<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1996
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ALLEGHENY TELEDYNE INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 25-1792394
(STATE OR OTHER 3316 (I.R.S.
JURISDICTION OF (PRIMARY STANDARD EMPLOYER IDENTIFICATION
INCORPORATION OR INDUSTRIAL NO.)
ORGANIZATION) CLASSIFICATION CODE
NUMBER)
1000 SIX PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5479
(412) 394-2800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JON D. WALTON
VICE PRESIDENT--GENERAL COUNSEL AND SECRETARY
ALLEGHENY TELEDYNE INCORPORATED
1000 SIX PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5479
(412) 394-2836
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES TO:
RONALD D. WEST HENRY LESSER
KIRKPATRICK & LOCKHART LLP IRELL & MANELLA LLP
1500 OLIVER BUILDING SUITE 3300, 333 SOUTH HOPE STREET
PITTSBURGH, PENNSYLVANIA 15222-2312 LOS ANGELES, CALIFORNIA 90071-3042
(412) 355-6500 (213) 620-1555
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: At the effective time of the Combination described in this
registration statement.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED (1) PER SHARE OFFERING PRICE (2) FEE (3)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, par value 183,778,552
$.10 per share........ shares -- $3,500,611,275 $453,987
</TABLE>
================================================================================
(1) Represents the maximum number of shares issuable to holders of Common
Stock, par value $.10 per share, of Allegheny Ludlum Corporation
("Allegheny Ludlum Common Stock") and holders of Common Stock, par value
$1.00 per share, of Teledyne, Inc. ("Teledyne Common Stock") pursuant to
the Agreement and Plan of Merger and Combination described in this
registration statement, including up to 68,275,902 shares issuable to
holders of Allegheny Ludlum Common Stock and up to 115,502,650 shares
issuable to holders of Teledyne Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee;
computed in accordance with Rule 457(f)(1) based upon the average of the
high and low sales prices of Allegheny Ludlum Common Stock and Teledyne
Common Stock on July 15, 1996, in each case as reported on the New York
Stock Exchange Composite Tape, and the respective ratios at which such
Common Stock will be converted into Allegheny Teledyne Incorporated Common
Stock pursuant to the Agreement and Plan of Merger and Combination
described in this registration statement.
(3) Offset in accordance with Rule 457(b) by fees aggregating $753,121
previously paid in connection with the filings of the preliminary Joint
Proxy Statement/Prospectus on May 16, 1996.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
ALLEGHENY TELEDYNE INCORPORATED
CROSS-REFERENCE SHEET PURSUANT TO RULE 404(A) OF REGULATION C AND ITEM 501(B)
OF REGULATION S-K SETTING FORTH THE LOCATION IN THE JOINT PROXY
STATEMENT/PROSPECTUS OF THE INFORMATION REQUIRED BY PART I OF FORM S-4.
<TABLE>
<CAPTION>
LOCATION IN JOINT PROXY
FORM S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
- -------------------------------- -----------------------
<S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus............................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Available Information; Incorporation
Pages of Prospectus................... of Certain Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information... Summary; Risk Factors; Comparative
Per Share Data; The Meetings; The
Combination
4. Terms of the Transaction.............. Summary; The Combination; The
Combination Agreement; The
Stockholder Agreements; Unaudited
Pro Forma Condensed Combined
Financial Information; Comparison of
Stockholder Rights; Description of
ATI Capital Stock
5. Pro Forma Financial Information....... Summary; Unaudited Pro Forma
Condensed Combined Financial
Information
6. Material Contacts with the Company
Being Acquired........................ The Combination
7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters............. *
8. Interests of Named Experts and
Counsel............................... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities........................... *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3
Registrants........................... *
11. Incorporation of Certain Information
by Reference.......................... *
12. Information with Respect to S-2 or S-3
Registrants........................... *
13. Incorporation of Certain Information
by Reference.......................... *
14. Information with Respect to
Registrants Other Than S-2 or S-3
Registrants........................... Outside Front Cover Page; Summary;
Unaudited Pro Forma Condensed
Combined Financial Information
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
15. Information with Respect to S-3
Companies............................. Outside Front Cover Page;
Incorporation of Certain Documents
by Reference; Summary; Unaudited
Pro Forma Condensed Combined
Financial Information
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION IN JOINT PROXY
FORM S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
- -------------------------------- -----------------------
<S> <C>
16. Information with Respect to S-2 or S-3
Companies............................... *
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies......... *
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited........ Outside Front Cover Page; Summary;
The Meetings; The Combination; The
Combination Agreement
19. Information if Proxies, Consents or
Authorizations are not to be Solicited
or in an Exchange Offer................. *
</TABLE>
- --------
* Not applicable or the answer is negative.
<PAGE>
[LOGO OF ALLEGHENY LUDLUM CORPORATION]
R. P. Simmons
Chairman of the Board
July 17, 1996
Dear Allegheny Ludlum Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Allegheny Ludlum Corporation to be held on Thursday, August 15, 1996, at Room
1000 Auditorium, 10th Floor, Two Mellon Bank Center (Union Trust Building),
435 Fifth Avenue, Pittsburgh, Pennsylvania, commencing at 1:00 p.m., local
time.
At the Special Meeting, you will be asked to approve and adopt an Agreement
and Plan of Merger and Combination and the transactions contemplated thereby
providing for the strategic combination of the businesses of Allegheny Ludlum
Corporation and Teledyne, Inc. As a result of the business combination, each
of Allegheny Ludlum and Teledyne will become a wholly owned subsidiary of a
new corporation named Allegheny Teledyne Incorporated, each outstanding share
of Allegheny Ludlum Common Stock will be converted into the right to receive
one share of Allegheny Teledyne Common Stock, and each outstanding share of
Teledyne Common Stock will be converted into the right to receive 1.925 shares
of Allegheny Teledyne Common Stock (with cash paid in lieu of fractional
shares).
The Board of Directors has unanimously determined that the transaction is in
the best interests of Allegheny Ludlum and its shareholders and recommends
that you vote FOR the proposal to approve and adopt the Agreement and Plan of
Merger and Combination and the transactions contemplated thereby. Salomon
Brothers Inc, Allegheny Ludlum's financial advisor, has delivered its opinion,
dated April 1, 1996, to the Board of Directors to the effect that, based upon
and subject to various considerations set forth in such opinion, as of the
date of such opinion, the transaction is fair to the holders of Allegheny
Ludlum Common Stock from a financial point of view.
At the Special Meeting, you will also be asked to approve certain proposed
employee and director compensation plans. The accompanying Joint Proxy
Statement/Prospectus describes the proposals to be considered at the Special
Meeting more fully. You are urged to give it your careful attention.
It is very important that your shares be represented at the Special Meeting
whether or not you are personally able to attend. In order to insure that you
will be represented, we ask you to complete and return the enclosed proxy card
promptly. A postage-paid return envelope is enclosed for your convenience.
If you plan to attend the Special Meeting in person, please complete and
return the enclosed postage-paid ticket request card promptly. An admission
ticket, which will expedite your admission, will be mailed to you prior to the
meeting. Shareholders without admission tickets will be admitted upon
verification of ownership.
You should not send in certificates representing Allegheny Ludlum Common
Stock at this time. Following consummation of the combination of Allegheny
Ludlum and Teledyne, information will be sent to you regarding the procedure
for surrendering your stock certificates and receiving certificates for the
shares of Allegheny Teledyne Common Stock issued in exchange for your
Allegheny Ludlum shares.
Sincerely,
/s/ R. P. Simmons
R. P. Simmons
<PAGE>
[LOGO OF ALLEGHENY LUDLUM CORPORATION]
1000 SIX PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5479
---------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 15, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of Allegheny
Ludlum Corporation, a Pennsylvania corporation ("Allegheny Ludlum"), will be
held on Thursday, August 15, 1996, at Room 1000 Auditorium, 10th Floor, Two
Mellon Bank Center (Union Trust Building), 435 Fifth Avenue, Pittsburgh,
Pennsylvania, commencing at 1:00 p.m., local time, to consider and vote upon
the following matters described in the accompanying Joint Proxy
Statement/Prospectus:
1. Approval and adoption of the Agreement and Plan of Merger and
Combination, dated as of April 1, 1996, as amended and restated (the
"Combination Agreement"), among Allegheny Teledyne Incorporated, a newly
formed Delaware corporation ("ATI"), Allegheny Ludlum, ALS Merger
Corporation, a newly formed Pennsylvania corporation and a wholly owned
subsidiary of ATI ("Allegheny Ludlum Merger Sub"), Teledyne, Inc., a
Delaware corporation ("Teledyne"), and TDY Merger, Inc., a newly formed
Delaware corporation and a wholly owned subsidiary of ATI, and the
transactions contemplated thereby, including the merger of Allegheny
Ludlum Merger Sub with and into Allegheny Ludlum, pursuant to which,
among other things, Allegheny Ludlum will become a wholly owned
subsidiary of ATI, and each outstanding share of Allegheny Ludlum Common
Stock (other than shares owned by Teledyne or any subsidiary of
Teledyne, or shares held in Allegheny Ludlum's treasury immediately
prior to the effective time of the Combination) will be converted into
the right to receive one share of ATI Common Stock. A copy of the
Combination Agreement is attached as Appendix A to the accompanying
Joint Proxy Statement/Prospectus.
2. Approval of the adoption of the Allegheny Teledyne Incorporated 1996
Incentive Plan.
3. Approval of the adoption of the Allegheny Teledyne Incorporated 1996
Non-Employee Director Stock Compensation Plan.
4. Approval of the adoption of the amended and restated Performance Share
Plan for Key Employees of Allegheny Ludlum Corporation and Subsidiaries.
5. Approval of the adoption of the Teledyne, Inc. 1996 Senior Executive
Performance Plan.
6. The transaction of such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
Only holders of record of Allegheny Ludlum Common Stock at the close of
business on July 8, 1996 will be entitled to notice of, and to vote at, the
Special Meeting and any adjournment or postponement thereof.
Whether or not you plan to attend the Special Meeting, please complete,
date, sign and return the enclosed proxy card promptly. A return envelope is
enclosed for your convenience and requires no postage for mailing in the
United States.
By Order of the Board of Directors,
/s/ Jon D. Walton
Jon D. Walton
Vice President-General Counsel and
Secretary
Pittsburgh, Pennsylvania
July 17, 1996
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
[LOGO OF TELEDYNE, INC.]
2049 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067-3101
July 17, 1996
Dear Fellow Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Teledyne, Inc. to be held at the Century Plaza Hotel, Los Angeles, California,
on Thursday, August 15, 1996, commencing at 10:00 a.m. local time.
At the meeting, we will vote on a proposal to approve and adopt an Agreement
and Plan of Merger and Combination and the transactions contemplated thereby,
providing for the strategic combination of the businesses of Teledyne and
Allegheny Ludlum Corporation. As a result of the combination, each of Teledyne
and Allegheny Ludlum will become a wholly owned subsidiary of a new
corporation named Allegheny Teledyne Incorporated, each outstanding share of
Teledyne Common Stock will be converted into the right to receive 1.925 shares
of Allegheny Teledyne Common Stock (with cash paid in lieu of fractional
shares) and each outstanding share of Allegheny Ludlum Common Stock will be
converted into the right to receive one share of Allegheny Teledyne Common
Stock.
THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF TELEDYNE HAS UNANIMOUSLY
RECOMMENDED TO THE TELEDYNE BOARD THAT IT APPROVE THE COMBINATION AGREEMENT.
THE TELEDYNE BOARD HAS CONSIDERED AND UNANIMOUSLY ACCEPTED THIS RECOMMENDATION
(EXCEPT FOR MR. RONALD LABOW, THE CHAIRMAN OF WHX CORPORATION, WHO ORIGINALLY
VOTED AGAINST THE COMBINATION AGREEMENT BUT SUBSEQUENTLY VOTED IN FAVOR OF THE
RESTATED VERSION THEREOF) AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE
PROPOSAL TO APPROVE AND ADOPT THE COMBINATION AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
Both the Special Committee and the Board of Teledyne have concluded that the
strategic combination with Allegheny Ludlum is in the best interests of
Teledyne's stockholders. We have concluded that the combination represents a
unique opportunity for creating both immediate and long-term value for
Teledyne stockholders in excess of the value expected to be created by the
continued pursuit of Teledyne's business plan on a stand-alone basis. Although
certain potential risks are inherent in the combination (which are discussed
in the enclosed Joint Proxy Statement/Prospectus), the Special Committee and
the Board believe that these are significantly outweighed by the potential
benefits of the transaction to our stockholders.
Our recommendation that stockholders approve the Combination Agreement and
the transactions contemplated thereby and our reasons for this recommendation,
as well as the background of the proposed combination, the conditions to
closing and other information about the transaction are set forth in the
accompanying Joint Proxy Statement/Prospectus, which also includes the opinion
of our financial advisors, Goldman, Sachs & Co., that, as of April 1, 1996,
the exchange ratio of 1.925 shares of Allegheny Teledyne for each share of
Teledyne is fair to Teledyne stockholders.
The accompanying Joint Proxy Statement/Prospectus also contains important
information regarding the terms of the transaction, the composition of the
initial board of directors of Allegheny Teledyne, assignment of senior
management responsibility for that company, certain proposed employee and
director compensation plans to be acted upon at the Special Meeting and other
matters. We urge you to give the document your careful attention.
Your vote is important regardless of how many shares you own. In order to
insure that you will be represented at the Special Meeting whether or not you
are personally able to attend, we ask you to complete the enclosed proxy card
promptly and return it in the envelope provided.
Please do not send us any of your stock certificates at this time. Following
the consummation of the combination, we will send you information about the
procedure for surrendering your stock certificates and receiving certificates
for the shares of Allegheny Teledyne common stock issued in exchange for your
Teledyne shares.
Sincerely,
/s/ W. P. Rutledge
William P. Rutledge
Chairman of the Board and
Chief Executive Officer
<PAGE>
[LOGO OF TELEDYNE, INC.]
2049 CENTURY PARK EAST
LOS ANGELES, CALIFORNIA 90067-3101
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 15, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Teledyne,
Inc., a Delaware corporation ("Teledyne"), will be held on Thursday, August
15, 1996 at 10:00 a.m., local time, at the Century Plaza Hotel, 2025 Avenue of
the Stars, Los Angeles, California.
The meeting is called for the following purposes (as more fully described in
the accompanying Joint Proxy Statement/Prospectus):
1. To consider and act upon a proposal to approve and adopt the Agreement
and Plan of Merger and Combination, dated as of April 1, 1996, as
amended and restated (the "Combination Agreement"), among Allegheny
Teledyne Incorporated, a newly formed Delaware corporation ("ATI"),
Allegheny Ludlum Corporation, a Pennsylvania corporation ("Allegheny
Ludlum"), ALS Merger Corporation, a newly formed Pennsylvania
corporation and a wholly owned subsidiary of ATI, Teledyne and TDY
Merger, Inc., a newly formed Delaware corporation and a wholly owned
subsidiary of ATI ("Teledyne Merger Sub"), and the transactions
contemplated thereby, including the merger of Teledyne Merger Sub with
and into Teledyne, pursuant to which, among other things, Teledyne will
become a wholly owned subsidiary of ATI and each outstanding share of
Common Stock of Teledyne (other than shares owned by Allegheny Ludlum or
any subsidiary of Allegheny Ludlum, or shares held in Teledyne's
treasury immediately prior to the effective time of the Combination)
will be converted into the right to receive 1.925 shares of ATI Common
Stock (with cash paid in lieu of fractional shares). A copy of the
Combination Agreement is attached as Appendix A to the accompanying
Joint Proxy Statement/Prospectus.
2. To consider and act upon a proposal to approve the Allegheny Teledyne
Incorporated 1996 Incentive Plan.
3. To consider and act upon a proposal to approve the adoption of the
Allegheny Teledyne Incorporated 1996 Non-Employee Director Stock
Compensation Plan.
4. To consider and act upon a proposal to approve the adoption of the
amended and restated Performance Share Plan for Key Employees of
Allegheny Ludlum Corporation and Subsidiaries.
5. To consider and act upon a proposal to approve the adoption of the
Teledyne, Inc. 1996 Senior Executive Performance Plan.
6. To consider and act upon such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on July 8, 1996 as
the record date for determining those stockholders who will be entitled to
vote at the meeting. A list of such stockholders will be open to examination
by any stockholder at the meeting and for a period of ten days prior to the
date of the meeting during ordinary business hours at the Teledyne, Inc.
corporate offices, 2049 Century Park East, Los Angeles, California 90067-3101.
By Order of the Board of
Directors,
Judith R. Nelson Secretary
July 17, 1996
REGARDLESS OF WHETHER YOU NOW EXPECT TO BE PRESENT PERSONALLYAT THE MEETING,
YOU ARE REQUESTED TO SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ENCLOSED SELF-ADDRESSED, POSTAGE PRE-PAID ENVELOPE.
<PAGE>
JOINT PROXY STATEMENT
OF
[LOGO OF ALLEGHENY LUDLUM]
and
[LOGO OF TELEDYNE, INC.]
----------------
PROSPECTUS
OF
ALLEGHENY TELEDYNE INCORPORATED
This Joint Proxy Statement/Prospectus is being furnished to holders of
Common Stock, par value $.10 per share ("Allegheny Ludlum Common Stock"), of
Allegheny Ludlum Corporation, a Pennsylvania corporation ("Allegheny Ludlum"),
in connection with the solicitation of proxies by the Board of Directors of
Allegheny Ludlum for use at the Special Meeting of Allegheny Ludlum
shareholders (the "Allegheny Ludlum Special Meeting") to be held on Thursday,
August 15, 1996, at Room 1000 Auditorium, 10th Floor, Two Mellon Bank Center
(Union Trust Building), 435 Fifth Avenue, Pittsburgh, Pennsylvania, commencing
at 1:00 p.m., local time, and at any adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus is also being furnished to holders of
Common Stock, par value $1.00 per share ("Teledyne Common Stock"), of
Teledyne, Inc., a Delaware corporation ("Teledyne"), in connection with the
solicitation of proxies by the Teledyne Board of Directors for use at the
Special Meeting of Teledyne stockholders (the "Teledyne Special Meeting") to
be held on Thursday, August 15, 1996, at the Century Plaza Hotel, 2025 Avenue
of the Stars, Los Angeles, California, commencing at 10:00 a.m., local time,
and at any adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus also constitutes the prospectus of
Allegheny Teledyne Incorporated, a Delaware corporation ("ATI"), with respect
to up to 183,778,552 shares of Common Stock, par value $.10 per share ("ATI
Common Stock"), to be issued in the Combination (as defined herein) in
exchange for outstanding shares of Allegheny Ludlum Common Stock and Teledyne
Common Stock and upon the exercise of outstanding options, rights and awards.
Based on the number of outstanding shares of Allegheny Ludlum Common Stock and
Teledyne Common Stock as of June 30, 1996 and the respective ratios at which
shares of Allegheny Ludlum Common Stock and Teledyne Common Stock will be
converted into shares of ATI Common Stock in the Combination, the shareholders
of Allegheny Ludlum and the stockholders of Teledyne immediately prior to the
consummation of the Combination will own approximately 38% and 62%,
respectively, of the outstanding shares of ATI Common Stock immediately
following consummation of the Combination.
All information contained in this Joint Proxy Statement/Prospectus relating
to Allegheny Ludlum has been supplied by Allegheny Ludlum, and all information
contained in this Joint Proxy Statement/Prospectus relating to Teledyne has
been supplied by Teledyne.
THE PROPOSED COMBINATION IS A COMPLEX TRANSACTION. STOCKHOLDERS ARE URGED TO
READ AND CONSIDER CAREFULLY THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS
ENTIRETY, INCLUDING THE MATTERS REFERRED TO BEGINNING ON PAGE 25 UNDER THE
CAPTION "RISK FACTORS."
----------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
This Joint Proxy Statement/Prospectus and the accompanying proxy cards are
first being mailed to shareholders of Allegheny Ludlum and stockholders of
Teledyne on or about July 17, 1996.
The date of this Joint Proxy Statement/Prospectus is July 17, 1996.
<PAGE>
ALLEGHENY LUDLUM SPECIAL MEETING
At the Allegheny Ludlum Special Meeting, shareholders of record of Allegheny
Ludlum Common Stock as of the close of business on July 8, 1996 will consider
and vote upon a proposal to approve and adopt the Agreement and Plan of Merger
and Combination, dated as of April 1, 1996, as amended and restated (the
"Combination Agreement"), among ATI, Allegheny Ludlum, ALS Merger Corporation,
a newly formed Pennsylvania corporation and a wholly owned subsidiary of ATI
("Allegheny Ludlum Merger Sub"), Teledyne and TDY Merger, Inc., a newly formed
Delaware corporation and a wholly owned subsidiary of ATI ("Teledyne Merger
Sub"), and the transactions contemplated thereby, pursuant to which, among
other things, Allegheny Ludlum Merger Sub will be merged with and into
Allegheny Ludlum (the "Allegheny Ludlum Merger") and Allegheny Ludlum will
become a wholly owned subsidiary of ATI. At the Allegheny Ludlum Special
Meeting, such shareholders will also consider and vote upon separate proposals
(the "Compensation Plan Proposals") to approve the adoption of the Allegheny
Teledyne Incorporated 1996 Incentive Plan (the "ATI Incentive Plan"), the
Allegheny Teledyne Incorporated 1996 Non-Employee Director Stock Compensation
Plan (the "ATI Director Stock Plan"), the amended and restated Performance
Share Plan for Key Employees of Allegheny Ludlum Corporation and Subsidiaries
(the "Allegheny Ludlum Performance Plan"), and the Teledyne, Inc. 1996 Senior
Executive Performance Plan (the "Teledyne SEP Plan").
TELEDYNE SPECIAL MEETING
At the Teledyne Special Meeting, holders of record of Teledyne Common Stock
as of the close of business on July 8, 1996 will consider and vote upon a
proposal to approve and adopt the Combination Agreement and the transactions
contemplated thereby, pursuant to which, among other things, Teledyne Merger
Sub will be merged with and into Teledyne (the "Teledyne Merger") and Teledyne
will become a wholly owned subsidiary of ATI. At the Teledyne Special Meeting,
such stockholders will also consider and vote upon the Compensation Plan
Proposals.
CONSUMMATION OF THE COMBINATION
Upon consummation of the Allegheny Ludlum Merger and the Teledyne Merger
(together, the "Combination"), each issued and outstanding share of Allegheny
Ludlum Common Stock (other than shares owned by Teledyne or any subsidiary of
Teledyne, or shares held in Allegheny Ludlum's treasury immediately prior to
the effective time of the Combination (the "Effective Time")) will be
converted into the right to receive one share of ATI Common Stock, and each
issued and outstanding share of Teledyne Common Stock (other than shares owned
by Allegheny Ludlum or any subsidiary of Allegheny Ludlum, or shares held in
Teledyne's treasury immediately prior to the Effective Time) will be converted
into the right to receive 1.925 shares of ATI Common Stock.
At the Effective Time, all shares of Allegheny Ludlum Common Stock and
Teledyne Common Stock will cease to be outstanding and will be canceled and
retired and will cease to exist (except as set forth above), and each holder
of a certificate formerly representing shares of Allegheny Ludlum Common Stock
or Teledyne Common Stock will thereafter cease to have any rights with respect
thereto, except the right to receive shares of ATI Common Stock to be issued
in consideration therefor upon the surrender of such certificate, without
interest. Fractional shares of ATI Common Stock will not be issuable in
connection with the Combination. Teledyne stockholders otherwise entitled to a
fractional share will be paid the value of such fraction in cash, determined
as described under "The Combination Agreement--Conversion of Securities."
Allegheny Ludlum Common Stock and Teledyne Common Stock are each listed on
the New York Stock Exchange (the "NYSE"), and ATI Common Stock has been
approved for listing on the NYSE subject to official notice of issuance.
Teledyne Common Stock is also listed on the Pacific Stock Exchange. The closing
prices of Allegheny Ludlum Common Stock (NYSE Symbol: "ALS") and Teledyne Common
Stock (NYSE Symbol: "TDY") as reported on the NYSE Composite Tape on July 15,
1996 were $19.00 and $36.125 per share, respectively. There can be no assurance
as to the market prices of Allegheny Ludlum Common Stock or Teledyne Common
Stock at any time prior to the Combination or as to the market price of ATI
Common Stock at any time thereafter. Stockholders are urged to obtain current
market quotations.
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE
OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, ANY SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ATI,
ALLEGHENY LUDLUM, TELEDYNE OR ANY OTHER PERSON. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF ATI, ALLEGHENY LUDLUM OR TELEDYNE SINCE THE DATE HEREOF OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS JOINT PROXY STATEMENT/PROSPECTUS CONTAINS CERTAIN STATEMENTS WITH
RESPECT TO, AMONG OTHER THINGS, THE FINANCIAL CONDITION, RESULTS OF
OPERATIONS, BUSINESS AND PROSPECTS OF ATI FOLLOWING CONSUMMATION OF THE
COMBINATION THAT MIGHT BE CONSIDERED FORWARD-LOOKING, INCLUDING STATEMENTS
RELATING TO SIGNIFICANT COST REDUCTIONS, CASH-FLOW INCREASES AND STRATEGIC
SYNERGIES WHICH THE SENIOR MANAGEMENTS OF ALLEGHENY LUDLUM AND TELEDYNE EXPECT
TO BE ACHIEVED AS A RESULT OF THE COMBINATION (SEE "THE COMBINATION--REASONS
FOR THE COMBINATION; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS"). THESE
FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS
THAT MAY CAUSE ACTUAL COST REDUCTIONS, CASH-FLOW INCREASES AND SYNERGIES TO
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS
INCLUDE, AMONG OTHERS, THOSE SET FORTH UNDER "RISK FACTORS."
AVAILABLE INFORMATION
Allegheny Ludlum and Teledyne are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith each files reports, proxy statements and
other information with the Securities and Exchange Commission (the
"Commission"). The reports, proxy statements and other information filed by
Allegheny Ludlum and by Teledyne with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 7 World Trade Center, Suite 1300, New York,
New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material also can be obtained at prescribed rates from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy, information statements and other information regarding
registrants that file electronically with the Commission. Such reports, proxy,
information statements and other information may be found on the Commission's
site address, http://www.sec.gov. The periodic reports, proxy statements and
other information filed by Allegheny Ludlum and Teledyne with the Commission
may also be inspected at the offices of the NYSE, 20 Broad Street, New York,
New York 10005, and (in the case of Teledyne) at the offices of the Pacific
Stock Exchange, 301 Pine Street, San Francisco, California 94104.
This Joint Proxy Statement/Prospectus is part of a Registration Statement on
Form S-4 (together with all amendments and exhibits thereto, the "Registration
Statement") that has been filed by ATI under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities to be issued
pursuant to the Combination Agreement. As permitted by the rules and
regulations of the Commission, this Joint Proxy Statement/Prospectus does not
contain all of the information set forth in the Registration Statement. Such
additional information may be obtained from the Commission's principal office
in Washington, D.C. Statements contained in this Joint Proxy
Statement/Prospectus or in any document incorporated by reference in this
Joint Proxy Statement/Prospectus as to the contents of any contract or other
document referred to herein or therein are not necessarily complete. In each
instance, reference is hereby made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document and each such statement is qualified in all respects by such
reference.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Allegheny Ludlum (File
No. 1-9498) and by Teledyne (File No. 1-5212) pursuant to the Exchange Act are
incorporated by reference in this Joint Proxy Statement/Prospectus:
1. Annual Report on Form 10-K of Allegheny Ludlum for the fiscal year ended
December 31, 1995;
2. Quarterly Report on Form 10-Q of Allegheny Ludlum for the fiscal quarter
ended March 31, 1996;
3. Current Reports on Form 8-K of Allegheny Ludlum dated April 2, 1996 and
July 1, 1996;
4. Description of Allegheny Ludlum Common Stock contained in Registration
Statement on Form 8-A of Allegheny Ludlum filed on April 27, 1987;
5. Annual Report on Form 10-K of Teledyne for the year ended December 31,
1995;
6. Quarterly Report on Form 10-Q of Teledyne for the quarter ended March 31,
1996;
7. Current Reports on Form 8-K of Teledyne dated April 3, 1996, April 29,
1996 and July 2, 1996; and
8. Description of Teledyne Common Stock contained in Exhibit 1 to
Registration Statement on Form 8-A of Teledyne filed on May 23, 1980.
All documents and reports subsequently filed by Allegheny Ludlum or Teledyne
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Joint Proxy Statement/Prospectus and prior to the date of the
Allegheny Ludlum and Teledyne Special Meetings shall be deemed to be
incorporated by reference in this Joint Proxy Statement/Prospectus and to be
part hereof from the dates of filing of such documents and reports. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein or in any subsequently filed document which is or
is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Joint Proxy
Statement/Prospectus.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
FILED WITH THE COMMISSION THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE
SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST, WITHOUT CHARGE, IN THE CASE OF
DOCUMENTS RELATING TO ALLEGHENY LUDLUM, DIRECTED TO VICE PRESIDENT-GENERAL
COUNSEL AND SECRETARY, ALLEGHENY LUDLUM CORPORATION, 1000 SIX PPG PLACE,
PITTSBURGH, PENNSYLVANIA 15222-5479 (TELEPHONE (412) 394-2800), OR, IN THE
CASE OF DOCUMENTS RELATING TO TELEDYNE, DIRECTED TO SECRETARY, TELEDYNE, INC.,
2049 CENTURY PARK EAST, LOS ANGELES, CALIFORNIA 90067-3101, (TELEPHONE (310)
277-3311). IN ORDER TO ENSURE TIMELY DELIVERY OF ANY DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY AUGUST 8, 1996.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................................................... 3
Incorporation of Certain Documents by Reference.......................... 4
Summary.................................................................. 6
Risk Factors............................................................. 25
Comparative Per Share Data............................................... 28
Market Price and Dividend Data........................................... 29
The Meetings............................................................. 30
General............................................................... 30
Matters to be Considered at the Meetings.............................. 30
Voting at the Meetings; Record Date................................... 30
Proxies............................................................... 34
The Combination.......................................................... 35
Background of the Combination......................................... 35
Reasons for the Combination; Recommendations of the Boards of
Directors............................................................. 43
Opinions of Financial Advisors........................................ 49
Interests of Certain Persons in the Combination....................... 59
Directors and Executive Officers of ATI............................... 61
Security Ownership of ATI After the Combination....................... 63
Stock Option and Stock Purchase Plans................................. 66
Accounting Treatment.................................................. 67
Certain Federal Income Tax Consequences............................... 67
Regulatory Approvals.................................................. 69
Resale Restrictions................................................... 69
No Appraisal Rights................................................... 70
The Combination Agreement................................................ 71
The Combination....................................................... 71
Conversion of Securities.............................................. 71
Representations and Warranties........................................ 72
Certain Covenants..................................................... 73
No Solicitation....................................................... 74
Indemnification and Insurance......................................... 74
Teledyne Stockholder Rights Plan...................................... 75
Stock Plans........................................................... 75
Conditions............................................................ 75
Termination; Termination Fees and Expenses............................ 76
Amendment and Waiver.................................................. 78
The Stockholder Agreements............................................... 79
Unaudited Pro Forma Condensed Combined Financial Information............. 80
Comparison of Stockholder Rights......................................... 88
Description of ATI Capital Stock......................................... 94
The Compensation Plans................................................... 95
Legal Matters............................................................ 119
Experts.................................................................. 119
Stockholder Proposals.................................................... 119
APPENDIX A Agreement and Plan of Merger and Combination
APPENDIX B Opinion of Salomon Brothers Inc
APPENDIX C Opinion of Goldman, Sachs & Co.
APPENDIX D Form of Allegheny Ludlum Shareholder Agreements
APPENDIX E Form of Teledyne Stockholder Agreements
APPENDIX F Performance Share Plan for Key Employees of Allegheny Ludlum
Corporation and Subsidiaries
APPENDIX G Teledyne, Inc. 1996 Senior Executive Performance Plan
</TABLE>
5
<PAGE>
SUMMARY
Following is a summary of certain information contained elsewhere in this
Joint Proxy Statement/Prospectus. Capitalized terms used and not defined in
this summary have the meanings ascribed thereto elsewhere in this Joint Proxy
Statement/Prospectus. Reference is made to, and this summary is qualified in
its entirety by, the more detailed information contained or incorporated by
reference in this Joint Proxy Statement/Prospectus and the Appendices hereto.
Stockholders are urged to read this Joint Proxy Statement/Prospectus and the
Appendices hereto in their entirety.
THE COMPANIES
Allegheny Ludlum.................... Allegheny Ludlum is one of the world's
leading manufacturers of specialty
materials and one of the largest domestic
producers of stainless steel. It
manufactures stainless steel sheet strip,
plate, foil, welded tubing and stampings;
silicon electrical steel sheet and strip;
and other specialty steel and specialty
metals alloys, including tool steels,
magnetic, thermostatic and electronic
sheet and strip, and high-temperature
alloys. The principal executive offices
of Allegheny Ludlum are located at 1000
Six PPG Place, Pittsburgh, Pennsylvania
15222-5479, and its telephone number is
(412) 394-2800.
Teledyne............................ Teledyne is a technology-based
manufacturing corporation serving
worldwide customers with commercial and
government-related aviation and
electronics products; specialty metals
for consumer, industrial and aerospace
applications; and industrial and consumer
products. The principal executive offices
of Teledyne are located at 2049 Century
Park East, Los Angeles, California 90071-
3042, and its telephone number is (310)
277-3311.
ATI................................. ATI is a corporation formed for the
purpose of becoming the parent company of
Allegheny Ludlum and Teledyne as a result
of the Combination. The principal
executive offices of ATI will be located
at 1000 Six PPG Place, Pittsburgh,
Pennsylvania 15222-5479, and its
telephone number will be (412) 394-2800.
THE MEETINGS
Time, Date and Place................ Allegheny Ludlum. The Allegheny Ludlum
Special Meeting is scheduled to be held
on Thursday, August 15, 1996, at Room
1000 Auditorium, 10th Floor, Two Mellon
Bank Center (Union Trust Building), 435
Fifth Avenue, Pittsburgh, Pennsylvania,
commencing at 1:00 p.m., local time.
Teledyne. The Teledyne Special Meeting is
scheduled to be held on Thursday, August
15, 1996, at the Century Plaza Hotel,
2025 Avenue of the Stars, Los Angeles,
California, commencing at 10:00 a.m.,
local time.
6
<PAGE>
Record Dates; Shares Entitled to
Vote................................ Allegheny Ludlum. Only holders of record
of shares of Allegheny Ludlum Common
Stock at the close of business on July 8,
1996 are entitled to notice of and to
vote at the Allegheny Ludlum Special
Meeting. As of July 8, 1996, there were
66,022,376 shares of Allegheny Ludlum
Common Stock outstanding, held by 2,824
holders of record. Each holder of record
of shares of Allegheny Ludlum Common
Stock on the record date is entitled to
cast one vote per share on each matter to
be acted upon or which may properly come
before the Allegheny Ludlum Special
Meeting.
Teledyne. Only holders of record of
shares of Teledyne Common Stock at the
close of business on July 8, 1996, are
entitled to notice of and to vote at the
Teledyne Special Meeting. As of July 8,
1996, there were 56,058,682 shares of
Teledyne Common Stock outstanding, held
by 12,107 holders of record. Each holder
of record of shares of Teledyne Common
Stock on the record date is entitled to
cast one vote per share on each matter to
be acted upon or which may properly come
before the Teledyne Special Meeting.
Purposes of the Meetings............ Allegheny Ludlum. The purpose of the
Allegheny Ludlum Special Meeting is to
consider and vote upon a proposal to
approve and adopt the Combination
Agreement and the transactions
contemplated thereby (including the
Allegheny Ludlum Merger), to consider and
vote upon each of the Compensation Plan
Proposals, and to consider and vote upon
such other matters as may properly be
brought before the Allegheny Ludlum
Special Meeting.
Teledyne. The purpose of the Teledyne
Special Meeting is to consider and vote
upon a proposal to approve and adopt the
Combination Agreement and the
transactions contemplated thereby
(including the Teledyne Merger), to
consider and vote upon each of the
Compensation Plan Proposals, and to
consider and vote upon such other matters
as may properly be brought before the
Teledyne Special Meeting.
Votes Required...................... Allegheny Ludlum Shareholders. The ap-
proval and adoption of the Combination
Agreement and the transactions contem-
plated thereby (including the Allegheny
Ludlum Merger) will require the affirma-
tive vote of the holders of a majority of
the votes cast by the holders of Alle-
gheny Ludlum Common Stock entitled to
vote thereon. The approval of each of the
Compensation Plan Proposals by Allegheny
Ludlum shareholders will require the af-
firmative vote of the holders of a major-
ity of
7
<PAGE>
the shares of Allegheny Ludlum Common
Stock that are present or represented and
entitled to vote at the Allegheny Ludlum
Special Meeting. In connection with the
Combination Agreement, each of Richard P.
Simmons, Chairman of the Board and a di-
rector of Allegheny Ludlum, Arthur H. Ar-
onson, President and Chief Executive Of-
ficer and a director of Allegheny Ludlum,
Robert P. Bozzone, Vice Chairman of the
Board and a director of Allegheny Ludlum,
and Charles J. Queenan, Jr., a director
of Allegheny Ludlum, who owned or had the
exclusive right to vote in the aggregate
22,266,938 shares, or approximately
33.7%, of outstanding Allegheny Ludlum
Common Stock as of June 30, 1996, entered
into an agreement (together, the "Alle-
gheny Ludlum Shareholder Agreements")
with Teledyne pursuant to which each such
Allegheny Ludlum shareholder agreed,
among other things, to vote, and at
Teledyne's request to grant Teledyne his
irrevocable proxy to vote, all shares of
Allegheny Ludlum Common Stock owned by
him in favor of approval and adoption of
the Combination Agreement and the trans-
actions contemplated thereby. See "The
Stockholder Agreements." Each other di-
rector and executive officer of Allegheny
Ludlum who owns Allegheny Ludlum Common
Stock has indicated his or her intention
to vote or direct the vote of all shares
of Allegheny Ludlum Common Stock over
which he or she has voting control in fa-
vor of approval and adoption of the Com-
bination Agreement and the transactions
contemplated thereby. In addition, each
director and executive officer of Alle-
gheny Ludlum who owns Allegheny Ludlum
Common Stock has indicated his or her in-
tention to vote or direct the vote of all
shares of Allegheny Ludlum Common Stock
over which he or she has voting control
in favor of approval of the Compensation
Plan Proposals. As of June 30, 1996, the
directors and executive officers of Alle-
gheny Ludlum, including Messrs. Simmons,
Aronson, Bozzone and Queenan, were the
beneficial owners of approximately 34.4%
of the outstanding shares of Allegheny
Ludlum Common Stock (excluding options or
other rights to acquire shares of Alle-
gheny Ludlum Common Stock). See "The
Meetings."
Teledyne Stockholders. The approval and
adoption by Teledyne stockholders of the
Combination Agreement and the
transactions contemplated thereby
(including the Teledyne Merger) will
require the affirmative vote of the
holders of a majority of the shares of
Teledyne Common Stock outstanding on the
record date for the Teledyne Special
Meeting. The approval of each of the
8
<PAGE>
Compensation Plan Proposals by Teledyne
stockholders will require the affirmative
vote of the holders of a majority of the
shares of Teledyne Common Stock that are
present or represented and entitled to
vote at the Teledyne Special Meeting. In
connection with the Combination Agreement,
each of William P. Rutledge, Chairman of
the Board and Chief Executive Officer and
a director of Teledyne, Donald B. Rice,
President and Chief Operating Officer and
a director of Teledyne, and George A.
Roberts (and Mrs. Roberts), Fayez Sarofim
and Henry E. Singleton, directors of
Teledyne, who owned or had the exclusive
right to vote in the aggregate 8,738,010
shares, or approximately 15.6%, of
outstanding Teledyne Common Stock as of
June 30, 1996, entered into an agreement
(together, the "Teledyne Stockholder
Agreements," and, together with the
Allegheny Ludlum Shareholder Agreements,
the "Stockholder Agreements") with
Allegheny Ludlum pursuant to which each
such Teledyne stockholder agreed, among
other things, to vote, and at Allegheny
Ludlum's request to grant Allegheny Ludlum
his irrevocable proxy to vote, all shares
of Teledyne Common Stock owned by him in
favor of approval and adoption of the
Combination Agreement and the transactions
contemplated thereby. See "The Stockholder
Agreements." Each other director and
executive officer of Teledyne who owns
Teledyne Common Stock has indicated his or
her intention to vote or direct the vote
of all shares of Teledyne Common Stock
over which he or she has voting control in
favor of approval and adoption of the
Combination Agreement and the transactions
contemplated thereby. In addition, each
director and executive officer of Teledyne
who owns Teledyne Common Stock has
indicated his or her intention to vote or
direct the vote of all shares of Teledyne
Common Stock over which he or she has
voting control in favor of approval of the
Compensation Plan Proposals. As of June
30, 1996, the directors and executive
officers of Teledyne other than Mr. LaBow,
including Messrs. Rutledge and Sarofim and
Drs. Rice, Roberts and Singleton, were the
beneficial owners of approximately 16.3%
of the outstanding shares of Teledyne
Common Stock (excluding options or other
rights to acquire shares of Teledyne
Common Stock). See "The Meetings."
Teledyne has noticed for redemption the
outstanding Teledyne Series E Cumulative
Preferred Stock and the redemption date
(August 14, 1996) will occur prior to the
Teledyne Special Meeting. The aggregate
amount
9
<PAGE>
payable to holders of Teledyne Series E
Cumulative Preferred Stock in respect of
such redemption will be approximately $43
million, which amount Teledyne will
irrevocably deposit in trust prior to
such redemption date. Accordingly,
holders of shares of Teledyne Series E
Cumulative Preferred Stock will not be
entitled to vote such shares on the
adoption and approval of the Combination
Agreement and the transactions
contemplated thereby or on any other
matter to be considered and voted upon at
the Teledyne Special Meeting.
THE COMBINATION
Risk Factors........................ For a discussion of certain risk factors
that Allegheny Ludlum shareholders and
Teledyne stockholders should take into
account in determining whether to approve
and adopt the Combination Agreement and
the transactions contemplated thereby,
including the different business profiles
of Allegheny Ludlum, Teledyne and ATI,
the cyclical nature of the specialty met-
als business (which on a pro forma basis
would have accounted for approximately
61% of ATI's 1995 total sales and 65% of
its 1995 total income), the dependence on
foreign sources for and price volatility
of certain raw materials used to produce
specialty metals, potential environmental
liabilities, risks associated with U.S.
government contracting, risks inherent in
export sales, inherent uncertainties as-
sociated with coordinating the operations
conducted by Allegheny Ludlum and
Teledyne following the Combination and
with realizing the cost reductions and
cash-flow increases expected to be real-
ized through the Combination, and the un-
certainty as to future market prices of
ATI Common Stock, see "Risk Factors."
Effects of the Combination.......... At the Effective Time, pursuant to the
Combination Agreement, (i) Allegheny
Ludlum Merger Sub will be merged with and
into Allegheny Ludlum, which will be the
surviving corporation of the Allegheny
Ludlum Merger and thereby become a wholly
owned subsidiary of ATI, (ii) Teledyne
Merger Sub will be merged with and into
Teledyne, which will be the surviving
corporation of the Teledyne Merger and
thereby become a wholly owned subsidiary
of ATI, (iii) each issued and outstanding
share of Allegheny Ludlum Common Stock
(other than shares owned by Teledyne or
any subsidiary of Teledyne, or shares
held in Allegheny Ludlum's treasury
immediately prior to the Effective Time)
will be
10
<PAGE>
converted into the right to receive one
share of ATI Common Stock, and (iv) each
issued and outstanding share of Teledyne
Common Stock (other than shares owned by
Allegheny Ludlum or any subsidiary of
Allegheny Ludlum, or shares held in
Teledyne's treasury immediately prior to
the Effective Time) will be converted
into the right to receive 1.925 shares of
ATI Common Stock. Fractional shares of
ATI Common Stock will not be issuable in
connection with the Combination. Teledyne
stockholders otherwise entitled to a
fractional share will be paid the value
of such fraction in cash determined as
described under "The Combination
Agreement--Conversion of Securities."
On March 29, 1996, the last full trading
day prior to the date on which the
Combination Agreement was executed and
delivered and the Combination was
publicly announced, the closing prices
per share of Allegheny Ludlum Common
Stock and Teledyne Common Stock as
reported on the NYSE Composite Tape were
$18.50 and $28.00, respectively. On July
15, 1996, the most recent practicable
date prior to the printing of this Joint
Proxy Statement/Prospectus, the closing
prices per share of Allegheny Ludlum
Common Stock and Teledyne Common Stock as
reported on the NYSE Composite Tape were
$19.00 and $36.125, respectively. See
"Market Price and Dividend Data."
Based upon the number of outstanding
shares of Allegheny Ludlum Common Stock
and Teledyne Common Stock as of June 30,
1996 and the respective ratios at which
shares of Allegheny Ludlum Common Stock
and Teledyne Common Stock will be
converted into shares of ATI Common Stock
in the Combination, the shareholders of
Allegheny Ludlum and the stockholders of
Teledyne immediately prior to the
consummation of the Combination will own
approximately 38% and 62%, respectively,
of the outstanding shares of ATI Common
Stock immediately following the
consummation of the Combination (for this
purpose, disregarding any shares of
Allegheny Ludlum Common Stock that may be
owned by Teledyne stockholders, and any
shares of Teledyne Common Stock that may
be owned by Allegheny Ludlum
shareholders, immediately prior to the
consummation of the Combination).
As provided in the Combination Agreement,
at the Effective Time each outstanding
stock option or other
11
<PAGE>
right to acquire shares of Allegheny
Ludlum Common Stock or Teledyne Common
Stock pursuant to stock- based
compensation plans of Allegheny Ludlum or
Teledyne will be converted into and
become a right with respect to ATI Common
Stock, and ATI will reserve for issuance
a sufficient number of shares of ATI
Common Stock for delivery upon exercise
of such options and rights. As of June
30, 1996, there were outstanding options
to purchase an aggregate of 1,732,373
shares of Allegheny Ludlum Common Stock
at a weighted average exercise price of
$18.69 per share; 76,000 units,
representing a maximum of 364,800 shares
of Allegheny Ludlum Common Stock, awarded
pursuant to Allegheny Ludlum's
Performance Share Plan for Key Employees;
participant elections to purchase shares
of Allegheny Ludlum Common Stock having
an aggregate value of up to $754,057 and
to designate 3,700 shares of Allegheny
Ludlum Common Stock under Allegheny
Ludlum's Stock Acquisition and Retention
Plan which will result in the issuance of
one share of Allegheny Ludlum Common
Stock for each two shares purchased or
designated; and outstanding options to
purchase an aggregate of 3,941,445 shares
of Teledyne Common Stock at a weighted
average exercise price of $20.71 per
share.
Pursuant to the Combination Agreement,
the Board of Directors of ATI will be
comprised of Richard P. Simmons (Chairman
of the Board and Chairman of the
Executive Committee), Arthur H. Aronson,
Robert P. Bozzone, Paul S. Brentlinger,
Frank V. Cahouet, Diane C. Creel, C. Fred
Fetterolf, Thomas Marshall, W. Craig
McClelland, William G. Ouchi, Charles J.
Queenan, Jr., George A. Roberts, James E.
Rohr, William P. Rutledge, Fayez Sarofim,
and Henry E. Singleton. Messrs. Simmons,
Aronson, Bozzone, Brentlinger, Fetterolf,
Marshall, McClelland, Queenan and Rohr
are currently members of the Board of
Directors of Allegheny Ludlum, and
Messrs. Cahouet, Sarofim and Rutledge,
Ms. Creel and Drs. Ouchi, Roberts and
Singleton are currently members of the
Board of Directors of Teledyne. If, prior
to the Effective Time, any of such
persons who are currently members of the
Board of Directors of Allegheny Ludlum
should die or otherwise be unable or
unwilling to serve as a director of ATI,
then a substitute for such person shall
be designated by Allegheny Ludlum. If,
prior to the Effective Time, any of such
persons who are currently members of the
Board of Directors of Teledyne should die
or otherwise be unable or unwilling to
serve as a director of ATI, then a
12
<PAGE>
substitute for such person shall be
designated by Teledyne. The Combination
Agreement further provides that, at the
Effective Time, the Certificate of
Incorporation and Bylaws of ATI will be
amended and restated in their entireties
to read as set forth in Annexes A and B
to the Combination Agreement,
respectively. Pursuant to such amended
and restated Certificate of Incorporation
and Bylaws, the Board of Directors of ATI
will be comprised of three classes of
directors. Dr. Donald B. Rice has
announced his resignation as a Teledyne
director, officer and employee, effective
immediately prior to the Effective Time,
in order to pursue other opportunities.
It was contemplated, when the Combination
Agreement was initially entered into,
that Dr. Rice would serve as a director
and an officer of ATI following the
Effective Time but he resigned such
positions on July 12, 1996. No
determination has been made as to whether
there will be a replacement for him on
the ATI Board. See "The Combination--
Directors and Executive Officers of ATI."
The Combination Agreement provides that
Richard P. Simmons (Chairman of the Board
of Allegheny Ludlum) will be Chairman of
the Board and Chairman of the Executive
Committee of the Board of ATI, Robert P.
Bozzone (Vice Chairman of the Board of
Allegheny Ludlum) will be Vice Chairman
of the Board of ATI, William P. Rutledge
(Chairman of the Board and Chief
Executive Officer of Teledyne) will be
President and Chief Executive Officer of
ATI, Arthur H. Aronson (President and
Chief Executive Officer of Allegheny
Ludlum) will be an Executive Vice
President of ATI, James L. Murdy (Senior
Vice President--Finance and Chief
Financial Officer of Allegheny Ludlum)
will be Senior Vice President and Chief
Financial Officer of ATI, and Jon D.
Walton (Vice President--General Counsel
and Secretary of Allegheny Ludlum) will
be Vice President--General Counsel and
Secretary of ATI. ATI has entered into an
employment agreement with each of Messrs.
Aronson, Murdy and Walton. See "The
Combination--Directors and Executive
Officers of ATI."
Certain provisions of ATI's Certificate
of Incorporation and Bylaws, in the form
to be effective at the Effective Time,
and Delaware law could have the effect of
making it more difficult for a third
party to acquire, or of discouraging a
third party from attempting to acquire,
control of ATI without the approval of
the Board of Directors of ATI. See
"Comparison of Stockholder Rights" and
"Description of ATI Capital Stock."
13
<PAGE>
The Combination Agreement provides, and
at the Effective Time the amended and
restated Bylaws of ATI will provide, that
the corporate headquarters of ATI will be
located in Pittsburgh, Pennsylvania.
For information with respect to the secu-
rity ownership of ATI following the Com-
bination, see "The Combination--Security
Ownership of ATI After the Combination."
For information with respect to certain
severance payments that might become due
to certain Teledyne employees following
consummation of the Combination, see "The
Combination--Interests of Certain Persons
in the Combination."
Reasons for the Combination......... Allegheny Ludlum. For a discussion of the
factors considered by the Board of
Directors of Allegheny Ludlum in reaching
its decision with respect to the
Combination, the Combination Agreement
and the transactions contemplated
thereby, see "The Combination--Reasons
for the Combination; Recommendations of
the Boards of Directors."
Teledyne. For a discussion of the factors
considered by the Board of Directors of
Teledyne in reaching its decision with
respect to the Combination, the Combina-
tion Agreement and the transactions con-
templated thereby, see "The Combination--
Reasons for the Combination;
Recommendations of the Boards of Direc-
tors."
Recommendations of the Boards of
Directors........................... Allegheny Ludlum. The Board of Directors
of Allegheny Ludlum has determined that
the Combination is in the best interests
of Allegheny Ludlum and its shareholders,
has approved the Combination Agreement
and recommends a vote FOR approval and
adoption of the Combination Agreement and
the transactions contemplated thereby by
the shareholders of Allegheny Ludlum.
Teledyne. The Board of Directors of
Teledyne has determined that the
Combination is in the best interests of
Teledyne and its stockholders, has
approved the Combination Agreement and
recommends a vote FOR approval and
adoption of the Combination Agreement and
the transactions contemplated thereby by
the stockholders of Teledyne.
For a discussion of the factors
considered by the respective Boards of
Directors in reaching their decisions,
see "The Combination--Reasons for the
Combination; Recommendations of the
Boards of Directors."
14
<PAGE>
Opinions of Financial Advisors...... Allegheny Ludlum. Salomon Brothers Inc
("Salomon Brothers") has delivered its
written opinion, dated April 1, 1996, to
the Board of Directors of Allegheny
Ludlum to the effect that, based upon and
subject to various considerations set
forth in such opinion, as of the date of
such opinion, the Combination is fair to
the holders of Allegheny Ludlum Common
Stock from a financial point of view.
Teledyne. Goldman, Sachs & Co. ("Goldman
Sachs") have delivered to the Board of
Directors of Teledyne their written
opinion, dated April 1, 1996, to the
effect that, as of the date of their
opinion, the exchange ratio of 1.925
shares of ATI Common Stock for each share
of Teledyne Common Stock in the
Combination (the "Teledyne Exchange
Ratio") is fair to the Teledyne
stockholders.
The full texts of the opinions of Salomon
Brothers and Goldman Sachs, which set
forth assumptions made, general
procedures followed, matters considered
and limits of review undertaken, are
attached to this Joint Proxy
Statement/Prospectus as Appendices B and
C, respectively, and are incorporated
herein by reference. Shareholders of
Allegheny Ludlum are urged to read
Salomon Brothers' opinion carefully and
in its entirety and stockholders of
Teledyne are urged to read Goldman Sachs'
opinion carefully and in its entirety.
See "The Combination--Opinions of
Financial Advisors."
Interests of Certain Persons in
the Combination..................... In considering the recommendations of
Allegheny Ludlum's and Teledyne's Boards
of Directors, Allegheny Ludlum
shareholders and Teledyne stockholders
should be aware that certain members of
Allegheny Ludlum's management and Board
of Directors and certain members of
Teledyne's management and Board of
Directors have certain interests in the
Combination that are in addition to the
interests of shareholders of Allegheny
Ludlum and stockholders of Teledyne
generally.
Pursuant to the Allegheny Ludlum Stock
Acquisition and Retention Plan, the
forfeiture provisions applicable to
shares of restricted Allegheny Ludlum
Common Stock granted pursuant thereto
lapse immediately upon a "change of
control" (as defined in the Plan) of
Allegheny Ludlum. Approval of the
Combination Agreement and the
transactions contemplated thereby by the
shareholders of Allegheny Ludlum will
constitute a "change of control" of
Allegheny Ludlum for these
15
<PAGE>
purposes unless the participant has
agreed otherwise. Based on the number of
shares of restricted Allegheny Ludlum
Common Stock granted under the Plan and
held as of June 30, 1996, and assuming
Allegheny Ludlum shareholder approval of
the Combination Agreement and the
transactions contemplated thereby had
occurred as of such date, the number of
shares of restricted Allegheny Ludlum
Common Stock held by executive officers
of Allegheny Ludlum as to which
applicable forfeiture provisions would
lapse would be 53,900 in the aggregate,
including 11,796 shares held by James L.
Murdy, Senior Vice President--Finance and
Chief Financial Officer of Allegheny
Ludlum, 8,598 shares held by Robert W.
Rutherford, Senior Vice President--
Commercial of Allegheny Ludlum, 5,468
shares held by Douglas A. Kittenbrink,
Vice President--Engineering and
Information Technology of Allegheny
Ludlum, 2,670 shares held by Carl R.
Moulton, Group Vice President of
Allegheny Ludlum, 9,292 shares held by
Robert S. Park, Vice President--Treasurer
of Allegheny Ludlum, 4,078 shares held by
Richard R. Roeser, Vice President--
Controller of Allegheny Ludlum, 5,464
shares held by David G. Vietmeier, Vice
President--Purchasing of Allegheny
Ludlum, and 6,534 shares held by Jon D.
Walton, Vice President--General Counsel
and Secretary of Allegheny Ludlum, as
well as that number of shares of
restricted Allegheny Ludlum Common Stock
having an aggregate value as of the
applicable purchase date (as defined in
the Plan) of up to $377,029 upon the
effectiveness of irrevocable elections to
purchase or designate shares of Allegheny
Ludlum Common Stock under the Plan,
including that number of shares having a
value of up to $119,000, $67,500,
$60,495, $59,826 and $70,208 to be
awarded to Messrs. Murdy, Moulton,
Roeser, Vietmeier and Walton,
respectively.
Because Teledyne stockholders will own
less than 70% of the outstanding ATI Com-
mon Stock upon consummation of the Combi-
nation, under the terms of Severance
Agreements between Teledyne and each of
its executive officers (collectively, the
"Teledyne Severance Agreements"), each of
Teledyne's executive officers will be en-
titled, if his or her employment is ter-
minated involuntarily (other than for
"cause," disability or death) or volun-
tarily, in either case within one year of
the Effective Time, to receive (i) a lump
sum payment based on a multiple of his or
her annualized compensation, including
performance bonuses, (ii) continuation
for up to two years of the life and
health insurance
16
<PAGE>
benefits that were being provided by
Teledyne to such officer and his or her
family immediately prior to termination,
(iii) personal financial and estate plan-
ning services, and (iv) outplacement
services for up to 52 weeks at Teledyne's
expense (up to a maximum of $15,000).
Each of the Teledyne Severance Agreements
contains identical terms and conditions,
except that the severance compensation
multiple for William P. Rutledge, Chair-
man of the Board and Chief Executive Of-
ficer of Teledyne, is 2.5 and the multi-
ple for the other executive officers is
2.25. Based on annual salary and target
bonus levels in effect as of June 30,
1996 and assuming that the employment of
each of the executive officers of
Teledyne were terminated involuntarily
(other than for "cause," disability or
death) or voluntarily within one year of
the Combination, the severance payments
payable to executive officers of Teledyne
under the Teledyne Severance Agreements
(giving effect to the provisions of the
next sentence) would be $6,597,461 in the
aggregate, including $2,610,076 payable
to Mr. Rutledge, $1,370,000 payable to
Hudson B. Drake, Senior Vice President of
Teledyne, $1,091,090 payable to Gary L.
Riley, Vice President of Teledyne, and
$763,795 payable to Douglas J. Grant,
Treasurer of Teledyne. All severance ben-
efits payable under the Teledyne Sever-
ance Agreements would be reduced to the
extent necessary to prevent any executive
officer from being subject to the excise
tax provisions of Section 4999 of the In-
ternal Revenue Code of 1986, as amended
(the "Code"), applicable to any "excess
parachute payment" (as defined in Section
280G of the Code) and to preserve the
ability of Teledyne to deduct the sever-
ance benefits paid; provided, that the
severance payments payable to a Teledyne
executive officer may not exceed the
amount payable to Teledyne's Chairman and
Chief Executive Officer. Under a Separa-
tion Agreement (which will supersede, if
the Combination is consummated, a
Teledyne Severance Agreement under which
he would have been entitled to a sever-
ance payment under certain circumstanc-
es), Dr. Rice will receive from Teledyne
a severance payment of $3.3 million when
his resignation as a Teledyne director,
officer and employee takes effect immedi-
ately prior to the Effective Time. Dr.
Rice will serve as a consultant to
Teledyne, as well as a supervisory non-
managerial director of the subsidiary
through which Teledyne conducts its Euro-
pean operations, until April 30, 1998.
Pursuant to the Combination Agreement,
certain directors of Allegheny Ludlum and
of Teledyne are or
17
<PAGE>
will become directors of ATI, and certain
officers of Allegheny Ludlum and of
Teledyne are or will become officers of
ATI.
The Combination Agreement provides that,
from and after the Effective Time, ATI
will indemnify and hold harmless each
present and former director and officer
of Allegheny Ludlum and Teledyne and any
of their respective subsidiaries against
any losses, claims, damages, costs,
expenses, liabilities or judgments
incurred in connection with any claim
arising out of matters existing or
occurring at or prior to the Effective
Time, to the full extent that a
corporation is permitted under the
Delaware General Corporation Law (the
"DGCL") to indemnify its own directors or
officers. ATI has also agreed to maintain
in effect for a specified period
directors' and officers' liability
insurance coverage, including coverage
with respect to claims arising from acts,
omissions or other events which occur
prior to or as of the Effective Time.
See "The Combination--Interests of
Certain Persons in the Combination," "The
Combination--Directors and Executive
Officers of ATI," "The Combination--
Security Ownership of ATI After the
Combination," "The Combination
Agreement--Certain Covenants" and "The
Combination Agreement--Indemnification
and Insurance."
Common Stock Dividends.............. The Combination Agreement provides that
Allegheny Ludlum and Teledyne may each
continue to pay cash dividends on shares
of Allegheny Ludlum Common Stock and
shares of Teledyne Common Stock,
respectively, prior to the Effective Time
at quarterly rates not to exceed, in the
case of Allegheny Ludlum, $.13 per share
of Allegheny Ludlum Common Stock in the
second quarter of 1996 and $.16 per share
of Allegheny Ludlum Common Stock in the
third quarter of 1996 and thereafter,
and, in the case of Teledyne, $.31 per
share of Teledyne Common Stock.
It is anticipated that the initial annual
rate of cash dividends to be declared on
shares of ATI Common Stock will be $.64
per share. There can be no assurance as
to the length of time that the level of
such dividend, or any other future
dividend that may be declared by the
Board of Directors of ATI, will be
maintained. The declaration and payment
by ATI of dividends and the amount
thereof will depend upon ATI's results of
operations, financial condition, cash
requirements, future prospects,
limitations imposed by credit agreements
or senior securities and other factors
deemed relevant by its Board of
Directors.
18
<PAGE>
See "Market Price and Dividend Data."
Effective Time of the Combination.. It is anticipated that the Combination
will become effective as promptly as
practicable after the requisite
shareholder and stockholder approvals
have been obtained and all other
conditions to the Combination have been
satisfied or waived. See "The Combination
Agreement--Conditions."
Conditions to the Combination;
Termination of the Combination
Agreement.......................... The obligations of Allegheny Ludlum and
Teledyne to consummate the Combination
are subject to the satisfaction of
certain conditions, including obtaining
requisite shareholder and stockholder
approvals; receipt of all requisite
governmental and regulatory approvals,
including expiration or termination of
all waiting periods applicable to
consummation of the Combination under the
Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act");
the absence of any injunction
prohibiting, or the enactment of any law
making illegal, consummation of the
Combination; receipt of any material
third party consents; the absence of a
material adverse change affecting either
Allegheny Ludlum or Teledyne; the absence
of certain pension law changes; the
receipt of certain legal opinions; and
the receipt of accountants' letters with
respect to qualification of the
Combination as a pooling of interests for
accounting purposes. See "The
Combination--Accounting Treatment," "The
Combination--Certain Federal Income Tax
Consequences," "The Combination--
Regulatory Approvals" and "The
Combination Agreement--Conditions."
Termination of the required waiting
period under the HSR Act with respect to
the Combination became effective on June
27, 1996.
The Combination Agreement is subject to
termination at the option of either
Allegheny Ludlum or Teledyne if the
Combination is not consummated before
September 30, 1996, or prior to such time
upon the occurrence of certain events.
See "The Combination Agreement--
Termination; Termination Fees and
Expenses."
Under certain circumstances, Teledyne may
be required to reimburse Allegheny Ludlum
for its expenses and to pay Allegheny
Ludlum a termination fee of $50,000,000
if the Combination Agreement is
terminated. Under certain circumstances,
Allegheny Ludlum may be required to
reimburse Teledyne for its expenses and
to pay Teledyne a termination fee of
$30,000,000 if the
19
<PAGE>
Combination Agreement is terminated. See
"The Combination Agreement--Termination;
Termination Fees and Expenses."
Exchange of Stock Certificates...... Upon consummation of the Combination,
each holder of a certificate or
certificates representing shares of
Allegheny Ludlum Common Stock or Teledyne
Common Stock outstanding immediately
prior to the Combination will, upon the
surrender thereof (duly endorsed, if
required) to ChaseMellon Shareholder
Services, L.L.C. (the "Exchange Agent"),
be entitled to receive a certificate or
certificates representing the number of
shares of ATI Common Stock into which
such shares of Allegheny Ludlum Common
Stock and Teledyne Common Stock will have
been automatically converted as a result
of the Combination, together with cash in
lieu of fractional shares. The Exchange
Agent will mail a letter of transmittal
with instructions to all holders of
record of Allegheny Ludlum Common Stock
and Teledyne Common Stock as of the
Effective Time for use in surrendering
their stock certificates in exchange for
certificates representing shares of ATI
Common Stock. CERTIFICATES SHOULD NOT BE
SURRENDERED UNTIL THE LETTER OF
TRANSMITTAL AND INSTRUCTIONS ARE
RECEIVED. See "The Combination
Agreement--Conversion of Securities."
No Appraisal Rights................. Neither holders of Allegheny Ludlum
Common Stock nor holders of Teledyne
Common Stock will be entitled to
dissenters' appraisal rights in
connection with the Combination. See "The
Combination--No Appraisal Rights."
Certain Federal Income Tax
Consequences....................... It is intended that the Allegheny Ludlum
Merger and the Teledyne Merger will each
constitute either a reorganization within
the meaning of Section 368(a) of the Code
or a non-recognition exchange of stock
pursuant to Section 351 of the Code, and
that no gain or loss will be recognized
by Allegheny Ludlum or Teledyne and no
gain or loss will be recognized by
Allegheny Ludlum shareholders or Teledyne
stockholders on the exchange of shares of
Allegheny Ludlum Common Stock and
Teledyne Common Stock for ATI Common
Stock pursuant to the Combination.
Consummation of the Combination is
conditioned upon the receipt of opinions
of counsel to Allegheny Ludlum and
Teledyne to such effect. For a further
discussion of certain federal income tax
consequences of the Combination, see "The
Combination--Certain Federal Income Tax
Consequences" and "The Combination
Agreement--Conditions."
20
<PAGE>
Accounting Treatment................ The Combination is intended to qualify as
a pooling of interests for accounting and
financial reporting purposes.
Consummation of the Combination is
subject to various conditions, including
that Allegheny Ludlum shall have received
a letter from Ernst & Young LLP and
Teledyne shall have received a letter
from Arthur Andersen LLP, each such
letter to be dated the date on which the
Effective Time occurs, to the effect, in
the case of the letter from Ernst & Young
LLP, that Allegheny Ludlum qualifies as
an entity that may be a party to a
business combination for which the
pooling of interests method of accounting
is available and that the Combination
will be treated for accounting purposes
as a pooling of interests under generally
accepted accounting principles and, in
the case of the letter from Arthur
Andersen LLP, that Teledyne qualifies as
an entity that may be a party to a
business combination for which the
pooling of interests method of accounting
is available.
Comparison of Stockholder Rights.... Upon consummation of the Combination, the
shareholders of Allegheny Ludlum, a
Pennsylvania corporation, and the
stockholders of Teledyne, a Delaware
corporation, will become stockholders of
ATI, a Delaware corporation. For a
discussion of certain differences between
the corporate laws of Delaware and
Pennsylvania, as well as between the
articles or certificates of incorporation
of Allegheny Ludlum, Teledyne and ATI,
with respect to statutory provisions
affecting business combinations and
control share acquisitions, charter
provisions affecting control and other
transactions, cumulative voting,
classification of directors, the right to
call a special meeting of stockholders,
procedures to bring business before a
meeting of stockholders and stockholders'
ability to take action by consent,
fiduciary duties of directors, and
charter and bylaw amendments, see
"Comparison of Stockholder Rights."
COMPENSATION PLANS.................. For information with respect to the
Compensation Plans and other information
pertaining to the Compensation Plan
Proposals, see "The Compensation Plans."
21
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION
Allegheny Ludlum Selected Financial Data
The selected consolidated financial data of Allegheny Ludlum for each of five
full fiscal years set forth below are derived from audited consolidated
financial statements of Allegheny Ludlum. The selected consolidated financial
data of Allegheny Ludlum for the first fiscal quarters ended March 31, 1996 and
April 2, 1995 have been derived from unaudited consolidated financial
statements which include, in the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
consolidated results of operations and financial position of Allegheny Ludlum
for such periods. The results of operations for any interim period are not
necessarily indicative of results to be expected for future periods or for the
full fiscal year. This summary should be read in conjunction with the financial
statements and other financial information included in documents incorporated
herein by reference. Allegheny Ludlum's fiscal year ends on the Sunday nearest
to December 31 in each year. References in the Joint Proxy Statement/Prospectus
to Allegheny Ludlum's fiscal years ended 1995, 1994, 1993, 1992 and 1991 mean,
respectively, the fiscal years ended December 31, 1995, January 1, 1995,
January 2, 1994, January 3, 1993 and December 29, 1991.
<TABLE>
<CAPTION>
FIRST FISCAL QUARTER FISCAL YEAR
--------------------- ---------------------------------------------
1996 1995 1995(1) 1994(2) 1993(3) 1992(4) 1991
---------- ---------- -------- -------- -------- -------- --------
(UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.............. $ 353.1 $ 395.3 $1,494.3 $1,076.9 $1,100.2 $1,036.0 $1,004.6
Operating income....... 32.1 46.5 178.9 41.4 103.9 76.4 73.7
Income before
cumulative effect
of accounting change
and extraordinary
loss.................. 19.1 28.9 114.8 18.2 70.8 46.9 41.1
Net income (loss)...... $ 19.1 $ 28.9 $ 111.9 $ 18.2 $ 70.8 $ (78.3) $ 41.1
========== ========== ======== ======== ======== ======== ========
Per common share:
Income before
cumulative effect
of accounting change
and extraordinary
loss................. $ .29 $ .41 $ 1.66 $ .26 $ 1.06 $ .71 $ .62
Net income (loss)..... $ .29 $ .41 $ 1.62 $ .26 $ 1.06 $ (1.19) $ .62
========== ========== ======== ======== ======== ======== ========
Cash dividends
declared............. $ .13 $ .12 $ .49 $ .48 $ .47 $ .44 $ .44
BALANCE SHEET DATA
(AT PERIOD END):
Working capital........ $ 284.6 $ 241.6 $ 270.8 $ 225.4 $ 258.9 $ 299.4 $ 192.9
Total assets........... 1,133.9 1,133.7 1,144.3 1,094.7 1,174.0 871.2 764.5
Long-term debt due
after one year........ 180.0 132.0 181.2 133.1 138.9 138.1 48.5
Shareholders' equity... 364.7 374.3 375.4 361.7 403.4 256.9 364.5
</TABLE>
- --------
(1) Includes income from assets held for sale beginning January 2, 1995 and
extraordinary loss of $2.9, net of tax, on early retirement of debt.
(2) The United Steelworkers of America called a strike in the second quarter of
1994 which lasted 10 weeks.
(3) Beginning November 10, 1993, results include acquisition of Jessop Steel
Company.
(4) Net income for 1992 reflects the early adoption of FAS Statement No. 106,
"Accounting For Postemployment Benefits," and the resulting immediate
recognition of a transition obligation of $125.2, net of tax. Amounts
related to postretirement benefits for 1991 are not comparable.
22
<PAGE>
Teledyne Selected Financial Data
The selected consolidated financial data of Teledyne for each of five full
fiscal years set forth below are derived from audited consolidated financial
statements of Teledyne. The selected consolidated financial data of Teledyne
for the first fiscal quarters ended March 31, 1996 and 1995 have been derived
from unaudited consolidated financial statements which include, in the opinion
of management, all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the consolidated results of operations and
financial position of Teledyne for such periods. The results of operations for
any interim period are not necessarily indicative of results to be expected for
future periods or for the full fiscal year. This summary should be read in
conjunction with the financial statements and other financial information
included in documents incorporated herein by reference.
<TABLE>
<CAPTION>
FIRST FISCAL QUARTER FISCAL YEAR
--------------------- -------------------------------------------------
1996(1) 1995(2) 1995(2) 1994(3) 1993(3)(4) 1992(3)(5) 1991(5)
---------- ---------- -------- -------- ---------- ---------- --------
(UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales:
Continuing............ $ 640.3 $ 580.5 $2,429.8 $2,079.1 $2,089.8 $2,143.8 $2,198.2
Discontinued.......... 28.4 45.0 138.0 312.1 401.9 743.8 1,008.6
---------- ---------- -------- -------- -------- -------- --------
Net sales.............. 668.7 625.5 2,567.8 2,391.2 2,491.7 2,887.6 3,206.8
Operating income....... 67.3 59.3 224.9 27.1 105.3 114.2 126.7
Income before
cumulative effect of
accounting changes
and extraordinary
losses................ 62.5 64.3 162.0 (8.4) 72.8 45.9 (25.4)
Net income (loss)...... $ 62.5 $ 64.3 $ 162.0 $ (8.4) $ (116.5) $ 33.2 $ (25.4)
========== ========== ======== ======== ======== ======== ========
Per common share:
Income before
cumulative effect of
accounting changes
and extraordinary
losses............... $ 1.11 $ 1.16 $ 2.88 $ (.15) $ 1.32 $ .83 $ (.46)
Net income (loss)..... $ 1.11 $ 1.16 $ 2.88 $ (.15) $ (2.10) $ .60 $ (.46)
========== ========== ======== ======== ======== ======== ========
Cash dividends
declared (6)......... $ .225 $ .10 $ .40 $ -- $ .80 $ .80 $ .80
BALANCE SHEET DATA
(AT PERIOD END):
Working capital........ $ 424.9 $ 335.0 $ 384.4 $ 292.2 $ 355.2 $ 488.2 $ 505.0
Total assets........... 1,652.9 1,484.4 1,606.2 1,477.7 1,477.8 1,535.9 1,719.4
Long-term debt due
after one year........ 377.9 359.4 380.0 356.6 356.6 449.7 497.1
Redeemable preferred
stock................. 41.5 8.3 33.1 -- -- -- --
Shareholders' equity... 432.2 329.3 395.6 273.0 280.5 441.1 453.9
</TABLE>
- --------
(1) Includes gain of $24.8 million net of tax on the sale of Teledyne's defense
vehicle business.
(2) Includes gain of $30.3 million net of tax on the sale of substantially all
of Teledyne's defense electronic systems business and related assets.
(3) Includes after-tax losses for 1994, 1993 and 1992 of $88.0 million, $10.7
million and $19.0 million, respectively, for charges to resolve certain
U.S. government investigations.
(4) Net income for 1993 reflects the adoption of FAS Statement No. 106,
"Accounting for Postemployment Benefits" and the resulting immediate
recognition of a transition obligation of $185.6, net of tax. Amounts
related to postretirement benefits for 1992 and 1991 are not comparable. In
addition, net income for 1993 includes a gain of $24.2 million on the sale
of Litton Common Stock.
(5) In 1991, Teledyne announced a restructuring plan that included the sale,
closure or transfer of certain operations. Income before tax included
income of $24.4 million in 1992 and a charge of $107.6 million in 1991 for
the effect of restructuring.
23
<PAGE>
(6) Teledyne also declared dividends on Teledyne Common Stock of $.15 per share
in face amount of Teledyne Series E Cumulative Preferred Stock for each
quarter in 1995 and the first quarter of 1996.
(7) Certain reclassifications have been made to the historical financial
information to conform to current presentation.
Unaudited Pro Forma Condensed Combined Summary Financial Information
The unaudited pro forma condensed combined summary financial information set
forth below gives effect to the Combination under the pooling of interests
accounting method. Pro forma combined balance sheet information as of March 31,
1996 combines the balance sheet information of Allegheny Ludlum and Teledyne as
of such date and gives effect to the Combination as if it had occurred on such
date. Pro forma combined statement of income information for the three month
periods ended March 31, 1996 and 1995 and for each of the three years ended
December 31, 1995 combines the results of Allegheny Ludlum and Teledyne for
such fiscal periods and gives effect to the Combination as if it had occurred
at the beginning of the period presented.
The pro forma consolidated balance sheet as of March 31, 1996 gives effect to
anticipated expenses and nonrecurring charges related to the Combination and
assumes that each outstanding share of Allegheny Ludlum Common Stock is
converted into one share of ATI Common Stock and each outstanding share of
Teledyne Common Stock is converted into 1.925 shares of ATI Common Stock. The
pro forma financial information excludes the effect of anticipated revenue
enhancements and expense reductions associated with the combination of the
operations of Allegheny Ludlum and Teledyne. See "The Combination--Reasons for
the Combination; Recommendations of the Boards of Directors."
The pro forma information is presented for illustrative purposes only and is
not necessarily indicative of the combined operating results or financial
position that would have occurred if the Combination had been consummated
during the periods or as of the dates indicated, nor is it necessarily
indicative of future operating results or financial position. See "Risk
Factors" and "Unaudited Pro Forma Condensed Combined Financial Information."
<TABLE>
<CAPTION>
FIRST FISCAL QUARTER FISCAL YEARS
--------------------- --------------------------
1996 1995 1995 1994 1993
---------- ---------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales..................... $ 1,021.8 $ 1,020.8 $4,062.1 $3,468.1 $3,591.9
Income before cumulative
effect of accounting change
and extraordinary items...... 81.6 93.2 276.8 9.8 143.6
Per common share............. .47 .53 1.57 .06 .83
BALANCE SHEET DATA
(AT PERIOD END):
Working capital............... $ 641.3 $ 576.6 $ 635.2 $ 517.6 $ 614.1
Total assets.................. 2,620.1 2,618.1 2,650.5 2,572.4 2,651.8
Long-term debt due after one
year......................... 557.9 491.4 561.1 489.7 495.5
Redeemable preferred stock.... -- 8.3 33.1 -- --
Shareholders' equity.......... 784.9 703.6 765.8 634.7 683.9
</TABLE>
24
<PAGE>
RISK FACTORS
The following factors should be taken into account by holders of Allegheny
Ludlum Common Stock and holders of Teledyne Common Stock in evaluating whether
to approve and adopt the Combination Agreement and the transactions
contemplated thereby, which approval and adoption will, if the other
conditions to the Combination are satisfied, result in their becoming holders
of ATI Common Stock. These factors should be taken into account in conjunction
with the other information included or incorporated by reference in this Joint
Proxy Statement/Prospectus.
DIFFERENT BUSINESS PROFILES OF ALLEGHENY LUDLUM, TELEDYNE AND ATI
Allegheny Ludlum operates in a single business segment, substantially all of
the production and maintenance employees of which are represented by the
United Steelworkers of America: specialty steel. In contrast, Teledyne has
four business segments, with an aggregate of less than 15% of its work force
represented by labor unions: specialty metals; aviation and electronics;
consumer; and industrial. Continuing operations from Teledyne's specialty
metals segment generated sales that contributed approximately 37% of 1995
total sales from continuing operations (for purposes of this section, "total
sales") and those sales contributed approximately 38% of 1995 total income
before taxes, extraordinary losses and cumulative effect of accounting change
(for purpose of this section, "total income"). Thus, Teledyne's other
businesses contributed, in the aggregate, a majority of its total sales and
total income in 1995.
ATI will derive its income from the combined businesses of Allegheny Ludlum
and Teledyne. On a pro forma basis, had the Combination taken effect as of
January 1, 1995 (allocating revenue to ATI's segments on such pro forma basis
in accordance with Teledyne's allocation of revenue to its segments for 1995
and treating all of Allegheny Ludlum's 1995 revenue as attributable to the ATI
specialty metals segment), ATI's four segments would have contributed the
following approximate percentages of 1995 total sales and total income:
specialty metals--61% and 65%, respectively; aviation and electronics--26% and
27%, respectively; consumer--8% and 4%, respectively; and industrial--5% and
4%, respectively.
Accordingly, former Allegheny Ludlum shareholders, by becoming stockholders
of ATI, will be investors in a company the financial results of which will
depend, in significant part, on businesses in which Allegheny Ludlum does not
currently engage and has never engaged. Teledyne stockholders, by becoming
stockholders of ATI, will be investors in a company the financial results of
which will depend to a more significant extent on the specialty metals
industry.
CERTAIN BUSINESS RISKS AFFECTING ATI
Cyclical Nature of Specialty Metals Businesses. Demand for products of ATI's
specialty metals businesses, which, on the pro forma basis indicated under
"Different Business Profiles of Allegheny Ludlum, Teledyne and ATI" above,
would have accounted for approximately 61% of ATI's 1995 total sales and 65%
of its 1995 total income, is cyclical because the industries in which their
customers operate are cyclical and are subject to changes in general economic
conditions, including decreases in the rate of consumption or use of their
products due to economic recessions or due to increases in use or decreases in
price of other materials which may be used in lieu of the materials they
produce, national and international overcapacity, fluctuations in the value of
the United States dollar against other currencies and levels of lower priced
imports, which affect market demand for specialty materials. From time to
time, these industries have experienced significant downturns. Significant
downturns in the domestic economy are believed to have adversely affected the
results of operations of each of Allegheny Ludlum and Teledyne from time to
time during their respective histories as public companies. As a result, ATI's
operating results could be subject to significant fluctuation.
Dependence on Foreign Sources for Certain Principal Raw Materials; Price
Volatility of Certain Critical Raw Materials. Certain of the principal raw
materials used to produce specialty metals can be acquired in large part only
from foreign sources, some of which are located in countries that may be
subject to unstable political and economic conditions which might disrupt
supplies or affect the prices of these materials. Purchase prices of certain
critical raw materials are volatile. As a result, ATI's operating results
could be subject to significant
25
<PAGE>
fluctuation. It is anticipated that ATI may enter into raw material futures
contracts from time to time to hedge its exposure to price fluctuations. It is
expected that these contracts will not be significant to ATI's total raw
material purchases and will not be material from a financial point of view.
Potential Environmental Liabilities. ATI will be subject to various federal,
state, local and foreign environmental laws and regulations. Environmental
laws and regulations have changed rapidly in recent years, and it is likely
that ATI will be subject to increasingly stringent environmental standards in
the future. Allegheny Ludlum and Teledyne believe that their respective
businesses are being operated in compliance in all material respects with
applicable environmental laws and regulations. Allegheny Ludlum and Teledyne
are parties to lawsuits and other proceedings involving alleged violations of
environmental laws. Based on currently available information, management of
Allegheny Ludlum and management of Teledyne do not believe that costs in
excess of those accrued for environmental matters will have a material adverse
effect on ATI. 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 ATI's financial condition or results of
operations.
Risks Associated With U.S. Government Contracting. Teledyne 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 as a whole, and sales under contracts with the Department of
Defense, as prime or sub contractor represented approximately 27% and 21%,
respectively, of Teledyne's 1995 total sales, and 17% and 13%, respectively,
of ATI's 1995 total sales on the pro forma basis indicated under "Different
Business Profiles of Allegheny Ludlum, Teledyne and ATI" above. Such business
has certain inherent risks that could have a material effect on ATI's
business, results of operations and financial condition, including the
following: (1) U.S. Government contracts are conditioned upon the continuing
availability of Congressional appropriations. Congress usually appropriates
funds for a given program on a fiscal-year basis even though contract
performance may take more than one year. Consequently, at the outset of a
major program, the contract is usually 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 U.S. defense
budget has been declining in real terms since the mid-1980's, resulting in
some delays in new program starts, program stretch-outs and program
cancellations, and future significant declines may occur; (2) Most of
Teledyne's U.S. Government contracts are, by their terms, subject to
termination by the U.S. Government either for its convenience or for the
default of the contractor. Termination-for-convenience provisions provide only
for the recovery by Teledyne of costs incurred or committed, settlement
expenses, and profit on work completed prior to termination. Termination-for-
default provisions provide for the contractor to be liable for excess costs
incurred by the U.S. Government in procuring undelivered items from another
source; (3) Teledyne obtains many U.S. Government prime and sub contracts
through the process of competitive bidding. There can be no assurance that
Teledyne will continue to be successful in having its bids accepted or, if
accepted, that awarded contracts will generate sufficient sales to result in
profitability for Teledyne's government contracting businesses; (4) A number
of Teledyne's U.S. Government prime and sub contracts are fixed price-type
contracts, with the inherent risk that actual performance cost may exceed the
contract price. This is particularly true where the contract was awarded and
the price finalized in advance of final completion of design (which may result
in unforeseen technological difficulties and/or cost overruns); and (5)
Teledyne, like other government contractors, has been and is presently subject
to various audits, reviews and investigations (including private party
"whistleblower" lawsuits) relating to its compliance with federal and state
laws. In addition, Teledyne has adopted a rigorous compliance program, which
from time to time surfaces issues that lead to voluntary disclosures to the
U.S. Government. Generally, claims arising out of these U.S. Government
inquiries and voluntary disclosures are resolved without resort to litigation.
However, should the unit involved be charged with wrongdoing, or should the
U.S. Government determine that the unit is not a "presently responsible
contractor," that unit, and conceivably Teledyne, 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, substantial amounts may be expended in defending
such charges and in damages, fines and penalties if such charges are proven or
result in negotiated settlements.
26
<PAGE>
Risks Inherent in Export Sales. During 1995, export sales accounted for 6%
and 20%, respectively, of Allegheny Ludlum's and Teledyne's sales. It is
anticipated that in the future export sales will continue to account for a
significant percentage of ATI's sales. Among the risks associated with export
sales are export controls, changes in legal and regulatory requirements,
policy changes affecting the markets for ATI's products, changes in tax laws
and tariffs, exchange rate fluctuations (which may affect sales to foreign
customers and the value of, and profits earned on, such sales when translated
into U.S. dollars), political and economic instability, accounts receivable
collection, and the seasonality of foreign sales. Any of these factors could
have a material adverse effect on ATI's business, results of operations and
financial condition.
INHERENT UNCERTAINTIES RELATING TO CERTAIN EFFECTS OF THE COMBINATION
Coordination of Operations. The success of the Combination in enhancing
long-term stockholder value depends in part on the ability of the respective
managements of Allegheny Ludlum and Teledyne to coordinate the operations of
their two substantial business enterprises. As in every business combination,
such coordination will require the dedication of management resources, which
may temporarily divert attention from the day-to-day business of ATI. The
difficulties of coordination may be increased by the necessity of managing
geographically separated organizations (Allegheny Ludlum will remain and ATI
will be headquartered in Pittsburgh, whereas Teledyne will remain based in Los
Angeles) and by the fact that three of Teledyne's segments engage in
businesses in which Allegheny Ludlum has never engaged. There can be no
assurance that the coordination necessary to maximize the benefits of the
Combination will be wholly realized.
Realization of Cost Reductions and Cash Flow Increases. The senior
managements of Allegheny Ludlum and Teledyne have identified reductions of at
least $85 million per year in pre-tax expenses and increases of at least $50
million per year in after-tax cash flow which they believe can be achieved,
without taking into account or attempting to quantify any of the incremental
operating profits or other cost savings expected to be realized over time
through the Combination. The Board of Directors of Allegheny Ludlum, and the
Teledyne Special Committee and Board, took into account this expectation in
deciding to approve the Combination Agreement and the transactions
contemplated thereby. See "The Combination--Reasons for the Combination;
Recommendations of the Boards of Directors." In addition, Salomon Brothers and
Goldman Sachs considered these savings in connection with rendering their
respective fairness opinions. See "The Combination--Opinions of Financial
Advisors." There can be no assurance that ATI will be able to realize, or do
so within any particular time frame, the expected cost reductions and cash-
flow increases (a substantial portion of which are based on the ability to
merge the respective pension plans of Allegheny Ludlum and Teledyne and use
the surplus created by such merger to meet both the current underfunding in
Allegheny Ludlum's plans and its obligations for retiree health benefits) or
generate additional revenue to offset any unanticipated inability to realize
such expected cost reductions and cash-flow increases.
UNCERTAINTY AS TO MARKET PRICE OF ATI COMMON STOCK
In light of the considerations set forth above, the fact that ATI will be a
new public company with no trading history, and the inherent uncertainty as to
future market prices of the stock of any public company, the prices at which
Allegheny Ludlum Common Stock and Teledyne Common Stock have traded in the
past or are trading immediately prior to the Effective Time will not
necessarily be indicative of the prices at which ATI Common Stock will trade
following the Effective Time. See "Market Price and Dividend Data."
27
<PAGE>
COMPARATIVE PER SHARE DATA
Set forth below are net income, cash dividends declared and book value per
common share data of Allegheny Ludlum and Teledyne on both historical and
unaudited pro forma combined bases and on a per share equivalent unaudited pro
forma basis. Unaudited pro forma combined per share information is derived
from the unaudited pro forma combined information presented elsewhere herein.
The information set forth below should be read in conjunction with the
respective financial statements of Allegheny Ludlum and Teledyne that are
incorporated by reference in this Joint Proxy Statement/Prospectus and with
the unaudited pro forma combined data included under "Unaudited Pro Forma
Condensed Combined Financial Information."
<TABLE>
<CAPTION>
FIRST
FISCAL QUARTER FISCAL YEAR
----------------------------------
1996 1995 1995 1994 1993
------- ------------ ------ -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ALLEGHENY LUDLUM--HISTORICAL
Net income (1)............................. $ .29 $ .41 $1.66 $ .26 $1.06
Cash dividends declared.................... .13 .12 .49 .48 .47
Book value................................. 5.53 -- -- -- --
TELEDYNE--HISTORICAL
Net income (loss) (2)...................... $ 1.11 $1.16 $2.88 $ (.15) $1.32
Cash dividends declared (3)................ .225 .10 .40 -- .80
Book value................................. 7.73 -- -- -- --
ATI--PRO FORMA COMBINED
Net income (4)............................. $ .47 $ .53 $1.57 $ .06 $ .83
Cash dividends declared (5)................ .16 -- .64 -- --
Book value (6)............................. 4.52 -- -- -- --
EQUIVALENT PRO FORMA COMBINED PER ALLEGHENY
LUDLUM COMMON SHARE (7)
Net income (4)............................. $ .47 $ .53 $1.57 $ .06 $ .83
Cash dividends declared (5)................ .16 -- .64 -- --
Book value (6)............................. 4.52 -- -- -- --
EQUIVALENT PRO FORMA COMBINED PER TELEDYNE
COMMON SHARE (7)
Net income (4)............................. $ .90 $1.02 $3.02 $ .12 $1.60
Cash dividends declared (5)................ .31 -- 1.23 -- --
Book value (6)............................. 8.70 -- -- -- --
</TABLE>
- --------
(1) Earnings per common share before extraordinary item.
(2) Earnings per common share before extraordinary items and cumulative effect
of accounting changes.
(3) Teledyne also declared dividends on Teledyne Common Stock of $.15 per
share in face amount of Teledyne Series E Cumulative Preferred Stock for
each quarter in 1995 and the first quarter of 1996.
(4) Reflects the combination of Allegheny Ludlum earnings per common share
with Teledyne earnings (loss) per common share before extraordinary item
and cumulative effect of accounting change.
(5) Because Allegheny Ludlum and Teledyne are combining in a transaction in
which their respective stockholders will be receiving shares of ATI Common
Stock, equivalent pro forma cash dividends declared is not meaningful. It
is anticipated that the initial annual rate of cash dividends to be
declared on shares of ATI Common Stock will be $.64 per share. There can
be no assurance as to the length of time that the level of such dividend,
or any other future dividend that may be declared by the Board of
Directors of ATI, will be maintained. The declaration and payment by ATI
of dividends and the amount thereof will depend upon ATI's results of
operations, financial condition, cash requirements, future prospects,
limitations imposed by credit agreements or senior securities and other
factors deemed relevant by its Board of Directors.
(6) Gives effect to anticipated expenses and nonrecurring charges of $25
million related to the Combination, but not the effect of anticipated
revenue enhancements and expense reductions associated with the
combination of the operations of Allegheny Ludlum and Teledyne. See "The
Combination--Reasons for the Combination; Recommendations of the Boards of
Directors."
(7) The equivalent pro forma data for Allegheny Ludlum represent the pro forma
data for ATI multiplied by an exchange ratio of 1.0 to 1.0; the equivalent
pro forma data for Teledyne represent the pro forma data for ATI
multiplied by an exchange ratio of 1.925 to 1.0.
28
<PAGE>
MARKET PRICE AND DIVIDEND DATA
Allegheny Ludlum Common Stock is listed on the NYSE and traded under the
symbol "ALS." Teledyne Common Stock is listed and principally traded on the
NYSE under the symbol "TDY" and is also listed on the Pacific Stock Exchange.
The table below sets forth, for the calendar quarters indicated, the range of
high and low sale prices of Allegheny Ludlum Common Stock and Teledyne Common
Stock as reported on the NYSE Composite Tape, and the cash dividends declared
on such stock.
<TABLE>
<CAPTION>
ALLEGHENY LUDLUM COMMON STOCK TELEDYNE COMMON STOCK
-----------------------------------------------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
---------- ---------- ------------------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1994
First Quarter........... $24.875 $18.125 $.12 $26.625 $16.625 $ --
Second Quarter.......... 21.25 17.00 .12 18.625 14.25 --
Third Quarter........... 22.375 18.375 .12 18.875 15.375 --
Fourth Quarter.......... 21.875 18.00 .12 21.125 15.50 --
1995
First Quarter........... 21.375 18.375 .12 27.375 20.00 .10 (1)
Second Quarter.......... 23.00 18.75 .12 26.50 23.375 .10 (1)
Third Quarter........... 22.625 19.75 .12 27.375 22.125 .10 (1)
Fourth Quarter.......... 20.50 16.375 .13 27.625 23.125 .10 (1)
1996
First Quarter........... 21.063 18.00 .13 29.75 24.125 .225(1)
Second Quarter.......... 21.375 17.375 .13 40.125 27.75 .31
Third Quarter (through
July 15, 1996).......... 19.375 18.875 -- 36.875 36.00 --
</TABLE>
- --------
(1) Teledyne also declared dividends on Teledyne Common Stock of $.15 per
share in face amount of Teledyne Series E Preferred Stock for each quarter
in 1995 and the first quarter of 1996.
On March 29, 1996, the last full trading day prior to the date on which the
Combination Agreement was executed and delivered and the Combination was
publicly announced, the closing prices as reported on the NYSE Composite Tape
were $18.50 per share of Allegheny Ludlum Common Stock and $28.00 per share of
Teledyne Common Stock.
On July 15, 1996, the most recent practicable date prior to the printing of
this Joint Proxy Statement/ Prospectus, the closing prices as reported on the
NYSE Composite Tape were $19.00 per share of Allegheny Ludlum Common Stock and
$36.125 per share of Teledyne Common Stock.
It is anticipated that the initial annual rate of cash dividends to be
declared on shares of ATI Common Stock will be $.64 per share. There can be no
assurance as to the length of time that the level of such dividend, or any
other future dividend that may be declared by the Board of Directors of ATI,
will be maintained. The declaration and payment by ATI of dividends and the
amount thereof will depend upon ATI's results of operations, financial
condition, cash requirements, future prospects, limitations imposed by credit
agreements or senior securities and other factors deemed relevant by its Board
of Directors.
ALLEGHENY LUDLUM SHAREHOLDERS AND TELEDYNE STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS FOR ALLEGHENY LUDLUM COMMON STOCK AND TELEDYNE
COMMON STOCK PRIOR TO THE ALLEGHENY LUDLUM SPECIAL MEETING AND THE TELEDYNE
SPECIAL MEETING, RESPECTIVELY. THE PRICES AT WHICH ALLEGHENY LUDLUM COMMON
STOCK AND TELEDYNE COMMON STOCK TRADE MAY NOT BE INDICATIVE OF THE PRICES AT
WHICH ATI COMMON STOCK WILL TRADE (SEE "RISK FACTORS--UNCERTAINTY AS TO MARKET
PRICE OF ATI COMMON STOCK").
29
<PAGE>
THE MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of
Allegheny Ludlum Common Stock in connection with the solicitation of proxies
by the Board of Directors of Allegheny Ludlum for use at the Allegheny Ludlum
Special Meeting to be held on Thursday, August 15, 1996, commencing at 1:00
p.m., local time, and at any adjournment or postponement thereof.
This Joint Proxy Statement/Prospectus is also being furnished to holders of
Teledyne Common Stock in connection with the solicitation of proxies by the
Board of Directors of Teledyne for use at the Teledyne Special Meeting to be
held on Thursday, August 15, 1996, commencing at 10:00 a.m., local time, and
at any adjournment or postponement thereof.
MATTERS TO BE CONSIDERED AT THE MEETINGS
Allegheny Ludlum. At the Allegheny Ludlum Special Meeting, holders of
Allegheny Ludlum Common Stock will consider and vote upon a proposal to
approve and adopt the Combination Agreement and the transactions contemplated
thereby (including the Allegheny Ludlum Merger), consider and vote upon each
of the Compensation Plan Proposals, and consider and vote upon such other
matters as may properly be brought before the Allegheny Ludlum Special
Meeting.
Teledyne. At the Teledyne Special Meeting, holders of Teledyne Common Stock
will consider and vote upon a proposal to approve and adopt the Combination
Agreement and the transactions contemplated thereby (including the Teledyne
Merger), consider and vote upon each of the Compensation Plan Proposals, and
consider and vote upon such other matters as may properly be brought before
the Teledyne Special Meeting.
