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Teledyne Technologies DEF 14A 2008 Table of Contents
TELEDYNE TECHNOLOGIES INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
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March 7,
2008
Dear
Stockholder:
We are pleased to invite you to attend the 2008 Annual Meeting
of Stockholders of Teledyne Technologies Incorporated. The
meeting will be held on Wednesday, April 23, 2008,
beginning at 9:00 a.m. (Pacific Time), at the
Company’s offices at 1049 Camino Dos Rios, Thousand Oaks,
California 91360.
This booklet includes the notice of meeting as well as the
Company’s Proxy Statement.
Enclosed with this booklet are the following:
A copy of the Company’s 2007 Annual Report (which contains
our
Form 10-K)
is 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 2008 Annual Meeting.
Sincerely,
Robert Mehrabian
Chairman, President and
Chief Executive Officer
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TELEDYNE
TECHNOLOGIES INCORPORATED
4) Transaction of any other business properly brought
before the meeting.
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, 1049 Camino Dos Rios, Thousand
Oaks, California 91360, for examination by any stockholder for
any legally valid purpose.
Teledyne’s 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.
Important Notice Regarding the Availability of Proxy
Materials for the 2008 Annual Meeting to be held on April 23,
2008: In accordance with new rules issued by the Securities and
Exchange Commission, you may access our 2007 Annual Report and
our Proxy Statement at www.teledyne.com/2008annualmeeting, which
does not have “cookies” that identify visitors to the
site.
By Order of the Board of Directors,
John T. Kuelbs
Executive Vice President, General Counsel
and Secretary
March 7, 2008
In this Proxy Statement, Teledyne
Technologies Incorporated is sometimes referred to as the
“Company” or “Teledyne”. 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.
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This Proxy Statement, the accompanying proxy card and the Annual
Report to Stockholders of Teledyne are being mailed on or about
March 19, 2008. The Board of Directors of Teledyne is
soliciting your proxy to vote your shares at the 2008 Annual
Meeting of Stockholders. The Board is soliciting your proxy to
give all stockholders of record the opportunity to vote on
matters that will be presented at the Annual Meeting. This Proxy
Statement provides you with information on these matters to
assist you in voting your shares.
VOTING
PROCEDURES
If you were a stockholder at the close of business on
March 3, 2008, you may vote at the Annual Meeting. On that
day, there were 35,318,185 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. Our Board of Directors
requests your proxy so that your shares will count toward
determination of the presence of a quorum and your shares can be
voted at the meeting.
All stockholders of record 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.
You may change your mind and revoke your proxy at any time
before it is voted at the meeting by:
Participants who hold common stock in the Teledyne Technologies
Incorporated 401(k) 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 by
11:59 p.m. (Eastern Time), on April 18, 2008, your
shares will not be voted by the plan trustee, except as
otherwise required by law.
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Votes will be counted by the inspector of election appointed for
the meeting, who will separately count “For” and
“Withhold” and, with respect to any proposals other
than the election of directors, “Against” votes,
abstentions and broker non-votes. A “broker non-vote”
occurs when a nominee holding shares for a beneficial owner does
not vote on a particular proposal because the nominee does not
have discretionary voting power with respect to that proposal
and has not received instructions with respect to that proposal
from the beneficial owner, despite voting on at least one other
proposal for which it does have discretionary authority or for
which it has received instructions. Abstentions will be counted
towards the vote total for each proposal, and will have the same
effect as “Against” votes. Broker non-votes have no
effect and will not be counted towards the vote total for any
proposal.
If your shares are held by your broker, bank or other agent as
your nominee (that is, in “street name”), you will
need to obtain a proxy form from the institution that holds your
shares and follow the instructions included on that form
regarding how to instruct your broker, bank or other agent to
vote your shares. If you do not give instructions to your
broker, bank or other agent, they can vote your shares with
respect to “discretionary” items, but not with respect
to “non-discretionary” items. Discretionary items are
proposals considered routine under the rules of the New York
Stock Exchange on which your broker, bank or other agent may
vote shares held in street name in the absence of your voting
instructions, and include the election of directors
(Item 1) and the ratification of the selection of our
independent auditors (Item 3). On non-discretionary items
for which you do not give instructions to your broker, bank or
other agent, which includes the approval of 2008 Incentive Award
Plan (Item 2), the shares will be treated as broker
non-votes.
Confidential
Voting Policy
We maintain a policy of keeping stockholder votes confidential.
BOARD COMPOSITION
AND PRACTICES
The Board of Directors directs the management of the business
and affairs of the Company as provided in our Amended and
Restated Bylaws and pursuant to the laws of the State of
Delaware. Except for Dr. 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 our business through discussions with the senior
management and other officers and managers of the Company and
its subsidiaries, by reviewing information provided to them, and
by participating in Board and committee meetings.
We encourage, but do not require, that all our directors attend
all meetings of the Board of Directors, all committee meetings
on which the directors serve and the annual stockholders
meeting. In 2007, the Board of Directors held seven meetings and
acted one time by unanimous written consent. During 2007, all
directors attended at least 75% of the aggregate number of
meetings of the Board that were held when they were members and
at least 75% of the aggregate number of meetings of the Board
committees of which they were members. All of the current
directors attended the 2007 Annual Meeting of Stockholders.
The Board of Directors determines the number of directors, which
under our Amended and Restated By-laws must consist of not less
than four members and not more than 10 members. The Board has
currently fixed the number at 10 members.
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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.
On June 1, 2000, we adopted a retirement policy for
directors. This policy, as amended, generally requires directors
to retire at the Annual Meeting following their
75th birthday. This policy also requires a director to
offer to tender his or her resignation if such director has a
change in professional status. As a result of this policy, if
Mr. Bozzone is re-elected at the 2008 Annual Meeting, he
will step down at the 2009 Annual Meeting, unless the Board
grants a waiver to the retirement policy. On January 22,
2008, the Board granted a waiver to the retirement policy
through the 2011 Annual Meeting to Mr. Cahouet, who turned
75 in 2007.
Our non-management directors meet in executive session without
management on a regularly scheduled basis. Committee chairs
rotate as presiding director in such sessions. The Board has
formally designated Frank V. Cahouet, one of our independent
directors, to serve as the lead director under circumstances
when the Chairman, President and Chief Executive Officer is
unable to perform the duties of that office.
CORPORATE
GOVERNANCE
In April 2007, our Nominating and Governance Committee assessed,
and our Board of Directors determined, the independence of each
director in accordance with the then existing rules of the New
York Stock Exchange and the Securities and Exchange Commission.
In order to comply with such items, our Nominating and
Governance Committee considered various relationship categories
including: whether the director is an employee, amount of stock
ownership and commercial, industrial, banking, consulting,
legal, accounting or auditing, charitable and familial
relationships, as well as a range of individual circumstances.
Our Nominating and Governance Committee and the Board also
considered our relationship and the relationship of the director
to ATI, from which we were spun-off in November 1999. See
“Certain Transactions” at page 63. The Board did
consider that certain directors consider themselves to be social
friends. As a result, the Nominating and Governance Committee,
followed by the Board, determined that each member of our Board
of Directors did not have any material relationships with us and
was thus independent, with the exception of Dr. Mehrabian,
our Chairman, President and Chief Executive Officer. Our
management, after reviewing director questionnaires, reported to
our Board in February 2008 that information on which the board
based its independence assessment in April 2007 has not
materially changed. The independent directors by name are:
Roxanne S. Austin, Robert P. Bozzone, Frank V. Cahouet, Charles
Crocker, Kenneth C. Dahlberg, Simon M. Lorne, Paul D. Miller,
Michael T. Smith and Wesley W. von Schack.
The Nominating and Governance Committee, followed by the Board,
also determined that each member of our Personnel and
Compensation Committee is an “outside director” within
the meaning of Rule 162(m) of the Internal Revenue Code and
are “non-management directors” within the meaning of
Rule 16b-3
under the Securities Exchange Act of 1934.
All of the Board’s standing committees consist only of
independent directors.
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At the time we became a public company in 1999, our Board of
Directors adopted many “best practices” in the area of
corporate governance, including separate standing committees of
the Board for each of audit, nominating and governance and
executive compensation matters, charters for each of the
committees, and corporate ethics and compliance guidelines.
Our ethics and compliance guidelines for employees are contained
in the Corporate Objectives and Guidelines for Employee Conduct.
These guidelines apply to all our employees, including our
principal executive, financial and accounting officers. Our
employees receive annual ethics training and questionnaires are
distributed annually to various personnel in an effort to
confirm compliance with these guidelines. It is our policy not
to waive compliance with these guidelines. We also have a
specialized code of ethics for financial executives that
supplements the employee guidelines. In addition, we have ethics
and compliance guidelines for our service providers.
In July 2007, our Board of Directors adopted a code of business
conduct and ethics for directors. This code is intended to
provide guidance to directors to help them recognize and deal
with ethical issues, including conflicts of interest, corporate
opportunities, fair dealing, compliance with law and proper use
of the company’s assets. It also provides mechanisms to
report possible unethical conduct.
Our Board of Directors has adopted Corporate Governance
Guidelines. These Corporate Governance Guidelines were initially
developed by our Nominating and Governance Committee and are
reviewed at least annually by such Committee. These Corporate
Governance Guidelines incorporate practices and policies under
which our Board has operated since its inception, in addition to
many of the requirements of the Sarbanes-Oxley Act of 2002 and
the New York Stock Exchange. Some of the principal subjects
covered by the Corporate Governance Guidelines include:
Copies of our Corporate Governance Guidelines, our Corporate
Objectives and Guidelines for Employee Conduct, our codes of
ethics for directors, financial executives and service providers
and our committee charters are available on our website at
www.teledyne.com. We intend to post any amendments to these
policies, and any waivers of the provisions thereof related to
directors or executive officers, on our website. If at any time
you would like to receive a paper copy, free-of-charge, please
write to John T. Kuelbs, Executive Vice President, General
Counsel and Secretary, Teledyne Technologies Incorporated, 1049
Camino Dos Rios, Thousand Oaks, California 91360.
In September 2002, we formally constituted the Sarbanes-Oxley
Disclosure Committee. Current members include: John T. Kuelbs,
Executive Vice President, General Counsel and Secretary; Dale A.
Schnittjer, Senior Vice President and Chief Financial Officer;
Susan L. Main, Vice President and Controller; Ivars R. Blukis,
Chief Business Risk Assurance Officer; Robyn E. McGowan, Vice
President, Administration and Human Resources and Assistant
Secretary; Melanie S. Cibik, Vice President, Associate General
Counsel and Assistant Secretary; Brian A. Levan, Director of
External Financial Reporting and Assistant Controller; S. Paul
Sassalos,
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Senior Corporate Counsel; and Jason VanWees, Vice President,
Corporate Development and Investor Relations. Among its tasks,
the Disclosure Committee discusses and reviews disclosure issues
to help us fulfill our disclosure obligations on a timely basis
in accordance with SEC rules and regulations and is intended to
be used as an additional resource for employees to raise
questions regarding accounting, auditing, internal controls and
disclosure matters.
Since we became a public company in 1999, we have had a
confidential Ethics/Help Line, where questions or concerns about
us can be raised confidentially and anonymously. The Ethics/Help
line is available to all of our employees, as well as concerned
individuals outside the company. The toll-free help line number
is 1-877-666-6968.
The receipt of concerns about our accounting, internal controls
and auditing matters will be reported to the Audit Committee.
Our Corporate Governance Guidelines provide that any interested
parties desiring to communicate with our non-management
directors, including our lead director, may contact them through
our Secretary, John T. Kuelbs, whose address is: Teledyne
Technologies Incorporated, 1049 Camino Dos Rios, Thousand Oaks,
California 91360.
ITEM 1 ON
PROXY CARD — ELECTION OF DIRECTORS
The Board of Directors has nominated for election this year the
class of four incumbent directors whose terms expire at the 2008
Annual Meeting.
The three-year term of the class of directors nominated and
elected this year will expire at the 2011 Annual Meeting.
However, as a result of our retirement policy for directors, if
Mr. Bozzone is re-elected he will be required to step down
at the 2009 Annual Meeting since he will turn 75 in August 2008.
The Board may grant a waiver to the retirement policy at a later
date. The Board granted a waiver for Mr. Cahouet, who is
already 75, to continue for his full three-year term.
The four individuals who receive the highest number of votes
cast will be elected. Broker non-votes, if any, are included in
determining the presence of a quorum at the Annual Meeting, but
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 four 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 has no reason to
believe that any nominee will be unable to serve.
Background information about the nominees and continuing
directors follows.
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The Board of
Directors Recommends
a Vote FOR the Election of the Nominees
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Our Board of Directors has established an Audit Committee, a
Nominating and Governance Committee and a Personnel and
Compensation Committee. From time to time, our Board of
Directors may establish other committees. Each of the Audit
Committee, Nominating and Governance Committee and Personnel and
Compensation Committee has a written charter that can be
accessed on our website at www.teledyne.com.
The members of the Audit Committee are:
Frank V. Cahouet, Chair
Roxanne S. Austin Robert P. Bozzone Kenneth C. Dahlberg Simon M. Lorne Paul D. Miller
The Audit Committee held six meetings in 2007.
