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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (As permitted by Rule
14A-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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ALLEGHENY TELEDYNE INCORPORATED
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(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------
(5) Total fee paid:
------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[ X ] No fee required
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ALLEGHENY TELEDYNE INCORPORATED
1000 SIX PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5479
NOTICE OF
1997 ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
THURSDAY, MAY 1, 1997
11:00 A.M. PITTSBURGH TIME
ROOM 1000 AUDITORIUM, 10TH FLOOR
TWO MELLON BANK CENTER
(UNION TRUST BUILDING)
435 FIFTH AVENUE
PITTSBURGH, PENNSYLVANIA
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TABLE OF CONTENTS PAGE
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Letter from the Chairman, President and Chief Executive Officer... 1
Notice of Annual Meeting of Stockholders.......................... 2
Proxy Statement................................................... 3
Election of Directors........................................ 4
Information About the Board of Directors..................... 9
Security Ownership........................................... 12
Ratification of Selection of Independent Auditors............ 15
Other Business to Come Before the Meeting.................... 15
Executive Compensation....................................... 16
Cumulative Total Stockholder Return.......................... 26
Certain Transactions......................................... 27
1998 Annual Meeting and Stockholder Proposals................ 29
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<PAGE> 3
RICHARD P. SIMMONS
Chairman,
President and Chief Executive Officer
Allegheny Teledyne Logo
1000 Six PPG Place
Pittsburgh, PA 15222-5479
March 27, 1997
Dear Stockholder:
We are pleased to invite you to attend the first annual meeting of the
stockholders of Allegheny Teledyne Incorporated to be held on Thursday, May 1,
1997, in Pittsburgh, Pennsylvania. The meeting will begin with a discussion and
voting on the matters set forth in the accompanying Notice of Annual Meeting and
Proxy Statement followed by a report on Company operations. I urge you to
attend.
If you are a stockholder of record and you plan to attend the meeting,
please complete and return the enclosed postage-paid ticket request card. An
admission ticket, which will expedite your admission to the meeting, will be
mailed to you prior to the meeting.
Whether you own few or many shares and whether or not you plan to attend
the meeting, it is important that you vote your shares. Please promptly read the
Proxy Statement and then complete, sign and return your proxy card in the
enclosed postage-paid envelope. If you sign and return your proxy card without
specifying your choices, it will be understood that you wish to have your shares
voted in accordance with the Directors' recommendations.
We look forward to seeing as many of you as possible at the 1997 Annual
Meeting.
Sincerely,
/s/ R. P. SIMMONS
R. P. Simmons
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ALLEGHENY TELEDYNE INCORPORATED
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 1, 1997
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The Annual Meeting of the Stockholders of Allegheny Teledyne Incorporated
will be held on Thursday, May 1, 1997, at 11 A.M., Pittsburgh time, at the Room
1000 Auditorium, 10th Floor, Two Mellon Bank Center (Union Trust Building), 435
Fifth Avenue, Pittsburgh, Pennsylvania, for the following purposes:
1. To elect four Class I directors to serve for a term of three years.
2. To ratify the selection of Ernst & Young LLP as independent auditors of the
Company for fiscal 1997.
3. To transact such other business as may properly come before the meeting or
any adjournments thereof.
Stockholders of record at the close of business on March 3, 1997 are
entitled to notice of and to vote at the meeting or any adjournments thereof. A
complete list of such stockholders will be open for examination by any
stockholder for any purpose germane to the meeting, during ordinary business
hours, at the offices of ChaseMellon Shareholder Services, Four Station Square,
Pittsburgh, Pennsylvania, for a period of ten days prior to the meeting.
By order of the Board of Directors
/s/ JON D. WALTON
Jon D. Walton
Vice President, General Counsel
and Secretary
Dated: March 27, 1997
YOU ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN
THE ENCLOSED POSTAGE-PAID ENVELOPE. THE RETURN OF THE ENCLOSED PROXY CARD WILL
NOT AFFECT YOUR RIGHT TO REVOKE SUCH PROXY OR TO VOTE IN PERSON IF YOU ATTEND
THE MEETING.
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ALLEGHENY TELEDYNE INCORPORATED
1000 SIX PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222-5479
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed
beginning on or about March 27, 1997 to stockholders in connection with the
solicitation of proxies by the Board of Directors of Allegheny Teledyne
Incorporated (the "Company") for use at the 1997 Annual Meeting of Stockholders
to be held May 1, 1997.
Stockholders whose names appeared of record on the books of the Company at
the close of business on March 3, 1997 are entitled to notice and to vote at the
meeting. On the record date for the meeting, there were 174,693,558 shares of
Common Stock of the Company outstanding and entitled to vote. Each share of
Common Stock is entitled to one vote per share on each matter properly brought
before the meeting. Shares can be voted at the meeting only if the stockholder
is present in person or is represented by proxy.
When your proxy card is returned properly signed, the shares represented
will be counted for quorum purposes and will be voted in accordance with your
instructions. You can specify your choices by marking the appropriate boxes on
the proxy card. Unless contrary instructions are indicated on your proxy card,
the shares will be voted as recommended by the Board of Directors. You may
revoke your proxy, by written notice to the Corporate Secretary of the Company,
at any time before it is voted at the meeting.
Your vote is important and you are urged to sign and return the
accompanying proxy card whether or not you plan to attend the meeting. If you do
attend, you may still vote by ballot at the meeting, which will automatically
cancel any proxy voting authority previously given. If you are a stockholder of
record and you are planning to attend the meeting in person, please complete and
return the enclosed postage-paid ticket request card promptly so that we can
mail your admission ticket. Stockholders without admission tickets will be
admitted upon verification of ownership.
Proxy cards, ballots and voting tabulations that identify individual
stockholders are normally available for examination only by the inspector of
elections, the Corporate Secretary and certain employees associated with
processing proxy cards and tabulating the vote. The Company does not disclose
the vote of any stockholder except as may be necessary to meet legal
requirements.
Each of the trustees of the Company's savings plans has the sole right to
exercise all rights relating to 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
shares of Common Stock allocated to their accounts and shown on the voting
instruction card which they will receive from the Plan Administrator. Each
trustee will vote shares for which no participant's instructions are received in
the same proportion as shares for which participant instructions have been
received.
Company stock held for the account of participants in the Teledyne Employee
Stock Purchase Plan (also known as "The Stock Advantage") will be voted in
accordance with the participant's signed voting instructions duly delivered to
the Plan Administrator for such Plan or, in the case of shares of Common Stock
for which instructions are not received, as the Plan Administrator determines in
the exercise of its duties.
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If a stockholder is a participant in the Company's Automatic Dividend
Reinvestment Service for Stockholders, 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.
The cost of this solicitation of proxies will be borne by the Company. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of the Company in person or by telephone,
telegram or other means of communication. The Company has retained Morrow & Co.,
at an estimated cost of $8,000 plus reimbursement of expenses, to assist in the
solicitation of proxies from brokers, nominees, institutions and individuals on
behalf of the Company. Arrangements will also be made with custodians, nominees
and fiduciaries for forwarding of proxy solicitation materials to beneficial
owners of Common Stock held of record by such custodians, nominees and
fiduciaries, and the Company will reimburse such custodians, nominees and
fiduciaries for reasonable expenses incurred in connection therewith.
Brokers, banks and other nominee holders will be requested to obtain voting
instructions of beneficial owners of Common Stock registered in their names.
Shares represented by a duly completed proxy card submitted by a nominee holder
on behalf of beneficial owners will be counted for quorum purposes and will be
voted to the extent instructed by the nominee holder on the proxy card. The
rules applicable to a nominee holder may preclude it from voting the shares that
it holds on certain kinds of proposals (sometimes referred to as "broker
non-votes") unless it receives voting instructions from the beneficial owners of
the shares. Broker non-votes on a particular proposal will not be counted as
having been voted for or against the proposal.
ELECTION OF DIRECTORS
(ITEM A ON PROXY CARD)
The business and affairs of the Company are managed under the direction of
the Board of Directors as provided in the by-laws of the Company and the laws of
the State of Delaware. The Board is not, however, involved in day-to-day
operations. Members of the Board are kept informed of the Company's business
through discussions with the Chairman, President and Chief Executive Officer,
the Vice Chairman of the Board, other members of senior management and other
officers and managers of the Company and its subsidiaries, by reviewing analyses
and reports sent to them, and by participating in Board and committee meetings.
After the consummation of the combination of the businesses of Allegheny Ludlum
Corporation ("Allegheny Ludlum") and Teledyne, Inc. ("Teledyne") which resulted
in the formation of the Company (the "Combination") on August 15, 1996, regular
meetings of the Board were held three times in 1996. Special meetings are
scheduled when required; none were held after the Combination in 1996. In 1996,
the directors' attendance at meetings of the Board and its committees was over
95% except for William G. Ouchi who attended 63% of the meetings of the Board
and the committees on which he serves.
Under the Company's certificate of incorporation, the Board has the power
to fix the number of directors. Following the resignation of William P. Rutledge
as a director of the Company in March 1997, the Board of Directors currently
consists of sixteen members, two of whom are employees of the Company. Dr. Henry
E. Singleton, who co-founded Teledyne in 1960 and served as the Chairman of
Teledyne's Board of Directors for over 30 years, has announced his intention to
retire from the Company's Board of Directors. Thomas Marshall, who retired as
Chairman of Aristech Chemical Corporation in 1995, and who served as a member of
Allegheny Ludlum's Board of Directors beginning in 1988, has also announced his
intention to retire from the Company's Board of Directors. The terms of each of
these valued members of the Board of Directors will expire at the 1997 Annual
Meeting. Following the Annual Meeting, the Board of Directors will consist of
fourteen members.