Boards of Directors Recommendations. The Board of Directors of Allegheny
Ludlum has determined that the Combination is in the best interests of
Allegheny Ludlum and its shareholders, has approved the Combination Agreement
and recommends that Allegheny Ludlum shareholders vote FOR approval and
adoption of the Combination Agreement and the transactions contemplated
thereby.
The Board of Directors of Teledyne has determined that the Combination is in
the best interests of Teledyne and its stockholders, has approved the
Combination Agreement and recommends that Teledyne stockholders vote FOR
approval and adoption of the Combination Agreement and the transactions
contemplated thereby.
The Boards of Directors of Allegheny Ludlum and Teledyne also recommend that
the stockholders of their respective corporations vote FOR approval of all of
the Compensation Plan Proposals.
VOTING AT THE MEETINGS; RECORD DATE
Allegheny Ludlum. The Board of Directors of Allegheny Ludlum has fixed July
8, 1996 as the record date for the determination of Allegheny Ludlum
shareholders entitled to notice of and to vote at the Allegheny Ludlum Special
Meeting. Accordingly, only holders of record of Allegheny Ludlum Common Stock
on that record date will be entitled to notice of and to vote at the Allegheny
Ludlum Special Meeting. As of July 8, 1996, there were 66,022,376 shares of
Allegheny Ludlum Common Stock outstanding, held by 2,824 holders of record.
Each holder of record of shares of Allegheny Ludlum Common Stock on the record
date is entitled to cast one vote per share on the proposal to approve and
adopt the Combination Agreement and the transactions contemplated thereby, on
each of the Compensation Plan Proposals, and on any other matters properly
submitted for the vote of Allegheny Ludlum shareholders, exercisable in person
or by properly executed proxy, at the Allegheny Ludlum Special Meeting. The
presence, in person or by properly executed proxy, of the holders of a
majority of the outstanding shares of Allegheny Ludlum Common Stock entitled
to vote at the Allegheny Ludlum Special Meeting is necessary to constitute a
quorum at the Allegheny Ludlum Special Meeting. Shares represented by duly
completed proxies submitted by nominee holders on behalf of beneficial owners
will be counted as present for purposes of determining the existence of a
quorum for all purposes (even if some such proxies reflect broker non-votes).
In addition, abstentions will be counted as present for purposes of
determining the existence of a quorum.
30
<PAGE>
The approval and adoption by Allegheny Ludlum shareholders of the
Combination Agreement and the transactions contemplated thereby (including the
Allegheny Ludlum Merger) will require the affirmative vote of the holders of a
majority of the votes cast by the holders of Allegheny Ludlum Common Stock
entitled to vote at the Allegheny Ludlum Special Meeting. Abstentions will be
counted as shares present at the Allegheny Ludlum Special Meeting for purposes
of determining the existence of a quorum, but will not be recorded as votes
cast on the proposal. Broker non-votes with respect to the proposal will be
treated as shares not capable of being voted on the proposal. Accordingly,
abstentions and broker non-votes will have no effect either on the minimum
number of affirmative votes necessary to approve the proposal or on the
outcome of voting on the proposal.
The approval of each of the Compensation Plan Proposals by Allegheny Ludlum
shareholders will require the affirmative vote of the holders of a majority of
the shares of Allegheny Ludlum Common Stock that are present or represented at
the Allegheny Ludlum Special Meeting and entitled to vote. Abstentions will be
counted as shares present at the Allegheny Ludlum Special Meeting and will
thus increase the minimum number of affirmative votes necessary to approve
each of the Compensation Plan Proposals. Because they will not be recorded as
votes in favor of the proposals, however, abstentions will have the effect of
votes against the proposals. Broker non-votes with respect to such proposals
will be treated as shares not entitled to be voted on the proposals;
accordingly, broker non-votes will have no effect either on the minimum number
of affirmative votes necessary to approve such proposals or on the outcome of
voting on the proposals. Although the Allegheny Ludlum Performance Plan is
being submitted for approval to the stockholders of Teledyne because benefits
thereunder are contemplated to be made available to employees of Allegheny
Ludlum following the Effective Time, in the event that the shareholders of
Allegheny Ludlum approve the Allegheny Ludlum Performance Plan and the
Combination Agreement is for any reason terminated, the approval of the
Allegheny Ludlum Performance Plan by Allegheny Ludlum shareholders will result
in the approval of the Allegheny Ludlum Performance Plan irrespective of the
vote of Teledyne stockholders with respect to such Plan. See "The Compensation
Plans."
Proxy cards, ballots and voting tabulations that identify individual
shareholders are normally available for examination only by the Judge of
Election, the Corporate Secretary and certain employees associated with
processing proxy cards and tabulating the vote. Allegheny Ludlum does not
disclose the vote of any shareholder except as may be necessary to meet legal
requirements.
The trustee of Allegheny Ludlum's Retirement Savings Plan, the Savings and
Security Plan of Allegheny Ludlum's Tubular Products Division, the Savings and
Security Plan of Allegheny Ludlum's Special Materials Division, the Allegheny
Ludlum Personal Retirement Account Plan and the 401(k) Savings Account Plan
for Employees of Allegheny Ludlum's Washington Plant has the sole right to
exercise all rights relating to Allegheny Ludlum Common Stock held for
participants in such plans. Participants have the right, however, to direct
the trustee as to the manner in which voting and other rights will be
exercised with respect to the full number of shares of Allegheny Ludlum Common
Stock allocated to their accounts and shown on the voting instruction cards
which they will receive from the Plan Administrator. The trustee will vote
shares for which no participant instructions are received in the same
proportion as shares for which participant instructions have been received.
The trustee will exercise its sole discretion in voting or not voting
fractional shares.
If a shareholder is a participant in Allegheny Ludlum's Automatic Dividend
Reinvestment Service for Shareholders, the proxy card represents authority to
vote the number of full shares in the participant's dividend reinvestment
service account on the record date, as well as shares registered in the
participant's name.
Teledyne has entered into an Allegheny Ludlum Shareholder Agreement with
each of Richard P. Simmons, Chairman of the Board and a director of Allegheny
Ludlum, Arthur H. Aronson, President and Chief Executive Officer and a
director of Allegheny Ludlum, Robert P. Bozzone, Vice Chairman of the Board
and a director of Allegheny Ludlum, and Charles J. Queenan, Jr., a director of
Allegheny Ludlum, pursuant to which each such Allegheny Ludlum shareholder has
agreed, among other things, to vote, and at Teledyne's request to grant
Teledyne his irrevocable proxy to vote, all shares of Allegheny Ludlum Common
Stock owned by him
31
<PAGE>
in favor of approval and adoption of the Combination Agreement and the
transactions contemplated thereby. Each such Allegheny Ludlum shareholder has
also agreed not to sell, transfer or encumber any of the shares of Allegheny
Ludlum Common Stock now owned or acquired during the term of the Allegheny
Ludlum Shareholder Agreement by such shareholders. As of June 30, 1996, such
shareholders owned or had the sole power to vote an aggregate of 22,266,938
shares, or approximately 33.7%, of outstanding Allegheny Ludlum Common Stock.
See "The Stockholder Agreements." Each other director and executive officer of
Allegheny Ludlum who owns or has the power to direct the voting of shares of
Allegheny Ludlum Common Stock has advised Allegheny Ludlum that he or she
intends to vote or direct the vote of all shares of Allegheny Ludlum Common
Stock over which he or she has voting control in favor of the approval and
adoption of the Combination Agreement and the transactions contemplated
thereby. In addition, each director and executive officer of Allegheny Ludlum
who owns Allegheny Ludlum Common Stock has indicated his or her intention to
vote or direct the vote of all shares of Allegheny Ludlum Common Stock over
which he or she has voting control in favor of approval of the Compensation
Plan Proposals. As of June 30, 1996, the directors and executive officers of
Allegheny Ludlum, including Messrs. Simmons, Aronson, Bozzone and Queenan,
were the beneficial owners of approximately 34.4% of the outstanding shares of
Allegheny Ludlum Common Stock (excluding shares subject to options or other
acquisition rights).
Teledyne. The Board of Directors of Teledyne has fixed July 8, 1996 as the
record date for the determination of Teledyne stockholders entitled to notice
of and to vote at the Teledyne Special Meeting. Accordingly, only holders of
record of Teledyne Common Stock on that record date will be entitled to notice
of and to vote at the Teledyne Special Meeting. As of July 8, 1996, there were
56,058,682 shares of Teledyne Common Stock outstanding, held by 12,107 holders
of record. Each holder of record of shares of Teledyne Common Stock on the
record date is entitled to cast one vote per share on the proposal to approve
and adopt the Combination Agreement and the transactions contemplated thereby,
on each of the Compensation Plan Proposals, and on any other matters properly
submitted for the vote of Teledyne stockholders, exercisable in person or by
properly executed proxy, at the Teledyne Special Meeting. The presence, in
person or by properly executed proxy, of the holders of a majority of the
outstanding shares of Teledyne Common Stock entitled to vote at the Teledyne
Special Meeting is necessary to constitute a quorum at the Teledyne Special
Meeting. Shares represented by duly completed proxies submitted by nominee
holders on behalf of beneficial owners will be counted as present for purposes
of determining the existence of a quorum for all purposes (even if some such
proxies reflect broker non-votes). In addition, abstentions will be counted as
present for purposes of determining the existence of a quorum.
The approval and adoption by Teledyne stockholders of the Combination
Agreement and the transactions contemplated thereby (including the Teledyne
Merger) will require the affirmative vote of the holders of a majority of the
outstanding shares of Teledyne Common Stock outstanding on the record date for
the Teledyne Special Meeting. Because abstentions and broker non-votes with
respect to the proposal will not be recorded as votes in favor of the
proposal, both abstentions and broker non-votes will have the effect of votes
against the proposal.
The approval of each of the Compensation Plan Proposals by Teledyne
stockholders will require the affirmative vote of the holders of a majority of
the shares of Teledyne Common Stock that are present or represented at the
Teledyne Special Meeting and entitled to vote. Abstentions will be counted as
shares present at the Teledyne Special Meeting will thus increase the minimum
number of affirmative votes necessary to approve each of the Compensation Plan
Proposals. Because they will not be recorded as votes in favor of the
proposals, however, abstentions will have the effect of votes against the
proposals. Broker non-votes with respect to such proposals will be treated as
shares not entitled to be voted on the proposals; accordingly, broker non-
votes will have no effect either on the minimum number of affirmative votes
necessary to approve such proposals or on the outcome of voting on the
proposals. Although the Teledyne SEP Plan is being submitted for approval to
the shareholders of Allegheny Ludlum because payments are contemplated to be
made under the Teledyne SEP Plan to executives of Teledyne following the
Effective Time, in the event that the stockholders of Teledyne approve the
Teledyne SEP Plan and the Combination Agreement is for any reason terminated,
the approval of
32
<PAGE>
the Teledyne SEP Plan by Teledyne stockholders will result in the approval of
the Teledyne SEP Plan irrespective of the vote of Allegheny Ludlum
shareholders with respect to such Plan. See "The Compensation Plans."
The Trustee of the Teledyne 401(k) Plan is responsible for exercising all
rights relating to Teledyne Common Stock held for the accounts of participants
in such plan. However, participants who have elected to invest any portion of
their individual accounts in Teledyne Common Stock (through the "Teledyne
Common Stock Fund") have the right to direct the Trustee as to the manner in
which voting and similar rights will be exercised with respect to the shares
of Teledyne Common Stock allocated to their individual accounts and shown on
the voting instruction cards that they will receive from the Plan
Administrator. The Trustee will vote shares of Teledyne Common Stock for which
no participant instructions are received in the same proportion as shares for
which participant instructions have been received.
Teledyne Common Stock held for the accounts of participants in the Teledyne
Employee Stock Purchase Plan (also known as "The Stock Advantage") will be
voted in accordance with the participants' signed proxy instructions duly
delivered to the Plan Administrator for such plan or, in the case of shares of
Teledyne Common Stock for which instructions are not received, in accordance
with applicable NYSE rules. Because NYSE rules prohibit the Plan Administrator
from voting shares held for the accounts of participants without specific
instructions from such participants, a failure by participants to give voting
instructions with respect to any shares of Teledyne Common Stock will result
in broker non-votes for such shares.
Allegheny Ludlum has entered into a Teledyne Stockholder Agreement with each
of William P. Rutledge, Chairman of the Board and Chief Executive Officer and
a director of Teledyne, Donald B. Rice, President and Chief Operating Officer
and a director of Teledyne, and George A. Roberts (and Mrs. Roberts), Fayez
Sarofim and Henry E. Singleton, directors of Teledyne, pursuant to which each
such Teledyne stockholder has agreed, among other things, to vote, and at
Allegheny Ludlum's request to grant Allegheny Ludlum his irrevocable proxy to
vote, all shares of Teledyne Common Stock owned by him in favor of approval
and adoption of the Combination Agreement and the transactions contemplated
thereby. Each such Teledyne stockholder has also agreed not to sell, transfer
or encumber any of the shares of Teledyne Common Stock now owned or acquired
during the term of the Teledyne Stockholder Agreement by such stockholders. As
of June 30, 1996, such stockholders owned or had the sole power to vote an
aggregate of 8,738,010 shares, or approximately 15.6%, of outstanding Teledyne
Common Stock. See "The Stockholder Agreements." Each other director and
executive officer of Teledyne who owns or has the power to direct the voting
of shares of Teledyne Common Stock has advised Teledyne that he or she intends
to vote or direct the vote of all shares of Teledyne Common Stock over which
he or she has voting control in favor of the approval and adoption of the
Combination Agreement and the transactions contemplated thereby. In addition,
each director and executive officer of Teledyne who owns Teledyne Common Stock
has indicated his or her intention to vote or direct the vote of all shares of
Teledyne Common Stock over which he or she has voting control in favor of
approval of the Compensation Plan Proposals. As of June 30, 1996, the
directors and executive officers of Teledyne other than Mr. LaBow, including
Messrs. Rutledge and Sarofim and Drs. Rice, Roberts and Singleton, were the
beneficial owners of approximately 16.3% of the outstanding shares of Teledyne
Common Stock (excluding shares subject to options or other acquisition
rights).
Teledyne has noticed for redemption the outstanding Teledyne Series E
Cumulative Preferred Stock and the redemption date (August 14, 1996) will
occur prior to the Teledyne Special Meeting. The aggregate amount payable to
holders of Teledyne Series E Cumulative Preferred Stock in respect of such
redemption will be approximately $43 million, which amount Teledyne will
irrevocably deposit in trust prior to such redemption date. Accordingly,
holders of shares of Teledyne Series E Cumulative Preferred Stock will not be
entitled to vote such shares on the adoption and approval of the Combination
Agreement and the transactions contemplated thereby or on any other matter to
be considered and voted upon at the Teledyne Special Meeting.
33
<PAGE>
PROXIES
All shares of Allegheny Ludlum Common Stock and Teledyne Common Stock which
are entitled to vote and are represented at the relevant Special Meeting by
properly executed proxies received prior to or at that Special Meeting, and
not revoked, will be voted at that Special Meeting in accordance with the
instructions indicated on such proxies. If no instructions are indicated, such
proxies will in each case be voted FOR approval and adoption of the
Combination Agreement and the transactions contemplated thereby and FOR
approval of each of the Compensation Plan Proposals.
If any other matters are properly presented at a Special Meeting for
consideration, including, among other things, a motion to adjourn that Special
Meeting to another time and/or place (including, without limitation, for the
purpose of soliciting additional proxies), the persons named in the enclosed
form of proxy and acting thereunder will have discretion to vote on such
matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Corporate Secretary of Allegheny Ludlum or Teledyne, as the case may
be, at or before the taking of the vote at the relevant Special Meeting, a
written notice of revocation bearing a later date than the proxy, (ii) duly
executing a later dated proxy relating to the same shares and delivering it to
the Corporate Secretary of Allegheny Ludlum or Teledyne, as the case may be,
before the taking of the vote at the relevant Special Meeting or (iii)
attending the relevant Special Meeting and voting in person (although
attendance at a Special Meeting will not in and of itself constitute a
revocation of a proxy). Any written notice of revocation or subsequent proxy
should be sent so as to be delivered, in the case of Allegheny Ludlum
shareholders, to Allegheny Ludlum Corporation, 1000 Six PPG Place, Pittsburgh,
Pennsylvania 15222-5479, Attention: Corporate Secretary and, in the case of
Teledyne stockholders, to Teledyne, Inc., 2049 Century Park East, Los Angeles,
California 90067-3101, Attention: Corporate Secretary, or hand delivered to
the designated representatives of Allegheny Ludlum or Teledyne, as the case
may be, at or before the taking of the vote at the relevant Special Meeting.
Except as described under "The Combination Agreement--Termination;
Termination Fees and Expenses," all expenses of this solicitation, excluding
the cost of mailing this Joint Proxy Statement/Prospectus and the filing fee
paid to the Commission in connection with filing the Registration Statement
(which will be shared equally by Allegheny Ludlum and Teledyne), will be paid
by the party incurring the expense. In addition to solicitation by use of the
mails, proxies may be solicited by directors, officers and employees of
Allegheny Ludlum and Teledyne in person or by telephone, telegram or other
means of communication. Such directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. Allegheny Ludlum has retained
D.F. King & Co., Inc. at an estimated cost of $7,500, plus reimbursement of
expenses, to assist in the solicitation of proxies from brokers, nominees,
institutions and individuals on behalf of Allegheny Ludlum. Teledyne has
retained Morrow & Co., Inc. at an estimated cost of $7,500, plus reimbursement
of expenses, to assist in the solicitation of proxies from brokers, nominees,
institutions and individuals on behalf of Teledyne. Arrangements will also be
made with custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
custodians, nominees and fiduciaries, and Allegheny Ludlum and Teledyne will
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
NEITHER ALLEGHENY LUDLUM SHAREHOLDERS NOR TELEDYNE STOCKHOLDERS SHOULD SEND
ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
34
<PAGE>
THE COMBINATION
BACKGROUND OF THE COMBINATION
From time to time over several years prior to November 28, 1994, Teledyne
and Allegheny Ludlum had occasional and general discussions about the
possibility of Allegheny Ludlum acquiring certain of Teledyne's specialty
materials businesses. These discussions were preliminary and inconclusive.
By letter dated November 28, 1994 addressed to the Board of Directors of
Teledyne (the "Teledyne Board"), WHX Corporation, a Delaware corporation that
is the parent company of Wheeling-Pittsburgh Steel Corporation ("WHX"), made
an unsolicited proposal to acquire Teledyne in a merger at a price of $22 per
share of Teledyne Common Stock, approximately 50% payable in cash and
approximately 50% in WHX preferred stock (the "1994 Unsolicited WHX
Proposal").
By letter dated December 19, 1994 addressed to Mr. Ronald LaBow, Chairman of
the Board of WHX, Teledyne advised WHX that the Teledyne Board had considered
the 1994 Unsolicited WHX Proposal; that the Teledyne Board believed Teledyne's
long-term strategic business plans suggested substantial increases in future
values for Teledyne's stockholders; that the Teledyne Board had conducted a
careful evaluation of all factors and circumstances which it considered
relevant, including its view that there was no significant value to Teledyne
stockholders associated with combining Teledyne and WHX; and that the
resultant unanimous conclusion by the Teledyne directors was that they had no
interest in pursuing the 1994 Unsolicited WHX Proposal. In reaching this
conclusion, the Teledyne Board took note of the fact that a substantial
component of the consideration offered by WHX was its own equity securities
and, in assessing the value of such consideration, the Teledyne Board
determined that there was no operational fit between Teledyne and WHX. The
Teledyne Board considered the fact that WHX's principal business is integrated
carbon steel manufacturing, which has a focus, methodology and markets
substantially different than Teledyne's specialty metals business, and that
WHX's non-steel related investments (a 50% interest in a greyhound race track
and a number of radio stations, subsequently sold in 1995) involved businesses
wholly unrelated to Teledyne's operations. The Teledyne Board also concluded
that a combination with WHX involving the receipt of its equity securities by
Teledyne's stockholders would subject them to significant risk by reason of
the extremely capital-intensive requirements of the business of integrated
carbon steel manufacture, as well as WHX's capital structure, which in the
view of the Teledyne Board was characterized by an unusually high proportion
of fixed-cost preferred equity, with correspondingly high fixed charges. On
December 21, 1994, Teledyne publicly announced that the Teledyne Board had
rejected the 1994 Unsolicited WHX Proposal and publicly released its December
19, 1994 letter to WHX. On November 25, 1994, the last trading day preceding
the date of the 1994 Unsolicited WHX Proposal, the closing price of Teledyne
Common Stock on the NYSE was $17 7/8. On December 20, 1994, the last trading
day preceding such announcement of the 1994 Unsolicited WHX Proposal, the
closing price of Teledyne Common Stock on the NYSE was $17 1/8.
On December 21, 1994, WHX publicly announced that it was filing a
notification form (the "WHX HSR Filing") under the HSR Act to allow it to
acquire up to 15% of the outstanding shares of Teledyne Common Stock, the
statutory waiting period applicable to which filing was terminated by the
Federal Trade Commission on January 13, 1995. WHX subsequently disclosed, in
its proxy statement dated March 31, 1995 issued in connection with the 1995
Teledyne Election Contest (as defined below), that it owned an aggregate of
2,477,800 shares of Teledyne Common Stock, representing approximately 4.5% of
the shares of Teledyne Common Stock entitled to vote in the 1995 Teledyne
Election Contest.
On January 5, 1995, Teledyne publicly announced that the Teledyne Board had
adopted a Stockholder Rights Plan (the "Teledyne Stockholders Rights Plan")
entitling all stockholders, except a non-approved acquiror, to purchase a
specified number of additional shares of Teledyne Common Stock at a 50%
discount if, without the prior approval of the Teledyne Board, a person or
group acquired 15% or more of Teledyne Common Stock or engaged in certain
enumerated transactions with Teledyne after making a non-approved stock
acquisition. Teledyne stated that the Teledyne Stockholder Rights Plan was
adopted in light of the 1994
35
<PAGE>
Unsolicited WHX Proposal and the WHX HSR Act filing. Teledyne also announced
that the Teledyne Board had amended Teledyne's Bylaws to require 60 days'
advance notice of a stockholder's intention to nominate board members or
submit proposals for consideration at an annual meeting of stockholders and
also to require that a stockholder desiring to solicit the written consent of
other stockholders request the Teledyne Board to set a record date for the
solicitation within ten days of the request.
In a letter to stockholders dated January 31, 1995 (the "January 31, 1995
Letter"), Teledyne stated (among other things) that the Teledyne Board had
adopted the Teledyne Stockholder Rights Plan in light of its rejection of the
1994 Unsolicited WHX Proposal and to give the Teledyne Board the ability to
respond on the basis of the stockholders' best interests to any unsolicited
takeover attempts; and that the Teledyne Stockholder Rights Plan would help
insure that any transaction involving Teledyne would be on terms approved by
the Teledyne Board and would treat all Teledyne stockholders fairly. In the
January 31, 1995 Letter, Teledyne further stated (among other things) that the
amendment to Teledyne's Bylaws was intended to protect the stockholders'
interests against disruptive uses of the stockholder voting machinery. The
Teledyne Board, in taking these measures, recognized that they could have
certain anti-takeover effects. The Teledyne Stockholder Rights Plan would
cause substantial dilution to a person or group that attempted to acquire
Teledyne without conditioning its offer on the rights issued under the
Teledyne Stockholder Rights Plan (the "Teledyne Rights") being redeemed or on
a substantial number of Rights being acquired; however, the Teledyne Board
also noted that the Rights should not interfere with any transaction (such as
the Combination) approved in advance by the Teledyne Board because the
Teledyne Stockholder Rights Plan empowers Teledyne to exempt transactions from
the operation of the Teledyne Stockholder Rights Plan. The amendment to the
Teledyne Bylaws requires any person or group seeking to solicit the approval
of Teledyne's stockholders to take or refrain from taking action at an annual
meeting of stockholders or by written consent (such as the election of
alternate nominees for election to the Teledyne Board) to disclose its plan
earlier than it might wish to do; however, the Teledyne Board considered that
requiring such disclosure was in the best interests of stockholders in order
to enable the Teledyne Board to formulate an informed position and disseminate
it to all stockholders on a timely basis.
On January 26, 1995 Teledyne publicly announced the resumption of quarterly
dividends on Teledyne Common Stock. In its announcement, Teledyne stated that
the Teledyne Board had declared a dividend of $.25 per share of Teledyne
Common Stock, to be paid $.10 in cash and $.15 in a new issue of Teledyne
Series E Cumulative Preferred Stock. In the January 31, 1995 Letter, Teledyne
stated that the Teledyne Board had resumed the payment of quarterly dividends
on Teledyne Common Stock as a measure of its confidence in Teledyne's future.
The Teledyne Board decided to utilize the Series E Cumulative Preferred Stock
as a means of paying a quarterly dividend in an aggregate amount of $0.25 per
share without the need for an immediate expenditure of that amount in cash. By
reason of the provisions of the Series E Cumulative Preferred Stock that
require the affirmative vote of at least two-thirds of the shares thereof,
voting as a separate class, to approve certain mergers, consolidations and
reorganizations, and because of Teledyne's obligation to redeem the Series E
Cumulative Preferred Stock following a "Change of Control" (as defined in the
Certificate of Designation, Preferences and Rights of Series E Preferred
Stock) for $16.50 per share if such Preferred Stock has not already been
redeemed at Teledyne's option at $15.00 per share (as will be the case in
connection with the Combination), the Series E Cumulative Preferred Stock
could have an effect on whether a Change of Control occurs or the terms of any
transaction pursuant to which a Change of Control would occur.
On February 14, 1995, WHX announced that it intended to commence a proxy
contest (the "1995 Teledyne Election Contest") for the election of directors
of Teledyne at the annual meeting of stockholders of Teledyne
scheduled for April 26, 1995 (the "Teledyne 1995 Annual Meeting"). WHX stated
that it was commencing the 1995 Teledyne Election Contest in light of
Teledyne's rejection of the 1994 Unsolicited WHX Proposal. WHX also announced
that its slate of nominees would be committed, if elected, to the sale or
merger of Teledyne to the highest bona fide bidder in a transaction that would
provide Teledyne stockholders with value of at least $22 per share and that
its nominees, if elected, would seek promptly to cause the Teledyne Board to
retain as advisors a nationally recognized investment banking firm, other than
any advisor to WHX, to assist in soliciting and reviewing bona fide offers for
the sale of Teledyne.
36
<PAGE>
On February 24, 1995, Teledyne received, and publicly announced, a notice
from a wholly owned subsidiary of WHX nominating eight candidates for election
to the Teledyne Board. After Teledyne filed with the Commission its
preliminary proxy material for the Teledyne 1995 Annual Meeting indicating
that the size of the Teledyne Board would be reduced from eight to seven to
reflect the retirement of Dr. George Kozmetsky, its co-founder and one of its
directors, WHX reduced its number of nominees to seven. All of the WHX
nominees for election to the Teledyne Board (the "1995 WHX Nominees") were
directors of WHX.
On March 28, 1995, Teledyne publicly announced (among other things) that,
while it believed that substantial stockholder value would be created through
execution of its business plan, it was committed to determining whether a sale
of Teledyne or other transaction would achieve superior value for Teledyne's
stockholders; that it had commenced a process to solicit offers for the
possible sale of Teledyne, had retained Goldman Sachs, which had been acting
as financial advisor to Teledyne in connection with the 1994 Unsolicited WHX
Proposal and the 1995 Teledyne Election Contest, to assist in this process,
had received and was responding to expressions of interest from third parties
other than WHX, and was providing WHX the opportunity to participate in the
process on the same basis as any other bidder; and that, in view of its
decision to solicit offers, Teledyne had requested WHX to terminate the 1995
Teledyne Election Contest so that Teledyne would not be distracted from its
principal objective of maximizing the value of Teledyne for the benefit of all
of its stockholders.
By letter dated March 28, 1995 to the Teledyne Board from Mr. LaBow, WHX
amended the 1994 Unsolicited WHX Proposal. In its letter, WHX stated that,
based on information furnished to it under a confidentiality letter with
Teledyne dated March 22, 1995, it was offering to acquire Teledyne in a merger
transaction at a price per share of Teledyne Common Stock of $22, payable in a
combination of $18 in cash and $4 in WHX common stock (the "1995 Unsolicited
WHX Proposal"). WHX stated that it was considering Teledyne's request that WHX
terminate the 1995 Teledyne Election Contest but was concerned that the
Teledyne Board had not committed to sell Teledyne by a certain date to the
highest bidder. The Teledyne Board decided that the 1995 Unsolicited WHX
Proposal would be considered by the Teledyne Board as part of the general
process of soliciting and evaluating offers initiated by the Teledyne Board;
accordingly, Teledyne did not separately respond thereto. As indicated below,
in October 1995 the Teledyne Board accepted the recommendation of the Teledyne
Special Committee to discontinue the process because continued implementation
of Teledyne's business plans offered superior value. This represented the
Board's response to (among other expressions of interest) the 1995 Unsolicited
WHX Proposal.
On March 30, 1995, WHX filed preliminary proxy materials with the Commission
in connection with the 1995 Teledyne Election Contest indicating that WHX had
reduced the number of 1995 WHX Nominees to two.
On April 26, 1995, at the conclusion of the Teledyne 1995 Annual Meeting,
Teledyne publicly announced that, while final results of the vote at the
Teledyne 1995 Annual Meeting would await the report of the official Inspectors
of Election, under applicable cumulative voting rules, whereby a candidate
receiving one vote more than 12.5% of the total shares voted would be elected,
it was expected that six of Teledyne's nominees for election to the Teledyne
Board (the "1995 Teledyne Nominees") would be elected to the Teledyne Board
along with one of the 1995 WHX Nominees.
On May 15, 1995, Teledyne publicly announced that, according to the official
report of the Inspectors of Election, the 1995 Teledyne Nominees received 81%
of the votes cast at the Teledyne 1995 Annual Meeting; that, under the
applicable cumulative voting rules, six of the 1995 Teledyne Nominees were re-
elected along with one of the 1995 WHX Nominees; that, at its May 15, 1995
meeting, the newly-elected Teledyne Board had restored its size from seven to
eight members; and that the Teledyne Board now consisted of the seven
individuals who had been serving on the Teledyne Board prior to the Teledyne
1995 Annual Meeting (other than Dr. Kozmetsky), namely Frank V. Cahouet, Diane
C. Creel, Donald B. Rice, George A. Roberts, William P. Rutledge, Fayez
Sarofim and Henry E. Singleton (all of whom, except Dr. Rice, are expected to
be Teledyne's nominees to the initial Board of Directors of ATI pursuant to
the Combination Agreement; see "The Combination--Directors and Executive
Officers of ATI"), plus Mr. LaBow. Teledyne also stated that, while
37
<PAGE>
its recent performance spoke to the success of its business plan, the Teledyne
Board was committed to seeing through to completion the solicitation and
assessment of proposals for the possible sale of Teledyne to determine if such
a sale might provide value for stockholders greater than that which could be
realized by continued implementation of Teledyne's business plan, and that the
Teledyne Board was also reviewing a wide range of other options to enhance
stockholder value. Such other options included various alternative forms of
recapitalization transactions, dispositions of assets or combinations thereof;
however, as indicated below, Teledyne subsequently concentrated its attention
on soliciting offers for the acquisition of the entire company.
At its May 15, 1995 meeting, following the final determination of the
results of the 1995 Teledyne Election Contest including the election of Mr.
LaBow, the Teledyne Board created a special committee (the "Teledyne Special
Committee") consisting of all members of the Teledyne Board except Mr.
Rutledge and Dr. Rice, the two directors who were also employees, and Mr.
LaBow. The Teledyne Special Committee was formed to oversee the process of
soliciting offers for the possible sale of Teledyne that the Teledyne Board
had initiated on March 28, 1996 and all matters that were under consideration
by the Teledyne Board in connection with that process were referred to it. The
Teledyne Special Committee was authorized to explore such possible
transactions as it deemed appropriate for the purpose of evaluating whether
any transaction might provide value for stockholders of Teledyne superior to
the value created by the pursuit of Teledyne's business plan, and to make such
recommendations to the entire Teledyne Board as it considered appropriate with
respect thereto. At a meeting held on June 7, 1995, the Special Committee
elected Dr. Henry E. Singleton, Teledyne's co-founder and largest stockholder,
as its Chairman.
Following its creation, the Teledyne Special Committee oversaw the process
of evaluating interest on the part of third parties in a possible transaction
with Teledyne. The Teledyne Special Committee was assisted by Goldman Sachs,
which had been retained as financial advisors to Teledyne at the time of the
1994 Unsolicited WHX Proposal, in the process of soliciting offers. Goldman
Sachs was in contact with 68 potential acquirors, comprising both industrial
firms (including Allegheny Ludlum, as indicated below) and investment groups.
Preliminary information packages were provided to a significant portion of
such potential acquirors. Scores of parties expressed interest in acquiring
one or more operating companies or business units of Teledyne. However, the
search concentrated on potential buyers which expressed interest in purchasing
the entire company (although, as noted below, Teledyne decided to proceed with
its pre-existing plan to seek to divest its Vehicle Systems business). This
was because, in the view of the Teledyne Special Committee, the disposition of
Teledyne's numerous discrete business units, beyond those non-core units which
were targeted for disposition under Teledyne's ongoing business plan, was
impracticable and highly unlikely to yield after-tax per share value in excess
of that expected to be produced by the business plan itself and because any
process that contemplated a break-up of Teledyne's core businesses would
likely have constituted a significant diversion of management resources over a
lengthy period and could have been detrimental to those businesses. Teledyne
then entered into confidentiality agreements with eight parties which
expressed interest in acquiring the entire company. All of those interested
parties received extensive confidential financial and operating information
and six, including WHX, were briefed in depth by the managers of Teledyne's
operating units. These interested parties discussed with representatives of
Teledyne, over a period of several months ending in October 1995, a variety of
potential transactions, although none of the parties except WHX made a formal
proposal. The potential transactions would have involved either a combination
of a leveraged acquisition and recapitalization or a possible purchase of
Teledyne, in either case at projected per share values which were not
materially in excess of the then-current market price of Teledyne Common
Stock. None of the potential transactions appeared to the Teledyne Special
Committee to present any long-term strategic advantage to Teledyne and its
stockholders since none of them appeared likely, having regard to the identity
of the interested party and/or the proposed terms, to create an opportunity
(through a potential fit of strategically compatible businesses with
consequential potential for cost-savings and enhanced revenue generation, or
otherwise) for the creation of long-term stockholder value in excess of that
expected to be achieved by the continued pursuit of Teledyne's business plan
as a stand-alone company.
In response to an inquiry from Goldman Sachs during the summer of 1995,
Richard P. Simmons, Chairman of the Board of Allegheny Ludlum, expressed
Allegheny Ludlum's interest in exploring the possibility of
38
<PAGE>
acquiring Teledyne's specialty metals business. Allegheny Ludlum did not
express interest in a possible business combination with, or acquisition of
the whole of, Teledyne and, accordingly, was not one of the eight parties with
whom a confidentiality agreement was entered into.
In August 1995, WHX communicated four "hypothetical transaction structures"
for the expressed purpose of facilitating further discussions, two of which
might have involved offers by WHX to acquire Teledyne at a price per share in
excess of the 1995 Unsolicited WHX Proposal, while also stating that it had
not as yet agreed to support any of these hypothetical transactions. All of
such scenarios involved hypothetical transactions in which Teledyne
stockholders would receive for each share of Teledyne Common Stock a
combination of cash and a publicly-traded WHX preferred stock (paying a $3.25
annual dividend and a $50 liquidation preference, and convertible into WHX
common stock at $15.78 per common share). Two of such scenarios hypothetically
involved transactions in which WHX would acquire Teledyne for a per share
price stated to be $30, with either $10 or $15 per share being payable in WHX
preferred stock. With respect to these two hypothetical cases, WHX advised
Teledyne that it might be constrained under its bank credit facilities from
servicing the aggregate level of preferred dividends and was unwilling to
effect those transactions because of "the financial hardship they would create
for the combined entity" and that they were being presented solely for
illustrative purposes. The other two hypothetical cases involved transactions
with a per share price stated to be $24 ($18 in cash and $6 in preferred
stock) and $28 ($19 in cash, $6 in preferred stock and a contingent right to
receive at the end of three years a payment equal to the amount by which $28
exceeded the aggregate per share consideration previously paid).
In September 1995, WHX made an unsolicited overture expressing interest in
possibly acquiring certain defense operations of Teledyne including its
Vehicle Systems business ("TVS") and associated pension assets and surplus.
Thereafter, in discussions with Teledyne, WHX provided various alternative
proposals for, in each case, the acquisition of TVS, together with other
businesses and assets, including pension assets. TVS was one of the non-core
units that had been targeted for divestiture under Teledyne's business plan
before the initiation by the Teledyne Board of the process of soliciting
offers for the entire company. At the time of WHX's unsolicited overture
Teledyne was in negotiations for a possible divesture of TVS to General
Dynamics (which divestiture was subsequently consummated in March 1996), with
which Teledyne had been discussing a possible sale of TVS since before the
1994 Unsolicited WHX Proposal was made. In Teledyne's view, none of WHX's
alternative proposals relating to TVS merited consideration in comparison to
the terms then being negotiated with General Dynamics, nor warranted Teledyne
incurring the risk of jeopardizing a possible transaction with General
Dynamics on those terms, because the WHX proposals would have involved the
disposition of assets, in addition to TVS, which Teledyne did not necessarily
want to transfer, and contemplated prices that Teledyne viewed as
significantly below the value of such assets. At no time did WHX make a firm
offer to acquire Teledyne that superseded or improved on the 1995 Unsolicited
WHX Proposal.
On October 25, 1995, Teledyne publicly announced that the Teledyne Board had
accepted the recommendation of the Teledyne Special Committee to discontinue
active investigation of a possible sale of Teledyne or other extraordinary
transaction. This recommendation of the Special Committee was accepted by the
full Teledyne Board except for Mr. LaBow, who abstained. In the October 25,
1995 announcement, Dr. Singleton stated that the Teledyne Special Committee
had concluded that continued implementation of Teledyne's business plans
offered superior value for Teledyne's stockholders; accordingly, while the
Teledyne Board remained open to any future proposal that provided superior
value to Teledyne's stockholders, continuing an active search for a possible
extraordinary transaction would not be productive, and would be an unnecessary
and unwise diversion of management attention. In the same public announcement,
Mr. Rutledge and Dr. Rice noted that Teledyne had seen four consecutive
quarters of improved earnings year-to-year and that Teledyne intended
aggressively to carry out all elements of its business plans, including
process improvement and new product development, expanded international
business, development of commercial products from defense technologies, and
acquisition of complementary businesses.
On January 31, 1996, Teledyne filed a preliminary shelf registration
statement with the Commission covering a proposed public offering of $400
million principal amount of debt securities (the "Proposed Debt
39
<PAGE>
Offering"). It was contemplated that the proceeds from the Proposed Debt
Offering would be used for general corporate purposes, including refinancing
of existing indebtedness in order to reduce annual interest expense by
approximately $10 million. In view of the pendency of the Combination, no
determination has been made as to whether the Proposed Debt Offering will be
pursued.
By letter dated February 9, 1996 addressed to the Teledyne Board and
publicly released on February 12, 1996 WHX made an unsolicited proposal to
acquire Teledyne in a merger at a price of $30 per share, payable $22 in cash
and the balance in WHX common stock (as amended in the manner described below,
the "1996 Unsolicited WHX Proposal"). In this letter, WHX stated that it was
possible WHX would be prepared to increase its offer if additional information
provided by Teledyne demonstrated to WHX that additional consideration was
warranted. On February 12, 1996 Teledyne publicly announced that it would
respond in due course to the 1996 Unsolicited WHX Proposal.
During the period from February 9, 1996 until the commencement of the
negotiations with Allegheny Ludlum in early March 1996 that culminated in the
execution of the Combination Agreement on April 1, 1996, Teledyne contacted a
limited number of third parties (not including Allegheny Ludlum) to inquire as
to their possible interest in considering a business combination with
Teledyne. The parties contacted were companies which Teledyne believed could
present strategic and synergistic possibilities through a potential fit of
strategically compatible businesses with consequential potential for cost
savings and enhanced revenue generation. These particular contacts did not
result in any meaningful discussions. Teledyne did not enter into any
negotiations with WHX because Teledyne continued to believe, for the reasons
identified above in connection with Teledyne's rejection of the 1994
Unsolicited WHX Proposal, that there was not a strategic fit with WHX and did
not view further discussions with WHX as productive in light of the terms of
the 1996 Unsolicited WHX Proposal and WHX's capital structure. In addition,
Teledyne recognized that WHX was free to propose different terms at any time,
as it had done in 1995 and did again on February 26, 1996 (as noted below).
On February 21, 1996, Teledyne publicly announced the text of a letter being
sent to its stockholders informing them of certain issues relating to the 1996
Unsolicited WHX Proposal. Among other things, such letter stated that, as
demonstrated by its 1995 financial results, Teledyne continued to make
excellent progress against its business plans; that, consistent with its
commitment to maximize stockholder value, the Teledyne Board would consider
any proposals or ideas that might enable it to provide value to stockholders
exceeding what implementation of its business plan could generate and that the
Teledyne Board was reviewing the 1996 Unsolicited WHX Proposal in that
context; and that Teledyne had asked Goldman Sachs to assist the Teledyne
Board in evaluating the 1996 Unsolicited WHX Proposal and had asked WHX to
provide Teledyne with its business plans and financial projections so that
Teledyne could more effectively evaluate the equity component of the 1996
Unsolicited WHX Proposal (WHX provided certain non-public information
regarding its 1996 plans on February 21, 1996). In its publicly-released
letter, Teledyne also stated that, shortly following WHX's announcement of the
1996 Unsolicited WHX Proposal, Standard & Poors had placed both WHX and
Teledyne on credit watch (after having given the Proposed Debt Offering a
favorable preliminary rating) and Moody's Investor Services also had placed
Teledyne on review; that, as a result, the rating process with respect to the
Proposed Debt Offering had been rendered uncertain; and that Goldman Sachs had
advised Teledyne that, despite the then generally favorable interest rate
environment, it was not advisable to proceed with the Proposed Debt Offering
in light of the uncertainty created by the 1996 Unsolicited WHX Proposal.
Although Allegheny Ludlum had not previously been interested in a business
combination with Teledyne, as distinct from considering an acquisition of its
specialty metals business, in the context of Allegheny Ludlum's ongoing
strategic planning and following further review of Teledyne's public filings,
on February 23, 1996, Mr. Simmons contacted Goldman Sachs to request that
Goldman Sachs inform Teledyne that Allegheny Ludlum might be interested in
considering a strategic combination transaction with Teledyne. While Allegheny
Ludlum was generally aware that WHX had previously made proposals to Teledyne,
its determination to consider a strategic combination with Teledyne was not
prompted by the WHX proposals to Teledyne. On February 23, 1996, Goldman Sachs
informed Teledyne of this contact. Goldman Sachs subsequently informed Mr.
Simmons
40
<PAGE>
that Teledyne might be interested in pursuing such a transaction with
Allegheny Ludlum. Mr. Simmons thereafter discussed these conversations with
other representatives of Allegheny Ludlum senior management and members of its
Board of Directors. It was concluded that it would be in Allegheny Ludlum's
interest to proceed with a preliminary confidential investigation of Teledyne.
On February 26, 1996, WHX publicly announced that it had sent a letter to
the Teledyne Board increasing the per share price offered in the 1996
Unsolicited WHX Proposal to $32, payable $22 in cash and the balance in WHX
common stock. On the same date, Teledyne publicly announced that the Teledyne
Board would consider the revised 1996 Unsolicited WHX Proposal. Teledyne also
stated that it would shortly be mailing proxy materials to its stockholders
and would comment on all relevant issues in due course.
On February 29, 1996, Teledyne publicly announced that the Teledyne Board
had concluded that the 1996 WHX Unsolicited Proposal did not measure up to the
value it expected Teledyne's business plan will generate and had concluded
that Teledyne was worth far more than $32 per share. The Teledyne Board,
without ascribing a specific value to Teledyne Common Stock, based this
conclusion on Teledyne's recent financial results, consultations with Goldman
Sachs, views of senior management regarding potential future results, and the
Board's business judgment generally. Teledyne also stated, among other things,
that the Teledyne Board was actively evaluating a variety of measures further
to enhance stockholder value. Teledyne's announcement also reported an
increase in the quarterly per share dividend on Teledyne Common Stock from
$0.25 to $0.375, including $.15 per share face amount of Teledyne Series E
Cumulative Preferred Stock, and that the Teledyne Board intended to pay all
future dividends on Teledyne Common Stock in cash. Teledyne also announced
that its eight candidates for election at the 1996 Annual Meeting of
Stockholders included all current directors, except Mr. LaBow, together with a
nominee not currently on the Teledyne Board (the "1996 Teledyne Nominees").
Mr. LaBow recused himself from the Teledyne Board's decision and vote at the
February 29, 1996 Teledyne Board meeting.
On February 29, 1996, Allegheny Ludlum contacted Teledyne to arrange for the
execution of the confidentiality agreements and the exchange of confidential
information. As a result of these discussions, on March 1, 1996 and March 4,
1996, Teledyne and Allegheny Ludlum executed confidentiality agreements which
provided, among other things, that (i) each company would provide the other
with confidential information regarding itself and a possible transaction with
the other, (ii) each company would keep confidential (except as otherwise
required by applicable law, regulation or legal process) any such information
and the fact that discussions or negotiations were taking place concerning a
possible transaction, and (iii) each company would not, for a three year
period, without the prior written consent of the other, (a) attempt to acquire
the other company or any subsidiary thereof or (b) participate in a proxy
solicitation involving the other company. It was also agreed that
representatives of Allegheny Ludlum senior management would visit Teledyne's
corporate headquarters to meet key personnel and obtain additional information
about Teledyne in order to determine whether or not the companies should
engage in further discussions regarding a possible strategic combination.
On March 3, 1996, WHX publicly announced that it had sent a letter to
Teledyne that day stating that it was extremely disappointed that the Teledyne
Board had rejected the 1996 Unsolicited WHX Proposal and was disturbed by the
Teledyne Board's rejection thereof without any meaningful dialogue or
negotiation. The WHX letter and announcement further stated that because WHX
felt that a combination of the two companies offered significant benefits to
stockholders of both companies, it intended to pursue the transaction by
nominating and seeking to elect a slate of directors committed to the sale of
Teledyne to the highest bidder (the "1996 Teledyne Election Contest").
During the week of March 4, 1996, meetings took place at Teledyne's
corporate headquarters among representatives of Allegheny Ludlum senior
management, representatives of Teledyne senior management and representatives
of Goldman Sachs. In the course of these meetings, non-public information
regarding Teledyne was provided and preliminary discussions took place with
respect to the possible financial terms and structure of a strategic
combination of Allegheny Ludlum and Teledyne, including tax and accounting
issues with respect to such a combination and the synergies that could be
created by such a combination.
41
<PAGE>
On March 14, 1996, the Board of Directors of Allegheny Ludlum received a
report regarding the discussions that had taken place with Teledyne the
previous week at Teledyne's corporate headquarters regarding the possible
strategic combination with Teledyne. Following discussion, the Allegheny
Ludlum Board authorized senior officers of Allegheny Ludlum to continue to
pursue the possibility of a strategic business combination with Teledyne. On
March 15, 1996, Allegheny Ludlum advised Teledyne that Allegheny Ludlum's
Board had authorized continuing discussions with Teledyne.
On March 16, 1996, Allegheny Ludlum contacted Salomon Brothers to discuss
its possible engagement to serve as financial advisor to Allegheny Ludlum in
connection with a possible strategic combination with Teledyne. Salomon
Brothers was subsequently engaged by Allegheny Ludlum to serve as its
financial advisor in connection therewith.
From March 18 through March 21, 1996, representatives of Teledyne's senior
management, Goldman Sachs and Teledyne's legal advisors met with Allegheny
Ludlum's senior officers, representatives of Salomon Brothers and Allegheny
Ludlum's legal advisors. In the course of these meetings, various financial
and structural terms and other issues regarding the possible strategic
combination of Allegheny Ludlum and Teledyne were reviewed, and possible
financial and operational synergies that could be expected to be achieved by
such a combination were considered in detail.
On March 21, 1996, Allegheny Ludlum's Board of Directors was updated
concerning the status of the discussions with Teledyne and provided with
additional background information concerning Teledyne and its business
operations. The various financial aspects of the proposed transaction were
also reviewed with the Board. Following discussions, the Allegheny Ludlum
Board authorized Allegheny Ludlum's senior officers to continue to negotiate
with Teledyne regarding a possible strategic combination of the two companies.
During the course of the following week, Allegheny Ludlum and Teledyne,
assisted by their respective advisors, continued due diligence investigations
with respect to each other. These investigations included various site visits
designed to provide each company with more complete information regarding the
details of the other company's business operations.
On or about March 22, 1996, WHX filed with the Commission definitive proxy
materials relating to the 1996 Teledyne Election Contest. In such proxy
materials, WHX stated (among other things) that the 1996 WHX Nominees were
committed to a sale or merger of Teledyne for a price of at least $32 per
share and, if elected, would seek to (i) solicit and review all acquisition
offers and negotiate the sale of Teledyne and (ii) remove any other barriers
to facilitate a negotiated sale of Teledyne; and that, because of possible
conflicts of interest that might exist if all of the 1996 WHX Nominees were
elected to the Teledyne Board, WHX currently planned that the solicitation
would be conducted by Teledyne together with a nationally recognized
investment banking firm (other than a firm advising, or otherwise providing
investment banking services to, WHX) which the 1996 WHX Nominees would cause
Teledyne to retain, or Teledyne's current investment banking firm. Such proxy
materials also contained information with respect to WHX's beneficial
ownership of Teledyne Common Stock indicating that during the period from
September 9, 1995 to January 18, 1996, WHX had sold an aggregate of 2,238,200
shares of Teledyne Common Stock, including 1,814,300 shares sold in September
1995.
On March 25 through March 27, 1996, certain of Allegheny Ludlum's senior
officers, representatives of Teledyne's senior management and the two
companies' respective financial advisors met at Teledyne's corporate
headquarters. Presentations were made regarding several of Teledyne's
operating businesses, and various financial and operational aspects of a
strategic combination of Allegheny Ludlum and Teledyne were discussed. A
portion of one of these meetings were attended by Dr. Henry E. Singleton,
Teledyne's co-founder and largest stockholder, and by Dr. George A. Roberts, a
director and former Chief Executive Officer of Teledyne.
On March 28, 1996, the Teledyne Special Committee was briefed by
representatives of Teledyne's senior management and its financial and legal
advisors with respect to the status of the discussions and negotiations
42
<PAGE>
taking place with Allegheny Ludlum, including the terms of drafts of the
Combination Agreement and Stockholder Agreements.
On March 29, 1996, Allegheny Ludlum's Board of Directors was updated by
Allegheny Ludlum's senior officers and its financial and legal advisors
regarding the meetings with, and investigation of, Teledyne that had taken
place since March 21, 1996. The Allegheny Ludlum Board also reviewed the
status of negotiations regarding the drafts of the Combination Agreement and
the Stockholder Agreements. Following discussion, the Board of Directors of
Allegheny Ludlum authorized Allegheny Ludlum's senior officers to contact
Teledyne's senior management with a view to finalizing the negotiations with
respect to definitive versions of the Combination Agreement for submission to
the Allegheny Ludlum Board and the Teledyne Board, respectively.
From March 29 through March 31, 1996, negotiations continued with respect to
various aspects of the Combination, including the terms of the Combination
Agreement and the Stockholder Agreements and the transactions contemplated
thereby.
On April 1, 1996, the Board of Directors of Allegheny Ludlum approved the
Combination Agreement and the transactions contemplated thereby, including the
Allegheny Ludlum Merger. Also on April 1, 1996, the Teledyne Special Committee
recommended to the Teledyne Board that it approve the Combination Agreement
and the transactions contemplated thereby, and the Teledyne Board accepted
such recommendation. See "The Combination--Reasons for the Combination;
Recommendations of the Boards of Directors."
On April 1, 1996, following the meetings of the Allegheny Ludlum Board, the
Teledyne Special Committee and the Teledyne Board, the Combination Agreement
and the Stockholder Agreements were executed and publicly announced.
REASONS FOR THE COMBINATION; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Allegheny Ludlum
On April 1, 1996, the Board of Directors of Allegheny Ludlum unanimously
determined that the Combination is in the best interests of Allegheny Ludlum
and its shareholders, approved the Combination Agreement and decided to
recommend approval and adoption of the Combination Agreement and the
transactions contemplated thereby to Allegheny Ludlum shareholders. In
reaching these conclusions, the Board of Directors of Allegheny Ludlum took
into account the following factors:
1. The business and financial advantages expected to result from the
Combination, which include the following:
(i) The Board of Directors of Allegheny Ludlum believes that the
Combination will facilitate the implementation of Allegheny Ludlum's core
strategy to become a more effective global competitor in the highly
competitive specialty metals industry. Allegheny Ludlum is acknowledged to
be one of the world's leading producers of a wide range of specialty
metals, including stainless steels, electrical steels, tool steels and high
technology alloys. Teledyne is an industry leader in the manufacture of a
variety of specialty metals that Allegheny Ludlum does not produce and also
has a leading position in the industries in which these products are used,
including the aircraft and aeronautical industry. The Allegheny Ludlum
Board believes that cross-marketing opportunities will be created by the
Combination which will provide ATI with improved access to the customers of
both Allegheny Ludlum and Teledyne. Teledyne's strong international
distribution network, operating out of centers in Europe and the Far East,
is expected to provide ATI with markets for products manufactured by
Allegheny Ludlum that Allegheny Ludlum currently does not serve. In
addition, as a technology-based manufacturing and engineering company,
Teledyne has advanced systems engineering capabilities that are expected to
provide ATI with an additional resource which, when combined with the
existing strong research capabilities of Allegheny Ludlum, should further
enhance the development of new products as well as new process technologies
that can improve quality and productivity while reducing costs.
43
<PAGE>
(ii) The Allegheny Ludlum Board believes that the Combination will
provide diversification that will balance the cyclicality of Allegheny
Ludlum's current specialty metals business. Teledyne's strong aviation and
electronics, industrial and consumer products businesses are expected to
provide ATI with opportunities in attractive markets which Allegheny Ludlum
does not currently serve. In this connection, the Allegheny Ludlum Board
also considered that certain Allegheny Ludlum shareholders who may be
interested in an investment in a company, such as Allegheny Ludlum, whose
business consists only of specialty metals may not be interested in an
investment in a company, such as ATI, with more diverse businesses.
(iii) The Allegheny Ludlum Board believes that the Combination will
result in substantial cost savings from coordinating certain of Allegheny
Ludlum's and Teledyne's respective operations, and in savings from
economies of scale, volume purchase discounts and other similar factors.
(iv) The Allegheny Ludlum Board believes that the Combination will enable
Allegheny Ludlum to fulfill a long-standing goal of eliminating the only
significant negative on its otherwise-strong balance sheet, namely its
underfunded pension liabilities, and providing for its retiree health and
life insurance liabilities. It is anticipated, based on the amount of
pension assets in excess of projected benefit obligations reflected in
Teledyne's financial statements, that a merger of Teledyne's overfunded
pension plans with Allegheny Ludlum's underfunded pension plans following
the Combination should generate (assuming no material change in current
law) annual pre-tax cash savings of over $50 million for the funding of
pension and retiree medical programs.
(v) The Allegheny Ludlum Board believes that the Combination will result
in opportunities for administrative and financial savings in addition to
those indicated above. These include management's estimates that: (1) based
on a comparison of the historic rates of returns on the investment of the
pension assets of the pension plans of Teledyne and Allegheny Ludlum, a
change in the investment strategy for Teledyne's pension assets to that
utilized by Allegheny Ludlum would have resulted in an after-tax gain of up
to $17 million in 1995; (2) assuming Teledyne's historical levels of
capital expenditures were to continue after the Effective Time, a change in
the depreciation method that has been historically employed by Teledyne to
the method utilized by Allegheny Ludlum would, with respect to future
capital expenditures by Teledyne, result in an after-tax reduction in
annual depreciation costs of approximately $16 million; (3) based on
current market conditions, a refinancing of Teledyne's 10% Subordinated
Debentures due 2004 would result in an annual after-tax interest expense
savings of more than $5 million; and (4) assuming that the Teledyne
Debentures were refinanced, the resulting one-time write-off of bond
discount amortization costs of approximately $15 million net of tax would
eliminate the amortization of these costs in future years, in the amount of
approximately $2 million net of tax annually. Other areas of administrative
and financial savings that were considered included savings from the
reduction of unused credit lines, coordination with respect to insurance
programs and a streamlining of corporate administration.
In considering the above factors, the Allegheny Ludlum Board of Directors
took into account the risk that there could be no assurance that ATI would be
able to realize, or do so within any particular time frame, the expected cost
savings, including the expected administrative and financial savings, or
generate additional revenue to offset any unanticipated inability to realize
such expected cost savings.
2. Information concerning the respective businesses, operations, assets,
financial condition, operating results, strategies and prospects of Allegheny
Ludlum and Teledyne, including the risks associated with Teledyne businesses
that perform work under contracts with the Department of Defense and other
agencies and departments of the U.S. Government and the potential
environmental liabilities relating to Teledyne's businesses.
3. The effect on shareholder value of Allegheny Ludlum continuing as an
independent entity, compared to the effect of a combination of the businesses
of Allegheny Ludlum and Teledyne, in light of the financial condition and
prospects of Allegheny Ludlum and the current economic and industry
environment, including the potential for increased value in ATI as compared to
Allegheny Ludlum or Teledyne alone; and the opportunity for Allegheny Ludlum
shareholders to become stockholders of a larger, more diversified company with
greater
44
<PAGE>
financial resources and a greater possibility of long-term appreciation, of
which Allegheny Ludlum shareholders would own approximately 38% of the common
equity immediately following the Combination.
4. The terms and conditions of the Combination Agreement and related
matters, which were generally reciprocal in nature and the product of arms'
length negotiations.
5. The possible advantages to shareholders of Allegheny Ludlum of becoming
stockholders of a company with a significantly greater market capitalization.
6. The advantages to shareholders of Allegheny Ludlum resulting from the
anticipated initial annual rate of cash dividends to be declared on shares of
ATI Common Stock of $.64 per share, as compared to the current annual rate of
cash dividends on Allegheny Ludlum Common Stock of $.52 per share. In this
connection, the Board of Directors of Allegheny Ludlum also considered that
there could be no assurance as to the length of time that the level of such
dividend, or any other future dividend that may be declared by the Board of
Directors of ATI, will be maintained.
7. The detailed financial analyses and other information with respect to
Allegheny Ludlum and Teledyne presented by Salomon Brothers, as well as the
written opinion of Salomon Brothers to the effect that, based upon and subject
to various considerations set forth in such opinion, as of April 1, 1996, the
Combination is fair to holders of Allegheny Ludlum Common Stock from a
financial point of view.
8. The fact that the Combination would be treated as a pooling of interests
for financial accounting purposes and be a transaction designed to be tax-free
to Allegheny Ludlum shareholders.
9. Recent and current market prices of Allegheny Ludlum Common Stock and
Teledyne Common Stock, and the risk of stock price fluctuations prior to and
following completion of the Combination.
10. The prospective composition of the Board of Directors and executive
management of ATI.
11. The risks associated with coordinating the operations of Allegheny
Ludlum and Teledyne following consummation of the Combination.
The foregoing discussion of the information and factors considered by the
Board of Directors of Allegheny Ludlum is not intended to be exhaustive, but
includes all material factors considered by the Board of Directors of
Allegheny Ludlum. In reaching its determination to approve the Combination
Agreement and the transactions contemplated thereby, the Board of Directors of
Allegheny Ludlum did not assign any relative or specific weights to the
various factors considered by it nor did it specifically characterize any
factor as positive or negative (except as described above), and individual
directors may have given different weights to different factors and may have
viewed certain factors more positively or negatively than others. After
considering the Combination Agreement and the transactions contemplated
thereby, and after considering, among other things, the matters discussed
above, the Board of Directors of Allegheny Ludlum, by unanimous vote, approved
the Combination Agreement and the transactions contemplated thereby as being
in the best interests of Allegheny Ludlum and its shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE BOARD OF DIRECTORS OF ALLEGHENY LUDLUM,
BY UNANIMOUS VOTE, APPROVED THE COMBINATION AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AS BEING IN THE BEST INTERESTS OF ALLEGHENY LUDLUM AND
ITS SHAREHOLDERS, AND RECOMMENDED THAT ALLEGHENY LUDLUM SHAREHOLDERS VOTE TO
APPROVE AND ADOPT THE COMBINATION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE ALLEGHENY LUDLUM MERGER.
Teledyne
On April 1, 1996, the Teledyne Special Committee (which consists of Ms.
Creel, Drs. Roberts and Singleton, and Messrs. Cahouet and Sarofim)
unanimously recommended to the Teledyne Board that it approve
45
<PAGE>
the Combination Agreement and the transactions contemplated thereby and that
it recommend adoption thereof to the stockholders of Teledyne. On the same
date, the Teledyne Board (which at the time consisted of the members of the
Special Committee, together with Mr. LaBow, Dr. Rice and Mr. Rutledge)
accepted the unanimous recommendation of the Teledyne Special Committee. Mr.
LaBow voted against approval of the Combination Agreement at the meeting of
the Teledyne Board held on April 1, 1996; accordingly, the following
description of the factors considered by the Teledyne Board in making its
decision and recommendation reflects the collective views of all of the other
members of the Teledyne Board, each of whom voted in favor of the approval of
the Combination Agreement. At a meeting of the Teledyne Board held on June 25,
1996 to consider various actions relating to the implementation of the
Combination which were recommended by the Teledyne Special Committee, all of
the directors present (including Mr. LaBow) voted to approve and recommend the
amended and restated Combination Agreement to the Teledyne stockholders, as
well as the Allegheny Ludlum Performance Plan and the Teledyne SEP Plan (see,
generally, " The Compensation Plans").
The Teledyne Special Committee and the Teledyne Board each decided that the
Combination is in the best interests of Teledyne and its stockholders. In
making their respective decisions, the Teledyne Special Committee and the
members of the Teledyne Board who voted to approve the adoption of the
Combination Agreement and recommend it to Teledyne stockholders considered the
factors listed below, which collectively constitute all material factors
considered by them in connection with their respective decisions (the full
Board having also considered the Teledyne Special Committee's unanimous
recommendation):
1. The Teledyne Special Committee and the Teledyne Board determined that the
Combination represented a unique opportunity to create significant long-term
stockholder value. In reaching this conclusion, the Teledyne Special Committee
and the Teledyne Board did not ascribe any specific per share notional value
to the Combination or compare any such value to the hypothetical or assumed
value of any other proposal for a transaction with Teledyne that had been
received since November 1994 (all of which had been rejected, as discussed
above), including any of the proposals from WHX or any expressions of interest
from other potential interested parties received during 1995 in connection
with the process of soliciting offers for the sale of Teledyne (see "The
Combination--Background of the Combination"), or compare any such value
against any hypothetical or assumed value for Teledyne Common Stock. Rather,
the Teledyne Special Committee and the Teledyne Board reached this conclusion
on the basis of the perceived merits of the Combination in relation to the
continued pursuit of Teledyne's business plan as a stand-alone company, taking
into account the following factors:
(i) The Teledyne Special Committee's and the Teledyne Board's familiarity
with and review of Teledyne's business, operations, financial condition and
earnings on both an historical and a prospective basis, including without
limitation, its strong earnings growth in 1995, as well as the range of
market prices of Teledyne Common Stock in recent years;
(ii) The information that had been developed by Teledyne's management and
staff and by its outside advisors, including information furnished by
Allegheny Ludlum, with respect to Allegheny Ludlum's business, operations,
financial condition and earnings on both an historical and a prospective
basis (including, without limitation, its long history of consistent
operating profitability), the range of market prices of Allegheny Ludlum
Common Stock in recent years and Allegheny Ludlum's legal and business
affairs generally;
(iii) The fact that the Combination would create a world leader in
specialty metals, with complementary markets and technical expertise and
significant opportunities for product enhancement and cross-marketing;
(iv) The fact that ATI will have strong diversified technology
businesses, with excellent positions in Teledyne's three non-specialty
metals segments (aviation and electronics, industrial and consumer
products); opportunities for technology cross-fertilization with specialty
metals and a substantial counterbalance against the inherent cyclicality of
the specialty metals business;
46
<PAGE>
(v) The significant business and strategic synergies which the senior
managements of both companies expect to be created through increased
distribution of Allegheny Ludlum products both internationally and
domestically, production and service center efficiencies, technology
interchange, reduction of sales, marketing and administrative costs, lower
financing costs and the opportunity to accelerate utilization of Teledyne's
pension surplus. In this regard, the Teledyne Special Committee and the
Teledyne Board noted that the senior managements of both companies had
identified reductions of at least $85 million per year in pre-tax expenses
and increases of at least $50 million per year in after-tax cash flow
(including the cost reductions generated by applying Teledyne's surplus
pension assets to Allegheny Ludlum's underfunded pension and retiree
medical obligations), which such managements believe can be achieved,
without taking into account or attempting to quantify any of the
incremental operating profits or other cost savings expected to be realized
over time through the Combination. The Teledyne Special Committee and the
Teledyne Board also took note of the belief of the senior managements of
both companies that among the factors that were expected to create
significant operating synergies were the reduction of materials costs for
Teledyne special metals operations, Allegheny Ludlum's access to Teledyne's
distribution channels and service centers, and the broadening of Allegheny
Ludlum's overseas presence through Teledyne's international offices.
(vi) The Teledyne Special Committee and the Teledyne Board concluded that
the ability of ATI to realize these opportunities for synergy were enhanced
by the fact that the Board of Directors of ATI would include significant
representation from the current boards of directors of both Teledyne and
Allegheny Ludlum, and that senior management responsibility for ATI would
be shared between members of the current senior managements of Allegheny
Ludlum and Teledyne, so that there would be continuity of oversight and
management from individuals fully conversant with the current businesses
and plans of both companies (see "The Combination--Directors and Executive
Officers of ATI").
(vii) The Teledyne Special Committee and the Teledyne Board considered
the material terms of the Combination, including the conditions to
consummation set forth in the Combination Agreement (see "The Combination
Agreement--Conditions") and the provisions therein for reciprocal cash
payments in the event that the Combination Agreement were terminated by
either company for any of certain specified reasons (see "The Combination
Agreement--Termination; Termination Fees and Expenses").
On the basis of these factors, the Teledyne Special Committee and the
Teledyne Board concluded that, by enabling Teledyne to continue to pursue the
implementation of its existing business plan and at the same time realize the
benefits of being strategically combined with Allegheny Ludlum, the
Combination could be expected to result in the long-term per share value of
ATI Common Stock exceeding the long-term value of Teledyne Common Stock.
2. The Teledyne Special Committee and the Teledyne Board concluded that the
Combination was likely to result in an immediate increase in per share value
for holders of shares of Teledyne Common Stock. The Teledyne Special Committee
and the Teledyne Board noted that the Teledyne exchange ratio of 1.925 shares
of ATI Common Stock for each share of Teledyne Common Stock specified in the
Combination Agreement (the "Teledyne Exchange Ratio") would result in a
current implied value per share of Teledyne Common Stock, based on then-recent
market prices of Teledyne Common Stock and Allegheny Ludlum Common Stock, in
excess of the current and recent market prices of Teledyne Common Stock, and
represented a premium of approximately 27% over the closing price of Teledyne
Common Stock on the NYSE on March 29, 1996 (the last trading day before the
Teledyne Special Committee meeting at which the Combination Agreement was
approved), approximately 25% over the average closing price of Teledyne Common
Stock on the NYSE since the public announcement of the 1996 Unsolicited WHX
Proposal on February 9, 1996 and approximately 24% over the average closing
price of Teledyne Common Stock on the NYSE since the public announcement of
WHX's increase in the 1996 Unsolicited WHX Proposal on February 26, 1996. The
Teledyne Exchange Ratio yielded a current implied value per share of Teledyne
Common Stock of $39.46, $36.58 and $35.61 on March 29, February 9, and
February 26, 1996, respectively, on the basis of the closing price of
Allegheny Ludlum Common Stock on the NYSE on those dates, although the
Teledyne Special Committee and the Teledyne Board recognized
47
<PAGE>
that any determination of current implied value as of any given date was
subject to the daily fluctuations in market price of Teledyne Common Stock and
Allegheny Ludlum Common Stock.
3. The Teledyne Special Committee and the Teledyne Board took account of the
evaluations that had previously been conducted by them with respect to the
1994 Unsolicited WHX Proposal, the 1995 WHX Unsolicited Proposal and the 1996
WHX Unsolicited Proposal, as well as their familiarity with the process of
soliciting offers for Teledyne that had been conducted in 1995 (see "The
Combination--Background of the Combination"). The Teledyne Special Committee
and the Teledyne Board concluded, having regard to those matters and the other
factors set forth above, that the Combination represented the best opportunity
that had presented itself for creating both immediate and long-term value for
Teledyne stockholders in excess of the value expected to be created by the
continued pursuit of Teledyne's business plan on a stand-alone basis.
4. The Teledyne Special Committee and the Teledyne Board considered the
opinion of Goldman Sachs rendered on April 1, 1996 that, as of the date of
such opinion, the Teledyne Exchange Ratio is fair to the holders of Teledyne
Common Stock. See "The Combination--Opinions of Financial Advisors--Teledyne."
A copy of Goldman Sachs' written opinion, setting forth the assumptions made,
matters considered and review undertaken, is attached as Appendix C to this
Joint Proxy Statement/Prospectus. The full text of such opinion is
incorporated herein by reference and the foregoing description thereof is
qualified in its entirety by such reference. Teledyne stockholders are urged
to read this opinion carefully in its entirety.
5. The Teledyne Special Committee and the Teledyne Board noted that the
consummation of the Combination was conditioned on an opinion of Teledyne's
counsel (which opinion such counsel indicated its expectation of being able to
render) to the effect that the Combination would be treated for federal income
tax purposes as either a tax-free reorganization or a non-recognition exchange
of stock, with the effect (among others) that, in general, for federal income
tax purposes no gain or loss would be recognized by Allegheny Ludlum or
Teledyne as a result of the Combination or by a holder of Teledyne Common
Stock with respect to the receipt of ATI Common Stock in the Combination. See
"The Combination--Certain Federal Income Tax Consequences."
6. The Teledyne Special Committee and the Teledyne Board noted that
Allegheny Ludlum had agreed with Teledyne that it would be appropriate to
announce the anticipation of both companies, in executing the Combination
Agreement, that ATI should be able to pay an annual cash dividend of $.64 per
share. The Teledyne Special Committee and the Teledyne Board also noted that,
on the basis of the Teledyne Exchange Ratio, this anticipated initial dividend
rate of $1.23 per share, while less than the annualized cash dividend that the
Board anticipated for 1996 on Teledyne Common Stock (see "Market Price and
Dividend Data"), was approximately 23% higher than the annualized cash
dividend that had been paid on Teledyne Common Stock in 1995, and was
approximately 23% higher than Allegheny Ludlum's current annualized cash
dividend of $0.52 per share.
7. The Teledyne Special Committee and the Teledyne Board noted that several
holders of a substantial number of shares of Teledyne Common Stock (all of
whom are members of the Teledyne Board) and several holders of a substantial
number of shares of Allegheny Ludlum Common Stock (all of whom are members of
the Allegheny Ludlum Board) were willing to demonstrate their support for the
Combination by entering into binding contracts to vote their shares in favor
of adoption of the Combination Agreement (see "The Stockholder Agreements").
The Teledyne Special Committee and the Teledyne Board concluded that, as a
result of these agreements, the likelihood of the consummation of the
Combination was substantially enhanced and the inherent risks of disruption
and diversion attendant on the announcement of a business combination in the
current merger and acquisition environment were limited.
8. The Teledyne Special Committee and the Teledyne Board took account of the
fact that there were certain risks associated with the Combination from the
perspective of the Teledyne stockholders (see "Risk Factors") but concluded
that such risks were limited and were outweighed by the potential benefits.
The Teledyne Special Committee and the Teledyne Board considered the following
factors:
48
<PAGE>
(i) The fact that ATI would have a different business profile from
Teledyne, with significantly more of its business operations concentrated
in a single segment (specialty metals). The Teledyne Special Committee and
the Teledyne Board were also familiar with the uncertainties inherent in
the specialty metals business by reason of its cyclical nature and its
dependence on certain raw materials. The Teledyne Special Committee and the
Teledyne Board concluded that, in view of Teledyne's own familiarity with
the specialty metals business, including strategies for addressing such
inherent uncertainties, and the significant operating synergies that could
be expected to be achieved by reason of the compatibility of Allegheny
Ludlum's business with the business of Teledyne's specialty metals segment,
the changed business profile of ATI could be expected to have benefits to
Teledyne's stockholders in addition to those expected to be realized by the
continued pursuit of Teledyne's business plan.
(ii) The inherent uncertainties relating to the successful coordination
of operations and realization of cost savings necessary to maximize the
benefits of the Combination. The Teledyne Special Committee and the
Teledyne Board concluded that various factors should ameliorate those
uncertainties, including the fact that the Board of Directors of ATI would
be comprised of current directors of Allegheny Ludlum and Teledyne, and
that senior management responsibility at ATI would be shared among the
senior executive officers of Allegheny Ludlum and Teledyne (see "The
Combination--Directors and Executive Officers of ATI"), and the fact that,
by reason of the structure of the Combination, the operating identity of
the respective businesses of Allegheny Ludlum and Teledyne would be
preserved and the individuals responsible for the day-to-day operations of
those businesses would generally retain that responsibility. The Teledyne
Special Committee and the Teledyne Board also noted that the savings in
pre-tax expenses and after-tax cash flow which the senior managements of
Allegheny Ludlum and Teledyne believe can be achieved do not take into
account an attempt to quantify any of the incremental operating profits or
cost savings they expect to be realized over time through the Combination
but, rather, are based on specifically identified categories of targeted
cost savings.
The foregoing discussion of the factors considered by the Teledyne Special
Committee and the Teledyne Board is not intended to be exhaustive but
summarizes all material factors considered. Neither the Teledyne Special
Committee nor the Teledyne Board assigned any relative or specific weights to
the foregoing factors nor did it specifically characterize any factor as
positive or negative (except as described above), and individual directors may
have given differing weights to differing factors and may have viewed certain
factors more positively or negatively than others. Throughout their respective
deliberations, the Teledyne Special Committee and the Teledyne Board received
the advice of Teledyne's financial advisors, Goldman Sachs, its general
outside counsel, Irell & Manella LLP, and its special outside employee
benefits counsel, O'Melveny & Myers.
THE BOARD OF DIRECTORS OF TELEDYNE RECOMMENDS THAT TELEDYNE STOCKHOLDERS
VOTE TO APPROVE AND ADOPT THE COMBINATION AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
OPINIONS OF FINANCIAL ADVISORS
Allegheny Ludlum
Salomon Brothers has acted as the exclusive financial advisor to Allegheny
Ludlum in connection with the Combination. Pursuant to this engagement,
Salomon Brothers delivered to the Allegheny Ludlum Board its written opinion
dated April 1, 1996, to the effect that, based upon and subject to various
considerations set forth in such opinion, as of the date of such opinion, the
Combination is fair to the holders of Allegheny Ludlum Common Stock from a
financial point of view.
THE FULL TEXT OF SALOMON BROTHERS' OPINION DATED APRIL 1, 1996, WHICH SETS
FORTH THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED, MATTERS CONSIDERED
AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX B TO THIS JOINT
PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY REFERENCE. SALOMON
BROTHERS' OPINION IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, OF THE COMBINATION AND DOES NOT ADDRESS ALLEGHENY LUDLUM'S UNDERLYING
BUSINESS DECISION TO EFFECT THE COMBINATION OR CONSTITUTE A RECOMMENDATION
CONCERNING HOW HOLDERS OF ALLEGHENY LUDLUM COMMON STOCK SHOULD VOTE WITH
RESPECT
49
<PAGE>
TO THE COMBINATION. THE SUMMARY OF SALOMON BROTHERS' OPINION SET FORTH BELOW
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SALOMON
BROTHERS' OPINION ATTACHED AS APPENDIX B HERETO. ALLEGHENY LUDLUM SHAREHOLDERS
ARE URGED TO, AND SHOULD, READ THE OPINION CAREFULLY AND IN ITS ENTIRETY.
In arriving at its opinion, Salomon Brothers reviewed certain publicly
available business and financial information relating to Allegheny Ludlum and
Teledyne, as well as certain other information, including financial
projections, provided to it by Allegheny Ludlum and Teledyne. Salomon Brothers
discussed the past and current operations and financial condition and
prospects of Allegheny Ludlum and Teledyne with members of senior management
of such companies. Salomon Brothers also considered such other information,
financial studies, analyses, investigations and financial, economic, market
and trading criteria as it deemed relevant.
Salomon Brothers assumed and relied on the accuracy and completeness of the
information reviewed by it for the purpose of its opinion and did not assume
any responsibility for any independent verification of such information or for
any independent evaluation or appraisal of the assets of Allegheny Ludlum or
Teledyne. With respect to Allegheny Ludlum's and Teledyne's financial
projections, Salomon Brothers assumed that they had been reasonably prepared
on bases reflecting the best currently available estimates and judgments of
Allegheny Ludlum's and Teledyne's management and Salomon Brothers expressed no
opinion with respect to such projections or the assumptions on which they were
based.
Salomon Brothers' opinion necessarily was based upon business, market,
economic and other conditions as they existed and could be evaluated on the
date of its opinion. Salomon Brothers' opinion did not imply any conclusion as
to the likely trading range for ATI Common Stock following the consummation of
the Combination, which may vary depending upon, among other factors, changes
in interest rates, dividend rates, market conditions, general economic
conditions and other factors that generally influence the price of securities.
In rendering its opinion, Salomon Brothers assumed that, in the course of
obtaining the necessary regulatory approvals for the Combination, no
restrictions would be imposed that would have a material adverse effect on
Allegheny Ludlum, Teledyne or the contemplated benefits of the Combination.
The following is a summary of the report (the "Salomon Brothers Report")
presented by Salomon Brothers to the Allegheny Ludlum Board on April 1, 1996,
in connection with the delivery of the Salomon Brothers opinion dated such
date.
Comparable Public Company Analysis. Salomon Brothers valued each of
Teledyne's four business segments (specialty metals; aviation and electronics;
industrial; and consumer) based on the financial and market performance of
groups of publicly traded companies corresponding to these segments. For
Teledyne's specialty metals segment, Salomon Brothers analyzed the performance
of the following companies: Allegheny Ludlum; Armco Inc.; Brush Wellman Inc.;
Carpenter Technology Corporation; J&L Specialty Steel, Inc.; Kennametal Inc.;
Lukens Inc.; Oregon Metallurgic Corporation; Precision Castparts Corp.; Quanex
Corporation; SPS Technologies, Inc.; and Wyman-Gordon Company. Salomon
Brothers analyzed the ranges of multiples of stock trading prices to
historical latest twelve month and projected 1996 and 1997 earnings (selected
multiple ranges of 15.0x to 19.0x, 15.0x to 16.5x and 11.0x to 13.0x,
respectively) and multiples of Firm Value (as defined below) to latest twelve
month sales (0.9x to 1.1x), EBITDA (defined as earnings before interest,
taxes, depreciation and amortization) (8.0x to 10.0x) and EBIT (defined as
earnings before interest and taxes) (11.0x to 13.0x) for these comparable
companies, and compared this data to corresponding information for Teledyne's
specialty metals segment. "Firm Value" equals equity market capitalization
plus total debt, preferred stock and minority interests less cash and equity
investments.
The comparable publicly traded aviation and electronics companies Salomon
Brothers analyzed consisted of two groups. The first group of companies
corresponded to Teledyne's Brown Engineering Unit and consisted of BDM
International, Inc.; CACI International Inc; EG&G, Inc.; Litton Industries,
Inc.; Logicon, Inc.; Nichols Research Corporation; and Tracor, Inc. The second
group was comparable to the remainder of Teledyne's aviation and electronics
business and was made up of Alliant Techsystems Inc.; General Dynamics
Corporation;
50
<PAGE>
Lockheed Martin Corporation; Northrop Grumman Corporation; Watkins-Johnson
Company; and Whittaker Corporation. Salomon Brothers analyzed the same ranges
of multiples for these companies as it did for the specialty metals segment
(selected trading price to historical and projected earnings multiple ranges
of 16.0x to 18.0x, 15.0x to 17.0x and 13.0x to 14.0x, respectively, and
selected Firm Value to sales, EBITDA and EBIT multiple ranges of 0.7x to 0.9x,
7.0x to 8.0x and 9.0x to 10.0x, respectively) and compared this data to
corresponding information for Teledyne's aviation and electronics segment.
For Teledyne's industrial business segment, Salomon Brothers reviewed the
financial and market performance of Case Corporation; The Duriron Company,
Inc.; Goulds Pumps, Incorporated; IDEX Corporation; Ingersoll-Rand Company;
Keystone International, Inc.; Roper Industries, Inc.; and Watts Industries,
Inc. Salomon Brothers analyzed the same ranges of multiples for these
companies as it did for the specialty metals segment (selected trading price
to historical and projected earnings multiple ranges of 15.5x to 17.5x, 13.0x
to 15.0x and 10.0x to 12.0x, respectively, and selected Firm Value to sales,
EBITDA and EBIT multiple of ranges of 1.1x to 1.4x, 8.0x to 10.0x and 9.5x to
12.5x, respectively) and compared this data to corresponding information for
Teledyne's industrial segment.
The group of publicly traded consumer companies analyzed by Salomon Brothers
consisted of The Black & Decker Corporation; Helen of Troy Limited; Premark
International, Inc.; Salton/Maxim Housewares, Inc.; Sunbeam Corporation; and
Windmere Corporation. Salomon Brothers analyzed the same ranges of multiples
for these companies as it did for the specialty metals segment (selected
trading price to historical and projected earnings multiple ranges of 14.5x to
15.5x, 12.0x to 14.0x and 10.0x to 12.0x, respectively, and selected Firm
Value to sales, EBITDA and EBIT multiple ranges of 0.8x to 1.0x, 6.0x to 7.0x
and 8.0x to 9.5x, respectively) and compared this data to corresponding
information for Teledyne's consumer segment.
Based on the above-described comparable public company valuations for each
of the four business segments and assuming a Firm Value of $163 million for
Teledyne's pension assets (based on the present value of the estimated after-
tax amount of retiree health and life insurance benefit costs and pension
costs of Teledyne) and synergies of $323 million from the combination of the
two companies' pension plans (which represents the present value of the annual
cash synergies expected to result from such combination), as well as $100
million in operating and other synergies (which represents the present value
of such synergies), Salomon Brothers estimated that the equity value for
Teledyne was approximately $1.9 billion to $2.4 billion, or $33 to $42 per
share of Teledyne Common Stock.
Comparable Transaction Analysis. Salomon Brothers also reviewed the
consideration paid or proposed to be paid in recent acquisitions of companies
operating in lines of business corresponding to Teledyne's four business
segments. For the specialty metals segment, Salomon Brothers analyzed the
following acquiror/acquiree transactions: Rubicon Group Plc/Calder Group;
Investor Group/Howmet Corporation (Pechiney S.A.); Allegheny Ludlum/Athlone
Industries, Inc.; Investor/Nuclear Fuel United (Pechiney S.A.); Armco
Inc./Cyclops Industries, Inc.; Lukens Inc./Washington Stainless; Wyman-Gordon
Company/Arwood Corporation; Mercury Stainless Corp./Washington Stainless; and
Dixons Group plc/Cyclops Corporation. Salomon Brothers calculated the
multiples of the consideration paid or payable in these transactions to the
acquirees' sales (selected multiple range of 0.8x to 1.0x), EBITDA (7.0x to
8.0x) and EBIT (11.0x to 12.5x), and compared these multiples to corresponding
data for Teledyne's specialty metals segment.
Salomon Brothers analyzed a number of transactions in the aviation and
electronics segment, including General Dynamics Corporation/TVS; Lockheed
Martin Corporation/Loral Corporation; Northrop Grumman
Corporation/Westinghouse Defense Business; Tracor, Inc./AEL Industries, Inc.;
Hughes Electronics Corporation/Magnavox Electronic Systems Company; Raytheon
Company/E-Systems, Inc.; and Loral Corporation/Unisys Corporation Defense
Business. Salomon Brothers calculated the multiples of the consideration paid
or payable in these transactions to the acquirees' sales (selected multiple
range of 0.9x to 1.0x), EBITDA (8.0x to 9.0x) and EBIT (9.0x to 10.0x), and
compared these multiples to corresponding data for Teledyne's aviation and
electronics segment.
51
<PAGE>
For Teledyne's industrial business segment, the acquiror/acquiree
transactions reviewed by Salomon Brothers included, among others: The Duriron
Company, Inc./Durametallic Corporation; WICOR, Inc./Hypro Corporation; Bowater
plc France/Sofab, S.A.; IDEX Corporation/Micropump Corporation; Dresser
Industries, Inc./Grove S.p.A; FMC Corporation/Moorco International Inc.;
Moorco International Inc./Daniel Industries, Inc; and Precision Castparts
Corp./Quamco, Inc. Salomon Brothers calculated the multiples of the
consideration paid or payable in these transactions to the acquirees' sales
(selected multiple range of 1.0x to 1.3x) and EBITDA (9.0x to 12.0x), and
compared these multiples to corresponding data for Teledyne's industrial
segment.
Salomon Brothers reviewed the following transactions in the consumer
business segment: Honeywell Inc./Duracraft Corp.; Health o meter Products,
Inc./Mr. Coffee Inc.; and Remington Products Company/Bristol-Myers Squibb
Company (Hair). Salomon Brothers calculated the multiples of the consideration
paid or payable in these transactions to the acquirees' sales (selected
multiple range of 1.1x to 1.3x) and EBIT (11.0x to 12.5x), and compared these
multiples to corresponding data for Teledyne's consumer segment. Salomon
Brothers noted that there were a limited number of comparable transactions for
this segment.
Based on the above-described comparable transaction analyses for each of the
four business segments and making the same valuation assumptions for pension
assets and pension and other synergies described above under the "Comparable
Public Company Analysis", Salomon Brothers calculated an equity value for
Teledyne of approximately $2.0 billion to $2.5 billion, or $36 to $43 per
share of Teledyne Common Stock.
Discounted Cash Flow Analysis. Using a discounted cash flow ("DCF")
analysis, Salomon Brothers estimated the present value of the future cash
flows that, beginning in 1996, could be produced by Teledyne on a consolidated
basis over a five-year period and by each of Teledyne's four business segments
over a three-year period, assuming performance was, in each case, on a stand-
alone basis (without giving effect to any operating or other synergies
pursuant to the Combination) in accordance with forecasts developed by the
management of Teledyne. Using discount rates ranging from 10% to 12.5% and
terminal EBITDA multiples ranging from 6.0x to 9.5x, Salomon Brothers' Firm
Value estimate for Teledyne on a consolidated basis was approximately $2.3
billion to $2.8 billion, and on a segment basis was approximately $2.4 billion
to $2.8 billion. The range for the discount rates approximated the estimated
weighted average cost of capital for each of Teledyne's business segments and
the company as a whole. In arriving at the weighted average cost of capital,
Salomon Brothers reviewed the leverage and cost of debt of comparable
companies, the relative risks of the businesses and the risk-free rate of
return and expected risk premium on investments in equity required by
investors. The range for the terminal EBITDA multiples for Teledyne's business
segments and the company as a whole approximated the going concern value of
the firm in the last year of the analysis. In arriving at the terminal EBITDA
multiples, Salomon Brothers reviewed the EBITDA multiples and projected growth
in free cash flow of publicly traded and comparable companies and the EBITDA
multiples of transactions for comparable companies.
Based on these DCF valuations and making the same valuation assumptions for
pension assets and pension and other synergies as described above, Salomon
Brothers determined an equity value range for Teledyne on a consolidated basis
of approximately $2.4 billion to $2.8 billion, or $41 to $49 per share of
Teledyne Common Stock, and for Teledyne on a segment basis of approximately
$2.5 billion to $2.9 billion, or $44 to $50 per share of Teledyne Common
Stock.
Allegheny Ludlum Analysis. Salomon Brothers also valued Allegheny Ludlum
according to the same comparable public company, comparable transaction and
DCF analyses described above. Based on a comparable public company group
consisting of Armco Inc.; J&L Specialty Steel, Inc.; and Lukens Inc., and the
multiple ranges for these companies described above (trading price to
historical and projected earnings mean multiples of 10.0x, 11.0x and 8.1x,
respectively, and Firm Value to sales, EBITDA and EBIT mean multiples of 0.7x,
6.0x and 9.2x, respectively), Salomon Brothers calculated a Firm Value for
Allegheny Ludlum of approximately $1.1 billion to $1.4 billion, or $17 to $21
per share of Allegheny Ludlum Common Stock. The precedent transactions Salomon
Brothers analyzed were Allegheny Ludlum/Athlone Industries; Armco Inc./Cyclops
Industries, Inc.; Lukens Inc./Washington Stainless; Mercury Stainless
Corporation/Washington Stainless; and Dixons Group plc/Cyclops Corporation.
After reviewing the multiples for these transactions described above (selected
transaction consideration to sales, EBITDA and EBIT multiple ranges of 0.8x to
1.1x, 6.5x to 8.5x and 7.5x to 9.5x, respectively), Salomon Brothers estimated
a Firm Value for Allegheny Ludlum of approximately $1.3
52
<PAGE>
billion to $1.8 billion, or $20 to $27 per share of Allegheny Ludlum Common
Stock. The DCF analysis for Allegheny Ludlum used discount rates of 10.5% to
12.5% and terminal EBITDA multiples of 6.0x to 8.0x and, based thereon,
Salomon Brothers' Firm Value estimate for Allegheny Ludlum was approximately
$1.2 billion to $1.4 billion, or $18 to $22 per share of Allegheny Ludlum
Common Stock. The ranges for such discount rates and terminal EBITDA multiples
were determined on the same basis for Allegheny Ludlum as described above for
Teledyne.
Contribution Analysis. Salomon Brothers analyzed the pro forma financial
contributions from each of Allegheny Ludlum and Teledyne to the combined
company, assuming the Combination is consummated as set forth in the
Combination Agreement. Salomon Brothers did not give any effect for the
pooling accounting treatment of the Combination or for any synergies that may
be realized in the Combination. The analysis determined that Allegheny Ludlum
and Teledyne would have contributed the following percentages to the combined
company's results for 1995: revenues--36.8% and 63.2%, respectively; EBITDA--
37.9% and 62.1%, respectively; EBIT-- 38.2% and 61.8%, respectively; and net
income--40.2% and 59.8%, respectively. For the results projected by management
for 1996, the contributions by Allegheny Ludlum and Teledyne would have been
as follows: revenues--36.1% and 63.9%, respectively; EBITDA--34.2% and 65.8%,
respectively; EBIT-- 33.6% and 66.4%, respectively; and net income--34.6% and
65.4%, respectively. Using these contribution percentages, Salomon Brothers
determined a range of implied exchange ratios for Teledyne Common Stock of
1.76x (based on the net income contributions) to 2.03x (based on the revenue
contributions) for 1995, and of 2.09x (based on the revenue contributions) to
2.33x (based on the EBIT contributions) for 1996.
Pro Forma Combination Consequences Analysis. Salomon Brothers analyzed
certain pro forma effects of the Combination on Allegheny Ludlum's 1995
results and for Allegheny Ludlum's projected results in 1996, 1997 and 1998.
Based on this analysis, Salomon Brothers estimated that, without giving effect
to any synergies from the Combination, there would have been dilution of 1.2%
for earnings per Allegheny Ludlum share in 1995 and accretion of 9.3%, 9.4%
and 22.8% for earnings per Allegheny Ludlum share in 1996, 1997 and 1998,
respectively.
In arriving at its opinion and in preparing the Salomon Brothers Report,
Salomon Brothers performed a variety of financial analyses, the material
portions of which are summarized above. Salomon Brothers did not separately
consider the extent to which any one of the analyses supported or did not
support the Salomon Brothers fairness opinion. The summary set forth above
does not purport to be a complete description of the analyses performed by
Salomon Brothers or its presentation to the Allegheny Ludlum Board. In
addition, Salomon Brothers believes that its analyses must be considered as a
whole and that selecting portions of such analyses and the factors considered
by it, without considering all such analyses and factors, could create an
incomplete view of the process underlying its analyses set forth in its
opinion and in the Salomon Brothers Report. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. In addition, Salomon Brothers made no attempt
to assign specific weights to particular analyses. With regard to the
comparable public company analysis and the comparable transaction analysis
summarized above, Salomon Brothers selected comparable public companies on the
basis of various factors, including the size of the public company and
similarity of the line of business; however, no public company or transaction
utilized as a comparison is identical to Allegheny Ludlum, Teledyne, any
business segment of Teledyne or the Combination. Accordingly, an analysis of
the foregoing is not mathematical; rather, it involves complex considerations
and judgments concerning differences in financial and operating
characteristics of the comparable companies and other factors that could
affect the transaction or public trading value of the comparable companies and
transactions to which Allegheny Ludlum, Teledyne, the business segments of
Teledyne and the Combination are being compared.
In performing its analyses, Salomon Brothers made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control
of Allegheny Ludlum and Teledyne. Any estimates contained in such analyses are
not necessarily indicative of actual past or future results or values, which
may be significantly more or less than such estimates. Actual values will
depend upon several factors, including events affecting the industries in
which Allegheny Ludlum and Teledyne operate, general economic, market and
interest rate conditions and other factors
53
<PAGE>
which generally influence the price of securities. Additionally, all
projections and estimates for future results of Allegheny Ludlum and Teledyne
referred to above were provided by the respective managements of such
companies. Projections and estimates for other companies referred to above
were based on publicly available analyst reports.
Salomon Brothers is an internationally recognized investment banking firm
and regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions and for other purposes. The Allegheny
Ludlum Board selected Salomon Brothers to act as its financial advisor on the
basis of Salomon Brothers' international reputation and Salomon Brothers'
familiarity with Allegheny Ludlum. Salomon Brothers previously rendered
certain investment banking and financial advisory services to Allegheny
Ludlum, including co-managing Allegheny Ludlum's 6.95% debentures and 5.875%
convertible debentures offerings and acting as agent in Allegheny Ludlum's
share repurchase program, for which Salomon Brothers received customary
compensation. In addition, in the ordinary course of its business, Salomon
Brothers may actively trade the securities of Allegheny Ludlum and Teledyne
for Salomon Brothers' own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Pursuant to a letter agreement dated March 22, 1996, between Salomon
Brothers and Allegheny Ludlum, Salomon Brothers agreed to act as exclusive
financial advisor to Allegheny Ludlum in connection with the Combination.
Allegheny Ludlum paid Salomon Brothers $100,000 upon execution of the letter
agreement and $400,000 upon execution of the Combination Agreement, and will
pay Salomon Brothers an additional $7,500,000, contingent upon, and payable
at, the consummation of the Combination. Allegheny Ludlum also agreed to
reimburse Salomon Brothers for its reasonable out-of-pocket expenses,
including fees and disbursements of counsel, and to indemnify Salomon Brothers
and its affiliates, their respective directors, officers, agents and employees
and each person, if any, controlling Salomon Brothers or any of its affiliates
against certain liabilities, including liabilities under the federal
securities laws, relating to, or arising out of, its engagement.
As noted under the caption "The Combination--Reasons for the Combination;
Recommendations of the Boards of Directors", the fairness opinion of Salomon
Brothers was only one of the many factors considered by the Allegheny Ludlum
Board in determining to approve the Combination Agreement and the Combination.
The amount of consideration payable in the Combination was determined by
arms'-length negotiations between Allegheny Ludlum and Teledyne, in
consultation with their respective financial advisors and other
representatives.
Teledyne
On April 1, 1996, Goldman Sachs delivered its opinion to the Teledyne Board
that, as of the date of such opinion, the Teledyne Exchange Ratio pursuant to
the Combination Agreement is fair to the holders of Teledyne Common Stock.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED APRIL 1, 1996,
WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
APPENDIX C AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF TELEDYNE COMMON
STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
(i) the Combination Agreement; (ii) the Annual Reports to Shareholders and
Annual Reports on Form 10-K of Teledyne and Allegheny Ludlum for the five
fiscal years ended December 31, 1995; (iii) certain interim reports to
shareholders and Quarterly Reports on Form 10-Q for Teledyne and Allegheny
Ludlum; (iv) certain other communications from Teledyne and Allegheny Ludlum
to their respective stockholders; and (v) certain internal financial analyses
and forecasts for Teledyne and Allegheny Ludlum prepared by their respective
managements. Goldman Sachs also held discussions with members of the senior
managements of Teledyne and Allegheny Ludlum regarding
54
<PAGE>
the past and current business operations, financial condition and future
prospects of their respective companies and the pro forma entity formed
pursuant to the Combination Agreement. In addition, Goldman Sachs reviewed the
reported price and trading activity for Teledyne Common Stock and Allegheny
Ludlum Common Stock, compared certain financial and stock market information
for Teledyne and Allegheny Ludlum with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the aviation and electronics,
specialty metals, industrial products, and consumer products industries
specifically and in other industries generally and performed such other
studies and analyses as it considered appropriate.
