-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Gpq/NUP24D2EGlHS18Qcl/106KaYs7HJiM04PsRR2wonz5ExWaRee/Iq4808CueK zCijoPgYLyR5EC86grEDeQ== 0000950128-00-000576.txt : 20000328 0000950128-00-000576.hdr.sgml : 20000328 ACCESSION NUMBER: 0000950128-00-000576 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20000102 FILED AS OF DATE: 20000327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TELEDYNE TECHNOLOGIES INC CENTRAL INDEX KEY: 0001094285 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING SERVICES [8711] IRS NUMBER: 251843385 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-15295 FILM NUMBER: 580113 BUSINESS ADDRESS: STREET 1: 2049 CENTURY PARK E CITY: LOS ANGELES STATE: CA ZIP: 90067-3101 BUSINESS PHONE: 3102773311 MAIL ADDRESS: STREET 1: 1000 SIX PPG PLACE CITY: PITTSBURGH STATE: PA ZIP: 15222-5479 10-K405 1 TELEDYNE TECHNOLOGIES, INC. FORM 10-K 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended January 2, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to Commission file number: 1-15295 TELEDYNE TECHNOLOGIES INCORPORATED (Exact name of registrant as specified in its charter) Delaware 25-1843385 (State of other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization)
2049 Century Park East, Suite 1500 Los Angeles, California 90067-3101 (Address of principal executive office and Zip Code) Registrant's telephone number, including area code: (310) 277-3311 Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange Title of each class on which registered ------------------- --------------------- Common Stock, par value $.01 per share New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None ---------------- (Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] At March 23, 2000, the number of outstanding shares of Common Stock of the registrant was 26,732,933. At March 23, 2000, the aggregate market value of the registrant's Common Stock held by non-affiliates of the registrant was approximately $350.7 million, based on the closing price of $13.625 per share as reported on the New York Stock Exchange. Shares of Common Stock known by the registrant to be beneficially owned by directors and executive officers subject to Section 16 of the Securities Exchange Act of 1934 are not included in the computation. The registrant, however, has made no determination that such persons are "affiliates" within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934. DOCUMENTS INCORPORATED BY REFERENCE Selected portions of the registrant's proxy statement for its 2000 Annual Meeting of Stockholders (the "2000 Proxy Statement") are incorporated by reference in Part III of this Report. Information required by paragraphs (k) and (l) of Item 402 of Regulation S-K is not incorporated by reference in this Form 10-K or in any other filing of the registrant. Such information shall not be deemed "soliciting material" or to be filed with the Commission as permitted by Instruction (9) to Item 402 of Regulation S-K. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INDEX
PAGE NUMBER ------ PART I Item Business.................................................... 3 1. Item Properties.................................................. 21 2. Item Legal Proceedings........................................... 23 3. Item Submission of Matters to a Vote of Security Holders......... 23 4. PART II Item Market for Registrant's Common Equity and Related 5. Stockholder Matters......................................... 24 Item Selected Financial Data..................................... 24 6. Item Management's Discussion and Analysis of Financial Condition 7. and Results of Operations................................... 25 Item Quantitative and Qualitative Disclosure About Market Risk... 32 7A. Item Financial Statements and Supplementary Data................. 32 8. Item Changes in and Disagreements with Accountants on Accounting 9. and Financial Disclosure.................................... 32 PART III Item Directors and Executive Officers of the Registrant.......... 33 10. Item Executive Compensation...................................... 33 11. Item Security Ownership of Certain Beneficial Owners and 12. Management.................................................. 33 Item Certain Relationships and Related Transactions.............. 33 13. PART IV Item Exhibits, Financial Statement Schedules, and Reports on Form 14. 8-K......................................................... 33 INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION F-1 SIGNATURES EXHIBIT INDEX
DEFINED TERMS In this Form 10-K, Teledyne Technologies Incorporated is sometimes referred to as the "Company", "Teledyne Technologies", or "TDY". References to ATI mean Allegheny Technologies Incorporated, formerly known as Allegheny Teledyne Incorporated, the company from which we were spun-off on November 29, 1999. 3 PART I ITEM 1. BUSINESS. WHO WE ARE Teledyne Technologies Incorporated is a leading provider of sophisticated electronic and communications products, systems engineering solutions and information technology services, and aerospace engines and components. Our customers include aerospace prime contractors, general aviation companies, government agencies and major communications and other commercial companies. We serve high-value niche market segments where performance, precision and reliability are critical and where we are in several cases the leading supplier. Our businesses are interrelated by their use of technology to provide cost-effective and value-added solutions. Our products include avionic systems that collect and communicate information for airlines and business aircraft systems; broadband communications subsystems for wireless and satellite systems; engineering and information technology services for space, defense and industrial customers; and engines for general aviation aircraft and for cruise missiles. Total sales in 1999 were $803.4 million, compared to $780.4 million and $756.6 million in 1998 and 1997, respectively. Our segment operating profits were $90.6 million, $89.2 million and $74.9 million in 1999, 1998 and 1997, respectively. Approximately 57% of our total sales in 1999 was to commercial customers and the balance was to the U.S. Government. Approximately 67% of these U.S. Government sales were attributable to fixed-price type contracts and the balance to cost plus fee type contracts. International sales accounted for approximately 18% of total sales in 1999. Our three business segments, their respective operating companies, and their contribution to our sales in 1999, 1998 and 1997 are summarized in the following table:
PERCENTAGE OF SALES --------------------- SEGMENT OPERATING BUSINESSES 1999 1998 1997 - ---------------------------------- ---------------------------------- ----- ----- ----- Electronics and Communications Teledyne Electronic Technologies 43% 44% 45% Systems Engineering Solutions Teledyne Brown Engineering, Inc. 28% 29% 28% Aerospace Engines and Components Teledyne Continental Motors and 29% 27% 27% Teledyne Cast Parts
Teledyne Technologies was organized as a Delaware corporation on August 23, 1999. Teledyne Technologies is comprised of certain businesses of the former Aerospace and Electronics segment of Allegheny Teledyne Incorporated, now known as Allegheny Technologies Incorporated. On November 29, 1999, we were spun-off from ATI after a strategic review concluded that our businesses would be able to grow faster and be stronger competitors if they were combined as a separate company. On such date, each holder of ATI stock as of the close of business on November 22, 1999 received one share of TDY Common Stock for every seven shares of ATI stock. Our origin dates back to Teledyne, Inc. founded in 1960 by Dr. Henry Singleton. Our principal executive offices are located at 2049 Century Park East, Suite 1500, Los Angeles, California 90067-3101. Our telephone number is (310) 277-3311. OUR BUSINESS SEGMENTS ELECTRONICS AND COMMUNICATIONS Our Electronics and Communications segment, through Teledyne Electronic Technologies, applies proprietary technology, advanced software and hardware design skills and manufacturing capabilities in three areas: Data Acquisition and Communications Products; Precision Electronic Devices; and Electronic Manufacturing. Data Acquisition and Communication Products We are a leading supplier of systems and software for data acquisition and communications 3 4 applications in commercial aviation, as well as critical components and subsystems for wireless and satellite communications terminals. We are focused on expanding our technology base to support the emerging needs for high data rate (HDR) broadband communications technology. We also supply a range of specialized components, subsystems and equipment to domestic and international government aviation and aerospace customers. We participate in the markets for data acquisition and communications equipment and services for both air transport (including commercial passenger aircraft) and business and commuter aircraft. - Air Transport Products. Our aircraft information management solutions are designed to increase the safety and efficiency of airline transportation throughout the world. With over 200 commercial airline customers, we are a leading supplier of digital flight data acquisition systems for the commercial airline industry. We have provided these systems for our airline customers for over one-half of Boeing aircraft currently in production. We also provide our systems of certain aircraft customers of Airbus Industrie's partner, DaimlerChrysler Aerospace Airbus. These systems acquire both mandatory data for use by the aircraft's flight data recorder, and record additional data for the airline's use, such as performance and engine condition monitoring. The markets for data acquisition and communications systems include both new and retrofitted aircraft. Boeing estimates that the worldwide operational air transport fleet will grow from a current fleet of 12,600 to 19,100 aircraft by 2008. Our newest digital flight data acquisition units have the most advanced features in the industry. These systems conform to the required expansion of data recording capabilities, which were mandated by the Federal Aviation Administration (FAA) in 1997. At that time, the FAA increased the number of mandatory parameters to be monitored from 17 (prior to the rule change) to 88 by the year 2002. Our flight data units also perform additional, non-mandatory aircraft and engine condition monitoring for use by airline customers. - Business and Commuter Products. Communication capabilities for business and commuter aircraft are growing rapidly as these aircraft have begun to mirror air transport aircraft in data gathering and aircraft monitoring. We are one of the largest suppliers of air-ground telephony, facsimile and data transmission products to the growing business and commuter aircraft market. Bombardier Aerospace selected us to provide a suite of communications products for its new, ultra long-range Global Express business jet. These products include an air-to-ground telephone system and our Telelink(TM) datalink system that link onboard avionics with ground service providers to facilitate air traffic management and flight operations. The business and commuter fleet is significantly larger than the commercial air transport fleet, with approximately 27,000 aircraft currently operational. Forecast International, an industry consultant, projects that the business and commuter fleet will increase by approximately 40% during the next decade. We expect continued demand for both new installations and upgrades for these systems by business and commuter aircraft customers. - Wireless Ground Link. In March 1999, we demonstrated a prototype of our new Wireless Ground Link that automates the transfer of in-flight data recorded by our data acquisition systems to an airline's operations center. Transmission of the data can occur anytime an aircraft is on the ground utilizing the existing digital wireless infrastructure. The raw data are then forwarded to the airline through the Internet, where our Flight Data Replay and Analysis System can process them 4 5 into useful formats. Such data can then be used by the airline in scheduling maintenance services and implementing safety procedures. - Wireless and Satellite Communication Components. Our communication components and subsystems are used in satellite earth terminals, communication satellites, and base stations for Personal Communication Services (PCS) and wireless loops. The technology that we apply to wireless and satellite communications originated in defense applications. We supply power amplifiers used in the L, C and Ku band satellite uplink transmitters. These products encompass both solid state monolithic microwave integrated circuits (MMICs) and high power helix traveling wave tubes. Markets include amplifiers for fixed wireless applications operating in the Unlicensed National Information Infrastructure (U-NII) band and Very Small Aperture Terminals (VSATs) used for credit card verification, corporate networking and mobile news gathering. The markets for both wireless and satellite systems are being driven by the growing need for high data rate (HDR) communications. In order to obtain sufficient bandwidth to support transmission of these data, wireless and satellite systems are moving to higher frequencies. We have developed a unique line of microwave filters that are manufactured with a patented injection molding technique. These metal-plated plastic filters are lighter in weight than competing metal filters, and can be used efficiently in the new lightweight microcell and picocell base stations for PCS systems. Our filters and our new VSAT transceivers have applications in wireless local loops, which are used to supply communications infrastructure in the developing world where the cost and time to deploy wireline communications can be excessive. - Defense and Space Electronics. We are a leading supplier of high power traveling wave tubes for electronic warfare systems, radar systems, and military satellite communications systems for both domestic and international applications. Our tubes are used in airborne systems on many aircraft, including the B-52, B-18, B-1B, F-15 and E-A6B, and Global Hawk, and on surface systems, such as AEGIS ships. We believe that there will be a continuing demand for our tubes in both new and existing systems. We believe that the use of traveling wave tubes for radar applications will grow as these systems are upgraded with advanced capabilities that cannot be achieved with current transmitter technologies. We have also supplied thousands of microprocessor-controlled ejection seat sequencers for U.S. Air Force and U.S. Navy tactical aircraft, such as the F-16, F-18 and the new F-22 fighter. Precision Electronic Devices We develop and manufacture microelectronic devices, high-performance relays, microelectromechanical systems (MEMS), high-density connectors and precision instruments that are engineered for demanding applications in the defense, commercial aerospace, medical, instrumentation and industrial markets where small size, high performance and reliability are of paramount importance. We also provide precision instruments to manufacturers in these industries. - Microelectronic Devices. Our hybrid microcircuits are used in applications such as military (including F-18 and F-22 aircraft and the M1A2 tank), aerospace, medical and instrumentation systems. These compact and complex electronic building blocks combine multiple transistors and integrated circuits in multi-chip modules (MCMs). In late 1999, Harris Corporation awarded us the contract to manufacture rugged fiber optic transmitters and receivers for the new F-22 fighter program. Approximately 50 transmit and 5 6 receive modules are used on each aircraft to route data to and from avionics equipment and the aircraft's central processor. Our fiber optic transmitter and receiver modules are also used for video distribution on the International Space Station. We have applied our MCM technology to the manufacture of life sustaining and life enhancing implantable medical devices, including cardiac pacemakers and defibrillators, neural stimulators and cochlear implant hearing aids. Newer products include biological signal sensors and ambulatory digital recorders for diagnosis and monitoring of epilepsy and sleep disorders. These products are distributed on a private label basis by our customers. Our medical manufacturing operations are FDA-registered, and like all of our electronic manufacturing facilities, certified to IS0 9000. - High Performance Relays. Our Teledyne Relays miniature electromechanical relays are used where maintenance of signal fidelity is essential. Examples of applications include switching of high-speed digital and microwave signals in semiconductor and microwave test equipment, wireless systems and communication satellites. According to Venture Development, an industry consultant, the size of the telecommunications and instrumentation relay market is approximately $870 million annually and is expected to grow at more than 5% per year. Growth in the transmission of broadband data via the Internet, increases in clock speeds of microprocessors, and the migration of wireless and satellite systems to higher frequency bands are all contributing to a need for switching devices that operate at higher frequencies. During 1999, we added new products to our growing line of high frequency relays and work towards introducing additional products in 2000. - Microelectromechanical Systems. We are leveraging our experience with precision electromechanical devices and microelectronics fabrication technology to develop new MEMS. The first product we are developing in this line is a microrelay based on an exclusively licensed patented electromagnetic actuation technique. The microrelay will be significantly smaller than current electromechanical relays, an important factor in modern, miniaturized electronic systems, and will provide us with access to a new market segment in which we do not currently compete. - High-Density Connectors. We supply custom, low profile, surface mount connectors for applications in commuter disk drives and consumer medical electronic devices. We have increased our development efforts for high-density microprocessor connectors, targeted for use in high-volume applications such as personal computers and workstations and personal communication systems handsets. We were issued a patent for a new, low- cost method of producing high-density connectors in October 1999. Prismark Partners, an industry consultant, estimates that the market for this type of connector will grow from 100 million units per year in 1999 to 200 million by 2003, with the price of a typical connector expected to be approximately $6. - Precision Instruments. We design and manufacture precision instruments for process applications in semiconductor and petrochemical manufacturing with a broadline of analyzers for oxygen and other gases, vacuum gauges, and mass flow meters and controllers. These instruments are sold under the Teledyne Analytical Instruments and Teledyne Hastings brand names. Our Model 2002(TM) sensor is a wide range digital vacuum meter used to measure vacuum or pressure in various process control and other systems applications. 6 7 Electronic Manufacturing We operate turnkey manufacturing facilities in Tennessee, Mexico and Scotland for low-to-moderate volume, technically sophisticated products, ranging from individual printed circuit board assemblies to complete electronic systems, used in the aerospace, medical and communications industries. We manufacture subsystems used in such diverse products as weapons release systems and medical magnetic resonance imaging systems. Our customers include major aerospace and electronic companies. Our production capabilities include through-hole, surface-mount and multi-chip module assembly; and digital, analog, radio frequency and microwave testing. Our patented REGAL(R) rigid-flex technology combines rigid and flexible printed circuits into one assembly that eliminates board-to-board connectors, which results in improved reliability and packaging density. These rigid-flex circuit boards are use in military (such as the AMRAAM missiles, the Airborne Self-Protection Jammer and the Apache Longbow Helicopter), commercial aerospace and medical applications. In late 1998, we added rapid prototyping capabilities for rigid-flex printed circuits to improve customer service. In 1999, we expanded our line of capital equipment for printed circuit board manufacturing with an innovative copper plating system designed to plate panels in ten minutes. This compact system occupies 50% less space than conventional systems. During 1998 we expanded our capacity for low-cost manufacturing in Mexico. Subject to prevailing labor conditions, we plan additional growth in Mexico and at our Scotland facility. According to Frost & Sullivan, an industry consultant, the market for military electronic contract manufacturing services was approximately $800 million in 1998 and is expected to grow at an 8% annual rate as major military systems companies increasingly focus more on integration of systems and rely on merchant suppliers for electronics manufacturing. SYSTEMS ENGINEERING SOLUTIONS Teledyne Brown Engineering, Inc. offers a wide range of engineering solutions and information services to government defense, aerospace and commercial customers. Our software solutions center on the following five areas: - Aerospace Solutions - Defense Solutions - Information Services - Environmental Solutions - Enterprise Control and Energy Products Aerospace Solutions We provide a broad range of highly sophisticated engineering solutions and services to U.S. space programs. U.S. Government budgeted expenditures in this market are approximately $19.3 billion in 2000. As the payload integration contractor for NASA's Marshall Space Flight Center, we have had major responsibilities in the numerous scientific missions of the Space Shuttle. This work has ranged from experiment planning, through designing and fabricating interface hardware, to manning the mission control center during flight operations. The centerpiece of our current space activities is the International Space Station. We are involved in both space-borne and ground-support hardware development and we participate in mission planning and operations. We have approximately 300 people working on International Space Station projects and realized sales associated with these projects of approximately $29 million in 1999. The development and integration of complex ground support equipment has long been one of our specialties. Recognition of this is reflected in our selection by the U.S. Air Force to produce three prototype aircraft cargo loaders as a part of the Air Force's Next Generation Small Loader program. 7 8 Defense Solutions For over 45 years, we have played a key role in the development of U.S. defense systems. The Department of Defense has budgeted $3.6 billion in expenditures in 2000 for various missile defense programs, which are projected to grow at a modest rate for the next five years. The current 2000 budget for the National Missile Defense program is approximately $837 million and is projected to grow to $1.8 billion in 2002. During the last 10 years alone, our systems engineering solutions in defense technologies have averaged over 1,000,000 man-hours per year. In ballistic missile defense programs, we have provided solutions in systems engineering, integration, and testing; real-time distributed testing and training; radar and optical systems design; command center development; and intelligence studies and threat analysis. We provide battle simulation software as part of our role for the U.S. Ballistic Missile Defense Organization's National Missile Defense program. We also provide an array of engineering solutions related to combat systems technologies, including research and development test support, operational test and evaluation, systems survivability analysis, and body armor development. Information Services One of our strongest capabilities is in information technology. The government sector of the information technology market is approximately $33.6 billion in 1999, and is expected to grow at an annual rate of between 4% and 10%. Approximately 30% of our contracts are in this sector. Our software products, most of which are certified to ISO 9001, are used for highly diverse applications, such as high-fidelity simulations, multi-media training, Internet website development, distributed real-time testing, and command and control centers. We have developed hundreds of simulation programs, including the Extended Air Defense Simulation, which is used by friendly governments worldwide and was combat-proven during Operation Desert Storm and more recent operations. We have recently upgraded the U.S. Army's land-combat model to include amphibious and tactical air operations. We are recognized as a leader in the development of real-time, vehicle-and weapons-integrated simulations for systems testing and training. Our Systems Exerciser is a simulation tool used to verify the inter-operational compatibility of geographically separated, complex defense systems. The Systems Exerciser "drives" actual weapons systems with a simulated environment including threats, weather, and terrain, creating a robust virtual world in which real systems can operate and interact. We have been continuously involved in weapons signature management development efforts since 1989, with over 47 successful programs, of which 37 were sole source contracts. We are particularly well known for systems that limit the detection of soldiers on the battlefield by radar or infrared sensors, as to which we hold several issued and pending patents. The Optical Signatures Code, which we developed and maintain, is the recognized standard in missile defense. We also developed the world's largest on-line database for optical signatures. Environmental Solutions We utilize our systems engineering solutions to assist the U.S. Government in complying with terms of the Chemical Weapons Convention Treaty. This Treaty requires the United States to destroy all chemical weapons and material by 2007. As a 50% participant in a joint venture, we are developing alternative technologies to incineration for the destruction of stockpile chemical munitions. We are presently the only contractor operating in the non-stockpile chemical munitions sector. As the prime contractor for the U.S. Army's Non-Stockpile Chemical Materiel Demilitarization program, we are designing, fabricating, integrating, and testing equipment to safely destroy small caches of chemical munitions and materiel located in over 30 states. 8 9 We were selected by the Air Force to establish and operate a highly specified analysis laboratory for performing nuclear forensic analysis of gas samples. Prior to selecting a contractor operation, military personnel at McClellan Air Force Base in California operated this laboratory for many years. Enterprise Control and Energy Products Our systems engineering capabilities are applied to energy problems through a variety of services and products. Our OpenVector(TM) supervisory control and data acquisitions systems are used for managing over half of the gas transportation pipelines in the United States, and we have some international customers. We manufacture and sell low power, continuously operating electrical generators utilized in energy remote locations. We market our line of low-power radioisotope thermoelectric generators under the SENTINEL(TM) brand name. One of our units aboard the Pioneer spacecraft has exited the solar system, after flawlessly providing power for more than two decades. Our TELAN(TM) thermoelectric systems provide up to 90 watts of constant, reliable power at remote locations throughout the world. Our recently announced 2.5-kilowatt Minotaur(TM) engine-generator system runs on natural gas and is designed for long-term, continuous, low-maintenance operation for the oil and gas production industry, and to provide prime power for applications in emerging countries that lack sophisticated infrastructures. AEROSPACE ENGINES AND COMPONENTS Our Aerospace Engines and Components Segment, through Teledyne Continental Motors and Teledyne Cast Parts, focuses on the design, development and manufacture of piston engines, turbine engines, electronic engine controls, batteries and complex metal castings. Piston Engines We design, develop and manufacture piston engines and ignition systems for major general aviation airframe manufacturers and provide spare parts and engine rebuilding services. We are one of two primary worldwide producers of piston engines and after-market service providers for the general aviation marketplace. Over 300,000 piston-powered aircraft have been produced since the inception of the general aviation industry. The active fleet of single and twin-engine aircraft is estimated to be 165,000, with approximately 200,000 engines currently in service. We estimate that our engines power approximately one half of the active fleet. The average age of this fleet is approximately 30 years. Our share of the installed base is extremely important in a business in which repair and replacement parts can provide substantial ongoing revenue. Our product lines included engines powering the industry benchmark Raytheon Beech Bonanza and Baron aircraft, the Mooney Aircraft line of advanced single engine aircraft, and the popular New Piper Seneca V twin-engine aircraft. In addition to these long-standing products, our engines will power four new high-speed composite aircraft currently entering production. These are the Cirrus SR-20, Lancair Columbia, Diamond Katana C1, and the Extra 400. The market for piston powered general aviation aircraft has shown a strong resurgence in recent years. Following the passage of the General Aviation Revitalization Act (GARA) of 1994, which limited manufacturers' product liability for aircraft over 18 years in age, the domestic production of new aircraft has increased from 444 new units in 1994 to over 1,500 units in 1998. Following the passage of GARA, the industry has introduced new and advanced airframes and avionics and increased the rate of spending for new product research and development. Additionally, NASA is sponsoring technology development programs aimed at increasing the efficient commercial use of small general aviation aircraft. These programs include the demonstration of a new piston aircraft engine for light aircraft that is fueled by Jet-A fuel. Teledyne Continental Motors was selected to design and demonstrate this advanced engine. In addition to the sales of new aircraft engines to aircraft producers, we also actively support the aircraft engine aftermarket. Piston aircraft engines are produced with a finite utiliza- 9 10 tion life generally expressed as time between overhaul (TBO). Rebuilding or overhauling of the engine is required at TBO, which can range between 1,600 and 2,000 hours for our aircraft engines. With an installed base of approximately 100,000 Teledyne Continental Motors engines and an average aircraft utilization of 133 hours per year, approximately 10,000 of our aircraft engines can be expected to require some degree of overhaul in the aftermarket each year. Our aftermarket support includes the rebuilding of nearly 3,000 of these units annually with our Gold Medallion Rebuilt Engine. We also provide a full complement of spare parts such as cylinders, crankcases, fuel systems, crankshafts, camshafts and ignition products. Our Aerosance unit has developed the first full authority digital electronic controls for piston aircraft engines. These controls are designed to automate many functions that currently require manual control, such as fuel flow and power management. This system also saves fuel as a result of improved engine management. We believe that these control systems, which are in the process of FAA certification testing, will become standard equipment on new aircraft, and will be retrofitted on higher-end, piston-powered general aviation aircraft. In November 1999, we acquired certain assets of Long Island, New York-based Mattituck Aviation Corporation, a privately owned aftermarket supplier and piston engine rebuilder and overhauler to the general aviation marketplace. This acquisition is expected to bring additional service capabilities to Teledyne Continental Motors. These service capabilities should leverage our investments in manufacturing excellence and the development of digital electronic controls for piston aircraft engines. Turbine Engines We design, develop and manufacture small turbine engines for missiles and unmanned aerial vehicles. We also produce engines that power military trainer aircraft. Since the late 1950s, we have delivered over 21,000 of these engines to defense contractors. We believe that the near-term demand for these engines will increase as a result of the depletion of cruise missiles in recent international conflicts. Our J402 engine powers the HARPOON missile system. Derivatives of this engine power the Standoff Land Attack Missile and the Standoff Land Attack Missile Expanded Response. Over 7,700 of these engines have been produced for these missile systems, which are deployed by the U.S. Navy and various NATO countries. A derivative of the J402 engine has been selected by Lockheed Martin Corporation to power the Joint Air-to-Surface Standoff Missile (JASSM) that is scheduled to be fielded in late 2001. We are the sole source provider for engines for the JASSM system. The JASSM production requirement, which initially was projected at 2,400 units, has been increased in recent months to 3,700 units. Another of our engines provides the turbine power for the Improved Tactical Air Launched Decoy being built for the U.S. Navy. This system enhances stand-off capability by identifying the enemy radar sources for lethal weapons. This low-cost turbine engine is the first of a family of lower-thrust engines to enter production. Another of our engines serves as the propulsion source for the T-37 aircraft, the primary jet trainer for the U.S. Air Force. This engine has been in service for over 40 years and will continue to power the T-37 well into the next decade. We are the sole source for major spare parts for this engine. Battery Products Our battery products operations specialize in the design, development and manufacture of engineered products for the lead acid battery markets. We are focused on providing engineered products in niche markets with more favorable margins than typical battery products. We design, develop and manufacture dry-charged batteries that can be stored for years without deterioration. Our maintenance-free, valve-regulated, recombinant batteries offer electrical performance and rechargeable characteris- 10 11 tics that are superior to other types of maintenance-free batteries. Our Gill(TM) line of lead acid batteries is widely recognized as the premier dry-charged, starting and standby power source for general aviation. More companies manufacturing new general aviation aircraft choose the Gill(TM) product line than any other lead acid battery. The technical characteristics of our batteries offer the possibility of sales to growing non-aviation markets, such as the cable television and telecommunications industries backup. Cast Parts Teledyne Cast Parts offers a wide range of complex sand-cast aluminum and magnesium castings and nickel-based superalloy and stainless steel investment castings to the aerospace and defense industries. Premium quality castings are produced from various processes in accordance with military, aerospace and commercial customer specifications to exacting tolerances and mechanical strengths. Our major customers include airframe and turbine engine manufacturers, missile producers and other defense contractors. We supply castings to the U.S. Navy for use in its Phalanx weapons system, as well as castings used in Tomahawk Cruise Missiles, jet engines and armament systems for both airborne and land vehicles. Based on publicly available sales data, we estimate that the market for aluminum and magnesium casting was approximately $1 billion in 1998 and the market for air melt steel and vacuum melt superalloys was approximately $2.6 billion. The metals casting industry has been highly fragmented and has experienced consolidation in recent years. We believe that this trend may provide us with additional growth opportunities. SALES AND MARKETING No commercial customer accounted for more than 10% of our total sales during 1999, 1998 or 1997. Approximately 43%, 40% and 40% of our total sales for 1999, 1998 and 1997 were derived from contracts with agencies of, and prime contractors to, the U.S. Government. We do not regard sales to the U.S. Government as constituting sales to a single customer, because various U.S. Government customers exercise independent purchasing decisions. Our principal U.S. Government customer is the U.S. Department of Defense. Our largest program with the U.S. Government, the Systems Engineering and Technical Assistance contract with the Space and Missiles Defense Command, represented 5.8%, 7.3% and 7.1% of total sales for 1999, 1998 and 1997. Sales by our segment to agencies of and prime contractors to the U.S. Government in each of the past three years were as follows:
1999 1998 1997 ------ ------ ------ (IN MILLIONS) Electronics and Communications........ $101.1 $102.4 $102.7 Systems Engineering Solutions............. $185.4 $159.2 $158.0 Aerospace Engines and Components............ $ 61.7 $ 46.8 $ 42.6
Our sales and marketing approach varies by segment and by products within our segments. A shared fundamental tenet is the commitment to work closely with our customers to understand their needs, with an aim to secure preferred supplier and longer-term relationships. Our business segments use a combination of internal sales forces, distributors and commissioned sales representatives to market and sell our products and services. Products are also advertised in appropriate trade journals and by means of various Internet web sites. To promote our products and other capabilities, our personnel regularly participate in relevant trade shows and professional associations. Many of our government contracts are awarded after a competitive bidding process in which we seek to emphasize our ability to provide superior products and technical solutions in addition to competitive pricing. COMPETITION We believe that technological capabilities and innovation and the ability to invest in the development of new and enhanced products are critical to obtaining and maintaining leadership in our markets and the industries in which we 11 12 compete generally. Although we have certain advantages that we believe help us compete in our markets effectively; each of our markets is highly competitive. Our businesses vigorously compete on the basis of quality, product performance and reliability, technical expertise, price and service. Many of our competitors have, and potential competitors could have, greater name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution capabilities and greater financial, technological and personnel resources than we do. RESEARCH AND DEVELOPMENT We spent a total of $215.9 million, $175.0 million and $188.4 million on research and development for 1999, 1998 and 1997, respectively. Customer-funded research and development, most of which was attributable to work under contracts with the U.S. Government, represented approximately 87%, 86% and 85% of total research and development costs for 1999, 1998 and 1997, respectively. INTELLECTUAL PROPERTY While we own and control various intellectual property rights, including patents, trade secrets, confidential information, trademarks, trade names, and copyrights, which, in the aggregate, are of material importance to our business, our management believes that our business as a whole is not materially dependent upon any one intellectual property or related group of such properties. We own over 700 active patents and are licensed to use certain patents, technology and other intellectual property rights owned and controlled by others. Similarly, other companies are licensed to use certain patents, technology and other intellectual property rights owned and controlled by us. Pursuant to a Trademark License Agreement, an affiliate of ATI granted us an exclusive license to use the "Teledyne" name and related logos, symbols and marks in connection with our operations. We pay an annual fee of $100,000 for this license and on November 24, 2004 have an option to purchase all rights and interests in the Teledyne marks for $412,000. Patents, patent applications and license agreements will expire or terminate over time by operation of law, in accordance with their terms or otherwise. We do not expect the expiration or termination of these patents, patent applications and license agreements to have a material adverse effect on our business, results of operations or financial condition. EMPLOYEES Out of a total workforce of approximately 5,800, about 1,400 individuals have engineering, physics, mathematics or computer science degrees. The International Union of United Automobile, Aerospace and Agricultural Implement Workers of America represents approximately 370 of our employees under a collective bargaining agreement that expires on December 16, 2000. We consider our relations with our employees to be good. 12 13 EXECUTIVE MANAGEMENT TDY's executive officers and segment presidents include:
NAME AND TITLE AGE PRINCIPAL OCCUPATIONS LAST 5 YEARS - -------------- --- ---------------------------------------- Executive Officers*: Robert Mehrabian 58 Dr. Mehrabian has been the President and President and Chief Executive Chief Executive Officer of TDY since its Officer; Director formation. Prior to the spin-off, he was the President and Chief Executive Officer of ATI's Aerospace and Electronics segment since July 1999 and had served ATI at various senior executive capacities since July 1997. Before joining ATI, Dr. Mehrabian served as President of Carnegie Mellon University. He is a director of TDY, Mellon Financial Corporation and PPG Industries, Inc. Stefan C. Riesenfeld 51 Mr. Riesenfeld has been the Executive Executive Vice President and Chief Vice President and Chief Financial Financial Officer Officer and the Treasurer of TDY since the spin-off. From August 1999 to the spin-off, he was the Executive Vice President and Chief Financial Officer of ATI's Aerospace and Electronics segment. From 1996 to May 1999, Mr. Riesenfeld was Chief Financial Officer of ICL, PLC, a global information systems and services company based in London, England. From 1983 to 1996, he was with Unisys Corporation where he served as Vice President and Corporate Treasurer from 1989. John T. Kuelbs 57 Mr. Kuelbs has been the Senior Vice Senior Vice President, General President, General Counsel and Secretary Counsel and Secretary of TDY since the spin-off, having joined ATI's Aerospace and Electronics segment in October 1999. Mr. Kuelbs was Senior Vice President - Acquisition Policy for Raytheon Company from November 1998 to September 1999 and Senior Vice President-Legal of Raytheon Systems Company from January 1998 to November 1998. Before Raytheon's acquisition of Hughes Aircraft Company, Mr. Kuelbs spent 17 years at Hughes Aircraft Company where he served as Senior Vice President, General Counsel and Secretary from 1994 to 1998.
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NAME AND TITLE AGE PRINCIPAL OCCUPATIONS LAST 5 YEARS - -------------- --- ---------------------------------------- Nicholas L. Blauwiekel 44 Mr. Blauwiekel became Vice President - Vice President - Human Resources Human Resources of TDY on March 1, 2000. From October 1998 through February 2000, he was Corporate Vice President, Human Resources of Shiloh Industries, a manufacturer of steel and advanced materials located in Cleveland, Ohio. From July 1996 to October 1998, Mr. Blauwiekel was Vice President, Human Resources of Cooper Automotive Company, located in Chesterfield, Missouri. For over 16 years prior thereto he held various human resources management positions with Eaton Corporation, a global manufacturer of highly engineered products which serve industrial, vehicle, construction, commercial and semiconductor markets. Dale A. Schnittjer 55 Mr. Schnittjer has been the Controller Controller of TDY since its spin-off. From 1998 to the spin-off, Mr. Schnittjer served as a financial executive to the Aerospace and Electronics and Industrial Segments of ATI. Prior to that, he was Vice President-Finance of Teledyne Wah Chang from 1997 to 1998 and Vice President-Finance of Teledyne Specialty Equipment from 1995 to 1997. Mr. Schnittjer has held various financial positions with several of Teledyne's aerospace and electronics companies since 1987. Segment Management: Marvin H. Fink 63 Mr. Fink has been the President of President, Teledyne Electronic Technologies since Teledyne Electronic Technologies 1993. Mr. Fink has held various management positions with several of Teledyne's aerospace and electronic companies for over 37 years. Richard A. Holloway 57 Mr. Holloway has been the President of President, Teledyne Brown Engineering since Teledyne Brown Engineering, Inc. February 1998. Prior thereto, he was Senior Vice President, Government Division of SCI Systems, Inc., a provider of manufacturing and design services to commercial companies, the U.S. military and foreign governments. Bryan L. Lewis 50 Mr. Lewis has been the President of President, Teledyne Continental Motors since 1992. Teledyne Continental Motors Mr. Lewis first joined Teledyne 18 years ago as a project engineer for its turbine engine business.
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NAME AND TITLE AGE PRINCIPAL OCCUPATIONS LAST 5 YEARS - -------------- --- ---------------------------------------- Charles E. McGill 64 Mr. McGill has been the President of President, Teledyne Cast Parts since March 1999. Teledyne Cast Parts Prior thereto, he was Vice President of ATI's Aerospace and Electronics segment and from 1993 through 1997, he was Vice President, Finance and Administration of Teledyne Electronic Technologies. Mr. McGill has held various management and financial positions with several of Teledyne's aerospace and electronics companies for over 34 years.
- ------------------------- * Such officers are subject to the reporting and other requirements of Section 16 of the Securities Exchange Act of 1934, as amended. Dr. Mehrabian has an Employment Agreement dated as of December 21, 1999 with Teledyne Technologies. A copy is filed as Exhibit 10.8 to this Form 10-K. Each of the above-listed persons and six other members of management have entered into Change in Control Severance Agreements with Teledyne Technologies. A form of such agreement is filed as Exhibit 10.9 to this Form 10-K. 15 16 RISK FACTORS; CAUTIONARY STATEMENT AS TO FORWARD-LOOKING STATEMENTS The following text highlights various risks and uncertainties associated with Teledyne Technologies. These factors could materially affect "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) that we may from time to time make, including forward-looking statements contained in "Item 1. Business" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-K and in TDY's 1999 Annual Report to Stockholders. IF WE FAIL TO UNDERTAKE A PUBLIC OFFERING OF OUR COMMON STOCK WITHIN ONE YEAR FOLLOWING THE SPIN-OFF, WE WILL BE IN BREACH OF OUR AGREEMENTS WITH ATI. ATI received a tax ruling from the IRS stating in principle that the spin-off will be tax-free to ATI and to ATI's stockholders. One of the assumptions underlying the tax ruling is that we will undertake a public offering of our Common Stock within one year following the spin-off and use the anticipated gross proceeds of approximately $125 million (less associated costs) for research and development and related capital projects, for the further development of our manufacturing capabilities and for acquisitions and/or joint ventures. Pursuant to the Separation and Distribution Agreement and the Tax Sharing and Indemnification Agreement, we have also agreed with ATI to undertake such a public offering. Our failure to do so would be a breach of those agreements and subject us to substantial liabilities. FAILURE OF REPRESENTATIONS AND ASSUMPTIONS UNDERLYING THE IRS TAX RULING COULD CAUSE THE SPIN-OFF NOT TO BE TAX-FREE TO ATI OR TO ATI'S STOCKHOLDERS AND MAY REQUIRE US TO INDEMNIFY ATI. While the tax ruling relating to the qualification of the spin-off as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code generally is binding on the IRS, the continuing validity of the tax ruling is subject to certain factual representations and assumptions, including the assumption that we will complete a required public offering of our Common Stock within one year following the spin-off, and use anticipated gross proceeds of approximately $125 million (less associated costs) for research and development and related capital projects, for the further development of our manufacturing capabilities and for acquisitions and/or joint ventures. In light of current market conditions and other factors, we cannot provide any assurances that we can complete a public offering of such size in the required time period. TDY's management is currently reviewing this public offering requirement. If the spin-off were not to qualify as a tax-free distribution within the meaning of Section 355 of the Code, ATI would recognize taxable gains generally equal to the amount by which the fair market value of the Teledyne Technologies Common Stock distributed to ATI's stockholders exceeded the tax basis in our assets. In addition, the distribution of our Common Stock to each ATI stockholder would generally be treated as taxable in an amount equal to the fair market value of the Teledyne Technologies Common Stock such stockholder receives. If the spin-off qualified as a distribution under Section 355 of the Code but failed to be tax-free to ATI because of certain post-spin-off circumstances (such as an acquisition of Teledyne Technologies) ATI would recognize a taxable gain as described above, but the distribution of our Common Stock in the spin-off would generally be tax-free to each ATI stockholder. The Tax Sharing and Indemnification Agreement provides that we will be responsible for any taxes imposed on, or other amounts paid by, ATI, its agents and representatives and its stockholders as a result of the failure of the spin-off to qualify as a tax-free distribution within the meaning of Section 355 of the Code if the failure or disqualification is caused by certain post-spin-off actions by or with respect to us (including our subsidiaries) or our stockholders. For example, the acquisition of Teledyne Technologies by a third party during the two-year period following the spin-off could cause such a failure or disqualification. If any of the taxes or other amounts described above were to become 16 17 payable by us, the payment could have a material adverse effect on our financial condition, results of operations and cash flow and could exceed our net worth by a substantial amount. OUR DEPENDENCE ON REVENUE FROM GOVERNMENT CONTRACTS SUBJECTS US TO THE RISK THAT WE MAY NOT BE SUCCESSFUL IN BIDDING FOR FUTURE CONTRACTS AND THAT GOVERNMENT FUNDING FOR THESE CONTRACTS MAY BE DELAYED OR CONTINUE TO DECREASE. We perform work on a number of contracts with the Department of Defense and other agencies and departments of the U.S. Government. Sales under contracts with the U.S. Government as a whole, including sales under contracts with the Department of Defense, as prime or subcontractor, represented approximately 43% of our total revenue for 1999. Performance under government contracts has certain inherent risks that could have a material effect on our business, results of operations and financial condition. Government contracts are conditioned upon the continuing availability of Congressional appropriations. Congress typically appropriates funds for a given program on a fiscal-year basis even though contract performance may take more than one year. As a result, at the beginning of a major program, a contract is typically only partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress for future fiscal years. The overall U.S. military budget declined in real dollars from the mid-1980's through the early 1990's. Although U.S. military budgets have stabilized in recent years, future levels of defense spending cannot be predicted. Delays or further declines in U.S. military expenditures could adversely affect our business, results of operations and financial condition, depending upon the programs affected, the timing and size of the changes and our ability to offset the impact with new business or cost reductions. Most of our U.S. Government contracts are subject to termination by the U.S. Government either at its convenience or upon the default of the contractor. Termination-for-convenience provisions provide only for the recovery of costs incurred or committed, settlement expenses, and profit on work completed prior to termination. Termination-for-default imposes liability on the contractor for excess costs incurred by the U.S. Government in reprocuring undelivered items from another source. We obtain many U.S. Government prime and subcontracts through the process of competitive bidding. We may not be successful in having our bids accepted. In addition, contracts may not be profitable. A number of our U.S. Government prime and subcontracts are fixed-price type contracts (67% in 1999). Under these types of contracts, we bear the inherent risk that actual performance cost may exceed the fixed contract price. This is particularly true where the contract was awarded and the price finalized in advance of final completion of design. We believe that the U.S. Government is increasingly requesting proposals for fixed-price type contracts. We, like other government contractors, are subject to various audits, reviews and investigations (including private party "whistleblower" lawsuits) relating to our compliance with federal and state laws. In addition, we have a compliance program designed to surface issues that may lead to voluntary disclosures to the U.S. Government. Generally, claims arising out of these U.S. Government inquiries and voluntary disclosures can be resolved without resorting to litigation. However, should the business unit or division involved be charged with wrongdoing, or should the U.S. Government determine that the unit or division is not a "presently responsible contractor," that unit or division, and conceivably our company as a whole, could be temporarily suspended or, in the event of a conviction, could be debarred for up to three years from receiving new government contracts or government-approved subcontracts. In addition, we could expend substantial amounts in defending against such charges and in damages, fines and penalties if such charges are proven or result in negotiated settlements. 17 18 WE MAY BE UNABLE TO SUCCESSFULLY INTRODUCE NEW AND ENHANCED PRODUCTS IN A TIMELY AND COST-EFFECTIVE MANNER. Our operating results will depend in part on our ability to introduce new and enhanced products on a timely basis. Successful product development and introduction depends on numerous factors, including our ability to anticipate customer and market requirements, changes in technology and industry standards, our ability to differentiate our offerings from offerings of our competitors, and market acceptance. We may not be able to develop and introduce new or enhanced products in a timely and cost-effective manner or to develop and introduce products that satisfy customer requirements. Our new products also may not achieve market acceptance or correctly anticipate new industry standards and technological changes. TECHNOLOGICAL CHANGE COULD CAUSE CERTAIN OF OUR PRODUCTS OR SERVICES TO BECOME OBSOLETE OR NON-COMPETITIVE. The markets for a number of our products and services are generally characterized by rapid technological development, evolving industry standards, changes in customer requirements and new product introductions and enhancements. A faster than anticipated change in one or more of the technologies related to our products or services or in market demand for products or services based on a particular technology could result in faster than anticipated obsolescence of certain of our products or services and could have a material adverse effect on our business, results of operation and financial condition. Currently accepted industry standards are also subject to change, which may contribute to the obsolescence of our products or services. WE MAY NOT HAVE SUFFICIENT RESOURCES TO FUND PLANNED OR NECESSARY RESEARCH AND DEVELOPMENT, CAPITAL EXPENDITURES AND POSSIBLE ACQUISITIONS. In order to remain competitive, we must make substantial investments in research and development to develop new and enhanced products and continuously upgrade our process technology and manufacturing capabilities. Although we believe that anticipated cash flows from operations and available borrowings under our $200 million credit facility will be sufficient to satisfy our working capital and normal operating requirements, we cannot fund our planned research and development, capital investment programs and possible acquisitions without additional financing. Our ability to raise additional capital will depend on a variety of factors, some of which will not be within our control, including investor perceptions of us, our businesses and the industries in which we operate, and general economic and market conditions. We may be unable to successfully raise needed capital and the amount of net proceeds that will be available to us may not be sufficient to meet our needs. Failure to successfully raise needed capital on a timely or cost-effective basis could have a material adverse effect on our business, results of operations and financial condition. INCREASING COMPETITION COULD REDUCE THE DEMAND FOR OUR PRODUCTS AND SERVICES. Although we have certain advantages that we believe help us compete in our markets, each of our markets is highly competitive. Many of our competitors have, and potential competitors could have, greater name recognition, a larger installed base of products, more extensive engineering, manufacturing, marketing and distribution capabilities and greater financial, technological and personnel resources than we do. New or existing competitors may also develop new technologies which could adversely affect the demand for our products and services. Industry consolidation trends, particularly among aerospace and defense contractors, could adversely affect demand for our products and 18 19 services if prime contractors seek to control more aspects of vertically-integrated projects. WE SELL PRODUCTS AND SERVICES TO CUSTOMERS IN INDUSTRIES WHICH ARE CYCLICAL AND SENSITIVE TO CHANGES IN GENERAL ECONOMIC ACTIVITY. We derive significant revenues from the commercial aerospace industry. Domestic and international commercial aerospace markets are cyclical in nature. Historic demand for new commercial aircraft has been related to the stability and health of domestic and international economies. Delays or changes in aircraft and component orders could impact the future demand for our products and have a material adverse effect on our business, results of operations and financial condition. In addition, we sell products and services to customers in industries that are sensitive to the level of general economic activity and in mature industries that are sensitive to capacity. Adverse economic conditions affecting these industries may reduce demand for our products and services, which may reduce our profits, or our production levels, or both. WE ARE SUBJECT TO THE RISKS ASSOCIATED WITH INTERNATIONAL SALES. During 1999, international sales accounted for approximately 18% of our total revenues. We anticipate that future international sales will continue to account for a significant percentage of our revenues. Risks associated with these sales include: - political and economic instability; - export controls; - changes in legal and regulatory requirements; - U.S. and foreign government policy changes affecting the markets for our products; - changes in tax laws and tariffs; - the impact of the transition to a common European currency; - convertibility and transferability of international currencies; and - exchange rate fluctuations (which may affect sales to international customers and the value of and profits earned on international sales when converted into dollars). Any of these factors could have a material adverse effect on our business, results of operations and financial condition. Weak conditions in Asian economies have affected our results of operations adversely. PRODUCT LIABILITY CLAIMS OR RECALLS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR REPUTATION, BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION. As a manufacturer and distributor of various products, our results of operations are susceptible to adverse publicity regarding the quality or safety of our products. In part, product liability claims challenging the safety of our products may result in a decline in sales for a particular product which could adversely affect our results of operations. This could be true even if the claims themselves are proven to not be true or settled for immaterial amounts. While we will have general liability and other insurance policies concerning product liabilities, we will have self-insured retentions or deductibles under such policies with respect to a portion of these liabilities. For example, our annual self-insured retention for general aviation aircraft liabilities incurred in connection with products manufactured by Teledyne Continental Motors is $10 million. Product recalls could also have a material adverse effect on our business, results of operations and financial condition. For example, in the second quarter of 1999, Teledyne Continental Motors engaged in a product recall of piston engines produced in 1998, which had an adverse effect on our recent financial performance. Product recalls have the potential for tarnishing a company's reputation and could have a material adverse effect on the sales of our products. 19 20 We cannot assure that we will not have additional product liability claims or that we will not recall any additional products. COMPLIANCE WITH INCREASING ENVIRONMENTAL REGULATIONS AND THE EFFECTS OF POTENTIAL ENVIRONMENTAL LIABILITIES COULD HAVE A MATERIAL ADVERSE FINANCIAL EFFECT ON US. We, like other industry participants, are subject to various federal, state, local and international environmental laws and regulations. We may be subject to increasingly stringent environmental standards in the future. Future developments, administrative actions or liabilities relating to environmental matters could have a material adverse effect on our business, results of operations or financial condition. Some of our businesses work with highly dangerous substances which require heightened standards of care. For example, as the prime contractor for the U.S. Army's Non-Stockpile Chemical Materiel Demilitarization program, we are responsible for the destruction of small caches of chemical munitions and materiel located in over 30 states. The destruction of chemical weapons is an inherently dangerous activity. Although we have not experienced any accidents or other adverse consequences as a result of our participation in this program, we cannot assure that we will not experience any problems in the future. For additional discussion of environmental matters, see the information at page 30 under the caption "Other Matters-Environmental" of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and Notes 2 and 13 to Notes to Consolidated Financial Statements. HAVING MINIMAL OPERATING HISTORY AS AN INDEPENDENT COMPANY MAKES IT DIFFICULT TO PREDICT OUR PROFITABILITY AS A STAND-ALONE COMPANY. We do not have an external operating history as an independent company. Prior to the spin-off, our businesses relied on ATI for various financial, managerial and administrative services and have been able to benefit from the earnings, financial resources, assets and cash flows of ATI's other businesses. Since the spin-off, ATI is only obligated to provide us with minimal transitional assistance and services. We expect costs and expenses associated with the management of a public company to be greater than the amount reflected in our historical financial statements. We also will incur interest expense and be subject to the other requirements associated with our credit facility. While we had been profitable as part of ATI, there can be no assurance that, as a stand-alone company, our future profits will be comparable to historical operating results before the spin-off. We have been dedicating significant managerial and other resources at the corporate level to establish the infrastructure and systems necessary for us to operate as an independent public company. While we believe that we have sufficient management resources, we cannot assure you that this will be the case or that we will successfully implement our operating and growth initiatives. Failure to implement these initiatives successfully could have a material adverse effect on our business, results of operations and financial condition. OUR INABILITY TO ATTRACT AND RETAIN KEY PERSONNEL COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FUTURE SUCCESS. Our future success depends to a significant extent upon the continued service of our executive officers and other key management and technical personnel and on our ability to continue to attract, retain and motivate qualified personnel. The loss of the services of one or more of our key employees or our failure to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and results of operations. In particular, the loss of the services of Robert Mehrabian, our President and Chief Executive Officer, could materially and adversely affect us. 20 21 ACQUISITIONS INVOLVE INHERENT RISKS THAT MAY ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION. Our growth strategy includes possible acquisitions. Acquisitions involve various inherent risks, such as: - our ability to assess accurately the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates; - the potential loss of key personnel of an acquired business; - our ability to integrate acquired businesses and to achieve identified financial and operating synergies anticipated to result from an acquisition; and - unanticipated changes in business and economic conditions affecting an acquired business. PROVISIONS OF OUR GOVERNING DOCUMENTS, APPLICABLE LAW, THE TAX SHARING AND INDEMNIFICATION AGREEMENT WITH ATI AND OUR CHANGE IN CONTROL SEVERANCE AGREEMENTS COULD MAKE AN ACQUISITION OF TELEDYNE TECHNOLOGIES MORE DIFFICULT. Our Restated Certificate of Incorporation, Amended and Restated Bylaws and Rights Agreement, and the General Corporation Law of the State of Delaware (the "DGCL"), contain several provisions that could make the acquisition of control of Teledyne Technologies in a transaction not approved by our board of directors more difficult. Certain tax aspects of the spin-off could also discourage an acquisition of control of Teledyne Technologies for some period of time. For example, the acquisition of Teledyne Technologies by a third party during the two-year period following the spin-off could result in the spin-off not qualifying as a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code and trigger indemnification obligations of Teledyne Technologies under the Tax Sharing and Indemnification Agreement. We have entered into Change in Control Severance Agreements with 15 members of our management, which could have an antitakeover effect. ITEM 2. PROPERTIES. Our principal facilities as of January 2, 2000 are listed below. Although the facilities vary in terms of age and condition, our management believes that these facilities have generally been well maintained. 21 22
SQUARE FOOTAGE FACILITY LOCATION PRINCIPAL USE (OWNED/LEASED) - --------------------------------------- --------------------------------------- ------------------- ELECTRONICS AND COMMUNICATIONS SEGMENT Teledyne Electronic Technologies Los Angeles, California Development and production of 123,000 (leased) electronic components and subsystems. 17,000 (owned) Los Angeles, California Production of digital data acquisition 154,000 (leased) systems for monitoring commercial aircraft and engines. Lewisburg, Tennessee Development and production of 153,000 (owned) electronic components and subsystems. Mountain View, California Production of ferrite components, 100,000 (owned) switching devices, filters and monolithic microwave integrated circuits. Hawthorne, California Production of electronic components. 83,000 (owned) Rancho Cordova, California Development of production of traveling 75,000 (owned) wave tubes and power supplies for use 16,000 (leased) in commercial markets. SYSTEMS ENGINEERING SOLUTIONS SEGMENT Teledyne Brown Engineering Huntsville, Alabama Provision of engineered services and 474,000 (owned) products, including systems 123,000 (leased) engineering, optical engineering, software and hardware engineering, and instrumentation technology. Hunt Valley, Maryland Manufacturing, assembling and 60,000 (leased) maintenance of power generating systems. Oak Ridge, Tennessee Laboratories and offices in support of 40,000 (leased) environmental services. Washington, DC Defense program offices supporting 21,500 (leased) governmental customers. AEROSPACE ENGINES AND COMPONENTS SEGMENT Teledyne Continental Motors Mobile, Alabama Design, development and production of 1,270,000 (leased) new and rebuilt piston engines, ignition systems and spare parts for the general aviation market. Redlands, California Manufacturing of batteries for the 91,000 (owned) general aviation market. Toledo, Ohio Design, development and production of 373,000 (leased) small turbine engines for aerospace and military markets. Teledyne Cast Parts Pomona, California Manufacturing of aluminum and magnesium 231,000 (owned) castings for air frames, turbine engines and missiles. City of Industry, California Manufacturing of nickel-based 70,000 (owned) superalloy and stainless steel investment castings.
We also own or lease facilities elsewhere in the U.S. and in countries outside the U.S., including Tijuana, Mexico, Gloucester, England and Cumbernauld, Scotland. Our executive offices are currently located at 2049 Century Park East, Suite 1500, Los Angeles, California 90067-3101 and are subleased from a subsidiary of ATI. 22 23 ITEM 3. LEGAL PROCEEDINGS. From time to time, we become involved in various lawsuits, claims and proceedings related to the conduct of our business. While we cannot predict the outcome of any lawsuits, claims or proceedings, our management does not believe that the disposition of any pending matters is likely to have a material adverse effect on our financial condition or liquidity. The resolution in any reporting period of one or more of these matters, however, could have a material adverse effect on our results of operations for that period. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of TDY's stockholders during the fourth quarter of 1999. 23 24 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. On November 29, 1999, in connection with the distribution of our Common Stock to record holders of ATI's stock as of the close of business on November 22, 1999, our Common Stock commenced trading "regular way" on the New York Stock Exchange under the symbol "TDY". For the period from November 29, 1999 through December 31, 1999, our stock traded at a high of $10 5/8 per share and at a low of $7 13/16 per share. As of January 2, 2000, there were approximately 9,000 record holders of TDY's Common Stock. ITEM 6. SELECTED FINANCIAL DATA. The historical financial information below does not include pro forma adjustments that reflect estimates of the expenses that would have been incurred had Teledyne Technologies operated as an independent company and as capitalized at the time of the spin-off for each period presented. The historical financial information should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." TELEDYNE TECHNOLOGIES INCORPORATED FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA(a)
FOR THE FISCAL YEARS 1999 1998 1997 1996 1995 -------------------- ------ ------ ------ ------ ------ (IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) Sales............................................... $803.4 $780.4 $756.6 $716.4 $680.5 Net income.......................................... $ 49.0 $ 48.7 $ 41.6 $ 40.7 $ 30.9 Working capital..................................... $105.3 $ 78.6 $ 87.7 $104.2 $ 92.8 Total assets........................................ $317.4 $250.8 $255.4 $253.0 $234.3 Long-term debt, net................................. $ 97.0 n/a n/a n/a n/a Stockholders' equity................................ $ 44.5 $106.4 $109.4 $128.0 $115.2 Basic earnings per common share(b).................. $ 1.79 $ 1.73 $ 1.48 $ 1.49 $ 1.23 Diluted earnings per common share(b)................ $ 1.79 $ 1.73 $ 1.48 $ 1.49 $ 1.23
- ------------------------- (a) Effective November 29, 1999, the Company spun-off from ATI. The historical financial information is not necessarily indicative of the results of operations or financial position that would have occurred if Teledyne Technologies had been a separate, independent company during the periods presented, nor is it indicative of future performance. (b) Prior to the spin-off, the average outstanding shares used to compute earnings per share were based on a distribution ratio of one share of Teledyne Technologies' Common Stock for every seven shares of ATI common stock. 24 25 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Effective November 29, 1999, Teledyne Technologies Incorporated was spun off from ATI. As a result of a strategic review initiated in 1998, ATI concluded that certain of its aerospace and electronics businesses, which now comprise Teledyne Technologies, would be able to grow faster and be stronger competitors if they were combined as a separate company. The operations included in Teledyne Technologies are a group of high technology businesses that have critical mass and shared core competencies, are strategically complementary and have the potential for profitable growth. The following is Teledyne Technologies' pro forma financial information for 1999, 1998 and 1997.