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Pursuant to the Company's certificate of incorporation, the members of the
Board of Directors are divided into three classes. Each class is to consist, as
nearly as may be possible, of one-third of the whole number of the Board. The
term of the Class I directors expires at the 1997 Annual Meeting of
Stockholders. The terms of the Class II and Class III directors will expire at
the 1998 and 1999 Annual Meetings, respectively. At each annual meeting, the
directors elected to succeed those whose terms expire are identified as being of
the same class as the directors they succeed and are elected for a term to
expire at the third annual meeting of stockholders after their election and
until their successors are duly elected and qualified. A director elected to
fill a vacancy is elected to the same class as the director such person
succeeds, and a director elected to fill a newly created directorship holds
office until the next election of the class to which such director is elected.
Four incumbent Class I directors are nominees for election this year for a
three-year term expiring at the annual meeting of stockholders to be held in the
year 2000. In the election, the four persons who receive the highest number of
votes actually cast will be elected. Broker non-votes will not be treated as
votes cast.
The proxies named in the proxy card intend to vote for the election of the
four Class I nominees listed below unless otherwise instructed. If you do not
wish your shares to be voted for a particular nominee, you must identify the
exception in the appropriate space provided on the proxy card, in which case
your shares will be voted for the other listed nominees. If any nominee becomes
unable to serve, the proxies may vote for another person designated by the Board
of Directors or the Board may reduce the number of directors. The Company has no
reason to believe that any nominee will be unable to serve.
A brief statement of the background of each nominee and each continuing
Class II and Class III director, including their principal occupations during
the past five years, is provided on the following pages.
Each nominee and each continuing director was elected to serve as a
director of the Company in connection with the Combination which was approved by
the stockholders of Allegheny Ludlum and Teledyne on August 15, 1996 except for
Robert Mehrabian who was elected as a director on September 12, 1996. Dr.
Mehrabian filed a Form 3 under the Securities Exchange Act of 1934 to report
that he had become a director of the Company on September 27, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE FOUR CLASS I
NOMINEES.
NOMINEES FOR DIRECTOR--TERM EXPIRES 2000
CLASS I
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DIANE C. CREEL Diane C. Creel is Chief Executive Officer and
Chief Executive Officer and President of EarthTech, an environmental
President, EarthTech consulting engineering firm. She served as the
Age: 48 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 served as a
director of Teledyne beginning in 1995. She is
the Chair of the Stock Incentive Award Committee
and a member of the Personnel and Compensation
Committee. Ms. Creel is also a director of
Glendale Federal Bank and the Boards of the
Corporations and Trusts which comprise the Fixed
Income Funds of the American Funds Group.
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C. FRED FETTEROLF C. Fred Fetterolf was President and Chief
Former President and Chief Operating Operating Officer of Aluminum Company of America
Officer, Aluminum Company prior to 1991. He served as a director of
of America Allegheny Ludlum beginning in 1987. Mr. Fetterolf
Age: 68 is a member of the Personnel and Compensation
Committee and a member of the Stock Incentive
Award Committee. He is also a director of
Commonwealth Aluminum Corp., Dentsply
International Inc., Mellon Bank Corporation,
Union Carbide Corporation, Praxair, Inc. and
Quaker State Corporation.
RICHARD P. SIMMONS Richard P. Simmons has been Chairman of the
Chairman, President and Chief Executive Company since August 1996 and President and Chief
Officer of the Company Executive Officer since February 1997.
Age: 65 Previously, he was Chairman of the Board of
Allegheny Ludlum, having begun his service on
that Board in 1980. He also served as Chief
Executive Officer of Allegheny Ludlum until 1990.
Mr. Simmons is Chairman of the Executive
Committee and a member of the Committee on
Governance. He is a also a director of PNC Bank
Corp. and Consolidated Natural Gas Co.
ROBERT MEHRABIAN Robert Mehrabian is the President of Carnegie
President, Carnegie Mellon University Mellon University. He is the Chairman of the
Age: 55 Technology Committee and a member of the
Committee on Governance. Dr. Mehrabian is also a
director of Mellon Bank Corporation, PPG
Industries, Inc. and DQE, Inc., whose principal
subsidiary is Duquesne Light Company.
CONTINUING DIRECTORS--TERM EXPIRES 1998
CLASS II
ARTHUR H. ARONSON Arthur H. Aronson has been Executive Vice
Executive Vice President President of the Company since August 1996 and is
of the Company responsible for the Company's Specialty Metals
Age: 61 business segment. He has been President of
Allegheny Ludlum since August 1994 and has served
as a director of Allegheny Ludlum since 1990. Mr.
Aronson was the Chief Executive Officer of
Allegheny Ludlum from August 1994 to August 1996.
Previously, he served as Executive Vice President
and Chief Operating Officer of Allegheny Ludlum.
Mr. Aronson is a member of the Technology
Committee. He is also a director of Cooper Tire &
Rubber Company.
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PAUL S. BRENTLINGER Paul S. Brentlinger is a Partner in Morgenthaler
Partner, Morgenthaler Ventures Ventures, a venture capital group headquartered
Age: 69 in Cleveland, Ohio. He served as a director of
Allegheny Ludlum beginning in 1987. Mr.
Brentlinger is a member of the Audit and Finance
Committee and a member
of the Technology Committee. He is also a
director of Ferro Corporation.
WILLIAM G. OUCHI William G. Ouchi is a professor of management at
Professor of Management, Anderson the Anderson Graduate School of Management,
Graduate School of Management, University of California at Los Angeles. He
University of California at Los Angeles became a director of Teledyne in 1996. Dr. Ouchi
Age: 53 is a member of the Audit and Finance Committee, a
member of the Personnel and Compensation
Committee and a member of the Stock Incentive
Award Committee. He is also a director of
FirstFed Financial Corp.
GEORGE A. ROBERTS George A. Roberts is a private investor. He was
Former President and Chief Executive President of Teledyne from 1966 to 1990 and Chief
Officer, Teledyne, Inc. Executive Officer from April 1968 to January
Age: 78 1991. Dr. Roberts served as a director of
Teledyne beginning in 1966 and served as Chairman
of the Board of Directors of Teledyne from
January 1991 through March 1993. Dr. Roberts is a
member of the Committee on Governance and a
member of the Technology Committee. He is also a
director of Argonaut Group, Inc. and Unitrin,
Inc.
JAMES E. ROHR James E. Rohr has been President of PNC Bank
President, PNC Bank Corp. Corp. since 1992. He also serves as President and
Age: 48 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 served as a
director of Allegheny Ludlum beginning in 1988.
He is a member of the Audit and Finance Committee
and a member of the Technology Committee. He is
also a director of PNC Bank Corp., Equitable
Resources, Inc. and Sallie Mae (Student Loan
Marketing Association).
FAYEZ SAROFIM Fayez Sarofim is the Chairman of the Board and
Chairman of the Board and President, President of Fayez Sarofim & Co., a registered
Fayez Sarofim & Co. investment advisor. He served as a director of
Age: 68 Teledyne beginning in 1986. Mr. Sarofim is a
member of the Audit and Finance Committee. He is
also a director of Argonaut Group, Inc., Imperial
Holly Corp. and Unitrin, Inc.
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CONTINUING DIRECTORS--TERM EXPIRES 1999
CLASS III
ROBERT P. BOZZONE Robert P. Bozzone has been Vice Chairman of the
Vice Chairman of the Board Company since August 1996. He had served as Vice
of the Company Chairman of Allegheny Ludlum since August 1994,
Age: 63 and previously was President and Chief Executive
Officer of Allegheny Ludlum. Mr. Bozzone served
as a director of Allegheny Ludlum beginning in
1981. Mr. Bozzone is a member of the Executive
Committee and a member of the Committee on
Governance. He is a director of DQE, Inc., whose
principal subsidiary is Duquesne Light Company.
FRANK V. CAHOUET Frank V. Cahouet is the Chairman, President and
Chairman, President and Chief Executive Chief Executive Officer of Mellon Bank
Officer, Mellon Bank Corporation Corporation, a bank holding corporation, and
Age: 64 Mellon Bank, N.A., a banking corporation. He
served as a director of Teledyne beginning in
1994. Mr. Cahouet is Chairman of the Audit and
Finance Committee and a member of the Committee
on Governance. He is also a director of Avery
Dennison Corporation, and Saint-Gobain
Corporation.
W. CRAIG MCCLELLAND W. Craig McClelland has been Chairman and Chief
Chairman and Chief Executive Officer, Executive Officer of Union Camp Corporation, a
Union Camp Corporation manufacturer of paper products, since July 1994.
Age: 62 Prior to that time, he served as President and
Chief Operating Officer of Union Camp. Mr.
McClelland served as a director of Allegheny
Ludlum beginning in 1987. He is Chairman of the
Committee on Governance. He is also a director of
Union Camp Corporation and PNC Bank Corp.
CHARLES J. QUEENAN, JR. Charles J. Queenan, Jr. is Senior Counsel to
Senior Counsel, Kirkpatrick & Lockhart LLP, attorneys-at-law.
Kirkpatrick & Lockhart LLP Prior to January 1996, he was a partner of that
Age: 66 firm. Mr. Queenan served as a director of
Allegheny Ludlum beginning in 1980. He is the
Chairman of the Personnel and Compensation
Committee and a member of the Executive
Committee. Mr. Queenan is also a director of
Crane Co. and Medusa Corporation.
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INFORMATION ABOUT THE BOARD OF DIRECTORS
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established six standing committees: the
Executive Committee, the Audit and Finance Committee, the Committee on
Governance, the Personnel and Compensation Committee, the Stock Incentive Award
Committee and the Technology Committee. The Committee meetings mentioned in the
following paragraphs are meetings that were held after the consummation of the
Combination on August 15, 1996.
EXECUTIVE COMMITTEE
The Executive Committee has broad powers to act on behalf of the full Board
of Directors. In practice, the Executive Committee acts when emergency issues or
scheduling problems make it difficult to convene a meeting of all directors and
on specific matters referred to the Committee by the Board of Directors. All
actions must be reported at the Board's next meeting. The Executive Committee
met once during 1996. The members of the Executive Committee are Richard P.
Simmons, Chairman, Robert P. Bozzone, Charles J. Queenan, Jr. and Henry E.
