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

 

 

 

TELEDYNE TECHNOLOGIES INCORPORATED

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

 

AGENDA

 

 

4) Transaction of any other business properly brought before the meeting.

 

STOCKHOLDER LIST

 

A list of stockholders entitled to vote will be available during business hours for 10 days prior to the meeting at the Company’s executive offices, 1049 Camino Dos Rios, Thousand Oaks, California 91360, for examination by any stockholder for any legally valid purpose.

 

ADMISSION TO THE MEETING

 

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

 

PROXY STATEMENT
TABLE OF CONTENTS

 

 

 

PROXY STATEMENT
FOR 2008 ANNUAL MEETING OF STOCKHOLDERS

 

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.

 

Who May Vote

 

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.

 

Methods of Voting

 

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.

 

 

Revoking Your Proxy

 

You may change your mind and revoke your proxy at any time before it is voted at the meeting by:

 

 

Voting By Employee Benefit Plan Participants

 

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.

Voting Shares Held By Brokers, Banks and Other Nominees

 

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.

 

Information and Meetings

 

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.

 

Number of Directors

 

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.

Director Terms

 

The directors are divided into three classes and the directors in each class serve for a three-year term. The term of one class of directors expires each year at the Annual Meeting of Stockholders. The Board may fill a vacancy by electing a new director to the same class as the director being replaced. The Board may also create a new director position in any class and elect a director to hold the newly created position until the term of the class expires.

 

Directors’ Retirement Policy

 

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.

 

Executive Sessions and Lead Director

 

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.

 

Director Independence

 

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.

Corporate Governance and Ethics Guidelines

 

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.

 

Sarbanes-Oxley Disclosure Committee

 

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,

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.

 

Communications with the Board

 

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.

 

 

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.

Nominees — For Terms Expiring at 2011 Annual Meeting (Class III)

 

 

The Board of Directors Recommends
a Vote FOR the Election of the Nominees

Continuing Directors — Terms Expire at 2009 Annual Meeting (Class I)

 

Continuing Directors — Terms Expire at 2010 Annual Meeting (Class II)

 

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.

 

Audit Committee

 

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:

 

 

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.

 

Nominating and Governance Committee

 

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:

 

 

 

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.

 

Personnel and Compensation Committee

 

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:

 

 

 

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.

 

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

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.

 

Shares Available for Awards

 

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.

Awards

 

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

 

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

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.

 

Restricted Stock

 

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.

 

Stock Appreciation Rights

 

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.

 

Other Awards under the Plan

 

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.”

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.

 

Performance Awards

 

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

company on the date the performance-based award is paid to be eligible for a performance-based award for any period.

 

Administration

 

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.

 

Eligibility

 

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.

 

Adjustments

 

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

(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.

 

Change in Control

 

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.

 

Termination or Amendment

 

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.

 

Section 409A of the Internal Revenue Code

 

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

Plan and any applicable awards may be modified to exempt the awards from Section 409A or comply with the requirements of Section 409A.

 

Federal Income Tax Consequences

 

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.

 

Stock Options

 

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.

 

Other Awards

 

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.

 

Section 409A of the Internal Revenue Code

 

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.

Tax Deductibility and Section 162(m) of the Internal Revenue Code

 

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).

 

Other Considerations

 

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.

 

Plan Benefits

 

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.”

 

Non-Employee Director Stock Compensation

 

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

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.

 

Delegation of Authority

 

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.

 

Equity Compensation Plans Information

 

The following table summarizes information with respect to equity compensation plans as of December 30, 2007:

 

 

 

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.

 

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.

 

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

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.

 

Report of the Audit Committee

 

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

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.

 

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.

 

 

 

 

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.

 

 

 

 

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.

 

Compensation Objectives

 

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:

 

 

Personnel and Compensation Committee

 

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).

 

Benchmarking

 

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

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:

 

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

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

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.

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

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

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.

 

Change in Control Severance Agreements

 

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

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.

 

Employment Agreement

 

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.

 

Perquisites and Other Benefits

 

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.

Deferred Compensation

 

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.

 

Pension Plans

 

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.

 

Deductibility of Executive Compensation

 

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.

Financial Restatements

 

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.

 

Policies Relating to the Timing and Pricing of Stock Option Awards and Stock Awards

 

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

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.

 

Stock Ownership Policies

 

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

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.

 

Personnel and Compensation Committee Report

 

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.

 

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”).

 

 

 

 

Grants of Plan-Based Awards

 

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.

 

The following table summarizes the outstanding equity awards held by the named executives as of December 30, 2007.