1999 1998 1997 ------ ------ ------ (IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) SALES................... $803.4 $780.4 $756.6 COSTS AND EXPENSES Cost of sales......... 587.7 572.1 551.1 Selling, general and administrative expenses............ 140.2 134.1 146.6 ------ ------ ------ 727.9 706.2 697.7 ------ ------ ------ OPERATING PROFIT........ 75.5 74.2 58.9 Interest and debt expense, net........ 8.1 8.0 8.0 Other income.......... 1.0 1.6 1.4 ------ ------ ------ INCOME BEFORE INCOME TAXES................. 68.4 67.8 52.3 Provision for income taxes................. 27.5 28.0 20.1 ------ ------ ------ NET INCOME.............. $ 40.9 $ 39.8 $ 32.2 ====== ====== ====== DILUTED EARNINGS PER COMMON SHARE.......... $ 1.50 $ 1.41 $ 1.15 ====== ====== ======
- ------------------------- The pro forma financial information above has been presented for informational purposes only and may not reflect the results of operations of Teledyne Technologies that would have occurred had Teledyne Technologies operated as a separate, independent company for the periods presented. The pro forma financial information should not be relied upon as being indicative of future results. Pro forma adjustments reflect the estimated expense impacts (primarily interest expense and corporate expenses) that would have been incurred had Teledyne Technologies been operated as a separate company as of the beginning of each year and as capitalized at the time of the spin-off for each period presented. As part of the spin-off, Teledyne Technologies assumed $100 million in long-term debt incurred by ATI. Pro forma income includes pro forma interest expense on this long-term debt as if it had been outstanding for all periods presented. Pro forma income adjusts corporate expenses to an annual level of $15 million from the amount previously allocated, which was lower. 1999 OVERVIEW Teledyne Technologies is a leading provider of sophisticated electronic and communication products, systems engineering solutions and information technology services and aerospace engines and components. Our customers include aerospace prime contractors, general aviation companies, government agencies and major communications and other commercial companies. We serve high-value niche market segments where performance, precision and reliability are critical and where we are in several cases the leading supplier. Our businesses are interrelated by their use of technology to provide cost-effective and value-added solutions. Teledyne Technologies operates in three business segments: Electronics and Communications; Systems Engineering Solutions; and Aerospace Engines and Components. Our products include avionics systems that collect and communicate information for airlines and business aircraft systems; broadband communication subsystems for wireless and satellite systems; engineering and information technology services for space, defense and industrial customers; and engines for general aviation aircraft and for cruise missiles. 25 26 Our segments' respective contributions to our total sales for 1999, 1998 and 1997 are summarized in the following table:
1999 1998 1997 ---- ---- ---- Electronics and Communications........... 43% 44% 45% Systems Engineering Solutions................ 28% 29% 28% Aerospace Engines and Components............... 29% 27% 27% --- --- --- 100% 100% 100% === === ===
RESULTS OF OPERATIONS Teledyne Technologies reported 1999 sales of $803.4 million, compared with sales of $780.4 million for 1998 and $756.6 million for 1997. Pro forma net income was $40.9 million ($1.50 per diluted share) for 1999, compared with pro forma net income of $39.8 million ($1.41 per diluted share) for 1998 and pro forma net income of $32.2 million ($1.15 per diluted share) for 1997. International sales represented approximately 18%, 22% and 21% of our total sales for 1999, 1998 and 1997, respectively. Sales under contracts with the U.S. Government, which included contracts with the Department of Defense, were approximately 43%, 40% and 40% of our total sales for 1999, 1998 and 1997, respectively. In 1999, segment operating profit was $90.6 million, compared with $89.2 million in 1998 and $74.9 million in 1997. Included in operating profit was pension income of $6.6 million in 1999, $1.7 million in 1998 and pension expense of $722 thousand in 1997. Net income, before pro forma adjustments, was $49.0 million ($1.79 per diluted share) in 1999, compared with $48.7 million ($1.73 per diluted share) in 1998 and $41.6 million ($1.48 per diluted share) in 1997. The historical financial statements reflect allocations representing corporate expense from ATI of $7.3 million, $7.8 million, $7.6 million for 1999, 1998 and 1997, respectively. These allocations were based on sales. The historical financial statements for 1999 also include one month of actual corporate expenses incurred by us after the spin-off and one month of interest costs on long-term debt. Cost of sales increased from 1997 to 1998 and from 1998 to 1999 in line with sales. Selling, general and administrative expenses decreased in 1998, compared with 1997, reflecting lower selling costs for each segment. SEGMENTS The following discussion of our three business segments should be read in conjunction with Note 12 to Notes to Consolidated Financial Statements. ELECTRONICS AND COMMUNICATIONS
1999 1998 1997 --------- --------- --------- (IN MILLIONS, EXCEPT AS INDICATED) Sales....................................................... $340.7 $342.1 $340.0 Operating profit............................................ $ 42.6 $ 42.6 $ 36.8 Operating profit % of sales................................. 12.5% 12.5% 10.8% International sales % of sales.............................. 17.3% 22.2% 23.0% Governmental sales % of sales............................... 29.6% 29.9% 30.2% Capital expenditures........................................ $ 13.5 $ 10.3 $ 10.8
Our Electronics and Communications segment, through Teledyne Electronic Technologies, applies proprietary technology, advanced software and hardware design skills and manufacturing capabilities in three areas: Data Acquisition and Communications Products; Precision Electronic Devices; and Electronic Manufacturing. 1999 Compared with 1998 Our Electronics and Communications segment sales were $340.7 million in 1999, down slightly from 1998 sales of $342.1 million. Operating profit was $42.6 million, the same as 1998. 26 27 Improved revenue growth and operating profit margins in the second half of 1999 allowed the segment to recover from a weak first half. For the year, sales of data acquisition and communications products increased by 3%, led by strong sales growth in communications equipment for business and commuter aircraft. Precision electronic device sales declined by 6% as strong sales increases in medical devices were offset by declines in other lines, particularly military microelectronics. Electronic manufacturing sales grew modestly. Operating profit, which was unchanged from 1998, reflected the sales impacts and included the licensing of certain intellectual property. 1998 Compared with 1997 Sales for our Electronics and Communications segment increased 1% and operating profit increased 16% in 1998, compared with 1997. Improvements in sales and operating profit for the segment in 1998 were due primarily to increases in sales and operating profit of data acquisition and communications products, which increased by $9.8 million and $11.8 million, respectively. These increases were attributable to expanded demand by commercial airlines as well as for the business and commuter aircraft market. Improved sales and operating profit for electronic contract manufacturing services of $7.4 million and $2.6 million, respectively, reflected continued strength in this market. These improvements offset declines in sales and operating profit with respect to precision electronic devices during the period, which decreased by $15.8 million and $9.4 million, respectively, due to continuing economic difficulties in Asia and the continued weakness in the semiconductor equipment market. Results for 1998 included a loss of $1.4 million associated with the contract development of a low-level windshear alert system which was terminated in 1998. SYSTEMS ENGINEERING SOLUTIONS
1999 1998 1997 --------- --------- --------- (IN MILLIONS, EXCEPT AS INDICATED) Sales....................................................... $226.5 $223.2 $210.4 Operating profit............................................ $ 20.2 $ 20.5 $ 13.1 Operating profit % of sales................................. 8.9% 9.2% 6.2% International sales % of sales.............................. 13.3% 21.8% 17.4% Governmental sales % of sales............................... 81.9% 71.3% 75.1% Capital expenditures........................................ $ 2.0 $ 2.6 $ 2.3
Our Systems Engineering Solutions segment, through Teledyne Brown Engineering, offers a wide range of engineering solutions and information services to government defense, aerospace and commercial customers. 1999 Compared with 1998 Sales for the Systems Engineering Solutions segment were $226.5 million, up slightly from 1998 sales of $223.2 million. For 1999, operating income was $20.2 million, down from $20.5 million for 1998. The aerospace, defense and environmental businesses all reported sales increases in double digits, with our environmental business growing by 24% relative to 1998. This strong performance was offset by a decline of $20.9 million in marine instrumentation products sales due to industry conditions affecting petroleum exploration activity. While operating profit was down slightly overall, significant increases in the rest of the business unit nearly offset a decline of approximately $4 million in marine products. 1998 Compared with 1997 Sales for our Systems Engineering Solutions segment increased 6% and operating profit increased 56% in 1998 compared with 1997. The improvement in sales and operating profit was principally due to the increased sales and operating profit of $18.6 million and $5.2 million, respectively, of marine instrumentation products due to favorable conditions in the oil industry, as 27 28 well as participation in defense programs, primarily ballistic missile defense activities. Aerospace program sales decreased by $6.9 million in 1998 as a result of the winding down of the NASA payload integration contract, but operating profit for aerospace programs increased by $800 thousand due to increased deliveries of international aerospace hardware. AEROSPACE ENGINES AND COMPONENTS
1999 1998 1997 --------- --------- --------- (IN MILLIONS, EXCEPT AS INDICATED) Sales....................................................... $236.2 $215.1 $206.2 Operating profit............................................ $ 27.8 $ 26.1 $ 25.0 Operating profit % of sales................................. 11.8% 12.1% 12.1% International sales % of sales.............................. 25.0% 22.5% 21.5% Governmental sales % of sales............................... 26.1% 21.8% 20.7% Capital expenditures........................................ $ 16.0 $ 5.2 $ 2.7
Our Aerospace Engines and Components segment, through Teledyne Continental Motors and Teledyne Cast Parts, focuses on the design, development and manufacture of piston engines, turbine engines, electronic engine controls, batteries and metal castings. 1999 Compared with 1998 Our Aerospace Engines and Components segment's 1999 sales were $236.2 million, which represented an increase of 10% from 1998 sales of $215.1 million. For the year, 1999 operating profit rose 7% to $27.8 million compared with $26.1 million for 1998. Engine related sales grew by over 15% in 1999, led by revenue increases of over 50% in turbine engines relative to 1998. Strong profit improvement in turbines was partially offset by a $3 million charge taken in the second quarter for a piston engine product recall. Sales and operating profit in our Teledyne Cast Parts business declined from the prior year due to production inefficiencies, difficult market conditions and a shift in product mix. 1998 Compared with 1997 Sales for our Aerospace Engines and Components segment increased 4% and operating profit increased 4% in 1998 compared with 1997. These sales and operating profit increases were due principally to a $10.6 million increase in sales and a $4.7 million increase in operating profit for new piston engine and turbine engine programs. These increases offset higher costs associated with manufacturing plant reconfiguration and the development of new products, including new digital electronic piston engine controls and a NASA-sponsored new piston engine program, as well as sales decreases of $1.7 million and a decrease in operating profit of $3.6 million as a result of production inefficiencies and delays in shipments experienced at Teledyne Cast Parts. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Our principal capital requirements are to fund working capital needs, capital expenditures and debt service requirements. It is anticipated that operating cash flow, together with available borrowings under the credit facility described below, will be sufficient to meet these requirements in the year 2000. In 1999, cash provided from operations amounted to $47.4 million, compared with $67.1 million in 1998 and $72.9 million in 1997. The decrease in cash provided from operations in 1999, compared with 1998, reflected an increase in accounts receivables in 1999, compared with 1998, while in 1998 accounts receivable decreased from the prior year. The impact of the increase in accounts receivable in 1999 was partially offset by higher accounts payable and income taxes payable compared with the prior year. 28 29 The January 2, 2000 balance sheet includes several accounts that were transferred to Teledyne Technologies in connection with the spin-off that were not included in the historical balance sheet at year end 1998. These amounts include certain deferred tax assets of $10.8 million, deferred compensation assets of $9.7 million, deferred compensation liabilities of $9.3 million, and net unrecognized actuarial gains on pension obligation of $14.7 million. Working capital increased to $105.3 million at year end 1999, compared with $78.5 million at year end 1998. The increase in working capital was primarily due to the increase in accounts receivable and current deferred tax asset balances. Net cash used in investing activities was primarily for capital expenditures as presented below.
1999 1998 1997 ----- ----- ----- (IN MILLIONS) Electronics and Communications.............. $13.5 $10.3 $10.8 Systems Engineering Solutions................... 2.0 2.6 2.3 Aerospace Engines and Components.................. 16.0 5.2 2.7 ----- ----- ----- $31.5 $18.1 $15.8 ===== ===== =====
Our capital spending for 2000 is expected to be approximately $32.5 million. Commitments at January 2, 2000 for capital expenditures were less than $2 million. The increase in property, plant and equipment primarily reflected capital spending offset, in part, by depreciation. Cash used in financing activities for 1999 primarily reflected net transactions with ATI as well as net payments on long-term debt. Cash used in financing activities for 1998 and 1997 only reflected net transactions with ATI. A $200 million five-year revolving credit agreement that terminates in November 2004 was arranged with a syndicate of banks in connection with the spin-off. ATI drew $100 million under the facility prior to our assumption of the facility. Teledyne Technologies assumed the repayment obligation for the amount drawn by ATI. At January 2, 2000 we had $97 million outstanding under the facility at an interest rate of 7.63%. Excluding interest and fees, no payments are due under the credit facility until the facility terminates. The estimated fair value of our long-term debt at January 2, 2000 was $97 million. At year end 1999, Teledyne Technologies had approximately $103 million of borrowing availability remaining under the credit facility. Borrowings under the credit facility bear interest at variable rates based on the prevailing prime or Eurodollar rates (or, in certain circumstances, the prevailing federal funds rate) and these rates will depend, in part, on the ratio of consolidated total indebtedness to consolidated total capitalization from time to time. The credit facility requires the Company to comply with various financial covenants and restrictions, including covenants and restrictions relating to indebtedness, liens, investments, dividend payments, consolidated net worth, interest coverage and the relationship of total consolidated indebtedness to earnings before interest, taxes and depreciation and amortization. The credit agreement prohibits the declaration of dividends or making other specified payments in amounts exceeding 25% of cumulative net income after the effective date of the credit agreement (which was $1.4 million as of January 2, 2000). The stock of our wholly-owned subsidiary, Teledyne Brown Engineering, Inc., was pledged to the lenders under the credit agreement as collateral to secure the obligations under the credit agreement until certain conditions related to a public offering of the Company's Common Stock are satisfied. In connection with the spin-off, a new defined benefit pension plan was established and we assumed the existing pension obligations for all of the employees, both active and inactive, at the operations which perform government contract work and for active employees at operations which do not perform government contract work. ATI transferred pension assets to fund the new defined benefit pension plan, which at the time of the transfer then had assets in excess of liabilities. In connection with the spin-off, ATI received a tax ruling from the IRS stating in principle that the spin-off will be tax-free to ATI and to ATI's stockholders. The continuing 29 30 validity of the IRS tax ruling is subject to certain factual representations and assumptions, including the completion of a public offering of our Common Stock within one year following the spin-off and use of anticipated gross proceeds of approximately $125 million (less associated costs) for research and development and related capital projects, for the further development of manufacturing capabilities and for acquisitions and/or joint ventures. Pursuant to the Separation and Distribution Agreement, Teledyne Technologies agreed with ATI to undertake such a public offering. In light of current market conditions and other factors, we cannot provide any assurances that we will be able to complete a public offering of such size in the required time period. Our management is currently reviewing this public offering requirement. The Tax Sharing and Indemnification Agreement between ATI and Teledyne Technologies provides that we will indemnify ATI and its agents or representatives for taxes imposed on, and other amounts paid by, them or ATI's stockholders if we take actions or fail to take actions (such as completing the public offering) that result in the spin-off not qualifying as a tax-free distribution. If any of the taxes or other amounts described above were to become payable by Teledyne Technologies, the payment could have a material adverse effect on our financial condition, results of operations and cash flow and could exceed Teledyne Technologies net worth by a substantial amount. OTHER MATTERS Taxes The effective income tax rate was 40.2%, 41.3% and 39.4% in 1999, 1998 and 1997, respectively. Based on our history of operating earnings, expectations of future operating earnings and potential tax planning strategies, it is more likely than not that the deferred income tax assets at January 2, 2000 will be realized. Costs and Pricing Inflationary trends in recent years have been moderate. We primarily use the last-in, first-out method of inventory accounting that reflects current costs in the costs of products sold. These costs, the increasing costs of equipment and other costs are considered in establishing sales pricing polices. The Company emphasizes cost containment in all aspects of its business. Hedging Activities; Market Risk Disclosures Teledyne Technologies generally does not actively engage in derivative financial instruments such as futures contracts, options and swaps, forward exchange contracts or interest rate swaps and futures. While we believe that adequate controls are in place to monitor any hedging activities in which we may engage, many factors, including those beyond our control such as changes in domestic and foreign political and economic conditions, could adversely affect these activities. At January 2, 2000 and January 3, 1999, there were no hedging contracts outstanding. Our primary exposure to market risk relates to changes in interest rates and foreign currency exchange rates. We periodically evaluate these risks and have taken measures to mitigate these risks. We own assets and operate facilities in countries that have been politically stable. Also, our foreign risk management objectives are geared towards stabilizing cash flow from the effects of foreign currency fluctuations. We will, whenever practical, offset local investments in foreign currencies with borrowings denominated in the same currencies. All of the Company's long-term debt is based on a market interest rate and, consequently, the fair value should not be affected materially by changes in market interest rates. Overall, we believe that our exposure to interest rate risk and foreign currency exchange rate changes is not material to our financial condition or results of operations. Environmental Teledyne Technologies is subject to various federal, state, local and international environmental laws and regulations which require that we investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations. This includes sites at which we have been identified as a potentially responsible party under the Compre- 30 31 hensive Environmental Response, Compensation and Liability Act, commonly known as Superfund, and comparable state laws. We are currently involved in the investigation and remediation of a number of sites. Reserves for environmental investigation and remediation totaled approximately $1.2 million at January 2, 2000. As investigation and remediation of these sites proceed and new information is received, we expect that accruals will be adjusted to reflect new information. Based on current information, we do not believe that future environmental costs, in excess of those already accrued, will materially and adversely affect our financial condition or liquidity. However, resolution of one or more of these environmental matters or future accrual adjustments in any one reporting period could have a material adverse effect on our results of operations for that period. With respect to proceedings brought under the federal Superfund laws, or similar state statutes, the Company has been identified as a potentially responsible party at approximately 17 such sites, excluding those sites at which we believe we have no future liability. Our involvement is very limited or de minimis at approximately 10 of these sites, and the potential loss exposure with respect to any of the remaining seven sites is not considered to be material. For additional discussion of environmental matters, see Notes 2 and 13 to Notes to Consolidated Financial Statements. Government Contracts Teledyne Technologies performs work on a number of contracts with the Department of Defense and other agencies and departments of the U.S. Government. Sales under contracts with the U.S. Government, which included contracts with the Department of Defense, were approximately 43% of total sales in 1999 and 40% of our total sales in both 1998 and 1997. For a breakdown of sales to the U.S. Government by segment, see Note 12 to Notes to Consolidated Financial Statements. Defense sales represented approximately 31%, 27% and 26% of our total sales for 1999, 1998 and 1997, respectively. Performance under government contracts has certain inherent risks that could have material adverse effect on the Company's business, results of operations and financial condition. Government contracts are conditioned upon the continuing availability of Congressional appropriations, which usually occurs on a fiscal year basis even though contract performance may take more than one year. The overall U.S. military budget declined in real dollars from the mid-1980s through the early 1990s. Although U.S. military budgets have stabilized in recent years, future levels of defense spending cannot be predicted. Delays or further declines in U.S. military expenditures could adversely affect our business, results of operations and financial condition, depending on the programs affected, the timing and size of the changes and our ability to offset the impact with new business or cost reductions. For information on accounts receivable from the U.S. Government, see Note 4 to Notes to Consolidated Financial Statements. ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133--"Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives in the statement of financial position and measure those instruments at fair value. In 1999, the FASB issued SFAS No. 137--"Accounting for Derivative Instruments and Hedging Activities-- Deferral of the Effective Date of FASB Statement No. 133--an amendment of FASB Statement No. 133," which defers the effective date of SFAS No. 133 for one year. Teledyne Technologies must implement SFAS No. 133 by the first quarter of 2001 and has not yet made a final determination of its impact on the financial statements. YEAR 2000 READINESS DISCLOSURE We spent approximately $1.3 million in 1999 and $2.0 million in 1998 to address Year 2000 issues which excludes expenditures necessi- 31 32 tated by ordinary business needs and continuing technological advancements in the computer industry. We have experienced no significant Year 2000 problems. We plan to monitor our critical computer applications and those of our suppliers and vendors throughout the year in the event that any latent Year 2000 matters arise. CAUTIONARY STATEMENT AS TO FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of Financial Condition and Results of Operations, contains forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, relating to growth opportunities and strategic plans. Actual results could differ materially from these forward-looking statements. Many factors, including the extent and timing of the required public offering, market, economic and political conditions, and implementation difficulties, could change the anticipated results. Additional information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements is contained on pages 16 to 21 of this Form 10-K under the caption "Risk Factors; Cautionary Statements as to Forward-Looking Statements." Forward-looking statements are generally accompanied by words such as "estimate", "project", "predict", "believes" or "expect", that convey the uncertainty of future events or outcomes. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or otherwise. REPORT OF MANAGEMENT The management of Teledyne Technologies is responsible for the integrity of our financial data. Fulfilling this responsibility requires the preparation and presentation of consolidated financial statements in accordance with generally accepted accounting principles. Management uses internal accounting controls, corporate-wide policies and procedures and judgment so that such statements reflect fairly our consolidated financial position, results of operations and cash flows. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK. The information required by this item is included in this Report at page 30 under the caption "Other Matters--Hedging Activities; Market Risk Disclosures" of "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item is included in this Report at page F-1 through F-28. See the "Index to Financial Statements and Related Information" at page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 32 33 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. In addition to the information set forth under the caption "Executive Management" in Part I of this Report, the information concerning the directors of Teledyne Technologies required by this item is set forth in the 2000 Proxy Statement under the caption "Election of Directors" and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item is set forth in the 2000 Proxy Statement under the captions "Director Compensation", "Executive Compensation" and "Compensation Committee Interlocks and Insider Participation" and is incorporated herein by reference. TDY does not incorporate by reference in this Form 10-K either the "1999 Report on Executive Compensation" or the "Cumulative Total Stockholder Return" section of the 2000 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is set forth in the 2000 Proxy Statement under the caption "Stock Ownership Information" and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is set forth in the 2000 Proxy Statement under the caption "Certain Transactions" and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) Exhibits and Financial Statement Schedules: (1) Financial Statements See the "Index to Financial Statements and Related Information" at page F-1 of this Report, which is incorporated herein by reference. (2) Financial Statement Schedules See Schedule II captioned "Valuation and Qualifying Accounts" at page F-28 of this Report, which is incorporated herein by reference. (3) Exhibits A list of exhibits filed with this Form 10-K or incorporated by reference is found in the Exhibit Index immediately following the signature page of this Report and incorporated herein by reference. (4) Reports on Form 8-K filed in the fourth quarter of 1999: Current Report on Form 8-K dated as of November 29, 1999, as amended by Amendment No. 1 (filed to report consummation of the spin-off and distribution of TDY's Common Stock to ATI's stockholders). 33 34 INDEX TO FINANCIAL STATEMENTS AND RELATED INFORMATION Financial Statements: Report of Independent Auditors............................ F-2 Consolidated Statements of Income......................... F-3 Consolidated Balance Sheets............................... F-4 Consolidated Statements of Stockholders' Equity........... F-5 Consolidated Statements of Cash Flows..................... F-6 Notes to Consolidated Financial Statements................ F-7 Quarterly Financial Data (Unaudited)...................... F-27 Financial Statement Schedule: Schedule II--Valuation and Qualifying Accounts............ F-28
F-1 35 REPORT OF INDEPENDENT AUDITORS To the Stockholders and Board of Directors Teledyne Technologies Incorporated: We have audited the accompanying consolidated balance sheets of Teledyne Technologies Incorporated as of January 2, 2000 and January 3, 1999, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three fiscal years in the period ended January 2, 2000. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Teledyne Technologies Incorporated at January 2, 2000 and January 3, 1999, and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended January 2, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. /s/ Ernst & Young LLP Los Angeles, California January 26, 2000 F-2 36 TELEDYNE TECHNOLOGIES INCORPORATED CONSOLIDATED STATEMENTS OF INCOME
1999 1998 1997 -------- -------- -------- (IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) SALES.............................................. $803.4 $780.4 $756.6 COSTS AND EXPENSES Cost of sales.................................... 587.7 572.1 551.1 Selling, general and administrative expenses..... 133.9 126.9 138.2 ------ ------ ------ 721.6 699.0 689.3 ------ ------ ------ OPERATING PROFIT................................... 81.8 81.4 67.3 Interest and debt expense, net................... .8 -- -- Other income..................................... 1.0 1.6 1.4 ------ ------ ------ EARNINGS BEFORE INCOME TAXES....................... 82.0 83.0 68.7 Provision for income taxes......................... 33.0 34.3 27.1 ------ ------ ------ NET INCOME......................................... $ 49.0 $ 48.7 $ 41.6 ====== ====== ====== BASIC EARNINGS PER COMMON SHARE.................... $ 1.79 $ 1.73 $ 1.48 ====== ====== ====== DILUTED EARNINGS PER COMMON SHARE.................. $ 1.79 $ 1.73 $ 1.48 ====== ====== ======
The accompanying notes are an integral part of these financial statements. F-3 37 TELEDYNE TECHNOLOGIES INCORPORATED CONSOLIDATED BALANCE SHEETS
1999 1998 ------- ------- (IN MILLIONS, EXCEPT SHARE AMOUNTS) CURRENT ASSETS Cash and cash equivalents................................. $ 7.1 $ -- Accounts receivable, net.................................. 117.6 103.2 Inventories, net.......................................... 53.7 53.2 Deferred income taxes, net................................ 21.7 12.9 Prepaid expenses and other current assets................. 4.5 1.7 ------ ------ TOTAL CURRENT ASSETS................................... 204.6 171.0 ------ ------ Property, plant and equipment, net........................ 62.1 43.0 Deferred income taxes, net................................ 25.6 22.1 Cost in excess of net assets acquired, net................ 8.2 9.4 Other assets.............................................. 16.9 5.3 ------ ------ TOTAL ASSETS........................................... $317.4 $250.8 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable.......................................... $ 46.9 $ 43.4 Accrued liabilities....................................... 48.6 49.1 Income taxes payable...................................... 3.8 -- ------ ------ TOTAL CURRENT LIABILITIES.............................. 99.3 92.5 Long-term debt............................................ 97.0 -- Net unrecognized actuarial gains on pension obligation.... 14.7 -- Accrued postretirement benefits........................... 33.6 32.9 Other long-term liabilities............................... 28.3 19.0 ------ ------ TOTAL LIABILITIES...................................... 272.9 144.4 ------ ------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Common stock, $.01 par value issued in 1999; authorized 125 million shares; outstanding shares: 1999--26,687,002....................................... .3 -- Additional paid-in capital................................ 37.9 -- Net advances from ATI..................................... -- 104.7 Retained earnings......................................... 5.6 -- Accumulated other comprehensive income.................... .7 1.7 ------ ------ TOTAL STOCKHOLDERS' EQUITY............................. 44.5 106.4 ------ ------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............. $317.4 $250.8 ====== ======
The accompanying notes are an integral part of these financial statements. F-4 38 TELEDYNE TECHNOLOGIES INCORPORATED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
ACCUMULATED ADVANCES ADDITIONAL OTHER TOTAL (TO) FROM COMMON PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS' ATI STOCK CAPITAL EARNINGS INCOME EQUITY --------- ------- ---------- -------- ------------- ------------- (IN MILLIONS) BALANCE, DECEMBER 29, 1996......... $ 126.1 $ -- $ -- $ -- $ 1.9 $ 128.0 Net income/comprehensive income.... 41.6 -- -- -- -- 41.6 Net transactions with ATI.......... (60.2) -- -- -- -- (60.2) -------- ------- ------- ------- ------- ------- BALANCE, DECEMBER 28, 1997......... $ 107.5 $ -- $ -- $ $ 1.9 $ 109.4 Net income......................... 48.7 -- -- -- -- 48.7 Other comprehensive income, net of tax: Foreign currency translation losses....................... -- -- -- -- (.2) (.2) -------- ------- ------- ------- ------- ------- Comprehensive income............... 48.7 -- -- -- (.2) 48.5 Net transactions with ATI.......... (51.5) -- -- -- -- (51.5) -------- ------- ------- ------- ------- ------- BALANCE, JANUARY 3, 1999........... $ 104.7 $ -- $ -- $ -- $ 1.7 $ 106.4 Net income......................... 43.4 -- -- -- -- 43.4 Other comprehensive income, net of tax: Foreign currency translation losses....................... -- -- -- -- (.1) (.1) -------- ------- ------- ------- ------- ------- Comprehensive income............... 43.4 -- -- -- (.1) 43.3 Net transactions with ATI.......... (47.5) -- -- -- -- (47.5) -------- ------- ------- ------- ------- ------- BALANCE PRIOR TO SPIN-OFF, NOVEMBER 29, 1999......................... $ 100.6 $ -- $ -- $ -- $ 1.6 $ 102.2 Spin-off capitalization transactions..................... (100.6) .3 37.9 -- (.9) (63.3) -------- ------- ------- ------- ------- ------- Balance after spin-off $ -- $ .3 $ 37.9 $ -- $ .7 $ 38.9 Net income/comprehensive income.... -- -- -- 5.6 -- 5.6 -------- ------- ------- ------- ------- ------- BALANCE, JANUARY 2, 2000........... $ -- $ .3 $ 37.9 $ 5.6 $ .7 $ 44.5 ======== ======= ======= ======= ======= =======
The accompanying notes are an integral part of these financial statements. F-5 39 TELEDYNE TECHNOLOGIES INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS
1999 1998 1997 ------- ------- ------- (IN MILLIONS) OPERATING ACTIVITIES Net income................................................ $ 49.0 $ 48.7 $ 41.6 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of assets................ 11.9 11.1 11.3 Deferred income taxes.................................. (1.4) (.4) .3 Gains on sale of property, plant and equipment......... (.1) (.4) -- Changes in operating assets and liabilities: Decrease (increase) in accounts receivable............. (14.4) 17.8 .2 Increase in inventories................................ (.5) (6.1) (2.9) Increase in prepaid expenses and other assets.......... (2.8) -- -- Increase in accounts payable........................... 3.6 .8 14.3 Increase (decrease) in accrued liabilities............. (.5) (5.5) 2.8 Increase in current income taxes payable............... 3.8 -- -- Increase in other long-term liabilities................ -- 2.9 3.1 Increase in accrued postretirement benefits............ .6 .2 .4 Other operating, net...................................... (1.8) (2.0) 1.8 ------- ------- ------- NET CASH PROVIDED BY OPERATING ACTIVITIES.............. 47.4 67.1 72.9 ------- ------- ------- INVESTING ACTIVITIES Purchases of property, plant and equipment................ (31.5) (18.1) (15.8) Disposals of property, plant and equipment................ .1 .7 .1 Other investing, net...................................... (.7) 1.8 2.9 ------- ------- ------- NET CASH USED BY INVESTING ACTIVITIES.................. (32.1) (15.6) (12.8) ------- ------- ------- FINANCING ACTIVITIES Net payments on revolving credit agreement................ (3.0) -- -- Net advances/spin-off capitalization with ATI............. (5.2) (51.5) (60.2) ------- ------- ------- NET CASH USED BY FINANCING ACTIVITIES.................. (8.2) (51.5) (60.2) ------- ------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ 7.1 -- (.1) Cash and cash equivalents -- beginning of year.............. -- -- .1 ------- ------- ------- CASH AND CASH EQUIVALENTS -- END OF YEAR.................... $ 7.1 $ -- $ -- ======= ======= =======
The accompanying notes are an integral part of these financial statements. F-6 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. ALLEGHENY TELEDYNE INCORPORATED'S SPIN-OFF OF TELEDYNE TECHNOLOGIES INCORPORATED - -------------------------------------------------------------------------------- Effective November 29, 1999 (the Distribution Date), Teledyne Technologies Incorporated (Teledyne Technologies or the Company) became an independent, public company as a result of the distribution by Allegheny Teledyne Incorporated, now known as Allegheny Technologies Incorporated (ATI) of the Company's Common Stock, $.01 par value per share, to holders of ATI Common Stock at a distribution ratio of one for seven (the spin-off). The spin-off has been treated as a tax-free distribution for federal income tax purposes. Immediately prior to the spin-off, ATI transferred certain of the businesses of ATI's Aerospace and Electronics segment to the new corporation. ATI no longer has a financial investment in Teledyne Technologies. Teledyne Technologies consists of the operations of the Teledyne Electronic Technologies division with operations in the United States, United Kingdom and Mexico; Teledyne Brown Engineering division with operations in the United States and United Kingdom; Teledyne Continental Motors and Teledyne Cast Parts divisions, both with operations in the United States. Prior to the spin-off, these operations were divisions of wholly-owned subsidiaries of ATI. A $200 million five-year revolving credit agreement was arranged with a syndicate of banks in connection with the spin-off. ATI drew $100 million under the facility prior to the assumption of the facility by Teledyne Technologies. Teledyne Technologies assumed the repayment obligation for the amount drawn by ATI. In addition, prior to and in connection with the spin-off, Teledyne Technologies and ATI entered into agreements providing for the separation of the companies and governing various relationships for separating employee benefits and tax obligations, indemnification and transition services. The consolidated financial statements for periods prior to the spin-off included certain expenses (primarily corporate expenses) based on an allocation of the overall expense of ATI. ATI's historical cost basis of assets and liabilities has been reflected in Teledyne Technologies' financial statements. The financial information in these financial statements is not necessarily indicative of results of operations, financial position and cash flows that would have occurred if Teledyne Technologies had been a separate stand-alone entity during the periods presented or of future results. The consolidated financial statements included herein do not reflect changes that occurred in the capitalization and operations of Teledyne Technologies as a result of, or after, the spin-off other than for the period following the spin-off. The following unaudited pro forma financial information is presented for informational purposes only and may not reflect the results of operations or financial position of Teledyne Technologies that would have occurred had Teledyne Technologies operated as a separate, independent company for the periods presented. The pro forma financial information should not be relied upon as being indicative of future results. Pro forma adjustments reflect the estimated expense impacts (primarily interest expense and corporate expenses) that would have been incurred had Teledyne Technologies been operated as a separate company as of the beginning of each year and as capitalized at the time of the spin-off for each period presented. As part of the spin-off, Teledyne Technologies assumed $100 million of long-term debt incurred by ATI. Pro forma income includes pro forma interest expense on the long-term debt as if it had been outstanding for all periods presented. Pro forma income adjusts corporate expenses to an annual level of $15 million from the amount previously allocated, F-7 41 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) which was lower. The following is Teledyne Technologies unaudited pro forma financial information for the 1999, 1998 and 1997 fiscal years:
1999 1998 1997 -------- -------- -------- (IN MILLIONS, EXCEPT PER SHARE-DATA) SALES........................................... $803.4 $780.4 $756.6 COSTS AND EXPENSES Cost of sales................................. 587.7 572.1 551.1 Selling, general and administrative expenses................................... 140.2 134.1 146.6 ------ ------ ------ 727.9 706.2 697.7 ------ ------ ------ OPERATING PROFIT................................ 75.5 74.2 58.9 Interest and debt expense, net................ 8.1 8.0 8.0 Other income.................................. 1.0 1.6 1.4 ------ ------ ------ INCOME BEFORE INCOME TAXES...................... 68.4 67.8 52.3 Provision for income taxes...................... 27.5 28.0 20.1 ------ ------ ------ NET INCOME...................................... $ 40.9 $ 39.8 $ 32.2 ====== ====== ====== BASIC EARNINGS PER COMMON SHARE................. $ 1.50 $ 1.41 $ 1.15 ====== ====== ====== DILUTED EARNINGS PER COMMON SHARE............... $ 1.50 $ 1.41 $ 1.15 ====== ====== ======
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------------------------------------- PRINCIPLES OF CONSOLIDATION The consolidated financial statements of Teledyne Technologies include the accounts of the businesses distributed by ATI and its subsidiaries as described in Note 1. Significant intercompany accounts and transactions have been eliminated. Certain financial statements, notes and supplementary data for prior years have been changed to conform to the 1999 presentation. FISCAL YEAR The Company is on a 53/52-week fiscal year convention. Fiscal years 1999 and 1997 were 52-week years and ended on January 2, 2000 and December 28, 1997, respectively and fiscal year 1998 was a 53-week year and ended on January 3, 1999. References to 1999, 1998 and 1997 are intended to refer to the respective fiscal year unless otherwise noted. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts and related disclosures. Actual results could differ from those estimates. Management believes that the estimates are reasonable. F-8 42 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) REVENUE RECOGNITION Commercial sales and revenue from U.S. Government fixed-price type contracts generally are recorded as shipments are made or as services are rendered. Occasionally, for certain fixed-price type contracts that require substantial performance over a long time period (one or more years) before shipments begin, sales may be recorded based upon attainment of scheduled performance milestones which could be time, event or expense driven. In these few instances, invoices are submitted to the customer under a contractual agreement and payments are made by the customer. Sales under cost-reimbursement contracts are recorded as costs are incurred and fees are earned. Since certain contracts extend over a long period of time, all revisions in cost and funding estimates during the progress of work have the effect of adjusting the current period earnings on a cumulative catch-up basis. If the current contract estimate indicates a loss, provision is made for the total anticipated loss. RESEARCH AND DEVELOPMENT Company-funded research and development costs were $27.8 million in 1999, $24.8 million in 1998 and $27.7 million in 1997, and include bid and proposal costs, are expensed as incurred. Costs related to customer-funded research and development contracts were $188.1 million in 1999, $150.3 million in 1998 and $160.7 million in 1997 and are charged to costs and expenses as the related sales are recorded. A portion of the costs incurred for Company-funded research and development is recoverable through overhead cost allowances on government contracts. INCOME TAXES Provision for income taxes includes deferred taxes resulting from temporary differences in income for financial and tax purposes using the liability method. Such temporary differences result primarily from differences in the carrying value of assets and liabilities. NET INCOME PER COMMON SHARE The average number of shares of Teledyne Technologies' Common Stock used in the computation of basic net income per common share was 27,303,421, 28,107,241 and 28,085,823 for the fiscal years ended January 2, 2000, January 3, 1999 and December 28, 1997, respectively. Prior to the spin-off, the number of shares outstanding was based on a distribution ratio of one share of Teledyne Technologies' Common Stock for every seven shares of ATI common stock. The average number of shares of Teledyne Technologies' Common Stock used in the computation of diluted net income per common share was 27,334,737, 28,133,879 and 28,120,380 for the fiscal years ended January 2, 2000, January 3, 1999 and December 28, 1997, respectively. ACCOUNTS RECEIVABLE Receivables are presented net of a reserve for doubtful accounts of $3.5 million at January 2, 2000 and $2.9 million at January 3, 1999. Expense recorded for the reserve for doubtful accounts was $608 thousand, $1.4 million and $1.3 million for the 1999, 1998 and 1997 fiscal years, respectively. The Company markets its products and services principally throughout the United States, Europe, Japan and Canada to commercial customers and agencies of, and prime contractors to, the U.S. Government. Trade credit is extended based F-9 43 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) upon evaluations of each customer's ability to perform its obligations, which are updated periodically. CASH AND CASH EQUIVALENTS Cash equivalents consist of highly liquid money-market mutual funds and bank deposits with initial maturities of three months or less. Cash equivalents totaled approximately $5.5 million at January 2, 2000 and included only bank deposits. INVENTORIES Inventories are stated at the lower of cost (last-in, first-out; first-in, first-out; and average cost methods) or market, less progress payments. Costs include direct material, direct labor, applicable manufacturing and engineering overhead, and other direct costs. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is capitalized at cost. The method of depreciation adopted for all property, plant and equipment placed into service after July 1, 1996 is the straight-line method. For property, plant and equipment acquired prior to July 1, 1996, depreciation is computed using a combination of accelerated and straight-line methods. The Company believes the straight-line method more appropriately reflects its financial results by better allocating costs of new property over the useful lives of these assets. COST IN EXCESS OF NET ASSETS ACQUIRED Cost in excess of net assets acquired related to businesses purchased prior to November 1970 is not being amortized. Cost in excess of net assets acquired related to businesses purchased after November 1970 is being amortized on a straight-line basis over periods not exceeding 15 years. Goodwill amortization expense was $672 thousand, $582 thousand and $510 thousand in 1999, 1998 and 1997, respectively. OTHER LONG-LIVED ASSETS The carrying value of long-lived assets is periodically evaluated in relation to the operating performance and future undiscounted cash flows of the underlying businesses. Adjustments are made if the sum of expected future net cash flows is less than book value. In 1997, the Company recorded an impairment loss of approximately $1.8 million in general and administrative expenses primarily to write off its investment in a limited liability corporation that was determined to have no value. This determination was made as a result of programs that were discontinued in the Systems Engineering Solutions business segment in 1997. ENVIRONMENTAL Costs that mitigate or prevent future environmental contamination or extend the life, increase the capacity or improve the safety or efficiency of property utilized in current operations are capitalized. Other costs that relate to current operations or an existing condition caused by past operations are expensed. Environmental liabilities are recorded when the Company's liability is probable and the costs are reasonably estimable, but generally not later than the completion of the feasibility study or the Company's recommendation of a remedy or commitment to an appropriate plan of action. The accruals are reviewed F-10 44 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) periodically and, as investigations and remediations proceed, adjustments are made as necessary. Accruals for losses from environmental remediation obligations do not consider the effects of inflation, and anticipated expenditures are not discounted to their present value. The accruals are not reduced by possible recoveries from insurance carriers or other third parties, but do reflect anticipated allocations among potentially responsible parties at federal Superfund sites or similar state-managed sites and an assessment of the likelihood that such parties will fulfill their obligations at such sites. The measurement of environmental liabilities by the Company is based on currently available facts, present laws and regulations, and current technology. Such estimates take into consideration the Company's prior experience in site investigation and remediation, the data concerning cleanup costs available from other companies and regulatory authorities, and the professional judgment of the Company's environmental experts in consultation with outside environmental specialists, when necessary. FOREIGN CURRENCY TRANSLATION The Company's foreign entities' accounts are measured using local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at year-end. Revenues and expenses are translated at the rates of exchange prevailing during the year. Unrealized translation gains and losses arising from differences in exchange rates from period to period are included as a component of accumulated other comprehensive income in stockholders' equity. ACCOUNTING PRONOUNCEMENTS SFAS No. 137 and 133 -- In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133--"Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives in the statement of financial position and measure those instruments at fair value. In 1999, the FASB issued SFAS No. 137--"Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133--an amendment of FASB Statement No. 133," which defers the effective date of SFAS No. 133 for one year. Teledyne Technologies must implement SFAS No. 133 by the first quarter of 2001 and has not yet made a final determination of its impact on the financial statements. SFAS No. 132 -- Effective for 1998, Teledyne Technologies adopted the provisions of SFAS No. 132--"Employers' Disclosures about Pensions and Other Postretirement Benefits." This statement standardized the disclosure requirements for pensions and other postretirement benefits and amends SFAS No. 87--"Employers' Accounting for Pensions", SFAS No. 88--"Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans" and SFAS No. 106--"Employers' Accounting for Postretirement Benefits Other Than Pensions." The provisions of SFAS No. 132 are disclosure oriented and do not change the measurement or recognition of the plans. Accordingly, the implementation of SFAS No. 132 did not have an impact on Teledyne Technologies' consolidated financial position or results of operations. SFAS No. 131 -- Effective for 1998, Teledyne Technologies adopted the provisions of SFAS No. 131--"Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for reporting and display of information about operating F-11 45 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) segments. It supersedes or amends several FASB statements, most notably, SFAS No. 14--"Financial Reporting for Segments of a Business Enterprise." The implementation of SFAS No. 131 did not have an impact on Teledyne Technologies' consolidated financial position or results of operations. SFAS No. 130 -- Effective for 1998, Teledyne Technologies adopted the provisions of SFAS No. 130--"Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. The implementation of SFAS No. 130 did not have an impact on Teledyne Technologies' results of operations. Teledyne Technologies' comprehensive income is primarily composed of net income and foreign currency translation adjustments. Teledyne Technologies' comprehensive income was $48.9 million, $48.5 million and $41.6 million for 1999, 1998 and 1997, respectively. HEDGING ACTIVITIES Teledyne Technologies generally does not actively engage in derivative financial instruments such as futures contracts, options and swaps, forward exchange contracts or interest rate swaps and futures. While Teledyne Technologies believes that adequate controls are in place to monitor any hedging activities in which the Company may engage, many factors, including those beyond its control such as changes in domestic and foreign political and economic conditions, could adversely affect these activities. At January 2, 2000 and January 3, 1999, there were no hedging contracts outstanding. SUPPLEMENTAL CASH FLOW INFORMATION Until the spin-off date, ATI was responsible for cash payments for federal, foreign and state income taxes. No tax payments were made by Teledyne Technologies from the date of the spin-off through year end. Interest paid by Teledyne Technologies from the date of the spin-off to year end 1999 totaled approximately $565 thousand. NOTE 3. FINANCIAL INSTRUMENTS - -------------------------------------------------------------------------------- Teledyne Technologies values financial instruments as required by SFAS No. 107--"Disclosures about Fair Value of Financial Instruments." The carrying amounts of cash and cash equivalents approximate fair value because of the short maturity of those instruments. Teledyne Technologies estimates the fair value of its long-term debt based on the value of debt of similar maturity and characteristics. The estimated fair value of Teledyne Technologies' long-term debt at January 2, 2000 approximated the carrying value of $97 million. The carrying value of other on-balance sheet financial instruments approximates fair value, and the cost, if any, to terminate off-balance sheet financial instruments is not significant. F-12 46 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 4. ACCOUNTS RECEIVABLE - -------------------------------------------------------------------------------- Accounts receivable are summarized as follows:
1999 1998 ------ ------ Balance at year end (IN MILLIONS) U.S. Government and prime contractors contract receivables: Billed receivables................................. $ 27.1 $ 18.1 Unbilled receivables............................... 20.4 21.3 Other receivables, primarily commercial.............. 73.6 66.7 ------ ------ 121.1 106.1 Reserve for doubtful accounts........................ (3.5) (2.9) ------ ------ Total accounts receivable, net....................... $117.6 $103.2 ====== ======
The billed contract receivables from the U.S. Government and prime contractors contain $9.8 million and $5.9 million at January 2, 2000 and January 3, 1999, respectively, due to long-term contracts. The unbilled contract receivables from the U.S. Government and prime contractors contain $10.5 million and $21.3 million at January 2, 2000 and January 3, 1999, respectively, due to long-term contracts. Unbilled contract receivables represent accumulated costs and profits earned but not yet billed to customers. The Company believes that substantially all such amounts will be billed and collected within one year. NOTE 5. INVENTORIES - -------------------------------------------------------------------------------- Inventories consisted of the following:
1999 1998 ------ ------ Balance at year end (IN MILLIONS) Raw materials and supplies............................ $ 24.2 $ 23.3 Work in process....................................... 62.5 65.3 Finished goods........................................ 9.1 10.4 ------ ------ Total inventories at current cost (first-in, first-out).......................................... 95.8 99.0 LIFO reserve.......................................... (36.8) (39.0) Progress payments..................................... (5.3) (6.8) ------ ------ Total inventories, net................................ $ 53.7 $ 53.2 ====== ======
Inventories, before progress payments, determined on the last-in, first-out method were $55.8 million at January 2, 2000 and $56.3 million at January 3, 1999. The remainder of the inventory was determined using the first-in, first-out and average cost methods. These inventory values do not differ materially from current cost. During 1999, 1998 and 1997, inventory usage resulted in liquidations of last-in, first-out inventory quantities. These inventories were carried at the lower costs prevailing in prior years as compared with the cost of current purchases. The effect of these last-in, first-out F-13 47 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) liquidations was to increase net income by $2.2 million in 1999, $264 thousand in 1998 and $2.2 million in 1997. Total inventories at current cost were net of $6.1 million and $5.1 million at January 2, 2000 and January 3, 1999, respectively, which were related to reserves for obsolete inventories. Inventories, before progress payments, related to long-term contracts were $8.8 million and $2.0 million at January 2, 2000 and January 3, 1999, respectively. Progress payments related to long-term contracts were $1.9 million and $125 thousand at January 2, 2000 and January 3, 1999, respectively. Under the contractual arrangements by which progress payments are received, the customer has a security interest in the inventories associated with specific contracts. NOTE 6. SUPPLEMENTAL BALANCE SHEET INFORMATION - -------------------------------------------------------------------------------- Property, plant and equipment were as follows:
1999 1998 ------- ------- Balance at year end (IN MILLIONS) Land................................................ $ 5.5 $ 5.5 Buildings........................................... 36.2 36.7 Equipment........................................... 152.7 135.5 ------- ------- 194.4 177.7 Accumulated depreciation and amortization........... (132.3) (134.7) ------- ------- Total property, plant and equipment, net............ $ 62.1 $ 43.0 ======= =======
Accrued liabilities included salaries and wages of $24.7 million and $22.6 million at January 2, 2000 and January 3, 1999, respectively. Other long-term liabilities included reserves for self-insurance and deferred compensation liabilities. NOTE 7. STOCKHOLDERS' EQUITY - -------------------------------------------------------------------------------- COMMON STOCK In connection with the spin-off 26,687,002 shares of Teledyne Technologies' Common Stock were issued and are outstanding at year end 1999. This amount includes 943 shares issued under the Non-Employee Director Stock Compensation Plan. PREFERRED STOCK Authorized preferred stock may be issued with designations, powers and preferences designated from time to time by the Board of Directors. At January 2, 2000, there were no shares of preferred stock issued. STOCKHOLDER RIGHTS PLAN On November 12, 1999, the Company's Board of Directors unanimously adopted a stockholder rights plan under which preferred share purchase rights were distributed as a dividend on each share of Teledyne Technologies' Common Stock distributed to ATI's F-14 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) stockholders in connection with the spin-off and each share to become outstanding between the effective date of the spin-off and the earliest of the distribution date, redemption date and final expiration date. The rights will be exercisable only if a person or group acquires 15 percent or more of the Company's Common Stock or announces a tender offer, the consummation of which would result in ownership by a person or group of 15 percent or more of the Common Stock. Each right will entitle stockholders to then buy one-hundredth of a share of a new series of junior participating preferred stock at an exercise price of $60. There are 1,250,000 shares of Series A Junior Participating Preferred Stock authorized for issuance under the plan. The record date for the distribution was the close of business of November 22, 1999. The rights will expire on November 12, 2009, subject to earlier redemption or exchange by Teledyne Technologies as described in the plan. The rights distribution is not taxable to stockholders. STOCK INCENTIVE PLAN ATI sponsored an incentive plan that provided for stock option awards to officers and key employees. Teledyne Technologies has officers and key employees that have participated in this plan. In connection with the spin-off, outstanding stock options held by Teledyne Technologies' employees were converted into options to purchase Teledyne Technologies' Common Stock. The number of shares and the exercise price of each ATI option that was converted to a Teledyne Technologies' option was converted based upon a formula designed to preserve the inherent economic value, vesting and term provisions of such ATI options as of the Distribution Date. The exchange ratio and fair market value of the Teledyne Technologies' Common Stock, upon active trading, also impacted the number of options issued to Teledyne Technologies' employees. Teledyne Technologies has established its own long-term incentive plan which provides its Board of Directors the flexibility to grant restricted stock, incentive stock options, stock appreciation rights and non-qualified stock options to officers and employees of Teledyne Technologies. The following disclosures are based on stock options held by Teledyne Technologies' employees and have been converted from ATI options to Teledyne Technologies' options as noted above. Teledyne Technologies accounts for its stock option plans in accordance with APB Opinion 25--"Accounting for Stock Issued to Employees" (APB 25), and related Interpretations. Under APB 25, no compensation expense is recognized because the exercise price of the Company's employee stock options equals the market price of the underlying stock at the date of the grant. If compensation cost for these options had been determined using the fair-value method prescribed by FASB Statement No. 123, "Accounting for Stock-based Compensation" (SFAS No. 123) net income would have been reduced by $1.6 million, $673 thousand and $154 thousand for the fiscal years 1999, 1998 and 1997, respectively. Under SFAS No. 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes F-15 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) option-pricing model with the following weighted-average assumptions (there were no option grants in 1997):
1999 1998 ----- ----- Expected dividend yield..................................... -- 2.8% Expected volatility......................................... 40.1% 31.0% Risk-free interest rate..................................... 5.5% 5.0% Expected lives.............................................. 8.0 8.0 Weighted-average fair value of options granted during the year...................................................... $4.91 $7.25
Stock option transactions in ATI common stock under ATI's incentive plan for Teledyne Technologies' employees have been converted to Teledyne Technologies as noted above and are summarized as follows:
1999 1998 1997 -------------------- -------------------- ------------------ WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE --------- -------- --------- -------- ------- -------- Beginning balance......... 1,757,392 $12.36 643,985 $ 7.66 708,816 $ 7.58 Granted or issued......... 487,500 $ 8.93 1,123,968 $14.99 -- $ -- Exercised................. (91,329) $ 5.76 (12,213) $ 6.64 (64,831) $ 6.87 Canceled or expired....... (30,266) $13.42 -- $ -- -- $ -- --------- ------ --------- ------ ------- ------ Ending balance............ 2,123,297 $11.84 1,757,392 $12.36 643,985 $ 7.66 ========= ====== ========= ====== ======= ====== Options exercisable at year-end................ 856,087 $10.93 495,891 $ 7.27 409,997 $ 6.85 ========= ====== ========= ====== ======= ======
For options outstanding at year end 1999, the exercise prices were between $5.57 and $17.60 and the weighted-average remaining contractual life was approximately 8 years. For options exercisable at year end 1999 the exercise prices were also between $5.57 and $17.60. NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN Teledyne Technologies also sponsors a stock option plan for non-employee directors. At year end 1999, options for 15,073 shares were issued and outstanding under the plan with exercise prices between $6.62 and $9.94 and a weighted-average exercise price of $9.70. All of these options become exercisable on November 29, 2000. F-16 50 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 8. RELATED PARTY TRANSACTIONS - -------------------------------------------------------------------------------- The accompanying financial statements include transactions with ATI for the year-to-date period ended November 29, 1999 and the 1998 and 1997 fiscal years:
1999(A) 1998 1997 ------- ------- ------- (IN MILLIONS) Net advances from ATI, beginning of the year.............. $104.7 $ 107.5 $ 126.1 Net cash transactions with ATI: Current provision for income taxes...................... 26.5 34.7 26.8 Insurance expense....................................... 15.9 17.2 18.6 Pension expense (income)................................ (5.8) (1.7) .7 Corporate general and administrative expense............ 7.3 7.8 7.6 Other net cash to ATI(b)................................ (91.4) (109.5) (113.9) ------ ------- ------- Net cash transactions with ATI.......................... (47.5) (51.5) (60.2) Net income................................................ 43.4 48.7 41.6 ------ ------- ------- Net advances from ATI, end of period...................... $100.6 $ 104.7 $ 107.5 ====== ======= =======
- ------------------------- (a) For the year-to-date period ending November 29, 1999. (b) Includes $100 million in long-term debt incurred by ATI and assumed by Teledyne Technologies. Until the spin-off date, Teledyne Technologies participated in ATI's centralized cash management system. Cash receipts in excess of cash requirements were transferred to ATI. These transactions with ATI were non-interest bearing and the net advances fluctuated on a daily basis. Corporate general and administrative expenses represent allocations for expenses incurred by ATI on the Company's behalf including costs for finance, legal, tax and human resources functions. Amounts above were allocated based on net sales, which management believes to be reasonable. Teledyne Technologies participated in the defined benefit pension plan sponsored by ATI through the date of the spin-off. The expense for the plan was allocated to Teledyne Technologies based upon actuarially-determined amounts for the pension obligation and assets ultimately transferred from ATI to Teledyne Technologies at the time of the spin-off. Teledyne Technologies also participated in casualty, medical and life insurance programs sponsored by ATI. Insurance expense was allocated to Teledyne Technologies based upon actual losses incurred plus a share of pooled catastrophic losses under the ATI self-insurance program. In the opinion of management, the allocations of these expenses were reasonable. In addition, prior to and in connection with the spin-off, Teledyne Technologies and ATI entered into agreements providing for the separation of the companies and governing various relationships for separating employee benefits and tax obligations, indemnification and transition services. Net sales include $1.4 million, $1.1 million and $293 thousand of sales to other ATI subsidiaries for the eleven month period ended November 30, 1999 and the fiscal years ended January 3, 1999 and December 28, 1997, respectively. There was a receivable of $532 thousand at year end 1998 from other ATI subsidiaries. F-17 51 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9. LONG-TERM DEBT - -------------------------------------------------------------------------------- Long-term debt at January 2, 2000, was $97 million in the form of bank borrowings under a $200 million long-term, revolving credit agreement. Borrowings under the agreement are on a revolving basis under commitments available until November 2004. The Company had approximately $103 million of borrowing availability under the credit facility at January 2, 2000. The interest-rate applicable to borrowings under the agreement is, indexed to the bank prime rate or the London Interbank Offered Rate (LIBOR), plus appropriate spreads over such indices during the period of the credit agreement and was 7.63% at January 2, 2000. The agreement also provides for a facility fee which are currently equal to .35% of the credit line. The facility fee will vary between .35% and .20% depending on Teledyne Technologies' capitalization ratio as calculated from time to time. Interest expense incurred on long-term debt and facility fees in 1999 were $796 thousand from the date of the spin-off. The financial covenants of the revolving credit agreement require the Company to maintain specified minimum consolidated net worth and ratios of consolidated debt and interest expense to certain measures of income. Under the most restrictive of these covenants, approximately $1.4 million of stockholders' equity was available for dividends as of January 2, 2000. NOTE 10. INCOME TAXES - -------------------------------------------------------------------------------- Until the effective date of the spin-off, Teledyne Technologies was included in the consolidated federal and certain state income tax returns of ATI. ATI is responsible for paying the taxes related to such returns including any subsequent adjustment resulting from the redetermination of such tax liability by the applicable taxing authorities. Provision for income taxes was calculated as if Teledyne Technologies had filed separate income tax returns for all years presented. Provision for income taxes was as follows:
1999 1998 1997 ----- ----- ----- (IN MILLIONS) Current Federal.............................................. $27.7 $29.1 $22.3 State................................................ 6.4 5.1 4.1 Foreign.............................................. .3 .5 .4 ----- ----- ----- 34.4 34.7 26.8 ----- ----- ----- Deferred Federal.............................................. (1.3) (.4) .2 State................................................ (.1) -- .1 ----- ----- ----- (1.4) (.4) .3 ----- ----- ----- Provision for income taxes............................. $33.0 $34.3 $27.1 ===== ===== =====
F-18 52 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Income before income taxes included income from domestic operations of $81.9 million for 1999, $82.2 million for 1998 and $68.8 million for 1997. The following is a reconciliation of the statutory federal income tax rate to the actual effective income tax rate:
1999 1998 1997 ---- ---- ---- U.S. federal statutory tax rate........................... 35.0% 35.0% 35.0% State and local taxes, net of federal benefit............. 5.2 4.5 3.8 Other..................................................... -- 1.8 .6 ---- ---- ---- Effective income tax rate................................. 40.2% 41.3% 39.4% ==== ==== ====
Deferred income taxes result from temporary differences in the recognition of income and expense for financial and income tax reporting purposes, and differences between the fair value of assets acquired in business combinations accounted for as purchases for financial reporting purposes and their corresponding tax bases. Deferred income taxes represent future tax benefits or costs to be recognized when those temporary differences reverse. No valuation allowance has been recorded for 1999 or 1998. The categories of assets and liabilities that have resulted in differences in the timing of the recognition of income and expense were as follows:
1999 1998 ----- ----- (IN MILLIONS) Deferred income tax assets: Postretirement benefits other than pensions.......... $12.6 $12.9 Reserves............................................. 16.1 10.0 Deferred compensation and other benefit plans........ 9.8 -- Inventory valuation.................................. 6.7 5.4 Accrued vacation..................................... 5.2 4.2 Other items.......................................... -- 4.2 ----- ----- Total deferred income tax assets....................... 50.4 36.7 ----- ----- Deferred income tax liabilities: Property, plant and equipment differences............ 3.0 1.7 Other items.......................................... .1 -- ----- ----- Total deferred income tax liabilities.................. 3.1 1.7 ----- ----- Net deferred income tax asset.......................... $47.3 $35.0 ===== =====
NOTE 11. PENSION PLANS AND POSTRETIREMENT BENEFITS - -------------------------------------------------------------------------------- Prior to the spin-off, certain Teledyne Technologies' employees participated in the noncontributory defined benefit plan sponsored by ATI. Benefits under the defined benefit plan are generally based on years of service and/or final average pay. ATI funded the pension plan in accordance with the requirements of the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code. F-19 53 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Net periodic pension income or expense allocated to Teledyne Technologies was $6.6 million of income, $1.7 of income and $722 thousand of expense in the years ended January 2, 2000, January 3, 1999 and December 28, 1997, respectively. As of the spin-off date, Teledyne Technologies assumed the existing defined benefit plan obligations for all of Teledyne Technologies' employees, both active and inactive, at its companies that perform government contract work and for Teledyne Technologies' active employees at its companies that do not perform government contract work. ATI transferred pension assets to fund the new Teledyne Technologies' defined benefit pension plan, which at the time of the transfer then had assets in excess of liabilities. Teledyne Technologies also participates in a 401(k) plan that is open to all full time U.S. employees which is currently sponsored by ATI. The costs associated with this plan were $2.9 million, $3.3 million, and $1.2 million for fiscal 1999, 1998 and 1997, respectively. Teledyne Technologies intends to establish its own 401(k) plan effective April 2000. The Company sponsors several postretirement defined benefit plans covering certain salaried and hourly employees. The plans provide health care and life insurance benefits for eligible retirees. The following table sets forth the components of net period pension benefit (income) expense for Teledyne Technologies' defined benefit pension plans and post-retirement benefit plans for fiscal 1999, 1998 and 1997:
PENSION BENEFITS POSTRETIREMENT BENEFITS -------------------------- ----------------------- 1999 1998 1997 1999 1998 1997 ------ ------ ------ ----- ----- ----- (IN MILLIONS) Service cost -- benefits earned during the period.... $ 12.7 $ 12.8 $ 13.2 $ .4 $ .3 $ .3 Interest cost on benefit obligation.................. 23.6 22.6 21.0 1.8 1.7 1.8 Expected return on plan assets...................... (35.9) (32.4) (28.4) -- -- -- Amortization of net transition asset....................... (6.4) (6.4) (6.4) -- -- -- Amortization of prior service cost........................ 2.1 2.1 1.3 (.4) (.4) (.4) Recognized actuarial (gain) loss........................ (2.7) (.4) -- (.4) (.1) -- ------ ------ ------ ---- ---- ---- Net periodic benefit (income) expense..................... $ (6.6) $ (1.7) $ .7 $1.4 $1.5 $1.7 ====== ====== ====== ==== ==== ====
F-20 54 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following table sets forth the reconciliation of the beginning and ending balances of the benefit obligation of the defined benefit pension and postretirement benefit plans:
POSTRETIREMENT PENSION BENEFITS BENEFITS ---------------- -------------- 1999 1998 1999 1998 ------ ------ ----- ----- (IN MILLIONS) Changes in benefit obligation: Benefit obligation -- beginning of year... $344.8 $329.3 $25.1 $26.6 Service cost -- benefits earned during the period................................. 12.7 12.8 .3 .3 Interest cost on projected benefit obligation............................. 23.6 22.6 1.8 1.7 Actuarial (gain) loss..................... (.2) (16.1) .7 (2.2) Amendments................................ -- 9.5 -- -- Benefits paid............................. (13.9) (13.3) (.8) (1.3) ------ ------ ----- ----- Benefit obligation -- end of year........... $367.0 $344.8 $27.1 $25.1 ====== ====== ===== =====
The following table sets forth the reconciliation of the beginning and ending balances of the fair value of plan assets for Teledyne Technologies' defined benefit pension plans:
PENSION BENEFITS ---------------- 1999 1998 ------ ------ (IN MILLIONS) Changes in plan assets: Fair value of plan assets -- beginning of year.............. $403.9 $367.0 Actual return on plan assets.............................. 47.5 50.0 Employer contribution..................................... .2 .2 Benefits paid............................................. (13.9) (13.3) ------ ------ Fair value of plan assets -- end of year.................... $437.7 $403.9 ====== ======
The weighted average discount rate used in determining the benefit obligations was 7.0% as of January 2, 2000 and January 3, 1999. The weighted average rate of increase in future compensation levels used in determining the benefit obligations was approximately 4.5% in 1999 and 1998. The expected weighted average long-term rate of return on assets was 9.0% in 1999 and 1998. The following table sets forth the funded status and amounts recognized in Teledyne Technologies' consolidated balance sheets for the postretirement benefit plans at year end 1999 and year end 1998. The following table also sets forth the funded status and amounts recognized in Teledyne Technologies' consolidated balance sheets for the defined benefit pension plan at year end 1999. The amounts shown for 1998 for the defined benefit pension F-21 55 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) plan are not reflected in consolidated balance sheet at year end 1998 since the plan was not transferred until the date of the spin-off:
POSTRETIREMENT PENSION BENEFITS BENEFITS ---------------- ------------------ 1999 1998 1999 1998 ------ ------ ------ ------ (IN MILLIONS) Funded status.............................. $ 70.7 $ 59.1 $(27.1) $(25.1) Unrecognized net transition obligation (asset).................................. (11.1) (17.6) -- -- Unrecognized prior service cost............ 15.4 17.6 (1.1) (1.4) Unrecognized net gain...................... (89.7) (80.5) (5.4) (6.4) ------ ------ ------ ------ Net amount recognized...................... $(14.7) $(21.4) $(33.6) $(32.9) ====== ====== ====== ====== Prepaid benefit cost....................... $(10.6) $(18.2) $ -- $ -- Accrued benefit liability.................. (5.5) (5.0) (33.6) (32.9) Intangible asset........................... 1.4 1.7 -- -- Other...................................... -- .1 -- -- ------ ------ ------ ------ Net amount recognized...................... $(14.7) $(21.4) $(33.6) $(32.9) ====== ====== ====== ======
The annual assumed rate of increase in the per capita cost of covered benefits (the health care cost trend rate) for health care plans was 8.4% in 2000 and was assumed to decrease to 5.0% in the year 2002 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one percentage point increase in the assumed health care cost trend rates would result in an increase in the annual service and interest costs by $273 thousand for 1999 and would result in an increase in the postretirement benefit obligation by $3.4 million at January 2, 2000. A one percentage point decrease in the assumed health care cost trend rates would result in a decrease in the annual service and interest costs by $238 thousand for 1999 and would result in a decrease in the postretirement benefit obligation by $3.0 million at January 2, 2000. NOTE 12. BUSINESS SEGMENTS - -------------------------------------------------------------------------------- Effective January 1, 1998, Teledyne Technologies adopted the provisions of SFAS No. 131--"Disclosures about Segments of an Enterprise and Related Information." Teledyne Technologies operates in three business segments: Electronics and Communications, Systems Engineering Solutions and Aerospace Engines and Components. The factors for determining the reportable segments were based on the distinct nature of their operations. They are managed as separate business units because each requires and is responsible for executing a unique business strategy. The Electronics and Communications segment, through Teledyne Electronic Technologies, applies proprietary technology, advanced software and hardware design skills and manufacturing capabilities in three areas: Data Acquisition and Communications Products; Precision Electronic Devices; and Electronic Manufacturing Services. The Systems Engineering Solutions segment, through Teledyne Brown Engineering, offers a wide range of engineering solutions and information services to government defense, aerospace and commercial customers. The Aerospace Engines and Components segment, through Teledyne Continental Motors and Teledyne Cast Parts, focuses on the design, development and F-22 56 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) manufacture of piston engines, turbine engines, electronic engine controls, batteries and metal castings. Identifiable assets are those assets used in the operations of the segments. Corporate assets primarily consist of cash and cash equivalents, deferred tax assets, pension assets and other assets. Information on the Company's business segments was as follows:
1999 1998 1997 ------ ------ ------ (IN MILLIONS) SALES Electronics and Communications.................... $340.7 $342.1 $340.0 Systems Engineering Solutions..................... 226.5 223.2 210.4 Aerospace Engines and Components.................. 236.2 215.1 206.2 ------ ------ ------ TOTAL SALES......................................... $803.4 $780.4 $756.6 ====== ====== ====== OPERATING PROFIT Electronics and Communications.................... $ 42.6 $ 42.6 $ 36.8 Systems Engineering Solutions..................... 20.2 20.5 13.1 Aerospace Engines and Components.................. 27.8 26.1 25.0 ------ ------ ------ SEGMENT OPERATING PROFIT....................... 90.6 89.2 74.9 Corporate expense including interest........... (9.6) (7.8) (7.6) Other income................................... 1.0 1.6 1.4 ------ ------ ------ INCOME BEFORE TAXES............................... $ 82.0 $ 83.0 $ 68.7 ====== ====== ====== DEPRECIATION AND AMORTIZATION Electronics and Communications.................... $ 6.6 $ 5.7 $ 5.7 Systems Engineering Solutions..................... 2.5 2.9 3.1 Aerospace Engines and Components.................. 2.8 2.5 2.5 ------ ------ ------ TOTAL DEPRECIATION AND AMORTIZATION................. $ 11.9 $ 11.1 $ 11.3 ====== ====== ====== CAPITAL EXPENDITURES Electronics and Communications.................... $ 13.5 $ 10.3 $ 10.8 Systems Engineering Solutions..................... 2.0 2.6 2.3 Aerospace Engines and Components.................. 16.0 5.2 2.7 ------ ------ ------ TOTAL CAPITAL EXPENDITURES.......................... $ 31.5 $ 18.1 $ 15.8 ====== ====== ====== IDENTIFIABLE ASSETS Electronics and Communications.................... $109.0 $ 96.2 $ 93.1 Systems Engineering Solutions..................... 62.2 63.4 70.7 Aerospace Engines and Components.................. 79.0 56.2 57.0 Corporate......................................... 67.2 35.0 34.6 ------ ------ ------ TOTAL IDENTIFIABLE ASSETS........................... $317.4 $250.8 $255.4 ====== ====== ======
F-23 57 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The Company's backlog of confirmed orders was approximately $373.7 million at January 2, 2000 and $401.8 million at January 3, 1999. Information on the Company's sales to the U.S. Government, including direct sales as a prime contractor and indirect sales as a subcontractor, were as follows:
1999 1998 1997 ------ ------ ------ (IN MILLIONS) Electronics and Communications.................... $101.1 $102.4 $102.7 Systems Engineering Solutions..................... 185.4 159.2 158.0 Aerospace Engines and Components.................. 61.7 46.8 42.6 ------ ------ ------ Total U.S. Government sales......................... $348.2 $308.4 $303.3 ====== ====== ======
Sales to the U.S. Government included sales to the Department of Defense of $246.3 million in 1999, $214.1 million in 1998 and $198.5 million in 1997. Total international sales were $148.1 million in 1999, $172.9 million in 1998 and $159.2 million in 1997. Of these amounts, sales by operations in the United States to customers in other countries were $131.1 million in 1999, $159.3 million in 1998 and $144.0 million in 1997. There were no sales to individual countries outside of the United States in excess of 10% of the Company's net sales. Sales between business segments, which were not material, generally were priced at prevailing market prices. NOTE 13. COMMITMENTS AND CONTINGENCIES - -------------------------------------------------------------------------------- Rental expense, under operating leases, net of sublease income, was $10.0 million in 1999, $10.4 million in 1998 and $10.2 million in 1997. Future minimum rental commitments under operating leases with non-cancelable terms of more than one year as of January 2, 2000, were as follows (in millions unless noted): $6.0 in 2000, $5.3 in 2001, $4.6 in 2002, $2.9 in 2003, $73 thousand in 2004 and $3.4 thereafter. The Company is subject to federal, state and local environmental laws and regulations which require that it investigate and remediate the effects of the release or disposal of materials at sites associated with past and present operations, including sites at which the Company has been identified as a potentially responsible party under the federal Superfund laws and comparable state laws. The Company has been identified as a potentially responsible party at approximately 17 such sites, excluding those at which the Company believes it has no future liability. In accordance with the Company's accounting policy disclosed in Note 2, environmental liabilities are recorded when the Company's liability is probable and the costs are reasonably estimable. In many cases, however, investigations are not yet at a stage where the Company has been able to determine whether it is liable or, if liability is probable, to reasonably estimate the loss or range of loss, or certain components thereof. Estimates of the Company's liability are further subject to uncertainties regarding the nature and extent of site contamination, the range of remediation alternatives available, evolving remediation standards, imprecise engineering evaluations and estimates of appropriate cleanup technology, methodology and cost, the extent of corrective actions that may be required, and the number and financial condition of other potentially responsible parties, as well as the extent of their F-24 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) responsibility for the remediation. Accordingly, as investigation and remediation of these sites proceeds, it is likely that adjustments in the Company's accruals will be necessary to reflect new information. The amounts of any such adjustments could have a material adverse effect on the Company's results of operations in a given period, but the amounts, and the possible range of loss in excess of the amounts accrued, are not reasonably estimable. Based on currently available information, however, management does not believe that future environmental costs in excess of those accrued with respect to sites with which the Company has been identified are likely to have a material adverse effect on the Company's financial condition or liquidity. However, there can be no assurance that additional future developments, administrative actions or liabilities relating to environmental matters will not have a material adverse effect on the Company's financial condition or results of operations. At January 2, 2000, the Company's reserves for environmental remediation obligations totaled approximately $1.2 million, of which approximately $836 thousand were included in other current liabilities. The Company is evaluating whether it may be able to recover a portion of future costs for environmental liabilities from its insurance carriers and from third parties other than participating potentially responsible parties. The timing of expenditures depends on a number of factors that vary by site, including the nature and extent of contamination, the number of potentially responsible parties, the timing of regulatory approvals, the complexity of the investigation and remediation, and the standards for remediation. The Company expects that it will expend present accruals over many years, and will complete remediation of all sites with which it has been identified in up to thirty years. Various claims (whether based on U.S. Government or Company audits and investigations or otherwise) have been or may be asserted against the Company related to its U.S. Government contract work, including claims based on business practices and cost classifications and actions under the False Claims Act. Although such claims are generally resolved by detailed fact-finding and negotiation, on those occasions when they are not so resolved, civil or criminal legal or administrative proceedings may ensue. Depending on the circumstances and the outcome, such proceedings could result in fines, penalties, compensatory and treble damages or the cancellation or suspension of payments under one or more U.S. Government contracts. Under government regulations, a company, or one or more of its operating divisions or units, can also be suspended or debarred from government contracts based on the results of investigations. However, although the outcome of these matters cannot be predicted with certainty, management does not believe there is any audit, review or investigation currently pending against the Company of which management is aware that is likely to result in suspension or debarment of the Company, or that is otherwise likely to have a material adverse effect on the Company's financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company's results of operations for that period. The Company learns from time to time that it has been named as a defendant in civil actions filed under seal pursuant to the False Claims Act. Generally, since such cases are under seal, the Company does not in all cases possess sufficient information to determine whether the Company could sustain a material loss in connection with such cases, or to reasonably estimate the amount of any loss attributable to such cases. In connection with the spin-off, ATI received a tax ruling from the Internal Revenue Service stating that the spin-off will be tax-free to ATI and to ATI's stockholders. The F-25 59 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) continuing validity of the Internal Revenue Service tax ruling is subject to certain factual representations and assumptions, including the Company's completion of a public offering of the Company's Common Stock within one year following the spin-off and use of the anticipated gross proceeds of approximately $125 million (less associated costs) for research and development and related capital projects, for the further development of the Company's manufacturing capabilities and for acquisitions and/or joint ventures. Pursuant to the Separation and Distribution Agreement that Teledyne Technologies signed prior to the spin-off, the Company agreed with ATI to undertake such a public offering. The Tax Sharing and Indemnification Agreement between ATI and Teledyne Technologies provides that the Company will indemnify ATI and its agents and representatives for taxes imposed on, and other amounts paid by, them or ATI stockholders if the Company takes actions or fails to take actions (such as completing the public offering) that result in the spin-off not qualifying as a tax-free distribution. If the Company were required to so indemnify ATI, such an obligation could have a material adverse effect on its financial condition, results of operations and cash flow and the amount the Company could be required to pay could exceed its net worth by a substantial amount. A number of other lawsuits, claims and proceedings have been or may be asserted against the Company relating to the conduct of its business, including those pertaining to product liability, patent infringement, commercial, employment and employee benefits. While the outcome of litigation cannot be predicted with certainty, and some of these lawsuits, claims or proceedings may be determined adversely to the Company, management does not believe that the disposition of any such pending matters is likely to have a material adverse effect on the Company's financial condition or liquidity, although the resolution in any reporting period of one or more of these matters could have a material adverse effect on the Company's results of operations for that period. F-26 60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED) - -------------------------------------------------------------------------------- The following is Teledyne Technologies' quarterly information:
1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- (IN MILLIONS, EXCEPT PER-SHARE AMOUNTS) FISCAL YEAR 1999(A) SALES..................................... $202.0 $195.4 $205.6 $200.4 GROSS PROFIT.............................. $ 50.6 $ 50.2 $ 60.1 $ 54.8 NET INCOME................................ $ 11.9 $ 10.2 $ 13.8 $ 13.1 DILUTED EARNINGS PER SHARE................ $ .43 $ .37 $ .50 $ .49 FISCAL YEAR 1998(B) Sales..................................... $198.8 $200.4 $189.5 $191.7 Gross profit.............................. $ 52.7 $ 55.1 $ 48.6 $ 51.9 Net income................................ $ 11.3 $ 13.9 $ 12.6 $ 10.9 Diluted earnings per share................ $ .40 $ .50 $ .45 $ .39
- ------------------------- (a) Teledyne Technologies spun-off from ATI effective November 29, 1999. (b) The 1998 third quarter results reflect the favorable impact of an adjustment to product liability self-insurance reserves as a result of favorable experience. F-27 61 SCHEDULE II TELEDYNE TECHNOLOGIES INCORPORATED VALUATION AND QUALIFYING ACCOUNTS FOR THE FISCAL YEARS ENDED JANUARY 2, 2000, JANUARY 3, 1999 AND DECEMBER 28, 1997 (IN MILLIONS)
ADDITIONS ----------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COSTS AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(A) PERIOD ----------- ---------- ---------- ---------- ------------- ---------- FISCAL 1999 RESERVE FOR DOUBTFUL ACCOUNTS $2.9 0.6 -- -- $3.5 FISCAL 1998 Reserve for doubtful accounts $3.2 1.4 -- (1.7) $2.9 FISCAL 1997 Reserve for doubtful accounts $2.0 1.3 -- (0.1) $3.2
- ------------------------- (a) Represents write-offs of doubtful accounts. F-28 62 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized as of March 27, 2000. TELEDYNE TECHNOLOGIES INCORPORATED (Registrant) By: /s/ ROBERT MEHRABIAN ----------------------------------- Robert Mehrabian President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. * Chairman and Director March 27, 2000 - ------------------------------------------ Thomas A. Corcoran /s/ ROBERT MEHRABIAN President and Chief March 27, 2000 - ------------------------------------------ Executive Officer Robert Mehrabian (Principal Executive Officer) and Director /s/ STEFAN C. RIESENFELD Executive Vice President March 27, 2000 - ------------------------------------------ and Chief Financial Officer Stefan C. Riesenfeld (Principal Financial Officer) /s/ DALE A. SCHNITTJER Controller March 27, 2000 - ------------------------------------------ (Principal Accounting Officer) Dale A. Schnittjer * Director March 27, 2000 - ------------------------------------------ Robert P. Bozzone * Director March 27, 2000 - ------------------------------------------ Paul S. Brentlinger * Director March 27, 2000 - ------------------------------------------ Frank V. Cahouet * Director March 27, 2000 - ------------------------------------------ Diane C. Creel * Director March 27, 2000 - ------------------------------------------ C. Fred Fetterolf * Director March 27, 2000 - ------------------------------------------ Charles J. Queenan, Jr.
