SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:)
[ ]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
AMP 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):
[X]$125 per Exchange Act Rule 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:
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(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 (setting forth
the amount on which the filing fee is calculated and how
such amount was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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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NOTICE OF
ANNUAL MEETING
AND
PROXY STATEMENT
___________
ANNUAL MEETING
OF
SHAREHOLDERS
April 26, 1995
__________
AMP
AMP Incorporated
Harrisburg, Pennsylvania
AMP Incorporated
Harrisburg, PA 17105-3608
AMP
Executive Offices
March 24, 1995
Dear Shareholder:
You are invited to attend the AMP Incorporated 1995 Annual Meeting of
Shareholders. This year the Annual Meeting will be held at the M. C.
Benton, Jr. Convention and Civic Center, 301 West Fifth Street, Winston-Salem,
North Carolina, on Wednesday, April 26, 1995, at 10:30 a.m., local time.
If you plan to attend the Annual Meeting, please mark the appropriate
box in the lower right-hand corner of the enclosed proxy so that an admission
card may be sent to you in advance. Only shareholders bearing an admission
card will be permitted admittance to the Annual Meeting, and the number of
admission cards issued will be limited to the seating capacity of the Benton
Convention Center. If your shares are not registered in your own name, please
advise the shareholder of record (e.g. your bank or broker) that you wish to
attend the Annual Meeting and they will request an admission card for you.
Also, it is of special significance this year that your shares be
represented at the Annual Meeting. In addition to the election of directors
and other matters that may properly be brought before the Annual Meeting, the
shareholders will be asked to vote on the revised Management Incentive Plan,
the 1993 Long-Term Equity Incentive Plan as amended and one Shareholder
Proposal. Please carefully read the descriptions included in the Proxy
Statement before completing, signing and returning the accompanying proxy in
the postage paid envelope provided for that purpose.
Thank you for your prompt attention to these important matters.
Very truly yours,
/s/ J. E. Marley
JAMES E. MARLEY
Chairman of the Board
AMP Incorporated
P.O. Box 3608
Harrisburg, Pennsylvania 17105-3608
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
April 26, 1995
To the Shareholders of
AMP Incorporated:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
AMP Incorporated will be held at the M. C. Benton, Jr. Convention and Civic
Center, 301 West Fifth Street, Winston-Salem, North Carolina, on Wednesday,
April 26, 1995, at 10:30 a.m., local time, for the purpose of considering
and acting upon the following:
1. The election of a Board of Directors, eleven in number, to serve
until the next Annual Meeting of Shareholders and until their
respective successors are elected and qualified.
2. A proposal to approve the revised AMP Management Incentive Plan.
3. A proposal to approve the AMP Incorporated 1993 Long-Term Equity
Incentive Plan as amended.
4. A shareholder proposal relating to minority and gender inclusiveness
in senior management and on the Board of Directors.
5. Such other matters that may properly come before the meeting and any
adjournments thereof.
The Board of Directors has fixed the close of business on March 10, 1995
as the record date for the determination of shareholders entitled to notice
of and to vote at said meeting and any adjournments thereof.
By order of the Board of Directors
/s/ D. F. Henschel
David F. Henschel,
Corporate Secretary
Dated: March 24, 1995.
AMP INCORPORATED
PROXY STATEMENT
________________
VOTING
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of AMP Incorporated (the "Corporation").
Such proxies will be voted at the Annual Meeting of Shareholders of the
Corporation to be held on Wednesday, April 26, 1995, and any adjournments
or postponements thereof, at the time and place and for the purposes set forth
in the accompanying Notice of Meeting dated March 24, 1995. The address of the
Corporation's principal executive offices is P.O. Box 3608, Harrisburg,
Pennsylvania 17105-3608. The approximate date on which this Proxy
Statement and the enclosed form of proxy are first sent or given to
shareholders is March 24, 1995. Shareholders of record at the close of
business on March 10, 1995 are entitled to notice of and to vote at said
meeting and any adjournments or postponements thereof, each share being
entitled to one vote. On March 10, 1995 the Corporation had 209,679,077
outstanding shares of Common Stock, no par value (excluding shares held in the
treasury of the Corporation, all of which are issued but not outstanding and
are not entitled to vote), which constitutes the only class of voting
securities of the Corporation. A majority of the shares entitled to vote and
either present in person or represented by proxy will constitute a quorum for
the transaction of business at the Annual Meeting.
Under Pennsylvania law and the Corporation's Articles of Incorporation
and Bylaws, each nominee for election as a director shall be elected if he
or she receives the affirmative vote of a majority of the votes cast by
shareholders entitled to vote and either present in person or represented
by proxy at the Annual Meeting. Similarly, the proposal to approve the
revised AMP Management Incentive Plan and the shareholder proposal will be
authorized by the shareholders if each receives the affirmative vote "for"
such proposal by a majority of the votes cast by shareholders entitled to
vote and either present in person or represented by proxy at the Annual
Meeting. With respect to the election of directors, votes may be cast in
favor of or withheld from the nominees. Shareholders are not entitled to
cumulative voting in the election of directors. Abstentions, votes that
are withheld from director nominees and broker non-votes (i.e., the inability
of a broker or other nominee holding shares for a beneficial owner to vote on
behalf of such beneficial owner on a particular non-routine matter because
such broker or nominee is not permitted, without receiving instructions from
the beneficial owner, to vote such owner's shares on that matter,
notwithstanding that the broker or nominee has discretionary authority on
another routine, non-controversial matter and has voted on such matter on
behalf of the beneficial owner) will be counted in determining whether a
quorum has been reached but will be excluded entirely from the vote and will
have no effect thereon.
On the other hand, the Corporation's proposal to approve the 1993 Long-
Term Equity Incentive Plan as amended (the "Plan Amendment Proposal") will be
approved by the shareholders if it receives the affirmative vote "for" such
proposal by a majority of the shareholders entitled to vote and either present
in person or represented by proxy. Abstentions not only are counted in
determining whether a quorum is present but also are counted in determining
the total number of shares present in person or represented by proxy and
entitled to vote. While not counted as votes for or against the Plan
Amendment Proposal, abstentions have the same effect as votes against the
proposal. Broker non-votes continue to be counted only for purposes of
determining whether a quorum is present at the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked in writing
by the person giving it at any time before it is exercised. Under the laws of
Pennsylvania, attendance at the Annual Meeting by a shareholder who has given
a proxy does not have the effect of revoking such proxy
<PAGE>
unless the shareholder files at any time prior to the voting of the proxy a
written notice of revocation with the Corporate Secretary at the Corporation's
principal executive offices set forth above or at the Annual Meeting,
including but not limited to the timely filing of a duly executed proxy
bearing a later date or the voting of the shares subject to this proxy by
written ballot cast at the Annual Meeting. All shares represented by valid
proxies received by the Board of Directors pursuant to this solicitation in
time to be voted and not revoked will be voted. If the proxy indicates a
choice with respect to any matter to be acted upon, the shares will be voted
in accordance with the direction made therein. Except as set forth above
with respect to brokers, if no direction is made, the shares will be voted as
to each proposal in accordance with the recommendations of your Board of
Directors. The proxy of a shareholder who is a participant in the
Corporation's Dividend Reinvestment Plan will also serve as an instruction to
the agent of that Plan to vote the shares held for the account of the
participant in the same way as the shares represented by such proxy are voted.
If a shareholder's proxy is not received, the shares held for his or her
account in the Dividend Reinvestment Plan will not be voted. If a shareholder
is a participant in the Corporation's Employee Savings and Thrift Plan, each
of these participants will receive a separate Proxy card covering these shares.
This Proxy card must be returned or the shares will be voted by the Trustee in
its sole and absolute discretion.
ITEM 1:
ELECTION OF DIRECTORS
A Board of Directors, eleven in number, is to be elected at the meeting
to serve until the next Annual Meeting of Shareholders and until their
respective successors are elected and qualified. Unless otherwise instructed
by the shareholder, it is the intention of the persons named in the proxy
(the "Proxy Committee") to vote such proxy for the election of the persons
named in the following list, each of whom is now a member of the Board of
Directors. Three directors elected at last year's Annual Meeting are not
named in the list of nominees. Mr. Jeffrey J. Burdge, a director since 1979,
and Mr. William E. Dearden, a director since 1982, having reached the
mandatory age for retirement of directors, retired effective January 1, 1995.
Mr. Benjamin Savidge, a director since 1990 and Executive Vice President and
Chief Financial Officer of the Corporation, retired from the Corporation
and the Board effective January 1, 1995. Mr. Takeo Shiina was elected a
director by the Board of Directors effective January 1, 1995 to fill the
unexpired term of one of the retiring directors.
The following information is supplied as to each person nominated for
election as a director. The information includes beneficial ownership of
the outstanding Common Stock of the Corporation as of March 10, 1995 by each
such person. Unless otherwise indicated, each Nominee for director possesses
sole voting and dispositive power (beneficial ownership) with respect to the
shares set forth opposite his or her name and there are no shares that any
Nominee has the right to acquire as beneficial owner within 60 days after
March 10, 1995.
<TABLE>
<CAPTION>
Nominee, Age and
Year First Principal Occupation and Shares of
Elected Director Business Experience Common Stock<F5>
---------------- ------------------------ ----------------
<S> <C> <C>
Retired Chairman of the Board and Chief Executive 2,000<F6>
Officer of Air Products and Chemicals, Inc., <F14>
Allentown, Pennsylvania, a supplier of industrial
gases, chemicals, and related equipment and
technology. Mr. Baker has served as a director of
[portrait Air Products and Chemicals, Inc. for more than the
photograph past five years and he is a former chief executive
of Dexter officer of that company, having served in that
F. Baker] capacity for more than five years. He also serves
as a director of Eastman Chemical.
