Audit Committee Report.................................... 22
Other Business.............................................. 23
Stock Ownership Information................................. 23
Section 16(a) Beneficial Ownership Reporting Compliance... 23
Five Percent Owners of Common Stock....................... 23
Stock Ownership of Management............................. 25
2001 Report on Executive Compensation....................... 26
Compensation Committee Interlocks and Insider
Participation............................................. 32
Executive Compensation...................................... 33
Summary Compensation Table................................ 33
Option Grants in Last Fiscal Year......................... 35
Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year End
Option Values.......................................... 36
ATI Performance Share Program Awards...................... 37
TDY Performance Share Plan Awards......................... 38
TDY Restricted Stock Awards............................... 38
Pension Plan.............................................. 39
Employment/Change in Control Agreements................... 40
Certain Transactions........................................ 41
Cumulative Total Stockholder Return......................... 43
Other Information........................................... 44
Annual Report on Form 10-K................................ 44
2003 Annual Meeting and Stockholder Proposals............. 44
Proxy Solicitation........................................ 45
ANNEX A -- Amended and Restated Charter of Audit
Committee................................................. A-1
ANNEX B -- 2002 Stock Incentive Plan........................ B-1
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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. Alternatively, complete, sign and date your proxy card and return it as soon as possible in the enclosed postage-paid envelope.
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.
WHO MAY VOTE
If you were a stockholder on the books of the Company at the close of business on March 11, 2002 you may vote at the Annual Meeting. On that day, there were 31,970,695 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 determination of the presence of a quorum and be voted at the meeting.
METHODS OF VOTING
All stockholders may vote by transmitting their proxy cards 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 of record 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. 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 dated later 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 (1) sign and return the voting instruction card provided by the plan or (2) transmit your instructions by telephone or Internet. If you do not transmit instructions, your shares will not be voted by the plan trustee, except as otherwise required by law.
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 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.
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 Bylaws of the Company and by the laws of the State of Delaware. Except for Robert Mehrabian, our Chairman, President and Chief Executive Officer, 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.
In 2001, the Board of Directors held six meetings. During 2001, all directors attended at least 75% of the aggregate number of meetings of the Board and the Board committees of which they were a member.
NUMBER OF DIRECTORS
The Board of Directors determines the number of directors. The Board currently consists of 10 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.
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. Six of our 10 directors are directors of ATI. While this composition requirement expires at this 2002 Annual Meeting, all three nominees are members of ATI's board.
DIRECTORS' RETIREMENT POLICY
On June 1, 2000, the Company adopted a retirement policy for directors. This policy generally requires directors to retire at the Annual Meeting following their 72nd birthday, with certain directors being subject to a "grandfather" provision. As a result of this policy, Messrs. Paul S. Brentlinger (Class II director) and C. Fred Fetterolf (Class I director) will step down at the 2002 Annual Meeting. Effective at the 2002 Annual Meeting, the size of the Board of Directors will be reduced from 10 to eight members in lieu of filling the vacancies created by the retirement of Messrs. Brentlinger and Fetterolf.
ITEM 1 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 2002 Annual Meeting.
The three-year term of the class of directors nominated and elected this year will expire at the 2005 Annual Meeting. However, as a result of our retirement policy for directors, Mr. Queenan, if re-elected, will step down 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, the continuing directors and the retiring directors follows.
Robert P. Bozzone Robert P. Bozzone is Chairman of ATI. From
Chairman of Allegheny Technologies December 6, 2000 to June 26, 2001, he was
Incorporated Chairman, President and Chief Executive
Director since 1999 Officer of ATI. Mr. Bozzone had been Vice
Age: 68 Chairman of the Board of ATI since August
1996. He had served as Vice Chairman of
Allegheny Ludlum Corporation, a subsidiary
of ATI, since August 1994 and 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
Officer of Mellon Financial Corporation Mellon Financial Corporation, a bank
Director since 1999 holding company, and Mellon Bank, N.A.,
Age: 69 prior to his retirement on December 31,
1998. He is also a director of ATI, Avery
Dennison Corporation, Korn Ferry
International 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
Senior Counsel, Kirkpatrick & Lockhart LLP to Kirkpatrick & Lockhart LLP,
Director since 1999 attorneys-at-law. Prior to January 1996,
Age: 71 he was a partner of that firm. He is also
a director of ATI, Water Pik Technologies,
Inc. and Crane Co. Mr. Queenan is Chair of
our Personnel and Compensation Committee
and a member of our Audit Committee.
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Diane C. Creel Diane C. Creel is Chief Executive Officer
President and Chief Executive Officer and President of Earth Tech, an
of Earth Tech international consulting engineering firm
Director since 1999 and subsidiary of Tyco International Ltd.
Age: 53 Ms. Creel is also a director of ATI and
Goodrich Corporation and 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 our Governance Committee.
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Paul D. Miller Paul D. Miller is Chairman and Chief
Chairman and Chief Executive Officer of ATK Executive Officer of ATK (Alliant
Director since 2001 Techsystems Inc.), an aerospace and
Age: 60 defense company. Prior to joining ATK in
January 1999, Admiral Miller served as
Vice President of Litton Marine Systems
and as President of Sperry Marine, Inc.
from November 1994 through December 1998,
following a distinguished 30-year career
with the U.S. Navy. Prior to his
retirement from the U.S. Navy, Admiral
Miller served as Commander-in-Chief, U.S.
Atlantic Command and NATO Supreme Allied
Commander-Atlantic. Admiral Miller became
a director of TDY on July 25, 2001. He
also serves on the Boards of SunTrust Bank
(Eastern Region) and Donaldson Company.
Admiral Miller is a member of our Audit
Committee.
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Charles Crocker Charles Crocker has been Chairman and
Chairman and Chief Executive Officer of BEI Chief Executive Officer of BEI
Technologies, Inc. Technologies, Inc., a diversified
Director since 2001 technology company, since March 2000. Mr.
Age: 63 Crocker served as Chairman, President and
Chief Executive Officer of BEI Electronics
from October 1995 to September 1997, at
which time he became Chairman, President
and Chief Executive Officer of BEI
Technologies, Inc. He has also been a
principal in Crocker Capital since 1971.
Mr. Crocker serves as a director of BEI
Medical Systems, Inc., Fiduciary Trust
International and Pope & Talbot, Inc. Mr.
Crocker became a director of TDY on
October 24, 2001. Mr. Crocker is a member
of our Personnel and Compensation
Committee.
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Robert Mehrabian Robert Mehrabian is the Chairman,
Chairman, President and President and Chief Executive Officer of
Chief Executive Officer TDY. He has been the President and Chief
of the Company Executive Officer of TDY since its
Director since 1999 formation. He became Chairman of the Board
Age: 60 on December 14, 2000. Prior to the
spin-off of the Company by ATI, Dr.