The primary purpose of the Audit Committee is to assist the
Board’s oversight of the integrity of our financial
statements, our compliance with legal and regulatory
requirements, the qualification and the independence of our
independent auditor, and the performance of our internal audit
function and independent auditor. As provided in its charter,
the Audit Committee is directly responsible for the appointment,
retention, compensation, oversight, evaluation and termination
of our independent auditor (including resolving disagreements
between management and the independent auditor regarding
financial reporting). The Audit Committee has been designated as
the “qualified legal compliance committee.” In
carrying out its responsibilities, the Audit Committee
undertakes to do many things, including:
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While reviewed annually, the charter of the Audit Committee was
last amended and restated on December 11, 2007. The Audit
Committee charter provides that our senior internal auditing
executive reports directly and separately to the Chair of the
Audit Committee and Chief Executive Officer. As required by the
charter, our Audit Committee also has established procedures for
the receipt, retention and treatment of complaints regarding
accounting, internal controls and auditing matters. See
“Corporate Governance — Sarbanes-Oxley Disclosure
Committee” at page 4.
The Audit Committee meets the size, independence and experience
requirements of the New York Stock Exchange, including the
enhanced independence requirements for Audit Committee members
under Exchange Act
Rule 10A-3.
The Board of Directors has determined that Frank V. Cahouet is
an “audit committee financial expert” within the
meaning of the SEC regulations and all of the members are
“independent” under the New York Stock Exchange
listing standards. Our Corporate Governance Guidelines provides
that no director may serve as a member of the Audit Committee if
such director serves on the audit committees of more than two
other public companies unless the Board determines that such
simultaneous service would not impair the ability of such
director to effectively serve on the Audit Committee. Any such
determination must be disclosed in the annual proxy statement.
Besides our Audit Committee, Ms. Austin and Mr. Smith
simultaneously serve on the audit committee of two other public
companies and each of Mr. Cahouet, Mr. Crocker and
Admiral Miller simultaneously serve on the audit committee of
one other public company.
The report of the Audit Committee is included under
“Item 3 on Proxy Card — Ratification of
Appointment of Independent Registered Public Accounting
Firm” at page 26.
The members of the Nominating and Governance Committee are:
Michael T. Smith, Chair
Roxanne S. Austin Frank V. Cahouet Charles Crocker Simon M. Lorne Paul D. Miller Wesley W. von Schack
The Nominating and Governance Committee held five meetings in
2007.
The Nominating and Governance Committee undertakes to:
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While reviewed annually, the charter of the Nominating and
Governance Committee was last amended and restated on
December 11, 2007. The members of the Nominating and
Governance Committee are “independent” under the New
York Stock Exchange listing standards.
The Nominating and 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 —
2009 Annual Meeting and Stockholder Proposals” at
page 65.
The Nominating and Governance Committee utilizes a variety of
methods for identifying and evaluating all nominees for
directors. The Committee periodically assesses the appropriate
size of the Board and whether vacancies on the Board are
expected due to retirement, change in professional status or
otherwise. Candidates may come to the attention of the Committee
through current Board members, members of our management,
stockholders and other persons. The Committee to date has not
engaged a professional search firm. Candidates are evaluated at
meetings of the Committee and may be considered at any point
during the year. As stated in the Corporate Governance
Guidelines, nominees for director are to be selected on the
basis of, among other criteria, experience, knowledge, skills,
expertise, integrity, diversity, ability to make analytical
inquiries, understanding of or familiarity with our business
products or markets or similar business products or markets, and
willingness to devote adequate time and effort to Board
responsibilities. The Committee may establish additional
criteria and is responsible for assessing the appropriate
balance of criteria required of Board members.
The members of the Personnel and Compensation Committee are:
Charles Crocker, Chair
Robert P. Bozzone Kenneth C. Dahlberg Michael T. Smith Wesley W. von Schack
The Personnel and Compensation Committee held five meetings in
2007.
The Personnel and Compensation Committee’s principal
authority and responsibilities include:
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While reviewed annually, the charter of the Personnel and
Compensation Committee was last amended and restated on
December 13, 2006. The members of the Personnel and
Compensation Committee are “independent” under the New
York Stock Exchange listing standards.
Our Chief Executive Officer works with the Personnel and
Compensation Committee Chair, our Vice President of
Administration and Human Resources and the Office of the
Corporate Secretary in establishing the agenda for the Committee
and makes compensation recommendations for the named executives
(other than himself). The Personnel and Compensation Committee
generally meets in executive session at each meeting. The
Personnel and Compensation Committee’s Chair reports the
committee’s recommendations on executive compensation to
the Board. The Personnel and Compensation Committee has the
authority, under its charter, to obtain advice and assistance
from internal or external legal, accounting or other advisors.
The Personnel and Compensation Committee has the sole authority
and resources to retain and terminate any compensation
consultant to be used to assist in the evaluation of Chief
Executive Officer or other executive compensation and has sole
authority to approve the consultant’s fees and other
retention terms. As discussed below under “Compensation
Discussion and Analysis,” the Committee has retained Hewitt
Associates LLC and Watson Wyatt Company to assist the Committee
in fulfilling its responsibilities in 2007. The Personnel and
Compensation Committee may delegate its responsibility to
control and manage the plan assets of our employee benefit
plans. In addition, under the terms of our stock incentive
plans, the Personnel and Compensation Committee may delegate its
powers and authority under the stock incentive plan as it deems
appropriate to a subcommittee
and/or
designated officers and, as discussed below under
“Compensation Discussion and Analysis,” the Personnel
and Compensation Committee has made a limited delegation of
authority to grant stock options to our Chief Executive Officer
pursuant to this authority.
The 2007 Report of the Personnel and Compensation Committee is
included under “Executive and Director Compensation”
at page 43.
ITEM 2 ON
PROXY CARD —
APPROVAL OF 2008 INCENTIVE AWARD PLAN
Our Board of Directors has adopted and approved the Teledyne
Technologies Incorporated 2008 Incentive Award Plan. The
continued effectiveness of the 2008 Incentive Award Plan after
the date of the 2008 Annual Meeting is subject to the approval
of the 2008 Incentive Award Plan by our stockholders.
Stockholder approval of the 2008 Incentive Award Plan is
desired, among other reasons, to comply with the listing rules
of the New York Stock Exchange and to permit the tax
deductibility by Teledyne of awards under the 2008 Incentive
Award Plan under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the “Internal Revenue
Code”). The proposal to adopt the 2008 Incentive Award Plan
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
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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 2008 Incentive Award
Plan. If you specifically abstain from voting on the proposal,
your shares will, in effect, be voted against the proposal.
Broker non-votes, if any, will not be counted as being entitled
to vote on the proposal and will not affect the outcome of the
vote. Brokers and nominees will not have any discretionary
voting privilege with respect to this proposal.
The 2008 Incentive Award Plan provides that if it is approved by
our stockholders, the 1999 Incentive Plan, the 2002 Stock
Incentive Plan and the 1999 Non-Employee Director Stock
Compensation Plan (the “Prior Plans”) will terminate
effective the next business day following such approval, and no
additional awards will thereafter be made under the Prior Plans.
In addition, if the 2008 Incentive Award Plan is approved, up to
176,162 shares of common stock originally reserved for
issuance under the 1999 Incentive Plan for the payout of shares
under the
2006-2008
cycle of our Performance Share Program will be reserved for
issuance under the 2008 Incentive Award Plan.
Any awards outstanding upon the termination of the Prior Plans
will remain outstanding and in full force and effect in
accordance with the terms of such Plans and the applicable award
agreements. If the 2008 Incentive Award Plan is not approved by
our stockholders, it will not become effective and the Prior
Plans will continue in full force and effect in accordance with
their terms. If the 2008 Incentive Award Plan is approved by our
stockholders, we intend to file with the Securities and Exchange
Commission a Registration Statement on
Form S-8
covering the shares of our common stock and other securities
issuable under the 2008 Incentive Award Plan. We will also file
an appropriate supplemental listing application with the New
York Stock Exchange.
The Board believes that the 2008 Incentive Award Plan will
promote the success and enhance the value of our company by
continuing to link the personal interest of eligible individuals
to those of our stockholders and by providing eligible
individuals with an incentive for outstanding performance.
A summary of the principal provisions of the 2008 Incentive
Award Plan is set forth below. This summary is qualified in its
entirety by reference to the 2008 Incentive Award Plan itself,
which is included as ANNEX A.
Subject to certain adjustments set forth in the plan, the
maximum number of shares of our common stock that may be issued
or awarded under the 2008 Incentive Award Plan is 1,610,000. The
aggregate number of shares of common stock available for
issuance under the 2008 Incentive Plan shall be reduced by
1.74 shares for each share of common stock delivered in
settlement of any full value award, which is any award other
than an option, stock appreciation right or other award for
which the holder pays the intrinsic value existing as of the
date of grant (whether directly or by forgoing a right to
receive a payment from the company). We have not granted any
awards under the 2008 Incentive Award Plan and do not intend to
do so unless and until our stockholders approve the plan.
To the extent that an award terminates, expires, lapses for any
reason, or is settled in cash, any shares of common stock
subject to the award will again be available for the grant of an
award pursuant to the 2008 Incentive Award Plan. The following
shares, however, may not again be made available for issuance as
awards under the 2008 Incentive Award Plan: (i) shares not
issued or delivered as a result of the net settlement of an
outstanding option or stock appreciation right, (ii) issued
shares used to pay the exercise price or withholding taxes
related to an outstanding award or (iii) shares repurchased
on the open market with the proceeds of the option exercise
price. While we have never issued such awards, for purposes of
calculating the number of shares available for issuance under
the 2008 Incentive Award Plan, to the extent that a stock
appreciation right is settled in common stock, the full number
of shares subject to such stock appreciation right will be
counted, regardless of the actual number of shares issued upon
settlement.
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The 2008 Incentive Award Plan provides for the grant of
incentive stock options, nonqualified stock options, restricted
stock, stock appreciation rights, coupled stock appreciation
rights, independent stock appreciation rights, performance
shares, dividend equivalents, stock payments, deferred stock,
restricted stock units, performance bonus awards, and
performance-based awards to our employees, consultants and
directors, who are referred to as eligible individuals. Except
as otherwise provided by the plan administrator, no award
granted under the 2008 Incentive Award Plan may be assigned,
transferred or otherwise disposed of by the grantee, except to
our company, or by will or the laws of descent and distribution
or pursuant to beneficiary designation procedures approved from
time to time by the plan administrator. The plan administrator
may, however, permit an award to be transferred without
consideration to certain persons or entities related to the
holder or who are otherwise approved, provided that no transfer
of an incentive stock option will be permitted to the extent
that the transfer would cause the option to fail to qualify as
an “incentive stock option” under the Internal Revenue
Code.
The maximum number of shares of our common stock which may be
subject to awards granted to any one eligible individual during
any calendar year is 750,000 shares and the maximum amount
that may be paid to an eligible individual in cash during any
calendar year with respect to one or more cash-based performance
awards is $5,000,000.
Awards under the 2008 Incentive Award Plan will be evidenced by
a written award agreement that sets forth the terms, conditions
and limitations for each award, as determined by the plan
administrator, which initially will be the Personnel and
Compensation Committee.
Stock options, including incentive stock options, as defined
under Section 422 of the Internal Revenue Code, and
nonqualified stock options, may be granted pursuant to the 2008
Incentive Award Plan. The option exercise price of all stock
options granted pursuant to the plan will be based on a price
that will not be less than 100% of the fair market value of our
common stock on the date of grant. No incentive stock option may
be granted to a grantee who owns more than 10% of the total
combined voting power of all classes of our capital stock on the
date of grant unless the exercise price is at least 110% of the
fair market value at the time of grant. For purposes of the 2008
Incentive Award Plan, provided that our common stock continues
to be traded on the New York Stock Exchange or another exchange,
the “fair market value” of the common stock on any
given date will be the closing price of a share as reported by
the New York Stock Exchange (or such other source, such as the
Wall Street Journal, as we may deem reliable) for that
date, or if no sale occurred on that date, the first trading day
immediately prior to such date during which a sale occurred. On
February 20, 2008, the closing price of our common stock as
reported on the New York Stock Exchange was $48.09 per share.
Notwithstanding whether an option is designated as an incentive
stock option, to the extent that the aggregate fair market value
of the shares with respect to which such option is exercisable
for the first time by any optionee during any calendar year
exceeds $100,000, such excess will be treated as a nonqualified
stock option.
The plan administrator will determine the methods of payment of
the exercise price of an option, including, without limitation,
cash, shares of our common stock with a fair market value on the
date of delivery equal to the exercise price of the option or
exercised portion thereof (including shares issuable upon
exercise of the option) or other property acceptable to the plan
administrator (including the delivery of a notice that the
holder has placed a market sell order with a broker with respect
to shares then issuable upon exercise of the option, and that
the broker has been directed to pay a sufficient portion of the
net proceeds of the sale to us in satisfaction of the option
exercise price, provided that payment of such proceeds is then
made to us not later than settlement of such sale). However, no
holder who is a director or an executive officer of our
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company within the meaning of Section 13(k) of the Exchange
Act will be permitted to pay the exercise price of an option in
any method which would violate Section 13(k) of the
Exchange Act.