Goldman Sachs relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by it for
purposes of its opinion. In addition, Goldman Sachs has not made an
independent evaluation or appraisal of the assets and liabilities of Teledyne
or Allegheny Ludlum or any of their respective subsidiaries and Goldman Sachs
has not been furnished with any such evaluation or appraisal. Goldman Sachs
has also assumed, with Teledyne's consent, that the consummation of the
transactions contemplated by the Combination Agreement will be accounted for
as a pooling of interests under generally accepted accounting principles.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its opinion to the Teledyne Board
on April 1, 1996.
(i) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to Teledyne to corresponding
financial information, ratios and public market multiples for selected
publicly traded companies in the fields of either diversified technology or
specialty metals. The selected diversified technology companies were
Allied-Signal Inc., Alliant Techsystems Inc., Rockwell International
Corporation, Textron, Inc., Thiokol Corporation, TRW Inc. and United
Technologies Corporation (collectively, the "Diversified Technology
Selected Companies"). The selected specialty metals companies were
Allegheny Ludlum, Armco Inc., Carpenter Technology Corporation, J & L
Specialty Steel Inc., Kennametal Inc. and Lukens Inc. (collectively, the
"Specialty Metals Selected Companies" and, together with the Diversified
Technology Selected Companies, the "Selected Companies"). The Selected
Companies were chosen because they are publicly-traded companies with
operations that, for purposes of Goldman Sachs' analysis, are considered
similar to Teledyne's. Goldman Sachs calculated and compared various
financial multiples and ratios. The multiples of Teledyne were calculated
using (a) a price of $26.88 per Share, the closing price of Teledyne Common
Stock on the NYSE on February 9, 1996 (the last trading day prior to the
announcement of the 1996 Unsolicited WHX Proposal) (the "Teledyne
Undisturbed Stock Price") and (b) a price of $35.61 per share of Teledyne
Common Stock, based on the closing price of Allegheny Ludlum Common Stock
of $18.50 as of March 29, 1996 and the Teledyne Exchange Ratio (the
"Teledyne Implied Stock Price"). The multiples of Allegheny Ludlum Common
Stock were calculated using a price of $18.50 as of March 29, 1996. The
multiples and ratios for Teledyne and the Selected Companies were based on
the most recent publicly available information. With respect to Teledyne
and the Selected Companies, Goldman Sachs considered the levered market
capitalization (i.e., market value of common equity plus face value of
preferred stock, minority interests, estimated market value of debt, post-
retirement liabilities and pension liabilities less cash and cash
equivalents) as a multiple of latest twelve month ("LTM") sales, as a
multiple of LTM earnings before interest, taxes, depreciation and
amortization ("EBITDA"), and as a multiple of LTM earnings before interest
and taxes ("EBIT"). Goldman Sachs' analysis of the Selected Companies
indicated: (A) levered multiples of LTM sales that ranged (i) from 0.66x to
1.47x with a median of 1.01x for the Diversified Technology Selected
Companies and (ii) from 0.79x to 1.45x with a median of 1.11x for the
Specialty Metals Selected Companies, compared to 0.73x for the Teledyne
Undisturbed Stock Price and 0.92x for the Teledyne Implied Stock Price, and
1.16x for Allegheny Ludlum Common Stock; (B) levered multiples of LTM
EBITDA that ranged (i) from 5.3x to 10.8x with a median of 7.1x for the
Diversified Technology Selected Companies and (ii) from 4.3x to 7.9x with a
median of 7.0x for the Specialty Metals Selected Companies, compared to
7.5x for the Teledyne Undisturbed Stock
55
<PAGE>
Price and 9.5x for the Teledyne Implied Stock Price, and 7.9x for Allegheny
Ludlum Common Stock; (C) levered multiples of LTM EBIT that ranged (i) from
7.9x to 21.2x with a median of 10.0x for the Diversified Technology
Selected Companies and (ii) from 4.9x to 11.3x with a median of 9.2x for
the Specialty Metals Selected Companies, compared to 10.5x for the Teledyne
Undisturbed Stock Price and 13.3x for the Teledyne Implied Stock Price, and
9.7x for Allegheny Ludlum Common Stock; (D) estimated calendar year 1996
price/earnings ("P/E") multiples (based on Institutional Broker Estimate
Service ("IBES") median estimates) that ranged (i) from 12.6x to 17.1x with
a median of 13.8x for the Diversified Technology Selected Companies and
(ii) from 9.0x to 13.4x with a median of 11.1x for the Specialty Metals
Selected Companies, compared to 10.8x for the Teledyne Undisturbed Stock
Price and 14.4x for the Teledyne Implied Stock Price, and 11.9x for
Allegheny Ludlum Common Stock; (E) estimated calendar year 1997 P/E
multiples (based on IBES median estimates) that ranged (i) from 11.9x to
15.0x with a median of 12.9x for the Diversified Technology Selected
Companies and (ii) from 5.7x to 11.6x with a median of 9.4x for the
Specialty Metals Selected Companies, compared to 9.6x for the Teledyne
Undisturbed Stock Price and 12.7x for the Teledyne Implied Stock Price, and
11.6x for Allegheny Ludlum Common Stock; (F) five-year earnings per share
("EPS") Growth Rates (based on IBES median estimates) that ranged (i) from
6.5% to 12.5% with a median of 10.0% for the Diversified Technology
Selected Companies and (ii) from 5.5% to 13.5% with a median of 12.0% for
the Specialty Metals Selected Companies, compared to 8.0% for the Teledyne
Undisturbed Stock Price and the Teledyne Implied Stock Price, and 12.5% for
Allegheny Ludlum Common Stock; and (G) IBES five-year EPS Growth Rates as a
multiple of estimated calendar year 1996 P/E multiples that ranged (i) from
1.31x to 2.12x with a median of 1.51x for the Diversified Technology
Selected Companies and (ii) from 0.65x to 1.03x with a median of 0.76x for
the Specialty Metals Selected Companies, compared to 1.35x for the Teledyne
Undisturbed Stock Price and 1.79x for the Teledyne Implied Stock Price, and
0.93x for Allegheny Ludlum Common Stock.
(ii) Discounted Cash Flow Analysis. Goldman Sachs performed a discounted
cash flow analysis using Teledyne's management projections. Using
Teledyne's terminal values in the year 1998 based on multiples ranging from
5.0x EBITDA to 7.0x EBITDA (which multiples were considered by Goldman
Sachs to be consistent with similar multiples in the industries in which
Teledyne operates) and discounting these terminal values to present value
using discount rates ranging from 14.0% to 18.0% (which discount rates are
considered by Goldman Sachs to represent the risks inherent in Teledyne's
realization of its business plan), the implied values per share of Teledyne
Common Stock ranged from $29.78 to $46.04.
(iii) Selected Transactions Analysis. Goldman Sachs analyzed certain
information relating to 25 selected transactions in the aviation and
electronics industry (the "A&E Selected Transactions"), 20 selected
transactions in the specialty metals industry (the "Specialty Metals
Selected Transactions"), 32 selected transactions in the industrial
industry (the "Industrial Selected Transactions") and 21 selected
transactions in the consumer industry (the "Consumer Selected
Transactions") since 1985 (collectively, the "Selected Transactions").
Goldman Sachs chose the Selected Transactions because they involved
companies that operate in lines of business that are similar to Teledyne's
respective businesses. Such analysis indicated that for the Selected
Transactions levered aggregate consideration (i) as a multiple of LTM
sales, indicated a median multiple of 0.59x for the A&E Selected
Transactions, 0.83x for the Specialty Metals Selected Transactions, 1.23x
for the Industrial Selected Transactions and 0.70 for the Consumer Selected
Transactions compared to the implied levered aggregate consideration in the
Combination (based on the Teledyne Exchange Ratio and calculated using a
per share stock price of $18.50 for Allegheny Ludlum Common Stock and
including the assumption of Teledyne debt and preferred stock having a
value of $378 million) as a multiple of Teledyne's 1995 sales, which
indicated a multiple of 0.92x and (ii) as a multiple of LTM EBIT, indicated
a median multiple of 8.8x for the A&E Selected Transactions, 13.2x for the
Specialty Metals Selected Transactions, 12.0x for the Industrial Selected
Transactions and 9.2x for the Consumer Selected Transactions compared to
the implied levered aggregate consideration in the Combination (based on
the Teledyne Exchange Ratio and calculated using a per share stock price of
$18.50
56
<PAGE>
for Allegheny Ludlum Common Stock and including the assumption of Teledyne
debt and preferred stock having a value of $378 million) as a multiple of
Teledyne's 1995 adjusted EBIT, which indicated a multiple of 13.3x.
(iv) Pro Forma Combination Analysis. Goldman Sachs prepared pro forma
analyses of the financial impact of the Combination. Using earnings
estimates for Teledyne and Allegheny Ludlum prepared by their respective
managements for the year 1996, Goldman Sachs compared the estimated 1996
EPS of Teledyne Common Stock ($2.77) and the estimated 1996 EPS of
Allegheny Ludlum Common Stock (which ranged from $1.14 to $1.42), each on a
standalone basis, to the prospective EPS of Teledyne Common Stock and
Allegheny Ludlum Common Stock on a pro forma basis following the
Combination. Goldman Sachs performed this analysis under the following two
scenarios: Goldman Sachs assumed (a) no synergies resulting from the
Combination (the "No Synergies Case") and (b) pre-tax synergies of $85.0
million resulting from the Combination (the "Synergies Case"). Based on
such analyses, in the No Synergies Case, the Combination would result in a
pro forma EPS for Teledyne Common Stock ranging from $2.56 to $2.77 and pro
forma EPS for Allegheny Ludlum Common Stock ranging from $1.33 to $1.44.
The analyses also indicated that, in the Synergies Case, the Combination
would result in a pro forma EPS for Teledyne Common Stock ranging from
$3.14 to $3.35 and a pro forma EPS for Allegheny Ludlum Common Stock
ranging from $1.63 to $1.74. Goldman Sachs also analyzed 1996 earnings
estimates for Teledyne and Allegheny Ludlum based on IBES median EPS
estimates of $2.48 and $1.55, respectively. Based on IBES median estimated
1996 EPS in the No Synergies Case, the Combination would result in a pro
forma EPS for Teledyne Common Stock of $2.70 and a pro forma EPS for
Allegheny Ludlum Common Stock of $1.40. Based on IBES median estimated 1996
EPS in the Synergies Case, the Combination would result in a pro forma EPS
for Teledyne Common Stock of $3.25 and a pro forma EPS for Allegheny Ludlum
Common Stock of $1.69.
(v) Contribution Analysis. Goldman Sachs reviewed certain historical and
estimated future operating and financial information (including, among
other things, revenues, EBITDA (excluding certain unusual items), net
income (excluding certain unusual items), market value, cash, assets and
shareholders' equity) for Teledyne, Allegheny Ludlum and the pro forma
combined entity resulting from the Combination based on Teledyne and
Allegheny Ludlum historical financial information and the respective
managements' forecasts for each of Teledyne, Allegheny Ludlum and ATI (pro
forma). Based on the market values of each of Teledyne and Allegheny Ludlum
on March 29, 1996, the analysis indicated that Teledyne stockholders would
contribute 56.2% of the market value of ATI following the Combination and
would receive 62.0% of the equity in ATI. The analyses also indicated that
Teledyne would have contributed to ATI in 1995 (a) 37% of the cash, (b)
58.4% of the assets and (c) 51.3% of the shareholders' equity. Goldman
Sachs also analyzed the relative income statement contributions of Teledyne
and Allegheny Ludlum to ATI on a pro forma basis before taking into account
any of the possible benefits that may be realized following the Combination
based on actual 1995 and estimated year 1996 financial data provided to
Goldman Sachs by the respective managements of Teledyne and Allegheny
Ludlum. This analysis indicated that Teledyne would have contributed in
1995 and would contribute in estimated 1996 (a) 63.2% and 63.8%,
respectively, to combined revenues, (b) 56.6% and 64.8%, respectively, to
combined EBITDA and (c) 53.1% and 64.4%, respectively, to combined net
income (based on Allegheny Ludlum's management budget as of November 1995
and excluding certain non-recurring items). In estimated 1996, Teledyne
would contribute 62.3% to combined net income (based on Allegheny Ludlum's
management projections as of March 1996).
(vi) Analysis of Exchange Ratio. Goldman Sachs compared the Teledyne
Exchange Ratio with the exchange ratios implied from then-prevailing market
prices of Teledyne Common Stock and Allegheny Ludlum Common Stock for the
periods (a) 10 trading days, (b) 6 months and (c) 3 years prior to March
26, 1996, which indicated implied exchange ratios of 1.500x, 1.393x and
1.258x, respectively.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Goldman
Sachs did not separately consider the extent to which any one of the
57
<PAGE>
analyses supported or did not support the Goldman Sachs fairness opinion.
Selecting portions of the analyses or of the summary set forth above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying Goldman Sachs' opinion. In arriving at its fairness
determination, Goldman Sachs considered the results of all such analyses. No
company or transaction used in the above analyses as a comparison is identical
to Teledyne or Allegheny Ludlum or the contemplated transaction. The analyses
were prepared solely for purposes of Goldman Sachs' providing its opinion to
the Teledyne Board as to the fairness of the Teledyne Exchange Ratio to the
holders of Teledyne Common Stock and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may
be sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are
inherently subject to uncertainty, being based upon numerous factors or events
beyond the control the parties or their respective advisors, none of Teledyne,
Allegheny Ludlum, ATI, Goldman Sachs or any other person assumes
responsibility if future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the Teledyne Board was one of
many factors taken into consideration by the Teledyne Board in making its
determination to approve the Combination Agreement. The foregoing summary does
not purport to be a complete description of the analysis performed by Goldman
Sachs and is qualified by reference to the written opinion of Goldman Sachs
set forth in Appendix C hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Teledyne selected
Goldman Sachs as its financial advisor because it is a nationally recognized
investment banking firm that has substantial experience in transactions
similar to the Combination. Goldman Sachs is familiar with Teledyne having
acted as its financial advisor in connection with the unsolicited proposals
and election contests by WHX (see "The Combination--Background of the
Combination") and having acted as financial advisor in connection with, and
having participated in, certain of the negotiations leading to the Combination
Agreement. Goldman Sachs is also familiar with Allegheny Ludlum having acted
as lead underwriter of Allegheny Ludlum's initial public offering in May 1987,
the issuance in December 1995 of Allegheny Ludlum's 6.95% Debentures due 2025
and the issuance in March 1992 of Allegheny Ludlum's 5.875% Convertible
Subordinated Debentures due 2002, for which Goldman Sachs received customary
compensation. Goldman Sachs may also provide investment banking services to
ATI in the future.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold long and short positions in the securities
or options on securities of Teledyne and/or Allegheny Ludlum for its own
account and for the account of customers.
Under the terms of letter agreements dated March 24, 1995 (the "1995 Letter
Agreement") and April 26, 1996, between Goldman Sachs and Teledyne (together,
the "Letter Agreements"), Goldman Sachs has acted as financial advisor to
assist Teledyne in responding to any acquisition proposals it may receive or
any other attempts to acquire control of Teledyne by way of a merger, tender
offer, purchase of all or a substantial portion of its stock or assets, any
contested solicitation of proxies or otherwise, including the 1994 Unsolicited
WHX Proposal, the 1995 Teledyne Election Contest, the 1995 Unsolicited WHX
Proposal, the 1996 Unsolicited WHX Proposal and the 1996 Teledyne Election
Contest. Under the terms of the Letter Agreements, if the Combination is
consummated, Goldman Sachs will be paid $10.65 million which would constitute
the aggregate amount payable to Goldman Sachs for all advisory services under
the Letter Agreements ($3.65 million of which has already been paid pursuant
to the 1995 Letter Agreement), including advisory services related to the WHX
acquisition proposals and the investigation of a possible sale of Teledyne or
other extraordinary transaction. If the Combination is not consummated,
Goldman Sachs will be paid $1.5 million which would constitute the aggregate
amount payable to Goldman Sachs for all advisory services under the Letter
Agreements (in addition to the $3.65 million which has already been paid).
Teledyne also has agreed to reimburse Goldman Sachs for their reasonable out-
of-pocket expenses and to indemnify Goldman Sachs against certain liabilities,
including liabilities under federal securities laws, arising in connection
with the provision of these services.
58
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE COMBINATION
In considering the recommendations of the Boards of Directors of Allegheny
Ludlum and Teledyne with respect to the Combination Agreement, shareholders of
Allegheny Ludlum and stockholders of Teledyne should be aware that certain
members of the management and Board of Directors of each of Allegheny Ludlum
and Teledyne have certain interests in the Combination that are in addition to
the interests of shareholders of Allegheny Ludlum and stockholders of Teledyne
generally. The Board of Directors of each of Allegheny Ludlum and Teledyne was
aware of these interests and considered them, among other matters, in
approving the Combination Agreement and the transactions contemplated thereby.
Allegheny Ludlum Stock Acquisition and Retention Plan. Pursuant to the
Allegheny Ludlum Stock Acquisition and Retention Plan, the forfeiture
provisions applicable to shares of restricted Allegheny Ludlum Common Stock
granted pursuant thereto lapse immediately upon a "change of control" (as
defined in the Plan) of Allegheny Ludlum. Because Allegheny Ludlum
shareholders will own less than 60% of the outstanding ATI Common Stock upon
consummation of the Combination, approval of the Combination Agreement and the
transactions contemplated thereby by the shareholders of Allegheny Ludlum will
constitute a "change of control" of Allegheny Ludlum, as defined by the Plan,
except as to a participant who agrees otherwise. Based on the number of shares
of restricted Allegheny Ludlum Common Stock granted under the Plan and held as
of June 30, 1996, and assuming Allegheny Ludlum shareholder approval of the
Combination Agreement and the transactions contemplated thereby had occurred
as of such date, the number of shares of restricted Allegheny Ludlum Common
Stock held by executive officers of Allegheny Ludlum as to which applicable
forfeiture provisions would lapse would be 53,900 in the aggregate, including
11,796 shares held by James L. Murdy, Senior Vice President--Finance and Chief
Financial Officer of Allegheny Ludlum, 8,598 shares held by Robert W.
Rutherford, Senior Vice President-Commercial of Allegheny Ludlum, 5,468 shares
held by Douglas A. Kittenbrink, Vice President-Engineering and Information
Technology of Allegheny Ludlum, 2,670 shares held by Carl R. Moulton, Group
Vice President of Allegheny Ludlum, 9,292 shares held by Robert S. Park, Vice
President-Treasurer of Allegheny Ludlum, 4,078 shares held by Richard R.
Roeser, Vice President-Controller of Allegheny Ludlum, 5,464 shares held by
David G. Vietmeier, Vice President-Purchasing of Allegheny Ludlum, and 6,534
shares held by Jon D. Walton, Vice President-General Counsel and Secretary of
Allegheny Ludlum, as well as that number of shares of restricted Allegheny
Ludlum Common Stock having an aggregate value as of the applicable purchase
date (as defined in the Plan) of up to $377,029 upon the effectiveness of
irrevocable elections to purchase or designate shares of Allegheny Ludlum
Common Stock under the Plan, including that number of shares having values of
up to $119,000, $67,500, $60,495, $59,826, and $70,208 to be awarded to
Messrs. Murdy, Moulton, Roeser, Vietmeier and Walton respectively.
Teledyne Severance Agreements. Teledyne is a party to a Teledyne Severance
Agreement with each of its executive officers. See "The Compensation Plans--
Teledyne Executive Compensation Information--Severance Arrangements." Because
Teledyne stockholders will own less than 70% of the outstanding ATI Common
Stock upon consummation of the Combination, under the terms of the Teledyne
Severance Agreements each of such executive officers will be entitled, if his
or her employment is terminated involuntarily (other than for "cause,"
disability or death) or voluntarily, in either case within one year of the
Effective Time, to receive (i) a lump sum payment based on a multiple of his
or her annualized compensation, including performance bonuses, (ii)
continuation for up to two years of the life and health insurance benefits
that were being provided by Teledyne to such officer and his or her family
immediately prior to termination, (iii) personal financial and estate planning
services, and (iv) outplacement services for up to 52 weeks at Teledyne's
expense (up to a maximum of $15,000). Each of the Teledyne Severance
Agreements contains identical terms and conditions, except that the severance
compensation multiple for William P. Rutledge, Chairman of the Board and Chief
Executive Officer of Teledyne, is 2.5 and the multiple for the other executive
officers is 2.25. All severance benefits payable under the Teledyne Severance
Agreements would be reduced to the extent necessary to prevent any executive
officer from being subject to the excise tax provisions of Section 4999 of the
Code applicable to any "excess parachute payment" (as defined in Section 280G
of the Code) and to preserve the ability of Teledyne to deduct the severance
benefits paid; provided, that the severance benefits payable to a Teledyne
59
<PAGE>
executive officer may not exceed the amount payable to Teledyne's Chairman and
Chief Executive Officer. Based on annual salary and target bonus levels in
effect as of June 30, 1996 and assuming that the employment of each of the
executive officers of Teledyne were terminated involuntarily (other than for
"cause," disability or death) or voluntarily within one year of the
Combination, the severance payments payable to executive officers of Teledyne
under the Teledyne Severance Agreements (giving effect to the provisions of
the preceding sentence) would be $6,597,461 in the aggregate, including
$2,610,076 payable to Mr. Rutledge, $1,370,000 payable to Hudson B. Drake,
Senior Vice President of Teledyne, $1,091,090 payable to Gary L. Riley, Vice
President of Teledyne, and $763,795 payable to Douglas J. Grant, Treasurer of
Teledyne.
Dr. Donald B. Rice is currently a director, President and Chief Operating
Officer of Teledyne. Dr. Rice has announced his resignation from these
positions and as an employee of Teledyne, effective immediately prior to the
Effective Time, in order to pursue other opportunities. Under a Separation
Agreement dated as of July 12, 1996 (the "Separation Agreement") among
Teledyne, ATI and Dr. Rice (which will supersede, if the Combination is
consummated, a Teledyne Severance Agreement under which he would have been
entitled to a severance payment under certain circumstances), Dr. Rice will
receive from Teledyne a severance payment of $3.3 million when his resignation
takes effect. Dr. Rice will serve as a consultant to Teledyne, as well as a
supervisory non-managerial director of the subsidiary through which Teledyne
conducts its European operations, until April 30, 1998, and will receive
consulting fees of $500 per hour but in no event less than $4,500 per month
but will not be precluded from taking other full-time employment. The
Separation Agreement also provides (among other things) that if the
Combination is consummated, Dr. Rice will receive a pro rata portion of his
1996 performance-based bonus, payable under the same criteria and at the same
time as the bonuses for other Teledyne senior executives; will be entitled to
participation on the same basis as Teledyne's senior executives in Teledyne's
group medical, dental and comparable insurance plans for two years following
his resignation; and will continue to have all rights and benefits under his
stock option agreements in accordance with their terms for so long as he
continues to provide services to Teledyne under the Separation Agreement. The
Separation Agreement also provides (among other things) that if (which the
parties believe will not be the case) any payment or benefit to Dr. Rice,
pursuant thereto or otherwise, in connection with or arising out of his
employment is finally determined by a government taxing authority to be
subject to the excise tax applicable to any "excess parachute payment" under
Section 280G of the Code, Dr. Rice will be entitled to receive a "gross-up
payment" equal, on an after-tax basis, to the excise tax imposed. Under the
Separation Agreement, upon the consummation of the Combination mutual releases
of all claims will be exchanged between, on the one hand, Teledyne, ATI and
Allegheny Ludlum, and, on the other hand, Dr. Rice.
Severance arrangements also are in effect for certain other employees of
Teledyne and its subsidiaries. Because Teledyne stockholders will own less
than 70% of the ATI Common Stock upon consummation of the Combination, under
the terms of these severance arrangements each such employee will be entitled,
if certain circumstances occur involving the involuntary termination or
voluntary termination after significant negative changes in the terms of
employment for such employees after the Effective Time, to a specified
severance payment. Approximately 235 Teledyne employees are covered by such
arrangements. Based on salary and bonus target levels in effect as of April
30, 1996, and assuming that all such employees and all of the executive
officers subject to the Teledyne Severance Agreements were terminated within
the prescribed period following the Combination, the maximum aggregate value
of benefits to be received by all such individuals as a group would be
approximately $28 million.
Directors and Executive Officers of ATI. Pursuant to the Combination
Agreement, certain directors of Allegheny Ludlum and of Teledyne are or will
become directors of ATI, and certain officers of Allegheny Ludlum and of
Teledyne are or will become officers of ATI. See "The Combination--Directors
and Executive Officers of ATI."
Indemnification; Insurance. ATI has agreed that, from and after the
Effective Time, it will indemnify and hold harmless each present and former
director and officer of Allegheny Ludlum and Teledyne and any of their
60
<PAGE>
respective subsidiaries against any losses, claims, damages, costs, expenses,
liabilities or judgments incurred in connection with any claim arising out of
matters existing or occurring at or prior to the Effective Time, to the full
extent that a corporation is permitted under the DGCL to indemnify its own
directors or officers. ATI has also agreed to maintain in effect for a
specified period policies of directors' and officers' liability insurance
coverage, including coverage with respect to claims arising from acts,
omissions or other events which occur prior to or as of the Effective Time.
See "The Combination Agreement--Indemnification and Insurance."
DIRECTORS AND EXECUTIVE OFFICERS OF ATI
Pursuant to the Combination Agreement, at the Effective Time the Board of
Directors of ATI will be comprised of Richard P. Simmons (Chairman of the
Board and Chairman of the Executive Committee), Arthur H. Aronson, Robert P.
Bozzone, Paul S. Brentlinger, C. Fred Fetterolf, Thomas Marshall, W. Craig
McClelland, Charles J. Queenan, Jr. and James E. Rohr, each of whom is
currently a director of Allegheny Ludlum, and Frank V. Cahouet, Diane C.
Creel, William G. Ouchi, George A. Roberts, William P. Rutledge, Fayez Sarofim
and Henry E. Singleton, each of whom is currently a director of Teledyne.
Richard P. Simmons, age 65, is Chairman of the Board of Allegheny Ludlum and
has been a director of Allegheny Ludlum since 1980. He was also Chief
Executive Officer of Allegheny Ludlum until 1990. He is also a director of PNC
Bank Corp. and Consolidated Natural Gas Co.
Arthur H. Aronson, age 60, has been President and Chief Executive Officer of
Allegheny Ludlum since August 1994 and a director of Allegheny Ludlum since
1990. Previously, he served as Executive Vice President and Chief Operating
Officer of Allegheny Ludlum. He is also a director of Cooper Tire & Rubber
Company.
Robert P. Bozzone, age 62, has been Vice Chairman of Allegheny Ludlum since
August 1994 and has been a director of Allegheny Ludlum since 1981.
Previously, he served as President and Chief Executive Officer of Allegheny
Ludlum. He is also a director of DQE Inc., whose principal subsidiary is
Duquesne Light Company, an electric utility.
Paul S. Brentlinger, age 69, is a Partner in Morgenthaler Ventures, a
venture capital group headquartered in Cleveland, Ohio. Mr. Brentlinger has
been a director of Allegheny Ludlum since 1987. He is also a director of Ferro
Corporation.
Frank V. Cahouet, age 63, has been Chairman and Chief Executive Officer of
Mellon Bank Corporation, a bank holding corporation, and Mellon Bank, N.A., a
banking corporation, since 1987, and was also named President of both of those
companies in 1990. He has been a director of Teledyne since 1994. He is also a
director of Avery Dennison Corporation, office and paperboard products.
Diane C. Creel, age 47, is Chief Executive Officer of EarthTech, an
environmental consulting firm. She served as the Chief Operating Officer of
EarthTech from December 1987 until January 1993 and became its President in
September 1988 and Chief Executive Officer in January 1993. Ms. Creel has been
a director of Teledyne since 1995. She also is a director of Glendale Federal
Bank, Compensation Resources, Inc. and the Boards of the Corporations and
Trusts which comprise the Fixed Income Funds of the American Funds Group.
C. Fred Fetterolf, age 67, was President and Chief Operating Officer of
Aluminum Company of America prior to 1991. He has been a director of Allegheny
Ludlum since 1987. He is also a director of CasTech Aluminum Group, Dentsply
International, Inc., Mellon Bank Corporation, Union Carbide Corporation,
Praxair, Inc., Quaker State Corporation and Urethane Technologies.
Thomas Marshall, age 67, has been Vice Chairman of Dynamet, Inc., a
privately owned company engaged in the manufacture of titanium, superalloy
products, machine components and die forgings, since January 1995. He was
Chairman of Aristech Chemical Corporation, a privately owned company engaged
primarily in the
61
<PAGE>
manufacture of chemical and polymer products, prior to April 1995. He also
served as Chief Executive Officer of Aristech until October 1994. Mr. Marshall
has been a director of Allegheny Ludlum since 1988. He also serves as a
director of PNC Bank Corp.
W. Craig McClelland, age 62, has been Chairman and Chief Executive Officer
of Union Camp Corporation, a manufacturer of paper products, since 1994. Prior
to that time, he served as President and Chief Operating Officer of Union
Camp. Mr. McClelland has been a director of Allegheny Ludlum since 1987. He
also serves as a director of Union Camp Corporation and PNC Bank Corp.
William G. Ouchi, age 52, has been a professor of management at the Anderson
Graduate School of Management at the University of California at Los Angeles
since 1979. He has been a director of Teledyne since April 1996. He also is a
director of FirstFed Financial Corp.
Charles J. Queenan, Jr., age 65, is Senior Counsel of Kirkpatrick & Lockhart
LLP, outside attorneys for Allegheny Ludlum. Prior to January 1996, he was a
partner of that firm. Mr. Queenan has been a director of Allegheny Ludlum
since 1980. He is also a director of Crane Co., Fansteel, Inc. and Medusa
Corporation.
George A. Roberts, age 77, is a private investor. He has been a director of
Teledyne since 1966 and was Chairman of the Board of Directors of Teledyne
from January 1991 through March 1993. Dr. Roberts was President of Teledyne
from 1966 to 1990 and Chief Executive Officer from April 1968 to January 1991.
He is also a director of Argonaut Group, Inc. and Unitrin, Inc.
James E. Rohr, age 47 has been President of PNC Bank Corp. since 1992. He
also serves as President and Chief Executive Officer of its Pennsylvania bank,
PNC Bank, National Association. Previously, Mr. Rohr held other executive
positions with the bank and the holding company. Mr. Rohr has been a director
of Allegheny Ludlum since 1988. He is also a director of Equitable Resources,
Inc., PNC Bank Corp. and Sallie Mae (Student Loan Marketing Association).
William P. Rutledge, age 54, has been employed by Teledyne since 1986. He
has served as a director of Teledyne since 1990, as Chief Executive Officer of
Teledyne since January 1991 and as Chairman of the Board of Directors of
Teledyne since March 1993. From 1990 to March 1993, Mr. Rutledge was President
of Teledyne. From 1986 to 1987, Mr. Rutledge was a Group Executive, from 1987
to 1988, a Vice President and from 1988 to 1989, a Senior Vice President.
During 1989 and part of 1990, he served as the Executive Vice President of
Teledyne. Mr. Rutledge is also a director of FirstFed Financial Corp.
Fayez Sarofim, age 67, is the Chairman of the Board and President of Fayez
Sarofim Co., a registered investment advisor. He has been a director of
Teledyne since 1986. He also is a director of Argonaut Group, Inc., Imperial
Holly Corp. (sugar refining), Mesa, Inc. (oil and gas) and Unitrin, Inc.
Henry E. Singleton, age 79, is a rancher and investor. He is the co-founder
and a director of Teledyne. He was Chairman of the Board of Directors of
Teledyne from 1960 to January 1991. From 1960 to 1986, he served as Chief
Executive Officer of Teledyne. Dr. Singleton is a director of Argonaut Group,
Inc. and Unitrin, Inc.
If, prior to the Effective Time, any person designated by Allegheny Ludlum
should die or otherwise be unable or unwilling to serve as a director of ATI,
then a substitute for such person shall be designated by Allegheny Ludlum. If,
prior to the Effective Time, any person designated by Teledyne should die or
otherwise be unable or unwilling to serve as a director of ATI, then a
substitute for such person shall be designated by Teledyne.
Pursuant to the Combination Agreement, at the Effective Time, the
Certificate of Incorporation and Bylaws of ATI will be amended and restated in
their entireties to read as set forth in Annexes A and B to the Combination
Agreement, respectively. Pursuant to such amended and restated Certificate of
Incorporation and Bylaws, the Board of Directors of ATI will be comprised of
three classes of directors. Pursuant to the
62
<PAGE>
Combination Agreement, Ms. Creel, Messrs. Fetterolf, Marshall and Simmons and
Dr. Singleton will be members of a class that will serve an initial term
expiring at the first annual meeting of stockholders of ATI to be held after
the Effective Time; Messrs. Aronson, Brentlinger, Rohr and Sarofim and Drs.
Ouchi and Roberts will be members of a class that will serve an initial term
expiring at the second annual meeting of stockholders of ATI to be held after
the Effective Time; and Messrs. Bozzone, Cahouet, McClelland, Queenan and
Rutledge will be members of a class that will serve an initial term expiring
at the third annual meeting of stockholders of ATI to be held after the
Effective Time.
The Combination Agreement provides that Richard P. Simmons (Chairman of the
Board of Allegheny Ludlum) will be Chairman of the Board and Chairman of the
Executive Committee of the Board of ATI, Robert P. Bozzone (Vice Chairman of
the Board of Allegheny Ludlum) will be Vice Chairman of the Board of ATI,
William P. Rutledge (Chairman of the Board and Chief Executive Officer of
Teledyne) will be President and Chief Executive Officer of ATI, Arthur H.
Aronson (President and Chief Executive Officer of Allegheny Ludlum) will be an
Executive Vice President of ATI, James L. Murdy (Senior Vice President--
Finance and Chief Financial Officer of Allegheny Ludlum) will be Senior Vice
President and Chief Financial Officer of ATI, and Jon D. Walton (Vice
President--General Counsel and Secretary of Allegheny Ludlum) will be Vice
President--General Counsel and Secretary of ATI.
Dr. Donald B. Rice has announced his resignation as a Teledyne director,
officer and employee, effective immediately prior to the Effective Time, in
order to pursue other opportunities. It was contemplated, when the Combination
Agreement was initially entered into, that he would serve as a director and an
officer of ATI following the Effective Time but he resigned such positions on
July 12, 1996. No determination has been made as to whether there will be a
replacement for him on the ATI Board.
ATI is party to employment agreements, the terms of employment under which
will begin at the Effective Time, with Mr. Aronson as Executive Vice President
(which, as of the Effective Time, will supersede his employment agreement with
Allegheny Ludlum), Mr. Murdy as Senior Vice President-Finance and Chief
Financial Officer and Mr. Walton as Vice President-General Counsel and
Secretary which provide for the payment of base salary as well as for
eligibility to participate in incentive compensation, equity, employee and
fringe benefit plans offered to senior executives of ATI. The term of the
agreement with Mr. Aronson ends on his sixty-fifth birthday; the term of the
agreements with Messrs. Murdy and Walton are for an initial three year term
which, absent notice from one party to the other, renews automatically each
month on and after the second anniversary of its effective date so that the
then remaining term will be no less than one year.
The agreements generally terminate prior to the expiration date without
breach by any party in the event of the death, disability or voluntary
resignation of the employee. ATI may also terminate the agreement for cause
without breach by it. An employee may resign for good reason (which is defined
to include demotion, reduction in base pay, or movement of corporate
headquarters and, in the case of the agreements with Messrs. Murdy and Walton,
resignation within one year after the Effective Time) and receive severance
payments equal to the base pay and bonus, determined based on actual financial
results, as well as continued participation in certain compensation and
employee benefit plans for the then remaining term, including certain
supplemental pension benefits. Under the agreements with Messrs. Murdy and
Walton, they would not be entitled to such supplemental pension benefits if
they were to voluntarily resign within one year after the Effective Time.
SECURITY OWNERSHIP OF ATI AFTER THE COMBINATION
The following table sets forth certain information concerning persons or
entities anticipated to own beneficially five percent or more of outstanding
shares of ATI Common Stock, as well as information concerning anticipated
ownership of ATI Common Stock by each executive officer of ATI, each director
of ATI and by all directors and executive officers of ATI as a group, in each
case based upon beneficial ownership by such persons or entities of shares of
Allegheny Ludlum Common Stock and Teledyne Common Stock as of June 30, 1996
and after giving effect to the Combination.
63
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNER (1) NUMBER OF SHARES PERCENT OF CLASS
- -------------------- ---------------- ----------------
<S> <C> <C>
Arthur H. Aronson (2)(3)..................... 101,470 *
Robert P. Bozzone (3)(4)..................... 5,269,244 3.0%
Paul S. Brentlinger (5)...................... 5,974 *
Frank V. Cahouet (6)......................... 22,322 *
Diane C. Creel (7)........................... 8,986 *
C. Fred Fetterolf (8)........................ 2,642 *
J. P. Morgan & Co., Incorporated (9)......... 12,818,036 7.4%
60 Wall Street
New York, NY 10260
Thomas Marshall.............................. 8,437 *
W. Craig McClelland (10)..................... 3,974 *
James L. Murdy (3)(11)....................... 50,771 *
William G. Ouchi............................. 962 *
Charles J. Queenan, Jr. (10)(12)............. 685,324 *
George A. Roberts (13)....................... 808,158 *
James E. Rohr................................ 4,619 *
William P. Rutledge (14)..................... 806,575 *
Fayez Sarofim (15)........................... 2,533,781 1.5%
Mr. and Mrs. Richard P. Simmons (3)(16)...... 16,306,897 9.4%
1000 Six PPG Place
Pittsburgh, PA 15222
Henry E. Singleton........................... 13,999,100 8.1%
335 North Maple Drive
Beverly Hills, CA 90210
Jon D. Walton (3)(10)(17).................... 69,708 *
All directors and executive officers of ATI
as a group (18 persons) (18)................. 40,673,944 23.3%
</TABLE>
- --------
*Less than one percent of the outstanding shares.
(1) Each person is anticipated to have sole voting and investment power with
respect to the shares listed, unless otherwise indicated.
(2) Does not include 13,500 shares to be owned by Mrs. Arthur H. Aronson. Mr.
Aronson disclaims any beneficial ownership of such shares. Includes 48,000
shares which may be acquired within 60 days of June 30, 1996 pursuant to
an Allegheny Ludlum stock option plan.
(3) Includes shares to be held by the trustee under the Allegheny Ludlum
Retirement Savings Plan for the account of the named person as of December
31, 1995.
(4) Does not include 240,000 shares to be owned by Mrs. Robert P. Bozzone and
143,700 shares to be owned by the Bozzone Family Foundation. Mr. Bozzone
disclaims any beneficial ownership of such shares.
(5) Does not include 200 shares to be owned by Mrs. Paul S. Brentlinger. Mr.
Brentlinger disclaims any beneficial ownership of such shares.
(6) Includes 22,129 shares which Mr. Cahouet has the right to acquire through
the exercise of stock options to acquire Teledyne Common Stock within 60
days of June 30, 1996.
(7) Includes 8,794 shares which Ms. Creel has the right to acquire through the
exercise of stock options to acquire Teledyne Common Stock within 60 days
of June 30, 1996.
(8) Does not include 2,600 shares to be owned by the Fetterolf Family
Foundation. Mr. Fetterolf disclaims any beneficial ownership of such
shares.
(9) J.P. Morgan & Co., Incorporated has filed an amended Schedule 13G under
the Securities Exchange Act of 1934, as amended, dated December 29, 1995,
stating that as of that date it held sole voting power with respect to
8,367,118 shares of Allegheny Ludlum Common Stock, shared voting power
with respect to 177,680 shares of Allegheny Ludlum Common Stock, sole
dispositive power with respect to 12,413,156 shares of Allegheny Ludlum
Common Stock and shared dispositive power with respect to 307,330 shares
of Allegheny Ludlum Common Stock and that the Schedule includes 273,466
shares where there is a right to acquire.
64
<PAGE>
(10) Includes shares to be held jointly with the named individual's spouse.
(11) Includes 9,333 shares which may be acquired within 60 days of June 30,
1996 pursuant to an Allegheny Ludlum stock option plan. Does not include
shares to be purchased by or granted to Mr. Murdy under the Allegheny
Ludlum Corporation Stock Acquisition and Retention Plan. In January 1996,
Mr. Murdy made an irrevocable election under the Plan to purchase shares
of Allegheny Ludlum Common Stock with a value as of the applicable
purchase date (as defined in the Plan) of $238,000. Mr. Murdy's election
will become effective at the end of the first window period (as defined
in the Plan) that occurs six months after the date of such election. One
restricted share of Allegheny Ludlum Common Stock is to be granted for
each two shares of Allegheny Ludlum Common Stock purchased by Mr. Murdy
under the Plan.
(12) Does not include 54,100 shares to be owned by Mrs. Charles J. Queenan,
Jr. Mr. Queenan disclaims any beneficial ownership of such shares.
(13) Excludes 16,541 shares to be owned by Mrs. George A. Roberts and with
respect to which Dr. Roberts disclaims beneficial ownership. Dr. Roberts'
and Mrs. Roberts' respective shares will be owned of record by a trust of
which he or she, as the case may be, is the sole trustee with sole voting
and dispositive power over the shares held by such trust.
(14) Includes 789,250 shares which Mr. Rutledge has the right to acquire
through the exercise of options to acquire Teledyne Common Stock within
60 days of June 30, 1996.
(15) Mr. Sarofim may be deemed to be the beneficial owner of 2,533,781 shares
of ATI Common Stock. Of such shares, Mr. Sarofim has sole voting and
dispositive power as to 1,785,120 shares of ATI Common Stock and shared
voting and dispositive power as to 748,661 shares of ATI Common Stock.
All of the securities which are not subject to sole voting and
dispositive powers are owned by Sarofim International Management Company
(a wholly owned subsidiary of Fayez Sarofim & Co.) or by the Pension and
Profit Sharing Trusts of Fayez Sarofim & Co. (of which Mr. Sarofim is the
trustee).
(16) Mr. and Mrs. Simmons own 16,248,785 shares of Allegheny Ludlum Common
Stock jointly. Mr. Simmons has the sole power to direct the voting of the
jointly-owned shares, and Mr. and Mrs. Simmons share the power to direct
the disposition of such shares. In addition, Mr. Simmons owns 14,000
shares; Mrs. Simmons disclaims any beneficial ownership of such shares.
Mrs. Simmons also owns 15,000 shares; Mr. Simmons disclaims any
beneficial ownership of such shares. Does not include 140,500 shares to
be owned by the R.P. Simmons Family Foundation. Mr. and Mrs. Simmons
disclaim any beneficial ownership of such shares.
(17) Includes 30,666 shares which may be acquired within 60 days of June 30,
1996 pursuant to an Allegheny Ludlum stock option plan. Does not include
shares to be purchased by or granted to Mr. Walton under the Allegheny
Ludlum Corporation Stock Acquisition and Retention Plan. In January 1996,
Mr. Walton made an irrevocable election under the Plan to purchase shares
of Allegheny Ludlum Common Stock with a value as of the applicable
purchase date (as defined in the Plan) of $140,415. Mr. Walton's election
will become effective at the end of the first window period (as defined
in the Plan) that occurs six months after the date of such election. One
restricted share of Allegheny Ludlum Common Stock is to be granted for
each two shares of Allegheny Ludlum Common Stock purchased by Mr. Walton
under the Plan. Does not include 7,400 shares to be owned by Mrs. Jon D.
Walton. Mr. Walton disclaims any beneficial ownership of such shares.
(18) Includes an aggregate of 908,172 shares which may be acquired within 60
days of June 30, 1996 pursuant to an Allegheny Ludlum or Teledyne stock
option plan. Does not include an aggregate of 633,541 shares with respect
to which beneficial ownership is disclaimed or shares that executive
officers have irrevocably elected to purchase under the Allegheny Ludlum
Corporation Stock Acquisition and Retention Plan or shares to be granted
to executive officers under the Plan as a result of such purchases or as
a result of irrevocable designations of stock under the Plan.
65
<PAGE>
STOCK OPTION AND STOCK PURCHASE PLANS
As provided in the Combination Agreement, Allegheny Ludlum will take such
actions as may be necessary so that, at the Effective Time, each stock option
or award outstanding (an "Allegheny Ludlum Option") pursuant to Allegheny
Ludlum's 1987 Stock Option Incentive Plan or under its Performance Share Plan
for Key Employees, and each outstanding purchase or designation right and
related award under Allegheny Ludlum's Stock Acquisition and Retention Plan
(collectively, the "Allegheny Ludlum Stock Plans"), whether or not then
exercisable, will be deemed to constitute an option, award or right, as the
case may be, to acquire or designate, on the same terms and conditions
(including per share exercise or acquisition price) as were applicable under
such Allegheny Ludlum Option or under such purchase or designation right and
related award, as the case may be, a number of shares of ATI Common Stock
equal to the number of shares of Allegheny Ludlum Common Stock subject to such
Allegheny Ludlum Option or purchase or designation right and related award, as
the case may be.
Also as provided in the Combination Agreement, Teledyne will take such
action as may be necessary so that, at the Effective Time: (A) each stock
option outstanding (a "Teledyne Option") pursuant to Teledyne's 1990 Stock
Option Plan, its 1994 Long-Term Incentive Plan, and its 1995 Non-Employee
Director Stock Option Plan (collectively, the "Teledyne Stock Plans"), whether
or not then exercisable, will be deemed to constitute an option or purchase
right with respect to shares of ATI Common Stock, and (i) the number of shares
of ATI Common Stock subject to each Teledyne Option shall be equal to the
number of shares of ATI Common Stock into which shares of Teledyne Common
Stock subject to such Teledyne Option would have been converted by virtue of
the Combination had such share of Teledyne Common Stock been outstanding at
the Effective Time, and (ii) the per share price for each share of ATI Common
Stock subject to a Teledyne Option shall be equal to (y) the price for the
share of Teledyne Common Stock that could otherwise be acquired pursuant to
such Teledyne Option divided by (z) 1.925, rounded up to the nearest cent; and
(B) each right of a participant (a "Teledyne ESPP Right") under Teledyne's
Employee Stock Purchase Plan (the "Teledyne ESPP") to have shares of Teledyne
Common Stock purchased for the Teledyne ESPP account of such participant, both
with contributions made by such participant and with the matching
contributions of Teledyne, will be converted into and become a right to have
shares of ATI Common Stock purchased for such participant's Teledyne ESPP
account on terms whereby the "Price" (as defined in the Teledyne ESPP) shall
mean either (i) with respect to treasury shares or authorized but unissued
shares purchased from ATI, the average of the closing sale prices per share of
Teledyne Common Stock divided by 1.925 (with respect to trading days prior to
and including the date on which the Effective Time occurs) or ATI Common Stock
(with respect to trading days following but excluding the date on which the
Effective Time occurs), as the case may be, quoted in The Wall Street Journal
for the last five trading days of the calendar month preceding the "Purchase
Date" (as defined in the Teledyne ESPP), or (ii) with respect to issued and
outstanding shares of ATI Common Stock purchased on the open market, the
average price per share of ATI Common Stock paid by the "Plan Administrator"
(as defined in the Teledyne ESPP) on such Purchase Date.
As of June 30, 1996, there were outstanding options to purchase an aggregate
of 1,732,373 shares of Allegheny Ludlum Common Stock at a weighted average
exercise price of $18.69 per share; 76,000 units, representing a maximum of
364,800 shares of Allegheny Ludlum Common Stock, awarded pursuant to Allegheny
Ludlum's Performance Share Plan for Key Employees; participant elections to
purchase shares of Allegheny Ludlum Common Stock having an aggregate value of
up to $754,057 and to designate 3,700 shares of Allegheny Ludlum Common Stock
under Allegheny Ludlum's Stock Acquisition and Retention Plan which will
result in the issuance of one share of Allegheny Ludlum Common Stock for each
two shares purchased or designated; and outstanding options to purchase an
aggregate of 3,986,164 shares of Teledyne Common Stock at a weighted average
exercise price of $20.61 per share.
At the Effective Time, ATI will assume each Allegheny Ludlum Option,
purchase or designation right and related award under the Allegheny Ludlum
Stock Plans, and each Teledyne Option and each purchase right under the
Teledyne ESPP (collectively the "Derivative Securities") in accordance with
the terms under which it was issued and any applicable agreement by which it
is evidenced. ATI has also agreed to reserve for issuance a
66
<PAGE>
sufficient number of shares of ATI Common Stock for delivery and, as soon as
practicable after the Effective Time, it will file a registration statement on
Form S-3 or Form S-8, as the case may be (or any successor or other
appropriate forms), with respect to the shares of ATI Common Stock subject to
such plans and use its best efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Derivative Securities
remain outstanding.
Approval of the Combination by the shareholders of Allegheny Ludlum and the
stockholders of Teledyne will be deemed to constitute their respective
approval of the adoption by ATI of the Allegheny Ludlum Stock Plans and the
Teledyne Stock Plans, and of the issuance of ATI Common Stock in accordance
with the terms of the Derivative Securities.
ACCOUNTING TREATMENT
The Combination is intended to qualify as a pooling of interests for
accounting and financial reporting purposes under Accounting Principles Board
Opinion No. 16. Under this method of accounting, the assets and liabilities of
Allegheny Ludlum and Teledyne will be carried forward to the combined company
at their recorded amounts, income of the combined company on a consolidated
basis will include income of Allegheny Ludlum and Teledyne for the entire
fiscal period in which the Combination occurs and the reported income of the
separate companies for prior periods will be combined and restated as
consolidated income of the combined company.
Pursuant to the Combination Agreement, each of Allegheny Ludlum and Teledyne
is required to exercise its best efforts to cause each of its affiliates to
execute a written agreement as of the Effective Time to the effect that such
person has not transferred shares of Allegheny Ludlum Common Stock or Teledyne
Common Stock within the 30 days preceding the Effective Time and will not
transfer any shares of ATI Common Stock prior to the date that ATI publishes
results covering at least 30 days of post-Combination operations.
One of the conditions to consummation of the Combination is that Allegheny
Ludlum shall have received a letter from Ernst & Young LLP and Teledyne shall
have received a letter from Arthur Andersen LLP, each such letter to be dated
the date on which the Effective Time occurs (the "Effective Date"), to the
effect, in the case of the letter from Ernst & Young LLP, that Allegheny
Ludlum qualifies as an entity that may be a party to a business combination
for which the pooling of interests method of accounting is available and that
the Combination will be treated for accounting purposes as a pooling of
interests under generally accepted accounting principles and, in the case of
the letter from Arthur Andersen LLP, that Teledyne qualifies as an entity that
may be a party to a business combination for which the pooling of interests
method of accounting is available. See "The Combination Agreement--Conditions"
and "Unaudited Pro Forma Condensed Combined Financial Information."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Following is a summary of material federal income tax consequences of the
Combination based on current law. Neither Allegheny Ludlum nor Teledyne has
requested or will request any ruling from the Internal Revenue Service (the
"IRS") as to the United States federal income tax consequences of the
Combination. Future legislative, judicial or administrative changes or
interpretations, which may be retroactive, could alter or modify the
statements set forth herein. This summary may not apply to certain classes of
taxpayers, including, without limitation, insurance companies, tax-exempt
organizations, financial institutions, dealers in securities, non-resident
aliens, foreign corporations, persons who acquired shares of either Allegheny
Ludlum Common Stock or Teledyne Common Stock pursuant to the exercise of
employee stock options or rights or otherwise as compensation and persons who
hold shares of either Allegheny Ludlum Common Stock or Teledyne Common Stock
in a hedging transaction or as part of a straddle or conversion transaction.
Also, the summary does not address state, local or foreign tax consequences of
the Combination. Consequently, each holder of Allegheny Ludlum Common Stock or
Teledyne Common Stock (a "Holder") should consult such Holder's own tax
advisor as to the specific tax consequences of the Combination to such holder.
67
<PAGE>
Allegheny Ludlum has received the opinion of Kirkpatrick & Lockhart LLP and
Teledyne has received the opinion of Irell & Manella LLP, their respective
counsel, concerning certain federal income tax consequences of the Allegheny
Ludlum Merger (in the case of the opinion from Kirkpatrick & Lockhart LLP) and
the Teledyne Merger (in the case of the opinion from Irell & Manella LLP), in
each case based upon certain customary representations and assumptions. Such
opinions, together with such assumptions and representations, have been filed
as exhibits to the Registration Statement (see "Available Information"). Based
in part upon such representations and assumptions, such counsel are of the
opinion that each of the Allegheny Ludlum Merger (in the case of the opinion
of Kirkpatrick & Lockhart LLP) and the Teledyne Merger (in the case of the
opinion of Irell & Manella LLP) will be treated as a reorganization within the
meaning of Section 368(a) of the Code; that, accordingly, for federal income
tax purposes, no gain or loss will be recognized by either Allegheny Ludlum or
Teledyne, as the case may be, as a result of the Combination; and that Holders
(other than the classes of Holders enumerated and excluded in the italicized
introductory paragraph under this caption) who exchange shares of Allegheny
Ludlum Common Stock or shares of Teledyne Common Stock for shares of ATI
Common Stock pursuant to the Combination will generally be treated as follows
(the treatment, set forth below, of Holders of Allegheny Ludlum Common Stock
being the subject of the opinion of Kirkpatrick & Lockhart LLP and the
treatment, as set forth below, of Holders of Teledyne Common Stock being the
subject of the opinion of Irell & Manella LLP):
(i) no gain or loss will be recognized by a Holder with respect to the
receipt of ATI Common Stock;
(ii) the aggregate adjusted tax basis of shares of ATI Common Stock
(including a fractional share interest in ATI Common Stock deemed received
and redeemed as described below) received by a Holder will be the same as
the aggregate adjusted tax basis of the shares of Allegheny Ludlum Common
Stock or Teledyne Common Stock, as the case may be, exchanged therefor;
(iii) the holding period of shares of ATI Common Stock (including the
holding period of a fractional share interest in ATI Common Stock) received
by a Holder will include the holding period of the Allegheny Ludlum Common
Stock or Teledyne Common Stock, as the case may be, exchanged therefor,
provided that such shares of Allegheny Ludlum Common Stock or Teledyne
Common Stock are held as capital assets at the Effective Time; and
(iv) a Holder of Teledyne Common Stock who receives cash in lieu of a
fractional share interest in ATI Common Stock will be treated as having
received such fractional share interest and then as having received the
cash in redemption of such fractional share interest. Under Section 302 of
the Code, if such deemed distribution is "substantially disproportionate"
with respect to the Holder or is "not essentially equivalent to a dividend"
after giving effect to the constructive ownership rules of the Code, the
Holder will generally recognize capital gain or loss equal to the
difference between the amount of cash received and the Holder's adjusted
tax basis in the fractional share interest. Under these rules, a minority
stockholder of Teledyne should recognize capital gain or loss on the
receipt of cash in lieu of a fractional share interest in ATI Common Stock.
The capital gain or loss will be long-term capital gain or loss if the
Holder's holding period in the fractional share interest is more than one
year.
Other than as set forth above, such counsel express no opinion as to the U.S.
federal, state, local, foreign or other tax consequences of the Combination
that may be applicable to a particular stockholder of Allegheny Ludlum or
Teledyne.
The obligation of Allegheny Ludlum to consummate the Combination is
conditioned on the receipt by Allegheny Ludlum of an opinion of its counsel,
Kirkpatrick & Lockhart LLP, dated as of the Effective Time, substantially to
the effect that the Allegheny Ludlum Merger will be treated for federal income
tax purposes either as a tax-free reorganization within the meaning of Section
368(a) of the Code or as a non-recognition exchange of stock pursuant to
Section 351 of the Code. The obligation of Teledyne to consummate the Teledyne
Merger is conditioned on the receipt by Teledyne of an opinion of its counsel,
Irell & Manella LLP, dated as of the Effective Time, substantially to the
effect that the Teledyne Merger will be treated for federal income tax
purposes either as a reorganization within the meaning of Section 368(a) of
the Code or as a non-recognition
68
<PAGE>
exchange of stock pursuant to Section 351 of the Code. The opinions of
Kirkpatrick & Lockhart LLP and Irell & Manella LLP referred to in this
paragraph will be based in part upon certain assumptions and representations
substantially similar to those made and obtained in connection with their
respective opinions filed as exhibits to the Registration Statement. Subject
to the receipt of such representations, Kirkpatrick & Lockhart LLP and Irell &
Manella LLP anticipate that they will render such opinions. If such opinions
are not received, the Combination will not be consummated unless the
conditions requiring their receipt are waived and the approvals of the
Allegheny Ludlum shareholders and the Teledyne stockholders are resolicited by
means of an updated Joint Proxy Statement/ Prospectus. Allegheny Ludlum and
Teledyne currently anticipate that such opinions will be delivered and that
neither Allegheny Ludlum nor Teledyne will waive the conditions requiring
receipt of such opinions. Such opinions will not be binding upon the IRS and
no assurance can be given that the IRS will not take a contrary position.
REGULATORY APPROVALS
Antitrust. Under the HSR Act and the rules promulgated thereunder, the
Combination could not be consummated until notifications had been given and
certain information had been furnished to the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and specified waiting period requirements had been satisfied.
Termination of the required waiting period under the HSR Act with respect to
the Combination became effective on June 27, 1996. At any time before or after
the Effective Time, and notwithstanding that the HSR Act waiting period has
been terminated, any state could take such action under the antitrust laws as
it deems necessary or desirable. Such action could include seeking to enjoin
the consummation of the Combination or seeking divestiture of businesses of
Allegheny Ludlum or Teledyne by ATI. Private parties may also seek to take
legal action under the antitrust laws under certain circumstances.
Based on information available to them, Allegheny Ludlum and Teledyne
believe that the Combination will be effected in compliance with federal and
state antitrust laws. However, there can be no assurance that a challenge to
the consummation of the Combination on antitrust grounds will not be made or
that, if such a challenge were made, Allegheny Ludlum and Teledyne would
prevail.
Foreign Approvals. Teledyne conducts operations in a number of foreign
countries where regulatory filings or approvals may be required in connection
with the consummation of the Combination. Teledyne is currently in the process
of making filings and seeking approvals that may be required in foreign
countries which may be material to ATI.
Consummation of the Combination is conditioned upon the receipt of all
material governmental authorizations, consents, orders and approvals, subject
to waiver of such condition in accordance with the terms of the Combination
Agreement. Allegheny Ludlum and Teledyne intend to pursue vigorously all
required regulatory approvals. However, there can be no assurance that such
approvals will, in fact, be obtained, or, if obtained, as to the timing of
their receipt. See "The Combination Agreement--Conditions."
RESALE RESTRICTIONS
All shares of ATI Common Stock received by Allegheny Ludlum shareholders and
Teledyne stockholders in the Combination will be freely transferable, except
that shares of ATI Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of Allegheny
Ludlum or Teledyne prior to the Combination may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of ATI) or as otherwise permitted under the Securities Act. The
Combination Agreement requires each of Allegheny Ludlum and Teledyne to
exercise its best efforts to cause each of its affiliates to execute a written
agreement to the effect that such person will not offer or sell, transfer or
otherwise dispose of any of the shares of ATI Common Stock issued to such
person in or pursuant to the Combination unless (a) such sale, transfer or
69
<PAGE>
other disposition has been registered under the Securities Act, (b) such sale,
transfer or other disposition is made in conformity with Rule 145 under the
Securities Act or (c) in the opinion of counsel, such sale, transfer or other
disposition is exempt from registration under the Securities Act.
NO APPRAISAL RIGHTS
Neither holders of Allegheny Ludlum Common Stock nor holders of Teledyne
Common Stock are entitled to dissenters' appraisal rights in connection with
the Combination.
70
<PAGE>
THE COMBINATION AGREEMENT
Following is a summary of the material terms of the Combination Agreement, a
copy of which is attached as Appendix A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Combination Agreement.
Shareholders of Allegheny Ludlum and stockholders of Teledyne are urged to
read the Combination Agreement in its entirety for a more complete description
of the Combination.
THE COMBINATION
The Combination Agreement provides that, following the approval and adoption
of the Combination Agreement and the transactions contemplated thereby by the
shareholders of Allegheny Ludlum and by the stockholders of Teledyne, and the
satisfaction or waiver of the other conditions to the Combination, Allegheny
Ludlum Merger Sub will be merged with and into Allegheny Ludlum and Teledyne
Merger Sub will be merged with and into Teledyne, whereupon each of Allegheny
Ludlum and Teledyne will be a subsidiary of ATI.
If all such conditions to the Combination are satisfied or waived, the
Combination will become effective upon the filing of duly executed Articles of
Merger with the Department of State of the Commonwealth of Pennsylvania (and,
to the extent applicable, the Secretary of State of the State of Delaware) in
the case of the Allegheny Ludlum Merger and of a duly executed Certificate of
Merger with the Secretary of State of the State of Delaware in the case of the
Teledyne Merger, or at such time thereafter as is provided in the Articles of
Merger and the Certificate of Merger.
At the Effective Time, the Certificate of Incorporation and Bylaws of ATI as
in effect immediately prior to the Effective Time will be amended and restated
in their entireties to read as set forth in Annexes A and B to the Combination
Agreement, respectively.
CONVERSION OF SECURITIES
Upon consummation of the Combination, pursuant to the Combination Agreement,
each issued and outstanding share of Allegheny Ludlum Common Stock (other than
shares owned by Teledyne or any subsidiary of Teledyne, or shares held in
Allegheny Ludlum's treasury immediately prior to the Effective Time, all of
which will be canceled) will be converted into the right to receive one share
of ATI Common Stock, and each issued and outstanding share of Teledyne Common
Stock (other than shares owned by Allegheny Ludlum or any subsidiary of
Allegheny Ludlum, or shares held in Teledyne's treasury immediately prior to
the Effective Time, all of which will be canceled) will be converted into the
right to receive 1.925 shares of ATI Common Stock.
After the Effective Time, all shares of Allegheny Ludlum Common Stock and
Teledyne Common Stock will cease to be listed on the NYSE (and, in the case of
Teledyne Common Stock, the Pacific Stock Exchange), and ATI will undertake to
terminate registration of Allegheny Ludlum Common Stock and Teledyne Common
Stock under the Exchange Act. However, it is a condition to the parties'
obligations to consummate the Combination that ATI Common Stock be approved
for listing on the NYSE subject to official notice of issuance, and ATI Common
Stock has been so approved.
Neither certificates nor scrip for fractional shares of ATI Common Stock
will be issued in the Combination, but in lieu thereof each holder of Teledyne
Common Stock otherwise entitled to a fraction of a share of ATI Common Stock
(after aggregating all fractional shares of ATI Common Stock that would
otherwise be received by such holder) will be entitled to receive a cash
payment. The amount of such cash payment will equal, in the case of each
fractional share, an amount (rounded to the nearest whole cent), without
interest, calculated as the product of (i) such fraction, multiplied by (ii)
the average of the high and low per share sales prices for ATI
71
<PAGE>
Common Stock on the NYSE for each of the five (5) consecutive trading days
immediately preceding the Effective Time as quoted in The Wall Street Journal
or other reliable financial newspaper or publication, or, if ATI Common Stock
does not trade prior to the Effective Time on a "when issued" basis, the
average of the high and low per share sales prices for the ATI Common Stock on
the trading day that includes the Effective Time (or, if the Effective Time
does not occur on a trading day, on the first trading day thereafter). For the
purposes of the preceding sentence, a "trading day" means a day on which
trading generally takes place on the NYSE. No such fractional share interest
will entitle the owner thereof to vote or to any rights of a stockholder of
ATI.
Based upon the number of outstanding shares of Allegheny Ludlum Common Stock
and Teledyne Common Stock as of June 30, 1996 and the respective ratios at
which shares of Allegheny Ludlum Common Stock and Teledyne Common Stock will
be converted into shares of ATI Common Stock in the Combination, the
shareholders of Allegheny Ludlum and the stockholders of Teledyne immediately
prior to the consummation of the Combination will own approximately 38% and
62%, respectively, of the outstanding shares of ATI Common Stock immediately
following the consummation of the Combination (for this purpose, disregarding
any shares of Allegheny Ludlum Common Stock that may be owned by Teledyne
stockholders and any shares of Teledyne Common Stock that may be owned by
Allegheny Ludlum shareholders immediately prior to the consummation of the
Combination).
Promptly after the Effective Time, the Exchange Agent will mail transmittal
forms and exchange instructions to each holder of record of Allegheny Ludlum
Common Stock and each holder of record of Teledyne Common Stock to be used to
surrender and exchange certificates evidencing shares of Allegheny Ludlum
Common Stock and Teledyne Common Stock for certificates evidencing the shares
of ATI Common Stock to which such holder has become entitled. After receipt of
such transmittal forms, each holder of certificates formerly representing
Allegheny Ludlum Common Stock or Teledyne Common Stock will be able to
surrender such certificates to the Exchange Agent, and each such holder will
receive in exchange therefor certificates evidencing the number of shares of
ATI Common Stock to which such holder is entitled and, in the case of holders
of Teledyne Common Stock, cash in lieu of fractional shares as indicated
above. Such transmittal forms will be accompanied by instructions specifying
other details of the exchange. ALLEGHENY LUDLUM SHAREHOLDERS AND TELEDYNE
STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A
TRANSMITTAL FORM.
After the Effective Time, each certificate evidencing Allegheny Ludlum
Common Stock or Teledyne Common Stock, until so surrendered and exchanged,
will be deemed, for all purposes, to evidence only the right to receive the
number of shares of ATI Common Stock (and cash in lieu of fractional shares)
which the holder of such certificate is entitled to receive, without interest.
The holder of such unexchanged certificate will not be entitled to receive any
dividends or other distributions payable by ATI until the certificate has been
exchanged. Following such exchange, such dividends or other distributions will
be paid to the holder entitled thereto, without interest.
ATI or the Exchange Agent will be entitled to deduct and withhold from the
consideration otherwise payable or issuable pursuant to the Combination
Agreement to any holder of Allegheny Ludlum Common Stock or Teledyne Common
Stock such amounts as ATI or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment or issuance under the
Code, or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by ATI or the Exchange Agent, such withheld amounts
shall be treated as having been paid to the holder of shares of Allegheny
Ludlum Common Stock or Teledyne Common Stock in respect of which such
deduction and withholding was made by ATI or the Exchange Agent.
REPRESENTATIONS AND WARRANTIES
The Combination Agreement contains various customary representations and
warranties (which will terminate upon consummation of the Combination)
relating to, among other things, (a) the corporate organization
72
<PAGE>
and qualification of each of Allegheny Ludlum and Teledyne and their
respective subsidiaries and certain similar corporate matters; (b) the capital
structure of each of Allegheny Ludlum and Teledyne; (c) the authorization,
execution, delivery and enforceability of the Combination Agreement and the
consummation of the transactions contemplated thereby and related matters; (d)
required governmental filings and absence of violations under charters,
bylaws, and certain instruments and laws; (e) documents and financial
statements filed by each of Allegheny Ludlum and Teledyne with the Commission
and the accuracy of information contained therein; (f) undisclosed
liabilities; (g) the absence of certain material adverse changes or events;
(h) litigation; (i) taxes, tax returns and audits; (j) employee benefits; (k)
environmental matters; (l) brokers and finders; (m) action by the Board of
Directors of Teledyne to render inapplicable to the Combination the business
combination provisions of the DGCL and Teledyne's Stockholder Rights Plan (see
"The Combination--Teledyne Stockholder Rights Plan" and "Comparison of
Stockholder Rights--Statutory Provisions Affecting Business Combinations and
Control Share Acquisitions"); (n) certain tax and accounting matters; (o)
labor matters; (p) compliance with laws; (q) title to assets; (r) intellectual
property; (s) insurance; (t) employment and change of control agreements; (u)
certain "related party" transactions; (v) the accuracy of information supplied
by each of Allegheny Ludlum and Teledyne in connection with the Registration
Statement and this Joint Proxy Statement/Prospectus; (w) opinions of financial
advisors; (x) the absence of existing discussions with other parties; (y)
restrictions on business activities; and (z) agreements, contracts and
commitments.
The Combination Agreement also contains various representations and
warranties of ATI with respect to (a) its organization; (b) the authorization,
execution, delivery and enforceability of the Combination Agreement and the
consummation of the transactions contemplated thereby; and (c) the absence of
violations under its Certificate of Incorporation or Bylaws.
CERTAIN COVENANTS
Pursuant to the Combination Agreement, each of Allegheny Ludlum and Teledyne
has agreed that, during the period from the date of the Combination Agreement
until the earlier of the termination of the Combination Agreement in
accordance with its terms or the Effective Time, except as otherwise disclosed
to the other in writing in connection with the Combination Agreement or
consented to in writing by the other, it and each of its subsidiaries will,
with certain exceptions: (a) carry on its business in the ordinary course in
substantially the same manner as previously conducted; (b) pay its debts and
taxes when due subject to good faith disputes over such debts or taxes, and
pay or perform other obligations when due; (c) use reasonable efforts
consistent with past practices to preserve intact its present business
organization; (d) except in the ordinary course of business, not acquire any
stock or other interest in or purchase any assets of any business organization
or entity; (e) not sell, lease, assign, transfer or otherwise dispose of any
of its assets, nor create any mortgage, security interest or other lien
thereon, except in the ordinary course of business and except for any assets
which were held for disposition as of the date of the Combination Agreement or
are obsolete; (f) not incur any indebtedness for borrowed money or any
obligation under any guarantee except in the ordinary course of business
consistent with past practice; (g) not (i) alter, amend or repeal any
provision of its Articles or Certificate of Incorporation or Bylaws; (ii)
change the number of its directors (other than as a result of the death,
retirement or resignation of a director); (iii) except in the ordinary course
of business, form or acquire any subsidiaries; (iv) except in the ordinary
course of business, enter into, modify or terminate any material contract or
agreement to which it is a party or agree to do so; (v) modify certain
employment agreements; or (vi) incur any obligation for the payment of any
bonus, additional salary or compensation or retirement, termination, welfare
or severance benefits payable or to become payable to any of its employees or
other persons, except in any such case for obligations incurred in the
ordinary course of business and consistent with past practice and such matters
as are required pursuant to the terms of any existing employment agreement or
benefit plan; (h) pay and discharge all material taxes imposed upon it; (i)
not declare, set aside, make or pay any dividends or other distributions with
respect to its capital stock except for regular cash dividends not to exceed,
in the case of Allegheny Ludlum, $.13 per share of Allegheny Ludlum Common
Stock in the second quarter of 1996 and $.16 per share of Allegheny Ludlum
Common Stock in the third quarter of 1996 and thereafter or, in the case of
Teledyne, $.31 per share of Teledyne Common Stock and regular cash dividends
on shares of Teledyne Series E Cumulative Preferred Stock, or purchase or
redeem any shares of its capital stock; (j) not authorize or make any capital
expenditure otherwise than in the ordinary course
73
<PAGE>
of business; or (k) with certain exceptions, not increase the number of shares
authorized or issued and outstanding of its capital stock, nor grant any
option, warrant, call, commitment, right or agreement of any character relating
to its capital stock, nor issue or sell any shares of its capital stock or
securities convertible into such capital stock, or any bonds, promissory notes,
debentures or other corporate securities.
NO SOLICITATION
The Combination Agreement provides that neither Allegheny Ludlum nor Teledyne
will, directly or indirectly, through any officer, director, employee,
representative or agent of it or any of its subsidiaries, (i) solicit, initiate
or encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale of substantial assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transactions
involving it or any of its subsidiaries, other than the transactions
contemplated by the Combination Agreement (any of the foregoing inquiries or
proposals being referred to in the Combination Agreement as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions concerning, or provide
any non-public information to any person or entity relating to, any Acquisition
Proposal, or (iii) agree to, approve or recommend any Acquisition Proposal;
provided, however, that nothing contained in the Combination Agreement shall
prevent Allegheny Ludlum or Teledyne or their respective Boards of Directors
from (a) furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity or recommending an
unsolicited bona fide written Acquisition Proposal to the stockholders of such
party, if and only to the extent that (1) its Board of Directors believes in
good faith (after consultation with and based on the written opinion of its
financial advisor) that such Acquisition Proposal would, if consummated, result
in a transaction more favorable to its stockholders from a financial point of
view than the transaction contemplated by the Combination Agreement (any such
more favorable Acquisition Proposal being referred to in the Combination
Agreement as a "Superior Proposal") and its Board of Directors determines in
good faith based on a written opinion of outside legal counsel that such action
is necessary for it to comply with its fiduciary duties to stockholders under
applicable law and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, its
Board of Directors receives from such person or entity an executed
confidentiality agreement with terms no less favorable to such party than those
contained in the respective Confidentiality Agreements dated March 1 and March
4, 1996 between Allegheny Ludlum and Teledyne; or (b) taking any position,
pursuant to Rules 14d-9 and 14e-2 under the Exchange Act, with regard to an
Acquisition Proposal consisting of a tender offer commenced by a third party
(other than a tender offer commenced by public announcement alone) that is
consistent with the advice of its counsel concerning its Board of Directors'
fiduciary duties under applicable law.
Each of Allegheny Ludlum and Teledyne is required to notify the other as soon
as practicable upon receipt of any Acquisition Proposal or request for non-
public information or access to its properties, books or records in connection
with an Acquisition Proposal.
INDEMNIFICATION AND INSURANCE
The Combination Agreement provides that each of Allegheny Ludlum and Teledyne
shall, and from and after the Effective Time, ATI shall, indemnify, defend and
hold harmless each person who was as of the date of the Combination Agreement
an officer or director of Allegheny Ludlum or Teledyne or any of its
subsidiaries, as the case may be, against all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement with
the approval of the indemnifying party of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on, or
arising in whole or in part out of, the fact that such person is or was a
director or officer of it or any of its subsidiaries, whether pertaining to any
matter existing or occurring at or prior to the Effective Time and whether
asserted or claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), and all Indemnified Liabilities based in whole or in part on, or
arising in whole or in part out of, or pertaining to the Combination Agreement
or the transactions contemplated thereby, in each case to the full extent that
a corporation is permitted under applicable law to indemnify its own directors
or officers.
74
<PAGE>
The Combination Agreement provides that, subject to certain limitations, ATI
will maintain in effect for a specified period policies of directors' and
officers' liability insurance coverage, including coverage with respect to
claims arising from acts, omissions or other events which occur prior to or as
of the Effective Time.
TELEDYNE STOCKHOLDER RIGHTS PLAN
On January 4, 1995, the Board of Directors of Teledyne adopted the Teledyne
Stockholder Rights Plan pursuant to the Rights Agreement, dated as of January
4, 1995 between Teledyne and Chemical Trust Company of California, as Rights
Agent. In accordance with the Teledyne Stockholder Rights Plan, the Board of
Directors of Teledyne declared a dividend of one Teledyne Right for each
outstanding share of Teledyne Common Stock. Pursuant to the Teledyne
Stockholder Rights Plan, if a person or group, without the prior approval of
the Board of Directors of Teledyne, becomes the beneficial owner of 15% or
more of outstanding Teledyne Common Stock, each Teledyne Right, except any
such Teledyne Rights held by the non-approved acquiror (or its affiliates or
transferees), will entitle the holder to purchase a number of shares of
Teledyne Common Stock that has a then-current market value of twice the
exercise price of the Teledyne Right, which is $75 (subject to adjustment). In
addition, if, after such an event, Teledyne sells 50 percent or more of its
assets or earning power to the non-approved acquiror (or any other person if
the transaction does not treat all shareholders alike), each Teledyne Right,
except any such Teledyne Rights held by the non-approved acquiror (or its
affiliates or transferees), will entitle the holder to buy a number of shares
of the voting stock of the other party to the transaction that has a then-
current market value of twice the exercise price. The Teledyne Stockholder
Rights Plan and the Teledyne Rights are to expire on January 4, 2005. The
Teledyne Rights may be redeemed by the Board of Directors of Teledyne for
$0.01 per Teledyne Right at any time prior to the occurrence of the first
triggering event described above or prior to the expiration of the Teledyne
Rights.
The Combination Agreement provides that Teledyne shall not redeem the
Teledyne Rights (but may delay any "distribution date" thereon or render the
Teledyne Rights inapplicable to the Combination Agreement, the Combination or
the Stockholder Agreements or any action permitted thereunder) or amend (other
than as contemplated by the final sentence of this paragraph) or terminate the
Teledyne Rights prior to the earlier of the Effective Time or the termination
of the Combination Agreement unless required to do so by a court of competent
jurisdiction. As contemplated by the Combination Agreement, the Teledyne Board
has taken action under the terms of the Teledyne Stockholder Rights Plan to
exempt the Combination thereunder and to prevent the Combination from
triggering the Teledyne Rights. In addition, as contemplated by the
Combination Agreement, such Plan has been amended to provide that the Teledyne
Rights will expire at the Effective Time.
STOCK PLANS
For a description of the provisions of the Combination Agreement relating to
the Allegheny Ludlum Stock Plans and the Teledyne Stock Plans and the
Derivative Securities outstanding thereunder, see "The Combination--Stock
Option and Stock Purchase Plans."
CONDITIONS
The respective obligations of Allegheny Ludlum and Teledyne to effect the
Combination are subject to the following conditions, among others: (a) the
approval and adoption of the Combination Agreement and the transactions
contemplated thereby by the shareholders of Allegheny Ludlum and the
stockholders of Teledyne; (b) the expiration or termination of the waiting
period applicable to the consummation of the Combination under the HSR Act;
(c) the receipt of all material governmental authorizations, consents, orders
or approvals; (d) the effectiveness of the Registration Statement, which shall
not be the subject of a stop order or proceedings seeking a stop order; (e)
the absence of any temporary restraining order, preliminary or permanent
injunction or other order to be in effect that prevents, or seeks to prevent,
the consummation of the Combination; (f) no statute, rule, regulation, or
order shall be enacted, entered, enforced or deemed applicable to the
Combination which makes the consummation of the Combination illegal; (g) the
receipt by Allegheny Ludlum and Teledyne of certain letters from their
respective independent public accountants with respect to the accounting
treatment of the Combination (See "The Combination--Accounting Treatment");
(h) the approval of the shares of ATI
75
<PAGE>
Common Stock to be issued in the Combination for listing on the NYSE upon
official notice of issuance; (i) receipt by Allegheny Ludlum of an opinion of
counsel to Allegheny Ludlum, and receipt by Teledyne of an opinion of counsel
to Teledyne, each dated the Effective Date, to the effect that the Allegheny
Ludlum Merger and the Teledyne Merger, respectively, will be treated for
federal income tax purposes either as a tax-free reorganization within the
meaning of Section 368(a) of the Code or as a non-recognition exchange of stock
pursuant to Section 351 of the Code; (j) receipt by ATI of all state securities
or "Blue Sky" permits and other authorizations necessary to issue shares of ATI
Common Stock pursuant to the Combination; (k) the obtaining of material
consents required to consummate the Combination; (l) the accuracy in all
material respects of the representations and warranties of the other party set
forth in the Combination Agreement; and (m) the performance in all material
respects of all obligations of the other party required to be performed under
the Combination Agreement. In addition, the obligations of Allegheny Ludlum and
Teledyne to effect the Combination are subject to the condition that no
adoption of or amendment to any statute, or promulgation of or revision to any
regulation, and no change in a position previously taken by one or more of
certain governmental agencies, shall have been effected or proposed which has
or would have the effect of prohibiting, or of limiting or restricting in any
material respect the merger of any pension plans of Allegheny Ludlum and
Teledyne or its economic equivalent or would cause a merger of such pension
plans or its economic equivalent to be illegal or impractical.
TERMINATION; TERMINATION FEES AND EXPENSES
The Combination Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual written consent of Allegheny Ludlum and Teledyne; or
(b) by either Allegheny Ludlum or Teledyne if the Combination shall not have
been consummated by September 30, 1996 (provided that the right to terminate
the Combination Agreement under this clause shall not be available to any party
whose failure to fulfill any material obligation under the Combination
Agreement has been a cause of or resulted in the failure of the Combination to
occur on or before such date); or
(c) by either Allegheny Ludlum or Teledyne if a court of competent
jurisdiction or other Governmental Entity (as defined in the Combination
Agreement) shall have issued a nonappealable final order, decree or ruling or
taken any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Combination; or
(d) by Allegheny Ludlum or Teledyne, if, at the Allegheny Ludlum Special
Meeting or the Teledyne Special Meeting (including any adjournment or
postponement), as the case may be, the requisite vote of the shareholders of
Allegheny Ludlum in favor of the Combination Agreement and the Allegheny Ludlum
Merger or the stockholders of Teledyne in favor of the Combination Agreement
and the Teledyne Merger, as the case may be, shall not have been obtained; or
(e) by Allegheny Ludlum, if (i) the Board of Directors of Teledyne shall have
withdrawn or modified its recommendation of the Combination Agreement or the
Combination in a manner adverse to consummation of the Combination or shall
have resolved to do any of the foregoing; (ii) the Board of Directors of
Teledyne shall have recommended to the stockholders of Teledyne an Alternative
Transaction (as defined below); (iii) a tender offer or exchange offer for 15%
or more of the outstanding shares of Teledyne Common Stock is commenced (other
than by Allegheny Ludlum or an affiliate of Allegheny Ludlum) and the Board of
Directors of Teledyne recommends that the stockholders of Teledyne tender their
shares in such tender or exchange offer; or (iv) for any reason Teledyne fails
to call and hold a meeting of its stockholders to consider and vote on the
Combination Agreement and the transactions contemplated thereby by September
30, 1996 unless such failure is due to the fact that the Registration Statement
was not declared effective sufficiently in advance of such date to enable
Teledyne to hold the Teledyne Special Meeting by such date; or
(f) by Teledyne, if (i) the Board of Directors of Allegheny Ludlum shall have
withdrawn or modified its recommendation of the Combination Agreement or the
Combination in a manner adverse to consummation of
76
<PAGE>
the Combination or shall have resolved to do any of the foregoing; (ii) the
Board of Directors of Allegheny Ludlum shall have recommended to the
shareholders of Allegheny Ludlum an Alternative Transaction (as defined
below); (iii) a tender offer or exchange offer for 15% or more of the
outstanding shares of Allegheny Ludlum Common Stock is commenced (other than
by Teledyne or an affiliate of Teledyne) and the Board of Directors of
Allegheny Ludlum recommends that the shareholders of Allegheny Ludlum tender
their shares in such tender or exchange offer, or (iv) for any reason
Allegheny Ludlum fails to call and hold a meeting of its shareholders to
consider and vote on the Combination Agreement and the transactions
contemplated thereby by September 30, 1996 unless such failure is due to the
fact that the Registration Statement was not declared effective sufficiently
in advance of such date to enable Allegheny Ludlum to hold the Allegheny
Ludlum Special Meeting by such date; or
(g) by Allegheny Ludlum or Teledyne, if (i) the other party has breached any
representation or warranty contained in the Combination Agreement, and such
breach shall not have been cured prior to the Effective Time (except where
such breach would not have a material adverse effect on the party having made
such representation or warranty and its subsidiaries taken as a whole and
would not have a material adverse effect upon ATI), or (ii) there has been a
breach of a covenant or agreement set forth in the Combination Agreement on
the part of the other party, which shall not have been cured within two
business days following receipt by the breaching party of written notice of
such breach from the other party (other than those described under "The
Combination Agreement--No Solicitation," as to which there shall be no cure
period).
In the event of any termination of the Combination Agreement by either
Allegheny Ludlum or Teledyne as provided above, the Combination Agreement will
become void and there will be no liability or obligation on the part of
Allegheny Ludlum, Teledyne or their respective officers, directors,
stockholders or affiliates, except as set forth in the Combination Agreement
and to the extent that such termination results from the willful breach by a
party of any of its representations, warranties, covenants or agreements set
forth in the Combination Agreement, provided that the provisions relating to
fees and expenses shall survive such termination.
Except as set forth below, whether or not the Combination is consummated,
all fees, costs and expenses incurred in connection with the Combination
Agreement and the transactions contemplated thereby shall be paid by the party
incurring such expenses, except that all fees and expenses, other than
attorneys' fees, incurred in relation to the printing and filing of this Joint
Proxy Statement/Prospectus and the Registration Statement shall be shared
equally by Allegheny Ludlum and Teledyne.
The Combination Agreement provides that Teledyne shall reimburse Allegheny
Ludlum for out-of-pocket expenses incurred by Allegheny Ludlum relating to the
transactions contemplated by the Combination Agreement prior to termination
(including, but not limited to, fees and expenses of Allegheny Ludlum's
counsel, accountants and financial advisors), upon the termination of this
Agreement by Allegheny Ludlum under the circumstances described in paragraph
(d) above as a result of the failure to receive the requisite vote for
approval of the Combination Agreement and the Teledyne Merger by the
stockholders of Teledyne at the Teledyne Special Meeting, or under the
circumstances described in paragraphs (e) or (g) above, and that Allegheny
Ludlum shall reimburse Teledyne for out-of-pocket expenses incurred by
Teledyne relating to the transactions contemplated by the Combination
Agreement prior to termination (including, but not limited to, fees and
expenses of Teledyne's counsel, accountants and financial advisors), upon the
termination of the Combination Agreement by Teledyne under the circumstances
described in paragraph (d) above as a result of the failure to receive the
requisite vote for approval of the Combination Agreement and the Allegheny
Ludlum Merger by the shareholders of Allegheny Ludlum at the Allegheny Ludlum
Special Meeting, or under the circumstances described in paragraphs (f) or (g)
above.
Teledyne will be required to pay Allegheny Ludlum a termination fee of
$50,000,000 upon the earliest to occur of the following events: (i) the
termination of this Combination Agreement by Allegheny Ludlum under the
circumstances described in paragraph (e) above; or (ii) the termination of the
Combination Agreement by Allegheny Ludlum under the circumstances described in
paragraph (g) above after a breach by Teledyne of the Combination Agreement;
or (iii) the termination of the Combination Agreement by Allegheny Ludlum
under the
77
<PAGE>
circumstances described in paragraph (d) above as a result of the failure to
receive the requisite vote for approval of the Combination Agreement and the
Teledyne Merger by the stockholders of Teledyne at the Teledyne Special
Meeting.
Allegheny Ludlum will be required to pay Teledyne a termination fee of
$30,000,000 upon the earliest to occur of the following events: (i) the
termination of the Combination Agreement by Teledyne under the circumstances
described in paragraph (f) above; or (ii) the termination of the Combination
Agreement by Teledyne under the circumstances described in paragraph (g) above
after a breach by Allegheny Ludlum of the Combination Agreement; or (iii) the
termination of the Combination Agreement by Teledyne under the circumstances
described in paragraph (d) above as a result of the failure to receive the
requisite vote for approval of the Combination Agreement and the Allegheny
Ludlum Merger by the shareholders of Allegheny Ludlum at the Allegheny Ludlum
Special Meeting.
If applicable, any expenses and fees payable as described above shall be
paid within one business day after the first to occur of the relevant
termination events.
As used in the Combination Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any person (or group of persons) (a "Third
Party") other than Allegheny Ludlum or Teledyne, acquires more than 15% of the
outstanding shares of Allegheny Ludlum Common Stock or Teledyne Common Stock,
as the case may be, pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving Allegheny Ludlum or
Teledyne pursuant to which any Third Party acquires more than 15% of the
outstanding equity securities of Allegheny Ludlum or Teledyne or the entity
surviving such merger or business combination, (iii) any other transaction
pursuant to which any Third Party acquires control of assets (including for
this purpose the outstanding equity securities of subsidiaries of Allegheny
Ludlum or Teledyne, and the entity surviving any merger or business
combination including any of them) of Allegheny Ludlum or Teledyne, as the
case may be, having a fair market value (as determined by the Board of
Directors of Allegheny Ludlum or Teledyne, as the case may be, in good faith)
equal to more than 15% of the fair market value of all the assets of Allegheny
Ludlum and its subsidiaries or Teledyne and its subsidiaries, in either case
taken as a whole, immediately prior to such transaction, or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing.
AMENDMENT AND WAIVER
The Combination Agreement may be amended at any time by action taken or
authorized by the respective Boards of Directors of Allegheny Ludlum and
Teledyne, but after approval by the stockholders of Allegheny Ludlum and
Teledyne of the Combination Agreement and the transactions contemplated
thereby, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. Allegheny Ludlum and
Teledyne, by action taken or authorized by their respective Boards of
Directors, may extend the time for performance of the obligations or other
acts of the other parties to the Combination Agreement, may waive inaccuracies
in the representations or warranties contained in the Combination Agreement
and may waive compliance with any agreements or conditions contained in the
Combination Agreement.
78
<PAGE>
THE STOCKHOLDER AGREEMENTS
Following is a summary of the Stockholder Agreements. Such summary is
qualified in its entirety by reference to the full texts of the forms of
Allegheny Ludlum Shareholder Agreement and Teledyne Stockholder Agreement
attached to this Joint Proxy Statement/Prospectus as Appendices D and E,
respectively.
Pursuant to the Stockholder Agreements, the individual parties thereto
(each, a "Stockholder") have each agreed that, until the earlier of (i) the
Effective Time or (ii) the date on which the Combination Agreement is
terminated in accordance with its terms (the earlier of such time and such
date being referred to herein as the "Stockholder Expiration Date"), the
Stockholder will vote, or take action by written consent with respect to, all
of his shares of Allegheny Ludlum Common Stock or Teledyne Common Stock, as
the case may be, (x) in favor of the adoption and approval of the Combination
Agreement and the transactions contemplated thereby, as such Combination
Agreement may be modified or amended from time to time (but not to reduce the
consideration to be received thereunder), and (y) against any action, omission
or agreement which would or could impede or interfere with, or have the effect
of discouraging, the Combination, including, without limitation, any
Acquisition Proposal other than the Combination.
At the request of Allegheny Ludlum or Teledyne, as the case may be, the
Stockholder will execute and deliver to Allegheny Ludlum or Teledyne an
irrevocable proxy and irrevocably appoint Allegheny Ludlum or Teledyne, as the
case may be, or its designee his attorney and proxy to vote or give consent
with respect to all of his or its shares of Allegheny Ludlum Common Stock or
Teledyne Common Stock, as the case may be, for the purposes set forth above.
Any such proxy will terminate on the Stockholder Expiration Date.
Each Stockholder Agreement contains the agreement of the Stockholder that,
among other things, until the Stockholder Expiration Date, he will: (a) not,
and will not agree to, sell, transfer, pledge, hypothecate, encumber, assign,
tender or otherwise dispose of any of his shares of Allegheny Ludlum Common
Stock or Teledyne Common Stock (or any interest therein), as the case may be
(other than in connection with certain transfers for estate planning purposes,
provided certain conditions are met); (b) other than as expressly contemplated
by the Stockholder Agreement, not grant any powers of attorney or proxies or
consents in respect of any of his shares of Allegheny Ludlum Common Stock or
Teledyne Common Stock, deposit any of his shares of Allegheny Ludlum Common
Stock or Teledyne Common Stock into a voting trust, enter into a voting
agreement with respect to any of his shares of Allegheny Ludlum Common Stock
or Teledyne Common Stock or otherwise restrict the ability of the holder of
any of his shares of Allegheny Ludlum Common Stock or Teledyne Common Stock,
in each case as the case may be, freely to exercise all voting rights with
respect thereto; (c) in the Stockholder's capacity as a shareholder of
Allegheny Ludlum or a stockholder of Teledyne, as the case may be, not, and
direct and use his best efforts to cause his agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making or implementation of any Acquisition Proposal or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Acquisition Proposal,
or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal, and will cease any existing activities related to the
foregoing; (d) notify Allegheny Ludlum or Teledyne, as the case may be, if any
such inquiry or proposal is received by such Stockholder; and (e) not take any
action that, based upon the advice of Allegheny Ludlum's or Teledyne's
accountants, as the case may be, would or could prevent the Combination from
qualifying for pooling of interests accounting treatment.
79
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma consolidated financial information gives effect to
the Combination on the basis that it will be accounted for as a pooling of
interests. See "The Combination--Accounting Treatment." The consolidated
financial information on the following pages presents the historical unaudited
consolidated balance sheets of each of Allegheny Ludlum and Teledyne at March
31, 1996 and the pro forma unaudited consolidated balance sheet of ATI as of
March 31, 1996, giving effect to the Combination as if it had occurred on that
date; and the historical consolidated statements of income of each of
Allegheny Ludlum and Teledyne for the three months ended March 31, 1996 and
1995 and for each of the three years in the period ended December 31, 1995,
and the pro forma unaudited consolidated statements of income for the three
months ended March 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1995, giving effect to the Combination as if it had
been effected at the beginning of the period presented. Certain
reclassifications have been made to the historical financial information to
conform to current presentation. Intercompany transactions between Allegheny
Ludlum and Teledyne are immaterial and, accordingly, have not been eliminated.
The unaudited pro forma consolidated balance sheet gives effect to
anticipated expenses and nonrecurring charges related to the Combination and
assumes each of the outstanding shares of Allegheny Ludlum Common Stock is
converted into one share of ATI Common Stock and each of the outstanding
shares of Teledyne Common Stock is converted into 1.925 shares of ATI Common
Stock. However, pro forma financial information excludes the estimated effect
of revenue enhancements and expense savings associated with the consolidation
of the operations of Allegheny Ludlum and Teledyne. See "Risk Factors--
Inherent Uncertainties Relating to Certain Effects of the Combination" and
"The Combination--Reasons for the Combination; Recommendations of the Boards
of Directors."
The unaudited pro forma consolidated financial statements are intended for
informational purposes and may not be indicative of the combined financial
position or results of operations that actually would have occurred had the
transaction been consummated during the periods or as of the dates indicated,
or which will be attained in the future. The pro forma consolidated financial
information should be read in conjunction with the 1995 Annual Reports on Form
10-K and the Quarterly Reports on Form 10-Q for the quarterly period ended
March 31, 1996 of Allegheny Ludlum and Teledyne incorporated by reference
herein.