Dexter F. Baker
Age 67
1990<F3><F4>
2
Nominee, Age and
Year First Principal Occupation and Shares of
Elected Director Business Experience Common Stock<F5>
---------------- ------------------------ ----------------
[portrait President of Harbor Point Associates, Inc., New York, 2,000<F14>
photograph New York, a private investment and consulting
of Ralph firm. Mr. DeNunzio also serves as a director of
D. DeNunzio] Harris Corporation, Federal Express Corporation, and
NIKE, Inc.
Ralph D. DeNunzio
Age 63
1977<F3><F4>
President and Chief Executive Officer of Barbara 616.8<F14>
Franklin Enterprises, Washington, D.C., a private
consulting and investment firm. Ms. Franklin is an
internationally recognized businesswoman and public
servant, having served as the U.S. Secretary of
Commerce in the Bush Administration. In addition,
she has been a director of the American Institute of
[portrait Certified Public Accountants, chaired AICPA's audit
photograph committee, and received the John J. McCloy Award
of Barbara from the Public Oversight Board for excellence in
H. Franklin] auditing. She also serves as a director of Aetna
Life & Casualty and The Dow Chemical Company.
Barbara Hackman Franklin
Age 55
1993<F2>
Chairman of the Board of Hixon Properties Incorporated, 1,577,570<F7>
San Antonio, Texas, maintaining real estate holdings <F14>
[reference and other investments. Mr. Hixon has served as a
Appendix] director of Hixon Properties Incorporated for more
than the past five years.
Joseph M. Hixon III
Age 56
1988<F2><F4>
[portrait Chief Executive Officer and President of the 26,369<F13>
photograph Corporation. Mr. Hudson has served as an officer <F15>
of William of the Corporation for more than the past five
J. Hudson, years. He also serves as a director of Carpenter
Jr.] Technology Corporation.
William J. Hudson, Jr.
Age 60
1992<F1>
3
Nominee, Age and
Year First Principal Occupation and Shares of
Elected Director Business Experience Common Stock<F5>
---------------- ------------------------ ----------------
Chairman of the Board of Directors of the 31,338<F8>
[portrait Corporation. Mr. Marley has served as an officer <F13>
photograph of the Corporation for more than the past five years. <F15>
of James He also serves as a director of Armstrong World
E. Marley] Industries, Inc., Dauphin Deposit Corporation, and
Harsco Corporation.
James E. Marley
Age 59
1986<F1>
[portrait Retired Chairman of the Board of Directors and Chief 46,936<F15>
photograph Executive Officer of the Corporation. Mr. McInnes
of Harold served as an officer of the Corporation for more than
A. McInnes] five years. He also serves as a director of PPG
Industries, Inc.
Harold A. McInnes
Age 67
1981<F1><F4>
President, Chief Executive Officer and a director 1,400<F9>
of Reliance Electric Company, Cleveland, Ohio, a <F14>
manufacturer of electrical, mechanical power
[portrait transmission, and telecommunications equipment.
photograph Mr. Morley has served as an officer and director
of John C. of Reliance Electric Company for more than the past
Morley] five years. He also serves as a director of KeyCorp
and Ferro Corporation.
John C. Morley
Age 63
1991<F2><F3>
Retired Chairman of the Board of Directors and Chief 55,316<F10>
[portrait Executive Officer of the Corporation. Mr. Raab served <F15>
photograph as an officer of the Corporation for more than five
of Walter years. He also serves as a director of The West Company,
F. Raab] Dauphin Deposit Corporation,and Harris Corporation.
Walter F. Raab
Age 70
1975<F1><F4>
4
Nominee, Age and
Year First Principal Occupation and Shares of
Elected Director Business Experience Common Stock<F5>
---------------- ------------------------ ----------------
Retired President and Chief Executive Officer of Parker 1,400<F11>
Hannifin Corporation, Cleveland, Ohio, an international <F14>
manufacturer of hydraulic, pneumatic and electromechanical
components. Mr. Schloemer has served as a director of
[portrait Parker Hannifin Corporation for more than the past five
photograph years and he is a former president and chief executive
of Paul G. officer of that company, having served in that capacity
Schloemer] for more than five years. He also serves as a director
of Esterline Technologies Corporation and Rubbermaid Inc.
Paul G. Schloemer
Age 66
1991<F3>
Chairman of the Advisory Council of IBM Japan, Ltd., 0<F12>
a manufacturer of computer systems located in Japan.
Mr. Shiina served as a board member of IBM Japan,
Ltd. from 1962 until his retirement as chief executive
[portrait officer in 1992, having served in the capacity as CEO
photograph for more than five years. He also serves as a
of Takeo director of Air Products and Chemicals, Inc. and a member
Shiina] of the European Advisory Board of Bankers Trust
Company.
Takeo Shiina
Age 65
1995<F2>
_________
<FN>
<F1> Member of the Executive Committee of the Board.
<F2> Member of the Audit Committee of the Board.
<F3> Member of the Compensation and Management Development Committee of the
Board.
<F4> Member of the Nominating and Governance Committee of the Board.
<F5> Each director owns less than 1% of the Corporation's outstanding
Common Stock.
<F6> Mr. Baker holds these shares of the Corporation's Common Stock in a
charitable foundation in which he shares voting and dispositive
powers. In addition, he owns 1,489.2 phantom shares under the phantom
AMP Common Stock account of the non-employee directors' deferred
compensation plan described on page 7 of this Proxy Statement.
<F7> Mr. Hixon has a 2% residual beneficial interest but no voting or
dispositive powers in a trust that holds 7,392 shares of Common Stock
of the Corporation. In addition, he owns 1,446.9 phantom shares under the
phantom AMP Common Stock account of the non-employee directors' deferred
compensation plan described on page 7 of this Proxy Statement.
<F8> In addition, 195.7 shares of Common Stock of the Corporation are owned
by a member of the immediate family of the Nominee; Mr. Marley disclaims
beneficial ownership of such stock. Additionally, 464.1 shares of
Common Stock of the Corporation are owned by a member of the immediate
family of Mr. Marley in a custodial account over which the Nominee has
voting and dispositive powers; Mr. Marley disclaims beneficial ownership
of such stock.
<F9> In addition, Mr. Morley owns 822.0 phantom shares under the phantom AMP
Common Stock account of the non-employee directors' deferred compensation
plan described on page 7 of this Proxy Statement.
<F10>In addition, 10,000 shares of Common Stock of the Corporation are owned
by a member of the immediate family of Mr. Raab; Mr. Raab disclaims
beneficial ownership of such stock.
<F11>Mr. Schloemer holds 800 of these shares of Common Stock of the
Corporation in a family trust of which he is co-trustee with his wife
and shares voting and dispositive powers.
5
<F12>Mr. Shiina owns 59.1 phantom shares under the phantom AMP Common Stock
account of the non-employee directors' deferred compensation plan
described on page 7 of this Proxy Statement. Mr. Shiina also holds
2,000 options granted under the Corporation's Stock Option Plan for
Outside Directors, which options are not exercisable until on or after
January 1, 1996.
<F13>A portion of the shares reported for Messrs. Hudson and Marley are held
in the Corporation's Employee Savings and Thrift Plan. Through further
contributions to this plan, each may acquire an undeterminable number
of additional shares within 60 days after March 10, 1995.
<F14>Ms. Franklin and Messrs. Baker, DeNunzio, Hixon, Morley and Schloemer
each hold 2,000 options granted under the Corporation's Stock Option Plan
for Outside Directors, which options are not exercisable until on or
after July 1, 1995.
<F15>Under the Corporation's former Bonus Plan (Stock Plus Cash), at December
31, 1994 Messrs. Hudson, Marley, McInnes and Raab had 34,868, 16,000,
26,666 and 13,332 Stock Bonus Units, respectively. Under the current
1993 Long-Term Equity Incentive Plan, Mr. Hudson has 226,000 Stock
Options and Mr. Marley has 167,000 Stock Options. In addition,
Mr. Hudson owns 9,930.7 phantom shares and Mr. Marley owns 8,068.8
phantom shares in the phantom AMP Common Stock account of the
Corporation's deferred compensation plan for designated executive officers
that is described in footnote (10) of the Summary Compensation Table,
page 12 of this Proxy Statement.
</TABLE>
Although the Board of Directors does not contemplate that any of the
Nominees for director will be unable to serve, in the event a vacancy in
the original slate of nominees is occasioned by death or other unexpected
occurrence, (a) shares of stock represented by the proxies shall be voted
for the election of such other nominee as may be designated by the Board of
Directors, or (b) prior to the meeting, the Board of Directors will amend
the Corporation's Bylaws in order to eliminate that office of director for
which such nominee is unable to accept election, or (c) in the event that
neither (a) nor (b) occurs, the Proxy Committee shall nominate other persons
in their discretion and vote the proxies for the election of such persons as
directors.
THE BOARD OF DIRECTORS
COMPENSATION
A director who was not an employee of the Corporation is paid $26,000
per year for services as a director and also $1,000 for each day in attendance
at a meeting of the Board. Additionally, a director is paid $1,000 for
attendance at each meeting of any committee of the Board on which he or she
serves, except the chairperson of any such committee who is paid $1,250 for any
meeting attended. A non-employee director may also be paid $1,000 per day for
special services or assignments requested by either the Chairman of the Board
or the CEO and President of the Corporation. A director who is also an
employee of the Corporation does not receive any director or committee fees.
During 1994 the Board of Directors held six meetings.