Singleton.
AUDIT AND FINANCE COMMITTEE
The Audit and Finance Committee is comprised of five directors, none of
whom is an officer or employee of the Company.
Among its principal audit functions, the Committee:
- Makes recommendations to the Board of Directors regarding the appointment
of the independent accountants for the coming year.
- Reviews the scope, general extent and proposed fees of the annual audit
plan and other activities of the independent accountants and the audit
plan of the internal auditors.
- Reviews with management and the independent accountants, upon completion
of the annual audit, the financial statements and related reports for
their adequacy and compliance with generally accepted accounting,
reporting and disclosure standards.
- Evaluates the effectiveness of the Company's internal and external audit
efforts, accounting and financial controls, policies and procedures and
business ethics policies and practices through a review of reports by,
and at regular meetings with, the internal and external auditors and with
management, as appropriate.
Among its principal finance functions, the Committee:
- Reviews and evaluates proposed bank credit agreements and other major
financial proposals.
- Reviews and evaluates Company relationships with banks and other
financial institutions.
- Reviews and makes recommendations to the Board of Directors concerning
policies with respect to dividends, capital structure and authorized
stock.
The independent auditors and the internal auditors have full and free
access to the Committee and meet with it, with and without management being
present, to discuss all appropriate matters. The present members
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of the Audit and Finance Committee are Frank V. Cahouet, Chairman, Paul S.
Brentlinger, Vice Chairman, William G. Ouchi, James E. Rohr and Fayez Sarofim.
The Committee met twice in 1996.
COMMITTEE ON GOVERNANCE
The Committee on Governance is comprised of W. Craig McClelland, Chairman,
Robert P. Bozzone, Frank V. Cahouet, Robert Mehrabian, George A. Roberts and
Richard P. Simmons. The Committee held one meeting in 1996.
The principal responsibilities of the Committee are to:
- Make recommendations to the Board of Directors with respect to candidates
for nomination as new Board members and with respect to incumbent
directors for nomination as continuing Board members.
- Make recommendations to the Board of Directors concerning the memberships
of committees of the Board and the chairpersons of the respective
committees.
- Make recommendations to the Board of Directors with respect to the
remuneration paid and benefits provided to members of the Board in
connection with their service on the Board or on its committees.
- Administer the Company's formal compensation programs for directors,
including the 1996 Non-Employee Director Stock Compensation Plan.
- Make recommendations to the Board of Directors concerning the
composition, organization and operations of the Board of Directors,
including the orientation of new members and the flow of information.
- Evaluate Board tenure policies as well as policies covering the
retirement or resignation of incumbent directors.
Under the Company's certificate of incorporation, recommendations by
stockholders of potential nominees must be directed to the Corporate Secretary
in the manner specified in the certificate of incorporation. See "1998 Annual
Meeting and Stockholder Proposals" below.
PERSONNEL AND COMPENSATION COMMITTEE
The Personnel and Compensation Committee is comprised of Charles J.
Queenan, Jr., Chairman, Diane C. Creel, Vice Chair, C. Fred Fetterolf, Thomas
Marshall and William G. Ouchi, none of whom is an employee of the Company and
each of whom is an "outside director" for the purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). See the "Board
Compensation Committees Report on Executive Compensation" below. The Committee
held one meeting in 1996.
Among its principal duties, the Committee:
- Makes recommendations to the Board of Directors concerning general
executive management organization matters.
- Makes recommendations to the Board of Directors concerning compensation
and benefits for employees who are also directors of the Company,
consults with the Chief Executive Officer on compensation and benefit
matters relating to other executive officers and makes recommendations to
the Board of Directors concerning compensation policies and procedures
relating to executive officers generally.
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- Makes recommendations to the Board of Directors concerning policy matters
relating to employee benefits and employee benefit plans.
- Makes recommendations to the Stock Incentive Award Committee of the Board
of Directors with respect to awards of stock-based compensation to
executive officers of the Company.
- Administers the Company's formal incentive compensation plans, except to
the extent that such plans are administered by the Stock Incentive Award
Committee.
STOCK INCENTIVE AWARD COMMITTEE
The Stock Incentive Award Committee is comprised of Diane C. Creel, Chair,
C. Fred Fetterolf, Thomas Marshall and William G. Ouchi, none of whom is an
employee of the Company and each of whom is a "non-employee director" for the
purposes of Rule 16b-3 of the Securities and Exchange Commission and an "outside
director" for the purposes of Section 162(m) of the Code. See the "Board
Compensation Committees Report on Executive Compensation" below. The Committee
held one meeting in 1996.
The Stock Incentive Award Committee is responsible for administering the
Company's stock-based incentive compensation programs, as they apply to
executive officers of the Company.
TECHNOLOGY COMMITTEE
The Technology Committee is comprised of Robert Mehrabian, Chairman, Arthur
H. Aronson, Paul S. Brentlinger, George A. Roberts and James E. Rohr. It is
concerned with the impact of technologies which do or could materially affect
the success of the Company. The Committee is also responsible for assessing the
technical capabilities of the Company and making recommendations to the Board of
Directors concerning priorities, asset deployment and other matters relevant to
the technical activities of the Company. The Committee did not meet in 1996.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are paid an annual fee of
$28,000, $1,500 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 $3,000. Directors who are employees of the Company do not receive any
compensation for their services on the Board or its committees.
Each non-employee director also participates in the 1996 Non-Employee
Director Stock Compensation Plan ("Director Stock Plan"). The purpose of the
Director Stock Plan is 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 an equity interest in the Company and an
increased personal interest in its performance. Under the Director Stock Plan,
options to purchase 1,000 shares of Common Stock are generally granted to each
non-employee director at the conclusion of each annual meeting of stockholders;
in 1996, these options were granted to each existing director on the first
trading date after the Combination became effective and, in the case of Dr.
Mehrabian, on his first date of Board service. The purchase price of the Common
Stock covered by the options is the fair market value of the Common Stock (as
defined in the Director Stock Plan) on the date the option is granted.
The Director Stock Plan also provides that each director will receive at
least one-fourth of the annual retainer fee payment in the form of Common Stock
and/or options to purchase Common Stock. Each director
11
<PAGE> 14
may elect to receive additional amounts of the annual retainer fee payment, and
may elect to receive all or any portion of such director's meeting fees, in the
form of Common Stock and/or options to purchase Common Stock. Options granted
under this part of the Director Stock Plan are intended to provide each electing
director with options at an exercise value on the date of grant equal to the
foregone fees; that is, if the options were exercised immediately after they
were granted, and the underlying shares of Common Stock were sold immediately,
the gain to be realized by the director would be equal to the foregone fees.
In order to continue to attract and retain outside directors of exceptional
quality, the Company also 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 (including service as a non-employee director of
Allegheny Ludlum or Teledyne, as the case may be, prior to the Combination). 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 a 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.
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock by each person known by the Company to
own beneficially own more than five percent of the outstanding Common Stock of
the Company as of March 15, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ---------------------------------------- ---------------------- ----------------------
<S> <C> <C>
Mr. and Mrs. Richard P. Simmons 16,283,357 (a) 9.2%
1000 Six PPG Place
Pittsburgh, PA 15222
Henry E. Singleton 13,999,257 8.0%
335 North Maple Drive
Beverly Hills, CA 90210
J. P. Morgan & Co. Incorporated 16,629,858 (b) 9.4%
60 Wall Street
New York, NY 10260
</TABLE>
(a) Mr. Simmons has the sole power to direct the voting of all of these shares,
and sole power to direct the disposition of 8,157,005 of such shares. Mrs.
Simmons has the sole power to direct the disposition of 8,126,392 of such
shares. The amount shown includes shares held by the trustee under the
Retirement Savings Plan, which is described in note (12) to the Summary
Compensation Table below, for the account of Mr. Simmons as of January 31,
1997 and options to acquire 855 shares which may be acquired by Mr. Simmons
within 60 days of March 15, 1997 pursuant to a Company stock plan. The
foregoing does not include 140,500 shares owned by the R. P. Simmons Family
Foundation; Mr. and Mrs. Simmons disclaim any beneficial ownership of such
shares.
(b) J. P. Morgan & Co. Incorporated has filed an amended Schedule 13G under the
Securities Exchange Act of 1934, as amended, dated December 31, 1996,
stating that as of that date it held sole voting power with
12
<PAGE> 15
respect to 10,698,137 shares of Common Stock, shared voting power with
respect to 244,981 shares of Common Stock, sole dispositive power with
respect to 16,258,778 shares of Common Stock and shared dispositive power
with respect to 363,920 shares of Common Stock.
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Common Stock of the
Company reported to the Company as of March 15, 1997, as being beneficially
owned by each nominee for director, each continuing director, each executive
officer named in the Summary Compensation Table, and all of such persons as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME BENEFICIAL OWNERSHIP(1) CLASS
- --------------------------------- ---------------------- ----------
<S> <C> <C>
Arthur H. Aronson 124,438(2)(3) *
Robert P. Bozzone 5,169,605(3)(4) 2.9%
Paul S. Brentlinger 6,430(5) *
Frank V. Cahouet 32,315(6) *
Diane C. Creel 11,766(7) *
C. Fred Fetterolf 3,351(8) *
Douglas J. Grant 345,537(9) *
Thomas Marshall 9,309 *
W. Craig McClelland 4,492(10) *
Robert Mehrabian 1,526(11) *
James L. Murdy 82,846(3)(12) *
William G. Ouchi 2,887(13) *
Charles J. Queenan, Jr. 673,063(10)(14) *
George A. Roberts 808,314(15) *
James E. Rohr 7,800 *
William P. Rutledge 303,187(16) *
Fayez Sarofim 2,534,691(17) 1.4%
Richard P. Simmons 16,283,357(3)(18) 9.2%
Henry E. Singleton 13,999,257 8.0%
Jon D. Walton 92,174(3)(10)(19) *
All directors and executive
officers as a group (20 persons) 40,496,345(20) 22.9%
</TABLE>
* Less than one percent of the outstanding shares.