80
<PAGE>
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(in millions of dollars)
<TABLE>
<CAPTION>
ALLEGHENY PRO FORMA
LUDLUM TELEDYNE ADJUSTMENTS PRO FORMA(1)
--------- -------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and marketable
securities.................. $ 99.5 $ 79.1 (43.2)(2) $ 135.4
Trade receivables........... 142.9 427.5 570.4
Inventories................. 217.3 235.9 453.2
Deferred income taxes....... -- 78.0 (8.2)(3) 69.8
Prepaid expenses and other
current assets.............. 13.2 12.8 26.0
-------- -------- ------- --------
Total current assets...... 472.9 833.3 (51.4) 1,254.8
Properties, plants and
equipment..................... 446.9 301.1 748.0
Cost in excess of net assets
acquired...................... 129.2 34.2 163.4
Prepaid pension cost.......... -- 400.6 (68.3)(4) 332.3
Assets held for sale.......... 22.4 -- 22.4
Other assets.................. 19.9 83.7 (9.8)(4) 93.8
Deferred income taxes......... 42.6 -- (37.2)(3)(4) 5.4
-------- -------- ------- --------
Total assets.............. $1,133.9 $1,652.9 $(166.7) $2,620.1
======== ======== ======= ========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term
debt........................ $ 2.0 $ 7.6 $ 9.6
Accounts payable............ 75.4 123.2 198.6
Income taxes payable........ 20.9 26.4 (8.2)(3) 39.1
Other accrued expenses...... 90.0 251.2 25.0(5) 366.2
-------- -------- ------- --------
Total current liabilities. 188.3 408.4 16.8 613.5
Long-term debt................ 180.0 377.9 557.9
Pensions...................... 102.3 -- (102.3)(4) --
Postretirement benefit
liability..................... 270.1 267.6 537.7
Deferred income taxes......... -- 27.7 (27.7)(3) --
Other......................... 28.5 97.6 126.1
-------- -------- ------- --------
Total liabilities......... 769.2 1,179.2 (113.2) 1,835.2
Redeemable preferred stock.... -- 41.5 (41.5)(2) --
Shareholders' equity:
Common stock................ 7.3 55.9 (45.8)(6) 17.4
Additional capital.......... 271.5 44.0 (78.5)(6) 237.0
Retained earnings........... 224.9 324.2 (26.7)(2)(5) 522.4
Other....................... -- 8.1 8.1
Equity adjustment--pension
minimum liability........... (14.7) -- 14.7(4) --
Common stock in treasury.... (124.3) -- 124.3(6) --
-------- -------- ------- --------
Total shareholders'
equity.................... 364.7 432.2 (12.0) 784.9
-------- -------- ------- --------
Total liabilities and
shareholders' equity...... $1,133.9 $1,652.9 $(166.7) $2,620.1
======== ======== ======= ========
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
81
<PAGE>
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
QUARTER ENDED MARCH 31, 1996
(in millions, except per share and share data)
<TABLE>
<CAPTION>
ALLEGHENY LUDLUM TELEDYNE PRO FORMA(7)
---------------- ---------- ------------
<S> <C> <C> <C>
Sales............................. $ 353.1 $ 668.7 $ 1,021.8
Costs and expenses:
Cost of sales................... 286.1 457.4 743.5
Research, development and
technology...................... 10.9 15.5 26.4
Commercial and administrative... 12.6 110.5 123.1
Depreciation and amortization... 11.5 18.0 29.5
Interest expense--net........... 1.3 10.1 11.4
---------- ---------- -----------
322.4 611.5 933.9
Operating earnings--assets held
for sale.......................... 1.2 -- 1.2
Other income--net................. .6 43.7 44.3
---------- ---------- -----------
Income before income taxes........ 32.5 100.9 133.4
Income taxes...................... 13.4 38.4 51.8
---------- ---------- -----------
Net income........................ $ 19.1 $ 62.5 $ 81.6
========== ========== ===========
Net income per common share....... $ .29 $ 1.11 $ .47
========== ========== ===========
Average common shares outstanding. 66,592,371 55,859,589 174,122,080
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
82
<PAGE>
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME QUARTER ENDED MARCH 31,
1995 (in millions, except per share and share data)
<TABLE>
<CAPTION>
ALLEGHENY LUDLUM TELEDYNE PRO FORMA(7)
---------------- ---------- ------------
<S> <C> <C> <C>
Sales................................. $ 395.3 $ 625.5 $ 1,020.8
Costs and expenses:
Cost of sales....................... 313.7 426.6 740.3
Research, development and
technology.......................... 11.2 12.4 23.6
Commercial and administrative....... 14.0 109.4 123.4
Depreciation and amortization....... 9.9 17.8 27.7
Interest expense--net............... 0.8 10.1 10.9
---------- ---------- -----------
349.6 576.3 925.9
Operating earnings--assets held for
sale.................................. 3.0 -- 3.0
Other income--net..................... .3 53.7 54.0
---------- ---------- -----------
Income before income taxes............ 49.0 102.9 151.9
Income taxes.......................... 20.1 38.6 58.7
---------- ---------- -----------
Net income............................ $ 28.9 $ 64.3 $ 93.2
========== ========== ===========
Net income per common share........... $ .41 $ 1.16 $ .53
========== ========== ===========
Average common shares outstanding..... 70,567,973 55,500,626 177,406,678
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
83
<PAGE>
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31,
1995 (in millions, except per share and share data)
<TABLE>
<CAPTION>
ALLEGHENY LUDLUM TELEDYNE PRO FORMA(7)
---------------- ---------- ------------
<S> <C> <C> <C>
Sales................................. $ 1,494.3 $ 2,567.8 $ 4,062.1
Costs and expenses:
Cost of sales....................... 1,173.4 1,785.1 2,958.5
Research, development and
technology.......................... 46.2 57.3 103.5
Commercial and administrative....... 55.3 430.1 485.4
Depreciation and amortization....... 40.5 70.4 110.9
Interest expense--net............... 1.5 39.3 40.8
---------- ---------- -----------
1,316.9 2,382.2 3,699.1
Operating earnings--assets held for
sale.................................. 11.5 -- 11.5
Other income--net..................... 1.8 64.6 66.4
---------- ---------- -----------
Income before income taxes and
extraordinary items................... 190.7 250.2 440.9
Income taxes.......................... 75.9 88.2 164.1
---------- ---------- -----------
Income before extraordinary item...... $ 114.8 $ 162.0 $ 276.8
========== ========== ===========
Income per common share before
extraordinary item.................... $ 1.66 $ 2.88 $ 1.57
========== ========== ===========
Average common shares outstanding..... 69,246,949 55,656,827 176,386,341
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
84
<PAGE>
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31,
1994 (in millions, except per share and share data)
<TABLE>
<CAPTION>
ALLEGHENY LUDLUM TELEDYNE PRO FORMA(7)
---------------- ---------- ------------
<S> <C> <C> <C>
Sales................................ $ 1,076.9 $ 2,391.2 $ 3,468.1
Costs and expenses:
Cost of sales...................... 915.0 1,651.7 2,566.7
Research, development and
technology......................... 36.6 65.9 102.5
Commercial and administrative...... 45.8 576.3 622.1
Depreciation and amortization...... 38.2 70.2 108.4
Interest expense--net.............. 6.0 38.0 44.0
---------- ---------- -----------
1,041.6 2,402.1 3,443.7
Other income (loss)--net............. (2.4) 7.2 4.8
---------- ---------- -----------
Income (loss) before income taxes.... 32.9 (3.7) 29.2
Income taxes......................... 14.7 4.7 19.4
---------- ---------- -----------
Net income (loss).................... $ 18.2 $ (8.4) $ 9.8
========== ========== ===========
Net income (loss) per common share... $ .26 $ (.15) $ .06
========== ========== ===========
Average common shares outstanding.... 70,827,362 55,446,296 177,561,482
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
85
<PAGE>
ALLEGHENY TELEDYNE INCORPORATED
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31,
1993 (in millions, except per share and share data)
<TABLE>
<CAPTION>
ALLEGHENY LUDLUM TELEDYNE PRO FORMA(7)
---------------- ---------- ------------
<S> <C> <C> <C>
Sales................................. $ 1,100.2 $ 2,491.7 $ 3,591.9
Costs and expenses:
Cost of sales....................... 877.7 1,781.2 2,658.9
Research, development and
technology.......................... 41.9 64.0 105.9
Commercial and administrative....... 46.0 468.5 514.5
Depreciation and amortization....... 30.7 72.7 103.4
Interest expense--net............... 2.6 33.2 35.8
---------- ---------- -----------
998.9 2,419.6 3,418.5
Other income--net..................... 17.7 41.2 58.9
---------- ---------- -----------
Income before income taxes,
extraordinary item and cumulative
effect of accounting change.......... 119.0 113.3 232.3
Income taxes.......................... 48.2 40.5 88.7
---------- ---------- -----------
Income before extraordinary item and
cumulative effect of accounting
change............................... $ 70.8 $ 72.8 $ 143.6
========== ========== ===========
Income per common share before
extraordinary item and cumulative
effect of accounting change.......... $ 1.06 $ 1.32 $ .83
========== ========== ===========
Average common shares outstanding..... 66,614,353 55,420,654 173,299,112
</TABLE>
See accompanying Notes to Pro Forma Consolidated Financial Information.
86
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
(1) The pro forma consolidated balance sheet gives effect to the Combination
by combining the respective balance sheets of the two companies at March
31, 1996 on a pooling of interests basis.
(2) The pro forma balance sheet gives effect to the redemption of Teledyne
Series E Cumulative Preferred Stock and the payment of the related
dividend.
(3) Reflects reclassification of deferred income tax liabilities.
(4) Prepaid and accrued pension obligations, equity adjustment and the
associated deferred tax amounts related to minimum liabilities of
Allegheny Ludlum have been eliminated on the pro forma balance sheet to
reflect the excess of plan assets over projected benefit obligations of
Teledyne. Although it is expected that ATI will pursue a course of action
which would allow Teledyne's surplus pension funds to be utilized to fund
Allegheny Ludlum's underfunded pension obligations subsequent to the
Combination, no adjustment has been made to reflect the foregoing in the
pro forma statements of income.
(5) A liability of $25 million has been recorded in the pro forma consolidated
balance sheet to reflect management's estimate of anticipated expenses
related to the Combination.
(6) The capital accounts have been adjusted to reflect the issuance of 173.7
million shares of ATI Common Stock in exchange for all the outstanding
shares of Allegheny Ludlum Common Stock and Teledyne Common Stock, and the
cancellation of treasury stock.
(7) The pro forma consolidated statements of income give effect to the
Combination by combining the respective statements of income of the two
companies for the three months ended March 31, 1996 and 1995 and for each
of the three years in the period ended December 31, 1995. The pro forma
consolidated statements of income do not give effect to anticipated
expenses and nonrecurring charges related to the Combination and the
estimated effect of revenue enhancements and expense savings associated
with the combination of the operations of Allegheny Ludlum and Teledyne.
Earnings per common share amounts for Allegheny Ludlum and Teledyne are
based on the historical weighted average number of common shares
outstanding for each company during the period. With respect to the pro
forma earnings per share computation, shares have been adjusted to the
equivalent shares of ATI for each period.
87
<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
Upon consummation of the Teledyne Merger, the stockholders of Teledyne, a
Delaware corporation, will become stockholders of ATI, a Delaware corporation.
Upon consummation of the Allegheny Ludlum Merger, the shareholders of
Allegheny Ludlum, a Pennsylvania corporation and a "registered corporation"
(as defined in the Pennsylvania Business Corporation Law of 1988, as amended
(the "PBCL")), will become stockholders of ATI. Differences between Teledyne's
Restated Certificate of Incorporation, as amended (the "Teledyne
Certificate"), and Amended and Restated Bylaws (the "Teledyne Bylaws") and
ATI's Restated Certificate of Incorporation to be in effect as of the
Effective Time (the "ATI Certificate") and ATI's Amended and Restated Bylaws
to be in effect as of the Effective Time (the "ATI Bylaws") will result in
changes in the rights of stockholders of Teledyne when they become
stockholders of ATI. Differences between the PBCL and the DGCL, as well as
between Allegheny Ludlum's Restated Articles of Incorporation, as amended (the
"Allegheny Ludlum Articles"), and Bylaws, as amended (the "Allegheny Ludlum
Bylaws"), and the ATI Certificate and the ATI Bylaws, will result in changes
in the rights of the shareholders of Allegheny Ludlum when they become
stockholders of ATI. Following is a description of certain of such
differences, based on the PBCL and the DGCL as in effect on the date hereof
and the respective charters and bylaws of Teledyne, Allegheny Ludlum and ATI.
Descriptions of provisions of the ATI Certificate or the ATI Bylaws are
qualified in their entirety by reference to the full texts thereof attached as
Annexes A and B to the Combination Agreement, respectively. Certain provisions
of the DGCL and of the ATI Certificate and Bylaws could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from attempting to acquire, control of ATI, without the approval
of ATI's Board of Directors.
STATUTORY PROVISIONS AFFECTING BUSINESS COMBINATIONS AND CONTROL SHARE
ACQUISITIONS
There are four "anti-takeover" provisions of the PBCL which are generally
applicable to registered corporations and relate to (i) "control
transactions," (ii) "business combinations," (iii) "control-share
acquisitions" and (iv) "disgorgement of profits." Pursuant to amendments to
the Allegheny Ludlum Bylaws adopted in accordance with the PBCL, Allegheny
Ludlum opted out of all four of these "anti-takeover" provisions. Accordingly,
other anti-takeover provisions of the PBCL related to severance compensation
for employees terminated following certain "control-share acquisitions" and to
the effect of business combinations on labor contracts are also not applicable
to Allegheny Ludlum.
Delaware has enacted a business combination statute, Section 203 of the DGCL
("Section 203"), which provides that any person who acquires 15% or more of a
corporation's voting stock (thereby becoming an "interested stockholder") may
not engage in a "business combination" with the corporation for a period of
three years following the time the person became an interested stockholder,
unless (i) the board of directors of the corporation approved, prior to such
time, either the business combination or the transaction that resulted in the
person becoming an interested stockholder, (ii) upon consummation of the
transaction that resulted in that person becoming an interested stockholder,
that person owns at least 85% of the corporation's voting stock outstanding at
the time the transaction commenced (excluding shares owned by persons who are
directors and officers of that corporation and shares owned by employee stock
plans in which participants do not have the right to determine confidentially
whether shares will be tendered in a tender or exchange offer), or (iii) the
business combination is approved by the board of directors and authorized by
the affirmative vote (at an annual or special meeting and not by written
consent) of at least 66 2/3% of the outstanding shares of voting stock not
owned by the interested stockholder.
In determining whether a stockholder is the "owner" of 15% or more of a
corporation's voting stock for purposes of Section 203, ownership is defined
to include the right, directly or indirectly, to acquire stock or to control
the voting or disposition of stock. A "business combination" is defined to
include (i) mergers or consolidations of a corporation with an interested
stockholder, (ii) sales or other dispositions of ten percent or more of the
assets of a corporation with or to an interested stockholder, (iii) certain
transactions resulting in the issuance or transfer to an interested
stockholder of any stock of a corporation or its subsidiaries, (iv) certain
transactions which would result in increasing the proportionate share of the
stock of a corporation or its subsidiaries owned by an interested stockholder,
and (v) receipt by an interested stockholder of the benefit
88
<PAGE>
(except proportionately as a stockholder) of any loans, advances, guarantees,
pledges or other financial benefits from, by or to a corporation or any of its
majority-owned subsidiaries.
Since neither the Teledyne Certificate nor the Teledyne Bylaws contains a
provision expressly electing not
to be governed by Section 203, it is subject to Section 203, and since neither
the ATI Certificate nor the ATI Bylaws will contain such a provision, ATI will
be subject to Section 203.
CHARTER PROVISIONS AFFECTING CONTROL AND OTHER TRANSACTIONS
Article Seventh of the Allegheny Ludlum Articles requires the affirmative
vote of the holders of at least two-thirds of the outstanding shares of
Allegheny Ludlum Common Stock to approve certain fundamental changes such as a
merger, consolidation, sale of substantially all of Allegheny Ludlum's assets,
dissolution, certain purchases by Allegheny Ludlum or one of its subsidiaries
of shares of Allegheny Ludlum Common Stock or other assets from a "significant
shareholder," any merger of a "significant shareholder" into Allegheny Ludlum
or one of its subsidiaries, or any reclassification or recapitalization of
Allegheny Ludlum consummated within five years after a "significant
shareholder" becomes such, if the result of such reclassification or
recapitalization is to reduce the number of outstanding shares of Allegheny
Ludlum Common Stock or convert any such shares into cash or other securities.
This supermajority voting requirement is not applicable if the fundamental
change has been approved at a meeting of the Allegheny Ludlum Board of
Directors by the vote of more than two-thirds of the incumbent directors. A
"significant shareholder" is defined as any person who owns beneficially a
number of shares of Allegheny Ludlum Common Stock that is greater than 10% of
the outstanding shares of Allegheny Ludlum Common Stock, and any and all
associates and affiliates of such person.
Article TWELVE of the ATI Certificate will be substantially the same as
Article Seventh of the Allegheny Ludlum Articles. Neither the Teledyne
Certificate nor the Teledyne Bylaws contains a similar provision relating to
transactions with substantial shareholders. Under the DGCL, the affirmative
vote of the holders of at least a majority of the outstanding shares entitled
to vote is required to approve certain transactions of the type referred to
above.
CUMULATIVE VOTING
The PBCL states that, except as otherwise provided in a Pennsylvania
corporation's articles of incorporation and except for certain types of
Pennsylvania corporations, in each election of directors every shareholder
entitled to vote will have the right to multiply the number of votes which he
may be entitled to vote on any other matter by the total number of directors
to be elected in that election and he may cast the whole number of his votes
for one candidate or he may distribute them among any two or more candidates.
The Allegheny Ludlum Articles do not otherwise so provide and the Allegheny
Ludlum Bylaws affirm that every Allegheny Ludlum shareholder entitled to vote
will have such rights.
The DGCL states that the certificate of incorporation of any Delaware
corporation may provide that at all or at certain elections of directors each
holder of stock entitled to vote may vote cumulatively for directors. The
Teledyne Certificate provides that each holder of Teledyne Common Stock will
be entitled to vote cumulatively for directors.
The ATI Certificate expressly provides that ATI Stockholders will not have
the right to cumulate their votes in the election of directors.
CLASSIFICATION OF DIRECTORS
The directors of Teledyne are elected annually to serve one-year terms. The
Allegheny Ludlum Board of Directors consists of three classes of directors
comprised as nearly as practicable of one-third of the Board and one class of
directors is elected at each annual meeting of shareholders to serve a three-
year term. The ATI Certificate will provide that ATI's Board of Directors will
consist of three classes of directors. The initial
89
<PAGE>
members of the Board of Directors of ATI designated pursuant to the
Combination Agreement will be divided into three classes to serve as follows:
the Class I Directors would initially hold office for a term to expire at the
first annual meeting of stockholders after their initial election; the Class
II Directors would initially hold office for a term to expire at the second
annual meeting of stockholders after their initial election; and the Class III
Directors would initially hold office for a term to expire at the third annual
meeting of stockholders after their initial election. At each annual meeting
of stockholders of ATI, only the election of directors of the class whose term
is expiring would be voted upon, and upon election each such director would
serve a three-year term.
RIGHT TO CALL A SPECIAL MEETING
The PBCL provides that a special meeting of the shareholders of a registered
corporation may be called at any time (i) by the board of directors, (ii) by
such officers or other persons as may be designated in the bylaws of that
corporation or (iii) by an interested stockholder for the purpose of approving
a business combination (which provision is not applicable to Allegheny
Ludlum). The Allegheny Ludlum Bylaws designate the Chairman of the Board and
the Chief Executive Officer as officers entitled to call a special meeting and
also provide that a special meeting may be called by holders of not less than
one-fifth of the outstanding shares entitled to vote at such meeting. There is
no provision in the Allegheny Ludlum Bylaws that restricts the business that
may come before a special meeting of shareholders.
The DGCL provides that a special meeting of the stockholders of a Delaware
corporation may be called by the board of directors or by such person or
persons as may be authorized by the certificate of incorporation or bylaws of
such corporation. The Teledyne Bylaws state that special meetings of the
stockholders may be called by the President and shall be called by the
President or Secretary at the request in writing of a majority of the board of
directors or at the request in writing of the stockholders owning a majority
in amount of the outstanding capital stock of Teledyne. The Teledyne Bylaws
specify that the business to be transacted at any special meeting of
stockholders will be limited to the purposes stated in the notice of such
meeting.
The ATI Certificate provides that special meetings of the stockholders may
only be called by the Chairman of the Board or the Chief Executive Officer or
by the Board of Directors pursuant to a resolution passed by a majority of the
directors then in office. Accordingly, stockholders of ATI will not have the
right to call a special meeting of the stockholders. The ATI Certificate
further provides that only such business will be conducted at a special
meeting of stockholders as shall have been brought before the meeting pursuant
to ATI's notice thereof. Nominations of persons for election to the board of
directors of ATI may be made at a special meeting of stockholders at which
directors are to be elected pursuant to ATI's notice of meeting (i) by or at
the direction of the Board of Directors or (ii) by any stockholder of record
at the time of the giving of notice of such meeting. Nominations by a
stockholder of persons for election to the board of directors may be made if
the stockholder's notice is delivered to the Secretary of ATI not earlier than
the 90th day prior to such special meeting and not later than the 75th day
prior to such special meeting or the 10th day following the day on which a
public announcement is first made of the special meeting and of the nominees
proposed by the board of directors to be elected at such meeting.
PROCEDURES TO BRING BUSINESS BEFORE A MEETING AND ACTION BY CONSENT
The Allegheny Ludlum Bylaws provide that annual meetings of its shareholders
will be held for the election of directors and the transaction of such other
business as may properly come before the shareholders. The Teledyne Bylaws and
the ATI Certificate provide that in order for nominations or other business to
be properly brought before an annual meeting by a stockholder, the stockholder
must give timely notice thereof in writing to the Secretary. To be timely, a
stockholder's notice must be delivered to the Secretary not less than 60 days
nor more than 90 days prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and not
later than the 60th day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first
made.
90
<PAGE>
The Allegheny Ludlum Bylaws provide that action may be taken by written
consent so long as that consent is signed by the holders of all outstanding
shares of Allegheny Ludlum Common Stock. Similarly, the Teledyne Bylaws state
that the meeting and vote of stockholders may be dispensed with if all the
stockholders who would have been entitled to vote upon the action if such
meeting were held shall consent in writing to such corporate action being
taken. The ATI Certificate provides that any action required to be taken by
the stockholders of ATI 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.
FIDUCIARY DUTIES OF DIRECTORS
Both Delaware and Pennsylvania law provide that a corporation's board of
directors has the ultimate responsibility for managing the business and
affairs of the corporation. The DGCL is silent as to the nature of the duties
of directors of a Delaware corporation. Delaware courts have held that the
duty of care requires the directors to exercise an informed business judgment.
Under Delaware case law, an informed business judgment means that the
directors have informed themselves of all material information reasonably
available to them. Having become so informed, they then must act with
requisite care in the discharge of their duties. Delaware courts have also
imposed a heightened standard of scrutiny regarding the conduct of directors
in resisting unsolicited takeover attempts. Liability of directors of a
Delaware corporation to the corporation or its stockholders for breach of the
duty of care generally requires a finding by a court that the directors were
grossly negligent. Delaware courts have also held that the directors of a
Delaware corporation owe the corporation and its stockholders a duty of
loyalty, requiring them to act in good faith and in what they believe to be
the best interests of the corporation and its stockholders and that, whenever
their interests with respect to a transaction conflict with those of the
corporation, the transaction be fair to the corporation.
The PBCL expressly provides that directors of a Pennsylvania corporation are
obligated to perform their duties in good faith, in a manner they reasonably
believe to be in the best interests of the corporation and with such care,
including reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances. Absent breach of fiduciary
duty, lack of good faith or self-dealing, actions taken as a director of a
Pennsylvania corporation are presumed to be in the best interests of the
corporation. The PBCL states that directors of a Pennsylvania corporation may,
but are not required to, take into consideration the effects of their actions
upon various groups affected by such action, including not only shareholders,
but also employees, suppliers, customers, creditors and communities. The PBCL
also makes clear that a director has no greater obligation to justify, or
higher burden of proof with respect to, any act relating to an actual or
potential takeover of the corporation than he or she has with respect to any
other act as a director.
The duty of loyalty in both states requires that the directors act in good
faith and place the best interests of the corporation and its stockholders
above any individual interests of their own.
Although the PBCL will not be applicable to ATI, Article ELEVEN of the ATI
Certificate will provide that the directors of ATI may take into account the
effects of their actions on employees, suppliers, distributors and customers
of ATI and its subsidiaries and the effect upon communities in which the
offices or facilities of ATI and its subsidiaries are located or any other
factors considered pertinent.
At the Effective Time, there will be in effect no ATI stockholder rights
plan similar to the Teledyne Stockholder Rights Plan (see "The Combination
Agreement--Teledyne Stockholder Rights Plan"). Unlike the PBCL, the DGCL does
not expressly provide for such plans. However, a line of cases applying
Delaware law has upheld the decision of the board of directors of a Delaware
corporation, such as ATI, in adopting such a plan and invoking its protection
against an unsolicited takeover attempt where both such adoption and such
invocation have been found to satisfy both the duty of care and the duty of
loyalty owed by the directors.
Both Delaware and Pennsylvania law permit a corporation to include in its
charter documents a provision eliminating the personal liability of a director
to the corporation or its stockholders for monetary damages in certain
circumstances. The Allegheny Ludlum Articles, the Teledyne Certificate and the
ATI Certificate each
91
<PAGE>
include such a provision. Under the DGCL, a Delaware corporation may include
in its certificate of incorporation a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for 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) for unlawful
payment of a dividend or an unlawful stock purchase or redemption, and (iv)
for any transaction from which the director derives an improper personal
benefit. The ATI Certificate contains such a provision and further provides
that, if the DGCL is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of an ATI
director shall be eliminated or limited to the fullest extent so permitted.
Such provision of the ATI Certificate also specifies that no amendment to or
repeal of the provision shall apply to or have any effect on the liability or
alleged liability of any director of ATI for or with respect to any acts or
omissions of such director occurring prior to such amendment or repeal.
CHARTER AMENDMENTS
Under the PBCL, amendments to the articles of incorporation of a registered
corporation may only be proposed by its board of directors. Except for certain
amendments which do not require shareholder approval and unless a greater vote
is required by its articles of incorporation, amendments of the articles of
incorporation of a Pennsylvania corporation are to be approved by the
affirmative vote of a majority of the votes cast by all shareholders entitled
to vote thereon and, if any class or series of capital stock is entitled to
vote as a class, the affirmative vote of a majority of the votes cast in each
such separate vote. Under the Allegheny Ludlum Articles, the approval of the
holders of at least two-thirds of the outstanding shares of Allegheny Ludlum
Common Stock is required to amend the provisions of the Allegheny Ludlum
Articles related to (i) the existence of Allegheny Ludlum, (ii) the
classification of directors and (iii) the approval of certain fundamental
changes.
To amend a Delaware corporation's certificate of incorporation, the DGCL
requires approval first by that corporation's board of directors and then by
the holders of a majority of the outstanding shares of stock entitled to vote
thereon and a majority of each class of stock entitled to vote thereon as a
class, unless a larger proportion is specified in its certificate of
incorporation or except when the provision being amended or repealed provides
for a supermajority vote of the board or the stockholders, in which case, the
same percentage of the board or the stockholders, as the case may be, is
needed to amend or repeal that provision.
The ATI Certificate provides that the affirmative vote of the holders of at
least 75% of the combined voting power of the outstanding shares of capital
stock of ATI is required to amend or rescind, or adopt any provision
inconsistent with the purpose or intent of the provisions of the ATI
Certificate relating to the adoption, amendment and repeal of the ATI Bylaws,
limitations of certain liabilities of directors, actions of stockholders,
classification of directors, certain factors permitted to be considered by the
directors, approval of certain fundamental changes, and amendments to the ATI
Certificate.
BYLAW AMENDMENTS
Under the PBCL, the shareholders of a Pennsylvania corporation who are
entitled to vote have the power to adopt, amend and repeal the bylaws thereof.
The authority to adopt, amend and repeal bylaws of a Pennsylvania corporation
may be expressly vested by the bylaws in the board of directors, subject to
the power of the shareholders to override such actions and except that a board
of directors may not have the authority to adopt or change a bylaw on any
subject that is committed expressly to the shareholders under the PBCL, unless
the articles of incorporation of that corporation give the board that
authority. The Allegheny Ludlum Bylaws provide that they may be amended by the
affirmative vote of the holders of a majority of the shares of Allegheny
Ludlum Common Stock or by the affirmative vote of a majority of its Board of
Directors at any regular or special meeting of that Board.
Under the DGCL, the stockholders entitled to vote have the power to adopt,
amend or repeal bylaws as do the directors to the extent that the certificate
of incorporation confers such powers on the directors. The Teledyne
92
<PAGE>
Certificate grants the Teledyne Board the power to make, alter or repeal the
Teledyne Bylaws. The ATI Certificate authorizes the ATI Board to adopt, amend
or repeal the ATI Bylaws. The ATI Certificate also provides that the
stockholders may not adopt, amend or repeal the ATI Bylaws other than by the
same affirmative vote that is required to amend certain provisions of the ATI
Certificate (see "Comparison of Stockholder Rights--Charter Amendments").
93
<PAGE>
DESCRIPTION OF ATI CAPITAL STOCK
The ATI Certificate will provide that the authorized capital of ATI consists
of 600,000,000 shares of Common Stock, par value $.10 per share, and
50,000,000 shares of Preferred Stock, par value $.10 per share ("ATI Preferred
Stock").
COMMON STOCK
Each share of ATI Common Stock will entitle its holder of record to one vote
for the election of directors and all other matters to be voted on by the
stockholders. Holders of ATI Common Stock will not have cumulative voting
rights, and therefore the holders of a majority of the shares of ATI Common
Stock voting for the election of directors may elect all nominees standing for
election as ATI directors. Subject to the rights of holders of Preferred
Stock, holders of ATI Common Stock will be entitled to receive such dividends,
if any, as may be declared from time to time by ATI Board of Directors in its
discretion from funds legally available for that use. Subject to the rights of
holders of Preferred Stock, holders of ATI Common Stock will be entitled to
share on a pro rata basis in any distribution to stockholders upon
liquidation, dissolution or winding up of ATI. No holder of ATI Common Stock
will have any preemptive right to subscribe for any stock or other security of
ATI.
PREFERRED STOCK
The Board of Directors of ATI, without further action by its stockholders,
may from time to time authorize the issuance of shares of ATI Preferred Stock
in one or more series and, within certain limitations, fix the powers,
preferences and rights and the qualifications, limitations or restrictions
thereof and the number of shares constituting any series or designations of
such series. Satisfaction of any dividend preferences of outstanding ATI
Preferred Stock would reduce the amount of funds available for the payment of
dividends on ATI Common Stock. Holders of ATI Preferred Stock would normally
be entitled to receive a preference payment in the event of any liquidation,
dissolution or winding up of ATI before any payment is made to the holders of
ATI Common Stock. In addition, under certain circumstances, the issuance of
such ATI Preferred Stock may render more difficult or tend to discourage a
change in control of ATI. Although ATI currently has no plans to issue shares
of ATI Preferred Stock, the Board of Directors of ATI, without stockholder
approval, may issue ATI Preferred Stock with voting and conversion rights
which could adversely affect the rights of holders of shares of ATI Common
Stock.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for ATI Common Stock will be ChaseMellon
Shareholder Services, L.L.C., Pittsburgh, Pennsylvania.
94
<PAGE>
THE COMPENSATION PLANS
The Boards of Directors of ATI, Allegheny Ludlum and Teledyne have approved
the compensation plans of their respective companies described below. The
purpose of each Compensation Plan covering executives is to provide incentives
and rewards to key executives who contribute to profitability and, in the case
of stock-based plans, to further align management's goals with those of the
stockholders. The purpose of the ATI Director Stock Plan is to promote the
interests of ATI and its stockholders by attracting, retaining and providing
an incentive to non-employee directors through the acquisition of an equity
interest in ATI and an increased personal interest in its performance.
Shareholders of Allegheny Ludlum and stockholders of Teledyne are being
asked to approve the Compensation Plan Proposals so that, among other things,
certain amounts paid or awarded pursuant to each plan are deductible for
federal income tax purposes by the company making the payment or issuing the
award. Section 162(m) of the Code and the regulations promulgated thereunder
by the IRS (together "Section 162(m)") provide that a publicly traded company
may not deduct compensation paid to any "covered employee" in excess of $1
million per year. "Covered employees" include such company's chief executive
officer and four other most highly compensated executive officers in office at
the end of the applicable year. However, Section 162(m) does not include in
the calculation of the $1 million limitation any compensation paid under a
performance-based plan, within the meaning of Section 162(m), provided such
plan is approved by the company's stockholders. To the extent that
compensation paid under any of the Compensation Plans must meet the
deductibility requirements of Section 162(m), approval of the applicable
Compensation Plans at the Allegheny Ludlum Special Meeting and the Teledyne
Special Meeting (see "The Meetings") is intended to satisfy the stockholder
approval requirement of Section 162(m).
Prior to the execution of the Combination Agreement on April 1, 1996,
Allegheny Ludlum had planned to submit the Allegheny Ludlum Performance Plan
for approval at its 1996 annual meeting of shareholders and Teledyne had
planned to submit the Teledyne SEP Plan for approval at its 1996 annual
meeting of stockholders. Following the execution of the Combination Agreement,
the two companies decided to postpone their respective 1996 annual meetings
and to submit the Combination Agreement and the Compensation Plan Proposals
for approval at special meetings of their respective stockholders. The
Compensation Plans are being submitted for approval by the stockholders of
both companies to facilitate the payment of compensation thereunder, after the
Effective Time, that is deductible under Section 162(m). In the event that the
shareholders of Allegheny Ludlum approve the Allegheny Ludlum Performance Plan
at the Allegheny Ludlum Special Meeting and the stockholders of Teledyne
approve the Teledyne SEP Plan at the Teledyne Special Meeting and the
Combination Agreement is thereafter terminated for any reason, such plans will
become effective and such approval of the respective company's stockholders
will satisfy the stockholder approval requirements of Section 162(m) as to the
applicable Compensation Plan.
None of the Compensation Plans is a guarantee of any bonus or continued
employment or continued service as a director (as the case may be) to any
eligible or covered participant.
THE ATI INCENTIVE PLAN
In accordance with the Combination Agreement, the Board of Directors of ATI
has adopted and approved a compensation plan to be sponsored and maintained by
ATI, which is named the Allegheny Teledyne Incorporated 1996 Incentive Plan.
The effectiveness of the ATI Incentive Plan is subject to the approval thereof
by the respective stockholders of Allegheny Ludlum and Teledyne. A copy of the
ATI Incentive Plan appears as Annex E to the Combination Agreement, which is
attached to this Joint Proxy Statement/Prospectus as Appendix A. The following
summary does not purport to be fully descriptive and reference is made to the
full text of the ATI Incentive Plan for more detailed information.
Administration. The ATI Incentive Plan will be administered by a committee
of the Board of Directors of ATI (the "ATI Committee") comprised of at least
two persons. The ATI Committee shall have the sole discretion to interpret the
ATI Incentive Plan, establish and modify administrative rules, impose
conditions and restrictions on awards, and take such other actions as it deems
necessary or advisable. The ATI Committee may
95
<PAGE>
delegate its authority under the ATI Incentive Plan to a subcommittee or to
one or more officers or employees of ATI. The selection of members of the ATI
Committee or any subcommittee thereof, and any delegation by the Committee to
designated officers or employees, must comply with Section 16(b) of the
Exchange Act, the performance-based compensation 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.
Amount of Stock. The ATI Incentive Plan provides for awards of up to
9,000,000 shares of ATI Common Stock. The number of shares available for
issuance under the ATI Incentive Plan shall be subject to anti-dilution
adjustments upon the occurrence of significant corporate events. The shares to
be offered under the ATI Incentive Plan will be either authorized and unissued
shares or issued shares which have been reacquired by ATI.
Eligibility and Participation. All officers and key employees of ATI or any
subsidiary of ATI will be eligible to participate, including officers who are
also directors of ATI or its subsidiaries. The ATI Committee may also grant
awards, other than incentive stock options, to non-employees who, in the
judgment of the ATI Committee, render significant service to ATI or any of its
subsidiaries. As of the date hereof, no determination has been made as to the
particular officers and key employees to whom incentive benefits under the ATI
Incentive Plan will be awarded, the type of incentive compensation under the
ATI Incentive Plan which will be awarded or the number of shares or other
benefits which any person will be awarded. No participant can receive awards
under the ATI Incentive Plan in any calendar year in respect of more than
750,000 shares of ATI Common Stock (whether through grants of options, stock
appreciation rights or other grants of ATI Common Stock or rights with respect
thereto) and $3,000,000 in cash. Shares reserved for issuance under the ATI
Incentive Plan may also be used to pay awards made under the Allegheny Ludlum
Performance Plan (see "The Compensation Plans--The Allegheny Ludlum
Performance Plan") and the Teledyne SEP Plan (see "The Compensation Plans--The
Teledyne SEP Plan"). Shares so issued will be governed exclusively by the
terms of the applicable Plan.
Amendment or Termination. The ATI Incentive Plan has no fixed expiration
date, except that no incentive stock options under Section 422 of the Code
("incentive stock options") may be granted after the tenth anniversary of the
Effective Time and the provisions of the ATI Incentive Plan with respect to
performance-based awards for purposes of Section 162(m) expire five years
after the Effective Time. The ATI Committee will establish expiration and
exercise dates on an award-by-award basis. However, for the purpose of
awarding incentive stock options, the ATI Incentive Plan will expire ten years
from its effective date.
Stock Options. The ATI Committee may grant to a participant incentive stock
options, options which do not qualify as incentive stock options ("non-
qualified stock options") or a combination thereof. The terms and conditions
of stock option grants including the quantity, price, waiting periods, and
other conditions on exercise will be determined by the ATI Committee. Grants
of incentive stock options shall be made in accordance with Section 422 of the
Code.
The exercise price for stock options will be determined by the ATI Committee
at its discretion, provided that the exercise price per share for each
incentive stock option shall be at least equal to 100% of the fair market
value of one share of ATI Common Stock on the date when the stock option is
granted.
Upon a participant's termination of employment (or, in the case of options
granted to a non-employee, termination of such non-employee's rendition of
significant service to ATI and its subsidiaries) for any reason, any stock
options which were not exercisable on the participant's termination date will
expire, unless otherwise determined by the ATI Committee. However, in the case
of a participant who ceases to be a director or employee but who thereafter
continues to render significant services to ATI or any of its subsidiaries,
the period during which the participant continues to render any such services
will count toward the participant's vesting requirement with respect to stock
options that were not exercisable at the time of the participant's termination
of employment.
Subject to the preceding paragraph, upon a participant's termination of
employment for reasons other than death, disability or retirement, the
participant's stock options will expire 90 days (or the next business day, as
applicable) after the date of termination, unless the right to exercise the
options is extended by the ATI
96
<PAGE>
Committee in its discretion, but in no event may the options be exercised
after the scheduled expiration date of the options. In general, upon a
participant's termination by reason of death, disability or retirement, stock
options which were exercisable on the participant's termination date (or which
are otherwise determined to be exercisable by the ATI Committee) may continue
to be exercised by the participant (or the participant's beneficiary) for a
period of two years from the date of the participant's termination of
employment, unless extended by the ATI Committee, but in no event may the
options be exercised after the scheduled expiration date of the options.
Subject to the ATI Committee's discretion, payment for ATI Common Stock on
the exercise of stock options may be made in cash, ATI Common Stock, a
combination of cash and ATI Common Stock or in any other form of consideration
acceptable to the ATI Committee (including one or more "cashless" exercise
forms).
Stock Appreciation Rights. Stock appreciation rights ("SARs") may be granted
by the ATI Committee to a participant either separate from or in tandem with
non-qualified stock options or incentive stock options. SARs may be granted at
the time of the stock option grant or, with respect to non-qualified stock
options, at any time prior to the exercise of the stock option. SARs entitle
the participant to receive, upon exercise, a payment equal to (i) the excess
of the fair market value of a share of ATI Common Stock on the exercise date
over the SAR exercise price, times (ii) the number of shares of ATI Common
Stock with respect to which the SAR is exercised. Upon exercise of SARs with
respect to ATI Common Stock, the number of shares of ATI Common Stock covered
by the stock options related to such SARs, if any, are correspondingly
reduced.
SARs granted in tandem with options are generally governed by the same terms
and conditions as govern the related stock option and may only be exercised to
the extent the related stock option is exercisable.
The exercise prices of SARs are determined by the ATI Committee, but in the
case of SARs granted in tandem with stock options, may not be less than the
exercise price of the related stock option. Upon exercise of SARs, payment
will be made in cash or ATI Common Stock, or a combination thereof, as
determined at the discretion of the ATI Committee.
Restricted Shares. The ATI Committee may award to a participant shares of
ATI Common Stock subject to specified restrictions ("Restricted Shares"). The
Restricted Shares are subject to forfeiture if the participant does not meet
certain conditions such as continued employment over a specified forfeiture
period (the "Forfeiture Period"), the attainment of specified performance
targets over the Forfeiture Period and/or retention of purchased or designated
shares of ATI Common Stock. With respect to performance-based grants to
"covered employees" (as defined in Section 162(m)), performance targets will
only be specified levels of one or more of 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 ATI or, where relevant, 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 (collectively, the "Performance Goals"). The terms and
conditions of Restricted Share awards will be determined by the ATI Committee.
Participants who have been awarded Restricted Shares will have all of the
rights of a holder of outstanding ATI Common Stock, including the right to
vote such shares and to receive dividends. During the Forfeiture Period, the
Restricted Shares are nontransferable and may be held in custody by ATI or its
designated agent, or if the certificate is properly legended, by the
participant. Upon the lapse or release of all restrictions, an unrestricted
certificate will be provided to the participant.
The ATI Committee, in its sole discretion, may waive all restrictions with
respect to a Restricted Share award under certain circumstances (including the
death, disability, or retirement of a participant, or a material change in
circumstances arising after the date of grant) subject to such terms and
conditions as it deems appropriate.
Performance Awards. The ATI Committee may grant performance awards to
participants under such terms and conditions as the ATI Committee deems
appropriate. A performance award entitles a participant to
97
<PAGE>
receive a payment from ATI, the amount of which is based upon the attainment
of predetermined performance targets over a specified award period.
Performance awards may be denominated and/or paid in cash, ATI Common Stock or
a combination thereof, as determined by the ATI Committee.
Award periods will be established in the discretion of the ATI Committee.
The performance targets will also be determined by the ATI Committee. In the
case of awards to "covered employees" (as defined in Section 162(m)), the
targets will consist only of the Performance Goals. When circumstances occur
which, in the determination of the ATI Committee, are extraordinary and cause
predetermined performance targets to be an inappropriate measure of
achievement, the ATI Committee, at its discretion, may adjust the performance
targets to the extent consistent with the provisions of Section 162(m).
If a participant terminates employment prior to the end of an award period,
the participant generally will forfeit all rights to any performance award,
unless otherwise provided by the ATI Committee. The ATI Committee, at its
discretion, may determine to pay all or any portion of a performance award to
a participant who has terminated employment prior to the end of an award
period under certain circumstances (including death, disability, retirement or
a material change in circumstances arising after the date of grant).
Other Stock-Based Awards. The ATI Committee is authorized to grant any stock
purchase rights (with or without loans to participants by ATI) or any cash
awards, ATI Common Stock awards or other types of awards which are valued in
whole or in part by reference to the value of ATI Common Stock. The terms and
conditions of such awards and the participants eligible for such awards will
be determined by the ATI Committee at its discretion. In addition, as noted
above, shares reserved for issuance under the ATI Incentive Plan may be issued
to pay awards made under the Allegheny Ludlum Performance Plan and the
Teledyne SEP Plan.
Short-Term Cash Awards. The ATI Incentive Plan authorizes performance-based
annual cash incentive compensation to be paid to covered employees subject to
Section 162(m). The material terms of the annual incentive compensation
feature of the ATI Incentive Plan are as follows:
(i) The class of persons covered consists of those senior executives of ATI
who are from time to time determined by the ATI Committee to be subject to
Section 162(m).
(ii) The targets for annual incentive payments to "covered employees" (as
defined in Section 162m)), will consist only of the Performance Goals. Use of
any other target will require ratification by stockholders if failure to
obtain such approval would jeopardize tax deductibility of future incentive
payments. Such performance targets shall be established by the ATI Committee
on a timely basis to ensure that the targets are considered "preestablished"
for purposes of Section 162(m).
(iii) In administering the incentive program and determining incentive
awards, the ATI Committee will not have the flexibility to pay a covered
executive more than the incentive amount indicated by his or her attainment
under the applicable payment schedule. The ATI Committee will have the
flexibility, based on its business judgment, to reduce this amount.
(iv) The annual incentive award feature of the ATI Incentive Plan will not
be operational until fiscal year 1997.
Change in Control. In general, events which constitute a change in control
(a "Change of Control") include: (i) acquisition by a person, other than ATI,
one of its subsidiaries or an ATI benefit plan, of 25% or more of the ATI
Common Stock; (ii) the individuals who constitute the Board of Directors of
ATI as of the effective date of the ATI Incentive Plan (the "Incumbent Board")
no longer constitute at least two-thirds of the Board of Directors of ATI
without prior approval by a majority vote of the Incumbent Board; (iii)
approval by the stockholders of ATI of certain reorganizations, mergers or
consolidations; or (iv) approval by the stockholders of ATI of a complete
liquidation or dissolution of ATI or sale or other disposition of
substantially all of the assets of ATI.
In the event of a Change in Control, unless otherwise specified by the ATI
Committee in the applicable award agreement, stock options and SARs
immediately become exercisable, the restrictions on all Restricted
98
<PAGE>
Shares lapse, all performance awards immediately become payable and all other
awards under the ATI Incentive Plan vest and become nonforfeitable.
Tax Consequences. The following is a summary of the principal federal income
tax consequences of ATI Incentive Plan benefits under present tax law. The
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences.
No tax is incurred by the participant, and no amount is deductible by ATI,
upon the grant of a nonqualified stock option. At the time of exercise of such
an option, the difference between the exercise price and the fair market value
of ATI Common Stock will constitute ordinary income to the participant. ATI
will be allowed a deduction equal to the amount of ordinary income recognized
by the participant.
In the case of incentive stock options, although no income is recognized
upon exercise and ATI is not entitled to a deduction, the excess of the fair
market value of ATI Common Stock on the date of exercise over the exercise
price is counted in determining the participant's alternative minimum taxable
income. If the participant does not dispose of the shares acquired on the
exercise of an incentive stock option within one year after their receipt and
within two years after the grant of the incentive stock option, gain or loss
recognized on the disposition of the shares will be treated as long-term
capital gain or loss.
In the event of an earlier disposition of shares acquired upon the exercise
of an incentive stock option, the participant may recognize ordinary income,
to the extent of the excess of the fair market value of the ATI Common Stock
on the date of exercise over the exercise price, and capital gain, to the
extent of the excess of the amount realized on the sale of the ATI Common
Stock over the optionee's basis in the ATI Common Stock (generally, the
exercise price plus any ordinary income recognized with respect to such
earlier disposition) and ATI will be entitled to a deduction, equal to the
amount of ordinary income recognized by the participant, when recognized by
the participant. Whether the capital gain recognized is long- term or short-
term will depend upon whether the one-year capital gain holding period for the
ATI Common Stock has been met.
The participant will not recognize any income at the time of grant of a SAR.
Upon the exercise of a SAR, the cash and the value of any ATI Common Stock
received will constitute ordinary income to the participant. ATI will be
entitled to a deduction in the amount of such income at the time of exercise.
A participant will normally not recognize taxable income upon an award of
Restricted Shares, and ATI will not be entitled to a deduction until the lapse
of the applicable restrictions. Upon the lapse of the restrictions, the
participant will recognize ordinary taxable income in an amount equal to the
fair market value, at the time of such lapse, of the ATI Common Stock as to
which the restrictions have lapsed, and ATI will be entitled to a deduction in
the same amount. However, a participant may elect under Section 83(b) of the
Code to recognize taxable ordinary income in the year the Restricted Shares
are awarded in an amount equal to the fair market value of the shares at that
time, determined without regard to the restrictions. In such event, ATI will
then be entitled to a deduction in the same amount. Any gain or loss
subsequently recognized by the participant will be a capital gain or loss. If,
after making a Section 83(b) election, any Restricted Shares are forfeited, or
if the fair market value at vesting or upon sale is lower than the amount on
which the participant was taxed, the participant cannot then claim a tax
deduction for the loss.
Normally, a participant will not recognize taxable income upon the grant of
performance awards or other stock-based and cash-based incentive awards .
Subsequently, when the conditions and requirements for the grants have been
satisfied and the payment determined, any cash received and the fair market
value of any ATI Common Stock received will constitute ordinary income to the
participant. ATI will also then be entitled to a deduction in the same amount.
The ATI Committee has discretion as to any award under the ATI Incentive
Plan to grant a participant a separate cash amount at exercise, vesting or
lapse of restrictions to meet mandatory tax withholding obligations or
reimburse for any individual taxes paid.
99
<PAGE>
The deductibility under the Code of compensation payable under the ATI
Incentive Plan to "covered employees" is subject to the requirements of
Section 162(m). The Incentive Plan is intended, with the approval of
stockholders, to meet such requirements.
Benefits Under the ATI Incentive Plan. No awards have been granted to date
under the ATI Incentive Plan and the benefits to be received under the ATI
Incentive Plan by any particular person are not determinable at this time.
THE BOARDS OF DIRECTORS OF ALLEGHENY LUDLUM AND TELEDYNE RECOMMEND THAT THE
SHAREHOLDERS OF ALLEGHENY LUDLUM AND THE STOCKHOLDERS OF TELEDYNE,
RESPECTIVELY, VOTE FOR APPROVAL OF THE ADOPTION OF THE ATI INCENTIVE PLAN.
THE ATI DIRECTOR STOCK PLAN
In accordance with the Combination Agreement, the Board of Directors of ATI
has adopted the Allegheny Teledyne Incorporated 1996 Non-Employee Director
Stock Compensation Plan. The effectiveness of the ATI Director Stock Plan is
subject to the approval thereof by the respective stockholders of Allegheny
Ludlum and Teledyne. A copy of the ATI Director Stock Plan appears as Annex F
to the Combination Agreement, which is attached to this Joint Proxy
Statement/Prospectus as Appendix A. The following summary does not purport to
be fully descriptive and reference is made to the full text of the ATI
Director Stock Plan for more detailed information.
In summary, under the ATI Director Stock Plan, non-employee directors of ATI
will have the right to elect to receive ATI Common Stock and/or stock options
in lieu of annual retainer and meeting payments and will automatically receive
part of their annual retainer fees in the form of shares of ATI Common Stock
rather than in the form of cash if they do not elect to receive such portion
in the form of ATI Common Stock and/or stock options. In addition, all non-
employee directors will receive automatic annual grants of options covering
1,000 shares of ATI Common Stock. (Directors who are employees of ATI will not
receive any compensation for their service on the Board or its committees.)
All options that may be granted under the ATI Director Stock Plan are referred
to collectively as "ATI Director Options."
Purpose and Administration. The purpose of the ATI Director Stock Plan is to
promote the interests of ATI and its stockholders by attracting, retaining and
providing an incentive to directors who are not employees of ATI or its
affiliates (the "Non-Employee ATI Directors") through the acquisition of an
equity interest in
ATI and an increased personal interest in its performance. Only Non-Employee
ATI Directors are eligible to participate in the ATI Director Stock Plan. All
shares of ATI Common Stock and ATI Director Options that may be granted under
the ATI Director Stock Plan must be granted within ten years after the
Effective Time.
The ATI Director Stock Plan will be administered by the Board of Directors
of ATI or a committee thereof (the "ATI Board"). The ATI Board will have the
power to interpret the ATI Director Stock Plan, promulgate, amend and rescind
rules and regulations relating to the ATI Director Stock Plan, and make all
other determinations necessary or advisable for its administration.
Shares Subject to the Plan. A maximum of 700,000 shares of ATI Common Stock
may be issued to Non-Employee ATI Directors under the ATI Director Stock Plan,
whether in the form of grants or pursuant to the exercise of ATI Director
Options. If any ATI Director Option granted under the ATI Director Stock Plan
expires or terminates for any reason, without having been exercised or vested
in full, as the case may be, the unpurchased shares subject thereto will again
be available for issuance under the ATI Director Stock Plan. ATI Director
Options granted under the ATI Director Stock Plan will not be qualified as
incentive stock options under Section 422 of the Code.
Election to Receive ATI Director Options or ATI Common Stock. Under the
terms of the ATI Director Stock Plan, unless a Non-Employee ATI Director has
made an election for the applicable Compensation Year
100
<PAGE>
(as defined in the ATI Director Stock Plan) to receive ATI Director Options
and/or ATI Common Stock in lieu of at least one-fourth of such director's
annual retainer fee payment (as described below), on each Quarterly Payment
Date (as defined in the ATI Director Stock Plan), three-fourths of such annual
retainer fee will be paid in cash, with the remainder to be paid in a number
of shares of ATI Common Stock with a Fair Market Value (as defined in the ATI
Director Stock Plan) equal to one-fourth of the portion of the annual fee that
would otherwise be payable by ATI to a Non-Employee ATI Director as of such
Quarterly Payment Date. In addition, each Non-Employee ATI Director may elect
to have up to 100% (but not less than 25%) of his or her annual retainer fee,
and any portion of his or her meeting fee payments, paid in the form of ATI
Director Options and/or ATI Common Stock. If such an election is made to
receive annual retainer fees in the form of ATI Common Stock, the number of
shares transferred on each Quarterly Payment Date to a Non-Employee ATI
Director will be determined by dividing the amount of the annual fee specified
by such Non-Employee ATI Director by the Fair Market Value of the ATI Common
Stock on such Quarterly Payment Date. If such an election is made to receive
meeting fees in the form of ATI Common Stock, a similar transfer will occur
promptly on first business day in January of the next following Compensation
Year, with the Fair Market Value of the ATI Common Stock to be determined as
of the date of issuance of such ATI Common Stock.
If a Non-Employee ATI Director has not elected to receive ATI Director
Options or ATI Common Stock in lieu of at least one-quarter of his or her
annual retainer fee, such director shall be deemed to have elected to receive
one-fourth of his or her annual retainer fee payment in the form of ATI Common
Stock, calculated in the same manner as described above.
In all cases, cash will be paid in lieu of any fractional shares.
Under the ATI Director Stock Plan, the term "Quarterly Payment Date" means
each of the quarterly dates on which the annual fee payable to Non-Employee
ATI Directors is paid by ATI. "Fair Market Value" under the ATI Director Stock
Plan means, on any given date the average of the high and low trading prices
of the ATI Common Stock on such date as reported on the NYSE.
Annual ATI Director Options. Conditioned on the occurrence of the Effective
Time, the ATI Director Stock Plan grants an ATI Director Option covering l,000
shares of ATI Common Stock to each Non-Employee ATI Director as of (and with
the date of grant for all purposes of the ATI Director Stock Plan being) the
first trading date for ATI Common Stock following the Effective Date.
Thereafter, an ATI Director option covering 1,000 shares of ATI Common Stock
will be granted to each Non-Employee ATI Director automatically at the
conclusion of each ATI annual meeting of stockholders. If a director first
becomes a Non-Employee ATI Director on a date other than an annual meeting
date, an ATI Director Option covering 1,000 shares of ATI Common Stock will be
granted to such director on his or her first date of ATI Board service. Each
such ATI Director Option (an "Annual ATI Director Option") and all rights
associated therewith will expire ten years from the date of grant. The
purchase price of the ATI Common Stock covered by such Annual ATI Director
Option will be the Fair Market Value of a share of ATI Common Stock as of the
date of grant of the Annual ATI Director Option. Each Annual ATI Director
Option granted under the ATI Director Stock Plan will become exercisable in
full one year after the date of the grant. No Annual ATI Director Option may
be exercised for a fraction of a share and no partial exercise of any Annual
ATI Director Option may be for less than 100 shares.
Retainer Fee ATI Director Options. If a Non-Employee ATI Director has
elected to receive ATI Director Options in lieu of his or her annual retainer
fees ("Retainer Fee ATI Director Option"), such Retainer Fee ATI Director
Option for a Compensation Year will be granted on January 2 of the next
following Compensation Year (or if January 2 is not a business day, on the
next succeeding business day) for service during that Compensation Year. The
number of shares of ATI Common Stock to be subject to a Retainer Fee ATI
Director Option will be the nearest number of whole shares determined by
multiplying the Fair Market Value of a share of ATI Common Stock on the date
of grant by 0.3333 and dividing the result into the portion of the director's
retainer fee which such director has elected to receive as ATI Director
Options. The purchase price of each share of ATI Common Stock covered by each
Retainer Fee ATI Director Option will be equal to the Fair Market Value of a
share of ATI Common Stock on the date of grant of the Retainer Fee ATI
Director Option multiplied by 0.6666. Each Retainer Fee ATI Director Option
will be exercisable in full one year after the date of the grant.
101
<PAGE>
Meeting Fee ATI Director Options. ATI Director Options in lieu of fees for
attending meetings of the ATI Board or any committee thereof ("Meeting Fee ATI
Director Options") for a Compensation Year will be granted on January 2 of the
next following Compensation Year (or if January 2 is not a business day, on
the next succeeding business day) after conclusion of the Compensation Year.
The number of shares of ATI Common Stock to be subject to a Meeting Fee ATI
Director Option and the purchase price of such shares will be calculated in
the manner described in the preceding paragraph, except that the Meeting Fees
and any other fees paid for service as a director are substituted for the
annual retainer in the calculation. Meeting Fee ATI Director Options become
exercisable immediately upon grant.
Retainer Fee ATI Director Options and Meeting Fee ATI Director Options are
referred to collectively as "Service ATI Director Options." All Service ATI
Director Options terminate upon the expiration of ten years from the date of
grant. No Service ATI Director Option may be exercised for a fraction of a
share and no partial exercise of any Service ATI Director Option may be for
less than 100 shares.
Service ATI Director Options are intended to provide each electing director
with ATI Director Options at an exercise value on the date of grant equal to
the foregone fees; that is, if the ATI Director Options were exercised
immediately after they were granted, and the underlying shares of ATI Common
Stock were sold immediately, the gain to be realized by the director would be
equal to the foregone fees.
Grants Under the ATI Director Stock Plan. The number of shares of ATI Common
Stock and/or the number of ATI Director Options to be granted to Non-Employee
ATI Directors under the ATI Director Stock Plan cannot be estimated at this
time, since the number of shares of ATI Common Stock and/or the number of ATI
Director Options to be granted depends on a variety of factors, including the
number of directors, the number of ATI Board or committee meetings held (and
attended by the director) in a year, whether the director elects to receive
ATI Common Stock and/or ATI Director Options in lieu of the annual retainer
and meeting fees, the Fair Market Value of ATI Common Stock on relevant dates,
and the amount paid by ATI for the annual retainer and/or meeting fees in a
given year. The actual value of contingent ATI Director Options granted to
date under the ATI Director Stock Plan cannot be calculated because such value
depends upon the amount by which the Fair Market Value of a share of ATI
Common Stock on the ATI Director Option exercise date exceeds the exercise
price of the ATI Director Options. Because a market for ATI Common Stock has
not been established yet, it is not possible to calculate the total value of
shares of ATI Common Stock subject to the ATI Director Stock Plan.
Exercise of ATI Director Options. The purchase price for the shares of ATI
Common Stock subject to ATI Director Options must be paid in full at the time
of exercise: (i) in cash or by check payable to the order of ATI; (ii) by
delivery of shares of ATI Common Stock already owned by, and in the possession
of the ATI Director Option holder; or (iii) by delivering a properly executed
exercise notice together with irrevocable instructions to a broker to deliver
promptly to ATI the amount of sale or loan proceeds to pay the ATI Director
Option price (in which case the exercise will be effective upon receipt of
such proceeds by ATI).
Transferability of ATI Director Options. ATI Director Options are not
transferable, other than by will or the laws of descent and distribution, and
are exercisable during an ATI Director Option holder's lifetime only by the
ATI Director 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 ATI Board.
Termination of Directorship. All rights of a Non-Employee ATI Director in an
ATI Director Option, to the extent that the ATI Director Option has not been
exercised, terminate three months after date of the termination of his or her
services as a director for any reason other than (i) the death of the
director, (ii) cessation of services as director because the individual,
although nominated by the ATI Board of Directors, is not elected by the
stockholders to the ATI Board of Directors, or (iii) retirement because of
total and permanent disability as defined in Section 22(e) of the Code
(collectively, "Termination Events"). If a Non-Employee ATI Director ceases to
be a director of ATI because of a Termination Event, a pro rata portion of
such person's ATI Director Options that were not previously exercisable will
become exercisable. All then-exercisable ATI Director Options terminate 12
months after the date of a Termination Event.
102
<PAGE>
Adjustments Upon Changes in ATI Common Stock. The number and kind of shares
available for issuance under the ATI Director Stock Plan, and the exercise
price of outstanding ATI Director 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 ATI Director Stock Plan or the shares issuable thereunder.
Amendment and Termination. The ATI Board will have complete power and
authority to amend the ATI Director Stock Plan at any time except that the ATI
Board may not, without the affirmative approval of the ATI stockholders,
increase the number of shares of ATI Common Stock available for issuance
thereunder or make any other amendment which requires shareholder approval
under Rule 16b-3 promulgated under the Exchange Act, unless the ATI Board
determines that such compliance is no longer desired, or under any applicable
law. The ATI Board will have the right to terminate the ATI Director Stock
Plan at any time. No amendment or termination of the ATI Director Stock Plan
may, without the consent of the Non-Employee ATI Director adversely affected
thereby, affect the right of such Non-Employee ATI Director with respect to
any ATI Director Options then outstanding.
Effective Date and Term of the ATI Director Stock Plan. The ATI Director
Stock Plan will become effective on the Effective Date if it is approved by
the stockholders of Teledyne and Allegheny Ludlum (see "The Meetings"). It
will 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 ATI Common Stock remain available for issuance under the ATI Director Stock
Plan.
Tax Consequences. The following is a summary of the principal federal income
tax consequences of grants of ATI Common Stock and ATI Director Options under
the ATI Director Stock Plan under present law. The summary is not intended to
be exhaustive and, among other things, does not describe state, local or
foreign tax consequences.
Under the Code, the issuance of ATI Common Stock in lieu of annual retainer
or meeting fees will result in ordinary income to the ATI Director Option
holder equal to the fair market value of the shares on the date of issuance.
Generally, ATI will be allowed, at the date of issuance, to take a deduction
for federal income tax purposes in an equivalent amount.
In addition, under the Code, the grant of an ATI Director Option that is a
nonqualified stock option has no tax effect on ATI or the ATI Director Option
holder to whom it is granted. Generally, the exercise of the ATI Director
Option will result in ordinary income to the ATI Director Option holder equal
to the excess of the fair market value of the shares at the time of exercise
over the ATI Director Option price. If the ATI Director Option holder pays
cash to exercise the ATI Director Option, the ATI Director Option holder's tax
basis in the shares received will be the aggregate exercise price paid by the
ATI Director Option holder plus the amount of taxable income recognized upon
exercise. Upon any subsequent disposition of such shares, gain or loss will be
capital gain or loss, and will be long-term if such shares are held more than
one year after exercise. Generally, ATI will be allowed, at the time of
recognition of ordinary income by the ATI Director Option holder, to take a
deduction for federal income tax purposes in an amount equal to such
recognized income.
If the ATI Director Option holder pays the exercise price by delivering
existing shares of ATI Common Stock, the tax treatment of the income from the
difference between the ATI Director Option price and the fair market value of
the stock received is the same as described above. Generally there is no gain
recognized by the ATI Director Option holder on the transfer of the ATI
Director Option holder's existing stock; instead, the corresponding number of
shares received on exercise of the ATI Director Option will be treated as if
they are the same as the shares used to pay for the exercise of the ATI
Director Option. Thus, gain on the shares used to pay the ATI Director Option
price will be deferred until the substituted shares received are later sold.
The basis in the remaining shares received upon exercise of the ATI Director
Option will be equal to the income recognized as a result of such exercise.
THE BOARDS OF DIRECTORS OF ALLEGHENY LUDLUM AND TELEDYNE RECOMMEND THAT THE
SHAREHOLDERS OF ALLEGHENY LUDLUM AND THE STOCKHOLDERS OF TELEDYNE,
RESPECTIVELY, VOTE FOR APPROVAL OF THE ADOPTION OF THE ATI DIRECTOR STOCK
PLAN.
103
<PAGE>
THE ALLEGHENY LUDLUM PERFORMANCE PLAN
The Board of Directors of Allegheny Ludlum has adopted the amended and
restated Performance Share Plan for Key Employees of Allegheny Ludlum
Corporation and Subsidiaries, subject to shareholder approval. A copy of the
Allegheny Ludlum Performance Plan is attached to this Joint Proxy
Statement/Prospectus as Appendix F. The following summary does not purport to
be fully descriptive and reference is made to the full text of the Allegheny
Ludlum Performance Plan for more detailed information.
Background. The original Allegheny Ludlum Performance Plan was adopted and
approved by Allegheny Ludlum shareholders in March 1987. The original Plan had
a term of approximately ten years and will expire on January 1, 1997. As of
April 30, 1996, no shares of Allegheny Ludlum Common Stock remain available
for issuance under the Allegheny Ludlum Performance Plan except for the shares
that have been set aside for possible issuance in connection with the award
made under the Plan for the 1995-1996 Award Period.
The amendments extend the term of the Allegheny Ludlum Performance Plan for
an additional ten years and authorize additional shares of Allegheny Ludlum
Common Stock for issuance under the Allegheny Ludlum Performance Plan. The
Allegheny Ludlum Performance Plan also contains provisions intended to permit
the deductibility of awards thereunder under the Code.
Purpose and Administration. The Allegheny Ludlum Performance Plan is
intended to provide executive officers and other key employees of Allegheny
Ludlum with awards of cash and/or shares of Allegheny Ludlum Common Stock as
an incentive to achieve long-term corporate objectives. The extent to which
awards are received by participants depends on whether corporate objectives
are achieved during a particular award period; awards are paid in installments
over a three year payment schedule following the award period.
Under the Allegheny Ludlum Performance Plan, the number of shares of
Allegheny Ludlum Common Stock reserved for issuance under the Allegheny Ludlum
Performance Plan would be increased from 900,000 to 2,250,000 shares. If the
Allegheny Ludlum Performance Plan is approved, up to 49,141 shares of the
additional shares reserved for issuance under the Allegheny Ludlum Performance
Plan will be available for payment of the award made to key employees of
Allegheny Ludlum in 1994 for the 1995-1996 award period. Pursuant to the
Combination Agreement, after the Effective Time, shares of stock issuable
under the Plan shall be shares of ATI Common Stock. Such shares of ATI Common
Stock will be issued under the ATI Incentive Plan but will be governed
exclusively by the terms of the applicable award under the Allegheny Ludlum
Performance Plan (see "The Compensation Plans--The ATI Incentive Plan").
The Allegheny Ludlum Performance Plan will be administered by the Personnel
and Compensation Committee of the Board of Directors of Allegheny Ludlum (the
"Allegheny Ludlum Committee"). All determinations necessary for the
implementation and administration of the Allegheny Ludlum Performance Plan
will be made by the Allegheny Ludlum Committee.
Plan Provisions. Under the Allegheny Ludlum Performance Plan, the Allegheny
Ludlum Committee determines at the beginning of, or prior to, each fiscal year
whether an award period should be established. If an award period is
established, the Allegheny Ludlum Committee determines which employees of
Allegheny Ludlum, in addition to executive officers, are key employees of
Allegheny Ludlum who are eligible to participate in the Allegheny Ludlum
Performance Plan and determines the financial objectives to be achieved during
the award period. In the case of awards intended to qualify for deductibility
under Section 162(m), the financial objectives will only be specified levels
of one or more of operating income, earnings per share, return on investment,
return on shareholders' equity and/or objective measures of individual
performance. In prior years, the awards made under the Allegheny Ludlum
Performance Plan have been based on the achievement by Allegheny Ludlum of
specified levels of operating income during the applicable award period.
The Allegheny Ludlum Committee selects the key employees to be awarded units
under the Allegheny Ludlum Performance Plan and the number of units to be
awarded to any participating key employee. Approximately 50 Allegheny Ludlum
employees are presently eligible to receive awards under the Allegheny
104
<PAGE>
Ludlum Performance Plan. Directors who are not also employees of Allegheny
Ludlum are not eligible to participate in the Allegheny Ludlum Performance
Plan. The Allegheny Ludlum Committee has the authority to prescribe
limitations, restrictions and conditions upon any award.
Units may be denominated by an amount of cash, a number of shares of
Allegheny Ludlum Common Stock or a combination of cash and shares of Allegheny
Ludlum Common Stock. The grant of units is evidenced by a written agreement
with the participant and Allegheny Ludlum. Units awarded under the Allegheny
Ludlum Performance Plan are nonassignable except by will or by the laws of
descent and distribution. In the event a participant retires with the consent
of the Chief Executive Officer (or, in the case the participant is the Chief
Executive Officer, with the consent of the Allegheny Ludlum Committee), dies
or is disabled after the close of an award period, any unpaid installments are
to be paid to the participant or his estate in due course as if he had
remained an employee. If a participant's employment is terminated for any
reason other than those stated in the immediately preceding sentence, any
nonvested awards and any unpaid installments with respect to that award period
are to be forfeited.
Certain provisions are included in the Allegheny Ludlum Performance Plan to
permit the deductibility of awards to each person who is a "named executive
officer" covered by Section 162(m), which includes the Chief Executive Officer
and the other four most highly compensated executive officers of Allegheny
Ludlum (the "Covered Employees"). For example, the Allegheny Ludlum
Performance Plan provides that the performance goals established by the
Allegheny Ludlum Committee for an award period shall meet the requirements of
an objective formula under the Code unless the Allegheny Ludlum Committee
determines otherwise. In addition, the Allegheny Ludlum Performance Plan
provides that the maximum award payable to a Covered Employee with respect to
any award period shall not exceed 100,000 shares of Allegheny Ludlum Common
Stock and $500,000 in cash.
The Board of Directors of Allegheny Ludlum may at any time amend or
terminate the Allegheny Ludlum Performance Plan without the consent of the
shareholders, except that no amendment may be made, without the affirmative
approval of the shareholders, which would increase the number of shares
available for issuance under the Allegheny Ludlum Performance Plan, which
would extend the term of the Allegheny Ludlum Performance Plan or which would
extend the period during which units may be granted under the Allegheny Ludlum
Performance Plan.
Plan Benefits. With respect to the 1995-1996 Award Period, a total of 76,000
units have been awarded to a total of 45 key employees of Allegheny Ludlum,
including 40,500 units which were awarded to 12 executive officers. The base
value of each unit consists of $50 in cash and four shares of Allegheny Ludlum
Common Stock.
If the Allegheny Ludlum Performance Plan is approved by stockholders, of the
1,350,000 additional shares of Allegheny Ludlum Common Stock reserved for
issuance under the Allegheny Ludlum Performance Plan, the maximum number of
shares issuable with respect to the 1995-1996 Award Period if the maximum
award payable for such Award Period is earned is as follows:
105
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH ALLEGHENY LUDLUM MAXIMUM NUMBER OF SHARES
--------------------------------------- ------------------------
<S> <C>
Arthur H. Aronson 3,362 shares
President and Chief Executive Officer
James L. Murdy 2,716 shares
Senior Vice President-Finance
and Chief Financial Officer
Robert W. Rutherford 2,457 shares
Senior Vice President-Commercial
Harry R. Wagner 2,457 shares
Senior Vice President-Operations
Jack W. Shilling 2,457 shares
Senior Vice President-Technical
Executive Group 26,186 shares
Non-Executive Director Group 0 shares
Non-Executive Officer Employee Group 22,953 shares
</TABLE>
The dollar value of such shares will be determined as of the date the award
for such Award Period is paid; under the terms of the award, payments of the
award will be made in three annual installments, beginning in 1997.
The Allegheny Ludlum Summary Compensation Table set forth herein contains
additional information about awards that have been made under the Allegheny
Ludlum Performance Plan. It is not possible to indicate the number of persons
who may receive awards in the future under the Allegheny Ludlum Performance
Plan or the amount of benefits that may be received pursuant to the Allegheny
Ludlum Performance Plan since those matters will be determined in the
discretion of the Committee.
Tax Consequences. The following is a summary of the principal federal income
tax consequences of awards under the Allegheny Ludlum Performance Plan under
present law. The summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences.
Generally, the award of units under the Allegheny Ludlum Performance Plan
will not result in taxable income to the participant upon grant. The
participant will recognize income in the year the cash and shares of Common
Stock are distributed under the Allegheny Ludlum Performance Plan, in an
amount equal to the sum of the cash and the fair market value (determined as
of the date of distribution) of any shares received. Allegheny Ludlum will be
entitled to a deduction at the same time and in the same amount. The
deductibility under the Code of compensation payable under the Allegheny
Ludlum Performance Plan to "covered employees" is subject to the requirements
of Section 162(m). The Allegheny Ludlum Performance Plan is intended, with the
approval of shareholders, to meet such requirements.
Term of Allegheny Ludlum Performance Plan. If the Allegheny Ludlum
Performance Plan is approved, the term of the Allegheny Ludlum Performance
Plan will be extended ten years so that it will terminate on January 1, 2007.
THE BOARDS OF DIRECTORS OF ALLEGHENY LUDLUM AND TELEDYNE RECOMMEND THAT THE
SHAREHOLDERS OF ALLEGHENY LUDLUM AND THE STOCKHOLDERS OF TELEDYNE,
RESPECTIVELY, VOTE FOR APPROVAL OF THE ADOPTION OF THE ALLEGHENY LUDLUM
PERFORMANCE PLAN.
THE TELEDYNE SEP PLAN
The Board of Directors of Teledyne has adopted the Teledyne, Inc. 1996
Senior Executive Performance Plan subject to shareholder approval. A copy of
the Teledyne SEP Plan is attached to this Joint Proxy Statement/Prospectus as
Appendix G. The following summary does not purport to be fully descriptive and
reference is made to the full text of the Teledyne SEP Plan for more detailed
information.
106
<PAGE>
General. The purpose of the Teledyne SEP Plan is to provide incentives and
rewards to key senior executives of Teledyne who create economic value and to
ensure that income paid pursuant to the Teledyne SEP Plan is deductible by
Teledyne for federal income tax purposes.
Administration. The Teledyne SEP Plan will be administered by the
Compensation and Stock Option Committee of the Teledyne Board of Directors, or
a subcommittee thereof ("Teledyne Committee") that satisfies the requirements
of Section 162(m). Each Teledyne Committee member serves in such capacity
until such time as he or she ceases to meet the requirements of Section 162(m)
and Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3"), or until the
Teledyne Board decides to replace such member. The Teledyne Committee will
have full authority to administer the Teledyne SEP Plan, including authority
to interpret and construe any relevant provision of the Teledyne SEP Plan and
to adopt any rules and regulations it may deem necessary. Decisions of the
Teledyne Committee are final and binding on all persons who have an interest
in the Teledyne SEP Plan.
Eligibility. The executive officers eligible to participate in the Teledyne
SEP Plan for any fiscal year are the Chief Executive Officer and each other
executive officer of Teledyne within the meaning of Rule 3b-7 promulgated
under the Exchange Act, or other executive officers that are deemed "covered"
employees of Teledyne under Section 162(m). Participants are approved for each
fiscal Teledyne SEP Plan year by the Teledyne Committee. The Teledyne
Committee has sole discretion to reduce or withhold a participant's award for
the year in which such participant's employment is terminated (voluntarily or
involuntarily).
Bonus Pool. Bonuses under the Teledyne SEP Plan are awarded out of a pool
based on Teledyne's economic value added ("EVA") for the year ("SEP Pool").
For these purposes, EVA means the amount, if any, by which Teledyne's net
operating profit after tax exceeds a reference cost of capital of no less than
7% ("Measurement Factors"). No later than ninety days after the commencement
of a Teledyne SEP Plan year ("Establishment Date"), the Teledyne Committee
must determine the percentage of EVA that will fund the pool, not to exceed 5%
of EVA, and must determine the reference cost of capital, not less than 7%, to
be used in calculating EVA. The Teledyne Committee must determine the
constituent parts of net operating profit after tax for a given year by the
Establishment Date. Generally, it is the intention of the Teledyne Committee
to adjust net income to reflect net operating profits after taxes, but before
non-cash bookkeeping entries. Adjustments may include material unusual or
infrequent items like restructuring charges, sales of businesses or
investments, litigation and other losses. In any event, net operating profit
after tax for a given year will not exceed Teledyne's reported net income
excluding reported financing costs such as interest expense, unusual losses
and the negative effect of accounting changes. Similarly, the Teledyne
Committee must establish the constituent parts of capital by the Establishment
Date. Although the Teledyne Committee intends to adjust capital to reflect the
cash invested in Teledyne over time, in no event will capital be lower than
Teledyne's reported shareholders' equity attributable to Teledyne's common and
preferred stock plus long-term debt, determined in accordance with generally
accepted accounting principles. Payments may be made under the Teledyne SEP
Plan in a combination of cash or shares of Teledyne Common Stock (or,
following the consummation of the Combination, in shares of ATI Common Stock,
which shares will be issued under the ATI Incentive Plan but will be governed
exclusively by the terms of the award made under the Teledyne SEP Plan (see
"The Compensation Plans--The ATI Incentive Plan")).
Bonus Awards. No later than the Establishment Date, the Teledyne Committee
must determine the share of the SEP Pool to be available to each participant
for that year. No participant's share of the SEP Pool may exceed thirty
percent.
New Teledyne SEP Plan Benefits. The Teledyne SEP Plan is intended to
supersede the EVA-based bonus system for executive officers currently in use
by Teledyne, as described in the Compensation and Stock Option Committee
Report on Executive Compensation of Teledyne included in its March 20, 1996
proxy statement in connection with its 1996 annual meeting of shareholders
(which was postponed following the execution of the Combination Agreement).
For 1996, the bonus pool for participating executive officers will be funded
by no more than 5% of Teledyne's 1996 SEP EVA. If such level had been in
effect for 1995, when Teledyne's maximum SEP EVA was $65,394,000 (making
certain assumptions as to the constituent parts of capital and net operating
profit after tax), the bonus pool would have been funded with $3,269,700,
leaving approximately
107
<PAGE>
$62,124,300 outside the bonus pool. No participating executive officer could
have received more than 30% of such pool, and, in any event, the Teledyne
Committee would have had discretion to decrease, but not to increase, the
amount to be awarded to any participant. As set forth under "The Compensation
Plans--Teledyne Executive Compensation Information," Teledyne's five most
highly-paid executive officers were paid aggregate bonuses of approximately
$2,000,000 for 1995 service. Because the amount of 1996 SEP EVA is unknowable
at this time and because the amount payable to any participating executive
officer under the Teledyne SEP Plan is subject to Teledyne Committee
determination both as to the share of the pool initially allocated and as to
whether the amount resulting from such share will actually be paid, neither
the amount that will be paid in the future to any eligible executive officer,
nor the amount that would have been paid last year had the Teledyne SEP Plan
been in effect, is presently determinable.
Duration, Amendment and Termination. Teledyne may, at any time, amend,
discontinue or terminate the Teledyne SEP Plan in whole or in part, provided
that (i) amounts which have been credited to a deferred bonus account must be
paid out in accordance with the applicable deferral election or, if the
Teledyne Committee so determines upon termination of the Teledyne SEP Plan,
distributed to such participant as soon as practicable after termination of
the Teledyne SEP Plan, and (ii) absent any required shareholder approval,
amendments cannot be made which alter the Measurement Factors or increase the
maximum amounts payable hereunder. In no event will any award be made under
the Teledyne SEP Plan for any year after fiscal year 2000. The Teledyne SEP
Plan, awards under the Teledyne SEP Plan, and any amendment to the Teledyne
SEP Plan which would change the class of executives who are eligible to
receive awards under the Teledyne SEP Plan or the permissible amount of such
awards will be subject to approval of Teledyne's stockholders in such manner
and with such frequency as required under Section 162(m).
Tax Consequences. The following is a summary of the principal federal income
tax consequences of awards of cash or shares under the Teledyne SEP Plan. The
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences.
Participants in the Teledyne SEP Plan will recognize income in the year the
cash or shares are distributed thereunder, in an amount equal to the sum of
the cash and the fair market value (determined on the date of distribution) of
any shares received. Teledyne will be entitled to a deduction at the same time
and in the same amount. The deductibility under the Code of compensation
payable under the Teledyne SEP Plan to "covered employees" is subject to
satisfaction of the requirements specified in Section 162(m). The Teledyne SEP
Plan is intended, with the approval of stockholders, to meet such
requirements.
THE BOARDS OF DIRECTORS OF ALLEGHENY LUDLUM AND TELEDYNE RECOMMEND THAT THE
SHAREHOLDERS OF ALLEGHENY LUDLUM AND THE STOCKHOLDERS OF TELEDYNE,
RESPECTIVELY, VOTE FOR APPROVAL OF THE ADOPTION OF THE TELEDYNE SEP PLAN.
108
<PAGE>
ALLEGHENY LUDLUM EXECUTIVE COMPENSATION INFORMATION
Summary of Cash and Certain Other Compensation. The following Summary
Compensation Table shows, for fiscal years 1993, 1994 and 1995, the
compensation paid to the Chief Executive Officer of Allegheny Ludlum and to
each of the other four most highly compensated executive officers who were
serving as executive officers as of December 31, 1995 (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------- ----------------------- --------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND COMPEN- AWARD OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITIONS YEAR SALARY ($)(2) BONUS ($)(3) SATION ($) ($)(4) (#)(5) ($)(6) ($)(7)
- ------------------- ---- ------------- ------------ ---------- ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arthur H. Aronson 1995 $300,000 $374,870 $28,955 $ 87,341 0 shs. $204,021 $206,496
President and Chief 1994 260,417 0 5,676 125,356 0 205,624 248,492
Executive Officer (1) 1993 250,000 193,634 36,000 151,625 121,310
James L. Murdy 1995 $238,706 $203,114 $10,574 $223,576 0 shs. $164,791 $118,027
Senior Vice President- 1994 219,889 0 10,937 0 0 166,086 122,865
Financial and Chief 1993 215,050 148,587 28,000 164,188 72,123
Financial Officer
Robert W. Rutherford 1995 $175,000 $127,698 $12,679 $ 85,895 0 shs. $149,103 $ 75,384
Senior Vice President- 1994 158,038 0 12,968 0 1,867 150,275 81,532
Commercial 1993 152,000 82,618 25,200 151,625 42,890
Harry R. Wagner 1995 $165,000 $122,619 $ 4,032 $ 82,499 0 shs. $149,103 $ 56,138
Senior Vice President- 1994 144,238 0 3,370 67,788 1,867 150,275 56,521
Operations 1993 134,400 80,390 25,200 164,188 28,501
Jack W. Shilling 1995 $155,000 $117,009 $ 7,478 $138,179 0 shs. $149,103 $ 55,518
Senior Vice President- 1994 132,033 0 7,066 1,867 150,275 56,037
Technical 1993 124,521 65,546 25,200 45,488 30,256
</TABLE>
- --------
(1) Mr. Aronson was elected President and Chief Executive Officer of Allegheny
Ludlum effective August 1, 1994. For a description of Allegheny Ludlum's
employment agreement with Mr. Aronson, see "Employment Agreement" below.
(2) Includes cash compensation deferred pursuant to the Savings part of
Allegheny Ludlum's Retirement Savings Plan, described in note (7) below.
1994 amounts reflect reductions in salary during the 10-week labor strike
called by the United Steelworkers of America on April 1, 1994. For the
months of April and May, 1994, the base salary of each of the named
executive officers was reduced 25%.
(3) Includes payments under Allegheny Ludlum's Performance Management System
Plan and payments under the salaried employees' profit-sharing plan. In
fiscal year 1994, as a result of the 10-week labor strike called by the
United Steelworkers of America on April 1, 1994, Allegheny Ludlum did not
achieve the threshold level of earnings under either of these plans and,
as a result, no awards were paid under the plans.
(4) Represents the closing market price on the NYSE, on the award date, of a
number of shares of Allegheny Ludlum Common Stock equal to the number of
shares of restricted stock awarded to the named executive under Allegheny
Ludlum's Stock Acquisition and Retention Plan, which was approved by
Allegheny Ludlum's shareholders at their 1994 Annual Meeting. The market
price does not take into account the diminution in value attributable to
the restrictions applicable to the shares awarded under the Plan. In
general, the restricted shares awarded under this Plan will vest only if
the participant retains the shares that are purchased and/or designated by
the participant as subject to the Plan for a period of five years.
Dividends are paid on all shares of restricted stock at the same rate as
on non-restricted shares. The number of restricted shares of Allegheny
Ludlum Common Stock held by each named executive officer in fiscal year
1995 under the Plan and the closing market price of that number of shares
on the NYSE on December 29, 1995 were: Mr. Aronson, 10,413 shares,
$192,641; Mr. Murdy, 11,796 shares, $218,226; Mr. Rutherford, 4,190
shares, $77,515; Mr. Wagner, 7,302 shares, $135,087; and Mr. Shilling,
7,548 shares, $139,638.
109
<PAGE>
(5) Reflects options awarded under Allegheny Ludlum's Stock Option Incentive
Plan. The amount represents the number of shares of Allegheny Ludlum
Common Stock which the executive officer could purchase by exercising the
options.
(6) Payments in fiscal years 1994 and 1995 reflect the achievement of 97% of
the performance objectives for the 1991-1993 award period under Allegheny
Ludlum's Performance Share Plan for Key Employees. Payment of the awards
to the 43 participants over a three-year period began in 1994. Payments in
fiscal year 1993 reflected the achievement of 120% of the performance
objectives for the 1988-1990 award period under the Performance Share
Plan. Payment of the awards to the 47 participants over a three-year
period began in 1991 and ended in 1993. In each case, the amount
represents the cash and the market value of the shares of Allegheny Ludlum
Common Stock distributed under the Plan on the relevant valuation dates.
(7) These amounts include the annual accruals made by Allegheny Ludlum with
respect to possible future payments to the named executive officers under
Allegheny Ludlum's Supplemental Pension Plan. For fiscal year 1995, the
amounts accrued were as follows: Mr. Aronson, $146,556; Mr. Murdy,
$69,650; Mr. Rutherford, $37,295; Mr. Wagner, $19,594; and Mr. Shilling,
$20,559. Also included are Allegheny Ludlum's contributions to the
accounts of the named executive officers pursuant to the Retirement part
of Allegheny Ludlum's Retirement Savings Plan which in fiscal year 1995
were as follows: Mr. Aronson, $8,020; Mr. Murdy, $8,251; Mr. Rutherford,
$8,751; Mr. Wagner, $8,826; and Mr. Shilling, $8,901. Also included are
Allegheny Ludlum's contributions to the accounts of the named executive
officers pursuant to the Savings part of Allegheny Ludlum's Retirement
Savings Plan which in fiscal year 1995 were as follows: Mr. Aronson,
$4,500; Mr. Murdy, $4,620; Mr. Rutherford, $4,594; Mr. Wagner, $4,606; and
Mr. Shilling, $4,585. The amounts also include contributions by Allegheny
Ludlum to the plan accounts of the named executive officers under
Allegheny Ludlum's Benefit Restoration Plan which, in fiscal year 1995,
were as follows: Mr. Aronson, $21,706; Mr. Murdy, $13,734; Mr. Rutherford,
$6,517; Mr. Wagner, $4,931; and Mr. Shilling, $3,332. For fiscal year
1995, also included are the dollar values of the benefits to the named
persons of Allegheny Ludlum-paid premiums for "split dollar" term life
insurance as follows: Mr. Aronson, $6,864; Mr. Murdy, $6,547; Mr.
Rutherford, $4,452; Mr. Wagner, $4,406; and Mr. Shilling, $4,366. For
fiscal 1995, the amounts also include the second of three annual
installments of cash awards made by the Personnel and Compensation
Committee during the first quarter of 1994 to a total of 43 management
personnel, including the named executive officers, in order to recognize
their contributions on behalf of Allegheny Ludlum during 1991-1993, as
follows: Mr. Aronson, $18,850; Mr. Murdy, $15,225; Mr. Rutherford,
$13,775; Mr. Wagner, $13,775; and Mr. Shilling, $13,775.
The Retirement Savings Plan is a qualified defined contribution plan within
the meaning of Section 401(a) of the Code. The Plan has two components: the
Retirement part and the Savings part. Employees eligible for the Retirement
part of the Plan include all salaried non-union employees. At the end of
1995, a total of 1,770 employees participated in the Retirement part of the
Plan. The Savings part of the Plan is designed to encourage eligible
employees to save for the future and accumulate a fund to supplement
retirement income through tax-deferred contributions. All contributions by
Allegheny Ludlum or by participants are subject to the applicable limits of
the Code. The Company matches participants' Basic Savings contributions on
the terms set forth in the Plan. Company contributions and earnings are
invested only in a fund invested solely in Allegheny Ludlum Common Stock
but may be transferred to any other fund available under the Plan monthly
following due notice. In 1995, a total of 1,526 employees participated in
the Savings part of the Plan.
The Benefit Restoration Plan provides that Allegheny Ludlum will supplement
the payments received by participants in Allegheny Ludlum's Pension Plan
for Salaried Employees (see "Pension Plans" below) and the Retirement and
Savings parts of the Retirement Savings Plan by making payments to or
accruing benefits on behalf of such participants in amounts which are the
equivalent of the portion of the payments or benefits which cannot be paid
or accrued under such plans by reason of the limitations imposed by the
Code.
Compensation and benefits paid or furnished by Allegheny Ludlum in the
fiscal years set forth in the above table to the executive officers, other
than as set forth in the table, were less than established reporting
thresholds.
110
<PAGE>
Stock Options. No stock options or stock appreciation rights were granted to
any of the executive officers named in the Summary Compensation Table during
fiscal year 1995 under Allegheny Ludlum's Stock Option Incentive Plan.
The following table sets forth information regarding the exercise of stock
options during fiscal year 1995 and the unexercised options held as of the end
of the 1995 fiscal year by the executive officers named in the Summary
Compensation Table. No stock appreciation rights ("SARs") were exercised by
any of the named executive officers and none of the named executive officers
held any unexercised SARs at the end of the fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FY- IN-THE-MONEY OPTIONS/
END (#) SARS AT FY-END ($)(2)
------------------------- -------------------------
SHARES
ACQUIRED
NAME ON EXERCISE (#) VALUE REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- --------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Arthur H. Aronson 0 0 63,000 shs. 36,000 shs. $533,273 $ 0
James L. Murdy 0 0 9,334 28,000 74,089 0
Robert W. Rutherford 12,126 shs. $175,615 25,200 27,067 200,025 0
Harry R. Wagner 0 0 28,800 27,067 224,640 0
Jack W. Shilling 8,400 shs. 101,325 18,525 27,067 129,728 0
</TABLE>
- --------
(1) The amount shown as "value realized" is calculated by subtracting the
exercise price paid by an optionee upon exercise of an option from the
mean between the high and low sales prices of a share of Allegheny Ludlum
Corporation Common Stock on the NYSE on the date the option was exercised.
(2) The "value of unexercised in-the-money options" is calculated by
subtracting the exercise price from $18.6875, which was the mean between
the high and low sales prices of a share of Allegheny Ludlum Corporation
Common Stock on the NYSE on December 29, 1995, the last trading day in
Allegheny Ludlum's 1995 fiscal year.
Pension Plans. In 1988, Allegheny Ludlum adopted the Retirement part of the
Retirement Savings Plan (formerly known as the Retirement Security Program),
and amended Allegheny Ludlum's Pension Plan for Salaried Employees (the
"Pension Plan") to provide that no additional benefits would accrue thereunder
from and after December 31, 1988 except for those employees who were
grandfathered under the Pension Plan. Benefits accrued prior to January 1,
1989 will be paid at the time, in the form and in the amount determined under
the Pension Plan.
The following table shows the estimated annual benefits calculated on a
straight life annuity basis payable under the Pension Plan and the defined
benefit portion of the Benefit Restoration Plan to participants in specified
compensation and years of service classifications upon attainment of age 65.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL ELIGIBLE EARNINGS FOR
HIGHEST FIVE CONSECUTIVE YEARS IN ESTIMATED ANNUAL PENSION BENEFITS FOR
TEN-YEAR PERIOD PRECEDING RETIREMENT REPRESENTATIVE YEARS OF CONTINUOUS SERVICE
- ------------------------------------ -----------------------------------------------------
15 20 25 30 35 40
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000 $ 48,000 $ 64,000 $ 80,000 $ 96,000 $112,000 $128,000
300,000 72,000 96,000 120,000 144,000 168,000 192,000
400,000 96,000 128,000 160,000 192,000 224,000 256,000
500,000 120,000 160,000 200,000 240,000 280,000 320,000
600,000 144,000 192,000 240,000 288,000 336,000 384,000
800,000 192,000 256,000 320,000 384,000 448,000 512,000
1,000,000 240,000 320,000 400,000 480,000 560,000 640,000
</TABLE>
111
<PAGE>
The formula used to determine retirement benefits under the Pension Plan
considers the participant's average annual eligible earnings in the highest
five consecutive years of the last ten years prior to retirement and the
number of the participant's years of service. Eligible earnings include base
salary, including tax-deferred contributions by the employee under Allegheny
Ludlum's savings plans, and awards when received under the Performance
Management System Plan. Eligible earnings for the purposes of the Pension Plan
and the defined benefit portion of the Benefit Restoration Plan for the 1995
calendar year for the named executives who are participants under the Pension
Plan are as follows: Mr. Aronson, $318,850; Mr. Murdy, $253,931; Mr.
Rutherford, $188,775; Mr. Wagner, $178,775; and Mr. Shilling, $168,775.
In certain circumstances, pension benefits are subject to integration with
Social Security and reduction for other payments made to the participant or
his or her spouse. The benefits payable from a qualified defined benefit plan
are also limited by Section 415 of the Code to an annual benefit of $120,000
payable at age 65 with actuarial reduction for earlier commencement. The
amounts shown in the table indicate the aggregate of payments under the
Pension Plan and the defined benefit portion of the Benefit Restoration Plan.
As of December 31, 1995, Messrs. Aronson, Murdy, Rutherford, Wagner, and
Shilling had .08, 0.58, 32, 29 and 23 credited years of service, respectively,
for purposes of the Pension Plan. For vesting purposes, Messrs. Aronson and
Murdy each had 7 years of service and are fully vested in the Pension Plan.
In addition, Allegheny Ludlum has established a Supplemental Pension Plan
which provides certain key employees of Allegheny Ludlum (or their
beneficiaries in the event of death) with monthly payments in the event of
retirement, disability or death, equal to 50 percent of monthly base salary as
of the date of retirement, disability or death. Monthly retirement benefits
start two months following the later of (i) age 62, if actual retirement
occurs prior to age 62 but after age 58 with the approval of the Board of
Directors, or (ii) the date actual retirement occurs, and continue for a 118-
month period. The Plan describes the events which will terminate an employee's
participation in the Plan. Since the payment of benefits to the named
executive officers is contingent on future events, the amount to be paid in
the future with respect to such officers cannot be determined at this time.
Employment Agreement. Mr. Aronson is employed pursuant to an Employment
Agreement with Allegheny Ludlum dated March 1, 1994 with a term that initially
will expire on February 28, 1997 but which will automatically be extended for
a period of one year thereafter on March 1 of each year commencing March 1,
1997 unless terminated by written notice by either party. The agreement
provides for a base salary of at least $250,000 annually exclusive of any
compensation he may receive pursuant to any other plan of Allegheny Ludlum or
which may be otherwise authorized by the Board of Directors. The agreement
also provides for his participation in any incentive plan of Allegheny Ludlum
and in the various benefit plans maintained by Allegheny Ludlum, including its
various pension, supplemental pension, disability, medical, insurance, sick
leave and other similar benefit and retirement arrangements.
Compensation of Directors. Directors who are not employees of Allegheny
Ludlum are paid an annual fee of $22,000, $1,000 for attendance at each
meeting of the Board of Directors and $1,000 for attendance at each meeting of
a committee of the Board on which they serve. In addition, each non-employee
chairman of a committee is paid an annual fee of $2,000. Directors who are
employees of Allegheny Ludlum do not receive any compensation for their
service on the Board or its committees.
Each non-employee director also participates automatically in the Allegheny
Ludlum Director Share Incentive Plan (the "Incentive Plan"). The Incentive
Plan is intended as an incentive to encourage such directors to increase their
stock ownership and proprietary interest in Allegheny Ludlum and to continue
as directors of Allegheny Ludlum, as well as to attract individuals of
outstanding ability to serve as non-employee directors of Allegheny Ludlum.
Under the Incentive Plan, on the first business day of each calendar year,
each non-employee director becomes entitled to receive a number of shares of
Allegheny Ludlum Common Stock (rounded to the nearest whole share) with a fair
market value on such date equal to $5,000. Pursuant to this Plan, on January
3, 1995, each non-employee director received 268 shares of Allegheny Ludlum
Common Stock.
112
<PAGE>
In order to continue to attract and retain outside directors of exceptional
ability, Allegheny Ludlum maintains a Fee Continuation Plan for Non-Employee
Directors (the "Fee Continuation Plan"). Under the Fee Continuation Plan,
benefits will be payable to a person who serves as a non-employee director for
a period of five years or more and who retires from service as a director
because of the age limitation established by Allegheny Ludlum's Bylaws or
because of death, disability or other circumstances specified in the Plan. The
benefit will be an amount equal to the annual fee for directors in effect
immediately prior to the participant's cessation of service as a director and
will continue at the rate of one year of benefit for each year of the
participant's credited service as a director (as defined in the Fee
Continuation Plan) up to a maximum of ten years.
Pursuant to an agreement between Robert P. Bozzone, Vice Chairman of
Allegheny Ludlum, and Allegheny Ludlum, dated August 1, 1994, Mr. Bozzone
served as an independent consultant to Allegheny Ludlum for compensation at an
annual rate of $100,000 from August 1, 1994 through July 31, 1995. Since
August 1, 1995, Mr. Bozzone has continued to provide services to Allegheny
Ludlum focusing particularly on customers and related areas. He does not
receive any compensation for the services he provides but is reimbursed for
the expenses he incurs in providing these services to Allegheny Ludlum.