6
In 1994 total compensation earned by the directors was as follows:
<TABLE>
<CAPTION>
Total Director
Director Compensation
------------------- --------------
<S> <C>
Dexter F. Baker........... $ 54,324 <F2><F3>
Jeffrey J. Burdge......... 53,464 <F2>
William E. Dearden........ 40,000
Ralph D. DeNunzio......... 56,648 <F2>
Barbara H. Franklin....... 55,702 <F2>
Joseph M. Hixon III....... 54,800 <F2><F3>
William J. Hudson, Jr..... 0 <F1>
James E. Marley........... 0 <F1>
Harold A. McInnes......... 134,000 <F4>
John C. Morley............ 51,745 <F2><F3>
Walter F. Raab............ 152,265 <F2><F5>
Benjamin Savidge.......... 0 <F1>
Paul G. Schloemer......... 50,630 <F2>
------------
<FN>
<F1> Messrs. Hudson, Marley and Savidge were employees as well as directors
of the Corporation, and therefore did not receive any separate director
or committee fees.
<F2> This compensation includes payments to reimburse the Director for
travel expenses incurred by the Director's spouse in connection with the
Board meeting held in the Asia/Pacific region in October, together with
payments of estimated taxes relating to such reimbursements.
<F3> This compensation includes amounts with respect to which the Director
elected to defer receipt under the terms of the Corporation's deferred
compensation plan for non-employee directors, described below.
<F4> This compensation includes consulting fees paid to Mr. McInnes, a former
Chairman of the Board and Chief Executive Officer of the Corporation,
under a consulting agreement with the Corporation. Under the agreement
Mr. McInnes is paid a monthly fee of $8,333 for services other than in
his capacity as a director. The consulting agreement will expire on
December 31, 1995 unless extended by agreement of the parties.
<F5> This compensation includes consulting fees paid to Mr. Raab, a former
Chairman of the Board and Chief Executive Officer of the Corporation,
under a consulting agreement with the Corporation. Under the agreement
Mr. Raab is paid a monthly fee of $8,333 for services other than in his
capacity as a director. The consulting agreement expired on December
31, 1994.
</TABLE>
Non-employee directors are permitted to defer receipt of all or a
portion of the annual retainer and the meeting fees. The period of the
deferral is within the discretion of each non-employee director, provided
however that payment must be made or commenced no later than the earliest
of the death of the director, a change in control and termination of the
director's services, or the year following the year in which he or she
reaches the age of 72. Deferred compensation may be allocated to either or
both of the following investment options: i) an interest-bearing account with
interest credited monthly based on 120% of the Long Term Applicable Federal
Rate as published by the Internal Revenue Service and adjusted quarterly;
and ii) a phantom AMP Common Stock account in which phantom dividends are
reinvested in further phantom stock units. Allocations or changes in
allocations can be made annually and apply prospectively to compensation
earned in future years. Payments of deferred director compensation can be
made in a lump sum or in up to ten annual installments.
Effective in July, 1994 following approval of the plan by the
shareholders at the 1994 Annual Meeting, the Stock Option Plan for Outside
Directors provides that the outside directors shall
7
receive a grant of 2,000 stock options in the Corporation's Common Stock when
they are first elected to the Board and in each July thereafter. Up to a
maximum of 10 awards may be made to any one director and up to 300,000 shares
may be awarded to all outside directors in the aggregate during the 10-year
term of the plan. These options vest after 1 year and remain exercisable for
9 years. (The maximum number of shares that may be awarded under the plan and
the number of options included in each grant have been doubled in preparation
to the 2-for-1 stock split in 1995, as permitted under the terms of the plan.)
RETIREMENT
The Corporation has a retirement plan for directors who are not and
have not been employees of the Corporation (an "outside director"). Under the
plan, an outside director who has either reached the normal retirement date
(the end of the calendar year in which the director reaches age 72) or
retired early due to disability, and who has served a minimum of five years
on the Board, is eligible for an annual retirement benefit. The annual
retirement benefit is equal to a percentage of the outside director's
annual base retainer at the time of retirement, with the actual percentage
being based on the outside director's years of service.
In the event of a "change of control", the annual retirement benefit
to which an outside director would be entitled based on his or her years of
service at the date service to the Board ceases for any reason shall be
fully vested and payable immediately, without regard to the outside director's
then attained age.
A "change of control" as that term is used in this Proxy Statement
would, unless otherwise indicated, generally be deemed to have occurred if
(a) any person or group acquires beneficial ownership of 30% or more of the
Corporation's issued and outstanding shares of Common Stock, or (b) there
occurs a change in the Board such that the directors constituting the Board
at a given point in time (the "Incumbent Board") and any subsequently elected
directors who were recommended or approved by a majority of the Incumbent
Board no longer constitute a majority of the Board, or (c) a reorganization,
merger or consolidation of the Corporation is approved by the shareholders
in which said shareholders will no longer own more than 50% of the
Corporation's issued and outstanding shares of Common Stock, or (d) there
occurs a liquidation or dissolution of the Corporation or the sale of all or
substantially all of the assets of the Corporation.
COMMITTEES AND MEETINGS
The Board of Directors has four standing committees: the Audit Committee,
the Compensation and Management Development Committee, the Nominating and
Governance Committee, and the Executive Committee.
The Audit Committee of the Board of Directors consults with the
Corporation's management regarding selection of the independent public
accountant; concurs in the appointment or dismissal of the Director,
Internal Audit; holds periodic meetings with the Corporation's internal and
independent auditors and financial officers as appropriate to monitor control
of the Corporation's financial resources and audit functions; reviews the
arrangements and related fees for and the scope of the independent auditor's
examination; considers the audit findings and management response; reviews
the independent public accountant's non-audit fees; reviews significant
accounting issues, regulatory changes and accounting or reporting developments
and the impact of such on the Corporation's financial statements; reviews the
status of special investigations; reviews the financial statements; oversees
the quarterly reporting process; discusses with the Corporation's management,
the Director, Internal Audit and in-house legal counsel significant issues
relating to litigation or compliance with environmental or governmental
regulations; reviews the Corporation's electronic data processing
procedures and controls; and reviews the Corporate Code of Conduct and
Conflict
8
of Interest policies and receives reports of disclosures of any deviations
from these policies. During 1994 the Audit Committee held four meetings.
The Compensation and Management Development Committee of the Board of
Directors makes recommendations to the Board regarding successors to and
the salaries of the Chairman of the Board and the Chief Executive Officer and
President; conducts annual performance reviews of the Chairman of the Board
and the Chief Executive Officer and President; reviews the salary budget for
the executive officers as a group and salary recommendations made by the
Chief Executive Officer and President for the named executive officers; makes
recommendations to the Board regarding changes to the Corporation's incentive
compensation plans, executive-only benefit plans and tax-qualified pension
and thrift plans; and reviews participation in, establishes certain targets
for and acts on awards under the Corporation's incentive compensation plans
for management and key employees. During 1994 the Compensation and Management
Development Committee held four meetings.
The Nominating and Governance Committee of the Board of Directors establishes
the criteria for selecting candidates for nomination to the Board; actively
seeks candidates who meet those criteria, are highly qualified and have
diverse backgrounds, including qualified female and minority candidates; makes
recommendations to the Board of nominees to fill vacancies on, or as
additions to, the Board; makes recommendations to the Board on changes in
the size, composition and structure of the Board; makes recommendations to
the Board on compensation and benefit programs for the Board; as
appropriate, reviews the performance of the directors and reports its
findings to the Chairman of the Board and, in its discretion, to the Board
itself; and considers matters relating to corporate governance and makes
decisions concerning those matters that should be recommended for action by
the Board in executive session. The Nominating and Governance Committee will
consider nominees for election to the Board that are recommended by
shareholders provided that a complete description of the nominees'
qualifications, experience and background, together with a statement signed
by each nominee in which he or she consents to act as such, accompany the
recommendations. Such recommendations should be submitted in writing to the
attention of the Chairman of the Board of the Corporation, and should not
include self-nominations. During 1994 the Nominating and Governance Committee
held two meetings.
The Executive Committee of the Board of Directors has been delegated the
authority to act on behalf of the Board with respect to any matter within
the ordinary course of the business of the Corporation. The Committee
typically acts on proposed capital expenditures and financial transactions
that require immediate Board action at times that are not near to the
regularly scheduled Board meetings. Certain matters, including those that
under the Pennsylvania Business Corporation Law cannot be delegated by the
Board, are specifically excluded from the authority of the Executive
Committee. All actions taken by the Committee are reported at the next
meeting of the Board for concurrence by the full Board. During 1994 the
Executive Committee took action on seven transactions either in a meeting
of the Committee or by written consent in lieu of a meeting.