(1) Each person has sole voting and investment power with respect to the shares
listed, unless otherwise indicated.
13
<PAGE> 16
(2) Does not include 13,500 shares owned by Mrs. Arthur H. Aronson. Mr. Aronson
disclaims beneficial ownership of such shares. Includes 48,000 shares which
may be acquired within 60 days of March 15, 1997 pursuant to a Company
stock incentive plan.
(3) Includes shares held by the trustee under the Allegheny Ludlum Corporation
Retirement Savings Plan for the account of the named person as of January
31, 1997.
(4) Does not include 240,000 shares owned by Mrs. Robert P. Bozzone and 71,700
shares owned by the Bozzone Family Foundation. Mr. Bozzone disclaims
beneficial ownership of such shares.
(5) Does not include 200 shares owned by Mrs. Paul S. Brentlinger. Mr.
Brentlinger disclaims beneficial ownership of such shares.
(6) Includes 32,123 shares which may be acquired within 60 days of March 15,
1997 pursuant to a Company stock incentive plan.
(7) Includes 11,385 shares which may be acquired within 60 days of March 15,
1997 pursuant to a Company stock incentive plan.
(8) Does not include 2,600 shares owned by the Fetterolf Family Foundation. Mr.
Fetterolf disclaims any beneficial ownership of such shares.
(9) Includes 341,687 shares which may be acquired within 60 days of March 15,
1997 pursuant to a Company stock incentive plan.
(10) Includes shares held jointly with the named individual's spouse.
(11) Includes 526 shares which may be acquired within 60 days of March 15, 1997
pursuant to a Company stock incentive plan.
(12) Includes 9,333 shares which may be acquired within 60 days of March 15,
1997 pursuant to a Company stock incentive plan.
(13) Includes 1,925 shares which may be acquired within 60 days of March 15,
1997 pursuant to a Company stock incentive plan.
(14) Does not include 54,100 shares owned by Mrs. Charles J. Queenan, Jr. Mr.
Queenan disclaims beneficial ownership of such shares.
(15) Shares are owned of record by a trust of which Dr. Roberts is sole trustee
with sole voting and dispositive power. Excludes 16,541 shares owned by a
trust of which Mrs. George A. Roberts is sole trustee with sole voting and
dispositive power. Dr. Roberts disclaims beneficial ownership of such
shares.
(16) Includes 288,750 shares which may be acquired within 60 days of March 15,
1997 pursuant to a Company stock incentive plan.
(17) Mr. Sarofim may be deemed to be the beneficial owner of 2,534,691 shares of
Common Stock. Of such shares, Mr. Sarofim has sole voting and dispositive
power as to 1,836,860 shares of Common Stock of which 50,829 are held by
the Pension and Profit Sharing Trusts of Fayez Sarofim & Co. (of which Mr.
Sarofim if ths trustee). Mr. Sarofim has shared voting and dispositive
power with respect to 697,831 shares of Common Stock owned by Sarofim
International Management Company (a wholly owned subsidiary of Fayez
Sarofim & Co.). Does not include 104,169 shares of Common Stock held in
investment advisory accounts managed by Fayez Sarofim & Co. for numerous
clients. Pursuant to its
14
<PAGE> 17
investment advisory contract with its clients, Fayez Sarofim & Co. has full
investment discretion with respect to such investment advisory accounts;
however, the clients are entitled to the economic benefits of ownership of
such shares.
(18) See note (a) to the table regarding "Security Ownership of Certain
Beneficial Owners" above.
(19) Includes 30,666 shares which may be acquired within 60 days of March 15,
1997 pursuant to Company stock incentive plan. Does not include 7,400
shares owned by Mrs. Jon D. Walton. Mr. Walton disclaims beneficial
ownership of such shares.
(20) Includes an aggregate of 765,250 shares which may be acquired within 60
days of March 15, 1997 pursuant to Company stock incentive plans. Does not
include an aggregate of 650,710 shares with respect to which beneficial
ownership is disclaimed as described above.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(ITEM B ON PROXY CARD)
Ernst & Young LLP ("Ernst & Young") has served as independent auditors for
the Company since the Combination on August 15, 1996 and served as independent
auditors for Allegheny Ludlum since 1980. The Board of Directors believes that
Ernst & Young is knowledgeable about the Company's operations and accounting
practices and is well qualified to act in the capacity of independent auditors.
Therefore, the Board of Directors has selected Ernst & Young as the Company's
independent auditors for 1997. The proposal to ratify the selection of Ernst &
Young will be approved by the stockholders if it receives the affirmative vote
of a majority of the shares present in person or represented by proxy at the
meeting and entitled to vote on the proposal. If your proxy card is specifically
marked as abstaining from voting on the proposal, your shares will, in effect,
be voted against the proposal. Broker non-votes will not be counted as being
entitled to vote on the proposal and will not affect the outcome of the vote. If
the stockholders do not ratify the selection of Ernst & Young, the appointment
of independent auditors will be reconsidered by the Board. It is expected that
representatives of Ernst &Young LLP will be present at the Annual Meeting and
will have an opportunity to make a statement if they desire to do so and will be
available to respect to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
FOR RATIFICATION OF THE SELECTION OF ERNST & YOUNG AS INDEPENDENT AUDITORS.
OTHER BUSINESS TO COME BEFORE THE MEETING
In addition to the matters described above, there will be an address by
Richard P. Simmons, Chairman, President and Chief Executive Officer of the
Company, and a general discussion period during which the stockholders will have
an opportunity to ask questions about the Company and its business.
The Company knows of no business which may be presented for consideration
at the Annual Meeting other than as indicated in the Notice of Annual Meeting.
If any other business should properly come before the meeting, the persons
designated as proxies in the proxy cards have discretionary authority to vote in
accordance with their best judgment.
15
<PAGE> 18
EXECUTIVE COMPENSATION
BOARD COMPENSATION COMMITTEES REPORT ON EXECUTIVE COMPENSATION
This report on executive compensation is furnished by the Personnel and
Compensation Committee and the Stock Incentive Award Committee of the Board of
Directors of the Company (sometimes referred to as the "Committees"). In
accordance with the rules of the Securities and Exchange Commission, this report
shall not be incorporated by reference into any of the Company's registration
statements under the Securities Act of 1933.
After the Combination of Allegheny Ludlum and Teledyne was consummated, the
Committees began the development of a comprehensive compensation program for the
executives of the new company. The Committees have retained the services of
Hewitt Associates, a nationally recognized executive compensation and benefits
consulting firm, to assist in this effort. It is contemplated that the program
will cover the four components of executive compensation: base compensation,
short-term incentive awards, long-term incentive programs, and benefits related
to employment security and health and welfare.
The amounts paid to the named executive officers as reported in the Summary
Compensation Table were paid pursuant to the executive compensation policies and
plans of Allegheny Ludlum and Teledyne in effect prior to the Combination.
On February 12, 1997, Mr. Rutledge announced that he was resigning as
President and Chief Executive Officer of the Company for personal and family
reasons effective immediately. Richard P. Simmons, the Chairman of the Board and
Chairman of the Executive Committee, was elected to serve as the Company's
President and Chief Executive Officer.
In March of 1997, the Committees took action regarding the compensation of
Mr. Simmons. Their action was based on their review, in consultation with Hewitt
Associates, of compensation packages for chief executive officers of comparable
companies. Mr. Simmons' compensation will be paid entirely in the equity of the
Company. Base salary and any short-term incentive compensation earned will be
paid in Common Stock. Longer-term incentives will be in the form of options and
performance units. It is contemplated that base salary and short-term incentive
payments at target levels of performance will represent approximately 50% of Mr.
Simmons' total compensation package. It is also contemplated that the value of
the options granted to Mr. Simmons will represent approximately 60% of the value
of the longer-term incentives.
The amount of Mr. Simmons' base salary for 1997 will be paid by the
issuance of 30,000 shares of Common Stock; based on the closing price of a share
of Common Stock on the New York Stock Exchange on February 12, 1997, the date
Mr. Simmons was elected to serve as the Company's President and Chief Executive
Officer, Mr. Simmons' base salary can be valued at $705,000. For his 1997
incentive bonus, at the target level of performance, Mr. Simmons will receive
24,000 shares of Common Stock, or approximately 80% of his base salary.
Compensation of the Company's Former Chief Executive Officer. Mr.
Rutledge's base salary for 1996 was $710,000. That base salary was set by
Teledyne in 1995.
Mr. Rutledge's bonus for 1996 service was established under the Teledyne,
Inc. Senior Executive Performance Plan (the "Teledyne SEP Plan") which was
approved by stockholders in 1996 in connection with the Combination. Bonuses
under the Teledyne SEP Plan were awarded to individuals who served as executive
officers of Teledyne in 1996, out of a pool based on Teledyne's economic value
added ("EVA") criteria for the year. For 1996, the Compensation and Stock Option
Committee of Teledyne's Board of
16
<PAGE> 19
Directors established Teledyne's EVA target at an adjusted net operating profit
after tax of approximately $16.8 million in excess of the cost of capital used
by Teledyne, assuming a cost of capital equal to 10%. Under the Teledyne SEP
Plan, if the target were reached, Mr. Rutledge's EVA-based bonus would have been
60% of his 1996 base salary. That bonus was subject to a proportionate increase
for EVA in excess of $16.8 million and a proportionate decrease for EVA below
$16.8 million.
Because Teledyne achieved actual EVA of approximately $47.3 million, or
approximately $30.5 million in excess of the target, the Personnel and
Compensation Committee determined that Mr. Rutledge be paid a bonus equal to
1.683 times 74% of his salary (14% of which was attributable to the level of
personal goals achieved by Mr. Rutledge in 1996). Consistent with the prior
practice established by Teledyne, the Personnel and Compensation Committee
required that a portion of that bonus be carried to 1997 and 1998 and put at
risk against any 1997 or 1998 "negative bonus" or added to any 1997 or 1998
"positive bonus." As a result, Mr. Rutledge was paid $794,768 and $227,498 was
carried to 1997 and 1998.