*By: /s/ JOHN T. KUELBS -------------------------------------------------- John T. Kuelbs Pursuant to Power of Attorney filed as Exhibit 24. 63 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Separation and Distribution Agreement dated as of November 29, 1999 by and among Allegheny Teledyne Incorporated, TDY Holdings, LLC, Teledyne Industries, Inc. and Teledyne Technologies Incorporated (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated as of November 29, 1999 (File No. 1-15295)) 3.1* Restated Certificate of Incorporation of Teledyne Technologies Incorporated (including Certificate of Designation of Series A Junior Participating Preferred Stock) 3.2* Amended and Restated Bylaws of Teledyne Technologies Incorporated 4.1 Rights Agreement dated as of November 29, 1999 between Teledyne Technologies Incorporated and ChaseMellon Shareholder Services, L.L.C. (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated as of November 29, 1999 (File No. 1-15295)) 4.2* Credit Agreement dated as of October 29, 1999 among Allegheny Teledyne Incorporated, Teledyne Technologies Incorporated, Bank of America, N.A., as Administrative Agent, Swing Line Lender and Issuing Lender, and the other financial institutions party thereto 4.3* First Amendment to the Credit Agreement dated as of November 10, 1999 10.1 Tax Sharing and Indemnification Agreement between Allegheny Teledyne Incorporated and Teledyne Technologies Incorporated (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K dated as of November 29, 1999 (File No. 1-15295)) 10.2 Interim Services Agreement between Allegheny Teledyne Incorporated and Teledyne Technologies Incorporated (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K dated as of November 29, 1999 (File No. 1-15295)) 10.3 Employee Benefits Agreement between Allegheny Teledyne Incorporated and Teledyne Technologies Incorporated (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K/A (Amendment No. 1) dated as of November 29, 1999 (File No. 1-15295))+ 10.4 Trademark License Agreement between Allegheny Teledyne Incorporated and Teledyne Technologies Incorporated (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K dated as of November 29, 1999 (File No. 1-15295)) 10.5* Teledyne Technologies Incorporated 1999 Incentive Plan, as amended+ 10.6* Teledyne Technologies Incorporated 1999 Non-Employee Director Stock Compensation Plan+ 10.7 Fee Continuation Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form 10/A-1 filed on October 29, 1999 (File No. 1-15295))+ 10.8* Employment Agreement dated as of December 31, 1999 between Robert Mehrabian and Teledyne Technologies Incorporated+ 10.9* Form of Change of Control Severance Agreement+ 10.10* Teledyne Technologies Incorporated Executive Deferred Compensation Plan+ 10.11* Teledyne Technologies Incorporated Pension Equalization/Benefit Restoration Plan+ 21* Significant Subsidiary of Teledyne Technologies Incorporated 23* Consent of Ernst & Young LLP 24* Power of Attorney 27.1* Financial Data Schedule 27.2* Financial Data Schedule (Restated)
- --------------- * Filed herewith. + Denotes management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-K.
EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF TELEDYNE TECHNOLOGIES INCORPORATED The name of the corporation is Teledyne Technologies Incorporated. The corporation's original Certificate of Incorporation was filed with the Secretary of the State of Delaware on August 23, 1999. This Restated Certificate of Incorporation restates and integrates and also further amends the Certificate of Incorporation of the corporation, as heretofore amended and supplemented, and was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. This Restated Certificate of Incorporation shall become effective upon filing with the Delaware Secretary of State. * * * * * ONE: The name of the corporation is Teledyne Technologies Incorporated (hereinafter referred to as the "Corporation"). TWO: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle, and the name of its registered agent at such address is The Corporation Trust Company. THREE: The purpose of the Corporation is to engage in any lawful act or activity for which a Corporation may be organized under the Delaware General Corporation Law. FOUR: The total number of shares of all classes of stock which the Corporation shall have authority to issue is One Hundred Forty Million (140,000,000) consisting of One Hundred Twenty-Five Million (125,000,000) shares of Common Stock, par value one cent ($.01) per share (the "Common Stock"), and Fifteen Million (15,000,000) shares of Preferred Stock, par value one cent ($.01) per share (the "Preferred Stock"). The term "Voting Stock" shall hereafter refer to all shares of capital stock entitled to vote generally in the election of directors. A. Common Stock 1. Except where otherwise provided by law, by this Restated Certificate of Incorporation, or by resolution of the Board of Directors pursuant to this Article FOUR, the holders of the Common Stock issued and outstanding shall have and possess the exclusive right to notice of stockholders' meetings and the exclusive voting rights and powers of the capital stock. 2. Subject to any preferential rights of the Preferred Stock, dividends may be paid on the Common Stock, as and when declared by the Board of Directors, out of any funds of the Corporation legally available for the payment of such dividends. 1 2 B. Preferred Stock The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate being hereinafter referred to as a "Preferred Stock Designation"), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers (including but not limited to voting powers, if any), preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation. FIVE: The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders: A. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by statute or by this Restated Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation. B. The Board of Directors may adopt, amend or repeal the Bylaws of the Corporation. The stockholders of the Corporation may not adopt, amend or repeal the Bylaws of the Corporation other than by the affirmative vote of 75% of the combined voting power of all outstanding voting securities of the Corporation entitled to vote generally in the election of directors of the Board of Directors of the Corporation ("Voting Power"), voting together as a single class. C. The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide. SIX: The Corporation reserves the right to amend and repeal any provision contained in this Restated Certificate of Incorporation in the manner from time to time prescribed by the laws of the State of Delaware. All rights herein conferred are granted subject to this reservation. SEVEN: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law or (iv) for any transaction from which such director derived any improper personal benefit. No amendment to or repeal of this Article SEVEN shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of 2 3 such director occurring prior to such amendment or repeal. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as amended. EIGHT: A. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she is or was a director or an officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (hereinafter an "indemnitee"), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith; provided, however, that, except as provided in Section C of this Article EIGHT with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part thereof) initiated by such indemnitee only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. B. Right to Advancement of Expenses. The right to indemnification conferred in Section A of this Article EIGHT shall include the right to be paid by the Corporation the expenses (including attorneys' fees) incurred in defending any such proceeding in advance of its final disposition (hereinafter an "advancement of expenses"); provided, however, that, if the Delaware General Corporation Law requires, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer of the Corporation (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of such indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (hereinafter a "final adjudication") that such indemnitee is not entitled to be indemnified for such expenses under this Section B or otherwise. The rights to indemnification and to the advancement of expenses conferred in Sections A and B of this Article EIGHT shall be contract rights and such rights shall continue as to an indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators. C. Right of Indemnitee to Bring Suit. If a claim under Section A or B of this Article EIGHT is not paid in full by the Corporation within sixty (60) days after a written claim has been 3 4 received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In any suit brought by the indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met any applicable standard for indemnification set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article EIGHT or otherwise shall be on the Corporation. D. Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Article EIGHT shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, the Corporation's Restated Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise. E. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. F. Indemnification of Employees and Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation, including any subsidiary of the Corporation, to the fullest extent of the provisions of this Article with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. 4 5 G. Amendment. Any repeal or modification of this Article EIGHT shall not change the rights of any person to indemnification with respect to any action or omission occurring prior to such repeal or modification. NINE: The following provisions are inserted for the definition, limitation and regulation of actions of the stockholders of the Corporation: A. Action to be Taken at Stockholder Meetings Only. Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such stockholders and may not be effected by the written consent of such stockholders. B. Calling of Special Meetings. Special meetings of the stockholders, other than those required by statute, may be called only by the Board of Directors pursuant to a resolution approved by a majority of the directors then in office, the Chairman of the Board or the Chief Executive Officer. The Board of Directors may postpone, reschedule or cancel any previously scheduled special meeting. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation's notice of meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation's notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice as provided in this Article NINE, Section B, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Article NINE, Section B. Nominations by stockholders of persons for election to the Board of Directors may be made at such a special meeting of stockholders if the stockholder's notice required by Article NINE, Section C shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of the seventy-fifth day prior to such special meeting or the tenth day following the day on which a public announcement (as defined in subparagraph (e) of Article NINE, Section C) is first made of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. C. Notice of Nominations and Action to be Taken at an Annual Meeting. (a) Nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Article NINE, Section C who is entitled to vote at the meeting and who complies with the notice procedures set forth in this Article NINE, Section C. (b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of paragraph (a) of this Article NINE, Section C, the stockholder must have given timely notice thereof in writing to the Secretary of the 5 6 Corporation and such business must be a proper matter for stockholder action under the Delaware General Corporation Law. To be timely, a stockholder's notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than seventy-five days nor more than ninety days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is advanced by more than thirty days or delayed by more than sixty days from such anniversary date, or in the case of the first annual meeting of the Corporation's stockholders after the Corporation becomes subject to the reporting requirements of Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the sixtieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any financial or other interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, (1) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner and (2) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner. (c) Notwithstanding anything in the second sentence of paragraph (b) of this Article NINE, Section C to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least eighty-five days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice required by this Article NINE, Section C shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation. (d) Only such persons who are nominated in accordance with the procedures set forth in this Article NINE, Section C shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Article NINE, Section C. The presiding officer of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Article NINE, Section C and, if any proposed nomination or 6 7 business is not in compliance with this Article NINE, Section C, to declare that such defective proposed business or nomination shall be disregarded. (e) For purposes of this Article NINE, Section C, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act. (f) Notwithstanding the foregoing provisions of this Article NINE, Section C, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Article NINE, Section C. Nothing in this Article NINE, Section C shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act. (g) The Bylaws of the Corporation may contain additional provisions not inconsistent with this Article NINE, Section C regarding nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be transacted by the stockholders. Without limiting the category of such provisions which would not be inconsistent with this Article NINE, Section C, a provision in the Bylaws of the Corporation which sets forth additional information which must be provided by a stockholder in the notice required by this Article NINE, Section C shall not be deemed to be so inconsistent. D. Voting. The stockholders shall not have the right to cumulate their votes in the election of directors. TEN: (A) Except as otherwise fixed pursuant to the provisions of Article FOUR hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed from time to time by the affirmative vote of a majority of the whole Board of Directors. The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes: Class I, Class II and Class III. The terms of office of the initial classes of directors shall be as follows: the Class I Directors shall be elected to hold office for a term to expire at the first annual meeting of stockholders after the initial classification of directors; the Class II Directors shall be elected to hold office for a term to expire at the second annual meeting of stockholders after the initial classification of directors; and the Class III Directors shall be elected to hold office for a term to expire at the third annual meeting of stockholders after the initial classification of directors; and in the case of each class, until their respective successors are duly elected and qualified. At each annual meeting of stockholders the directors elected to succeed those whose terms have expired shall be identified as being of the same class as the directors they succeed and shall be elected to hold office for a 7 8 term to expire at the third annual meeting of stockholders after their election, or until his or her earlier resignation or removal, and until their respective successors are duly elected and qualified. (B) Except as otherwise fixed pursuant to the provisions of Article FOUR hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors: (a) In case of any increase in the number of directors, the additional director or directors, and in case of any vacancy in the Board of Directors due to death, resignation, removal, disqualification or any other reason, the successors to fill the vacancies, shall be elected only by a majority of the directors then in office, even though less than a quorum, or by a sole remaining director and not by the stockholders, unless otherwise provided by law or by resolution adopted by a majority of the whole Board of Directors. (b) Directors appointed in the manner provided in paragraph (a) to newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, removal, disqualification or any other cause shall hold office for a term expiring at the next annual meeting of stockholders at which the term of the class to which they have been elected expires. (c) No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. (C) Except as otherwise fixed pursuant to the provisions of Article FOUR hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors, any director or directors may be removed from office at any time, but only for cause and only by the affirmative vote of 75% of the Voting Power, voting together as a single class. ELEVEN: In addition to any other considerations which the Board of Directors, any committee thereof or any individual director lawfully may take into account in determining whether to take or refrain from taking corporate action on any matter, including making or declining to make any recommendations to the stockholders of the Corporation, the Board of Directors, any committee thereof or any individual director may in its, his or her discretion consider the long term as well as the short term best interests of the Corporation (including the possibility that these interests may best be served by the continued independence of the Corporation), taking into account and weighing as deemed appropriate the effects of such action on employees, suppliers, distributors and customers of the Corporation and its subsidiaries and the effect upon communities in which the offices or facilities of the Corporation and its subsidiaries are located and any other factors considered pertinent. This Article ELEVEN shall be deemed to grant discretionary authority to the Board of Directors, any committee thereof and each individual director, and shall not be deemed to provide to any specific constituency any right to be considered. TWELVE: In addition to the requirements of (i) law and (ii) the other provisions of this Restated Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds of 8 9 the outstanding shares of Common Stock of the Corporation entitled to vote shall be required for the adoption or authorization of a Fundamental Change unless the Fundamental Change has been approved at a meeting of the Board of Directors by the vote of more than two-thirds of the incumbent members of the Board of Directors. As used in this Article TWELVE, "Fundamental Change" shall mean (1) any merger or consolidation of the Corporation with or into any other corporation, (2) any sale, lease, exchange, transfer or other disposition, but excluding a mortgage or any other security device, of all or substantially all of the assets of the Corporation, (3) any merger or consolidation of a Significant Shareholder with or into the Corporation or a direct or indirect subsidiary of the Corporation, (4) any sale, lease, exchange, transfer or other disposition to the Corporation or to a direct or indirect subsidiary of the Corporation of any Common Stock of the Corporation held by a Significant Shareholder or any other assets of a Significant Shareholder which, if included with all other dispositions consummated during the same fiscal year of the Corporation by the same Significant Shareholder, would result in dispositions of assets having an aggregate fair value in excess of five percent of the total consolidated assets of the Corporation as shown on its certified balance sheet as of the end of the fiscal year preceding the proposed disposition, (5) any reclassification of Common Stock of the Corporation, or any recapitalization involving Common Stock of the Corporation, consummated within five years after a Significant Shareholder becomes a Significant Shareholder, whereby the number of outstanding shares of Common Stock is reduced or any of such shares are converted into or exchanged for cash or other securities, (6) any dissolution and (7) any agreement, contract or other arrangement providing for any of the transactions described in this definition of Fundamental Change but, notwithstanding anything to the contrary herein, Fundamental Change shall not include any merger pursuant to the Delaware General Corporation Law, as amended from time to time, which does not require a vote of the Corporation's stockholders for approval. As used in this Article TWELVE, "Significant Shareholder" shall mean any person who or which beneficially owns a number of shares of Common Stock of the Corporation, whether or not such number includes shares not then outstanding or entitled to vote, which exceeds a number equal to fifteen percent of the outstanding shares of Common Stock of the Corporation entitled to vote, any and all affiliates of such person and any and all associates and family members of such person or any such affiliate. THIRTEEN: Notwithstanding any other provisions of this Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of Voting Stock required by law or this Restated Certificate of Incorporation, the affirmative vote of the holders or at least 75% of the Voting Power, voting together as a single class, shall be required to alter, amend, supplement or repeal, or to adopt any provision inconsistent with the purpose or intent of, paragraph B of Article FIVE and Articles SEVEN, NINE, TEN, ELEVEN, TWELVE or THIRTEEN; provided, however, that no amendment of Article TWELVE shall apply to any person who is a Significant Shareholder at the time of the adoption of such amendment. 9 10 IN WITNESS WHEREOF, the corporation has caused this certificate to be executed by the undersigned duly authorized officer on November 29, 1999. TELEDYNE TECHNOLOGIES INCORPORATED By: /s/ Robert Mehrabian ------------------------------------------- Title: President and Chief Executive Officer 10 11 CERTIFICATE OF DESIGNATIONS of SERIES A JUNIOR PARTICIPATING PREFERRED STOCK of TELEDYNE TECHNOLOGIES INCORPORATED (Pursuant to Section 151 of the Delaware General Corporation Law) Teledyne Technologies Incorporated, a corporation organized and existing under the General Corporation Law of the State of Delaware (hereinafter called the "Corporation"), hereby certifies that the following resolution was adopted by the Board of Directors of the Corporation as required by Section 151 of the General Corporation Law at a meeting duly called and held on November 12, 1999. RESOLVED, that, pursuant to the authority granted to and vested in the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the Corporation and hereby states the designation and number of shares and fixes the relative rights, preferences, and limitations thereof as follows: SECTION 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as "Series A Junior Participating Preferred Stock" (the "Series A Preferred Stock") and the number of shares constituting the Series A Preferred Stock shall be 1,250,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion or exchange of any outstanding securities issued by the Corporation convertible into or exchangeable for shares of Series A Preferred Stock. SECTION 2. DIVIDENDS AND DISTRIBUTIONS. (A) Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior to the Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock, in preference to the holders of shares of Common Stock, par value $.01 per share (the "Common Stock"), of the Corporation and of any other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being 1 12 referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided, that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1 per share on the Series A Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than 60 days prior to the date fixed for the payment thereof. 2 13 SECTION 3. VOTING RIGHTS. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein, in any other Certificate of Designations creating a series of Preferred Stock or any similar stock, or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) Except as set forth herein or as otherwise provided by law, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of the Common Stock as set forth herein) for taking any corporate action. SECTION 4. CERTAIN RESTRICTIONS. (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the Corporation shall not: (i) declare or pay dividends or make any other distributions on any shares of stock ranking junior (as to dividends) to the Series A Preferred Stock; (ii) declare or pay dividends or make any other distributions on any shares of stock ranking on a parity (as to dividends) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable and in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem, purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; provided, that the Corporation may at any time redeem, purchase or otherwise 3 14 acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) redeem, purchase or otherwise acquire for consideration any shares of Series A Preferred Stock or any shares of stock ranking on a parity with the Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. SECTION 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized and unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation or in any other Certificate of Designations creating a series of Preferred Stock or any similar stock or otherwise required by law. SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon any liquidation, dissolution or winding up of the Corporation, no distribution shall be made (1) to the holders of shares of stock ranking junior (upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $100 per share, plus an amount equal to the accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment; provided, that the holders of shares of Series A Preferred Stock shall be entitled to receive an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount to be distributed per share to holders of shares of Common Stock, or (2) to the holders of shares of stock ranking on a parity (upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except distributions made ratably on the Series A Preferred Stock and all such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the aggregate amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of 4 15 Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. SECTION 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series A Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. SECTION 8. NO REDEMPTION. The shares of Series A Preferred Stock shall not be redeemable. SECTION 9. RANK. The Series A Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets, junior to all other series of the Preferred Stock. SECTION 10. AMENDMENT. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the shares of Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock, voting together as a single class. IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by the undersigned duly authorized officer this 29th day of November, 1999. /s/ Robert Mehrabian ------------------------------------- President and Chief Executive Officer EX-3.2 3 AMENDED AND RESTATED BYLAWS 1 Exhibit 3.2 ---------------------------------------------- AMENDED AND RESTATED BYLAWS OF TELEDYNE TECHNOLOGIES INCORPORATED ---------------------------------------------- ADOPTED: NOVEMBER 29, 1999 2 TABLE OF CONTENTS
Page ---- ARTICLE I OFFICES.....................................................................................1 Section 1. Registered Office...........................................................1 Section 2. Other Offices...............................................................1 ARTICLE II MEETINGS OF STOCKHOLDERS....................................................................1 Section 1. Place of Meetings...........................................................1 Section 2. Annual Meeting..............................................................1 Section 3. Special Meetings............................................................1 Section 4. Notice of Meetings..........................................................1 Section 5. Quorum; Adjournment.........................................................2 Section 6. Proxies and Voting..........................................................2 Section 7. Stock List..................................................................2 ARTICLE III BOARD OF DIRECTORS..........................................................................3 Section 1. Duties and Powers...........................................................3 Section 3. Vacancies...................................................................4 Section 4. Meetings....................................................................4 Section 5. Quorum......................................................................5 Section 6. Actions of Board Without a Meeting..........................................5 Section 7. Meetings by Means of Conference Telephone...................................5 Section 8. Committees..................................................................5 Section 9. Compensation................................................................5 Section 10. Removal.....................................................................6 Section 11. Initial Period..............................................................6 ARTICLE IV OFFICERS....................................................................................6 Section 1. General.....................................................................6 Section 2. Election; Term of Office....................................................7 Section 3. Chairman of the Board.......................................................7 Section 4. Chief Executive Officer.....................................................7 Section 5. President...................................................................7 Section 6. Vice President..............................................................8 Section 7. Secretary...................................................................8 Section 8. Assistant Secretaries.......................................................8 Section 9. Treasurer...................................................................8 Section 10. Assistant Treasurers........................................................8 Section 11. Other Officers..............................................................9
i 3 ARTICLE V STOCK.......................................................................................9 Section 1. Form of Certificates; Uncertificated Shares.................................9 Section 2. Signatures..................................................................9 Section 3. Lost Certificates...........................................................9 Section 4. Transfers...................................................................9 Section 5. Record Date................................................................10 Section 6. Beneficial Owners..........................................................10 Section 7. Voting Securities Owned by the Corporation.................................10 ARTICLE VI NOTICES....................................................................................10 Section 1. Notices....................................................................10 Section 2. Waiver of Notice...........................................................11 ARTICLE VII GENERAL PROVISIONS.........................................................................11 Section 1. Dividends..................................................................11 Section 2. Disbursements..............................................................11 Section 3. Corporation Seal...........................................................11 ARTICLE VIII AMENDMENTS.................................................................................11
ii 4 AMENDED AND RESTATED BYLAWS OF TELEDYNE TECHNOLOGIES INCORPORATED -------------------------------------------- (hereinafter called the "Corporation") ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may determine from time to time. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors or the officer of the Corporation calling the meeting as authorized by the Corporation's Certificate of Incorporation and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meeting. Each Annual Meeting of Stockholders shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. At an Annual Meeting, the stockholders shall elect directors, and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings. Special meetings of the stockholders, other than those required by statute, may be called only as provided in, and for the purposes specified in accordance with, the Corporation's Certificate of Incorporation. Section 4. Notice of Meetings. Written notice of the place, date, and time of each meeting of the stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or as required from time to time by the Delaware 5 General Corporation Law or the Certificate of Incorporation. The notice of a special meeting shall also state the purpose or purposes for which the meeting is called. Section 5. Quorum; Adjournment. At any meeting of the stockholders, the holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law or the Certificate of Incorporation. If a quorum shall fail to attend any meeting, the chairperson of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time until a quorum shall be present or represented. When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 6. Proxies and Voting. At any meeting of the stockholders, every stockholder entitled to vote may vote in person or by proxy, authorized by an instrument in writing or in such manner as may be prescribed by the Delaware General Corporation Law, filed in accordance with the procedure established for the meeting. Each stockholder shall have one vote for every share of stock entitled to vote which is registered in his name on the record date for the meeting, except as otherwise provided herein or required by law or the Certificate of Incorporation. All voting, including on the election of directors but excepting where otherwise provided herein or required by law or the Certificate of Incorporation, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or such stockholder's proxy, or at the discretion of the chairperson of the meeting, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the Board of Directors or the chairperson of the meeting. All elections shall be determined by a plurality of the votes cast. Except as otherwise required by law or the Certificate of Incorporation, all other matters shall be determined by a majority of the votes cast. For purposes of these Bylaws, a vote characterized as an abstention shall not count as a vote "cast." Section 7. Stock List. A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in such stockholder's name, shall be open to the examination of any such stockholder, for any purpose germane to the meeting, during 2 6 ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held. The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. ARTICLE III BOARD OF DIRECTORS Section 1. Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. Section 2. Number and Term of Office. Subject to Section 11 of this Article III, the Board of Directors shall consist of not less than four (4) and not more than ten (10) members. Subject to the foregoing sentence, the number of directors shall be fixed and may be changed from time to time by resolution duly adopted by a majority of the directors then in office, except as otherwise provided by law, the Certificate of Incorporation or these Bylaws. Except as provided in Section 3 of this Article, directors shall be elected by the holders of record of a plurality of the votes cast at Annual Meetings of stockholders. Any director may resign at any time upon written notice to the Corporation. Directors need not be stockholders. The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes: Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the whole number of the Board of Directors. The terms of office of the initial classes of directors shall be as follows: the Class I Directors shall be elected to hold office for a term to expire at the first Annual Meeting of stockholders after the initial classification of directors; the Class II Directors shall be elected to hold office for a term to expire at the second Annual Meeting of stockholders; and the Class III Directors shall be elected to hold office for a term to expire at the third Annual Meeting of stockholders; and in the case of each class, until their respective successors are duly elected and qualified. At each annual meeting of stockholders the directors elected to succeed those whose terms have expired shall be identified as being of the same class as the directors they succeed and shall be elected to hold office for a term to expire at the third Annual Meeting of stockholders after their election, or until his or her earlier resignation or removal, and until their respective successors are duly elected and qualified. This paragraph of Article III, Section 2 is also contained in Article TEN, Section (A) of the Corporation's 3 7 Certificate of Incorporation, and accordingly, may be altered, amended or repealed only to the extent and at the time the comparable Certificate Article is altered, amended or repealed. Section 3. Vacancies. Except as otherwise fixed pursuant to the provisions of Article FOUR of the Corporation's Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect directors: (a) In case of any increase in the number of directors, the additional director or directors, and in case of any vacancy in the Board of Directors due to death, resignation, removal, disqualification or any other reason, the successors to fill the vacancies, shall be elected by a majority of the directors then in office, even though less than a quorum, or by a sole remaining director. (b) Directors appointed in the manner provided in paragraph (a) to newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, removal, disqualification or any other cause shall hold office for a term expiring at the next Annual Meeting of stockholders at which the term of the class to which they have been elected expires and until their successors are duly elected and qualified, or until their earlier resignation or removal. (c) No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. The foregoing provisions of this Article III, Section 3 are also contained in Article TEN, Section (B) of the Corporation's Certificate of Incorporation, and accordingly, may be altered, amended or repealed only to the extent and at the time the comparable Certificate Article is altered, amended or repealed. Section 4. Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. The first meeting of each newly-elected Board of Directors shall be held immediately following the Annual Meeting of Stockholders and no notice of such meeting shall be necessary to be given the newly-elected directors in order legally to constitute the meeting, provided a quorum shall be present. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or a majority of the directors then in office. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone, telegram or facsimile transmission on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Meetings may be held at any time without notice if all the directors are present or if all those not present waive such notice in accordance with Section 2 of Article VI of these Bylaws. 4 8 Section 5. Quorum. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws (including Section 11 of this Article III), at all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 6. Actions of Board Without a Meeting. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 7. Meetings by Means of Conference Telephone. Unless otherwise provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting. Section 8. Committees. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any committee, to the extent allowed by law and provided in the Bylaw or resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 9. Compensation. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving 5 9 the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 10. Removal. Any director or directors may be removed from office only as provided in the Corporation's Certificate of Incorporation. Section 11. Initial Period. (a) As used in these Bylaws, (i) the "Third Annual Meeting" means the third Annual Meeting of stockholders held after the date on which the common stock of the Corporation becomes registered pursuant to Section 12 of the Securities Exchange Act of 1934, (ii) the "Initial Period" means the period beginning on the date of the adoption of this Section 11 and ending on the date of the Third Annual Meeting, (iii) "ATI" means Allegheny Teledyne Incorporated, a Delaware corporation, (iv) and "Majority Directors" means directors of the Corporation who are also members of the Board of Directors of ATI. (b) During the Initial Period, at least a majority of the directors of the Corporation shall be Majority Directors. If the election of any director at any time during the Initial Period or if a director's ceasing to be a member of the Board of Directors of ATI results in the number of Majority Directors being less than a majority of the directors of the Corporation then in office, the number of directors shall be increased to the next largest number such that the filling of the resulting vacancy or vacancies by the election of one or more directors who are also members of the Board of Directors of ATI will result in a majority of the directors of the Corporation being Majority Directors, and the successor or successors to fill said vacancy or vacancies shall be elected by a majority of the Majority Directors then in office, or by a sole remaining Majority Director. (c) In case of any vacancy in the Board of Directors during the Initial Period due to death, resignation, removal or disqualification of or any other reason affecting any Majority Director, the successor to fill the vacancy shall be elected by a majority of the Majority Directors then in office, or by a sole remaining Majority Director. Directors elected in the manner provided in this paragraph (c) shall hold office for a term expiring at the next Annual Meeting of stockholders at which the term of the class to which they have been elected expires and until their successors are duly elected and qualified, or until their earlier resignation or removal. (d) During the Initial Period, no quorum shall exist at a meeting of the Board of Directors and no act shall be the act of the Board of Directors unless a majority of the directors present at any such meeting are Majority Directors. (e) The provisions of this Section 11 may not be altered, amended or repealed during the Initial Period except by a resolution duly adopted by all of the Majority Directors. ARTICLE IV OFFICERS Section 1. General. The officers of the Corporation shall be appointed by the Board of Directors and shall consist of a Chairman of the Board, a Chief Executive Officer, a President, 6 10 such number of Vice Presidents as the Board of Directors shall elect from time to time, a Secretary, a Treasurer (or a position with the duties and responsibilities of a Treasurer) and such other officers and assistant officers (if any) as the Board of Directors may elect from time to time. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide. Section 2. Election; Term of Office. The Board of Directors at its first meeting held after each Annual Meeting of stockholders shall elect a Chairman of the Board or a President, or both, a Secretary and a Treasurer (or a position with the duties and responsibilities of a Treasurer), and may also elect at that meeting or any other meeting, such other officers and agents as it shall deem necessary or appropriate. Each officer of the Corporation shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors together with the powers and duties customarily exercised by such officer; and each officer of the Corporation shall hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. The Board of Directors may remove any officer at any time, with or without cause, by the affirmative vote of a majority of directors then in office. Section 3. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors and shall have such other duties and powers as may be prescribed by the Board of Directors from time to time. The Board of Directors may also designate one of its members as Vice Chairman of the Board. The Vice Chairman of the Board shall, during the absence or inability to act of the Chairman of the Board, have the powers and perform the duties of the Chairman of the Board, and shall have such other powers and perform such other duties as shall be prescribed from time to time by the Board of Directors. Section 4. Chief Executive Officer. The Chief Executive Officer shall have general charge and control over the affairs of the Corporation, subject to the Board of Directors, shall see that all orders and resolutions of the Board of Directors are carried out, shall report thereon to the Board of Directors, and shall have such other powers and perform such other duties as shall be prescribed from time to time by the Board of Directors. Section 5. President. The President shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall have and exercise such further powers and duties as may be specifically delegated to or vested in the President from time to time by these Bylaws or the Board of Directors. In the absence of the Chairman of the Board and the Vice Chairman of the Board, or in the event of the inability of or refusal to act by the Chairman of the Board and the Vice Chairman of the Board, or if the Board of Directors has not designated a Chairman or Vice Chairman, the President shall perform the duties of the Chairman of the Board, and, when so acting, shall have all of the powers and be subject to all of the restrictions upon the Chairman of the Board. 7 11 Section 6. Vice President. In the absence of the President or in the event of his inability or refusal to act, the Vice President (or in the event there be more than one vice president, the vice presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President and, when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing and special committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 8. Assistant Secretaries. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, or the Secretary, and shall have the authority to perform all functions of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 9. Treasurer. The Treasurer shall have the custody of the corporate funds and securities, shall keep complete and accurate accounts of all receipts and disbursements of the Corporation, and shall deposit all monies and other valuable effects of the Corporation in its name and to its credit in such banks and other depositories as may be designated from time to time by the Board of Directors. The Treasurer shall disburse the funds of the Corporation, taking proper vouchers and receipts for such disbursements. The Treasurer shall, when and if required by the Board of Directors, give and file with the Corporation a bond, in such form and amount and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of his or her duties as Treasurer. The Treasurer shall have such other powers and perform such other duties as the Board of Directors or the President shall from time to time prescribe. Section 10. Assistant Treasurers. Except as may be otherwise provided in these Bylaws, Assistant Treasurers, if there be any, shall perform such duties and have such powers as from 8 12 time to time may be assigned to them by the Board of Directors, the President, or the Treasurer, and shall have the authority to perform all functions of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. Section 11. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as may be assigned to them from time to time by the Board of Directors. The Board of Directors may delegate to any officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. ARTICLE V STOCK Section 1. Form of Certificates; Uncertificated Shares. The shares of the Corporation shall be represented by certificates; provided, that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares in accordance with the Delaware General Corporation Law. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock in the Corporation represented by a certificate, and upon request every holder of uncertificated shares of stock in the Corporation, shall be entitled to have a certificate signed in the name of the Corporation (i) by the Chairman of the Board or the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. Section 2. Signatures. Any or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner's legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or in the Corporation's books as the 9 13 registered owner of uncertificated shares or by such person's attorney lawfully constituted in writing and upon the surrender of the certificate (if any) therefor, which shall be cancelled before a new certificate shall be issued. Section 5. Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 6. Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. Section 7. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board, the President, any Vice President or the Secretary and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE VI NOTICES Section 1. Notices. Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, facsimile transmission, electronic mail, telex or cable and such 10 14 notice shall be deemed to be given at the time of receipt thereof if given personally or at the time of transmission thereof if given by telegram, facsimile transmission, electronic mail, telex or cable. Section 2. Waiver of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws to be given to any director, member or a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting or by any Committee of the Board of Directors having such authority at any meeting thereof, and may be paid in cash, in property, in shares of the capital stock or in any combination thereof. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. Section 2. Disbursements. All notes, checks, drafts and orders for the payment of money issued by the Corporation shall be signed in the name of the Corporation by such officers or such other persons as the Board of Directors may designate from time to time. Section 3. Corporation Seal. The corporate seal, if the Corporation shall have a corporate seal, shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII AMENDMENTS Except as otherwise specifically provided in the particular Article of these Bylaws to be altered, amended or repealed, these Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any meeting of the Board of Directors or of the stockholders, provided notice of the proposed change was given in the notice of the meeting. 11
EX-4.2 4 CREDIT AGREEMENT 1 EXHIBIT 4.2 ================================================================================ CREDIT AGREEMENT AMONG ALLEGHENY TELEDYNE INCORPORATED, TELEDYNE TECHNOLOGIES INCORPORATED AND BANK OF AMERICA, N.A. AS ADMINISTRATIVE AGENT, SWING LINE LENDER AND ISSUING LENDER AND THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO DATED AS OF OCTOBER 19, 1999 BANC OF AMERICA SECURITIES LLC, AS SOLE ARRANGER AND SOLE BOOK MANAGER [BANK OF AMERICA LOGO] ================================================================================ 2 TABLE OF CONTENTS
Section Page - ------- ---- SECTION 1. DEFINITIONS AND ACCOUNTING TERMS................................................................1 1.01 Defined Terms...................................................................................1 1.02 Use of Certain Terms...........................................................................27 1.03 Accounting Terms...............................................................................27 1.04 Rounding.......................................................................................27 1.05 Exhibits and Schedules.........................................................................27 1.06 References to Agreements and Laws..............................................................28 SECTION 2. THE COMMITMENTS AND EXTENSIONS OF CREDIT.......................................................28 2.01 Amount and Terms of Commitments................................................................28 2.02 Borrowings, Conversions and Continuations of Loans.............................................28 2.03 Letters of Credit..............................................................................29 2.04 Swing Line.....................................................................................34 2.05 Prepayments....................................................................................35 2.06 Reduction or Termination of Commitments........................................................36 2.07 Principal and Interest.........................................................................36 2.08 Fees...........................................................................................36 2.09 Computation of Interest and Fees...............................................................37 2.10 Making Payments................................................................................38 2.11 Funding Sources................................................................................38 2.12 Release of ALT.................................................................................39 SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY.........................................................39 3.01 Taxes..........................................................................................39 3.02 Illegality.....................................................................................40 3.03 Inability to Determine Rates...................................................................40 3.04 Increased Cost and Reduced Return; Capital Adequacy............................................41 3.05 Breakfunding Costs.............................................................................42 3.06 Matters Applicable to all Requests for Compensation............................................42 3.07 Survival.......................................................................................42 SECTION 4. CONDITIONS PRECEDENT...........................................................................42 4.01 Conditions to Effectiveness of the Credit Agreement............................................42 4.02 Conditions of Initial Extension of Credit to ALT...............................................45 4.03 Conditions to Assumption of Obligations and Initial Extensions of Credit to TTI................47 4.04 Conditions to all Extensions of Credit.........................................................49 SECTION 5. REPRESENTATIONS AND WARRANTIES.................................................................50 5.01 Existence and Qualification; Power; Compliance with Laws.......................................50 5.02 Power; Authorization; Enforceable Obligations..................................................50
3 5.03 No Legal Bar...................................................................................50 5.04 Financial Statements; No Material Adverse Effect...............................................51 5.05 Litigation.....................................................................................51 5.06 No Default.....................................................................................51 5.07 Ownership of Property; Liens...................................................................52 5.08 Taxes..........................................................................................52 5.09 Margin Regulations; Investment Company Act; Public Utility Holding Company Act.................52 5.10 ERISA Compliance...............................................................................52 5.11 Intellectual Property..........................................................................53 5.12 Compliance With Laws...........................................................................53 5.13 Environmental Compliance.......................................................................53 5.14 Insurance......................................................................................53 5.15 Year 2000......................................................................................53 5.16 Disclosure.....................................................................................54 5.17 Solvency.......................................................................................54 SECTION 6. AFFIRMATIVE COVENANTS..........................................................................54 6.01 Financial Statements...........................................................................54 6.02 Certificates, Notices and Other Information....................................................55 6.03 Payment of Taxes...............................................................................56 6.04 Preservation of Existence......................................................................56 6.05 Maintenance of Properties......................................................................56 6.06 Maintenance of Insurance.......................................................................56 6.07 Compliance With Laws...........................................................................56 6.08 Inspection Rights..............................................................................57 6.09 Keeping of Records and Books of Account........................................................57 6.10 Compliance with ERISA..........................................................................57 6.11 Compliance With Agreements.....................................................................57 6.12 Use of Proceeds................................................................................57 6.13 Additional Borrower Parties....................................................................57 SECTION 7. NEGATIVE COVENANTS.............................................................................58 7.01 Indebtedness...................................................................................58 7.02 Liens and Negative Pledges.....................................................................59 7.03 Fundamental Changes............................................................................60 7.04 Dispositions...................................................................................61 7.05 Investments....................................................................................61 7.06 Restricted Payments............................................................................62 7.07 ERISA..........................................................................................62 7.08 Limitation on Nature of Business...............................................................62 7.09 Transactions with Affiliates...................................................................62 7.10 Hostile Acquisitions...........................................................................62 7.11 Limitations on Upstreaming, etc................................................................62 7.12 Financial Covenants............................................................................63
- ii - 4 7.13 Limitation on Amendments to Spinoff Documents..................................................63 7.14 Limitation on Modifications of Indebtedness....................................................63 SECTION 8. EVENTS OF DEFAULT AND REMEDIES.................................................................63 8.01 Events of Default..............................................................................63 8.02 Remedies Upon Event of Default.................................................................66 SECTION 9. ADMINISTRATIVE AGENT...........................................................................68 9.01 Appointment and Authorization of Administrative Agent..........................................68 9.02 Delegation of Duties...........................................................................68 9.03 Liability of Administrative Agent..............................................................68 9.04 Reliance by Administrative Agent...............................................................69 9.05 Notice of Default..............................................................................69 9.06 Credit Decision; Disclosure of Information by Administrative Agent.............................70 9.07 Indemnification of Administrative Agent........................................................70 9.08 Administrative Agent in Individual Capacity....................................................71 9.09 Successor Administrative Agent.................................................................71 SECTION 10. MISCELLANEOUS..................................................................................72 10.01 Amendments; Consents...........................................................................72 10.02 Release of Collateral..........................................................................72 10.03 Transmission and Effectiveness of Notices and Signatures.......................................73 10.04 Attorney Costs, Expenses and Taxes.............................................................74 10.05 Binding Effect; Assignment.....................................................................75 10.06 Set-off........................................................................................76 10.07 Sharing of Payments............................................................................76 10.08 No Waiver; Cumulative Remedies.................................................................77 10.09 Usury..........................................................................................78 10.10 Counterparts...................................................................................78 10.11 Integration....................................................................................78 10.12 Nature of Lenders' Obligations.................................................................78 10.13 Survival of Representations and Warranties.....................................................78 10.14 Indemnity by Borrower..........................................................................79 10.15 Nonliability of Lenders........................................................................79 10.16 No Third Parties Benefited.....................................................................80 10.17 Severability...................................................................................80 10.18 Confidentiality................................................................................80 10.19 Further Assurances.............................................................................81 10.20 Headings.......................................................................................81 10.21 Time of the Essence............................................................................81 10.22 Foreign Lenders and Participants...............................................................81 10.23 Removal and/or Replacement of Lenders..........................................................82 10.24 Governing Law..................................................................................83 10.25 Waiver of Right to Trial by Jury; Other Waivers................................................83 10.26 Entire Agreement...............................................................................84
- iii - 5 EXHIBITS FORM OF A Request for Extension of Credit B Compliance Certificate C Note D Notice of Assignment and Acceptance E-1 Opinion of Counsel on the Signing Date E-2 Opinion of Counsel on the ALT Closing Date E-3 Opinion of Counsel on the TTI Closing Date F ALT Global Note G Guaranty H Pledge Agreement I ALT Subordination Agreement J Assumption Agreement SCHEDULES 1.01 Consolidated EBITDA; Consolidated EBIT; Consolidated Interest Charges 2.01 Commitments and Pro Rata Shares 7.01(b) Existing Indebtedness of ALT and its Subsidiaries 7.01(c) Existing Indebtedness of TTI and its Subsidiaries 7.02(a) Liens of ALT and its Subsidiaries 7.02(b) Liens of TTI and its Subsidiaries 7.05(a) Investments by ALT and its Subsidiaries 7.05(b) Investments by TTI and its Subsidiaries 10.03 Eurodollar and Domestic Lending Offices, Addresses for Notices - iv - 6 CREDIT AGREEMENT This CREDIT AGREEMENT is entered into as of October 19, 1999, by and among ALLEGHENY TELEDYNE INCORPORATED, a Delaware corporation ("ALT"), TELEDYNE TECHNOLOGIES INCORPORATED, a Delaware corporation ("TTI"), each lender from time to time party hereto (collectively, "Lenders" and individually, a "Lender"), and BANK OF AMERICA, N.A., as Administrative Agent, Issuing Lender and Swing Line Lender. BANK OF AMERICA SECURITIES LLC has acted as sole arranger and sole book manager. RECITALS WHEREAS, ALT has incorporated TTI, a wholly-owned Subsidiary of ALT, for the purpose of effecting the transfer by ALT to TTI of certain assets and liabilities and operations of the Aerospace and Electronics segment of ALT (the "Line of Business Transfer") in accordance with the Spinoff Documents (as defined below). WHEREAS, following consummation of the Line of Business Transfer, ALT will make a distribution of all the capital stock of TTI to the stockholders of ALT (the "Spinoff") in accordance with the Spinoff Documents (as defined below). WHEREAS, ALT and TTI have requested that Lenders make credit facilities available to ALT and TTI for the purposes set forth herein. NOW THEREFORE, in consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree intending to be legally bound as follows: AGREEMENT SECTION 1. DEFINITIONS AND ACCOUNTING TERMS 1.01 DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings set forth below: "Acquired Indebtedness" means Indebtedness of any Person that becomes a Subsidiary of TTI after the TTI Closing Date pursuant to a Permitted Acquisition, if such Indebtedness was outstanding prior to the time such Person became a Subsidiary of TTI and was not created in contemplation of or in connection with such Person becoming a Subsidiary of TTI and constitutes either (i) obligations under capital leases or (ii) purchase money or other Indebtedness incurred to finance the acquisition of fixed or capital assets and otherwise satisfying the requirements of Section 7.02(h). "Acquisition" means the acquisition, in one transaction or a series of transactions, by Borrower or any of its Subsidiaries of all or substantially all the stock, partnership or other equity interests or assets of any other Person or all or substantially all of the assets of any division or business of any other Person. - 1 - 7 "Acquisition Consideration" means the purchase consideration for any Permitted Acquisition and all other payments made and liabilities incurred by Borrower or any of its Subsidiaries in exchange for, or as part of, or in connection with, any Permitted Acquisition, whether paid in cash or by exchange of assets or otherwise and whether payable at or prior to the consummation of such Permitted Acquisition or deferred for payment at any future time, whether or not any such future payment is subject to the occurrence of any contingency, and includes any and all payments and liabilities representing the purchase price and any assumptions of liabilities, "earn-outs" and other Profit Payment Agreements, consulting agreements, services agreements and non-competition agreements and other liabilities of every type and description. "Administrative Agent" means Bank of America, N.A., in its capacity as administrative agent under any of the Loan Documents, and any successor administrative agent. "Administrative Agent's Office" means Administrative Agent's address and, as appropriate, account as set forth on Schedule 10.03, or such other address or account as Administrative Agent hereafter may designate by written notice to Borrower and Lenders. "Administrative Agent-Related Persons" means Administrative Agent (including any successor agent), together with its Affiliates (including, in the case of Administrative Agent, the Arranger), and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates. "Affiliate" means any Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, another Person. A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "Agreement" means this Credit Agreement, as amended, restated, extended, supplemented or otherwise modified in writing from time to time. "ALT" has the meaning set forth in the introductory paragraph hereto. "ALT Closing Date" means the date on which all the conditions precedent in Section 4.02 are satisfied or waived in accordance with Section 4.02, which date shall be no later than [November 15], 1999. "ALT Global Note" means the promissory note made by Borrower in favor of Administrative Agent for the account of Lenders, substantially in the form of Exhibit F. "ALT Subordination Agreement" means the ALT subordination and indemnity agreement in the form of Exhibit I. "Applicable Amount" means (a) prior to the consummation of a Qualified Public Offering, (i) with respect to the Facility Fee, .35%, (ii) with respect to the Utilization Fee, 0.0%, - 2 - 8 (iii) with respect to the Base Rate, 0.75%, and (iv) with respect to the Eurodollar Rate and Letters of Credit, 1.15%, and (b) from and after the consummation of a Qualified Public Offering, the following amounts per annum, based upon the Capitalization Ratio as set forth in the then most recent Compliance Certificate received by Administrative Agent pursuant to Section 6.02(b) (provided, however, that, if this clause (b) is applicable, until Administrative Agent receives the first Compliance Certificate after the TTI Closing Date, such amounts shall be those indicated for pricing level I set forth below):
PRICING CAPITALIZATION RATIO FACILITY UTILIZATION BASE EURODOLLAR RATE/ LEVEL FEE FEE RATE LETTERS OF CREDIT - --------------------- --------------------- -------------- ----------------- ----------------- ----------------------- I Greater than or equal to 55% .35% .25% .50% .90% II Greater than or equal to 45% .30% .25% .375% .825% III Greater than or equal to 35% .25% .25% .125% .625% IV Less than 35% .20% .125% 0% .55%