9
EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------------- -----------------------
Awards <F11>
----------------------
Other Annual Securities Underlying All Other
Name and principal Salary Bonus Compensation Options/SARs Compensation
position Year ($) ($) ($) (#) ($)
----------------------- --------- ---------- --------- -------------- --------------------- -------------------
(a) (b) (c)<F10> (d)<F10> (e)<F1> (f)<F2> (g)
----------------------- --------- ---------- --------- -------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
William J. Hudson, Jr. 1994 600,000 422,400 12,831 114,000 73,400<F3>
Chief Executive Officer 1993 533,333 196,747 8,350 132,000 105,196
and President, and a 1992 363,750 122,800 30,937 12,200 61,462
Director
James E. Marley 1994 500,000 311,000 53,746 83,000 52,350<F4>
Chairman of the 1993 475,000 162,023 26,372 84,000 54,146
Board 1992 429,167 141,100 83,438 ...... 49,187
Jean Gorjat 1994 265,000 124,315 402,840 25,600 95,800<F5>
Vice President 1993 245,000 66,224 340,596 26,000 135,800
1992 208,958 36,100 200,144 ...... 83,800
Javad K. Hassan 1994 271,667 85,195 6,617 26,200 36,934<F6>
Vice President 1993 228,750 56,433 7,155 34,000 32,142
1992 190,833 59,800 6,443 ...... 17,406
John E. Gurski 1994 235,000 119,780 295,916 22,800 20,800<F7>
Vice President 1993 218,333 45,000 77,660 22,000 22,438
1992 196,250 54,100 5,816 ...... 26,385
Benjamin Savidge 1994 366,423 195,640 214,614 14,000 340,455<F8>
Retired Executive Vice 1993 332,500 114,181 67,522 53,400 167,251
President and Chief 1992 305,000 95,700 82,780 ...... 152,792
Financial Officer,
and a Director <F9>
------------
<FN>
<F1> Unless otherwise indicated, no executive officer named in the Summary
Compensation Table received personal benefits or perquisites in excess of
the lesser of $50,000 or 10% of his total compensation reported in
columns(c) and(d).
Reported in this column is annual compensation related to: i) the Cash
Bonus paid under the Corporation's former Bonus Plan (Stock Plus Cash) to
cover Federal income taxes as described in footnote (1) to the
"Aggregated Option/SAR Exercises in 1994 and FY-End Option/SAR Values"
table, pages 14-15, and fractional shares of the Bonus Plan Stock Bonus;
ii) payments of estimated taxes relating to reimbursement of expenses
incurred by Mr. Hudson's, Mr. Marley's and Mr. Savidge's spouses in
connection with the Board meeting held in the Asia/Pacific region;
iii)the payment of estimated income taxes of Mr. Savidge on both
contributions to a pension security trust and income earned thereon
under the Corporation's SERP; iv) overseas allowances for Mr. Gorjat
in 1992 through 1994 and Mr. Gurski in 1993 and 1994; v) certain
relocation compensation, and payments of estimated income taxes
relating to relocation compensation, received by Mr. Hudson and Mr.
Gorjat in 1992 and by Mr. Gurski in 1993 and 1994; vi) certain payments
of estimated taxes relating to Mr. Gorjat's assignment overseas in 1994
and Mr. Gurski's assignment overseas in 1993 and 1994; and vii) $33,978
as the personal benefit to Mr. Gorjat in 1993 for an automobile provided
by the Corporation.
10
<F2> These awards for 1992 were for stock bonus units (stock appreciation
rights, or "SARs") and were made pursuant to the Corporation's former
Bonus Plan (Stock Plus Cash), as described in footnote (1) to the
"Aggregated Option/SAR Exercises in 1994 and FY-End Option/SAR Values"
table, pages 14-15. These awards for years after 1992 were made pursuant
to the Corporation's 1993 Long-Term Equity Incentive Plan and include both
options and SARs. This Plan is described in footnote (1) to the
"Option/SAR Grants in 1994" table, pages 13-14. All outstanding awards
have been adjusted for the 2-for-1 stock split in 1995.
<F3> Includes $3,600 as the company-matching contribution under the Employee
Savings and Thrift Plan; and $69,800 as the total premium paid by the
Corporation in 1994 under a split-dollar insurance plan, including both
the portion of the premium that is attributable to term life insurance
coverage for Mr. Hudson and the full dollar value of the remainder of the
premium. The split-dollar insurance plan provides life insurance
coverage for Mr. Hudson equal to twice his base salary (in lieu
of the coverage available under the Corporation's group-term life
insurance plan), and a substantial portion of the value of the advances
made to pay the premium as shown in this table will be repaid to the
Corporation from policy proceeds.
<F4> Includes $3,600 as the company-matching contribution under the Employee
Savings and Thrift Plan; $4,800 as total director fees paid to Mr.
Marley in 1994 by two wholly-owned subsidiaries of the Corporation; and
$43,950 as the total premium paid by the Corporation in 1994 under a
split-dollar insurance plan, including both the portion of the premium
that is attributable to term life insurance coverage for Mr. Marley and
the full dollar value of the remainder of the premium. The split-dollar
insurance plan provides life insurance coverage for Mr. Marley equal to
twice his base salary (in lieu of the coverage available under the
Corporation's group-term life insurance plan), and a substantial portion
of the value of the advances made to pay the premium as shown in this
table will be repaid to the Corporation from policy proceeds.
<F5> Includes $95,800 as the total premium paid by the Corporation in 1994
under a split-dollar insurance plan, including both the portion of the
premium that is attributable to term life insurance coverage for Mr.
Gorjat and the full dollar value of the remainder of the premium. The
split-dollar insurance plan provides life insurance coverage for Mr.
Gorjat equal to at least twice his base salary (in lieu of the coverage
available under the Corporation's group-term life insurance plan), and
a substantial portion of the value of the advances made to pay the
premium as shown in this table will be repaid to the Corporation from
policy proceeds.
<F6> Includes $3,600 as the company-matching contribution under the Employee
Savings and Thrift Plan; and $33,334 as the total premium paid by the
Corporation in 1994 under a split-dollar insurance plan, including both
the portion of the premium that is attributable to term life insuance
coverage for Mr. Hassan and the full dollar value of the remainder of the
premium. The split-dollar insurance plan provides life insurance
coverage for Mr. Hassan equal to at least twice his base salary (in lieu
of the coverage available under the Corporation's group-term life
insurance plan), and a substantial portion of the value of the advances
made to pay the premium as shown in this table will be repaid to the
Corporation from policy proceeds.
<F7> Includes $3,600 as the company-matching contribution under the Employee
Savings and Thrift Plan; and $17,200 as the total premium paid by the
Corporation in 1994 under a split-dollar insurance plan, including both
the portion of the premium that is attributable to term life insurance
coverage for Mr. Gurski and the full dollar value of the remainder of
the premium. The split-dollar insurance plan provides life insurance
coverage for Mr. Gurski equal to at least twice his base salary (in lieu
of the coverage available under the Corporation's group-term life
insurance plan), and a substantial portion of the value of the advances
made to pay the premium as shown in this table will be repaid to the
Corporation from policy proceeds.
<F8> Includes $3,600 as the company-matching contribution under the Employee
Savings and Thrift Plan; $250,000 to fund a pension security trust under
the Corporation's SERP, which
11
amount relates to benefits accrued from 1959 through 1994; $4,800 as
total director fees paid to Mr. Savidge in 1994 by two wholly-owned
subsidiaries of the Corporation; and $82,055 as the total premium paid
by the Corporation in 1994 under a split-dollar insurance plan, including
both the portion of the premium that is attributable to term life
insurance coverage for Mr. Savidge and the full dollar value of the
remainder of the premium. The split-dollar insurance plan provides life
insurance coverage for Mr. Savidge equal to at least twice his base salary
(in lieu of the coverage available under the Corporation's group-term life
insurance plan), and a substantial portion of the value of the advances
made to pay the premium as shown in this table will be repaid to the
Corporation from policy proceeds.
<F9> Effective January 1, 1995 Mr. Savidge retired from the Corporation. The
Corporation has entered into a noncompetition and confidentiality
agreement with Mr. Savidge that has a 1-year term unless extended by
agreement of the parties and under which he agrees to make himself
reasonably available for advice and consultation. Under the agreement
Mr. Savidge will receive $5,000 a month.
<F10>Effective January 1, 1995, designated executive officers are permitted
to defer receipt of a portion of their annual base salary and all or a
portion of their annual cash bonus. The period of deferral is within
the discretion of the executive, but is generally until the year
following termination of employment. During the period of deferral, the
deferred compensation may be allocated or reallocated by the executive
between and among the following investment options: i) an interest-
bearing account with interest credited monthly based on 120% of the Mid-
Term Applicable Federal Rate as published by the Internal Revenue
Service, adjusted monthly and ii) a phantom AMP Common Stock Account in
which the phantom dividends are reinvested in the phantom stock units.
Payments of the deferred compensation can be made at the executive's
election in either a lump sum or up to ten annual installments. Amounts
of salary or bonus attributable to 1994, the receipt of which has been
deferred under this plan, are nevertheless included in columns (c) and
(d), as appropriate, of the Summary Compensation Table.
<F11>While no shares of restricted stock were granted to the named executive
officers in 1994, a total of 48,000 shares of restricted stock (adjusted
for the 2-for-1 stock split in 1995) were granted in 1994 and still held
at December 31, 1994. These shares had an aggregate value of $1,746,000
based upon an adjusted $36.375 per share closing price of the
Corporation's Common Stock as reported on the New York Stock Exchange
Composite Tape on December 31, 1994, and dividends are paid on these
shares to the same extent as any other shares of the Corporation's
Common Stock.