113
<PAGE>
TELEDYNE EXECUTIVE COMPENSATION INFORMATION
Compensation of Executive Officers. The following table sets forth certain
information concerning the annual and long-term compensation of Mr. Rutledge
and the other four most highly compensated executive officers of Teledyne
(determined as of the end of the last fiscal year) for fiscal years 1995,
1994, and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------
NO. OF
SECURITIES
ANNUAL COMPENSATION
------------------------------------------ UNDERLYING
NAME AND OTHER ANNUAL OPTIONS/SAR'S ALL OTHER
PRINCIPAL POSITION YEAR SALARY (1) BONUS (2) COMPENSATION (3) (IN SHARES) (4) COMPENSATION (5)
- ------------------------ ---- ---------- --------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
William P. Rutledge 1995 $710,000 $715,385 $ -- -- $ 300
Chairman of the Board
of 1994 630,000 424,778 329,268(6) 300,000 1,452
Directors and Chief 1993 600,000 150,000 -- 150,000 1,452
Executive Officer
Hudson B. Drake 1995 400,000 277,287 -- -- 765
Senior Vice President 1994 400,000 219,400 -- 100,000 876
1993 400,000 100,000 203,150(7) 30,000 876
Douglas J. Grant 1995 252,455 181,529 -- 20,000 1,079
Chief Financial Officer 1994 222,500 106,950 -- 100,000 300
and Treasurer 1993 193,750 80,000 -- 30,000 300
Donald B. Rice 1995 587,500 604,550 -- -- 2,848
President and Chief 1994 520,290 361,305 -- 250,000 --
Operating Officer 1993 407,693 350,000 542,444(8) 200,000 --
Gary L. Riley 1995 325,709 171,447 -- -- 1,120
Vice President 1994 310,000 47,740 -- 100,000 225
1993 271,667 95,000 192,206(9) 30,000 75
</TABLE>
- --------
(1) Includes amounts deferred under Teledyne's 401(k) Plan and under the
Teledyne, Inc. Executive Deferred Compensation Plan.
(2) Bonuses relating to service in a fiscal year generally have been paid
during the immediately following fiscal year. Therefore, amounts shown for
fiscal years 1995, 1994, and 1993 were actually paid in 1996, 1995, and
1994, respectively. Includes amounts deferred under the Teledyne, Inc.
Executive Deferred Compensation Plan. Does not include contingent bonuses
awarded but not paid ("banked") with respect to 1995 service that the
Compensation and Stock Option Committee has required the executive
officers to carry over and put at risk against 1996 and 1997 performance.
(3) In accordance with Commission regulations, this table does not include
perquisites and other personal benefits received by a named executive
officer during a fiscal year unless the aggregate value of such
perquisites and other benefits exceed the lesser of $50,000 or 10% of the
total Salary and Bonus reported for the named executive officer.
(4) In 1994 options were granted under the Teledyne, Inc. 1994 Long-Term
Incentive Plan. Options were granted in 1995 and 1993 under the Teledyne,
Inc. 1990 Stock Option Plan. No stock appreciation rights have been
granted under either plan.
(5) Amounts included under All Other Compensation were contributed or accrued
for the applicable executive officer by Teledyne under Teledyne's 401(k)
Plan and/or paid on behalf of the applicable executive officer
114
<PAGE>
for additional group term life insurance premiums not generally paid on
behalf of all salaried employees under Teledyne's life insurance plans.
(6) In connection with the refinancing of his mortgage obligations, in 1994
Teledyne made a special payment to Mr. Rutledge of $300,000, the after-tax
proceeds of which were used to reduce substantially Teledyne-guaranteed
loan balance.
(7) In 1993, Mr. Drake received a special payment of $200,000, the after-tax
proceeds of which were used to reduce Teledyne-guaranteed loan balance for
a residence in Los Angeles.
(8) Teledyne required Dr. Rice to relocate his residence from the Washington,
D.C. area to Los Angeles, California. In connection with this relocation,
Teledyne compensated Dr. Rice $511,009 for the loss on the sale of his
residence and paid $16,611 for the costs of this relocation.
(9) Teledyne required Mr. Riley to relocate his residence from the Pittsburgh,
Pennsylvania area to Los Angeles, California. Teledyne paid $87,681 for
the costs of Mr. Riley's relocation and made to Mr. Riley a one-time
special payment of $100,000 to compensate him for moving at Teledyne's
request.
Option Grants, Exercises and Year-End Values. Shown below is further
information with respect to stock options granted during fiscal year 1995
under Teledyne's 1990 Stock Option Plan to individuals listed in the Summary
Compensation Table above. No options or stock appreciation rights were granted
in 1995 under Teledyne's 1994 Long-Term Incentive Plan to such named executive
officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE APPRECIATION FOR 11-YEAR
OPTION TERM (2)
-------------------------------------------------
INDIVIDUAL GRANTS 0% ($) 5% ($) 10% (4)
- ---------------------------------------------------------------------- -------- ------------------ --------------------
ASSUMED
COMMON ASSUMED ASSUMED
NUMBER OF % OF TOTAL STOCK COMMON COMMON
SECURITIES OPTIONS PRICE ON STOCK STOCK
UNDERLYING GRANTED TO EXERCISE JUNE 29, PRICE ON PRICE ON
OPTIONS EMPLOYEES IN OR BASE EXPIRATION 2006 JUNE 29, 2006 JUNE 29, 2006
NAME GRANTED (1) FISCAL YEAR PRICE DATE $24.75 $42.33 $70.61
- ---- ----------- ------------ -------- ---------- -------- ------------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas J. Grant........ 20,000 3.7 $24.75 06/29/06 0 $ 351,618 $ 917,293
Total Shareholder
Benefit (3)............. 0 Approx. $1 billion Approx. $2.5 billion
Benefit to Named Officer
as a Percent of Total... 0 .036% .036%
</TABLE>
- --------
(1) Options are exercisable at a rate of 25% per year, commencing on the first
anniversary of their grant. Options are nonqualified under the Code, and
were granted at an exercise price equal to the fair market value on the
date of grant. Vesting of options may be accelerated upon a change in
control of Teledyne. No stock appreciation rights have been granted under
Teledyne's 1990 Stock Option Plan or Teledyne's 1994 Long-Term Incentive
Plan.
(2) Except with respect to the first column, the amounts shown are not the
values of the options on the date they were granted. Instead, these are
hypothetical future values based on the difference between the option
exercise price and an assumed future Teledyne Common Stock price at the
end of the 11 year term of the options using hypothetical rates of growth
at 0%, 5% and 10%, respectively. There can be no assurance that the growth
rates specified in this table will be achieved.
(3) Represents the increase in market value of Teledyne Common Stock for all
stockholders at assumed rates of stock appreciation over the eleven-year
period.
115
<PAGE>
The following table provides further information with respect to the shares
acquired on exercise of stock options in the last fiscal year and the number
and value of unexercised options at fiscal year-end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTIONS (IN SHARES) OPTIONS
NAME ON EXERCISE REALIZED (1) AT FY-END (2) AT FY-END (3)
- ---- --------------- ------------ ------------------------- -------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
------------------------- -------------------------
<S> <C> <C> <C> <C>
William P. Rutledge..... 2,500 $8,125 285,000 / 312,500 $1,700,625 / $2,490,625
Hudson B. Drake......... 700 6,300 133,050 / 96,250 764,775 / 777,500
Douglas J. Grant........ -- -- 95,000 / 115,000 559,375 / 794,375
Donald B. Rice.......... 95,000 527,187 67,500 / 287,500 362,812 / 2,271,875
Gary L. Riley........... -- -- 108,750 / 96,250 621,250 / 777,500
</TABLE>
- --------
(1) Deemed gain calculated by determining the difference between the fair
market value of the Teledyne Common Stock underlying the option on the
date of the exercise and the exercise price. None of the officers has sold
any of the shares of Common Stock issued pursuant to such exercises.
(2) Options have been granted under Teledyne's 1990 Stock Option Plan and 1994
Long-Term Incentive Plans. No stock appreciation rights have been granted
under either plan and no stock options have been granted with respect to
these individuals since the end of the last fiscal year. Vesting of
options may be accelerated by a change in control of Teledyne.
(3) Calculated by determining the difference between the fair market value of
the Teledyne Common Stock underlying the options on December 29, 1995
($25.625, the closing price on the NYSE-Composite Transactions) and the
exercise price of the options on that date.
Defined Benefit Plans. The following table presents the estimated annual
retirement benefits payable on a straight-life annuity basis, assuming
retirement at age 65 or older in 1996, to participating employees, including
executive officers, under Teledyne's Retirement Plan for Salaried Employees
("Plan") and the Pension Equalization Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
-----------------------------------
REMUNERATION
(1) 15 20 25 30 (2)
------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
$125,000 $ 28,249 $ 37,665 $ 47,081 $ 56,498
150,000 34,436 45,915 57,394 68,873
175,000 40,624 54,165 67,706 81,248
200,000 46,811 62,415 78,019 93,623
225,000 52,999 70,665 88,331 105,998
250,000 59,186 78,915 98,664 118,373
300,000 71,561 95,415 119,269 143,123
400,000 96,311 128,415 160,519 192,623
450,000 108,686 144,915 181,144 217,373
500,000 121,061 161,415 201,769 242,123
600,000 145,811 194,415 243,019 291,623
700,000 170,561 227,415 284,269 341,123
800,000 195,311 260,415 325,519 390,623
</TABLE>
- --------
(1) The benefits shown are calculated as if remuneration is the annual average
Plan compensation under the terms of the Plan. For periods through
December 31, 1994, Plan compensation was limited to an individual's basic
salary. Effective January 1, 1995, plan compensation includes basic salary
and incentive compensation
116
<PAGE>
received on and after January 1, 1995. Basic Salary for the past three
years for the named executive officers is shown under the heading "Salary"
and incentive compensation is shown under the heading "Bonus" in the
Summary Compensation Table above.
(2) Maximum benefits payable under the Plan are reached after 30 years of
credited service.
The Plan is a defined benefit retirement plan qualified under the Code and
covers employees, except nonsupervisory production or maintenance employees,
with at least one year of service to Teledyne or those of its divisions or
subsidiaries that have adopted the Plan. Benefits under the Plan depend upon
an individual's average compensation (as described above) over the 60 highest
consecutive months during the 120 months preceding termination of employment
and the number of years such individual has participated in the Plan.
Participants vest in their accrued benefits under the Plan after five years of
service to Teledyne or its divisions or subsidiaries. Benefits payable under
the Plan are not subject to any deduction for Social Security or other offset
amounts.
Section 415 of the Code imposes limitations on the amount of benefits
payable under tax-qualified plans. Accordingly, the maximum annual benefit
provided by the Plan for 1996 is $120,000. In addition, the Code imposes an
annual limit upon the amount of compensation which may be included in the
calculation of a benefit from a tax-qualified plan; in 1996, the maximum
includable compensation is $150,000. This amount is adjusted periodically for
increases in the cost of living. Teledyne has adopted a Pension Equalization
Plan to restore retirement benefits, which would be payable under the Plan but
for the limits imposed by the Code, to the level set forth in the preceding
table, calculated pursuant to the Plan formula.
The number of years of credited service and the average basic salary covered
by the Plan and the Pension Equalization Plan as of December 31, 1995, for
each named executive officer is: Hudson B. Drake, 22.2 years and $435,880;
Douglas J. Grant 17.1 years and $222,629; Donald B. Rice, 1.8 years and
$662,396; Gary L. Riley, 8.9 years and $286,023; and William P. Rutledge, 8.9
years and $692,956.
Severance Arrangements. In 1995, Teledyne entered into Teledyne Severance
Agreements with each of Teledyne's executive officers. Among other things, the
Teledyne Severance Agreements were intended to encourage Teledyne's executive
officers to remain with Teledyne during a period of uncertainty with respect
to Teledyne's ownership and governance (see "The Combination--Background of
the Combination"). On February 29, 1996, the Board of Directors of Teledyne
approved amendments to the Teledyne Severance Agreements extending their terms
for one year.
The Teledyne Severance Agreements provide various severance benefits to such
executive officers in the event their employment is terminated involuntarily
(other than for cause, disability or death) or voluntarily, in either case
within one year of the occurrence of a Change of Control (defined below). In
general, a Change of Control will occur if (i) on or prior to July 31, 1997,
any person acquires a majority of the voting power of Teledyne's stock, (ii)
the individuals who comprised Teledyne's Board of Directors on March 5, 1995
cease to comprise a majority of the Board at or before the conclusion of the
1996 Annual Meeting of Shareholders, or (iii) on or prior to July 31, 1997, a
merger, consolidation, reorganization or sale of all or substantially all of
Teledyne's assets occurs and Teledyne's shareholders do not own, in
substantially the same proportion as before such transaction, at least 70% of
the voting securities of the entity resulting from such merger, consolidation
or reorganization or which acquires such assets.
The Teledyne Severance Agreements provide for the following severance
benefits to each executive officer: (i) a lump sum payment based on a multiple
of his or her annualized compensation, including performance bonuses, (ii)
continuation for up to two years of the life and health insurance benefits
that were being provided by Teledyne to such officer and his or her family
immediately prior to termination, (iii) personal financial and estate planning
services, and (iv) outplacement services for up to 52 weeks at Teledyne's
expense (up to a maximum of $15,000). Each of the Agreements contains
identical terms and conditions, except that the severance compensation
multiple for Mr. Rutledge and Dr. Rice is 2.5 and the multiple for the other
executive officers is 2.25. All severance benefits payable under the Teledyne
Severance Agreements would be reduced to the extent
117
<PAGE>
necessary to prevent any executive officer from being subject to the excise tax
provisions of Section 4999 of the Code applicable to any "excess parachute
payment" (as defined in Section 280G of the Code) and to preserve the ability
of Teledyne to deduct the severance benefits paid; provided, that the severance
benefits payable to an executive officer may not exceed the highest amount
payable to Teledyne's Chairman and Chief Executive Officer. The Teledyne
Severance Agreements are not employment contracts.
Severance arrangements also are in effect for certain other employees of
Teledyne and its subsidiaries, conditional on a change of control with respect
to Teledyne and involuntary termination or voluntary termination upon
significant negative changes in the terms of employment for such employees. In
total, approximately 235 employees are covered by such arrangements. If all
such employees and all of the executive officers subject to the Teledyne
Severance Agreements were terminated upon a change of control, at current
salary and target bonus levels, the maximum aggregate value of benefits to be
received by all such individuals as a group would be approximately $28 million.
For a discussion of the effect of the consummation of the Combination under
the Teledyne Severance Agreements and the other severance arrangements
summarized above, see "The Combination--Interests of Certain Persons in the
Combination."
Compensation of Directors. Non-employee directors of Teledyne earn an annual
retainer of $28,000, a fee of $1,500 per Board meeting attended, $1,000 per
committee meeting attended, and a $5,000 additional retainer for serving as
chair of the Audit or Compensation and Stock Option Committee. Pursuant to the
terms of the Teledyne, Inc. 1995 Non-Employee Director Stock Option Plan, non-
employee directors of Teledyne who first become directors after January 1, 1994
may elect to receive stock options in lieu of retainer and/or meeting fees. In
addition, such directors receive annual stock options awards of 1,000 shares.
118
<PAGE>
LEGAL MATTERS
The validity of the shares of ATI Common Stock to be issued in connection
with the Combination will be passed upon by Jon D. Walton, Vice President-
General Counsel and Secretary of ATI. As of June 30, 1996, Mr. Walton owned
beneficially 69,708 shares of Allegheny Ludlum Common Stock and held a right
to acquire shares of Allegheny Ludlum Common Stock having a value equal to
$210,623.
EXPERTS
The consolidated financial statements and schedule of Allegheny Ludlum at
December 31, 1995 and January 1, 1995, and for each of the three fiscal years
in the period ended December 31, 1995, incorporated by reference to the Annual
Report on Form 10-K of Allegheny Ludlum for the year ended December 31, 1995
and incorporated in this Joint Proxy Statement/Prospectus, which is referred
to and made part of this Joint Proxy Statement/Prospectus, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their reports
thereon incorporated by reference therein and incorporated herein by
reference. Such financial statements and schedule have been incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of Teledyne included in the Annual
Report on Form 10-K for the year ended December 31, 1995 incorporated by
reference in this Joint Proxy Statement/Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report. Reference is made to said
report, which includes an explanatory paragraph with respect to Teledyne's
adoption of SFAS No. 106 in 1993 as discussed in Note 9 to such consolidated
financial statements.
STOCKHOLDER PROPOSALS
Allegheny Ludlum and Teledyne have each postponed their respective 1996
annual meetings of stockholders in view of the pendency of the Combination and
the decision of the two companies to submit the Combination Agreement for
approval at special meetings of their respective stockholders. Accordingly,
the dates that Allegheny Ludlum and Teledyne had set forth in their respective
proxy statements previously issued in connection with such 1996 annual
meetings as the dates by which stockholder proposals would have to be
submitted in order to be timely for the purpose of Rule 14a-8 under the
Exchange Act in relation to their annual meetings are no longer applicable. If
the Combination is consummated, neither Allegheny Ludlum nor Teledyne will
thereafter hold an annual meeting of stockholders that will be subject to the
provisions of the Exchange Act. If the Combination Agreement is terminated for
any reason, each of Allegheny Ludlum and Teledyne will thereafter schedule an
annual meeting of stockholders and stockholder proposals will be timely, for
the purpose of Rule 14a-8, with respect to either of such annual meetings if
such stockholder proposals are received a reasonable time before Allegheny
Ludlum or Teledyne (as the case may be) begins to solicit proxies in
connection with such annual meeting. The proxy statements of Allegheny Ludlum
and Teledyne issued in connection with such annual meetings will set forth
information with respect to the timeliness requirement of 14a-8 in relation to
the annual meetings of their respective stockholders following the meetings
with respect to which such proxy statements are issued.
If the Combination is consummated, the first annual meeting of stockholders
of ATI (the "1997 ATI Annual Meeting") will occur on a date in 1997 that has
not yet been determined. With respect to the 1997 ATI Annual Meeting,
stockholder proposals will be timely, for the purpose of Rule 14a-8, if they
are received a reasonable time before ATI begins to solicit proxies with
respect to the 1997 ATI Annual Meeting and ATI intends to treat any
stockholder proposal that is submitted on or before November 20, 1996 as
timely (and any stockholder proposal submitted thereafter as untimely), for
the purpose of Rule 14a-8, in relation to the 1997 ATI Annual Meeting because
that was the date by which stockholder proposals would have been required to
be submitted in order to have been timely under Rule 14a-8 with respect to the
1997 annual meetings of both Allegheny Ludlum
119
<PAGE>
and Teledyne had their respective 1996 annual meetings been held on the
originally scheduled dates. Stockholder proposals are required to satisfy a
number of requirements, in addition to timeliness, in order to be includable
in a company's proxy statement under Rule 14a-8. The Commission's staff has
issued an interpretation applicable to a recent business combination
transaction which pertained to the provision of Rule 14a-8 requiring a
stockholder who submits a proposal to a corporation to have held shares of
that corporation for at least one year. If that interpretation were ruled
applicable to the Combination, stockholders of ATI would not be entitled to
rely on Rule 14a-8 to submit proposals for inclusion in ATI's proxy statement
relating to the 1997 ATI Annual Meeting if, as expected, the 1997 ATI Annual
Meeting is held within less than a year from the Effective Time, because they
would not have held their shares of ATI Common Stock for at least one year.
The proxy statement of ATI issued in connection with the 1997 ATI Annual
Meeting will set forth information with respect to the timeliness requirement
of Rule 14a-8 in relation to the 1998 Annual Meeting of Stockholders of ATI.
Under Teledyne's Bylaws, Teledyne stockholders who wish to present proposals
for action, or to nominate directors, at an annual meeting of stockholders of
Teledyne must give written notice thereof to the Secretary on a timely basis.
If the Combination Agreement is terminated for any reason and Teledyne
thereafter schedules an annual meeting of its stockholders, the effect of such
provisions of the Teledyne Bylaws will be to require any such notice to be
given no earlier than 90 days prior to such annual meeting and no later than
the later of 60 days prior to such annual meeting or the tenth day following
the first public announcement of the date of such meeting. Teledyne's proxy
statement issued in connection with such annual meeting will set forth
information with respect to the timeliness requirement of its Bylaws for the
presentation of proposals in relation to its annual meeting of stockholders
following the annual meeting with respect to which such proxy statement is
issued.
The ATI Certificate provides that in order for nominations or other business
to be properly brought before an annual meeting by a stockholder, the
stockholder must give timely notice thereof in writing to the Secretary. To be
timely, a stockholder's notice must be delivered to the Secretary not less
than 60 days nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event the date
of the annual meeting is advanced by more than 30 days or delayed by more than
60 days from such anniversary date or in the case of the 1997 ATI Annual
Meeting, notice by the stockholder to be timely must be so delivered not
earlier than the 90th day prior to such annual meeting and not later than the
later of the 60th day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first
made.
120
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER AND COMBINATION
DATED AS OF APRIL 1, 1996
AS AMENDED AND RESTATED
AMONG
ALLEGHENY TELEDYNE INCORPORATED,
ALLEGHENY LUDLUM CORPORATION,
ALS MERGER CORPORATION,
TELEDYNE, INC.
AND
TDY MERGER, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I
THE COMBINATION.......................................................... A-1
Section 1.1 Effective Time of the Combination....................... A-1
Section 1.2 Closing................................................. A-2
Section 1.3 Effects of the Combination.............................. A-2
Section 1.4 Headquarters of ATI..................................... A-2
ARTICLE II
CONVERSION OF SECURITIES................................................. A-2
Section 2.1 Conversion of Capital Stock............................. A-3
Section 2.2 Exchange of Certificates................................ A-3
Section 2.3 No Further Transfers.................................... A-4
Section 2.4 No Fractional Shares.................................... A-4
Section 2.5 Withholding............................................. A-5
Section 2.6 Retirement of ATI Common Stock Issued Prior to the
Effective Time.......................................... A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES........................................... A-5
Section 3.1 Representations and Warranties of ALC and TI............ A-5
Section 3.2 Representations of ATI, ALC Merger Sub and TI Merger
Sub..................................................... A-14
ARTICLE IV
COVENANTS................................................................ A-15
Section 4.1 No Solicitation......................................... A-15
Section 4.2 Stockholder Approvals................................... A-15
Section 4.3 Conduct of Business..................................... A-16
Section 4.4 Access to Information................................... A-17
Section 4.5 Legal Conditions to the Combination..................... A-18
Section 4.6 Public Announcements.................................... A-18
Section 4.7 Tax-Free Reorganization................................. A-18
Section 4.8 Pooling Accounting...................................... A-18
Section 4.9 Affiliate Agreements.................................... A-18
Section 4.10 Representations, Covenants and Conditions; Further
Assurances.............................................. A-18
Section 4.11 Stock Plans............................................. A-19
Section 4.12 Indemnification; Insurance.............................. A-20
Section 4.13 TI Rights Plan.......................................... A-22
Section 4.14 Notification of Certain Matters......................... A-22
Section 4.15 Plan Documents.......................................... A-22
Section 4.16 ATI Matters............................................. A-22
ARTICLE V
CONDITIONS TO COMBINATION................................................ A-23
Section 5.1 Conditions to Each Party's Obligation to Effect the
Combination............................................. A-23
Section 5.2 Additional Conditions to Obligation of ALC.............. A-24
Section 5.3 Additional Conditions to Obligation of TI............... A-24
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE VI
TERMINATION AND AMENDMENT............................................ A-25
Section 6.1 Termination......................................... A-25
Section 6.2 Effect of Termination............................... A-26
Section 6.3 Fees and Expenses................................... A-26
Section 6.4 Amendment........................................... A-27
Section 6.5 Extension; Waiver................................... A-27
ARTICLE VII
MISCELLANEOUS........................................................ A-27
Section 7.1 Nonsurvival of Representations, Warranties and
Agreements.......................................... A-27
Section 7.2 Notices............................................. A-27
Section 7.3 Interpretation...................................... A-28
Section 7.4 Knowledge........................................... A-29
Section 7.5 Counterparts........................................ A-29
Section 7.6 Entire Agreement; No Third Party Beneficiaries...... A-29
Section 7.7 Governing Law....................................... A-29
Section 7.8 Assignment.......................................... A-29
Section 7.9 Severability........................................ A-29
Section 7.10 Failure or Indulgence Not Waiver; Remedies
Cumulative.......................................... A-29
Annex A--Restated Certificate of Incorporation of Allegheny Teledyne
Incorporated
Annex B--Allegheny Teledyne Incorporated Amended and Restated Bylaws
Annex C--Directors and Officers of Allegheny Teledyne Incorporated
Annex D--Form of Affiliate Agreement
Annex E--Allegheny Teledyne Incorporated 1996 Incentive Plan
Annex F--Allegheny Teledyne Incorporated 1996 Non-Employee Director
Stock Compensation Plan
</TABLE>
A-ii
<PAGE>
AGREEMENT AND PLAN OF MERGER AND COMBINATION
AGREEMENT AND PLAN OF MERGER AND COMBINATION ("AGREEMENT"), dated as of
April 1, 1996, by and among Allegheny Teledyne Incorporated (formerly
XYZ/Power, Inc.), a Delaware corporation ("ATI"), Allegheny Ludlum
Corporation, a Pennsylvania corporation ("ALC"), ALS Merger Corporation, a
Pennsylvania corporation ("ALC MERGER SUB") and wholly owned subsidiary of
ATI, Teledyne, Inc., a Delaware corporation ("TI"), and TDY Merger, Inc., a
Delaware corporation ("TI MERGER SUB") and wholly owned subsidiary of ATI.
WHEREAS, the Boards of Directors of the parties hereto have approved this
Agreement and deem it advisable and in the best interests of their respective
corporations and stockholders that ALC and TI enter into a strategic business
combination in order to advance the long-term business interests of ALC and
TI; and
WHEREAS, such strategic business combination of ALC and TI will be effected
pursuant to the terms of this Agreement by means of separate transactions, the
consummation of each of which is a condition to the consummation of the other,
in which ALC Merger Sub will merge with and into ALC (the "ALC MERGER"), and
TI Merger Sub will merge with and into TI (the "TI MERGER"), whereupon ALC and
TI will each become a wholly owned subsidiary of ATI, and the shareholders of
ALC and the stockholders of TI will become shareholders of ATI (the
"COMBINATION"); and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to ALC's willingness to enter into this
Agreement, Henry E. Singleton, George A. Roberts, Fayez Sarofim, William P.
Rutledge and Donald B. Rice, each of whom is a stockholder of TI, have entered
into Stockholder Agreements (the "TI STOCKHOLDER AGREEMENTS") with ALC
pursuant to which such stockholders have agreed to vote their shares of Common
Stock, par value $1.00 per share, of TI ("TI COMMON STOCK") in favor of this
Agreement and the TI Merger and otherwise in favor of the Combination; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to TI's willingness to enter into this
Agreement, Richard P. Simmons, Robert P. Bozzone, Charles J. Queenan, Jr. and
Arthur H. Aronson, each of whom is a shareholder of ALC, have entered into
Shareholder Agreements (the "ALC SHAREHOLDER AGREEMENTS" and, together with
the TI Stockholder Agreements, the "STOCKHOLDER AGREEMENTS") with TI pursuant
to which such shareholders have agreed to vote their shares of Common Stock,
par value $0.10 per share, of ALC ("ALC COMMON STOCK") in favor of this
Agreement and the ALC Merger and otherwise in favor of the Combination; and
WHEREAS, for federal income tax purposes, it is intended that each of the
ALC Merger and the TI Merger shall qualify either (i) as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "CODE"), or (ii) as a non-recognition exchange of stock under
Section 351 of the Code; and
WHEREAS, for financial accounting purposes, it is intended that the
Combination shall be accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE COMBINATION
Section 1.1 Effective Time of the Combination. Subject to the provisions of
this Agreement, (i) articles of merger in such form (including, if required,
an agreement of merger or consolidation) as is required in order to effect the
ALC Merger under the relevant provisions of the Pennsylvania Business
Corporation Law (the
A-1
<PAGE>
"PBCL") and to the extent applicable, the Delaware General Corporation Law
(the "DGCL") (collectively, the "ARTICLES OF MERGER"), and (ii) a certificate
of merger in such form (including, if required, an agreement of merger or
consolidation) as is required in order to effect the TI Merger under the
relevant provisions of the DGCL (the "CERTIFICATE OF MERGER") shall each be
duly prepared, executed and acknowledged by the appropriate party or parties
and thereafter delivered to the Department of State of the Commonwealth of
Pennsylvania (in the case of the Articles of Merger) and the Secretary of
State of the State of Delaware (in the case of the Certificate of Merger and,
to the extent applicable, the Articles of Merger) for filing as provided in
the PBCL and the DGCL, respectively, as soon as practicable on or after the
Closing Date. The Combination, including the ALC Merger and the TI Merger,
shall become effective upon the filing of the Articles of Merger with the
Department of State of the Commonwealth of Pennsylvania and, to the extent
applicable, the Secretary of State of the State of Delaware, and the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
or at such time thereafter as is provided in the Articles of Merger and the
Certificate of Merger (the "EFFECTIVE TIME").
Section 1.2 Closing. The closing of the Combination (the "CLOSING") will
take place at 10:00 a.m., eastern time, on a date to be specified by ALC and
TI, which shall be as soon as practicable after all of the conditions to the
Combination set forth in Article V have been satisfied or waived, subject to
the rights of termination and abandonment hereinafter set forth (the "CLOSING
DATE"), at the offices of Kirkpatrick & Lockhart LLP, 1500 Oliver Building,
Pittsburgh, Pennsylvania 15222.
Section 1.3 Effects of the Combination.
(a) At the Effective Time (i) ALC Merger Sub shall be merged with and into
ALC and the separate existence of ALC Merger Sub will cease, (ii) TI Merger
Sub shall be merged with and into TI and the separate existence of TI Merger
Sub shall cease, (iii) the Articles of Incorporation and Bylaws of ALC Merger
Sub as in effect immediately prior to the ALC Merger shall become the Articles
of Incorporation and Bylaws of ALC as the surviving corporation of the ALC
Merger, (iv) the Certificate of Incorporation and Bylaws of TI Merger Sub as
in effect immediately prior to the Effective Time shall become the Certificate
of Incorporation and Bylaws of TI as the surviving corporation of the TI
Merger, (v) the directors of ALC Merger Sub at the Effective Time shall be the
directors of ALC as the surviving corporation of the ALC Merger and hold
office as provided in the Bylaws of ALC as in effect beginning at the
Effective Time, and (vi) the directors of TI Merger Sub at the Effective Time
shall be the directors of TI as the surviving corporation of the TI Merger and
hold office as provided in the Bylaws of TI as in effect beginning at the
Effective Time.
(b) The ALC Merger shall otherwise have the effects specified in applicable
provisions of the PBCL and the TI Merger shall otherwise have the effects
specified in applicable provisions of the DGCL.
(c) At the Effective Time, the Certificate of Incorporation and Bylaws of
ATI shall be amended and restated in their entireties to read as set forth in
Annexes A and B attached hereto, respectively.
(d) In accordance with Section 4.16, the directors and officers of ATI shall
initially be as set forth on Annex C attached hereto.
Section 1.4 Headquarters of ATI. The corporate headquarters of ATI shall be
maintained in Pittsburgh, Pennsylvania.
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock. As of the Effective Time, by virtue
of the Combination, including the ALC Merger and the TI Merger, and without
any action on the part of the holder of any shares of ALC Common Stock, TI
Common Stock or capital stock of ATI, ALC Merger Sub or TI Merger Sub:
A-2
<PAGE>
(a) The issued and outstanding shares of the capital stock of ALC Merger Sub
shall be converted into and become 1,000 fully paid and nonassessable shares
of Common Stock, par value $0.10 per share, of ALC, as the surviving
corporation of the ALC Merger.
(b) The issued and outstanding shares of the capital stock of TI Merger Sub
shall be converted into and become 1,000 fully paid and nonassessable shares
of Common Stock, par value $1.00 per share, of TI, as the surviving
corporation of the TI Merger.
(c) Each issued and outstanding share of ALC Common Stock other than shares
of ALC Common Stock issued and held in the treasury of ALC or owned of record
by TI, TI Merger Sub or any direct or indirect subsidiary thereof shall be
converted into and shall become, by virtue of the ALC Merger and without any
further action by the holder thereof, one (1) share of the Common Stock, par
value $0.10 per share of ATI ("ATI COMMON STOCK").
(d) Each issued and outstanding share of TI Common Stock other than shares
of TI Common Stock issued and held in the treasury of TI or owned of record by
ALC, ALC Merger Sub or any direct or indirect subsidiary thereof shall be
converted into and shall become, by virtue of the TI Merger and without any
further action by the holder thereof, 1.925 shares of ATI Common Stock (the
ratio of 1 to 1.925 being referred to herein as the "TI EXCHANGE RATIO").
(e) Each share of ALC Common Stock issued and held in the treasury of ALC or
owned of record by TI, TI Merger Sub or any indirect subsidiary thereof
immediately prior to the Effective Time shall automatically be canceled and
retired without any conversion thereof, and no consideration shall be
exchangeable therefor.
(f) Each share of TI Common Stock issued and held in the treasury of TI or
owned of record by ALC, ALC Merger Sub or any indirect subsidiary thereof
immediately prior to the Effective Time shall automatically be canceled and
retired without any conversion thereof, and no consideration shall be
exchangeable therefor.
Section 2.2 Exchange of Certificates.
(a) After the Effective Time, each holder of a certificate formerly
evidencing shares of ALC Common Stock which have been converted pursuant to
Section 2.1(c) and each holder of a certificate formerly evidencing shares of
TI Common Stock which have been converted pursuant to Section 2.1(d), upon
surrender of the same to ChaseMellon Shareholder Services, L.L.C. or another
exchange agent selected by ATI (the "EXCHANGE AGENT") as provided in Section
2.2(b) hereof, shall be entitled to receive in exchange therefor (i) a
certificate or certificates representing the number of whole shares of ATI
Common Stock into which such shares of ALC Common Stock or TI Common Stock
shall have been converted as provided in this Article II and (ii) as provided
in Section 2.4, cash in lieu of any fractional share of ATI Common Stock into
which such shares of ALC Common Stock or TI Common Stock would have otherwise
been converted, without any interest thereon. Until so surrendered, each
certificate formerly evidencing shares of ALC Common Stock or TI Common Stock
which have been so converted will be deemed for all corporate purposes of ATI
to evidence ownership of the number of whole shares of ATI Common Stock for
which the shares of ALC Common Stock or TI Common Stock formerly represented
thereby were exchanged and the right to receive cash in lieu of fractional
shares as herein provided, without any interest thereon; provided, however,
that until such certificate is so surrendered, no dividend payable to holders
of record of ATI Common Stock as of any date subsequent to the Effective Time
shall be paid to the holder of such certificate in respect of the shares of
ATI Common Stock evidenced thereby and such holder shall not be entitled to
vote such shares of ATI Common Stock. Upon surrender of a certificate formerly
evidencing shares of ALC Common Stock or TI Common Stock which have been so
converted, there shall be paid to the record holder of the certificates of ATI
Common Stock issued in exchange therefor (i) at the time of such surrender,
the amount of dividends and any other distributions theretofore paid with
respect to such shares of ATI Common Stock as of any date subsequent to the
Effective Time to the extent the same has not yet been paid to a public
official pursuant to abandoned property, escheat or similar laws and (ii) at
the appropriate
A-3
<PAGE>
payment date, the amount of dividends and any other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such shares of ATI Common
Stock. No interest shall be payable with respect to the payment of such
dividends.
(b) As soon as practicable after the Effective Time, the Exchange Agent
shall send a notice and a transmittal form to each holder of certificates
formerly evidencing shares of ALC Common Stock and each holder of certificates
formerly evidencing shares of TI Common Stock (other than certificates
formerly representing shares of ALC Common Stock and TI Common Stock to be
canceled pursuant to Sections 2.1(e) and 2.1(f)) advising such holder of the
effectiveness of the Combination and the procedure for surrendering to the
Exchange Agent (who may appoint forwarding agents with the approval of ATI)
such certificates for exchange into certificates evidencing ATI Common Stock
(including cash in lieu of any fractional share). Each holder of certificates
theretofore evidencing shares of ALC Common Stock or TI Common Stock, upon
proper surrender thereof to the Exchange Agent together and in accordance with
such transmittal form, shall be entitled to receive in exchange therefor
certificates evidencing ATI Common Stock (and cash in lieu of any fractional
share) deliverable in respect of the shares of ALC Common Stock or TI Common
Stock theretofore evidenced by the certificates so surrendered.
Notwithstanding the foregoing, neither the Exchange Agent nor any party hereto
shall be liable to a holder of certificates theretofore representing shares of
ALC Common Stock or TI Common Stock for any amount which may be required to be
paid to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(c) If any certificate evidencing shares of ATI Common Stock is to be
delivered to a person other than the person in whose name the certificates
surrendered in exchange therefor are registered, it shall be a condition to
the issuance of such certificate evidencing shares of ATI Common Stock that
the certificates so surrendered shall be properly endorsed or accompanied by
appropriate stock powers and otherwise in proper form for transfer, that such
transfer otherwise be proper and that the person requesting such transfer pay
to the Exchange Agent any transfer or other taxes payable by reason of the
foregoing or establish to the satisfaction of the Exchange Agent that such
taxes have been paid or are not required to be paid.
(d) In the event any certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
certificate to be lost, stolen or destroyed, ATI will issue in exchange for
such lost, stolen or destroyed certificate the certificate evidencing shares
of ATI Common Stock deliverable in respect thereof, as determined in
accordance with this Article II. When authorizing such issue of the
certificate of shares of ATI Common Stock in exchange therefor, the Board of
Directors of ATI may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate to give ATI a bond in such sum as it may direct as indemnity
against any claim that may be made against ATI with respect to the certificate
alleged to have been lost, stolen or destroyed.
(e) Approval and adoption of this Agreement by the shareholders of ALC and
the stockholders of TI shall constitute, as an integral part of the
Combination, ratification of the appointment of, and the reappointment of,
said Exchange Agent.
Section 2.3 No Further Transfers. After the Effective Time, there shall be
no registration of transfers of shares on the respective stock transfer books
of ALC or TI of the shares of ALC Common Stock and TI Common Stock that were
outstanding immediately prior to the Effective Time.
Section 2.4 No Fractional Shares. Neither certificates nor scrip for
fractional shares of ATI Common Stock will be issued in the Combination, but
in lieu thereof each holder of ALC Common Stock and each holder of TI Common
Stock otherwise entitled to a fraction of a share of ATI Common Stock (after
aggregating all fractional shares of ATI Common Stock that would otherwise be
received by such holder) will be entitled hereunder to receive a cash payment.
The amount of such cash payment shall equal, in the case of each fractional
share, an amount (rounded to the nearest whole cent), without interest,
calculated as the product of (i) such fraction, multiplied by (ii) the average
of the high and low per share sales prices for the ATI Common Stock on the New
York Stock Exchange for each of the five (5) consecutive trading days
immediately preceding the
A-4
<PAGE>
Effective Time as quoted in the Wall Street Journal or other reliable
financial newspaper or publication, or, if the ATI Common Stock does not trade
prior to the Effective Time on a "when issued" basis, the average of the high
and low per share sales prices for the ATI Common Stock on the trading day
that includes the Effective Time (or, if the Effective Time does not occur on
a trading day, on the first trading day thereafter). For the purposes of the
preceding sentence, a "trading day" means a day on which trading generally
takes place on the New York Stock Exchange. No such fractional share interest
shall entitle the owner thereof to vote or to any rights of a stockholder of
ATI.
Section 2.5 Withholding. ATI or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable or issuable
pursuant to this Agreement to any holder of ALC Common Stock or TI Common
Stock such amounts as ATI or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment or issuance under the
Code, or any provision of state, local or foreign tax law. To the extent that
amounts are so withheld by ATI or the Exchange Agent, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of ALC Common Stock or TI Common Stock in respect of
which such deduction and withholding was made by ATI or the Exchange Agent.
Section 2.6 Retirement of ATI Common Stock Issued Prior to the Effective
Time. ATI shall not issue any shares of ATI Common Stock prior to the
Effective Time other than shares issued to any person or entity approved by
both ALC and TI and on terms consistent with the following sentence. Any
shares of ATI Common Stock issued and outstanding immediately prior to the
Effective Time shall be re-acquired by ATI, and cancelled and retired,
immediately prior to or at the Effective Time.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of ALC and TI. When used in
connection with ALC or any of its respective Subsidiaries or TI or any of its
respective Subsidiaries, as the case may be, the term "MATERIAL ADVERSE
EFFECT" for all purposes of this Agreement means any change or effect that (i)
individually or when taken together with all other such changes or effects
that have occurred during any relevant time period prior to the date of
determination of the occurrence of the Material Adverse Effect, is or is
reasonably likely to be materially adverse to the business, assets (including
intangible assets), financial condition or results of operations or prospects
of ALC and its respective Subsidiaries or TI and its respective Subsidiaries,
respectively, in each case taken as a whole, or (ii) does or is reasonably
likely to materially adversely affect the ability of, in the case of ALC, ALC
and its Subsidiaries taken as a whole, or, in the case of TI, TI and its
Subsidiaries taken as a whole, as the case may be, to perform its respective
obligations under this Agreement or the Ancillary Documents (as hereinafter
defined), to consummate the transactions contemplated hereby or thereby or to
conduct their respective businesses after the Effective Time substantially as
such businesses are being conducted as of the date hereof. When used herein,
the term "material" for all purposes of this Agreement means material to the
party referred to and its Subsidiaries taken as a whole. Except as set forth
in the disclosure letter (designated as such specifically for purposes of this
Agreement) delivered at or prior to the execution hereof to ALC or TI, as the
case may be, by TI and ALC, respectively (each, a "DISCLOSURE LETTER"), ALC
(except for paragraphs (c) and (n) below) hereby represents and warrants to
TI, TI Merger Sub and ATI, and TI (except for paragraph (b) below), hereby
represents and warrants to ALC, ALC Merger Sub and ATI, that:
(a) Corporate Organization and Qualification. It and each of its
Subsidiaries (both domestic and foreign), is an entity duly formed, validly
existing and in good standing under the laws of its respective jurisdiction of
formation and is in good standing as a foreign entity in each jurisdiction
where the properties owned, leased or operated, or the business conducted, by
it or its Subsidiaries require such qualification, except for such failure to
so qualify or be in such good standing which does not constitute a Material
Adverse Effect. As used in this Agreement, the word "SUBSIDIARY" means, with
respect to any party, any corporation or other entity or organization, whether
incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which are held by
A-5
<PAGE>
such party or any Subsidiary of such party that do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries. It and
each of its Subsidiaries has the requisite corporate power and authority to
carry on its respective businesses as they are now being conducted. It has
made available to the other a complete and correct copy of its Articles or
Certificate of Incorporation and Bylaws. Such Articles or Certificate of
Incorporation and Bylaws so delivered are in full force and effect.
(b) Authorized Capital of ALC. The authorized capital stock of ALC consists
of 250,000,000 shares of ALC Common Stock, of which 65,991,891 shares were
outstanding as of March 29, 1996, and 50,000,000 shares of Preferred Stock,
par value $1.00 per share ("ALC PREFERRED STOCK"), of which no shares were
outstanding on such date. Since such date, no additional shares of capital
stock of ALC have been issued except for shares of ALC Common Stock which have
been issued pursuant to the exercise of options or rights outstanding as of
such date or pursuant to the purchase, designation or award of shares, under
the ALC Stock Plans (as defined below) in effect as of such date or granted or
awarded since such date in accordance with Article IV, and, except for grants
made under the ALC Stock Plans in accordance with Article IV, no options,
warrants or other rights to acquire shares of ALC Common Stock have been
granted or issued by ALC other than pursuant to ALC's Stock Acquisition and
Retention Plan. As of such date, 1,172,998 shares of ALC Common Stock were
issuable upon exercise of outstanding options under the ALC 1987 Stock Option
Incentive Plan, as amended; 76,000 units, representing a maximum of 364,800
shares of ALC Common Stock, had been awarded pursuant to ALC's Performance
Share Plan for Key Employees; and participants had elected to purchase shares
of ALC Common Stock having an aggregate value of up to $634,405 and to
designate up to 3,700 shares of ALC Common Stock under ALC's Stock Acquisition
and Retention Plan, which will result in the issuance of one share of ALC
Common Stock for each two shares purchased or designated. All of the
outstanding shares of ALC Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. ALC has no shares of ALC Common
Stock or ALC Preferred Stock reserved for issuance, except that, as of such
date, 4,911,823 shares of ALC Common Stock were reserved for issuance pursuant
to ALC's 1987 Stock Option Incentive Plan, as amended, 1,665,659 shares of ALC
Common Stock were reserved for issuance pursuant to ALC's Performance Share
Plan for Key Employees, 802,737 shares of ALC Common Stock were reserved for
issuance pursuant to ALC's Stock Acquisition and Retention Plan, 89,897 shares
were reserved for issuance pursuant to ALC's Director Share Incentive Plan and
250,000 shares were reserved for issuance under ALC's 1996 Non-Employee
Director Stock Compensation Plan (such ALC plans are referred to herein
together as the "ALC STOCK PLANS"). ALC has no outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or are
convertible into or exercisable or exchangeable for securities having the
right to vote) with the shareholders of ALC on any matter. Each of the
outstanding shares of capital stock of each of ALC's corporate Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and, except for
the outstanding capital stock of ALstrip, Inc. (90% of which is owned by ALC)
and except for shares held by officers and directors of ALC and its
Subsidiaries as nominees and for the benefit of ALC or any of its
Subsidiaries, owned, either directly or indirectly, by ALC free and clear of
all liens, pledges, security interests, claims or other encumbrances. Except
as set forth above, as of the date hereof there are no shares of capital stock
of ALC authorized, issued and outstanding, and there are no preemptive rights
or any outstanding subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of ALC or any of its
Subsidiaries of any character relating to the issued or unissued capital stock
or other securities of ALC or any of its Subsidiaries.
(c) Authorized Capital of TI. The authorized capital stock of TI consists of
100,000,000 shares of TI Common Stock, of which 55,896,923 shares were
outstanding as of February 28, 1996, and 15,000,000 shares of Preferred Stock,
par value $1.00 per share ("TI PREFERRED STOCK"), including 100,000 shares of
Series D Preferred Stock, of which none were outstanding as of such date, and
5,000,000 shares of Series E Cumulative Preferred Stock, of which 2,763,722
shares of Series E Cumulative Preferred Stock were outstanding as of March 29,
1996. No additional shares of capital stock of TI have been issued except for
shares of TI Common Stock which have been issued pursuant to the exercise of
options outstanding under the TI Stock Plans as of such date
A-6
<PAGE>
or granted or awarded since such date in accordance with Article IV, and,
except for grants made under TI Stock Plans in accordance with Article IV, no
options, warrants or other rights to acquire TI Common Stock have been granted
or issued since such date by TI. As of March 11, 1996, 3,406,808 shares of TI
Common Stock were issuable upon exercise of outstanding options under the TI
Stock Plans. All of the outstanding shares of TI Common Stock and TI Series E
Preferred Stock have been duly authorized and are validly issued, fully paid
and nonassessable. TI has no TI Common Stock or TI Preferred Stock reserved
for issuance except for shares of TI Series D Preferred Stock issuable
pursuant to the Rights Agreement, dated as of January 4, 1995, between TI and
Chemical Trust Company of California, as Rights Agent (including any successor
thereto) (the "TI RIGHTS PLAN"), and except that, as of such date, 2,500,000
shares of TI Common Stock were reserved for issuance pursuant to TI's 1990
Stock Option Plan, 2,500,000 shares of TI Common Stock were reserved for
issuance pursuant to TI's 1994 Long-Term Incentive Plan, 200,000 shares of TI
Common Stock were reserved for issuance pursuant to TI's 1995 Non-Employee
Director Stock Option Plan, and 2,500,000 shares of TI Common Stock were
reserved for issuance pursuant to TI's Employee Stock Purchase Plan (The Stock
Advantage) (the "TI ESPP" and together with such other TI plans, the "TI STOCK
PLANS"). TI does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or are convertible
into or exercisable or exchangeable for securities having the right to vote)
with the stockholders of TI on any matter. Each of the outstanding shares of
capital stock of each of TI's corporate Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and, except for shares held by
officers and directors of TI and its Subsidiaries as nominees and for the
benefit of TI or any of its Subsidiaries, owned, either directly or
indirectly, by TI free and clear of all liens, pledges, security interests,
claims or other encumbrances except for pledges of capital stock of
Subsidiaries that are not significant subsidiaries (as defined in Regulation
S-X promulgated by the Securities and Exchange Commission (the "SEC"))
pursuant to financing arrangements entered into in the ordinary course of
business and in effect as of the date hereof. Except as set forth above, as of
the date hereof there are no shares of capital stock of TI authorized, issued
or outstanding, and there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of TI or any of its Subsidiaries of any character
relating to the issued or unissued capital stock or other securities of TI or
any of its Subsidiaries.
(d) Corporate Authority. Subject only to approval of this Agreement and the
ALC Merger by (in the case of ALC) the affirmative vote of at least a majority
of the votes cast by holders of ALC Common Stock entitled to vote thereon, and
to the approval of this Agreement and the TI Merger by (in the case of TI) the
holders of at least a majority of the outstanding shares of TI Common Stock,
it has the requisite corporate power and authority and has taken all corporate
action necessary in order to execute and deliver this Agreement and any other
agreement, instrument or certificate (collectively, the "ANCILLARY DOCUMENTS")
to be executed or delivered by it pursuant hereto, and to consummate the
transactions contemplated hereby and thereby. Its Board of Directors has
approved this Agreement and the Combination and (i) in the case of ALC, the TI
Stockholder Agreements, and (ii) in the case of TI, the ALC Shareholder
Agreements and (for purposes of Section 203 of the DGCL and the TI Rights
Plan) the TI Stockholder Agreements, and has directed that this Agreement and
the ALC Merger (in the case of ALC) and TI Merger (in the case of TI) be
submitted to its stockholders for approval and adoption in accordance with
applicable law and its Articles or Certificate of Incorporation and Bylaws,
and, subject to Section 4.1(a) below, has recommended that its stockholders
approve this Agreement and the ALC Merger (in the case of ALC) and the TI
Merger (in the case of TI). This Agreement and each Ancillary Document to be
executed and delivered by it pursuant hereto is a valid and binding agreement,
certificate or instrument, as the case may be, of it enforceable against it in
accordance with its terms.
(e) Governmental Filings; No Violations. (i) Other than the filings provided
for in Section 1.1, filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), filings required under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), filings
required under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
filings required under state securities and "Blue Sky" laws, and any filings
required to be made under the laws of any foreign jurisdiction, no notices,
reports or other filings are required to be made by it or its Subsidiaries
with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by it or its Subsidiaries from, any
governmental or regulatory authority, agency, court, commission or other
entity, domestic or foreign ("GOVERNMENTAL ENTITY"),
A-7
<PAGE>
in connection with the execution and delivery of this Agreement or any of the
Ancillary Documents by it and the consummation by it of the transactions
contemplated hereby and thereby, the failure of which to make or obtain would
constitute a Material Adverse Effect.
(ii) Neither the execution and delivery of this Agreement or any of the
Ancillary Documents by it, nor the consummation by it of any of the
transactions contemplated hereby or thereby, or any action required by
applicable law as a result thereof, will constitute or result in (A) a breach
or violation of, or a default under, its Articles or Certificate of
Incorporation or Bylaws or the comparable governing instruments of any of its
Subsidiaries, (B) a breach or violation of, a default (with or without the
giving of notice or the passage of time) under or the triggering of any
payment or other obligations, or the right of any third party to require a
payment or performance of an obligation not otherwise due, pursuant to, or
accelerate vesting under, any existing collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, employee stock ownership, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees of it or
any of its Subsidiaries ("BENEFIT PLANS") or any grant or award made under any
of the foregoing, (C) a breach or violation of, a default under, a change in
the rights of any party under, or the acceleration of or the creation of a
lien, pledge, security interest or other encumbrance on assets (with or
without the giving of notice or the lapse of time) pursuant to, any provision
of any note, bond, mortgage, indenture, agreement, lease, contract,
instrument, arrangement or other obligation of it or any of its Subsidiaries
or (D) a breach or violation of any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or non-governmental permit,
license, franchise or other similar right or authorization to which it or any
of its Subsidiaries is subject except, in the case of clauses (B), (C) or (D)
above, for such breaches, violations, defaults, accelerations or changes that
would not constitute a Material Adverse Effect. Its Disclosure Letter sets
forth, to the knowledge of its officers, a list of any consents, approvals or
waivers required under or pursuant to any of the foregoing to be obtained
prior to consummation of the transactions contemplated by this Agreement. It
will use commercially reasonable efforts to obtain the consents, approvals or
waivers referred to in its Disclosure Letter.
(f) SEC Reports; Financial Statements. Each of ALC and TI has delivered to
the other a copy of each report, proxy statement or information statement
filed by it since December 31, 1993 and prior to the date hereof, each in the
form (including exhibits and any amendments thereto and all documents
incorporated by reference therein) filed with the SEC under the Exchange Act
(collectively, the "SEC REPORTS"). As of their respective dates, its SEC
Reports did not and any report, proxy statement or information statement filed
by it with the SEC subsequent to the date hereof (collectively, "SUBSEQUENT
SEC REPORTS") will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading. As of their respective dates, each of
its consolidated balance sheets included in or incorporated by reference into
the SEC Reports or Subsequent SEC Reports (including the related notes and
schedules) fairly presented (with respect to the SEC Reports) or will fairly
present (with respect to the Subsequent SEC Reports) the consolidated
financial position of it and its Subsidiaries as of its date, and each of the
consolidated statements of income, of stockholders' equity and of cash flows
included in or incorporated by reference into the SEC Reports or Subsequent
SEC Reports (including any related notes and schedules) fairly presented (with
respect to the SEC Reports) or will fairly present (with respect to the
Subsequent SEC Reports) the results of operations, stockholders' equity and
cash flows of it and its Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with United States generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein. Except for the SEC Reports and the Subsequent SEC Reports, since
December 31, 1993, neither ALC nor any of its Subsidiaries (in the case of
ALC) nor TI nor any of its Subsidiaries (in the case of TI) is or was required
to file any report, proxy statement or information statement with the SEC
pursuant to the requirements of the Exchange Act, the Securities Act or
otherwise.
(g) Absence of Undisclosed Liabilities. Except as set forth in its
Disclosure Letter or its SEC Reports, it and its Subsidiaries do not have any
liabilities, whether accrued or contingent and whether or not required to be
reflected in financial statements in accordance with United States generally
accepted accounting principles, that are material to the financial condition
of it and its Subsidiaries taken as a whole, other than (i) liabilities (or
A-8
<PAGE>
reserves therefor) reflected in its consolidated balance sheet as of December
31, 1995 and (ii) normal or recurring liabilities incurred since December 31,
1995 in the ordinary course of business consistent with past practices. Its
Disclosure Letter sets forth an accurate and complete list of all contracts,
agreements and other commitments and arrangements pursuant to which it or any
of its Subsidiaries has agreed to indemnify or exonerate any person that would
involve or be reasonably likely to involve a material liability. Its
Disclosure Letter also sets forth an accurate and complete list of each
contract, agreement or other commitment or arrangement (including such with
any collective bargaining unit, union or other entity or group) that, pursuant
to its terms, would give rights to any party as a result of the execution and
delivery of this Agreement or consummation of the Combination, the exercise of
which would constitute a Material Adverse Effect (for this purpose, the
definition thereof to include the effects listed in the definition of
"Material Adverse Effect" as applied to ATI and its Subsidiaries from and
after the Effective Time (a "ATI MATERIAL ADVERSE EFFECT")).
(h) Absence of Certain Changes. Except as set forth in its SEC Reports,
since December 31, 1995, it and its Subsidiaries have conducted their
respective businesses only in, and have not engaged in any material
transaction other than in, the ordinary and usual course of such businesses
and there has not been (i) any change in it or any development or combination
of developments of which its officers have knowledge which constitutes a
Material Adverse Effect; (ii) except as contemplated by Section 4.3(l), any
declaration, setting aside or payment of any dividend or other distribution
with respect to its capital stock except for regular cash dividends of not
more than $.13 per quarter in the case of ALC or, in the case of TI, dividends
on TI Common Stock in the aggregate amount of $.225 in cash per share and $.15
in face amount of TI Series E Cumulative Preferred Stock per share prior to
the date of this Agreement and regular cash dividends of not more than $.31
per quarter on the TI Common Stock and regular cash dividends on the TI Series
E Cumulative Preferred Stock thereafter; or (iii) any change by it in
accounting principles, practices or methods. Since March 15, 1996, except as
provided for herein and other than in the ordinary course consistent with past
practice, there has not been any increase in the compensation payable or which
could become payable by it or its Subsidiaries to their officers or key
employees, or any material amendment of any of its Benefit Plans.
(i) Litigation. Except as described in its SEC Reports, there are no civil,
criminal or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the knowledge of its officers, threatened, against
it or any of its Subsidiaries that have resulted or are reasonably likely to
result in any claims against, or obligations or liabilities of, it or any of
its Subsidiaries, that constitutes a Material Adverse Effect.
(j) Taxes. All federal, state, local and foreign tax returns required to be
filed by or on behalf of it or any of its Subsidiaries have been timely filed
or requests for extension have been timely filed and any such extension shall
have been granted and not have expired other than those returns with respect
to which the failure to timely file or the failure to request an extension of
the time for filing would not have a Material Adverse Effect, and all such
filed returns are complete and accurate in all material respects. Except as
currently being contested in good faith or with respect to which adequate
reserves have been made in its financial statements referenced in Section
3.1(f), all taxes required to be shown on returns or to be paid with respect
to returns for which extensions have been filed by it have been paid in full
or have been recorded on its consolidated balance sheet and consolidated
statement of earnings or income in accordance with United States generally
accepted accounting principles. There is no outstanding audit examination,
deficiency, or refund litigation with respect to any taxes of it or any of its
Subsidiaries that might reasonably be expected to result in a determination
that would constitute a Material Adverse Effect, except for any such
examination, deficiency or litigation as to which adequate reserves are
reflected in the financial statements referenced in Section 3.1(f). All taxes,
interest, additions, and penalties due with respect to completed and settled
examinations or concluded litigation relating to it or any of its Subsidiaries
have been paid in full or have been recorded on its balance sheet and
consolidated statement of earnings or income (in accordance with United States
generally accepted accounting principles). Neither it nor any of its
Subsidiaries has executed an extension or waiver of any statute of limitations
on the assessment or collection of any tax due that is currently in effect,
the failure to pay which would constitute a Material Adverse Effect.
(k) Employee Benefits. (i) All benefit plans as defined in Section 3(3) of
the Employee Retirement Security Act of 1974, as amended ("ERISA"), covering
employees or former employees of it or its Subsidiaries (excluding Foreign
Plans) which are pension plans, disability plans, life insurance plans or
severance plans, and
A-9
<PAGE>
all benefit plans, contracts or arrangements covering non-resident aliens
(with respect to the United States) or covering employees or former employees
of any foreign Subsidiaries other than government-sponsored programs or
government-required benefits which are referred to herein as "FOREIGN PLANS,"
are referred to collectively as "PLANS."
(ii) Except for such incidents of actual or possible noncompliance which
would not constitute a Material Adverse Effect, (A) all of its Plans, to the
extent subject to ERISA, are in substantial compliance with ERISA, (B) each
Plan which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("PENSION PLAN") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
covering the Tax Reform Act of 1986 from the Internal Revenue Service or
application for such a favorable determination has been made within the
applicable remedial amendment period provided by the Code, and it is not aware
of any circumstances likely to result in revocation of any such favorable
determination letter, (C) each Plan which is a group health plan within the
meaning of Section 4980B(g)(2) of the Code is in substantial compliance with
the requirements of Section 4980B of the Code, and (D) there is no pending or,
to the knowledge of its officers, threatened litigation, investigation or
audit relating to the Plans other than claims for benefits made in the
ordinary course. Neither it nor any Subsidiary has engaged in a transaction
with respect to any Plan that, assuming the taxable period of such transaction
expired as of the date hereof, could subject it or any of its Subsidiaries to
a tax or penalty imposed by either Section 4975 of the Code or Section 502(i)
of ERISA in an amount which would reasonably be expected to constitute a
Material Adverse Effect. Neither it nor any of its Subsidiaries has completely
or partially withdrawn from a "multiemployer plan" within the meaning of
Section 3(37) of ERISA or has suffered a 70% decline in "contribution base
units" within the meaning of Section 4205(b)(1)(A) of ERISA in any plan year
beginning after 1979. No withdrawal liability has been or is expected to be
incurred by it or its Subsidiaries with respect to any multiemployer plan in
which it or any of its Subsidiaries participates or a former Subsidiary
participated and it has no reason to believe that any such liability will
arise as a result of the consummation of the Combination. It has furnished to
the other a copy of the most recent annual report of the trustee of each such
multiemployer plan and, to the knowledge of its management, each such report
is true, accurate and complete. Each of its Foreign Plans complies and, to its
knowledge, each benefit plan, contract or arrangement (other than government-
sponsored programs or government-required benefits) covering employees or
former employees of any of its Subsidiaries doing business in any other
foreign jurisdiction complies, with all applicable laws governing its
administration and maintenance, except for such incidents of actual or
possible noncompliance which would not constitute a Material Adverse Effect.
(iii) No material liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by it or any Subsidiary with respect to any
ongoing, frozen or terminated Plan currently or formerly maintained by any of
them, or any Plan of any entity which is considered one employer with it or
any of its Subsidiaries under Section 4001 of ERISA or Section 414 of the Code
(an "ERISA AFFILIATE"). No notice of a "reportable event," within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any Pension Plan or by any
ERISA Affiliate within the 12-month period ending on the date hereof.
(iv) All material contributions required to be made by it or any of its
Subsidiaries under the terms of any Plan have been timely made or have been
accrued pending full and timely payment. Except as described in its SEC
Reports, no Plan of an ERISA Affiliate has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or
Section 302 of ERISA. None of it, its Subsidiaries or its ERISA Affiliates has
provided, or is required to provide, security to any Plan of an ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) For all Pension Plans that are "defined benefit plans" within the
meaning of Section 3(35) of ERISA, the disclosures prepared under FAS 87 and
set forth in the footnotes to its financial statements as of and for the year
ended December 31, 1995 and included in the SEC Reports are true and correct
in all material respects. There has been no material adverse change in the
financial condition of any such Pension Plan since the last day of the most
recent plan year.
A-10
<PAGE>
(vi) Except as described in its SEC Reports, neither it nor its Subsidiaries
have any obligations for retiree health and life benefits under any Plan. With
regard to health and life benefits for employees other than employees covered
by a collective bargaining agreement, or who are not residents of the United
States, the current plan documents contain no restrictions on the rights of it
or its Subsidiaries to amend or terminate any such Plan without incurring
liability thereunder with respect to unincurred benefit obligations.
(1) Environmental Matters. (i) It and each of its Subsidiaries has applied
for and has in effect all federal, state and local governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights ("ENVIRONMENTAL PERMITS") under applicable statutes, laws,
ordinances, rules, orders and regulations which are administered, interpreted
or enforced by the U.S. Environmental Protection Agency or state and local
agencies with jurisdiction over pollution or protection of the environment
(collectively, "ENVIRONMENTAL LAWS") necessary for it to carry on its business
as now conducted, and there has occurred no default under any such
Environmental Permit, except for the lack of Environmental Permits and for
defaults under Environmental Permits which would not constitute a Material
Adverse Effect. Neither it nor any of its Subsidiaries has received written
notice from any foreign government or agency with jurisdiction over pollution
or protection of the environment of its or any such Subsidiary's failure to
have in effect, or of any default under, any comparable Environmental Permit
under applicable statutes, laws, ordinances, rules, orders and regulations of
such foreign government or agency (collectively, "FOREIGN ENVIRONMENTAL LAWS")
necessary for it to carry on its or such Subsidiary's business in any foreign
jurisdiction, except for such notices regarding the lack of such comparable
Environmental Permits, and for such defaults, which do not constitute a
Material Adverse Effect.
(ii) To its knowledge, it and each of its Subsidiaries is, and has been, in
compliance with applicable Environmental Laws and Foreign Environmental Laws,
except for instances of possible noncompliance which do not constitute a
Material Adverse Effect.
(iii) There is no suit, action, proceeding or inquiry pending or, to its
knowledge, threatened before any court, governmental agency or authority or
other forum in which it or any of its Subsidiaries has been or, with respect
to threatened suits, actions and proceedings, may be named as a defendant (a)
for alleged noncompliance (including by any predecessor) with any
Environmental Law or Foreign Environmental Law or (b) relating to the release
into the environment of any Hazardous Material (as hereinafter defined),
asbestos, polychlorinated biphenyls or oil, whether or not occurring at, on,
under or involving a site owned, leased or operated by it or any of its
Subsidiaries, or (c) any site or location for which it or its Subsidiaries has
been designated as a potentially responsible party under any federal, state,
local or foreign superfund law, or (d) any claim, potential claim or express
reservation of responsibility for damages to natural resources, except in each
of the cases (a) through (d) above for any such suits, actions, proceedings
and inquiries which do not constitute a Material Adverse Effect.
(iv) During the period of ownership or operation by it and its current or
former Subsidiaries of any of their respective current or formerly owned
properties, there have been no underground storage tanks (whether currently
active or not) and no polychlorinated biphenyls in transformers or other
electrical equipment and there have been no releases of Hazardous Material or
of asbestos, polychlorinated biphenyls or oil in, on, under or affecting such
properties or, to its knowledge, any surrounding site, except in each case for
those which do not constitute a Material Adverse Effect. Prior to the period
of ownership or operation by it or its current or former Subsidiaries of any
of their respective current or formerly owned properties, to the knowledge of
its officers, there were no releases of Hazardous Material or asbestos,
polychlorinated biphenyls or oil or other petroleum products in, on, under or
affecting any such property or any surrounding site, except in each case for
those which do not constitute a Material Adverse Effect. "HAZARDOUS MATERIAL"
shall mean any pollutant, contaminant, or hazardous substance within the
meaning of the Comprehensive Environmental Response, Compensation, and
Liability Act, other Environmental Laws or Foreign Environmental Laws or any
similar state or local law.
(m) Brokers and Finders. Neither it nor any of its officers, directors or
employees has employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with the
transactions contemplated hereby, except that ALC has retained Salomon
Brothers Inc as its financial advisor
A-11
<PAGE>
and TI has retained Goldman, Sachs & Co. as its financial advisor in
connection with the transactions contemplated hereby, the arrangements with
which have been disclosed in writing to the other prior to the date hereof.
(n) Takeover Statutes; Rights Plan. The Board of Directors of TI has taken
all actions so that the restrictions contained in Section 203 of the DGCL
applicable to an "interested stockholder" or a "business combination" (as
defined in Section 203) will not apply to the execution, delivery or
performance of this Agreement or the Stockholder Agreements or the
consummation of the Combination (including the TI Merger) or the other
transactions contemplated by this Agreement or by the Stockholder Agreements.
The TI Rights Plan does not cause or permit, and will not cause or permit, TI
stockholders to exercise rights as a result of the existence or implementation
of this Agreement or the Stockholder Agreements, or any of the transactions
contemplated hereby or thereby.
(o) Tax and Accounting Matters. Neither it nor any of its Subsidiaries or
affiliates has taken or agreed to take any action that would prevent each of
the ALC Merger and the TI Merger from being treated as either a reorganization
within the meaning of Section 368(a) of the Code or a non-recognition exchange
of stock under Section 351 of the Code, or would prevent ATI from accounting
for the business combination to be effected by the Combination as a pooling of
interests.
(p) Labor Matters. It has previously furnished to the other true and
complete copies of all labor and collective bargaining agreements to which it
or its Subsidiaries is a party and that are currently in effect, together with
all amendments thereto (if any). There are no strikes or other work stoppages
involving any employees of it or any of its Subsidiaries and there are no
material labor disputes by any labor organization in progress or pending or,
to the knowledge of its officers, threatened against it or any of its
Subsidiaries that would constitute a Material Adverse Effect. To the knowledge
of its officers, it and its Subsidiaries are in compliance with all applicable
laws and regulations in respect of employment and employment practices, terms
and conditions of employment, wages and hours, occupational safety, health or
welfare conditions relating to premises occupied, and civil rights, non-
compliance with which would constitute a Material Adverse Effect. There are no
charges of unfair labor practices pending before any governmental authority
involving or affecting it or any of its Subsidiaries that would constitute a
Material Adverse Effect. It has not been notified that any customer or
supplier of it or any Subsidiary is involved in or threatened with or affected
by any strike or other labor disturbance or dispute, litigation or
administrative proceeding or judgment, order, injunction, decree or award, the
consequences of which would constitute a Material Adverse Effect.
(q) Compliance with Laws. It and each of its Subsidiaries has all permits,
licenses, certificates of authority, orders, and approvals of, and has made
all filings, applications, and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently conducted, except for such
permits, licenses, certificates, orders and approvals, the absence of which
would not constitute a Material Adverse Effect ("MATERIAL PERMITS"). All
Material Permits are in full force and effect, and, to the knowledge of its
officers, no suspension or cancellation of any of them is threatened. Except
as described in its SEC Reports, to the knowledge of its officers, the
operations of it and of each of its Subsidiaries are in compliance with all
applicable federal, state and local and foreign laws, rules and regulations,
and neither it nor any of its Subsidiaries has received written notice from
any federal, state, local or foreign government, agency or individual
regarding noncompliance by it or any such Subsidiary with any federal, state,
local or foreign laws, rules or regulations, in each case including, without
limitation, the Foreign Corrupt Practices Act and the False Claims Act, each
as amended, and laws, rules and regulations relating to the employment of
individuals, civil rights and occupational safety and health, except for
instances of actual or possible noncompliance which would not constitute a
Material Adverse Effect.
(r) Title to Assets. Each of it and its Subsidiaries has good and marketable
title to its properties and assets (other than property as to which it is
lessee), except for such defects in title that would not constitute a Material
Adverse Effect and encumbrances for obligations incurred in the ordinary
course of business and reflected in its consolidated balance sheet as of
December 31, 1995 or incurred thereafter in the ordinary course of business
consistent with past practice.
A-12
<PAGE>
(s) Intellectual Property. It and its Subsidiaries either own, or to its
knowledge, have valid, binding and enforceable rights to use all patents,
trademarks, trade names, service marks, service names, copyrights, other
proprietary intellectual property rights, applications therefor and licenses
or other rights in respect thereof ("INTELLECTUAL PROPERTY") used or held for
use or necessary in connection with the business of it or its Subsidiaries,
without any conflict with the rights of others, except for such conflicts that
have not had and are not reasonably likely to constitute a Material Adverse
Effect. Neither it nor any of its Subsidiaries has, as of the date hereof,
received any notice from any other person pertaining to or challenging the
right of it or its Subsidiaries to use any Intellectual Property or any trade
secrets, proprietary information, inventions, know-how, processes and
procedures owned or used by or licensed to it or any of its Subsidiaries,
except with respect to rights the loss of which, individually or in the
aggregate, have not had and are not reasonably likely to constitute a Material
Adverse Effect. To its knowledge, none of its or its Subsidiaries' personnel
is in violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of
any such employee with it or its Subsidiaries or any other party the result of
which has had or is reasonably likely to constitute a Material Adverse Effect.
(t) Insurance. It and each of its Subsidiaries has in effect valid and
effective policies of insurance, issued by companies believed by it to be
sound and reputable, insuring it or such Subsidiary (as the case may be) for
losses customarily insured against by others engaged in similar lines of
business. Such policies are reasonable, in both scope and amount, in light of
the risks attendant to the businesses conducted by it and its Subsidiaries.
During the past five years, all insurance policies covering products liability
and general liability maintained by or for the benefit of it or its
Subsidiaries have been "occurrence" policies and not "claims made" policies.
(u) Employment and Change in Control Agreements.
(i) Its Disclosure Letter sets forth a true and complete list of all
agreements with any officer or director of it or any of its Subsidiaries to
which it or any of its Subsidiaries is a party, providing for the terms of his
or her employment with it or any of its Subsidiaries and the terms of his or
her severance or other payments upon termination of such employment (the
"EMPLOYMENT AGREEMENTS"). It has previously furnished to the other true and
complete copies of all Employment Agreements, together with all amendments
thereto (if any).
(ii) Except as it disclosed in its SEC Reports, and except as provided for
in this Agreement, neither it nor any of its Subsidiaries is a party to any
oral or written (i) agreement with any officer or other key employee of it or
any of its Subsidiaries (A) the benefits of which are contingent, or the terms
of which are materially altered, upon the occurrence of a transaction
involving it of the nature contemplated by this Agreement or (B) providing for
compensation payments that would not be deductible by it for federal income
tax purposes, or (ii) agreement or Benefit Plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement.
(v) Certain Transactions. Except as set forth in its SEC Reports, none of
the officers or directors of it or of any of its Subsidiaries nor any
affiliate of it, and, to its knowledge, none of its key employees or the key
employees of any of its Subsidiaries, is a party to any transaction with it or
any of its Subsidiaries (other than for services as an employee, officer or
director and other than transactions between it and one or more of its direct
or indirect wholly owned Subsidiaries or between such Subsidiaries),
including, without limitation, any contract, agreement or other arrangement
(i) providing for the furnishing of services to or by, (ii) providing for
rental of real or personal property to or from, or (iii) otherwise requiring
payments to or from, any such officer, director, affiliate or key employee,
any member of the family of any such officer, director or key employee or any
corporation, partnership, trust or other entity in which any such officer,
director or key employee has a substantial interest (excluding the ownership
of not more than two percent (2%) of the capital stock of a publicly traded
corporation) or which is an affiliate of such officer, director or key
employee, in each case covered by clauses (i) through (iii) if such matter
would be required to be disclosed pursuant to Item 404 of Regulation S-K
promulgated by the SEC if such person was a person identified in such Item.
A-13
<PAGE>
(w) Information in Disclosure Documents and Registration Statement. None of
the information supplied or to be supplied by it for inclusion or
incorporation by reference in (i) the registration statement on Form S-4 to be
filed with the SEC in connection with the issuance of shares of ATI Common
Stock in the Combination (the "S-4") will, at the time of the filing of the S-
4 and any amendments thereto and at the time the S-4 becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made,
not misleading, and (ii) the joint proxy statement/prospectus relating to the
meetings of TI's and ALC's stockholders to be held in connection with the
Combination and the offering of shares of ATI Common Stock to the holders of
shares of ALC Common Stock and TI Common Stock (the "JOINT PROXY STATEMENT")
will, at the date mailed to the stockholders and at the times of the meetings
of stockholders to be held in connection with the ALC Merger, the TI Merger
and the Combination, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading.
(x) Opinion of Financial Advisor. It has received the opinion of its
financial advisor referred to in Section 3.1(m), dated the date hereof, to the
effect that, as of such date, the transactions contemplated hereby are fair to
its stockholders from a financial point of view, a copy of which opinion has
been delivered to the other.
(y) No Existing Discussions. As of the date hereof, it is not engaged,
directly or indirectly, in any discussions or negotiations with any other
party with respect to an Acquisition Proposal (as defined in Section 4.1).
(z) Restrictions on Business Activities. Except for this Agreement and to
the extent disclosed in its Disclosure Letter, there is no agreement,
judgment, injunction, order or decree binding upon it or any of its
Subsidiaries that has or could reasonably be expected to have the effect of
prohibiting or impairing any material business practice of ATI, ALC, TI and
their respective Subsidiaries (in each case, taken as a whole), the
acquisition of any material property by ATI, ALC, TI and their respective
Subsidiaries (in each case, taken as a whole) or the conduct of the business
by ATI, ALC, TI and their respective Subsidiaries (in each case, taken as a
whole) as such business is currently conducted by ALC and TI and their
respective Subsidiaries.
(aa) Agreements, Contracts and Commitments. Neither it nor any of its
Subsidiaries has breached, nor received in writing any claim or threat that it
has breached, any of the terms or conditions of any agreement, contract or
commitment (or any series of similar agreements, contracts or commitments)
which, individually or in the aggregate, would constitute a Material Adverse
Effect. Each such agreement, contract and commitment that has not expired or
been terminated is in full force and effect and is not subject to any material
default thereunder of which its officers have knowledge by any party obligated
to it thereunder.
Section 3.2 Representations of ATI, ALC Merger Sub and TI Merger Sub. Each
of ATI, ALC Merger Sub and TI Merger Sub hereby represents and warrants to ALC
and TI that (i) it is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, and has
all requisite corporate power and authority to enter into this Agreement, (ii)
the execution and delivery by it of this Agreement and the consummation by it
of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on its part, (iii) this Agreement has been
duly executed and delivered by it and constitutes the valid and binding
obligation of it, enforceable against it in accordance with its terms, (iv) it
has delivered to each of ALC and TI a true and correct copy of each of its
Articles or Certificate of Incorporation and Bylaws, (v) the execution and
delivery of this Agreement by it does not, and the consummation by it of the
transactions contemplated by this Agreement will not, conflict with or result
in a violation of, or default under (with or without notice or lapse of time
or both), any provision of its Articles or Certificate of Incorporation or
Bylaws, and (vi) it has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
A-14
<PAGE>
ARTICLE IV
COVENANTS
Section 4.1 No Solicitation. From and after the date hereof until the
earlier of the termination of this Agreement in accordance with Article VI and
the Effective Time:
(a) Neither ALC nor TI shall, directly or indirectly, through any officer,
director, employee, representative or agent of it or any of its Subsidiaries,
(i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer
for a merger, consolidation, business combination, sale of substantial assets,
sale of shares of capital stock (including without limitation by way of a
tender offer) or similar transactions involving it or any of its Subsidiaries,
other than the transactions contemplated by this Agreement (any of the
foregoing inquiries or proposals being referred to in this Agreement as an
"ACQUISITION PROPOSAL"), (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any person or entity
relating to, any Acquisition Proposal, or (iii) agree to, approve or recommend
any Acquisition Proposal; provided, however, that nothing contained in this
Agreement shall prevent it or its Board from (A) furnishing non-public
information to, or entering into discussions or negotiations with, any person
or entity in connection with an unsolicited bona fide written Acquisition
Proposal by such person or entity or recommending an unsolicited bona fide
written Acquisition Proposal to its stockholders, if and only to the extent
that (1) its Board believes in good faith (after consultation with its
financial advisor, and based upon the written opinion of such financial
advisor) that such Acquisition Proposal would, if consummated, result in a
transaction (an "ACQUISITION TRANSACTION") more favorable to its stockholders
from a financial point of view than the transaction contemplated by this
Agreement (any such more favorable Acquisition Transaction being referred to
in this Agreement as a "SUPERIOR PROPOSAL") and its Board determines in good
faith based on a written opinion of outside legal counsel that such action is
necessary for it to comply with its fiduciary duties to stockholders under
applicable law and (2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, its
Board receives from such person or entity an executed confidentiality
agreement with terms no more favorable to such party than those contained in
the respective Confidentiality Agreements dated March 1 and March 4, 1996
between ALC and TI ("CONFIDENTIALITY AGREEMENT"); or (B) taking any position
with regard to an Acquisition Proposal pursuant to Rules 14d-9 and 14e-2 under
the Exchange Act which is consistent with the advice of counsel concerning its
Board's fiduciary duties under applicable law with respect to a tender offer
commenced by a third party (other than by public announcement alone).
(b) Each of ALC and TI shall notify the other as soon as practicable upon
receipt by it (or its advisors) of any Acquisition Proposal or any request for
non-public information in connection with an Acquisition Proposal or for
access to its properties, books or records by any person or entity. Such
notice shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offeror and the terms and conditions of such
proposal, inquiry or contact.
Section 4.2 Stockholder Approvals. (a) As promptly as practicable following
the execution and delivery of this Agreement, unless this Agreement shall have
been previously terminated in accordance with Article VI, each of ALC and TI
shall submit this Agreement and the ALC Merger (in the case of ALC) and the TI
Merger (in the case of TI) to its stockholders for approval and adoption at a
meeting of its stockholders called for such purpose (the "ALC SHAREHOLDERS
MEETING" and "TI STOCKHOLDERS MEETING," respectively). Unless this Agreement
shall have been previously terminated in accordance with Article VI and
subject to Section 4.1, (i) the ALC Board shall recommend that the
shareholders of ALC vote to approve and adopt this Agreement and the ALC
Merger and shall use its best efforts to solicit and secure from its
shareholders their approval and adoption of this Agreement and the ALC Merger,
and (ii) the TI Board shall recommend that the stockholders of TI vote to
approve and adopt this Agreement and the TI Merger and shall use its best
efforts to solicit and secure from its stockholders their approval and
adoption of this Agreement and the TI Merger.
A-15
<PAGE>
(b) Unless this Agreement shall have been previously terminated in
accordance with Article VI, ATI, as the sole stockholder of ALC Merger Sub and
TI Merger Sub, shall, prior to the Effective Time, consent in writing to the
approval and adoption of this Agreement and the ALC Merger and TI Merger.
Section 4.3 Conduct of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement in accordance with Article VI and the Effective Time, each of ALC
and TI agrees as to itself and its Subsidiaries (except (subject to the
provisions of Article IV other than this Section 4.3) to the extent provided
in its Disclosure Letter and except to the extent that the other shall
otherwise consent in writing), to carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted,
to pay its debts and taxes when due subject to good faith disputes over such
debts or taxes, to pay or perform its other obligations when due, and to use
all reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, to the end that its goodwill and ongoing business
be substantially unimpaired at the Effective Time. Except as expressly
contemplated by this Agreement, and not in limitation of the foregoing, during
the aforesaid period each of ALC and TI shall (and shall cause its
Subsidiaries to), except (subject to the provisions of Article IV other than
this Section 4.3) as otherwise provided in its Disclosure Letter or except as
approved in writing by the other party:
(a) preserve and maintain its corporate existence and all of its rights,
privileges and franchises reasonably necessary or desirable in the normal
conduct of its business;
(b) not acquire any stock or other interest in, nor (except in the ordinary
course of business) purchase any assets of, any corporation, partnership,
association or other business organization or entity or any division thereof
(except any stock or assets distributed to it or any of its Subsidiaries as
part of any bankruptcy or other creditor settlement or pursuant to a plan of
reorganization), nor agree to do any of the foregoing;
(c) not sell, lease, assign, transfer or otherwise dispose of any of its
assets (including, without limitation, patents, trade secrets or licenses),
nor create any mortgage, security interest or other lien on any of its assets,
except as permitted by this Agreement or in the ordinary course of business
and except that it and each of its Subsidiaries may sell or otherwise dispose
of any assets which are held for disposition as of the date hereof or are
obsolete;
(d) not incur any indebtedness for borrowed money or any obligation under
any guarantee or "make whole" or capital support agreement or arrangement,
other than as a result of borrowings or drawdowns, the issuance of letters of
credit for its account and the incurrence of interest, letter of credit
reimbursement obligations and other obligations incurred in the ordinary
course of business consistent with past practice;
(e) not (i) alter, amend or repeal any provision of its Articles or
Certificate of Incorporation or Bylaws, (ii) change the number of its
directors (other than as a result of the death, retirement or resignation of a
director), (iii) except in the ordinary course of its business, form or
acquire any Subsidiaries not existing as of the date of this Agreement, (iv)
except in the ordinary course of its business, enter into, modify or terminate
any material contracts or agreement to which it is a party or agree to do so,
(v) modify any Employment Agreement, or (vi) declare, pay, commit to or incur
any obligation of any kind for the payment of any bonus, additional salary or
compensation or retirement, termination, welfare or severance benefits payable
or to become payable to any of its employees or such other persons, except in
any such case for obligations incurred in the ordinary course of business and
consistent with past practice and such matters as are required pursuant to the
terms of any existing Employment Agreement or Benefit Plan;
(f) maintain its books, accounts and records in the usual, ordinary and
regular manner and in material compliance with all applicable laws;
(g) pay and discharge all material federal, state, local and foreign taxes
imposed upon it or upon its income or profits, or upon any property belonging
to it, prior to the date on which penalties attach thereto, except to the
A-16
<PAGE>
extent that it is currently contesting, in good faith and by proper
proceedings, the payment of such taxes and it maintains appropriate reserves
with respect thereto;
(h) use commercially reasonable efforts to meet its obligations under all
material contracts, agreements and instruments to which it is a party, and not
become in default thereunder which would constitute a Material Adverse Effect;
(i) use commercially reasonable efforts to maintain its business and assets
in good repair, order and condition, reasonable wear and tear excepted, and to
maintain insurance upon such business and assets at least comparable in amount
and kind to that in effect on the date hereof;
(j) use commercially reasonable efforts to maintain its present
relationships and goodwill with suppliers, brokers, manufacturers,
representatives, distributors, customers and others having business relations
with it (provided that it may pursue overdue accounts and otherwise exercise
lawful remedies in its customary fashion);
(k) carry on and operate its business in, and only in, the usual, regular
and ordinary course in substantially the same manner as heretofore conducted
and use its commercially reasonable efforts to cause its representations and
warranties set forth in this Agreement and in any Ancillary Document to be
true and correct, in all respects, on and as of the Effective Time, subject
only to changes in the ordinary course of business;
(l) not declare, set aside, make or pay any dividends or other distributions
with respect to its capital stock except for regular cash dividends not to
exceed $.13 per share of ALC Common Stock in the second quarter of 1996 and
$.16 per share of ALC Common Stock in the third quarter of 1996 and thereafter
or $.31 per share of TI Common Stock per quarter and regular cash dividends on
shares of TI Series E Cumulative Preferred Stock (including the dividend
payable in connection with the redemption thereof), or purchase or redeem any
shares of its capital stock except, in the case of TI, shares of TI Series E
Cumulative Preferred Stock, or agree to take any such action;
(m) not authorize or make any capital expenditure otherwise than in the
ordinary course of business;
(n) not increase the number of shares authorized or issued and outstanding
of its capital stock, nor grant or make any pledge, option, warrant, call,
commitment, right or agreement of any character relating to its capital stock,
nor issue or sell any shares of its capital stock or securities convertible
into such capital stock, or any bonds, promissory notes, debentures or other
corporate securities or become obligated so to sell or issue any such
securities or obligations, except, in any case, issuance of shares of ALC
Common Stock or TI Common Stock pursuant to (i) the exercise of options,
warrants or other rights outstanding as of the date hereof and referred to in
Sections 3.1(b) or (c), (ii) the purchase, designation or award of shares
under the ALC Stock Acquisition Retention Plan, (iii) the grant of options or
awards under the ALC Stock Plans or the TI Stock Plans to newly-hired
employees in amounts consistent with policies for such grants in effect on the
date hereof, (iv) the grant of options to acquire not more than 1,000,000
shares of ALC Common Stock in the aggregate pursuant to the ALC Stock Plans,
(v) the issuance of shares of ALC Common Stock pursuant to ALC's 1996 Non-
Employee Director Stock Option Plan, (vi) the issuance of shares of TI Common
Stock pursuant to the TI ESPP, or (vii) the grant of options to acquire not
more than 700,000 shares of TI Common Stock in the aggregate pursuant to the
TI Stock Plans.
Prior to the Effective Time, none of ATI, ALC Merger Sub or TI Merger Sub
shall conduct any business other than for the purpose of fulfilling its
respective obligations under, and consummating the transactions contemplated
by, this Agreement.
Section 4.4 Access to Information. Upon reasonable notice, each of ALC and
TI shall (and shall cause its Subsidiaries to) (i) afford to the officers,
employees, accountants, counsel and other representatives of the other,
access, during normal business hours during the period prior to the earlier of
the termination of this Agreement and the Effective Time, to all its
properties, books, contracts, commitments, records, officers, employees,
accountants, accountants' work papers, correspondence and affairs, and (ii)
cause its and their officers and employees to furnish to the other and its
authorized representatives any and all financial, technical and operating data
and other information pertaining to its businesses and those of its
Subsidiaries as the other shall
A-17
<PAGE>
from time to time reasonably request. Each party will hold any such
information which is subject to the Confidentiality Agreement in accordance
with and subject to the restrictions contained in the Confidentiality
Agreement. No information or knowledge obtained in any investigation pursuant
to this Section 4.4 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of
the parties to consummate the Combination.
Section 4.5 Legal Conditions to the Combination. Each of the parties hereto
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to the Combination (which
actions shall include, without limitation, furnishing all information required
under the HSR Act and in connection with approvals of or filings with any
other Governmental Entity) and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed
upon any of them or any of their Subsidiaries in connection with the
Combination. Each of the parties hereto will, and will cause its Subsidiaries
to, take all reasonable actions necessary to obtain (and will cooperate with
each other in obtaining) any consent, authorization, order or approval of, or
any exemption by, any Governmental Entity or other public third party,
required to be obtained or made by any of the parties hereto or any of their
Subsidiaries in connection with the Combination or the taking of any action
contemplated thereby or by this Agreement.
Section 4.6 Public Announcements. Neither ALC nor TI shall make any press
release or other written public statement or publicly deliver any formally
prepared oral statement concerning the matters covered by this Agreement
without the approval of the other, except as required by law or applicable
regulation, and each shall in all events use its best efforts to permit such
other parties an opportunity to review and comment upon any such release or
statement prior to dissemination.
Section 4.7 Tax-Free Reorganization. The parties hereto shall each use its
best efforts to cause each of the ALC Merger and the TI Merger to be treated
either as a reorganization within the meaning of Section 368(a) of the Code or
as a non-recognition exchange of stock pursuant to Section 351 of the Code.
Section 4.8 Pooling Accounting. The parties hereto shall each use its best
efforts to cause the business combination to be effected by the Combination to
be accounted for as a pooling of interests. In particular, but without
limitation of the foregoing, each party will take all remedial and other
actions that are reasonably necessary or advisable (including, if necessary,
the sale of treasury stock by such party) in order to ensure such accounting
treatment. ALC and TI shall each use all commercially reasonable efforts to
cause its Rule 145 Affiliates (as hereinafter defined) not to take any action
that would adversely affect the ability of ATI to account for the business
combination to be effected by the Combination as a pooling of interests.
Section 4.9 Affiliate Agreements. Within two weeks following the date of
this Agreement, each of ALC and TI will provide the other with a list of those
persons who are, in its reasonable judgment after review by its independent
counsel, "affiliates" of it within the meaning of Rule 145 promulgated under
the Securities Act ("RULE 145") (each such person who is an "affiliate" within
the meaning of Rule 145 is referred to herein as a "RULE 145 AFFILIATE"). Each
of ALC and TI shall provide the other with such information and documents as
the other shall reasonably request for purposes of reviewing such list and
shall notify the other in writing regarding any change in the identity of its
Rule 145 Affiliates prior to the Closing Date. Each of ALC and TI shall use
its commercially reasonable efforts to deliver or cause to be delivered to the
other prior to the Effective Time from each of its Rule 145 Affiliates, an
executed Affiliate Agreement, in substantially the form attached hereto as
Annex D (each an "AFFILIATE AGREEMENT"). ATI shall be entitled to place
appropriate legends on the certificates evidencing any ATI Common Stock to be
received by such Rule 145 Affiliates pursuant to the terms of this Agreement,
and to issue appropriate stop transfer instructions to the transfer agent for
ATI Common Stock, consistent with the terms of the Affiliate Agreements.
Section 4.10 Representations, Covenants and Conditions; Further Assurances.
(a) The parties hereto will each use its commercially reasonable efforts (i)
to take, and to cause their respective Subsidiaries to take, all actions
necessary to render accurate as of the Effective Time their respective
representations and warranties contained herein, (ii) to refrain, and to cause
their respective Subsidiaries to
A-18
<PAGE>
refrain, from taking any action which would render any such representation or
warranty inaccurate in any material respect as of such time and (iii) to
perform or cause to be satisfied, and to cause their respective Subsidiaries
to perform or cause to be satisfied, each covenant or condition to be
performed or satisfied by them.
(b) In addition to the provisions of Section 4.5 hereof and in furtherance
thereof, upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and to otherwise satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.
Without limiting the generality of the foregoing, each of the parties agrees
to reasonably engage in discussions and negotiations and provide information
to any governmental authority with jurisdiction over the enforcement of any
applicable antitrust laws, in a reasonable effort to address any concerns on
the part of any such authority regarding the legality under any antitrust law
of the Combination. Notwithstanding the foregoing, nothing in this Agreement
shall be deemed to create any obligation of ALC or TI to agree to divest,
abandon, license or take similar action with respect to any assets (tangible
or intangible) of ALC, TI or ATI.
Section 4.11 Stock Plans. (a) Prior to the Effective Time, ALC shall take
such actions as may be necessary such that at the Effective Time each option
(an "ALC OPTION") to purchase a share of ALC Common Stock outstanding pursuant
to the ALC Stock Plans, whether or not then exercisable, shall become an
option to purchase, on the same terms and conditions (including per share
exercise price), a number of shares of ATI Common Stock equal to the number of
shares of ALC Common Stock subject to such ALC Option. At or prior to the
Effective Time, ALC shall make all necessary arrangements with respect to the
applicable ALC Stock Plans to permit the assumption of the unexercised ALC
Options by ATI pursuant to this Section 4.11; provided, however, that such
arrangements shall not include any change in the terms of the applicable ALC
Stock Plans if such change would, in the opinion of ALC's independent public
accountants, have an adverse effect on ATI's ability to account for the
Combination as a pooling of interests for financial reporting purposes.
(b) Prior to the Effective Time, ALC shall take such actions as may be
necessary such that at the Effective Time shares of ALC Common Stock issuable
pursuant to awards ("ALC AWARDS") under the ALC Performance Share Plan for Key
Employees and each right to purchase or otherwise acquire or to designate
shares of ALC Common Stock pursuant to the ALC Stock Acquisition and Retention
Plan ("ALC RIGHTS"), whether or not then issuable or exercisable, shall become
an award or a right to purchase or otherwise acquire or to designate, on the
same terms and conditions (including per share price), a number of shares of
ATI Common Stock equal to the number of shares of ALC Common Stock subject to
such ALC Award or ALC Right. At or prior to the Effective Time, ALC shall make
all necessary arrangements with respect to the applicable ALC Stock Plans to
permit the assumption of the ALC Rights and ALC Awards by ATI pursuant to this
Section 4.11; provided, however, that such arrangements shall not include any
change in the terms of the applicable ALC Stock Plans if such change would, in
the opinion of ALC's independent public accountants, have an adverse effect on
ATI's ability to account for the Combination as a pooling of interests for
financial reporting purposes.
(c) Prior to the Effective Time, TI shall take such actions as may be
necessary such that at the Effective Time each right of a participant under
the TI ESPP ("TI ESPP Rights") to have shares of TI Common Stock purchased for
the TI ESPP account of such participant, both with contributions made by such
participant and with the matching contributions of TI, shall be converted into
and become a right to have shares of ATI Common Stock purchased for such
participant's TI ESPP account on terms whereby the "Price" (as defined in the
TI ESPP) shall mean either (i) with respect to treasury shares or authorized
but unissued shares purchased from ATI, the average of the closing sale prices
per share of TI Common Stock divided by 1.925 (with respect to trading days
prior to and including the date on which the Effective Time occurs) or ATI
Common Stock (with respect to trading days following but excluding the date on
which the Effective Time occurs), as the case may be, quoted in The Wall
Street Journal or successor journal for the last five trading days of the
calendar month preceding the "Purchase Date" (as defined in the TI ESPP), or
(ii) with respect to issued and outstanding shares of ATI Common Stock
purchased on the open market, the average price per share of ATI Common Stock
paid by the "Plan Administrator" (as defined in the TI ESPP) on such Purchase
Date. At or prior to the Effective
A-19
<PAGE>
Time, TI shall make all necessary arrangements with respect to the TI ESPP to
permit the assumption of the TI ESPP Rights by ATI pursuant to this Section
4.11; provided, however, that such arrangements shall not include any change
in the terms of the TI ESPP if such change would, in the opinion of TI's
independent public accountants, have an adverse effect on ATI's ability to
account for the Combination as a pooling of interests for financial accounting
purposes.
(d) Prior to the Effective Time, TI shall take such actions as may be
necessary such that at the Effective Time each option (an "TI OPTION") to
purchase a share of TI Common Stock outstanding pursuant to the TI Stock
Plans, whether or not then exercisable, shall be converted into and become
rights to purchase shares of ATI Common Stock. At the Effective Time, (i) each
TI Option assumed by ATI may be exercised solely for shares of ATI Common
Stock, (ii) the number of shares of ATI Common Stock subject to each TI Option
shall be equal to the number of shares of ATI Common Stock into which shares
of TI Common Stock subject to such TI Option would have been converted by
virtue of the TI Merger in accordance with Article II, had such share of TI
Common Stock been outstanding at the Effective Time, and (iii) the per share
exercise price for each such TI Option shall be equal to (y) the exercise
price for the share of TI Common Stock otherwise purchasable pursuant to such
TI Option divided by (z) the TI Exchange Ratio, rounded up to the nearest
cent. At or prior to the Effective Time, TI shall make all necessary
arrangements with respect to the applicable TI Stock Plans to permit the
assumption of the unexercised TI Options by ATI pursuant to this Section 4.11;
provided, however, that such arrangements shall not include any change in the
terms of the applicable TI Stock Plans if such change would, in the opinion of
TI's independent public accountants, have an adverse effect on TI's ability to
account for the Combination as a pooling of interests for financial accounting
purposes.