In 1996, Teledyne's Compensation and Stock Option Committee granted Mr.
Rutledge options to purchase 288,750 shares of Company Common Stock at an
exercise price (after giving effect to the Combination) of $14.61 per share. In
determining the number of stock options to be granted, the Compensation and
Stock Option Committee made a subjective determination based, among other
things, on Mr. Rutledge's stock holdings and option holdings in Teledyne,
overall compensation levels (including options) compared to certain other public
companies, as well as Teledyne's performance and Mr. Rutledge's individual
performance during the several preceding years and his years of service. The
Compensation and Stock Option Committee did not assign specific weights to any
of the factors in considered in awarding stock options to Mr. Rutledge, and did
not set specific long-term target levels of share ownership for Mr. Rutledge.
For a discussion of Mr. Rutledge's separation agreement with the Company,
see "Separation and Severance Agreements" below.
Deductibility of Executive Compensation. Under Section 162(m) of the Code,
compensation paid to the Company's Chief Executive Officer and certain executive
officers of the Company in excess of $1 million in any year may be
non-deductible for Federal income tax purposes unless the compensation qualifies
as "performance-based" compensation or is otherwise exempt under the law. The
Company's 1996 Incentive Plan is intended to meet the deductibility requirements
of the regulations promulgated under Section 162(m). The Committees may
determine in any year that it would be in the best interests of the Company for
an award or awards to be paid under the 1996 Incentive Plan or otherwise in a
manner that would not satisfy the requirements of Section 162(m) and its
regulations for deductibility.
MEMBERS OF THE PERSONNEL AND COMPENSATION COMMITTEE
Charles J. Queenan, Jr., Chairman
Diane C. Creel
C. Fred Fetterolf
Thomas Marshall
William G. Ouchi
MEMBERS OF THE STOCK INCENTIVE AWARD COMMITTEE
Diane C. Creel, Chair
C. Fred Fetterolf
Thomas Marshall
William G. Ouchi
17
<PAGE> 20
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Personnel and Compensation Committee or Stock Incentive
Award Committee during 1996 was an officer or employee of the Company. The law
firm to which Mr. Queenan serves as senior counsel provided services to the
Company during 1996 and 1997; Mr. Queenan does not participate in the earnings
or profits of, and does not receive compensation for any services that he may
provide to, such firm. Other than as indicated in the preceding sentence, no
member of the Committees during 1996 had a current or prior relationship, and no
executive officer of the Company had a relationship to any other company,
required to be described under the Securities and Exchange Commission rules
relating to disclosure of executive compensation.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following Summary Compensation Table sets forth, for fiscal years 1994,
1995 and 1996, information about the compensation paid by the Company, Allegheny
Ludlum and Teledyne to the Chief Executive Officer of the Company and to each of
the other four most highly compensated executive officers who were serving as
executive officers of the Company as of December 31, 1996 (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ----------------------------------------------------------------------------------------------------------------------------
OTHER
ANNUAL RESTRICTED SECURITIES
NAME AND COMPEN- STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS SATION AWARD OPTIONS/SARS PAYOUTS COMPENSATION
POSITIONS(1) YEAR ($)(2) ($)(3) ($)(4) ($)(5) (#)(6) ($)(7) ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William P. Rutledge 1996 $710,000 $794,768 -- 0 288,750 shs. 0 $ 3,000(10)
President and Chief 1995 710,000 715,385 -- 0 0 0 300(10)
Executive
Officer(8) 1994 630,000 424,778 $329,268(9) 0 577,500 0 1,452(10)
Arthur H. Aronson 1996 $400,000 $257,560 $12,216 $201,759 36,000 shs. $197,626 $553,711(12)
Executive Vice 1995 300,000 374,870 28,955 87,341 0 204,021 206,496(12)
President(11) 1994 260,417 0 5,676 125,356 0 205,624 248,492(12)
James L. Murdy 1996 $258,399 $179,884 $10,543 $126,947 34,000 shs. $172,235 $564,571(12)
Executive Vice 1995 238,706 203,114 10,574 223,576 0 164,791 118,027(12)
President, Finance 1994 219,889 0 10,937 0 0 166,086 122,865(12)
and Administration
and Chief Financial
Officer(11)
Jon D. Walton 1996 $155,104 $177,931 $ 9,284 $ 74,889 24,000 shs. $114,008 $291,429(12)
Vice President, 1995 140,415 85,594 9,313 134,344 0 117,708 48,770(12)
General Counsel and 1994 129,778 0 9,351 0 0 118,633 51,854(12)
Secretary(11)
Douglas J. Grant 1996 $271,250 $222,839 -- 0 57,750 shs. 0 $ 300(10)
Vice President, 1995 252,455 181,529 -- 0 38,500 0 1,079(10)
Finance and 1994 222,500 106,950 -- 0 192,500 0 300(10)
Deputy Chief
Financial Officer
</TABLE>
18
<PAGE> 21
(1) Prior to the consummation of the Combination, Mr. Rutledge was Chairman of
the Board of Directors and Chief Executive Officer of Teledyne, Mr. Aronson
was President and Chief Executive Officer of Allegheny Ludlum, Mr. Murdy
was Senior Vice President, Finance and Chief Financial Officer of Allegheny
Ludlum, Mr. Walton was Vice President, General Counsel and Secretary of
Allegheny Ludlum and Mr. Grant was Treasurer of Teledyne. As described
below, in 1996, Messrs. Rutledge and Grant received benefits under the
applicable Teledyne plans and Messrs. Aronson, Murdy and Walton received
benefits under the applicable Allegheny Ludlum plans. On February 12, 1997,
Mr. Rutledge resigned as President and Chief Executive Officer of the
Company and Richard P. Simmons was elected as the Company's President and
Chief Executive Officer. In March 1996, Mr. Grant resigned as the Vice
President, Finance and Deputy Chief Financial Officer; he continues to
serve as the vice president-finance for the Company's Teledyne
subsidiaries.
(2) In the case of Messrs. Rutledge and Grant, includes cash compensation
deferred under the Teledyne, Inc. 401(k) Plan and under the Teledyne, Inc.
Executive Deferred Compensation Plan. In the case of Messrs. Aronson, Murdy
and Walton, includes cash compensation deferred pursuant to the savings
part of Allegheny Ludlum's Retirement Savings Plan. The Teledyne 401(k)
Plan and the Allegheny Ludlum Retirement Savings Plan are qualified defined
contribution plans within the meaning of Section 401(a) of the Code. For
Messrs. Aronson, Murdy and Walton, 1994 amounts reflect reductions in
salary during the 10-week labor strike called at Allegheny Ludlum by the
United Steelworkers of America on April 1, 1994; for the months of April
and May, 1994, the base salary of each such individual was reduced 25%.
(3) In the case of Messrs. Rutledge and Grant, includes payments under the
Teledyne SEP Plan. In the case of Messrs. Aronson, Murdy and Walton,
includes payments under Allegheny Ludlum's Performance Management System
Plan and salaried employees' profit-sharing plan. In 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) In accordance with applicable regulations, the amounts set forth in this
column do not include perquisites and other personal benefits received by
the named executive officer unless the aggregate value of such perquisites
and other benefits exceeded the lesser of $50,000 or 10% of the total
salary and bonus reported for the named executive officer.
(5) Represents the closing market price on the New York Stock Exchange, on the
award date, of a number of shares of Common Stock equal to the number of
shares of restricted stock awarded to the named executive under the
Allegheny Ludlum Stock Acquisition and Retention Plan. The market price
does not take into account any diminution in value attributable to the
restrictions applicable to the shares awarded under the plan. In general,
the restricted shares 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. The approval by the Allegheny Ludlum
shareholders of the Combination of Allegheny Ludlum and Teledyne
constituted a "change of control" as defined in the plan which caused the
forfeiture restrictions on the restricted shares held by Messrs. Murdy and
Walton to lapse. Prior to the Combination, Mr. Aronson agreed that the
restrictions on his restricted shares would not lapse as a result of the
Combination. See note (12) below. On December 31, 1996, Mr. Aronson held
19,852 restricted shares of Common Stock under the plan; the closing market
price of that number of shares on the New York Stock Exchange on December
31, 1996 was $456,596. Messrs. Murdy and Walton held no restricted shares
of Common Stock under the plan at December 31, 1996.
19
<PAGE> 22
(6) Reflects options awarded under an employee stock option plan of Teledyne or
Allegheny Ludlum, as the case may be. The amount represents the number of
shares the executive officer could purchase by exercising the options.
(7) For Messrs. Aronson, Murdy and Walton, payments reflect the achievement of
97% of the performance objectives for the 1991-1993 award period under the
Allegheny Ludlum Performance Share Plan for Key Employees. Payment of the
awards to the 43 participants over a three-year period began in 1994. The
amount represents the cash and the market value of the shares of Common
Stock distributed under the plan on the relevant valuation dates.
(8) For a description of Mr. Rutledge's separation agreement, see "Separation
and Severance Agreements" below.
(9) 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 the Teledyne-guaranteed
loan balance.
(10) The amounts include the contribution of $300 made for each of Messrs.
Rutledge and Grant under the Teledyne, Inc. 401(k) plan. The amounts also
include payments made on behalf of the named executive officer for
additional group term life insurance premiums not generally paid on behalf
of all salaried employees under Teledyne life insurance plans, as follows:
Mr. Rutledge, $2,700 ; Mr. Grant, $0.
(11) For a description of the Company's employment agreements with Messrs.
Aronson, Murdy and Walton, see "Employment Agreements" below.
(12) The amounts include the annual accruals made by Allegheny Ludlum with
respect to possible future payments to the named executive officers under
the Allegheny Ludlum Supplemental Pension Plan described at "Pension
Plans--Provisions Applicable to Former Employees of Allegheny Ludlum"
below. For 1996, the amounts accrued were as follows: Mr. Aronson,
$456,592; Mr. Murdy, $126,817; and Mr. Walton, $43,381. Also included are
Allegheny Ludlum's contributions to each of the accounts of Messrs.