The Applicable Amount shall be in effect from the date the most recent Compliance Certificate is received by Administrative Agent to but excluding the date the next Compliance Certificate is received; provided, however, that if Borrower fails to timely deliver the next Compliance Certificate, the Applicable Amount from the date such Compliance Certificate was due to but excluding the date such Compliance Certificate is received by Administrative Agent shall be the highest pricing level set forth above, and, thereafter, the pricing level indicated by such Compliance Certificate when received. "Applicable Payment Date" means, (a) as to any Eurodollar Rate Loan, the last day of the relevant Interest Period and any date that such Loan is prepaid or converted in whole or in part and the Maturity Date; provided, however, that if any Interest Period for a Eurodollar Rate Loan exceeds three months, interest shall also be paid on the date which falls every three months after the beginning of such Interest Period, and (b) as to any other Obligations, the last Business Day of each calendar quarter and the Maturity Date; provided, further, that interest accruing at the Default Rate shall be payable from time to time at any time upon written demand of Administrative Agent. "Arranger" means Banc of America Securities LLC, in its capacity as sole arranger and sole book manager. "Assumption Agreement" means an assumption agreement in the form of Exhibit J. - 3 - 9 "Attorney Costs" means and includes all fees and disbursements of any law firm or other external counsel and the allocated cost of internal legal services and all disbursements of internal counsel. "Audited ALT Financial Statements" means the audited consolidated balance sheet of ALT and its Subsidiaries for the fiscal year ended December 31, 1998, and the related consolidated statements of income and cash flows for such fiscal year of ALT. "Audited TTI Financial Statements" means, collectively, (i) the audited combined balance sheet of TTI for the fiscal years ended December 31, 1997 and December 31, 1998, and (ii) the combined statements of income, stockholders equity and cash flows for the fiscal years ended December 31, 1996, December 31, 1997 and December 31, 1998. "Bank of America" means Bank of America, N.A. "Base Rate" means, for any day, a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its "prime rate." Such prime rate is a rate set by Bank of America based upon various factors including Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. "Base Rate Loan" means a Loan which bears interest based on the Base Rate. "Borrower" means (i) on or prior to the TTI Closing Date and the assumption by TTI pursuant to the Assumption Agreement of ALT's Obligations (other than ALT's Obligations under the ALT Subordination Agreement), ALT, and (ii) thereafter, TTI. "Borrower Party" means Borrower or any Person other than Lenders and any Affiliates of Lenders, Administrative Agent and Issuing Lender from time to time party to a Loan Document. "Borrowing" and "Borrow" each mean, a borrowing hereunder consisting of Loans of the same type made on the same day and, other than in the case of Base Rate Loans, having the same Interest Period. "Borrowing Date" means the date that a Loan is made, which shall be a Business Day. "Business Day" means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where Administrative Agent's Office is located or the State of California and, if such day relates to any Eurodollar Rate Loan, means any such day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market. - 4 - 10 "Capitalization Ratio" means, as of any date of determination, for Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Total Indebtedness as of such date to (b) Consolidated Total Capitalization as of such date. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means all property of the Borrower Parties, now owned or hereafter acquired, with respect to which a Lien is purported to be created by the Pledge Agreement. "Collateral Release Date" means the date on which each of the following shall have occurred: (i) TTI shall have consummated a Qualified Public Offering on or before the date that is 12 months after the ALT Closing Date, (ii) no Default or Event of Default shall have occurred and be continuing, (iii) Borrower shall have delivered to Administrative Agent a written request for the release of the Collateral and a certificate of the chief financial officer of Borrower certifying that the requirements of clauses (i) and (ii) of this definition have been satisfied. "Commitment" means, for each Lender, the obligation of such Lender to make Extensions of Credit in an aggregate principal amount not exceeding the amount set forth opposite such Lender's name on Schedule 2.01 at any one time outstanding, as such amount may be reduced or adjusted from time to time in accordance with this Agreement (collectively, the "combined Commitments"). "Compliance Certificate" means a certificate in the form of Exhibit B, properly completed and signed by a Responsible Officer of Borrower. "Consolidated EBIT" means, for any period, for TTI and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, and (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income. "Consolidated EBITDA" means, for any period, for TTI and its Subsidiaries on a consolidated basis, an amount equal to the sum of (a) Consolidated Net Income, (b) Consolidated Interest Charges, (c) the amount of taxes, based on or measured by income, used or included in the determination of such Consolidated Net Income, and (d) the amount of depreciation and amortization expense deducted in determining such Consolidated Net Income; provided that for purposes of calculating Consolidated EBITDA of TTI and its Subsidiaries for any period, (i) the Consolidated EBITDA of any Person or assets acquired by TTI and its Subsidiaries in a Permitted Acquisition during such period shall be included on a pro forma basis for such period (assuming the consummation of such Permitted Acquisition and the incurrence or assumption of any Indebtedness in connection therewith occurred on the first day of such period) and (ii) the Consolidated EBITDA of any Person or assets Disposed of by TTI or its Subsidiaries during such period shall be excluded for such period (assuming the consummation of such Disposition and the repayment of any Indebtedness in connection therewith occurred on the first day of such period). - 5 - 11 "Consolidated Interest Charges" means, for any period, for TTI and its Subsidiaries on a consolidated basis, the sum of all interest, premium payments, fees, charges and related expenses payable for such period by TTI and its Subsidiaries in connection with Indebtedness (including capitalized interest and other fees and charges incurred under any asset securitization program), in each case to the extent treated as interest in accordance with GAAP (including any such amounts payable in respect of Indebtedness of any Person acquired during such period and in respect of Indebtedness incurred in connection with such acquisition, in each case as if such Indebtedness was incurred on the first day of such period). "Consolidated Net Income" means, for any period, for TTI and its Subsidiaries on a consolidated basis, the net income of TTI and its Subsidiaries from continuing operations after extraordinary items (excluding gains or losses from Dispositions of assets) for that period, determined in accordance with GAAP. "Consolidated Net Worth" means, as of any date of determination, for TTI and its Subsidiaries on a consolidated basis, Stockholders' Equity of TTI and its Subsidiaries on that date, determined in accordance with GAAP. "Consolidated Total Assets" means, as of any date of determination, for TTI and its Subsidiaries on a consolidated basis, the value of all properties and all right, title and interest in such properties which would be classified as assets of TTI and its Subsidiaries, determined in accordance with GAAP. "Consolidated Total Capitalization" means, as of any date of determination, the sum of (i) Consolidated Total Indebtedness, and (ii) Consolidated Net Worth, in each case as of such date. "Consolidated Total Indebtedness" means, as of any date of determination, for TTI and its Subsidiaries on a consolidated basis, the sum of (a) the outstanding principal amount of all obligations and liabilities of TTI and its Subsidiaries, whether current or long-term, for borrowed money (including Extensions of Credit hereunder), (b) that portion of obligations with respect to capital leases that are capitalized in the consolidated balance sheet of TTI and its Subsidiaries, (c) without duplication, all Guaranty Obligations with respect to Indebtedness of the type specified in subsections (a) and (b) above of Persons other than TTI or any of its Subsidiaries, (d) the outstanding principal amount of all obligations and liabilities, whether current or long-term, associated with any sale by TTI or any of its Subsidiaries of its accounts receivable, (e) Synthetic Lease Obligations of TTI and its Subsidiaries, (f) Indebtedness of TTI and its Subsidiaries in respect of Swap Contracts, in each case, determined in accordance with GAAP, and (g) Joint Venture Indebtedness of TTI and its Subsidiaries. "Continuation" and "Continue" mean, with respect to any Eurodollar Rate Loan, the continuation of such Eurodollar Rate Loan as a Eurodollar Rate Loan on the last day of the Interest Period for such Loan. - 6 - 12 "Contractual Obligation" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Conversion" and "Convert" mean, with respect to any Loan, the conversion of such Loan from or into another type of Loan. "Debtor Relief Laws" means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect affecting the rights of creditors generally. "Default" means any event that, with the giving of any notice, the passage of time, or both, would be an Event of Default. "Default Rate" means an interest rate equal to the Base Rate plus the Applicable Amount, if any, applicable to Base Rate Loans plus 2% per annum, to the fullest extent permitted by applicable Laws; provided, however, that with respect to a Eurodollar Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Amount) otherwise applicable to such Loan plus 2% per annum. "Designated Deposit Account" means a deposit account to be maintained by Borrower with Bank of America, as from time to time designated by Borrower by written notification to Administrative Agent. "Disposition" means the sale, transfer, license (excluding the license of property that has a fair market value, individually or in the aggregate, of not greater than $________) or other disposition (including any sale and leaseback transaction) of any property by any Person, including any sale, assignment, transfer or other disposal with or without recourse of any notes or accounts receivable or any rights and claims associated therewith, and the terms "Dispose" and "Disposed of" have correlative meanings. "Dollar" and "$" means lawful money of the United States of America. "Eligible Assignee" means (a) a financial institution organized under the laws of the United States, or any state thereof, and having a combined capital and surplus of at least $100,000,000; (b) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development, or a political subdivision of any such country, and having a combined capital and surplus of at least $100,000,000, provided that such bank is acting through a branch or agency located in the United States; (c) a Person that is primarily engaged in the business of commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a Lender is a Subsidiary; (d) another Lender; (e) any other entity which is an "accredited investor" (as defined in Regulation D under the Securities Act of 1933, as - 7 - 13 amended) which extends credit or buys loans as one of its businesses, including but not limited to, insurance companies, mutual funds and lease financing companies; or (f) other lenders or institutional investors consented to in writing in advance by Administrative Agent and, so long as no Default or Event of Default shall have occurred and be continuing, Borrower. No Borrower Party or any Affiliate of a Borrower Party shall be an Eligible Assignee. "Environmental Laws" means all foreign, federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety and land use matters applicable to any property. "ERISA" means the Employee Retirement Income Security Act of 1974 and any regulations issued pursuant thereto, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common control with Borrower within the meaning of Sections 414(b) or (c) of the Code (and Sections 414(m) and (o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any ERISA Affiliate. "Eurodollar Base Rate" has the meaning set forth in the definition of Eurodollar Rate. "Eurodollar Rate" means for any Interest Period with respect to any Eurodollar Rate Loan, a rate per annum determined by Administrative Agent pursuant to the following formula: Eurodollar Base Rate Eurodollar Rate = ------------------------------------ 1.00 - Eurodollar Reserve Percentage Where, "Eurodollar Base Rate" means, for such Interest Period: - 8 - 14 (a) the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to be the offered rate that appears on the page of the Telerate Screen that displays an average British Bankers Association Interest Settlement Rate for deposits in dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (b) in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum (carried out to the fifth decimal place) equal to the rate determined by Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period, or (c) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by Administrative Agent as the rate of interest at which dollar deposits (for delivery on the first day of such Interest Period) in same day funds in the approximate amount of the applicable Eurodollar Rate Loan and with a term equivalent to such Interest Period would be offered by its London Branch to major banks in the eurodollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period. "Eurodollar Reserve Percentage" means, for any day during any Interest Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, whether or not applicable to any Lender, under regulations issued from time to time by the Board of Governors of the Federal Reserve System for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage. "Eurodollar Rate Loan" means a Loan bearing interest based on the Eurodollar Rate. "Event of Default" means any of the events specified in Section 8. "Existing ALT Credit Agreement" means that certain Credit Agreement, dated as of August 30, 1996, among ALT, the lenders from time to time parties thereto, Bank of America Illinois, The Chase Manhattan Bank, Mellon Bank, N.A. and PNC Bank, National Association, as managing agents, and PNC Bank, National Association, as documentation and administrative agent, as amended by First Amendment to Credit Agreement, dated as of August 31, 1997, Second Amendment to Credit Agreement, dated as of March 24, 1998, Third Amendment to Credit Agreement dated as of March 30, 1999, Fourth Amendment to Credit Agreement and - 9 - 15 Waiver, dated as of August 6, 1999, and [identify any additional required consent to Loan Documents and Spinoff Documents]. "Extension of Credit" means (a) the Borrowing of Loans, (b) the Conversion or Continuation of any Loans, or (c) any Letter of Credit Action which has the effect of increasing the amount of any Letter of Credit, extending the maturity of any Letter of Credit or making any material modification to any Letter of Credit or the reimbursement of drawings thereunder (collectively, the "Extensions of Credit"). "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to Bank of America on such day on such transactions as determined by Administrative Agent. "Foreign Subsidiary" means any "controlled foreign corporation" within the meaning of Section 957(a) of the Code as to which TTI or any of its Subsidiaries is a "United States shareholder" as defined in Section 951(b) of the Code; provided that a "controlled foreign corporation" that is treated as a pass through entity for United States federal income tax purposes shall not be a Foreign Subsidiary while so treated. "Form 10" means TTI's Form 10 Report, as filed with the Securities and Exchange Commission on September 13, 1999, including, without limitation, the information statement contained therein, as amended, restated, extended, supplemented or otherwise modified in writing from time to time in accordance with this Agreement. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or such other principles as may be approved by a significant segment of the accounting profession, that are applicable to the circumstances as of the date of determination, consistently applied. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either Borrower or the Required Lenders shall so request, Administrative Agent, Lenders and Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of, and to reflect, such change in GAAP (subject to the approval of the Required Lenders), provided that, until so amended, (a) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrower shall provide to Administrative Agent and Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP. - 10 - 16 "Governing State" means the State of New York. "Governmental Authority" means (a) any international, foreign, federal, state, county or municipal government, or political subdivision thereof, (b) any governmental or quasi-governmental agency, authority, board, bureau, commission, department, instrumentality, central bank or public body, or (c) any court, administrative tribunal or public utility. "Guaranty" means collectively, (i) the guaranty substantially in the form of Exhibit G, and (ii) any supplements thereto substantially in the form of Annex A to Exhibit G executed and delivered pursuant to Section 6.13. "Guarantor" means each Material Subsidiary of TTI (other than any Foreign Subsidiary) that is a party to the Guaranty. "Guaranty Obligation" means, as to any Person, any (a) guaranty by that Person of Indebtedness of, or other obligation payable or performable by, any other Person or (b) agreement, undertaking or arrangement given by that Person to an obligee of any other Person with respect to the payment or performance of an obligation by, or the financial condition of, such other Person, whether direct, indirect or contingent, including any purchase or repurchase agreement covering such obligation or any collateral security therefor, any agreement to provide funds (by means of loans, capital contributions or otherwise) to such other Person, any agreement to support the solvency or level of any balance sheet item of such other Person or any "keep-well" or other arrangement of whatever nature given for the purpose of assuring or holding harmless such obligee against loss with respect to any obligation of such other Person; provided, however, that the term Guaranty Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guaranty Obligation shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, covered by such Guaranty Obligation or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by the Person in good faith. "Indebtedness" means, as to any Person at any time, all items which would, in conformity with GAAP, be classified as liabilities on a balance sheet of such Person at such time (excluding trade and other accounts payable in the ordinary course of business in accordance with customary trade terms and which are not overdue for a period of more than 90 days and excluding deferred taxes), but in any event including: (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) any direct or contingent obligations of such Person arising under letters of credit (including standby and commercial), banker's acceptances, bank guaranties, surety bonds and similar instruments; - 11 - 17 (c) net obligations under any Swap Contract in an amount equal to (i) if such Swap Contract has been closed out, any outstanding termination value thereof, or (ii) if such Swap Contract has not been closed out, the mark-to-market value thereof determined on the basis of readily available quotations provided by any recognized dealer in such type of Swap Contract; (d) whether or not so included as liabilities in accordance with GAAP, all obligations of such Person to pay the deferred purchase price of property or services, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse; (e) lease payment obligations under capital leases or Synthetic Lease Obligations; (f) all Guaranty Obligations of such Person in respect of any of the foregoing; (g) obligations and liabilities associated with any sale by such Person of its accounts receivable; and (h) Joint Venture Indebtedness. "Indemnified Liabilities" has the meaning set forth in Section 10.14. "Interest Coverage Ratio" means, as of any date of determination, the ratio of (a) Consolidated EBIT for the period of the four prior fiscal quarters ending on such date to (b) Consolidated Interest Charges during such period (giving pro forma effect to the Line of Business Transfer and the Spinoff); provided, however, that for purposes of determining Consolidated EBIT and Consolidated Interest Charges for any period of four fiscal quarters that includes the quarters ended December 31, 1998, March 31, 1999, June 30, 1999 or September 30, 1999, Consolidated EBIT and Consolidated Interest Charges for such fiscal quarters shall be as set forth on Schedule 1.01 (which shall give pro forma effect to the Line of Business Transfer and the Spinoff). "Interest Period" means, for each Eurodollar Rate Loan as requested by Borrower, (a) initially, the period commencing on the date such Eurodollar Rate Loan is disbursed, Continued as, or Converted into, a Eurodollar Rate Loan and (b) thereafter, the period commencing on the last day of the preceding Interest Period, and ending, in each case, on the earlier of (x) the scheduled Maturity Date, or (y) one, two, three or six months thereafter; provided that: (i) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; - 12 - 18 (ii) any Interest Period which begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and (iii) unless Administrative Agent otherwise consents, there may not be more than 10 Interest Periods in effect at any time. "Investment" means, as to any Person, any acquisition or any investment by such Person, whether by means of the purchase or other acquisition of stock or other securities of any other Person or by means of a loan, creating a debt, capital contribution, guaranty or other debt or equity participation or interest in any other Person, including any partnership and joint venture interests in such other Person. For purposes of covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment. "IRS" means the Internal Revenue Service. "Issuing Lender" means Bank of America, or any successor issuing lender hereunder. "Joint Venture Indebtedness" means, as to any Person at any time, all Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer, unless and to the extent such Indebtedness is expressly made non-recourse to such Person except for customary exceptions approved by the Required Lenders. "Laws" or "Law" means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, in each case whether or not having the force of law. "Lender" means each lender from time to time party hereto, Issuing Lender and Swing Line Lender. "Lending Office" means, as to any Lender, the office or offices of such Lender described as such on Schedule 10.03, or such other office or offices as such Lender may from time to time notify Borrower and Administrative Agent. "Letter of Credit" means any letter of credit issued or outstanding hereunder. A Letter of Credit may be a financial letter of credit only. "Letter of Credit Action" means the issuance, supplement, amendment, renewal, extension, modification or other action relating to a Letter of Credit. "Letter of Credit Application" means an application for a Letter of Credit Action as shall at any time be in use by Issuing Lender. - 13 - 19 "Letter of Credit Cash Collateral Account" means a blocked deposit account at Bank of America with respect to which Borrower hereby grants a security interest in such account to Administrative Agent for and on behalf of Lenders as security for Letter of Credit Usage and with respect to which Borrower agrees to execute and deliver from time to time such documentation as Administrative Agent may reasonably request to further assure and confirm such security interest. "Letter of Credit Commitment" means an amount equal to the lesser of the combined Commitments and $25,000,000. "Letter of Credit Expiration Date" means the date which is 30 days prior to the Maturity Date. "Letter of Credit Usage" means, as at any date of determination, the aggregate undrawn face amount of outstanding Letters of Credit plus the aggregate amount of all drawings under the Letters of Credit honored by Issuing Lender and not reimbursed to Issuing Lender by Borrower or converted into Loans. "Leverage Ratio" means, as of any date of determination, for TTI and its Subsidiaries on a consolidated basis, the ratio of (a) Consolidated Total Indebtedness as of such date (giving pro forma effect to the Line of Business Transfer and the Spinoff) to (b) Consolidated EBITDA for the period of the four fiscal quarters ending on that date; provided, however, that for purposes of determining Consolidated EBITDA for any period of four fiscal quarters that includes the quarters ended December 31, 1998, March 31, 1999, June 30, 1999 or September 30, 1999, Consolidated EBITDA for such fiscal quarters shall be as set forth on Schedule 1.01 (which shall give pro forma effect to the Line of Business Transfer and the Spinoff and shall be subject to adjustments for Permitted Acquisitions occurring after the TTI Closing Date as described in the definition of "Consolidated EBITDA"). "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement (in the nature of compensating balances, cash collateral accounts or security interests), encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the Uniform Commercial Code or comparable Laws of any jurisdiction), including the interest of a purchaser of accounts receivable. "Line of Business Transfer" has the meaning set forth in the recitals hereto. "Loan" means any advance made by any Lender to Borrower as provided in Section 2 (collectively, the "Loans"). "Loan Documents" means this Agreement, the Guaranty, the Pledge Agreement, the ALT Subordination Agreement, the Assumption Agreement, any Letter of Credit Application, any - 14 - 20 Request for Extension of Credit and any Note (including, without limitation, the ALT Global Note), certificate, any fee letter, any commitment letter, and other instrument, document or agreement from time to time delivered in connection with this Agreement. "Material Adverse Effect" means any set of circumstances or events which (a) has or would reasonably be expected to have any material adverse effect whatsoever upon the validity or enforceability of any Loan Document, (b) is or would reasonably be expected to be material and adverse to the condition (financial or otherwise), business, assets, operations or liabilities (contingent or otherwise) of Borrower and its Subsidiaries taken as a whole, or (c) materially impairs or would reasonably be expected to materially impair the ability of any Borrower and its Subsidiaries taken as a whole to perform the Obligations. For purposes of this definition, the phrase "Borrower and its Subsidiaries" means (i) on and prior to the consummation of the Spinoff and the assumption by TTI of ALT's Obligations (other than ALT's Obligations under the ALT Subordination Agreement) pursuant to the Assumption Agreement, each of (a) ALT and its Subsidiaries, or (b) the assets and liabilities and operations of the Aerospace and Electronics segment of ALT intended to be transferred in connection with the Line of Business Transfer to TTI and its Subsidiaries, and (ii) following the consummation of the Spinoff and the assumption by TTI of ALT's Obligations (other than ALT's Obligations under the ALT Subordination Agreement) pursuant to the Assumption Agreement, TTI and its Subsidiaries. "Material Subsidiary" means, as of any date of determination, any Subsidiary of TTI that has on such date (i) Total Assets constituting ten percent or more of Consolidated Total Assets or (ii) total revenues constituting ten percent or more of the consolidated total revenues of TTI and its Subsidiaries, determined in accordance with GAAP. "Maturity Date" means (i) if the Spinoff has not been consummated in accordance with the terms of the Spinoff Documents and applicable Law on or before such date, the date that is one month following the ALT Closing Date and (ii) otherwise, the date that is five years following the ALT Closing Date, in each case, as it may be earlier terminated or extended in accordance with the terms hereof. "Minimum Amount" means, with respect to each of the following actions, the minimum amount and any multiples in excess thereof set forth opposite such action: - 15 - 21
MINIMUM AMOUNT INCREMENTS IN TYPE OF ACTION EXCESS THEREOF --------------------------------------------- ------------------- --------------------- Borrowing of, prepayment of, or Conversion $500,000 $100,000 into, Base Rate Loans Borrowing of, prepayment of, Continuation $5,000,000 $1,000,000 of, or Conversion into, Eurodollar Rate Loans Borrowing of, or prepayment of, Swing Line $100,000 None Loans Letter of Credit Action [$100,000] None Reduction in Commitments $1,000,000 $500,000 Assignments $10,000,000 $1,000,000
"Multiemployer Plan" means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA. "Notes" means, collectively (i) each promissory note made by Borrower in favor of a Lender evidencing Loans made by such Lender, substantially in the form of Exhibit C. "Notice of Assignment and Acceptance" means a Notice of Assignment and Acceptance substantially in the form of Exhibit D. "Obligations" means all advances to, and debts, liabilities, obligations (including, without limitation, obligations to provide cash collateral and indemnification obligations), covenants and duties of, any Borrower Party arising under any Loan Document, whether direct or indirect (including those acquired by assignment), absolute or contingent, due or to become due, now existing or hereafter arising and including interest that accrues after the commencement of any proceeding under any Debtor Relief Laws by or against any Borrower Party or any Subsidiary or Affiliate of any Borrower Party. "Ordinary Course Dispositions" means: (a) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business; (b) Dispositions of cash, cash equivalents, inventory and other property in the ordinary course of business; (c) Dispositions of property in the ordinary course of business to the extent that such property is exchanged for credit against the purchase price of similar replacement property, or the proceeds of such sale are reasonably promptly applied to the purchase price of such replacement property or where TTI or its Subsidiary determine - 16 - 22 in good faith that the failure to replace such equipment will not be detrimental to the business of TTI or such Subsidiary; and (d) Dispositions of assets or property by any Subsidiary of TTI to TTI or another wholly-owned Solvent Subsidiary of TTI; provided, however, that no such Disposition shall be for less than the fair market value of the property being disposed of. "Ordinary Course Indebtedness" means: (a) Indebtedness under the Loan Documents; (b) intercompany Guaranty Obligations of TTI or any of its Subsidiaries guarantying Indebtedness and other obligations otherwise permitted hereunder of TTI or any wholly-owned Subsidiary of TTI; (c) Indebtedness arising from the honoring of a check, draft or similar instrument against insufficient funds; and (d) Ordinary Course Swap Obligations. "Ordinary Course Investments" means: (a) Investments consisting of cash and cash equivalents; (b) Investments consisting of advances to officers, directors and employees of TTI and its Subsidiaries for travel, entertainment, relocation and analogous ordinary business purposes; (c) Investments of TTI in any Guarantor and Investments of any Subsidiary of TTI in TTI or any Guarantor; (d) Investments consisting of or evidencing the extension of credit to customers or suppliers of TTI and its Subsidiaries in the ordinary course of business and any Investments received in satisfaction or partial satisfaction thereof; and (e) Investments consisting of Guaranty Obligations permitted by Section 7.01. "Ordinary Course Liens" means: (a) Liens pursuant to any Loan Document; (b) Liens for taxes not yet due or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP; - 17 - 23 (c) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are not overdue for a period of more than 30 days or which are being contested in good faith and by appropriate proceedings, if adequate reserves with respect thereto are maintained on the books of the applicable Person; (d) pledges or deposits in connection with worker's compensation, unemployment insurance and other social security legislation; (e) deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business; (f) easements, rights-of-way, restrictions and other similar encumbrances affecting real property which, in the aggregate, are not substantial in amount, and which do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of any Person; and (g) attachment, judgment or other similar Liens arising in connection with litigation or other legal proceedings (and not otherwise a Default hereunder) in the ordinary course of business that is currently being contested in good faith by appropriate proceedings, so long as adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP and no material property is subject to a material risk of loss or forfeiture. "Ordinary Course Swap Obligations" means all obligations (contingent or otherwise) of TTI or any Subsidiary existing or arising under any Swap Contract, provided that each of the following criteria is satisfied: (a) such obligations are (or were) entered into by such Person in the ordinary course of business for the purpose of directly mitigating risks associated with liabilities, commitments or property held or reasonably anticipated by such Person, or changes in the value of securities issued by such Person in conjunction with a securities repurchase program not otherwise prohibited hereunder, and not for purposes of speculation or taking a "market view;" and (b) such Swap Contracts do not contain (i) any provision ("walk-away" provision) exonerating the non-defaulting party from its obligation to make payments on outstanding transactions to the defaulting party, or (ii) any provision creating or permitting the declaration of an event of default, termination event or similar event upon the occurrence of an Event of Default hereunder (other than an Event of Default under Section 8.01(f)(ii)). "Organization Documents" means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws; (b) with respect to any limited liability company, the articles of formation and operating agreement; and (c) with respect to any partnership, joint venture or other form of business entity, the partnership agreement and any agreement, filing or notice with respect thereto filed with the secretary of state of the state of its formation, in each case as amended from time to time. - 18 - 24 "Outstanding Obligations" means, as of any date, and giving effect to making any Extensions of Credit requested on such date and all payments, repayments and prepayments made on such date, (a) when reference is made to all Lenders, the sum of (i) the aggregate outstanding principal amount of all Loans, and (ii) all Letter of Credit Usage, and (b) when reference is made to one Lender the sum of (i) the aggregate outstanding principal amount of all Loans (excluding, in the case of the Swing Line Lender, Swing Line Loans) made by such Lender, (ii) such Lender's ratable participation in all Letter of Credit Usage, and (iii) such Lender's ratable participation in all outstanding Swing Line Loans. "PBGC" means the Pension Benefit Guaranty Corporation or any successor thereto established under ERISA. "Pension Plan" means any "employee pension benefit plan" (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by Borrower or any ERISA Affiliates or to which Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer plan (as described in Section 4064(a) of ERISA) has made contributions at any time during the immediately preceding five plan years. "Permitted Acquisition" means any non-hostile Acquisition by TTI or any Guarantor if all of the following conditions are met: (a) before and immediately after giving effect thereto, (i) no Default or Event of Default has occurred and is continuing or would result therefrom, and (ii) the representations and warranties of each Borrower Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Acquisition, as though made on and as of such date, other than any such representations or warranties that by their terms refer to a date other than the date of such Acquisition, in which case such representations and warranties shall be true and correct in all material respects as of such other date; (b) such Acquisition has not been preceded by an unsolicited tender offer for such Person by TTI or any of its Affiliates; (c) all transactions related thereto shall be consummated in accordance with applicable Laws; (d) in the case of any Acquisition of shares, partnership interests or other equity interests in any Person, such Acquisition is an Acquisition of 80% of the equity interests in such Person and, after giving effect to such Acquisition, such Person becomes an 80%-owned Subsidiary of TTI; (e) all actions required to be taken, if any, with respect to any acquired or newly formed Subsidiary under Section 6.13 shall have been taken; - 19 - 25 (f) such assets are used for, or such Person is engaged in, a line of business permitted under Section 7.08; (g) in the event that the Acquisition Consideration payable in connection with such Acquisition is in excess of $50,000,000, (i) at least 10 days prior to entering into such Acquisition, or any agreement therefor, TTI delivers notice thereof to Administrative Agent, (ii) at least 5 days prior to the consummation of such Acquisition, TTI delivers to Administrative Agent and Lenders a certificate signed by the chief financial officer of TTI calculating the Capitalization Ratio, Consolidated Net Worth, the Interest Coverage Ratio and the Leverage Ratio, each on a pro forma basis so as to give effect to such Acquisition and all Acquisition Consideration therefor and all other Indebtedness assumed or incurred by TTI or any of its Subsidiaries in connection therewith, and attaching TTI's then-current good faith and reasonable financial projections for the first fiscal quarter ending after the consummation of such Acquisition and the succeeding three quarters, demonstrating (to the reasonable satisfaction of the Required Lenders) that, after giving effect to such Acquisition, (A) TTI would have been in compliance with the covenants set forth in Section 7.12 as of the last day of TTI's fiscal quarter most recently ended prior to the consummation of such Acquisition and (B) based solely on such projections and without any assurance that such projections will be achieved, TTI can reasonably be expected to remain in compliance with such covenants for the twelve-month period following the consummation of such Acquisition, and to have sufficient cash liquidity to conduct its business, to support working capital requirements, to make required income tax distributions and pay its debts and other liabilities as they become due and otherwise remain Solvent, and (iii) prior to the inclusion in the calculation of Consolidated EBITDA of the Consolidated EBITDA of the Person and its consolidated Subsidiaries or the assets to be acquired in such Acquisition, TTI delivers to Administrative Agent the consolidated balance sheet of such acquired Person and its consolidated Subsidiaries (or, in the case of an Acquisition of assets, a consolidated balance sheet reflecting such assets in a manner reasonably satisfactory to Administrative Agent) as at the end of the period preceding the acquisition of such Person or assets and the related consolidated statements of income and stockholders' equity and of cash flows for the period in respect of which Consolidated EBITDA is to be calculated, and such financial statements (x) have been previously provided to Administrative Agent and Lenders and (y) either (1) have been reported on without a qualification arising out of the scope of the audit by independent certified public accountants of nationally recognized standing or (2) have been approved by Administrative Agent; (h) after giving effect to such Acquisition, (A) TTI would have been in compliance with the covenants set forth in Section 7.12 as of the last day of TTI's fiscal quarter most recently ended prior to the consummation of such Acquisition and (B) based solely on TTI's then-current good faith and reasonable financial projections for the fiscal quarter ending after the consummation of such Acquisition and the succeeding three quarters and without any assurance that such projections will be achieved, TTI can reasonably be expected to remain in compliance with such covenants for the twelve- - 20 - 26 month period following the consummation of such Acquisition, and to have sufficient cash liquidity to conduct its business, to support working capital requirements, to make required income tax distributions and pay its debts and other liabilities as they become due and otherwise remain Solvent; (i) neither TTI nor any of its Subsidiaries shall incur, assume or otherwise become liable for or subject to any Indebtedness in connection with such Acquisition except for Indebtedness permitted by Section 7.01; (j) the assets acquired in such Acquisition shall be acquired free and clear of all Liens other than Ordinary Course Liens and Liens permitted by Section 7.02(i); and (k) as soon as reasonably practicable and, in any event, within 45 days following the date of such Acquisition, Administrative Agent shall have received copies of all acquisition documents related thereto and legal opinions, evidence of solvency and other documents and instruments reasonably requested by Administrative Agent in connection with such Acquisition. "Person" means any individual, trustee, corporation, general partnership, limited partnership, limited liability company, joint stock company, trust, unincorporated organization, bank, business association, firm, joint venture, Governmental Authority, or otherwise. "Plan" means any employee benefit plan maintained or contributed to by a Borrower Party or by any trade or business (whether or not incorporated) under common control with a Borrower Party as defined in Section 4001(b) of ERISA and insured by the Pension Benefit Guaranty Corporation under Title IV of ERISA. "Pledge Agreement" means, collectively, (i) the pledge agreement executed and delivered by each Material Subsidiary of TTI (other than any Foreign Subsidiary), substantially in the form of Exhibit H, and (ii) any supplements thereto substantially in the form of Annex A to Exhibit H executed and delivered pursuant to Section 6.13. "Private Letter Ruling" mean an IRS private letter ruling confirming the tax free treatment of the Spinoff under Section 355 of the Code, as amended, restated, extended, supplemented or otherwise modified in writing from time to time in accordance with this Agreement. "Profit Payment Agreement" means any agreement to make any payment the amount of which is, or the terms of payment of which are, in any respect subject to or contingent upon the revenues, income, cash flow or profits (or the like) of any Person or business. "Pro Rata Share" means, with respect to each Lender, the percentage of the combined Commitments set forth opposite the name of that Lender on Schedule 2.01, as such share may be adjusted pursuant to Section 10.23. - 21 - 27 "Qualified Public Offering" means an underwritten public offering, pursuant to an effective registration statement under the Securities Act of 1933, as amended, of shares of common stock of TTI which results in gross proceeds to TTI of not less than $115,000,000. "Reportable Event" means any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, a withdrawal from a Plan described in Section 4063 of ERISA, or a cessation of operations described in Section 4062(e) of ERISA. "Request for Extension of Credit" means a written request substantially in the form of Exhibit A duly completed and signed by a Responsible Officer, or a telephonic request followed by such a written request, in each case delivered to Administrative Agent by Requisite Notice. In the case of a request for a new or amended Letter of Credit, the written Letter of Credit Application shall be deemed to be the Request for Extension of Credit. "Required Lenders" means (a) as of any date of determination if the Commitments are then in effect, Lenders (excluding any Lenders not funding when required to so hereunder) having in the aggregate more than 50% of the combined Commitments then in effect and (b) as of any date of determination if the Commitments have then been terminated and there are Loans and/or Letter of Credit Usage outstanding, Lenders holding Loans and Letter of Credit Usage aggregating more than 50% of the aggregate outstanding principal amount of the Loans and Letter of Credit Usage. "Requisite Notice" means, unless otherwise provided herein, (a) irrevocable written notice to the intended recipient or (b) except with respect to Letter of Credit Actions (which must be in writing), irrevocable telephonic notice to the intended recipient, promptly followed by a written notice to such recipient. Such notices shall be (i) delivered to such recipient at the address or telephone number specified on Schedule 10.03 or as otherwise designated by such recipient by Requisite Notice to each other party hereto, and (ii) if made by any Borrower Party, given or made by a Responsible Officer of such Borrower Party. Any written notice delivered in connection with any Loan Document shall be in the form, if any, prescribed in the applicable section hereof or thereof and may be delivered as provided in Section 10.03. Any notice sent by other than hardcopy shall be promptly confirmed by a telephone call to the recipient and, if requested by Administrative Agent, by a manually-signed hardcopy thereof. "Requisite Time" means, with respect to any of the actions listed below, the time and date set forth below opposite such action (all times are local time (standard or daylight) as observed in the state where Administrative Agent's Office is located):
TYPE OF ACTION TIME DATE OF ACTION ---------------------------------------------------- ---------------- -------------------------------------------- Delivery of Request for Extension of Credit for, or notice for: o Borrowing of, prepayment of, or 9:00 A.M. Same date as such Borrowing, prepayment or Conversion into, Base Rate Loans Conversion o Borrowing of, prepayment of, Continuation 10:00 A.M. 3 Business Days prior to such Borrowing, of, or Conversion into, Eurodollar Rate Loans prepayment or Conversion
- 22 - 28 o Borrowing of, or prepayment of, Swing 1:00 P.M. Same date as such Borrowing or prepayment Line Loans 2 Business Days prior to such action (or o Letter of Credit Action 10:00 A.M. such lesser time which is acceptable to Issuing Lender) o Voluntary reduction in or termination of 10:00 A.M. 2 Business Days prior to such reduction or Commitments termination o Payments by Lenders or Borrower to 11:00 A.M. On date payment is due Administrative Agent
"Responsible Officer" means the president, chief financial officer, treasurer or assistant treasurer of any Borrower Party. Any document or certificate hereunder that is signed by a Responsible Officer of a Borrower Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Borrower Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Borrower Party. "Restricted Payment" means: (a) the declaration or payment of any dividend or distribution by Borrower or any of its Subsidiaries, either in cash or property, on any shares of the capital stock of any class of Borrower or any of its Subsidiaries (except dividends or other distributions payable solely in shares of capital stock of Borrower or any of its Subsidiaries or payable by a Subsidiary to Borrower or another wholly-owned Subsidiary of Borrower that is a Guarantor); (b) the purchase, redemption or retirement by Borrower or any of its Subsidiaries of any shares of its capital stock of any class or any warrants, rights or options to purchase or acquire any shares of its capital stock, whether directly or indirectly; (c) any other payment or distribution by Borrower or any of its Subsidiaries in respect of its capital stock, either directly or indirectly; (d) any Investment other than an Investment otherwise permitted under any Loan Document; and (e) the prepayment, repayment, redemption, defeasance or other acquisition or retirement for value prior to any scheduled maturity, scheduled repayment or scheduled sinking fund payment, or the segregation of funds for any such prepayment, repayment, redemption, defeasance or other acquisition or retirement for value, of any Indebtedness - 23 - 29 not otherwise expressly permitted under any Loan Document to be so paid, except scheduled repayments of Indebtedness created under the Existing ALT Credit Agreement, as in effect on the date hereof. "Separation and Distribution Agreement" means that certain Separation and Distribution Agreement, entered into in connection with the Spinoff, among ALT, TII Holdings, LLC, Teledyne Industries, Inc. and TTI. "Signing Date" means the date on which all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01, which date shall be no later than October 29, 1999. "Solvent" means, when used with respect to any Person, as of any date of determination, that (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state Laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, (d) such Person will be able to pay its debts as they mature, and (e) such Person is not insolvent within the meaning of any applicable Law. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Spinoff" has the meaning set forth in the introductory paragraph hereto. "Spinoff Documents" means, collectively, (i) the Form 10, (ii) the Private Letter Ruling, (iii) the Separation and Distribution Agreement, (iv) the Tax Sharing and Indemnification Agreement, (iv) the Interim Services Agreement, entered into in connection with the Spinoff, between ALT and TTI, (v) the Employee Benefits Agreement, entered into in connection with the Spinoff, between ALT and TTI, (vi) the Trademark License Agreement, entered into in connection with the Spinoff, among TII Holdings, LLC and TTI, and (vii) and all schedules, exhibits, annexes and amendments thereto and all side letters and agreements affecting the terms thereof or entered into in connection therewith. "Stockholders' Equity" means, as of any date of determination for TTI and its Subsidiaries on a consolidated basis, stockholders' equity as of that date determined in accordance with GAAP. - 24 - 30 "Subsidiary" means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by Borrower. "Swap Contract" means (a) any and all rate swap transactions, basis swaps, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, or (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., or any other master agreement (any such master agreement, together with any related schedules, as amended, restated, extended, supplemented or otherwise modified in writing from time to time, a "Master Agreement"), including any such obligations or liabilities under any Master Agreement. "Swap Termination Value" means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, any outstanding termination value(s), and (b) for any date prior to the date referenced in clause (a) the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include any Lender). "Swing Line" means the revolving line of credit established by Swing Line Lender in favor of Borrower pursuant to Section 2.04. "Swing Line Commitment" means an amount equal to the lesser of (a) $10,000,000 and (b) the combined Commitments. "Swing Line Lender" means Bank of America, or any successor swing line lender hereunder. "Swing Line Loan" means a loan which bears interest at a rate per annum equal to interest payable on a Base Rate Loan (plus the Applicable Amount, if any) and made by Swing Line Lender to Borrower under the Swing Line. - 25 - 31 "Swing Line Outstandings" means, as of any date, the aggregate principal amount of all outstanding Swing Line Loans. "Synthetic Lease Obligations" means all monetary obligations of a Person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations which do not appear on the balance sheet of such Person but which, upon the insolvency or bankruptcy of such Person, would be characterized as the Indebtedness of such Person (without regard to accounting treatment). "Tax Sharing and Indemnification Agreement" means that certain Tax Sharing and Indemnification Agreement, entered into in connection with the Spinoff, between ALT and TTI. "Threshold Amount" means $10,000,000. "Total Assets" means, as of any date of determination, for any Person, the value of all properties and all right, title and interest in such properties which would be classified as assets of such Person, determined in accordance with GAAP. "to the best knowledge of" means, when modifying a representation, warranty or other statement of any Person, that the fact or situation described therein is known by such Person (or, in the case of a Person other than a natural Person, known by any officer of such Person) making the representation, warranty or other statement, or with the exercise of reasonable due diligence under the circumstances (in accordance with the standard of what a reasonable Person in similar circumstances would have done) would have been known by such Person (or, in the case of a Person other than a natural Person, would have been known by an officer of such Person). "TTI" has the meaning set forth in the introductory paragraph hereto. "TTI Closing Date" means the date on which all the conditions precedent in Section 4.03 are satisfied or waived in accordance with Section 4.03, which date shall be no later the date that is one month following the ALT Closing Date. "TTI Financial Statements" means, collectively, (i) the Audited TTI Financial Statements and (ii) the Unaudited TTI Financial Statements. "TTI Group" means, collectively, TTI and its Subsidiaries. "type", when used with respect to any Loan, means the designation of whether such Loan is a Base Rate Loan or a Eurodollar Rate Loan. "Unaudited TTI Financial Statements" means the unaudited pro forma consolidated statement of income of TTI for the fiscal year ended December 31, 1998, (ii) the unaudited pro forma consolidated balance sheet of TTI as at June 30, 1999, (iii) the unaudited pro forma consolidated statement of income of TTI for the six months ended June 30, 1999, and (iv) [___________________]. - 26 - 32 "Unfunded Pension Liability" means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "Voting Stock" means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even though the right so to vote has been suspended by the happening of such a contingency. 1.02 USE OF CERTAIN TERMS. (a) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto or thereto, unless otherwise defined therein. (b) As used herein, unless the context requires otherwise, the masculine, feminine and neuter genders and the singular and plural include one another. (c) The words "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term "including" is by way of example and not limitation. References herein to a Section, subsection or clause shall refer to the appropriate Section, subsection or clause in this Agreement. (d) The term "or" is disjunctive; the term "and" is conjunctive. The term "shall" is mandatory; the term "may" is permissive. Masculine terms also apply to females; feminine terms also apply to males. 1.03 ACCOUNTING TERMS. All accounting terms not specifically or completely defined in this Agreement shall be construed in conformity with, and all financial data required to be submitted by this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. 1.04 ROUNDING. Any financial ratios required to be maintained by Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed in this Agreement and rounding the result up or down to the nearest number (with a round-up if there is no nearest number) to the number of places by which such ratio is expressed in this Agreement. 1.05 EXHIBITS AND SCHEDULES. All exhibits and schedules to this Agreement, either as originally existing or as the same may from time to time be supplemented, modified or amended, are incorporated herein by this reference. - 27 - 33 1.06 REFERENCES TO AGREEMENTS AND LAWS. Unless otherwise expressly provided herein, (a) references to the Loan Documents, the Private Letter Ruling, the Form 10 and the other Spinoff Documents shall include all amendments, restatements, extensions, supplements or other modifications thereto in accordance with this Agreement, (b) references to agreements and other contractual instruments (other than those included in clause (a) above) shall include all amendments, restatements, extensions, supplements or other modifications thereto (unless prohibited by any Loan Document), and (c) references to any statute or regulation shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting the statute or regulation. SECTION 2. THE COMMITMENTS AND EXTENSIONS OF CREDIT 2.01 AMOUNT AND TERMS OF COMMITMENTS. (a) Subject to the terms and conditions set forth in this Agreement, each Lender severally agrees to make, Convert and Continue Loans until the Maturity Date as Borrower may from time to time request; provided, however, that the Outstanding Obligations of each Lender shall not exceed such Lender's Commitment, and the Outstanding Obligations of all Lenders shall not exceed the combined Commitments at any time. Subject to the foregoing and the other terms and conditions hereof, Borrower may borrow, Convert, Continue, prepay and reborrow Loans as set forth herein without premium or penalty. (b) Loans made by each Lender shall be evidenced by one or more loan accounts or records maintained by such Lender in the ordinary course of business. Upon the request of any Lender made through Administrative Agent, such Lender's Loans may be evidenced by one or more Notes, instead of or in addition to loan accounts; provided that Loans made to ALT shall be evidenced by the ALT Global Note only. Each such Lender may attach schedules to its Note(s) and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto. Such loan accounts, records or Notes shall be conclusive absent manifest error of the amount of such Loans and payments thereon. Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of Borrower to pay any amount owing with respect to the Loans. 2.02 BORROWINGS, CONVERSIONS AND CONTINUATIONS OF LOANS. (a) Borrower may irrevocably request a Borrowing, Conversion or Continuation of Loans in a Minimum Amount therefor by delivering a Request for Extension of Credit therefor by Requisite Notice to Administrative Agent not later than the Requisite Time therefor. All Borrowings, Conversions and Continuations shall constitute Base Rate Loans unless properly and timely otherwise designated as set forth in the prior sentence. (b) Following receipt of a Request for Extension of Credit, Administrative Agent shall promptly notify each Lender of its Pro Rata Share thereof by Requisite Notice. In the case of a Borrowing of Loans, each Lender shall make the funds for its Loan available to - 28 - 34 Administrative Agent at Administrative Agent's Office not later than the Requisite Time therefor on the Business Day specified in such Request for Extension of Credit. Upon satisfaction of the applicable conditions set forth in Section 4, all funds so received shall be made available to Borrower in like funds received. (c) Administrative Agent shall promptly notify Borrower and Lenders of the interest rate applicable to any Loan other than a Base Rate Loan upon determination of same. (d) Except as otherwise provided herein, a Eurodollar Rate Loan may be Continued or Converted only on the last day of the Interest Period for such Eurodollar Rate Loan. No Loans may be requested as, Converted into or Continued as Eurodollar Rate Loans during the existence of a Default or Event of Default. During the existence of a Default or Event of Default, the Required Lenders may demand that any or all of the then outstanding Eurodollar Rate Loans be Converted immediately into Base Rate Loans. Such Conversion shall be effective upon notice to Borrower and shall continue so long as such Default or Event of Default continues to exist. (e) If a Loan is to be made on the same date that another Loan is due and payable, Borrower or Lenders, as the case may be, shall, unless Administrative Agent otherwise requests, make available to Administrative Agent the net amount of funds giving effect to both such Loans and the effect for purposes of this Agreement shall be the same as if separate transfers of funds had been made with respect to each such Loan. (f) The failure of any Lender to make any Loan on any date shall not relieve any other Lender of any obligation to make a Loan on such date, but no Lender shall be responsible for the failure of any other Lender to so make its Loan. 2.03 LETTERS OF CREDIT. (a) THE LETTER OF CREDIT COMMITMENT. Subject to the terms and conditions hereof, at any time and from time to time from the TTI Closing Date through the Letter of Credit Expiration Date, Issuing Lender shall take such Letter of Credit Actions under the Commitments as Borrower may request; provided, however, that (i) the Outstanding Obligations of each Lender shall not exceed such Lender's Commitment and the Outstanding Obligations of all Lenders shall not exceed the combined Commitments at any time, and (ii) the aggregate outstanding Letter of Credit Usage shall not exceed the Letter of Credit Commitment at any time. Each Letter of Credit Action shall be in a form reasonably acceptable to Issuing Lender and shall not violate any policies of Issuing Lender. Subject to subsection (f) below and unless consented to by the Issuing Lender and the Required Lenders, no Letter of Credit may expire more than 12 months after the date of its issuance or last renewal; provided, however, that no Letter of Credit shall expire after the Letter of Credit Expiration Date. If any Letter of Credit Usage remains outstanding after the Letter of Credit Expiration Date, Borrower shall, not later than the Letter of Credit Expiration Date, deposit cash in an amount equal to such Letter of Credit Usage in a Letter of Credit Cash Collateral Account. - 29 - 35 (b) REQUESTING LETTER OF CREDIT ACTIONS. Borrower may irrevocably request a Letter of Credit Action in a Minimum Amount therefor by delivering a Letter of Credit Application therefor to Issuing Lender, with a copy to Administrative Agent (who shall notify Lenders), by Requisite Notice not later than the Requisite Time therefor. Unless Administrative Agent notifies Issuing Lender that such Letter of Credit Action is not permitted hereunder or Issuing Lender determines that such Letter of Credit Action is contrary to any Laws or policies of Issuing Lender or does not otherwise conform to the requirements of this Agreement, Issuing Lender shall effect such Letter of Credit Action. This Agreement shall control in the event of any conflict with any Letter of Credit Application. Upon the issuance of a Letter of Credit, each Lender shall be deemed to have purchased a pro rata participation in such Letter of Credit from Issuing Lender in an amount equal to that Lender's Pro Rata Share. (c) REIMBURSEMENT OF PAYMENTS UNDER LETTERS OF CREDIT. Borrower shall reimburse Issuing Lender through Administrative Agent for any payment that Issuing Lender makes under a Letter of Credit on or before the date of such payment; provided, however, that if the conditions precedent set forth in Section 4 can be satisfied, Borrower may request a Borrowing of Loans to reimburse Issuing Lender for such payment on or before the date thereof by complying with Section 2.02, or Borrower may allow a deemed Borrowing of Loans which are Base Rate Loans to take place on such payment date pursuant to subsection (e) below. (d) FUNDING BY LENDERS WHEN ISSUING LENDER NOT REIMBURSED. Upon any drawing under a Letter of Credit, Issuing Lender shall notify Administrative Agent and Borrower. If Borrower fails to timely make the payment required pursuant to subsection (c) above, Issuing Lender shall notify Administrative Agent of such fact and the amount of such unreimbursed payment. Administrative Agent shall promptly notify each Lender of its Pro Rata Share of such amount by Requisite Notice. Each Lender shall make funds in an amount equal its Pro Rata Share of such amount available to Administrative Agent at Administrative Agent's Office not later than the Requisite Time on the Business Day specified by Administrative Agent, and Administrative Agent shall remit the funds so received to reimburse Issuing Lender. The obligation of each Lender to so reimburse Issuing Lender shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or otherwise impair the obligation of Borrower to reimburse Issuing Lender for the amount of any payment made by Issuing Lender under any Letter of Credit, together with interest as provided herein. (e) NATURE OF LENDERS' FUNDING. If the conditions precedent set forth in Section 4 can be satisfied (except for the giving of a Request for Extension of Credit) on the date Borrower is obligated to make, but fails to make, a reimbursement of a payment under a Letter of Credit, the funding by Lenders pursuant to subsection (d) above shall be deemed to be part of a Borrowing of Loans which are Base Rate Loans (without regard to the Minimum Amount therefor) requested by Borrower. If the conditions precedent set forth in Section 4 cannot be satisfied on the date Borrower is obligated to make, but fails to make, a reimbursement of a payment under a Letter of Credit, the funding by Lenders pursuant to subsection (d) above shall be deemed to be a funding by each Lender of its participation in such Letter of Credit, and such funds shall be payable by Borrower upon demand and shall bear interest at the Default Rate - 30 - 36 payable on demand, and each Lender making such funding shall thereupon acquire a pro rata participation, to the extent of such reimbursement, in the claim of Issuing Lender against Borrower in respect of such payment and shall share, in accordance with that pro rata participation, in any payment made by Borrower with respect to such claim. If Administrative Agent or Issuing Lender is required at any time to return to Borrower, or to a trustee, receiver, liquidator, custodian, or any official under any proceeding under Debtor Relief Laws, any portion of the payments made by Borrower to Administrative Agent for the account of Issuing Lender pursuant to this subsection in reimbursement of a payment made under a Letter of Credit or interest or fee thereon, each Lender shall, on demand of Administrative Agent, forthwith return to Administrative Agent or Issuing Lender the amount of its Pro Rata Share of any amounts so returned by Administrative Agent or Issuing Lender plus interest thereon from the date such demand is made to the date such amounts are returned by such Lender to Administrative Agent or Issuing Lender, at a rate per annum equal to the daily Federal Funds Rate. (f) SPECIAL PROVISIONS RELATING TO EVERGREEN LETTERS OF CREDIT. Borrower may request Letters of Credit that have automatic extension or renewal provisions ("evergreen" Letters of Credit) so long as Issuing Lender has the right to not permit any such extension or renewal at least annually within a notice period to be agreed upon at the time each such Letter of Credit is issued. Once an evergreen Letter of Credit is issued, unless Administrative Agent has notified Issuing Lender that all Lenders have elected not to permit such extension or renewal, the Borrower Parties, Administrative Agent and Lenders shall be deemed to authorize (but may not require) Issuing Lender to, in its sole and absolute discretion, permit the renewal of such evergreen Letter of Credit at any time to a date not later than the Letter of Credit Expiration Date, and, unless directed by Issuing Lender, Borrower shall not be required to request such extension or renewal. Notwithstanding the foregoing, Issuing Lender may, in its sole and absolute discretion, upon not less than 60 days' advance notice to Borrower, elect not to permit an evergreen Letter of Credit to be extended or renewed at any time. (g) OBLIGATIONS ABSOLUTE. The obligation of Borrower to pay to Issuing Lender the amount of any payment made by Issuing Lender under any Letter of Credit shall be absolute, unconditional, and irrevocable. Without limiting the foregoing, Borrower's obligation shall not be affected by any of the following circumstances: (i) any lack of validity or enforceability of the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; (ii) any amendment or waiver of or any consent to departure from the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto; (iii) the existence of any claim, setoff, defense, or other rights which Borrower may have at any time against Issuing Lender, Administrative Agent or any Lender, any beneficiary of the Letter of Credit (or any persons or entities for whom any such beneficiary may be acting) or any other Person, whether in connection with the Letter of Credit, this Agreement, or any other agreement or instrument relating thereto, or any unrelated transactions; - 31 - 37 (iv) any demand, statement, or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever so long as any such document appeared to comply with the terms of the Letter of Credit; (v) payment by Issuing Lender in good faith under the Letter of Credit against presentation of a draft or any accompanying document which does not strictly comply with the terms of the Letter of Credit; or any payment made by Issuing Lender under any Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of any Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Laws; (vi) the existence, character, quality, quantity, condition, packing, value or delivery of any property purported to be represented by documents presented in connection with any Letter of Credit or for any difference between any such property and the character, quality, quantity, condition, or value of such property as described in such documents; (vii) the time, place, manner, order or contents of shipments or deliveries of property as described in documents presented in connection with any Letter of Credit or the existence, nature and extent of any insurance relative thereto; (viii) the solvency or financial responsibility of any party issuing any documents in connection with a Letter of Credit; (ix) any failure or delay in notice of shipments or arrival of any property; (x) any error in the transmission of any message relating to a Letter of Credit not caused by Issuing Lender, or any delay or interruption in any such message; (xi) any error, neglect or default of any correspondent of Issuing Lender in connection with a Letter of Credit; (xii) any consequence arising from acts of God, wars, insurrections, civil unrest, disturbances, labor disputes, emergency conditions or other causes beyond the control of Issuing Lender; (xiii) so long as Issuing Lender in good faith determines that the document appears to comply with the terms of the Letter of Credit, the form, accuracy, genuineness or legal effect of any contract or document referred to in any document submitted to Issuing Lender in connection with a Letter of Credit; and (xiv) where Issuing Lender has acted in good faith under any other circumstances whatsoever. - 32 - 38 In addition, Borrower will promptly examine a copy of each Letter of Credit and amendments thereto delivered to it and, in the event of any claim of noncompliance with Borrower's instructions or other irregularity, Borrower will immediately notify Issuing Lender in writing. Borrower shall be conclusively deemed to have waived any such claim against Issuing Lender and its correspondents unless such notice is given as aforesaid. (h) ROLE OF ISSUING LENDER. Each Lender and Borrower Party agree that, in paying any drawing under a Letter of Credit, Issuing Lender shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. No Administrative Agent-Related Person nor any of the respective correspondents, participants or assignees of Issuing Lender shall be liable to any Lender for any action taken or omitted in connection herewith at the request or with the approval of Lenders or the Required Lenders, as applicable; any action taken or omitted in the absence of gross negligence or willful misconduct as determined in a final, nonappealable judgment by a court of competent jurisdiction; or the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit. Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude Borrower's pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement. No Administrative Agent-Related Person, nor any of the respective correspondents, participants or assignees of Issuing Lender, shall be liable or responsible for any of the matters described in subsection (g) above. In furtherance and not in limitation of the foregoing, Issuing Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and Issuing Lender shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason. (i) APPLICABILITY OF ISP98. Unless otherwise expressly agreed by the Issuing Lender and Borrower when a Letter of Credit is issued, performance under Letters of Credit by the Issuing Lender, its correspondents, and beneficiaries will be governed by the rules of the "International Standby Practices 1998" (ISP98) or such later revision as may be published by the International Chamber of Commerce. (j) LETTER OF CREDIT FEE. On each Applicable Payment Date, Borrower shall pay to Administrative Agent in arrears, for the account of each Lender in accordance with its Pro Rata Share, a Letter of Credit fee equal to the indicated Applicable Amount for Letters of Credit times the actual daily maximum amount available to be drawn under each Letter of Credit since the later of the TTI Closing Date and the previous Applicable Payment Date. If there is any change in the Applicable Amount during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Amount separately for each period during such quarter that such Applicable Amount was in effect. - 33 - 39 (k) FRONTING FEE AND DOCUMENTARY AND PROCESSING CHARGES PAYABLE TO ISSUING LENDER. Borrower shall pay to Administrative Agent for the sole account of Issuing Lender a fronting fee in an amount equal to 1/8 of 1% per annum on the daily average face amount thereof, payable quarterly in arrears on each Applicable Payment Date. In addition, Borrower shall pay directly to Issuing Lender for its sole account its customary documentary and processing charges in accordance with its standard schedule, as from time to time in effect, for any Letter of Credit Action or other occurrence relating to a Letter of Credit for which such charges are customarily made. Such fees and charges are nonrefundable. 2.04 SWING LINE. (a) Subject to the terms and conditions set forth in this Agreement, Swing Line Lender agrees to make Swing Line Loans from the TTI Closing Date until the Maturity Date in such amounts as Borrower may from time to time request; provided, however, that (i) the aggregate principal amount of all Swing Line Loans shall not exceed the Swing Line Commitment, and (ii) the Outstanding Obligations of each Lender shall not exceed such Lender's Commitment and the Outstanding Obligations of all Lenders shall not exceed the combined Commitments at any time. Swing Line Lender may terminate or suspend the Swing Line at any time and from time to time in its sole discretion upon at least 24 hours prior notice to Borrower. Without the consent of the Required Lenders and Swing Line Lender, no Swing Line Loan shall be made during the continuation of an Event of Default. Borrower may borrow, repay and reborrow under this Section. Unless notified to the contrary by Swing Line Lender, Borrowings under the Swing Line shall be made in the Minimum Amount therefor upon Requisite Notice made to Swing Line Lender not later than the Requisite Time therefor. Each such request for a Swing Line Loan shall constitute a representation and warranty by Borrower that the conditions set forth in Sections 4.04(a) and (b) are satisfied. Promptly after receipt of such request, Swing Line Lender shall obtain telephonic verification from Administrative Agent that there is availability for such Swing Line Loan under the Commitments. Unless notified to the contrary by Swing Line Lender, each repayment of a Swing Line Loan shall be made directly to Swing Line Lender in the Minimum Amount therefor by payment or debit at a demand deposit account at the Swing Line Lender. All payments received after the Requisite Time therefor shall be deemed received on the next succeeding Business Day. Swing Line Lender shall promptly notify Administrative Agent of the Swing Line Outstandings each time there is a change therein. Upon the making of a Swing Line Loan, each Lender shall be deemed to have purchased from Swing Line Lender a risk participation therein in an amount equal to that Lender's Pro Rata Share times the amount of the Swing Line Loan. (b) Swing Line Loans shall bear interest at a fluctuating rate per annum equal to the rate of interest payable on Base Rate Loans (plus the Applicable Amount, if any) payable on such dates, not more frequent than monthly, as may be specified by Swing Line Lender and, in any event, on the Maturity Date. Interest on Swing Line Loans shall be payable upon demand of Swing Line Lender, and Swing Line Lender shall be responsible for invoicing Borrower for such interest. The interest payable on Swing Line Loans is solely for the account of Swing Line Lender. - 34 - 40 (c) The Swing Line Loans shall be payable on the earliest of (i) the fifth Business Day after it is made, (ii) the Maturity Date and (iii) upon demand made by Swing Line Lender. (d) Unless Borrower has made other arrangements satisfactory to Swing Line Lender in Swing Line Lender's sole discretion, if any Swing Line Loan remains outstanding in excess of five consecutive Business Days, then on the next Business Day, Borrower shall repay such Swing Line Loan by payment directly to Swing Line Lender or by debit at a demand deposit account at Swing Line Lender not later than the Requisite Time for payments hereunder. Borrower shall also pay accrued interest on any principal amount so repaid. (e) If Borrower fails to timely make any principal or interest payment required pursuant to subsection (d) above, Swing Line Lender shall notify Administrative Agent of such fact and the unpaid amount. Administrative Agent shall promptly notify each Lender of its Pro Rata Share of such amount by Requisite Notice. Each Lender shall make funds in an amount equal its Pro Rata Share of such amount available to Administrative Agent at Administrative Agent's Office not later than the Requisite Time for payments hereunder on the following Business Day. The obligation of each Lender to make such payment shall be absolute and unconditional and shall not be affected by the occurrence of an Event of Default or any other occurrence or event. Any such payment shall not relieve or otherwise impair the obligation of Borrower to repay Swing Line Lender for any amount of Swing Line Loans, together with interest as provided herein. (f) If the conditions precedent set forth in Section 4 can be satisfied (except for the giving of a Request for Extension of Credit) on any date Borrower is obligated to make, but fails to make, a repayment of Swing Line Loans, the funding by Lenders pursuant to subsection (e) above shall be deemed to be part of a Borrowing of Loans which are Base Rate Loans (without regard to the Minimum Amount therefor) requested by Borrower. If the conditions precedent set forth in Section 4 cannot be satisfied on the date Borrower is obligated to make, but fails to make, such payment, the funding by Lenders pursuant to subsection (e) above shall be deemed to be a funding by each Lender of its participation in such Swing Line Loans, and such funds shall be payable by Borrower upon demand and shall bear interest at the Default Rate, and each Lender making such funding shall thereupon acquire a pro rata participation, to the extent of such payment, in the claim of Swing Line Lender against Borrower in respect of such payment and shall share, in accordance with that pro rata participation, in any payment made by Borrower with respect to such claim. 