Stock options may be exercised as determined by the plan
administrator, but in no event after the tenth anniversary of
the date of grant. However, in the case of an incentive stock
option granted to a person who owns more than 10% of the total
combined voting power of all classes of our capital stock on the
date of grant, such term will not exceed five years.
Eligible individuals may be issued restricted stock in such
amounts and on such terms and conditions as determined by the
plan administrator. Restricted stock will be evidenced by a
written restricted stock agreement. The restricted stock
agreement will contain restrictions on transferability and other
such restrictions as the plan administrator may determine,
including, without limitation, limitations on the right to vote
restricted stock or the right to receive dividends on the
restricted stock. These restrictions may lapse separately or in
combination at such times, pursuant to such circumstances, in
such installments, or otherwise, as the plan administrator
determines at the time of grant of the award or thereafter.
A stock appreciation right (or a “SAR”) is the right
to receive payment of an amount equal to the excess of the fair
market value of a share of our common stock on the date of
exercise of the SAR over the per share exercise price of the
SAR, which exercise price will not be less than the fair market
value of a share of our common stock on the date of grant of the
SAR. The plan administrator may issue SARs in such amounts and
on such terms and conditions as it may determine, consistent
with the terms of the 2008 Incentive Award Plan. SARs may be
exercised as determined by the plan administrator, but in no
event after the tenth anniversary of the date of grant. The plan
administrator may elect to pay SARs in cash, in our common stock
or in a combination of cash and our common stock. A SAR may be
coupled with an option issuance and be exercisable only when and
the extent the related option is exercisable.
The 2008 Incentive Award Plan provides that the plan
administrator may also grant or issue performance shares,
performance stock units, dividend equivalents, stock payments,
deferred stock, restricted stock units, performance bonus
awards, and performance-based awards or any combination thereof
to eligible employees, consultants and directors. The terms of
each such grant or issuance will be set by the plan
administrator in its discretion. The plan administrator may
establish the exercise price or purchase price, if any, of any
such award, provided that such price will not be less than the
par value of a share of our common stock, unless otherwise
permitted by applicable state law.
Any such award will only vest or be exercisable or payable while
the holder is an employee, consultant or director of our company
or our qualifying corporate subsidiaries, provided that the plan
administrator, in its sole discretion, may provide that any such
award may vest or be exercised or paid subsequent to a
termination of employment or service, as applicable, or
following a change in control (as defined in the 2008 Incentive
Award Plan) of our company, or because of the holder’s
retirement, death or disability, or otherwise. However, to the
extent required to preserve the tax deductibility under
Section 162(m) of the Internal Revenue Code, any such
provision with respect to awards that are intended to constitute
“qualified performance-based compensation” within the
meaning of Section 162(m) of the Internal Revenue Code will
be subject to the requirements of Section 162(m) of the
Internal Revenue Code that apply to such “qualified
performance-based compensation.”
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Payments with respect to any such award will be made in cash, in
our common stock or a combination of both, as determined by the
plan administrator.
Performance Shares. Awards of
performance shares are denominated in a number of shares of our
common stock and may be linked to any one or more performance
criteria determined appropriate by the plan administrator, in
each case on a specified date or dates or over any period or
periods determined by the plan administrator.
Dividend Equivalents. Dividend
equivalents are rights to receive the equivalent value (in cash
or our common stock) of dividends paid on our common stock. They
represent the value of the dividends per share paid by us,
calculated with reference to the number of shares that are
subject to any award held by the holder.
Stock Payments. Stock payments include
payments in the form of our common stock or options or other
rights to purchase our common stock, in each case made in lieu
of all or any portion of the compensation that would otherwise
be paid to the holder. The number of shares will be determined
by the plan administrator and may be based upon specific
performance criteria determined appropriate by the plan
administrator, determined on the date such stock payment is made
or on any date thereafter.
Performance Bonus Awards. Any eligible
individual selected by the plan administrator may be granted a
cash bonus payable upon the attainment of performance goals that
are established by the plan administrator and relate to any one
or more performance criteria determined appropriate by the plan
administrator on a specified date or dates or over any period or
periods determined by the plan administrator. Any such cash
bonus paid to a “covered employee” within the meaning
of Section 162(m) of the Internal Revenue Code may be a
performance-based award as described below.
The plan administrator may grant performance awards to eligible
individuals, which are awards based upon the attainment of
specified performance criteria designated by the administrator,
and such awards may be granted to “covered employees,”
as defined in Section 162(m) of the Internal Revenue Code,
as “performance-based awards” that are intended to be
performance-based awards within the meaning of
Section 162(m) of the Internal Revenue Code in order to
preserve the deductibility of these awards for federal income
tax purposes. Eligible individuals are only entitled to receive
payment for a performance-based award for any given performance
period to the extent that pre-established performance goals set
by the plan administrator for the period are satisfied. These
pre-established performance goals must be based on one or more
of the following performance criteria: (i) net earnings
(either before or after interest, taxes, depreciation and
amortization), (ii) gross or net sales or revenue,
(iii) net income (either before or after taxes),
(iv) operating income or profit (earnings from continuing
operations before interest and taxes), (v) cash flow
(including, but not limited to, operating cash flow and free
cash flow), (vi) return on assets, (vii) return on
investment or working capital, (viii) return on
stockholders’ equity, (ix) return on sales,
(x) gross or net profit or operating margin,
(xi) costs, (xii) funds from operations,
(xiii) expense, (xiv) working capital,
(xv) earnings per share, (xvi) price per share of
common stock, (xvii) regulatory body approval for
commercialization of a product, (xviii) implementation or
completion of critical projects, (xix) market share,
(xx) reductions in inventory, (xiv) inventory turns
and on-time delivery performance, (xxi) levels of accounts
receivable and inventory and (xxii) economic value added
(the amount, if any by which net operating profit after tax
exceeds a reference cost of capital). These performance criteria
may be measured in absolute terms or as compared to performance
in an earlier period or as compared to any incremental increase
or as compared to results of a peer group, industry index or
other companies or a business plan. With regard to a particular
performance period, the plan administrator will have the
discretion to select the length of the performance period, the
type of performance-based awards to be granted, and the goals
that will be used to measure the performance for the period. In
determining the actual size of an individual performance-based
award for a performance period, the plan administrator may
reduce or eliminate (but not increase) the award. Generally, an
eligible individual will have to be employed by our
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company on the date the performance-based award is paid to be
eligible for a performance-based award for any period.
Unless otherwise determined by our Board of Directors, the 2008
Incentive Award Plan will be administered by a committee
consisting of at least two directors, each of whom qualifies as
a non-employee director pursuant to
Rule 16b-3
of the Exchange Act, an “outside director” pursuant to
Section 162(m) of the Internal Revenue Code and an
independent director under the rules of the principal securities
market on which our shares are traded. Our Personnel and
Compensation Committee will be the administrator of the 2008
Incentive Award Plan. However, our Nominating and Corporate
Governance Committee will administer the plan with respect to
awards granted to our non-employee directors. In addition, our
Board may at any time exercise any rights and duties of the
Personnel and Compensation Committee as they relate to the 2008
Incentive Award Plan except with respect to matters which under
Rule 16b-3
of the Exchange Act or Section 162(m) of the Internal
Revenue Code, or any regulations or rules issued thereunder, are
required to be determined in the sole discretion of the
Personnel and Compensation Committee.
The governance of the Personnel and Compensation Committee will
be subject to its charter as approved by our Board of Directors.
Any action taken by the Personnel and Compensation Committee
under the 2008 Incentive Award Plan will be valid and effective,
whether or not its members at the time of such action are later
determined not to have satisfied the requirements for membership
provided in the 2008 Incentive Award Plan or the charter of the
Personnel and Compensation Committee.
The plan administrator will have the exclusive authority to
administer the plan, including, but not limited to, the power to
determine eligibility, the types and sizes of awards, the price
and timing of awards and the acceleration or waiver of any
vesting or forfeiture restriction, provided that the plan
administrator will not have the authority to accelerate vesting
or waive the forfeiture of any performance-based awards under
Section 162(m) of the Internal Revenue Code.
Employees, consultants and directors of our company and our
qualifying corporate subsidiaries are referred to as eligible
individuals and are eligible to be granted non-qualified stock
options, restricted stock, stock appreciation rights,
performance share awards, performance stock units, dividend
equivalents, stock payments, deferred stock, restricted stock
units, and performance bonus awards under the 2008 Incentive
Award Plan. Only employees of our company and our qualifying
corporate subsidiaries are eligible to be granted options that
are intended to qualify as “incentive stock options”
under Section 422 of the Internal Revenue Code. We and our
subsidiaries currently have approximately 8,130 employees
worldwide and our board consists of nine non-employee directors
who would be eligible to participate in the 2008 Incentive Award
Plan.
If there is any stock dividend, stock split, combination or
exchange of shares, merger, consolidation or other distribution
(other than normal cash dividends) of our assets to
stockholders, or any other change affecting the shares of our
common stock or the share price of our common stock other than
an equity restructuring (as defined in the 2008 Incentive Award
Plan), the plan administrator will make such proportionate
adjustments, if any, as the plan administrator in its discretion
may deem appropriate to reflect such change with respect to
(i) the aggregate number and type of shares that may be
issued under the 2008 Incentive Award Plan (including, but not
limited to, adjustments of the number of shares available under
the plan and the maximum number of shares which may be subject
to one or more awards to an eligible individual pursuant to the
plan during any calendar year), (ii) the terms and
conditions of any outstanding awards
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(including, without limitation, any applicable performance
targets or criteria with respect thereto), and (iii) the
grant or exercise price per share for any outstanding awards
under the plan. If there is any equity restructuring,
(i) the number and type of securities subject to each
outstanding award and the grant or exercise price per share for
each outstanding award, if applicable, will be proportionately
adjusted, and (ii) the plan administrator will make
proportionate adjustments to reflect such equity restructuring
with respect to the aggregate number and type of shares that may
be issued under the 2008 Incentive Award Plan (including, but
not limited to, adjustments of the number of shares available
under the plan and the maximum number of shares which may be
subject to one or more awards to an eligible individual pursuant
to the plan during any calendar year). Adjustments in the event
of an equity restructuring will not be discretionary. Any
adjustment affecting an award intended as “qualified
performance-based compensation” will be made consistent
with the requirements of Section 162(m) of the Internal
Revenue Code. The plan administrator also has the authority
under the 2008 Incentive Award Plan to take certain other
actions with respect to outstanding awards in the event of a
corporate transaction, including provision for the cash-out,
termination, assumption or substitution of such awards.
Except as may otherwise be provided in any written agreement
between the holder and us, in the event of a change in control
(as defined in the 2008 Incentive Award Plan) of our company in
which awards are not converted, assumed, or replaced by the
successor, such awards will become fully exercisable and all
forfeiture restrictions on such awards will lapse. Upon, or in
anticipation of, a change in control, the plan administrator may
cause any and all awards outstanding under the 2008 Incentive
Award Plan to terminate at a specific time in the future and
will give each holder the right to exercise such awards during a
period of time as the plan administrator, in its sole
discretion, will determine.
With the approval of our Board of Directors, the plan
administrator may terminate, amend, or modify the 2008 Incentive
Award Plan at any time. However, stockholder approval will be
required for any amendment to the extent necessary and desirable
to comply with any applicable law, regulation or stock exchange
rule, to increase the number of shares available under the plan,
to permit the grant of options or SARs with an exercise price
below fair market value on the date of grant, or to extend the
exercise period for an option or SAR beyond ten years from the
date of grant. In addition, absent stockholder approval, no
option or SAR may be amended to reduce the per share exercise
price of the shares subject to such option or SAR below the per
share exercise price as of the date the option or SAR was
granted and, except to the extent permitted by the plan in
connection with certain changes in capital structure, no option
or SAR may be granted in exchange for, or in connection with,
the cancellation or surrender of an option or SAR having a
higher per share exercise price.
No award may be granted pursuant to the 2008 Incentive Award
Plan after the tenth anniversary of the effective date of the
plan, and no awards that are intended to be incentive stock
options may be granted under the plan after the tenth
anniversary of the date the plan is adopted by our Board of
Directors. Any awards that are outstanding on the tenth
anniversary of the effective date will remain in force according
to the terms of the 2008 Incentive Award Plan and the applicable
award agreement.
To the extent that the plan administrator determines that any
award granted under the 2008 Incentive Award Plan is subject to
Section 409A of the Internal Revenue Code
(“Section 409A”), the award agreement evidencing
such award shall incorporate the terms and conditions required
by Section 409A. In the event that the plan administrator
determines that any award may be subject to Section 409A,
the 2008 Incentive Award
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Plan and any applicable awards may be modified to exempt the
awards from Section 409A or comply with the requirements of
Section 409A.
The federal income tax consequences of the 2008 Incentive Award
Plan under current federal income tax law are summarized in the
following discussion which deals with the general tax principles
applicable to the 2008 Incentive Award Plan and is intended for
general information only. The following discussion of federal
income tax consequences does not purport to be a complete
analysis of all of the potential tax effects of the 2008
Incentive Award Plan. It is based upon laws, regulations,
rulings and decisions now in effect, all of which are subject to
change. Foreign, state and local tax laws, and estate and gift
tax considerations are not discussed, and may vary depending on
individual circumstances and from locality to locality.