Mehrabian was the President and Chief
Executive Officer of ATI's 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.
Michael T. Smith Michael T. Smith is the retired Chairman
Retired Chairman of the Board and Chief of the Board and Chief Executive Officer
Executive Officer of of Hughes Electronics Corporation. He had
Hughes Electronics been elected to those positions in October
Director since 2001 1997. Mr. Smith has been a director of TDY
Age: 58 since January 1, 2001. He is also a
director of Alliant Techsystems Inc.,
Ingram Micro Corporation and NeTune
Communications. Mr. Smith is a member of
our Personnel and Compensation Committee
and our Governance Committee.
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Paul S. Brentlinger Paul S. Brentlinger is a Partner of
Partner, Morgenthaler Ventures Morgenthaler Ventures, a venture capital
Director since 1999 group located in Cleveland, Ohio and Menlo
Age: 74 Park, California. He led Morgenthaler's
investment in such companies as Microchip
Technology, Inc. and Dispatch
Communications (now part of Nextel
Communications, Inc.). Prior to joining
Morgenthaler, 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.
C. Fred Fetterolf C. Fred Fetterolf was President and Chief
Retired President and Operating Officer of Alcoa, Inc. prior to
Chief Operating Officer of his retirement in 1991. He is also a
Alcoa, Inc. director of ATI, Commonwealth Industries
Director since 1999 and Dentsply International Inc. Mr.
Age: 73 Fetterolf is Chair of our Governance
Committee and a member of our Personnel
and Compensation Committee.
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Our Board of Directors has established an Audit Committee, a Governance Committee and a Personnel and Compensation Committee. 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
Paul D. Miller
Charles J. Queenan, Jr.
The Audit Committee held six meetings in 2001.
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 recently revised its charter to provide that TDY's senior internal auditing executive reports directly and separately to the Chair of the Audit Committee and the Chief Executive Officer of TDY. A copy of the Amended and Restated Charter is attached as Annex A.
The Audit Committee meets the size, independence and experience requirements of the New York Stock Exchange, except as follows. Since Mr. Bozzone within the last three years has been an executive officer of ATI, the Board of Directors specially determined, in accordance with its business judgment and New York Stock Exchange requirements, that Mr. Bozzone's membership on the Audit Committee is required by the best interests of the Company and its stockholders. The Board believes that, among other things, Mr. Bozzone's membership on the Audit Committee will facilitate and assist in assuring TDY's compliance with various continuing obligations under our Separation and Distribution Agreement with ATI and related spin-off documents.
The report of the Audit Committee is included under "Item 3 on Proxy Card -- Ratification of Selection of Independent Auditors."
GOVERNANCE COMMITTEE
The members of the Governance Committee are:
C. Fred Fetterolf, Chair
Frank V. Cahouet
Diane C. Creel
Michael T. Smith
The Governance Committee had four meetings in 2001.
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 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.
The Governance Committee will consider stockholder recommendations for nominees for director. Any stockholders interested in suggesting a nominee should follow the procedures outlined in "Other Information -- 2003 Annual Meeting and Stockholder Proposals."
The members of the Personnel and Compensation Committee are:
Charles J. Queenan, Jr., Chair
Diane C. Creel
Charles Crocker
C. Fred Fetterolf
Michael T. Smith
The Personnel and Compensation Committee held three meetings in 2001 and acted by unanimous written consent on one occasion.
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, consulting 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, and making 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.
Directors who are not our employees are paid an annual retainer fee of $24,000. Directors are also paid $1,200 for each Board meeting and $1,000 for each committee meeting attended. 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.
The non-employee directors also participate in the Teledyne Technologies Incorporated 1999 Non-Employee Director Stock Compensation Plan, as amended (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 then non-employee directors both on the date of our spin-off from ATI and at the conclusion of our 2000 Annual Meeting. Under the Director Stock Plan, from and after the 2001 Annual Meeting, options to purchase 4,000 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 is 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. Options granted under the Director Stock Plan terminate 10 years from the date of grant.
Of the 200,000 shares of Common Stock authorized for issuance under the Director Stock Plan, at February 28, 2002, 13,526 shares have been issued and options in respect of 93,490 shares have been granted. The outstanding options have exercise prices ranging from $6.31 to $22.47 and expiration dates ranging from November 29, 2009 to February 26, 2012. At February 28, 2002, there were 92,984 shares available for issuance under the Director Stock Plan.
ITEM 2 ON PROXY CARD --
APPROVAL OF 2002 STOCK INCENTIVE PLAN
Our Board of Directors has adopted and approved a compensation plan sponsored and maintained by the Company, namely the Teledyne Technologies Incorporated 2002 Stock Incentive Plan (the "2002 Incentive Plan"). The continued effectiveness of the 2002 Incentive Plan after the date of the Annual Meeting is subject to the approval of the 2002 Incentive Plan by our stockholders. Stockholder approval of the 2002 Incentive Plan is desired, among other reasons, to ensure the tax deductibility by the Company of awards under the 2002 Incentive Plan under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). Approval of the 2002 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 2002 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 having been voted 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 2002 Incentive Plan is qualified in its entirety by reference to the complete text of such plan, which appears as Annex B to this Proxy Statement.
No awards have been made under the 2002 Incentive Plan. For information regarding awards made under the Teledyne Technologies Incorporated 1999 Incentive Plan, as amended (the "1999 Incentive Plan"), see "1999 Incentive Plan -- As Amended by the 2002 Incentive Plan" below. If our stockholders approve the 2002 Incentive Plan, the 1999 Incentive Plan will be amended to the extent provided under the "1999 Incentive Plan -- As Amended by the 2002 Incentive Plan."
ADMINISTRATION. The 2002 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 2002 Incentive Plan, establish and modify administrative rules, impose conditions and restrictions on awards, to issue new options in substitution for previously-granted options, and to take such other actions as it deems necessary or advisable. However, the actions of the Committee shall be subject to stockholder approval where approval is required by the Code or under any applicable law or rule of any stock exchange on which Common Stock or other voting securities of TDY are listed. Further, the Committee cannot cause or otherwise provide for repricing of any award unless such repricing is subject to stockholder approval. 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 2002 Incentive Plan to one or more officers or employees of the Company.