</TABLE>
12
Option/SAR Grants in 1994
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term<F3>
------------------------------------------------- ------------------------ -----------------------------
Number of
Securities % of Total
Underlying Options/SARs Exercise Market
Options/SARs Granted to or Base Price at
Granted<F1> Employees in Price Expiration Grant 0% 5% 10%
Name Date (#) 1994 ($/share) Date<F2> ($/share) ($) ($) ($)
----------------------- --------- ------------ ------------ ---------- ----------- ---------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William J. Hudson, Jr. .. 7/26/94 114,000 11.23 35.6875 7/26/2004 35.6875 0 2,558,579 6,483,942
Chief Executive
Officer and President,
and a Director
James E. Marley.......... 7/26/94 83,000 8.18 35.6875 7/26/2004 35.6875 0 1,862,825 4,720,765
Chairman of the Board
Jean Gorjat.............. 7/26/94 25,600 2.52 35.6875 7/26/2004 35.6875 0 574,558 1,456,043
Vice President
Javad K. Hassan.......... 7/26/94 26,200 2.58 35.6875 7/26/2004 35.6875 0 588,024 1,490,169
Vice President
John E. Gurski........... 7/26/94 22,800 2.25 35.6875 7/26/2004 35.6875 0 511,716 1,296,788
Vice President
Benjamin Savidge......... 7/26/94 14,000 1.38 35.6875 7/26/2004 35.6875 0 314,211 796,274
Retired Executive Vice
President and Chief
Financial Officer,
and a Director
---------------
<FN>
<F1> The Corporation's 1993 Long-Term Equity Incentive Plan (the "1993 Plan")
became effective on July 1, 1993 and is a long-term incentive
compensation program that is based on stock price appreciation both in
the form of stock options (either incentive or non-qualified stock
options) and in the form of freestanding SARs payable in the
Corporation's Common Stock or occasionally, in the discretion of the
Corporation, in cash. The 1993 Plan is administered by the Compensation
and Management Development Committee of the Corporation's Board of
Directors (the "Committee"). Under the 1993 Plan, each employee
designated by the Committee to participate is credited with stock
options having an option price per share of Common Stock that is not less
than 100% of the closing price of the Common Stock on the New York Stock
Exchange Composite Tape on the award date, and/or stock bonus units
(SARs) having a designated value per unit of not less than 95% of the
average closing price of the Common Stock on the New York Stock Exchange
Composite Tape for the 10 trading days immediately prior to the award
date. Aggregate awards of stock options and stock bonus units that were
made to the named executive officers in 1994 are shown in column (f) of
the Summary Compensation Table, page 10. All 1994 awards and related
share prices have been adjusted for the 2-for-1 stock plit in 1995.
With respect to stock options, all options granted in 1994 will vest 3
years from the date of award and will expire 7 years after such vesting.
They have an exercise price equal to 100% of the closing price of the
Common Stock on the New York Stock Exchange on the award date.
No stock bonus units were granted to any named executive officers in
1994. When such awards are made, bonus computations with respect to the
stock bonus units are made on the 4th through 6th anniversaries of the
award date for one-third of each participant's bonus units and are based
on the increase in the market price of the Common Stock over the
designated value, as established on the award date. The bonus typically
paid in stock (the "Stock Bonus") is the number of shares of Common Stock
having an aggregate market value on the computation date equivalent to
the one-third of the participant's bonus units multiplied by the increase
in market price described above. A cash bonus (the "Supplemental Cash
Bonus") is also paid under the 1993 Plan in conjunction with Stock
Bonuses. The Supplemental Cash Bonus is paid
13
at the same time that payment of the Stock Bonus is made and is a
percentage of the value of the Stock Bonus that is designated at the
time of award and is no greater than that calculated to provide a payout
sufficient to pay the anticipated United States Federal income tax at a
maximum rate for the highest taxable bracket with respect to the aggregate
of the Stock Bonus and the Supplemental Cash Bonus. Supplemental Cash
Bonus awards are not included in this table when stock bonus unit (SAR)
awards are made in the reported year and disclosed in this table.
<F2> The expiration date for stock options under the 1993 Plan is the date
determined by the Committee at the time of the award of such options.
When SARs are granted in the reported year and disclosed in this table,
the 6th anniversary date is designated as the "expiration date" because
computations of the Stock Bonus are made on the 4th through 6th
anniversaries of the award date for one-third of each participant's
bonus units granted in the award.
<F3> In 1994 the named executive officers received awards under the 1993 Plan
entirely in stock options, and therefore assumed values contained in this
table relate only to the options. These values are based on assumed
appreciation rates set by the Securities and Exchange Commission and
are not intended to forecast possible future appreciation, if any, of the
Corporation's stock price. The values are based on the difference
between the exercise price and the exercise price as increased by the
assumed annual appreciation rate over the 10-year term of the options,
compounded annually, with said difference multiplied by the number of
options granted as shown in the table.
</TABLE>
Aggregated Option/SAR Exercises<F1> In 1994 and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs on In-The-Money Options/SARs
Shares Acquired Value December 31, 1994 (#) on December 31, 1994 ($)
on Exercise Realized ------------------------------ -----------------------------------
Name (#)<F2> ($)<F3> Exercisable/Unexercisable<F4> Exercisable/Unexercisable<F4><F5>
------------------------- ---------------- ----------- ------------------------------ -----------------------------------
<S> <C> <C> <C> <C>
William J. Hudson, Jr. ........ 800 25,450 0 / 260,868 0 / 1,063,261
Chief Executive Officer
and President, and a
Director
James E. Marley................ 1,396 91,947 0 / 183,000 0 / 767,563
Chairman of the Board
Jean Gorjat.................... 748 28,705 0 / 59,600 0 / 274,850
Vice President
Javad K. Hassan................ 444 13,070 0 / 66,600 0 / 300,668
Vice President
John E. Gurski................. 400 11,775 0 / 51,400 0 / 227,150
Vice President
Benjamin Savidge............... 3,644 123,331 0 / 78,066 0 / 523,031
Retired Executive Vice
President and Chief
Financial Officer,
and a Director
--------------
<FN>
<F1> All exercises shown in this table relate to stock bonus units (SARs)
granted under the Corporation's Bonus Plan (Stock Plus Cash) (the "Bonus
Plan"), which preceded the 1993 Plan. The Corporation first awarded
stock options in 1993, under the 1993 Plan. Because these options
generally will not vest until 3 years after the date of award, no
exercises occurred in 1994. Similarly, computations of Stock Bonuses
under the 1993 Plan will not commence until the 4th anniversary of the
award date and, since such awards under the 1993 Plan were first made
in 1993, no computations (in other words, "exercises") were made in 1994.
14
With respect to the stock bonus units granted under the Bonus Plan, the
Bonus Plan was a long-term incentive compensation program that was based
on stock price appreciation in the form of freestanding SARs payable in
the Corporation's Common Stock or occasionally, in the discretion of the
Corporation, in cash. Under the Bonus Plan, each employee designated by
the Board of Directors to participate was credited with bonus units
having a designated value per unit of not less than 95% of the closing
price of the Common Stock on the New York Stock Exchange on the award
date.
Bonus computations are made on the 4th through 6th anniversaries of the
award date for one-third of each participant's bonus units and are based
on the greater of the increase in the market price of the Common Stock
(a) over the designated value, as established on the award date, or (b)
over an adjusted designated value. The adjusted designated value is 95%
of an amount determined by discounting the market price of the Common
Stock on the computation date by a percentage (not to exceed 7.5% per
year) equal to one-half of the Corporation's compound average annual
growth rate in earnings per share during the period between the award
date and the computation date. The bonus typically paid in stock (the
"Bonus Plan Stock Bonus") is the number of shares of the Common Stock
having an aggregate market value on the computation date equivalent to
the amount computed as described above.
A cash bonus (the "Cash Bonus") is also paid under the Bonus Plan. For
awards made prior to January 27, 1988, the Cash Bonus is an amount equal
to a percentage designated at the time of award (not more than 50%) of
the value of the Bonus Plan Stock Bonus. For awards under the Bonus Plan
that were made between January 27, 1988 and June 30, 1993, the Cash Bonus
is an amount sufficient to pay the anticipated United States Federal
income tax with respect to both the Bonus Plan Stock Bonus and the Cash
Bonus as determined at the time of the distribution of the bonuses, not
to exceed an amount that is 50% of the value of the Bonus Plan Stock
Bonus. The amounts of the Cash Bonus paid in 1994 based on distributions
made in that year are included in column (e), "Other Annual
Compensation", of the Summary Compensation Table, page 10.
In view of the foregoing, "exercises" for purposes of this table are
deemed to be the Bonus Plan Stock Bonus computations that are made on the
4th through 6th anniversaries of the award date for one-third of each
participant's bonus units granted in an award under the Corporation's
Bonus Plan.
<F2> The number of shares of Common Stock reported in this table as having
been acquired on exercise in 1994 has been adjusted for the 2-for-1
stock split in 1995.
<F3> "Value Realized" includes only the Bonus Plan Stock Bonus paid under the
Bonus Plan based on stock price appreciation, and does not include the
Cash Bonus as described in footnote (1) above.
<F4> The stock bonus units (SARs) awarded under the Bonus Plan and the stock
bonus units (SARs) awarded under the 1993 Plan are not exercised by the
participants, but are paid based on bonus computations made on the 4th
through 6th anniversaries of the award date for one-third of each
participant's bonus units. All outstanding awards and related share
prices have been adjusted for the 2-for-1 stock split in 1995.
<F5> These values relate only to the Bonus Plan Stock Bonus described in
footnote (1) above and the Stock Options and Stock Bonus awarded under
the 1993 Plan as described in footnote (1) of the table entitled
"Option/SAR Grants in 1994", pages 13-14. A Cash Bonus under the Bonus Plan
and a Supplemental Cash Bonus under the 1993 Plan is also paid as
previously described, but is not included in the values disclosed in this
column. With respect to Bonus Plan Stock Bonuses, these values also have
been calculated based on the designated values for the respective awards
and without regard to adjusted designated values, as those terms are
defined under the Bonus Plan and described in footnote (1) above.