Aronson, Murdy and Walton pursuant to the Retirement portion of the
Allegheny Ludlum Retirement Savings Plan in the amount of $10,270 for 1996
as well as Allegheny Ludlum's contributions to the accounts of the
following executive officers pursuant to the Savings portion of the
Allegheny Ludlum Retirement Savings Plan, which in 1996 were as follows:
Mr. Aronson, $4,667; Mr. Murdy, $4,661; and Mr. Walton, $4,486. The amounts
also include contributions by Allegheny Ludlum to the Allegheny Ludlum
Benefit Restoration Plan which, in 1996, were as follows: Mr. Aronson,
$56,903; Mr. Murdy, $28,816; and Mr. Walton, $7,189. Under the Benefit
Restoration Plan, Allegheny Ludlum supplements the payments received by
participants under the Allegheny Ludlum Pension Provisions described at
"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 as a result of the limitations imposed by the Code. For 1996,
also included are the dollar values of the benefits to the following
executive officers of the remainder of Allegheny Ludlum-paid premiums for
"split dollar" life insurance, as follows: Mr. Aronson, $6,429; Mr. Murdy,
$5,177; and Mr. Walton, $3,669. For 1996, the amount also includes the
final of three annual installments of cash awards made by Allegheny Ludlum
to a total of 43 management personnel, including the following executive
officers, in order to recognize their contributions on behalf of Allegheny
Ludlum during 1991-1993: Mr. Aronson, $18,850; Mr. Murdy, $15,225; and Mr.
Walton, $10,875. Also included is the dollar value of the shares of
restricted stock acquired by the following executive officers under the
Allegheny Ludlum Stock
20
<PAGE> 23
Acquisition and Retention Plan which vested upon the approval by the
Allegheny Ludlum shareholders of the Combination of Allegheny Ludlum and
Teledyne, which constituted a "change of control" of Allegheny Ludlum, as
defined in the plan: Mr. Murdy, $373,605; and Mr. Walton, $211,559. The
dollar value represents the average of the high and low sales prices of a
share of Allegheny Ludlum Common Stock on the New York Stock Exchange on
the date the change of control occurred. Prior to the Combination, Mr.
Aronson agreed that the restrictions on his restricted shares would not
lapse as a result of the Combination.
STOCK OPTIONS
The following table sets forth information regarding the grant of stock
options during 1996 under the employee stock option plans of Allegheny Ludlum
and Teledyne, as the case may be, to each of the executive officers named in the
Summary Compensation Table and to all optionees as a group, in each case
adjusted to reflect the Combination.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1)
--------------------------------------------------------------------
%
NUMBER OF OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/ VALUE AT ASSUMED ANNUAL
UNDERLYING SARS RATES OF STOCK PRICE
OPTIONS/ GRANTED TO EXERCISE APPRECIATION FOR OPTION TERM (2)
SARS EMPLOYEES OR BASE ------------------------------------
GRANTED IN FISCAL PRICE EXPIRATION 0% 5% 10%
NAME (#) YEAR ($/ SHARE) DATE ($)(3) ($) ($)
- -------------- --------- ---------- --------------- ----------------- ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
William P.
Rutledge 288,750 shs. 14% $14.61 3/27/07 $ 0 $2,996,619 $7,817,704
Arthur A.
Aronson 36,000 2% $21.125 5/16/06 0 478,282 1,212,041
James L. Murdy 34,000 2% $21.125 5/16/06 0 451,710 1,144,705
Jon D. Walton 24,000 1% $21.125 5/16/06 0 318,854 808,027
Douglas J.
Grant 57,750 3% $14.61 3/27/07 0 599,324 1,563,541
All Optionees 2,058,200 100% $13.77-$21.125 5/16/06-4/23/07 0 23,168,531 59,821,889
</TABLE>
(1) Options under the Teledyne employee stock option plan, which were granted to
Messrs. Rutledge and Grant, are exercisable at the rate of 25% per year,
commencing on the first anniversary date of the grant. Options granted under
the Allegheny Ludlum plan become exercisable in one-third increments, after
May 31, 1999, May 31, 2000 and May 31, 2001. Under each plan, options
include the right to pay the exercise price in cash or in previously
acquired Company Common Stock, and the right to have shares withheld by the
Company to pay withholding tax obligations due in conjunction with the
exercise.
(2) These assumed "potential realizable values" are mathematically derived from
certain prescribed rates of stock price appreciation. The actual value of
these option grants is dependent on the future performance of Company Common
Stock and overall stock market conditions. There is no assurance that the
values reflected in this table will be achieved.
(3) No gain to the optionees is possible without stock price appreciation, which
will benefit all stockholders commensurately. Zero percent stock price
appreciation will result in zero dollars for the optionee.
The following table sets forth information regarding the exercise of stock
options during 1996 and the unexercised options held as of the end of 1996 by
the named executive officers, as adjusted to reflect the Combination.
21
<PAGE> 24
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT FY-END (#) IN-THE MONEY OPTIONS/
SHARES SARS AT FY-END ($) (2)
ACQUIRED VALUE REALIZED ------------------------------ ------------------------------
NAME ON EXERCISE (#) ($) (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ ---------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William P. Rutledge 0shs. $ 0 789,250shs. 649,688shs. $10,878,652 $ 7,507,506
Arthur H. Aronson 27,000 306,585 48,000 60,000 441,750 69,000
James L. Murdy 9,334 86,340 9,333 52,667 583 64,917
Jon D. Walton 4,500 44,078 30,666 39,334 282,229 45,958
Douglas J. Grant 0 0 264,687 197,313 3,402,239 2,352,164
</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 Company Common Stock on
the New York Stock Exchange on the date the option was exercised.
(2) The "value of unexercised in-the-money options" is calculated by subtracting
the exercise price from $23.00, which was the mean between the high and low
sales prices of a share of Company Common Stock on the New York Stock
Exchange on December 31, 1996.
PENSION PLANS
In 1996, the underfunded defined benefit pension plans of Allegheny Ludlum
and subsidiaries were merged with overfunded defined benefit pension plans of
Teledyne. The plan mergers created the Allegheny Teledyne Incorporated Pension
Plan (the "Allegheny Teledyne Pension Plan"), which is a single defined benefit
plan, qualified under the Code. The benefit formulas and distribution provisions
applicable to the employee participants of Teledyne prior to the Combination and
the provisions applicable to the employee participants of Allegheny Ludlum prior
to the Combination did not change as a result of the Combination or plan
mergers.
The benefits payable from a qualified defined benefit plan are limited by
Section 415 of the Code to an annual benefit of $120,000 payable at age 65 with
an actuarial reduction for earlier commencement. 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 was $150,000. The amounts shown in the table below
indicate the aggregate of payments under the Allegheny Teledyne Pension Plan
and, in the case of Messrs. Rutledge and Grant, Teledyne's Pension Equalization
Plan described below and, in the case of Messrs. Aronson, Murdy and Walton, the
defined benefit portion of Allegheny Ludlum's Benefit Restoration Plan described
in note (12) to the Summary Compensation Table.
Provisions Applicable to Former Employees of Allegheny Ludlum. In 1988,
Allegheny Ludlum adopted the Retirement part of its Retirement Savings Plan
referred to in note (12) to the Summary Compensation Table, and amended its
pension plan for salaried employees, which is now a part of the Allegheny
Teledyne Pension Plan (the "Allegheny Ludlum Pension Provisions"), to provide
that no additional benefits would accrue thereunder from and after December 31,
1988, except for those employees who were grandfathered under the Allegheny
Ludlum Pension Provisions. Benefits accrued prior to January 1, 1989 will be
paid at the time, in the form and in the amount determined under the Allegheny
Ludlum Pension Provisions.
22
<PAGE> 25
The following table shows the estimated annual benefits calculated on a
straight life annuity basis payable under the Allegheny Ludlum Pension
Provisions and the defined benefit portion of the Allegheny Ludlum Benefit
Restoration Plan described at note (12) to the Summary Compensation Table to
participants in specified compensation and years of service classifications upon
attainment of age 65.
ALLEGHENY LUDLUM PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BENEFITS FOR
REMUNERATION 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>
The formula used to determine retirement benefits under the Allegheny
Ludlum Pension Provisions considers the participant's annual eligible earnings
in the highest five consecutive years of the last ten years prior to retirement
or, in the case of Allegheny Ludlum employees with frozen benefits, prior to
1988, 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 Allegheny
Ludlum Performance Management System Plan.
In certain circumstances, pension benefits are subject to integration with
Social Security and reduction for other payments made to the participant and his
or her spouse.
As of December 31, 1996, Messrs. Aronson, Murdy and Walton had 0.08, 0.58
and 2.83 credited years of service, respectively. For vesting purposes, Messrs.
Aronson and Murdy each had 8 years of service and Mr. Walton had 10 years of
service and each such individual is fully vested in the Allegheny Ludlum Pension
Provisions.
In addition, Allegheny Ludlum has established a Supplemental Pension Plan
which provides certain key employees of the company (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 (1) age 62, if actual retirement occurs prior to age 62
but after age 58 with the approval of the Board of Directors, or (2) the date
actual retirement occurs, and continue for a 118-month period. The plan
describes the events that will terminate an employee's participation in the
plan. Since the payment of benefits to Messrs. Aronson, Murdy and Walton is
contingent on future events, the amount to be paid in the future with respect to
such officers cannot be determined at this time.
23
<PAGE> 26
Provisions Applicable to Former Employees of Teledyne. The following table
shows the estimated annual benefits calculated on a straight life annuity basis
payable under the part of the Allegheny Teledyne Pension Plan applicable to
employees of Teledyne (the "Teledyne Pension Provisions") and Teledyne's Pension
Equalization Plan to participants in specified compensation and years of service
classifications upon attainment of age 65. The Pension Equalization Plan is
designed to restore benefits which would be payable under the Teledyne Pension
Plan Provisions but for the limits imposed by the Code, to the levels set forth
in the Provisions, calculated pursuant to the formula in the Provisions.