AMOUNT OF STOCK. The 2002 Incentive Plan provides for awards of up to 2,400,000 shares of TDY Common Stock, 1,000,000 of which may be allocated to awards of incentive stock options as defined in Section 422 of the Code ("incentive stock options"). No more than 360,000 shares of Common Stock may be issued under the 2002 Incentive Plan as "full value" award shares (which includes restricted stock). The number of shares available for issuance under the 2002 Incentive Plan is subject to anti-dilution adjustments upon the occurrence of significant corporate events. The shares of Common Stock offered under the 2002 Incentive Plan will be either authorized and unissued shares or issued shares that have been reacquired by the Company. Shares underlying awards that are terminated, canceled or forfeited may be subject to new awards under the 2002 Incentive Plan.
ELIGIBILITY AND PARTICIPATION. All officers and key employees of the Company or any of its subsidiaries will be 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 2002 Incentive Plan in any calendar year in respect of more than 360,000 shares of our Common Stock and $1,000,000 in cash.
AMENDMENT OR TERMINATION. The 2002 Incentive Plan expires by its terms on February 26, 2012, but the Committee has the power to terminate it earlier. The Committee establishes expiration and exercise dates on an award-by-award basis. However, options and stock appreciation rights issued under the 2002 Incentive Plan must terminate 10 years from the date of grant. The Board of Directors of the Company has the power to amend the 2002 Incentive Plan at any time; provided, however, that the actions of the Committee shall be subject to stockholder approval where approval is required by the Code or under any applicable law or rule of any stock exchange on which Common Stock or other voting securities of TDY are listed. Further, the Committee cannot cause or otherwise provide for repricing of any award unless such repricing is subject to stockholder approval. No amendment or termination of the 2002 Incentive Plan will, without the applicable participant's consent, adversely affect an award under the 2002 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 of any option cannot be less than 85% of the fair market value of one share of Common Stock on the date when the stock option is granted. The exercise price per share of each incentive stock option, however, must be at least equal to 100% of the fair market value of one share of Common Stock on the date on which 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 2002 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. Unless the Committee determines otherwise in a particular award agreement, 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 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).
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 they cannot be less than 85% of the fair market value of a share of Common Stock on the date of grant. However, in the case of SARs granted in tandem with stock options, the exercise price 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 terms and conditions of Restricted Share awards are determined by the Committee, but the Forfeiture Period cannot be less than three years unless forfeiture of the applicable Restricted Shares is based on failure to meet certain performance targets or is otherwise determined to be performance-based. For participants who are subject to Section 162(m) of the Code, the performance targets would be established by the Committee, in its discretion, based on one or more specific measures. These measures include operating income, operating profit, earnings per share, return on investment or working capital, return on stockholders' equity, economic value added, reductions in inventory, inventory turns and on-time delivery performance. They may be measured with respect to the Company or any or more of its subsidiaries or divisions. They may be in absolute terms or compared to another company or companies. Such performance targets may also include quantifiable, objective measures of individual performance relevant to the participant's job responsibilities.
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.
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. With respect to participants subject to Section 162(m) of the Code, the applicable performance targets would be established by the Committee, in its discretion, based on one or more of the specific measures described above under "Restricted Shares." To the extent not inconsistent with Section 162(m) or if a participant is not subject to Section 162(m), 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).
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 2002 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 2002 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 specific performance targets discussed under the section titled "Restricted Shares" 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 executive more than the incentive amount indicated by his or her attainment of the performance target under the applicable payment schedule. The Committee will have the flexibility, based on its business judgment, to reduce this amount.
CHANGE IN CONTROL. In the event of a change in control, to the extent provided in an award agreement, stock options and SARs immediately become exercisable, the restrictions on all Restricted Shares lapse and all performance awards immediately become payable. In general, events which constitute a change in control include: (i) 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; (ii) individuals who constitute the Board as of the effective date of the 2002 Incentive Plan (the "Incumbent Board") no longer constituting at least two-thirds of the Board without prior approval by a majority vote of the Incumbent Board; (iii) approval by the stockholders of the Company of a reorganization, merger or consolidation; or (iv) 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.
TAX CONSEQUENCES. The following is a summary of the principal federal income tax consequences of 2002 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. No tax is incurred by the participant, 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 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 2002 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.
Section 162(m). The 2002 Incentive Plan is intended to meet the deductibility requirements of the regulations promulgated under Section 162(m) of the Code. This section imposes limits on tax deductions for annual compensation paid to the chief executive officer and other highly compensated officers unless the compensation qualifies as "performance-based" or is otherwise exempt under law. The Committee, however, may determine in any year that it would be in the best interests of the Company for awards to be paid under the 2002 Incentive Plan that would not satisfy the requirements of Section 162(m).
1999 INCENTIVE PLAN -- AS AMENDED BY THE 2002 INCENTIVE PLAN
Teledyne Technologies has a 1999 Incentive Plan. The 1999 Incentive Plan was approved by the Company's stockholders on June 1, 2000. The 1999 Incentive Plan provides that the Company may issue a maximum of 4,000,000 shares of Common Stock, and if the number of issued and outstanding shares of Common Stock is increased after January 26, 2000, the total number of shares available for issuance under 1999 Incentive Plan will be increased by 10% of that increase. However, if the 2002 Incentive Plan is approved by the Company's stockholders, the number of shares available under the 10% evergreen provision described in the preceding sentence will be limited to an additional 2,500,000 shares. As a result of the Company's public offering completed in the third quarter of 2000, 460,500 additional shares were made available for issuance under the 1999 Incentive Plan. The 2002 Incentive Plan does not replace the 1999 Incentive Plan, which will continue to exist on its own terms, but subject to the amendments described below.
The 2002 Incentive Plan by its own terms amends the 1999 Incentive Plan in four areas. First, it amends the 10% evergreen provision contained in the 1999 Incentive Plan, by providing that no more than 2,500,000 shares may be issued under the 1999 Incentive Plan by virtue of such provision. Second, it provides that no more than 550,000 shares of Common Stock may be issued under the 1999 Incentive Plan as "full value" awards (which would include restricted shares). Third, it amends the 1999 Incentive Plan to provide that the exercise price per share of any non-qualified stock option cannot be less than 85% of the fair market value of one share of Common Stock on the date when the stock option is granted. Fourth, it amends the 1999 Incentive Plan to provide that options and stock appreciation rights issued under the 1999 Incentive Plan must terminate 10 years from the date of grant. These amendments to the 1999 Incentive Plan do not affect or alter awards heretofore granted under the 1999 Incentive Plan.