</TABLE>
15
RETIREMENT BENEFITS
The Corporation maintains a pension plan ("Pension Plan") for its
employees that is designed and administered to qualify under Section 401(a)
of the Internal Revenue Code of 1986, as amended ("Code"). The Pension Plan
has been noncontributory since January 1, 1991. Prior to January 1, 1994 the
Pension Plan was a career average defined benefit plan under which, for each
year of covered service with the Corporation, an employee accrued a benefit
equal to 1.67% of his or her current base earnings. The Pension Plan also
included an alternative formula that updated pension benefits for prior
service. An employee received the greater of the benefit the employee had
otherwise earned under the Pension Plan or the benefit calculated under the
alternative formula based on final average base earnings and years of
credited service.
Effective as of January 1, 1994 the Corporation amended the Pension Plan
to provide benefits based on final average base earnings and total years of
credited service at retirement. The final average base earnings is determined
based on the average of the year-end annual earnings rates for the
3-consecutive year period that represents the employee's highest 3-year
average during such employee's last 10 years of service. The benefit is
calculated by adding (1) 1.0% of such final average base earnings, up to the
then-current Social Security covered compensation level ($25,920 in 1995),
multiplied by the employee's credited years of past service (not to exceed
35 years), (2) 1.5% of such final average base earnings in excess of the
Social Security covered compensation level, multiplied by the employee's
credited years of past service (not to exceed 35 years), and (3) 1.2% of
such final average base earnings multiplied by the number of the employee's
credited years of past service in excess of 35 years. Credited years of
past service are counted back to age 21 and one year of service for
participants who joined the Pension Plan when first eligible, otherwise
back to the date of actual enrollment in the Pension Plan. Employees who
were age 60 or older as of January 1, 1994 will receive the higher of the
benefit under the prior career average defined benefit approach or the
benefit under the new final average base earnings method.
Earnings used to calculate benefits under the Pension Plan are restricted
to (a) annual base salary, including amounts deferred under the Corporation's
Employee Savings and Thrift Plan, amounts applied to the employee portion of
the welfare benefit plan premiums pursuant to a salary reduction agreement,
and amounts credited to health care and dependent care flexible spending
accounts pursuant to a salary reduction agreement and (b), for individuals
paid on a commission basis, annual base salary (as described above) plus
commissions, but commissions are included only to the extent that the sum of
the annual base salary and commissions does not exceed a designated amount.
Normal Retirement Date under the Pension Plan is defined as age 65, but there
is no actuarial reduction of a participant's pension for early retirement
between the ages of 60 and 65.
The Pension Plan also provides for a special pension benefit formula that
would be used to recalculate benefits in the event of a change in control of
the Corporation. The special formula, which the Corporation plans to review
and modify from time to time as the funding status of the Pension Plan
warrants, is intended to ensure that excess Pension Plan assets at the time
of a change in control are used to provide increased retirement benefits
for covered employees. The special formula is similar in design to the
final average earnings formula described above under the amended Pension
Plan, with the 1%, 1.5% and 1.2% factors replaced by 1.25%, 1.75%, and
1.67%, respectively. For purposes of this provision of the Pension Plan, a
"change in control" would be deemed to have occurred if (a) any person or
group acquires beneficial ownership of 30% or more of the Corporation's
issued and outstanding shares of Common Stock, or (b) there occurs a change
in the Board such that the directors constituting the Board in the
immediately preceding year ("Incumbent Board") and any subsequently elected
directors who were recommended or approved by a majority of the Incumbent
Board no longer constitute a majority of the Board.
16
In accordance with Code requirements, the Pension Plan limits the
maximum amount of annual compensation that may be taken into account under the
Pension Plan ($150,000 in 1994 and 1995) and the maximum annual employer-
provided benefit that can be paid under the Pension Plan ($118,800 in 1994 and
$120,000 in 1995). The Corporation maintains a supplemental employee
retirement program ("SERP") pursuant to which certain employees whose
retirement benefits otherwise payable under the Pension Plan are limited by
these Code restrictions will receive payment of a supplemental pension from
non-Pension Plan sources. The total benefit payable under both the Pension
Plan and the SERP is calculated without regard to the Code limitations
applicable to the Pension Plan using the same pension formula(s) applicable
under the Pension Plan and using a 3-consecutive year average of both base
earnings and annual cash bonus. The total benefit thus calculated, reduced
by the restricted benefit actually payable from the Pension Plan, is the
benefit payable from the SERP. Effective May 23, 1988 the Corporation
established a pension security trust (the "Trust"), with a national bank as
trustee, to fund certain SERP benefits. During 1994 the Corporation
contributed to the Trust $250,000 to further fund the restricted Pension Plan
benefits that have been earned by Mr. Savidge and are attributable to all
years of service through 1994. The Corporation also paid to Mr. Savidge an
amount ($190,513) calculated to cover his estimated Federal, state, and local
income taxes with respect to both the Corporation's contribution to the Trust
and income earned thereon. Such amounts are included in the Summary
Compensation Table, page 10.
The following table shows the combined annual retirement benefit payable to
the Corporation's executive officers named in the Summary Compensation
Table under both the Pension Plan and the SERP, as amended effective
January 1, 1994, upon normal retirement, based on the indicated amount of
final average renumeration and number of credited years of service:
<TABLE>
<CAPTION>
PENSION PLAN TABLE <F3>
Years of Service <F2>
-----------------------------------------------------------
Renumeration<F1> 15 20 25 30 35 40
----------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 250,000......... $ 54,310 $ 72,410 $ 90,510 $ 108,610 $ 126,710 $ 141,710
300,000......... 65,560 87,410 109,260 131,110 152,960 170,960
350,000......... 76,810 102,410 128,010 153,610 179,210 200,210
400,000......... 88,060 117,410 146,760 176,110 205,460 229,460
450,000......... 99,310 132,410 165,510 198,610 231,710 258,710
500,000......... 110,560 147,410 184,260 221,110 257,960 287,960
550,000......... 121,810 162,410 203,010 243,610 284,210 317,210
600,000......... 133,060 177,410 221,760 266,110 310,460 346,460
650,000......... 144,310 192,410 240,510 288,610 336,710 375,710
700,000......... 155,560 207,410 259,260 311,110 362,960 404,960
750,000......... 166,810 222,410 278,010 333,610 389,210 434,210
800,000......... 178,060 237,410 296,760 356,110 415,460 463,460
850,000......... 189,310 252,410 315,510 378,610 441,710 492,710
900,000......... 200,560 267,410 334,260 401,110 467,960 521,960
950,000......... 211,810 282,410 353,010 423,610 494,210 551,210
1,000,000......... 223,060 297,410 371,760 446,110 520,460 580,460
1,050,000......... 234,310 312,410 390,510 468,610 546,710 609,710
1,100,000......... 245,560 327,410 409,260 491,110 572,960 638,960
1,150,000......... 256,810 342,410 428,010 513,610 599,210 668,210
1,200,000......... 268,060 357,410 446,760 536,110 625,460 697,460
---------------
17
<FN>
<F1> The compensation covered by the combination of the Pension Plan and SERP
includes the employee's final average earnings, as determined by the
average of the 3-consecutive year period that represents the employee's
highest base earnings during such employee's last 10 years of service,
together with the average of the employee's annual cash bonus payments
also paid in such 3-consecutive year period. In the case of the named
executive officers, the annual base earnings considered in such a
determination includes the amount of salary and bonus shown in columns
(c) and (d) of the Summary Compensation Table, page 10.
<F2> The current estimated credited years of service for the named executive
officers are as follows: W. J. Hudson, Jr. - 29 years; J. E. Marley -
30.5 years; J. Gorjat - 4 years; J. K. Hassan - 5.75 years; J. E. Gurski
- 21.5 years; and B. Savidge - 34.17 years. The estimated credited years
of service for the named executive officers at the Normal Retirement Date
are as follows: W. J. Hudson, Jr. - 33.42 years; J. E. Marley - 36.08
years; J. Gorjat - 4.42 years; J. K. Hassan - 16.58 years; J. E. Gurski -
32.5 years; and B. Savidge - 34.17 years.
<F3> The retirement benefit shown in the Pension Plan Table is a straight life
annuity amount and is not subject to any reduction for Social Security or
other offset amounts. However, as required by law, the form of payment
for married employees under the Pension Plan and SERP is a 50% joint and
survivor annuity, which is typically less than the straight life annuity
amount.
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS
The AMP equity security ownership as of March 10, 1995 by officers of the
Corporation who were executive officers during 1994 is as follows:
</TABLE>
<TABLE>
<CAPTION>
Amounts and Nature
Name and Address of Beneficial Ownership Percent
Title of Class of Beneficial Owner (shares) Of Class
-------------- ------------------------ ----------------------- -----------
<S> <C> <C> <C>
Common Stock....William J. Hudson, Jr. 26,369<F2> less than 1
Harrisburg, Pennsylvania <F3>
<F4>
Common Stock....James E. Marley 31,338<F2> less than 1
Harrisburg, Pennsylvania <F3>
<F4>
Common Stock....Jean Gorjat 2,676<F4> less than 1
Tokyo, Japan
Common Stock....Javad K. Hassan 2,095<F1> less than 1
Harrisburg, Pennsylvania <F4>
Common Stock....John E. Gurski 5,953<F1> less than 1
London, England <F2>
<F4>
Common Stock....Benjamin Savidge 28,470<F4> less than 1
Harrisburg, Pennsylvania
Common Stock....all Executive Officers<F1><F2><F3> 1,870,260 0.89
(15 persons)
and Directors as a Group
-----------------
<FN>
<F1> Four executive officers have the right to acquire an undeterminable
number of shares under the Corporation's Bonus Plan (Stock Plus Cash)
within 60 days after March 10, 1995.