(e) Effective at the Effective Time, ATI shall assume each ALC Option, ALC
Right, ALC Award, TI Option and TI Right (collectively, the "DERIVATIVE
SECURITIES") in accordance with the terms under which it was issued and any
applicable agreement by which it is evidenced. At or prior to the Effective
Time, ATI shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of ATI Common Stock for delivery upon exercise of
Derivative Securities assumed by it in accordance with this Section 4.11. As
soon as practicable after the Effective Time, ATI shall file a registration
statement on Form S-3 or Form S-8, as the case may be (or any successor or
other appropriate forms), or another appropriate form with respect to the
shares of ATI Common Stock subject to such Derivative Securities, and shall
use its commercially reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Derivative Securities
remain outstanding.
(f) As soon as practicable after the Effective Time, ATI shall deliver to
each holder of Derivative Securities an appropriate notice setting forth such
holder's rights pursuant thereto and such Derivative Security shall continue
in effect on the same terms and conditions (including further anti-dilution
provisions, and subject to the adjustments required by this Section 4.11 after
giving effect to the Combination). ATI shall comply with the terms of all such
Derivative Securities and ensure, to the extent required by, and subject to
the provisions of, any applicable ALC Stock Plan or TI Stock Plan that
Derivative Securities which qualified for special tax treatment prior to the
Effective Time continue to so qualify after the Effective Time.
(g) Approval and adoption of this Agreement by the shareholders of ALC and
the stockholders of TI shall constitute, as an integral part of the
Combination, ratification of the ALC Stock Plans and the TI Stock Plans, and
the issuance of ATI Common Stock in accordance with the terms of the
Derivative Securities, by the shareholders of ATI.
Section 4.12 Indemnification; Insurance. (a) ALC shall, and from and after
the Effective Time ATI shall, indemnify, defend and hold harmless each person
who is now, or has been at any time through the date of this Agreement or who
becomes prior to the Effective Time, an officer, director or employee of ALC
or any of its Subsidiaries (the "ALC INDEMNIFIED PARTIES") against (i) all
losses, claims, damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director, officer or employee of ALC or any of its Subsidiaries or is or was a
plan fiduciary serving at the request of ALC
A-20
<PAGE>
or any of its Subsidiaries, whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or claimed
prior to, or at or after the Effective Time ("ALC INDEMNIFIED LIABILITIES")
and (ii) all ALC Indemnified Liabilities based in whole or in part on, or
arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby or any actual or proposed Alternative
Transaction (as hereinafter defined), whether proposed or occurring as of the
date of this Agreement, prior to such date or hereafter, in each case to the
full extent a corporation is permitted under the PBCL or the DGCL, as
applicable, to indemnify its own directors, officers and employees, as the
case may be (and ATI will pay expenses in advance of the final disposition of
any such action or proceeding to each ALC Indemnified Party to the full extent
permitted by law upon receipt of any undertaking contemplated by Section 1745
of the PBCL or Section 145 of the DGCL, as applicable). Without limiting the
foregoing, in the event that any such claim, action, suit, proceeding or
investigation is brought against any ALC Indemnified Party (whether arising
before or after the Effective Time), (i) the ALC Indemnified Parties may
retain counsel satisfactory to them and ALC (or them and ATI after the
Effective Time), (ii) ALC (or after the Effective Time, ATI) shall pay all
reasonable fees and expenses of such counsel for the ALC Indemnified Parties
promptly as statements therefor are received, and (iii) ALC (or after the
Effective Time, ATI) will use all reasonable efforts to assist in the vigorous
defense of any such matter, provided that neither ALC nor ATI shall be liable
for any settlement of any claim effected without its written consent, which
consent, however, shall not be unreasonably withheld. Any ALC Indemnified
Party wishing to claim indemnification under this Section 4.12(a), upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify ALC or, after the Effective Time, ATI (but the failure so to notify
shall not relieve ALC or ATI from any liability which it may have under this
Section 4.12(a) except to the extent such failure prejudices such party), and
shall deliver to ALC (or after the Effective Time, ATI) the undertaking
contemplated by Section 1745 of the PBCL or Section 145 of the DGCL, as
applicable. The ALC Indemnified Parties as a group may retain only one law
firm to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more ALC Indemnified Parties.
(b) TI shall, and from and after the Effective Time ATI shall, indemnify,
defend and hold harmless each person who is now, or has been at any time
through the date of this Agreement or who becomes prior to the Effective Time,
an officer, director or employee of TI or any of its Subsidiaries (the "TI
INDEMNIFIED PARTIES") against (i) all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement with
the approval of the indemnifying party (which approval shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole
or in part out of the fact that such person is or was a director, officer or
employee of TI or any of its Subsidiaries or is or was a plan fiduciary
serving at the request of ALC or any of its Subsidiaries, whether pertaining
to any matter existing or occurring at or prior to the Effective Time and
whether asserted or claimed prior to, or at or after the Effective Time ("TI
INDEMNIFIED LIABILITIES") and (ii) all TI Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to
this Agreement or the transactions contemplated hereby or any actual or
proposed Alternative Transaction (as hereinafter defined), whether proposed or
occurring as of the date of this Agreement, prior to such date or hereafter,
in each case to the full extent a corporation is permitted under the DGCL to
indemnify its own directors, officers and employees, as the case may be (and
ATI will pay expenses in advance of the final disposition of any such action
or proceeding to each TI Indemnified Party to the full extent permitted by law
upon receipt of any undertaking contemplated by Section 145(e) of the DGCL).
Without limiting the foregoing, in the event that any such claim, action,
suit, proceeding or investigation is brought against any TI Indemnified Party
(whether arising before or after the Effective Time), (i) the TI Indemnified
Parties may retain counsel satisfactory to them and TI (or them and ATI after
the Effective Time), (ii) TI (or after the Effective Time, ATI) shall pay all
reasonable fees and expenses of such counsel for the TI Indemnified Parties
promptly as statements therefor are received, and (iii) TI (or after the
Effective Time, ATI) will use all reasonable efforts to assist in the vigorous
defense of any such matter, provided that neither TI nor ATI shall be liable
for any settlement of any claim effected without its written consent, which
consent, however, shall not be unreasonably withheld. Any TI Indemnified Party
wishing to claim indemnification under this Section 4.12(b), upon learning of
any such claim, action, suit, proceeding or investigation, shall notify TI or,
after the Effective Time, ATI (but the failure so to notify shall not relieve
TI or
A-21
<PAGE>
ATI from any liability which it may have under this Section 4.12(b) except to
the extent such failure prejudices such party), and shall deliver to ALC (or
after the Effective Time, ATI) the undertaking contemplated by Section 145(e)
of the DGCL. The TI Indemnified Parties as a group may retain only one law
firm to represent them with respect to each such matter unless there is, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of any two or more TI Indemnified Parties.
(c) For a period of at least five years after the Effective Time, ATI shall
cause to be maintained in effect standard policies of directors' and officers'
liability insurance in an aggregate coverage amount not less than the greater
of the coverage amounts maintained by ALC and TI respectively as of the date
hereof and including coverage with respect to claims arising from facts or
events which occurred before the Effective Time to the extent available;
provided, that in no event shall ATI be required to expend, in order to
maintain or procure insurance coverage pursuant to this Section 4.12(c), any
amount per annum in excess of 150 percent of the greater of the per annum
amounts paid by ALC and TI as of the date hereof.
(d) The provisions of this Section 4.12 are intended to be for the benefit
of, and shall be enforceable by, each ALC Indemnified Party and TI Indemnified
Party, and his or her heirs and representatives.
Section 4.13 TI Rights Plan. TI shall not redeem the rights issued under the
TI Rights Plan (but may delay any "distribution date" thereon or render the
rights inapplicable to this Agreement, the Combination, or the Stockholder
Agreements or any action permitted hereunder or thereunder) or (subject to the
following sentence) amend or terminate the TI Rights Plan prior to the earlier
of the Effective Time or the termination of this Agreement unless required to
do so by a court of competent jurisdiction. As soon as practicable after the
date hereof, TI shall amend the TI Rights Plan in a manner satisfactory to ALC
such that it provides that the rights issued thereunder shall expire and cease
to be exercisable at the Effective Time.
Section 4.14 Notification of Certain Matters. Each of ALC and TI shall give
prompt notice to the other of (i) the occurrence, or non-occurrence, of any
event the occurrence, or non-occurrence, of which would be reasonably likely
to cause any representation or warranty of it contained in this Agreement to
be materially untrue or inaccurate and (ii) any failure of it to materially
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice and further
provided that failure to give such notice shall not be treated as a breach of
covenant for the purposes of Section 6.1(g)(ii) unless the failure to give
such notice results in material prejudice to the other party.
Section 4.15 Plan Documents. Each of ALC and TI will furnish to the other,
on or before April 25, 1996, true and complete copies of the documents
evidencing its Plans, or setting forth the terms thereof, including, without
limitation, any trust instruments and/or insurance contracts, if any, forming
a part thereof, and all amendments thereto.
Section 4.16 ATI Matters. As soon as is practicable after the execution and
delivery of this Agreement, the parties hereto will take all action necessary
or appropriate to cause ATI's directors and officers to consist of those
persons identified in Annex C attached hereto. At or prior to the Effective
Time, ATI will (i) adopt the Allegheny Teledyne Incorporated 1996 Incentive
Plan in the form attached hereto as Annex E and the Allegheny Teledyne
Incorporated 1996 Non-Employee Director Stock Compensation Plan in the form
attached hereto as Annex F, and (ii) take all corporate action necessary to
reserve for issuance a sufficient number of shares of ATI Common Stock for
issuance upon exercise of stock options and other rights subject to grant
under the plans referred to in the immediately preceding sentence.
A-22
<PAGE>
ARTICLE V
CONDITIONS TO COMBINATION
Section 5.1 Conditions to Each Party's Obligation to Effect the
Combination. The respective obligations of each party to this Agreement to
effect the Combination shall be subject to the satisfaction prior to the
Closing Date of the following conditions:
(a) Stockholder Approvals. This Agreement and the ALC Merger shall have been
approved and adopted by the affirmative vote of at least a majority of the
votes cast by holders of ALC Common Stock entitled to vote thereon, and this
Agreement and the TI Merger shall have been approved and adopted by the
affirmative vote of the holders of a majority of the outstanding shares of TI
Common Stock.
(b) Governmental and Regulatory Consents. The waiting period applicable to
the consummation of the Combination under the HSR Act shall have expired or
been terminated and, other than the filings provided for in Section 1.1, all
filings required to be made prior to the Effective Time by ATI, ALC, TI or any
of their respective Subsidiaries with, and all consents, approvals and
authorizations required to be obtained prior to the Effective Time by ATI,
ALC, TI or any of their respective Subsidiaries from, any Governmental Entity
in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been made or
obtained, except failures in the foregoing that do not have a Material Adverse
Effect.
(c) S-4. The S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order or proceedings seeking a stop
order.
(d) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Combination or limiting or
restricting in any material respect ATI's conduct or operation of the
businesses of ALC and TI after the Combination shall have been issued, nor
shall there be any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Combination (including either the ALC
Merger or the TI Merger) which makes the consummation of the Combination
(including either the ALC Merger or the TI Merger) illegal.
(e) Blue Sky Laws. ATI shall have received all state securities or "Blue
Sky" permits and other authorizations necessary to issue shares of ATI Common
Stock pursuant to the Combination.
(f) Pooling Letters. Allegheny Ludlum shall have received a letter from
Ernst & Young LLP and Teledyne shall have received a letter from Arthur
Andersen LLP, each such letter to be dated the date of the Joint Proxy
Statement, which letters shall be confirmed in writing on the date on which
the Effective Time occurs (the "EFFECTIVE DATE"), to the effect (i) in the
case of the letters from Ernst & Young LLP to Allegheny Ludlum, that Allegheny
Ludlum qualifies as an entity that may be a party to a business combination
for which the pooling of interests method of accounting is available and that
the business combination to be effected by the Combination will be treated for
accounting purposes as a pooling of interests transaction under generally
accepted accounting principles, and (ii) in the case of the letters from
Arthur Andersen LLP to Teledyne, that Teledyne qualifies as an entity that may
be a party to a business combination for which the pooling of interests method
of accounting is available.
(g) Consents. Each of ALC and TI shall have obtained all consents required
to consummate the transactions contemplated by this Agreement, including the
Combination, and all other consents in connection with the Combination and the
other transactions contemplated hereby, the failure to obtain which would
constitute a ATI Material Adverse Effect.
(h) NYSE. The shares of ATI Common Stock to be issued in the Combination
shall have been approved for listing on the New York Stock Exchange upon
official notice of issuance.
(i) Representations and Warranties. The representations of ATI, ALC Merger
Sub and TI Merger Sub set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement and (except to the
extent such representations and warranties are made as of an earlier date,
which representations and warranties shall be true and correct in all material
respects at and as of such date) as of the Closing Date as though made on and
as of the Closing Date, in each case except for changes contemplated by this
Agreement.
A-23
<PAGE>
(j) Pension Law Changes. No adoption of or amendment to any statute, no
promulgation of or revision to any regulation issued by the U. S. Department
of the Treasury, the U. S. Department of Labor or by the Pension Benefit
Guaranty Corporation, and no change in a position previously taken by any one
or more of foregoing agencies, shall have been effected or proposed which has
or would have the effect of prohibiting, or of limiting or restricting in any
material respect the merger of any Pension Plans of ALC and TI or its economic
equivalent or would cause a merger of such Pension Plans or its economic
equivalent to be illegal or impractical.
Section 5.2 Additional Conditions to Obligation of ALC. The obligation of
ALC to effect the ALC Merger is subject to the satisfaction of each of the
following additional conditions, any of which may be waived in writing
exclusively by ALC:
(a) Representations and Warranties of TI. The representations and warranties
of TI set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent such
representations and warranties are made as of an earlier date, which
representations and warranties shall be true and correct in all material
respects at and as of such date) as of the Closing Date as though made on and
as of the Closing Date, in each case except for changes contemplated by this
Agreement, and ALC shall have received a certificate signed on behalf of TI by
the Chief Executive Officer and the Chief Financial Officer of TI to such
effect.
(b) Performance of Obligations of TI. TI shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and ALC shall have received a
certificate signed on behalf of TI by the Chief Executive Officer and the
Chief Financial Officer of TI to such effect.
(c) Tax Opinion. ALC shall have received a written opinion from Kirkpatrick
& Lockhart LLP, counsel to ALC, dated the Effective Date, to the effect that
the ALC Merger will be treated for federal income tax purposes either as a
tax-free reorganization within the meaning of Section 368(a) of the Code or as
a non-recognition exchange of stock under Section 351 of the Code. In
rendering such opinion, counsel may rely upon representations and certificates
of ATI, ALC, ALC Merger Sub, TI and TI Merger Sub.
(d) Material Adverse Change. Since the date of this Agreement, there shall
have been no changes, occurrences or circumstances involving the business,
results of operations or financial condition or prospects of TI and any of its
Subsidiaries that constitute a Material Adverse Effect.
Section 5.3 Additional Conditions to Obligation of TI. The obligation of TI
to effect the Combination is subject to the satisfaction of each of the
following additional conditions, any of which may be waived, in writing,
exclusively by TI:
(a) Representations and Warranties of ALC. The representations and
warranties of ALC set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties are made as of an earlier date, which
representations and warranties shall be true and correct in all material
respects at and as of such date) as of the Closing Date as though made on and
as of the Closing Date, in each case except for changes contemplated by this
Agreement, and TI shall have received a certificate signed on behalf of ALC by
the Chief Executive Officer and the Chief Financial Officer of ALC to such
effect.
(b) Performance of Obligations of ALC. ALC shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and TI shall have received a
certificate signed on behalf of ALC by the Chief Executive Officer and the
Chief Financial Officer of ALC to such effect.
(c) Tax Opinion. TI shall have received the opinion of Irell & Manella LLP,
counsel to TI, dated the Effective Date, to the effect that the TI Merger will
be treated for federal income tax purposes as either a tax-free
A-24
<PAGE>
reorganization within the meaning of Section 368(a) of the Code or as a non-
recognition exchange of stock under Section 351 of the Code. In rendering such
opinion, counsel may rely upon representations and certificates of ATI, ALC,
ALC Merger Sub, TI and TI Merger Sub.
(d) Material Adverse Change. Since the date of this Agreement, there shall
have been no changes, occurrences or circumstances involving the business,
results of operations or financial condition or prospects of ALC and any of
its Subsidiaries that constitute a Material Adverse Effect.
ARTICLE VI
TERMINATION AND AMENDMENT
Section 6.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time by written notice by the terminating party to the other
party under the circumstances set forth below:
(a) by mutual written consent of ALC and TI; or
(b) by either ALC or TI if the Combination shall not have been consummated
by September 30, 1996 (provided that the right to terminate this Agreement
under this Section 6.1(b) shall not be available to any party whose failure to
fulfill any material obligation under this Agreement has been a cause of or
has resulted in the failure of the Combination to occur on or before such
date); or
(c) by either ALC or TI if a court of competent jurisdiction or other
Governmental Entity shall have issued a nonappealable final order, decree or
ruling or taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the Combination;
or
(d) by ALC or TI, if, at the ALC Shareholders' Meeting or the TI
Stockholders' Meeting (including any adjournment or postponement), the
requisite vote of the shareholders of ALC in favor of this Agreement and the
ALC Merger or the stockholders of TI in favor of this Agreement and the TI
Merger shall not have been obtained; or
(e) by ALC, if (i) the Board of Directors of TI shall have withdrawn or
modified its recommendation of this Agreement or the Combination in a manner
adverse to consummation of the Combination or shall have resolved to do any of
the foregoing; (ii) the Board of Directors of TI shall have recommended to the
shareholders of TI an Alternative Transaction (as defined in Section 6.3(f));
(iii) a tender offer or exchange offer for 15% or more of the outstanding
shares of TI Common Stock is commenced (other than by ALC or an affiliate of
ALC) and the Board of Directors of TI recommends that the shareholders of TI
tender their shares in such tender or exchange offer, or (iv) for any reason
TI fails to call and hold the TI Shareholders' Meeting by September 30, 1996,
unless such failure is due to the fact that the Registration Statement was not
declared effective sufficiently in advance of such date to enable TI to hold
the TI Shareholders' Meeting by such date; or
(f) by TI, if (i) the Board of Directors of ALC shall have withdrawn or
modified its recommendation of this Agreement or the Combination in a manner
adverse to consummation of the Combination or shall have resolved to do any of
the foregoing; (ii) the Board of Directors of ALC shall have recommended to
the shareholders of ALC an Alternative Transaction (as defined in Section
6.3(f)); (iii) a tender offer or exchange offer for 15% or more of the
outstanding shares of ALC Common Stock is commenced (other than by TI or an
affiliate of TI) and the Board of Directors of ALC recommends that the
stockholders of ALC tender their shares in such tender or exchange offer, or
(iv) for any reason ALC fails to call and hold the ALC Shareholders' Meeting
by September 30, 1996, unless such failure is due to the fact that the
Registration Statement was not declared effective sufficiently in advance of
such date to enable ALC to hold the ALC Shareholders' Meeting by such date; or
A-25
<PAGE>
(g) by ALC or TI, if (i) the other has breached any representation or
warranty contained in this Agreement, and such breach shall not have been
cured prior to the Effective Time (except where such breach would not have a
material adverse effect on the party having made such representation or
warranty and its Subsidiaries taken as a whole and would not constitute a ATI
Material Adverse Effect after giving effect to the transactions contemplated
by this Agreement), or (ii) if there has been a breach of a covenant or
agreement set forth in this Agreement on the part of the other, which shall
not have been cured within 2 business days following receipt by the breaching
party of written notice of such breach from the other party (other than those
set forth in Section 4.1, as to which there shall be no cure period).
Section 6.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 6.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of any party
hereto or their respective officers, directors, stockholders or affiliates
arising from the execution and delivery of this Agreement or its termination,
except as set forth in Section 6.3 and further except to the extent that such
termination results from the wilful breach by a party of any of its
representations, warranties or covenants set forth in this Agreement; provided
that, the provisions of Section 6.3 of this Agreement shall remain in full
force and effect and survive any termination of this Agreement.
Section 6.3 Fees and Expenses.
(a) Except as set forth in this Section 6.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the
Combination is consummated; provided, however, that ALC and TI shall share
equally all fees and expenses, other than attorneys' fees, incurred in
relation to the printing and filing of the Joint Proxy Statement (including
any related preliminary materials) and the Registration Statement (including
financial statements and exhibits) and any amendments or supplements.
(b) TI shall reimburse ALC for out-of-pocket expenses incurred by ALC
relating to the transactions contemplated by this Agreement prior to
termination (including, but not limited to, fees and expenses of ALC's
counsel, accountants and financial advisors), upon the termination of this
Agreement by ALC pursuant to Section 6.1(d) as a result of the failure to
receive the requisite vote for approval of this Agreement and the TI Merger by
the stockholders of TI at the TI Stockholders' Meeting, or pursuant to Section
6.1(e) or Section 6.1(g), and ALC shall reimburse TI for out-of-pocket
expenses incurred by TI relating to the transactions contemplated by this
Agreement prior to termination (including, but not limited to, fees and
expenses of TI's counsel, accountants and financial advisors), upon the
termination of this Agreement by TI pursuant to Section 6.1(d) as a result of
the failure to receive the requisite vote for approval of this Agreement and
the ALC Merger by the shareholders of ALC at the ALC Shareholders' Meeting, or
pursuant to Section 6.1(f) or Section 6.1(g).
(c) TI shall pay ALC a termination fee of $50,000,000 upon the earliest to
occur of the following events:
(1) the termination of this Agreement by ALC pursuant to Section 6.1(e); or
(2) the termination of this Agreement by ALC pursuant to Section 6.1(g)
after a breach by TI of this Agreement; or
(3) the termination of this Agreement by ALC pursuant to Section 6.1(d) as a
result of the failure to receive the requisite vote for approval of this
Agreement and the TI Merger by the stockholders of TI at the TI Stockholders'
Meeting.
(d) ALC shall pay TI a termination fee of $30,000,000 upon the earliest to
occur of the following events:
(1) the termination of this Agreement by TI pursuant to Section 6.1(f); or
(2) the termination of this Agreement by TI pursuant to Section 6.1(g) after
a breach by ALC of this Agreement; or
A-26
<PAGE>
(3) the termination of this Agreement by TI pursuant to Section 6.1(d) as a
result of the failure to receive the requisite vote for approval of this
Agreement and the ALC Merger by the shareholders of ALC at the ALC
Shareholders' Meeting.
(e) The expenses and fees, if applicable, payable pursuant to Sections
6.3(b), 6.3(c) and 6.3(d) shall be paid in immediately available funds within
one business day after the first to occur of any of the events described in
Section 6.3(b), 6.3(c) and 6.3(d); provided, however, that in no event shall
ALC or TI, as the case may be, be required to pay such expenses and fees to
the other if, immediately prior to the termination of this Agreement, the
party to receive such expenses and fees was in material breach of its
obligations under this Agreement.
(f) As used in this Agreement, "ALTERNATIVE TRANSACTION" means either (i) a
transaction pursuant to which any person (or group of persons) (a "THIRD
PARTY") other than ALC or TI acquires more than 15% of the outstanding shares
of ALC Common Stock or TI Common Stock, as the case may be, pursuant to a
tender offer or exchange offer or otherwise, (ii) a merger or other business
combination involving ALC or TI pursuant to which any Third Party acquires
more than 15% of the outstanding equity securities of ALC or TI or the entity
surviving such merger or business combination, (iii) any other transaction
pursuant to which any Third Party acquires control of assets (including for
this purpose the outstanding equity securities of Subsidiaries of ALC or TI,
and the entity surviving any merger or business combination including any of
them) of ALC or TI having a fair market value (as determined by the Board of
Directors of ALC or TI, as the case may be, in good faith) equal to more than
15% of the fair market value of all the assets of ALC or TI and its
Subsidiaries taken as a whole immediately prior to such transaction, or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
Section 6.4 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Combination by the stockholders of TI, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of all of the parties
hereto.
Section 6.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto by the other
parties hereto and (iii) waive compliance with any of the agreements or
conditions contained herein for their benefit. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Article II, Sections 6.2, 6.3,
the last sentence of Section 6.4 and Article VII, and the agreements of the
Affiliates of ALC and TI delivered pursuant to Section 4.9. The
Confidentiality Agreement shall survive the execution and delivery of this
Agreement.
Section 7.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
A-27
<PAGE>
(a) if to ALC, to:
Allegheny Ludlum Corporation
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222
Attention: Chairman
Telecopy No. (412) 394-3010
with a copy to:
Jon D. Walton
Vice President-General Counsel and Secretary
Allegheny Ludlum Corporation
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222
Telecopy No. (412) 394-3010
and to:
Ronald D. West
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222
Telecopy No. (412) 355-6501
(b) if to TI, to:
Teledyne, Inc.
2049 Century Park East
Los Angeles, California 90067-3101
Attention: Chairman and Chief Executive Officer
Telecopy No. (310) 551-4204
with copies to:
Judith R. Nelson, Secretary
Elizabeth J. Keefer, General Counsel
Teledyne, Inc.
2049 Century Park East
Los Angeles, California 90067-3101
Telecopy No. (310) 551-4366
and to:
Edmund M. Kaufman
Irell & Manella LLP
333 South Hope Street
Los Angeles, California 90071-3042
Telecopy No. (213) 229-0515
Section 7.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "INCLUDE,"
"INCLUDES" or "INCLUDING" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The phrases "THE DATE OF THIS
AGREEMENT,"
A-28
<PAGE>
"THE DATE HEREOF," and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to April 1, 1996.
Section 7.4 Knowledge. All references in this Agreement or any certificate
to the knowledge of ALC or TI shall mean the knowledge of any officer or
officers of such party (but only the officer executing any such certificate,
in the case of a certificate) and shall reflect reasonable inquiry by such
officer or officers in connection specifically with respect to the statement
made to such knowledge.
Section 7.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 7.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) and the
Stockholder Agreements constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and, except for the provisions of
Section 4.12, are not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder.
Section 7.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
Section 7.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 7.9 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner to the end that transactions contemplated hereby are fulfilled to the
extent possible.
Section 7.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein, nor shall any single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
A-29
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers, thereunto duly authorized, as of the date first set
forth above.
ALLEGHENY TELEDYNE INCORPORATED ALLEGHENY LUDLUM CORPORATION
By: /s/ Richard P. Simmons By: /s/ Richard P. Simmons
--------------------------- ---------------------------
Title: Chairman of the Board Title: Chairman
/s/ William P. Rutledge TELEDYNE, INC.
- ------------------------------
Title: President and Chief Executive Officer
By: /s/ William P. Rutledge
---------------------------
ALS MERGER CORPORATION
Title: Chairman of the Board and
Chief Executive Officer
By: /s/ Richard P. Simmons
---------------------------
Title: President
TDY MERGER, INC.
By: /s/ William P. Rutledge
---------------------------
Title: President
A-30
<PAGE>
ANNEX A
RESTATED CERTIFICATE OF INCORPORATION
OF
ALLEGHENY TELEDYNE INCORPORATED
ONE: The name of the corporation is Allegheny Teledyne 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 Six Hundred Fifty Million
(650,000,000), consisting of Six Hundred Million (600,000,000) shares of
Common Stock, par value ten cents ($.10) per share (the "Common Stock"), and
Fifty Million (50,000,000) shares of Preferred Stock, par value ten cents
($.10) 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.
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.
<PAGE>
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
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 (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.
2
<PAGE>
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 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 (i) 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 (ii) 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 or 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 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.
G. Amendment. Any repeal or modification of this Article EIGHT shall not
change the rights of any officer or director 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.
3
<PAGE>
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, Clause (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 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, 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 Securities Exchange Act of
1934, as amended (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
4
<PAGE>
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 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 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.
5
<PAGE>
(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 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
6
<PAGE>
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.
7
<PAGE>
ANNEX B
-------------------------------------------------------------------------
ALLEGHENY TELEDYNE INCORPORATED
AMENDED AND RESTATED BYLAWS
-------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I OFFICES.......................................................... 1
Section 1. Registered Office............................................. 1
Section 2. Corporate Headquarters........................................ 1
Section 3. 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........................................... 1
Section 6. Proxies and Voting............................................ 2
Section 7. Stock List.................................................... 2
ARTICLE III BOARD OF DIRECTORS............................................. 2
Section 1. Duties and Powers............................................. 2
Section 2. Number and Term of Office..................................... 2
Section 3. Vacancies..................................................... 3
Section 4. Meetings...................................................... 3
Section 5. Quorum........................................................ 4
Section 6. Actions of Board Without a Meeting............................ 4
Section 7. Meetings by Means of Conference Telephone..................... 4
Section 8. Committees.................................................... 4
Section 9. Compensation.................................................. 4
Section 10. Removal...................................................... 4
ARTICLE IV OFFICERS........................................................ 4
Section 1. General....................................................... 4
Section 2. Election; Term of Office...................................... 4
Section 3. Chairman of the Board......................................... 5
Section 4. Chief Executive Officer....................................... 5
Section 5. President..................................................... 5
Section 6. Vice President................................................ 5
Section 7. Secretary..................................................... 5
Section 8. Assistant Secretaries......................................... 6
Section 9. Treasurer..................................................... 6
Section 10. Assistant Treasurers......................................... 6
Section 11. Other Officers............................................... 6
ARTICLE V STOCK............................................................ 6
Section 1. Form of Certificates.......................................... 6
Section 2. Signatures.................................................... 6
Section 3. Lost Certificates............................................. 6
Section 4. Transfers..................................................... 7
Section 5. Record Date................................................... 7
Section 6. Beneficial Owners............................................. 7
Section 7. Voting Securities Owned by the Corporation.................... 7
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VI NOTICES......................................................... 7
Section 1. Notices....................................................... 7
Section 2. Waiver of Notice.............................................. 7
ARTICLE VII GENERAL PROVISIONS............................................. 8
Section 1. Dividends..................................................... 8
Section 2. Disbursements................................................. 8
Section 3. Corporation Seal.............................................. 8
ARTICLE VIII AMENDMENTS.................................................... 8
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
ALLEGHENY TELEDYNE 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. Corporate Headquarters. The corporate headquarters of the
Corporation shall be in the City of Pittsburgh, County of Allegheny,
Commonwealth of Pennsylvania.
Section 3. 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 from time to time determine.
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 which meetings
the stockholders shall elect by a plurality vote a Board of 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, and for the
purposes specified, in the Corporation's Certificate of Incorporation.
Section 4. Notice of Meetings. Written notice of the place, date, and time
of all meetings 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 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 voting power 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 chairman of
the meeting or the holders of a majority of the voting power 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 without notice other than announcement
at the meeting, until a quorum shall be present or represented.
<PAGE>
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 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 at the
discretion of the chairman 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 chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law or the Certificate of Incorporation, all
other matters shall be determined by the affirmative vote of the holders of a
majority of the shares of stock entitled to vote represented in person or by
proxy at the meeting.
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
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 and affairs 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. The Board of Directors shall consist
of one (1) or more members. 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 or the
Certificate of Incorporation. 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 the annual meetings of stockholders. Any director may resign at
any time upon written notice to the Corporation. Directors need not be
stockholders.
2
<PAGE>
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 the directors, or until his or her earlier resignation or
removal; 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 the directors, or until his or her earlier resignation or
removal; 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 the directors, or until his or her earlier resignation or
removal, 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 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.
(c) No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
This Article III, Section 3 is 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.
3
<PAGE>
Section 5. Quorum. Except as may be otherwise specifically provided by law,
the Certificate of Incorporation or these Bylaws, at all meetings of the Board
of Directors, a majority of the total number of directors 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 directors then in office, 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. 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 and expense reimbursement of directors including the
authority to fix the compensation and expense reimbursement of members of
special or standing committees and the chairmen of such committees. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 10. Removal. Any director or directors may be removed from office
only as provided in the Corporation's Certificate of Incorporation.
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, and a President, such number of Vice Presidents as the
Board of Directors shall elect from time to time (one or more of whom may be
designated Executive Vice Presidents), 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 from time to
time appoint. 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
4
<PAGE>
(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 at any time, with or without cause, by the affirmative
vote of a majority of directors then in office, remove any officer.
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
direction of 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. In the
absence of the Chairman of the Board or the Vice Chairman of the Board (if
any) or in the event of the inability of or refusal to act by the Chairman of
the Board or the Vice Chairman of the Board (if any), or if the Board has not
designated a Chairman or Vice Chairman, the Chief Executive Officer (if a
member of the Board of Directors) 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.
Section 5. President. The President shall have general and active management
of the business of the Corporation, subject to the direction of the Board of
Directors, 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.
Section 6. Vice President. In the absence of the President or in the event
of inability of or refusal to act by the President, the Vice President (or in
the event there be more than one vice president, the vice presidents in the
order designated by the 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 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
5
<PAGE>
kept or filed are properly kept or filed, as the case may be except as
otherwise provided in the Bylaws of the Corporation or by resolution of the
Board of Directors.
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 in the absence of
the Secretary or in the event of the inability of or refusal to act by the
Secretary, the Assistant Secretary (or if there be more than one Assistant
Secretary, the Assistant Secretaries in the order designated by the Board of
Directors or in the absence of any designation, then in order of their
election) 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 time to time may be assigned to them by the Board
of Directors, the President, or the Treasurer, and in the absence of the
Treasurer or in the event of the inability of or refusal to act by the
Treasurer, the Assistant Treasurer (or if there be more than one Assistant
Treasurer, the Assistant Treasurers in the order designated by the Board of
Directors or in the absence of any designation, then in the order of their
election) 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 from time to time
may be assigned to them by the Board of Directors. The Board of Directors may
delegate to any other 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. Every holder 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
6
<PAGE>
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
by such person's attorney lawfully constituted in writing and upon the
surrender of the certificate 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, telex or cable or
by overnight delivery or courier service and such 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, 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,
7
<PAGE>
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 from time to time designate.
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 stated within an Article 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.
8
<PAGE>
ANNEX C
DIRECTORS OF ATI:
Initial Directors of ATI:
Richard P. Simmons
Robert P. Bozzone
Arthur H. Aronson
Paul S. Brentlinger
C. Fred Fetterolf
Thomas Marshall
W. Craig McClelland
Charles J. Queenan, Jr.
James E. Rohr
Frank V. Cahouet
Diane C. Creel
William G. Ouchi
George A. Roberts
William P. Rutledge
Fayez Sarofim
Henry E. Singleton
Ms. Creel, Messrs. Fetterolf, Marshall and Simmons and Dr. Singleton will
be members of a class that will serve an initial term expiring at the first
annual meeting of stockholders of ATI to be held after the Effective Time;
Messrs. Aronson, Brentlinger, Rohr and Sarofim and Drs. Ouchi and Roberts
will be members of a class that will serve an initial term expiring at the
second annual meeting of stockholders of ATI to be held after the Effective
Time; and Messrs. Bozzone, Cahouet, McClelland, Queenan and Rutledge will
be members of a class that will serve an initial term expiring at the third
annual meeting of stockholders of ATI to be held after the Effective Time.
If, prior to the Effective Time, any of Messrs. Simmons, Bozzone, Aronson,
Brentlinger, Fetterolf, Marshall, McClelland, Queenan or Rohr shall die or
otherwise be unable or unwilling to serve, then a substitute for each such
person shall be named by ALC. If, prior to the Effective Time, any of Ms.
Creel or Messrs. Cahouet, Rutledge or Sarofim, or Drs. Ouchi, Roberts or
Singleton shall die or otherwise be unable or unwilling to serve, then a
substitute for each such person shall be named by TI.
OFFICERS OF ATI:
Chairman of the Board and Chairman of the Executive Committee: Richard P.
Simmons Vice Chairman of the Board: Robert P. Bozzone President and Chief
Executive Officer: William P. Rutledge Executive Vice President: Arthur H.
Aronson Senior Vice President and Chief Financial Officer: James L. Murdy
Vice President--General Counsel and Secretary: Jon D. Walton
<PAGE>
ANNEX D
[FORM OF AFFILIATE AGREEMENT]
, 1996
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222
Ladies and Gentlemen:
The undersigned has been advised that as of the date hereof the undersigned
may be deemed to be an "affiliate" of Allegheny Ludlum Corporation, a
Pennsylvania corporation ("ALC"), or Teledyne, Inc., a Delaware corporation
("TI"), as the term "affiliate" is (i) defined for purposes of paragraphs (c)
and (d) of Rule 145 of the Rules and Regulations (the "Rules and Regulations")
of the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), and/or (ii) used in and for
purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Amended and Restated Agreement and
Plan of Merger and Combination, dated as of April 1, 1996 (the "Agreement"),
among Allegheny Teledyne Incorporated, a Delaware corporation ("ATI"), ALC,
ALS Merger Corporation, a Pennsylvania corporation, TI and TDY Merger, Inc., a
Delaware corporation, at the Effective Time (as defined in the Agreement) ALC
and TI will each become a wholly owned subsidiary of ATI.
As a result of the Combination (as defined in the Agreement), the
undersigned may receive shares of Common Stock, par value $0.10 per share
("ATI Common Stock"), of ATI. The undersigned would receive such shares in
exchange for shares of Common Stock, par value $0.10 per share, of ALC or
shares of Common Stock, par value $1.00 per share, of TI owned by the
undersigned.
The undersigned hereby represents and warrants to, and covenants with, ATI
that in the event the undersigned receives any ATI Common Stock in the
Combination:
(A) The undersigned shall not make any sale, transfer or other
disposition of the ATI Common Stock in violation of the Act or the Rules
and Regulations.
(B) The undersigned has carefully read this letter and discussed its
requirements and other applicable limitations upon the undersigned's
ability to sell, transfer or otherwise dispose of the ATI Common Stock, to
the extent the undersigned has felt it necessary, with the undersigned's
counsel.
(C) The undersigned has been advised that the issuance of shares of ATI
Common Stock to the undersigned in the Combination has been registered
under the Act by a Registration Statement on Form S-4. However, the
undersigned has also been advised that because (i) at the time of the
Combination's submission for a vote of the stockholders of ALC or TI the
undersigned may be deemed an affiliate of ALC or TI, as the case may be,
and (ii) the distribution by the undersigned of the ATI Common Stock has
not been registered under the Act, the undersigned may not sell, transfer
or otherwise dispose of ATI Common Stock issued to the undersigned in the
Combination unless (a) such sale, transfer or other disposition has been
registered under the Act, (b) such sale, transfer or other disposition is
made in conformity with the volume and other applicable limitations imposed
by Rule 145 under the Act, or (c) in the opinion of counsel reasonably
acceptable to ATI, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
<PAGE>
Allegheny Teledyne Incorporated
, 1996
Page 2
(D) The undersigned understands that ATI will be under no obligation to
register the sale, transfer or other disposition of the ATI Common Stock by
the undersigned or on the undersigned's behalf under the Act or to take any
other action necessary in order to make compliance with an exemption from
such registration available.
(E) The undersigned understands that stop transfer instructions will be
given to ATI's transfer agent with respect to the ATI Common Stock owned by
the undersigned and that there may be placed on the certificates for the
ATI Common Stock issued to the undersigned, or any substitutions therefor,
a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 under the Securities Act of 1933 applies.
The shares represented by this certificate may only be transferred in
accordance with the terms of a letter agreement dated , 1996, a
copy of which agreement is on file at the principal offices of
Allegheny Teledyne Incorporated."
(F) The undersigned also understands that unless the transfer by the
undersigned of the undersigned's ATI Common Stock has been registered under
the Act or is a sale made in conformity with the provisions of this letter,
ATI reserves the right, in its sole discretion, to place the following
legend on the certificates issued to any transferee of shares from the
undersigned:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and were acquired from a person who
received such shares in a transaction to which Rule 145 under the
Securities Act of 1933 applies. The shares have been acquired by the
holder not with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933
and may not be offered, sold, pledged or otherwise transferred except
in accordance with an exemption from the registration requirements of
the Securities Act of 1933."
It is understood and agreed that the legend set forth in paragraph E or F
above shall be removed by delivery of substitute certificates without such
legend if the undersigned shall have delivered to ATI (i) a copy of a letter
from the staff of the Commission, or an opinion of counsel, in form and
substance reasonably satisfactory to ATI to the effect that such legend is not
required for purposes of the Act or (ii) reasonably satisfactory evidence or
representations that the shares represented by such certificates are being or
have been transferred in a transaction made in conformity with the provisions
of Rule 145.
2
<PAGE>
Allegheny Teledyne Incorporated
, 1996
Page 3
The undersigned further represents and warrants to, and covenants with, ATI
that the undersigned did not, within the 30 days prior to the Effective Time
(as defined in the Agreement), sell, transfer or otherwise dispose of any
shares of the Common Stock of either ALC or TI held by the undersigned, and
that the undersigned will not sell, transfer or otherwise dispose of the ATI
Common Stock received by the undersigned in the Combination until after such
time as results covering at least 30 days of combined operations of ALC and TI
have been published by ATI within the meaning of Section 201.01 of the
Commission's Codification of Financial Reporting Policies.
Very truly yours,
Acknowledged this day of , 1996.
ALLEGHENY TELEDYNE INCORPORATED
By:
-------------------------------
Name:
3
<PAGE>
ANNEX E
ALLEGHENY TELEDYNE INCORPORATED
1996 INCENTIVE PLAN
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the Allegheny Teledyne Incorporated 1996
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 Allegheny Teledyne
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 Allegheny Teledyne Incorporated, to be effective as of the effective date of
the transactions described in the Amended and Restated Agreement and Plan of
Merger and Combination, dated as of April 1, 1996, by and among Allegheny
Teledyne Incorporated, Allegheny Ludlum Corporation, ALS Merger Corporation,
Teledyne, Inc. and TDY Merger, Inc. (the "Effective Date"), but is subject to
the approval of the stockholders of Allegheny Ludlum Corporation and Teledyne,
Inc. The Plan shall remain in effect until terminated by action of the Board;
provided, however, that no Incentive Stock Option may be granted hereunder
after the tenth anniversary of the Effective Date and the provisions of
Articles VII, VIII, IX and X with respect to performance-based awards to
"covered employees" under Section 162(m) of the Code shall expire as of the
fifth anniversary of the Effective Date.
ARTICLE II
DEFINITIONS
For the purpose of this Plan, capitalized terms shall have the following
meanings:
2.01 AWARD means any one or a combination of Non-Qualified Stock Options or
Incentive Stock Options described in Article VI, Stock Appreciation Rights
described in Article VI, Restricted Shares described in Article VII,
Performance Awards described in Article VIII, Awards of cash or any other Award
made under the terms of the Plan.
2.02 AWARD AGREEMENT means a written agreement between the Company and a
Participant or a written acknowledgment from the Company to a Participant
specifically setting forth the terms and conditions of an Award granted under
the Plan.
2.03 AWARD PERIOD means, with respect to an Award, the period of time set
forth in the Award Agreement during which specified target performance goals
must be achieved or other conditions set forth in the Award Agreement must be
satisfied.
2.04 BENEFICIARY means an individual, trust or estate who or which, by a
written designation of the Participant filed with the Company or by operation
of law, succeeds to the rights and obligations of the Participant under the
Plan and the Award Agreement upon the Participant's death.
2.05 BOARD means the Board of Directors of the Company.
<PAGE>
2.06 CHANGE IN CONTROL means, and shall be deemed to have occurred upon the
occurrence of, any one of the following events:
(a) The acquisition in one or more transactions, other than from the
Company, by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of a number
of Company Voting Securities in excess of 25% of the Company Voting
Securities unless such acquisition has been approved by the Board;
(b) Any election has occurred of persons to the Board that causes two-
thirds of the Board to consist of persons other than (i) persons who were
members of the Board on the Effective Date and (ii) persons who were
nominated for elections as members of the Board at a time when two-thirds
of the Board consisted of persons who were members of the Board on the
Effective Date; provided, however, that any person nominated for election
by a Board at least two-thirds of whom constituted persons described in
clauses (i) and/or (ii) or by persons who were themselves nominated by such
Board shall, for this purpose, be deemed to have been nominated by a Board
composed of persons described in clause (i);
(c) Approval by the stockholders of the Company of a reorganization,
merger or consolidation, unless, following such reorganization, merger or
consolidation, all or substantially all of the individuals and entities who
were the respective beneficial owners of the Outstanding Common Stock and
Company Voting Securities immediately prior to such reorganization, merger
or consolidation, following such reorganization, merger or consolidation
beneficially own, directly or indirectly, more than seventy five (75%) of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors or trustees, as the case may be, of
the entity resulting from such reorganization, merger or consolidation in
substantially the same proportion as their ownership of the Outstanding
Common Stock and Company Voting Securities immediately prior to such
reorganization, merger or consolidation, as the case may be; or
(d) Approval by the stockholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) a sale or other
disposition of all or substantially all the assets of the Company.
2.07 CODE means the Internal Revenue Code of 1986, as amended. References to
a section of the Code shall include that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes said
section.
2.08 COMMITTEE means the Committee defined in Section 3.01.
2.09 COMPANY means Allegheny Teledyne Incorporated, a Delaware corporation,
and its successors.
2.10 COMMON STOCK means Common Stock of the Company, par value $.10 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
<PAGE>
2.15 FAIR MARKET VALUE means, on any date, the average of the high and low
quoted sales prices of a share of Common Stock, as reported on the Composite
Tape for New York Stock Exchange Listed Companies on such date or, if there
were no sales on such date, on the last date preceding such date on which a
sale was reported.
2.16 INCENTIVE STOCK OPTION means a stock option within the meaning of
Section 422 of the Code.
2.17 MERGER means any merger, reorganization, consolidation, exchange,
transfer of assets or other transaction having similar effect involving the
Company.
2.18 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option.
2.19 OPTIONS means all Non-Qualified Stock Options and Incentive Stock
Options granted at any time under the Plan.
2.20 OUTSTANDING COMMON STOCK means, at any time, the issued and outstanding
shares of Common Stock.
2.21 PARTICIPANT means a person designated to receive an Award under the
Plan in accordance with Section 5.01.
2.22 PERFORMANCE AWARDS means Awards granted in accordance with Article
VIII.
2.23 PERFORMANCE GOALS means operating income, operating profit (earnings
from continuing operations before interest and taxes), earnings per share,
return on investment or working capital, return on stockholders' equity,
economic value added (the amount, if any, by which net operating profit after
tax exceeds a reference cost of capital), reductions in inventory, inventory
turns and on-time delivery performance, any one of which may be measured with
respect to the Company or any one or more of its Subsidiaries and divisions
and either in absolute terms or as compared to another company or companies,
and quantifiable, objective measures of individual performance relevant to the
particular individual's job responsibilities.
2.24 PLAN means the Allegheny Teledyne Incorporated 1996 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
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.
3
<PAGE>
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. The selection of
members of 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.
ARTICLE IV
SHARES
4.01 NUMBER OF SHARES ISSUABLE. The total number of shares initially
authorized to be issued under the Plan shall be 9,000,000 shares of Common
Stock. 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.
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
4
<PAGE>
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 $3,000,000 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.
(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 SHAREHOLDER. A Participant or a transferee of an Option
pursuant to Section 11.04 shall have no rights as a shareholder 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
5
<PAGE>
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.
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.
(B) DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and Stock
Appreciation Rights shall terminate after 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 as provided in Section 6.03(e),
following the Participant's Termination of Employment; or
(iii) In the case of an Incentive Stock Option, ten years from the
Date of Grant; or
6
<PAGE>
(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 OF EXERCISE TIME. The Committee, in its sole discretion,
shall have the right (but shall not in any case be obligated), exercisable
at any time after the Date of Grant, to permit the exercise of any Option
or Stock Appreciation Right prior to the time such Option or Stock
Appreciation Right would otherwise become exercisable under the terms of
the Award Agreement.
(D) EXTENSION OF EXERCISE TIME. In addition to the extensions permitted
under Section 6.03(e) in the event of Termination of Employment, the
Committee, in its sole discretion, shall have the right (but shall not in
any case be obligated), exercisable on or at any time after the Date of
Grant, to permit any Option or Stock Appreciation Right granted under this
Plan to be exercised after its expiration date described in Section
6.03(e), subject, however, to the limitations described in Section
6.03(b)(i), (iii), and (iv).
(E) EXERCISE OF OPTIONS OR STOCK APPRECIATION RIGHTS UPON TERMINATION OF
EMPLOYMENT.
(i) TERMINATION OF VESTED OPTIONS AND STOCK APPRECIATION RIGHTS UPON
TERMINATION OF EMPLOYMENT.
(A) TERMINATION. In the event of Termination of Employment of a
Participant other than by reason of death, disability or Retirement,
the right of the Participant to exercise the Option or Stock
Appreciation Right under the Plan shall terminate on the 90th day (or,
if such day is not a business day, the next business day) after the
date of such Termination of Employment, unless the exercise period is
extended by the Committee in accordance with Section 6.03(d) or Section
6.03(e)(ii) applies. In no event, however, may any Option or Stock
Appreciation Right be exercised later than the date of expiration of
the Option determined pursuant to Section 6.03(b)(i), (iii) or (iv).
(B) DISABILITY OR RETIREMENT. In the event of a Participant's
Termination of Employment by reason of disability or Retirement, the
right of the Participant to exercise the Options or Stock Appreciation
Rights which he or she was entitled to exercise upon Termination of
Employment (or which became exercisable at a later date pursuant to
Section 6.03(e)(ii)) shall terminate two years after the date of such
Termination of Employment, unless the exercise period is extended by
the Committee in accordance with Section 6.03(d). In no event, however,
may any Option or Stock Appreciation Right be exercised later than the
date of expiration of the Option determined pursuant to Section
6.03(b)(i), (iii) or (iv).
(C) DEATH. In the event of the death of a Participant while employed
by the Company or a Subsidiary or within the additional period of time
from the date of the Participant's Termination of Employment and prior
to the expiration of the Option or Stock Appreciation Right as may be
permitted in Section 6.03(e)(i)(B) or Section 6.03(d) above, to the
extent the right to exercise the Option or Stock Appreciation Right
accrued as of the date of such Termination of Employment and did not
expire during such additional period and prior to the Participant's
death, the right of the Participant's Beneficiary to exercise the
Option or Stock Appreciation Right under the Plan shall terminate upon
the expiration of three years from the date of the Participant's death
(but in no event more than two years from the date of the Participant's
Termination of Employment by reason of disability or Retirement),
unless the exercise period is extended by the Committee in accordance
with Section 6.03(d). In no event, however, may any Option or Stock
Appreciation Right be exercised later than the date of expiration of
the Option determined pursuant to Section 6.03(b)(i), (iii) or (iv).
(ii) TERMINATION OF UNVESTED OPTIONS OR STOCK APPRECIATION RIGHTS UPON
TERMINATION OF EMPLOYMENT. Subject to Section 6.03(c), (i) to the extent
the right to exercise an Option or a Stock Appreciation Right granted to an
employee of the Company or any of its Subsidiaries, or any portion thereof,
has not accrued as of the date of Termination of Employment, such right
shall expire at the date of such Termination of Employment and (ii) to the
extent the right to exercise an Option or a Stock Appreciation Right
granted to a non-employee, or any portion thereof, has not accrued as of
the date on which such non-employee ceases, in the judgment of the
Committee, to render significant services to the Company or any of the
Subsidiaries such right shall expire at the date of such cessation.
Notwithstanding
7
<PAGE>
the foregoing, the unvested Options and Stock Appreciation Rights of a
Participant who terminates employment and who continues to render
significant services to the Company or any of its Subsidiaries after his or
her Termination of Employment shall continue to vest during the period in
which the individual continues to render such services.
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 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
8
<PAGE>
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) SHAREHOLDER 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 shareholder of the Company
with respect to all shares 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 right to the delivery of share
certificate or certificates for such shares in accordance with Section
7.01(d).
9
<PAGE>
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.
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,
10
<PAGE>
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 8.01(d), within 30 days after such Change in Control.
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
11
<PAGE>
(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.
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 1996, 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
12
<PAGE>
benefit of individuals who are Participants hereunder as the Board or
Committee, as the case may be, deems appropriate and in the best interests
of the Company.
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 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
13
<PAGE>
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 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
14
<PAGE>
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.
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 Rule 16b-3 or the Code,
unless such compliance is no longer desired under Rule 16b-3, 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 made under
the Performance Share Plan for Key Employees of Allegheny Ludlum Corporation
and Subsidiaries (As Amended and Restated) (the "Allegheny Ludlum Performance
Plan") and the Teledyne, Inc. Senior Executive Performance Plan (the "Teledyne
SEP Plan"). All decisions with respect to the making of awards, and the
payment of such awards in shares of Common Stock, under the Allegheny Ludlum
Performance Plan or the Teledyne SEP Plan (each a "Subsidiary Plan") shall be
made by the body in whom the power to administer the applicable Subsidiary
Plan is vested from time to time and shall be complied with by the Committee
and the Company. All shares of Common Stock issued in payment of an award
under either Subsidiary Plan shall be governed exclusively by the terms of
such award, and any terms of this Plan inconsistent therewith shall be
inapplicable to such shares.
15
<PAGE>
ANNEX F
ALLEGHENY TELEDYNE INCORPORATED
1996 NON-EMPLOYEE DIRECTOR STOCK COMPENSATION PLAN
ARTICLE I. GENERAL
1.01 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 Fees, 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
1,000 shares of Common Stock.
1.02 Adoption and Term. The Plan has been approved by the Board and, subject
to approval by the stockholders of Allegheny Ludlum Corporation and Teledyne,
Inc., respectively, 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.
1.03 Definitions. As used herein the following terms have the following
meanings:
(a) "Annual Options" means the Stock Options issuable under Section 4.04(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 $0.10 per share, of
the Company.
(e) "Company" means Allegheny Teledyne 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.
(g) "Director" means a member of the Board.
(h) "Director's Fees" means the Director's Retainer Fee Payments and the
Director's Meeting Fee Payments.
(i) "Director's Meeting Fee Payment" means the dollar value of the fees
which the Non-Employee Director would be entitled to receive for
attending meetings of the Board or any committee of the Board or for
serving as the chair of the Board or any committee of the Board.
(j) "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 as of a particular Quarterly Payment Date, as
established by the Board and in effect from time to time.
(k) "Effective Date" means the date on which the "Effective Time" occurs.
The term "Effective Time" shall have the meaning set forth in the
Amended and Restated Agreement and Plan of Merger and Combination,
dated as of April 1, 1996, by and among the Company, Allegheny Ludlum
Corporation, ALS Merger Corporation, Teledyne, Inc. and TDY Merger,
Inc.
(l) "Employee" means any employee of the Company or an affiliate.
(m) "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
<PAGE>
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.
(n) "Meeting Fee Options" means the Stock Options issuable under Section
4.04(c) of the Plan.
(o) "Non-Employee Director" means a Director who is not an Employee.
(p) "Non-Employee Director Notice" means a written notice delivered in
accordance with Section 4.02.
(q) "Plan" means this Allegheny Teledyne Incorporated 1996 Non-Employee
Director Stock Compensation Plan, as it may hereafter be amended from
time to time.
(r) "Quarterly Payment Date" means each of the quarterly dates on which the
Director's Fee Payment is paid by the Company.
(s) "Retainer Fee Options" means the Stock Options issuable under Section
4.04(b) of the Plan.
(t) "Stock Options" means options to purchase shares of Common Stock of the
Company issuable hereunder.
1.04 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 5.01 hereof,
the aggregate amount of such stock which may be issued or subject to Stock
Options issued hereunder shall not exceed 700,000. 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
2.01 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 under the Securities Exchange Act of 1934, as amended.
ARTICLE III. PARTICIPATION
3.01 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
4.01 General. The Director's Retainer Fee Payment shall be paid to each Non-
Employee Director, as of each Quarterly 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. Director's Meeting Fee payments shall be paid
reasonably
2
<PAGE>
promptly following the date of the meeting to which such payments relate. If
for the applicable Compensation Year such Non-Employee Director has not made
an election to receive Stock Options or Common Stock in lieu of at least one-
fourth (1/4) of the Director's Retainer Fee Payment pursuant to Section 4.02,
three-fourths (3/4) of the Director's Retainer Fee Payment shall be paid in
cash and one-fourth (1/4) of the Director's Retainer Fee Payment shall be paid
in the form of Common Stock.
4.02 Non-Employee Director Notice. Non-Employee Directors may file with the
Committee or its designee at least six months prior to the commencement of a
Compensation Year, and at such other times as the Board may approve, a Non-
Employee Director Notice electing to receive (a) a specified portion (but not
below twenty five percent (25%)) of his or her Director's Retainer Fee Payment
in the form of Stock Options and/or Common Stock, and/or (b) a specified
portion of his or her Director's Meeting Fee Payment in the form of Stock
Options and/or Common Stock. 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 at least six
months in advance of receiving the corresponding Common Stock or Stock Options
or otherwise as the Board may permit and (i) the director making such election
became a Non-Employee Director less than six months before the commencement of
the subject Compensation Year, or (ii) such elections relate to the Common
Stock or Stock Options for service in calendar years 1996 and 1997. In the
case of such irrevocable election, the Common Stock and/or Stock Options shall
be granted at the later of (i) the first business day which is six months and
one day after the date of the director's election to receive a Common Stock or
Stock Option or (ii) the date on which Stock Options or shares of Common Stock
otherwise would be issued.
4.03 Conversion to Shares.
(a) Director's Retainer Fee Payment. Each Non-Employee Director who pursuant
to Section 4.01 or 4.02 is to receive Common Stock as 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 and as of the applicable Quarterly
Payment Date, shall receive as of each Quarterly 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 Quarterly Payment Date. Cash shall be paid in
lieu of any fractional shares.
(b) Director's Meeting Fee Payment. Each Non-Employee Director who has duly
filed a Non-Employee Director Notice in accordance with Section 4.02 with
respect to a Compensation Year and elected to receive all or any portion of
the Director's Meeting Fee Payment in the form of Common Stock shall receive
on the first business day in January of the next following Compensation Year a
number of shares of Common Stock equal to the quotient obtained by dividing
(i) the amount of the Director's Meeting Fee Payment for the Compensation Year
to be paid in the form of Common Stock by (ii) the Fair Market Value of the
Common Stock per share on the day immediately preceding the date of issuance
of such Common Stock. Cash shall be paid in lieu of any fractional shares.
4.04 Stock Options.
(a) Annual Option Grants. Conditioned on the occurrence of the Effective
Time, an Annual Option covering 1,000 shares of Common Stock is hereby granted
to each Non-Employee Director as of (and with the date of grant for all
purposes of the Plan being), the first trading day for Common Stock following
the Effective Date. Thereafter, an Annual Option covering 1,000 shares of
Common Stock will be granted to each Non-Employee Director automatically at
the conclusion of each Company annual meeting. If, after the date of adoption
of this Plan, a director first becomes a Non-Employee Director on a date other
than an annual meeting date, an Annual Option covering 1,000 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.
3
<PAGE>
(b) Retainer Fees Options. Retainer Fees Options for a Compensation Year
will be granted on January 2 of such Compensation Year (or if such January 2
is not a business day, on the next succeeding business day) for service during
such Compensation Year. The number of shares of Common Stock to be subject to
a Retainer Fees 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 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) Meeting Fee Options. Meeting Fee Options for a Compensation Year will be
granted on January 2 of the next following Compensation Year (or if such
January 2 is not a business day, on the next succeeding business day) after
the conclusion of the Compensation Year. The number of shares of Common Stock
to be subject to a Meeting 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 portion of the Director's Meeting Fee Payment elected to be received
as Stock Options by the Non-Employee Director. The purchase price of each
share covered by each Meeting Fee Option shall be equal to the Fair Market
Value of a share of Common Stock on the date of grant of the Meeting Fee
Option multiplied by 0.6666.
(d) Duration and Exercise of Stock Options. Subject to Section 4.04(g)
below, Annual Options and Retainer Fee Options become exercisable on the first
anniversary of the date on which they were granted and Meeting Fee Options
become exercisable immediately upon grant. 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.
(e) 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 owned by
the 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.
(f) 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 (i) transfer is permitted by Rule 16b-3 promulgated under the Exchange
Act, and (ii) approved by the Committee. Subject to the foregoing, Stock
Options shall not be assigned, pledged or otherwise encumbered by the holder
thereof, either voluntarily or by operation of law.
(g) Termination of Directorship. All rights of a director in a Stock Option,
to the extent that the Stock Option has not been exercised, shall terminate
three months after the date of the termination of his or her services as a
director for any reason other than (i) the death of the director, (ii)
cessation of services as a director because the individual, although nominated
by the Board, is not elected by the stockholders to the Board, or (iii)
retirement because of total and permanent disability as defined in Section
22(e)(3) of the Code (collectively, "Termination Events"). If a director
ceases to be a director of the Company because of a Termination Event, (i) the
nearest whole number of unexercisable Stock Options shall immediately become
exercisable which equals the number of full months actually served by the
director as a Non-Employee Director during the Compensation Year at issue
divided by 12, multiplied by the number of unexercisable Stock Options on the
date of the Termination Event. The remaining unexercisable portion of all such
Stock Options shall terminate. All then exercisable Stock Options shall expire
twelve months after the date of a Termination Event.
4
<PAGE>
ARTICLE V. MISCELLANEOUS
5.01 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.
5.02 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, increase the number of shares of Common Stock available for issuance
hereunder or make any other amendment which requires shareholder approval
under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended, unless the Board determines that such compliance is no longer
desired, or under any applicable law. 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.
5.03 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.
5.04 No Guarantee of Membership. Nothing in the Plan shall confer upon a
Non-Employee Director any right to continue to serve as a Director.
5.05 Construction. Words of any gender used in the Plan shall be construed
to include any other gender, unless the context requires otherwise.
5
<PAGE>
SALOMON BROTHERS INC APPENDIX B
Seven World Trade Center
New York, New York 10048
212-783-7000
----------------
SALOMON BROTHERS
--------------
April 1, 1996
Board of Directors
Allegheny Ludlum Corporation
1000 Six PPG Place
Pittsburgh, PA 15222
Members of the Board:
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of Common Stock, par
value $0.10 per share ("Company Common Stock"), of Allegheny
Ludlum Corporation (the "Company") of the Proposed
Transaction (as defined below). We understand that the
Company, Teledyne, Inc. ("Teledyne") and a newly formed
holding company to be known as Allegheny Teledyne
Incorporated ("Newco") have entered into an Agreement and
Plan of Merger and Combination dated as of April 1, 1996
(the "Agreement"). Pursuant to the Agreement, (i) newly
formed subsidiaries of Newco will be merged with and into
Salomon each of the Company and Teledyne, (ii) each share of Company
Brothers Inc Common Stock (subject to certain exceptions) will be
& Worldwide converted into one share of Common Stock, par value $0.10
Affiliates per share ("Newco Common Stock"), of Newco and (iii) each
Atlanta share of Common Stock, par value $1.00 per share, of
Berlin Teledyne (subject to certain exceptions) will be converted
Boston into 1.925 of a share of Newco Common Stock (the "Proposed
Chicago Transaction").
Dallas
Frankfurt In arriving at our opinion, we have reviewed certain
Hong Kong publicly available business and financial information
London relating to the Company and Teledyne, as well as certain
Los Angeles other information, including financial projections, provided
Madrid to us by the Company and Teledyne. We have discussed the
Melbourne past and current operations and financial condition and
New York prospects of the Company and Teledyne with members of senior
Osaka management of such companies. We have also considered such
Paris other information, financial studies, analyses,
San Francisco investigations and financial, economic, market and trading
Seoul criteria as we deemed relevant.
Singapore
Sydney We have assumed and relied on the accuracy and completeness
Taipei of the information reviewed by us for the purpose of this
Tokyo opinion and we have not assumed any responsibility for any
Toronto independent verification of such information or for any
Zurich
B-1
<PAGE>
SALOMON BROTHERS INC
April 1, 1996
Page 2
----------------
SALOMON BROTHERS
--------------
independent evaluation or appraisal of the assets of the
Company or Teledyne. With respect to the Company's and
Teledyne's financial projections, we have assumed that they
have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the Company's
and Teledyne's management and we express no opinion with
respect to such projections or the assumptions on which they
are based.
Our opinion necessarily is based upon business, market,
economic and other conditions as they exist and can be
evaluated on the date hereof. Our opinion as expressed below
does not imply any conclusion as to the likely trading range
for Newco Common Stock following the consummation of the
Proposed Transaction, which may vary depending upon, among
other factors, changes in interest rates, dividend rates,
market conditions, general economic conditions and other
factors that generally influence the price of securities.
Our opinion does not address the Company's underlying
business decision to effect the Proposed Transaction. Our
opinion is directed only to the fairness, from a financial
point of view, of the Proposed Transaction and does not
constitute a recommendation concerning how holders of
Company Common Stock should vote with respect to the
Proposed Transaction.
In rendering our opinion we have assumed that, in the course
of obtaining the necessary regulatory approvals for the
Proposed Transaction, no restrictions will be imposed that
would have a material adverse effect on the Company,
Teledyne or the contemplated benefits of the Proposed
Transaction. We understand that the Proposed Transaction
will qualify as a tax-free reorganization under the Internal
Revenue Code of 1986, as amended, and that, for accounting
purposes, the Proposed Transaction will be accounted for as
a pooling of interests in accordance with generally accepted
accounting principles as described in Accounting Principles
Board Opinion Number 16.
We have acted as financial advisor to the Board of Directors
of the Company in connection with the Proposed Transaction
and will receive a fee from the Company for our services, a
portion of which is contingent upon consummation of the
Proposed Transaction. We have previously rendered certain
investment banking and financial advisory services to the
Company, including co-managing the Company's $150 million
6.95% debentures and $100 million 5.875% convertible
debentures offerings and acting as agent in the Company's
share repurchase program, for which we have received
customary compensation. In addition, in the ordinary course
of our business, we may actively trade the securities of the
Company and Teledyne for our
B-2
<PAGE>
SALOMON BROTHERS INC
April 1, 1996
Page 3
----------------
SALOMON BROTHERS
--------------
own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position
in such securities.
Based upon and subject to the foregoing, it is our opinion
that, as of the date hereof, the Proposed Transaction is
fair to the holders of Company Common Stock from a financial
point of view.
Very truly yours,
/s/ Salomon Brothers Inc
B-3
<PAGE>
GOLDMAN, SACHS & CO. | 85 BROAD STREET | NEW YORK, NEW YORK 10004
TEL: 212-902-1000
APPENDIX C
[LOGO OF GOLDMAN SACHS]
PERSONAL AND CONFIDENTIAL
- -------------------------
April 1, 1996
Board of Directors
Teledyne, Inc.
2049 Century Park East
Los Angeles, California 90087-3101
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $0.01 per share (the "Shares"),
of Teledyne, Inc. (the "Company") of the exchange ratio of 1.925 shares of
Common Stock, par value $0.10 per share (the "Newco Common Stock"), of
XYZ/Power, Inc. ("Newco"), a corporation formed for the purpose of becoming
the parent company of the Company and Allegheny Ludlum Corporation ("Allegheny
Ludlum"), to be received for each Share (the "Exchange Ratio") pursuant to the
Agreement and Plan of Merger and Combination dated as of April 1, 1996 by and
among Newco, Allegheny Ludlum and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. We are familiar with the Company having acted as its financial
advisor in connection with the unsolicited proposals and election contests by
WHX Corporation and having acted as financial advisor in connection with, and
having participated in certain of the negotiations leading, to the Agreement.
We are familiar with Allegheny Ludlum having provided certain investment
banking services to Allegheny Ludlum from time to time including having acted
as lead managing underwriter for Allegheny Ludlum's initial public offering of
Common Stock in May 1987, the issuance in March 1992 of $90 million principal
amount of 5.875% Convertible Subordinated Debentures due 2002, and the
issuance in December 1995 of $150 million principal amount of 6.95% Debentures
due 2025. We may provide certain investment banking services to Allegheny
Ludlum or Newco in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Shareholders and Annual Reports on Form 10-K of
the Company and Allegheny Ludlum for the five fiscal years ended December 31,
1995; certain interim reports to shareholders and Quarterly Reports on Form
10-Q for the Company and Allegheny Ludlum; certain other communications from
the Company and Allegheny Ludlum to their respective shareholders; and certain
internal financial analyses and forecasts for the Company and Allegheny Ludlum
prepared by their respective managements. We also have held discussions with
members of the senior managements of the Company and Allegheny Ludlum
regarding the past and current
C-1
<PAGE>
Teledyne, Inc.
April 1, 1996
Page Two
business operations, financial condition and future prospects of their
respective companies and the pro-forma combined entity formed pursuant to the
Agreement. In addition, we have reviewed the reported price and trading
activity for the Shares and the shares of Common Stock, par value $0.10 per
share, of Allegheny Ludlum, compared certain financial and stock market
information for the Company and Allegheny Ludlum with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the aviation and
electronics, specialty metals, industrial products and consumer products
industries specifically and in other industries generally and performed such
other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In addition, we have not made an independent
evaluation or appraisal of the assets and liabilities of the Company or
Allegheny Ludlum or any of their respective subsidiaries and we have not been
furnished with any such evaluation or appraisal. We have also assumed, with
your consent, that the consummation of the transactions contemplated by the
Agreement will be recorded as a pooling of interests under generally accepted
accounting principles. We are not expressing any opinion herein as to the
prices at which the shares of Newco Common Stock may trade if and when they are
issued.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the holders of Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
C-2
<PAGE>
APPENDIX D
FORM OF
SHAREHOLDER AGREEMENT
This Shareholder Agreement, dated as of April 1, 1996, by and between
Teledyne, Inc., a Delaware corporation ("TI"), and the shareholder listed on
the signature page hereof (such shareholder being referred to herein as the
"Shareholder");
WITNESSETH:
Whereas, the Shareholder, as of the date hereof, is the owner of or has the
sole right to vote the number of shares of Common Stock, par value $0.10 per
share (the "Common Stock"), of Allegheny Ludlum Corporation, a Pennsylvania
corporation (the "Company"), set forth below the name of the Shareholder on
the signature page hereof (the "Shares"); and
Whereas, in reliance upon the execution and delivery of this Agreement, TI
will enter into an Agreement and Plan of Merger and Combination, dated as of
the date hereof (the "Combination Agreement"), with XYZ/Power, Inc. and the
Company which provides, among other things, that upon the terms and subject to
the conditions thereof, the Company and TI will each become a wholly owned
subsidiary of New Corporation (the "Combination"); and
Whereas, to induce TI to enter into the Combination Agreement and to incur
the obligations set forth therein, the Shareholder is entering into this
Agreement pursuant to which the Shareholder agrees to vote in favor of the
Combination and certain other matters as set forth herein, and to make certain
agreements with respect to the Shares upon the terms and conditions set forth
herein;
Now Therefore, in consideration of the foregoing and of the mutual covenants
and agreements set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1. Voting of Shares; Proxy. (a) The Shareholder agrees that until
the earlier of (i) the Effective Time (as defined in the Combination
Agreement) or (ii) the date on which the Combination Agreement is terminated
(the earliest thereof being hereinafter referred to as the "Expiration Date"),
the Shareholder shall vote all Shares owned by the Shareholder at any meeting
of the Company's shareholders (whether annual or special and whether or not an
adjourned meeting), or, if applicable, take action by written consent (i) for
adoption and approval of the Combination Agreement and in favor of the ALC
Merger (as defined in the Combination Agreement) and otherwise in favor of the
Combination and any other transaction contemplated by the Combination
Agreement as such Combination Agreement may be modified or amended from time
to time and (ii) against any action, omission or agreement which would or
could impede or interfere with, or have the effect of discouraging, the
Combination, including, without limitation, any Acquisition Proposal (as
defined in the Combination Agreement) other than the Combination. Any such
vote shall be cast or consent shall be given in accordance with such
procedures relating thereto as shall ensure that it is duly counted for
purposes of determining that a quorum is present and for purposes of recording
the results of such vote or consent.
(b) At the request of TI, the Shareholder, in furtherance of the
transactions contemplated hereby and by the Combination Agreement, and in
order to secure the performance by the Shareholder of his or her duties under
this Agreement, shall promptly execute, in accordance with the provisions of
Section 1759(d) of the Pennsylvania Business Corporation Law, and deliver to
TI, an irrevocable proxy, substantially in the form of Annex A hereto, and
irrevocably appoint TI or its designees, with full power of substitution, his
or her attorney and proxy to vote, or, if applicable, to give consent with
respect to, all of the Shares owned by the Shareholder in respect of any of
D-1
<PAGE>
the matters set forth in, and in accordance with the provisions of, clauses
(i) and (ii) above of Section 1(a). The Shareholder acknowledges that the
proxy executed and delivered by him or her shall be coupled with an interest,
shall constitute, among other things, an inducement for TI to enter into the
Combination Agreement, shall be irrevocable and shall not be terminated by
operation of law upon the occurrence of any event, including, without
limitation, the death or incapacity of the Shareholder. Notwithstanding any
provision contained in such proxy, such proxy shall terminate upon the
Expiration Date.
Section 2. Covenants of the Shareholder. The Shareholder covenants and
agrees for the benefit of TI that, until the Expiration Date, he will:
(a) not sell, transfer, pledge, hypothecate, encumber, assign, tender or
otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
hypothecation, encumbrance, assignment, tender or other disposition of, any
of the Shares owned by him or her or any interest therein (provided, that
the foregoing shall not prevent the Shareholder from transferring the
Shares to an entity for estate planning purposes, provided that the
Shareholder retains sole voting rights over the Shares or the estate
planning entity executes a joinder agreeing to be bound by the terms of
this Agreement);
(b) other than as expressly contemplated by this Agreement, not grant any
powers of attorney or proxies or consents in respect of any of the Shares
owned by him or her, deposit any of the Shares owned by him into a voting
trust, enter into a voting agreement with respect to any of the Shares
owned by him or her or otherwise restrict the ability of the holder of any
of the Shares owned by him or her freely to exercise all voting rights with
respect thereto;
(c) not, in his or her capacity as a shareholder of the Company (it being
understood that nothing in this Shareholder Agreement shall restrict or
affect Shareholder in any other capacity, including as a director or
officer, as applicable, of the Company) and he or she shall direct and use
his or her best efforts to cause his or her agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries
or the making or implementation of any Acquisition Proposal or engage in
any negotiations concerning, or provide any confidential information or
data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal. The Shareholder shall immediately
cease and cause to be terminated any existing activities, including
discussions or negotiations with any parties, conducted heretofore with
respect to any of the foregoing and will take the necessary steps to inform
his or her agents and representatives of the obligations undertaken in this
Section 2(c). The Shareholder shall notify TI immediately if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, him or her; and
(d) not take any action whatsoever that, based on advice from TI's or the
Company's independent auditors would or could prevent the Combination from
qualifying for "pooling of interests" accounting treatment.
Section 3. Covenants of TI. TI covenants and agrees for the benefit of the
Shareholder that (a) immediately upon execution of this Agreement, TI shall
enter into the Combination Agreement, and (b) until the Expiration Date, it
shall use all reasonable efforts to take, or cause to be taken, all action,
and do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
and the Combination Agreement, consistent with the terms and conditions of
each such agreement; provided, however, that nothing in this Section 3,
Section 12 or any other provision of this Agreement is intended, nor shall it
be construed, to limit or in any way restrict TI's right or ability to
exercise any of its rights under the Combination Agreement.
Section 4. Representations and Warranties of the Shareholder. The
Shareholder represents and warrants to TI that: (a) the execution, delivery
and performance by the Shareholder of this Agreement will not conflict
D-2
<PAGE>
with, require a consent, waiver or approval under, or result in a breach of or
default under, any of the terms of any contract, commitment or other
obligation (written or oral) to which the Shareholder is bound; (b) this
Agreement has been duly executed and delivered by the Shareholder and
constitutes a legal, valid and binding obligation of the Shareholder,
enforceable against the Shareholder in accordance with its terms; (c) the
Shareholder is the sole owner of or has the sole right to vote the Shares and
the Shares represent all shares of Common Stock which the Shareholder is the
sole owner of or has the sole right to vote at the date hereof, and the
Shareholder does not have any right to acquire, nor is he the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended) of, any other shares of any class of capital stock of
the Company or any securities convertible into or exchangeable or exercisable
for any shares of any class of capital stock of the Company (other than shares
subject to options or other rights granted by the Company); (d) the
Shareholder has full right, power and authority to execute and deliver this
Agreement and to perform his or her obligations hereunder; and (e) the
Shareholder owns the Shares free and clear of all liens, claims, pledges,
charges, proxies, restrictions, encumbrances, proxies, voting trusts and
voting agreements of any nature whatsoever other than as provided by this
Agreement. The representations and warranties contained herein shall be made
as of the date hereof and as of each day from the date hereof through and
including the Effective Time (as defined in the Combination Agreement).
Section 5. Adjustments; Additional Shares. In the event (a) of any stock
dividend, stock split, merger (other than the Combination), recapitalization,
reclassification, combination, exchange of shares or the like of the capital
stock of the Company on, of or affecting the Shares or (b) that the
Shareholder shall become the beneficial owner of any additional shares of
Common Stock or other securities entitling the holder thereof to vote or give
consent with respect to the matters set forth in Section 1, then the terms of
this Agreement shall apply to the shares of capital stock or other instruments
or documents held by the Shareholder immediately following the effectiveness
of the events described in clause (a) or the Shareholder becoming the
beneficial owner thereof as described in clause (b), as though, in either
case, they were Shares hereunder.
Section 6. Specific Performance. The Shareholder acknowledges that the
agreements contained in this Agreement are an integral part of the
transactions contemplated by the Combination Agreement, and that, without
these agreements, TI would not enter into the Combination Agreement, and
acknowledges that damages would be an inadequate remedy for any breach by him
or her of the provisions of this Agreement. Accordingly, the Shareholder and
TI each agree that the obligations of the parties hereunder shall be
specifically enforceable and neither party shall take any action to impede the
other from seeking to enforce such right of specific performance.
Section 7. Notices. All notices, requests, claims, demands and other
communications hereunder shall be effective upon receipt (or refusal of
receipt), shall be in writing and shall be delivered in person, by telecopy or
telefacsimile, by telegram, by next-day courier service, or by mail
(registered or certified mail, postage prepaid, return receipt requested) to
the Shareholder at the address listed on the signature page hereof, and to TI
at 2049 Century Park East, Los Angeles, California 90067-3101 Attention:
Secretary, telecopy number 310-551-4366, or to such other address or telecopy
number as any party may have furnished to the other in writing in accordance
herewith.
Section 8. Binding Effect; Survival. Upon execution and delivery of this
Agreement by TI, this Agreement shall become effective as to the Shareholder
at the time the Shareholder executes and delivers this Agreement. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, personal representatives, successors and assigns.
Section 9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be performed entirely within such Commonwealth.
Section 10. Counterparts. This Agreement may be executed in two
counterparts, both of which shall be an original and both of which together
shall constitute one and the same agreement.
D-3
<PAGE>
Section 11. Effect of Headings. The Section headings herein are for
convenience of reference only and shall not affect the construction hereof.
Section 12. Additional Agreements; Further Assurance. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement. The
Shareholder will provide TI with all documents which may reasonably be
requested by TI and will take reasonable steps to enable TI to obtain all
rights and benefits provided it hereunder.
Section 13. Amendment; Waiver. No amendment or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and signed by TI and the Shareholder, in the case of an amendment, or
by the party which is the beneficiary of any such provision, in the case of a
waiver or a consent to depart therefrom.
In Witness Whereof, this Agreement has been duly executed by the parties
hereto all as of the day and year first above written.
Teledyne, Inc.
By
----------------------------------
Name:
Title:
- -----------------------------
Shareholder
Address:
Number of Shares:
D-4
<PAGE>
ANNEX A
[FORM OF PROXY]
IRREVOCABLE PROXY
In order to secure the performance of the duties of the undersigned pursuant
to the Shareholder Agreement, dated as of April 1, 1996 (the "Shareholder
Agreement"), between the undersigned and Teledyne, Inc., a Delaware
corporation, a copy of such agreement being attached hereto and incorporated
by reference herein, the undersigned hereby irrevocably appoint(s)
and , and each of them, the attorneys, agents and proxies, with full
power of substitution in each of them, for the undersigned and in the name,
place and stead of the undersigned, in respect of any of the matters set forth
in clauses (i) and (ii) of Section 1 of the Shareholder Agreement, to vote or,
if applicable, to give written consent, in accordance with the provisions of
said Section 1 and otherwise act (consistent with the terms of the Shareholder
Agreement) with respect to all shares of Common Stock, par value $0.10 per
share (the "Shares"), of Allegheny Ludlum Corporation, a Pennsylvania
corporation (the "Company"), whether now owned or hereafter acquired, which
the undersigned is or may be entitled to vote at any meeting of the Company
held after the date hereof, whether annual or special and whether or not an
adjourned meeting, or, if applicable, to give written consent with respect
thereto. This Proxy is coupled with an interest, shall be irrevocable and
binding on any successor in interest of the undersigned and shall not be
terminated by operation of law upon the occurrence of any event, including,
without limitation, the death or incapacity of the undersigned. This Proxy
shall operate to revoke any prior proxy as to the Shares heretofore granted by
the undersigned. This Proxy shall terminate on September 30, 1996. This Proxy
has been executed in accordance with Section 1759(d) of the Pennsylvania
Business Corporation Law.
Dated:
--------------------------------- ---------------------------------
Dated:
--------------------------------- ---------------------------------
D-5
<PAGE>
APPENDIX E
FORM OF
STOCKHOLDER AGREEMENT
This Stockholder Agreement, dated as of April 1, 1996, by and between
Allegheny Ludlum Corporation, a Pennsylvania corporation ("ALC"), and the
stockholder listed on the signature page hereof (such stockholder and (with
respect to Shares owned jointly with his or her spouse) together with his or
her spouse, being referred to herein as the "Stockholder");
WITNESSETH:
Whereas, the Stockholder, as of the date hereof, is the owner of or has the
sole right to vote the number of shares of Common Stock, par value $1.00 per
share (the "Common Stock"), of Teledyne, Inc., a Delaware corporation (the
"Company"), set forth below the name of the Stockholder on the signature page
hereof (the "Shares"); and
Whereas, in reliance upon the execution and delivery of this Agreement, ALC
will enter into an Agreement and Plan of Merger and Combination, dated as of
the date hereof (the "Combination Agreement"), with New Corporation and the
Company which provides, among other things, that upon the terms and subject to
the conditions thereof ALC and the Company will each become a wholly owned
subsidiary of New Corporation (the "Combination"); and
Whereas, to induce ALC to enter into the Combination Agreement and to incur
the obligations set forth therein, the Stockholder is entering into this
Agreement pursuant to which the Stockholder agrees to vote in favor of the
Combination and certain other matters as set forth herein, and to make certain
agreements with respect to the Shares upon the terms and conditions set forth
herein;
Now Therefore, in consideration of the foregoing and of the mutual covenants
and agreements set forth herein and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
Section 1. Voting of Shares; Proxy. (a) The Stockholder agrees that until
the earlier of (i) the Effective Time (as defined in the Combination
Agreement) or (ii) the date on which the Combination Agreement is terminated
(the earliest thereof being hereinafter referred to as the "Expiration Date"),
the Stockholder shall vote all Shares owned by the Stockholder at any meeting
of the Company's stockholders (whether annual or special and whether or not an
adjourned meeting), or, if applicable, take action by written consent (i) for
adoption and approval of the Combination Agreement and in favor of the TI
Merger (as defined in the Combination Agreement) and otherwise in favor of the
Combination and any other transaction contemplated by the Combination
Agreement as such Combination Agreement may be modified or amended from time
to time and (ii) against any action, omission or agreement which would or
could impede or interfere with, or have the effect of discouraging, the
Combination, including, without limitation, any Acquisition Proposal (as
defined in the Combination Agreement) other than the Combination. Any such
vote shall be cast or consent shall be given in accordance with such
procedures relating thereto as shall ensure that it is duly counted for
purposes of determining that a quorum is present and for purposes of recording
the results of such vote or consent.
(b) At the request of ALC, the Stockholder, in furtherance of the
transactions contemplated hereby and by the Combination Agreement, and in
order to secure the performance by the Stockholder of his or her duties under
this Agreement, shall promptly execute, in accordance with the provisions of
Section 212(e) of the Delaware General Corporation Law, and deliver to ALC, an
irrevocable proxy, substantially in the form of Annex A hereto, and
irrevocably appoint ALC or its designees, with full power of substitution, his
or her attorney and proxy to vote, or, if applicable, to give consent with
respect to, all of the Shares owned by the Stockholder in respect of
E-1
<PAGE>
any of the matters set forth in, and in accordance with the provisions of,
clauses (i) and (ii) above of Section 1(a). The Stockholder acknowledges that
the proxy executed and delivered by him or her shall be coupled with an
interest, shall constitute, among other things, an inducement for ALC to enter
into the Combination Agreement, shall be irrevocable and shall not be
terminated by operation of law upon the occurrence of any event, including,
without limitation, the death or incapacity of the Stockholder.
Notwithstanding any provision contained in such proxy, such proxy shall
terminate upon the Expiration Date.
Section 2. Covenants of the Stockholder. The Stockholder covenants and
agrees for the benefit of ALC that, until the Expiration Date, he will:
(a) not sell, transfer, pledge, hypothecate, encumber, assign, tender or
otherwise dispose of, or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
hypothecation, encumbrance, assignment, tender or other disposition of, any
of the Shares owned by him or her or any interest therein (provided, that
the foregoing shall not prevent the Stockholder from transferring the
Shares to an entity for estate planning purposes, provided that the
Stockholder retains sole voting rights over the Shares or the estate
planning entity executes a joinder agreeing to be bound by the terms of
this Agreement;
(b) other than as expressly contemplated by this Agreement, not grant any
powers of attorney or proxies or consents in respect of any of the Shares
owned by him or her, deposit any of the Shares owned by him or her into a
voting trust, enter into a voting agreement with respect to any of the
Shares owned by him or her or otherwise restrict the ability of the holder
of any of the Shares owned by him or her freely to exercise all voting
rights with respect thereto;
(c) not, in his or her capacity as a shareholder of the Company (it being
understood that nothing in this Stockholder Agreement shall restrict or
affect Stockholder in any other capacity, including as a director or
officer, as applicable, of the Company) and he or she shall direct and use
his or her best efforts to cause his or her agents and representatives not
to, initiate, solicit or encourage, directly or indirectly, any inquiries
or the making or implementation of any Acquisition Proposal or engage in
any negotiations concerning, or provide any confidential information or
data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make
or implement an Acquisition Proposal. The Stockholder shall immediately
cease and cause to be terminated any existing activities, including
discussions or negotiations with any parties, conducted heretofore with
respect to any of the foregoing and will take the necessary steps to inform
his or her agents and representatives of the obligations undertaken in this
Section 2(c). The Stockholder shall notify ALC immediately if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, him or her; and
(d) not take any action whatsoever that, based on advice from ALC's or
the Company's independent auditors would or could prevent the Combination
from qualifying for "pooling of interests" accounting treatment.
Section 3. Covenants of ALC. ALC covenants and agrees for the benefit of the
Stockholder that (a) immediately upon execution of this Agreement, ALC shall
enter into the Combination Agreement, and (b) until the Expiration Date, it
shall use all reasonable efforts to take, or cause to be taken, all action,
and do, or cause to be done, all things necessary or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
and the Combination Agreement, consistent with the terms and conditions of
each such agreement; provided, however, that nothing in this Section 3,
Section 12 or any other provision of this Agreement is intended, nor shall it
be construed, to limit or in any way restrict ALC's right or ability to
exercise any of its rights under the Combination Agreement.
Section 4. Representations and Warranties of the Stockholder. The
Stockholder represents and warrants to ALC that: (a) the execution, delivery
and performance by the Stockholder of this Agreement will not conflict
E-2
<PAGE>
with, require a consent, waiver or approval under, or result in a breach of or
default under, any of the terms of any contract, commitment or other
obligation (written or oral) to which the Stockholder is bound; (b) this
Agreement has been duly executed and delivered by the Stockholder and
constitutes a legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms; (c) the
Stockholder is the sole owner of or has the sole right to vote the Shares and
the Shares represent all shares of Common Stock which the Stockholder is the
sole owner of or has the sole right to vote at the date hereof, and the
Stockholder does not have any right to acquire, nor is he the "beneficial
owner" (as such term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended) of, any other shares of any class of capital stock of
the Company or any securities convertible into or exchangeable or exercisable
for any shares of any class of capital stock of the Company (other than shares
subject to options or other rights granted by the Company); (d) the
Stockholder has full right, power and authority to execute and deliver this
Agreement and to perform his or her obligations hereunder; and (e) the
Stockholder owns the Shares free and clear of all liens, claims, pledges,
charges, proxies, restrictions, encumbrances, proxies, voting trusts and
voting agreements of any nature whatsoever other than as provided by this
Agreement. The representations and warranties contained herein shall be made
as of the date hereof and as of each day from the date hereof through and
including the Effective Time (as defined in the Combination Agreement).
Section 5. Adjustments; Additional Shares. In the event (a) of any stock
dividend, stock split, merger (other than the Combination) recapitalization,
reclassification, combination, exchange of shares or the like of the capital
stock of the Company on, of or affecting the Shares or (b) that the
Stockholder shall become the beneficial owner of any additional shares of
Common Stock or other securities entitling the holder thereof to vote or give
consent with respect to the matters set forth in Section 1, then the terms of
this Agreement shall apply to the shares of capital stock or other instruments
or documents held by the Stockholder immediately following the effectiveness
of the events described in clause (a) or the Stockholder becoming the
beneficial owner thereof as described in clause (b), as though, in either
case, they were Shares hereunder.
Section 6. Specific Performance. The Stockholder acknowledges that the
agreements contained in this Agreement are an integral part of the
transactions contemplated by the Combination Agreement, and that, without
these agreements, ALC would not enter into the Combination Agreement, and
acknowledges that damages would be an inadequate remedy for any breach by him
or her of the provisions of this Agreement. Accordingly, the Stockholder and
ALC each agree that the obligations of the parties hereunder shall be
specifically enforceable and neither party shall take any action to impede the
other from seeking to enforce such right of specific performance.
Section 7. Notices. All notices, requests, claims, demands and other
communications hereunder shall be effective upon receipt (or refusal of
receipt), shall be in writing and shall be delivered in person, by telecopy or
telefacsimile, by telegram, by next-day courier service, or by mail
(registered or certified mail, postage prepaid, return receipt requested) to
the Stockholder at the address listed on the signature page hereof, and to ALC
at 1000 Six PPG Place, Pittsburgh, Pennsylvania 15222, Attention: Secretary,
telecopy number 412-394-3010, or to such other address or telecopy number as
any party may have furnished to the other in writing in accordance herewith.
Section 8. Binding Effect; Survival. Upon execution and delivery of this
Agreement by ALC, this Agreement shall become effective as to the Stockholder
at the time the Stockholder executes and delivers this Agreement. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective heirs, personal representatives, successors and assigns.
Section 9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State.
Section 10. Counterparts. This Agreement may be executed in two
counterparts, both of which shall be an original and both of which together
shall constitute one and the same agreement.
E-3
<PAGE>
Section 11. Effect of Headings. The Section headings herein are for
convenience of reference only and shall not affect the construction hereof.
Section 12. Additional Agreements; Further Assurance. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement. The
Stockholder will provide ALC with all documents which may reasonably be
requested by ALC and will take reasonable steps to enable ALC to obtain all
rights and benefits provided it hereunder.
Section 13. Amendment; Waiver. No amendment or waiver of any provision of
this Agreement or consent to departure therefrom shall be effective unless in
writing and signed by ALC and the Stockholder, in the case of an amendment, or
by the party which is the beneficiary of any such provision, in the case of a
waiver or a consent to depart therefrom.
In Witness Whereof, this Agreement has been duly executed by the parties
hereto all as of the day and year first above written.
Allegheny Ludlum Corporation
By __________________________________
Name:
Title:
- -----------------------------
Stockholder
- -----------------------------
Spouse
Address:
Number of Shares:
E-4
<PAGE>
ANNEX A
[FORM OF PROXY]
IRREVOCABLE PROXY
In order to secure the performance of the duties of the undersigned pursuant
to the Stockholder Agreement, dated as of April 1, 1996 (the "Stockholder
Agreement"), between the undersigned and Allegheny Ludlum Corporation. a
Pennsylvania corporation, a copy of such agreement being attached hereto and
incorporated by reference herein, the undersigned hereby irrevocably appoints
and , and each of them, the attorneys, agents and proxies, with full
power of substitution in each of them, for the undersigned and in the name,
place and stead of the undersigned, in respect of any of the matters set forth
in clauses (i) and (ii) of Section 1 of the Stockholder Agreement, to vote or,
if applicable, to give written consent, in accordance with the provisions of
said Section 1 and otherwise act (consistent with the terms of the Stockholder
Agreement) with respect to all shares of Common Stock, par value $1.00 per
share (the "Shares"), of Teledyne, Inc., a Delaware corporation (the
"Company"), whether now owned or hereafter acquired, which the undersigned is
or may be entitled to vote at any meeting of the Company held after the date
hereof, whether annual or special and whether or not an adjourned meeting, or,
if applicable, to give written consent with respect thereto. This Proxy is
coupled with an interest, shall be irrevocable and binding on any successor in
interest of the undersigned and shall not be terminated by operation of law
upon the occurrence of any event, including, without limitation, the death or
incapacity of the undersigned. This Proxy shall operate to revoke any prior
proxy as to the Shares heretofore granted by the undersigned. This Proxy shall
terminate on September 30, 1996. This Proxy has been executed in accordance
with Section 212(e) of the Delaware General Corporation Law.
Dated:
--------------------------------- ---------------------------------
Dated:
--------------------------------- ---------------------------------
E-5
<PAGE>
APPENDIX F
PERFORMANCE SHARE PLAN FOR KEY EMPLOYEES OF
ALLEGHENY LUDLUM CORPORATION AND SUBSIDIARIES
(AS AMENDED AND RESTATED)
ARTICLE I
PURPOSE
The purposes of the Performance Share Plan For Key Employees of Allegheny
Ludlum Corporation and Subsidiaries are to promote the growth and
profitability of Allegheny Ludlum Corporation and its subsidiaries, to provide
key employees with an incentive to achieve long-term corporate objectives and
to attract and retain key employees of outstanding competence.
ARTICLE II
DEFINITIONS
The following terms shall have the meanings shown:
2.01 "Award Period" shall mean the time period established by the Committee
pursuant to Article IV of the Plan for the purpose of measuring attainment of
performance objectives.
2.02 "Board of Directors" shall mean the Board of Directors of the
Corporation.
2.03 "Chief Executive Officer" shall mean the chief executive officer of the
Corporation.
2.04 "Committee" shall mean the Personnel and Compensation Committee of the
Board of Directors which may be appointed from time to time by the Board of
Directors, subject to the provisions of Section 3.1(a) hereof.
2.05 "Common Stock" shall mean common stock, $0.10 par value per share, of
the Corporation.
2.06 "Corporation" shall mean Allegheny Ludlum Corporation.
2.07 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2.08 "Executive Officer" shall mean an "officer" of the Corporation as
defined in Rule 16a-1(f) as promulgated by the Securities and Exchange
Commission under the Exchange Act, as such Rule may be amended from time to
time.
2.09 "Fair Market Value" shall mean the fair market value of shares of
Common Stock, as determined by the Committee in its discretion. The Committee
may change from time to time any method or formula by which it determines Fair
Market Value.
2.10 "Grantee" shall mean a Key Employee to whom a Unit or Units have been
granted.
2.11 "Key Employee" shall mean (a) an employee who is an Executive Officer
(subject to the second sentence of this subsection) and (b) any other employee
of the Corporation or a Subsidiary who is, in the judgment of the Chief
Executive Officer, responsible to a material extent for the profitability and
continued growth of the Corporation and Subsidiaries. Directors of the
Corporation who are not otherwise officers or employees of the Corporation and
directors who are members of the Committee may not be designated as Key
Employees.
F-1
<PAGE>
2.12 "Plan" shall mean the Performance Share Plan For Key Employees of
Allegheny Ludlum Corporation and Subsidiaries.
2.13 "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Securities and
Exchange Commission under the Exchange Act, as in effect prior to May 1, 1991
until the Committee elects otherwise and thereafter as such Rule may be
amended from time to time.
2.14 "Section 162(m)" shall mean Section 162(m) of the Internal Revenue Code
of 1986, as amended, and the regulations promulgated thereunder.
2.15 "Subsidiary" shall mean any corporation at least a majority of whose
outstanding voting shares shall at the time be owned by the Corporation or by
one or more Subsidiaries.
2.16 "Unit" shall mean a unit denominated in a fixed dollar amount and/or
shares of Common Stock in such form and amount as the Committee shall
determine as of the date of grant of such Unit in accordance with the
provisions hereof.