With respect to nonqualified stock options, we are generally
entitled to deduct and the optionee recognizes taxable income in
an amount equal to the difference between the option exercise
price and the fair market value of the shares at the time of
exercise. An optionee receiving incentive stock options will not
recognize taxable income upon grant. Additionally, if applicable
holding period requirements are met, the optionee will not
recognize taxable income at the time of exercise. However, the
excess of the fair market value of the shares received over the
option price is an item of tax preference income potentially
subject to the alternative minimum tax. If common stock acquired
upon exercise of an incentive stock option is held for a minimum
of two years from the date of grant and one year from the date
of exercise, the gain or loss (in an amount equal to the
difference between the fair market value on the date of sale and
the exercise price) upon disposition of the common stock will be
treated as a long-term capital gain or loss, and we will not be
entitled to any deduction. If the holding period requirements
are not met, the incentive stock option will be treated as one
which does not meet the requirements of the Internal Revenue
Code for incentive stock options and the tax consequences
described for nonqualified stock options will apply.
The current federal income tax consequences of other awards
authorized under the 2008 Incentive Award Plan generally follow
certain basic patterns: SARs are taxed and deductible in
substantially the same manner as nonqualified stock options;
nontransferable restricted stock subject to a substantial risk
of forfeiture results in income recognition equal to the excess
of the fair market value over the price paid, if any, only at
the time the restrictions lapse (unless the recipient elects to
accelerate recognition as of the date of grant); stock-based
performance awards, dividend equivalents and other types of
awards are generally subject to tax at the time of payment.
Compensation otherwise effectively deferred is taxed when paid.
In each of the foregoing cases, we will generally have a
corresponding deduction at the time the holder recognizes
income, subject to Section 162(m) of the Internal Revenue
Code with respect to covered employees.
Certain types of awards under the 2008 Incentive Award Plan may
constitute, or provide for, a deferral of compensation under
Section 409A of the Internal Revenue Code. Unless certain
requirements set forth in Section 409A are complied with,
holders of such awards may be taxed earlier than would otherwise
be the case (e.g., at the time of vesting instead of the time of
payment) and may be subject to an additional 20% penalty tax
(and, potentially, certain interest penalties). To the extent
applicable, the 2008 Incentive Award Plan and awards granted
under the 2008 Incentive Award Plan will be structured and
interpreted to comply with Section 409A and the Department
of Treasury regulations and other interpretive guidance that may
be issued pursuant to Section 409A.
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Section 162(m) of the Internal Revenue Code generally
places a $1 million annual limit on the amount of
compensation paid to each of our named executive officers that
may be deducted by our company for federal income tax purposes
unless such compensation constitutes “qualified
performance-based compensation” which is based on the
achievement of pre-established performance goals set by a
committee of the Board of Directors pursuant to an incentive
plan that has been approved by our company’s stockholders.
The 2008 Incentive Award Plan provides that certain awards made
thereunder may, in the discretion of the plan administrator, be
structured so as to qualify for the “qualified
performance-based compensation” exception to the
$1 million annual deductibility limit of
Section 162(m).
Awards that are granted, accelerated or enhanced upon the
occurrence of a change in control may give rise, in whole or in
part, to excess parachute payments within the meaning of
Section 280G of the Internal Revenue Code to the extent
that such payments, when aggregated with other payments subject
to Section 280G, exceed the limitations contained in that
provision. Such excess parachute payments are not deductible by
our company and are subject to a 20% excise tax payable by the
recipient.
The 2008 Incentive Award Plan is not subject to any provision of
the Employee Retirement Income Security Act of 1974, as amended,
and is not qualified under Section 401(a) of the Internal
Revenue Code. Special rules may apply to a holder who is subject
to Section 16 of the Exchange Act. Certain additional
special rules apply if the exercise price for an option is paid
in common stock previously owned by the holder rather than in
cash.
No awards will be granted pursuant to the 2008 Incentive Award
Plan unless and until it is approved by our stockholders. In
addition, awards are subject to the discretion of the plan
administrator and no determination has been made as to the types
or amounts of awards that will be granted to specific
individuals pursuant to the plan. Therefore, it is not possible
to determine the benefits that will be received in the future by
eligible individuals in the 2008 Incentive Award Plan or the
benefits that would have been received by such eligible
individuals if the 2008 Incentive Award Plan had been effect in
the fiscal year ended December 30, 2007.
Certain information regarding prior awards to our individual
named executive officers and our directors under the Prior Plans
is presented in the section headed “Compensation Disclosure
and Analysis” and in the tables below captioned
“Summary Compensation Table,” “Grants of Plan
Based Awards,” “Outstanding Equity Awards at Fiscal
Year-End” and “Options Exercised and Stock
Vested.”
In connection with the adoption of the 2008 Incentive Award
Plan, our Board adopted administrative rules under the plan
related to non-employee director stock compensation, which rules
would become effective upon stockholder approval of the 2008
Incentive Award Plan. The rules reserve up to
200,000 shares of common stock under the 2008 Incentive
Award Plan for issuance to our non-employee directors in
connection with retainer fees and meeting fees as well as our
annual stock option grants as described below. In lieu of cash
annual retainer fees, cash Committee Chair fees and cash meeting
fees, this plan permits non-employee directors to elect to
receive shares of our common stock
and/or stock
options or to defer compensation under the Teledyne Technologies
Incorporated Executive Deferred Compensation Plan (including a
phantom share fund); provided, however, that at least 25% of the
annual retainer fee must be paid in the form of our common stock
and/or
options to acquire our common stock. It also provides for
certain automatic stock option grants for 4,000 shares of
our common stock at the end of each Annual Meeting of
Stockholders. If a non-employee
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director is first elected other than at an annual meeting, such
non-employee director would receive an automatic option grant
for 2,000 shares of our common stock.
Stock options granted to non-employee directors as part of the
annual grant have exercise prices equal to the fair market value
of our common stock on the date of grant. For a non-employee
director that elects to have all or a portion of his or her
retainer or meeting fees paid in the form of stock options, the
number of shares to be subject to the stock option is determined
by dividing the applicable portion of the non-employee
director’s fees elected to be received as stock options by
an amount equal to the fair market value of a share of common
stock on the date of grant multiplied by 0.3333, and the
exercise price for such non-employee director’s stock
options is equal to the fair market value of our common stock on
the date of grant multiplied by 0.6666. For non-employee
directors that elect to receive meeting fees or annual retainer
fees in the form of a stock award the number of shares to be
subject to the stock award is determined by dividing the
applicable portion of the non-employee director’s fees
elected to be received as stock by an amount equal to the fair
market value of a share of our common stock on the meeting date.
For annual retainer fees, which are paid semi-annually, the
grant date is the first business day of January and July.
The 2008 Incentive Award Plan provides that the board of
directors or the Personnel and Compensation Committee may from
time to time delegate to a committee of one or more members of
the board or one or more officers of the company the authority
to grant or amend awards, subject to certain conditions and
restrictions. In connection with the adoption of the 2008
Incentive Award Plan, the Personnel and Compensation Committee
delegated to our Chief Executive Officer the authority to grant
options to purchase up to 50,000 shares of common stock
under the 2008 Incentive Award Plan, subject to stockholder
approval of the Plan. This delegated authority is intended to be
used to issue stock options to facilitate acquisitions, to
recognize promotions and achievements and to further employee
retention in other circumstances. The Nominating and Corporate
Governance Committee has been delegated authority to administer
the administrative rules for non-employee director stock
compensation under the 2008 Incentive Award Plan.
The following table summarizes information with respect to
equity compensation plans as of December 30, 2007:
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As of February 20, 2008: (1) there were
311,937 shares available for issuance under our 1999
Incentive Plan, 2002 Stock Incentive Plan and 1999 Non-Employee
Director Stock Compensation Plan; (2) there were 3,309,826
stock options outstanding, having a weighted average exercise
price of $27.42 and having a weighted average remaining term of
6.6 years; and (3) there were 100,948 shares of
restricted stock outstanding. As of February 20, 2008, we
had 35,316,766 shares outstanding.
On the date of the 2008 Annual Meeting we expect to issue up to
an aggregate of 36,000 stock options to non-employee directors
under the 2002 Stock Incentive Plan in keeping with our
automatic annual stock grant. Also on the date of the 2008
Annual Meeting, we expect to issue up to 750 stock options and
up to 250 shares of stock under the 1999 Non-Employee
Directors Stock Compensation Plan to non-employee directors in
lieu of meeting and committee fees for the board and committee
meetings scheduled to be held on that date. Other than these
anticipated stock option and stock grants, no other awards have
been or will be made between February 20, 2008 and the date
of our Annual Meeting under our current stock incentive plans.
The Board of
Directors Recommends
a Vote FOR Approval of the Teledyne Technologies Incorporated 2008 Incentive Award Plan.
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ITEM 3 ON
PROXY CARD —
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Ernst & Young LLP as
our independent registered public accounting firm for fiscal
2008. Ernst & Young LLP has served as our independent
registered public accounting firm since the November 29,
1999 spin-off. The firm had also served as the independent
registered public accounting firm for ATI and its predecessors
since 1980. The Audit Committee believes that Ernst &
Young LLP is knowledgeable about our operations and accounting
practices and is well qualified to act in the capacity of
independent registered public accounting firm.
Although the appointment of an independent registered public
accounting firm is not required to be approved by the
stockholders, the Audit Committee and the Board of Directors
believe that stockholders should participate in such selection
through ratification. The proposal to ratify the Audit
Committee’s appointment 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 LLP as our independent registered public
accounting firm for 2008. If you specifically abstain from
voting on the proposal, your shares will, in effect, be voted
against the proposal. Broker non-votes, if any, are included in
determining the presence of a quorum at the Annual Meeting, but
will not be counted as being entitled to vote on the proposal
and will not affect the outcome of the vote. If the stockholders
do not ratify the selection of Ernst & Young LLP, the
Audit Committee will reconsider the appointment of an
independent registered public accounting firm. It is expected
that representatives of Ernst & Young LLP will be
present at the meeting and will have an opportunity to make a
statement and respond to appropriate questions.
The Board of
Directors Recommends
a Vote FOR Ratification of the Appointment of the Independent Registered Public Accounting Firm.
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The following table sets forth fees billed by Ernst &
Young LLP for professional services rendered for 2007 and 2006
(in thousands).
In October 2002, our Audit Committee adopted guidelines relating
to the rendering of services by external auditors. The
guidelines require the approval of the Audit Committee prior to
retaining any firm to perform any Audit Services. “Audit
Services” include the services necessary to audit our
consolidated financial statements for a specified fiscal year
and the following audit and audit-related services:
(a) Statement on Auditing Standards No. 71 quarterly
review services; (b) regulatory and employee benefit plan
financial statement audits; and (c) compliance and
statutory attestation services for our subsidiaries. Subject to
limited exceptions, the guidelines further provide that the
Audit Committee must pre-approve the engagement of
Ernst & Young LLP to provide any services other than
Audit Services. The Chair of the Audit Committee may, however,
pre-approve the engagement of Ernst & Young LLP for
such non-audit services to the extent the fee is reasonably
expected to be less than $150,000. If the fee for any non-audit
services is reasonably expected to be $250,000 or more, we must
seek at least one competing bid from another firm prior to
engaging Ernst & Young LLP, unless there are
exceptional circumstances or if it relates to the public
offering of our securities. The guidelines prohibit us from
engaging Ernst & Young LLP to perform any of the
following non-audit services or other services that the Public
Company Accounting Oversight Board determines by regulation to
be prohibited: bookkeeping or other services related to
accounting records or financial statements; financial
information systems design and implementation; appraisal or
valuation services, fairness opinions, or
contribution-in-kind
reports; actuarial services; internal auditing outsourcing
services; management functions or
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human resources; broker or dealer, investment advisor, or
investment banking services; or legal services and expert
services unrelated to the audit.
For 2007, all audit and non-audit services rendered by
Ernst & Young LLP were pre-approved in accordance with
our guidelines.
In making its recommendation to ratify the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ending December 28,
2008, the Audit Committee considered whether the provision of
non-audit services by Ernst & Young LLP is compatible
with maintaining Ernst & Young LLP’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 our 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, 2007 (the “Financial Statements”) of
Teledyne Technologies Incorporated and its consolidated
subsidiaries (the “Company”).
The responsibilities of the Audit Committee are set forth in the
Audit Committee Charter, as amended and restated as of
December 11, 2007, which has been adopted by the Board of
Directors. The Audit Committee is comprised of six directors.
The Company’s Board of Directors has determined that each
of the members of the Audit Committee is independent in
accordance with the applicable rules of the New York Stock
Exchange. The Board of Directors has also determined that at
least one director has “financial management
expertise” under New York Stock Exchange listing standards
and that Frank V. Cahouet is an “audit committee financial
expert” within the meaning of the Securities and Exchange
Commission regulations.
Management is responsible for the preparation, presentation and
integrity of the Company’s financial statements, the
Company’s internal controls and financial reporting process
and the procedures designed to assure compliance with accounting
standards and applicable laws and regulations. Ernst &
Young LLP (“Ernst & Young”), the
Company’s independent registered public accounting firm, is
responsible for performing an independent audit of the
Company’s Financial Statements and expressing an opinion as
to their conformity with generally accepted accounting
principles. 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 (Codification of Statements on
Auditing Standards, AU Section 380), as amended. 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 discussed with Ernst & Young its
independence.