<F2> A portion of the shares reported for four executive officers are held in
the Corporation's Employee Savings and Thrift Plan. Through further
contributions to this plan, each may acquire an undeterminable number of
additional shares within 60 days after March 10, 1995.
18
<F3> Under the Corporation's deferred compensation plan for designated
executive officers, Messrs. Hudson and Marley own 9,930.7 and 8,068.8
phantom shares, respectively, in the phantom AMP Common Stock account.
<F4> In addition, a total of 10,925.8 shares are held by immediate family
members of two directors and two executive officers; the directors and
executive officers disclaim beneficial ownership. Additionally, a
director has a 2% residual beneficial interest but no voting or
dispositive powers in a trust that holds 7,392 shares of Common Stock of
the Corporation. Seven directors hold a total 14,000 options and 15
executive officers hold a total of 827,200 options and 136,800 Stock Bonus
Units. Four directors also own a total of 3,817.2 phantom shares in the
phantom AMP Common Stock account of the non-employee directors' deferred
compensation plan and six executive officers own a total of 20,047.8
phantom shares in the phantom AMP Common Stock account of the designated
executive officers' deferred compensation plan.
19
</TABLE>
<TABLE>
<CAPTION>
Performance Graph
CUMULATIVE TOTAL SHAREHOLDER RETURN
1989-94
<S> <C> <C>
220 |
| Base Period Indexes/Cumulative Returns
| Company/Index Name 1989 1990 1991 1992 1993 1994
200 | ------------------ ----------- ------ ------ ------ ------ ------
| AMP Incorporated 100 100.71 139.56 141.70 158.37 187.07
| S&P 500 100 96.90 126.42 136.05 149.76 151.74
180 | Peer Group 100 85.72 108.93 130.61 157.95 179.88
|
|
160 |
|
TOTAL |
SHAREHOLDER 140 |
RETURN<F2> |
(DOLLARS) |
120 |
| AMP _________
| S&P 500 ..........
100 | PEER GROUP<F1> _ _ _ _
|
80 |___________________________________________________________
1989 1990 1991 1992 1993 1994
-------------
<FN>
<F1> The Peer Group includes the following companies:
Advanced Micro Services Moore Corporation Ltd.
Amdahl Corporation Motorola Inc.
Apple Computer Inc. National Semiconductor Corporation
Ceridian Corporation Perkin-Elmer Corporation
Compaq Computer Corporation Pitney Bowes Inc.
Cray Research Inc. Raychem Corporation
Data General Corporation Tandem Computers Inc.
Digital Equipment Corporation Tektronix Inc.
Emerson Electric Company Texas Instruments Inc.
W. W. Grainger Inc. Thomas & Betts Corporation
Hewlett-Packard Company Unisys Corporation
Honeywell Inc. Wang Laboratories Inc.
Intel Corporation Westinghouse Electric Corporation
Intergraph Corporation Xerox Corporation
The Peer Group remains unchanged from the last 2 years and essentially
consists of all companies included in the following Standard and Poor's
industrial classifications as of April 1993: Electrical Equipment,
Electronics (Instrumentation), Office Equipment, Computer Systems, and
Electronics (Semiconductors). However the Peer Group does not include
the Corporation, which is one of the companies listed in the Electrical
Equipment classification, and it also does not include General Electric
Company and International Business Machines Corporation because of their
dissimilar market capitalizations. Although changes have occurred since
1993 to the composition of the Standard and Poor's industrial
classifications that the Corporation relied on in determining its
original Peer Group, the Corporation has elected at this time to continue
with the Peer Group as originally devised in order to enhance the
comparability of the Performance Graph year-to-year.
<F2> The Total Shareholder Return assumes a fixed investment of $100 in the
AMP Common Stock or indicated index, and a reinvestment of dividends.
The total return of each company included in the S&P 500 and Peer Group
indexes has been weighted in accordance with the company's market
capitalization as of the beginning of the year reported. The weighting
was accomplished by: i) calculating the market capitalization for each
company at the beginning of the respective calendar year based on the
closing stock price and outstanding shares; ii) determining the
percentage that each such market capitalization represents against the
total of such market capitalizations for all companies included in the
index; and iii) multiplying the percentage determined in ii) above by the
total shareholder return of the company in question for the year being
reported.
</TABLE>
20
THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT ON
EXECUTIVE COMPENSATION.
The Compensation and Management Development Committee of the Board of
Directors, among other responsibilities, has responsibility for the
Corporation's executive compensation program. The Committee is currently
composed entirely of outside directors. The Committee is chaired by Mr.
Ralph D. DeNunzio, President, Harbor Point Associates, Inc. Other Committee
members include Mr. Dexter F. Baker, Retired Chairman and CEO, Air Products and
Chemicals, Inc.; Mr. John C. Morley, President and CEO, Reliance Electric
Company; and Mr. Paul G. Schloemer, Retired President and CEO, Parker
Hannifin Corporation.
The Committee is responsible for reviewing and approving compensation and
benefit programs that cover officers and key executives of the Corporation.
This includes oversight of salary levels and salary increases for senior
officers, annual Management Incentive Plan cash bonus awards and payment
decisions, awards of stock bonuses and stock options under the 1993 Long-
Term Equity Incentive Plan, and any special benefits affecting officers and
key executives such as supplemental retirement plans, change of control
agreements and other plans. The Committee in appropriate cases makes
recommendations to the Board of Directors on matters involving the executive
compensation program.
The Corporation's compensation philosophy is to ensure that the delivery
of compensation, both in the short- and long-term, is consistent with the
sustained progress, growth and profitability of the Corporation and acts as an
inducement to attract and retain qualified individuals. The Corporation's
intent is to have short- and long-term incentive compensation plans that
correlate to the growth, success and profitability of the Corporation and thus
align the interests of the Corporation's executives with its shareholders.
These at-risk, performance-based incentive compensation plans are intended
to form a significant portion of the total compensation opportunity for all
participants. Base salary compensation and compensation that is incidental
and/or supplemental to base compensation is kept competitive with the
participant's counterparts in industry, with due regard to country site and
appropriate business custom.
The Corporation annually reviews compensation surveys and other published
compensation data covering the electrical/electronics industry and industry in
general to assess whether its own executive salary ranges and compensation
practices remain competitive. Where they do not remain competitive,
appropriate adjustments are made. In this comparative process, the
compensation levels and practices at the companies comprising the Peer Group
Index in the Performance Graph at page 20 are not specifically or separately
analyzed, but to a substantial extent these Peer Group companies and their
compensation practices are included in the general electrical/electronic
industry and industry in general surveys that are reviewed and considered by
the Corporation in setting its CEO and other executive compensation levels
and practices. The salaries, and any periodic increases thereof, of the
Chairman of the Board and the Chief Executive Officer and President are
determined by the Board of Directors of the Corporation based on
recommendations made by the Committee. These officers in turn formulate the
salary plan for the other executive officers, with the review and oversight
of the Committee.
The level of base salary compensation for officers and key executives is
determined by both their scope of responsibility and the salary ranges for
officers and key executives of the Corporation established by the process
described above. Periodic increases in base salary are dependent on the
individual's performance in his or her position for a given period, on the
individual's competency, skill and experience, and on general levels of wage
and price inflation.
The AMP Management Incentive Plan provides opportunity for annual cash
bonuses based on two or more of the following weighted performance components:
(1) overall corporate earnings
21
per share (EPS) performance for a given year measured against an EPS target
for the year (weighted four-fifths for named executive officer participants
such as the CEO with corporate-wide responsibilities and two-fifths for those
with specific unit responsibilities); (2) operating unit performance for a
given year measured against operating unit income, sales or other targets for
the year (weighted two-fifths for named executive officer participants with
specific unit responsibilities); and (3) individual performance for a given
year measured against individual performance objectives for such year
(weighted one-fifth for named executive officer participants). The Committee
sets the EPS target for the year at the start of each year, with the review of
the Board of Directors, and also sets the individual performance objectives
of the Chairman of the Board and the CEO. The EPS target for 1994 was
$3.24 and the actual EPS performance was $3.52 (on a pre-stock split basis).
The unit and individual performance targets for 1994 and the actual unit and
individual performance levels for 1994 necessarily varied widely between units
and individuals. In addition to setting the EPS target, the Committee assigns
to each participant under the Management Incentive Plan a minimum, target and
maximum bonus percentage, which vary from participant to participant to
reflect competitive practice, the participant's position, and the scope of the
participant's responsibility. Actual performance between 90% and 120% of the
target performance levels results in a bonus calculation that ranges between
the participant's minimum and maximum bonus percentages.
Long-term incentive compensation awards in the form of bonus units
(essentially, stock appreciation rights) and stock options are made under the
1993 Long-Term Equity Incentive Plan. Both the bonus units and the stock
options deliver value to the participant over time, but only if and to the
extent that the value of the Corporation's stock rises. In this way, long-
term compensation is linked both to increased shareholder value and continuing
service to the Corporation. The current practice of the Corporation is to
grant only stock options to the named executive officers.
With respect to bonus unit awards under the Plan, the Committee has
discretion as to the timing and amount of the awards. The general practice,
however, is to make bonus unit awards on a three-year cycle and to use the
quotient obtained by dividing the participant's annual base salary by the
fair market value of a share of Common Stock on the award date as a benchmark
for determining the number of bonus units to award. The designated value of
a bonus unit is set on the award date at no less than 95% of the fair market
value of a share of Common Stock as defined under the Plan.
The Committee also has discretion with respect to the timing and amount
of stock option awards under the Plan. In granting stock option awards during
1994, the Committee gave considerable weight to the annual stock option award
levels and practices of a diverse range of 270 public companies included in
a recent Towers Perrin survey of long-term incentive compensation practices.