ARTICLE III
GENERAL
3.1 Administration.
(a) The Plan shall be administered by the Committee. The Committee will be
constituted so as to qualify awards for exemption under Rule 16b-3 and as
"performance-based compensation" for the purposes of Section 162(m), with
respect to the participation of Executive Officers in the Plan.
(b) The Chief Executive Officer shall designate which employees, in addition
to the Executive Officers, are Key Employees. The Committee shall (i) grant
awards pursuant to the Plan; (ii) prescribe such limitations and restrictions
as the Committee shall deem appropriate; and (iii) interpret the Plan, adopt,
amend and rescind rules and regulations relating to the Plan, and make all
other determinations and take all other action necessary or advisable for the
implementation and administration of the Plan.
(c) All such actions shall be final, conclusive and binding upon the Key
Employees. Neither the Chief Executive Officer nor any member of the Committee
shall be liable for any action taken or decision made in good faith relating
to the Plan or any award thereunder.
3.2 Grant of Units. The Committee shall select from among the Key Employees
those individuals who shall be granted awards under the Plan. The Committee
shall determine the number, form and amount of Units to be granted to a
Grantee. In granting such awards and determining their form and amount,
consideration shall be given to the recommendations of the Chief Executive
Officer, the functions and responsibilities of the Grantee, the Grantee's
potential contributions to the profitability and sound growth of the
Corporation and such other factors as shall be deemed relevant.
ARTICLE IV
ESTABLISHMENT OF CORPORATE OBJECTIVES
During the first ninety days of a fiscal year or prior to such fiscal year,
the Committee shall determine whether to establish an Award Period commencing
with the beginning of such fiscal year and the appropriate length of the Award
Period. If the Committee establishes an Award Period, the Committee, in
consultation with the Chief Executive Officer, shall determine the financial
objectives of the Corporation and its Subsidiaries to be achieved during such
Award Period and the basis on which Units granted for such Award Period shall
vest upon either partial achievement of the corporate objectives or upon the
meeting or surpassing of the corporate objectives. The performance goals shall
meet the requirements of an objective formula under Section 162(m), unless the
Committee determines otherwise.
F-2
<PAGE>
ARTICLE V
GRANT OF UNITS
5.1 Grant of Units. The Committee, subject to the provisions of the Plan,
may grant Units, or fractions thereof, to Key Employees and determine (and the
Performance Unit Agreement shall state) the number, form and amount of Units
granted to the respective Grantees and such other terms and conditions as the
Committee may consider appropriate. In taking such action, consideration shall
be given to the recommendations of the Chief Executive Officer.
Notwithstanding any other provision of the Plan, no Executive Officer who is a
"covered employee" under Section 162(m) shall receive, with respect to any
Award Period, Units in respect of more than 100,000 shares of Common Stock and
more than $500,000 in cash.
5.2 Performance Unit Agreements. Units granted to a Key Employee under the
Plan shall be evidenced by a written "Performance Unit Agreement", to be
entered into between the Corporation and the Key Employee and to contain such
terms and conditions as the Committee may consider appropriate in each case.
5.3 Grantee Account. At such time as it shall be determined by the Committee
that the objectives for such Award Period shall have been fully or partially
achieved or surpassed, the Corporation shall establish and maintain a
bookkeeping account for each Grantee who shall have been granted Units for
such Award Period and shall credit to such account a dollar amount and/or the
number of shares of Common Stock equal to the dollar value and/or the number
of shares of Common Stock of the Units to which the Grantee becomes entitled
pursuant to his Performance Unit Agreement.
5.4 Payment of Grantee Account. The dollar amount and/or the number of
shares of Common Stock credited to a Grantee's bookkeeping account shall be
paid to the Grantee in installments; provided, however, that a Grantee must be
then and have continuously been an employee of the Corporation or any of its
Subsidiaries from the date of the grant of the Units to the date of each
installment payment. The installment payments shall be in the amount and/or
the number of shares of Common Stock as follows: thirty-three and one-third
percent (33%) of the total dollar amount and number of shares of Common Stock
credited to the Grantee's account on or before the first day of the calendar
month following the calendar month in which the amount was credited to the
account and an additional thirty-three and one-third percent (33%) on or
before the first business day of January of each succeeding calendar year
thereafter, until such amount is completely distributed. Fractional shares
shall not be distributed but shall be aggregated and paid in the last maturing
installment. Notwithstanding the foregoing, in the event of the death of the
Grantee, total disability of the Grantee (as determined by the Committee in
its sole discretion) or retirement of the Grantee with the consent of the
Chief Executive Officer or, in the case the Grantee is the Chief Executive
Officer, with the consent of the Committee, and pursuant to a pension plan
maintained by the Corporation or a Subsidiary, any unpaid installments shall
be paid to the Grantee or his estate, as the case may be, in due course as if
the Grantee had remained an employee of the Corporation.
ARTICLE VI
AGGREGATE LIMITATION ON SHARES SUBJECT TO PLAN
Shares of Common Stock which may be issued pursuant to Units granted under
the Plan may be either authorized and unissued shares or authorized and issued
shares of Common Stock held by the Corporation as treasury shares. The number
of shares of Common Stock reserved for issuance under the Plan shall not
exceed 2,250,000 shares, which amount has been adjusted to reflect the stock
splits effective July 2, 1990 and July 1, 1993, subject to further adjustment
pursuant to Section 7.10 hereof; provided, however, if any Units shall be
cancelled prior to the expiration of the Award Period and prior to its
exercise in full for any reason, the shares subject to such Units shall be
thereafter available under the Plan. Notwithstanding the foregoing, following
the effective time of the combination of the Corporation and Teledyne, Inc.,
references to "Common Stock" under this Article VI shall be deemed reference
to the common stock of Allegheny Teledyne Incorporated, issued under such
company's 1996 Incentive Plan, and not to the common stock of the Corporation.
F-3
<PAGE>
ARTICLE VII
MISCELLANEOUS
7.1 General Restriction. Any Unit denominated in Common Stock under the Plan
shall be subject to the requirement that if at any time the Committee shall
determine that any listing or registration of the shares of Common Stock or
any consent or approval of any governmental body or any other agreement or
consent is necessary or desirable as a condition of the granting of a Unit or
issuance of shares of Common Stock or cash in satisfaction thereof, such grant
of a Unit or issuance of shares of Common Stock may not be consummated unless
such requirement is satisfied in a manner acceptable to the Committee.
7.2 Non-Assignability. No Unit granted under the Plan shall be assignable or
transferable by the recipient thereof, except by will or by the laws of
descent and distribution. During the life of the recipient, any Unit shall be
exercisable only by such individual. No assignment or transfer of a Unit or of
the rights represented thereby, whether voluntary or involuntary, by operation
of law or otherwise (except by will or the laws of descent and distribution),
shall vest in the assignee or transferee any interest or right herein
whatsoever, but immediately upon such assignment or transfer the Units shall
terminate and become of no further effect.
7.3 Withholding Taxes. Whenever the Corporation makes payments under the
Plan, in whole or in part, the Corporation shall notify the Key Employee of
the amount of withholding tax, if any, which must be paid under federal and,
where applicable, state and local law. The Corporation shall, in the
discretion of the Corporation, but with the consent of the Committee, arrange
for payment for such withholding taxes in any one or combination of the
following ways: (i) acceptance of an amount in cash paid by the Key Employee,
(ii) deduction of amounts for withholding taxes from Key Employee's regular
salary payments, (iii) deduction of amounts for withholding taxes from amounts
of cash payable as an installment under the Plan, (iv) reduction in the number
of shares to be issued in an installment by that number of shares having a
Fair Market Value equal to the amount which the Corporation is required to
withhold and/or (v) acceptance of whole shares of Common Stock already owned
by the Key Employee, having a Fair Market Value equal to the amount the
Corporation is required to withhold. If the full amount of the withholding tax
is not recovered in the above manner, the Key Employee shall, forthwith upon
receipt of notice, remit the deficiency to the Corporation. No certificates
for shares of Common Stock shall be issued or delivered to a Key Employee
under the Plan until all applicable taxes shall have been satisfied in full.
7.4 Delivery of Certificates. As soon as practicable after compliance by a
Key Employee with all applicable conditions, the Corporation will issue and
deliver by mail, or cause delivery by mail to the Key Employee at the address
specified, certificates registered in the name of the Key Employee for the
number of shares of Common Stock which the Key Employee is entitled to receive
(subject to reduction for withholding tax as provided in Section 7.3 hereof)
under the provisions of the Plan and the Performance Unit Agreement.
7.5 No Right to Employment. Nothing in the Plan or in any agreement entered
into pursuant to it shall confer upon any employee the right to continue in
the employ of the Corporation or Subsidiary or affect any right which the
Corporation or a Subsidiary may have to terminate the employment of any
employee.
7.6 Non-Uniform Determinations. The actions and recommendations of the Chief
Executive Officer and the determinations by the Committee under the Plan
(including without limitation the determinations by the Chief Executive
Officer and the Committee of the persons to receive awards, and the
determinations by the Committee of the form, amount and timing of such awards,
and the terms and provisions of such awards) need not be uniform and may be
made by the Chief Executive Officer or the Committee, as the case may be,
selectively among persons who receive, or are eligible to receive awards under
the Plan, whether or not such persons are similarly situated.
F-4
<PAGE>
7.7 Amendment or Termination of the Plan. The Board may at any time
terminate the Plan or any part thereof and may from time to time amend the
Plan as it may deem advisable; provided, however, that without shareholder
approval, the Board of Directors may not (i) increase the aggregate number of
shares of Common Stock which may be issued under the Plan (other than
increases permitted under Paragraph 7.10 hereof), (ii) extend the term of the
Plan, or (iii) extend the period during which Units may be granted. The
termination or amendment of the Plan shall not, without the consent of a
Grantee, affect such Grantee's rights under a previous grant of Units.
7.8 Investment Representation. Each Performance Unit Agreement may provide
that the Key Employee shall deliver to the Committee, upon demand by the
Committee, at the time of any payment of an installment which contains shares
of Common Stock a written representation that the shares to be acquired are to
be acquired for investment and not for resale or with a view to the
distribution thereof. Upon such demand, delivery of such representation prior
to delivery of any shares shall be a condition precedent to the right of the
Key Employee to receive any shares.
7.9 No Rights as Shareholders. Recipients of Units denominated in Common
Stock under the Plan shall have no rights as shareholders of the Corporation
with respect thereto unless and until certificates for shares of Common Stock
are issued to them.
7.10 Adjustment of Units. In the event of any change or changes in the
outstanding Common Stock of the Corporation by reason of any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares or any rights offering to purchase a substantial amount
of Common Stock at below fair market value or of any similar change affecting
the Common Stock, any of which takes effect after the first grant of a Unit
under the Plan, the Committee may, in its discretion, appropriately adjust the
number of shares of Common Stock which may be issued under the Plan, the
number of shares of Common Stock subject to Units theretofore granted under
the Plan, and any and all other adjustments deemed appropriate by the
Committee to prevent substantial dilution or enlargement of the rights granted
to a Key Employee in such manner as the Committee shall deem appropriate.
7.11 Units Not a Bar to Corporate Event. The existence of the Units granted
hereunder shall not affect in any way the right or the power of the
Corporation or its shareholders to make or authorize any or all adjustments,
recapitalizations, reorganizations or other changes in the Corporation's
capital structure or its business, or any merger or consolidation of the
Corporation, or any issue of bonds, debentures, preferred or prior preference
stocks ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Corporation, or any sale or transfer of all
or any part of its assets or business, or any other corporate act or
proceeding, whether of a similar character or otherwise.
ARTICLE VIII
EFFECTIVE DATE OF THE PLAN; CONTINGENT EFFECTIVENESS
The Plan became effective on the closing on the initial public offering by
the Corporation of shares of Common Stock in a transaction registered under
the Securities Act of 1933 on Form S-1. The effectiveness of the amendment and
restatement of the Plan is conditioned upon approval, at a regular or special
meeting at which a quorum is present and votes, by the holders of a majority
of the securities of the Corporation present or represented at such meeting
and entitled to vote with respect to the Plan.
ARTICLE IX
TERMINATION OF THE PLAN
The Plan shall expire on January 1, 2007.
F-5
<PAGE>
ARTICLE X
RULE 16B-3 COMPLIANCE
It is intended, unless the Committee shall determine otherwise, that the
Plan comply with Rule 16b-3, and that all interpretations of the Plan relating
to Executive Officers shall be consistent with such Rule and the Exchange Act.
In order to maintain compliance with such Rule and the Exchange Act and to
facilitate and promote the conformity of the transactions of Executive
Officers under the Plan with such Rule, the Committee may adopt such rules and
policies as it deems advisable, including, but not limited to, rules and
policies restricting the timing of the reduction in the number of shares to be
issued in an installment pursuant to Section 7.3 hereof, and any related rules
or policies delaying payments pursuant to Section 5.4 hereof, and any election
with respect thereto.
ARTICLE XI
SECTION 162(M) COMPLIANCE
It is intended, unless the Committee shall determine otherwise, that the
Plan comply with Section 162(m), and that all interpretations of the Plan
relating to Executive Officers who are "covered employees" as defined in
Section 162(m) shall be consistent with such Section. In order to maintain
compliance with such Section, the Committee may adopt such rules and policies
as it deems advisable.
F-6
<PAGE>
APPENDIX G
TELEDYNE, INC.
SENIOR EXECUTIVE PERFORMANCE PLAN
This Senior Executive Performance Plan ("Plan" or "SEP Plan") is established
by Teledyne, Inc. ("Company") effective beginning on or after January 1, 1996
for any fiscal year beginning on or after January 1, 1996 with respect to
those executives who are selected for participation in the Plan for such year.
1.PURPOSE
The purposes of the Plan are to:
(A) Promote the interests of the Company.
(B) Provide incentives and rewards to key senior executives, as a group and
individually, who are largely responsible for the management, growth and
profitability of the Company.
(C) Qualify compensation under the Plan as performance-based compensation
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended, or successor provision, and regulations promulgated thereunder
("Section 162(m)").
2.ADMINISTRATION
The Plan will be administered by a committee satisfying the outside director
requirements of Section 162(m) (including the transition rules) and, if
applicable, the "Disinterested Administration" requirements of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule 16b-
3"), which committee shall be the Compensation and Stock Option Committee, or
a subcommittee thereof ("Committee"). Each Committee member serves in such
capacity until the earlier of such time as he or she ceases to meet the
applicable director administration requirements of Section 162(m) (including
the transition rules) and Rule 16b-3 or until the Board of Directors decides
to replace such member. The Committee will have full authority to administer
the Plan, including authority to interpret and construe any relevant provision
of the Plan and to adopt such rules and regulations as it may deem necessary.
The Plan is intended to comply with the provisions of Section 162(m). The
Committee may adopt rules and regulations consistent with such intention.
Decisions of the Committee are final and binding on all persons who have an
interest in the Plan.
3.ELIGIBILITY AND PARTICIPATION
(A) Eligible Officers. The executive officers eligible to participate in the
Plan for any fiscal year shall be the Chief Executive Officer and each other
executive officer of the Company within the meaning of Rule 3b-7 promulgated
under the Securities Exchange Act of 1934, as amended, or such other executive
officers that are deemed, from time-to-time, to be "covered" employees under
Section 162(m).
(B) Participation. Eligible executives shall only participate in the Plan
for a fiscal year if approved for participation by the Committee and will not
be eligible for an award for any year unless explicitly approved for such
year. Participants may, at the discretion of the Committee, be approved for
participation for part of a fiscal year.
(C) Termination of Employment. The Committee has the right, in its sole and
absolute discretion, to withhold an award under the Plan for any fiscal year
if a participant's employment is terminated (involuntarily or voluntarily) for
any reason.
G-1
<PAGE>
4.SEP POOL; BONUSES
(A) Determination of SEP Pool. The total amount of bonuses available for
payout ("SEP Pool") for any fiscal year (or other performance period) to the
group of participating executive officers shall be a specified percentage, not
to exceed 5%, of that portion, if any, of the Company's net operating profit
after tax in excess of a reference cost of capital of no less than 7% for the
performance period ("EVA"). The specified percentage of EVA, the reference
cost of capital, the constituent parts of net operating profit after tax and
capital and the formula for determining the cost of capital (collectively,
"Measurement Factors") shall be determined and specified in writing by the
Committee no later than 90 days after the commencement of the applicable
performance period; provided, however, the Measurement Factors must be
established prior to the elapse of 25% of the applicable performance period
(the "Establishment Date"). The Committee must determine affirmatively on or
prior to the Establishment Date that achieving positive EVA for the
performance period is "substantially uncertain" within the meaning of Section
162(m).
(B) Bonuses. The Committee shall determine, in its sole discretion, no later
than the Establishment Date, the share of the SEP Pool available to each
participant. In no event shall any participant's share of the SEP Pool exceed
30%. Nor shall the sum of individual percentages of the SEP Pool available to
participating executive officers exceed 100%. The Committee reserves the right
to reduce or cancel any bonus payment from the applicable officer's percentage
of the SEP Pool if, in its sole discretion, the Committee deems such action
warranted based on the performance of the Company, the applicable participant
or that participant's business unit; provided that any such reduction does not
increase the bonus to any other participant.
(C) Form of Payment. Bonuses may be paid in any combination of cash or
shares of Company Common Stock (or following the effective time of the
combination of the Company and Allegheny Ludlum Corporation, shares of
Allegheny Teledyne Incorporated issued pursuant to such company's 1996
Incentive Plan), as determined in the discretion of the Committee prior to the
end of the performance period. Payments shall be made no later than 75 days
after the conclusion of the performance period. Shares of Company Common Stock
to be awarded in connection with such bonuses shall be issued under the terms
of the Teledyne, Inc. 1994 Long-Term Incentive Plan ("LTI Plan"), so long as
such issuance complies with the terms of that plan and such issuance is
coordinated with the administrative committee of the LTI Plan. The number of
shares to be granted in connection with such bonus to correspond with the cash
value of the bonus shall be determined by reference to the closing price of
Company Common Stock reported in THE WALL STREET JOURNAL for the business day
on which the cash payment otherwise would be made.
(D) Certification. Before any bonus is paid to an executive officer under
the Plan, the Committee shall certify in writing that the performance goals
have been met which permit the payment of such bonus.
5.DEFERRAL ELECTION
Each participant in the Plan may elect to defer part or all of the cash
bonus awarded to him or her under the Plan in accordance with, and subject to,
the terms of the Teledyne, Inc. Executive Deferred Compensation Plan.
6.AMENDMENT, TERMINATION
The Company hereby reserves the right, exercisable by the Committee, to
amend the Plan at any time and in any respect or to discontinue and terminate
the Plan in whole or in part at any time, subject to Section 7. Any amendment
or termination of the Plan may be effective with respect to any amount which
has not yet been paid out, except that (i) amounts which have been credited to
a deferred bonus account shall be paid out in accordance with the applicable
deferral election or, if the Committee so determines upon termination of the
Plan, distributed to such participant as soon as practicable after termination
of the Plan, and (ii) absent any required shareholder approval, amendments
cannot be made which alter the Measurement Factors or increase the maximum
amounts payable hereunder.
No provision of the Plan shall be deemed to constitute a commitment of the
Company to pay, or to confer any contractual or other rights upon a
participant to receive a bonus award for any one or more fiscal years or to
G-2
<PAGE>
confer upon any participant any right to continue in the employ of the Company
or to constitute any contract or agreement of employment or to interfere in
any way with the right of the Company to terminate a participant's employment
at any time, with or without cause, but nothing contained herein shall affect
any contractual right of a participant pursuant to a written employment
agreement.
7.AWARDS AND SHAREHOLDER APPROVAL
Neither the Plan, nor any award made hereunder, shall be effective unless
the Plan is approved by the Company Shareholders. In no event shall any award
be made under the Plan for any year after calendar year 2000. The Plan, awards
under the Plan, and any amendment to the Plan which would change the class of
executives who are eligible to receive awards under the Plan or the
permissible amount of such awards shall be subject to approval of the
Company's shareholders in such manner and with such frequency as shall be
required under Section 162(m).
G-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of
directors to the corporation or its stockholders for monetary damages for
breaches of fiduciary duty, except for liability (a) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for any
transaction from which the director derived an improper personal benefit.
Article SEVEN of the Restated Certificate of Incorporation of Allegheny
Teledyne Incorporated (the "Company") provides, among other things, that the
personal liability of directors of the Company is so eliminated.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his being a director or officer of the
corporation if it is determined that he acted in accordance with the
applicable standard of conduct set forth in such statutory provision. Article
EIGHT of the Restated Certificate of Incorporation of the Company provides
that the Company will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that he is or was a director or
officer of the Company, or is or was serving at the request of the Company as
a director, officer, employee or agent of another entity, against certain
liabilities, costs and expenses. The Company is also authorized to maintain
insurance on behalf of any person who is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another entity against any liability asserted
against such person and incurred by such person in any such capacity or
arising out of his status as such, whether or not the Company would have the
power to indemnify such person against such liability under the DGCL.
ITEM 21. EXHIBITS.
The following exhibits are filed as part of this registration statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger and Combination, dated as of April 1,
1996, as amended and restated, among Allegheny Teledyne
Incorporated, Allegheny Ludlum Corporation, ALS Merger
Corporation, Teledyne, Inc. and TDY Merger, Inc. (Filed herewith;
appears as Appendix A to the Joint Proxy Statement/Prospectus
forming part of this registration statement)
2.2 Form of Shareholder Agreement, dated as of April 1, 1996, between
Teledyne, Inc. and each of Richard P. Simmons, Arthur H. Aronson,
Robert P. Bozzone and Charles J. Queenan, Jr. (Filed herewith;
appears as Appendix D to the Joint Proxy Statement/Prospectus
forming part of this registration statement)
2.3 Form of Stockholder Agreement, dated as of April 1, 1996, between
Allegheny Ludlum Corporation and each of William P. Rutledge,
Donald B. Rice, George A. Roberts (and Mrs. Roberts), Fayez
Sarofim and Henry E. Singleton (Filed herewith; appears as
Appendix E to the Joint Proxy Statement/Prospectus forming part of
this registration statement)
3.1 Form of Restated Certificate of Incorporation of Allegheny
Teledyne Incorporated (Filed herewith; appears as Annex A to
Appendix A to the Joint Proxy Statement/Prospectus forming part of
this registration statement)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.2 Form of Amended and Restated By-Laws of Allegheny Teledyne
Incorporated (Filed herewith; appears as Annex B to Appendix A to
the Joint Proxy Statement/Prospectus forming part of this
registration statement)
5.1 Opinion of Jon D. Walton, Esquire as to the legality of the
securities being registered (Filed herewith)
8.1 Opinion of Kirkpatrick & Lockhart LLP regarding certain tax
matters (Filed herewith)
8.2 Opinion of Irell & Manella LLP regarding certain tax matters
(Filed herewith)
10.1 Allegheny Teledyne Incorporated 1996 Incentive Plan (Filed
herewith; appears as Annex E to Appendix A to the Joint Proxy
Statement/Prospectus forming part of this registration statement)
10.2 Allegheny Teledyne Incorporated 1996 Non-Employee Director Stock
Compensation Plan (Filed herewith; appears as Annex F to Appendix
A to the Joint Proxy Statement/Prospectus forming part of this
registration statement)
10.3 Employment Agreement, dated July 15, 1996, between Allegheny
Teledyne Incorporated and Arthur H. Aronson (Filed herewith)
10.4 Employment Agreement, dated July 15, 1996, between Allegheny
Teledyne Incorporated and James L. Murdy (Filed herewith)
10.5 Employment Agreement, dated July 15, 1996, between Allegheny
Teledyne Incorporated and Jon D. Walton (Filed herewith)
10.6 Separation Agreement, dated July 12, 1996, among Teledyne, Inc.,
Allegheny Teledyne Incorporated and Dr. Donald B. Rice (Filed
herewith)
23.1 Consent of Jon D. Walton, Esquire (Included in opinion filed as
Exhibit 5.1)
23.2 Consent of Kirkpatrick & Lockhart LLP (Included in opinion filed
as Exhibit 8.1)
23.3 Consent of Irell & Manella LLP (Included in opinion filed as
Exhibit 8.2)
23.4 Consent of Ernst & Young LLP (Filed herewith)
23.5 Consent of Arthur Andersen LLP (Filed herewith)
23.6 Consent of Salomon Brothers Inc
23.7 Consent of Goldman, Sachs & Co.
24.1 Power of Attorney (Filed herewith; appears as part of signature
page)
99.1 Form of Proxy of Allegheny Ludlum Corporation (Filed herewith)
99.2 Form of Voting Instruction Materials of Allegheny Ludlum
Corporation (Filed herewith)
99.3 Form of Proxy of Teledyne, Inc. (Filed herewith)
</TABLE>
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-2
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(7) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(8) To supply by means of a post-effective amendment all required
information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the
registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PITTSBURGH,
COMMONWEALTH OF PENNSYLVANIA, ON JULY 16, 1996.
Allegheny Teledyne Incorporated
/s/ William P. Rutledge
By: _________________________________
WILLIAM P. RUTLEDGE
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints either William P. Rutledge or Douglas J. Grant
and either James L. Murdy or Jon D. Walton, acting jointly, his or her true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments to this registration
statement, and to file the same with all exhibits thereto, and other
documentation in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE CAPACITY DATE
Chairman of the
/s/ Richard P. Simmons Board and a July 16, 1996
- ------------------------------------- Director
RICHARD P. SIMMONS
President and Chief
/s/ William P. Rutledge Executive Officer July 16, 1996
- ------------------------------------- and a Director
WILLIAM P. RUTLEDGE
Vice Chairman of the
/s/ Robert P. Bozzone Board and a July 16, 1996
- ------------------------------------- Director
ROBERT P. BOZZONE
Executive Vice
/s/ Arthur H. Aronson President and a July 16, 1996
- ------------------------------------- Director
ARTHUR H. ARONSON
II-4
<PAGE>
SIGNATURE TITLE DATE
Senior Vice
/s/ James L. Murdy President and Chief July 16, 1996
- ------------------------------------- Financial Officer
JAMES L. MURDY (Principal
Financial and
Accounting Officer)
Director
/s/ Paul S. Brentlinger July 16, 1996
- -------------------------------------
PAUL S. BRENTLINGER
Director
/s/ Frank V. Cahouet July 16, 1996
- -------------------------------------
FRANK V. CAHOUET
Director
/s/ Diane C. Creel July 16, 1996
- -------------------------------------
DIANE C. CREEL
Director
/s/ C. Fred Fetterolf July 16, 1996
- -------------------------------------
C. FRED FETTEROLF
Director
/s/ Thomas Marshall July 16, 1996
- -------------------------------------
THOMAS MARSHALL
Director
/s/ W. Craig McClelland July 16, 1996
- -------------------------------------
W. CRAIG MCCLELLAND
Director
/s/ William G. Ouchi July 16, 1996
- -------------------------------------
WILLIAM G. OUCHI
Director
/s/ Charles J. Queenan, Jr. July 16, 1996
- -------------------------------------
CHARLES J. QUEENAN, JR.
Director
/s/ George A. Roberts July 16, 1996
- -------------------------------------
GEORGE A. ROBERTS
Director
/s/ James E. Rohr July 16, 1996
- -------------------------------------
JAMES E. ROHR
Director
/s/ Fayez Sarofim July 16, 1996
- -------------------------------------
FAYEZ SAROFIM
Director
/s/ Henry E. Singleton July 16, 1996
- -------------------------------------
HENRY E. SINGLETON
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
2.1 Agreement and Plan of Merger and Combination, dated as of April 1,
1996, as amended and restated, among Allegheny Teledyne Incorporated,
Allegheny Ludlum Corporation, ALS Merger Corporation, Teledyne, Inc.
and TDY Merger, Inc. (Appears as Appendix A to the Joint Proxy
Statement/Prospectus forming part of this registration statement)
2.2 Form of Shareholder Agreement, dated as of April 1, 1996, between
Teledyne, Inc. and each of Richard P. Simmons, Arthur H. Aronson,
Robert P. Bozzone and Charles J. Queenan, Jr. (Appears as Appendix D
to the Joint Proxy Statement/Prospectus forming part of this
registration statement).
2.3 Form of Stockholder Agreement, dated as of April 1, 1996, between
Allegheny Ludlum Corporation and each of William P. Rutledge, Donald
B. Rice, George A. Roberts (and Mrs. Roberts), Fayez Sarofim and Henry
E. Singleton (Appears as Appendix E to the Joint Proxy
Statement/Prospectus forming part of this registration statement)
3.1 Form of Restated Certificate of Incorporation of Allegheny Teledyne
Incorporated (Appears as Annex A to Appendix A to the Joint Proxy
Statement/Prospectus forming part of this registration statement)
3.2 Form of Amended and Restated By-Laws of Allegheny Teledyne
Incorporated (Appears as Annex B to Appendix A to the Joint Proxy
Statement/Prospectus forming part of this registration statement)
5.1 Opinion of Jon D. Walton, Esquire as to the legality of the securities
being registered
8.1 Opinion of Kirkpatrick & Lockhart LLP regarding certain tax matters
8.2 Opinion of Irell & Manella LLP regarding certain tax matters
10.1 Allegheny Teledyne Incorporated 1996 Incentive Plan (Appears as Annex
E to Appendix A to the Joint Proxy Statement/Prospectus forming part
of this registration statement)
10.2 Allegheny Teledyne Incorporated 1996 Non-Employee Director Stock
Compensation Plan (Appears as Annex F to Appendix A to the Joint Proxy
Statement/Prospectus forming part of this registration statement)
10.3 Employment Agreement, dated July 15, 1996, between Allegheny Teledyne
Incorporated and Arthur H. Aronson
10.4 Employment Agreement, dated July 15, 1996, between Allegheny Teledyne
Incorporated and James L. Murdy
10.5 Employment Agreement, dated July 15, 1996, between Allegheny Teledyne
Incorporated and Jon D. Walton
10.6 Separation Agreement, dated July 12, 1996, among Teledyne, Inc.,
Allegheny Teledyne Incorporated and Dr. Donald B. Rice
23.4 Consent of Ernst & Young LLP
23.5 Consent of Arthur Andersen LLP
23.6 Consent of Salomon Brothers Inc
23.7 Consent of Goldman, Sachs & Co.
24.1 Power of Attorney (Appears as part of signature page)
99.1 Form of Proxy of Allegheny Ludlum Corporation
99.2 Form of Voting Instruction Materials of Allegheny Ludlum Corporation
99.3 Form of Proxy of Teledyne, Inc.
</TABLE>
<PAGE>
Exhibit 5.1
ALLEGHENY TELEDYNE INCORPORATED
1000 Six PPG Place
Pittsburgh, PA 15222
Jon D. Walton
Vice President -
General Counsel and Secretary
(412) 394-2836
July 16, 1996
Allegheny Teledyne Incorporated
1000 Six PPG Place
Pittsburgh, Pennsylvania 15222-5479
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
I am the Vice President-General Counsel and Secretary of Allegheny
Teledyne Incorporated, a Delaware corporation (the "Company"), and have acted in
such capacity in connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, relating to the
issuance by the Company of an aggregate of up to 183,778,552 shares (the
"Shares") of the Common Stock, par value $.10 per share, of the Company pursuant
to the Agreement and Plan of Merger and Combination, dated as of April 1, 1996,
as amended and restated (the "Combination Agreement"), among the Company,
Allegheny Ludlum Corporation, a Pennsylvania corporation, ALS Merger
Corporation, a Pennsylvania corporation and wholly owned subsidiary of the
Company, Teledyne, Inc., a Delaware corporation, and TDY Merger, Inc., a
Delaware corporation and a wholly owned subsidiary of the Company.
I am familiar with the Registration Statement. I have reviewed the
Company's Restated Certificate of Incorporation, as amended, the Company's
Amended and Restated By-laws, and the Combination Agreement and related
documents. I have also examined such other public and corporate documents,
certificates, instruments and corporate records, and such questions of law, as I
have deemed necessary for purposes of expressing an opinion on the matters
hereinafter set forth. In all examinations of documents, instruments and other
papers, I have assumed the genuineness of all signatures on original and
certified documents and the conformity to original and certified documents of
all copies submitted to me as conformed, photostatic or other copies.
<PAGE>
Allegheny Teledyne Incorporated
July 16, 1996
Page 2
On the basis of the foregoing, I am of the opinion that the Shares,
when issued in accordance with the Combination Agreement, will be validly
issued, and fully paid and non-assessable.
I consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to me in the Joint Proxy Statement/Prospectus
forming a part thereof under the caption "Legal Matters."
Very truly yours,
/s/ Jon D. Walton
Jon D. Walton
JDW/pt
<PAGE>
Exhibit 8.1
_____________________________
KIRKPATRICK & LOCKHART LLP
_____________________________
1500 OLIVER BUILDING
PITTSBURGH, PENNSYLVANIA 15222-2312
TELEPHONE (412) 355-6500
FACSIMILE (412) 355-6501
July 17, 1996
Allegheny Ludlum Corporation
1000 Six PPG Place
Pittsburgh, PA 15222-5477
Gentlemen:
We have acted as counsel to Allegheny Ludlum Corporation, a Pennsylvania
corporation ("ALC"), in connection with the proposed merger (the "Merger") of
ALS Merger Corporation, a Pennsylvania corporation ("ALC Merger Sub") and a
wholly owned subsidiary of Allegheny Teledyne Incorporated, a Delaware
corporation ("ATI"), with and into ALC. You have requested our opinion
regarding the U.S. federal income tax consequences of the Merger.
In rendering our opinion, we have reviewed the Agreement and Plan of
Merger and Combination, as amended and restated, dated as of April 1, 1996, by
and among ATI, Teledyne, Inc., a Delaware corporation ("TI"), TDY Merger, Inc.,
a Delaware corporation and a wholly owned subsidiary of ATI, ALC and ALC Merger
Sub, relating to the Merger (the "Combination Agreement"), the Joint Proxy
Statement/Prospectus to shareholders of ALC and stockholders of TI (the "Proxy
Statement/Prospectus"), and such other materials as we have deemed necessary or
appropriate as a basis for our opinion.
In rendering this opinion, we have assumed that the Merger will be
consummated in accordance with the Combination Agreement and that the Proxy
Statement/Prospectus accurately reflects the material facts of the Merger and
those surrounding ALC, ALC Merger Sub and ATI. In addition, as to any facts
material to this opinion which we did not
<PAGE>
Allegheny Ludlum Corporation
July 17, 1996
Page 2
independently establish or verify, we have relied upon the facts contained in
the statements and representations of officers and other representatives of ALC,
ALC Merger Sub, ATI and others, which facts may in certain instances derive from
the best knowledge of such persons without duty of inquiry. Such
representations of ALC are attached hereto as Exhibit A and such representations
of ATI and ALC Merger Sub are attached hereto as Exhibit B.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
regulations, pertinent judicial authorities, rulings of the Internal Revenue
Service, and such other authorities as we have considered relevant.
Based upon the foregoing, it is our opinion that, under present law, for
U.S. federal income tax purposes the Merger pursuant to which the shares of
common stock of ALC held by the shareholders of ALC will be converted into
shares of the common stock of ATI will be treated as a reorganization within the
meaning of Section 368(a) of the Code. We further confirm, based on the
foregoing, our opinion as set forth (subject to the qualifications and
limitations also set forth) under the heading "Certain Federal Income Tax
Consequences" in the Proxy Statement/Prospectus. Other than as expressly set
forth above, we express no opinion as to the U.S. federal, state, local, foreign
or other tax consequences of the Merger to any particular shareholder of ALC.
Any material changes in the facts from those set forth or assumed herein
or in the Proxy Statement/Prospectus may affect the conclusions stated herein.
We hereby consent to the filing of this opinion as an exhibit to the
Form S-4 and to the reference to us under the caption "THE COMBINATION - Certain
Federal Income Tax Consequences" in the Proxy Statement/Prospectus forming part
of the Form S-4 and any amendments thereto. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Yours truly,
/s/ Kirkpatrick & Lockhart LLP
<PAGE>
Exhibit A
ALLEGHENY LUDLUM CORPORATION
1000 Six PPG Place
Pittsburgh, PA 15222
July 17, 1996
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Dear Sirs:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger and Combination, as amended and restated, dated as
of April 1, 1996 (the "Combination Agreement"), by and among Allegheny Teledyne
Incorporated, a Delaware corporation ("ATI"), Allegheny Ludlum Corporation, a
Pennsylvania corporation ("ALC"), ALS Merger Corporation, a Pennsylvania
corporation and wholly owned subsidiary of ATI ("ALC Merger Sub"), Teledyne,
Inc., a Delaware corporation ("TI") and TDY Merger, Inc., a Delaware corporation
and wholly owned subsidiary of ATI, relating to the proposed merger (the
"Merger") of ALC Merger Sub with and into ALC, and recognizing that you will
rely on this letter in rendering said opinion, the undersigned, a duly
authorized officer of ALC and acting as such, hereby certifies that to the best
knowledge of the undersigned after reasonable inquiry, the facts relating to the
Merger as described in the Combination Agreement and the Joint Proxy
Statement/Prospectus, dated July 17, 1996, including attachments thereto, are
true, correct and complete in all material respects and hereby certifies, to the
best knowledge of the undersigned after reasonable inquiry, to the following as
of the date hereof. References herein only to the "knowledge" of any person are
to such person's (or management's in the case of an entity) actual knowledge
without duty of inquiry. Insofar as such certification pertains to any person
other than ALC and any of its subsidiaries, the voting stock of which ALC owns
at least eighty percent (80%) (an "Affiliate"), such certification is only as to
the knowledge of the undersigned without specific inquiry. We understand that
you will reaffirm your opinion at the Closing and that, in connection with such
reaffirmation, you will require that we reaffirm this certification as of that
time.
<PAGE>
Capitalized terms in this letter shall have the same meanings ascribed to
them in the Combination Agreement unless otherwise specified herein.
A. Representations. ALC hereby certifies, warrants, and represents that
---------------
the following facts are now true and will continue to be true as of the Closing
Date and as of the Effective Time:
1. The Merger will be consummated in accordance with the material
terms of the Combination Agreement and none of the material conditions therein
have been waived or modified and ALC has no plan or intention to waive or modify
any such material conditions.
2. The ratio for the exchange of shares of common stock of ALC (the
"ALC Common Stock") for common stock of ATI (the "ATI Common Stock") in the
Merger was negotiated through arm's length bargaining.
3. There is no present plan or intention (a "Plan") on the part of the
shareholders of ALC who own five percent (5%) or more of the ALC stock, and to
the best of the knowledge of the management of ALC, there is no Plan on the part
of the remaining shareholders, to engage in a sale, exchange, transfer,
reduction of risk of ownership or any other direct or indirect disposition (a
"Sale") of (i) shares of ATI Common Stock to be issued to them in the Merger,
which shares have an aggregate fair market value, as of the period ending at the
Effective Time, in excess of fifty percent (50%) of the aggregate fair market
value, immediately prior to the Merger, of the outstanding shares of ALC Common
Stock held by shareholders immediately prior to the Merger ("Outstanding ALC
Common Stock") (including shares of ALC Common Stock issued after the date
hereof and prior to the Effective Time pursuant to exercise of options to
acquire ALC Common Stock issued to present or former employees of ALC in the
ordinary course of business (the "ALC Options")), or (ii) more than fifty
percent (50%) of the shares of ATI Common Stock received by such shareholders in
the Merger. For purposes of the foregoing, a Sale of ATI Common Stock shall be
considered to have occurred pursuant to a Plan if such Sale occurs in a
transaction that is in contemplation of or related to the Merger (a "Related
Transaction"). In addition, shares of ALC Common Stock (or the portion thereof)
with respect to which a Sale occurred in a Related Transaction prior to the
Merger shall be considered to have been Outstanding ALC Common Stock that was
exchanged for ATI Common Stock in the Merger and then disposed of pursuant to a
Plan.
<PAGE>
4. Immediately following the Merger and all Related Transactions, ALC
will hold at least 90 percent of the fair market value of its net assets and at
least 70 percent of the fair market value of its gross assets, and at least 90
percent of the fair market value of ALC Merger Sub's net assets and at least 70
percent of the fair market value of ALC Merger Sub's gross assets held
immediately prior to the Merger (or, if earlier, immediately prior to any
Related Transaction). For purposes of this representation, amounts paid by ALC
or ALC Merger Sub to pay reorganization expenses and all redemptions and
distributions (except for regular, normal dividends) made by ALC will be
included as assets of ALC or ALC Merger Sub, respectively, immediately prior to
the Merger (or, if earlier, immediately prior to any Related Transaction).
5. ALC has made no transfer of any of its assets in contemplation of
the Merger or during the pre-Merger period other than in the ordinary course of
business.
6. ALC has no obligation, understanding, agreement, plan or intention
to issue additional shares of its stock that would result in ATI losing control
of ALC within the meaning of Section 368(c) of the Internal Revenue Code of
1986, as amended (the "Code") (control within the meaning of Section 368(c) of
the Code is hereinafter referred to as "Control").
7. To the knowledge of ALC, ATI has no plan or intention to reacquire
any of its stock issued in the Merger.
8. To the knowledge of ALC, ATI has no plan or intention to liquidate
ALC; to merge ALC with or into another corporation; to sell or otherwise dispose
of the stock of ALC; or to cause ALC to sell or otherwise dispose of any of its
assets or of any of the assets acquired from ALC Merger Sub, except for
dispositions made in the ordinary course of business or transfers of assets to a
corporation controlled by ALC.
9. To the knowledge of ALC, following the Merger and all Related
Transactions, ATI will cause ALC to continue its historic business or use a
significant portion of its historic business assets in a business.
10. ATI, ALC Merger Sub, ALC, and the shareholders of ALC will each
pay their respective expenses, if any, incurred in connection with the Merger
and all Related Transactions.
11. There is no intercorporate indebtedness existing between ATI and
ALC or between ALC Merger Sub and ALC that was issued, acquired, or will be
settled at a discount.
<PAGE>
12. In the Merger, shares of ALC stock representing Control of ALC will
be exchanged solely for voting stock of ATI. For purposes of this
representation, shares of ALC stock exchanged for cash or other property
originating with ATI will be treated as outstanding ALC stock on the date of the
Merger. Moreover, for purposes of this representation, in the case of ATI shares
issued in the Merger and reacquired in a Related Transaction, the ALC shares to
which such ATI shares are attributable will be treated as having been exchanged
in the Merger for other than voting stock.
13. At the Effective Time, ALC will not have outstanding any warrants,
options, convertible securities, or any other type of right pursuant to which
any person could acquire stock in ALC that, if exercised or converted, would
affect ATI's acquisition or retention of Control of ALC.
14. ATI does not own, nor has it owned during the past five years, any
shares of the stock of ALC.
15. ALC is not an "investment company" as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
16. On the date of the Merger, the fair market value of the assets of
ALC will exceed the sum of its liabilities, plus the amount of liabilities, if
any, to which such assets are subject.
17. ALC is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of the Code.
18. The liabilities of ALC have been incurred by ALC in the ordinary
course of its business.
19. None of the compensation received by any shareholder-employee of
ALC will be separate consideration for, or allocable to, any of their shares of
ALC stock; none of the shares of ATI stock received by any shareholder-employees
will be separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
B. Reliance by You in Rendering Opinions; Limitations on Your Opinions.
-------------------------------------------------------------------
1. ALC recognizes that (i) your opinions will be based on the
representations set forth herein, and on the
<PAGE>
statements contained in the Combination Agreement and the documents related
thereto and (ii) your opinions will be subject to certain limitations and
qualifications including without limitation that they may not be relied upon if
any such representations are not accurate.
2. ALC recognizes that your opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
ALLEGHENY LUDLUM CORPORATION
a Pennsylvania corporation
By: /s/ James L. Murdy
------------------------------
Title: Senior Vice President-Finance and Chief Financial Officer
---------------------------------------------------------
<PAGE>
Exhibit B
ALLEGHENY TELEDYNE INCORPORATED
1000 Six PPG Place
Pittsburgh, PA 15222
July 17, 1996
Kirkpatrick & Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Dear Sirs:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger and Combination, as amended and restated, dated as
of April 1, 1996 (the "Combination Agreement"), by and among Allegheny Teledyne
Incorporated, a Delaware corporation ("ATI"), Allegheny Ludlum Corporation, a
Pennsylvania corporation ("ALC"), ALS Merger Corporation, a Pennsylvania
corporation and wholly owned subsidiary of ATI ("ALC Merger Sub"), Teledyne,
Inc., a Delaware corporation ("TI") and TDY Merger, Inc., a Delaware corporation
and wholly owned subsidiary of ATI, relating to the proposed merger (the
"Merger") of ALC Merger Sub with and into ALC, and recognizing that you will
rely on this letter in rendering said opinion, the undersigned, duly authorized
officers of ATI and ALC Merger Sub respectively, and acting as such, hereby
certify that to the best knowledge of the undersigned after reasonable inquiry,
the facts relating to the Merger as described in the Combination Agreement and
the Joint Proxy Statement/Prospectus, dated July 17, 1996, including attachments
thereto, are true, correct and complete in all material respects and hereby
certify, to the best knowledge of the undersigned after reasonable inquiry, to
the following as of the date hereof. The undersigned also recognize that ALC
will rely on the representations contained in this letter to the extent such
representations relate to ATI and ALC Merger Sub. References herein only to the
"knowledge" of any person are to such person's (or management's in the case of
an entity) actual knowledge without duty of inquiry. Insofar as such
certification pertains to any person other than ATI and any of its subsidiaries,
the voting stock of which ATI owns at least eighty percent (80%) (an
"Affiliate"), such certification is only as to the knowledge of the undersigned
without specific inquiry. We understand that you will reaffirm your opinion at
the Closing and that, in connection with such reaffirmation, you will require
that we reaffirm this certification as of that time.
<PAGE>
Capitalized terms in this letter shall have the same meanings ascribed to
them in the Combination Agreement unless otherwise specified herein.
A. Representations. ATI and ALC Merger Sub each hereby certifies,
---------------
warrants, and represents, with respect to itself, as applicable, that the
following facts are now true and will continue to be true as of the Closing Date
and as of the Effective Time:
1. The Merger will be consummated in accordance with the material
terms of the Combination Agreement and none of the material conditions therein
have been waived or modified and ATI and ALC Merger Sub have no plan or
intention to waive or modify any such material conditions.
2. The ratio for the exchange of shares of common stock of ALC (the
"ALC Common Stock") for common stock of ATI (the "ATI Common Stock") in the
Merger was negotiated through arm's length bargaining.
3. To the knowledge of ATI and ALC Merger Sub, there is no present
plan or intention (a "Plan") on the part of the shareholders of ALC to engage in
a sale, exchange, transfer, reduction of risk of ownership or any other direct
or indirect disposition (a "Sale") of (i) shares of ATI Common Stock to be
issued to them in the Merger, which shares have an aggregate fair market value,
as of the period ending at the Effective Time, in excess of fifty percent (50%)
of the aggregate fair market value, immediately prior to the Merger, of the
outstanding shares of ALC Common Stock held by shareholders immediately prior to
the Merger ("Outstanding ALC Common Stock") (including shares of ALC Common
Stock issued after the date hereof and prior to the Effective Time pursuant to
exercise of options to acquire ALC Common Stock issued to present or former
employees of ALC in the ordinary course of business (the "ALC Options")), or
(ii) more than fifty percent (50%) of the shares of ATI Common Stock received by
such shareholders in the Merger. For purposes of the foregoing, a Sale of ATI
Common Stock shall be considered to have occurred pursuant to a Plan if such
Sale occurs in a transaction that is in contemplation of or related to the
Merger (a "Related Transaction"). In addition, shares of ALC Common Stock (or
the portion thereof) with respect to which a Sale occurred in a Related
Transaction prior to the Merger shall be considered to have been Outstanding ALC
Common Stock that was exchanged for ATI Common Stock in the Merger and then
disposed of pursuant to a Plan.
4. Prior to the Merger, ATI will be in control of ALC Merger Sub
within the meaning of Section 368(c) of the Internal Revenue Code of 1986, as
amended (the "Code") (control within the
<PAGE>
meaning of Section 368(c) of the Code is hereinafter referred to as "Control").
5. ATI has no plan or intention to cause ALC to issue additional
shares of stock after the Merger, or take any other action, that would result in
ATI losing Control of ALC.
6. ATI has no plan or intention to reacquire any of its stock issued
in the Merger.
7. ATI has no plan or intention to liquidate ALC; to merge ALC with or
into another corporation; to sell or otherwise dispose of the stock of ALC; or
to cause ALC to sell or otherwise dispose of any of its assets or of any of the
assets acquired from ALC Merger Sub, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation controlled
by ALC.
8. The liabilities of ALC Merger Sub, if any, assumed by ALC and the
liabilities, if any, to which the transferred assets of ALC Merger Sub are
subject were incurred by ALC Merger Sub in the ordinary course of its business.
9. Following the Merger and all Related Transactions, ALC will
continue its historic business or use a significant portion of its historic
business assets in a business.
10. ATI, ALC Merger Sub, ALC, and the shareholders of ALC will each pay
their respective expenses, if any, incurred in connection with the Merger and
all Related Transactions.
11. There is no intercorporate indebtedness existing between ATI and
ALC or between ALC Merger Sub and ALC that was issued, acquired, or will be
settled at a discount.
12. In the Merger, shares of ALC stock representing Control of ALC will
be exchanged solely for voting stock of ATI. For purposes of this
representation, in the case of ATI shares issued in the Merger and reacquired in
a Related Transaction, the TI shares to which such ATI shares are attributable
will be treated as having been exchanged in the Merger for other than voting
stock.
13. ATI does not own, nor has it owned during the past five years, any
shares of the stock of ALC.
14. Neither ATI nor ALC Merger Sub is an "investment company" as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
<PAGE>
15. None of the compensation received by any shareholder-employee of
ALC will be separate consideration for, or allocable to, any of their shares of
ALC stock; none of the shares of ATI stock received by any shareholder-employees
will be separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
B. Reliance by You in Rendering Opinions; Limitations on Your Opinions.
-------------------------------------------------------------------
1. ATI and ALC Merger Sub each recognizes that (i) your opinions will
be based on the representations set forth herein, and on the statements
contained in the Combination Agreement and the documents related thereto and
(ii) your opinions will be subject to certain limitations and qualifications
including without limitation that they may not be relied upon if any such
representations are not accurate.
2. ATI and ALC Merger Sub each recognizes that your opinions will not
address any tax consequences of the Merger or any action taken in connection
therewith except as expressly set forth in such opinions.
Very truly yours,
ALLEGHENY TELEDYNE INCORPORATED
a Delaware corporation
By: /s/ James L. Murdy
----------------------------
Title: Senior Vice President and Chief Financial Officer
-------------------------------------------------
ALS MERGER CORPORATION
a Pennsylvania corporation
By: /s/ James L. Murdy
----------------------------
Title: Vice President
--------------------------
<PAGE>
Exhibit 8.2
_________________________
IRELL & MANELLA LLP
_________________________
1800 AVENUE OF THE STARS
SUITE 900
LOS ANGELES, CALIFORNIA 90067-4276
(310) 277-1010
July 17, 1996
Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067-3101
Gentlemen:
We have acted as counsel to Teledyne, Inc., a corporation organized
under the laws of the State of Delaware ("TI"), in connection with the proposed
merger (the "Merger") of TDY Merger, Inc., a corporation organized under the
laws of the State of Delaware ("TI Merger Sub") and a wholly owned subsidiary of
Allegheny Teledyne Incorporated, a corporation organized under the laws of
Delaware ("ATI"), with and into TI. You have requested our opinion regarding the
U.S. federal income tax consequences of the Merger.
In rendering our opinion, we have reviewed the Agreement and Plan of
Merger and Combination, as amended and restated, dated as of April 1, 1996, by
and among ATI, Allegheny Ludlum Corporation, a Pennsylvania corporation ("ALC"),
ALS Merger Corporation, a Pennsylvania corporation and wholly owned subsidiary
of ATI, TI and TI Merger Sub, relating to the Merger (the "Combination
Agreement"), the Joint Proxy Statement/Prospectus to stockholders of TI and ALC
(the "Proxy Statement/Prospectus"), and such other materials as we have deemed
necessary or appropriate as a basis for our opinion.
In rendering this opinion, we have assumed that the Merger will be
consummated in accordance with the Combination Agreement and that the Proxy
Statement/Prospectus accurately reflects the material facts of the Merger and
those
<PAGE>
Teledyne, Inc.
July 17, 1996
Page 2
surrounding TI, TI Merger Sub and ATI. In addition, as to any facts material to
this opinion which we did not independently establish or verify, we have relied
upon the facts contained in the statements and representations of officers and
other representatives of TI, TI Merger Sub, ATI and others, which facts may in
certain instances derive from the best knowledge of such persons without duty of
inquiry. Such representations of TI are attached hereto as Exhibit A and such
representations of ATI and TI Merger Sub are attached hereto as Exhibit B.
In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986 (the "Code"), Treasury regulations,
pertinent judicial authorities, rulings of the Internal Revenue Service, and
such other authorities as we have considered relevant.
Based upon the foregoing, it is our opinion that, under present law, for
U.S. federal income tax purposes the Merger pursuant to which the shares of
common stock of TI held by the stockholders of TI will be converted into shares
of the common stock of ATI will be treated as a reorganization within the
meaning of Section 368(a) of the Code. We further confirm, based on the
foregoing, our opinion as set forth (subject to the qualifications and
limitations as also set forth) under the heading "Certain Federal Income Tax
Consequences" in the Proxy Statement/Prospectus. Other than as expressly set
forth above, we express no opinion as to the U.S. federal, state, local, foreign
or other tax consequences of the Merger to any particular stockholder of TI.
Any material changes in the facts from those set forth or assumed herein
or in the Proxy Statement/Prospectus may affect the conclusions stated herein.
We hereby consent to the filing of this opinion as an exhibit to the
Form S-4 and to the reference to us under the caption "THE COMBINATION - Certain
Federal Income Tax Consequences" in the Proxy Statement/Prospectus forming part
of the Form S-4 and any amendments thereto. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission thereunder.
<PAGE>
Teledyne, Inc.
July 17, 1996
Page 3
Very truly yours,
/s/ Irell & Manella LLP
<PAGE>
Exhibit A
TELEDYNE, INC.
2049 Century Park East
Los Angeles, CA 90067-3101
July 17, 1996
Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Dear Sirs:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger and Combination, as amended and restated, dated as
of April 1, 1996 (the "Combination Agreement"), by and among Allegheny Teledyne
Incorporated, a Delaware corporation ("ATI"), Allegheny Ludlum Corporation, a
Pennsylvania corporation ("ALC"), ALS Merger Corporation, a Pennsylvania
corporation and wholly owned subsidiary of ATI, Teledyne, Inc., a Delaware
corporation ("TI") and TDY Merger, Inc., a Delaware corporation and wholly owned
subsidiary of ATI ("TI Merger Sub"), relating to the proposed merger (the
"Merger") of TI Merger Sub with and into TI, and recognizing that you will rely
on this letter in rendering said opinion, the undersigned, a duly authorized
officer of TI and acting as such, hereby certifies that to the best knowledge of
the undersigned after reasonable inquiry, the facts relating to the Merger as
described in the Combination Agreement and the Joint Proxy Statement/Prospectus,
dated July 17, 1996, including attachments thereto, are true, correct and
complete in all material respects and hereby certifies, to the best knowledge of
the undersigned after reasonable inquiry, to the following as of the date
hereof. References herein only to the "knowledge" of any person are to such
person's (or management's in the case of an entity) actual knowledge without
duty of inquiry. Insofar as such certification pertains to any person other
than TI and any of its subsidiaries, the voting stock of which TI owns at least
eighty percent (80%) (an "Affiliate"), such certification is only as to the
knowledge of the undersigned without specific inquiry. We understand that you
will reaffirm your opinion at the Closing and that, in connection with such
reaffirmation, you will require that we reaffirm this certification as of that
time.
Capitalized terms in this letter shall have the same meanings ascribed to
them in the Combination Agreement unless otherwise specified herein.
<PAGE>
A. Representations. TI hereby certifies, warrants, and represents that
---------------
the following facts are now true and will continue to be true as of the Closing
Date and as of the Effective Time:
1. The Merger will be consummated in accordance with the material terms of
the Combination Agreement and none of the material conditions therein have been
waived or modified and TI has no plan or intention to waive or modify any such
material conditions.
2. The ratio for the exchange of shares of common stock of TI (the "TI
Common Stock") for common stock of ATI (the "ATI Common Stock") in the Merger
was negotiated through arm's length bargaining.
3. There is no present plan or intention (a "Plan") on the part of the
stockholders of TI who own five percent (5%) or more of the TI stock, and to the
best of the knowledge of the management of TI, there is no Plan on the part of
the remaining shareholders, to engage in a sale, exchange, transfer, reduction
of risk of ownership or any other direct or indirect disposition (a "Sale") of
(i) shares of ATI Common Stock to be issued to them in the Merger, which shares
have an aggregate fair market value, as of the period ending at the Effective
Time, in excess of fifty percent (50%) of the aggregate fair market value,
immediately prior to the Merger, of the outstanding shares of TI Common Stock
held by shareholders immediately prior to the Merger ("Outstanding TI Common
Stock") (including shares of TI Common Stock issued after the date hereof and
prior to the Effective Time pursuant to exercise of options to acquire TI Common
Stock issued to present or former employees or directors of TI in the ordinary
course of business (the "TI Options")), or (ii) more than fifty percent (50%) of
the shares of ATI Common Stock received by such stockholders in the Merger. For
purposes of the foregoing, a Sale of ATI Common Stock shall be considered to
have occurred pursuant to a Plan if such Sale occurs in a transaction that is in
contemplation of or related to the Merger (a "Related Transaction"). In
addition, shares of TI Common Stock (or the portion thereof) (i) exchanged for
cash in lieu of fractional shares of ATI Common Stock or (ii) with respect to
which a Sale occurred in a Related Transaction prior to the Merger shall be
considered to have been Outstanding TI Common Stock that was exchanged for ATI
Common Stock in the Merger and then disposed of pursuant to a Plan.
4. Immediately following the Merger and all Related Transactions, TI will
hold at least 90 percent of the fair market value of its net assets and at least
70 percent of the fair market value of its gross assets, and at least 90 percent
of the fair market value of TI Merger Sub's net assets and at least 70 percent
of the fair market value of TI Merger Sub's gross assets held immediately prior
to the Merger (or, if earlier, immediately prior to any Related Transaction).
For purposes of this representation, amounts paid by TI or TI Merger Sub to pay
reorganization expenses and all redemptions and distributions (except for
regular, normal dividends) made by TI will be included as assets of TI or TI
Merger Sub, respectively, immediately prior to the Merger (or, if earlier,
immediately prior to any Related Transaction).
<PAGE>
5. TI has made no transfer of any of its assets in contemplation of the
Merger or during the pre-Merger period other than in the ordinary course of
business.
6. TI has no obligation, understanding, agreement, plan or intention to
issue additional shares of its stock that would result in ATI losing control of
TI within the meaning of Section 368(c) of the Internal Revenue Code of 1986, as
amended (the "Code") (control within the meaning of Section 368(c) of the Code
is hereinafter referred to as "Control").
7. To the knowledge of TI, ATI has no plan or intention to reacquire any
of its stock issued in the Merger.
8. To the knowledge of TI, ATI has no plan or intention to liquidate TI;
to merge TI with or into another corporation; to sell or otherwise dispose of
the stock of TI; or to cause TI to sell or otherwise dispose of any of its
assets or of any of the assets acquired from TI Merger Sub, except for
dispositions made in the ordinary course of business or transfers of assets to a
corporation controlled by TI.
9. To the knowledge of TI, following the Merger and all Related
Transactions, ATI will cause TI to continue its historic business or use a
significant portion of its historic business assets in a business.
10. ATI, TI Merger Sub, TI, and the shareholders of TI will each pay their
respective expenses, if any, incurred in connection with the Merger and all
Related Transactions.
11. There is no intercorporate indebtedness existing between ATI and TI or
between TI Merger Sub and TI that was issued, acquired, or will be settled at a
discount.
12. In the Merger, shares of TI stock representing Control of TI will be
exchanged solely for voting stock of ATI. For purposes of this representation,
shares of TI stock exchanged for cash or other property originating with ATI
will be treated as outstanding TI stock on the date of the Merger. Moreover,
for purposes of this representation, in the case of ATI shares issued in the
Merger and reacquired in a Related Transaction, the TI shares to which such ATI
shares are attributable will be treated as having been exchanged in the Merger
for other than voting stock.
13. At the Effective Time, TI will not have outstanding any warrants,
options, convertible securities, or any other type of right pursuant to which
any person could acquire stock in TI that, if exercised or converted, would
affect ATI's acquisition or retention of Control of TI.
14. ATI does not own, nor has it owned during the past five years, any
shares of the stock of TI.
<PAGE>
15. TI is not an "investment company" as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
16. On the date of the Merger, the fair market value of the assets of TI
will exceed the sum of its liabilities, plus the amount of liabilities, if any,
to which such assets are subject.
17. TI is not under the jurisdiction of a court in a Title 11 or similar
case within the meaning of Section 368(a)(3)(A) of the Code.
18. The liabilities of TI have been incurred by TI in the ordinary course
of its business.
19. The payment of cash in lieu of fractional shares of ATI stock is
solely for the purpose of avoiding the expense and inconvenience to ATI of
issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the
transaction to shareholders of TI instead of issuing fractional shares of ATI
stock will not exceed one percent of the total consideration that will be issued
in the transaction to the shareholders of TI in exchange for their shares of TI.
The fractional share interests of each shareholder of TI will be aggregated, and
no shareholder of TI will receive cash in an amount equal to or greater than the
value of one full share of ATI stock.
20. None of the compensation received by any shareholder-employee of TI
will be separate consideration for, or allocable to, any of their shares of TI
stock; none of the shares of ATI stock received by any shareholder-employees
will be separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
B. Reliance by You in Rendering Opinions; Limitations on Your Opinions.
-------------------------------------------------------------------
1. TI recognizes that (i) your opinions will be based on the
representations set forth herein, and on the statements contained in the
Combination Agreement and the documents related thereto and (ii) your opinions
will be subject to certain limitations and qualifications including without
limitation that they may not be relied upon if any such representations are not
accurate.
<PAGE>
2. TI recognizes that your opinions will not address any tax consequences
of the Merger or any action taken in connection therewith except as expressly
set forth in such opinions.
Very truly yours,
TELEDYNE, INC.
a Delaware corporation
By: /s/ Douglas J. Grant
------------------------
Title: Treasurer and Chief Financial Officer
-------------------------------------------------
<PAGE>
Exhibit B
ALLEGHENY TELEDYNE INCORPORATED
1000 Six PPG Place
Pittsburgh, PA 15222
July 17, 1996
Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Dear Sirs:
In connection with the opinion to be delivered by you pursuant to the
Agreement and Plan of Merger and Combination, as amended and restated, dated as
of April 1, 1996 (the "Combination Agreement"), by and among Allegheny Teledyne
Incorporated, a Delaware corporation ("ATI"), Allegheny Ludlum Corporation, a
Pennsylvania corporation ("ALC"), ALS Merger Corporation, a Pennsylvania
corporation and wholly owned subsidiary of ATI, Teledyne, Inc., a Delaware
corporation ("TI") and TDY Merger, Inc., a Delaware corporation and wholly owned
subsidiary of ATI ("TI Merger Sub"), relating to the proposed merger (the
"Merger") of TI Merger Sub with and into TI, and recognizing that you will rely
on this letter in rendering said opinion, the undersigned, duly authorized
officers of ATI and TI Merger Sub, respectively, and acting as such, hereby
certify that to the best knowledge of the undersigned after reasonable inquiry,
the facts relating to the Merger as described in the Combination Agreement and
the Joint Proxy Statement/Prospectus, dated July 17, 1996, including attachments
thereto, are true, correct and complete in all material respects and hereby
certify, to the best knowledge of the undersigned after reasonable inquiry, to
the following as of the date hereof. The undersigned also recognize that TI
will rely on the representations contained in this letter to the extent such
representations relate to ATI and TI Merger Sub. References herein only to the
"knowledge" of any person are to such person's (or management's in the case of
an entity) actual knowledge without duty of inquiry. Insofar as such
certification pertains to any person other than ATI and any of its subsidiaries,
the voting stock of which ATI owns at least eighty percent (80%) (an
"Affiliate"), such certification is only as to the knowledge of the undersigned
without specific inquiry. We understand that you will reaffirm your opinion at
the Closing and
<PAGE>
that, in connection with such reaffirmation, you will require that we reaffirm
this certification as of that time.
Capitalized terms in this letter shall have the same meanings ascribed to
them in the Combination Agreement unless otherwise specified herein.
A. Representations. ATI and TI Merger Sub each hereby certifies,
---------------
warrants, and represents, with respect to itself, as applicable, that the
following facts are now true and will continue to be true as of the Closing Date
and as of the Effective Time:
1. The Merger will be consummated in accordance with the material terms of
the Combination Agreement and none of the material conditions therein have been
waived or modified and TI has no plan or intention to waive or modify any such
material conditions.
2. The ratio for the exchange of shares of common stock of TI (the "TI
Common Stock") for common stock of ATI (the "ATI Common Stock") in the Merger
was negotiated through arm's length bargaining.
3. To the knowledge of ATI and TI Merger Sub, there is no present plan or
intention (a "Plan") on the part of the stockholders of TI to engage in a sale,
exchange, transfer, reduction of risk of ownership or any other direct or
indirect disposition (a "Sale") of (i) shares of ATI Common Stock to be issued
to them in the Merger, which shares have an aggregate fair market value, as of
the period ending at the Effective Time, in excess of fifty percent (50%) of the
aggregate fair market value, immediately prior to the Merger, of the outstanding
shares of TI Common Stock held by shareholders immediately prior to the Merger
("Outstanding TI Common Stock") (including shares of TI Common Stock issued
after the date hereof and prior to the Effective Time pursuant to exercise of
options to acquire TI Common Stock issued to present or former employees or
directors of TI in the ordinary course of business (the "TI Options")), or (ii)
more than fifty percent (50%) of the shares of ATI Common Stock received by such
stockholders in the Merger. For purposes of the foregoing, a Sale of ATI Common
Stock shall be considered to have occurred pursuant to a Plan if such Sale
occurs in a transaction that is in contemplation of or related to the Merger (a
"Related Transaction"). In addition, shares of TI Common Stock (or the portion
thereof) (i) exchanged for cash in lieu of fractional shares of ATI Common Stock
or (ii) with respect to which a Sale occurred in a Related Transaction prior to
the Merger shall be considered to have been Outstanding TI Common Stock that was
exchanged for ATI Common Stock in the Merger and then disposed of pursuant to a
Plan.
4. Prior to the Merger, ATI will be in control of TI Merger Sub within the
meaning of Section 368(c) of the Internal
<PAGE>
Revenue Code of 1986, as amended (the "Code") (control within the meaning of
Section 368(c) of the Code is hereinafter referred to as "Control").
5. ATI has no plan or intention to cause TI to issue additional shares of
stock after the Merger, or take any other action, that would result in ATI
losing Control of TI.
6. ATI has no plan or intention to reacquire any of its stock issued in
the Merger.
7. ATI has no plan or intention to liquidate TI; to merge TI with or into
another corporation; to sell or otherwise dispose of the stock of TI; or to
cause TI to sell or otherwise dispose of any of its assets or of any of the
assets acquired from TI Merger Sub, except for dispositions made in the ordinary
course of business or transfers of assets to a corporation controlled by TI.
8. The liabilities of TI Merger Sub, if any, assumed by TI and the
liabilities, if any, to which the transferred assets of TI Merger Sub are
subject were incurred by TI Merger Sub in the ordinary course of its business.
9. Following the Merger and all Related Transactions, TI will continue its
historic business or use a significant portion of its historic business assets
in a business.
10. ATI, TI Merger Sub, TI, and the shareholders of TI will each pay their
respective expenses, if any, incurred in connection with the Merger and all
Related Transactions.
11. There is no intercorporate indebtedness existing between ATI and TI or
between TI Merger Sub and TI that was issued, acquired, or will be settled at a
discount.
12. In the Merger, shares of TI stock representing Control of TI will be
exchanged solely for voting stock of ATI. For purposes of this representation,
in the case of ATI shares issued in the Merger and reacquired in a Related
Transaction, the TI shares to which such ATI shares are attributable will be
treated as having been exchanged in the Merger for other than voting stock.
13. ATI does not own, nor has it owned during the past five years, any
shares of the stock of TI.
14. Neither ATI nor TI Merger Sub is an "investment company" as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
15. To the knowledge of ATI and TI Merger Sub, on the date of the Merger,
the fair market value of the assets of TI
<PAGE>
will exceed the sum of its liabilities, plus the amount of liabilities, if any,
to which such assets are subject.
16. The payment of cash in lieu of fractional shares of ATI stock is
solely for the purpose of avoiding the expense and inconvenience to ATI of
issuing fractional shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the
transaction to shareholders of TI instead of issuing fractional shares of ATI
stock will not exceed one percent of the total consideration that will be issued
in the transaction to the shareholders of TI in exchange for their shares of TI.
The fractional share interests of each shareholder of TI will be aggregated, and
no shareholder of TI will receive cash in an amount equal to or greater than the
value of one full share of ATI stock.
17. None of the compensation received by any shareholder-employee of TI
will be separate consideration for, or allocable to, any of their shares of TI
stock; none of the shares of ATI stock received by any shareholder-employees
will be separate consideration for, or allocable to, any employment agreement;
and the compensation paid to any shareholder-employees will be for services
actually rendered and will be commensurate with amounts paid to third parties
bargaining at arm's length for similar services.
B. Reliance by You in Rendering Opinions; Limitations on Your Opinions.
-------------------------------------------------------------------
1. ATI and TI Merger Sub each recognizes that (i) your opinions will be
based on the representations set forth herein, and on the statements contained
in the Combination Agreement and the documents related thereto and (ii) your
opinions will be subject to certain limitations and qualifications including
without limitation that they may not be relied upon if any such representations
are not accurate.
<PAGE>
2. ATI and TI Merger Sub each recognizes that your opinions will not
address any tax consequences of the Merger or any action taken in connection
therewith except as expressly set forth in such opinions.
Very truly yours,
ALLEGHENY TELEDYNE INCORPORATED
a Delaware corporation
By: /s/ William P. Rutledge
----------------------------
Title: President and Chief Executive Officer
-------------------------------------------------
TDY MERGER, INC.
a Delaware corporation
By: /s/ Douglas J. Grant
----------------------------
Title: Treasurer
-------------------------
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of July 15, 1996, by and between
ALLEGHENY TELEDYNE INCORPORATED, a Delaware corporation, with its principal
executive offices at 10th Floor, Six PPG Place, Pittsburgh, Pennsylvania 15222,
on behalf of itself and each of its subsidiaries (collectively, the "Company"),
and
ARTHUR H. ARONSON, an individual residing in Allegheny County, Pennsylvania (the
"Executive"),
WHEREAS, the Company wishes to assure itself of the services of Executive
for a term of continuing until the Executive's normal retirement date under the
terms and conditions set forth herein and the Executive is willing to serve in
the employ of the Company on a full time basis for said period upon the terms
and conditions hereinafter provided; and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that the best interests of Company would be served by providing for the terms
and conditions of Executive's employment as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the Company and the Executive hereby
agree as follows:
1. POSITION AND DUTIES.
(a) The Company hereby agrees to, and hereby does, employ the Executive,
for the term of this Agreement, to render services to the Company as Executive
Vice President of the Company and a member of the Board of Directors of the
Company and in connection therewith to perform such duties which are not
inconsistent with this Agreement as the Executive may be reasonably directed to
perform by the Chief Executive Officer of the Company (the "CEO"). With the
consent of the Board of the Company, (i) the Executive may devote a reasonable
amount of time and effort to industry, community or charity organizations, and
(ii), subject further to the provisions of Section 3 and Section 4 hereof, the
Executive may serve as a director of other companies and/or financial
institutions.
(b) The Executive hereby accepts such employment and agrees faithfully to
perform to the best of his ability the duties described in Section 1(a).
2. TERM. Subject to Section 6 hereof, the term of the employment of the
Executive under this Agreement shall commence upon consummation of the
transactions contemplated by
<PAGE>
the Agreement and Plan of Merger and Combination, dated as of April 1, 1996, as
amended and restated, by and among the Company, Allegheny Ludlum Corporation
("ALC"), ALS Merger Corporation, Teledyne, Inc., and TDY Merger, Inc. (the
"Effective Date") and shall terminate on the date the Executive attains the age
of 65 (the "Expiration Date"). The period between the Effective Date and the
Expiration Date is hereinafter referred to as the "Term". Nothing in this
Section 2 shall prevent the Company and the Executive from discussing terms and
conditions upon which the Term of this Agreement may be extended.
3. NON-COMPETITION. During the period ending on the Expiration Date:
(a) The Executive shall not, directly or indirectly, engage in competition
with the Company in any manner or capacity (e.g., as a management consultant,
principal, partner, officer, director, stockholder or management employee) in
any phase of the Company's business as then being conducted.
(b) Ownership by the Executive, as a passive investment, of less than 1% of
the outstanding shares of capital stock of any corporation listed on a national
securities exchange or publicly traded in the over-the-counter market shall not
constitute a breach of this Section 3.
(c) The Executive further agrees that, during the Term, he will not,
directly or indirectly, assist or encourage any other person in carrying out,
directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 3 if such activity were carried out by the Executive,
either directly or indirectly, and in particular the Executive agrees that he
will not, directly or indirectly, induce any employee of the Company to carry
out, directly or indirectly, any such activity.
4. CONFIDENTIALITY. Except as permitted or directed by the Company's
Board, the Executive shall not during the Term or at any time thereafter
divulge, furnish, disclose or make accessible (other than in the ordinary course
of the business of the Company) to anyone for use in any way confidential or
secret knowledge or information of the Company which the Executive has acquired
or become acquainted with or will acquire or become acquainted with prior to the
termination of the period of his employment by the Company (including employment
by the Company prior to the date of this Agreement), whether developed by
himself or by others, concerning any trade secrets, confidential or secret
designs, processes, formulae, software or computer programs, plans, devices or
material (whether or not patented or patentable, copyrighted or copyrightable)
directly or indirectly useful in any aspect of the business of the Company, any
- 2 -
<PAGE>
confidential customer or supplier lists of the Company, any confidential or
secret development or research work of the Company, or any other confidential,
secret or non-public aspects of the business of the Company. The Executive
acknowledges that the above-described knowledge or information constitutes a
unique and valuable asset of the Company acquired at great time and expense by
the Company, and that any disclosure or other use of such knowledge or
information other than for the sole benefit of the Company would be wrongful and
would cause irreparable harm to the Company. During the term of this Agreement,
the Executive will refrain from any acts or omissions that would reduce the
value of the use of such knowledge or information to the Company. The foregoing
obligations of confidentiality, however, shall not apply to any knowledge or
information which is published or which subsequently becomes generally publicly
known, other than as a direct or indirect result of the breach of this Agreement
by the executive.
5. COMPENSATION. In consideration of the Executive's agreements contained
herein, the Company shall pay or grant to him the following salary and other
compensation and benefits:
(a) Base salary, not less than $400,000 per year, as is determined from
time to time by the Board or an appropriate committee thereof, provided,
however, that the Executive's base salary shall be reviewed by the Board no less
frequently than annually and shall be increased (but not decreased) if the Board
determines that an increase is appropriate on the basis of the types of factors
it generally takes into account in increasing the salaries of executive officers
of the Company including, but not limited to, cost-of-living factors, payable in
equal installments not less frequently than monthly in accordance with the
Company's payroll practices.
(b) Participation in and the right to earn compensation under each and all
incentive compensation plans now existing, including, but not limited to, the
annual bonus amounts determined under the ALC Performance Management System Plan
and longer term bonuses earned under the ALC Performance Share Plan, or
successors thereto or other plans hereafter adopted as applicable to one or more
executive officers of the Company and/or ALC (a "Bonus Plan"), each in
accordance with its terms and conditions as such may be amended from time to
time to equitably affect all executive officers of the Company;
- 3 -
<PAGE>
(c) Participation in and the right to earn compensation under each and all
stock option, restricted stock or other equity compensation plans now existing
(but only to the extent that any such plan is actually used to make grants or
awards to executive officers of the Company), including, but not limited to, the
ALC Stock Acquisition and Retention Plan, the ALC Stock Option Incentive Plan
and the Company's 1996 Incentive Plan (when effective) or successors thereto or
other plans hereafter adopted as applicable to one or more executive officers of
the Company and/or ALC (collectively, the "Equity Plans"), each in accordance
with its terms as such may be amended from time to time to equitably affect all
executive officers of the Company;
(d) Participation in and the right to earn compensation under any other
deferred or additional compensation plan, program or arrangement now existing,
including, but not limited to, the ALC Supplemental Pension Plan and the ALC
Benefit Restoration Plan, or successors thereto or other plans hereafter adopted
as applicable to executive officers of the Company and/or ALC (collectively, the
"Deferred Compensation Plans"), each in accordance with its terms as such may be
amended from time to time to equitably affect all executive officers of the
Company;
(e) Participation in and the right to receive benefits under each and all
employee benefit plans, programs or arrangements whether or not qualified within
the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), now existing or hereafter adopted as applicable to
executive officers of the Company as such may be amended from time to time in a
manner not inconsistent with this Agreement;
(f) Reimbursement for travel and other expenses incurred by the Executive
in performing his obligations hereunder pursuant to the terms and conditions of
the applicable policy of the Company as such policy may be amended from time to
time as applicable to all similarly situated employees of the Company;
(g) Reasonable vacations (which shall take into account the term of the
Executive's employment with the Company or any of its predecessors), absences on
account of temporary illness, corporate perquisites, including, but not limited
to, those provided to the Executive on the Effective Date, and fringe benefits
customarily enjoyed by employees or officers of the Company, each under the
terms and conditions of the policy of the Company as such policy may be amended
from time to time as applicable to all similarly situated employees of the
Company; and
- 4 -
<PAGE>
(h) Indemnification and protection from liability to the full extent
provided under the bylaws of the Company and the laws of the State of Delaware.
Nothing contained in this Agreement shall prevent the Board (or an
appropriate committee thereof charged with administration) from (x) amending or
otherwise altering any plan, program or arrangement so long as such amendment or
alteration (i) is accomplished pursuant to the terms thereof as in effect on the
Effective Date or on the date such plan or arrangement is adopted, if later
adopted, and (ii) equitably affects all employees, executive or otherwise, of
the Company previously covered under such plan or (y) taking into account the
duties of the Executive in comparison with other executive officers of the
Company covered under the Bonus, Equity or Deferred Compensation Plans when
determining performance goals and compensation opportunities under such plans.
For purposes of this Section 6, the Teledyne Senior Executive Performance Plan
shall not be deemed a plan applicable to one or more executive officers of the
Company and/or ALC.
6. TERMINATION OF EMPLOYMENT. This Agreement shall terminate upon the
Expiration Date or upon the death of the Executive. The Company may terminate
this Agreement and the Executive's employment hereunder prior to the Expiration
Date for "Disability" or "Cause", as such terms are herein defined. The
Executive may terminate this Agreement and his employment hereunder prior to the
Expiration Date by his "Resignation for Good Reason" or "Retirement for Good
Reason" as such terms are hereinafter defined. Termination of this Agreement
for any reason not set forth above shall be a breach of this Agreement. In the
event of any termination of this Agreement and/or the Executive's employment
hereunder prior to the Expiration Date, whether constituting a breach or
otherwise, the provisions of Section 7 of this Agreement shall determine the
amount, if any, of any compensation thereafter due the Executive in respect to
such termination.
As used in this Agreement, the following terms shall have the meanings set
forth:
(a) DISABILITY. The Executive shall be entitled to leaves of absence from
the Company in accordance with the policy of the Company generally applicable to
executive officers for illness or other temporary disabilities for a period or
periods not exceeding, in aggregate, six (6) months in any calendar year, and
his compensation and status as an employee hereunder shall continue during any
such period or periods. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
with the Company on a full-time basis for six consecutive months, and within
thirty days after written notice of
- 5 -
<PAGE>
termination is given by the Company, the Executive shall not have returned to
the full-time performance of his duties, the Executive shall be deemed to have
experienced a Disability and the Company may terminate the Executive's
employment.
(b) CAUSE. Termination by the Company of Executive's employment for
"Cause" shall mean termination for reason of the Executive's personal dishonesty
directly affecting the Company, willful misconduct, breach of a fiduciary duty
involving profit personal to the Executive, intentional failure to perform
stated duties or conviction of a felony. For purposes of this subsection (b),
no act or omission shall be regarded as intentionally or willfully done unless
done or omitted to be done by the Executive following receipt of written notice
from the Board advising the Executive the particular act or omission would be
regarded as an intentional or wilful act or omission. No termination for Cause
shall be effective unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by a majority of the Board stating
that, in the good faith opinion of the Board, a particular act or omission
constitutes Cause under this Agreement; provided, however, this sentence shall
not be applicable in the event the termination for cause is for reason of theft,
embezzlement or defalcation involving assets of the Company.
(c) RETIREMENT FOR GOOD REASON. For purposes of this Agreement,
"Retirement for Good Reason" shall mean the Executive's election to retire
following the occurrence of one of the events referred to in Subsection (e)
below.
(d) RESIGNATION FOR GOOD REASON. For purposes of this Agreement,
"Resignation for Good Reason" shall mean the Executive's election to resign as a
result of the occurrence of one of the events referred to in Subsection (e)
below.
(e) GOOD REASON. For purposes of this Agreement, "Good Reason" shall,
absent the Executive's express written consent to the contrary, mean the
occurrence of any one of the following:
(i) removal of the Executive as Executive Vice President or
failure to renominate the Executive as a Director of the Company (by reason
other than death, Disability or Cause), or any other material breach by the
Company of its obligations contained in this Agreement;
(ii) without the prior written consent of the Executive, the
assignment to the Executive of any duties inconsistent with his position as
Executive Vice President or as a Director of the Company or a substantial
alteration in the nature or status of the Executive's duties and
- 6 -
<PAGE>
responsibilities which renders the Executive's position to be of less
dignity, responsibility or scope;
(iii) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from
time to time, except for proportional across-the-board salary reductions
similarly affecting all executive officers of the Company; provided,
however, that in no event shall the Executive's base salary be reduced
below the per year amount set forth in Section 5(a) hereof without the
Executive's consent;
(iv) the relocation of the principal executive offices of the
Company to a location outside the counties of Allegheny, Butler, Beaver,
Washington, Westmoreland or Armstrong, Pennsylvania or the Company's
requiring the Executive to be based anywhere other than the Company's
principal executive offices except for required travel on the business of
the Company;
(v) failure of the Company to continue in effect and/or the
Executive's participation in any compensation plan, program or arrangement
in which the Executive then participates (whether existing at the Effective
Date or thereafter adopted) unless (i) an equitable arrangement reasonably
acceptable to the Executive and embodied in an on-going plan, program or
arrangement has been made with respect to such plan or (ii) the failure to
continue a plan, program or arrangement or the Executive's participation
therein is pursuant to an action which equally affects all executive
officers of the Company; or
(vi) any material reduction by the Company of the benefits
enjoyed by the Executive under any of the life insurance, medical, health-
and-accident, disability or other employee welfare benefit plans or
programs, including vacation days or corporate perquisites or arrangements
as in effect from time to time provided that this paragraph (vi) shall not
apply to any proportional across-the-board reduction or action similarly
affecting all executive officers of the Company.
(f) NOTICE OF TERMINATION. Any purported termination by the Company
or Resignation for Good Reason or Retirement for Good Reason by the Executive
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination, resignation or retirement provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
- 7 -
<PAGE>
provide a basis for such termination, resignation or retirement under the
provision so indicated.
(g) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (i) if
the Executive's employment is terminated for Cause, the date the Notice of
Termination is given; (ii) if the Executive's employment is terminated for
Disability, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time daily basis during such thirty-day period) or (iii) if the
Executive's employment is terminated for any reason other than Cause or
Disability, the date specified in the Notice of Termination (which shall not be
less than thirty days nor more than sixty days, from the date such Notice of
Termination is given); provided that if within thirty days after any Notice of
Termination is given the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined by
mutual written agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected). Any
party giving notice of a dispute shall pursue the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay the Executive an amount equal to one half of
his full compensation in effect on the date notice was given (including, but not
limited to, base salary) and continue the Executive as a participant in all
compensation, employee benefit and insurance plans, programs and arrangements in
which the Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in accordance with this
Subsection 6(g); provided, however, that if the Executive is terminated for
Cause, he shall have no right to any compensation or benefits of any kind during
or with respect to the period of the pendency of such dispute, except as
required by applicable state or federal law and, provided, further, in the event
the Executive is not the prevailing party in an action brought to final
judgement under Section 9 hereof, the Executive shall repay to the Company
within twenty (20) business days of the entry of such final judgment an amount
equal the amount paid under this sentence.
7. COMPENSATION UPON TERMINATION.
(a) DEATH. If the Executive's employment hereunder terminates by
reason of his death, the Company shall pay to the Executive's spouse, or if
none, a beneficiary named by the Executive, or if none, the Executive's estate,
an amount equal to his base salary at the rate then in effect under Section 5(a)
for one calendar year, payable in equal monthly
- 8 -
<PAGE>
installments. The foregoing shall be in addition to (i) the proceeds of any
insurance policies on the life of the Executive which by their respective terms
are payable to the Executive's beneficiary, estate or personal representative,
(ii) under the Company's insurance programs and other employee benefit plans,
programs and arrangements then in effect and (iii) under any pension plan.
(b) DISABILITY. If the Executive's employment hereunder terminates by
reason of his Disability, the Executive shall be entitled to receive an amount
equal to seventy percent (70%) of the Executive's base salary at the rate then
in effect under Section 5(a) for the remainder of the Term, payable in equal
monthly installments. Benefits receivable by the Executive pursuant to this
Subsection (b) shall be reduced to the extent other benefits are actually
received by the Executive under a policy, plan, program or arrangement
applicable to employees generally or a policy or policies of disability
insurance specific to the Executive generally or a plan, program or arrangement,
the premium or cost of which had been paid in full by the Company, but no
reduction shall apply unless or until such benefits are actually received by the
Executive. Neither the Company nor the Executive shall be under any obligation
to file any claim for benefits under any such other plan, policy or arrangement.
If the Executive dies prior to the date on which disability amounts would have
ceased to be payable under this Subsection (b) and (i) his spouse survives him,
the amount that would have been payable by the Company had he lived shall
continue to be paid by the Company to his surviving spouse at the same time and
for the duration payable to the Executive had he lived or, (ii) if his spouse
does not survive him, the amount payable to the Executive shall be payable to
this estate for a period of twelve (12) months.
(c) CAUSE. If the Executive's employment hereunder is terminated by
the Company for Cause, the Company shall pay to the Executive his full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given and the Company shall have no further obligations to the
Executive under this Agreement.
(d) VOLUNTARY RESIGNATION OR RETIREMENT. In the event the Executive
retires or resigns for reasons other than Good Reason, the Company shall pay to
the Executive his full base salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given and, except as provided in
Section 8, the Company shall have no further obligations to the Executive under
this Agreement.
(e) TERMINATION WITH PREJUDICE. If, prior to the Expiration Date and
for reasons other than the death of the Executive, the Executive's employment
hereunder is terminated
- 9 -
<PAGE>
(A) by the Company for reasons other than Cause or Disability (whether or not
such termination by the Company constitutes a breach of this Agreement) or (B)
by the Executive pursuant to his Retirement for Good Reason or Resignation for
Good Reason, then the Executive's employment shall be deemed to have been
terminated with prejudice and the Executive shall be entitled to liquidated
damages, not severance, in the amount determined as follows:
(i) the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given;
(ii) with respect to regular base salary for the then remaining
term, such regular base salary shall be determined at the rate in effect on
the date a Notice of Termination is delivered (unless a reduction in
compensation has preceded the Executive's Resignation or Retirement for
Good Reason in which case the rate of base salary shall be the rate in
effect prior to such reduction) and the Company shall pay to the Executive,
at the election of the Company made no later than the fifth (5th) business
day after delivery of a Notice of Termination, either (A) his regular base
salary for the then remaining term of this Agreement at the times and in
installments consistent with the Company's payroll practices then in effect
or (B) in lieu of any further payments of regular base salary, a lump sum
payment payable not later than the fifteenth day following the Date of
Termination, equal to the Executive's regular base salary for the then
remaining term of this Agreement discounted to present value at a discount
rate equal to the then prime interest rate as announced by Mellon Bank,
N.A. ("Mellon Prime") applied to each future payment from the time it would
have become payable;
(iii) notwithstanding any contrary provision in any Bonus Plan, the
Company shall pay to the Executive an amount in cash equal to the amount
which would have been payable (including at fair market value any property
which would have been distributable) to the Executive under ALC Performance
Management System Plan, the ALC Performance Share Plan (or successors) and
any other Bonus Plan in effect on the date of Termination at the level of
actual performance achieved and as other factors considered by such Bonus
Plan attained in the period at the times payments under each such plan is
made to other participants;
(iv) (A) the period of the then remaining term of this Agreement
shall be credited to the Executive under the ALC Deferred Compensation
Plans, including, but not limited to, the ALC Supplemental Retirement Plan
and the ALC Benefit Restoration Plan (or successors), for the purpose of
- 10 -
<PAGE>
accruing additional benefits or awards as if he had continued in the employ
of the Company for such period, (B) if he is not otherwise vested under
such Deferred Compensation Plans, he shall be and become fully vested in
any benefits, (C) to the extent the approval of the Board of the Company or
of any subsidiary (or a committee of either) is a prerequisite to receipt
of payments under such Deferred Compensation Plans, such approval shall be
deemed granted and (D) payments of the benefits and awards under each such
Deferred Compensation Plan shall be made in accordance with their
respective terms as modified herein;
(v) the Company shall also pay to the Executive (or promptly
following written notice from the Executive reimburse the Executive for
amounts paid by the Executive with regard to the following) (A) all legal
fees and expenses incurred by the Executive in contesting or disputing any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement, provided, however, in the event the Executive
is not the prevailing party in an action brought to final judgement under
Section 9 hereof, the Executive shall repay to the Company within twenty
(20) business days of the entry of such final judgement an amount equal to
the sum of legal fees paid by the Company in connection with such dispute
and/or (B) such fees and expenses incurred in connection with any tax audit
or proceeding to the extent attributable to the application of Section 4999
of the Code to any payment or benefit provided hereunder;
(vi) for the remainder of the Term, the Executive shall
participate in and be covered by all employee benefit and compensations
plans, programs, policies and arrangements of the Company applicable to
executive employees, whether funded or unfunded, provided, however, in the
event any plan administrator or any insurance carrier shall contest
Executive's participation in or coverage such plan, programs, policy or
arrangement, the Company shall arrange to provide the Executive with and
shall pay the cost of premiums when due for life, disability and health-
and-accident and other insurance benefits substantially similar to those
which the Executive is receiving immediately prior to the Notice of
Termination and shall make cash payments to the Executive in an amount
equal to the amount which would have been contributed by the Company with
respect to the Executive under other compensation plans, programs, policies
or arrangements at the time such amounts would have been contributed;
(vii) The payments provided for in this Subsection (f) shall be
made not later than the applicable date set forth above for such payment,
provided, however, that if the
- 11 -
<PAGE>
amounts of such payments cannot be finally determined on or before such
day, the Company shall pay to the Executive on such day an estimated
amount, as determined in good faith by the Company, of the minimum amount
of such payments and shall pay the remainder of such payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than the
thirtieth day after the date upon which such estimated amount shall have
been paid. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive payable on the fifth day
after demand by the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code); and
(viii) Notwithstanding the foregoing provision of this Section
7(f), the amount of liquidated damages payable under this Section 7(f)
shall be reduced to the extent necessary to cause the aggregate of all
payments which must be taken into account for purposes of 280G of the Code
and any regulations thereunder to be $100.00 less than the amount which
would be deemed an excess parachute payment as defined in Section
280G(b)(1) of the Code.
(g) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 7 be reduced by
any compensation earned by the Executive as the result of employment by another
employer, or otherwise. Benefits otherwise receivable by the Executive pursuant
to Section 7(f)(vi) above shall be reduced to the extent comparable benefits are
actually received by the Executive during the period of time remaining until the
Expiration Date from the plan or plans of any subsequent employer or from any
program maintained by any governmental body not requiring contribution by the
Executive, and any such benefits actually received by the Executive shall be
reported to the Company.
(h) In addition to all other amounts payable to the Executive under
this Section 7, the Executive shall be entitled to receive all benefits payable
to him under a pension plan, and any other plan, program or arrangement relating
to retirement. No amount payable to the Executive under Subsection 7(f) shall
be considered for any benefit calculation or other purpose under a pension plan.
8. RETIREMENT UNDER CIRCUMSTANCES NOT CONSTITUTING RETIREMENT FOR
GOOD REASON. Nothing contained in this Agreement shall be deemed to limit the
Executive's ability to retire under the Company's retirement policies and/or
pension plan under
- 12 -
<PAGE>
circumstances not constituting Retirement for Good Reason and to receive all
benefits payable to him under a pension plan, and any other plan, program or
arrangement relating to retirement.
9. ARBITRATION. Any disputes hereunder shall be settled by
arbitration conducted in Pittsburgh, Pennsylvania, under the auspices of, and in
accordance with the rules of, the American Arbitration Association. The
decision in such arbitration shall be final and conclusive on the parties and
the judgment upon such decision may be entered in any court having jurisdiction
thereof.
10. NOTICES. All notices and other communications which are required
or may be given under this Agreement shall be in writing and shall be delivered
personally or by registered or certified mail addressed to the party concerned
at the following addresses:
If to the Company:
Allegheny Teledyne Incorporated
10th Floor
Six PPG Place
Pittsburgh, PA 15222
Attention: Secretary
If to the Executive:
Arthur H. Aronson
136 Hamel Road
Renfrew, PA 16053
or to such other address as shall be designated by notice in writing to the
other party in accordance herewith. Notices and other communications hereunder
shall be deemed effectively given when personally delivered, or, if mailed, 72
hours after deposit in the United States mail.
11. MISCELLANEOUS.
(a) Effective as of the Effective Date, this Agreement shall
supersede that certain Employment Agreement by and between the Executive and
ALC dated March 1, 1994 and each other, prior agreement, arrangement and
undertaking, written or oral, relating to the subject matter hereof.
(b) (i) This Agreement shall inure to the benefit of and be binding
upon the Executive, the Executive's heirs, representatives or estate.
(ii) This Agreement shall be binding upon and inure to the benefit of
the Company and its successors and
- 13 -
<PAGE>
assigns. The Company shall require any successor (whether direct or indirect,
by purchase, conversion of form, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement in form
and substance 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 would be required to perform if no such succession had taken place. As
used in this Agreement, "Company" shall mean (A) the Company as defined in the
preamble to this Agreement, (B) each member of a controlled group of
corporations within the meaning of Section 1563 of the Code which includes the
Company and (C) any successor to the business or any of the assets of the
Company which executes and delivers the agreement provided for in this
Subsection 11(b)(ii) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(c) This Agreement may be amended, modified, superseded, canceled,
renewed or extended and the terms or covenants hereof may be waived, only by a
written instrument executed by both of the parties hereto, or in the case of a
waiver, by the party waiving compliance. The failure of either party at any
time or times to require performance of any provisions hereof shall in no manner
affect the right at a later time to enforce such provisions thereafter. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach or a waiver of the breach, preceding or succeeding, of any other term or
covenant contained in this Agreement.
(d) In the event any one or more of the covenants, terms or provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity of the remaining covenants, terms and provisions contained
herein shall be in no way affected, prejudiced or disturbed thereby.
(e) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in
Paragraph 11(b) above. Without limiting the foregoing, the Executive's right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
his will or by the laws of descent or distribution, and in the event of any
attempted assignment or transfer contrary to this Subsection 11(e) the Company
shall have no liability to pay any amount so attempted to be assigned or
transferred.
- 14 -
<PAGE>
(f) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania of regardless of its
principles of conflict of laws, except as such laws of the Commonwealth of
Pennsylvania may be preempted by the laws of the United States.
(g) All payments required hereunder shall be made from the general
assets of the Company and the Executive shall have no rights greater than the
rights of a general creditor of the Company.