The members of the Audit Committee are not professionally
engaged in the practice of auditing or accounting and are not,
and do not represent themselves to be, performing the functions
of auditors or accountants. Members of the Audit Committee may
rely without independent verification on the information
provided to them and on the representations made by management
and Ernst & Young. Accordingly, the Audit
Committee’s oversight does not provide an independent basis
to determine that management has maintained appropriate
accounting and financial reporting principles or appropriate
internal controls and procedures designed to assure compliance
with accounting standards and applicable laws and regulations.
Furthermore, the
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Audit Committee’s considerations and discussions referred
to above do not assure that the audit of the Company’s
financial statements has been carried out in accordance with
generally accepted auditing standards, that the financial
statements are presented in accordance with generally accepted
accounting principles or that the Company’s auditors are in
fact “independent”.
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 fiscal year ended December 30, 2007 for filing with
the Securities and Exchange Commission.
Submitted by the Audit Committee of the Board of Directors:
Frank V. Cahouet, Chair
Roxanne S. Austin Robert P. Bozzone Kenneth C. Dahlberg Simon M. Lorne Paul D. Miller
February 19, 2008
We know 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, will address the meeting and will hold a
general discussion period during which the stockholders will
have an opportunity to ask questions about our company and
businesses.
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STOCK OWNERSHIP
INFORMATION
The rules of the Securities and Exchange Commission require that
we disclose late filings of reports of stock ownership (and
changes in stock ownership) by our directors and statutory
insiders. To the best of our knowledge, all of the filings for
our directors and statutory insiders were made on a timely basis
in 2007.
The following table sets forth the number of shares of our
common stock owned beneficially by each person known to us to
own beneficially more than five percent of our outstanding
common stock. As of February 20, 2008, we had received
notice that the individuals and entities listed in the following
table are beneficial owners of five percent or more of our
common stock. In general, “beneficial ownership”
includes those shares that a person has the power to vote or
transfer, and options to acquire common stock that are
exercisable currently or within 60 days. As of
February 20, 2008, we had 35,316,766 shares
outstanding.
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Stock Ownership
of Management
The following table shows the number of shares of common stock
reported to us as beneficially owned by (i) each of our
directors and executive officers named in the executive
compensation tables and (ii) all of our directors and
Section 16 statutory officers as a group, in each case
based upon the beneficial ownership of such persons of common
stock as reported to us as of February 20, 2008, 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. Certain shares
beneficially owned by our officers and directors may be held in
accounts with third party brokerage firms, where such shares may
from time to time be subject to a security interest for margin
credit provided in accordance with such brokerage firm’s
policies. The information for Mr. Link below is as of
July 31, 2007, the last date Mr. Link was a
Section 16 statutory officer. As of February 20, 2008,
we had 35,316,766 shares outstanding.
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Phantom Shares. Under the Teledyne
Technologies Incorporated Non-Employee Director Stock
Compensation Plan, non-employee directors may elect to defer
payment of up to 75% of their annual retainer fees and committee
chair fees and 100% of their meeting fees under the Teledyne
Technologies Incorporated Executive Deferred Compensation Plan.
Under the Deferred Compensation Plan, non-employee directors may
elect to have their deferred monies treated as though they are
invested in our common stock (called the “Teledyne Common
Stock Phantom Fund”). Deferrals to the Teledyne Common
Stock Phantom Fund mirror actual purchases of stock, but no
actual stock is issued. There are no voting or other stockholder
rights associated with the fund. As of February 20, 2008,
the following directors had the following number of phantom
shares of common stock under the Deferred Compensation Plan:
Charles Crocker — 450.8118 phantom shares; Frank V.
Cahouet — 1,943.16 phantom shares; Simon
Lorne — 1,048.7106 phantom shares; Paul D.
Miller — 3,606.4973 phantom shares; and Michael T.
Smith — 781.2798 phantom shares.
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EXECUTIVE AND
DIRECTOR COMPENSATION
Compensation
Discussion and Analysis
Our objective with respect to executive compensation is to
attract and retain high quality executives and to align the
interests of management with the interests of stockholders. To
achieve this objective, our Personnel and Compensation Committee
has determined that total compensation for executives will be
comprised of three general characteristics:
The Personnel and Compensation Committee reviews and administers
the compensation for the Chief Executive Officer and other
members of senior management, including the named executive
officers listed on the Summary Compensation Table beginning on
page 43 of this Proxy Statement. In the case of the Chief
Executive Officer, the compensation determination made by the
Committee is reviewed by the entire Board. The Committee also
oversees our employee benefit plans. The Committee is composed
exclusively of non-employee, independent directors. The
Committee has periodically retained compensation consultants,
Hewitt Associates LLC and Watson Wyatt Company, to assist the
Committee in fulfilling its responsibilities, and has done so in
2007. The principal services that Hewitt Associates LLC performs
for Teledyne are related to executive and director compensation
and are primarily in support of decision-making by the
Committee. The Committee has also considered publicly available
market and other data on executive compensation matters.
The Personnel and Compensation Committee has a written charter
that delineates its responsibilities, a full copy of which is
posted on our website at www.teledyne.com. Among other duties,
the charter states that the Committee shall, at least annually,
review and approve corporate goals and objectives relevant to
Chief Executive Officer compensation, evaluate the Chief
Executive Officer’s performance in light of those goals and
objectives, and recommend to the Board the Chief Executive
Officer’s compensation levels based on this evaluation. In
determining the long-term incentive component of Chief Executive
Officer compensation, the Committee considers corporate
performance and relative shareholder return, the value of
similar incentive awards to chief executive officers at
comparable companies and the awards given to the Chief Executive
Officer in past years. The charter also states that the
Committee shall review and evaluate, on at least an annual
basis, the performance of our executive officers and report to
the Board concerning the results of its evaluation.
Our Chief Executive Officer works with the Personnel and
Compensation Committee Chair, our Vice President of
Administration, Human Resources and the Office of the Corporate
Secretary in establishing the agenda for the Committee and makes
compensation recommendations for the named executives (other
than himself).
The companies we use for comparative purposes are based for the
most part on size and the industries in which we operate,
specifically aerospace, electronics and systems engineering.
Such peer group is not used for
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the purposes of the performance
graph included in our Annual Report. The performance graph does
compare our performance to the Russell 2000 Index, which is a
performance measure under our long-term incentive compensation
programs as discussed below. In order to provide industry
specific data for those jobs not matched to positions in the
peer group, data from other published survey sources was used as
additional reference.
Our peer group is intended to be representative of companies of
similar size to us in the industries in which we compete. Our
peer group for 2007 compensation purposes was comprised of the
following companies:
Our peer group contains companies with average revenue of
$1.422 billion and market capitalization of
$1.954 billion, and the Committee generally sets
compensation at levels above the median for our peer group in
recognition that we compete with much larger companies for
executive-level talent. The Committee also reviews data
collected from a broader industry peer group consisting of
87 companies in order to understand what an executive with
comparable responsibility to a company executive would earn in
the broader industry. The companies in the general industry
group have average revenue of $1.978 billion and market
capitalization of $2.468 billion.
Determining the
Amount and Mix of Compensation
In determining both the amount and mix of compensation, the
Committee, with assistance from Hewitt Associates, compared each
named executive’s pay to various market data points for
that named executive’s position and set compensation levels
for salary, bonus and long-term compensation at levels that fall
between the 50th percentile and 75th percentile of our
peer group for each position. Mr. Kuelbs’ compensation
was above the 75th percentile for general counsels in the
peer group and the general industry group used by us in
recognition that his responsibilities exceed that of the typical
industry general counsel — for example, he serves a
leading role in negotiating our aircraft product liability
insurance. Mr. Schnittjer’s total compensation was
slightly above the 75th percentile for chief financial
officers in the peer group but between the 50th and
75th percentile for chief financial officers in the general
industry group. Ms. Main’s total compensation was paid
at the median for controllers in a industry-specific survey
database provided by Hewitt and approximated the
75th percentile of the general industry group.
Our compensation program is designed to balance our need to
provide our executives with incentives to achieve our short-and
long-term performance goals with the need to pay competitive
base salaries. The Personnel and Compensation Committee will
consider the amount of prior salary increases, stock option
grants and restricted stock grants as a factor in determining
compensation for the current period. At the time that 2007
compensation for named executives was approved by the Personnel
and Compensation Committee, the allocation of compensation
between base salary, estimated target bonus and estimated
long-term compensation for our named executives was as follows:
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There is no pre-established policy for allocating between either
cash and non-cash or short-term or long-term compensation. As
discussed below, stock-based compensation in the form of stock
options, restricted stock awards and performance share program
awards represent a significant part of each named
executive’s total compensation, and, as a result, the
amount of stock-based compensation that a named executive
receives compared to cash compensation is largely a factor of a
named executive’s long-term compensation relative to total
compensation. Since 2003, we have reduced the amount of annual
stock option grants in anticipation of the expensing of stock
options, which accounting practice became effective in 2006 and
which can have the effect of decreasing our earnings per share.
As a result, stock option awards now represent a smaller
percentage of long-term compensation than they did in prior
years. In 2008, based on a market value analysis under
SFAS 123(R), the Committee approved stock option grants
that in general represented a 33% reduction to 2007 grants.
Future awards of stock based compensation may be limited by the
amount of shares and full value awards available for grant under
our stock incentive plans.
Base Salary. Base salary for all
management positions will be at the unit’s industry/market
median for comparable positions unless there are sound reasons,
such as competitive factors for a particular executive’s
skill set, for varying significantly from industry medians. The
Personnel and Compensation Committee’s judgment will always
be the guiding factor in base salary determinations, as well as
any other compensation issue. The Committee believes that no
system should be so rigid that it prevents the use of judgment.
The principal factors considered in decisions to adjust base
salary are changes in compensation in our general industry and
at our peer companies, our recent and projected financial
performance and individual performance measured against
pre-established goals and objectives.
Aggregate base salaries for our named executives increased by
5.44% in 2007 compared to aggregate base salaries for 2006. In
making such increases, the Committee considered general industry
and peer industry compensation information provided by Hewitt
Associates and also our strategic growth plan, our strong
performance, growth in specific business segments and prior
annual salary increases. Base salaries are reviewed by the
Committee in July of each year and take effect on September 1 of
each year. Base salaries are also reviewed at the time of a
promotion or other changes in responsibilities.
Mr. Pichelli’s base salary was increased to $350,000
on January 1, 2008 to recognize the additional
responsibilities associated with overseeing a larger Electronics
and Communications segment.
Short-Term Incentives. Annual incentive
plan awards are cash bonuses based on the achievement of
pre-defined performance measures, with up to 200% of the target
award paid in the case of significant over-achievement. The
majority of the awards are based on our achievement of financial
performance goals, with a smaller portion tied to the
achievement of pre-established individual goals.
For 2007, aggregate awards for all employees were paid from a
pool equal to 7.4% of operating profit, which is less that the
11% limit initially established by the Committee when it
approved the 2007 annual incentive plan goals. For 2006,
aggregate awards equaled 8.8% of operating profit. The
Non-Equity Incentive Plan Compensation column in the Summary
Compensation Table contains the annual incentive plan award for
2007 paid to the named executives.
For 2007, awards were determined as follows for corporate
executives: 40% of the award was tied to the achievement of
predetermined levels of operating profit, 25% to the achievement
of predetermined levels of revenue, 15% to the achievement of
predetermined levels of accounts receivable and inventory as a
percentage of revenue and 20% to the achievement of specific
individual performance objectives.
For business unit presidents, 10% of the award was tied to the
achievement of predetermined levels of operating profit at the
corporate level and 30% of the award was tied to achievement of
predetermined levels of operating profit at the business unit
level, 5% to the achievement of predetermined levels of revenue
at the corporate level and 20% to the achievement of
predetermined levels of revenue at the business unit level, 5%
to the achievement of predetermined levels of accounts
receivable and inventory as a percentage of revenue at the
corporate level and 10% to the achievement of predetermined
levels of accounts receivable and inventory
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as a percentage of revenue at the
business unit level, and 20% to the achievement of specific
individual performance objectives.
No annual incentive plan bonus is earned in any year unless
operating profit is positive, after accruing for bonus payments,
and operating profit is at least 75% of the operating plan,
subject in each case to modification by the Committee. We chose
operating profit, revenue and accounts receivable and inventory
as a percentage of revenue as the components of the award
because we believe these measures are key objective indicators
of our year-over-year financial performance.
For 2007, our operating profit at the corporate level was 120.3%
of the 2007 business plan target of $133.4 million, our
revenue was 103.3% of the 2007 business plan target of
$1.557 billion and our accounts receivable and inventory as
a percentage of revenue was 98.3% of the 2007 business plan
target of 23.8%. For purposes of calculating operating profit,
revenue and accounts receivable and inventory as a percentage of
revenue for 2007 annual incentive plan awards, we excluded sales
and operating profit resulting from 2007 acquisitions that were
not in our 2007 business plan at the time the annual incentive
plan targets were established. In addition, for purposes of
calculating operating profit for the 2007 annual incentive plan
awards, we made other adjustments for certain costs that were
not contemplated in our 2007 business plan, such as interest
expenses related to 2007 acquisitions and for favorable tax
provision impacts.