TELEDYNE PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL PENSION BENEFITS FOR
REMUNERATION(1) REPRESENTATIVE YEARS OF CREDITED SERVICE(2)
- -------------------------------------------------------------------------------------------------
15 20 25 30
<S> <C> <C> <C> <C>
$ 200,000 $ 46,643 $ 62,190 $ 77,738 $ 93,286
300,000 71,393 95,190 118,988 142,786
400,000 96,143 128,190 160,238 192,286
500,000 120,893 161,190 201,488 241,786
600,000 145,643 194,190 242,738 291,286
700,000 170,393 227,190 283,988 340,786
800,000 195,143 260,190 325,238 390,286
1,000,000 244,643 326,190 407,738 489,286
</TABLE>
(1) For periods through December 31, 1994, plan compensation was limited to an
individual's base salary. Effective January 1, 1995, plan compensation
includes base salary and incentive compensation received on and after
January 1, 1996.
(2) Maximum benefits payable under the Teledyne Pension Provisions are reached
after 30 years of credited service.
The Teledyne Pension Provisions cover 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
Provisions. Participants vest in their accrued benefits under the Teledyne
Pension Provisions after five years of service to Teledyne or its divisions or
subsidiaries.
The formula used to determine retirement benefits under the Teledyne
Pension Provisions depends upon an individual's average compensation (as
described below) over the 60 highest consecutive months during the 120 months
preceding termination of employment and the number of years the individual has
participated in the Teledyne Pension Provisions. Compensation under the
provisions of the Teledyne Pension Provisions and the Teledyne Pension
Equalization Plan for 1996 for Messrs. Rutledge and Grant was $868,033 and
$280,696, respectively.
Benefits payable under the Teledyne Pension Provisions are not subject to
any deduction for Social Security or other offset amounts.
As of December 31, 1996, Messrs. Rutledge and Grant had 11 and 19.2
credited years of service, respectively, for purposes of the Teledyne Pension
Provisions.
24
<PAGE> 27
SEPARATION AND SEVERANCE AGREEMENTS
In 1995, Teledyne entered into individual severance agreements with each of
the individuals who then served as executive officers of Teledyne, including
Messrs. Rutledge and Grant. On February 26, 1996, Teledyne's board of Directors
approved amendments to these agreements extending their terms for one year.
Separation Agreement. As previously reported, Mr. Rutledge has resigned as
a director, officer and employee of the Company and its subsidiaries. Under a
separation agreement dated as of March 6, 1997 between the Company and Mr.
Rutledge (which supersedes Mr. Rutledge's severance agreement with Teledyne,
under which he would have been entitled to payments under certain
circumstances), Mr. Rutledge received from the Company a cash payment of $3.13
million on the effective date of the agreement. The agreement also provides that
Mr. Rutledge will serve as a consultant to the Chairman of the Company until
April 1, 2000 for which he will receive a monthly retainer of $23,000 plus $500
per hour in addition to 40 hours in any month and continue to receive health and
life insurance benefits (except to the extent provided through other
employment). Mr. Rutledge will also serve as a director of Teledyne Industries
International, Inc. ("TII"), a subsidiary of Teledyne, Inc. Under the agreement,
Mr. Rutledge will also receive a pro rata portion of his 1997 performance-based
bonus, payable under the same criteria and at the same time as 1997
performance-based bonuses are paid to other Company executives, as well as
amounts carried to 1997 under Teledyne's EVA-based plans. In addition, Mr.
Rutledge will continue to have all rights and benefits under his stock option
agreements in accordance with their terms so long as he continues to be a
director of TII and will continue to be entitled to benefits under Teledyne
retirement plans to the extent accrued on the date he resigned as an officer of
the Company
Severance Agreement. The severance agreement between Teledyne and Mr. Grant
provides various severance benefits to Mr. Grant in the event his 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 of Teledyne. The combination of Teledyne and Allegheny Ludlum
constituted a change of control of Teledyne for purposes of the agreement.
The severance agreement provides for the following severance benefits to
Mr. Grant: (1) a lump sum payment based on a multiple of his annualized
compensation, including performance bonuses, (2) continuation for up to two
years of the life and health insurance benefits that were being provided by
Teledyne to him and his family immediately prior to termination, (3) personal
financial and estate planning services, and (4) outplacement services for up to
52 weeks at Teledyne's expense (up to a maximum of $15,000). The severance
compensation multiple for Mr. Grant is 2.25. All severance benefits payable
under the severance agreement will be reduced to the extent necessary to prevent
Mr. Grant 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 the Company to deduct the severance
benefits paid; provided, that the severance benefits payable to Mr. Grant may
not exceed the highest amount payable to Teledyne's Chairman and Chief Executive
Officer.
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements, which became effective at
the effective time of the Combination, with Messrs. Aronson, Murdy and Walton.
The agreements 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 the Company. 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
25
<PAGE> 28
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. The Company 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 of the Combination) 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 of the
Combination.
CUMULATIVE TOTAL STOCKHOLDER RETURN
The graph set forth below shows the cumulative total stockholder return
(i.e., price change plus reinvestment of dividends) on Company Common Stock from
the first day of trading in the Common Stock following the Combination through
December 31, 1996 as compared to the S&P 500 Index, the S&P Iron & Steel Index
and a peer group index consisting of Allied Signal, Inc., Crane Co., Tenneco,
Inc. and Textron Inc. The graph assumes that $100 was invested on August 16,
1996.
In accordance with the rules of the Securities and Exchange Commission,
this presentation shall not be incorporated by reference into any of the
Company's registration statements under the Securities Act of 1933.
TOTAL STOCKHOLDER RETURNS
<TABLE>
<CAPTION>
MEASUREMENT PERIOD ALLEGHENY S&P 500 S&P IRON &
(FISCAL YEAR COVERED) TELEDYNE INDEX STEEL INDEX PEER GROUP
<S> <C> <C> <C> <C>
AUGUST 16 1996 100 100 100 100
SEPTEMBER 1996 108.38 103.53 105.03 102.51
DECEMBER 1996 110.93 112.16 106.30 107.29
</TABLE>
26
<PAGE> 29
CERTAIN TRANSACTIONS
Argonaut Group, Inc. Three of the Company's directors, George A. Roberts,
Fayez Sarofim and Henry E. Singleton, also are directors of Argonaut Group, Inc.
("Argonaut Group"), a former subsidiary of Teledyne. In addition, as of February
15, 1997, directors of the Company beneficially owned in the aggregate more than
28% of the outstanding stock of Argonaut Group.
Teledyne has provided Argonaut Group with certain investment trade
execution services. During 1996, Argonaut Group paid Teledyne approximately
$116,911 for these services. During 1996, Argonaut Insurance Company ("Argonaut
Insurance"), a subsidiary of Argonaut Group, paid Teledyne approximately
$1,052,212 pursuant to certain retrospective rating provisions of insurance
policies previously written by Argonaut Group for Teledyne. Future payments to
or from Argonaut Insurance may be required under the retrospective rating
provisions and reinsurance provisions of such policies. In 1996, the Company
paid approximately $1,284,502 to AGI Properties, Inc. ("AGI), a non-insurance
subsidiary of Argonaut Insurance, pursuant to a real property leases in Los
Angeles, California. The Company believes that the transactions described above
have been entered into on terms no less favorable than could have been
negotiated with non-affiliated third parties.
Unitrin, Inc. Three of the Company's directors, George A. Roberts, Fayez
Sarofim and Henry E. Singleton, also are directors of Unitrin, Inc. ("Unitrin"),
a former subsidiary of Teledyne. In addition, as of December 31, 1996, directors
of the Company beneficially owned in the aggregate more than 29% of the
outstanding stock of Unitrin.
Teledyne has provided Unitrin with certain investment trade execution and
other professional services, as well as the use of company aircraft. During
1996, Unitrin paid Teledyne approximately $458,345 for these services. Unitrin
provided data processing services to Teledyne for which Teledyne paid
approximately $972,396 in 1996. In addition, during 1996, Unitrin earned
premiums of approximately $6.1 million for group life insurance coverages on
Teledyne employees and their dependents. In prior years, pursuant to certain
contractual arrangements with Teledyne, Unitrin insured Teledyne and its
subsidiaries for certain coverages, including workers' compensation, general
liability and automobile liability. These insurance arrangements contained
retrospective rating and reinsurance provisions which reduce Unitrin's financial
exposure by giving it recourse against Teledyne and its subsidiaries. The
Company believes that the transactions described above have been entered into on
terms no less favorable than could have been negotiated with non-affiliated
third parties. In addition, Teledyne and Unitrin have certain indemnities with
respect to certain tax matters and the operation of Teledyne prior to the 1990
distribution of Unitrin stock to Teledyne's stockholders.
Code, Hennessy & Simmons Funds. Allegheny Ludlum and subsidiaries of
Allegheny Ludlum have engaged in investment transactions with two limited
partnership funds: Code, Hennessy and Simmons Limited Partnership ("Fund I"),
and Code, Hennessy & Simmons II L. P. ("Fund II"). The objective of both funds
is to seek maximum return by investing in leveraged buyouts of operating
companies. Profits and losses of Fund I and of Fund II are allocated 80 percent
to the limited partners and 20 percent to the general partner. The general
partner of Fund I is CHS Management Limited Partnership ("CHS I"), and the
general partner of Fund II is CHS Management II, L. P. ("CHS II"). The general
partners of CHS I and the stockholders of the general partner of CHS II are
Andrew W. Code, Daniel J. Hennessy, and Brian P. Simmons, each of whom has an
equal interest in each of such firms. Brian P. Simmons is the son of Richard P.
Simmons, Chairman, President and Chief Executive Officer of the Company.