2.05 PREPAYMENTS. (a) Upon Requisite Notice to Administrative Agent not later than the Requisite Time therefor, Borrower may at any time and from time to time voluntarily prepay Loans in part in the Minimum Amount therefor or in full without premium or penalty. Administrative Agent will promptly notify each Lender thereof and of such Lender's Pro Rata Share of such prepayment. Any prepayment of a Eurodollar Rate Loan shall be accompanied by all accrued interest thereon, together with the costs set forth in Section 3.05. - 35 - 41 (b) If for any reason the Outstanding Obligations exceed the combined Commitments as in effect or as reduced or because of any limitation set forth in this Agreement or otherwise, Borrower shall immediately prepay Loans and/or deposit cash in a Letter of Credit Cash Collateral Account in an aggregate amount equal to such excess. 2.06 REDUCTION OR TERMINATION OF COMMITMENTS. Upon Requisite Notice to Administrative Agent not later than the Requisite Time therefor, Borrower may at any time and from time to time, without premium or penalty, permanently and irrevocably reduce the Commitments in a Minimum Amount therefor to an amount not less than the Outstanding Obligations at such time or terminate the Commitments. Any such reduction or termination shall be accompanied by payment of all accrued and unpaid fees payable under Section 2.08 with respect to the portion of the Commitments being reduced or terminated. Administrative Agent shall promptly notify Lenders of any such request for reduction or termination of the Commitments. Each Lender's Commitment shall be reduced by an amount equal to such Lender's Pro Rata Share times the amount of such reduction. 2.07 PRINCIPAL AND INTEREST. (a) If not sooner paid, Borrower agrees to pay the outstanding principal amount of each Loan on the Maturity Date. (b) Subject to subsection (c) below, Borrower shall pay interest on the unpaid principal amount of each Loan (before and after default, before and after maturity, before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Laws) from the date borrowed until paid in full (whether by acceleration or otherwise) on each Applicable Payment Date at a rate per annum equal to the interest rate determined in accordance with the definition of such type of Loan, plus, to the extent applicable in each case, the Applicable Amount. (c) If any amount payable by any Borrower Party under any Loan Document is not paid when due (without regard to any applicable grace periods), it shall thereafter bear interest (after as well as before entry of judgment thereon to the extent permitted by law) at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Law. Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be payable upon demand. 2.08 FEES. (a) UTILIZATION FEE. After the consummation of a Qualified Public Offering, Borrower shall pay to Administrative Agent for the account of each Lender pro rata according to its Pro Rata Share, a utilization fee equal to the Applicable Amount times the actual daily amount of the Outstanding Obligations (including Swing Line Loans) in respect of each day on which the actual daily amount of such Outstanding Obligations exceeds an amount equal to 50% of the combined Commitments. The utilization fee shall accrue at all times from and after the consummation of a Qualified Public Offering until the Maturity Date and shall be payable - 36 - 42 quarterly in arrears on each Applicable Payment Date. The utilization fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Amount during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Amount separately for each period during such quarter that such Applicable Amount was in effect. (b) FACILITY FEE. Borrower shall pay to Administrative Agent for the account of each Lender a facility fee equal to the Applicable Amount times the actual daily amount of each Lender's Commitment, regardless of usage. The facility fee shall accrue at all times from the Signing Date until the Maturity Date and shall be payable quarterly in arrears on each Applicable Payment Date. The facility fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Amount during any quarter, the actual daily amount shall be computed and multiplied by the Applicable Amount separately for each period during such quarter that such Applicable Amount was in effect. The facility fee shall accrue at all times, including at any time during which one or more conditions in Section 4 are not met. (c) AGENT FEES. Borrower shall pay to Administrative Agent an agency fee and such other fees, if any, in such amounts and at such times as set forth in a separate letter agreement or agreements among Borrower, Administrative Agent and Arranger. The agency fee is for the services to be performed by Administrative Agent in acting as Administrative Agent and is fully earned on the date paid. Any such fees paid to Administrative Agent are solely for its own account and are nonrefundable. (d) STRUCTURING AND SYNDICATING FEE. On the Signing Date, Borrower shall pay to the Arranger a structuring and syndicating fee in the amount set forth in a separate letter agreement among Borrower, Administrative Agent and Arranger. Such arrangement fee is for the services of Arranger in structuring and syndicating the credit facilities under this Agreement and is fully earned on the date paid. The structuring and syndicating fee paid to Arranger is solely for its own account and is nonrefundable. (e) LENDERS' UPFRONT FEE. On the ALT Closing Date, Borrower shall pay to Administrative Agent, for the respective accounts of Lenders pro rata according to their Pro Rata Share, an upfront fee in an amount set forth in a separate letter from the Arranger to each Lender and acknowledged by that Lender as the applicable upfront fee for such Lender. Such upfront fees are for the credit facilities committed by each Lender under this Agreement and are fully earned on the date paid. The upfront fee paid to each Lender is solely for its own account and is nonrefundable. 2.09 COMPUTATION OF INTEREST AND FEES. Computation of interest on Base Rate Loans when the Base Rate is determined by Bank of America's "prime rate" shall be calculated on the basis of a year of 365 or 366 days, as the case may be, and the actual number of days elapsed. Computation of all other types of interest and all fees shall be calculated on the basis of a year of 360 days and the actual number of days elapsed, which results in a higher yield to Lenders than a method based on a year of 365 or 366 days. Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on - 37 - 43 which the Loan or such portion is paid, provided that any Loan that is repaid on the same day on which it is made shall bear interest for one day. 2.10 MAKING PAYMENTS. (a) Except as otherwise provided herein, all payments by Borrower or any Lender shall be made to Administrative Agent at Administrative Agent's Office not later than the Requisite Time for such type of payment. All payments received after such Requisite Time shall be deemed received on the next succeeding Business Day. All payments shall be made in immediately available funds in lawful money of the United States of America. All payments by Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. (b) Upon satisfaction of any applicable terms and conditions set forth herein, Administrative Agent shall promptly make any amounts received in accordance with the prior subsection available in like funds received as follows: (i) if payable to Borrower, by crediting the Designated Deposit Account, and (ii) if payable to any Lender, by wire transfer to such Lender at the address specified in Schedule 10.03. (c) Subject to the definition of "Interest Period," if any payment to be made by any Borrower Party shall come due on a day other than a Business Day, payment shall instead be considered due on the next succeeding Business Day, and such extension of time shall be reflected in computing interest and fees. (d) Except as otherwise provided in Section 2.03(c) with respect to Borrower reimbursing drawings under Letters of Credit, unless Borrower or any Lender has notified Administrative Agent prior to the date any payment to be made by it is due, that it does not intend to remit such payment, Administrative Agent may, in its sole and absolute discretion, assume that Borrower or such Lender, as the case may be, has timely remitted such payment and may, in its sole and absolute discretion and in reliance thereon, make available such payment to the Person entitled thereto. If such payment was not in fact remitted to Administrative Agent in immediately available funds, then: (i) if Borrower failed to make such payment, each Lender shall forthwith on demand repay to Administrative Agent the amount of such assumed payment made available to such Lender, together with interest thereon in respect of each day from and including the date such amount was made available by Administrative Agent to such Lender to the date such amount is repaid to Administrative Agent at the Federal Funds Rate; and (ii) if any Lender failed to make such payment, Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender. If such Lender does not pay such corresponding amount forthwith upon Administrative Agent's demand therefor, Administrative Agent promptly shall notify Borrower, and Borrower shall pay such corresponding amount to Administrative Agent. Administrative Agent also shall be entitled to recover interest on such corresponding amount in respect of each day from the date such - 38 - 44 corresponding amount was made available by Administrative Agent to Borrower to the date such corresponding amount is recovered by Administrative Agent, (A) from such Lender at a rate per annum equal to the daily Federal Funds Rate, and (B) from Borrower, at a rate per annum equal to the interest rate applicable to such Borrowing. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which Administrative Agent or Borrower may have against any Lender as a result of any default by such Lender hereunder. 2.11 FUNDING SOURCES. Nothing in this Agreement shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner. 2.12 RELEASE OF ALT. Upon the effectiveness of the assumption by TTI pursuant to the Assumption Agreement of the Obligations of ALT, ALT shall be released in full from such Obligations (other than ALT's Obligations under the ALT Subordination Agreement) and shall have no further Obligations under the Loan Documents (except for its Obligations under the ALT Subordination Agreement), in each case, without further action on the part of Administrative Agent or any Lender. In connection with such release, Administrative Agent shall execute all such further documents and instruments as may be reasonably requested by ALT in order to more fully evidence or effect such release. All such deliveries shall be at the expense of ALT, with no liability to Administrative Agent or any Lender, and with no representation or warranty by or recourse to Administrative Agent or any Lender. SECTION 3. TAXES, YIELD PROTECTION AND ILLEGALITY 3.01 TAXES. (a) Any and all payments by Borrower to or for the account of Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities with respect thereto, excluding, in the case of Administrative Agent and any Lender, taxes imposed on or measured by its net income, and franchise taxes imposed on it (in lieu of net income taxes), by the jurisdiction (or any political subdivision thereof) under the Laws of which Administrative Agent or such Lender, as the case may be, is organized or maintains a lending office (all such non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to as "Taxes"). If Borrower shall be required by any Laws to deduct any Taxes from or in respect of any sum payable under any Loan Document to Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section), Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower shall pay the full amount deducted to the relevant taxation authority or other authority - 39 - 45 in accordance with applicable Laws, and (iv) within 30 days after the date of such payment, Borrower shall furnish to Administrative Agent (who shall forward the same to such Lender) the original or a certified copy of a receipt evidencing payment thereof. (b) In addition, Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise or property taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as "Other Taxes"). (c) If Borrower shall be required by the Laws of any jurisdiction outside the United States to deduct any Taxes from or in respect of any sum payable under any Loan Document to Administrative Agent or any Lender, Borrower shall also pay to such Lender or Administrative Agent (for the account of such Lender), at the time interest is paid, such additional amount that the respective Lender specifies as necessary to preserve the after-tax yield (after factoring in United States (federal and state) taxes imposed on or measured by net income) the Lender would have received if such deductions (including deductions applicable to additional sums payable under this Section) had not been made. (d) Borrower agrees to indemnify Administrative Agent and each Lender for the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section) paid by Administrative Agent and such Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. The obligations of Borrower under this subsection shall survive payment of all Obligations. 3.02 ILLEGALITY. If any Lender determines that any Laws have made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurodollar Rate Loans, or materially restricts the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the applicable eurodollar market, or to determine or charge interest rates based upon the Eurodollar Rate, then, on notice thereof by Lender to Borrower through Administrative Agent, any obligation of that Lender to make Eurodollar Rate Loans shall be suspended until Lender notifies Administrative Agent and Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, Borrower shall, upon demand from such Lender (with a copy to Administrative Agent), prepay or Convert all Eurodollar Rate Loans of that Lender, either on the last day of the Interest Period thereof, if Lender may lawfully continue to maintain such Eurodollar Rate Loans to such day, or immediately, if Lender may not lawfully continue to maintain such Eurodollar Rate Loans. Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender. 3.03 INABILITY TO DETERMINE RATES. If, in connection with any Request for Extension of Credit involving any Eurodollar Rate Loan, Administrative Agent determines that (a) Dollar deposits are not being offered to banks in the applicable eurodollar market for the applicable - 40 - 46 amount and Interest Period of the requested Eurodollar Rate Loan, (b) adequate and reasonable means do not exist for determining the underlying interest rate for such Eurodollar Rate Loan, or (c) such underlying interest rate does not adequately and fairly reflect the cost to any Lender of funding such Eurodollar Rate Loan, Administrative Agent will promptly notify Borrower and all Lenders. Thereafter, the obligation of all Lenders to make or maintain such Eurodollar Rate Loan shall be suspended until Administrative Agent revokes such notice. Upon receipt of such notice, Borrower may revoke any pending request for a Borrowing of Eurodollar Rate Loans or, failing that, be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein. 3.04 INCREASED COST AND REDUCED RETURN; CAPITAL ADEQUACY. (a) If any Lender determines that any Laws: (i) subject such Lender to any Tax, duty, or other charge with respect to any Eurodollar Rate Loans or its obligation to make Eurodollar Rate Loans, or change the basis on which taxes are imposed on any amounts payable to such Lender under this Agreement in respect of any Eurodollar Rate Loans; (ii) shall impose or modify any reserve, special deposit, or similar requirement (other than the reserve requirement utilized in the determination of the Eurodollar Rate) relating to any extensions of credit or other assets of, or any deposits with or other liabilities or commitments of, such Lender (including its Commitment); or (iii) shall impose on such Lender or on the eurodollar interbank market any other condition affecting this Agreement or any of such extensions of credit or liabilities or commitments; and the result of any of the foregoing is to increase the cost to such Lender of making, Converting into, Continuing, or maintaining any Eurodollar Rate Loans or to reduce any sum received or receivable by such Lender under this Agreement with respect to any Eurodollar Rate Loans, then from time to time upon demand of such Lender (with a copy of such demand to Administrative Agent), Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction. (b) If any Lender determines that any change in or the interpretation of any Laws have the effect of reducing the rate of return on the capital of such Lender or compliance by such Lender (or its Lending Office) or any corporation controlling such Lender as a consequence of such Lender's obligations hereunder (taking into consideration its policies with respect to capital adequacy and such Lender's desired return on capital), then from time to time upon demand of such Lender (with a copy to Administrative Agent), Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such reduction. - 41 - 47 3.05 BREAKFUNDING COSTS. Upon demand of any Lender (with a copy to Administrative Agent) from time to time, Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: (a) any Continuation, Conversion, payment or prepayment of any Loan other than a Base Rate Loan on a day other than the last day of the Interest Period for such Loan (whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or (b) any failure by Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, Continue or Convert any Loan other than a Base Rate Loan on the date or in the amount notified by Borrower; including any loss of anticipated profits and any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained. Borrower shall also pay any customary administrative fees charged by such Lender in connection with the foregoing. 3.06 MATTERS APPLICABLE TO ALL REQUESTS FOR COMPENSATION. (a) A certificate of Administrative Agent claiming compensation under this Section 3 and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of clearly demonstrable error. In determining such amount, Administrative Agent may use any reasonable averaging and attribution methods. For purposes of this Section 3, a Lender shall be deemed to have funded each Eurodollar Rate Loan at the Eurodollar Base Rate used in determining the Eurodollar Rate for such Loan by a matching deposit or other borrowing in the eurodollar interbank market, whether or not such Eurodollar Rate Loan was in fact so funded. (b) Upon any Lender making a claim for compensation under Sections 3.01 or 3.04, Borrower may remove and replace such Lender in accordance with Section 10.23. 3.07 SURVIVAL. All of Borrower's obligations under this Section 3 shall survive termination of the Commitments and payment in full of all Obligations. SECTION 4. CONDITIONS PRECEDENT 4.01 CONDITIONS TO EFFECTIVENESS OF THE CREDIT AGREEMENT. The effectiveness of this Agreement is subject to satisfaction of the following conditions precedent: (a) Unless waived by all Lenders (or by Administrative Agent with respect to immaterial matters, or items specified in subsections (iv) or (v) below, that the Borrower has given assurances reasonably satisfactory to Administrative Agent that they will be delivered promptly following the Signing Date), Administrative Agent's receipt of the following, each of which shall be originals unless otherwise specified, each properly executed by a Responsible - 42 - 48 Officer of each applicable Borrower Party, each dated on or about the Signing Date and each in form and substance reasonably satisfactory to Administrative Agent and its legal counsel: (i) executed counterparts of this Agreement and the ALT Subordination Agreement, sufficient in number for distribution to Administrative Agent, Lenders, ALT and TTI; (ii) the ALT Global Note executed by ALT in favor of Administrative Agent for the account of each Lender, in a principal amount equal to the combined Commitments; (iii) such certificates or resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Borrower Party as Administrative Agent may reasonably require to establish the identities of and verify the authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer thereof; (iv) certified copies of each Borrower Party's Organization Documents and a certificate of good standing for each Borrower Party in its jurisdiction of organization; (v) a certificate signed by a Responsible Officer of ALT certifying that (A) the conditions specified in Sections 4.01(c) and 4.01(d) have been satisfied, and (B) there has been no event or circumstance since December 31, 1998 which would reasonably be expected to have a Material Adverse Effect; (vi) an opinion of counsel to Borrower substantially in the form of Exhibit E-1 hereto; and (vii) such other assurances, certificates, documents, consents or opinions as Administrative Agent, Issuing Lender or the Required Lenders reasonably may require. (b) Administrative Agent, Arranger, each Lender and/or their respective Affiliates shall have received all fees and expenses required to be paid on or before the Signing Date. (c) The representations and warranties made by Borrower herein, or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the Signing Date. (d) Each Borrower Party shall be in compliance with all the terms and provisions of the Loan Documents to which it is a party, and no Default or Event of Default shall have occurred and be continuing. - 43 - 49 (e) Borrower shall have paid all Attorney Costs of Administrative Agent to the extent invoiced prior to or on the Signing Date, plus such additional amounts of Attorney Costs as shall constitute its reasonable estimate of Attorney Costs incurred or to be incurred by it through the closing proceedings (provided that such estimate shall not thereafter preclude final settling of accounts between Borrower and Administrative Agent). (f) Administrative Agent and Lenders shall have received the Form 10 and all amendments thereto and the other Spinoff Documents (or, to the extent not then finalized, the then current drafts thereof), including (x) the form and substance of the private letter requests to the IRS regarding the tax free treatment of the Spinoff, (y) the Private Letter Ruling, and (z) all documents relating to the indemnification by TTI of ALT regarding the tax-free treatment of the Spinoff (which indemnification shall be subordinated to the prior payment in full of all Obligations pursuant to the ALT Subordination Agreement), which documents shall, in each case, be satisfactory in form and substance to Administrative Agent and the Lenders. The Spinoff Documents shall contain mutual indemnification terms relating to existing direct and contingent obligations of ALT and TTI, all in form and substance satisfactory to Administrative Agent in its discretion. (g) The corporate, capital and ownership structure and management of TTI and its Subsidiaries (before and after giving effect to the Line of Business Transfer and to the Spinoff) including, without limitation, the execution of employment contracts with key executives of the lines of business transferred in connection with the Line of Business Transfer, shall be satisfactory to Administrative Agent. (h) Administrative Agent shall have completed, with results reasonably satisfactory to Administrative Agent and its counsel, its reasonable due diligence investigation, including, without limitation, with respect to litigation, tax (including all matters relating to the tax free treatment of the Spinoff), accounting, labor, insurance, pension liabilities (actual or contingent), real estate leases, environmental matters, material contracts, debt agreements, property ownership, contingent liabilities and management of ALT, TTI and their respective Subsidiaries (before and after giving effect to the Line of Business Transfer and to the Spinoff). (i) There shall not have occurred a material adverse change since December 31, 1998 in the business, assets, liabilities (actual or contingent), operations or condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole or of TTI and its Subsidiaries taken as a whole or in the facts and information regarding such entities as represented on or prior to the Signing Date. (j) Administrative Agent and Lenders shall have received and reviewed, with results satisfactory to Administrative Agent and Lenders, information confirming that (a) ALT, TTI and their respective Subsidiaries are taking all necessary and appropriate steps to ascertain the extent of, and to quantify and successfully address, business and financial risks facing ALT, TTI and their respective Subsidiaries as a result of what is commonly referred to as the "Year 2000 problem" (i.e., the inability of certain computer applications and devices containing imbedded computer chips to recognize correctly and perform properly date-sensitive functions - 44 - 50 involving certain dates prior to and after December 31, 1999), including risks resulting from the failure of key vendors and customers of ALT, TTI and their respective Subsidiaries to successfully address the Year 2000 problem, and (b) ALT's, TTI's and their respective Subsidiaries' material computer applications and those of their key vendors and customers will, on a timely basis, adequately address the Year 2000 problem in all material respects. (k) All governmental and third party consents required to be obtained on or before the Signing Date (other than any third party consents the failure of which to obtain on or before the Signing Date would not reasonably be expected to have a Material Adverse Effect), including but not limited to the consent of the lenders under the Existing ALT Credit Agreement, necessary or desirable in connection with the Line of Business Transfer, the Spinoff and the other transactions contemplated hereby and by the Spinoff Documents shall have been obtained; all such consents and approvals shall be in full force and effect; and all applicable waiting periods shall have expired without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on the Line of Business Transfer, the Spinoff or such other transactions or that could seek to enjoin or threaten any of the foregoing, and no Law shall be applicable which in the judgment of Administrative Agent could have such effect. (l) There shall not exist (a) any order, decree, judgment, ruling or injunction which restrains the consummation of the Spinoff or the Extensions of Credit in the manner contemplated by the Spinoff Documents or the Loan Documents, and (b) any pending or threatened action, suit, investigation or proceeding, which, if adversely determined, could materially and adversely affect ALT, TTI or any of their respective Subsidiaries, any transaction contemplated hereby or by the Spinoff Documents or the ability of ALT, TTI or any of their respective Subsidiaries to perform their obligations under the Loan Documents or the ability of Lenders to exercise their rights thereunder. (m) Borrower shall have delivered to Administrative Agent a certificate of a Responsible Officer of Borrower certifying that the insurance required to be maintained pursuant to Section 6.06 is in full force and effect, is adequate in nature and amount and complies with Borrower's and each Subsidiary's obligations under Section 6.06. 4.02 CONDITIONS OF INITIAL EXTENSION OF CREDIT TO ALT. The obligation of each Lender to make the initial Extension of Credit to ALT is subject to satisfaction of the following conditions precedent: (a) Unless waived by all Lenders (or by Administrative Agent with respect to immaterial matters, or items specified in subsections (ii) or (iii) below, that the Borrower has given assurances reasonably satisfactory to Administrative Agent that they will be delivered promptly following the ALT Closing Date), Administrative Agent's receipt of the following, each of which shall be originals unless otherwise specified, each properly executed by a Responsible Officer of each applicable Borrower Party, each dated on or about the ALT Closing Date and each in form and substance reasonably satisfactory to Administrative Agent and its legal counsel: - 45 - 51 (i) such certificates or resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Borrower Party as Administrative Agent may reasonably require to establish the identities of and verify the authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer thereof; (ii) certified copies of each Borrower Party's Organization Documents and a certificate of good standing for each Borrower Party in its jurisdiction of organization; (iii) a certificate signed by a Responsible Officer of ALT certifying that (A) the conditions specified in Sections 4.02(c) and 4.02(d) have been satisfied, and (B) there has been no event or circumstance since December 31, 1998 which would reasonably be expected to have a Material Adverse Effect; (iv) an opinion of counsel to Borrower substantially in the form of Exhibit E-2 hereto; and (v) such other assurances, certificates, documents, consents or opinions as Administrative Agent, Issuing Lender or the Required Lenders reasonably may require. (b) Administrative Agent, Arranger, each Lender and/or their respective Affiliates shall have received all fees and expenses required to be paid on or before the ALT Closing Date. (c) The representations and warranties made by Borrower herein, or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the ALT Closing Date. (d) Each Borrower Party shall be in compliance with all the terms and provisions of the Loan Documents to which it is a party, and no Default or Event of Default shall have occurred and be continuing. (e) All conditions precedent to the Spinoff set forth in the Spinoff Documents (in each case, with no material modifications from such documents (or, to the extent applicable, the drafts thereof) reviewed by Lenders on or before the Signing Date) shall have been satisfied in accordance with the terms thereof. (f) All governmental and third party consents (other than any third party consents the failure of which to obtain on or before the ALT Closing Date would not reasonably be expected to have a Material Adverse Effect), including but not limited to (x) the consent of the lenders under the Existing ALT Credit Agreement and (y) the receipt of the Private Letter Ruling in form and substance satisfactory to all Lenders, and approvals necessary or desirable in connection with the Line of Business Transfer, the Spinoff and the other transactions contemplated hereby and by the Spinoff Documents shall have been obtained; all such rulings, - 46 - 52 consents and approvals shall be in full force and effect without modification; and all applicable waiting periods shall have expired without any action being taken by any authority that could restrain, prevent or impose any material adverse conditions on the Line of Business Transfer, the Spinoff or such other transactions or that could seek to enjoin or threaten any of the foregoing, and no Law shall be applicable which in the judgment of Administrative Agent could have such effect. (g) There shall not exist (a) any order, decree, judgment, ruling or injunction which restrains the consummation of the Line of Business Transfer or the Spinoff or the Extensions of Credit in the manner contemplated by the Spinoff Documents or the Loan Documents, and (b) any pending or threatened action, suit, investigation or proceeding, which, if adversely determined, could reasonably be expected to materially and adversely affect ALT, TTI or any of their respective Subsidiaries, any transaction contemplated hereby or by the Spinoff Documents or the ability of ALT, TTI or any of their respective Subsidiaries to perform their obligations under the Loan Documents or the ability of Lenders to exercise their rights thereunder. (h) There shall not have occurred a material adverse change since December 31, 1998 in the business, assets, liabilities (actual or contingent), operations or condition (financial or otherwise) of ALT and its Subsidiaries taken as a whole or of TTI and its Subsidiaries taken as a whole or in the facts and information regarding such entities as represented on or prior to the ALT Closing Date. (i) [Administrative Agent shall have received a satisfactory reliance letter entitling Administrative Agent, Arranger and Lenders to rely on all fairness and/or solvency opinions delivered in connection with the Line of Business Transfer and the Spinoff.] 4.03 CONDITIONS TO ASSUMPTION OF OBLIGATIONS AND INITIAL EXTENSIONS OF CREDIT TO TTI. The assumption by TTI of the Obligations of ALT (other than ALT's Obligations under the ALT Subordination Agreement) and the obligation of each Lender to make the initial Extensions of Credit to TTI are subject to satisfaction of the following conditions precedent: (a) Unless waived by all Lenders (or by Administrative Agent with respect to immaterial matters, or items specified in subsections (iii) or (iv) below, that Borrower has given assurances reasonably satisfactory to Administrative Agent that they will be delivered promptly following the Signing Date), Administrative Agent's receipt of the following, each of which shall be originals unless otherwise specified, each properly executed by a Responsible Officer of each applicable Borrower Party, each dated on or about the Signing Date and each in form and substance reasonably satisfactory to Administrative Agent and its legal counsel: (i) executed counterparts of the Assumption Agreement, the Guaranty and the Pledge Agreement, sufficient in number for distribution to Administrative Agent, Lenders, ALT and TTI; - 47 - 53 (ii) Notes executed by TTI in favor of each Lender requesting a Note, each in a principal amount equal to that Lender's Commitment; (iii) such certificates or resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Borrower Party as Administrative Agent may reasonably require to establish the identities of and verify the authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer thereof; (iv) certified copies of each Borrower Party's Organization Documents and a certificate of good standing for each Borrower Party in its jurisdiction of organization; (v) a certificate signed by a Responsible Officer of each of ALT and TTI certifying that (A) the conditions specified in Sections 4.03(c) and 4.03(d) have been satisfied, and (B) there has been no event or circumstance since December 31, 1998 which would reasonably be expected to have a Material Adverse Effect; (vi) an opinion of counsel to Borrower substantially in the form of Exhibit E-3 hereto; and (vii) such other assurances, certificates, documents, consents or opinions as Administrative Agent, Issuing Lender or the Required Lenders reasonably may require. (b) Administrative Agent, Arranger, each Lender and/or their respective Affiliates shall have received all fees and expenses required to be paid on or before the TTI Closing Date. (c) The representations and warranties made by Borrower herein, or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the TTI Closing Date. (d) Each Borrower Party shall be in compliance with all the terms and provisions of the Loan Documents to which it is a party, and no Default or Event of Default shall have occurred and be continuing. (e) Both the Line of Business Transfer and the Spinoff shall have been (or shall concurrently be) consummated in accordance with the terms of the Spinoff Documents (in each case, with no material modifications from such documents (or, to the extent applicable, the drafts thereof) reviewed by Administrative Agent and Lenders prior to the ALT Closing Date) and in compliance in all material respects with applicable Law and regulatory approvals. None of the Spinoff Documents shall have been altered, amended or otherwise changed or supplemented or any condition therein waived without the prior written consent of Administrative Agent. - 48 - 54 (f) There shall not exist (i) any order, decree, judgment, ruling or injunction which restrains the consummation of the Line of Business Transfer or the Spinoff or the Extensions of Credit in the manner contemplated by the Spinoff Documents or the Loan Documents, and (ii) any pending or threatened action, suit, investigation or proceeding, which, if adversely determined, could materially and adversely affect ALT, TTI or any of their respective Subsidiaries, any transaction contemplated hereby or by the Spinoff Documents or the ability of ALT, TTI or any of their respective Subsidiaries to perform their obligations under the Loan Documents or the ability of Lenders to exercise their rights thereunder. (g) After giving effect to the transactions contemplated by the Line of Business Transfer and the Spinoff, and the assumption by TTI of ALT's Obligations (other than ALT's Obligations under the ALT Subordination Agreement) pursuant to the Assumption Agreement, (i) each of TTI and each of its Subsidiaries, taken as a whole, Borrower and each Material Subsidiary shall be Solvent, and (ii) the Leverage Ratio on such date shall be not greater than 3.0: 1.0, and, with respect to the matters set forth in clauses (i) and (ii), TTI shall have delivered to Administrative Agent and all Lenders a certificate of its chief financial officer (together with supporting calculations), in form and substance satisfactory to Administrative Agent, to such effect. (h) After giving effect to any outstanding Extensions of Credit, the combined Commitments shall exceed the Outstanding Obligations by not less than $100,000,000. 4.04 CONDITIONS TO ALL EXTENSIONS OF CREDIT. In addition to any applicable conditions precedent set forth elsewhere in this Section 4 or in Section 2, the obligation of each Lender to honor any Request for Extension of Credit is subject to the following conditions precedent: (a) the representations and warranties of Borrower contained in Section 5, or which are contained in any certificate, document or financial or other statement furnished at any time under or in connection herewith or therewith, shall be true and correct in all material respects on and as of the date of such Extension of Credit, except to the extent that such representations and warranties specifically refer to any earlier date. (b) no Default or Event of Default exists or would result from such proposed Extension of Credit. (c) Administrative Agent shall have timely received a Request for Extension of Credit by Requisite Notice by the Requisite Time therefor. (d) Administrative Agent shall have received, in form and substance satisfactory to it, such other assurances, certificates, documents or consents related to the foregoing as Administrative Agent or Required Lenders reasonably may require. Each Request for Extension of Credit by Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 4.04(a) and (b) have been satisfied and on and as of the date of such Extension of Credit. - 49 - 55 SECTION 5. REPRESENTATIONS AND WARRANTIES Borrower represents and warrants to Administrative Agent and Lenders that: 5.01 EXISTENCE AND QUALIFICATION; POWER; COMPLIANCE WITH LAWS. Each Borrower Party is a corporation, partnership or limited liability company duly organized or formed, validly existing and in good standing under the Laws of the state of its incorporation or organization, has the power and authority and the legal right to own and operate its properties, to lease the properties it operates and to conduct its business, is duly qualified and in good standing under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification (other than under the Laws of any jurisdiction in which the failure to be so qualified as a foreign corporation or other entity would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect), and is in compliance with all Laws except to the extent that noncompliance does not have a Material Adverse Effect. 5.02 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each Borrower Party has the power and authority and the legal right to make, deliver and perform each Loan Document and Spinoff Document to which it is a party and Borrower has power and authority to Borrow and request the issuance of Letters of Credit hereunder and has taken all necessary action to authorize the Borrowings and other Extensions of Credit on the terms and conditions of this Agreement and to authorize the execution, delivery and performance of this Agreement and the other Loan Documents and Spinoff Documents to which it is a party. No consent or authorization of, filing with, or other act by or in respect of any Governmental Authority, is required in connection with the Borrowings and other Extensions of Credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement, any of the other Loan Documents or any Spinoff Document, other than any consent or authorization of, filing with, or other act by or in respect of any Governmental Authority, the failure of which to have been obtained on or before the date hereof would not reasonably be expected to have a Material Adverse Effect. The Loan Documents have been duly executed and delivered by each Borrower Party party thereto, and constitute a legal, valid and binding obligation of each such Borrower Party, enforceable against each such Borrower Party in accordance with their respective terms. Upon the due execution and delivery by each Borrower Party party thereto, the Spinoff Documents shall constitute a legal, valid and binding obligation of each such Borrower Party, enforceable against each such Borrower Party in accordance with their respective terms. 5.03 NO LEGAL BAR. Other than exceptions to any of the following (other than the requirements of clause (a)(i) below) that could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the execution, delivery, and performance by each Borrower Party of the Loan Documents and Spinoff Documents to which it is a party and compliance with the provisions thereof have been duly authorized by all requisite action on the part of such Borrower Party and do not and will not (a) violate or conflict with, or result in a breach of, or require any consent under (i) any Organization Documents of such Borrower Party or any of its Subsidiaries, (ii) any applicable Laws, rules, or regulations or any order, writ, injunction, or decree of any Governmental Authority or arbitrator, or (iii) any Contractual - 50 - 56 Obligation (including, without limitation, any Spinoff Document) of such Borrower Party or any of its Subsidiaries or by which any of them or any of their property is bound or subject, (b) constitute a default under any such Contractual Obligation, or (c) result in, or require, the creation or imposition of any Lien on any of the properties of such Borrower Party or any of its Subsidiaries. Neither the consummation of the transactions contemplated by, nor the execution and delivery of, the Loan Documents and the Spinoff Documents will constitute or result in a tortious interference with any Contractual Obligation of any Borrower Party. 5.04 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE EFFECT. (a) The Audited ALT Financial Statements and the Audited TTI Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein; (ii) fairly present in all material respects the financial condition of ALT and its Subsidiaries and TTI and its Subsidiaries, respectively, as of the dates thereof and their results of operations for the periods covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein; and (iii) show all material indebtedness and other liabilities, direct or contingent, of ALT and its Subsidiaries and TTI and its Subsidiaries, respectively, as of the dates thereof, including liabilities for taxes, material commitments and Indebtedness in accordance with GAAP consistently applied throughout the periods covered thereby. (b) The Unaudited TTI Financial Statements (i) were prepared in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein, (ii) fairly present in all material respects the pro forma financial condition of TTI and its Subsidiaries as of the dates thereof and their pro forma results of operations for the periods covered thereby; and (iii) show all pro forma material indebtedness and other liabilities, direct or contingent, of TTI and its Subsidiaries as of the dates thereof, including liabilities for taxes, material commitments and Indebtedness in accordance with GAAP consistently applied throughout the periods covered thereby. (c) Since December 31, 1998, there has been no event or circumstance which would reasonably be expected to have a Material Adverse Effect. 5.05 LITIGATION. No litigation, investigation or proceeding of or before an arbitrator or Governmental Authority is pending or, to the knowledge of Borrower, threatened by or against any Borrower Party or any of its Subsidiaries or against any of their properties or revenues which, if determined adversely, would reasonably be expected to have a Material Adverse Effect. 5.06 NO DEFAULT. Neither any Borrower Party nor any of their respective Subsidiaries are in default under or with respect to any Contractual Obligation (including, without limitation, any Spinoff Document) which could have a Material Adverse Effect, and no Default or Event of Default has occurred and is continuing or will result from the consummation of this Agreement, any of the other Loan Documents or any Spinoff Document, or the making of the Extensions of Credit hereunder. - 51 - 57 5.07 OWNERSHIP OF PROPERTY; LIENS. Each Borrower Party and its Subsidiaries have valid fee or leasehold interests in all material real property which they use in their respective businesses, and each Borrower Party and their respective Subsidiaries have good and marketable title to all their other material property, and none of such material property is subject to any Lien, except as permitted in Section 7.02. 5.08 TAXES. Each Borrower Party and its Subsidiaries have filed all [federal and other material] tax returns which are required to be filed, and have paid, or made provision for the payment of, all taxes with respect to the periods, property or transactions covered by said returns, or pursuant to any assessment received by such Borrower Party or its respective Subsidiaries, except (a) such taxes, if any, as are being contested in good faith by appropriate proceedings and as to which adequate reserves have been established and maintained in accordance with GAAP, and (b) immaterial taxes; provided, however, that in each case no material item or portion of property of any Borrower Party or any of its Subsidiaries is in jeopardy of being seized, levied upon or forfeited. 5.09 MARGIN REGULATIONS; INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT. (a) No Borrower Party is engaged or will engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" "margin stock" within the respective meanings of each of the quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect. No part of the proceeds of any Extensions of Credit hereunder will be used for "purchasing" or "carrying" "margin stock" as so defined or for any purpose which violates, or which would be inconsistent with, the provisions of Regulations T, U or X of such Board of Governors. (b) No Borrower Party or any of its Subsidiaries (i) is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (ii) is or is required to be registered as an "investment company" under the Investment Company Act of 1940, as amended. 5.10 ERISA COMPLIANCE. (a) Each Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state Laws. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the best knowledge of Borrower, nothing has occurred which would prevent, or cause the loss of, such qualification. Borrower and each ERISA Affiliate have made all required contributions to each Plan subject to Section 412 of the Code, and no application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. - 52 - 58 (b) There are no pending or, to the best knowledge of Borrower, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that would reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that would reasonably be expected to have a Material Adverse Effect. (c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension Plan has any Unfunded Pension Liability; (iii) neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) neither Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v) neither Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA. 5.11 INTELLECTUAL PROPERTY. Each Borrower Party and its Subsidiaries own, or possess the right to use, all material trademarks, trade names, copyrights, patents, patent rights, franchises, licenses and other intangible assets that are used in the conduct of their respective businesses as now operated, and none of such items conflicts with the valid trademark, trade name, copyright, patent, patent right or intangible asset of any other Person to the extent that such conflict would reasonably be expected to have a Material Adverse Effect. 5.12 COMPLIANCE WITH LAWS. Each Borrower Party and its Subsidiaries are in compliance in all material respects with all Laws that are applicable to it. 5.13 ENVIRONMENTAL COMPLIANCE. Each Borrower Party and its Subsidiaries conduct in the ordinary course of business a review of the effect of existing Environmental Laws and claims alleging potential liability or responsibility for violation of any Environmental Law on their respective businesses, operations and properties, and as a result thereof Borrower has reasonably concluded that such Environmental Laws and claims could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. 5.14 INSURANCE. The properties of each Borrower Party and its Subsidiaries are insured with financially sound and reputable insurance companies not Affiliates of Borrower, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where Borrower or such Subsidiary operates. 5.15 YEAR 2000. Borrower has (a) initiated a review and assessment of all material areas within its and each of its Subsidiaries' business and operations (including those affected by customers and vendors) that could be adversely affected by the "Year 2000 Problem" (that is, the risk that computer applications and devices containing imbedded computer chips used by any Borrower Party or any of its Subsidiaries (or their respective key customers and vendors) may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to - 53 - 59 and any date after December 31, 1999), (b) developed a plan and timeline for addressing the Year 2000 Problem on a timely basis, and (c) to date, implemented that plan in all material respects in accordance with that timetable. Based on the foregoing, Borrower believes that all computer applications and devices containing imbedded computer chips (including those of its and its Subsidiaries' key customers and vendors) that are material to its or any of its Subsidiaries' business and operations are reasonably expected on a timely basis to be able to perform properly date-sensitive functions for all dates before and after January 1, 2000 (that is, be "Year 2000 Compliant"), except to the extent that a failure to do so would not reasonably be expected to have a Material Adverse Effect. 5.16 DISCLOSURE. No statement, information, report, representation, or warranty made by any Borrower Party in any Loan Document or Spinoff Document or furnished to Administrative Agent or any Lender in connection with any Loan Document or Spinoff Document contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. 5.17 SOLVENCY. Each of Borrower and its Subsidiaries, taken as a whole, the Borrower and each Material Subsidiary is, and after giving effect to the Line of Business Transfer, the Spinoff, the assumption by TTI of ALT's Obligations (other than ALT's Obligations under the ALT Subordination Agreement) pursuant to the Assumption Agreement and the incurrence of all Indebtedness and obligations being incurred in connection with the Loan Documents, the Line of Business Transfer and the Spinoff will be and will continue to be, Solvent. SECTION 6. AFFIRMATIVE COVENANTS So long as any Obligation remains unpaid or unperformed, or any portion of the Commitments remains outstanding, Borrower shall, and shall (except in the case of Borrower's reporting covenants) cause each of its Subsidiaries to: 6.01 FINANCIAL STATEMENTS. Deliver to Administrative Agent in form and detail reasonably satisfactory to Administrative Agent and the Required Lenders, with sufficient copies for each Lender: (a) as soon as available, but in any event within 100 days after the end of each fiscal year of Borrower, a consolidated balance sheet of Borrower and its Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing, which report and opinion shall be prepared in accordance with GAAP and shall not be subject to any qualifications or exceptions as to the scope of the audit nor to any qualifications and exceptions (including possible errors generated by financial reporting and related systems due to the Year 2000 Problem) not reasonably acceptable to the Required Lenders; and - 54 - 60 (b) as soon as available, but in any event within 50 days after the end of each of the first three fiscal quarters of each fiscal year of Borrower [commencing with the fiscal quarter ended March 31, 2000], a consolidated balance sheet of Borrower and its Subsidiaries as at the end of such fiscal quarter, and the related consolidated statements of income and cash flows for such fiscal quarter and for the portion of Borrower's fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year and the corresponding portion of the previous fiscal year, all in reasonable detail and certified by a Responsible Officer of Borrower as fairly presenting in all material respects the financial condition, results of operations and cash flows of Borrower and its Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes. 6.02 CERTIFICATES, NOTICES AND OTHER INFORMATION. Deliver to Administrative Agent in form and detail reasonably satisfactory to Administrative Agent and the Required Lenders, with sufficient copies for each Lender: (a) concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of Borrower; (b) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the stockholders of Borrower, and copies of all annual, regular, periodic and special reports and registration statements which Borrower may file or be required to file with the Securities and Exchange Commission under Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and not otherwise required to be delivered to Administrative Agent pursuant hereto; (c) promptly after the occurrence thereof, notice of any Default or Event of Default; (d) promptly after the commencement thereof, notice of any litigation, investigation or proceeding affecting any Borrower Party in which there is a reasonable possibility of an adverse determination and which, if adversely determined, would reasonably be expected to have a Material Adverse Effect; (e) promptly after the occurrence thereof, notice of any Reportable Event with respect to any Plan or a decision to terminate any Plan, or the institution of proceedings or the taking or expected taking of any other action to terminate any Plan or withdraw from any Plan; (f) promptly of any discovery or determination that any computer application (including those of its key suppliers and vendors) that is material to any Borrower Parties' or any of their Subsidiaries' business and operations will not be Year 2000 Compliant on a timely basis, except to the extent that such failure would not reasonably be expected to have a Material Adverse Effect; - 55 - 61 (g) promptly after receipt thereof, copies of any notice relating to revocation of the Private Letter Ruling and any claim for indemnification, individually or in the aggregate, in excess of the Threshold Amount under any Spinoff Document; (h) concurrently with the delivery of the financial statements referred to in Section 6.01(a), a certificate of a Responsible Officer of Borrower certifying that the insurance required to be maintained pursuant to Section 6.06 is in full force and effect, is adequate in nature and amount and complies with Borrower's and each Subsidiary's obligations under Section 6.06; and (i) promptly, such other data and information as from time to time may be reasonably requested by Administrative Agent, or, through Administrative Agent or any Lender. Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer of Borrower in reasonable detail setting forth details of the occurrence referred to therein and stating what action Borrower has taken and proposes to take with respect thereto. 6.03 PAYMENT OF TAXES. Pay and discharge in all material respects when due all taxes, assessments, and governmental charges, Ordinary Course Liens or levies imposed on any Borrower Party or its Subsidiaries or on its income or profits or any of its property, except for any such tax, assessment, charge, or levy which is an Ordinary Course Lien under subsection (b) of the definition of such term. 6.04 PRESERVATION OF EXISTENCE. Preserve and maintain its existence, licenses, permits, rights, franchises and privileges necessary or desirable in the normal conduct of its business, except as permitted under Section 7.03 or, with respect to such licenses, permits, rights, franchises and privileges, where failure to do so would not reasonably be expected to have a Material Adverse Effect. 6.05 MAINTENANCE OF PROPERTIES. Maintain, preserve and protect all of its material properties and equipment necessary in the operation of its business in good order and condition, subject to wear and tear in the ordinary course of business, and not permit any waste of its properties, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect. 6.06 MAINTENANCE OF INSURANCE. Maintain liability and casualty insurance with responsible insurance companies in such amounts and against such risks as is customary for similarly situated businesses. 6.07 COMPLIANCE WITH LAWS. (a) Comply with the requirements of all applicable Laws and orders of any Governmental Authority, noncompliance with which would reasonably be expected to have a Material Adverse Effect. - 56 - 62 (b) Conduct its operations and keep and maintain its property in compliance with all Environmental Laws, noncompliance with which would reasonably be expected to have a Material Adverse Effect. 6.08 INSPECTION RIGHTS. At any time during regular business hours and as often as reasonably requested, permit Administrative Agent or any Lender, or any employee, agent or representative thereof, to examine and make copies and abstracts from the Borrower Parties' records and books of account and to visit and inspect their properties and to discuss their affairs, finances and accounts with any of their Responsible Officers, and, upon request, furnish promptly to Administrative Agent or any Lender true copies of all [publicly available] financial information. 6.09 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Keep in all material respects adequate records and books of account reflecting all financial transactions in conformity with GAAP, consistently applied, and in material conformity with all applicable requirements of any Governmental Authority having regulatory jurisdiction over Borrower or any of its Subsidiaries. 6.10 COMPLIANCE WITH ERISA. Cause, and cause each of its ERISA Affiliates to: (a) maintain each Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or state Law; (b) cause each Plan which is qualified under Section 401(a) of the Code to maintain such qualification; and (c) make all required contributions to any Plan subject to Section 412 of the Code. 6.11 COMPLIANCE WITH AGREEMENTS. Promptly and comply [fully] [in all material respects] with the Private Letter Ruling and all Spinoff Documents and all other Contractual Obligations under all material agreements, indentures, leases and/or instruments to which any one or more of them is a party, except for any such Contractual Obligations (a) the performance of which would cause a Default, (b) then being contested by any of them in good faith by appropriate proceedings, or (c) if the failure to comply therewith would not reasonably be expected to have a Material Adverse Effect. 6.12 USE OF PROCEEDS. Use the proceeds of Extensions of Credit: (i) for the repayment of a portion of ALT's indebtedness related to the assets to be transferred by ALT to TTI in accordance with the Spinoff Documents in conjunction with the Spinoff, (ii) for working capital, capital expenditures, and other lawful general corporate purposes of TTI following consummation of the Spinoff, and (iii) to finance acquisitions by TTI following consummation of the Spinoff to the extent expressly permitted under the Loan Documents. 6.13 ADDITIONAL BORROWER PARTIES. Substantially concurrently with the formation or acquisition of any Material Subsidiary of TTI (and upon any Subsidiary of TTI becoming a Material Subsidiary), (i) cause such Subsidiary (unless such Subsidiary is a Foreign Subsidiary) to guarantee the payment and performance of the Obligations hereunder and under the other Loan Documents by executing and delivering to Administrative Agent a supplement to the Guaranty in substantially the form of Annex A to Exhibit G, (ii) at all times prior to the Collateral Release Date, (A) cause such Subsidiary (unless such Subsidiary is a Foreign - 57 - 63 Subsidiary) to execute and deliver to Administrative Agent a supplement to the Pledge Agreement, in substantially the form of Annex A to Exhibit H (whereby such Subsidiary shall grant a Lien on those of its assets described in the Pledge Agreement), (B) promptly pledge to Administrative Agent or cause to be pledged to Administrative Agent all of the outstanding capital stock of such Subsidiary (or, if such Subsidiary is a Foreign Subsidiary, 65% of such capital stock) owned by TTI or any of its Subsidiaries to secure such Borrower Party's Obligations under the Loan Documents, and (C) promptly take, and cause such Subsidiary and each other Borrower Party to take all action necessary or (in the opinion of Administrative Agent or the Required Lenders) desirable to perfect and protect the Liens intended to be created by the Pledge Agreement, as amended pursuant to this Section 6.13, and (iii) promptly deliver to Administrative Agent such opinions of counsel, if any, as Administrative Agent or the Required Lenders may reasonably require with respect to the foregoing (including opinions as to enforceability and, prior to the Collateral Release Date, perfection of security interests). SECTION 7. NEGATIVE COVENANTS So long as any Obligations remain unpaid or unperformed, or any portion of the Commitments remains outstanding, Borrower shall not, nor shall it permit any of its Subsidiaries to, directly or indirectly: 7.01 INDEBTEDNESS. Create, incur, assume or suffer to exist any Indebtedness, except: (a) Ordinary Course Indebtedness of TTI and its Subsidiaries; (b) Indebtedness of ALT and its Subsidiaries (other than any member of the TTI Group) outstanding on the date hereof and listed on Schedule 7.01(b) and any refinancings, refundings, renewals or extensions thereof, provided that (i) the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the premium or other amount paid, and fees and expenses incurred, in connection with such refinancing and by an amount equal to any utilized commitments thereunder, and (ii) no member of the TTI Group is an obligor or guarantor in respect thereof; (c) Indebtedness of TTI and its Subsidiaries outstanding on the date hereof and listed on Schedule 7.01(c) and any refinancings, refundings, renewals or extensions thereof, provided that the amount of such Indebtedness is not increased at the time of such refinancing, refunding, renewal or extension except by an amount equal to the premium or other amount paid, and fees and expenses incurred, in connection with such refinancing and by an amount equal to any utilized commitments thereunder; (d) Indebtedness of TTI and the Guarantors secured by Liens permitted by Section 7.02(h) in an aggregate principal amount not to exceed $25,000,000 at any time outstanding; - 58 - 64 (e) additional unsecured (except to the extent of any Liens permitted pursuant to Section 7.02(k)) Indebtedness of TTI and the Guarantors; provided such additional Indebtedness, when added to the then outstanding Indebtedness of TTI and its Subsidiaries, would not cause TTI to be in violation of Section 7.12; and provided further that (i) the additional Indebtedness permitted pursuant to this clause (e) which is incurred by (A) the Guarantors shall not exceed, in the aggregate at any one time outstanding, $25,000,000 or (B) Joint Venture Indebtedness of TTI and its Subsidiaries shall not exceed, in the aggregate at any time outstanding $10,000,000, and (ii) Indebtedness incurred pursuant to this clause (e) may not contain covenants more restrictive than or in addition to those contained herein; (f) Acquired Indebtedness of TTI and its Subsidiaries in an aggregate principal amount not to exceed $25,000,000 at any time outstanding; and (g) on and prior to the TTI Closing Date, Indebtedness of ALT and its Subsidiaries (other than any member of the TTI Group) to the extent permitted under Section 5.1 of the Existing ALT Credit Agreement, as in effect on the date hereof. 7.02 LIENS. Incur, assume or suffer to exist, any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, except: (a) Liens of ALT and its Subsidiaries (other than any member of the TTI Group) existing on the date hereof and listed on Schedule 7.02(a) and any renewals or extensions thereof, provided that (i) the obligations secured or benefited thereby or the property covered thereby are not increased, except as permitted by Section 7.01(b), and (ii) no capital stock of or assets of any member of the TTI Group are encumbered thereby; (b) Liens of TTI and its Subsidiaries existing on the date hereof and listed on Schedule 7.02(b) and any renewals or extensions thereof, provided that the obligations secured or benefited thereby or the property covered thereby are not increased, except as permitted by Section 7.01(c); (c) Ordinary Course Liens of TTI and its Subsidiaries; (d) Security interests granted by TTI or any of its Subsidiaries in favor of lessors of personal property, which property is the subject of a true lease between such lessor and TTI or any of its Subsidiaries as lessee; (e) [Liens granted by TTI or any of its Subsidiaries against production contracts to secure Indebtedness of TTI or any of its Subsidiaries permitted hereunder that is incurred to acquire equipment and facilities required to produce the items being sold pursuant to such production contracts;] (f) [Liens granted by TTI or any of its Subsidiaries in favor of any Governmental Authority created pursuant to production contracts with such Governmental Authority to which TTI or any of its Subsidiaries is a party in [describe property subject to Liens];] - 59 - 65 (g) Liens of TTI and its Subsidiaries arising solely by virtue of any statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a dedicated cash collateral account and is not subject to restrictions against access by TTI or any of its Subsidiaries in excess of those set forth by regulations promulgated by the Federal Reserve Board, and (ii) such deposit account is not intended by TTI or any of its Subsidiaries to provide collateral to the depository institution; (h) Liens granted by TTI and the Guarantors securing Indebtedness of TTI or any Guarantor incurred after the TTI Closing Date pursuant to Section 7.02(d) to finance the acquisition of fixed or capital assets, provided that (i) such Liens shall be created substantially simultaneously with the acquisition of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) the amount of Indebtedness secured thereby is not increased; (i) any Lien on any property or asset owned by TTI or any of its Subsidiaries that was existing on such property or asset prior to the acquisition thereof by TTI or such Subsidiary or that was owned by any Person that becomes a Subsidiary of TTI after the date hereof prior to the time such Person became a Subsidiary of TTI, in each case, if (i) such Lien was not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary of TTI, as the case may be, (ii) such Lien is not enforceable against, or spread to cover, any other property or assets of TTI or any of its Subsidiaries, and (iii) such Lien secures only (A) those obligations (including Acquired Indebtedness other than Acquisition Consideration) that it secures on the date of such acquisition or the date such Person becomes a Subsidiary of TTI, as the case may be and (B) Acquired Indebtedness permitted hereunder; (j) on and prior to the TTI Closing Date, Liens granted by ALT and its Subsidiaries (other than any member of the TTI Group) on property and assets of ALT and its Subsidiaries (other than any capital stock of or assets of any member of the TTI Group) to the extent permitted under Section 5.2 of the Existing ALT Credit Agreement, as in effect on the date hereof; and (k) other Liens which secure Indebtedness of TTI and its Subsidiaries; provided that neither the aggregate principal amount of Indebtedness secured thereby nor the fair market value of the property subject to such Liens shall at any time exceed $10,000,000. 7.03 FUNDAMENTAL CHANGES. Merge or consolidate with or into any Person or liquidate, wind-up or dissolve itself, or permit or suffer any liquidation or dissolution or sell all or substantially all of its assets, except, that so long as no Default or Event of Default exists or would result therefrom: (a) any Solvent Subsidiary of TTI may merge with (i) TTI provided that TTI shall be the continuing or surviving corporation, (ii) with any one or more other Solvent Subsidiaries of TTI (provided that if either party to such merger is a Guarantor, the surviving entity shall be a Guarantor), and (iii) with any joint ventures, partnerships and other Persons, so - 60 - 66 long as such joint ventures, partnerships and other Persons will, as a result of making such merger and all other contemporaneous related transactions, become a wholly owned Subsidiary of TTI; provided that when any wholly-owned Material Subsidiary of TTI is merging into another Subsidiary of TTI, the wholly-owned Material Subsidiary of TTI shall be the continuing or surviving Person; (b) any Subsidiary of TTI may sell all or substantially all of its assets (upon voluntary liquidation or otherwise), to TTI or any of its Solvent Subsidiaries that is a Guarantor; provided that when any wholly-owned Subsidiary of TTI is selling all or substantially all of its assets to another Subsidiary of TTI, the Subsidiary acquiring such assets shall be a wholly-owned Subsidiary of TTI; (c) on and prior to the TTI Closing Date, ALT and its Subsidiaries (other than any member of the TTI Group) may merge or consolidate with other Persons to the extent permitted under Section 5.6 of the Existing ALT Credit Agreement, as in effect on the date hereof; (d) Dispositions permitted under Sections 7.04(a), (c) and (d); and (e) [Teledyne to describe specific elements of Spinoff that need to be permitted]. 7.04 DISPOSITIONS. Make any Dispositions, except: (a) Ordinary Course Dispositions by TTI and its Subsidiaries; (b) Dispositions by TTI and its Subsidiaries permitted by Section 7.03; (c) Dispositions by TTI and its Subsidiaries, so long as the book value of any assets or property Disposed of in any fiscal year of TTI does not exceed in the aggregate ten percent of Consolidated Total Assets determined as of the last day of the immediately preceding fiscal year; and (d) on and prior to the TTI Closing Date, Dispositions by ALT and its Subsidiaries (other than any member of the TTI Group) to the extent permitted under Section 5.5 of the Existing ALT Credit Agreement, as in effect on the date hereof. 7.05 INVESTMENTS. Make or hold any Investments, except: (a) Investments by ALT and its Subsidiaries (other than any member of the TTI Group) existing on the date hereof and listed on Schedule 7.05(a); (b) Investments by TTI and its Subsidiaries existing on the date hereof and listed on Schedule 7.05(b); (c) Ordinary Course Investments by TTI and its Subsidiaries; - 61 - 67 (d) Investments by TTI and its Subsidiaries permitted by Section 7.03; (e) Permitted Acquisitions; (f) Investments by TTI and the Guarantors after the TTI Closing Date in an aggregate amount not to exceed, when combined with the amount of Restricted Payments made pursuant to clause (iii) of Section 7.06, an amount equal to the sum of $5,000,000 and 25% of cumulative Consolidated Net Income since the TTI Closing Date; and (g) on and prior to the TTI Closing Date, Investments by ALT and its Subsidiaries (other than any member of the TTI Group) permitted under Section 5.1 of the Existing ALT Credit Agreement, as in effect on the date hereof. 7.06 RESTRICTED PAYMENTS. Make any Restricted Payments, except (i) the special distribution by ALT of all of the capital stock of TTI to the stockholders of ALT in accordance with the Spinoff Documents, (ii) on and prior to the TTI Closing Date, ALT and its Subsidiaries (other than any member of the TTI Group) may make Restricted Payments to the extent permitted under the Existing ALT Credit Agreement, as in effect on the date hereof, and (iii) from and after the TTI Closing Date, TTI and its Subsidiaries may make dividends and other distributions payable solely in cash in an aggregate amount not to exceed, when combined with the amount of Investments made pursuant to Section 7.05(f), an amount equal to the sum of $5,000,000 and 25% of cumulative Consolidated Net Income since the TTI Closing Date. 7.07 ERISA. At any time engage in a transaction which could be subject to Sections 4069 or 4212(c) of ERISA, or permit any Pension Plan to (a) engage in any non-exempt "prohibited transaction" (as defined in Section 4975 of the Code); (b) fail to comply with ERISA or any other applicable Laws; or (c) incur any material "accumulated funding deficiency" (as defined in Section 302 of ERISA), which, with respect to each event listed above, would reasonably be expected to have a Material Adverse Effect. 7.08 LIMITATION ON NATURE OF BUSINESS. Enter into any business, either directly or through a Subsidiary, except for (i) any business in which Borrower or the applicable Subsidiary is engaged on the date hereof, (ii) any business that is reasonably related thereto, or (iii) any business that is in substantially the same industry as any business conducted by Borrower or such Subsidiary on the date hereof. 