Of the 4,460,500 shares registered and approved for listing on the New York Stock Exchange with respect to the 1999 Incentive Plan, there were 133,208 shares available for issuance as of February 28, 2002. This amount takes into account 266,672 shares reserved for potential issuance under the Performance Share Plan if the performance goals for the 2000-2002 award period are achieved at target. Additional shares could eventually be issued under the 1999 Incentive Plan as a result of the previously approved 10% evergreen provision contained in such plan, but such amount would be capped by the 2002 Incentive Plan. If the 2002 Incentive Plan is approved, up to 2,039,500 additional shares could become available for potential issuance under the 1999 Incentive Plan depending on the Company's issued and outstanding shares of Common Stock after January 26, 2000 (after considering that, as a result of our 2000 public offering, 460,500 shares have already been registered and listed with respect to the 1999 Incentive Plan under this 10% evergreen provision). The 1999 Incentive Plan has no fixed expiration date.
If the 2002 Incentive Plan is not approved, the 1999 Incentive Plan will not be amended and would continue in the form previously approved by the Company's stockholders.
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
60,000 $19.56 February 20, 2011
60,000 $14.48 January 22, 2012
Robert J. Naglieri............. 20,000 $24.88 October 3, 2010
20,000 $19.56 February 20, 2011
30,000 $14.48 January 22, 2012
John T. Kuelbs................. 70,000 $ 8.94 November 30, 2009
20,000 $ 9.67 January 25, 2010
30,000 $19.56 February 20, 2011
30,000 $14.48 January 22, 2012
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
12,000 $19.56 February 20, 2011
12,000 $14.48 January 22, 2012
James M. Link.................. 15,000 $13.00 July 23, 2011
14,500 $14.48 January 22, 2012
Executive Group (5 persons).... 875,387 (a) (b)(e)
Non-Executive Group (334
persons)..................... 2,488,827 (c) (d)(e)
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(a) Exercise prices range from $8.42 per share to $24.88 per share.
(b) Expiration dates range from June 29, 2005 to January 22, 2012.
(c) Exercise prices range from $5.57 per share to $28.69 per share.
(d) Expiration dates range from March 9, 2004 to February 15, 2012.
(e) Options granted since the spin-off have a maximum term of 10 years from the date of grant, as provided in the various option award agreements.
ATI STOCK ACQUISITION AND RETENTION PROGRAM. 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 1999 Incentive Plan to Dr. Mehrabian and aggregate of 71,167 shares to six other TDY employees who had been participants in the ATI Stock Acquisition and Retention Program. Teledyne Technologies established a Restricted Stock Award Program under the 1999 Incentive Plan to replace the ATI Stock Acquisition and Retention Program.
2000-2002 PERFORMANCE SHARE PROGRAM. In January 2000, the Committee established under the 1999 Incentive Plan a three-year award performance cycle commencing January 1, 2000. There are 25 participants in the Performance Share Program for this cycle. The table on page 38 sets forth information for the 2000-2002 award period with respect to the named executives, the named executives as a group and the non-executive group. The amounts included in the Estimated Future Payout columns represent the potential payments of Common Stock and of cash to the named executives depending on the level of achievement (i.e., threshold, target or maximum) of the performance goals for the three-year period 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.
RESTRICTED STOCK AWARD PROGRAM. Under the 1999 Incentive Plan, in July 2000, the Company established a Restricted Stock Award Program (the "RSAP") to replace the ATI Stock Acquisition and Retention Program. An award in respect of an aggregate of 54,314 Restricted Shares was granted to 14 selected officers and key executives on July 25, 2000 and an award in respect of an aggregate of 62,411 Restricted Shares was granted to 15 selected officers and key executives on January 22, 2002. With respect to the July 2000 award, a total of 6,854 shares was forfeited upon the termination of employment of two recipients. In each case, the award of Restricted Shares made to the recipient had an aggregate fair market value equal to 30% of the recipient's annual base salary as of the date of grant. For the purpose of this calculation, fair market value was based on the average of the high and low closing prices of a share of Common Stock as reported on the New York Stock Exchange for the 20 trading days preceding the date of the award. For the July 2000 grant, the fair market value was determined to be $17.62 per share and for the January 2002 grant, the fair market value was determined to be $16.41 per share. The restrictions are subject to both a time-based and performance based component. In general, with exceptions for retirement, disability and a change in control, each recipient must continue in the employment of the Company for three years from the date of grant or the shares are forfeited. For the July 2000 award, the performance-based component is based on achievement of specified levels of operating profit, revenue and return to shareholders during the three-year period ending December 31, 2002. For the January 2002 award, the performance-based component is based on return to shareholders at the end of the three-year period ending December 31, 2004.
Performance Period -- January 1, 2000 through December 31, 2002 Restrictive Period -- Ends July 25, 2003 Restricted Share Issuance Price -- $17.62
NUMBER OF
NAME RESTRICTED SHARES
---- -----------------
Robert Mehrabian........................................... 9,619
Robert J. Naglieri......................................... (a)
John T. Kuelbs............................................. 5,306
Dale A. Schnittjer......................................... 2,980
James M. Link.............................................. (a)
Executive Group (3 persons)................................ 17,905
Non-Executive Group (9 persons)............................ 29,555(b)
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(a) Messrs. Naglieri and Link were not employed by the Company on July 25, 2000, and accordingly did not receive any Restricted Shares.
(b) Excludes awards in respect of an aggregate of 6,854 Restricted Shares to two employees whose employment has terminated and whose shares were forfeited.
Performance Period -- January 1, 2002 through December 31, 2004 Restrictive Period -- Ends January 22, 2005 Restricted Share Issuance Price -- $16.41
NUMBER OF
NAME RESTRICTED SHARES
---- -----------------
Robert Mehrabian........................................... 10,330
Robert J. Naglieri......................................... 5,485
John T. Kuelbs............................................. 5,866
Dale A. Schnittjer......................................... 3,518
James M. Link.............................................. 4,205
Executive Group (5 persons)................................ 29,404
Non-Executive Group (10 persons)........................... 33,007
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Ernst & Young LLP ("Ernst & Young") has served as independent auditors for the Company since the November 29, 1999 spin-off. Ernst & Young had served as independent auditors for ATI and predecessors since 1980. The Board of Directors believes that Ernst & Young 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 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 as independent auditors for 2002. 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, the Board will reconsider the appointment of independent auditors. It is expected that representatives of Ernst & Young will be present at the meeting and will have an opportunity to make a statement and respond to appropriate questions.
AUDIT FEES
Ernst & Young has billed the Company $566,000, in the aggregate, for professional services rendered by them for the audit of the Company's annual financial statements for the Company's 2001 fiscal year and the reviews of the interim financial statements included in the Company's Quarterly Reports on Form 10-Q for the Company's 2001 fiscal year.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Ernst & Young did not provide the Company with any professional services related to financial information systems design and implementation as described in Rule 2-01 of Regulation S-X.