(h) The Company may withhold from any payment required hereunder such
amounts for federal, state and local income tax as the Company, in good faith,
determines to be required by applicable laws, provided, however, the Company
shall provide the Executive with notice of the amount so withheld and shall
promptly pay over such amounts to the appropriate taxing body.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
ATTEST: ALLEGHENY TELEDYNE
INCORPORATED
/s/ Jon D. Walton /s/ R. P. Simmons
By____________________________ By:_________________________
Chairman
Secretary Title:______________________
WITNESS: ARTHUR H. ARONSON
/s/ Mary Beth Luksik /s/ Arthur H. Aronson
By____________________________ ____________________________
- 15 -
<PAGE>
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of July 15, 1996, by and between
ALLEGHENY TELEDYNE INCORPORATED, a Delaware corporation, with its principal
executive offices at 10th Floor, Six PPG Place, Pittsburgh, Pennsylvania 15222,
on behalf of itself and each of its subsidiaries (collectively, the "Company"),
and
JAMES L. MURDY, an individual residing in Allegheny County, Pennsylvania (the
"Executive"),
WHEREAS, the Company wishes to assure itself of the services of Executive
for a term of no less than three (3) years and as such may be extended from time
to time under the terms and conditions set forth herein and the Executive is
willing to serve in the employ of the Company on a full time basis for said
period upon the terms and conditions hereinafter provided; and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that the best interests of Company would be served by providing for the terms
and conditions of Executive's employment as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the Company and the Executive hereby
agree as follows:
1. POSITION AND DUTIES.
(a) The Company hereby agrees to, and hereby does, employ the Executive,
for the term of this Agreement, to render services to the Company as Senior Vice
President - Finance and Chief Financial Officer of the Company and in connection
therewith to perform such duties which are not inconsistent with this Agreement
as the Executive may be reasonably directed to perform by the Chief Executive
Officer of the Company (the "CEO"). With the consent of the Board of the
Company, (i) the Executive may devote a reasonable amount of time and effort to
industry, community or charity organizations, and (ii), subject further to the
provisions of Section 3 and Section 4 hereof, the Executive may serve as a
director of other companies and/or financial institutions.
(b) The Executive hereby accepts such employment and agrees faithfully to
perform to the best of his ability the duties described in Section 1(a).
2. TERM. Subject to Section 6 and Subsection 7(e)(iv) hereof, the term of
the employment of the Executive
<PAGE>
under this Agreement shall commence upon consummation of the transactions
contemplated by the Agreement and Plan of Merger and Combination, dated as of
April 1, 1996, as amended and restated, by and among the Company, Allegheny
Ludlum Corporation ("ALC"), ALS Merger Corporation, Teledyne, Inc., and TDY
Merger, Inc. (the "Effective Date") and, unless terminated in accordance with
this Section 2 prior to such time, shall terminate on the third anniversary of
the Effective Date. On the last day of the month in which the second
anniversary of the Effective Date occurs and on the last day of each month
thereafter (the last day of each month after the second anniversary of the
Effective Date is hereinafter referred to as an "Extension Date"), the term of
this Agreement shall be extended for one additional month unless one party
provides written notice to the other prior to then next Extension Date that it
does not wish to extend the term of this Agreement. As of the last day of the
month in which such notice is delivered, the term of this Agreement shall be
twelve (12) months and shall not be further extended. The last day of the
calendar month in which the term hereof expires, as extended from time to time,
is hereinafter referred to as the "Expiration Date" and the period between the
Effective Date and the Expiration Date is hereinafter referred to as the "Term".
3. NON-COMPETITION. During the period ending on the Expiration Date:
(a) The Executive shall not, directly or indirectly, engage in competition
with the Company in any manner or capacity (e.g., as a management consultant,
principal, partner, officer, director, stockholder or management employee) in
any phase of the Company's business as then being conducted.
(b) Ownership by the Executive, as a passive investment, of less than 1% of
the outstanding shares of capital stock of any corporation listed on a national
securities exchange or publicly traded in the over-the-counter market shall not
constitute a breach of this Section 3.
(c) The Executive further agrees that, during the Term, he will not,
directly or indirectly, assist or encourage any other person in carrying out,
directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 3 if such activity were carried out by the Executive,
either directly or indirectly, and in particular the Executive agrees that he
will not, directly or indirectly, induce any employee of the Company to carry
out, directly or indirectly, any such activity.
4. CONFIDENTIALITY. Except as permitted or directed by the Company's
Board, the Executive shall not during the Term or at any time thereafter
divulge, furnish, disclose or make
- 2 -
<PAGE>
accessible (other than in the ordinary course of the business of the Company) to
anyone for use in any way confidential or secret knowledge or information of the
Company which the Executive has acquired or become acquainted with or will
acquire or become acquainted with prior to the termination of the period of his
employment by the Company (including employment by the Company prior to the date
of this Agreement), whether developed by himself or by others, concerning any
trade secrets, confidential or secret designs, processes, formulae, software or
computer programs, plans, devices or material (whether or not patented or
patentable, copyrighted or copyrightable) directly or indirectly useful in any
aspect of the business of the Company, any confidential customer or supplier
lists of the Company, any confidential or secret development or research work of
the Company, or any other confidential, secret or non-public aspects of the
business of the Company. The Executive acknowledges that the above-described
knowledge or information constitutes a unique and valuable asset of the Company
acquired at great time and expense by the Company, and that any disclosure or
other use of such knowledge or information other than for the sole benefit of
the Company would be wrongful and would cause irreparable harm to the Company.
During the term of this Agreement, the Executive will refrain from any acts or
omissions that would reduce the value of the use of such knowledge or
information to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information which is published or
which subsequently becomes generally publicly known, other than as a direct or
indirect result of the breach of this Agreement by the executive.
5. COMPENSATION. In consideration of the Executive's agreements contained
herein, the Company shall pay or grant to him the following salary and other
compensation and benefits:
(a) Base salary, not less than $264,964 per year, as is determined from
time to time by the Board or an appropriate committee thereof, provided,
however, that the Executive's base salary shall be reviewed by the Board no less
frequently than annually and shall be increased (but not decreased) if the Board
determines that an increase is appropriate on the basis of the types of factors
it generally takes into account in increasing the salaries of executive officers
of the Company including, but not limited to, cost-of-living factors, payable in
equal installments not less frequently than monthly in accordance with the
Company's payroll practices.
- 3 -
<PAGE>
(b) Participation in and the right to earn compensation under each and all
incentive compensation plans now existing, including, but not limited to, the
annual bonus amounts determined under the ALC Performance Management System Plan
and longer term bonuses earned under the ALC Performance Share Plan, or
successors thereto or other plans hereafter adopted as applicable to one or more
executive officers of the Company and/or ALC (a "Bonus Plan"), each in
accordance with its terms and conditions as such may be amended from time to
time to equitably affect all executive officers of the Company;
(c) Participation in and the right to earn compensation under each and all
stock option, restricted stock or other equity compensation plans now existing
(but only to the extent that any such plan is actually used to make grants or
awards to executive officers of the Company), including, but not limited to, the
ALC Stock Acquisition and Retention Plan, the ALC Stock Option Incentive Plan
and the Company's 1996 Incentive Plan (when effective) or successors thereto or
other plans hereafter adopted as applicable to one or more executive officers of
the Company and/or ALC (collectively, the "Equity Plans"), each in accordance
with its terms as such may be amended from time to time to equitably affect all
executive officers of the Company;
(d) Participation in and the right to earn compensation under any other
deferred or additional compensation plan, program or arrangement now existing,
including, but not limited to, the ALC Supplemental Pension Plan and the ALC
Benefit Restoration Plan, or successors thereto or other plans hereafter adopted
as applicable to executive officers of the Company and/or ALC (collectively, the
"Deferred Compensation Plans"), each in accordance with its terms as such may be
amended from time to time to equitably affect all executive officers of the
Company;
(e) Participation in and the right to receive benefits under each and all
employee benefit plans, programs or arrangements whether or not qualified within
the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), now existing or hereafter adopted as applicable to
executive officers of the Company as such may be amended from time to time in a
manner not inconsistent with this Agreement;
(f) Reimbursement for travel and other expenses incurred by the Executive
in performing his obligations hereunder pursuant to the terms and conditions of
the applicable policy of the Company as such policy may be amended from time to
time as applicable to all similarly situated employees of the Company;
(g) Reasonable vacations (which shall take into account the term of the
Executive's employment with the Company
- 4 -
<PAGE>
or any of its predecessors), absences on account of temporary illness, corporate
perquisites, including, but not limited to, those provided to the Executive on
the Effective Date, and fringe benefits customarily enjoyed by employees or
officers of the Company, each under the terms and conditions of the policy of
the Company as such policy may be amended from time to time as applicable to all
similarly situated employees of the Company; and
(h) Indemnification and protection from liability to the full extent
provided under the by-laws of the Company and the laws of the State of Delaware.
Nothing contained in this Agreement shall prevent the Board (or an
appropriate committee thereof charged with administration) from (x) amending or
otherwise altering any plan, program or arrangement so long as such amendment or
alteration (i) is accomplished pursuant to the terms thereof as in effect on the
Effective Date or on the date such plan or arrangement is adopted, if later
adopted, and (ii) equitably affects all employees, executive or otherwise, of
the Company previously covered under such plan or (y) taking into account the
duties of the Executive in comparison with other executive officers of the
Company covered under the Bonus, Equity or Deferred Compensation Plans when
determining performance goals and compensation opportunities under such plans.
Notwithstanding the foregoing, the Executive shall not be entitled to
participate in the Teledyne Senior Executive Performance Plan.
6. TERMINATION OF EMPLOYMENT. This Agreement shall terminate upon the
Expiration Date or upon the death of the Executive. The Company may terminate
this Agreement and the Executive's employment hereunder prior to the Expiration
Date for "Disability" or "Cause", as such terms are herein defined. The
Executive may terminate this Agreement and his employment hereunder prior to the
Expiration Date by his "Resignation for Good Reason" or "Retirement for Good
Reason" as such terms are hereinafter defined. Termination of this Agreement
for any reason not set forth above shall be a breach of this Agreement. In the
event of any termination of this Agreement and/or the Executive's employment
hereunder prior to the Expiration Date, whether constituting a breach or
otherwise, the provisions of Section 7 of this Agreement shall determine the
amount, if any, of any compensation thereafter due the Executive in respect to
such termination.
As used in this Agreement, the following terms shall have the meanings set
forth:
(a) DISABILITY. The Executive shall be entitled to leaves of absence from
the Company in accordance with the policy of the Company generally applicable to
executive officers
- 5 -
<PAGE>
for illness or other temporary disabilities for a period or periods not
exceeding, in aggregate, six (6) months in any calendar year, and his
compensation and status as an employee hereunder shall continue during any such
period or periods. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
with the Company on a full-time basis for six consecutive months, and within
thirty days after written notice of termination is given by the Company, the
Executive shall not have returned to the full-time performance of his duties,
the Executive shall be deemed to have experienced a Disability and the Company
may terminate the Executive's employment.
(b) CAUSE. Termination by the Company of Executive's employment for
"Cause" shall mean termination for reason of the Executive's personal dishonesty
directly affecting the Company, willful misconduct, breach of a fiduciary duty
involving profit personal to the Executive, intentional failure to perform
stated duties or conviction of a felony. For purposes of this subsection (b),
no act or omission shall be regarded as intentionally or willfully done unless
done or omitted to be done by the Executive following receipt of written notice
from the Board advising the Executive the particular act or omission would be
regarded as an intentional or wilful act or omission. No termination for Cause
shall be effective unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by a majority of the Board stating
that, in the good faith opinion of the Board, a particular act or omission
constitutes Cause under this Agreement; provided, however, this sentence should
not be applicable in the event the termination for cause is for reason of theft,
embezzlement or defalcation involving assets of the company.
(c) RETIREMENT FOR GOOD REASON. For purposes of this Agreement,
"Retirement for Good Reason" shall mean the Executive's election to retire
following the occurrence of one of the events referred to in Subsection (e)
below.
(d) RESIGNATION FOR GOOD REASON. For purposes of this Agreement,
"Resignation for Good Reason" shall mean the Executive's election to resign as a
result of the occurrence of one of the events referred to in Subsection (e)
below.
(e) GOOD REASON. For purposes of this Agreement, "Good Reason" shall,
absent the Executive's express written consent to the contrary, mean the
occurrence of any one of the following:
(i) a resignation or retirement by the Executive for any reason,
including, but not limited to, a voluntary resignation, on or before the
first anniversary of the Effective Date;
- 6 -
<PAGE>
(ii) removal of the Executive as Senior Vice President - Finance
and Chief Financial Officer (by reason other than death, Disability or
Cause), or any other material breach by the Company of its obligations
contained in this Agreement;
(iii) without the prior written consent of the Executive, the
assignment to the Executive of any duties inconsistent with his position as
Senior Vice President -Finance and Chief Financial Officer or a substantial
alteration in the nature or status of the Executive's duties and
responsibilities which renders the Executive's position to be of less
dignity, responsibility or scope;
(iv) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from
time to time, except for proportional across-the-board salary reductions
similarly affecting all executive officers of the Company; provided,
however, that in no event shall the Executive's base salary be reduced
below the per year amount set forth in Section 5(a) hereof without the
Executive's consent;
(v) the relocation of the principal executive offices of the
Company to a location outside the counties of Allegheny, Butler, Beaver,
Washington, Westmoreland or Armstrong, Pennsylvania or the Company's
requiring the Executive to be based anywhere other than the Company's
principal executive offices except for required travel on the business of
the Company;
(vi) failure of the Company to continue in effect and/or the
Executive's participation in any compensation plan, program or arrangement
in which the Executive then participates (whether existing at the Effective
Date or thereafter adopted) unless (i) an equitable arrangement reasonably
acceptable to the Executive and embodied in an on-going plan, program or
arrangement has been made with respect to such plan or (ii) the failure to
continue a plan, program or arrangement or the Executive's participation
therein is pursuant to an action which equally affects all executive
officers of the Company; or
(vii) any material reduction by the Company of the benefits
enjoyed by the Executive under any of the life insurance, medical, health-
and-accident, disability or other employee welfare benefit plans or
programs, including vacation days or corporate perquisites or arrangements
as in effect from time to time provided that this paragraph (vii) shall not
apply to any proportional across-the-board reduction or action similarly
affecting all executive officers of the Company.
- 7 -
<PAGE>
(f) NOTICE OF TERMINATION. Any purported termination by the Company
or Resignation for Good Reason or Retirement for Good Reason by the Executive
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination, resignation or retirement provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination, resignation or retirement under the
provision so indicated.
(g) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (i) if
the Executive's employment is terminated for Cause, the date the Notice of
Termination is given; (ii) if the Executive's employment is terminated for
Disability, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time daily basis during such thirty-day period) or (iii) if the
Executive's employment is terminated for any reason other than Cause or
Disability, the date specified in the Notice of Termination (which shall not be
less than thirty days nor more than sixty days, from the date such Notice of
Termination is given); provided that if within thirty days after any Notice of
Termination is given the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined by
mutual written agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected). Any
party giving notice of a dispute shall pursue the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay the Executive an amount equal to one half of
his full compensation in effect on the date notice was given (including, but not
limited to, base salary) and continue the Executive as a participant in all
compensation, employee benefit and insurance plans, programs and arrangements in
which the Executive was participating when the notice giving rise to the dispute
was given, until the dispute is finally resolved in accordance with this
Subsection 6(g); provided, however, that if the Executive is terminated for
Cause, he shall have no right to any compensation or benefits of any kind during
or with respect to the period of the pendency of such dispute, except as
required by applicable state or federal law and, provided, further, in the event
the Executive is not the prevailing party in an action brought to final
judgement under Section 9 hereof, the Executive shall repay to the Company
within twenty (20) business days of the entry of such final judgement an amount
equal to the amount paid under this sentence.
- 8 -
<PAGE>
7. COMPENSATION UPON TERMINATION.
(a) DEATH. If the Executive's employment hereunder terminates by
reason of his death, the Company shall pay to the Executive's spouse, or if
none, a beneficiary named by the Executive, or if none, the Executive's estate,
an amount equal to his base salary at the rate then in effect under Section 5(a)
for one calendar year payable in equal monthly installments. The foregoing
shall be in addition to (i) the proceeds of any insurance policies on the life
of the Executive which by their respective terms are payable to the Executive's
beneficiary, estate or personal representative, (ii) under the Company's
insurance programs and other employee benefit plans, programs and arrangements
then in effect and (iii) under any pension plan.
(b) DISABILITY. If the Executive's employment hereunder terminates by
reason of his Disability, the Executive shall be entitled to receive an amount
equal to seventy percent (70%) of the Executive's base salary at the rate then
in effect under Section 5(a) for the remainder of the Term, payable in equal
monthly installments. Benefits receivable by the Executive pursuant to this
Subsection (b) shall be reduced to the extent other benefits are actually
received by the Executive under a policy, plan, program or arrangement
applicable to employees generally or a policy or policies of disability
insurance specific to the Executive, the premium for which had been paid in full
by the Company but no reduction shall apply unless or until such benefits are
actually received by the Executive. Neither the Company nor the Executive shall
be under any obligation to file any claim for benefits under any such other
plan, policy or arrangement. If the Executive dies prior to the date on which
disability amounts would have ceased to be payable under this Subsection (b) and
(i) his spouse survives him, the amount that would have been payable by the
Company had he lived shall continue to be paid by the Company to his surviving
spouse at the same time and for the duration payable to the Executive had he
lived or, (ii) if his spouse does not survive him, the amount payable to the
Executive shall be payable to this estate for a period of twelve (12) months.
(c) CAUSE. If the Executive's employment hereunder is terminated by
the Company for Cause, the Company shall pay to the Executive his full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given and the Company shall have no further obligations to the
Executive under this Agreement.
(d) VOLUNTARY RESIGNATION OR RETIREMENT. In the event the Executive
retires or resigns after the first anniversary of the Effective Date for reasons
other than Good Reason, the Company shall pay to the Executive his full base
- 9 -
<PAGE>
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given and, except as provided in Section 8, the Company shall
have no further obligations to the Executive under this Agreement.
(e) TERMINATION WITH PREJUDICE. If, prior to the Expiration Date and
for reasons other than the death of the Executive, the Executive's employment
hereunder is terminated (A) by the Company for reasons other than Cause or
Disability (whether or not such termination by the Company constitutes a breach
of this Agreement) or (B) by the Executive pursuant to his Retirement for Good
Reason or Resignation for Good Reason, then the Executive's employment shall be
deemed to have been terminated with prejudice and the Executive shall be
entitled to liquidated damages, not severance, in the amount determined as
follows:
(i) the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given;
(ii) with respect to regular base salary for the then remaining
term, such regular base salary shall be determined at the rate in effect on
the date a Notice of Termination is delivered (unless a reduction in
compensation has preceded the Executive's Resignation or Retirement for
Good Reason in which case the rate of base salary shall be the rate in
effect prior to such reduction) and the Company shall pay to the Executive,
at the election of the Company made no later than the fifth (5th) business
day after delivery of a Notice of Termination, either (A) his regular base
salary for the then remaining term of this Agreement at the times and in
installments consistent with the Company's payroll practices then in effect
or (B) in lieu of any further payments of regular base salary, a lump sum
payment payable not later than the fifteenth day following the Date of
Termination, equal to the Executive's regular base salary for the then
remaining term of this Agreement discounted to present value at a discount
rate equal to the then prime interest rate as announced by Mellon Bank,
N.A. ("Mellon Prime") applied to each future payment from the time it would
have become payable;
(iii) notwithstanding any contrary provision in any Bonus Plan,
the Company shall pay to the Executive an amount in cash equal to the
amount which would have been payable (including at fair market value any
property which would have been distributable) to the Executive under the
ALC Performance Management System Plan, the ALC Performance Share Plan (or
successors) and any other Bonus Plan then in effect on the date of
Termination at the level of actual performance achieved and other factors
considered by such
- 10 -
<PAGE>
Bonus Plan attained in the period at the times payment under each such plan
is made to other participants;
(iv) (A) the period of the then remaining term of this Agreement
shall be credited to the Executive under the ALC Deferred Compensation
Plans, including, but not limited to, the ALC Supplemental Retirement Plan
and the ALC Benefit Restoration Plan (or successors), for the purpose of
accruing additional benefits or awards as if he had continued in the employ
of the Company for such period, (B) if he is not otherwise vested under
such Deferred Compensation Plans, he shall be and become fully vested in
any benefits, (C) to the extent the approval of the Board of the Company or
of any subsidiary (or a committee of either) is a prerequisite to receipt
of payments under such Deferred Compensation Plans, such approval shall be
deemed granted and (D) payments of the benefits and awards under each such
Deferred Compensation Plan shall be made in accordance with their
respective terms as modified herein, provided, however, in the event the
Executive resigns for the reason defined as Good Reason in Section 6(e)(i),
the vesting, Board approval and eligibility for payment provisions of
clauses (B), (C) and (D) of this Subsection 7(e)(iv) shall not be
applicable, and provided, further, this Subsection 7(e)(iv) shall survive
the Expiration Date and the Executive shall be entitled to the benefits of
the provisions hereof in the event his employment is terminated after the
Expiration Date for a reason which would be Good Reason as defined in
Subsection 6(e);
(v) the Company shall also pay to the Executive (or promptly
following written notice from the Executive reimburse the Executive for
amounts paid by the Executive with regard to the following) (A) all legal
fees and expenses incurred by the Executive in contesting or disputing any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement, provided, however, in the event the Executive
is not prevailing party in an action brought to final judgement under
Section 9 hereof, the Executive shall repay to the Company within twenty
(20) business days of the entry of such final judgement an amount equal to
the sum of legal fees paid by the Company in connection with such dispute
and/or (B) such fees and expenses incurred in connection with any tax audit
or proceeding to the extent attributable to the application of Section 4999
of the Code to any payment or benefit provided hereunder;
(vi) for the remainder of the Term, the Executive shall
participate in and be covered by all employee benefit and compensations
plans, programs, policies and arrangements of the Company applicable to
executive employees, whether
- 11 -
<PAGE>
funded or unfunded,provided, however, in the event any plan administrator
or any insurance carrier shall contest Executive's participation in or
coverage such plan, programs, policy or arrangement, the Company shall
arrange to provide the Executive with and shall pay the cost of premiums
when due for life, disability and health-and-accident and other insurance
benefits substantially similar to those which the Executive is receiving
immediately prior to the Notice of Termination and shall make cash payments
to the Executive in an amount equal to the amount which would have been
contributed by the Company with respect to the Executive under other
compensation plans, programs, policies or arrangements at the time such
amounts would have been contributed;
(vii) The payments provided for in this Subsection (f) shall be
made not later than the applicable date set forth above for such payment,
provided, however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimated amount, as determined in good faith by the Company,
of the minimum amount of such payments and shall pay the remainder of such
payments (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined
but in no event later than the thirtieth day after the date upon which such
estimated amount shall have been paid. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to the Executive
payable on the fifth day after demand by the Company (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code); and
(viii) Notwithstanding the foregoing provision of this Section
7(f), the amount of liquidated damages payable under this Section 7(f)
shall be reduced to the extent necessary to cause the aggregate of all
payments which must be taken into account for purposes of 280G of the Code
and any regulations thereunder to be $100.00 less than the amount which
would be deemed an excess parachute payment as defined in Section
280G(b)(1) of the Code or, if liquidated damages are due with respect to a
resignation or retirement for the Good Reason event defined in Subsection
6(e)(i), to the amount, if less than the amount determined under the
limitation set forth above with regard to Section 280G of the Code, equal
to the result of multiplying 2.5 by the sum of (A) the Executive's
compensation as reported on his Form W-2 for the calendar year immediately
preceding his resignation or retirement and (B) any amounts deferred
pursuant to Sections 125 or 401(k) for such calendar year.
- 12 -
<PAGE>
(g) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 7 be reduced by
any compensation earned by the Executive as the result of employment by another
employer, or otherwise. Benefits otherwise receivable by the Executive pursuant
to Section 7(f)(vi) above shall be reduced to the extent comparable benefits are
actually received by the Executive during the period of time remaining until the
Expiration Date from the plan or plans of any subsequent employer or from any
program maintained by any governmental body not requiring contribution by the
Executive, and any such benefits actually received by the Executive shall be
reported to the Company.
(h) In addition to all other amounts payable to the Executive under
this Section 7, the Executive shall be entitled to receive all benefits payable
to him under a pension plan, and any other plan, program or arrangement relating
to retirement. No amount payable to the Executive under Subsection 7(f) shall
be considered for any benefit calculation or other purpose under a pension plan.
8. RETIREMENT UNDER CIRCUMSTANCES NOT CONSTITUTING RETIREMENT FOR
GOOD REASON. Nothing contained in this Agreement shall be deemed to limit the
Executive's ability to retire under the Company's retirement policies and/or
pension plan under circumstances not constituting Retirement for Good Reason and
to receive all benefits payable to him under a pension plan, and any other plan,
program or arrangement relating to retirement.
9. ARBITRATION. Any disputes hereunder shall be settled by
arbitration conducted in Pittsburgh, Pennsylvania, under the auspices of, and in
accordance with the rules of, the American Arbitration Association. The
decision in such arbitration shall be final and conclusive on the parties and
the judgment upon such decision may be entered in any court having jurisdiction
thereof.
10. NOTICES. All notices and other communications which are required
or may be given under this Agreement shall be in writing and shall be delivered
personally or by registered or certified mail addressed to the party concerned
at the following addresses:
If to the Company:
Allegheny Teledyne Incorporated
10th Floor
Six PPG Place
Pittsburgh, PA 15222
Attention: Secretary
- 13 -
<PAGE>
If to the Executive:
James L. Murdy
2670 Merry Oak Lane
Pittsburgh, PA 15241-2953
or to such other address as shall be designated by notice in writing to the
other party in accordance herewith. Notices and other communications hereunder
shall be deemed effectively given when personally delivered, or, if mailed, 72
hours after deposit in the United States mail.
11. MISCELLANEOUS.
(a) This Agreement supersedes all prior agreements, arrangements and
undertakings, written or oral, relating to the subject matter hereof.
(b) (i) This Agreement shall inure to the benefit of and be
binding upon the Executive, the Executive's heirs, representatives or estate.
(ii) This Agreement shall be binding upon and inure to the benefit of
the Company and its successors and assigns. The Company shall require any
successor (whether direct or indirect, by purchase, conversion of form, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance 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 would be required to perform if
no such succession had taken place. As used in this Agreement, "Company" shall
mean (A) the Company as defined in the preamble to this Agreement, (B) each
member of a controlled group of corporations within the meaning of Section 1563
of the Code which includes the Company and (C) any successor to the business or
any of the assets of the Company which executes and delivers the agreement
provided for in this Subsection 11(b)(ii) or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.
(c) This Agreement may be amended, modified, superseded, canceled,
renewed or extended and the terms or covenants hereof may be waived, only by a
written instrument executed by both of the parties hereto, or in the case of a
waiver, by the party waiving compliance. The failure of either party at any
time or times to require performance of any provisions hereof shall in no manner
affect the right at a later time to enforce such provisions thereafter. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or
- 14 -
<PAGE>
continuing waiver of any such breach or a waiver of the breach, preceding or
succeeding, of any other term or covenant contained in this Agreement.
(d) In the event any one or more of the covenants, terms or provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity of the remaining covenants, terms and provisions contained
herein shall be in no way affected, prejudiced or disturbed thereby.
(e) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in
Paragraph 11(b) above. Without limiting the foregoing, the Executive's right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
his will or by the laws of descent or distribution, and in the event of any
attempted assignment or transfer contrary to this Subsection 11(e) the Company
shall have no liability to pay any amount so attempted to be assigned or
transferred.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania of regardless of its
principles of conflict of laws, except as such laws of the Commonwealth of
Pennsylvania may be preempted by the laws of the United States.
(g) All payments required hereunder shall be made from the general
assets of the Company and the Executive shall have no rights greater than the
rights of a general creditor of the Company.
(h) The Company may withhold from any payment required hereunder such
amounts for federal, state and local income tax as the Company, in good faith,
determines to be required by applicable laws, provided, however, the Company
shall provide the Executive with notice of the amount so withheld and shall
promptly pay over such amounts to the appropriate taxing body.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
ATTEST: ALLEGHENY TELEDYNE
INCORPORATED
/s/ Jon D. Walton /s/ R. P. Simmons
By_____________________________ By:__________________________
Chairman
Secretary Title:_______________________
WITNESS: JAMES L. MURDY
/s/ Mary Beth Luksik /s/ James L. Murdy
By_____________________________ ______________________________
- 16 -
<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT dated as of July 15, 1996, by and between
ALLEGHENY TELEDYNE INCORPORATED, a Delaware corporation, with its principal
executive offices at 10th Floor, Six PPG Place, Pittsburgh, Pennsylvania 15222,
on behalf of itself and each of its subsidiaries (collectively, the "Company"),
and
JON D. WALTON, an individual residing in Allegheny County, Pennsylvania (the
"Executive"),
WHEREAS, the Company wishes to assure itself of the services of Executive
for a term of no less than three (3) years and as such may be extended from time
to time under the terms and conditions set forth herein and the Executive is
willing to serve in the employ of the Company on a full time basis for said
period upon the terms and conditions hereinafter provided; and
WHEREAS, the Board of Directors of the Company (the "Board") has determined
that the best interests of Company would be served by providing for the terms
and conditions of Executive's employment as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and intending to be legally bound hereby, the Company and the Executive hereby
agree as follows:
1. POSITION AND DUTIES.
(a) The Company hereby agrees to, and hereby does, employ the Executive,
for the term of this Agreement, to render services to the Company as Vice
President, General Counsel and Secretary of the Company and in connection
therewith to perform such duties which are not inconsistent with this Agreement
as the Executive may be reasonably directed to perform by the Chief Executive
Officer of the Company (the "CEO"). With the consent of the Board of the
Company, (i) the Executive may devote a reasonable amount of time and effort to
industry, community or charity organizations, and (ii), subject further to the
provisions of Section 3 and Section 4 hereof, the Executive may serve as a
director of other companies and/or financial institutions.
(b) The Executive hereby accepts such employment and agrees faithfully to
perform to the best of his ability the duties described in Section 1(a).
<PAGE>
2. TERM. Subject to Section 6 hereof, the term of the employment of the
Executive under this Agreement shall commence upon consummation of the
transactions contemplated by the Agreement and Plan of Merger and Combination,
dated as of April 1, 1996, as amended and restated, by and among the Company,
Allegheny Ludlum Corporation ("ALC"), ALS Merger Corporation, Teledyne, Inc.,
and TDY Merger, Inc. (the "Effective Date") and, unless terminated in accordance
with this Section 2 prior to such time, shall terminate on the third anniversary
of the Effective Date. On the last day of the month in which the second
anniversary of the Effective Date occurs and on the last day of each month
thereafter (the last day of each month after the second anniversary of the
Effective Date is hereinafter referred to as an "Extension Date"), the term of
this Agreement shall be extended for one additional month unless one party
provides written notice to the other prior to then next Extension Date that it
does not wish to extend the term of this Agreement. As of the last day of the
month in which such notice is delivered, the term of this Agreement shall be
twelve (12) months and shall not be further extended. The last day of the
calendar month in which the term hereof expires, as extended from time to time,
is hereinafter referred to as the "Expiration Date" and the period between the
Effective Date and the Expiration Date is hereinafter referred to as the "Term".
3. NON-COMPETITION. During the period ending on the Expiration Date:
(a) The Executive shall not, directly or indirectly, engage in competition
with the Company in any manner or capacity (e.g., as a management consultant,
principal, partner, officer, director, stockholder or management employee) in
any phase of the Company's business as then being conducted.
(b) Ownership by the Executive, as a passive investment, of less than 1% of
the outstanding shares of capital stock of any corporation listed on a national
securities exchange or publicly traded in the over-the-counter market shall not
constitute a breach of this Section 3.
(c) The Executive further agrees that, during the Term, he will not,
directly or indirectly, assist or encourage any other person in carrying out,
directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 3 if such activity were carried out by the Executive,
either directly or indirectly, and in particular the Executive agrees that he
will not, directly or indirectly, induce any employee of the Company to carry
out, directly or indirectly, any such activity.
4. CONFIDENTIALITY. Except as permitted or directed by the Company's
Board, the Executive shall not during the Term
- 2 -
<PAGE>
or at any time thereafter divulge, furnish, disclose or make accessible (other
than in the ordinary course of the business of the Company) to anyone for use in
any way confidential or secret knowledge or information of the Company which the
Executive has acquired or become acquainted with or will acquire or become
acquainted with prior to the termination of the period of his employment by the
Company (including employment by the Company prior to the date of this
Agreement), whether developed by himself or by others, concerning any trade
secrets, confidential or secret designs, processes, formulae, software or
computer programs, plans, devices or material (whether or not patented or
patentable, copyrighted or copyrightable) directly or indirectly useful in any
aspect of the business of the Company, any confidential customer or supplier
lists of the Company, any confidential or secret development or research work of
the Company, or any other confidential, secret or non-public aspects of the
business of the Company. The Executive acknowledges that the above-described
knowledge or information constitutes a unique and valuable asset of the Company
acquired at great time and expense by the Company, and that any disclosure or
other use of such knowledge or information other than for the sole benefit of
the Company would be wrongful and would cause irreparable harm to the Company.
During the term of this Agreement, the Executive will refrain from any acts or
omissions that would reduce the value of the use of such knowledge or
information to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information which is published or
which subsequently becomes generally publicly known, other than as a direct or
indirect result of the breach of this Agreement by the executive.
5. COMPENSATION. In consideration of the Executive's agreements contained
herein, the Company shall pay or grant to him the following salary and other
compensation and benefits:
(a) Base salary, not less than $160,000 per year, as is determined from
time to time by the Board or an appropriate committee thereof, provided,
however, that the Executive's base salary shall be reviewed by the Board no less
frequently than annually and shall be increased (but not decreased) if the Board
- 3 -
<PAGE>
determines that an increase is appropriate on the basis of the types of factors
it generally takes into account in increasing the salaries of executive officers
of the Company including, but not limited to, cost-of-living factors, payable in
equal installments not less frequently than monthly in accordance with the
Company's payroll practices.
(b) Participation in and the right to earn compensation under each and all
incentive compensation plans now existing, including, but not limited to, the
annual bonus amounts determined under the ALC Performance Management System Plan
and longer term bonuses earned under the ALC Performance Share Plan, or
successors thereto or other plans hereafter adopted as applicable to one or more
executive officers of the Company and/or ALC (a "Bonus Plan"), each in
accordance with its terms and conditions as such may be amended from time to
time to equitably affect all executive officers of the Company;
(c) Participation in and the right to earn compensation under each and all
stock option, restricted stock or other equity compensation plans now existing
(but only to the extent that any such plan is actually used to make grants or
awards to executive officers of the Company), including, but not limited to, the
ALC Stock Acquisition and Retention Plan, the ALC Stock Option Incentive Plan
and the Company's 1996 Incentive Plan (when effective) or successors thereto or
other plans hereafter adopted as applicable to one or more executive officers of
the Company and/or ALC (collectively, the "Equity Plans"), each in accordance
with its terms as such may be amended from time to time to equitably affect all
executive officers of the Company;
(d) Participation in and the right to earn compensation under any other
deferred or additional compensation plan, program or arrangement now existing,
including, but not limited to, the ALC Supplemental Pension Plan and the ALC
Benefit Restoration Plan, or successors hereto or other plans hereafter adopted
as applicable to executive officers of the Company and/or ALC (collectively, the
"Deferred Compensation Plans"), each in accordance with its terms as such may be
amended from time to time to equitably affect all executive officers of the
Company;
(e) Participation in and the right to receive benefits under each and all
employee benefit plans, programs or arrangements whether or not qualified within
the meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or subject to the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), now existing or hereafter adopted as applicable to
executive officers of the Company as such may be amended from time to time in a
manner not inconsistent with this Agreement;
- 4 -
<PAGE>
(f) Reimbursement for travel and other expenses incurred by the Executive
in performing his obligations hereunder pursuant to the terms and conditions of
the applicable policy of the Company as such policy may be amended from time to
time as applicable to all similarly situated employees of the Company;
(g) Reasonable vacations (which shall take into account the term of the
Executive's employment with the Company or any of its predecessors), absences on
account of temporary illness, corporate perquisites, including, but not limited
to, those provided to the Executive on the Effective Date, and fringe benefits
customarily enjoyed by employees or officers of the Company, each under the
terms and conditions of the policy of the Company as such policy may be amended
from time to time as applicable to all similarly situated employees of the
Company; and
(h) Indemnification and protection from liability to the full extent
provided under the by-laws of the Company and the laws of the State of Delaware.
Nothing contained in this Agreement shall prevent the Board (or an
appropriate committee thereof charged with administration) from (x) amending or
otherwise altering any plan, program or arrangement so long as such amendment or
alteration (i) is accomplished pursuant to the terms thereof as in effect on the
Effective Date or on the date such plan or arrangement is adopted, if later
adopted, and (ii) equitably affects all employees, executive or otherwise, of
the Company previously covered under such plan or (y) taking into account the
duties of the Executive in comparison with other executive officers of the
Company covered under the Bonus, Equity or Deferred Compensation Plans when
determining performance goals and compensation opportunities under such plans.
Notwithstanding the foregoing, the Executive shall not be entitled to
participate in the Teledyne Senior Executive Performance Plan.
6. TERMINATION OF EMPLOYMENT. This Agreement shall terminate upon the
Expiration Date or upon the death of the Executive. The Company may terminate
this Agreement and the Executive's employment hereunder prior to the Expiration
Date for "Disability" or "Cause", as such terms are herein defined. The
Executive may terminate this Agreement and his employment hereunder prior to the
Expiration Date by his "Resignation for Good Reason" or "Retirement for Good
Reason" as such terms are hereinafter defined. Termination of this Agreement for
any reason not set forth above shall be a breach of this Agreement. In the event
of any termination of this Agreement and/or the Executive's employment hereunder
prior to the Expiration Date, whether constituting a breach or otherwise, the
provisions of Section 7 of this Agreement shall determine the amount, if any, of
any
- 5 -
<PAGE>
compensation thereafter due the Executive in respect to such termination.
As used in this Agreement, the following terms shall have the meanings set
forth:
(a) DISABILITY. The Executive shall be entitled to leaves of absence from
the Company in accordance with the policy of the Company generally applicable to
executive officers for illness or other temporary disabilities for a period or
periods not exceeding, in aggregate, six (6) months in any calendar year, and
his compensation and status as an employee hereunder shall continue during any
such period or periods. If, as a result of the Executive's incapacity due to
physical or mental illness, the Executive shall have been absent from his duties
with the Company on a full-time basis for six consecutive months, and within
thirty days after written notice of termination is given by the Company, the
Executive shall not have returned to the full-time performance of his duties,
the Executive shall be deemed to have experienced a Disability and the Company
may terminate the Executive's employment.
(b) CAUSE. Termination by the Company of Executive's employment for
"Cause" shall mean termination for reason of the Executive's personal dishonesty
directly affecting the Company, willful misconduct, breach of a fiduciary duty
involving profit personal to the Executive, intentional failure to perform
stated duties or conviction of a felony. For purposes of this Subsection (b), no
act or omission shall be regarded as intentionally or willfully done unless done
or omitted to be done by the Executive following receipt of written notice from
the Board advising the Executive the particular act or omission would be
regarded as an intentional or wilful act or omission. No termination for Cause
shall be effective unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by a majority of the Board stating
that, in the good faith opinion of the Board, a particular act or omission
constitutes Cause under this Agreement; provided, however, this sentence shall
not be applicable in the event the termination for cause is for reason of theft,
embezzlement or defalcation involving assets of the Company.
(c) RETIREMENT FOR GOOD REASON. For purposes of this Agreement,
"Retirement for Good Reason" shall mean the Executive's election to retire
following the occurrence of one of the events referred to in Subsection (e)
below.
(d) RESIGNATION FOR GOOD REASON. For purposes of this Agreement,
"Resignation for Good Reason" shall mean the Executive's election to resign as a
result of the occurrence of one of the events referred to in Subsection (e)
below.
- 6 -
<PAGE>
(e) GOOD REASON. For purposes of this Agreement, "Good Reason" shall,
absent the Executive's express written consent to the contrary, mean the
occurrence of any one of the following:
(i) a resignation or retirement by the Executive for any reason,
including, but not limited to, a voluntary resignation, on or before
the first anniversary of the Effective Date;
(ii) removal of the Executive as Vice President, General Counsel
and Secretary (by reason other than death, Disability or Cause), or
any other material breach by the Company of its obligations contained
in this Agreement;
(iii) without the prior written consent of the Executive, the
assignment to the Executive of any duties inconsistent with his
position as Vice President, General Counsel and Secretary or a
substantial alteration in the nature or status of the Executive's
duties and responsibilities which renders the Executive's position to
be of less dignity, responsibility or scope;
(iv) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased
from time to time, except for proportional across-the-board salary
reductions similarly affecting all executive officers of the Company;
provided, however, that in no event shall the Executive's base salary
be reduced below the per year amount set forth in Section 5(a) hereof
without the Executive's consent;
(v) the relocation of the principal executive offices of the
Company to a location outside the counties of Allegheny, Butler,
Beaver, Washington, Westmoreland or Armstrong, Pennsylvania or the
Company's requiring the Executive to be based anywhere other than the
Company's principal executive offices except for required travel on
the business of the Company;
(vi) failure of the Company to continue in effect and/or the
Executive's participation in any compensation plan, program or
arrangement in which the Executive then participates (whether existing
at the Effective Date or thereafter adopted) unless (i) an equitable
arrangement reasonably acceptable to the Executive and embodied in an
on-going plan, program or arrangement has been made with respect to
such plan or
- 7 -
<PAGE>
(ii) the failure to continue a plan, program or arrangement or the
Executive's participation therein is pursuant to an action which
equally affects all executive officers of the Company; or
(vii) any material reduction by the Company of the benefits
enjoyed by the Executive under any of the life insurance, medical,
health-and-accident, disability or other employee welfare benefit
plans or programs, including vacation days or corporate perquisites or
arrangements as in effect from time to time provided that this
paragraph (vii) shall not apply to any proportional across-the-board
reduction or action similarly affecting all executive officers of the
Company.
(f) NOTICE OF TERMINATION. Any purported termination by the Company
or Resignation for Good Reason or Retirement for Good Reason by the Executive
shall be communicated by written Notice of Termination to the other party hereto
in accordance with Section 10 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination, resignation or retirement provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for such termination, resignation or retirement under the
provision so indicated.
(g) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (i) if
the Executive's employment is terminated for Cause, the date the Notice of
Termination is given; (ii) if the Executive's employment is terminated for
Disability, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of the Executive's duties
on a full-time daily basis during such thirty-day period) or (iii) if the
Executive's employment is terminated for any reason other than Cause or
Disability, the date specified in the Notice of Termination (which shall not be
less than thirty days nor more than sixty days, from the date such Notice of
Termination is given); provided that if within thirty days after any Notice of
Termination is given the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be the date on which the dispute is finally determined by
mutual written agreement of the parties, by a binding arbitration award, or by a
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected). Any
party giving notice of a dispute shall pursue the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay the Executive an amount
- 8 -
<PAGE>
equal to one half of his full compensation in effect on the date notice was
given (including, but not limited to, base salary) and continue the Executive as
a participant in all compensation, employee benefit and insurance plans,
programs and arrangements in which the Executive was participating when the
notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection 6(g); provided, however, that if the
Executive is terminated for Cause, he shall have no right to any compensation or
benefits of any kind during or with respect to the period of the pendency of
such dispute, except as required by applicable state or federal law and,
provided, further, in the event the Executive is not the prevailing party in an
action brought to final judgement under Section 9 hereof, the Executive shall
repay to the Company within twenty (20) business days of the entry of such final
judgement an amount equal to the amount paid under this sentence.
7. COMPENSATION UPON TERMINATION.
(a) DEATH. If the Executive's employment hereunder terminates by
reason of his death, the Company shall pay to the Executive's spouse, or if
none, a beneficiary named by the Executive, or if none, the Executive's estate,
an amount equal to his base salary at the rate then in effect under Section 5(a)
for one calendar year, payable in equal monthly installments. The foregoing
shall be in addition to (i) the proceeds of any insurance policies on the life
of the Executive which by their respective terms are payable to the Executive's
beneficiary, estate or personal representative, (ii) under the Company's
insurance programs and other employee benefit plans, programs and arrangements
then in effect and (iii) under any pension plan.
(b) DISABILITY. If the Executive's employment hereunder terminates by
reason of his Disability, the Executive shall be entitled to receive an amount
equal to seventy percent (70%) of the Executive's base salary at the rate then
in effect under Section 5(b) for the remainder of the Term, payable in equal
monthly installments. Benefits receivable by the Executive pursuant to this
Subsection (b) shall be reduced to the extent other benefits are actually
received by the Executive under a policy or policies of disability insurance
covering employees generally, the premium for which had been paid in full by the
Company but shall not be reduced unless or until such benefits are actually
received by the Executive. Neither the Company nor the Executive shall be under
any obligation to file any claim for benefits under any such other plan, policy
or arrangement. If the Executive dies prior to the date on which disability
amounts would have ceased to be payable under this Subsection (b) and (i) his
spouse survives him, the amount that would have been payable by the Company had
he lived shall continue to be paid by the Company to his surviving spouse at the
same time and for the
- 9 -
<PAGE>
duration payable to the Executive had he lived or, (ii) if his spouse does not
survive him, the amount payable to the Executive shall be payable to this estate
for a period of twelve (12) months.
(c) CAUSE. If the Executive's employment hereunder is terminated by
the Company for Cause, the Company shall pay to the Executive his full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given and the Company shall have no further obligations to the
Executive under this Agreement.
(d) VOLUNTARY RESIGNATION OR RETIREMENT. In the event the Executive
retires or resigns after the first anniversary of the Effective Date for reasons
other than Good Reason, the Company shall pay to the Executive his full base
salary through the Date of Termination at the rate in effect at the time Notice
of Termination is given and, except as provided in Section 8, the Company shall
have no further obligations to the Executive under this Agreement.
(e) TERMINATION WITH PREJUDICE. If, prior to the Expiration Date and
for reasons other than the death of the Executive, the Executive's employment
hereunder is terminated (A) by the Company for reasons other than Cause or
Disability (whether or not such termination by the Company constitutes a breach
of this Agreement) or (B) by the Executive pursuant to his Retirement for Good
Reason or Resignation for Good Reason, then the Executive's employment shall be
deemed to have been terminated with prejudice and the Executive shall be
entitled to liquidated damages, not severance, in the amount determined as
follows:
(i) the Company shall pay the Executive his full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given;
(ii) with respect to regular base salary for the then remaining
term, such regular base salary shall be determined at the rate in
effect on the date a Notice of Termination is delivered (unless a
reduction in compensation has preceded the Executive's Resignation or
Retirement for Good Reason in which case the rate of base salary shall
be the rate in effect prior to such reduction) and the Company shall
pay to the Executive, at the election of the Company made no later
than the fifth (5th) business day after delivery of a Notice of
Termination, either (A) his regular base salary for the then remaining
term of this Agreement at the times and in installments consistent
with the Company's payroll practices then in effect or (B) in lieu of
any further payments of regular base salary, a lump sum payment
- 10 -
<PAGE>
payable not later than the fifteenth day following the Date of
Termination, equal to the Executive's regular base salary for the then
remaining term of this Agreement discounted to present value at a
discount rate equal to the then prime interest rate as announced by
Mellon Bank, N.A. ("Mellon Prime") applied to each future payment from
the time it would have become payable;
(iii) notwithstanding any contrary provision in any Bonus Plan,
the Company shall pay to the Executive an amount in cash equal to the
amount which would have been payable (including at fair market value
any property which would have been distributable) to the Executive
under the ALC Performance Management System Plan, the ALC Performance
Share Plan (or successors) and any other Bonus Plan in effect on the
date of Termination at the level of actual performance achieved and
other factors considered by such Bonus Plan attained in the period at
the times payment under each such plan is made to other participants;
(iv) (A) the period of the then remaining term of this Agreement
shall be credited to the Executive under the ALC Deferred Compensation
Plans, including, but not limited to, the ALC Supplemental Retirement
Plan and the ALC Benefit Restoration Plan (or successors), for the
purpose of accruing additional benefits or awards as if he had
continued in the employ of the Company for such period, (B) if he is
not otherwise vested under such Deferred Compensation Plans, he shall
be and become fully vested in any benefits, (C) to the extent the
approval of the Board of the Company or of any subsidiary (or a
committee of either) is a prerequisite to receipt of payments under
such Deferred Compensation Plans, such approval shall be deemed
granted and (D) payments of the benefits and awards under each such
Deferred Compensation Plan shall be made in accordance with their
respective terms as modified herein;
(v) the Company shall also pay to the Executive (or promptly
following written notice from the Executive reimburse the Executive
for amounts paid by the Executive with regard to the following) (A)
all legal fees and expenses incurred by the Executive in contesting or
disputing any such termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement, provided, however, in the
event the Executive is not the prevailing party in an action brought
to final judgement under Section 9 hereof, the Executive shall repay
to the Company within twenty (20) business days of the entry of such
final
- 11 -
<PAGE>
judgement an amount equal to the sum of legal fees paid by the Company
in connection with such dispute and/or (B) such fees and expenses
incurred in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code to any
payment or benefit provided hereunder;
(vi) for the remainder of the Term, the Executive shall
participate in and be covered by all employee benefit and
compensations plans, programs, policies and arrangements of the
Company applicable to executive employees, whether funded or unfunded,
provided, however, in the event any plan administrator or any
insurance carrier shall contest Executive's participation in or
coverage such plan, programs, policy or arrangement, the Company shall
arrange to provide the Executive with and shall pay the cost of
premiums when due for life, disability and health-and-accident and
other insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of Termination
and shall make cash payments to the Executive in an amount equal to
the amount which would have been contributed by the Company with
respect to the Executive under other compensation plans, programs,
policies or arrangements at the time such amounts would have been
contributed;
(vii) The payments provided for in this Subsection (f) shall be
made not later than the applicable date set forth above for such
payment, provided, however, that if the amounts of such payments
cannot be finally determined on or before such day, the Company shall
pay to the Executive on such day an estimated amount, as determined in
good faith by the Company, of the minimum amount of such payments and
shall pay the remainder of such payments (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the
thirtieth day after the date upon which such estimated amount shall
have been paid. In the event that the amount of the estimated payments
exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by the Company to the Executive payable
on the fifth day after demand by the Company (together with interest
at the rate provided in Section 1274(b)(2)(B) of the Code); and
(viii) Notwithstanding the foregoing provision of this Section
7(f), the amount of liquidated damages payable under this Section 7(f)
shall be reduced to the
- 12 -
<PAGE>
extent necessary to cause the aggregate of all payments which must be
taken into account for purposes of 280G of the Code and any
regulations thereunder to be $100.00 less than the amount which would
be deemed an excess parachute payment as defined in Section 280G(b)(1)
of the Code or, if liquidated damages are due with respect to a
resignation or retirement for the Good Reason event defined in
Subsection 6(e)(i), to the amount, if less than the amount determined
under the limitation set forth above with regard to Section 280G of
the Code, equal to the result of multiplying 2.5 by the sum of (A) the
Executive's compensation as reported on his Form W-2 for the calendar
year immediately preceding his resignation or retirement and (B) any
amounts deferred pursuant to Section 125 and/or 401(k) of the Code for
such calendar year.
(g) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 7 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 7 be reduced by
any compensation earned by the Executive as the result of employment by another
employer, or otherwise. Benefits otherwise receivable by the Executive pursuant
to Section 7(f)(vi) above shall be reduced to the extent comparable benefits are
actually received by the Executive during the period of time remaining until the
Expiration Date from the plan or plans of any subsequent employer or from any
program maintained by any governmental body not requiring contribution by the
Executive, and any such benefits actually received by the Executive shall be
reported to the Company.
(h) In addition to all other amounts payable to the Executive under
this Section 7, the Executive shall be entitled to receive all benefits payable
to him under a pension plan, and any other plan, program or arrangement relating
to retirement. No amount payable to the Executive under Subsection 7(f) shall be
considered for any benefit calculation or other purpose under a pension plan.
8. RETIREMENT UNDER CIRCUMSTANCES NOT CONSTITUTING RETIREMENT FOR
GOOD REASON. Nothing contained in this Agreement shall be deemed to limit the
Executive's ability to retire under the Company's retirement policies and/or
pension plan under circumstances not constituting Retirement for Good Reason and
to receive all benefits payable to him under a pension plan, and any other plan,
program or arrangement relating to retirement.
9. ARBITRATION. Any disputes hereunder shall be settled by
arbitration conducted in Pittsburgh, Pennsylvania, under the auspices of, and in
accordance with the rules of, the American Arbitration Association. The decision
in such
- 13 -
<PAGE>
arbitration shall be final and conclusive on the parties and the judgment upon
such decision may be entered in any court having jurisdiction thereof.
10. NOTICES. All notices and other communications which are required
or may be given under this Agreement shall be in writing and shall be delivered
personally or by registered or certified mail addressed to the party concerned
at the following addresses:
If to the Company:
Allegheny Teledyne Incorporated
10th Floor
Six PPG Place
Pittsburgh, PA 15222
Attention: Secretary
If to the Executive:
Jon D. Walton
137 Hoodridge Drive
Pittsburgh, PA 15228
or to such other address as shall be designated by notice in writing to the
other party in accordance herewith. Notices and other communications hereunder
shall be deemed effectively given when personally delivered, or, if mailed, 72
hours after deposit in the United States mail.
11. MISCELLANEOUS.
(a) This Agreement supersedes all prior agreements, arrangements and
undertakings, written or oral, relating to the subject matter hereof.
(b) (i) This Agreement shall inure to the benefit of and be binding
upon the Executive, the Executive's heirs, representatives or estate.
(ii) This Agreement shall be binding upon and inure to the benefit of
the Company and its successors and assigns. The Company shall require any
successor (whether direct or indirect, by purchase, conversion of form, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance 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 would be required to perform if
no such succession had taken place. As used in this Agreement, "Company" shall
mean (A) the Company as defined in the preamble to this Agreement, (B) each
member of a controlled group of
- 14 -
<PAGE>
corporations within the meaning of Section 1563 of the Code which includes the
Company and (C) any successor to the business or any of the assets of the
Company which executes and delivers the agreement provided for in this
Subsection 11(b)(ii) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(c) This Agreement may be amended, modified, superseded, canceled,
renewed or extended and the terms or covenants hereof may be waived, only by a
written instrument executed by both of the parties hereto, or in the case of a
waiver, by the party waiving compliance. The failure of either party at any time
or times to require performance of any provisions hereof shall in no manner
affect the right at a later time to enforce such provisions thereafter. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach or a waiver of the breach, preceding or succeeding, of any other term or
covenant contained in this Agreement.
(d) In the event any one or more of the covenants, terms or provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity of the remaining covenants, terms and provisions contained
herein shall be in no way affected, prejudiced or disturbed thereby.
(e) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in
Paragraph 11(b) above. Without limiting the foregoing, the Executive's right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
his will or by the laws of descent or distribution, and in the event of any
attempted assignment or transfer contrary to this Subsection 11(e) the Company
shall have no liability to pay any amount so attempted to be assigned or
transferred.
(f) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania of regardless of its
principles of conflict of laws, except as such laws of the Commonwealth of
Pennsylvania may be preempted by the laws of the United States.
(g) All payments required hereunder shall be made from the general
assets of the Company and the Executive shall have no rights greater than the
rights of a general creditor of the Company.
- 15 -
<PAGE>
(h) The Company may withhold from any payment required hereunder such
amounts for federal, state and local income tax as the Company, in good faith,
determines to be required by applicable laws, provided, however, the Company
shall provide the Executive with notice of the amount so withheld and shall
promptly pay over such amounts to the appropriate taxing body.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date first above written.
ATTEST: ALLEGHENY TELEDYNE
INCORPORATED
/s/ Cynthia L. Schmidt /s/ R. P. Simmons
By____________________________ By:___________________________
Chairman
Assistant Secretary Title:________________________
WITNESS: JON D. WALTON
/s/ Mary Beth Luksik /s/ Jon D. Walton
By____________________________ ______________________________
- 16 -
<PAGE>
Exhibit 10.6
SEPARATION AGREEMENT
--------------------
THIS SEPARATION AGREEMENT (this "Agreement"), is entered into as of July
12, 1996 by the following:
(i) Dr. Donald B. Rice, an individual (hereinafter "Rice"); and
(ii) Teledyne, Inc., a Delaware corporation (the "Company"), and Allegheny
Teledyne Incorporated, a Delaware corporation ("ATI"), for themselves and
on behalf of their respective parents, subsidiaries and affiliates
(together with the Company and ATI, collectively, the "Company Parties").
RECITALS
--------
A. WHEREAS, the Company, ATI and Allegheny Ludlum Corporation, a
Pennsylvania corporation ("AL"), are parties to that certain Agreement and Plan
of Merger and Combination dated April 1, 1996 (the "Combination Agreement"),
pursuant to which the Company and AL will be parties to two simultaneous mergers
the result of which will be that they will both become subsidiaries of ATI (the
"Combination");
B. WHEREAS, Rice is a party to various agreements with certain of the
Company Parties, including (i) various non-qualified stock option agreements
with the Company (collectively, the "Option Agreements"), and (ii) various other
agreements or arrangements with certain of the Company Parties (all such
agreements or arrangements other than the Option Agreements, collectively, the
"Rice Agreements"), including without limitation the employment, severance and
similar agreements; and
C. WHEREAS, Rice currently serves as a director and officer of ATI and the
Company and it had been contemplated that Rice would continue to serve in such
capacities following the consummation of the Combination (the "Closing");
D. WHEREAS, Rice has now decided to pursue other opportunities after the
Closing;
E. WHEREAS, the Company desires to have the benefit of Rice's services as a
consultant for a period following the Closing; and
F. WHEREAS, subject to the terms and conditions of this Agreement, Rice and
the Company Parties wish (i) to provide for the termination of the employment
and other relationships (except as otherwise set forth herein) between Rice, on
the one hand, and each of the Company Parties, on the other, (ii) to set forth
the terms of the severance due to Rice in connection with such termination, and
(iii) to provide for Rice's continued service to the Company as a consultant
until April 30, 1998;
<PAGE>
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
conditions and releases set forth below, Rice and the Company Parties hereby
agree as follows:
1. Termination of Employment; Release of Claims.
--------------------------------------------
Subject to Rice's right to revoke his consent to this Agreement as set forth
in Paragraph 6 below:
a. Resignations and Termination of Employment. Effective upon the
------------------------------------------
execution of this Agreement, Rice hereby resigns from each position he holds
as a director and officer of ATI and ATI hereby accepts such resignation.
Immediately prior to the Closing, Rice shall resign from each position he
then holds as a director, officer or employee of the Company and the Company
shall accept such resignation (the date and time of Rice's resignation under
this sentence being collectively referred to in this Agreement as the
"Effective Date"). Notwithstanding the foregoing, until April 30, 1998 Rice
shall serve as a supervisory directeur of Teledyne, B.V., a Dutch holding
company that is a Company subsidiary and his services as such will involve
no managerial duties or responsibilities.
b. Release of Claims. As evidenced by their execution of Attachment A
----------------- ------------
hereto (which attachment is an integral part of this Agreement), Rice,
Rice's spouse and the Company Entities (as defined in said Attachment A)
hereby give the releases set forth in Attachment A. By the releases set
------------
forth therein, Rice and Rice's spouse shall release all claims against the
Company Entities (except as otherwise set forth in this Agreement), in
consideration of the payment of the Severance Amount set forth below and the
releases given by the Company Entities in Attachment A.
------------
2. Severance Arrangements.
----------------------
a. Severance Payment. Unless Rice has revoked his consent to this
-----------------
Agreement pursuant to Paragraph 6 hereof, Rice shall be entitled to Three
Million, Three Hundred Thousand Dollars ($3,300,000.00) (the "Severance
Payment") as severance pay and in substitution for any other severance
payment, reimbursements for expenses, bonus payments, retirement plan
distributions or other amounts or benefits Rice may heretofore have been
entitled to in connection with the termination of his employment on the
Effective Date or otherwise (except for compensation earned pursuant to his
services at the Company through the date of his resignation as referred to
in clause a. of Paragraph 1 hereof and as set forth in clause c. of this
Paragraph 2). Upon the Effective Date, the Company shall pay the Severance
Payment to Rice, less applicable deductions, in a lump sum by business check
or wire transfer of funds to an account designated in advance by Rice.
b. Consulting Services. Commencing upon the Effective Date and until
-------------------
April 30, 1998, Rice agrees (i) to make himself available from time to time
as
-2-
<PAGE>
Company may reasonably request to provide services as a consultant with
regard to general business matters (including without limitation the matters
set forth in Attachment B hereto) in an amount of up to twenty (20) hours
------------
per month, and, additionally, (ii) to consult with Company with regard to
any disputes, lawsuits or controversies in which Company is involved the
facts of which relate to events which occurred during the time Consultant
was employed by Company (the foregoing (i) and (ii), the "Consulting
Services"); provided, however, that in no event will the Consulting Services
-------- -------
be so extensive as to preclude Rice taking other, full-time employment.
Rice shall during the period of this consultancy (x) be entitled to use the
Company as his business address, utilizing the title "Consultant to
Teledyne," and (y) be reimbursed by the Company for his reasonable and
documented expenses incurred in connection with the Consulting Services. As
compensation for the Consulting Services, Rice shall be entitled to $500.00
per hour that Rice provides such services to the Company, but in any event
no less than $4,500.00 per month (the "Consulting Fees"). The Consulting
Fees shall be paid as follows:
(1) at the end of each calendar month during which Rice has been
available to consult with the Company pursuant to this Agreement,
$4,500.00 (a "Monthly Payment"); and
(2) at the end of each calendar quarter, the excess, if any, of (A)
$500.00 for each hour that Rice actually consulted with the Company
during such quarter, over (B) the sum of all Monthly Payments paid or
payable in respect of the calendar months occurring in such quarter.
The foregoing payments will be reflected on Form 1099, a copy of which will
be provided to Consultant.
c. Continuation of Certain Benefits. For two years following the
--------------------------------
Effective Date, Rice shall continue to be eligible to participate on the
same basis as senior executive employees of the Company in the Company's
group medical, dental and comparable insurance plans, as if Rice had
remained such a senior executive employee. After the Effective Date, and
for so long as Rice continues, pursuant to this Agreement, to provide
services to the Company as comprehended by the Company's stock option plans
and the awards thereunder, Rice shall continue to have all of the rights and
benefits under the Option Agreements in accordance with their terms.
Following the Effective Date, Rice shall have the right to receive a portion
of the bonus he would have received had he served as an executive employee
of the Company during the whole of 1996 (pro rated to reflect the portion of
1996 during which Rice so served), to be determined according to the same
standards and paid to Rice at the same time as the comparable bonuses to
other Company executives.
-3-
<PAGE>
3. Prior Agreements Superseded and Terminated.
------------------------------------------
As of the Effective Date, this Agreement shall supersede all of the Rice
Agreements but not the Option Agreements, which shall continue in full force and
effect in accordance with their terms.
4. Rice's Continuing Obligations. Rice acknowledges and agrees that he is
-----------------------------
obligated by existing contracts and by operation of law to maintain the
confidentiality of the trade secrets and other confidential information of any
of the Company Parties not publicly known. In light of these facts and in
consideration of Rice's past employment by the Company Parties, the payment to
him of the Severance Payment and the Consulting Fees, and the mutual covenants
and releases contained herein, Rice covenants and agrees with each of the
Company Parties as follows:
a. Confidential Information. Rice shall protect, and shall not use or
------------------------
divulge, disclose, or communicate to any other person or entity, any of the
trade secrets or confidential information of any of the Company Parties
(including without limitation through the sale, license or other
exploitation of any product or service which embodies, in whole or part, any
such trade secret or confidential information), except as disclosure shall
be compelled by judicial process or otherwise required by law.
b. Confidentiality of this Agreement. This Agreement and its
---------------------------------
provisions are intended to be confidential. Accordingly, except to the
extent made public to satisfy the public disclosure or financial or
accounting requirements of any of the Company Parties or as may be compelled
by court order, Rice shall not disclose or publicize to any person or entity
the terms of this Agreement without the consent of the Company Parties. As
reasonably necessary, Rice may discuss this Agreement with his wife,
attorney, financial advisor, tax advisor, benefit advisor or compensation
advisor, provided, however, that each agrees to be bound by the terms of
-------- -------
this paragraph to keep the information confidential. It shall not be a
breach of this confidentiality provision for Rice to advise any future
employer, prospective employer or financial institution of Rice of the
limitations set forth in Paragraph 4.a, above, provided, that no other term
--------
or provision of this Agreement is disclosed thereby.
c. Remedies for Breach. This Paragraph 4 shall inure to the benefit of
-------------------
each of the Company Parties and their successors and assigns. Rice
acknowledges and agrees that if he breaches or threatens to breach his
covenants in this Paragraph 4, his actions may cause irreparable harm and
damage to the Company Parties which could not be adequately compensated in
damages. Accordingly, if Rice breaches or threatens to breach this
Paragraph 4, then the Company Parties, and each of them and any successor or
assign thereof, shall be entitled to injunctive relief, in addition to any
other rights or remedies of the Company Parties hereunder or otherwise.
-4-
<PAGE>
5. Excise Tax Gross-Up Payments.
----------------------------
a. Gross-Up Payment. The parties believe that no payment or benefit
----------------
(within the meaning of Section 280G(b)(2) of the Internal Revenue Code of
1986, as amended (the "Code")), to Rice or for Rice's benefit paid or
payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise in connection with, or arising out of, Rice's
employment with any of the Company Parties (any such payment(s) or
benefit(s), a "Payment" or "Payments"), would be subject to the excise tax
imposed by Section 4999 of the Code. In the event that it is determined in
a determination (as defined in Section 1313(a) of the Code) from the
applicable government taxing authority (a "Final Determination") that any
such payment or benefit is so subject or that any interest or penalties are
due from Rice with respect to such excise tax (such excise tax, together
with any such interest and penalties, collectively, the "Excise Tax"), then
Rice will be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by Rice of all taxes
(including any interest or penalties imposed with respect to such taxes and
the Excise Tax, other than interest and penalties imposed by reason of
Rice's failure to file timely a tax return or pay taxes shown due on Rice's
return), including any Income Tax or Excise Tax imposed upon the Gross-Up
Payment, Rice retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments as a result of the Final Determination.
b. Company's Right to Defend. The Company may, at its option and sole
-------------------------
expense, defend, and control the prosecution and disposition of any
proceedings relating to, any assertion by any government taxing authority
that any Payment is subject to any Excise Tax. Rice shall cooperate in all
ways necessary for the Company to carry out such defense.
6. Rice Right to Revoke. Rice shall have seven (7) days to revoke this
--------------------
Agreement after he has executed it. This Agreement shall not become effective
or enforceable until after seven (7) days have past following its execution by
Rice.
7. Automatic Termination. This Agreement shall automatically terminate,
---------------------
and cease to have any force and effect, upon the termination of the Combination
Agreement prior to the Closing having occurred.
8. Indemnification and Limitations upon Liability. Notwithstanding
----------------------------------------------
anything to the contrary in this Agreement (including without limitation the
releases set forth in Attachment A): (a) Rice shall continue to enjoy the
------------
benefits of the limitations upon the liability and the right of indemnification
generally provided to persons in any of the capacities in which he served or
shall serve any of the Company Parties pursuant to the certificate of
incorporation, bylaws or other charter documents of the Company Parties
(collectively, the "Charter Documents") or applicable law, to the fullest extent
permitted by the Delaware General Corporation Law or other applicable law, and
shall be entitled to enforce such limitations upon liability or right of
indemnification as provided in the Charter Documents or under applicable law;
and (b) Rice shall continue to enjoy the
-5-
<PAGE>
benefits of and have rights to indemnification and insurance coverage provided
pursuant to Section 4.12 of the Combination Agreement in connection with his
service as an officer, director or employee of the Company or other Company
Parties, and shall be entitled to enforce such Section 4.12 as provided in
clause (d) thereof.
9. Recitals and Paragraph Headings. Each term of this Agreement is
-------------------------------
contractual and not merely a recital. All recitals are incorporated by
reference into this Agreement. Captions and paragraph headings are used herein
for convenience only, are not part of this Agreement and shall not be used in
interpreting or construing it.
10. Additional Documents. The parties will execute all such further and
--------------------
additional documents and undertake all such other actions as shall be
reasonable, convenient, necessary or desirable to document or carry out the
provisions of this Agreement (including without limitation such documents as any
Company Party may reasonably request in order to document Rice's resignations
pursuant to Paragraph 1 hereof).
11. California Law; Choice of Forum. This Agreement was negotiated,
-------------------------------
executed and delivered within the State of California, and the rights and
obligations of the parties hereto shall be construed and enforced in accordance
with and governed by the laws of the State of California. The parties hereto
agree that the sole and exclusive forum for any suit, action or proceeding under
or arising out of this Agreement shall be the state or federal courts located in
Los Angeles County, California; provided that the foregoing shall not preclude a
--------
suit, action or proceeding in another forum or jurisdiction solely to enforce or
realize upon any judgment rendered in a state or federal court suit, action or
proceeding otherwise authorized by this Agreement. Each of the parties hereto
consents to the in personam jurisdiction of any state or federal court in Los
-- --------
Angeles County, California and waives any objection to the venue of any such
suit, action or proceeding.
12. Entire Agreement; Amendments. This Agreement constitutes a single
----------------------------
integrated contract expressing the entire agreement of the parties with respect
to the subject matter hereof and supersedes all prior and contemporaneous oral
and written agreements and discussions with respect to the subject matter hereof
(with the exception of the Option Agreements). There are no other agreements,
written or oral, express or implied, between the parties hereto, concerning the
subject matter hereof, except as set forth herein and in the Option Agreements.
This Agreement may be amended only by written agreement.
13. Binding Effect. This Agreement is binding upon and shall inure to the
--------------
benefit of the parties hereto, their heirs, assignees and successors in interest
(including successors in any reorganization or merger with any other entity).
14. Construction of Agreement. Each party has cooperated in the drafting
-------------------------
and preparation of this Agreement, and, accordingly, in any construction or
interpretation of this Agreement, the same shall not be construed against any
party by reason of the source of drafting.
-6-
<PAGE>
15. Counterparts. This Agreement may be executed in counterparts, including
------------
facsimile counterparts. When each party has signed and delivered at least one
such counterpart, each counterpart shall be deemed an original, and, when taken
together with other signed counterparts, shall constitute one Agreement which
shall be binding upon and effective as to all parties. No counterpart shall be
effective until all parties hereto have executed and exchanged an executed
counterpart hereof.
16. No Waiver. The failure to enforce at any time any of the provisions of
---------
this Agreement, or to require at any time performance by the other party of any
of the provisions hereof, shall in no way be construed to be a waiver of such
provisions or to affect either the validity of this Agreement or any part hereof
or the right of any party thereafter to enforce each and every provision in
accordance with the terms of this Agreement.
17. Notices. Except as otherwise expressly provided in this Agreement or by
-------
law, any and all notices or other communications required or permitted by this
Agreement or by law to be served on, given to, or delivered to any party hereto
shall be deemed duly served, given, delivered and received (A) when personally
delivered to the party to whom it is directed, or (B) in lieu of such personal
delivery, three (3) days after the date mailed, with postage prepaid, or when
sent by facsimile transmission with receipt confirmed by the transmitting
facsimile machine, to:
(i) If to any of the Company Parties, to
Teledyne, Inc. or Allegheny Teledyne Incorporated
(as the case may be)
c/o Teledyne, Inc.
2049 Century Park East, Suite 1500
Los Angeles, CA 90067-3101
ATTN: Elizabeth J. Keefer, General Counsel
FAX: (310) 551-4366
(ii) If to Rice, to
Dr. Donald B. Rice
10126 Empyrean Way #103
Los Angeles, CA 90067
FAX: (310) 286-3106
Any party may change his or its address for the purpose of this paragraph by
giving written notice of such change to the other parties in the manner provided
in this paragraph.
18. Rice's Legal Counsel; Reimbursement of Attorneys Fees. Rice has been
-----------------------------------------------------
advised by legal counsel in connection with the negotiation, preparation and
execution of this Agreement and has been fully apprised of his rights and the
significance of the
-7-
<PAGE>
waivers and releases included in Attachment A to this Agreement. Promptly upon
------------
Rice's demand (accompanied by reasonable documentation), the Company shall
reimburse Rice his reasonable attorneys fees and costs relating to the
negotiation, preparation and execution of this Agreement and the consummation of
the transactions contemplated hereby.
19. Limitation On Remedies. Notwithstanding anything contained herein to
----------------------
the contrary, neither the Company Parties, on the one hand, nor Rice, on the
other hand, shall be entitled to rescind or terminate this Agreement or their
respective obligations hereunder on account of the other party's breach hereof.
20. Prevailing Parties Entitled to Fees. In the event that litigation is
-----------------------------------
instituted between any of the parties in connection with any controversy or
dispute arising from or under or related to this Agreement, the judgment therein
shall include a reasonable sum to be paid to the prevailing party for and on
account of attorneys fees and costs incurred in such litigation.
REST OF PAGE INTENTIONALLY LEFT BLANK
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
EXECUTION AND ACKNOWLEDGMENT BY THE COMPANY PARTIES:
---------------------------------------------------
The following execute this Agreement for themselves and on behalf of
their respective subsidiaries and affiliates:
TELEDYNE, INC.
By: /s/ William P. Rutledge
-----------------------
Its: Chairman and Chief
Executive Officer
ALLEGHENY TELEDYNE INCORPORATED
By: /s/ Richard P. Simmons
----------------------
Its: Chairman
EXECUTION AND ACKNOWLEDGMENT BY DR. DONALD B. RICE:
--------------------------------------------------
I received this Separation Agreement on July 12, 1996. I freely choose
to sign this Agreement on July 12, 1996. I understand that I will
have seven (7) days thereafter within which to revoke my acceptance of this
Agreement and that this Agreement shall not be effective until the
expiration of that seven (7) day period.
/s/ Donald B. Rice
----------------------------------
Donald B. Rice
-9-
<PAGE>
ACCEPTED AND AGREED:
- -------------------
ALLEGHENY LUDLUM CORPORATION
By: /s/ Richard P. Simmons
----------------------------
Its: Chairman
Dated: July 12, 1996
-10-
<PAGE>
ATTACHMENT A
------------
Releases of Rice, Rice's Spouse and the Company Entities
--------------------------------------------------------
THIS ATTACHMENT A (this "Attachment") is an integral part of the Separation
Agreement to which it is attached (the "Agreement"). Each capitalized term used
in this Attachment and not otherwise defined herein shall have the meanings
given to such term in the main body of the Agreement. For purposes of this
Attachment A, the term "Company Entities" means each of the Company Parties
together with AL and its parents, subsidiaries and affiliates.
Rice and the Company Entities, each in order to induce the other to enter
into (or in the case of AL, consent to) the Agreement, give the following
releases as part of the Agreement:
1. Releases by Rice.
----------------
a. General Release. Excepting only obligations to be performed by the
---------------
Company Parties under the Agreement and the Option Agreements, and to the
maximum extent permitted by applicable law, Rice, on behalf of himself and his
heirs, administrators, executors and assigns, and each of them, shall and does
hereby forever relieve, release and discharge each of the Company Entities and
the past and present parent, subsidiary and affiliated corporations,
partnerships, joint ventures, limited liability companies or other entities of
any of the Company Entities, as well as their respective owners, shareholders,
partners, joint venturers, officers, directors, managers, members, agents,
employees, attorneys and representatives, past or present, as well as the heirs,
administrators, executors, successors, predecessors and assigns of any of the
foregoing (all of the foregoing, collectively, the "Company Entity Releasees"),
from any and all causes of action, actions, judgments, liens, acts, promises,
agreements, debts, indebtedness, obligations, damages, losses, claims,
liabilities, demands, costs and expenses (including without limitation
attorneys' fees) of whatsoever kind or character, known or unknown, suspected to
exist or not suspected to exist, anticipated or not anticipated, fixed or
contingent, whether or not heretofore brought before any state or federal court
or before any state or federal agency or other governmental entity or any
arbitrator, whether statutory or administrative or common law, heretofore or
hereafter arising out of, connected with or incidental to any dealings between
the parties prior to the date of this Agreement or any other fact or matter
existing prior to the date of execution of this Attachment (all of the
foregoing, "Claims"), including without limitation on the generality of the
foregoing, any and all claims, demands or causes of action attributable to,
connected with, or incidental to (i) the employment of Rice by any of the
Company Parties or Rice's status as an officer or director of any of the Company
Parties, (ii) the separation of that employment and termination of that status,
(iii) any of the Rice Agreements, or (iv) any dealings between the parties
concerning any of the foregoing matters. This release is intended to apply to
(1) any claims arising from federal, state or local laws including those which
prohibit discrimination on the basis of race, national
A-1
<PAGE>
ATTACHMENT A
------------
origin, sex, religion, age, marital status, pregnancy, handicap, perceived
handicap, ancestry, sexual orientation, family or personal leave or any other
form of discrimination, (2) any common law claims of any kind whatever
(including without limitation any contract, tort, and property rights claims
such as breach of contract, breach of the implied covenant of good faith and
fair dealing, tortious interference with contract or current or prospective
economic advantage, fraud, deceit, breach of privacy, misrepresentation,
defamation, wrongful termination, tortious infliction of emotional distress,
loss of consortium, breach of fiduciary duty, violation of public policy and any
other common law claim of any kind whatever), (3) any claims for severance pay,
sick leave, family leave, vacation, life insurance, bonuses, incentive
compensation, health insurance, disability or medical insurance or any other
fringe benefit or compensation, (4) any claims under laws such as workers'
compensation laws, which provide rights and remedies for injuries sustained in
the workplace, (5) all rights and claims arising under the Employee Retirement
Income Security Act of 1974 ("ERISA"), or pertaining to ERISA regulated
benefits, and (6) as set forth in Paragraph 5.b below, all rights and claims
arising under the federal Age Discrimination in Employment Act.
b. Waiver and Release of Rights or Claims Arising Under the ADEA. Rice
-------------------------------------------------------------
specifically waives any and all rights or Claims he may have against the Company
Entity Releasees, or against any of them, which may have arisen under the Age
Discrimination in Employment Act of 1967 ("ADEA"), 29 U.S.C. (S) 621 et. seq.,
--------
as a result of Rice's employment, or termination from employment, with the
Company Parties. In connection with this waiver and release, Rice hereby
represents, warrants and agrees as follows:
(i) He has been informed that he has a period of at least twenty-
one (21) days to consider an unexecuted copy of this Agreement and that, if
he chooses to sign this Agreement prior to the expiration of such period, he
does so voluntarily;
(ii) He understands all of the terms and conditions of this
Agreement;
(iii) The Company Parties have advised him to consult with an
attorney prior to executing the Agreement and this Attachment;
(iv) He has consulted or shall consult with an attorney regarding
all of the terms and conditions of the Agreement and this Attachment before
executing the Agreement and this Attachment;
(v) This waiver of any and all ADEA claims is in exchange for
consideration in addition to anything of value to which Rice is already
entitled.
A-2
<PAGE>
ATTACHMENT A
------------
2. Release by the Company Entities. Excepting only obligations to be
-------------------------------
performed by Rice under this Agreement or the Option Agreements and matters
arising out of fraudulent or unlawful conduct by Rice, each of the Company
Entities does hereby release and forever discharge Rice from any and all Claims,
known or unknown, suspected to exist or not suspected to exist, anticipated or
not anticipated, whether or not heretofore brought before any state or federal
court or before any state or federal agency or other governmental entity or any
arbitrator, whether statutory or administrative or common law, heretofore or
hereafter arising out of, connected with or incidental to any dealings between
the parties prior to the date of this Attachment or any other matter existing
prior to the date of execution of this Attachment.
3. Unknown Claims Released. Each of Rice and the Company Entities
-----------------------
specifically waives the benefits of the provisions of Section 1542 of the Civil
Code of the State of California and any other analogous state, federal or
foreign law, right or regulation, whether statutory, administrative or common
law. Said Section 1542 of the California Civil Code reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Each of Rice and the Company Entities expressly waives and releases any right or
benefit which they have or may have under Section 1542 of the Civil Code of the
State of California, or any similar law or rule of any other jurisdiction, to
the full extent that they may waive all such rights and benefits pertaining to
the matters released herein. In connection with such waiver and relinquishment,
each of Rice and the Company Entities acknowledge that he, she or it (i) has
made such investigation of the facts pertaining to the matters resolved by this
Attachment and of all the matters pertaining thereto, as he, she or it deems
necessary, (ii) is aware that he, she or it may hereafter discover claims or
facts in addition to or different from those he, she or it now knows or believes
to be true with respect to the matters resolved herein, and (iii) is aware that
he, she or it may hereafter discover claims presently unknown or unsuspected, or
facts in addition to or different from those which they now know or believe to
be true with respect to the matters released herein. Nevertheless, it is the
intention of each party hereto, through this Attachment, to settle and release
fully, finally and forever all such matters and all claims relative thereto
which may exist or may heretofore have existed between them. In furtherance of
such intention, the release herein given shall be and remain in effect as a full
and complete release of such matters notwithstanding the discovery or existence
of any such additional different claims or facts relative thereto.
4. No Assignment. Each of the parties represents and warrants that he or
-------------
it has not heretofore assigned, transferred or granted or purported to assign,
transfer or grant
A-3
<PAGE>
ATTACHMENT A
------------
any claims, matters, demands or causes of action herein released, disclaimed,
discharged or terminated, and agrees to indemnify and hold harmless any other
party from and against any and all costs, expense, loss or liability incurred as
a consequence of any such assignment.
A-4
<PAGE>
ATTACHMENT A
------------
EXECUTION AND ACKNOWLEDGMENT BY THE COMPANY ENTITIES:
- ----------------------------------------------------
The following execute this Attachment for themselves and on behalf of their
respective subsidiaries and affiliates:
TELEDYNE, INC. ALLEGHENY LUDLUM CORPORATION
By: /s/ William P. Rutledge By: /s/ Richard P. Simmons
------------------------ -----------------------
Its: Chairman and Its: Chairman
Chief Executive Officer
ALLEGHENY TELEDYNE INCORPORATED
By: /s/ Richard P. Simmons
----------------------
Its: Chairman
EXECUTION AND ACKNOWLEDGMENT BY DR. DONALD B. RICE
- --------------------------------------------------
I received this Attachment (together with the Separation Agreement of which
it is a part) on July 12, 1996. I freely choose to sign this Attachment (as
well as the Separation Agreement) on July 12, 1996. I understand that I will
have seven (7) days thereafter within which to revoke my acceptance of the
Separation Agreement (including this Attachment) and that the Separation
Agreement (including this Attachment) shall not be effective until the
expiration of that seven (7) day period.
/s/ Donald B. Rice
- -----------------------------
Donald B. Rice
A-5
<PAGE>
ATTACHMENT A
------------
ADDITIONAL CONSIDERATION
------------------------
In order to induce the Company Parties (as defined in the Separation
Agreement to which this Attachment is a part (the "Agreement")) to enter into
the Agreement, I agree to forever release and discharge the Company Party
Releasees (as defined above in this Attachment) from any and all Claims (as
defined above in this Attachment), of whatsoever kind or character, known or
unknown, suspected to exist or not suspected to exist, anticipated or not
anticipated, fixed or contingent, whether or not heretofore brought before any
state or federal court or before any state or federal agency or other
governmental entity or any arbitrator, including without limitation on the
generality of the foregoing, any and all claims, demands or causes of action
attributable to, connected with, or incidental to the employment of my husband
by any of the Company Parties, the separation of that employment, the Rice
Agreements (as defined in the Agreement), and any dealings between the parties
concerning my husband's employment, the Rice Agreements, or any other matter
existing prior to the date of execution of this Agreement, excepting only those
obligations to be performed under the Agreement and the Option Agreements. This
release is intended to apply to any and all claims based on common law contract
theories or state or federal statutory or constitutional law theories.
I also specifically waive the benefits of the provisions of Section 1542
of the Civil Code of the State of California and any other analogous state,
federal or foreign law, right or regulation, whether statutory, administrative
or common law. Said Section 1542 of the California Civil Code reads as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
Executed this 11th day of July, 1996.
/s/ Susan F. Rice
-----------------
Susan F. Rice,
Wife of Donald B. Rice
A-6
<PAGE>
ATTACHMENT B
------------
Certain Particular Consulting Duties
------------------------------------
As and when requested by the Company:
1. Consult with the Company regarding the rationalization and restructuring
of the recently acquired StellRam businesses in Europe, including a modification
and/or relocation of offices in four countries and the ongoing integration of
those businesses with the North American cutting tools business of the Company.
2. Advise the Company on legal matters related to government contracting,
compliance with specifications or procedures, and export licensing.
3. Advise the Company on negotiations with government officials and on
disposition of such matters.
4. Advise the Company on government compliance policies and practices.
5. Assist the Company with relationships and communications with the
Department of Defense and other government agencies.
6. Advise on such other questions as may be requested or assigned by ATI's
Chief Executive Officer.
B-1
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "THE
COMBINATION--Accounting Treatment," "THE COMBINATION AGREEMENT--Conditions,"
and "Experts" in the Registration Statement on Form S-4 and related Joint
Proxy Statement of Allegheny Ludlum Corporation and Teledyne, Inc. and
Prospectus of Allegheny Teledyne, Inc. and to the incorporation by reference
therein of our reports dated January 30, 1996, with respect to the
consolidated financial statements of Allegheny Ludlum Corporation incorporated
by reference in its Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and the related financial statement schedule included
therein, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
July 17, 1996
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated January 13, 1996
included in Teledyne, Inc.'s Form 10-K for the year ended December 31, 1995
and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
July 16, 1996
<PAGE>
EXHIBIT 23.6
SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
212-783-7000
----------------
SALOMON BROTHERS
--------------
CONSENT OF SALOMON BROTHERS INC
We hereby consent to the use of our name and to the description of our
opinion letter dated April 1, 1996 under the caption "The Combination--
Opinions of Financial Advisors" in, and to the inclusion of our opinion letter
as Annex B to, the Joint Proxy Statement/Prospectus of Allegheny Ludlum
Corporation/Teledyne, Inc., which Joint Proxy Statement/Prospectus is part of
the Registration Statement on Form S-4 of Allegheny Ludlum Corporation. By
giving consent we do not thereby admit that we are experts with respect to any
part of such Registration Statement within the meaning of the term "expert" as
used in, or that we come within the category of persons whose consent is
required under, the Securities Act of 1933 or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Salomon SALOMON BROTHERS INC
Brothers Inc
& Worldwide New York, New York
Affiliates
Atlanta July 16, 1996
Berlin
Boston
Chicago
Dallas
Frankfurt
Hong Kong
London
Los Angeles
Madrid
Melbourne
New York
Osaka
Paris
San Francisco
Seoul
Singapore
Sydney
Taipei
Tokyo
Toronto
Zurich
<PAGE>
EXHIBIT 23.7
Goldman, Sachs & Co. | 85 Broad Street | New York, New York 10004
Tel: 212-902-1000
GOLDMAN
SACHS
July 16, 1996
Board of Directors
Teledyne, Inc.
2049 Century Park East
Los Angeles, CA 90067-3101
Re: Registration Statement of Allegheny Teledyne Incorporated relating to
Common Stock, par value $0.10 per share, issued in exchange for
outstanding shares of Allegheny Ludlum Common Stock and Teledyne Common
Stock, being registered in connection with the Combination of Allegheny
Ludlum Corporation and Teledyne, Inc.
Gentlemen and Madame:
Reference is made to our opinion letter dated April 1, 1996 with respect to
the fairness to the holders of the outstanding shares of Common Stock, par
value $0.01 per share (the "Shares"), of Teledyne, Inc. (the "Company") of the
exchange ratio of 1,925 shares of Common Stock, par value $0.10 per share, of
XYZ/Power, Inc. ("Newco"), a corporation formed for the purpose of becoming
the parent company of the Company and Allegheny Ludlum Corporation ("Allegheny
Ludlum"), to be received for each Share pursuant to the Agreement and Plan of
Merger and Combination dated as of April 1, 1996 by and among Newco, Allegheny
Ludlum and the Company.
The foregoing opinion letter is for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated therein and is not to be used, circulated, quoted or
otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the captions "Summary - The Combination - Opinions of Financial
Advisors", "The Combination - Opinions of Financial Advisors" and "The
Combination - Reasons for the Combination; Recommendations of the Board of
Directors" and to the inclusion of the foregoing opinion in the above-
mentioned Registration Statement. In giving such consent, we do not thereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
GOLDMAN, SACHS & CO.
<PAGE>
EXHIBIT 99.1
ALLEGHENY LUDLUM CORPORATION
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 15, 1996
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ALLEGHENY LUDLUM CORPORATION
The undersigned hereby appoints James L. Murdy, Jon D. Walton and Mary W.
Snyder or any of them, each with power of substitution and revocation, proxies
or proxy to vote all shares of Common Stock which the undersigned is entitled
to vote with all powers which the undersigned would possess if personally
present, at the Special Meeting of Shareholders of Allegheny Ludlum
Corporation on August 15, 1996, and any adjournments thereof, upon the matters
set forth on the reverse of this card, and, in their discretion, upon such
other matters as may properly come before such meeting.
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THIS PROXY CARD AND TO
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN. IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT WILL BE
VOTED "FOR" ALL PROPOSALS.
Please, vote, date and sign on the reverse side.
FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
X Please mark
your vote as
indicated in the
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING ITEMS:
1. Approval and adoption of the Agreement and Plan of Merger and Combination
and the transactions contemplated thereby
FOR
AGAINST
ABSTAIN
2. Approval of the adoption of the Allegheny Teledyne Incorporated 1996
Incentive Plan
FOR
AGAINST
ABSTAIN
3. Approval of the adoption of the Allegheny Teledyne Incorporated 1996 Non-
Employee Director Stock Compensation Plan
FOR
AGAINST
ABSTAIN
4. Approval of the adoption of the amended and restated Performance Share Plan
for Key Employees of Allegheny Ludlum Corporation and Subsidiaries
FOR
AGAINST
ABSTAIN
5. Approval of the adoption of the Teledyne Inc. 1996 Senior Executive Perfor-
mance Program
FOR
AGAINST
ABSTAIN
DATE: __________________________, 1996
______________________________________
______________________________________
(Signature or Signatures)
Please sign EXACTLY as your name
appears at the left. When signing as a
fiduciary or corporate officer, give
full title. For joint accounts, please
furnish both signatures.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[ALC LOGO]
Dear Shareholder:
Enclosed are materials relating to the Special Meeting of Shareholders of
Allegheny Ludlum Corporation to be held on August 15, 1996. The Notice of
Meeting and Joint Proxy Statement/Prospectus describe the formal business to be
transacted at the meeting.
Your vote is important. Please complete, sign and promptly return the
attached proxy card in the accompanying postage-paid envelope whether or not
you expect to attend the meeting.
/s/ Jon D. Walton
Jon D. Walton
Vice President-General Counsel and Secretary
<PAGE>
EXHIBIT 99.2
ALLEGHENY LUDLUM CORPORATION
VOTING INSTRUCTION CARD FOR SPECIAL MEETING
PERSONAL RETIREMENT ACCOUNT PLAN
RETIREMENT SAVINGS PLAN
SAVINGS AND SECURITY PLAN OF THE SPECIAL MATERIALS DIVISION
SAVINGS AND SECURITY PLAN OF THE TUBULAR PRODUCTS DIVISION
401(K) SAVINGS ACCOUNT PLAN FOR EMPLOYEES OF THE WASHINGTON PLANT
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ALLEGHENY LUDLUM CORPORATION
The undersigned hereby directs the Trustee of the above Plans to vote the
full number of shares of Common Stock allocated to the account of the
undersigned under the Plans, at the Special Meeting of Shareholders of
Allegheny Ludlum Corporation on August 15, 1996, and any adjournments thereof,
upon the matters set forth on the reverse of this card, and, in its discretion,
upon such other matters as may properly come before such meeting.
YOU ARE REQUESTED TO COMPLETE, DATE AND SIGN THIS CARD AND TO RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
THIS VOTING INSTRUCTION CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IF NO DIRECTION TO THE CONTRARY IS INDICATED, IT WILL
BE VOTED "FOR" ALL PROPOSALS.
Please, vote, date and sign on the reverse side.
FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark
your vote as
indicated in the
example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING ITEMS:
1. Approval and adoption of the Agreement and Plan of Merger and Combination
and the transactions contemplated thereby
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Approval of the adoption of the Allegheny Teledyne Incorporated 1996
Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the adoption of the Allegheny Teledyne Incorporated 1996 Non-
Employee Director Stock Compensation Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Approval of the adoption of the amended and restated Performance Share Plan
for Employees of Allegheny Ludlum Corporation and Subsidiaries
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Approval of the adoption of Teledyne Inc. 1996 Senior Executive Performance
Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DATE: __________________________, 1996
______________________________________
______________________________________
(Signature)
Please sign EXACTLY as your name
appears at the left.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
ALLEGHENY LUDLUM CORPORATION
PERSONAL RETIREMENT ACCOUNT PLAN
RETIREMENT SAVINGS PLAN
SAVINGS AND SECURITY PLAN OF THE SPECIAL MATERIALS DIVISION
SAVINGS AND SECURITY PLAN OF THE TUBULAR PRODUCTS DIVISION
401(K) SAVINGS ACCOUNTS PLAN FOR EMPLOYEES OF THE WASHINGTON PLANT
July 1996
Dear Participant:
Enclosed you will find a Notice of Special Meeting of Shareholders, a copy of
a Joint Proxy Statement/Prospectus, a voting instruction card (above), a
postage-paid return envelope addressed to Mellon Bank, N.A., as Trustee of each
of the above-named Plans, and a postage-paid ticket request card.
As a participant in one of the Plans, you have the right to direct the
Trustee as to the manner in which voting rights will be exercised at the
meeting with respect to the full number of shares of Common Stock of the
Company allocated to your Plan account and shown on the above voting
instruction card. Your directions to the Trustee will be held in complete
confidence by the Trustee except as may be necessary to meet legal
requirements. The Trustee will vote shares for which no participant
instructions are received in the same proportion as shares for which
participant instructions have been received. The Trustee will also exercise its
sole discretion in voting or not voting fractional shares.
The enclosed Joint Proxy Statement/Prospectus contains detailed information
concerning voting at the Special Meeting and the matters that will be acted
upon. You are encouraged to read the enclosed materials carefully and to
exercise your right to direct the Trustee how to vote your Plan shares.
You must complete and sign the above voting instruction card, and it must be
received by the Trustee by August 12, 1996 in order to have your shares under
the Plan voted at the meeting.
You will also receive proxy solicitation materials, including a proxy card,
from the Company if you own shares of Common Stock that are not held by the
Trustee under the Plan. In order to vote your non-Plan shares, you should
complete and sign the proxy card and return it to the Company.
Very truly yours,
J. F. Schatt, Plan Administrator
<PAGE>
EXHIBIT 99.3
[LOGO OF TELEDYNE, INC.]
SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The stockholder designated on the reverse of this card appoints William P.
Rutledge, Donald B. Rice and Henry E. Singleton, and each of them, the
stockholder's attorney and proxy, each with full power of substitution, to vote
upon the propositions set forth herein all shares of Teledyne, Inc. Common
Stock held of record as of July 8, 1996, at the Special Meeting of Stockholders
of Teledyne, Inc. and at all adjournments thereof. Such Special Meeting will be
held at the Century Plaza Hotel, Los Angeles, California, at 10:00 a.m., local
time, on Thursday, August 15, 1996. (THIS PROXY REVOKES ALL PRIOR PROXIES GIVEN
BY THE UNDERSIGNED).
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN. WHERE NO VOTE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR SUCH PROPOSAL.
THE INDIVIDUALS NAMED ABOVE ARE AUTHORIZED TO VOTE IN THEIR DISCRETION ON ANY
OTHER MATTERS THAT PROPERLY COME BEFORE THE MEETING.
(Continued and to be signed on the other side.)
FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark
your vote as
indicated in
the example
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTPAID ENVELOPE PROVIDED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH
OF THE PROPOSALS:
1. Approval of the Agreement and Plan of Merger and Combination and the
transactions contemplated thereby
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Approval of the Allegheny Teledyne Incorporated 1996 Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the Allegheny Teledyne Incorporated 1996 Non-Employee Director
Stock Compensation Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Approval of the amended and restated Performance Share Plan for Employees of
Allegheny Ludlum Corporation and Subsidiaries
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Approval of the Teledyne, Inc. Senior Executive Performance Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please DATE this proxy and SIGN EXACTLY AS YOUR NAME(S) APPEAR(S) HEREON.
When signing as attorney, executor, administrator, trustee, guardian or other
representative, give your full title as such. If a corporation, sign the full
corporate name by an authorized officer, stating his/her title. If a
partnership, sign in partnership name by an authorized person.
Dated: , 1996
--------------------------------------
Signature:
----------------------------------------
Signature if held jointly:
------------------------
Name of Corp. or Part.
----------------------------
Authorized officer:
-------------------------------
Title or authority:
-------------------------------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