7.09 TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any kind with any Affiliate of Borrower other than arm's-length transactions with Affiliates that are otherwise permitted hereunder. 7.10 HOSTILE ACQUISITIONS. Use the proceeds of any Extension of Credit in connection with the acquisition of any voting interest in any Person if such acquisition is opposed by the board of directors or management of such Person. 7.11 LIMITATIONS ON UPSTREAMING, ETC. Suffer to exist or become effective any restriction or limitation on the ability of Borrower or any of its Subsidiaries (or, in the case of - 62 - 68 clause (a) only, any Subsidiary of Borrower) to: (a) make Restricted Payments, (b) pay or subordinate any Indebtedness owed to Borrower or any other Subsidiary, (c) make Investments in Borrower or any other Subsidiary or (d) transfer any of its assets to Borrower or any other Subsidiary, except for the restrictions contained in the Loan Documents. 7.12 FINANCIAL COVENANTS. (a) CONSOLIDATED NET WORTH. Permit Consolidated Net Worth at any time to be less than the sum of (a) an amount equal to 75% of Consolidated Net Worth as of the TTI Closing Date, (b) an amount equal to 50% of the Consolidated Net Income earned in each fiscal quarter of TTI ending after the TTI Closing Date (with no deduction for a net loss in any such fiscal quarter) and (c) an amount equal to 75% of the net proceeds after the TTI Closing Date of the issuance and sale of capital stock of TTI (including upon any conversion of debt securities of TTI into such capital stock). (b) INTEREST COVERAGE RATIO. Permit the Interest Coverage Ratio as of the end of any fiscal quarter of TTI to be less than 3.0: 1.0. (c) LEVERAGE RATIO. Permit the Leverage Ratio at any time to be greater than 3.0: 1.0. 7.13 LIMITATION ON AMENDMENTS TO SPINOFF DOCUMENTS. Amend, supplement, replace or otherwise modify (whether pursuant to a waiver granted by or to such Person or otherwise) or fail to enforce the terms and conditions of any Spinoff Document, except for exceptions to the foregoing that could not, individually or in the aggregate, reasonably be expected to be adverse to Administrative Agent or any Lender. 7.14 LIMITATION ON MODIFICATIONS OF INDEBTEDNESS. Except as otherwise permitted under Section 7.01(b), amend, modify or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms (including, without limitation, the subordination terms) of any Indebtedness (excluding the Indebtedness hereunder) (other than any such amendment, modification, waiver or other change which (i) would extend the maturity or reduce the amount of any payment of principal thereof, reduce the rate or extend the date for payment of interest thereon and (ii) does not involve the payment of a consent fee). SECTION 8. EVENTS OF DEFAULT AND REMEDIES 8.01 EVENTS OF DEFAULT. Any one or more of the following events shall constitute an Event of Default: (a) Borrower fails to pay any principal on any Outstanding Obligation (other than fees) as and on the date when due; or (b) Borrower fails to pay any interest on any Outstanding Obligation, or any fees payable under Section 2.08 due hereunder, or any other fees or amount payable to - 63 - 69 Administrative Agent or any Lender under any Loan Document, in each case, within five days after the date when due; or (c) Any default occurs in the observance or performance of any agreement contained in Sections 6.01, 6.02, 6.08 or 7; or (d) The occurrence of an Event of Default (as such term is or may hereafter be specifically defined in any other Loan Document) under any other Loan Document; or any Borrower Party fails to perform or observe any other covenant or agreement (not specified in subsections (a), (b) or (c) above) contained in any Loan Document on its part to be performed or observed and such failure continues for 30 days; or (e) Any representation or warranty in any Loan Document or in any certificate, agreement, instrument or other document made or delivered by any Borrower Party pursuant to or in connection with any Loan Document proves to have been incorrect in any material respect when made or deemed made; or (f) (i) any Borrower Party (x) defaults in any payment when due of principal of or interest on any Indebtedness (other than Indebtedness hereunder) or (y) defaults in the observance or performance of any other agreement or condition relating to any Indebtedness (other than Indebtedness hereunder) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, Indebtedness having an aggregate principal amount in excess of the Threshold Amount to be demanded or become due (automatically or otherwise) prior to its stated maturity, or any Guaranty Obligation in such amount to become payable or cash collateral in respect thereof to be demanded, or any Borrower Party is unable or admits in writing its inability to pay its debts as they mature; or (ii) the occurrence under any Swap Contract of an Early Termination Date (as defined in such Swap Contract) resulting from (x) any event of default under such Swap Contract as to which Borrower or any Subsidiary is the Defaulting Party (as defined in such Swap Contract) or (y) any Termination Event under any Swap Contract (as defined therein) as to which Borrower or any Subsidiary is an Affected Party (as defined therein), if, in either event, the Swap Termination Value owed by Borrower or such Subsidiary as a result thereof is greater than the Threshold Amount; or (g) Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of all Lenders or satisfaction in full of all the Obligations and termination of the combined Commitments, ceases (other than, in the case of the Pledge Agreement, pursuant to the terms thereof on or after the Collateral Release Date) to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or any Borrower Party denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate or rescind any Loan Document; or - 64 - 70 (h) The Pledge Agreement, at any time after its execution and delivery and for any reason other than the agreement of all Lenders or satisfaction in full of all the Obligations and termination of the combined Commitments, ceases (other than pursuant to the terms thereof on or after the Collateral Release Date) to create a valid and perfected first priority Lien on the Collateral purported to be covered thereby; or (i) A final judgment against any Borrower Party is entered for the payment of money in excess of the Threshold Amount, or any non-monetary final judgment is entered against any Borrower Party which has a Material Adverse Effect and, in each case if such judgment remains unsatisfied without procurement of a stay of execution within 30 calendar days after the date of entry of judgment or, if earlier, five days prior to the date of any proposed sale, or any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any such Person and is not released, vacated or fully bonded within 30 calendar days after its issue or levy; or (j) Any Borrower Party or any of its Subsidiaries institutes or consents to the institution of any proceeding under Debtor Relief Laws, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator or similar officer is appointed without the application or consent of that Person and the appointment continues undischarged or unstayed for 60 calendar days; or any proceeding under Debtor Relief Laws relating to any such Person or to all or any part of its property is instituted without the consent of that Person and continues undismissed or unstayed for 60 calendar days, or an order for relief is entered in any such proceeding; or (k) (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or would reasonably be expected to result in liability of Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of the Threshold Amount; (ii) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds the Threshold Amount; or (iii) Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of the Threshold Amount; or (l) TTI fails, on or before the date that is 12 months after the ALT Closing Date, to consummate a Qualified Public Offering; or (m) The Private Letter Ruling is withdrawn or otherwise ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or, prior to its satisfaction of its liabilities and obligations thereunder, any Borrower Party denies that it has any or further liability or obligation under the Private Letter Ruling, or fails to satisfy any condition contained therein, or purports to revoke, terminate or rescind the Private Letter Ruling; or - 65 - 71 (n) Any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended), directly or indirectly, of Voting Stock of Borrower (or other securities convertible into such Voting Stock) representing 25% or more of the combined voting power of all Voting Stock of Borrower; or (ii) during any period of up to 24 consecutive months, commencing after the date of this Agreement, individuals who at the beginning of such 24-month period were directors of Borrower, or individuals whose nomination for election to the board of directors of Borrower was recommended by at least 66-2/3% of the then directors of Borrower, shall cease for any reason to constitute a majority of the board of directors of Borrower; or (iii) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of, control over Voting Stock of Borrower (or other securities convertible into such securities) representing 25% or more of the combined voting power of all Voting Stock of Borrower; or (o) There shall be any suspension or debarment of any contracting rights of Borrower or any of its Material Subsidiaries (or a division of any thereof) in effect for more than 30 days from its commencement (or Borrower shall learn that any such suspension or debarment shall be imposed for a period in excess of 30 days); or (p) An indemnification claim in excess of the Threshold Amount shall be made against any member of the TTI Group by ALT, any of its Affiliates or any of their respective stockholders pursuant to, or in connection with, any of the Spinoff Documents including, without limitation, pursuant to Section 6.1 of the Tax Sharing and Indemnification Agreement and Section 5.02 of the Separation and Distribution Agreement. 8.02 REMEDIES UPON EVENT OF DEFAULT. Without limiting any other rights or remedies of Administrative Agent or Lenders provided for elsewhere in this Agreement, or the other Loan Documents, or by applicable Law, or in equity, or otherwise: (a) Upon the occurrence, and during the continuance, of any Event of Default other than an Event of Default described in Section 8.01(j): (i) the Required Lenders may request Administrative Agent to, and Administrative Agent thereupon shall, terminate the Commitments and/or declare all or any part of the unpaid principal of all Loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents to be immediately due and payable, whereupon the same shall become and be immediately due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower; and (ii) Issuing Lender may, with the approval of Administrative Agent on behalf of the Required Lenders, demand immediate payment by Borrower of an amount equal to the aggregate amount of all outstanding Letters of Credit Usage to be held in a Letter of Credit Cash Collateral Account. - 66 - 72 (b) Upon the occurrence of any Event of Default described in Section 8.01(j): (i) the Commitments and all other obligations of Administrative Agent or Lenders shall automatically terminate without notice to or demand upon Borrower, which are expressly waived by Borrower; (ii) the unpaid principal of all Loans, all interest accrued and unpaid thereon and all other amounts payable under the Loan Documents shall be immediately due and payable, without protest, presentment, notice of dishonor, demand or further notice of any kind, all of which are expressly waived by Borrower; and (iii) an amount equal to the aggregate amount of all outstanding Letters of Credit Usage shall be immediately due and payable to Issuing Lender without notice to or demand upon Borrower, which are expressly waived by Borrower, to be held in a Letter of Credit Cash Collateral Account. (c) Upon the occurrence of any Event of Default, Lenders and Administrative Agent, or any of them, without notice to (except as expressly provided for in any Loan Document) or demand upon Borrower, which are expressly waived by Borrower (except as to notices expressly provided for in any Loan Document), may proceed to (but only with the consent of the Required Lenders) protect, exercise and enforce their rights and remedies under the Loan Documents against any Borrower Party and such other rights and remedies as are provided by Law or equity or otherwise. (d) Except as permitted by Section 10.06, no Lender may exercise any rights or remedies with respect to the Obligations without the consent of the Required Lenders in their sole and absolute discretion. The order and manner in which Administrative Agent's and Lenders' rights and remedies are to be exercised shall be determined by the Required Lenders in their sole and absolute discretion. Regardless of how a Lender may treat payments for the purpose of its own accounting, for the purpose of computing the Obligations hereunder, payments shall be applied first, to costs and expenses (including Attorney Costs) incurred by Administrative Agent and each Lender, second, to the payment of accrued and unpaid interest on the Loans to and including the date of such application, third, to the payment of the unpaid principal of the Loans, and fourth, to the payment of all other amounts (including fees) then owing to Administrative Agent and Lenders under the Loan Documents, in each case paid pro rata to each Lender in the same proportions that the aggregate Obligations owed to each Lender under the Loan Documents bear to the aggregate Obligations owed under the Loan Documents to all Lenders, without priority or preference among Lenders. No application of payments will cure any Event of Default, or prevent acceleration, or continued acceleration, of amounts payable under the Loan Documents, or prevent the exercise, or continued exercise, of rights or remedies of Administrative Agent and Lenders hereunder or thereunder or at Law or in equity or otherwise. - 67 - 73 SECTION 9. ADMINISTRATIVE AGENT 9.01 APPOINTMENT AND AUTHORIZATION OF ADMINISTRATIVE AGENT. (a) Each Lender hereby irrevocably (subject to Section 9.09) appoints, designates and authorizes Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Loan Document, Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, nor shall Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term "agent" in this Agreement with reference to Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties. (b) Issuing Lender shall act on behalf of Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time and except for so long as Administrative Agent may agree at the request of the Required Lenders to act for Issuing Lender with respect thereto; provided, however, that Issuing Lender shall have all of the benefits and immunities (i) provided to Administrative Agent in this Section 9 with respect to any acts taken or omissions suffered by Issuing Lender in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the term "Administrative Agent" as used in this Section 9 included Issuing Lender with respect to such acts or omissions, and (ii) as additionally provided in this Agreement with respect to Issuing Lender. 9.02 DELEGATION OF DUTIES. Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 9.03 LIABILITY OF ADMINISTRATIVE AGENT. None of Administrative Agent-Related Persons shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct as determined in a final, nonappealable judgment by a court of competent jurisdiction), or (ii) be responsible in any manner to any Lender for any recital, statement, representation or warranty made by Borrower or - 68 - 74 any Subsidiary or Affiliate of Borrower, or any officer thereof, contained in this Agreement or in any other Loan Document or Spinoff Document, or in any certificate, report, statement or other document referred to or provided for in, or received by Administrative Agent under or in connection with, this Agreement, any other Loan Document or any Spinoff Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any other Loan Document or any Spinoff Document, or for any failure of Borrower or any other party to any Loan Document or Spinoff Document to perform its obligations hereunder or thereunder. No Administrative Agent-Related Person shall be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement, any other Loan Document or any Spinoff Document, or to inspect the properties, books or records of Borrower or any of Borrower's Subsidiaries or Affiliates. 9.04 RELIANCE BY ADMINISTRATIVE AGENT. (a) Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to Borrower), independent accountants and other experts selected by Administrative Agent. Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders or all Lenders, as the case may be, as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders or all Lenders, if required hereunder, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Lenders. Where this Agreement expressly permits or prohibits an action unless the Required Lenders otherwise determine, and in all other instances, Administrative Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of Lenders. (b) For purposes of determining compliance with the conditions specified in Sections 4.01, 4.02 and 4.03, each Lender that has executed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter either sent by Administrative Agent to such Lender for consent, approval, acceptance or satisfaction, or required thereunder to be consented to or approved by or acceptable or satisfactory to such Lender. 9.05 NOTICE OF DEFAULT. Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to Administrative Agent for the account of Lenders, unless Administrative Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Default or Event of Default and - 69 - 75 stating that such notice is a "notice of default". Administrative Agent will notify Lenders of its receipt of any such notice. Administrative Agent shall take such action with respect to such Default or Event of Default as may be requested by the Required Lenders in accordance with Section 8; provided, however, that unless and until Administrative Agent has received any such request, Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable or in the best interest of Lenders. 9.06 CREDIT DECISION; DISCLOSURE OF INFORMATION BY ADMINISTRATIVE AGENT. Each Lender acknowledges that none of Administrative Agent-Related Persons has made any representation or warranty to it, and that no act by Administrative Agent hereinafter taken, including any consent to and acceptance of any assignment or review of the affairs of Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by any Administrative Agent-Related Person to any Lender as to any matter, including whether Administrative Agent-Related Persons have disclosed material information in their possession. Each Lender, including any Lender by assignment, represents to Administrative Agent and Borrower that it has, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower and its Subsidiaries, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to Borrower hereunder. Each Lender also represents that it will, independently and without reliance upon any Administrative Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of Borrower or any of its Subsidiaries. Except for notices, reports and other documents expressly required to be furnished to Lenders by Administrative Agent herein, Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of Borrower or any of its Subsidiaries which may come into the possession of any of Administrative Agent-Related Persons. 9.07 INDEMNIFICATION OF ADMINISTRATIVE AGENT. Whether or not the transactions contemplated hereby are consummated, Lenders shall indemnify upon demand each Administrative Agent-Related Person (to the extent not reimbursed by or on behalf of Borrower and without limiting the obligation of Borrower to do so), pro rata, and hold harmless each Administrative Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided, however, that no Lender shall be liable for the payment to any Administrative Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Person's gross negligence or willful misconduct as determined by a final nonappealable judgment by a court of competent jurisdiction; provided, however, that no action - 70 - 76 taken in accordance with the directions of the Required Lenders or all Lenders, as the case may be, shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that Administrative Agent is not reimbursed for such expenses by or on behalf of Borrower. The undertaking in this Section shall survive the payment of all Obligations hereunder and the resignation or replacement of Administrative Agent. 9.08 ADMINISTRATIVE AGENT IN INDIVIDUAL CAPACITY. Bank of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with Borrower and its Subsidiaries and Affiliates as though Bank of America were not Administrative Agent or Issuing Lender hereunder or Swing Line Lender and without notice to or consent of Lenders. Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding Borrower or its Affiliates (including information that may be subject to confidentiality obligations in favor of Borrower or such Affiliate) and acknowledge that Administrative Agent shall be under no obligation to provide such information to them. With respect to its Loans and Letters of Credit, Bank of America shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though it were not Administrative Agent or Issuing Lender. 9.09 SUCCESSOR ADMINISTRATIVE AGENT. Administrative Agent may, and at the request of the Required Lenders shall, resign as Administrative Agent upon 30 days' notice to Lenders and Borrower. If Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among Lenders a successor administrative agent for Lenders which successor administrative agent shall, so long as no Default or Event of Default shall have occurred and be continuing, be approved by Borrower. If no successor administrative agent is appointed prior to the effective date of the resignation of Administrative Agent, Administrative Agent may appoint, after consulting with Lenders and Borrower, a successor administrative agent from among Lenders. Upon the acceptance of its appointment as successor administrative agent hereunder, such successor administrative agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term "Administrative Agent" shall mean such successor administrative agent and the retiring Administrative Agent's appointment, powers and duties as Administrative Agent shall be terminated. After any retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Section 9 and Sections 10.04 and 10.12 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and Lenders shall perform all of the duties of - 71 - 77 Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. Notwithstanding the foregoing, however, Bank of America may not be removed as Administrative Agent at the request of the Required Lenders unless Bank of America shall also simultaneously be replaced as "Issuing Lender" and "Swing Line Lender" hereunder pursuant to documentation in form and substance reasonably satisfactory to Bank of America. SECTION 10. MISCELLANEOUS 10.01 AMENDMENTS; CONSENTS. No amendment, modification, supplement, extension, termination or waiver of any provision of this Agreement or any other Loan Document, no approval or consent thereunder, and no consent to any departure by any Borrower Party therefrom shall be effective unless in writing signed by Borrower and the Required Lenders and acknowledged by Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Except as otherwise expressly provided herein, without the approval in writing of Borrower, Administrative Agent and all Lenders, no amendment, modification, supplement, termination, waiver or consent may be effective: (a) to reduce the amount of principal, principal prepayments or the rate of interest payable on, any Loan, or the amount of any fee or other amount payable to any Lender under the Loan Documents (unless such modification is consented to by each Lender entitled to receive such fee) or to waive an Event of Default consisting of the failure of Borrower to pay when due principal, interest or any utilization fee or facility fee; (b) to postpone any date fixed for any payment of principal of, prepayment of principal of, or any installment of interest on, any Loan or any installment of any fee payable to Lenders under Section 2.08, to extend the term of, or increase the amount of, any Lender's Commitment (it being understood that a waiver of an Event of Default shall not constitute an extension or increase in the Commitment of any Lender) or modify the Pro Rata Share of any Lender; (c) to amend the provisions of the definition of "Required Lenders", Sections 4, 9, this Section 10.01 or Section 10.07; (d) to amend any provision of this Agreement that expressly requires the consent or approval of all Lenders; (e) to release all or substantially all of the Guarantors from their guarantee obligations under the Guaranty; or (f) to release all or substantially all of the Collateral (other than pursuant to Section 10.02); - 72 - 78 provided, however, that (i) no amendment, waiver or consent shall, unless in writing and signed by Issuing Lender in addition to Borrower and Required Lenders or all Lenders, as the case may be, affect the rights or duties of Issuing Lender under any Loan Document relating to Letters of Credit, (ii) no amendment, waiver or consent shall, unless in writing and signed by Administrative Agent in addition to Borrower and Required Lenders or all Lenders, as the case may be, affect the rights or duties of Administrative Agent under any Loan Document, (iii) no amendment, waiver or consent shall, unless in writing and signed by Swing Line Lender in addition to Borrower and Required Lenders or all Lenders, as the case may be, affect the rights or duties of Swing Line Lender under any Loan Document, and (iv) any fee letter may be amended, or rights or privileges thereunder waived, in a writing executed by the parties thereto. Any amendment, modification, supplement, termination, waiver or consent pursuant to this Section shall apply equally to, and shall be binding upon, all Lenders and Administrative Agent. 10.02 Release of Collateral. Anything contained in this Agreement or any of the other Loan Documents to the contrary notwithstanding, on the Collateral Release Date, the Pledge Agreement shall be terminated, and all Collateral pledged thereunder shall be released, without further action on the part of Administrative Agent or any Lender (the date of such release, the "Collateral Release Date"). Any release of Collateral pledged under the Pledge Agreement in accordance with the provisions of this Section 10.02 shall be deemed to be a release of such pledged Collateral approved by all Lenders for purposes of the Loan Documents. In connection with any such release, Administrative Agent shall execute all such further documents and instruments as may be reasonably requested by Borrower in order to more fully evidence or effect such release. All such deliveries shall be at the expense of Borrower, with no liability to Administrative Agent or any Lender, and with no representation or warranty by or recourse to Administrative Agent or any Lender. Notwithstanding anything to the contrary herein or in any other Loan Document, the Guaranty shall not be terminated on the Collateral Release Date. 10.03 TRANSMISSION AND EFFECTIVENESS OF NOTICES AND SIGNATURES. (a) MODES OF DELIVERY. Except as otherwise provided in any Loan Document, notices, requests, demands, directions, agreements and documents delivered in connection with the Loan Documents (collectively, "communications") shall be transmitted by Requisite Notice to the number and address set forth on Schedule 10.03, may be delivered by the following modes of delivery, and shall be effective as follows: MODE OF DELIVERY EFFECTIVE ON EARLIER OF ACTUAL RECEIPT AND: - -------------------------------------------------------------------------------- Courier Scheduled delivery date Facsimile When transmission in legible form complete Mail Fourth Business Day after deposit in U.S. mail first class postage pre-paid Personal delivery When received Telephone When conversation completed - 73 - 79 provided, however, that communications delivered to Administrative Agent pursuant to Section 2 shall not be effective until actually received by Administrative Agent. (b) RELIANCE BY ADMINISTRATIVE AGENT AND LENDERS. Administrative Agent and Lenders shall be entitled to rely and act on any communications purportedly given by or on behalf of any Borrower Party even if such communications (i) were not made in a manner specified herein, (ii) were incomplete, (iii) were not preceded or followed by any other notice specified herein, or (iv) the terms thereof, as understood by the recipient, varied from any subsequent related communications provided for herein. Borrower shall indemnify Administrative Agent and Lenders from any loss, cost, expense or liability as a result of relying on any communications permitted herein. The obligations of Borrower in this subsection shall survive payment of all Obligations. (c) EFFECTIVENESS OF FACSIMILE SIGNATURES. Signatures on communications may be transmitted by facsimile; provided that the Administrative Agent may, in its sole and absolute discretion in each instance, require the delivery of originally executed signature pages. The effectiveness of any such facsimile signatures accepted by Administrative Agent shall, subject to applicable Law, have the same force and effect as manual signatures and shall be binding on all Borrower Parties and Administrative Agent and Lenders. Administrative Agent may also require that any such facsimile signature be confirmed by a manually-signed hardcopy thereof; provided, however, that the failure to request any such manually-signed hardcopy confirmation shall not affect the effectiveness of any facsimile signatures. 10.04 ATTORNEY COSTS, EXPENSES AND TAXES. Borrower agrees (a) to pay or reimburse Administrative Agent for all reasonable costs and expenses incurred in connection with the development, preparation, negotiation and execution of the Loan Documents, and the development, preparation, negotiation and execution of any amendment, waiver, consent, supplement or modification to, any Loan Documents, and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including reasonable Attorney Costs, and (b) to pay or reimburse Administrative Agent and each Lender for all costs and expenses incurred in connection with any refinancing, restructuring, reorganization (including a bankruptcy reorganization) and enforcement or attempted enforcement, or preservation of any rights under any Loan Documents, and any other documents prepared in connection herewith or therewith, or in connection with any refinancing, or restructuring of any such documents in the nature of a "workout" or of any insolvency or bankruptcy proceeding, including all Attorney Costs. The foregoing costs and expenses shall include all (and, in the case of clause (a) of the immediately preceding sentence only, all reasonable) search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and other out-of-pocket expenses incurred by Administrative Agent and the cost of independent public accountants and other outside experts retained by Administrative Agent or any Lender. Such costs and expenses shall also include administrative costs of Administrative Agent reasonably attributable to the administration of the - 74 - 80 Loan Documents. Any amount payable by Borrower under this Section shall bear interest from the second Business Day following the date of demand for payment at the Default Rate, unless waived by Administrative Agent. The agreements in this Section shall survive repayment of all Obligations. 10.05 BINDING EFFECT; ASSIGNMENT. (a) This Agreement and the other Loan Documents to which Borrower is a party will be binding upon and inure to the benefit of Borrower, Administrative Agent, Lenders and their respective successors and assigns, except that, Borrower may not assign its rights hereunder or thereunder or any interest herein or therein without the prior written consent of all Lenders and any such attempted assignment shall be void. Any Lender may at any time pledge its Note or any other instrument evidencing its rights as a Lender under this Agreement to a Federal Reserve Bank, but no such pledge shall release that Lender from its obligations hereunder or grant to such Federal Reserve Bank the rights of a Lender hereunder absent foreclosure of such pledge. (b) From time to time following the Signing Date, each Lender may assign to one or more Eligible Assignees all or any portion of its Pro Rata Share of its Commitment and/or Extensions of Credit; provided that (i) such assignment, if not to a Lender or an Affiliate of the assigning Lender, shall be consented to by Borrower at all times other than during the existence of a Default or Event of Default and Administrative Agent, Issuing Lender and Swing Line Lender (which approval of Borrower shall not be unreasonably withheld or delayed), (ii) a copy of a duly signed and completed Notice of Assignment and Acceptance shall be delivered to Administrative Agent, (iii) except in the case of an assignment to an Affiliate of the assigning Lender, to another Lender or of the entire remaining Commitment of the assigning Lender, the assignment shall not assign a Pro Rata Share equivalent to less than the Minimum Amount therefor, and (iv) the effective date of any such assignment shall be as specified in the Notice of Assignment and Acceptance, but not earlier than the date which is five Business Days after the date Administrative Agent has received the Notice of Assignment and Acceptance. Upon acceptance by Administrative Agent of such Notice Assignment and Acceptance and consent thereto by Administrative Agent, Issuing Lender and Swing Line Lender and payment of the requisite fee described below, the Eligible Assignee named therein shall be a Lender for all purposes of this Agreement, with the Pro Rata Share therein set forth and, to the extent of such Pro Rata Share, the assigning Lender shall be released from its further obligations under this Agreement. Borrower agrees that it shall execute and deliver upon request (against delivery by the assigning Lender to Borrower of any Note) to such assignee Lender, one or more Notes evidencing that assignee Lender's Pro Rata Share, and to the assigning Lender if requested, one or more Notes evidencing the remaining balance Pro Rata Share retained by the assigning Lender; provided that Loans made to ALT shall be evidenced by the ALT Global Note only. Administrative Agent's consent to and acceptance of any assignment shall not be deemed to constitute any representation or warranty by any Administrative Agent-Related Person as to any matter. - 75 - 81 (c) After receipt of a completed Notice of Assignment and Acceptance, and receipt of an assignment fee of $3,500 from such Eligible Assignee (including Affiliates of assigning Lenders), Administrative Agent shall, promptly following the effective date thereof, provide to Borrower and Lenders a revised Schedule 10.03 giving effect thereto. (d) Each Lender may from time to time grant participations to one or more other Person (including another Lender) all or any portion of its Pro Rata Share of its Commitment and/or Extensions of Credit; provided, however, that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participating banks or other financial institutions shall not be a Lender hereunder for any purpose except, if the participation agreement so provides, for the purposes of Section 3 (but only to the extent that the cost of such benefits to Borrower does not exceed the cost which Borrower would have incurred in respect of such Lender absent the participation) and subject to Sections 10.06 and 10.07, (iv) Borrower, Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement, (v) the participation shall not restrict an increase in the Commitment or in granting Lender's Pro Rata Share, so long as the amount of the participation interest is not affected thereby, and (vi) the consent of the holder of such participation interest shall not be required for amendments or waivers of provisions of the Loan Documents; provided, however, that the assigning Lender may, in any agreement with a participant, give such participant the right to consent to any matter which (A) extends the Maturity Date as to such participant or any other date upon which any payment of money is due to such participant, (B) reduces the rate of interest owing to such participant, any fee or any other monetary amount owing to such participant, (C) reduces the amount of any installment of principal owing to such participant, or (D) releases of all or substantially all of the Guarantors or releases of all or substantially all of the Collateral (other than pursuant to Section 10.02). 10.06 SET-OFF. In addition to any rights and remedies of Administrative Agent and Lenders or any assignee or participant of Lenders or any Affiliates thereof (each, a "Proceeding Party") provided by law or in equity or otherwise, upon the occurrence and during the continuance of any Event of Default, each Proceeding Party is authorized at any time and from time to time, without prior notice to Borrower, any such notice being waived by Borrower to the fullest extent permitted by law, to proceed directly, by right of set-off, banker's lien or counterclaim, or otherwise, against any assets of the Borrower Parties which may be in the hands of such Proceeding Party (including all general or special, time or demand, provisional or other deposits and other indebtedness owing by such Proceeding Party to or for the credit or the account of Borrower) and apply such assets against the Obligations, irrespective of whether such Proceeding Party shall have made any demand therefor and although such Obligations may be unmatured. Each Lender agrees promptly to notify Borrower and Administrative Agent after any such set-off and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. 10.07 SHARING OF PAYMENTS. Each Lender severally agrees that if it, through the exercise of any right of setoff, banker's lien or counterclaim against Borrower, or otherwise, - 76 - 82 receives payment of the Obligations held by it that is ratably more than any other Lender, through any means, receives in payment of the Obligations held by that Lender, then, subject to applicable Laws: (a) Lender exercising the right of setoff, banker's lien or counterclaim or otherwise receiving such payment shall purchase, and shall be deemed to have simultaneously purchased, from the other Lender a participation in the Obligations held by the other Lender and shall pay to the other Lender a purchase price in an amount so that the share of the Obligations held by each Lender after the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment shall be in the same proportion that existed prior to the exercise of the right of setoff, banker's lien or counterclaim or receipt of payment; and (b) such other adjustments and purchases of participations shall be made from time to time as shall be equitable to ensure that all of Lenders share any payment obtained in respect of the Obligations ratably in accordance with each Lender's Pro Rata Share of the Obligations immediately prior to, and without taking into account, the payment; provided that, if all or any portion of a disproportionate payment obtained as a result of the exercise of the right of setoff, banker's lien, counterclaim or otherwise is thereafter recovered from the purchasing Lender by Borrower or any Person claiming through or succeeding to the rights of Borrower, the purchase of a participation shall be rescinded and the purchase price thereof shall be restored to the extent of the recovery, but without interest. Each Lender that purchases a participation in the Obligations pursuant to this Section shall from and after the purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased. Borrower expressly consents to the foregoing arrangements and agrees that any Lender holding a participation in an Obligation so purchased may exercise any and all rights of setoff, banker's lien or counterclaim or otherwise with respect to the participation as fully as if Lender were the original owner of the Obligation purchased. 10.08 NO WAIVER; CUMULATIVE REMEDIES. (a) No failure by any Lender or Administrative Agent to exercise, and no delay by any Lender or Administrative Agent in exercising, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under any Loan Document preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. (b) The rights, remedies, powers and privileges herein or therein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law. Any decision by Administrative Agent or any Lender not to require payment of any interest (including Default Interest), fee, cost or other amount payable under any Loan Document or to calculate any amount payable by a particular method on any occasion shall in no way limit or be deemed a waiver of Administrative Agent's or such Lender's right to require full payment thereof, or to calculate an amount payable by another method that is not inconsistent with this Agreement, on any other or subsequent occasion. (c) The terms and conditions of Section 9 are inserted for the sole benefit of Administrative Agent and Lenders; the same may be waived in whole or in part, with or without - 77 - 83 terms or conditions, in respect of any Extension of Credit without prejudicing Administrative Agent's or Lenders' rights to assert them in whole or in part in respect of any other Extension of Credit. 10.09 USURY. Notwithstanding anything to the contrary contained in any Loan Document, the interest and fees paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable Law (the "Maximum Rate"). If Administrative Agent or any Lender shall receive interest or a fee in an amount that exceeds the Maximum Rate, the excessive interest or fee shall be applied to the principal of the Outstanding Obligations or, if it exceeds the unpaid principal, refunded to Borrower. In determining whether the interest or a fee contracted for, charged, or received by Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations. 10.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.11 INTEGRATION. This Agreement, together with the other Loan Documents and any letter agreements referred to herein, comprises the complete and integrated agreement of the parties on the subject matter hereof and supersedes all prior agreements, written or oral, on the subject matter hereof. In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control and govern; provided that the inclusion of supplemental rights or remedies in favor of Administrative Agent or Lenders in any other Loan Document shall not be deemed a conflict with this Agreement. Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof. 10.12 NATURE OF LENDERS' OBLIGATIONS. The obligations of Lenders hereunder are several and not joint or joint and several. Nothing contained in this Agreement or any other Loan Document and no action taken by Administrative Agent or Lenders or any of them pursuant hereto or thereto may, or may be deemed to, make Lenders a partnership, an association, a joint venture or other entity, either among themselves or with Borrower or any Affiliate of Borrower. Each Lender's obligation to make any Extension of Credit pursuant hereto is several and not joint or joint and several, and in the case of the initial Extension of Credit only is conditioned upon the performance by all other Lenders of their obligations to make initial Extensions of Credit. A default by any Lender will not increase the Pro Rata Share attributable to any other Lender. 10.13 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties made hereunder and in any Loan Document, certificate or statement delivered - 78 - 84 pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery thereof but shall terminate the later of (a) when the Commitments are terminated and (b) when no Obligations remain outstanding under any Loan Document. Such representations and warranties have been or will be relied upon by Administrative Agent and each Lender, notwithstanding any investigation made by Administrative Agent or any Lender or on their behalf. 10.14 INDEMNITY BY BORROWER. Borrower agrees to indemnify, save and hold harmless each Administrative Agent-Related Person and each Lender and their respective Affiliates, directors, officers, agents, advisors and employees (collectively the "Indemnitees") from and against, and to pay upon demand: (a) any and all claims, demands, actions or causes of action that are asserted against any Indemnitee by any Person relating directly or indirectly to a claim, demand, action or cause of action that such Person asserts or may assert against any Borrower Party, any of their Affiliates or any of their officers or directors; (b) any and all claims, demands, actions or causes of action arising out of or relating to, the Spinoff Documents, the Spinoff, the Line of Business Transfer, the Loan Documents, any predecessor loan documents, the Commitments, the use or contemplated use of the proceeds of any Extension of Credit, or the relationship of any Borrower Party, Administrative Agent and Lenders under this Agreement; (c) any administrative or investigative proceeding by any Governmental Authority arising out of or related to a claim, demand, action or cause of action described in subsection (a) or (b) above; and (d) any and all liabilities, losses, costs or expenses (including reasonable Attorney Costs) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action, cause of action or proceeding, or as a result of the preparation of any defense in connection with any foregoing claim, demand, action, cause of action or proceeding, in all cases, whether or not an Indemnitee is a party to such claim, demand, action, cause of action or proceeding, including those liabilities caused by an Indemnitee's own negligence (all the foregoing, collectively, the "Indemnified Liabilities"); provided that no Indemnitee shall be entitled to indemnification for any loss caused by its own gross negligence or willful misconduct as determined by a final nonappealable judgment by a court of competent jurisdiction. No Indemnitee shall be liable for any damages arising from the use by others of information or other materials obtained through internet, Intralinks or other similar information transmission systems in connection with Extensions of Credit or the Loan Documents. The obligations of Borrower under this Section shall survive payment of all Obligations. 10.15 NONLIABILITY OF LENDERS. Borrower acknowledges and agrees that: (a) Any inspections of any property of Borrower made by or through Administrative Agent or Lenders are for purposes of administration of the Loan Documents only, and Borrower is not entitled to rely upon the same (whether or not such inspections are at the expense of Borrower); (b) By accepting or approving anything required to be observed, performed, fulfilled or given to Administrative Agent or Lenders pursuant to the Loan Documents, neither Administrative Agent nor Lenders shall be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or - 79 - 85 condition thereof, and such acceptance or approval thereof shall not constitute a warranty or representation to anyone with respect thereto by Administrative Agent or Lenders; (c) The relationship between Borrower and Administrative Agent and Lenders is, and shall at all times remain, solely that of borrower and lenders; neither Administrative Agent nor Lenders shall under any circumstance be construed to be partners or joint venturers of Borrower or its Affiliates; neither Administrative Agent nor Lenders shall under any circumstance be deemed to be in a relationship of confidence or trust or a fiduciary relationship with Borrower or its Affiliates, or to owe any fiduciary duty to Borrower or its Affiliates; neither Administrative Agent nor Lenders undertake or assume any responsibility or duty to Borrower or its Affiliates to select, review, inspect, supervise, pass judgment upon or inform Borrower or its Affiliates of any matter in connection with their property or the operations of Borrower or its Affiliates; Borrower and its Affiliates shall rely entirely upon their own judgment with respect to such matters; and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by Administrative Agent or Lenders in connection with such matters is solely for the protection of Administrative Agent and Lenders and neither Borrower nor any other Person is entitled to rely thereon; and (d) Administrative Agent and Lenders shall not be responsible or liable to any Person for any loss, damage, liability or claim of any kind relating to injury or death to Persons or damage to property caused by the actions, inaction or negligence of Borrower and/or its Affiliates and Borrower hereby indemnifies and holds Administrative Agent and Lenders harmless from any such loss, damage, liability or claim. The obligations of Borrower under this subsection shall survive payment of all Obligations. 10.16 NO THIRD PARTIES BENEFITED. This Agreement is made for the purpose of defining and setting forth certain obligations, rights and duties of Borrower, Administrative Agent and Lenders in connection with the Extensions of Credit, and is made for the sole benefit of Borrower, Administrative Agent and Lenders, and Administrative Agent's and Lenders' successors and assigns. Except as provided in Sections 10.05 and 10.14, no other Person shall have any rights of any nature hereunder or by reason hereof. 10.17 SEVERABILITY. Any provision of the Loan Documents that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.18 CONFIDENTIALITY. Administrative Agent and each Lender shall use any confidential non-public information concerning the Borrower Parties and their Subsidiaries that is furnished to Administrative Agent or such Lender by or on behalf of the Borrower Parties and their Subsidiaries in writing in connection with the Loan Documents (collectively, "Confidential Information") solely for the purpose of evaluating and providing products and services to them and administering and enforcing the Loan Documents, and it will hold the Confidential Information in confidence. Notwithstanding the foregoing, Administrative Agent and each - 80 - 86 Lender may disclose Confidential Information (a) to their Affiliates or any of their or their Affiliates' directors, officers, employees, advisors, or representatives (collectively, the "Representatives") whom it determines need to know such information for the purposes set forth in this Section; (b) to any bank or financial institution or other entity to which such Lender has assigned or desires to assign an interest or participation in the Loan Documents or the Obligations, provided that any such foregoing recipient of such Confidential Information agrees to keep such Confidential Information confidential as specified herein; (c) to any governmental agency or regulatory body having or claiming to have authority to regulate or oversee any aspect of Administrative Agent's or such Lender's business or that of their Representatives in connection with the exercise of such authority or claimed authority; (d) to the extent necessary or appropriate to effect or preserve Administrative Agent's or such Lender's or any of their Affiliates' security (if any) for any Obligation or to enforce any right or remedy or in connection with any claims asserted by or against Administrative Agent or such Lender or any of their Representatives; and (e) pursuant to, and as required to comply with, any subpoena or any similar legal process; provided that, to the extent permitted under applicable Law, Administrative Agent or such Lender, as the case may be, shall notify Borrower of any such requirement applicable to it so that Borrower may seek a protective order or other appropriate remedy to prevent the disclosure thereof. For purposes hereof, the term "Confidential Information" shall not include information that (x) is in Administrative Agent's or a Lender's possession prior to its being provided by or on behalf of the Borrower Parties, provided that such information is not known by Administrative Agent or such Lender to be subject to another confidentiality agreement with, or other legal or contractual obligation of confidentiality to, a Borrower Party, (y) is or becomes publicly available (other than through a breach hereof by Administrative Agent or such Lender), or (z) becomes available to Administrative Agent or such Lender on a nonconfidential basis, provided that the source of such information was not known by Administrative Agent or such Lender to be bound by a confidentiality agreement or other legal or contractual obligation of confidentiality with respect to such information. 10.19 FURTHER ASSURANCES. Borrower and its Subsidiaries shall, at their expense and without expense to Lenders or Administrative Agent, do, execute and deliver such further acts and documents as any Lender or Administrative Agent from time to time reasonably requires for the assuring and confirming unto Lenders or Administrative Agent of the rights hereby created or intended now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document. 10.20 HEADINGS. Section headings in this Agreement and the other Loan Documents are included for convenience of reference only and are not part of this Agreement or the other Loan Documents for any other purpose. 10.21 TIME OF THE ESSENCE. Time is of the essence of the Loan Documents. 10.22 FOREIGN LENDERS AND PARTICIPANTS. Each Lender, and each holder of a participation interest herein, that is a "foreign corporation, partnership or trust" within the meaning of the Code shall deliver to Administrative Agent, prior to receipt of any payment subject to withholding (or after accepting an assignment or receiving a participation interest - 81 - 87 herein), two duly signed completed copies of either Form W-8BEN or any successor thereto (relating to such Person and entitling it to a complete exemption from withholding on all payments to be made to such Person by Borrower pursuant to this Agreement) or Form W-8ECI or any successor thereto (relating to all payments to be made to such Person by Borrower pursuant to this Agreement) of the IRS or such other evidence satisfactory to Borrower and Administrative Agent that no withholding under the federal income tax Laws is required with respect to such Person. Thereafter and from time to time, each such Person shall (a) promptly submit to Administrative Agent such additional duly completed and signed copies of one of such forms (or such successor forms as shall be adopted from time to time by the relevant United States taxing authorities) as may then be available under then current United States Laws and regulations to avoid, or such evidence as is satisfactory to Borrower and Administrative Agent of any available exemption from, United States withholding taxes in respect of all payments to be made to such Person by Borrower pursuant to this Agreement, and (b) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Lending Office, if any) to avoid any requirement of applicable Laws that Borrower make any deduction or withholding for taxes from amounts payable to such Person. If such Persons fails to deliver the above forms or other documentation, then Administrative Agent may withhold from any interest payment to such Person an amount equivalent to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code, without reduction. If any Governmental Authority asserts that Administrative Agent did not properly withhold any tax or other amount from payments made in respect of such Person, such Person shall indemnify Administrative Agent therefor, including all penalties and interest and costs and expenses (including Attorney Costs) of Administrative Agent. The obligation of Lenders under this subsection shall survive the payment of all Obligations and the resignation or replacement of Administrative Agent. 10.23 REMOVAL AND/OR REPLACEMENT OF LENDERS. (a) Under any circumstances set forth in this Agreement providing that Borrower shall have the right to remove and/or replace a Lender as a party to this Agreement, Borrower may, upon notice to such Lender and Administrative Agent, remove such Lender by (i) non ratably terminating such Lender's Commitment and/or (ii) causing such Lender to assign its Commitment to one or more other Lenders or Eligible Assignees acceptable to Borrower, Administrative Agent, Swing Line Lender and Issuing Bank. Any removed or replaced Lender shall be entitled to (x) payment in full of all principal, interest, fees and other amounts owing to such Lender through the date of termination or assignment (including any amounts payable pursuant to Section 3.05), (y) appropriate assurances and indemnities (which may include letters of credit) as such Lender may reasonably require with respect to its participation interest in any Letters of Credit or any Swing Line Loans then outstanding and (z) a release of such Lender from its obligations under the Loan Documents. Any Lender being replaced shall execute and deliver a Notice of Assignment and Acceptance covering that Lender's Commitment. Administrative Agent shall distribute an amended Schedule 2.01, which shall thereafter be incorporated into this Agreement, to reflect adjustments to Lenders and their Commitments. - 82 - 88 (b) In order to make all Lender's interests in any outstanding Extensions of Credit ratable in accordance with any revised Pro Rata Shares after giving effect to the removal or replacement of a Lender, Borrower shall pay or prepay, if necessary, on the effective date thereof, all outstanding Extensions of Credit of all Lenders, together with any amounts due under Section 3.05. Borrower may then request Extensions of Credit from Lenders in accordance with their revised Pro Rata Shares. 10.24 GOVERNING LAW. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, the LAW OF THE GOVERNING STATE applicable to agreements made and to be performed entirely within such State; PROVIDED THAT ADMINISTRATIVE Agent AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF THE GOVERNING STATE OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF THE GOVERNING STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER PARTY, ADMINISTRATIVE Agent AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH BORROWER PARTY, ADMINISTRATIVE Agent AND EACH LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED HERETO. EACH BORROWER PARTY, ADMINISTRATIVE Agent AND EACH LENDER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF THE GOVERNING STATE. 10.25 WAIVER OF RIGHT TO TRIAL BY JURY; OTHER WAIVERS. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO - 83 - 89 TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT WAIVES, TO THE FULLEST EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING REFERRED TO IN SECTION 10.24(b) ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES. 10.26 ENTIRE AGREEMENT. THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ANY LETTER AGREEMENTS REFERRED TO HEREIN REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. - 84 - 90 IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed as of the date first above written. ALLEGHENY TELEDYNE INCORPORATED By: /s/ Robert S. Park -------------------------------------- Name: Robert S. Park Title: Vice President-Treasurer TELEDYNE TECHNOLOGIES INCORPORATED By: /s/ Stefan Riesenfeld -------------------------------------- Name: Stefan Riesenfeld Title: Executive Vice President and Chief Financial Officer BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Gina Meador -------------------------------------- Name: Gina Meador Title: Vice President BANK OF AMERICA, N.A., as Issuing Lender, Lender and Swing Line Lender By: /s/ Michelle L. Hilse -------------------------------------- Name: Michelle L. Hilse Title: Vice President - 85 - 91 MELLON BANK, N.A., as Syndication Agent and Lender By: /s/ John N. Cate -------------------------------------- Name: John N. Cate Title: Vice President - 86 - 92 THE CHASE MANHATTAN BANK, as Syndication Agent and Lender By: /s/ Richard C. Smith -------------------------------------- Name: Richard C. Smith Title: Vice President - 87 - 93 THE BANK OF NEW YORK, as Co-Agent and Lender By: /s/ Elizabeth T. Ying -------------------------------------- Name: Elizabeth T. Ying Title: Vice President - 88 - 94 BANK ONE, NA, as Co-Agent and Lender By: /s/ Mark A. Isley -------------------------------------- Name: Mark A. Isley Title: First Vice President - 89 - 95 NATIONAL CITY BANK OF PENNSYLVANIA, as Co-Agent and Lender By: /s/ Michael A. Heinricher -------------------------------------- Name: Michael A. Heinricher Title: Assistant Vice President - 90 - 96 BANK OF TOKYO - MITSUBISHI TRUST COMPANY, as Lender By: /s/ J. R. Jeffers -------------------------------------- Name: J. R. Jeffers Title: SVP & Manager - 91 - 97 THE FUJI BANK, LIMITED, as Lender By: /s/ Hiromitsu Ugawa -------------------------------------- Name: Hiromitsu Ugawa Title: Senior Vice President - 92 - 98 WACHOVIA BANK, N.A., as Lender By: /s/ Charles S. Zimmerman -------------------------------------- Name: Charles S. Zimmerman Title: Vice President - 93 -
EX-4.3 5 FIRST AMENDMENT TO CREDIT AGREEMENT 1 Exhibit 4.3 FIRST AMENDMENT TO CREDIT AGREEMENT DATED AS OF NOVEMBER 10, 1999 This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is among ALLEGHENY TELEDYNE INCORPORATED, a Delaware corporation ("ALT"), TELEDYNE TECHNOLOGIES INCORPORATED, a Delaware corporation ("TTI"), the financial institutions and other entities party to the Credit Agreement referred to below as Lenders (the "Lenders"), and BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the "Administrative Agent"), Issuing Lender and Swing Line Lender under such Credit Agreement. PRELIMINARY STATEMENTS: 1. Reference is made to the Credit Agreement (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement") dated as of October 29, 1999 among ALT, TTI, the Lenders, Mellon Bank, N.A. and The Chase Manhattan Bank, as Syndication Agents, The Bank of New York, Bank One, NA and National City Bank of Pennsylvania, as Co-Agents and Bank of America, N.A., as Administrative Agent, Issuing Lender and Swing Line Lender. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Credit Agreement. 2. ALT and TTI have requested an amendment to the definition of the term "ALT Closing Date" as set forth in the Credit Agreement and the Lenders have agreed, subject to the provisions of this Amendment, to amend the Credit Agreement as set forth herein. NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree intending to be legally bound, as follows: SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the Amendment Effective Date (as defined in Section 2 hereof), the Credit Agreement is hereby amended as follows: (a) Section 1.01 of the Credit Agreement is hereby amended by amending and restating the following defined terms in their entirety to read as follows: "'ALT Closing Date' means the date on which all the conditions precedent in Section 4.02 are satisfied or waived in accordance with Section 4.02, which date shall be no later than December 15, 1999. 'Maturity Date' means (i) if the ALT Closing Date does not occur on or before December 15, 1999, December 15, 1999, (ii) if the TTI Closing Date does not occur on or 2 before the date that is one month following the ALT Closing Date, the date that is one month following the ALT Closing Date, (iii) otherwise, the date that is five years following the ALT Closing Date, in each case, as it may be earlier terminated or extended in accordance with the terms hereof." (b) Section 2.08(e) of the Credit Agreement is hereby amended and restated in its entirety to read as follows: "(e) LENDERS' UPFRONT FEE. ALT shall pay to Administrative Agent, for the respective accounts of Lenders pro rata according to their Pro Rata Share, an upfront fee in an amount set forth in a separate letter from the Arranger to each Lender and acknowledged by that Lender as the applicable upfront fee for such Lender. Such upfront fee shall be payable in two equal installments of 50% of the total amount of such upfront fee, with the first such installment due and payable on November 24, 1999 and the second such installment due and payable on the earlier of the ALT Closing Date and the Maturity Date. Such upfront fees are for the combined Commitments made by each Lender under this Agreement and are fully earned on the date paid. The upfront fee paid to each Lender is solely for its own account and is nonrefundable." SECTION 2. CONDITIONS TO EFFECTIVENESS. The amendments set forth herein shall become effective on the date (the "Amendment Effective Date") on which the Administrative Agent shall have executed this Amendment and shall have received counterparts of this Amendment executed by ALT, TTI and each Lender. SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of ALT and TTI represents and warrants as follows: (a) AUTHORITY. Each of ALT and TTI has the requisite corporate power and authority to execute and deliver this Amendment and to perform its obligations hereunder and under the Loan Documents (in each case as modified hereby) to which it is a party. The execution, delivery and performance by each of ALT and TTI of this Amendment and the performance by each Borrower Party of each Loan Document (in each case as modified hereby) to which it is a party have been duly approved by all necessary corporate action of such Borrower Party and no other corporate proceedings on the part of such Borrower Party are necessary to consummate such transactions. (b) ENFORCEABILITY. This Amendment has been duly executed and delivered by each of ALT and TTI. This Amendment and each Loan Document (in each case as modified hereby) is the legal, valid and binding obligation of each Borrower Party party hereto and thereto, enforceable against such Borrower Party in accordance with its terms, and is in full force and effect. (c) REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in each Loan Document executed and delivered on the Signing Date and (except to the extent that such representations and warranties specifically refer to any earlier date) are true and 2 3 correct on and as of the date hereof as though made on and as of the date hereof and will be true and correct on and as of the Amendment Effective Date as though made on and as of such date. (d) NO DEFAULT. After giving effect to this Amendment, no event has occurred and is continuing that constitutes a Default or Event of Default under any Loan Document executed and delivered on the Signing Date. SECTION 4. REFERENCE TO AND EFFECT ON THE LOAN DOCUMENTS AND THE CREDIT DOCUMENTS. (a) Upon and after the effectiveness of this Amendment, each reference in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to the Credit Agreement, and each reference in the other Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement as modified hereby. (b) Except as specifically modified above, the Credit Agreement and the other Loan Documents executed and delivered on the Signing Date are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents. SECTION 5. COSTS, EXPENSES AND TAXES. ALT agrees (a) to pay or reimburse Administrative Agent for all reasonable costs and expenses incurred in connection with the development, preparation, negotiation and execution of this Amendment and any other documents prepared in connection herewith, and the consummation and administration of the transactions contemplated hereby, including reasonable Attorney Costs, and (b) to pay or reimburse Administrative Agent and each Lender for all costs and expenses incurred in connection with any refinancing, restructuring, reorganization (including a bankruptcy reorganization) and enforcement or attempted enforcement, or preservation of any rights under this Amendment, and any other documents prepared in connection herewith, or in connection with any refinancing, or restructuring of any such documents in the nature of a "workout" or of any insolvency or bankruptcy proceeding, including all Attorney Costs. The foregoing costs and expenses shall include all (and, in the case of clause (a) of the immediately preceding sentence only, all reasonable) search, filing, recording, title insurance and appraisal charges and fees and taxes related thereto, and (and, in the case of clause (a) of the immediately preceding sentence only, all reasonable) other out-of-pocket expenses incurred by Administrative Agent and the cost of independent public accountants and other outside experts retained by Administrative Agent or any Lender. Such costs and expenses shall also include administrative costs of Administrative Agent reasonably attributable to the administration of the Loan Documents (as modified hereby). Any amount payable by ALT under this Section shall bear interest from the second Business Day following the date of demand for payment at the Default Rate, unless waived by Administrative Agent. The agreements in this Section shall survive repayment of all Obligations. 3 4 SECTION 6. COUNTERPARTS. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment. SECTION 7. GOVERNING LAW. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York. [Signature Pages Follow] 4 5 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first written above. ALLEGHENY TELEDYNE INCORPORATED By: /s/ Robert S. Park --------------------------------- Name: Robert S. Park Title: Vice President-Treasurer 6 TELEDYNE TECHNOLOGIES INCORPORATED By: /s/ Stefan Riesenfeld --------------------------------- Name: Stefan Riesenfeld Title: Executive Vice President and Chief Financial Officer 7 BANK OF AMERICA, N.A., as Administrative Agent By: /s/ Gina Meador --------------------------- Name: Gina Meador Title: Vice President 8 BANK OF AMERICA, N.A., as Issuing Lender, Lender and Swing Line Lender By: /s/ Michelle L. Hilse -------------------------------- Name: Michelle L. Hilse Title: Vice President 9 MELLON BANK, N.A., as Syndication Agent and Lender By: /s/ John N. Cate ---------------------------- Name: John N. Cate Title: Vice President 10 THE CHASE MANHATTAN BANK, as Syndication Agent and Lender By: /s/ Richard C. Smith -------------------------- Name: Richard C. Smith Title: Vice President 11 THE BANK OF NEW YORK, as Co-Agent and Lender By: /s/ Elizabeth T. Ying --------------------------- Name: Elizabeth T. Ying Title: Vice President 12 BANK ONE, NA, as Co-Agent and Lender By: /s/ Mark A. Isley ---------------------------- Name: Mark A. Isley Title: First Vice President 13 NATIONAL CITY BANK OF PENNSYLVANIA, as Co-Agent and Lender By: /s/ Michael A. Heinricher ------------------------------ Name: Michael A. Heinricher Title: Assistant Vice President 14 BANK OF TOKYO - MITSUBISHI TRUST COMPANY, as Lender By: /s/ J. R. Jeffers ------------------------------ Name: J. R. Jeffers Title: SVP & Manager 15 THE FUJI BANK, LIMITED, as Lender By: /s/ Hiromitsu Ugawa ---------------------------- Name: Hiromitsu Ugawa Title: Senior Vice President 16 WACHOVIA BANK, N.A., as Lender By: /s/ Charles S. Zimmerman ------------------------------ Name: Charles S. Zimmerman Title: Vice President EX-10.5 6 1999 INCENTIVE PLAN 1 Exhibit 10.5 TELEDYNE TECHNOLOGIES INCORPORATED 1999 INCENTIVE PLAN (As amended through January 26, 2000) ARTICLE I PURPOSE AND ADOPTION OF THE PLAN 1.01. PURPOSE. The purpose of the Teledyne Technologies Incorporated 1999 Incentive Plan (hereinafter referred to as the "Plan") is to assist in attracting and retaining highly competent employees, to act as an incentive in motivating selected officers and other key employees of Teledyne Technologies Incorporated and its Subsidiaries to achieve long-term corporate objectives and to enable cash incentive awards to qualify as performance-based for purposes of the tax deduction limitations under Section 162(m) of the Code. 1.02. ADOPTION AND TERM. The Plan has been approved by the Board of Directors of Teledyne Technologies Incorporated, to be effective as of the effective date of the distribution by Allegheny Teledyne Incorporated to its stockholders of Teledyne Technologies Incorporated Common Stock (the "Effective Date"), but is subject to the approval of the stockholders of the Company. The Plan shall remain in effect until terminated by action of the Board; provided, however, that no Incentive Stock Option may be granted hereunder after the tenth anniversary of the Effective Date and the provisions of Articles VII, VIII, IX and X with respect to performance-based awards to "covered employees" under Section 162(m) of the Code shall expire as of the fifth anniversary of the Effective Date. ARTICLE II DEFINITIONS For the purpose of this Plan, capitalized terms shall have the following meanings: 2.01. AWARD means any one or a combination of Non-Qualified Stock Options or Incentive Stock Options described in Article VI, Stock Appreciation Rights described in Article VI, Restricted Shares described in Article VII, Performance Awards described in Article VIII, Awards of cash or any other Award made under the terms of the Plan. 2.02. AWARD AGREEMENT means a written agreement between the Company and a Participant or a written acknowledgment from the Company to a Participant specifically setting forth the terms and conditions of an Award granted under the Plan. 2.03. AWARD PERIOD means, with respect to an Award, the period of time set forth in the Award Agreement during which specified target performance goals must be achieved or other conditions set forth in the Award Agreement must be satisfied. 2 2.04. BENEFICIARY means an individual, trust or estate who or which, by a written designation of the Participant filed with the Company or by operation of law, succeeds to the rights and obligations of the Participant under the Plan and the Award Agreement upon the Participant's death. 2.05. BOARD means the Board of Directors of the Company. 2.06. CHANGE IN CONTROL means, and shall be deemed to have occurred upon the occurrence of, any one of the following events: (a) The acquisition in one or more transactions, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number of Company Voting Securities in excess of 25% of the Company Voting Securities unless such acquisition has been approved by the Board; (b) Any election has occurred of persons to the Board that causes two-thirds of the Board to consist of persons other than (i) persons who were members of the Board on the Effective Date and (ii) persons who were nominated for elections as members of the Board at a time when two-thirds of the Board consisted of persons who were members of the Board on the Effective Date, provided, however, that any person nominated for election by a Board at least two-thirds of whom constituted persons described in clauses (i) and/or (ii) or by persons who were themselves nominated by such Board shall, for this purpose, be deemed to have been nominated by a Board composed of persons described in clause (i); (c) Approval by the stockholders of the Company of a reorganization, merger or consolidation, unless, following such reorganization, merger or consolidation, all or substantially all of the individuals and entities who were the respective beneficial owners of the Outstanding Common Stock and Company Voting Securities immediately prior to such reorganization, merger or consolidation, following such reorganization, merger or consolidation beneficially own, directly or indirectly, more than seventy five (75%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors or trustees, as the case may be, of the entity resulting from such reorganization, merger or consolidation in substantially the same proportion as their ownership of the Outstanding Common Stock and Company Voting Securities immediately prior to such reorganization, merger or consolidation, as the case may be; or (d) Approval by the stockholders of the Company of (i) a complete liquidation or dissolution of the Company or (ii) a sale or other disposition of all or substantially all the assets of the Company. 