ALL OTHER FEES
Ernst & Young has billed the Company $282,000, in the aggregate, for professional services rendered by Ernst & Young for all other services, principally audit-related services in connection with the Company's employee benefit plans and our acquisition of Advanced Pollution Instrumentation, Inc.
In making its recommendation to ratify the appointment of Ernst & Young as the Company's independent auditors for the fiscal year ending December 29, 2002, the Audit Committee considered whether the provision of non-audit services by Ernst & Young is compatible with maintaining Ernst & Young's independence.
The following report of the Audit Committee is included in accordance with the rules and regulations of the Securities and Exchange Commission. It is not incorporated by reference into any of the Company's registration statements under the Securities Act of 1933.
The following is the report of the Audit Committee with respect to the audited financial statements for the fiscal year ended December 30, 2001 (the "Financial Statements") of Teledyne Technologies Incorporated (the "Company").
The responsibilities of the Audit Committee are set forth in the Audit Committee Charter, as amended and restated as of January 22, 2002, which has been adopted by the Board of Directors. A copy of the Amended and Restated Charter is attached to the Proxy Statement as Annex A. The Audit Committee is comprised of five directors. Except for Robert P. Bozzone, the members meet the independence requirements under applicable provisions of the New York Stock Exchange listing standards. Since within the last three years Mr. Bozzone had been an executive officer of ATI, the Board of Directors specially reviewed his membership, and following discussion, determined in accordance with its business judgment and New York Stock Exchange requirements, that his membership was required by the best interests of the Corporation and its stockholders.
Management is responsible for the Company's internal controls and financial reporting process. Ernst & Young LLP ("Ernst & Young"), the Company's independent accountants, are responsible for performing an independent audit of the Company's Financial Statements. The Audit Committee reviewed and discussed the Company's Financial Statements with management and Ernst & Young, and discussed with Ernst & Young the matters required to be discussed by Statement of Auditing Standards No. 61 (Communication with Audit Committees). The Audit Committee has received written disclosures and the letter from Ernst & Young required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) and has considered the compatibility of non-audit services with Ernst & Young's independence. Based on these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Financial Statements be included in the Company's Annual Report on Form 10-K for the year ended December 30, 2001 for filing with the Securities and Exchange Commission.
Frank V. Cahouet, Chair
Robert P. Bozzone
Paul S. Brentlinger
Paul D. Miller
Charles J. Queenan, Jr.
February 26, 2002
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, Chairman, 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.
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 2001.
FIVE PERCENT OWNERS OF COMMON STOCK
The following table sets forth the number of shares of our Common Stock owned beneficially by each person known to us who owns beneficially more than five percent of our outstanding Common Stock. As of February 28, 2002, 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.
NUMBER OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF CLASS
------------------------------------ --------- --------
David J. Greene & Co. LLC (1)..................... 1,803,399 5.6%
599 Lexington Avenue
New York, NY 10022
Mellon Financial Corporation (2).................. 1,664,273 5.2%
One Mellon Center
Pittsburgh, PA 15258
Richard P. Simmons (3)............................ 2,092,287 6.5%
Birchmere
Quaker Hollow Road
Sewickley, PA 15143
Singleton Group LLC (4)........................... 1,999,990 6.3%
335 North Maple Drive, Suite 177
Beverly Hills, CA 90210
The TCW Group, Inc. (5)........................... 2,274,488 7.1%
865 South Figueroa Street
Los Angeles, CA 90017
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1. David J. Greene & Co. LLC, a registered investment adviser, filed a Schedule 13G on February 14, 2002. It reported shared voting power with respect to 1,374,360 shares and shared dispositive power with respect to all 1,803,399 shares.
2. Mellon Financial Corporation filed a Schedule 13G on January 22, 2002 for itself and direct and indirect subsidiaries, including Mellon Bank, N.A., in their fiduciary capacities. It reported sole voting power with respect to 1,385,904 shares, shared voting power with respect to 201,800 shares, sole dispositive power with respect to 1,660,694 shares and shared dispositive power with respect to 3,579 shares.
3. Mr. Simmons filed an amendment to his Schedule 13G on February 6, 2002. Mr. Simmons reported that as of December 31, 2001 he had the sole power to direct the voting and the disposition of all 2,092,287 shares.
4. Singleton Group LLC, jointly with William W. Singleton, Carolyn W. Singleton and Donald E. Rugg, filed a Schedule 13G on April 19, 2000. Mr. Singleton, Mrs. Singleton and Mr. Rugg reported that they share voting and dispositive power with respect to 1,999,990 shares in their capacities as managers of Singleton Group LLC. Mr. Rugg reported that he owned an additional 45 shares of TDY Common Stock directly, with respect to which he has sole voting and dispositive power.
5. The TCW Group, Inc. filed a Schedule 13G on February 13, 2002 and an amendment thereto on March 7, 2002, on behalf of itself and direct and indirect subsidiaries primarily engaged in the provision of investment management services. It reported shared voting power with respect to all 2,274,488 shares and shared dispositive power with respect to all 2,274,488 shares. It reported that as of July 6, 2001, the ultimate parent of The TCW Group, Inc. is Societe Generale, S.A., a corporation formed under the laws of France and whose principal business is acting as a holding company for a global financial services group. It also reported that, in accordance with Securities and Exchange Commission Release No. 34-39538 dated January 12, 1998 and due to the separate management and independent operation of its business units, Societe Generale, S.A. disclaims beneficial ownership of these shares.
The following table shows the number of shares of Common Stock reported to the Company as beneficially owned by (i) each of our directors and named executives and (ii) all of our directors and named executives as a group, in each case based upon the beneficial ownership of such persons of Common Stock as reported to us as of February 28, 2002, including shares as to which a right to acquire ownership exists (for example, through the exercise of stock options) within the meaning of Rule 13d-3(d)(1) under the Securities Exchange Act of 1934.
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES CLASS
---------------- --------- ----------
Robert Mehrabian.................................. 451,994 *
Robert L. Naglieri................................ 21,319 *
John T. Kuelbs.................................... 113,326(1) *
James M. Link..................................... 4,205 *
Dale A. Schnittjer................................ 61,052 *
Robert P. Bozzone................................. 769,263(1) 2.4%
Paul S. Brentlinger............................... 17,295(1) *
Frank V. Cahouet.................................. 34,856 *
Diane C. Creel.................................... 9,341 *
Charles Crocker................................... 511 *
C. Fred Fetterolf................................. 14,910(1) *
Paul D. Miller.................................... -0- *
Michael T. Smith.................................. 8,527(1) *
Charles J. Queenan, Jr. .......................... 113,109(1) *
All directors and executives
as a group (14 persons)......................... 1,619,708(1) 5.0%
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* Less than one percent.