27
<PAGE> 30
At the end of the first quarter of 1994, Allegheny Ludlum voluntarily
contributed its limited partnership interest in Fund I to an irrevocable trust
established for the purpose of partially funding the retiree medical and
insurance benefit obligations Allegheny Ludlum has to its employees represented
by the United Steelworkers of America. Later in the 1994 and 1995 fiscal years
and in the first quarter of 1996, Allegheny Ludlum voluntarily contributed
investments it had made in Fund II, in the amounts of $5.6 million, $7.5 million
and $1.5 million, respectively, to the irrevocable trust. In February 1997,
Allegheny Ludlum contributed investments it had made in Fund II in the amount of
$6 million to a subsidiary of Allegheny Ludlum. Subsequently, Allegheny Ludlum
voluntarily contributed its remaining investment in Fund II to the irrevocable
trust. Investors had made commitments to invest approximately $155 million in
Fund II, which was formed in 1993, including $30 million to be invested by
Allegheny Ludlum.
A subsidiary of Allegheny Ludlum continues to be the limited partner in CHS
I and CHS II and to receive 10 percent of CHS I's 20 percent share of Fund I's
net profits and losses (i.e., two percent of Fund I's net profits and losses).
The same subsidiary is a limited partner in CHS II and receives 5 percent of CHS
II's 20 percent share of Fund II's net profits and losses (i.e., one percent of
Fund II's net profits and losses). During 1996, the Allegheny Ludlum subsidiary
that invested in CHS I made no investments in, and received no distributions,
from CHS I. The same subsidiary made investments of $116,822 in, and received
distributions of $16,629 from, CHS II.
CHS I and CHS II are responsible for managing the selection and structuring
of their respective fund's investments. In 1996, the annual base management fee
for each fund was 1.8% of the fund's total capital commitments. In each case,
the management fees were offset by fees which the general partner charges to
companies its fund acquires. After the offset for fees, the net amounts received
by CHS I and CHS II were 0.8% and 0%, respectively.
In addition to the investment by the Company, Richard P. Simmons, Chairman,
President and Chief Executive Officer of the Company, Robert P. Bozzone, Vice
Chairman of the Board of the Company, and a subsidiary of PNC Bank Corp. have
invested or will invest $4,473,360, $1,250,000, and $5,000,000, respectively, in
Fund I. In addition to the investment by the Company, Messrs. Simmons and
Bozzone, and a subsidiary of PNC Bank Corp., directly or indirectly, have
invested or will invest $5.2 million, $2.5 million, and $7.5 million,
respectively, in Fund II. James E. Rohr, President of PNC Bank Corp., is a
member of the Company's Board of Directors.
Pursuant to a written agreement with another subsidiary, Allegheny Ludlum
agreed to furnish consulting services which the subsidiary in turn has agreed to
furnish to CHS I. Under this agreement, no fee is to be paid for the services of
Richard P. Simmons, who is primarily responsible for such consultations, or
James L. Murdy, the Executive Vice President, Finance and Administration and
Chief Financial Officer, for up to one day per week each. A similar arrangement
may be made with respect to CHS II. In 1995 and 1996, no substantial services
were provided to CHS I which required the payment of compensation. Richard P.
Simmons also serves as a member of Advisory Boards of Fund I and Fund II.
Kirkpatrick & Lockhart LLP. The Company retained the law firm of
Kirkpatrick & Lockhart LLP to perform services for the Company during 1996 and
1997. Charles J. Queenan, Jr., a member of the Company's Board of Directors, is
senior counsel to that law firm. See "Compensation Committee Interlocks and
Insider Participation."
Loan Guarantee. Teledyne has guaranteed repayment to an unaffiliated
banking institution of $464,000 of Mr. Rutledge's loan obligations with respect
to his residence in Los Angeles. As of March 1, 1997, Mr. Rutledge was current
in this obligation.
28
<PAGE> 31
Loans under Stock Acquisition and Retention Plan. Under the terms of the
Allegheny Ludlum Stock Acquisition and Retention Plan, persons who served as
executive officers of Allegheny Ludlum could deliver a promissory note, payable
to Allegheny Ludlum, as payment for the purchase price of the shares of Common
Stock purchased under the plan. Each note has a term of not more than 10 years
and is secured by the shares of Common Stock being purchased with the note.
Interest accrues on the notes at a rate, as determined on the applicable
purchase date, equal to the lesser of the average borrowing rate of Allegheny
Ludlum or the prime lending rate of PNC Bank, but not lower than the minimum
rate necessary to avoid imputed interest under the applicable federal income tax
laws. During the 1996 fiscal year, James L. Murdy, Executive Vice President,
Finance and Administration and Chief Financial Officer, and Jon D. Walton, Vice
President, General Counsel and Secretary, delivered promissory notes to
Allegheny Ludlum to pay the purchase price of Common Stock purchased under the
plan. The largest amount of indebtedness outstanding under the plan during the
1996 fiscal year and the amount of indebtedness outstanding under the plan as of
March 3, 1997 were $714,191 and $712,905 for Mr. Murdy and $428,020 and $427,051
for Mr. Walton, respectively.
ANNUAL REPORT ON FORM 10-K
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, WITHOUT EXHIBITS, CAN
BE OBTAINED WITHOUT CHARGE FROM THE CORPORATE SECRETARY AT 1000 SIX PPG PLACE,
PITTSBURGH, PENNSYLVANIA 15222-5479.
1998 ANNUAL MEETING AND STOCKHOLDER PROPOSALS
Under Rule 14a-8 of the Securities and Exchange Commission, proposals of
stockholders intended to be presented at the 1998 Annual Meeting of Stockholders
must be received no later than November 28, 1997 for inclusion in the Proxy
Statement and proxy card for that meeting. In addition, the Company's
certificate of incorporation 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 of the
Company. To be timely, a stockholder's notice must be delivered to the Secretary
not less than 60 days and not more than 90 days prior to the first anniversary
of the preceding year's annual meeting which, in the case of the 1998 Annual
Meeting of Stockholders, would be no earlier than January 31, 1998 and no later
than February 15, 1998. If, however, the date of the annual meeting is advanced
by more than 30 days or delayed by more than 60 days from such anniversary date,
to be timely, notice by the stockholder 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. The Company's
certificate of incorporation also requires that such notice contain certain
additional information. Copies of the certificate of incorporation can be
obtained without charge from the Corporate Secretary.
By order of the Board of Directors
/s/ JON D. WALTON
Jon D. Walton
Vice President, General Counsel
and Secretary
Dated: March 27, 1997
29
<PAGE> 32
ALLEGHENY TELEDYNE INCORPORATED
PROXY FOR 1997 ANNUAL MEETING
Solicited on Behalf of the Board of Directors of Allegheny Teledyne Incorporated
The undersigned hereby appoints James L. Murdy, Mary W. Snyder and Jon D.
Walton 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 Annual Meeting of Stockholders of Allegheny Teledyne
Incorporated on May 1, 1997, 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.
STOCKHOLDERS 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
Please mark your vote as indicated in this example [ X ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING ITEMS:
A. ELECTION OF DIRECTORS.
FOR WITHHELD
all nominees (except from all nominees
as indicated)
[ ] [ ]
A. Election of Diane C. Creel, C. Fred Fetterolf, Robert Mehrabian and
Richard P. Simmons as Class I directors.
(To withhold authority to vote for any nominee(s), write the name(s) of the
nominee(s) in the space that follows:
- ----------------------------------------------------------------------------
B. SELECTION OF AUDITORS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DATE: , 1997
--------------------------
-------------------------------------
-------------------------------------
(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
[LOGO]
ALLEGHENY TELEDYNE
INCORPORATED
1000 Six PPG Place
Pittsburgh, PA 15222-5479
Dear Stockholder:
Enclosed are materials relating to Allegheny Teledyne Incorporated's 1997
Annual Meeting of Stockholders. The Notice of the Meeting and Proxy Statement
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> 33
ALLEGHENY TELEDYNE INCORPORATED
VOTING INSTRUCTION CARD FOR 1997 ANNUAL MEETING
Personal Retirement and 401(k) Savings Account Plan
Retirement Savings Plan
Savings and Security Plan of the Lockport and Waterbury Facilities
Savings and Security Plan of the Tubular Products and Plate Products Divisions
The 401(k) Savings Account Plan of Allegheny Ludlum Corporation
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ALLEGHENY TELEDYNE INCORPORATED
The undersigned hereby directs the Trustee of the above Plans to vote the shares
of Common Stock allocated to the account of the undersigned under the Plans, at
the Annual Meeting of Stockholders of Allegheny Teledyne Incorporated on May 1,
1997, and any adjournments thereof, upon the matters set forth on the reverse of
this card, and, in its discretion, upon such matters as may properly come before
such meeting.
PLAN PARTICIPANTS 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
Please mark your vote as indicated in this example [ X ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING ITEMS:
A. ELECTION OF DIRECTORS.
FOR WITHHELD
all nominees (except from all nominees
as indicated)
[ ] [ ]
A. Election of Diane C. Creel, C. Fred Fetterolf, Robert Mehrabian and
Richard P. Simmons as Class I directors.
(To withhold authority to vote for any nominee(s), write the name(s) of the
nominee(s) in the space that follows:
- ----------------------------------------------------------------------------
B. SELECTION OF AUDITORS.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DATE: , 1997
------------------------------
-----------------------------------------
-----------------------------------------
(Signature)
Please sign EXACTLY as your name appears at the left.
FOLD AND DETACH HERE
ALLEGHENY TELEDYNE INCORPORATED
Personal Retirement and 401(k) Savings Account Plan
Retirement Savings Plan
Savings and Security Plan of the Lockport and Waterbury Divisions
Savings and Security Plan of the Tubular Products and Plate Products Divisions
The 401(k) Savings Account Plan of Allegheny Ludlum Corporation
March 27, 1997
Enclosed you will find a copy of the Allegheny Teledyne Incorporated 1996
Annual Report, a Notice of the 1997 Annual Meeting of Stockholders and Proxy
Statement, 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 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 enclosed Proxy Statement contains detailed information concerning
voting at the Annual 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 April 28, 1997 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.