2.07. CODE means the Internal Revenue Code of 1986, as amended. References to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section. 2 3 2.08. COMMITTEE means the Committee defined in Section 3.01. 2.09. COMPANY means Teledyne Technologies Incorporated, a Delaware corporation, and its successors. 2.10. COMMON STOCK means Common Stock of the Company, par value $0.01 per share. 2.11. COMPANY VOTING SECURITIES means the combined voting power of all outstanding voting securities of the Company entitled to vote generally in the election of directors to the Board. 2.12. DATE OF GRANT means the date designated by the Committee as the date as of which it grants an Award, which shall not be earlier than the date on which the Committee approves the granting of such Award. 2.13. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. 2.14. EXERCISE PRICE means, with respect to a Stock Appreciation Right, the amount established by the Committee in the Award Agreement which is to be subtracted from the Fair Market Value on the date of exercise in order to determine the amount of the payment to be made to the Participant, as further described in Section 6.02(b). 2.15. FAIR MARKET VALUE means, on any date, the average of the high and low quoted sales prices of a share of Common Stock, as reported on the Composite Tape for New York Stock Exchange Listed Companies on such date or, if there were no sales on such date, on the last date preceding such date on which a sale was reported. 2.16. INCENTIVE STOCK OPTION means a stock option within the meaning of Section 422 of the Code. 2.17. MERGER means any merger, reorganization, consolidation, exchange, transfer of assets or other transaction having similar effect involving the Company. 2.18. NON-QUALIFIED STOCK OPTION means a stock option which is not an Incentive Stock Option. 2.19. OPTIONS means all Non-Qualified Stock Options and Incentive Stock Options granted at any time under the Plan. 2.20. OUTSTANDING COMMON STOCK means, at any time, the issued and outstanding shares of Common Stock. 3 4 2.21. PARTICIPANT means a person designated to receive an Award under the Plan in accordance with Section 5.01. 2.22. PERFORMANCE AWARDS means Awards granted in accordance with Article VIII. 2.23. PERFORMANCE GOALS means operating income, operating profit (earnings from continuing operations before interest and taxes), earnings per share, return on investment or working capital, return on stockholders' equity, economic value added (the amount, if any, by which net operating profit after tax exceeds a reference cost of capital), reductions in inventory, inventory turns and on-time delivery performance, any one of which may be measured with respect to the Company or any one or more of its Subsidiaries and divisions and either in absolute terms or as compared to another company or companies, and quantifiable, objective measures of individual performance relevant to the particular individual's job responsibilities. 2.24. PLAN means the Teledyne Technologies Incorporated 1999 Incentive Plan as described herein, as the same may be amended from time to time. 2.25. PURCHASE PRICE, with respect to Options, shall have the meaning set forth in Section 6.01(b). 2.26. RESTORATION OPTION means a Non-Qualified Stock Option granted pursuant to Section 6.01(f). 2.27. RESTRICTED SHARES means Common Stock subject to restrictions imposed in connection with Awards granted under Article VII. 2.28. RETIREMENT means early or normal retirement under a pension plan or arrangement of the Company or one of its Subsidiaries in which the Participant participates. 2.29. RULE 16B-3 means Rule 16b-3 promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act, as the same may be amended from time to time, and any successor rule. 2.30. STOCK APPRECIATION RIGHTS means Awards granted in accordance with Article VI. 2.31. SUBSIDIARY means a subsidiary of the Company within the meaning of Section 424(f) of the Code. 2.32. TERMINATION OF EMPLOYMENT means the voluntary or involuntary termination of a Participant's employment with the Company or a Subsidiary for any reason, including death, disability, retirement or as the result of the divestiture of the Participant's employer or any similar transaction in which the Participant's employer ceases to be the Company or one of its Subsidiaries. Whether entering military or other government service shall 4 5 constitute Termination of Employment, or whether a Termination of Employment shall occur as a result of disability, shall be determined in each case by the Committee in its sole discretion. ARTICLE III ADMINISTRATION 3.01. COMMITTEE. The Plan shall be administered by a committee of the Board ("Committee") comprised of at least two persons. The Committee shall have exclusive and final authority in each determination, interpretation or other action affecting the Plan and its Participants. The Committee shall have the sole discretionary authority to interpret the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and restrictions on Awards as it determines appropriate, to cancel Awards (including those made pursuant to other plans of the Company) and to substitute new Options for previously awarded Options which, at the time of such substitution, have an exercise price in excess of the Fair Market Value of the underlying Common Stock (including options granted under other incentive compensation programs of the Company) with the consent of the recipient, and to take such steps in connection with the Plan and Awards granted hereunder as it may deem necessary or advisable. The Committee shall not, however, have or exercise any discretion that would disqualify amounts payable under Article X as performance-based compensation for purposes of Section 162(m) of the Code. The Committee may delegate such of its powers and authority under the Plan as it deems appropriate to a subcommittee of the Committee and/or designated officers or employees of the Company. In addition, the full Board may exercise any of the powers and authority of the Committee under the Plan. In the event of such delegation of authority or exercise of authority by the Board, references in the Plan to the Committee shall be deemed to refer, as appropriate, to the delegate of the Committee or the Board. Actions taken by the Committee or any subcommittee thereof, and any delegation by the Committee to designated officers or employees, under this Section 3.01 shall comply with Section 16(b) of the Exchange Act, the performance-based provisions of Section 162(m) of the Code, and the regulations promulgated under each of such statutory provisions, or the respective successors to such statutory provisions or regulations, as in effect from time to time, to the extent applicable. ARTICLE IV SHARES 4.01. NUMBER OF SHARES ISSUABLE. The total number of shares authorized to be issued under the Plan shall be 4,000,000 shares of Common Stock. If the number of issued and outstanding shares of Common Stock is increased after January 26, 2000, the total number of shares available under the Plan will be increased by 10% of such increase. No more than 2,650,000 shares of Common Stock may be issued under the Plan as Incentive Stock Options. The number of shares available for issuance under the Plan shall be further subject to adjustment in accordance with Section 11.07. The shares to be offered under the Plan shall be authorized and unissued Common Stock or issued Common Stock which shall have been reacquired by the Company. 5 6 4.02. SHARES SUBJECT TO TERMINATED AWARDS. Common Stock covered by any unexercised portions of terminated Options (including canceled Options) granted under Article VI, Common Stock forfeited as provided in Section 7.02(a) and Common Stock subject to any Awards which are otherwise surrendered by the Participant may again be subject to new Awards under the Plan. Common Stock subject to Options, or portions thereof, which have been surrendered in connection with the exercise of Stock Appreciation Rights shall not be available for subsequent Awards under the Plan, but Common Stock issued in payment of such Stock Appreciation Rights shall not be charged against the number of shares of Common Stock available for the grant of Awards hereunder. ARTICLE V PARTICIPATION 5.01. ELIGIBLE PARTICIPANTS. Participants in the Plan shall be such officers and other key employees of the Company and its Subsidiaries, whether or not members of the Board, as the Committee, in its sole discretion, may designate from time to time. The Committee's designation of a Participant in any year shall not require the Committee to designate such person to receive Awards or grants in any other year. The designation of a Participant to receive awards or grants under one portion of the Plan does not require the Committee to include such Participant under other portions of the Plan. The Committee shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of their respective Awards. Notwithstanding any provision herein to the contrary, the Committee may grant Awards under the Plan, other than Incentive Stock Options, to non-employees who, in the judgment of the Committee, render significant services to the Company or any of its Subsidiaries, on such terms and conditions as the Committee deems appropriate and consistent with the intent of the Plan. Subject to adjustment in accordance with Section 11.07, in any calendar year, no Participant shall be granted Awards in respect of more than 750,000 shares of Common Stock (whether through grants of Options or Stock Appreciation Rights or other grants of Common Stock or rights with respect thereto) and $3 million in cash. ARTICLE VI STOCK OPTIONS AND STOCK APPRECIATION RIGHTS 6.01. OPTION AWARDS. (a) GRANT OF OPTIONS. The Committee may grant, to such Participants as the Committee may select, Options entitling the Participant to purchase shares of Common Stock from the Company in such number, at such price, and on such terms and subject to such conditions, not inconsistent with the terms of this Plan, as may be established by the Committee. The terms of any Option granted under this Plan shall be set forth in an Award Agreement. 6 7 (b) PURCHASE PRICE OF OPTIONS. The Purchase Price of each share of Common Stock which may be purchased upon exercise of any Option granted under the Plan shall be determined by the Committee; provided, however, that the Purchase Price of the Common Stock purchased pursuant to Options designated by the Committee as Incentive Stock Options shall be equal to or greater than the Fair Market Value on the Date of Grant as required under Section 422 of the Code. (c) DESIGNATION OF OPTIONS. Except as otherwise expressly provided in the Plan, the Committee may designate, at the time of the grant of each Option, the Option as an Incentive Stock Option or a Non-Qualified Stock Option. (d) INCENTIVE STOCK OPTION SHARE LIMITATION. No Participant may be granted Incentive Stock Options under the Plan (or any other plans of the Company and its Subsidiaries) which would result in shares with an aggregate Fair Market Value (measured on the Date of Grant) of more than $100,000 first becoming exercisable in any one calendar year. (e) RIGHTS AS A STOCKHOLDER. A Participant or a transferee of an Option pursuant to Section 11.04 shall have no rights as a stockholder with respect to Common Stock covered by an Option until the Participant or transferee shall have become the holder of record of any such shares, and no adjustment shall be made for dividends in cash or other property or distributions or other rights with respect to any such Common Stock for which the record date is prior to the date on which the Participant or a transferee of the Option shall have become the holder of record of any such shares covered by the Option; provided, however, that Participants are entitled to share adjustments to reflect capital changes under Section 11.07. (f) RESTORATION OPTIONS UPON THE EXERCISE OF A NON-QUALIFIED STOCK OPTION. In the event that any Participant delivers to the Company, or has withheld from the shares otherwise issuable upon the exercise of a Non-Qualified Stock Option, shares of Common Stock in payment of the Purchase Price of any Non-Qualified Stock Option granted hereunder in accordance with Section 6.04, the Committee shall have the authority to grant or provide for the automatic grant of a Restoration Option to such Participant. The grant of a Restoration Option shall be subject to the satisfaction of such conditions or criteria as the Committee in its sole discretion shall establish from time to time. A Restoration Option shall entitle the holder thereof to purchase a number of shares of Common Stock equal to the number of such shares so delivered or withheld upon exercise of the original Option and, in the discretion of the Committee, the number of shares, if any, delivered or withheld to the Corporation to satisfy any withholding tax liability arising in connection with the exercise of the original Option. A Restoration Option shall have a per share Purchase Price of not less than 100% of the per share Fair Market Value of the Common Stock on the date of grant of such Restoration Option, a term not longer than the remaining term of the original Option at the time of exercise thereof, and such other terms and conditions as the Committee in its sole discretion shall determine. 7 8 6.02. STOCK APPRECIATION RIGHTS. (a) STOCK APPRECIATION RIGHT AWARDS. The Committee is authorized to grant to any Participant one or more Stock Appreciation Rights. Such Stock Appreciation Rights may be granted either independent of or in tandem with Options granted to the same Participant. Stock Appreciation Rights granted in tandem with Options may be granted simultaneously with, or, in the case of Non-Qualified Stock Options, subsequent to, the grant to such Participant of the related Option; provided however, that: (i) any Option covering any share of Common Stock shall expire and not be exercisable upon the exercise of any Stock Appreciation Right with respect to the same share, (ii) any Stock Appreciation Right covering any share of Common Stock shall expire and not be exercisable upon the exercise of any related Option with respect to the same share, and (iii) an Option and Stock Appreciation Right covering the same share of Common Stock may not be exercised simultaneously. Upon exercise of a Stock Appreciation Right with respect to a share of Common Stock, the Participant shall be entitled to receive an amount equal to the excess, if any, of (A) the Fair Market Value of a share of Common Stock on the date of exercise over (B) the Exercise Price of such Stock Appreciation Right established in the Award Agreement, which amount shall be payable as provided in Section 6.02(c). (b) EXERCISE PRICE. The Exercise Price established under any Stock Appreciation Right granted under this Plan shall be determined by the Committee, but in the case of Stock Appreciation Rights granted in tandem with Options shall not be less than the Purchase Price of the related Option. Upon exercise of Stock Appreciation Rights granted in tandem with options, the number of shares subject to exercise under any related Option shall automatically be reduced by the number of shares of Common Stock represented by the Option or portion thereof which are surrendered as a result of the exercise of such Stock Appreciation Rights. (c) PAYMENT OF INCREMENTAL VALUE. Any payment which may become due from the Company by reason of a Participant's exercise of a Stock Appreciation Right may be paid to the Participant as determined by the Committee (i) all in cash, (ii) all in Common Stock, or (iii) in any combination of cash and Common Stock. In the event that all or a portion of the payment is made in Common Stock, the number of shares of Common Stock delivered in satisfaction of such payment shall be determined by dividing the amount of such payment or portion thereof by the Fair Market Value on the Exercise Date. No fractional share of Common Stock shall be issued to make any payment in respect of Stock Appreciation Rights; if any fractional share would be issuable, the combination of cash and Common Stock payable to the Participant shall be adjusted as directed by the Committee to avoid the issuance of any fractional share. 6.03. TERMS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. (a) CONDITIONS ON EXERCISE. An Award Agreement with respect to Options and/or Stock Appreciation Rights may contain such waiting periods, exercise dates and restrictions on exercise (including, but not limited to, periodic installments) as may be determined by the Committee at the time of grant. 8 9 (b) DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and Stock Appreciation Rights shall terminate upon the first to occur of the following events: (i) Expiration of the Option or Stock Appreciation Right as provided in the Award Agreement; or (ii) Termination of the Award in the event of a Participant's disability, Retirement, death or other Termination of Employment as provided in the Award Agreement; or (iii) In the case of an Incentive Stock Option, ten years from the Date of Grant; or (iv) Solely in the case of a Stock Appreciation Right granted in tandem with an Option, upon the expiration of the related Option. (c) ACCELERATION OR EXTENSION OF EXERCISE TIME. The Committee, in its sole discretion, shall have the right (but shall not be obligated), exercisable on or at any time after the Date of Grant, to permit the exercise of an Option or Stock Appreciation Right (i) prior to the time such Option or Stock Appreciation Right would become exercisable under the terms of the Award Agreement, (ii) after the termination of the Option or Stock Appreciation Right under the terms of the Award Agreement, or (iii) after the expiration of the Option or Stock Appreciation Right. 6.04. EXERCISE PROCEDURES. Each Option and Stock Appreciation Right granted under the Plan shall be exercised by written notice to the Company which must be received by the officer or employee of the Company designated in the Award Agreement on or before the close of business on the expiration date of the Award. The Purchase Price of shares purchased upon exercise of an Option granted under the Plan shall be paid in full in cash by the Participant pursuant to the Award Agreement; provided however, that the Committee may (but shall not be required to) permit payment to be made by delivery to the Company of either (a) Common Stock (which may include Restricted Shares or shares otherwise issuable in connection with the exercise of the Option, subject to such rules as the Committee deems appropriate) or (b) any combination of cash and Common Stock, or (c) such other consideration as the Committee deems appropriate and in compliance with applicable law (including payment in accordance with a cashless exercise program under which, if so instructed by the Participant, Common Stock may be issued directly to the Participant's broker or dealer upon receipt of an irrevocable written notice of exercise from the Participant). In the event that any Common Stock shall be transferred to the Company to satisfy all or any part of the Purchase Price, the part of the Purchase Price deemed to have been satisfied by such transfer of Common Stock shall be equal to the product derived by multiplying the Fair Market Value as of the date of exercise times the number of shares of Common Stock transferred to the Company. The Participant may not transfer to the Company in satisfaction of the Purchase Price any fractional share of Common Stock. Any part of the Purchase Price paid in cash upon the exercise of any Option shall be added to the general 9 10 funds of the Company and may be used for any proper corporate purpose. Unless the Committee shall otherwise determine, any Common Stock transferred to the Company as payment of all or part of the Purchase Price upon the exercise of any Option shall be held as treasury shares. 6.05. CHANGE IN CONTROL. Unless otherwise provided by the Committee in the applicable Award Agreement, in the event of a Change in Control, all Options outstanding on the date of such Change in Control, and all Stock Appreciation Rights shall become immediately and fully exercisable. The provisions of this Section 6.05 shall not be applicable to any Options or Stock Appreciation Rights granted to a Participant if any Change in Control results from such Participant's beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act) of Common Stock or Company Voting Securities. ARTICLE VII RESTRICTED SHARES 7.01. RESTRICTED SHARE AWARDS. The Committee may grant to any Participant an Award of Common Stock in such number of shares, and on such terms, conditions and restrictions, whether based on performance standards, periods of service, retention by the Participant of ownership of purchased or designated shares of Common Stock or other criteria, as the Committee shall establish. With respect to performance-based Awards of Restricted Shares to "covered employees" (as defined in Section 162(m) of the Code), performance targets will be limited to specified levels of one or more of the Performance Goals. The terms of any Restricted Share Award granted under this Plan shall be set forth in an Award Agreement which shall contain provisions determined by the Committee and not inconsistent with this Plan. (a) ISSUANCE OF RESTRICTED SHARES. As soon as practicable after the Date of Grant of a Restricted Share Award by the Committee, the Company shall cause to be transferred on the books of the Company, or its agent, Common Stock, registered on behalf of the Participant, evidencing the Restricted Shares covered by the Award, but subject to forfeiture to the Company as of the Date of Grant if an Award Agreement with respect to the Restricted Shares covered by the Award is not duly executed by the Participant and timely returned to the Company. All Common Stock covered by Awards under this Article VII shall be subject to the restrictions, terms and conditions contained in the Plan and the Award Agreement entered into by the Participant. Until the lapse or release of all restrictions applicable to an Award of Restricted Shares, the share certificates representing such Restricted Shares may be held in custody by the Company, its designee, or, if the certificates bear a restrictive legend, by the Participant. Upon the lapse or release of all restrictions with respect to an Award as described in Section 7.01(d), one or more share certificates, registered in the name of the Participant, for an appropriate number of shares as provided in Section 7.01(d), free of any restrictions set forth in the Plan and the Award Agreement shall be delivered to the Participant. (b) STOCKHOLDER RIGHTS. Beginning on the Date of Grant of the Restricted Share Award and subject to execution of the Award Agreement as provided in Section 7.01(a), the Participant shall become a stockholder of the Company with respect to all shares 10 11 subject to the Award Agreement and shall have all of the rights of a shareholder, including, but not limited to, the right to vote such shares and the right to receive dividends; provided, however, that any Common Stock distributed as a dividend or otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed, shall be subject to the same restrictions as such Restricted Shares and held or restricted as provided in Section 7.01(a). (c) RESTRICTION ON TRANSFERABILITY. None of the Restricted Shares may be assigned or transferred (other than by will or the laws of descent and distribution, or to an inter vivos trust with respect to which the Participant is treated as the owner under Sections 671 through 677 of the Code, except to the extent that Section 16 of the Exchange Act limits a participant's right to make such transfers), pledged or sold prior to lapse of the restrictions applicable thereto. (d) DELIVERY OF SHARES UPON VESTING. Upon expiration or earlier termination of the forfeiture period without a forfeiture and the satisfaction of or release from any other conditions prescribed by the Committee, or at such earlier time as provided under the provisions of Section 7.03, the restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively feasible thereafter, subject to the requirements of Section 11.05, the Company shall deliver to the Participant or, in case of the Participant's death, to the Participant's Beneficiary, one or more share certificates for the appropriate number of shares of Common Stock, free of all such restrictions, except for any restrictions that may be imposed by law. 7.02. TERMS OF RESTRICTED SHARES. (a) FORFEITURE OF RESTRICTED SHARES. Subject to Sections 7.02(b) and 7.03, all Restricted Shares shall be forfeited and returned to the Company and all rights of the Participant with respect to such Restricted Shares shall terminate unless the Participant continues in the service of the Company or a Subsidiary as an employee until the expiration of the forfeiture period for such Restricted Shares and satisfies any and all other conditions set forth in the Award Agreement. The Committee shall determine the forfeiture period (which may, but need not, lapse in installments) and any other terms and conditions applicable with respect to any Restricted Share Award. (b) WAIVER OF FORFEITURE PERIOD. Notwithstanding anything contained in this Article VII to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other conditions set forth in any Award Agreement under appropriate circumstances (including the death, disability or Retirement of the Participant or a material change in circumstances arising after the date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate number of the Restricted Shares) as the Committee shall deem appropriate. 7.03. CHANGE IN CONTROL. Unless otherwise provided by the Committee in the applicable Award Agreement, in the event of a Change in Control, all restrictions applicable to the Restricted Share Award shall terminate fully and the Participant shall immediately have the 11 12 right to the delivery of share certificate or certificates for such shares in accordance with Section 7.01(d). ARTICLE VIII PERFORMANCE AWARDS 8.01. PERFORMANCE AWARDS. (a) AWARD PERIODS AND CALCULATIONS OF POTENTIAL INCENTIVE AMOUNTS. The Committee may grant Performance Awards to Participants. A Performance Award shall consist of the right to receive a payment (measured by the Fair Market Value of a specified number of shares of Common Stock, increases in such Fair Market Value during the Award Period and/or a fixed cash amount) contingent upon the extent to which certain predetermined performance targets have been met during an Award Period. Performance Awards may be made in conjunction with, or in addition to, Restricted Share Awards made under Article VII. The Award Period shall be two or more fiscal or calendar years as determined by the Committee. The Committee, in its discretion and under such terms as it deems appropriate, may permit newly eligible employees, such as those who are promoted or newly hired, to receive Performance Awards after an Award Period has commenced. (b) PERFORMANCE TARGETS. The performance targets may include such goals related to the performance of the Company or, where relevant, any one or more of its Subsidiaries or divisions and/or the performance of a Participant as may be established by the Committee in its discretion. In the case of Performance Awards to "covered employees" (as defined in Section 162(m) of the Code), the targets will be limited to specified levels of one or more of the Performance Goals. The performance targets established by the Committee may vary for different Award Periods and need not be the same for each Participant receiving a Performance Award in an Award Period. Except to the extent inconsistent with the performance-based compensation exception under Section 162(m) of the Code, in the case of Performance Awards granted to employees to whom such section is applicable, the Committee, in its discretion, but only under extraordinary circumstances as determined by the Committee, may change any prior determination of performance targets for any Award Period at any time prior to the final determination of the Award when events or transactions occur to cause the performance targets to be an inappropriate measure of achievement. (c) EARNING PERFORMANCE AWARDS. The Committee, at or as soon as practicable after the Date of Grant, shall prescribe a formula to determine the percentage of the Performance Award to be earned based upon the degree of attainment of performance targets. (d) PAYMENT OF EARNED PERFORMANCE AWARDS. Subject to the requirements of Section 11.05, payments of earned Performance Awards shall be made in cash or Common Stock, or a combination of cash and Common Stock, in the discretion of the Committee. The Committee, in its sole discretion, may define such terms and conditions with respect to the payment of earned Performance Awards as it may deem desirable. 12 13 8.02. TERMS OF PERFORMANCE AWARDS. (a) TERMINATION OF EMPLOYMENT. Unless otherwise provided below or in Section 8.03, in the case of a Participant's Termination of Employment prior to the end of an Award Period, the Participant will not have earned any Performance Awards. (b) RETIREMENT. If a Participant's Termination of Employment is because of Retirement prior to the end of an Award Period, the Participant will not be paid any Performance Awards, unless the Committee, in its sole and exclusive discretion, determines that an Award should be paid. In such a case, the Participant shall be entitled to receive a pro-rata portion of his or her Award as determined under Subsection (d). (c) DEATH OR DISABILITY. If a Participant's Termination of Employment is due to death or disability (as determined in the sole and exclusive discretion of the Committee) prior to the end of an Award Period, the Participant or the Participant's personal representative shall be entitled to receive a pro-rata share of his or her Award as determined under Subsection (d). (d) PRO-RATA PAYMENT. The amount of any payment made to a Participant whose employment is terminated by Retirement, death or disability (under circumstances described in Subsections (b) and (c)) will be the amount determined by multiplying the amount of the Performance Award which would have been earned, determined at the end of the Award Period, had such employment not been terminated, by a fraction, the numerator of which is the number of whole months such Participant was employed during the Award Period, and the denominator of which is the total number of months of the Award Period. Any such payment made to a Participant whose employment is terminated prior to the end of an Award Period under this Section 8.02 shall be made at the end of the respective Award Period, unless otherwise determined by the Committee in its sole discretion. Any partial payment previously made or credited to a deferred account for the benefit of a Participant as provided under Section 8.01(d) of the Plan shall be subtracted from the amount otherwise determined as payable as provided in this Section. (e) OTHER EVENTS. Notwithstanding anything to the contrary in this Article VIII, the Committee may, in its sole and exclusive discretion, determine to pay all or any portion of a Performance Award to a Participant who has terminated employment prior to the end of an Award Period under certain circumstances (including the death, disability or retirement of the Participant or a material change in circumstances arising after the Date of Grant) and subject to such terms and conditions as the Committee shall deem appropriate. 8.03. CHANGE IN CONTROL. Unless otherwise provided by the Committee in the applicable Award Agreement, in the event of a Change in Control, all Performance Awards for all Award Periods shall immediately become fully payable to all Participants and shall be paid to Participants in accordance with Section 8.02(d), within 30 days after such Change in Control. 13 14 ARTICLE IX OTHER STOCK-BASED AWARDS 9.01. GRANT OF OTHER STOCK-BASED AWARDS. Other stock-based awards, consisting of stock purchase rights (with or without loans to Participants by the Company containing such terms as the Committee shall determine), Awards of cash, Awards of Common Stock, or Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, may be granted either alone or in addition to or in conjunction with other Awards under the Plan. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be granted pursuant to such Awards, and all other conditions of the Awards. Any such Award shall be confirmed by an Award Agreement executed by the Committee and the Participant, which Award Agreement shall contain such provisions as the Committee determines to be necessary or appropriate to carry out the intent of this Plan with respect to such Award. 9.02. TERMS OF OTHER STOCK-BASED AWARDS. In addition to the terms and conditions specified in the Award Agreement, Awards made pursuant to this Article IX shall be subject to the following: (a) Any Common Stock subject to Awards made under this Article IX may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses; and (b) If specified by the Committee in the Award Agreement, the recipient of an Award under this Article IX shall be entitled to receive, currently or on a deferred basis, interest or dividends or dividend equivalents with respect to the Common Stock or other securities covered by the Award; and (c) The Award Agreement with respect to any Award shall contain provisions dealing with the disposition of such Award in the event of a Termination of Employment prior to the exercise, realization or payment of such Award, whether such termination occurs because of Retirement, disability, death or other reason, with such provisions to take account of the specific nature and purpose of the Award. 9.03. FOREIGN QUALIFIED AWARDS. Awards under the Plan may be granted to such employees of the Company and its Subsidiaries who are residing in foreign jurisdictions as the Committee in its sole discretion may determine from time to time. The Committee may adopt such supplements to the Plan as may be necessary or appropriate to comply with the applicable laws of such foreign jurisdictions and to afford Participants favorable treatment under such laws; provided, however, that no Award shall be granted under any such supplement with terms or conditions inconsistent with the provision set forth in the Plan. 14 15 ARTICLE X SHORT-TERM CASH INCENTIVE AWARDS 10.01. ELIGIBILITY. Executive officers of the Company who are from time to time determined by the Committee to be "covered employees" for purposes of Section 162(m) of the Code will be eligible to receive short-term cash incentive awards under this Article X. 10.02. AWARDS. (a) PERFORMANCE TARGETS. For each fiscal year of the Company after fiscal year 1999, the Committee shall establish objective performance targets based on specified levels of one or more of the Performance Goals. Such performance targets shall be established by the Committee on a timely basis to ensure that the targets are considered "preestablished" for purposes of Section 162(m) of the Code. (b) AMOUNTS OF AWARDS. In conjunction with the establishment of performance targets for a fiscal year, the Committee shall adopt an objective formula (on the basis of percentages of Participants' salaries, shares in a bonus pool or otherwise) for computing the respective amounts payable under the Plan to Participants if and to the extent that the performance targets are attained. Such formula shall comply with the requirements applicable to performance-based compensation plans under Section 162(m) of the Code and, to the extent based on percentages of a bonus pool, such percentages shall not exceed 100% in the aggregate. (c) PAYMENT OF AWARDS. Awards will be payable to Participants in cash each year upon prior written certification by the Committee of attainment of the specified performance targets for the preceding fiscal year. (d) NEGATIVE DISCRETION. Notwithstanding the attainment by the Company of the specified performance targets, the Committee shall have the discretion, which need not be exercised uniformly among the Participants, to reduce or eliminate the award that would be otherwise paid. (e) GUIDELINES. The Committee shall adopt from time to time written policies for its implementation of this Article X. Such guidelines shall reflect the intention of the Company that all payments hereunder qualify as performance-based compensation under Section 162(m) of the Code. (f) NON-EXCLUSIVE ARRANGEMENT. The adoption and operation of this Article X shall not preclude the Board or the Committee from approving other short-term incentive compensation arrangements for the benefit of individuals who are Participants hereunder as the Board or Committee, as the case may be, deems appropriate and in the best of the Company. 15 16 ARTICLE XI TERMS APPLICABLE GENERALLY TO AWARDS GRANTED UNDER THE PLAN 11.01. PLAN PROVISIONS CONTROL AWARD TERMS. Except as provided in Section 11.16, the terms of the Plan shall govern all Awards granted under the Plan, and in no event shall the Committee have the power to grant any Award under the Plan which is contrary to any of the provisions of the Plan. In the event any provision of any Award granted under the Plan shall conflict with any term in the Plan as constituted on the Date of Grant of such Award, the term in the Plan as constituted on the Date of Grant of such Award shall control. Except as provided in Section 11.03 and Section 11.07, the terms of any Award granted under the Plan may not be changed after the Date of Grant of such Award so as to materially decrease the value of the Award without the express written approval of the holder. 11.02. AWARD AGREEMENT. No person shall have any rights under any Award granted under the Plan unless and until the Company and the Participant to whom such Award shall have been granted shall have executed and delivered an Award Agreement or received any other Award acknowledgment authorized by the Committee expressly granting the Award to such person and containing provisions setting forth the terms of the Award. 11.03. MODIFICATION OF AWARD AFTER GRANT. No Award granted under the Plan to a Participant may be modified (unless such modification does not materially decrease the value of the Award) after the Date of Grant except by express written agreement between the Company and the Participant, provided that any such change (a) shall not be inconsistent with the terms of the Plan, and (b) shall be approved by the Committee. 11.04. LIMITATION ON TRANSFER. Except as provided in Section 7.01(c) in the case of Restricted Shares, a Participant's rights and interest under the Plan may not be assigned or transferred other than by will or the laws of descent and distribution, and during the lifetime of a Participant, only the Participant personally (or the Participant's personal representative) may exercise rights under the Plan. The Participant's Beneficiary may exercise the Participant's rights to the extent they are exercisable under the Plan following the death of the Participant. Notwithstanding the foregoing, to the extent permitted under Section 16(b) of the Exchange Act with respect to Participants subject to such Section, the Committee may grant Non-Qualified Stock Options that are transferable, without payment of consideration, to immediate family members of the Participant or to trusts or partnerships for such family members, and the Committee may also amend outstanding Non-Qualified Stock Options to provide for such transferability. 11.05. TAXES. The Company shall be entitled, if the Committee deems it necessary or desirable, to withhold (or secure payment from the Participant in lieu of withholding) the amount of any withholding or other tax required by law to be withheld or paid by the Company with respect to any amount payable and/or shares issuable under such Participant's Award, or with respect to any income recognized upon a disqualifying disposition of shares received pursuant to the exercise of an Incentive Stock Option, and the Company may defer payment or issuance of 16 17 the cash or shares upon exercise or vesting of an Award unless indemnified to its satisfaction against any liability for any such tax. The amount of such withholding or tax payment shall be determined by the Committee and shall be payable by the Participant at such time as the Committee determines in accordance with the following rules: (a) The Participant shall have the right to elect to meet his or her withholding requirement (i) by having withheld from such Award at the appropriate time that number of shares of Common Stock, rounded up to the next whole share, whose Fair Market Value is equal to the amount of withholding taxes due, (ii) by direct payment to the Company in cash of the amount of any taxes required to be withheld with respect to such Award or (iii) by a combination of shares and cash. (b) The Committee shall have the discretion as to any Award, to cause the Company to pay to tax authorities for the benefit of any Participant, or to reimburse such Participant for the individual taxes which are due on the grant, exercise or vesting of any share Award, or the lapse of any restriction on any share Award (whether by reason of a Participant's filing of an election under Section 83(b) of the Code or otherwise), including, but not limited to, Federal income tax, state income tax, local income tax and excise tax under Section 4999 of the Code, as well as for any such taxes as may be imposed upon such tax payment or reimbursement. (c) In the case of Participants who are subject to Section 16 of the Exchange Act, the Committee may impose such limitations and restrictions as it deems necessary or appropriate with respect to the delivery or withholding of shares of Common Stock to meet tax withholding obligations. 11.06. SURRENDER OF AWARDS. Any Award granted under the Plan may be surrendered to the Company for cancellation on such terms as the Committee and the holder approve. 11.07. ADJUSTMENTS TO REFLECT CAPITAL CHANGES. (a) RECAPITALIZATION. The number and kind of shares subject to outstanding Awards, the Purchase Price or Exercise Price for such shares, the number and kind of shares available for Awards subsequently granted under the Plan and the maximum number of shares in respect of which Awards can be made to any Participant in any calendar year shall be appropriately adjusted to reflect any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other change in capitalization with a similar substantive effect upon the Plan or the Awards granted under the Plan. The Committee shall have the power and sole discretion to determine the amount of the adjustment to be made in each case. (b) MERGER. After any Merger in which the Company is the surviving corporation, each Participant shall, at no additional cost, be entitled upon any exercise of all Options or receipt of other Award to receive (subject to any required action by shareholders), in lieu of the number of shares of Common Stock receivable or exercisable pursuant to such Award, the number and class of shares or other securities to which such Participant would have been 17 18 entitled pursuant to the terms of the Merger if, at the time of the Merger, such Participant had been the holder of record of a number of shares equal to the number of shares receivable or exercisable pursuant to such Award. Comparable rights shall accrue to each Participant in the event of successive Mergers of the character described above. In the event of a Merger in which the Company is not the surviving corporation, the surviving, continuing, successor, or purchasing corporation, as the case may be (the "Acquiring Corporation"), shall either assume the Company's rights and obligations under outstanding Award Agreements or substitute awards in respect of the Acquiring Corporation's stock for such outstanding Awards. In the event the Acquiring Corporation fails to assume or substitute for such outstanding Awards, the Board shall provide that any unexercisable and/or unvested portion of the outstanding Awards shall be immediately exercisable and vested as of a date prior to such Merger, as the Board so determines. The exercise and/or vesting of any Award that was permissible solely by reason of this Section 11.07(b) shall be conditioned upon the consummation of the Merger. Any Options which are neither assumed by the Acquiring Corporation nor exercised as of the date of the Merger shall terminate effective as of the effective date of the Merger. (c) OPTIONS TO PURCHASE SHARES OR STOCK OF ACQUIRED COMPANIES. After any Merger in which the Company or a Subsidiary shall be a surviving corporation, the Committee may grant substituted options under the provisions of the Plan, pursuant to Section 424 of the Code, replacing old options granted under a plan of another party to the Merger whose shares or stock subject to the old options may no longer be issued following the Merger. The foregoing adjustments and manner of application of the foregoing provisions shall be determined by the Committee in its sole discretion. Any such adjustments may provide for the elimination of any fractional shares which might otherwise become subject to any Options. 11.08. NO RIGHT TO EMPLOYMENT. No employee or other person shall have any claim of right to be granted an Award under this Plan. Neither the Plan nor any action taken hereunder shall be construed as giving any employee any right to be retained in the employ of the Company or any of its Subsidiaries. 11.09. AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Payments received by a Participant pursuant to the provisions of the Plan shall not be included in the determination of benefits under any pension, group insurance or other benefit plan applicable to the Participant which is maintained by the Company or any of its Subsidiaries, except as may be provided under the terms of such plans or determined by the Board. 11.10. GOVERNING LAW. All determinations made and actions taken pursuant to the Plan shall be governed by the laws of the State of Delaware and construed in accordance therewith. 11.11. NO STRICT CONSTRUCTION. No rule of strict construction shall be implied against the Company, the Committee, or any other person in the interpretation of any of the terms of the Plan, any Award granted under the Plan or any rule or procedure established by the Committee. 18 19 11.12. COMPLIANCE WITH RULE 16b-3. It is intended that, unless the Committee determines otherwise, Awards under the Plan be eligible for exemption under Rule 16b-3. The Board is authorized to amend the Plan and to make any such modifications to Award Agreements to comply with Rule 16b-3, as it may be amended from time to time, and to make any other such amendments or modifications as it deems necessary or appropriate to better accomplish the purposes of the Plan in light of any amendments made to Rule 16b-3. 11.13. CAPTIONS. The captions (i.e., all Section headings) used in the Plan are for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit, characterize or affect in any way any provisions of the Plan, and all provisions of the Plan shall be construed as if no captions have been used in the Plan. 11.14. SEVERABILITY. Whenever possible, each provision in the Plan and every Award at any time granted under the Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Plan or any Award at any time granted under the Plan shall be held to be prohibited by or invalid under applicable law, then (a) such provision shall be deemed amended to accomplish the objectives of the provision as originally written to the fullest extent permitted by law and (b) all other provisions of the Plan and every other Award at any time granted under the Plan shall remain in full force and effect. 11.15. AMENDMENT AND TERMINATION. (a) AMENDMENT. The Board shall have complete power and authority to amend the Plan at any time; provided, however, that the Board shall not, without the requisite affirmative approval of shareholders of the Company, make any amendment which requires shareholder approval under the Code or under any other applicable law or rule of any stock exchange which lists Common Stock or Company Voting Securities. No termination or amendment of the Plan may, without the consent of the Participant to whom any Award shall theretofore have been granted under the Plan, adversely affect the right of such individual under such Award. (b) TERMINATION. The Board shall have the right and the power to terminate the Plan at any time. No Award shall be granted under the Plan after the termination of the Plan, but the termination of the Plan shall not have any other effect and any Award outstanding at the time of the termination of the Plan may be exercised after termination of the Plan at any time prior to the expiration date of such Award to the same extent such Award would have been exercisable had the Plan not terminated. 11.16. SPECIAL PROVISION RELATING TO CERTAIN STOCK ISSUANCES. Notwithstanding anything to the contrary contained in this Plan, shares of Common Stock authorized to be issued under this Plan may be issued to pay awards originally made under and satisfy options originally granted under the Allegheny Teledyne Incorporated 1996 Incentive Plan or any other stock option plan adopted by ATI (an "ATI Plan"), as provided in the Employee Benefits Agreement dated as of November 29, 1999, between the Company and 19 20 Allegheny Teledyne Incorporated. All shares of Common Stock issued in payment of an award or grant shall be governed exclusively by the terms of such award or grant under the applicable ATI Plan, and any terms of this Plan inconsistent therewith shall be inapplicable to such shares. 20 EX-10.6 7 1999 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN 1 Exhibit 10.6 TELEDYNE TECHNOLOGIES INCORPORATED 1999 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN (As of November 12, 1999) ARTICLE I. GENERAL 1.1. Purpose. It is the purpose of the Plan to promote the interests of the Company and its stockholders by attracting, retaining and providing an incentive to Non-Employee Directors through the acquisition of a proprietary interest in the Company and an increased personal interest in its performance. This purpose will be served by providing an opportunity for Non-Employee Directors to elect to receive Stock Options and/or Common Stock in lieu of Director's Retainer Fee Payments, the automatic payment of a portion of the Director's Retainer Fee Payment in the form of Common Stock to those Non-Employee Directors not electing to receive such portion in the form of Stock Options and/or Common Stock and granting each Non-Employee Director annually an option covering 2,000 shares of Common Stock. 1.2. Adoption and Term. The Plan has been approved by the Board and shall become effective as of the Effective Date (as hereinafter defined). The Plan shall terminate without further action upon the earlier of (a) the tenth anniversary of the effective date, and (b) the first date upon which no shares of Common Stock remain available for issuance under the Plan. 1.3. Definitions. As used herein the following terms have the following meanings: (a) "Annual Options" means the Stock Options issuable under Section 4.4(a) of the Plan. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended. References to a section of the Code shall include that section and any comparable section or sections of any future legislation that amends, supplements or supersedes said section. (d) "Common Stock" means the common stock, par value $0.01 per share, of the Company. (e) "Company" means Teledyne Technologies Incorporated, a Delaware corporation, and any successor thereto. (f) "Compensation Year" means each calendar year or portion thereof during which the Plan is in effect. 2 (g) "Director" means a member of the Board. (h) "Director's Retainer Fee Payment" means the dollar value of that portion of the annual retainer fee payable by the Company to a Non-Employee Director for serving as a Director and for serving as the chair of the Board or any committee of the Board as of a particular Payment Date, as established by the Board and in effect from time to time. (i) "Effective Date" means the effective date of the distribution by Allegheny Teledyne Incorporated to its stockholders of the Common Stock. (j) "Employee" means any employee of the Company or an affiliate. (k) "Exchange Act" means the Securities Exchange Act of 1934, as amended. References to a section of the Exchange Act or rule promulgated thereunder shall include that section or rule and any comparable section(s) or rule(s) of any future legislation or rulemaking that amends, supplements or supersedes said section or rule. (l) "Fair Market Value" means, as of any given date, the average of the high and low trading prices of the Common Stock on such date as reported on the New York Stock Exchange, or, if the Common Stock is not then traded on the New York Stock Exchange, on such other national securities exchange on which the Common Stock is admitted to trade, or, if none, on the National Association of Securities Dealers Automated Quotation System if the Common Stock is admitted for quotation thereon; provided, however, if there were no sales reported as of such date, Fair Market Value shall be computed as of the last date preceding such date on which a sale was reported; provided, further, that if any such exchange or quotation system is closed on any day on which Fair Market Value is to be determined, Fair Market Value shall be determined as of the first date immediately preceding such date on which such exchange or quotation system was open for trading. (m) "Non-Employee Director" means a Director who is not an Employee. (n) "Non-Employee Director Notice" means a written notice delivered in accordance with Section 4.2. (o) "Payment Date" means the first business day of January and July of each Compensation Year on which the Director's Retainer Fee Payment for serving as a Director is paid by the Company and the first business day of January of each Compensation Year on which the Director's Retainer Fee Payment for serving as the chair of the Board or any committee of the Board is paid by the Company. 2 3 (p) "Plan" means this Teledyne Technologies Incorporated 1999 Non-Employee Director Stock Compensation Plan, as it may hereafter be amended from time to time. (q) "Retainer Fee Options" means the Stock Options issuable under Section 4.3 of the Plan. (r) "Stock Options" means options to purchase shares of Common Stock of the Company issuable hereunder. 1.4. Shares Subject to the Plan. The shares to be offered under the Plan shall consist of the Company's authorized but unissued Common Stock or treasury shares and, subject to adjustment as provided in Section 5.1 hereof, the aggregate amount of such stock which may be issued or subject to Stock Options issued hereunder shall not exceed 200,000 shares. If any Stock Option granted under the Plan shall expire or terminate for any reason, without having been exercised or vested in full, as the case may be, the unpurchased shares subject thereto shall again be available for issuance under the Plan. Stock Options granted under the Plan will not be qualified as "incentive stock options" under Section 422 of the Code. ARTICLE II. ADMINISTRATION 2.1. The Board. The Plan shall be administered by the Board. Subject to the provisions of the Plan, the Board shall interpret the Plan, promulgate, amend, and rescind rules and regulations relating to the Plan and make all other determinations necessary or advisable for its administration. Interpretation and construction of any provision of the Plan by the Board shall be final and conclusive. Notwithstanding the foregoing, the Board shall have or exercise no discretion with respect to the selection of persons eligible to participate hereunder, the determination of the number of shares of Common Stock or number of Stock Options issuable to any person or any other aspect of Plan administration with respect to which such discretion is not permitted in order for grants of shares of Common Stock and Stock Options to be exempt under Rule 16b-3 promulgated under the Exchange Act. 3 4 ARTICLE III. PARTICIPATION 3.1. Participants. Each Non-Employee Director shall participate in the Plan on the terms and conditions hereinafter set forth. ARTICLE IV. PAYMENT OF DIRECTOR'S FEES 4.1. General. The Director's Retainer Fee Payment shall be paid to each Non-Employee Director, as of each Payment Date, as set forth in the Plan and subject to such other payment policies and procedures as the Board may establish from time to time. If, for the applicable Compensation Year, a Non-Employee Director has not made an election pursuant to Section 4.2 to receive Stock Options or Common Stock in lieu of at least twenty-five percent (25%) of the Director's Retainer Fee Payment, then seventy-five percent (75%) of such Director's Retainer Fee Payment shall be paid in cash and twenty-five percent (25%) of the Director's Retainer Fee Payment shall be paid in the form of Common Stock. 4.2. Non-Employee Director Notice. A Non-Employee Director may file with the Secretary of the Company or other designee of the Board of Directors prior to the commencement of a Compensation Year a Non-Employee Director Notice making an election to receive either twenty-five percent (25%), fifty percent (50%), seventy-five percent (75%) or one hundred (100%) of his or her Director's Retainer Fee Payment in the form of Stock Options and/or Common Stock with the balance to be paid in cash. If a Director does not timely file an election, he or she shall receive twenty-five percent (25%) of the Director's Retainer Fee Payment in Common Stock and seventy-five percent (75%) in cash. Notwithstanding the foregoing, elections to receive Common Stock or Stock Options may be made at any time during a Compensation Year so long as such elections are made irrevocably in advance of receiving the corresponding Common Stock or Stock Options and approved in accordance with Rule 16b-3 under the Exchange Act. 4.3 Conversion of Retainer Fee Payment to Shares. Each Non-Employee Director who pursuant to Section 4.1 or 4.2 is to receive Common Stock as all or part of his or her Director's Retainer Fee Payment with respect to a Compensation Year and who is elected or reelected or is a continuing Non-Employee Director as of the date of commencement of such Compensation Year as of the applicable Payment Date, shall receive as of each Payment Date during such Compensation Year a number of shares of Common Stock equal to the quotient obtained by dividing (i) the amount of the Director's Retainer Fee Payment to be paid in the form of Common Stock by (ii) the Fair Market Value of the Common Stock per share on such Payment Date. Cash shall be paid in lieu of any fractional shares. 4 5 4.4 Stock Options (a) Annual Option Grants. An Annual Option covering 2,000 shares of Common Stock shall be granted to each Non-Employee Director on the Effective Date, subject to approval by the stockholders of the Company. Thereafter, an Annual Option covering 2,000 shares of Common Stock will be granted to each Non-Employee Director automatically at the conclusion of each Company Annual Meeting. If, after the Effective Date, a director first becomes a Non-Employee Director on a date other than an Annual Meeting date, an Annual Option covering 2,000 shares of Common Stock will be granted to such director on his or her first date of Board service. The purchase price of the Common Stock covered by each Annual Option will be the Fair Market Value of a share of Common Stock as of the date of grant of the Annual Option. (b) Retainer Fees Options. Retainer Fee Options will be granted on the Payment Dates of each Compensation Year. The number of shares of Common Stock to be subject to a Retainer Fee Option shall be equal to the nearest number of whole shares determined by multiplying the Fair Market Value of a share of Company Common Stock on the date of grant by 0.3333 and dividing the result into the applicable portion of the Director's Retainer Fee Payment elected to be received as Stock Options by the Non-Employee Director for the Compensation Year. The purchase price of each share covered by each Retainer Fee Option shall be equal to the Fair Market Value of a share of Common Stock on the date of grant of the Retainer Fee Option multiplied by 0.6666. (c) Duration and Exercise of Stock Options. Subject to Section 4.4(f) below, Annual Options and Retainer Fee Options become exercisable on the first anniversary of the date on which they were granted. Stock Options shall terminate upon the expiration of ten years from the date of grant. No Stock Option may be exercised for a fraction of a share and no partial exercise of any Stock Option may be for less than one hundred (100) shares. (d) Purchase Price. The purchase price for the shares shall be paid in full at the time of exercise (i) in cash or by check payable to the order of the Company, (ii) by delivery of shares of Common Stock of the Company already owned by, and in the possession of Stock Option holder, or (iii) by delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the Stock Option price (in which case the exercise will be effective upon receipt of such proceeds by the Company). Shares of Common Stock used to satisfy the exercise price of a Stock Option shall be valued at their Fair Market Value on the date of exercise. (e) Transferability. Stock Options granted hereunder shall not be transferable, other than by will or the laws of descent and distribution, and shall be exercisable during a Stock Option holder's lifetime only by the Stock Option holder or by his or her guardian or legal representative, except to the extent transfer is permitted by Rule 16b-3 promulgated under the Exchange Act and approved by the Board or its designee. Subject 5 6 to the foregoing, Stock Options shall not be assigned, pledged or otherwise encumbered by the holder thereof, either voluntarily or by operation of law. (f) Termination of Directorship. If a director ceases to be a director of the Company for any reason other than death or removal by the Board of Directors or the stockholders, the director's Stock Options shall continue to vest as provided in Section 4.4 (c) above and the right of the Optionee to exercise such Stock Options shall continue until the options expire in accordance with Section 4.4(c). In no event may a Stock Option be exercised after the expiration of the period specified in Section 4.4(c). In the event of death of a director or former director who holds an outstanding Stock Option, all unvested Stock Options shall automatically become fully vested as of the date of death and the right of his or her estate or beneficiary to exercise the Stock Options shall terminate upon the expiration of twelve months from the date of death, but in no event may a Stock Option be exercised after the expiration of the Option Period. In the event of removal of a director from the Board of Directors, all rights of such director in a Stock Option that the director was entitled to exercise on the date of removal shall terminate on the 30th day (or, if such day is not a business day, on the next business day) after the date of removal, but in no event may such Stock Options be exercised after the expiration of the Option Period. ARTICLE V. MISCELLANEOUS 5.1. Adjustments Upon Changes in Common Stock. The number and kind of shares available for issuance under the Plan, and the number and kind of shares subject to, and the exercise price of, outstanding Stock Options, shall be appropriately adjusted to prevent dilution or enlargement of rights by reason of any stock dividend, stock split, combination or exchange of shares, recapitalization, merger, consolidation or other change in capitalization with a similar substantive effect upon the Plan or the shares issuable under the Plan. 5.2. Amendment and Termination. The Board shall have complete power and authority to amend the Plan at any time; provided, however, that the Board shall not, without the affirmative approval of the shareholders of the Company, make any amendment which requires shareholder approval under any applicable law or regulation of a national stock exchange on which the Common Stock is traded. The Board shall have the right and the power to terminate the Plan at any time. No amendment or termination of the Plan may, without the consent of the Non-Employee Director, adversely affect the right of such Non-Employee Director with respect to any Stock Options then outstanding. 5.3. Requirements of Law. The issuance of Common Stock under the Plan shall be subject to all applicable laws, rules and regulations and to such approval by governmental agencies as may be required. 5.4. No Guarantee of Membership. Nothing in the Plan shall confer upon a 6 7 Non-Employee Director any right to continue to serve as a Director. 5.5 Construction. Words of any gender used in the Plan shall be construed to include any other gender, unless the context requires otherwise. 5.6 Governing Law. This Plan shall be governed by, construed and interpreted in accordance with the laws of the State of Delaware, without regard to its principles of conflict of law, as to all matters, including matters of validity, construction, effect, performance and remedies. 7 EX-10.8 8 EMPLOYMENT AGREEMENT 1 Exhibit 10.8 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Employment Agreement") is made and entered into as of the 21st day of December, 1999 by and between Teledyne Technologies Incorporated, a Delaware corporation with its executive offices at 2049 Century Park East, 15th Floor, Los Angeles, California 90067-3101(the "Company"), and Dr. Robert Mehrabian, an individual residing at 5388 Baseline Avenue, Santa Ynez, California 93460 (the "Executive"). RECITALS WHEREAS, the Company hired the Executive and the Executive agreed to serve as the Company's President and Chief Executive Officer ("CEO"); and WHEREAS, the Personnel and Compensation Committee of the Board of Directors (the "Committee") authorized the Company to enter into and the Company and the Executive entered into a Change in Control Severance Agreement dated as of December 21, 1999 (the "CIC Agreement"); and WHEREAS, the CIC Agreement provides for payment of severance benefits if the Executive's employment is terminated under circumstances described in the CIC Agreement; and WHEREAS, the Company wishes to supplement the CIC Agreement with respect to the Executive by specifying in this Employment Agreement the Executive's titles and the types and rates of compensation to which he is entitled during his employment with the Company. NOW, THEREFORE, in consideration of the respective covenants and agreements hereinafter set forth, and intending to be legally bound, the parties hereto agree as follows: 1. Term of Agreement. This Employment Agreement shall be effective as of the date first above written and shall continue in effect until December 31, 2000, unless extended as described in the next sentence. Effective as of November 1, 2000 and, if previously extended, each November 1st thereafter, the term of this Employment Agreement shall be extended for one additional year unless one party shall give written notice to the other on or before October 31, 2000 or, if previously extended, the then next October 31st that the term will not be thereafter extended. If such notice is given by either party, the Executive may retire on the first December 31st following receipt of such notice. 2. Employment Agreement to Supplement the CIC Agreement. This Employment Agreement shall supplement the CIC Agreement and the terms and conditions of this Employment Agreement are not intended to alter or vary the terms and conditions of the CIC Agreement. The intention of this Employment Agreement is to memorialize certain terms and conditions of the employment of the Executive which are particular to him and not specified in the CIC Agreement. Except as specifically set forth herein, initially capitalized terms shall have the meaning ascribed thereto under the CIC Agreement which is incorporated herein and made a part hereof as if set forth at length. 2 3. Position and Duties. The Company shall employ Executive and the Executive shall serve as the President and CEO of the Company and shall have primary responsibility to manage and direct the day-to-day business of the Company including the generation of income and control of expenses. Subject to the approval of the Board of Directors of the Company, the Executive may serve as a director of charitable organizations and/or for profit corporations which do not compete with the Company or any of its subsidiaries and affiliates. The Company acknowledges that Executive serves as a director of Mellon Financial Corporation and PPG Industries, Inc. as of the date hereof and agrees that the Executive may continue to serve as a director of those corporations. 4. Compensation. The Executive shall receive the following items of compensation at the rates thereof set forth below. a. Base Salary. During the Term, the Company shall pay Executive a base salary at the annualized rate of Five Hundred Thousand ($500,000) Dollars ("Base Salary"). Base Salary shall be paid periodically in accordance with normal Company payroll practices applicable to executive employees. b. Participation in Compensation Plans and Programs. In accordance with the respective terms and conditions of the respective plans and programs, the Executive shall be entitled to participate in the following compensation plans and programs: 1. AIP. In the AIP at an annual opportunity at 80% of Base Salary if targets are reached at 100%, or such greater percentage if provided in the AIP for any year. 2. PSP. In the PSP at an opportunity equal to 150% of Base Salary if targets are reached at 100%, or such greater percentage if provided in the PSP for any measurement period. 3. SARP. In the SARP at the level approved by the Committee. In the event Allegheny Technologies Incorporated alters to the benefit of participants the terms and conditions of its SARP, to the extent those alterations are not made applicable to the Executive by the terms of those alterations, the Company shall make arrangements so that the Executive is made whole for the benefits of such alterations. 4. Stock Options. In addition to the initial award of 300,000 stock options made as of November 29, 1999, eligibility to receive future grants of options in a number determined by the Personnel and Compensation Committee of the Board of Directors, each subject to the terms and conditions of the Stock Option Incentive Plan. 5. Employee Benefits. The Executive shall participate in each qualified, non-qualified and supplemental employee benefit, executive benefit, fringe benefit and perquisite plan, policy or arrangement of the Company applicable to executive level employees, including, but not limited to, expense reimbursement policies, a country club and a city club membership, - 2 - 3 and use of an automobile, in each case, in accordance with the terms and conditions thereof (including tax equalization payments to the extent provided with respect to such plans by Allegheny Teledyne Incorporated on or prior to November 29, 1999) as in effect from time to time. Nothing in this Employment Agreement shall be construed as preventing the amendment or termination of any such plan, policy or arrangement by the Company so long as such amendment or termination affects all executive employees of the Company then participating. 6. Non-Qualified Pension Arrangement. In addition to the employee benefits described in Section 5, the Company will pay to the Executive (or his designee if amounts are payable after the death of the Executive) following his Retirement (as defined below), as payments supplemental to any accrued pension under the Company's qualified pension plan, an annual amount, paid in equal monthly installments, equal to 50% of his Base Compensation at the rate in effect on the date of his Retirement. Such annual amount shall be paid each year for a number of years following his Retirement equal to the number of whole and fractional years of service, not in excess of ten (10), the Executive has rendered to the Company (including the period from August, 1997 through and including November, 1999 rendered as service to the Company's predecessor, Allegheny Teledyne Incorporated). For purposes of Section 6 of this Employment Agreement and without effect upon whether the Executive is deemed to be retired under the CIC Agreement, the Executive will be deemed to have a Retirement upon his separation from service with the Company for any reason other than for Cause. 7. Binding Agreement. The Company will use its best efforts to require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company) to expressly assume and agree to perform this Employment Agreement and the CIC Agreement in the same manner and to the same extent that the Company would be required to perform them if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be deemed to be a termination without Cause for purposes of this Employment Agreement and the CIC Agreement. For purposes of implementing the foregoing, the date on which any such succession becomes effective shall be the Date of Termination. 8. Notices. Any notice required or permitted under this Agreement shall be given in writing and shall be deemed to have been effectively made or given if personally delivered at the address first above written or such other address as may be given by one party to the other. 9. Withholding. The Company shall be entitled to withhold, or cause to be withheld, from payment any amount payable under this Employment Agreement of any payroll and withholding taxes required by law, as determined by the Company in good faith. 10. Governing Law. This Agreement shall be construed, interpreted, and governed in accordance with the laws of the State of California without reference to rules relating to conflict of law. 11. Headings. The headings of sections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. - 3 - 4 12. Counterparts. This Agreement may be executed by either of the parties hereto in counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of the day and year first above written. EXECUTIVE By: /s/ Robert Mehrabian ------------------------- Robert Mehrabian TELEDYNE TECHNOLOGIES INCORPORATED By: /s/ Thomas A. Corcoran ------------------------- Name: Thomas A. Corcoran Title: Chairman - 4 - EX-10.9 9 FORM OF CHANGE OF CONTROL SEVERENCE AGREEMENT 1 Exhibit 10.9 FORM OF CHANGE OF CONTROL SEVERANCE AGREEMENT [This is the form of Change of Control Agreement that has been entered into with the following executive officers and nine other key employees.