1. The amounts shown include shares to which beneficial ownership is disclaimed as follows: 2,525 shares owned by Mr. Kuelbs's wife; 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; 200 shares owned by Mr. Smith's wife; and 10,028 shares owned by Mr. Queenan's wife.
The following report of the Personnel and Compensation Committee is included in accordance with the rules and regulations of the Securities and Exchange Commission. It is not incorporated by reference into any of the Company's registration statements under the Securities Act of 1933.
This report on executive compensation is furnished by the Personnel and Compensation Committee (the "Committee") of the Board of Directors of Teledyne Technologies Incorporated ("TDY" or the "Company"). This report acknowledges the resignation of Nickolas L. Blauwiekel as Vice President, Human Resources of TDY, effective February 6, 2001. 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 approved various modifications to the Company's executive compensation program to enable the Company to be more competitive and aligned with high technology businesses and, thus, better assure attraction and retention of quality management. The Committee did not engage any outside executive compensation consultant with respect to TDY's original adoption of its executive compensation program. However, Hewitt Associates LLC recently reviewed TDY's current executive compensation program from a competitive marketplace perspective. In addition, Watson Wyatt & Company and Hewitt Associates LLC each have from time to time provided TDY with compensation and benefits advice and data. The Committee also has considered publicly available market and other data on executive compensation matters.
EXECUTIVE COMPENSATION POLICY
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.
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. For 2001, 40 percent of the AIP award was 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 accounts receivable and inventory management and 20 percent to the achievement of specific individual performance objectives. A discretionary adjustment of plus or minus 20 percent is allowed, though aggregate upward adjustments will not exceed 5 percent. All AIP awards historically have been paid from a pool equal to 7.5 percent of operating profit. For 2002, to be more aligned with the aggregate amount of historical bonus pools, such pool has been increased to 11 percent of operating profit, subject to modification by the Committee. No AIP bonus will be earned unless operating profit is positive, after accruing for bonus payments, and 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 consist of three components:
Stock options are to be awarded annually to all key employees who are nominated by management to receive an award and whose award is approved by the Committee. In practice, the amount of the award generally depends on the executive's salary grade and position.
A three-year Performance Share Program ("PSP") opportunity, with a new "cycle" beginning every three years, is available to 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. Forty percent of the PSP award is 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. Under the current 2000 through 2002 cycle, for the three-year aggregate return to shareholders performance measure, the S&P SmallCap 600 Index (in which TDY is included) is the benchmark. For future cycles, the Russell 2000 Index will be the benchmark. No awards are 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 the target is achieved. Awards are generally 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 under the current cycle, two-thirds will be paid in TDY Common Stock and one-third will be paid in cash. For future cycles, one-half will be paid in TDY Common Stock and one-half will be paid in cash.
A Restricted Stock Award Program ("RSAP") opportunity has also been established for selected officers and key executives, which was approved and adopted by the Committee in 2000. The RSAP provides grants of "restricted stock", generally each calendar year, to selected officers and key executives at an aggregate fair market value equal to 30 percent of each recipient's annual base salary as of the date of the grant, unless otherwise determined by the Committee. The restrictions are subject to both a time-based and performance-based component. In general, the "restricted period" for each grant of restricted stock extends from the date of the grant to the third anniversary of such date, with the restrictions lapsing on the third anniversary. However, if the Company fails to meet certain minimum performance goals for a multi-year performance cycle (typically three years) established by the Committee as applicable to a restricted stock award, then all of the restricted stock is forfeited. If the Company achieves the minimum established performance goals, but fails to attain an aggregate level of 100 percent of the targeted performance goals, then a portion of the restricted stock would be forfeited.
A participant cannot transfer the restricted stock during the restricted period. In addition, during the restricted period, restricted stock will be forfeited upon a participant's termination of employment for any reason. However, if the participant dies, becomes disabled or retires prior to the expiration of the applicable performance cycle, the amount of the participant's restricted stock that is not subject to forfeiture at the end of the performance cycle will be pro-rated for the portion of the performance cycle completed by the participant prior to his death, disability or retirement and that amount will become vested at the end of the performance cycle. Upon expiration of the restricted period without a forfeiture, the Company will deliver to the recipient of restricted stock one or more stock certificates for the appropriate number of shares of Company common stock, as determined by the Committee based on achievement of the specified performance objectives. The RSAP replaces, and is the successor to, the Stock Acquisition and Retention Program established by ATI (the "ATI SARP"), which the Company assumed in part in connection with the spin-off.
2001 COMPENSATION
ANNUAL INCENTIVE PLAN. In 2001, no AIP awards were earned since, in accordance with terms of the AIP, TDY's operating profit was less than 75% of the operating plan. However, since certain business units did perform well in 2001 as compared to their respective business unit plans and as compared to TDY as a whole, and to recognize the hard work and contributions of certain employees during a difficult year, the Committee established a special discretionary bonus pool out of the AIP pool that had been accrued on TDY's books and approved special discretionary bonus awards to select performing employees. The bonus column of the Summary Compensation Table contains any special discretionary award for 2001 to the named executives.
STOCK OPTIONS. The Company made one annual award of stock options at the beginning of 2001 under the Teledyne Technologies Incorporated 1999 Incentive Plan, as amended (the "1999 Incentive Plan"). In addition, during 2001, stock options were granted to James M. Link (15,000 shares) when he first joined Teledyne Brown Engineering, Inc. and to select other key employees, primarily as part of recruitment and retention initiatives.
In 2001, the Company made the second installment payment of awards under the shortened ATI Performance Share Program assumed in the spin-off by the Company under the Employee Benefits Agreement. An aggregate of 35,207 shares was issued to 17 participants. Of the named executive officers in the Summary Compensation Table, only Dr. Mehrabian (7,646 shares) and Mr. Schnittjer (1,806 shares) participated in this program.
RESTRICTED STOCK AWARD PROGRAM. No shares of restricted stock were awarded under the RSAP in 2001 principally due to the large reduction in force that TDY underwent.
ATI SARP. As a result of the spin-off, under the Employee Benefits Agreement, seven TDY executives (including three now retired executives) who had purchased or designated shares of ATI stock under the ATI SARP received distributions of common stock of TDY and Water Pik Technologies, Inc. ("Water Pik") on the purchased or designated ATI shares. The shares that they received in the spin-off as well as the original shares continue to be held as collateral for loans for purchased shares, all of which were retained by ATI, until the loans are fully paid. Restricted shares issued under the ATI SARP were converted into shares of TDY Common Stock and, except as provided below, continue to bear the restrictions set forth in the original ATI SARP. In 2000, the Committee took action to permit TDY executives who participated in the ATI SARP to use ATI and Water Pik shares that they had purchased under the ATI SARP to pay down loans for purchased shares, whether or not such shares had been held for five years as otherwise required by the ATI SARP. The Committee also released the transfer restrictions on ATI and Water Pik shares that TDY participants held as designated stock under the ATI SARP. Shares of TDY Common Stock that were purchased or designated under the ATI SARP continue to be held in accordance with the ATI SARP. In accordance with the terms of the ATI SARP, upon their retirement in 2001, three former TDY executives paid off their ATI loans and the restrictions on their shares of TDY Common Stock were removed.