For 2007, operating profit at our Electronics and Communications
segment, of which Aldo Pichelli is the President and Chief
Operating Officer, was 110.5% of the 2007 business plan target
of $126.2 million, revenue was 102.7% of the 2007 business
plan target of $1,030.5 million and accounts receivable and
inventory as a percentage of revenue was 96.6% of the 2007
business plan target of 26.7%. Operating profit at our
Engineered Systems segment, of which James M. Link was the
President until August 1, 2007, was 95.2% of the 2007
business plan target of $27.1 million, revenue was 100.7%
of the 2007 business plan target of $300.0 million and
accounts receivable and inventory as a percentage of revenue was
115.3% of the 2007 business plan target of 8.5%.
The annual incentive plan awards in 2007 followed the same
formula as the awards for 2006, the only changes being the
predetermined levels of financial performance, which increased
in 2007 as compared to 2006, and each named executive’s
individual performance objectives.
The annual incentive plan award is expressed as a percentage of
the participant’s base salary earned during the plan year.
The schedule below shows the award guidelines for the 2007
awards for named executives as a percentage of 2007 base salary:
The target and maximum percentages were the same as in 2006.
In determining the actual 2007 annual incentive awards, the
Personnel and Compensation Committee exercised its authority to
make an upward discretionary adjustments in the case of all the
named executive officers except for Mr. Link. The Committee
determined the upward discretionary adjustment was appropriate
as a result of the amounts by which the performance goals of the
named executives exceeded the goals set out in the 2007 business
plan, the efforts undertaken during 2007 to review and enhance
the company’s strategic
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growth plan and the company’s deliberate acquisition
process and pursuits. In the case of Dr. Mehrabian, the
Committee and the Board recognized Dr. Mehrabian’s
leadership role in Teledyne’s accomplishments and his
executive recruitment, leadership development and succession
planning efforts.
Dr. Mehrabian earned a bonus equal to 127.3% of his base
salary, to which was added upward discretionary adjustments
aggregating 27.7%, for an actual 2007 bonus equal to 163% of his
2007 base salary. Mr. Schnittjer earned a bonus equal to
89.5% of his base salary, to which was added a 20% upward
discretionary adjustment, for an actual 2007 bonus equal to 107%
of his 2007 base salary. Mr. Kuelbs earned a bonus equal to
89.5% of his base salary, to which was added a 15% upward
discretionary adjustment, for an actual 2007 bonus equal to 103%
of his 2007 base salary. Mr. Link earned an actual 2007
bonus equal to 45% of his base salary. Mr. Pichelli earned
a bonus equal to 60% of his base salary, to which was added a
20% upward discretionary adjustment, for an actual 2007 bonus
equal to 72% of his 2007 base salary. Ms. Main earned a
bonus equal to 66.2% of her base salary, to which was added a
20% upward discretionary adjustment, for an actual 2007 bonus
equal to 79% of her 2007 base salary.
The Committee determined that Dr. Mehrabian achieved 200%
of his individual performance objectives, Mr. Schnittjer
achieved 150% of his individual performance objectives,
Mr. Kuelbs achieved 150% of his individual performance
objectives, Mr. Pichelli achieved 200% of his individual
performance objectives, Mr. Link achieved 100% of his
individual performance objectives and Ms. Main achieved
140% of her individual performance objectives.
Long-Term Incentives. We have two
long-term incentive plans that have been approved by our
stockholders, the Teledyne Technologies Incorporated 1999
Incentive Plan and the Teledyne Technologies Incorporated 2002
Stock Incentive Plan. The Teledyne Technologies Incorporated
2008 Incentive Award Plan will replace these two existing plans
if approved by the stockholders at the 2008 Annual Meeting.
Long-term incentives consist of three components: stock options,
a three-year performance share program and a restricted stock
award program
Stock Options. Stock options are
awarded annually to a broad group of key employees who are
nominated by management to receive awards and whose awards the
Personnel and Compensation Committee approves. In practice, the
amount of the award generally depends on the employee’s
position. Stock options provide our employees with the
opportunity to participate in shareholder value created as a
result of stock price appreciation, and as a result further our
objective of aligning the interests of management with the
interests of our stockholders.
All stock options granted are non-qualified stock options, vest
at a rate of one-third per year, with full vesting at the end of
three years and have a term of ten years. A description of the
terms under our incentive plans related to the treatment of
stock options upon termination of employment can be found under
the heading “Potential Payments Upon Termination or a
Change in Control” on page 57 of this Proxy Statement.
At the beginning of 2007, under the 2002 Stock Incentive Plan
and 1999 Incentive Plan, we made an annual award of stock
options for an aggregate of 528,153 shares of common stock
to a total of 301 employees, of which options to purchase
109,000 shares of common stock were awarded to named
executives. For purposes of the Summary Compensation Table,
stock options are valued at fair value calculated in accordance
with FAS 123(R) and the compensation expense associated
with an executive’s stock options as of December 30,
2007 is reported in the Option Awards column.
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The following schedule represents award guidelines established
by the Personnel and Compensation Committee for named executives
and the actual stock option grants awarded to those named
executives in 2007:
Actual awards made within the guidelines, except for awards made
to the Chief Executive Officer, are based on the recommendation
of the Chief Executive Officer and approval of the Personnel and
Compensation Committee. The award for the Chief Executive
Officer is made at the sole discretion of the Committee. The
Committee reserves the right to change the award schedule set
forth above, or other material terms of the plan, at its sole
discretion.
Performance Share Program. A three-year
performance share program opportunity, with a new cycle
beginning every three years, is available to key employees.
Performance share program awards are intended to reward
executives to the extent we achieve specific pre-established
financial performance goals and provide a greater long-term
return to shareholders relative to a broader market index. The
performance share program provides grants of performance share
units, which key officers and executives may earn if we meet
specified performance objectives over a three-year period. Forty
percent of the award is based on the achievement of specified
levels of operating profit, 30% on the achievement of specified
levels of revenue and 30% on the achievement of specified levels
of return to shareholders. No awards are made if the three-year
aggregate operating profit is less than 75% of target, unless
the Committee determines otherwise. A maximum of 200% for each
component can be earned if 120% of the target is achieved. For
the
2003-2005
and
2006-2008
cycles, the Russell 2000 Index is the benchmark for the
specified return to shareholders component. Awards are generally
paid to the participants in three annual installments after the
end of the performance cycle so long as they remain employed. A
description of the treatment of performance share program awards
upon termination of employment can be found under the heading
“Potential Payments Upon Termination or a Change in
Control” beginning on page 57 of this Proxy Statement.
For the
2003-2005
and the
2006-2008
cycles, one-half of the award will be paid in cash and, subject
to the availability of full value award shares, one-half will be
paid in shares of our common stock. We chose operating profit,
revenue and return to shareholders as the components of the
award because we believe these metrics strongly correlate with
our growth and equity value. We established a three-year payout
period following the end of each performance cycle to encourage
continued employment by the participant.
In January 2006, under the 1999 Incentive Plan, the Committee
established a performance cycle for the three-year period ending
December 31, 2008. As of December 30, 2007, there were
27 participants in this performance cycle. Forty percent of the
2006-2008
performance cycle is based on achievement of operating profit of
$378.5 million for three years, 30% on the achievement of
revenue of $4,309.6 million for three years and 30% on the
achievement of a return to shareholders that requires our stock
performance to exceed the stock performance of the Russell 2000
Index. These performance targets are used by Teledyne solely for
compensation purposes and should not be understood to be
management’s expectations or guidance relating to future
financial performance. All of the named executives in the
Summary Compensation Table participate in the
2006-2008
performance share program. We have reserved a total of
176,162 shares under the 1999 Incentive Plan to cover the
maximum number of shares payable under the
2006-2008
performance cycle. If the
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2008 Incentive Award Plan is
approved by stockholders at the Annual Meeting, these shares
will be reserved for issuance under the 2008 Incentive Award
Plan.
The potential cash and stock payouts under the
2006-2008
performance cycle to the named executive officers are set forth
in the table below:
The cash portion of the performance share award for the
2006-2008
performance cycle will be included in the Summary Compensation
Table under the Non-Equity Incentive Plan Compensation column in
the year in which the performance criteria are met (i.e., in the
last year of the performance cycle). For purposes of the Summary
Compensation Table, the stock portion of the performance share
award for the
2006-2008
performance cycle is valued at fair value calculated in
accordance with FAS 123(R) and the compensation expense
associated with the stock portion of the performance share award
as of December 30, 2007 is recorded in the Stock Awards
column. If the performance criteria are met, payments would
occur in three annual installments commencing in 2009.
In December 2002, under the 2002 Stock Incentive Plan, the
Committee established a performance cycle for the three-year
period ended December 31, 2005. As of December 30,
2007, there were 26 participants in this performance cycle. With
respect to this
2003-2005
cycle, the Committee has determined that 170.2% of the target
performance was met. All of the named executives in the Summary
Compensation Table participated in the
2003-2005
performance share program, with payments being made in 2006,
2007 and 2008. The installment payments of awards was made in
February of each of 2006, 2007 and 2008. The number of shares
that the named executives were entitled to receive under the
2003-2005
performance cycle as of December 30, 2007 can be found in
the table headed “Outstanding Equity Awards at Fiscal Year
End” beginning on page 48 of this Proxy Statement.
Restricted Stock Award Program. A
restricted stock award program has also been established for key
employees, which was first approved and adopted by the Personnel
and Compensation Committee in 2000. This program provides grants
of restricted stock, generally each calendar year, to key
employees at an aggregate fair market value equal to 30% 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, unless the Committee determines
otherwise, if we fail 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 we
achieve the minimum established performance goals, but fail to
attain an aggregate level of 100% of the targeted performance
goals, then a portion of the restricted stock would be
forfeited. The performance goal for 2007, as in previous years,
was the price of our common stock as compared to the Russell
2000 Index. In order for a participant to retain the restricted
shares, our three-year aggregate return to shareholders (as
measured by our stock price) must be at least 35% of the
performance of the Russell 2000 Index for the three-year period.
If our stock performance is
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less than 35% of the Russell 2000 Index performance, all
restricted shares would be forfeited. If it ranges from 35% to
less than 100%, a portion of the restricted shares will be
forfeited. If it is 100% or more than 100%, no shares are
forfeited and the participant does not receive additional
shares. We believe that benchmarking the restricted stock
performance goals to a broader market index like the Russell
2000 Index aligns the interest of management and stockholders
because executives are rewarded only to the extent that our
stock price performs relative to the stock prices of companies
with similar market capitalizations.
A participant cannot transfer the restricted stock during the
restricted period. In addition, during the restricted period,
restricted stock generally will be forfeited upon a
participant’s termination of employment. A description of
the treatment of restricted stock awards upon termination of
employment in cases of death, disability or retirement can be
found under the heading “Potential Payments Upon
Termination or a Change in Control” beginning on
page 57 of this Proxy Statement. Upon expiration of the
restricted period, absent any forfeiture, we will deliver to the
recipient certificates for the appropriate number of shares of
common stock, as determined by the Committee based on
achievement of the specified performance objectives, free of the
restrictive legend.
We granted restricted stock to key employees on January 22,
2008, January 23, 2007, January 24, 2006,
January 25, 2005 and January 27, 2004. All
restrictions on the January 27, 2004 awards lapsed on
January 27, 2007 and all restrictions on the
January 25, 2005 awards lapsed on January 25, 2008.
Our stock performance was 149.7% and 153.6% of the Russell 2000
Index for the measurement periods associated with the 2004 and
2005 restricted stock grants, respectively.
For purposes of the Summary Compensation Table, restricted stock
awards are valued at fair value calculated in accordance with
FAS 123(R) and the compensation expense associated with an
executive’s restricted stock awards as of December 30,
2007 is reported in the Stock Awards column.
The potential payouts under January 23, 2007 restricted
stock award can be found in the table headed “Grants of
Plan-Based Awards” on page 47 of this Proxy Statement.
The maximum number of shares that the named executive could
retain under the restricted stock awards granted on
January 25, 2005, January 24, 2006 and
January 23, 2007 awards can be found in the table headed
“Outstanding Equity Awards at Fiscal Year End”
beginning on page 48 of this Proxy Statement.
We believe that the terms of the stock options, the performance
share awards and restricted stock awards are consistent with our
compensation goals of employee retention, rewarding executives
for long-term performance and rewarding executives for long-term
increases in our stock price, both in absolute terms and as
compared to the broader market.
Each of our currently employed named executives, as well as nine
other executives, is a party to a change in control severance
agreement with us. A description of the terms of the agreements
can be found under the heading “Potential Payments Upon
Termination or a Change in Control” beginning on
page 57 of this Proxy Statement. In entering into these
agreements, the Personnel and Compensation Committee desired to
assure that we would 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 our employ. The Committee
believes that, should the possibility of a change in control
arise, it is imperative that we be able to receive and rely upon
our executives’ advice, if requested, as to the best
interests of our company and 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.