Name of Executive Officer Title Date of Agreement Section - ------------------------- ----- ----------------- ------- 1(m) level ---------- Robert Mehrabian President and December 21, 1999 three times Chief Executive Officer Stefan C. Riesenfeld Executive Vice President December 21, 1999 three times and Chief Financial Officer John T. Kuelbs Senior Vice President, December 21, 1999 three times General Counsel and Secretary Nicholas L. Blauwiekel Senior Vice President of March 9, 2000 three times Human Resources Dale A. Schnittjer Controller December 21, 1999 two times]
THIS AGREEMENT ("Agreement") is made and entered into as of this ___ day of ________________ (the "Effective Date"), by and among Teledyne Technologies Incorporated, a Delaware corporation (hereinafter referred to as the "Company"), and ____________________, an individual residing at the address set forth on the signature page of this Agreement (the "Executive"). W I T N E S S E T H: WHEREAS, the Board of Directors of the Company (the "Board") has approved the Company entering into this agreement providing for certain severance protection for the Executive following a Change in Control (as hereinafter defined); WHEREAS, the Board of the Company believes that, should the possibility of a Change in Control arise, it is imperative that the Company be able to receive and rely upon the Executive's advice, if requested, as to the best interests of the Company and its stockholders without concern that he or she might be distracted by the personal uncertainties and risks created by the possibility of a Change in Control; and WHEREAS, in addition to the Executive's regular duties, he or she may be called upon to assist in the assessment of a possible Change in Control, advise management and the Board of the Company as to whether such Change in Control would be in the best interests of the Company and its stockholders, and to take such other actions as the Board determines to be appropriate; NOW, THEREFORE, to assure the Company that it will have the continued dedication of the Executive and the availability of his or her advice and counsel notwithstanding the possibility, threat, or occurrence of a Change in Control, and to induce the Executive to remain in the employ of the Company, and for good and valuable consideration and the mutual 2 covenants set forth herein, the Company and the Executive, intending to be legally bound, agree as follows: Article I. Definitions Whenever used in this Agreement, the following terms shall have the meanings set forth below when the initial letter of the word or abbreviation is capitalized: (a) "Accrued Obligations" means, as of the Effective Date of Termination, the sum of (i) the Executive's Base Compensation through and including the Effective Date of Termination, (ii) the amount of any bonus, incentive compensation, deferred compensation and other cash compensation accrued by the Executive as of the Effective Date of Termination under the terms of any such arrangement and not then paid, including, but not limited to, AIP accrued but not paid for a year ending prior to the year in which occur, the Effective Date of Termination, (iii) unused vacation time monetized at the then rate of Base Compensation, (iv) expense reimbursements or other cash entitlements, (v) amounts accrued under any qualified, non-qualified or supplemental employee benefit plan, payroll practice, policy or perquisite. (b) "AIP" means the Company's Annual Incentive Plan as it exists on the date hereof and as it may be amended, supplemented or modified from time to time or any successor plan. (c) "Base Compensation" shall mean (1) the highest annual rate of base salary of the Executive within the time period consisting of one year prior to the date of a Change in Control and the Effective Date of Termination and (2) the AIP bonus target for performance in the calendar year that a Change in Control occurs or the actual AIP payment for the year immediately preceding the Change in Control, whichever is higher. (d) "Beneficiary" shall mean the persons or entities designated or deemed designated by the Executive pursuant to Section 7.2 herein. (e) "Board" shall mean the Board of Directors of the Company. (f) For purposes hereof, the term "Cause" shall mean the Executive's conviction of a felony, breach of a fiduciary duty involving personal profit to the Executive or intentional failure to perform stated duties reasonably associated with the Executive's position; provided, however, an intentional failure to perform stated duties shall not constitute Cause unless and until the Board provides the Executive with written notice setting forth the specific duties that, in the Board's view, the Executive has failed to perform and the Executive is provided a period of thirty (30) days to cure such specific failure(s) to the reasonable satisfaction of the Board. (g) For the purposes of this Agreement, "Change in Control" shall mean, and shall be deemed to have occurred upon the occurrence of, any of the following events: (1) The Company acquires actual knowledge that (x) any Person, other than the Company, a subsidiary, any employee benefit plan(s) sponsored by the Company or a -2- 3 subsidiary, has acquired the Beneficial Ownership, directly or indirectly, of securities of the Company entitling such Person to 20% or more of the Voting Power of the Company, or (y) any Person or Persons agree to act together for the purpose of acquiring, holding, voting or disposing of securities of the Company or to act in concert or otherwise with the purpose or effect of changing or influencing control of the Company, or in connection with or as Beneficial Ownership, directly or indirectly, of securities of the Company entitling such Person(s) to 20% or more of the Voting Power of the Company; or (2) The completion of a Tender Offer is made to acquire securities of the Company entitling the holders thereof to 20% or more of the Voting Power of the Company; or (3) The occurrence of a successful solicitation subject to Rule 14a-11 under the Securities Exchange Act of 1934 as amended (or any successor Rule) (the "1934 Act") relating to the election or removal of 50% or more of the members of the Board or any class of the Board shall be made by any person other than the Company or less than 51% of the members of the Board (excluding vacant seats) shall be Continuing Directors; or (4) The occurrence of a merger, consolidation, share exchange, division or sale or other disposition of assets of the Company as a result of which the stockholders of the Company immediately prior to such transaction shall not hold, directly or indirectly, immediately following such transaction a majority of the Voting Power of (i) in the case of a merger or consolidation, the surviving or resulting corporation, (ii) in the case of a share exchange, the acquiring corporation or (iii) in the case of a division or a sale or other disposition of assets, each surviving, resulting or acquiring corporation which, immediately following the transaction, holds more than 20% of the consolidated assets of the Company immediately prior to the transaction; provided, however that (A) if securities beneficially owned by Executive are included in determining the Beneficial Ownership of a Person referred to in Section (i), (B) if Executive is named pursuant to Item 2 of the Schedule 14D-1 (or any similar successor filing requirement) required to be filed by the bidder making a Tender Offer referred to in Section (ii) or (C) if Executive is a "participant" as defined in Instruction 3 to Item 4 of Schedule 14A under the 1934 Act in a solicitation referred to in Section (iii) then no Change of Control with respect to Executive shall be deemed to have occurred by reason of any such event. For the purposes of Section 1(g), the following terms shall have the following meanings: (i) The term "Person" shall be used as that term is used in Section 13(d) and 14(d) of the 1934 Act as in effect on the Effective Date hereof. -3- 4 (ii) "Beneficial Ownership" shall be determined as provided in Rule 13d-3 under the 1934 Act as in effect on the Effective Date hereof. (iii) A specified percentage of "Voting Power" of a company shall mean such number of the Voting Shares as shall enable the holders thereof to cast such percentage of all the votes which could be cast in an annual election of directors (without consideration of the rights of any class of stock, other than the common stock of the company, to elect directors by a separate class vote); and "Voting Shares" shall mean all securities of a company entitling the holders thereof to vote in an annual election of directors (without consideration of the rights of any class of stock, other than the common stock of the company, to elect directors by a separate class vote). (iv) "Tender Offer" shall mean a tender offer or exchange offer to acquire securities of the Company (other than such an offer made by the Company or any subsidiary), whether or not such offer is approved or opposed by the Board. (v) "Continuing Directors" shall mean a director of the Company who either (x) was a director of the Company on the date hereof or (y) is an individual whose election, or nomination for election, as a director of the Company was approved by a vote of at least two-thirds of the directors then still in office who were Continuing Directors (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of directors of the Company which would be subject to Rule 14a-11 under the 1934 Act, or any successor Rule). (h) "Code" shall mean the Internal Revenue Code of 1986, as amended. (i) "Effective Date of Termination" shall mean the date on which the Executive's employment terminates in a circumstance in which Section 2.1 provides for Severance Benefits (as defined in Section 2.1). (j) "Good Reason" shall mean, without the Executive's express written consent, the occurrence of any one or more of the following: (1) A material diminution of the Executive's authorities, duties, responsibilities, or status (including offices, titles, or reporting relationships) as an employee of the Company from those in effect as of one hundred eighty (180) days prior to the Change in Control or as of the date of execution of this Agreement if a Change in Control occurs within one hundred eighty (180) days of the execution of this Agreement (the "Reference Date") or the assignment to the Executive of duties or responsibilities inconsistent with his position as of the Reference Date, other than an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of notice thereof given by the Executive, and other than any such alteration which is consented to by the Executive in writing; -4- 5 (2) The Company's requiring the Executive to be based at a location in excess of thirty-five (35) miles from the location of the Executive's principal job location or office immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with the Executive's present business obligations; (3) A reduction in the Executive's annual salary or any material reduction by the Company of the Executive's other compensation or benefits from that in effect on the Reference Date or on the date of the Change in Control, whichever is greater; (4) The failure of the Company to obtain an agreement satisfactory to the Executive from any successor to the Company to assume and agree to perform the Company's obligations under this Agreement, as contemplated in Article 5 herein; and (5) Any purported termination by the Company of the Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 2.6 below, and for purposes of this Agreement, no such purported termination shall be effective. The Executive's right to terminate employment for Good Reason shall not be affected by the Executive's (A) incapacity due to physical or mental illness or (B) continued employment following the occurrence of any event constituting Good Reason herein. (k) "PSP" means the Company's Performance Share Program as it exists on the date hereof and as it may be, amended, supplemented, or modified from time to time or any successor plan. (l) "SARP" means the Company's Stock Acquisition and Retention Program as it exists on the date hereof and as it may be, amended, supplemented or modified from time to time or any successor plan. (m) "Severance Compensation" means [three/two times] Base Compensation. Article II. Severance Benefits 2.1 Right to Severance Benefits. The Executive shall be entitled to receive from the Company severance benefits described in Section 2.2 below (collectively, the "Severance Benefits") if a Change in Control shall occur and within twenty-four (24) months after the Change in Control either of the following shall occur: (a) an involuntary termination of the Executive's employment with the Company without Cause; or (b) a voluntary termination of the Executive's employment with the Company for Good Reason. -5- 6 2.2 Severance Benefits. In the event that the Executive becomes entitled to receive Severance Benefits, as provided in Section 2.1, the Company shall provide the Executive with total Severance Benefits as follows (but subject to Sections 2.5 and 2.6): (a) The Executive shall receive a single lump sum cash Severance Compensation payment within thirty (30) days of the Effective Date of Termination. (b) The Executive shall receive the Accrued Obligations. (c) The Executive shall receive as AIP for the year in which occurs the Effective Date of Termination a lump sum cash payment paid within thirty (30) days of the Effective Date of Termination equal to that which would have been paid if corporate and personal performance had achieved 120% of target objectives established for the annual period in which the Change in Control occurred, multiplied by a fraction, the numerator of which is the number of days elapsed in the current fiscal period to the Effective Date of Termination, and the denominator of which is 365. (d) The Executive shall receive a lump sum payment paid within thirty (30) days of the Effective Date of Termination (in accordance with the then current PSP; provided that any portion of the PSP award which would have been paid in stock under the PSP is to be paid in cash based on the current market value of the stock) which payment will be determined based upon actual performance for the number of full years of completed then current PSP measurement period(s) at the time of the Effective Date of Termination and for years not yet completed in the then current PSP measurement period(s) Executive will be assumed to have met all applicable goals at 120% of performance. (e) All welfare benefits, including medical, dental, vision, life and disability benefits pursuant to plans under which the Executive and/or the Executive's family is eligible to receive benefits and/or coverage shall be continued for a period of thirty-six (36) months after the Effective Date of Termination. Such benefits shall be provided to the Executive at no less than the same coverage level as in effect as of the date of the Change in Control. The Company shall pay the full cost of such continued benefits, except that the Executive shall bear any portion of such cost as was required to be borne by key executives of the Company generally at the date of the Change in Control. Notwithstanding the foregoing, the benefits described in this Section 2.2(e) may be discontinued prior to the end of the periods provided in this Section to the extent, but only to the extent, that the Executive receives substantially similar benefits from a subsequent employer. In the event any insurance carrier shall refuse to provide coverage to a former employee, the Company shall secure comparable -6- 7 coverage or may self-insure the benefits if it pays such benefits together with a payment to the Executive equal to the federal income tax consequences of payments to a former highly compensated employee from a discriminatory self-insured plan. (f) The Executive shall be entitled to reimbursement for actual payments made for professional outplacement services or job search not to exceed $25,000 in the aggregate. (g) In determining the Executive's pension benefit following entitlement to a Severance Benefit, the Executive shall be deemed to have satisfied the age and service requirements for full vesting under the Company's qualified (within applicable legal parameters), non-qualified and supplemental pension plans as of the Effective Date of Termination such that the Executive shall be entitled to receive the full accrued benefit under all such plans in effect as of the date of the Change in Control, without any actuarial reduction for early payment. 2.3. Stock Options. All Company stock options previously granted to the Executive shall be fully vested and exercisable immediately upon a Change in Control. Such options shall be exercisable for the remainder of the term established by the Company's stock option plan as if the options had vested in accordance with the normal vesting schedule and the Executive had remained an employee of the Company. Company stock acquired pursuant to any such exercise may be sold by the Executive free of any Company restrictions, whatsoever (other than those imposed by federal and state securities laws). 2.4. SARP. In the event of entitlement to a Severance Benefit, all forfeiture restrictions on all Company stock purchased by or granted to the Executive under the Company's SARP shall lapse and all shares of restricted stock shall vest. All of the foregoing shares may be sold by the Executive free of any Company restrictions whatsoever (other than those imposed by federal and state securities laws). Any promissory notes of Executive under the SARP shall be paid off by the Executive within ninety (90) days after Executive's receipt of the Severance Benefits. 2.5. Termination for any Other Reason. If the Executive's employment with the Company is terminated under any circumstances other than those set forth in Section 2.1, including without limitation by reason of retirement, death, disability, discharge for Cause or resignation without Good Reason, or any termination, for any reason, that occurs prior to a Change in Control (other than as provided below) or after twenty-four (24) months following a Change in Control, the Executive shall have no right to receive the Severance Benefits under this Agreement or to receive any payments in respect of this Agreement. In such event Executive's benefits, if any, in respect of such termination shall be determined in accordance with the Company's retirement, survivor's benefits, insurance, and other applicable plans, programs, policies and practices then in effect. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment with the Company is terminated at any time from three (3) to -7- 8 eight (8) months prior to the date on which a Change in Control occurs either (i) by the Company other than for Cause or (ii) by the Executive for Good Reason, and it is reasonably demonstrated that termination of employment (a) was at the request of an unrelated third party who has taken steps reasonably calculated to effect a Change in Control, or (b) otherwise arose in connection with or in anticipation of the Change in Control, then for all purposes of this Agreement the termination shall be deemed to have occurred as if immediately following a Change in Control for Good Reason and the Executive shall be entitled to Severance Benefits as provided in Section 2.2 hereof. Notwithstanding anything in this Agreement to the contrary, if the Executive's employment with the Company is terminated at any time within three (3) months prior to the date on which a Change in Control occurs either (i) by the Company other than for Cause or (ii) by the Executive for Good Reason, such termination shall conclusively be deemed to have occurred as if immediately following a Change in Control for Good Reason and the Executive shall be entitled to Severance Benefits as provided in Section 2.2. hereof. 2.6. Notice of Termination. Any termination by the Company for Cause or by the Executive for Good Reason shall be communicated by Notice of Termination to the other party. For purposes of this Agreement, a "Notice of Termination" shall mean a written notice which shall indicate the specific termination provision in this Agreement relied upon, and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated. 2.7. Withholding of Taxes. The Company shall withhold from any amounts payable under this Agreement all Federal, state, local, or other taxes that are legally required to be withheld. 2.8. Certain Additional Payments by the Company. (a) Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any economic benefit or payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up-Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 2.8(c), all determinations required to be made under this Section 2.8, including whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be made by the -8- 9 Company's regular outside independent public accounting firm (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the Effective Date of Termination, if applicable, or such earlier time as is requested by the Company . The initial Gross-Up Payment, if any, as determined pursuant to this Section 2.8(b), shall be paid to the Executive within five (5) days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive with an opinion that he or she has substantial authority not to report any Excise Tax or excess parachute payments on his or her federal income tax return. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 2.8(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the later of either (i) the date the Executive has actual knowledge of such claim, or (ii) ten (10) days after the Internal Revenue Service issues to the Executive either a written report proposing imposition of the Excise Tax or a statutory notice of deficiency with respect thereto, and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, (iv) permit the Company to participate in any -9- 10 proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limitation of the foregoing provisions of this Section 2.8(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to request or accede to a request for an extension of the statute of limitations with respect only to the tax claimed, or pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further that any extension of the statute of limitations requested or acceded to by the Executive at the Company's request and relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 2.8(c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 2.8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 2.8(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such -10- 11 determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. (e) In the event that any state or municipality or subdivision thereof shall subject any Payment to any special tax which shall be in addition to the generally applicable income tax imposed by such state, municipality, or subdivision with respect to receipt of such Payment, the foregoing provisions of this Section 2.8 shall apply, mutatis mutandis, with respect to such special tax. Article III. The Company's Payment Obligation 3.1 Payment Obligations Absolute. Except as otherwise provided in the last sentence of Section 2.2(e), the Company's obligation to make the payments and the arrangements provided for in this Agreement shall be absolute and unconditional, and shall not be affected by any circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or other right that the Company may have against the Executive or any other party. All amounts payable by the Company under this Agreement shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company shall not seek to recover all or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any reasons whatsoever. Notwithstanding any other provisions of this Agreement to the contrary, the Company shall have no obligation to make any payment to the Executive hereunder to the extent, but only to the extent, that such payment is prohibited by the terms of any final order of a Federal or state court or regulatory agency of competent jurisdiction; provided, however, that such an order shall not affect, impair, or invalidate any provision of this Agreement not expressly subject to such order. 3.2 Contractual Rights to Payments and Benefits. This Agreement establishes and vests in the Executive a contractual right to the payments and benefits to which he or she is entitled hereunder. Nothing herein contained shall require or be deemed to require, or prohibit or be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other assets, in trust or otherwise, to provide for any payments to be made or required hereunder. The Executive shall not be obligated to seek other employment in mitigation of the amounts payable or arrangements made under any provision of this Agreement, and the obtaining of any such other employment shall in no event effect any reduction of the Company's obligations to make the payments and arrangements required to be made under this Agreement, except to the extent provided in the last sentence of Section 2.2(e). Article IV . Enforcement and Legal Remedies 4.1. Consent to Jurisdiction. Each of the parties hereto irrevocably consents to personal jurisdiction in any action brought in connection with this Agreement in the United States District Court for the Central District of California or any California court of competent jurisdiction. The parties also consent to venue in the above forums and to the convenience of the -11- 12 above forums. Any suit brought to enforce the provisions of this Agreement must be brought in the aforementioned forums. 4.2 Cost of Enforcement. In the event that it shall be necessary or desirable for the Executive to retain legal counsel in connection with the enforcement of any or all of his or her rights to Severance Benefits under Section 2.2 of this Agreement, and provided that the Executive substantially prevails in the enforcement of such rights, the Company, as applicable, shall pay (or the Executive shall be entitled to recover from the Company, as the case may be) the Executive's reasonable attorneys' fees, costs and expenses in connection with the enforcement of his or her rights. Article V. Binding Effect; Successors The rights of the parties hereunder shall inure to the benefit of their respective successors, assigns, nominees, or other legal representatives. The Company shall require any successor (whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of property or stock, liquidation, or otherwise) to all or a significant portion of the assets of the Company, as the case may be, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company, as the case may be, would be required to perform if no such succession had taken place. Regardless of whether such agreement is executed, this Agreement shall be binding upon any successor in accordance with the operation of law and such successor shall be deemed the "Company", as the case may be, for purposes of this Agreement. Article VI. Term of Agreement The term of this Agreement shall commence on the Effective Date and shall continue in effect for three (3) full years (the "Term") unless further extended as provided in this Article. The Term of this Agreement shall be automatically and without action by either party extended for one additional calendar month on the last business day of each calendar month so that at any given time there are no fewer than 35 nor more than 36 months remaining unless one party gives written notice to the other that it no longer wishes to extend the Term of this Agreement, after which written notice, the Term shall not be further extended except as may be provided in the following sentence. However, in the event a Change in Control occurs during the Term, this Agreement will remain in effect for the longer of: (i) thirty-six (36) months beyond the month in which such Change in Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled and all benefits required hereunder have been paid to the Executive or other party entitled thereto. Article VII. Miscellaneous 7.1 Employment Status. Neither this Agreement nor any provision hereof shall be deemed to create or confer upon the Executive any right to be retained in the employ of the Company or any subsidiary or other affiliate thereof. -12- 13 7.2 Beneficiaries. The Executive may designate one or more persons or entities as the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under this Agreement. Such designation must be in the form of a signed writing acceptable to the Board of Directors of the Company. The Executive may make or change such designation at any time. 7.3 Entire Agreement. This Agreement contains the entire understanding of the Company and the Executive with respect to the subject matter hereof. Any payments actually made under this Agreement in the event of the Executive's termination of employment shall be in lieu of any severance benefits payable under any severance plan, program, or policy of the Company to which the Executive might otherwise be entitled. 7.4 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular, and the singular shall include the plural. 7.5 Notices. All notices, requests, demands, and other communications hereunder must be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the continental United States by first-class certified mail, return receipt requested, postage prepaid, to the other party, addressed as follows: (a) If to the Company: Teledyne Technologies Incorporated 2049 Century Park East 15th Floor Los Angeles, California 90067 Attn: Senior Vice President, General Counsel and Secretary (b) If to Executive, to him or her at the address set forth at the end of this Agreement. Addresses may be changed by written notice sent to the other party at the last recorded address of that party. 7.6 Execution in Counterparts. The parties hereto in counterparts may execute this Agreement, each of which shall be deemed to be original, but all such counterparts shall constitute one and the same instrument, and all signatures need not appear on any one counterpart. 7.7. Severability. In the event any provision of this Agreement shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. Further, the captions of this Agreement are for convenience of reference and not part of the provisions hereof and shall have no force and effect. -13- 14 7.8. Modification. No provision of this Agreement may be modified, waived, or discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the Executive and on behalf of the Company. 7.9 Applicable Law. To the extent not preempted by the laws of the United States, the laws of the State of California, other than the conflict of law provisions thereof, shall be the controlling laws in all matters relating to this Agreement. -14- 15 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. TELEDYNE TECHNOLOGIES INCORPORATED By:____________________________________ Name:__________________________________ Title:_________________________________ EXECUTIVE _______________________________________ Name: Address: -15-
EX-10.10 10 EXECUTIVE DEFERRED COMPENSATION PLAN 1 Exhibit 10.10 TELEDYNE TECHNOLOGIES INCORPORATED EXECUTIVE DEFERRED COMPENSATION PLAN as effective November 29, 1999 2 TABLE OF CONTENTS 1 PURPOSE...................................................1 2 DEFINITIONS...............................................1 3 PARTICIPATION.............................................4 4 DEFERRAL ELECTIONS........................................4 5 PARTICIPANT ACCOUNTS......................................6 6 VESTING...................................................7 7 DISTRIBUTIONS.............................................7 8 PRE-DISTRIBUTION DEATH BENEFIT............................9 9 ADMINISTRATION...........................................10 10 MISCELLANEOUS............................................12 3 1 PURPOSE. The Teledyne Technologies Incorporated Executive Deferred Compensation Plan (the "Plan") is established initially to provide benefits to employees of Teledyne Technologies Incorporated who were employees of Allegheny Teledyne Incorporated or its subsidiaries and participated in the Allegheny Teledyne Incorporated Executive Deferred Compensation Plan. This Plan accepted the benefit payment obligations of the Allegheny Teledyne Incorporated Executive Deferred Compensation Plan (the Prior Plan as defined below) with respect to former participants in the ATI Plan who became employees of Teledyne Technologies Incorporated or any of its subsidiaries on or within sixty days of the Effective Date. Following the Effective Date, Eligible Employees may participate under the terms and conditions of this Plan with respect to their service to and compensation from Teledyne Technologies Incorporated. The Teledyne Technologies Incorporated Executive Deferred Compensation Plan is an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and 29 CFR 2520.104-23. 2 DEFINITIONS. 2.1 "Account" shall mean the bookkeeping account maintained by the Committee for each Participant that is credited with (1) the portion of the Participant's Salary that he elects to defer (including transfers to this Plan from the Allegheny Teledyne Incorporated Executive Deferred Compensation Plan), (2) the portion of the Participant's Bonus that he elects to defer, (3) portions of the Participant's account balance under the Prior Plan and (4) earnings on such amounts. 2.2 "Beneficiary" shall mean the Participant's spouse or, if the Participant has no spouse or the spouse consents in writing in the presence of a notary public, the person or persons, trustee, or other legal entity or entities last designated by the Participant on a form substantially as set forth in Exhibit "A" attached hereto to receive the benefits specified hereunder in the event of the Participant's death. If the Participant has not designated a beneficiary or if no person designated as a beneficiary survives the Participant, the payment of the Participant's benefits under this Plan following his death shall be made (a) to the Participant's spouse, if living, (b) if his spouse is not then living, to his then living issue by right of representation, (c) if neither his spouse nor his issue are then living, to his then living parents, or (d) if none of the above are then living, to his estate. Notwithstanding the foregoing, the Beneficiary of an Insurable Participant under the Plan must be the same as the beneficiary designated with respect to the benefit provided under Article 8 hereof if the Insurable Participant dies prior to his Payment Eligibility Date. 2.3 "Bonus" shall mean the award or awards payable under the Teledyne Technologies Incorporated management bonus program (or the comparable annual incentive plan of a subsidiary, if applicable, and any predecessor or successor program to any such annual incentive plan). - 1 - 4 2.4 "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.5 "Committee" shall mean the administrative committee appointed pursuant to Section 9.1 of the Plan. 2.6 "Company" shall mean Teledyne Technologies Incorporated, a Delaware corporation, and any corporation which is a subsidiary of the corporation (within the meaning of Code Section 424(f)) involving Teledyne Technologies Incorporated, unless the context requires otherwise. 2.7 "Compensation" shall mean the Salary and Bonus paid by the Company to a Participant. 2.8 "Director of Human Resources" shall mean such person as the Committee may from time to time designate and, in the absence of such designation, the Chief Financial Officer of Teledyne Technologies Incorporated. 2.09 "Effective Date" shall mean November 29, 1999. 2.10 "Eligible Employee" shall mean: 2.10.1 For a Plan Year other than the short Plan Year covering the period from the Effective Date to December 31, 1999, each employee of the Company who: (a) as of December 1 of the preceding Plan Year holds the title of president of an operating company; or (b) received Compensation during the preceding Plan Year at least equal to the amount specified in Section 414(q)(1)(B) of the Code, as such amount is adjusted for such calendar year by the Secretary of the Treasury for increases in the cost of living. 2.10.2 For the short Plan Year of the Plan covering the period from the Effective Date to December 31, 1999, each employee of the Company who: (a) as of the Effective Date holds the title of president of an operating company; or (b) for employees of Teledyne Technologies Incorporated who were participants in the Allegheny Teledyne Incorporated Executive Deferred Compensation Plan prior to the Effective Date, received (from the Company and Allegheny Teledyne Incorporated or an affiliate) or is expected to receive Compensation during the applicable calendar year at least equal to the amount specified in Section 414(q)(1)(B) of the Code, as such amount is adjusted for such calendar year by the Secretary of the Treasury for increases in the cost of living. 2.10.3 For any Plan Year beginning on or after the Effective Date which includes an employee's date of hire, each employee of the Company who: (a) as of the employee's date of hire holds the title of president of an operating company; or (b) receives Compensation during such Plan Year at least equal to the amount specified in Section 4.14(q)(1)(B) of the Code. For purposes of this Section 2.10.3 only, - 2 - 5 Compensation shall include Salary that would be paid if the employee's Salary were paid for the full Plan Year. 2.11 "Fund" or "Funds" shall mean one or more of the mutual funds, investment portfolios or contracts selected by the Committee pursuant to Section 4.2.2. 2.12 "Initial Election Period" shall mean the first thirty days of the first Plan Year during which an employee of the Company is an Eligible Employee or, in the case of an employee who is an Eligible Employee on his date of hire after the Effective Date, the first thirty days after such date of hire; provided, however, for the short Plan Year beginning on November 29, 1999 and ending on December 31, 1999, the Committee may keep in effect any election made for the 1999 Plan Year of the Prior Plan. 2.13 "Insurable Participant" shall mean a Participant who satisfies underwriting standards for the issuance of life insurance determined by the insurance company selected by the Company to provide the pre-distribution death benefit described in Article 8. 2.14 "Interest Rate" shall mean, for each Fund, the net rate, expressed as a percent, of gain or loss on the assets of such Fund for the applicable period. 2.15 "Participant" shall mean any Eligible Employee who, prior to the Effective Date, has not announced his intention to retire and who (a) elects to defer Compensation in accordance with Section 4.1, or (b) has an account balance under the Prior Plan. 2.16 "Payment Eligibility Date" shall mean the earlier of (i) the date selected by an Eligible Employee on his Deferred Election form, but no such date shall be before the end of the Plan Year which is three calendar years after the end of the Plan Year for which such election is made or (ii) the first day of the month following the end of the calendar quarter in which a Participant terminates employment or dies. A Participant receiving benefits under the Company's short-term disability plan or on an approved leave of absence shall not be deemed to have terminated employment for purposes of the Plan. 2.17 "Plan" shall mean the Teledyne Technologies Incorporated Executive Deferred Compensation Plan as set forth herein, or as amended from time to time. This Plan is the successor plan to the Allegheny Teledyne Incorporated Executive Deferred Compensation Plan (the Prior Plan as defined below) with respect to Participants in the Prior Plan who, as of the Effective Date, became employees of the Company in connection with the spin off to stockholders of Allegheny Teledyne Incorporated of the stock of the Company on November 29, 1999. The Prior Plan was adopted Allegheny Teledyne Incorporated in 1996 and the Prior Plan assumed the payment obligations of the Teledyne, Inc. Executive Deferred Compensation Plan with regard to then Participants in such plan. As of the Effective Date, the Company assumed all payment obligations of benefits accrued by employees of the Company on November 29, 1999, whether such benefits were accrued under the Prior Plan or its predecessor. - 3 - 6 2.18 "Plan Year" shall mean the calendar year, except that the initial Plan Year shall be the period from the Effective Date through December 31, 1999. 2.19 "Prior Plan" shall mean, with respect to employees of the Company as of November 29, 1999 who participated in the Prior Plan on or before November 29, 1999, the Allegheny Teledyne Incorporated Executive Deferred Compensation Plan, and its predecessor plan, the Teledyne, Inc. Executive Deferred Compensation Plan. 2.20 "Retirement" shall mean the date as of which a Participant commences to receive a benefit under a pension plan maintained by the Company, the date as of which a Participant commences to receive disability benefits under the Company's long-term disability plan or, in the case of a Participant who is not entitled to benefits under the Company's long-term disability plan, the date the Committee determines is the first date the Participant satisfies the definition of disability set forth in that plan. 2.21 "Salary" shall mean the base rate of pay that an employee is entitled to receive for services rendered to the Company. 3 PARTICIPATION. An Eligible Employee who, prior to the Effective Date, has not announced his intention to retire shall become a Participant in the Plan on (a) the first day of the first pay period for which he elects to defer a portion of his Compensation in accordance with Section 4.1, or (b) the Effective Date if he has an account balance under the Prior Plan. 4 DEFERRAL ELECTIONS. 4.1 Elections to Defer Compensation. 4.1.1 General Rule. An Eligible Employee may elect to defer, in increments of 1% and subject to the limitation set forth herein, up to 50% of his Salary and, separately, up to 100% of his Bonus for the calendar year following the calendar year in which a written election, on a form approved by the Director of Human Resources, to defer Salary and/or Bonus is delivered to the Director of Human Resources. Each election to defer Salary and/or Bonus shall be effective for only the next succeeding calendar, shall expire on the last day of the calendar year next following its delivery and shall specify the Participant's elections as to distribution time and form from among those then permitted under the Plan. No election may be for less than 5% of the Salary or Bonus payment, respectively, and no election shall exceed an amount which would prevent the Eligible Employee from making required or elected contributions under employee benefit plans or to have required federal, state and local income or payroll tax payments made or such other amounts as determined appropriate by the Committee. An election to defer Salary or Bonus with respect to services rendered during a calendar year must be filed with the Director of Human Resources on or before December 1 of the preceding calendar year. 4.1.2 Committee Discretion. Notwithstanding Section 4.1.1 and in addition to any other power or discretion granted to the Committee, the Committee may, in its sole discretion and on a case-by-case basis, permit one or more Eligible Employees to elect to defer - 4 - 7 more than 50% of his Salary. In the event that the Committee permits one or more Eligible Employees to defer more than 50% of his Salary, the amount permitted to be deferred shall not exceed the amount necessary to permit the Eligible Employee to make contributions, as elected by or required of the Eligible Employee, under employee benefit plans, and to have withheld applicable federal, state and local income or payroll tax and such other amounts as determined appropriate by the Committee. 4.1.2 Initial Election Period. Each Eligible Employee may elect to defer Compensation by filing with the Director of Human Resources an election, on a form provided by the Committee, no later than the last day of his Initial Election Period. An election to defer Compensation during the Initial Election Period shall be effective with respect to the Participant's Salary earned during the first pay period beginning after the election and with respect to the portion of the Participant's Bonus attributable to the portion of the calendar year following the election. For the short Plan Year beginning November 29, 1999 and ending on December 31, 1999, the Committee may keep in effect any election made by a Participant under the Prior Plan for the 1999 Plan Year of the Prior Plan. 4.1.3 Elections other than Elections during the Initial Election Period. Subject to the limitations of Section 4.1.2 above, any Eligible Employee who fails to elect to defer Compensation during his Initial Election Period may subsequently elect to defer Compensation, and any Eligible Employee who has terminated a prior Salary deferral election may elect to again defer Salary, by filing with the Director of Human Resources an election, on a form provided by the Committee, to defer Compensation as described in Section 4.1.1 above. An election to defer Salary payable during a calendar year must be filed with the Director of Human Resources on or before December 1 of the preceding calendar year. An election to defer Bonus payable with respect to services rendered during a calendar year must be filed with the Director of Human Resources on or before December 1 of the preceding calendar year. 4.1.4 Duration of Salary Deferral Election. Any Salary deferral election made under Section 4.1.2 or Section 4.1.3 shall remain in effect, notwithstanding any change in the Participant's Salary, until changed or terminated in accordance with the terms of this Section 4.1.2.4; provided, however, that such election shall terminate for any Plan Year for which the Participant is not an Eligible Employee. A Participant may increase, decrease or terminate his Salary deferral election with respect to Salary earned during a calendar year by filing a new election, in accordance with the terms of this Section 4.1, with the Director of Human Resources on or before December 1 of the preceding calendar year. 4.1.5 Duration of Bonus Deferral Election. Any Bonus deferral election made under Section 4.1.2 or Section 4.1.3 shall be irrevocable and shall apply only to the Bonus payable with respect to services performed during the calendar year for which the election is made. For each subsequent calendar year, an Eligible Employee must make a new election, subject to the limitations set forth in this Section 4.1, to defer a percentage of his Bonus. Such election shall be on forms provided by the Committee and shall be filed with the Director of Human Resources on or before December 1 of the calendar year preceding the calendar year in which the services that are to result in the Bonus are performed. - 5 - 8 4.1.6 Extension of Election Deadline. Notwithstanding the foregoing provisions of this Section 4.1, the Committee may extend the deadline for filing elections set forth in Sections 4.1.3, 4.1.4 and 4.1.5 from December 1 of a particular calendar year as the Committee shall determine. The Committee shall give notice of such extension to all Eligible Employees. 4.2 Investment Elections. 4.2.1 Investment Options. The Committee shall select from time to time the types of mutual funds, investment portfolios underlying universal life products or contracts in which Participants' Accounts shall be deemed to be invested. At the time an Eligible Employee first becomes a Participant, the Participant shall file with the Director of Human Resources a form provided by the Committee designating which of such types of mutual funds, investment portfolios or contracts the Participant's Account shall be deemed to be invested in for purposes of determining the amount of earnings to be credited to such Account. In making the designation pursuant to this Section 4.2.1, the Participant may specify that all or any portion of his Account, designated in whole percentages, be deemed to be invested in one or more of the types of mutual funds, investment portfolios or contracts selected by the Committee. A Participant may change monthly the designation made under this Section 4.2.1 by filing with the Director of Human Resources an election, on a form provided by the Committee, at any time during a month, with such change to be effective as of the first day of the month immediately succeeding the date on which such form is filed. If a Participant fails to elect a type of fund under this Section 4.2.1, any prior election shall remain in effect or, if there is no prior election of types of funds, any deferral election made by the Participant shall be void. If a Participant who receives allocations to his Account only pursuant to Sections 5.3 and 5.4 fails to elect a type of fund under this Section 4.2.1, he shall be deemed to have elected the fund or contract designated by the Committee as the default fund. 4.2.2 Committee Selection of Funds. Although the Participant may designate the type of mutual funds, investment portfolios or contracts pursuant to Section 4.2.1, the Committee shall select from time to time, in its sole discretion, a commercially available fund, portfolio or contract of each of the types selected pursuant to Section 4.2.1 to be the Funds. The Interest Rate of each such Fund shall be used to determine the amount of earnings to be credited to Participants' Accounts under Section 5.4. 5 PARTICIPANT ACCOUNTS. The Committee shall establish and maintain an Account for each Participant under the Plan. Each Participant's Account shall be further divided into separate subaccounts ("subaccounts"), each of which corresponds to a mutual fund, investment portfolio or contract elected by the Participant in accordance with Section 4.2. A Participant's Account shall be credited as follows: 5.1 Salary Credits. As of the last day of each month, the Committee shall credit the subaccounts of the Participant's Account with an amount equal to Salary deferred by the Participant during each pay period ending in that month in accordance with the Participant's election under Section 4.2; that is, the portion of the Participant's deferred Salary that the - 6 - 9 Participant has elected to be deemed to be invested in a certain type of Fund shall be credited to the subaccount corresponding to that Fund. 5.2 Bonus Credits. As of the last day of the month in which the Bonus is payable, the Committee shall credit the subaccounts of the Participant's Account with an amount equal to the portion of the Bonus deferred by the Participant in accordance with the Participant's election under Section 4.2; that is, the portion of the Participant's deferred Bonus that the Participant has elected to be deemed to be invested in a particular type of Fund shall be credited to the subaccount corresponding to that Fund. 5.3 Prior Plan Credits. As of the Effective Date, the Committee shall credit the subaccounts of the Participant's Account with an amount equal to the Participant's account balance under the Prior Plan as of the Effective Date. 5.4 Earnings Credits. As of the last day of each month in which any amount remains credited to a Participant's Account, each subaccount of a Participant's Account shall be credited with earnings in an amount equal to that determined by multiplying the balance credited to such subaccount as of the last day of the preceding month by the Interest Rate for that month for the corresponding Fund selected by the Company pursuant to Section 4.2.2. 6 VESTING. A Participant's Account shall be 100 percent vested at all times. 7 DISTRIBUTIONS. 7.1 Amount and Time of Distribution. 7.1.1 Payment as of Payment Eligibility Date. Each Participant (or, in the case of his death, his Beneficiary) shall be entitled to receive a distribution of benefits under this Plan as soon as practicable following his Payment Eligibility Date. The amount payable to a Participant shall be the amount credited to the Participant's Account as of his Payment Eligibility Date. 7.1.2 Payment Prior to Payment Eligibility Date. A Participant may elect by filing with the Director of Human Resources a form substantially as set forth in Exhibit "B" attached hereto to receive an amount equal to ninety percent of his Account balance at any time prior to his Payment Eligibility Date. If the Participant makes an election described in this Section 7.1.2: the balance of the Participant's Account not distributed to the Participant shall be forfeited to the Company; the amount to which he is entitled under this Section 7.1.2 shall be distributed to the Participant in a single lump sum within thirty days following such election; the Participant shall be prohibited from participating in the Plan for the balance of the Plan Year in which this distribution is made and the following Plan Year; and any elections previously made pursuant to Article 4 of this Plan shall cease to be effective. - 7 - 10 7.2 Form of Distribution. 7.2.1 Pre-Retirement Distributions. If a Participant's Payment Eligibility Date occurs prior to the date of his Retirement, the Participant's Account shall be paid to such Participant in the form of payment elected by the Participant from among the forms available under Section 7.2.3 or, if no election is made on a timely basis, in a single lump sum. 7.2.2 Post-Retirement Distributions. If a Participant's Payment Eligibility Date occurs on or after the date of his Retirement, the Participant's Account shall be paid to such Participant or, in the event of the Participant's death on or after his Payment Eligibility Date, his Beneficiary in the form of sixty quarterly installments. Such installment payments shall commence on the Participant's Payment Eligibility Date or as soon thereafter as is practicable and shall continue on the first day of each of the 59 calendar quarters thereafter. 7.2.3 Election of Optional Form of Distributions. Notwithstanding the provisions of Section 7.2.2, a Participant whose Payment Eligibility Date occurs on or after the date of his Retirement may elect to receive distribution of his Account balance in a single lump sum, twenty quarterly installments, or forty quarterly installments provided that at least one year prior to his Payment Eligibility Date, the Director of Human Resources receives from the Participant a notice, in substantially the form of Exhibit "C" attached hereto, that the Participant elects to receive payment in one of such optional forms. Any such payment shall be made or commence to be made as of the Participant's Payment Eligibility Date. Any election made pursuant to this Section 7.2.3 may be revoked by filing notice of such revocation with the Director of Human Resources on or before the date which is one year prior to the Participant's Payment Eligibility Date. 7.2.4 Method for Calculating Installments. If a Participant or Beneficiary receives payment of his Account balance in installments pursuant to Section 7.2.2 or 7.2.3, the amount of each quarterly installment payable during the Plan Year which includes the Participant's Payment Eligibility Date shall equal the Participant's Account balance on the Payment Eligibility Date divided by the total number of installments the Participant or Beneficiary is scheduled to receive. The amount of each quarterly installment payable during each succeeding Plan Year, other than the last Plan Year in which the Participant or Beneficiary receives installment payments under the Plan, shall equal the Participant's Account balance on September 30 of the preceding Plan Year divided by the number of installments remaining to be paid after the last day of such preceding Plan Year. The amount of each quarterly installment payable during the last Plan Year in which the Participant or Beneficiary receives installment payments under the Plan shall equal the Participant's Account balance on the last day of the second preceding calendar quarter divided by the number of installments remaining to be paid after the last day of the preceding calendar quarter, except that the final quarterly installment shall be equal to the remaining balance in the Participant's Account. 7.2.5 Small Account Balances. Notwithstanding any other provision of this Section 7.2, if a Participant's Account balance on his Payment Eligibility Date is $30,000 or less, such Account balance shall be paid in a single lump sum. - 8 - 11 8 PRE-DISTRIBUTION DEATH BENEFIT. 8.1 Amount of Benefit. The Company shall own and maintain one or more life insurance policies on the life of each Insurable Participant (collectively, the "Policy") each with a death benefit no less than the death benefit payable under this Section 8.1. Until an employee of the Company (other than a Participant who has already been determined not to be an Insurable Participant) completes an application for the Policy, any deferral elections made by the employee pursuant to Article 4 hereof shall be void. If an Insurable Participant shall die at least sixty days following the first day of the month in which allocations pursuant to Article 5 of the Plan are first made to his Account and prior to his Payment Eligibility Date, his Beneficiary shall receive directly from the insurance company issuing the Policy in a single lump sum an amount equal the lesser of (1) or (2): (1) the greatest of (i) the amount of insurance coverage in effect on December 31, 1998, if applicable, (ii) the Participant's Account balance as of a relevant time or (iii) $1,000,000; or (2) the greater of: (i) ten times the amounts allocated to the Insurable Participant's Account pursuant to Sections 5.1 and/or 5.2 during the first twelve months in which the Insurable Participant receives allocations to his Account; or (ii) two times the Insurable Participant's Account balance as of his date of death if the Insurable Participant has not attained age 56 at the date of death or, if the Insurable Participant is age 56 or older at death, 1.5 times the Insurable Participant's Account balance as of his date of death. 8.2 Other Rules. 8.2.1 Reduction of Account Balance. Notwithstanding anything contained herein to the contrary, any benefits otherwise payable with respect to an Insurable Participant under this Plan shall be reduced by the value of benefits received by the Insurable Participant's Beneficiary under the Policy. 8.2.2 Death on or After Payment Eligibility Date. If an Insurable Participant shall die on or after his Payment Eligibility Date, his Beneficiary shall receive no benefits under the Policy and any death benefits thereunder shall be paid to the Company. 8.2.3 Effect of Account Distribution Prior to Payment Eligibility Date. If an Insurable Participant receives a distribution pursuant to Section 7.1.2, for purposes of Section 8.1.1, the first twelve months in which he receives allocations to his Account shall be deemed to be the first Plan Year after such distribution in which he receives allocations under Section 5.1 or 5.2 and, for purposes of Section 8.1.2, the Insurable Participant's Account shall include only amounts allocated to the Insurable Participant's Account following such distribution and prior to his date of death. - 9 - 12 8.2.4 Death Prior to Eligibility for Pre-Distribution Death Benefit. If a Participant should die before completing the sixty-day eligibility period for the pre-distribution death benefit set forth in Section 8.1, his Beneficiary shall receive only the balance in the Participant's Account as of the Participant's Payment Eligibility Date. 8.2.5 Failure to Remain Insurable. Notwithstanding the foregoing provisions of this Article 8, if a Participant satisfies the definition of an Insurable Participant (as set forth in Section 2.14) at the time he becomes a Participant, but fails to satisfy such definition thereafter, the pre-distribution death benefit payable to the Participant's Beneficiary shall equal the lesser of: (1) the pre-distribution death benefit determined under the foregoing provisions of this Article 8; or (2) the death benefit under the Policy payable to the Participant's Beneficiary at the time the Participant fails to satisfy the definition of an Insurable Participant. 9 ADMINISTRATION. 9.1 Committee Action. The Plan shall be administered by the Committee, consisting of at least three members, appointed by and holding office at the pleasure of the Chief Financial Officer of Teledyne Technologies Incorporated. The Committee shall act at meetings by an affirmative vote of a majority of the members of the Committee. Any action permitted to be taken at a meeting may be taken without a meeting if a written consent to the action is signed by all members of the Committee and such written consent is filed with the minutes of the proceedings of the Committee. A member of the Committee shall not vote or act upon any matter which relates solely to himself as a Participant. The Chairman or any other member or members of the Committee designated by the Chairman may execute any certificate or other written direction on behalf of the Committee. 9.2 Powers and Duties of the Committee. The Committee, on behalf of the Participants and their Beneficiaries, shall enforce the Plan in accordance with its terms, shall be charged with the general administration of the Plan, and shall have all powers necessary to accomplish its purposes, including, but not by way of limitation, the following: o To determine all questions relating to the eligibility of employees to participate; o To construe and interpret the terms and provisions of this Plan; o To compute and certify to the amount and kind of benefits payable to Participants and their Beneficiaries; - 10 - 13 o To maintain all records that may be necessary for the administration of the Plan; o To provide for the disclosure of all information and the filing or provision of all reports and statements to Participants, Beneficiaries or governmental agencies as shall be required by law; o To make and publish such rules for the regulation of the Plan and procedures for the administration of the Plan as are not inconsistent with the terms hereof; and o To appoint a plan administrator or, any other agent, and to delegate to such person such powers and duties in connection with the administration of the Plan as the Committee may from time to time prescribe. 9.3 Construction and Interpretation. The Committee shall have full discretion to construe and interpret the terms and provisions of this Plan, which interpretation or construction shall be final and binding on all parties, including but not limited to the Company and any Participant or Beneficiary. The Committee shall administer such terms and provisions in a uniform and nondiscriminatory manner and in full accordance with any and all laws applicable to the Plan. 9.4 Information. To enable the Committee to perform its functions, the Company shall supply full and timely information to the Committee on all matters relating to the Compensation of all Participants, their death or other cause of termination, and such other pertinent facts as the Committee may require. 9.5 Compensation, Expenses and Indemnity. 9.5.1 The members of the Committee shall serve without compensation for their services hereunder. 9.5.2 The Committee is authorized at the expense of the Company to employ such legal counsel as it may deem advisable to assist in the performance of its duties hereunder. Expenses and fees in connection with the administration of the Plan shall be paid by the Company. 9.5.3 The Company shall indemnify and save harmless the Committee and each member thereof, and the Chief Financial Officer, the Director of Human Resources, and any delegate of the Committee who is an employee of the Company against any and all expenses, liabilities and claims, including legal fees to defend against such liabilities and claims, arising out of their discharge of responsibilities under or incident to the Plan, other than expenses and liabilities arising out of willful misconduct. This indemnity shall not preclude such further indemnities as may be available under insurance purchased by the Company or provided by the - 11 - 14 Company under any bylaw, agreement or otherwise, as such indemnities are permitted under applicable law. 9.6 Quarterly Statements. Under procedures established by the Committee, a Participant shall receive quarterly statements with respect to such Participant's Account. 10 MISCELLANEOUS. 10.1 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no legal or equitable rights, claims, or interest in any specific property or assets of the Company. No assets of the Company shall be held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future, and the rights of the Participants and Beneficiaries shall be no greater than those of unsecured general creditors. The Plan is intended to be unfunded for tax purposes and for purposes of Title I of ERISA. 10.2 Restriction Against Assignment. The Company shall pay all amounts payable hereunder only to the person or persons designated by the Plan and not to any other person or corporation. No part of a Participant's Account shall be liable for the debts, contracts, or engagements of any Participant, his Beneficiary, or successors in interest, nor shall a Participant's Account be subject to execution by levy, attachment, or garnishment or by any other legal or equitable proceeding, nor shall any such person have any right to alienate, anticipate, commute, pledge, encumber, or assign any benefits or payments hereunder in any manner whatsoever. 10.3 No Right to Continued Employment. Neither an employee's participation in the Plan, nor his rights to his Account shall confer upon such employee any right with respect to continuance of employment by or receipt of Bonuses from the Company, nor shall such items interfere in any way with the right of the Company to terminate such employee's employment or alter such employee's Compensation at any time. 10.4 Withholding. There shall be deducted from each payment made under the Plan or, if such payment is not large enough, from any other funds payable to the Participant, all taxes which the Company determines are required to be withheld with respect to such payment under the Plan. The Company shall have the right to reduce any payment by the amount of cash sufficient to provide the amount of said taxes. 10.5 Amendment, Modification, Suspension or Termination. The Personnel and Compensation Committee of the Company's Board of Directors may amend, modify, suspend or terminate the Plan in whole or in part except that no amendment, modification, suspension or termination shall reduce any amounts then credited to a Participant's Account. The Company shall provide notice of such action to all Participants and Beneficiaries of deceased Participants. - 12 - 15 10.6 Governing Law. Except to the extent that it is preempted by federal law, this Plan shall be construed, governed and administered in accordance with the laws of the State of Delaware. 10.7 Receipt or Release. Any payment to a Participant or the Participant's Beneficiary in accordance with the provisions of the Plan, including but not limited to any payment from an insurance company, shall, to the extent thereof, be in full satisfaction of all claims under the Plan against the Committee and the Company. Any payment, whether by the Company or an insurance company, to a Participant or the Participant's Beneficiary of an amount described in Section 5.3 shall, to the extent thereof, be in full satisfaction of all claims to such amount which the Participant or his Beneficiary or any beneficiary designated in accordance with the Prior Plan may have against the Company or any other person under the Prior Plan. The Committee may require such Participant or Beneficiary, as a condition precedent to such payment, to execute a receipt and release to such effect. The Company has assumed the payment liabilities with respect to Participants in this Plan from the Prior Plan and indemnified Allegheny Teledyne Incorporated from any and all payment liabilities with respect to the amount of benefits accrued prior to the Effective Date. 10.8 Payments on Behalf of Minors. In the event that any amount becomes payable under the Plan to a minor or a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefore, the Committee may direct that such payment be made only to the conservator or the guardian of the estate of such person appointed by a court of competent jurisdiction or such other person or in such other manner as the Committee determines is necessary to assure that the payment will legally discharge the Plan's obligation to such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Company. 10.9 Miscellaneous. All pronouns and any variations thereof contained herein shall be deemed to refer to masculine or feminine, singular or plural, as the identity of the person or persons may require. The headings used in this Plan are for convenience only and shall not be construed in interpreting this Plan. - 13 - 16 EXHIBIT A BENEFICIARY DESIGNATION I hereby designate the following individual or entity to receive any benefits to which I am entitled under the Teledyne Technologies Incorporated Executive Deferred Compensation Plan if such benefits become payable after my death: Name: Address: Relationship: Social Security or Tax Identification Number: I understand and acknowledge that if I am married on the date of my death and I have designated above someone other than the individual who is my spouse on the date of my death, such designation shall not be effective unless my spouse consents in writing as set forth on the following page in the presence of a notary. Date Signature Printed Name 17 SPOUSAL CONSENT TO BENEFICIARY DESIGNATION I am the spouse of _____________________. I hereby consent to the designation made by my spouse of ____________________ as the beneficiary under the Teledyne Technologies Incorporated Executive Deferred Compensation Plan. I understand that this consent is valid only with respect to the naming of the beneficiary indicated on the prior page and that the designation of any other beneficiary will not be valid unless I consent in writing to such designation. This consent is being voluntarily given, and no undue influence or coercion has been exercised in connection with my consent to the designation made by my spouse of the beneficiary named on the prior page rather than myself as the beneficiary under the Teledyne Technologies Incorporated Executive Deferred Compensation Plan. Date Spouse's Signature Print Spouse's Name State of __________________ County of__________________ On __________ (date) before me _______________(name, title) personally appeared ___________________________ (name of spouse) personally known to me (or) proved to me on the basis of satisfactory evidence to be the person whose name is subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her authorized capacity, and that by his/her signature on the instrument the person executed the instrument. WITNESS my hand and official seal. Signature of Notary 18 EXHIBIT B DISTRIBUTION PRIOR TO PAYMENT ELIGIBILITY DATE Pursuant to Section 7.1.2 of the Teledyne Technologies Incorporated Executive Deferred Compensation Plan (the "Plan"), I hereby elect to receive distribution of ninety percent (90%) of my account balance under the Plan within thirty days of the receipt of this election by the Director of Human Resources of Teledyne Technologies Incorporated. I understand and acknowledge that as a result of this election: 1. The balance of my account under the Plan not distributed to me shall be forfeited to Teledyne Technologies Incorporated; 2. I shall be prohibited from participating in the Plan for the balance of the Plan Year in which this distribution is made and the following Plan Year; 3. Any deferral elections previously made pursuant to Article 4 of the Plan shall cease to be effective; and 4. The pre-distribution death benefit provided under the Plan shall cease to be available to my beneficiary following this distribution. If I resume participation in the Plan to the extent permitted by the Plan in accordance with paragraph 2 above, my beneficiary may again be eligible to receive a death benefit under the Plan but such death benefit shall be computed only with respect to allocations to my account under the Plan following such distribution and prior to my date of death. Date Signature Printed Name Received by Teledyne Technologies Incorporated on by 19 EXHIBIT C ELECTION OF FORM OF DISTRIBUTION Pursuant to Section 7.2.3 of the Teledyne Technologies Incorporated Executive Deferred Compensation Plan (the "Plan"), I hereby notify Teledyne Technologies Incorporated that instead of receiving distribution of my Account balance under the Plan in sixty quarterly installments, I hereby elect that my Account balance under the Plan be paid to me in one of the following forms: forty quarterly installments; twenty quarterly installments; or a single lump sum. I understand that in order for this election to be effective: 1. This notice must be received by Teledyne Technologies Incorporated, c/o the Director of Human Resources, 2049 Century Park East, 15th Floor, Los Angeles, California 90067, at least one year prior to my Payment Eligibility Date; and 2. My Payment Eligibility Date, as that term is defined in the Plan, must occur on or after the date as of which I commence to receive a benefit under a pension plan maintained by Teledyne Technologies Incorporated or a subsidiary, the date as of which I commence to receive disability benefits under the long-term disability plan of Teledyne Technologies Incorporated or a subsidiary, or, if I am not entitled to benefits under the long-term disability plan of Teledyne Technologies Incorporated or a subsidiary, the date the Administrative Committee of the Plan determines is the first date I satisfy the definition of disability set forth in such disability plan. Date Signature Printed Name Received by Teledyne Technologies Incorporated on by EX-10.11 11 EXHIBIT 10.11 1 Exhibit 10.11 TELEDYNE TECHNOLOGIES INCORPORATED PENSION EQUALIZATION/BENEFIT RESTORATION PLAN As of November 29, 1999 2 PURPOSE The purpose of the Teledyne Technologies Incorporated Pension Equalization/Benefit Restoration Plan is to provide certain corporate employees of Teledyne Technologies Incorporated who participate in qualified pension and profit sharing plans with benefits and retirement income equal to that which they would have received (i) but for the limitations imposed on plans which are qualified within the meaning of Section 401(a) of the Code by Sections 401(a)(17), 401(k), 401(m), 402(g) or 415 of the Internal Revenue Code of 1986, as amended, and (ii) but for participation in the Teledyne Technologies Incorporated Executive Deferred Compensation Plan (the "Executive Deferred Compensation Plan"), by supplementing, on an unfunded basis, amounts payable under such qualified plans with amounts paid under this Plan. Allegheny Ludlum Corporation and, thereafter, Allegheny Teledyne Incorporated ("ATI") sponsored a Benefit Restoration Plan for several years prior to the spin off of the Corporation from ATI. At that time, the Corporation adopted this Plan, permitted each participant in the Prior Plan hired by the Corporation to participate in this Plan and credited each such person with an initial balance equal to his or her balance under the Prior Plan. ARTICLE I. DEFINITIONS 1.01 "Administrator" shall mean the person or committee appointed by the Board for such purpose under Article VI. 1.02 "Code" shall mean the Internal Revenue Code of 1986, as the same shall be amended from time to time. 1.03 "Corporation" shall mean Teledyne Technologies Incorporated, a Delaware corporation. 1.04 "Defined Benefit Portion" shall mean that portion of this Plan that relates to restoration of benefits under the Pension Plan. 1.05 "DCP" shall mean the Teledyne Technologies Incorporated Executive Deferred Compensation Plan. 1.06 "Defined Contribution Portion" shall mean that portion of this Plan which relates to the restoration of aggregate benefits under the Teledyne Technologies Incorporated 401(k) Plan or such other Defined Contribution Plan in effect from time to time. 1.07 "Employee" shall mean any employee of the Corporation. 1.08 "Limitations" shall mean any limitation, with respect to a qualified plan, within the meaning of Section 401(a) of the Code, on the amount of contributions or the accrual or payment of benefits to or on behalf of a Participant as imposed under Section 401(a)(17), Section 401(k), 2 3 Section 401(m), Section 402(g), Section 415 and/or under any other Section of the Code hereinafter adopted which shall be the successor of any of them or have the effect of any of them. 1.09 "Matching Contributions" shall mean the contributions made by the Corporation under the Defined Contribution Portion. 1.10 "Participant" shall mean any Employee who meets the conditions for participation set forth in Article III. 1.11 "Pension Plan" shall mean the Teledyne Technologies Incorporated Pension Plan, as in effect as of the relevant time, or its predecessor the Allegheny Teledyne Incorporated Pension Plan. 1.12 "Plan" shall mean this Teledyne Technologies Incorporated Pension Equalization/ Benefit Restoration Plan. 1.13. "Prior Plan" shall mean the Allegheny Teledyne Incorporated Benefit Restoration Plan. ARTICLE II. EFFECTIVE DATE The Effective Date of this Plan is November 29, 1999. ARTICLE III. PARTICIPATION 3.01 Group Eligible to Participate. Participation is limited to that group of highly compensated Employees eligible to participate in the Annual Incentive Program, or a successor plan as in effect from time to time comparable to the Annual Incentive Plan or its successor. 3.02 Contributions by Participants. Participants shall not be permitted to make contributions in any form to this Plan. ARTICLE IV. DEFINED BENEFIT PORTION 4.01 Restoration of Pension Plan Benefits. In respect of each Participant who participates or participated in the Pension Plan, the Corporation agrees to pay to the Participant, without requirement for Participant contribution upon his retirement, a retirement benefit equal to the difference between (a) and (b): (a) the maximum life annuity to which the participant would be entitled under the Pension Plan upon his or her retirement determined (i) without regard to the Limitations and (ii) by including as compensation for purposes of the Pension Plan formula for benefits, as if paid in the year deferred, Participant deferrals under the DCP; less 3 4 (b) the life annuity which is actually paid to the participant under the Pension Plan after giving effect to the Limitations. Notwithstanding any provision to the contrary, each participant who was a participant in the Prior Plan shall be a Participant in this Plan with a Defined Benefit Portion balance no less at any given time than his or her balance under the Prior Plan. 4.02 Elections and Calculations. Any election made by a Participant pursuant to the Pension Plan relating to his benefit thereunder shall be deemed an election hereunder and the Participant shall be deemed to have made the same election hereunder without requirement of additional elections. All calculations pursuant to the Defined Benefit Portion shall be consistent with those used in determining benefits under the Pension Plan, including, but not limited to, calculation of actuarial equivalents for optional forms of benefits and reductions for early payment. 4.03 Reports. The Corporation may, but shall not be required to, send reports from time to time to each Participant regarding the amounts to which he is entitled under this Plan. 4.04 Payment of Restored Defined Benefit Portion Benefits. When a Participant retires within the meaning of the Pension Plan or dies, the Corporation shall pay to the Participant or his or her beneficiary, as the case may be, the amounts determined under this Article IV in the same manner, at the same times and frequencies and subject to the same terms and conditions (except as set forth herein) which the Participant's benefits are paid under the Pension Plan. ARTICLE V. DEFINED CONTRIBUTION PORTION 5.01 Restoration of Savings Portion. The applicable, if any, of the following amounts shall be credited to a Participant's Defined Contribution Portion: (a) Restoration of Deferrals for Effect of Limitations. In the event a Participant is deferring or contributing the maximum amount then permitted under the Limitations and such contributed amount is less than the amount which could be deferred or contributed by the Participant to the Corporation's defined contribution plan as then in effect without regard to the Limitations, the Participant's Defined Contribution Portion shall be credited with an amount equal to the difference between (i) the amount which would have been contributed as a Corporation matching contribution without regard to the Limitations and (ii) the amount actually contributed on the Participant's behalf as matching contributions. (b) Restoration of Matching Contributions for Participation in the DCP. A Participant's Defined Contribution Portion shall be credited with an amount equal to the amount of Matching Contributions the Participant would have received on his or her deferrals, if any, to the DCP if such deferrals under the DCP were compensation for purposes of the Corporation's defined contribution plan as then in effect, the Participant 4 5 contributed at the same rate with respect to the DCP deferrals as the rate then elected by the Participant for the defined contribution plan and the Limitations did not apply. 5.02 Earnings. Balances in Participant's Defined Contribution Portion shall be credited with earnings as of the last day of each calendar year at the rate then in effect under one of the investment funds offered under the defined contribution plan as determined from time to time by the Committee. 5.03 Accounting. The Administrator shall establish on its records, for bookkeeping purposes, an account for each Participant receiving credits under this Deferred Contribution Portion to record the amount credited as contributions under Section 5.01 and earnings, if any, pursuant to Section 5.02. The Administrator shall post any contributions to such bookkeeping account within thirty (30) days of the date a contribution would have been made to the appropriate of the Plans under this Article V. The Administrator shall respond to any inquiry of any Participant concerning the status of his account within thirty (30) days of receipt thereof. 5.04 No Withdrawals or Loans. No withdrawals of or loans against any balance under the Plan may be made at any time by a Participant. 5.05 Payment of Restored Defined Contribution Portion Benefit. (a) Death. In the event of a Participant's death, his then balance in his or her Defined Contribution Portion (including any Corporation contributions for such calendar year pursuant to Section 5.01 whether or not then actually made, net of withholding of applicable federal, state and local taxes) shall be distributed in a single cash payment to his beneficiary designated pursuant to the Corporation's defined contribution plan as then in effect as soon as administratively feasible after the Administrator receives notice of such death. (b) Disability, Retirement or Other Severance from Service. In the event of the Participant's Disability, Retirement or other severance from service, his then balance in his or her Defined Contribution Portion (including Corporation contributions for such calendar year pursuant to Section 5.01 whether or not then actually made, net of withholding or applicable federal, state and local income tax) shall be distributed in a single cash payment to him as soon as administratively feasible after the Administrator receives notice of such event; provided, however, with the consent of the Administrator, the Participant may elect in the tax year of the Participant prior to the tax year in which the distribution is then due to be made or to commence to receive such amount at a later time and/or in a different form of payment. ARTICLE VI. ADMINISTRATION 6.01 Administration. The Plan shall be administered by the Administrator appointed for such purpose by the Board who shall have the power and duty to interpret the Plan and to make such rules and regulations as the Administrator, in its discretion, shall deem appropriate. The 5 6 Administrator may retain such experts, consultants, or advisors as it, in its discretion deems necessary or appropriate to the administration of the Plan and/or may delegate to the Corporation or to employees of Corporation such duties as it may deem necessary or appropriate. Any determination of the Administrator shall be final, conclusive and binding for all parties. ARTICLE VII. AMENDMENT AND TERMINATION The Corporation shall have the right to amend or terminate this Plan at any time; provided that no amendment shall be made which would have the effect of decreasing the amount payable to any Participants hereunder. ARTICLE VIII. ASSIGNMENT No benefit or other right under or created by this Plan shall be assignable by any Participant or the Participant's beneficiary by pledge or otherwise. Any attempt to assign, pledge or otherwise dispose of or anticipate benefits under this Plan shall be void. ARTICLE IX. BENEFITS UNFUNDED The benefits provided under this Plan shall be unfunded. All payments of benefits hereunder shall be made by the Corporation from general assets and the Corporation will not be obligated to establish any special or separate fund or make other segregation of assets to assure the payment of any benefits hereunder. In the event the Corporation establishes any fund or segregation, no party who is or becomes entitled to receive amounts hereunder shall have any right to assert any claim, levy or lien thereon or assert any right thereto unless such right is specifically set forth in writing. The rights of any party to receive payments of any benefits hereunder shall be no greater than the rights of an unsecured creditor of the Corporation. ARTICLE X. MISCELLANEOUS 10.01 Applicable Law. This Plan shall be governed by, and construed in accordance with, the law of the State of California, except with regard to its principles of conflicts of laws or to the extent that the law of the State of California shall have been specifically preempted by federal law. 10.02 Incapacity of Recipient of Benefits. If any person entitled to receive benefits hereunder shall be physically or mentally incapable of receiving or acknowledging receipt of any payment of benefits, the Corporation, upon the receipt of satisfactory evidence that such incapacitated person is so incapacitated and that another person or institution is maintaining him or her and that no guardian or committee has been appointed for him or her, may provide for such payment of benefits hereunder to such person or institution maintaining him or her, and such payments so made shall be deemed for every purpose to have been made to such incapacitated person. 6 7 10.03 Liability of Officers and Directors of the Corporation. No past, present or future officer or director of the Corporation shall be personally liable to any Participant, beneficiary or other person under any provision of this Plan. 10.04 Assets Owned by the Corporation. Nothing contained herein shall be deemed to give any Participant or his beneficiary any interest in any specific property of the Corporation or any right except to receive such distributions as are expressly provided for in this Plan. 10.05 Withholding. The payment of any benefits under this Plan shall be net of any federal, state and local taxes that the Corporation is required to withhold. 10.06 Meaning of Certain Words. As used herein any gender shall include all other genders and the singular shall include the plural and the plural shall include the singular in all cases where such meaning would be appropriate. The terms "herein", "hereto", "hereunder", and the like shall be deemed to refer to this Plan as a whole and not to any particular paragraph or other subdivision of this Plan. 7 EX-21 12 SIGNIFICANT SUBSIDIARY 1 Exhibit 21 Significant Subsidiary of Teledyne Technologies Incorporated Teledyne Brown Engineering, Inc. (a Delaware corporation) EX-23 13 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Teledyne Technologies Incorporated ("TDY") of our report dated January 26, 2000, included in the 1999 Annual Report to Stockholders of Teledyne Technologies Incorporated. We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-94739) pertaining to the TDY 1999 Incentive Plan, Registration Statement (Form S-8 No. 333-91781) pertaining to the TDY Executive Deferred Compensation Plan, Registration Statement (Form S-8 No. 333-91785) pertaining to Teledyne 401(k) Plan, Registration Statement (Form S-8 No. 333-91787) pertaining to TDY Employee Stock Purchase Plan and in the Registration Statement (Form S-8 No. 333-91791) pertaining to TDY Non-Employee Director Stock Compensation Plan of our report dated January 26, 2000, with respect to the consolidated financial statements incorporated herein by reference. /s/ Ernst & Young LLP Los Angeles, California March 27, 2000 EX-24 14 POWER OF ATTORNEY 1 Exhibit 24 POWER OF ATTORNEY Teledyne Technologies Incorporated - 1999 Annual Report on Form 10-K The undersigned directors and officers of Teledyne Technologies Incorporated, a Delaware corporation ("TDY"), do hereby constitute and appoint John T. Kuelbs and Melanie S. Cibik, or either of them, our true and lawful attorneys and agents, to execute, file and deliver the Annual Report on Form 10-K of TDY for its 1999 fiscal year ("Form 10-K"), in our name and on our behalf in our capacities as directors and officers of TDY as listed below, and to do any and all acts or things, in our name and on our behalf in our capacities as directors and officers of TDY as listed below, which said attorneys and agents, or either of them, may deem necessary or advisable to enable TDY to comply with the Securities Exchange Act of 1934 and any rules, regulations and requirements of the Securities and Exchange Commission in connection with the Form 10-K (including without limitation executing, filing and delivering any amendments to the Form 10-K), and the undersigned do hereby ratify and confirm all that said attorneys and agents, or either of them, shall do or cause to be done by virtue hereof. Witness the due execution hereof as of March 9, 2000. /s/ Thomas A. Corcoran Chairman and Director - ----------------------------- Thomas A. Corcoran /s/ Robert Mehrabian President and Chief and Chief Executive Officer - ----------------------------- (Principal Executive Officer) and Director Robert Mehrabian /s/ Stefan C. Riesenfeld Executive Vice President and Chief Financial - ----------------------------- Officer (Principal Financial Officer) Stefan C. Riesenfeld /s/ Dale A. Schnittjer Controller (Principal Accounting Officer) - ----------------------------- Dale A. Schnittjer /s/ Robert P. Bozzone Director - ----------------------------- Robert P. Bozzone /s/ Paul S. Brentlinger Director - ----------------------------- Paul S. Brentlinger /s/ Frank V. Cahouet Director - ----------------------------- Frank V. Cahouet /s/ Diane C. Creel Director - ----------------------------- Diane C. Creel /s/ C. Fred Fetterolf Director - ----------------------------- C. Fred Fetterolf /s/ Charles J. Queenan, Jr. Director - ----------------------------- Charles J. Queenan, Jr.
EX-27.1 15 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF TELEDYNE TECHNOLOGIES FOR THE FISCAL YEAR ENDED JANUARY 2, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS, WHICH ARE IN ITS FORM 10-K 1,000 12-MOS JAN-02-2000 JAN-03-1999 JAN-02-2000 7,100 0 121,009 3,452 53,667 204,581 194,444 132,303 317,367 99,301 97,000 0 0 270 44,217 317,367 803,384 803,384 587,714 587,714 0 0 822 81,977 32,955 49,022 0 0 0 49,022 1.79 1.79
EX-27.2 16 FINANCIAL DATA SCHEDULE
5 THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S COMBINED STATEMENT OF INCOME FOR THE FISCAL YEAR ENDED JANUARY 3, 1999 AND THE NINE MONTHS ENDED OCTOBER 3, 1999 AND COMBINED BALANCE SHEET AS OF JANUARY 3, 1999 AND OCTOBER 3, 1999 AND COMBINED BALANCE SHEET AS OF JANUARY 3, 1999 AND OCTOBER 3, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001094285 TELEDYNE TECHNOLOGIES INCORPORATED 1,000 12-MOS 9-MOS JAN-03-1999 JAN-02-2000 DEC-28-1997 JAN-03-1999 JAN-03-1999 OCT-03-1998 0 0 0 0 106,088 123,724 2,890 3,461 53,186 53,852 171,048 195,491 177,776 182,737 134,754 132,284 250,819 277,497 92,480 102,406 0 0 0 0 0 0 0 0 106,402 126,370 250,819 277,497 780,393 602,978 780,393 602,978 572,087 442,146 572,087 442,146 0 0 0 0 0 0 82,993 61,048 34,276 25,213 48,717 35,835 0 0 0 0 0 0 48,717 35,835 0 0 0 0
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