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 (other than Messrs. Naglieri and Link) and selected other key executives. The Agreements for Messrs. Naglieri and Link were approved when they joined the Company. 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 is 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. Naglieri, Kuelbs, and Link and one other executive) or two times (in the case of Mr. Schnittjer and seven 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 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 Award Program).
- 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
EMPLOYMENT AGREEMENT. The Company and Robert Mehrabian, Chairman, President and Chief Executive Officer, are parties to an Amended and Restated Employment Agreement dated as of April 25, 2001 (the "Employment Agreement"), which amended and restated the Employment Agreement dated as of December 21, 1999 that had been recommended and approved by the Committee. The Employment Agreement provides that the Company shall employ him as the Chairman, President and Chief Executive Officer and supplements his Change in Control Severance Agreement dated as of December 21, 1999. The Employment Agreement terminates on December 31, 2002, but will automatically be extended annually unless either party gives the other written notice prior to October 31 of such term that it will not be extended.
BASE SALARY AND BONUS. The Committee determined the 2001 compensation of Dr. Mehrabian in accordance with the general compensation philosophy described above.
Like other participants, Dr. Mehrabian did not receive any award under the Annual Incentive Plan for 2001 because TDY did not achieve the required minimum level of operating profit. However, while recognizing that Dr. Mehrabian expressly asked that no bonus be awarded to him, the Committee determined to award Dr. Mehrabian a special discretionary bonus of $300,000. In determining this special bonus award to Dr. Mehrabian, the Committee acknowledged Dr. Mehrabian's leadership, perseverance and foresight in completing extensive cost reduction initiatives, initiating a significant change in strategy in the optoelectronics area, and preparing the Company for a market turnaround. In arriving at the amount, the Committee considered the AIP awards paid to Dr. Mehrabian for 1999 and 2000.
STOCK OPTIONS. On February 20, 2001, the Committee awarded Dr. Mehrabian options to purchase 60,000 shares of the Company's common stock. As with other grants under the 1999 Incentive Plan on that date, Dr. Mehrabian's options have a per share exercise price of $19.56, are exercisable in one-third increments commencing on February 20, 2002, and have a 10-year term. The Committee authorized this grant to Dr. Mehrabian as a means of appropriately rewarding his leadership and perseverance.
PERFORMANCE SHARE PROGRAM. As described above, Dr. Mehrabian participates in the PSP. Compensation to be awarded under this plan will be determined based on Company performance through December 31, 2002, which is the end of the three-year performance period established under the PSP.
RESTRICTED STOCK AWARD PROGRAM. As described above with respect to other executives, Dr. Mehrabian received no restricted stock award under the RSAP during fiscal year 2001. On July 25, 2000, the Company granted Dr. Mehrabian 9,619 shares of restricted common stock, which was equivalent to 30 percent of his annual base salary as of the date of the grant. The number of shares of common stock that Dr. Mehrabian will ultimately receive under this 2000 grant will be determined based on Company performance through December 31, 2002, which is the end of the three-year performance period for his 2000 restricted stock award established by the Committee.
PENSION ARRANGEMENTS. 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.
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).
February 26, 2002
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Personnel and Compensation Committee of our Board of Directors 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 2001 and currently provides services to the Company. 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.
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 Chairman, President and Chief Executive Officer for fiscal 2001, 2000, and 1999. It also sets forth information about compensation paid to each of our officers who was required to file reports under Section 16 of the Securities Exchange Act of 1934 and another officer of a significant subsidiary (the "named executives") for fiscal 2001.
Dr. Mehrabian, our Chairman, President and Chief Executive Officer, is the only executive officer who was employed as an executive officer by ATI during fiscal 1999. Mr. Schnittjer became an executive officer of TDY in connection with the spin-off and has principally served as our Controller. Mr. Kuelbs joined ATI in October 1999 in anticipation of the spin-off, while Mr. Naglieri joined TDY in October 2000 and Mr. Link joined Teledyne Brown Engineering, Inc. as its President in July 2001.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------------------------------
OTHER ANNUAL RESTRICTED
NAME AND FISCAL COMPENSATION STOCK OPTIONS LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) AWARDS($) (SHARES) PAYOUTS($) COMPENSATION($)
------------------ ------------- --------- -------- ------------- ---------- -------- ------------ ---------------
Robert Mehrabian..... 2001 565,000 300,000 -- 0 60,000 $181,858(3) 308,164(4)
Chairman, President 2000 565,000 465,127 -- 169,505(2) 60,000 $109,843(3) 300,742(5)
and Chief Executive 1999 408,334 450,000 359,508(6) 166,566(7) 300,000 0 740,424(8)
Officer
Robert J. Naglieri... 2001 300,000 83,480 317,974(9) 0 20,000 0 0
Senior Vice President 2000 75,000 29,589 -- 0 20,000 0 0
and Chief Financial (3 months)
Officer
John T. Kuelbs....... 2001 318,138 94,683 -- 0 30,000 0 2,447(11)
Senior Vice
President, 2000 299,417 116,613 212,389(10) 93,502(2) 20,000 0 1,477(12)
General Counsel 1999 92,467 34,498 -- 0 70,000 0 0
(2 1/2
and Secretary months)
James M. Link........ 2001 97,703 47,300 15,533(13) 0 15,000 0 856(14)
(5 1/2
President, Teledyne months)
Brown Engineering,
Inc.
Dale A. Schnittjer... 2001 190,550 55,974 -- 0 12,000 42,957(3) 2,839(15)
Vice President and 2000 175,667 69,148 -- 52,513(2) 10,000 25,956(3) 3,046(16)
Controller 1999 144,655 65,113 -- 0 0 0 13,337(17)
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1. In accordance with applicable regulations, the amounts do not include perquisites and other personal benefits received by the named executive 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 executive.
2. Represents the formula price ($17.621875) of TDY Common Stock on the award date of restricted stock under the Restricted Stock Award Program. On July 25, 2000, under the Restricted Stock Award Program, Dr. Mehrabian and Messrs. Kuelbs and Schnittjer received 9,619 shares, 5,306 shares and 2,980 shares, respectively. On December 31, 2001, based on the closing price of a share ($16.29), the restricted shares held by Dr. Mehrabian and Messrs. Kuelbs and Schnittjer were valued at $156,694, $86,435 and $48,544, respectively.