We chose the specific amounts and triggers contained in the
change in control agreements because we believe such terms
provide reasonable assurances that our executive officers will
remain with us during an
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acquisition or change of control event, should one occur, and
assist in the assessment of a possible acquisition or change in
control event and advise management and the board as to whether
such acquisition or change in control event would be in the best
interests of our company and stockholders.
The Personnel and Compensation Committee has reviewed the
potential aggregate costs to a potential acquirer associated
with the change in control severance agreements, including
estimated excise taxes and
gross-up
payments associated with the agreements. The Committee considers
it unlikely that the employment of all 14 applicable employees
would be terminated following a change in control. The Committee
did not adjust the compensation of the applicable employees as a
result of the employees entering into these change of control
severance agreements.
In 1999, we entered into an employment agreement with
Dr. Mehrabian, which agreement was amended and restated on
April 25, 2001 to update Dr. Mehrabian’s titles
and the types and rates of compensation to which he was
entitled, on January 24, 2006, primarily to assure
compliance with Section 409A of the Internal Revenue Code,
and on September 1, 2007, to reflect an increase in
Dr. Mehrabian’s base salary and, per
Dr. Mehrabian’s request, to reflect that his
eligibility to receive country club and city club membership and
related tax
gross-ups
was discontinued. The employment agreement was initially entered
into in order to memorialize compensation-related agreements
made by Dr. Mehrabian and ATI prior to our spin-off from
ATI. The amended and restated employment agreement provides that
we shall employ Dr. Mehrabian as our Chairman, President
and Chief Executive Officer. The agreement terminates on
December 31, 2008, but will be automatically extended
annually unless either party gives the other written notice
prior to October 31 that it will not be extended. No such notice
was given in 2007. On January 23, 2007, without amending
Dr. Mehrabian’s employment agreement, our Board of
Directors asked Dr. Mehrabian to continue to serve as its
Chairman, President and Chief Executive Officer through at least
December 31, 2009.
Under the current agreement, Dr. Mehrabian has an annual
base salary of $800,000. The agreement provides that
Dr. Mehrabian is entitled to participate in our annual
incentive bonus plan and other executive compensation and
benefit programs. The agreement provides Dr. Mehrabian with
a supplemental non-qualified pension arrangement, which we will
pay to Dr. Mehrabian starting six months following his
retirement for a period of ten years. Effective July 31,
2007, the number of years of credited service under this
supplemental pension equalization plan reached the maximum
number of ten years; as a result, no additional years of service
will be credited under this plan.
Some of our named executives receive car allowances
and/or
leased vehicles. We provide car allowances and leased vehicles
in cases where the named executive typically travels for
business and also for retention of senior executives. In 2007,
at the request of our Chairman, President and Chief Executive
Officer, we discontinued making club memberships available to
the named executives. In addition, in December 2006, the
Personnel and Compensation Committee approved relocation
assistance to Mr. Pichelli and Mr. Schnittjer, along
with certain other members of management, in connection with the
relocation of our corporate headquarters in the first quarter of
2007. The relocation assistance consists of realtor fees on sale
of a home or initial leasing expense, closing costs associated
with the purchase of a new home, physical relocation expenses
and gross-up
reimbursement of taxes. The cost associated with these benefits
for named executives, to the extent they aggregate more than
$10,000 per individual, are included in the Other Compensation
column of the Summary Compensation Table, to the extent paid in
2006 or 2007.
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Our named executives are eligible to participate in our
executive deferred compensation plan. The deferred compensation
plan is a voluntary, non-tax qualified, unfunded deferred
compensation plan available to all members of management and
certain other highly-compensated employees for the purpose of
providing deferred compensation, and thus potential tax
benefits, to these employees. The deferred compensation plan was
initially established to provide benefits to our employees who
participated in the ATI executive deferred compensation plan
prior to our spin-off. A description of the terms of the
deferred compensation plan can be found under the heading
“Nonqualified Deferred Compensation” beginning on
page 52 of this Proxy Statement. In addition, the
Nonqualified Deferred Compensation Table on page 52 of this
Proxy Statement sets forth information about the account
balances, contributions and withdrawals of each named executive
that participates in the deferred compensation plan.
In connection with the spin-off, we adopted a defined benefit
pension plan on terms substantially similar to the parts of the
ATI pension plan applicable to all of our employees, both active
and inactive at our operations that perform government contract
work and for our active employees at our commercial operations.
All of the named executives other than Ms. Main participate
in the pension plan. The annual benefits payable under these
parts of the pension plan to participating salaried employees
retiring at or after age 65 is calculated under a formula
which takes into account the participant’s compensation and
years of service. The Internal Revenue Code limits the amounts
payable to participants under a qualified pension plan. We have
also adopted a benefit restoration/pension equalization plan,
which is designed to restore benefits that would be payable
under the pension plan provisions but for the limits imposed by
the Internal Revenue Code, to the levels calculated pursuant to
the formulas contained in the pension plan provisions or for any
monies deferred under our deferred compensation plan.
Our pension plan was initially established to provide benefits
to employees who participated in the ATI pension plan prior to
our spin-off. Effective January 1, 2004, in order to limit
our future obligations under our pension plan, new non-union
employee hires do not participate in the pension plan, and
effective February 20, 2007, all new employee hires do not
participate in the pension plan. Instead such new hires
participate in an enhanced 401(k) plan.
A description of the terms of our pension plan can be found
under the heading “Pension Benefits” beginning on
page 51 of this Proxy Statement. In addition, the Pension
Benefits Table on page 51 of this Proxy Statement sets
forth information about each named executive’s years of
credited service and the actuarial present value of each named
executive’s accumulated benefit under our pension plan.
Section 162(m) of the Internal Revenue Code generally
disallows a tax deduction for annual compensation paid to a
chief executive officer and certain other highly compensated
officers in excess of $1 million unless the compensation
qualifies as “performance-based” or is otherwise
exempt under the law. Both stock incentive plans are 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 our best interest
for awards to be paid under stock incentive plans, or for other
compensation to be paid, that would not satisfy the requirements
for deductibility under Section 162(m). In making such
determination, the Committee would consider the net cost to us
and our ability to effectively administer executive compensation
in the long-term interests of shareholders.
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Our Personnel and Compensation Committee does not have an
established practice regarding the adjustment or recovery of
awards or payment if the relevant performance measures upon
which they are based are restated or otherwise adjusted in a
manner that would reduce the size of an award or payment. The
Committee will determine whether to seek recovery of incentive
compensation in the event of a financial restatement or similar
event based on the facts and circumstances surrounding a
financial restatement or similar event, should one occur. Among
the key factors that the Committee will consider is whether the
executive officer engaged in fraud or willful misconduct that
resulted in need for a restatement. Since the time of our
spin-off, we have not restated our financial statements.
In addition, individual performance objectives for executive
officers under our annual incentive plan program include
compliance with laws and Company policies and procedures. As a
result, an executive’s bonus may be adversely affected to
the extent a financial restatement or similar event involved a
violation of law or Company policy.
Stock Options Stock options may be
granted under our 1999 Incentive Plan and 2002 Stock Incentive
Plan by the Personnel and Compensation Committee, which is the
administrator of the two plans. The Committee has delegated
authority to our Chief Executive Officer to grant a specified
number of options to employees under the 1999 Incentive Plan.
This authority is used to make grants to new hires, upon
promotion of certain employees, to retain certain employees, and
in connection with acquisitions. Of these shares, 50,000
remained available for grant by our Chief Executive Officer
under this delegated authority as of January 22, 2008.
Stock options may also be granted to non-employee directors
under our 1999 Non-Employee Director Stock Compensation Plan and
under administrative rules under our 2002 Stock Incentive Plan
adopted on January 23, 2007. Our Nominating and Governance
Committee administers these non-employee director plans. The
Teledyne Technologies Incorporated 2008 Incentive Award Plan
will replace these existing plans if approved by the
stockholders at the 2008 Annual Meeting.
Stock options are generally granted by the Personnel and
Compensation Committee in January of each year at its regularly
scheduled committee meeting. At this meeting the Committee
finalizes annual bonuses for the previous fiscal year and sets
the terms of our annual incentive plan for the current fiscal
year. We typically issue our press release containing financial
results for the fourth quarter and year end shortly following
this meeting date. Grants by our Chief Executive Officer under
his delegated authority may be made at any time, but primarily
have been made to new hires (including new hires resulting from
acquisitions) or following the successful completion of special
projects. In 2007, our Chief Executive Officer granted options
to purchase up to 5,000 shares to seven employees under
this delegated authority. Under our non-employee director stock
compensation plan, an annual grant of options to purchase
4,000 shares is made to each non-employee director after
our annual meeting of stockholders. In addition, directors may
elect to receive all or a part of their board and committee
meeting fees and annual retainer fee in the form of stock
options.
Pursuant to the terms of our 1999 Incentive Plan and 2002 Stock
Incentive Plan, the exercise price for new stock option grants
must equal the fair market value of our common stock, which for
purposes of the plans is defined as the average of the high and
low quoted sales price of a share of our common stock on the New
York Stock Exchange on the date of grant. Under our proposed
2008 Incentive Award Plan, fair market value is defined as the
closing sales price of a share of our common stock on the New
York Stock Exchange on the date of grant. New grants made by our
Personnel and Compensation Committee have exercise prices equal
to the fair market value of our common stock on the date of the
meeting at which the grant was approved by the Committee. Grants
made by the Chief Executive Officer have exercise prices equal
to the fair market value of our common stock on the date of
grant. Stock options granted to non-employee directors as part
of the annual grant have exercise prices equal to the fair
market value of our common stock on the date of grant. For a
non-employee director that elects to have all or a portion of
his or her retainer or meeting fees paid in the form of stock
options, the number of shares to be subject to the stock option
is determined by
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dividing the applicable portion of
the non-employee director’s fees elected to be received as
stock options by an amount equal to the fair market value of a
share of common stock on the date of grant multiplied by 0.3333,
and the exercise price for such non-employee director’s
stock options is equal to the fair market value of our common
stock on the date of grant multiplied by 0.6666.
Stock Awards Restricted stock awards
and performance share program stock awards may be granted under
our 1999 Incentive Plan and 2002 Stock Incentive Plan by the
Personnel and Compensation Committee, which is the administrator
of the two plans. If approved by the stockholders at the 2008
Annual Meeting, future restricted stock awards will be made
under the Teledyne Technologies Incorporated 2008 Incentive
Award Plan.
Restricted stock awards are generally granted each year by the
Personnel and Compensation Committee at the same January meeting
that the Personnel and Compensation Committee makes stock option
award grants. The number of shares is determined by dividing an
amount generally equal to in value to 30% of a participating
executive’s base salary by the average of the high and low
stock prices for 20 trading days preceding the date of grant.
Performance cycles under the performance share program are
generally established once every three years, at the same
January meeting that the Personnel and Compensation Committee
makes restricted stock award grants and stock option award
grants. The number of shares for the stock portion of the award
is determined by dividing one half of the value of the award by
the an amount equal to the average of the high and low quoted
sales price of a share of our common stock on the New York Stock
Exchange on the date that the performance cycle is established
by the Personnel and Compensation Committee.
For non-employee directors that elect to receive meeting fees or
annual retainer fees in the form of a stock award the number of
shares to be subject to the stock award is determined by
dividing the applicable portion of the non-employee
director’s fees elected to be received as stock by an
amount equal to the average of the high and low quoted sales
price of a share of our common stock on the New York Stock
Exchange on the meeting date. For annual retainer fees, which
are paid semi-annually, the grant date is the first business day
of January and July.
Our Personnel and Compensation Committee believes stock-based
compensation is an important element of compensation and, as
discussed above, stock-based compensation figures prominently in
our mix of compensation. In 2007, our Board adopted stock
ownership guidelines that require key executives and
non-employee directors to maintain ownership of a specified
amount of Teledyne common stock. Key executives are required to
own shares of Teledyne common stock equal in market value to the
amount set forth below:
A key executive who is defined as a recipient of a restricted
stock award is expected to attain the minimum level of target
ownership within a period of five years from the date of hire or
promotion, and is expected to own continuously sufficient shares
to meet the guideline once attained.
Each non-employee director is required to own shares of Teledyne
common stock equal in market value to three times the amount of
the annual retainer. Non-employee directors are expected to
attain the minimum level of target ownership by
December 31, 2009. A new director is expected to attain the
minimum level of target ownership within a period of five years
from the date he or she is first becomes a director of the
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Company. Once achieved, the guideline amount must be maintained
for so long as the non-employee director retains his seat on the
Board.
Our Nominating and Corporate Governance Committee reviews
compliance with the stock ownership guidelines annually at its
January meeting. As of January 2008, all of our key executives
and non-employee directors owned sufficient shares to comply
with the guidelines with the exception of three executives and
one non-employee director, all of whom had additional time to
achieve compliance pursuant to the terms of the guidelines. The
full text of our stock ownership guidelines is available on our
website at www.teledyne.com.
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 our registration statements under the
Securities Act of 1933.
We have reviewed and discussed the foregoing Compensation
Discussion and Analysis with management. Based on our review and
discussion with management, we have recommended to the Board of
Directors that the Compensation Discussion and Analysis be
included in this proxy statement and in Teledyne Technologies
Incorporated’s Annual Report on
Form 10-K
for the year ended December 30, 2007.