3. Represents an installment payment of awards under the shortened ATI Performance Share Program. In 2001, Dr. Mehrabian received $36,966 and 7,645 shares of Common Stock, and in 2000, he received $36,967 and 7,646 shares of Common Stock. In 2001, Mr. Schnittjer received $8,733 and 1,806 shares of Common Stock, and in 2000, he received $8,733 and 1,807 shares of Common Stock. On December 31, 2001, based on the closing price of such shares, such shares issued in 2001 and 2000 to Dr. Mehrabian were valued at $124,538 and $124,553, respectively. On December 31, 2001, based on the closing price of a share, such shares issued in 2001 and 2000 to Mr. Schnittjer were valued at $29,420 and $29,436, respectively.
4. Includes annual accruals for possible future payments to Dr. Mehrabian under his supplemental pension arrangement in the amount of $288,250 and the dollar value of the benefit to Dr. Mehrabian of company-paid premiums of split-dollar life insurance in the amount of $19,914.
5. Includes annual accruals for possible future payments to Dr. Mehrabian under his supplemental pension arrangement in the amount of $288,250 and the dollar value of the benefit to Dr. Mehrabian of company-paid premiums of split-dollar life insurance in the amount of $12,492.
6. Includes one-time tax reimbursement of $353,658 relating to ATI Stock Acquisition and Retention Program.
7. 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. On December 31, 2001, the number of shares (and value based on the closing price of such shares, if unrestricted,) held by Dr. Mehrabian under the Program were: 24,921 shares ($405,963).
8. 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 $46,006, 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.
9. Includes one-time relocation expenses of $284,424, a one-time new hire bonus of $25,000 and $8,550 allowance with respect to his car.
10. Includes one-time relocation expenses of $206,487 (which includes tax reimbursement of $62,089) and $5,902 in respect of a leased company car.
11. Includes $1,000 in company contributions pursuant to the Teledyne Technologies Incorporated 401(k) Plan and $1,447 in respect of a death benefit under the Teledyne Technologies Incorporated Executive Deferred Compensation Plan.
12. Includes $1,000 in company contributions pursuant to the Teledyne Technologies Incorporated 401(k) Plan and $477 in respect of a death benefit under the Teledyne Technologies Incorporated Executive Deferred Compensation Plan.
13. Includes $11,010 in respect of country club dues and $4,523 in respect of a leased company car.
14. Represents $856 paid in respect of life insurance.
15. Includes $1,000 in company contributions pursuant to the Teledyne Technologies Incorporated 401(k) Plan, $1,200 in respect of the employer matching contribution under The Stock Advantage Plan (Employer Stock Purchase Plan) and $639 in respect of a death benefit under the Teledyne Technologies Incorporated Executive Deferred Compensation Plan.
16. Includes $1,000 in company contributions pursuant to the Teledyne Technologies Incorporated 401(k) Plan, $1,200 in respect of the employer matching contribution under The Stock Advantage Plan (Employer Stock Purchase Plan) and $846 in respect of a death benefit under the Teledyne Technologies Incorporated Executive Deferred Compensation Plan.
17. 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 $2,937.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information on grants to the named executives of options to purchase TDY Common Stock pursuant to the 1999 Incentive Plan during the year ended December 31, 2001. These grants are reflected in the Summary Compensation Table.
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------------- RATES OF STOCK PRICE
% OF TOTAL APPRECIATION FOR
NUMBER OF OPTIONS OPTION TERM(1)
SECURITIES GRANTED TO EXERCISE OR ---------------------
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) DATE $ $
---- --------------- ------------ ----------- ---------- --------- ---------
Robert Mehrabian............ 60,000 8.3 $19.56 2/20/2011 1,331,471 2,463,816
Robert J. Naglieri.......... 20,000 2.8 $19.56 2/20/2011 443,824 821,272
John T. Kuelbs.............. 30,000 4.2 $19.56 2/20/2011 665,735 1,231,908
James M. Link............... 15,000 2.1 $13.00 7/23/2011 172,584 360,730
Dale A. Schnittjer.......... 12,000 1.7 $19.56 2/20/2011 266,294 492,763
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1. No gain to the optionee is possible without stock price appreciation, which
will benefit all stockholders commensurately. The assumed "potential
realizable values" are mathematically derived from certain prescribed rates
of stock price appreciation. The actual value of these option grants depends
on the future performance of TDY Common Stock and overall stock market
condition. The values reflected in this table may not be realized.
As shown in the table below, no options were exercised by the named executives during 2001.
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE FISCAL YEAR END(#) FISCAL YEAR END($)(2)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
Robert Mehrabian(1)....... 0 0 294,292/200,000 1,795,655/1,019,400
Robert L. Naglieri........ 0 0 6,667/33,333 0/0
John T. Kuelbs............ 0 0 27,667/92,333 202,357/457,143
James M. Link............. 0 0 0/15,000 0/51,540
Dale A. Schnittjer(1)..... 0 0 40,929/18,666 175,506/45,067
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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 $16.43, 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, 2001. The "*" denotes that the relevant options were "out-of-the-money" at December 31, 2001, meaning the exercise price per share was greater than $16.43.
The following table sets forth information about awards for the three-year award period made in 1998 under the ATI Performance Share Program, which, as a result of the spin-off, and in accordance with the Employee Benefits Agreement, was terminated and the award period shortened to cover the two-year period of January 1, 1998 through December 31, 1999. The amounts included in the Payouts columns represent the payment of TDY Common Stock and cash to the applicable named executives, the executive group and the non-executive group in 2000, 2001 and 2002. No more amounts remain to be issued or paid under the ATI PSP.
PAYOUTS UNDER
NUMBER OF NON-STOCK PRICE-BASED PLANS
SHARES, PERFORMANCE --------------------------------------------
UNITS OR OR OTHER PERIOD 2000 2001 2002
OTHER UNTIL MATURATION PAYOUT PAYOUT PAYOUT
NAME RIGHTS(#) OR PAYOUT ($ 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
Executive Group...... * 1998 - 1999 award period 9,453 shs. 9,452 shs. 9,451 shs.
(2 persons) (2000 - 2002 payout period) $ 45,700 $ 45,699 $ 45,698
Non-Executive Group.. * 1998 - 1999 award period 32,258 shs. 25,755 shs. 24,094 shs.
(17, 15 and 14 (2000 - 2002 payout period) $ 166,469 $ 148,389 $ 140,751
persons in 2000, 2001
and 2002,
respectively)
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* The amount