Submitted by the Personnel and Compensation Committee of the
Board of Directors:
Charles Crocker, Chair
Robert P. Bozzone Kenneth C. Dahlberg Michael T. Smith Wesley W. von Schack
February 19, 2008
No member of the Personnel and Compensation Committee of our
Board of Directors is an officer or employee of the Company.
During 2007, no member of the Committee had a current or prior
relationship and no officer who was a statutory insider had a
relationship to any other company, in each case that must 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 earned by certain of our executive
officers during fiscal year 2007 and fiscal year 2006. It sets
forth information about compensation paid to: (1) our Chief
Executive Officer, (2) our Chief Financial Officer,
(3) the three other most highly compensated executive
officers who were required to file reports under Section 16
of the Securities Exchange Act of 1934 for fiscal 2007 and
fiscal year 2006 and (4) one additional executive officer
who would have been one of the three most highly compensated
executive officers, other than Chief Executive Officer and Chief
Financial Officer, but for the fact that he was not an executive
officer at the end of fiscal year 2007 (collectively, the
“named executives”).
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The table below sets forth information on grants to the named
executives of options and stock awards in fiscal year 2007.
The material terms of our Annual Incentive Plan, stock option
awards, Performance Share Program, Restricted Stock Award
Program and our employment agreement with Dr. Mehrabian are
described in Compensation Discussion and Analysis.
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Outstanding
Equity Awards at Fiscal Year-End
The following table summarizes the outstanding equity awards
held by the named executives as of December 30, 2007.
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Option Exercises
and Stock Vested
The following table sets forth information about stock options
exercised by the named executives in fiscal year 2007 and stock
awards that vested or were paid in fiscal year 2007 to the named
executives.
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Pension
Benefits
The following table describes pension benefits provided to the
named executives. Since Ms. Main was hired after
January 1, 2004, she does not participate in any pension
plan sponsored by us and is not included as a named executive
officer for purposes of this Pension Benefits discussion.
In connection with the spin-off of Teledyne from ATI, we adopted
the Teledyne Technologies Incorporated Pension Plan on terms
substantially similar to the parts of the defined benefit ATI
Pension Plan applicable to our employees, both active and
inactive, at our operations that perform government contract
work and for our active employees at our commercial operations.
Effective January 1, 2004, new non-union employee hires,
and effective February 20, 2007, all new employee hires, do
not participate in the Pension Plan, but participate in our
enhanced Teledyne Technologies Incorporated 401(k) Plan. The
annual benefits payable under these parts of the pension plan to
participating salaried employees retiring at or after
age 65 is calculated under a formula which takes into
account the participant’s compensation and years of
service. The Internal Revenue Code limits the amounts payable to
participants under a qualified pension plan.
The normal retirement age under the Pension Plan is generally
the later of age 65 or the fifth anniversary of the date
the participant commences participation in the Pension Plan.
Participants that have satisfied the Pension Plan’s
eligibility requirements and terminate employment on after their
normal retirement date will be eligible to receive a lifetime
monthly income following termination of employment. Generally,
the basic retirement benefit is equal to one percent of a
participant’s average monthly compensation up to monthly
Social Security covered compensation, plus 1.65% of average
monthly salary in excess of monthly Social
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Security covered compensation. This amount is then multiplied by
the years of credited service completed by the participant, up
to 30 years, but with some grandfathered exceptions, such
as in the case of Mr. Schnittjer. In general, a participant
that has achieved the age of 55 and has completed five years of
service or has a vested accrued benefit is eligible for early
retirement benefits under the Pension Plan. Early retirement
benefits are the same as normal retirement benefits, except that
the benefit is reduced by an amount equal to 3 percent for
each year that a participant’s early retirement date
precedes his or her normal retirement date. In 2007,
participants in the Pension Plan had the choice of two different
annuity types (four types if married). Participants are
prohibited from changing the annuity type elected once monthly
benefit payments begin.
All of the named executives who participate in our pension plans
are currently eligible for either normal retirement or early
retirement. For named executives, a year of credited service is
any year in which the named executive has performed 1,000 or
more service hours. None of the named executives have been
granted extra years of credited service and it is our policy not
to grant named executives with extra years of credited service.
We have also adopted a Benefit Restoration/Pension Equalization
Plan, which is designed to restore benefits which would be
payable under the pension plan provisions but for the limits
imposed by the Internal Revenue Code, to the levels calculated
pursuant to the formulas contained in the pension plan
provisions or for any monies deferred under the Teledyne
Technologies Incorporated Executive Deferred Compensation Plan.
The Benefit Restoration/Pension Equalization Plan provides that
Teledyne will pay to the participant, without requirement for
participant contribution upon his retirement, a retirement
benefit equal to the difference between the maximum life annuity
to which the participant would be entitled under the Pension
Plan upon his or her retirement and the life annuity which is
actually paid to the participant under the Pension Plan after
giving effect to the limitations imposed by the Internal Revenue
Code.
The agreement with Dr. Mehrabian provides
Dr. Mehrabian with a non-qualified supplemental pension
arrangement under which we will pay annually to
Dr. Mehrabian starting six months following his retirement
and for a period of ten years, as payments supplemental to any
accrued pension under our qualified pension plan, an amount
equal to 50 percent of his base compensation as in effect
at retirement. Effective July 31, 2007, the number of years
of credited service under this supplemental pension equalization
plan reached the maximum number of ten years; as a result, no
additional years of service will be credited under this plan.
The following table sets forth information about the
participation of named executives in the Executive Deferred
Compensation Plan.
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The Teledyne Executive Deferred Compensation plan is a
voluntary, non-tax qualified, unfunded deferred compensation
plan available to all employees earning $100,000 or more per
year for the purpose of providing deferred compensation, and
thus potential tax benefits, to these employees.
A participant in the Deferred Compensation Plan may elect to
defer up to 100% of his or her salary and up to 100% of his or
her bonus for a calendar year. As participants defer funds into
the Deferred Compensation Plan, premiums in the amount of the
deferrals are deposited in life insurance contracts.
Participants make deemed investment choices in funds underlying
life insurance contracts. Upon retirement or termination, a
participant receives his or her account balance. A participant
can also receive his or her benefits prior to retirement or
termination by pre-selecting a distribution date that is no less
than three calendar years after the end of the year for which
the election is made. A participant may elect to receive an
amount equal to 90% of his or her account balance prior to his
or her payment eligibility date. A participant may change
monthly his or her investment designations. Deferral elections
with respect to annual salaries are irrevocable, except that a
participant may elect to increase, decrease or terminate his or
her salary deferral earned during a calendar year by filing a
new election on or before December 1 of the preceding
calendar year. Deferral elections with respect to bonuses are
irrevocable and must be made each calendar year.
Director
Compensation
Directors who are not our employees are paid an annual retainer
fee of $40,000. Directors are also paid $1,500 for each Board
meeting, Audit Committee meeting, Personnel and Compensation
Committee meeting and Nominating and Governance Committee
meeting attended. The chair of the Audit Committee is paid an
annual fee of $7,000. Each chair of the Personnel and
Compensation Committee and Nominating and Governance Committee
is paid an annual fee of $4,000. 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, and the 2002 Stock Incentive Plan
under administrative rules adopted in January 2007. In lieu of
cash annual retainer fees, cash Committee chair fees and cash
meeting fees, this plan permits non-employee directors to elect
to receive shares of our common stock
and/or stock
options or to defer compensation under the Teledyne Technologies
Incorporated Executive Deferred Compensation Plan (including a
phantom share fund); provided, however, that at least 25% of the
annual retainer fee must be paid in the form of our common stock
and/or
options to acquire our common stock. It also provides for
certain automatic stock option grants for 4,000 shares of
our common stock at the end of each Annual Meeting of
Stockholders. If a non-employee director is first elected other
than at an annual meeting, such non-employee director would
receive an automatic option grant for 2,000 shares of our
common stock.
On October 1, 2007, Teledyne and directors Frank V.
Cahouet, Charles Crocker, Simon M. Lorne, Paul D. Miller and
Michael T. Smith agreed to amend non-employee director stock
options granted to the directors in 2005 in lieu of cash
retainer fees and meeting fees to increase the per share
exercise price of those stock options to an amount equal to the
fair market value of a share of Teledyne common stock on the
date of grant for each option. The exercise prices of the
original option grants in 2005 were determined by a formula that
was based on the fair market value of Teledyne common stock on
the date of grant and then adjusted to account for a prepayment
of the exercise price equal to the amount of retainer fees
and/or
meeting fees foregone. The purpose of the amendment increasing
the exercise price per share was to avoid potential adverse tax
consequences under Section 409A of the Internal Revenue
Code relating to foregone meeting and retainer fees. The
amendment of each stock option has been reported by each
director on a Form 4. In connection with the amendment,
each of the directors became entitled to receive, on
January 2, 2008, a payment equal to the aggregate amount of
retainer fees
and/or
meeting fees that the director would have received had the
director not elected to use such fees to prepay the exercise
price in the form of lower per share exercise price. Except for
Mr. Cahouet, each director elected to receive this payment
in the form of phantom stock pursuant to the
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Teledyne Technologies Incorporated Executive Deferred
Compensation Plan. The aggregate change in the incremental fair
value of the amended stock options for each director as
calculated under FAS 123R was as follows: Mr. Cahouet,
$23,953; Mr. Crocker, $8,901; Mr. Lorne, $20,837;
Mr. Miller, $3,038; and Mr. Smith, $15,366.
The following table sets forth a summary of the compensation we
paid to our non-employee directors in 2007.
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The amounts under the column headed “Fees Earned or Paid in
Cash” include the cash value of meeting
and/or
retainer fees that the following directors elected to receive in
the form of fully vested phantom stock awards, as detailed below:
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The following table sets forth the aggregate number of option
awards and aggregate number of stock awards held by our
directors as of December 30, 2007.
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Potential
Payments Upon Termination or a Change in Control
Each of the currently employed named executives, as well as nine
other executives, is a party to a Change in Control Severance
Agreement with the Company. 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 we terminate
the executive’s employment for reasons other than cause or
the executive terminates the employment for good reason.
“Severance benefits” consist of:
In addition, the Agreements provide for the immediate vesting of
all stock options, with options being exercisable for the full
remaining term, upon a change of control.
For the purposes of the Change in Control Severance Agreement, a
“change in control” will generally be deemed to occur
if (1) the Company acquires actual knowledge that any
person or group of persons acting together has acquired the
beneficial ownership of securities of the Company entitling such
person to 20% or more of the voting power of the Company,
(2) a tender offer to acquire 20% or more of the voting
power of the Company is completed, (3) a successful third
party proxy solicitation is made relating to the election or
removal of 50% or more of the members of the Board or any class
of the Board, or (4) a merger, consolidation, share
exchange, division or sale or other disposition of assets of the
Company occurs as a result
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of which the stockholders of the Company immediately prior to
such transaction do not hold, immediately following such
transaction, a majority of the voting power of the surviving,
acquiring or resulting corporation.
The paragraphs below explain the impact on our executive
compensation programs for named executive officers of various
change in control and termination scenarios other than a
termination that would trigger the benefits under the Change in
Control Severance Agreements.
The following is a summary of the terms of awards under our
incentive plans related to the treatment of the annual incentive
upon termination of employment:
If a participant’s employment is terminated before the end
of a plan year for reason of death, permanent disability, or
normal or early retirement, the bonus will be calculated at the
end of the plan year, based on their actual salary earned during
the plan year, provided they were with the Company for at least
six months during the plan year.
If a participant’s employment is terminated during the plan
year for any other reason, no bonus award will be paid for the
plan year.
The following table summarizes the terms of awards under our
incentive plans related to the treatment of stock options upon
termination of employment or upon a change in control:
In the event of a change in control, or a participant terminates
employment because of retirement, his or her performance share
plan participation will be prorated based on the number of full
months of employment during the cycle, divided by 36. Awards for
retired participants are paid at the same time as awards are
paid to active participants. On a change in control, awards are
paid thirty days following the change in control event. If a
participant terminates employment for any other reason, the
current cycle’s incentive and any prior cycle’s
incentive will be forfeited unless deemed otherwise by the
Personnel and Compensation Committee.
During the restricted period, restricted stock will be forfeited
upon a participant’s termination of employment. 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
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performance cycle. In the event of a change in control, all
restrictions applicable to the restricted stock award will
terminate fully.
The following table sets forth the potential payments upon a
change in control and termination following a change of control,
retirement, resignation or termination of the named executives
as of December 28, 2007, the last business day of our 2007
fiscal year, assuming the change in control or termination event
had taken place on December 28, 2007. The amounts shown
include amounts earned through December 28, 2007, other
than pension benefits, and are estimates of the amounts which
would be paid out to the executives upon their termination
following a termination event. The actual amounts to be paid out
can only be determined at the time of such executive’s
separation from the Company, and such amounts may be subject to
re-negotiation at the time of actual termination. Estimated
monthly pension benefits for named executives upon retirement or
termination following a change in control are described at the
end of this section.
Robert Mehrabian
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John T. Kuelbs
Dale A. Schnittjer
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James M. Link
Aldo Pichelli
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Susan L. Main
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