Of the twenty-eight companies comprising the Peer Group Index in the
Performance Graph at page 20, twelve were included in the Towers Perrin
survey.
The stock option award levels for 1994 were generally set at between the
50th and the 75th percentile of the option award levels reflected in the
Towers Perrin survey. The number of stock options calculated to be granted
in any year is reduced by one-third of the most recent triennial stock bonus
unit award, if any. The exercise price of each option awarded in 1994 was
set at $35.6875 (adjusted for the 2-for-1 stock split in 1995), which was
100% of the fair market value of a share of Common Stock as defined under
the Plan. It is the current intention of the Committee to grant stock
option awards on an annual cycle.
It is improbable that the 1995 aggregate compensation of any executive
will equal or exceed the $1,000,000 per executive annual limitation on Federal
tax-deductible compensation. However, in anticipation of possible future
growth in executive compensation to levels that do exceed this
22
$1,000,000 per year limit, the Corporation is submitting its performance-based
compensation plans to the Corporation's shareholders for approval as a part of
this proxy solicitation. Compensation paid pursuant to shareholder-approved,
performance-based plans will be excludable from the $1,000,000 per year
deduction limit, according to the provisions of Section 162(m) of the Internal
Revenue Code of 1986, as amended.
1994 CEO Compensation
Effective January 1, 1994, Mr. Hudson's base salary rate per annum was
adjusted to $600,000 representing an increase of $50,000 over his prior base
salary rate. In adjusting Mr. Hudson's salary compensation upwards in 1994,
the Committee considered Mr. Hudson's performance since his prior increase,
his competency, skill and experience, and salary range survey data on his
counterparts in the electrical/electronic industry and industry in general.
The data indicated to the Committee that Mr. Hudson's prior base salary rate
of $550,000 was at the low end of the competitive salary range for peer
CEOs in industry in general, and was at approximately the 25th percentile
compared to peer CEO salaries in the electrical/electronics industry. The
adjusted salary level of $600,000 set for Mr. Hudson was still substantially
below the $685,000 median annual salary level for comparable CEOs in industry
in general and also substantially below the $643,000 50th percentile salary
level for comparable CEOs in the electrical/electronics industry.
Mr. Hudson's assigned minimum, target, and maximum bonus percentages
under the Management Incentive Plan for 1994 were 10%, 55% and 80%,
respectively. Accordingly, Mr. Hudson had the potential to earn an annual
bonus of up to 80% of base annual salary if the Corporation were to attain
120% or more of the $3.24 EPS target and Mr. Hudson were to fully accomplish
his individual performance targets. Based on the Corporation's adjusted EPS
performance for 1994 and the Committee's assessment of Mr. Hudson's individual
performance, Mr. Hudson's aggregate bonus under the Plan for 1994 was 70.4% of
his base salary, or $422,400.
On July 26, 1994 Mr. Hudson was awarded 114,000 stock options (2,800
incentive stock options and 111,200 nonqualified stock options, adjusted for
the 2-for-1 stock split in 1995) under the 1993 Long-Term Incentive Plan, all
with an adjusted exercise price of $35.6875. These options will first be
exercisable July 26, 1997 and remain exercisable to July 26, 2004. In making
this award, the Committee's intent was to continue a practice begun in 1993,
when the Corporation's first stock option plan became effective, to increase
the proportion of stock-based compensation in the total compensation package
of the Corporation's executive officers, particularly the CEO, thereby
further increasing the executives' community of interest with the
Corporation's shareholders. The stock option award levels set for Mr. Hudson
in 1994 were at the 75th percentile of comparable option award recipients
reflected in the Towers Perrin survey data relied upon by the Committee.
Mr. Hudson now holds a total of 226,000 stock options, adjusted for the 2-for-1
stock split in 1995, which will not start to vest until 1996.
In January, 1989, Mr. Hudson had been awarded 4,000 bonus units under the
Corporation's former Stock Plus Cash Bonus Plan, with a designated value of
$44.50 and an unspecified cash bonus percentage (not in excess of 50%) to
cover Federal taxes on the payout. In January, 1994, when the fair market
value of a share of the Corporation's Common Stock had increased to $63.625,
1,333 of these 4,000 bonus units matured, resulting in a stock bonus payment
to Mr. Hudson of 400 shares of Common Stock of the Corporation and a cash
payment of $12,790.45. In making these payout calculations, the award date
designated value of $44.50 per bonus unit was used to determine the spread
in lieu of the alternative designated value defined under the Plan. The
Plan's alternative designated value, which is based on earnings per share
growth between the award date and the maturity date, is used in payout
calculations whenever it would result in a greater stock bonus payout than
would the award date designated value. (For an explanation of the alternative
designated value, see footnote (1) to the Aggregated Option/SAR Exercises in
1994 and FY-End Option/SAR Values Table, pages 14-15.)
23
The Compensation and Management Development Committee:
Dexter F. Baker Ralph D. DeNunzio, Chairman
John C. Morley Paul G. Schloemer
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Corporation has entered into agreements with the named executive
officers (with the exception of Mr. Gorjat) to assure their unbiased counsel
and continued dedication in the event of an unsolicited tender offer or other
occurrence that may result in a change of control.
The terms of the agreements provide that, in the event of a change of
control, as previously defined, and the termination of the executive's
employment at any time during the 2-year period thereafter, the executive will
be paid a lump sum amount equal to his highest annual base salary rate in
effect during the year of termination multiplied by the number of whole
years and fractions thereof remaining to his 65th birthday, but, depending on
the date of the agreement, such multiplier shall in no event exceed 5, 4 or 3.
Any agreement entered into after January 1, 1990 provides for the payment of
an amount necessary to pay any excise tax, and any taxes thereon, due on the
lump sum or other payment.
Additionally, the executive will be vested and paid under any bonus plans
he is participating in; be paid a pension computed on his base salary rate
prior to termination projected to the earlier of his elected early retirement
date, entry into a new employer's pension plan or age 65; receive continuation
of his Corporation-provided life insurance; and receive continuation of medical
and dental benefits for up to 3 years.
Notwithstanding the foregoing, several executive officers have agreements
where a change in control would be deemed to have occurred only if the then-
current Board of Directors of the Corporation should cease to constitute a
majority of the Board of the Corporation as the result of an unsolicited
tender offer or a tender offer solicited in response to such unsolicited
tender offer, or if any person or group acquires 30% or more of the
Corporation's issued and outstanding shares of Common Stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1994 there were a) no transactions between the Corporation and
management, the Directors (and Nominees for director) or related third
parties; b) no business relationship between the Corporation and a Director
or Nominee for director; and c) no indebtedness to the Corporation by
management, the Directors (and Nominees for director) or related third
parties or entities, that must be disclosed.
PRINCIPAL SHAREHOLDERS
The Corporation knows of no person who beneficially owns more than 5% of
the outstanding Common Stock of the Corporation as of March 10, 1995.
INDEPENDENT ACCOUNTANTS
The selection of Arthur Andersen LLP as the independent accountants for
previous years has continued during the year 1995. Arthur Andersen LLP has
no financial interest, direct or indirect, in the Corporation or any of its
subsidiaries.
24
A representative of Arthur Andersen LLP will attend the Annual Meeting
with the opportunity to make a statement if he desires to do so and to answer
questions that may be asked of him by the shareholders.
1996 SHAREHOLDER PROPOSALS
Any shareholder, whether of record or a beneficial owner, desiring to
submit a proposal for consideration to appear in the Corporation's 1996 Proxy
Statement shall submit such proposal, typewritten or printed, addressed to the
Secretary of the Corporation. Such proposal must identify the name and address
of the shareholder, the number of the Corporation's shares held of record or
beneficially, the dates upon which the shareholder acquired such shares and
documentary support for a claim of beneficial ownership. The proposal should
be sent Certified Mail - Return Receipt Requested to the attention of the
Secretary of the Corporation, P.O. Box 3608, Harrisburg, Pennsylvania
17105-3608 and must be received not later than November 25, 1995.
In addition to the foregoing procedure for inclusion of a shareholder
proposal in the Corporation's Proxy Statement, the Corporation will consider
other items of business and nominations for election as director of the
Corporation that are properly brought before the Annual Meeting by a
shareholder. To be properly brought before the Annual Meeting, items of
business must be appropriate subjects for shareholder consideration, timely
notice thereof must be given in writing to the Secretary of the Corporation,
and other applicable requirements must be met. In general, such notice is
timely if it is received at the principal executive offices of the
Corporation at least 60 days in advance of the date in the then-current year
that corresponds to the date of the previous year's Annual Meeting.
Alternative notice deadlines apply if the date of the Annual Meeting differs
by more than 15 days from the date of the previous year's Annual Meeting.
The Bylaws specify the information to be included in the shareholder's notice.
Shareholders may either recommend nominations of director for
consideration by the Nominating and Governance Committee in the process
described on page 9 of this Proxy Statement, or directly nominate persons
for election to the Board by complying with the notice provisions set forth in
the Bylaws. In general, such notice is timely if it is received by the
Secretary of the Corporation at least 60 days in advance of the date in the
current year that corresponds to the date of the previous year's Annual
Meeting. Alternative notice deadlines apply if the date of the Annual Meeting
differs by more than 15 days from the date of the previous year's Annual
Meeting or if the election is to be held at a special meeting of
shareholders. The Bylaws specify the information to be included in the
shareholder's notice of nomination.
Interested shareholders can obtain full copies of the Bylaw provisions
by making a written request therefor to the Secretary of the Corporation.
ITEM 2:
PROPOSAL FOR SHAREHOLDER APPROVAL OF THE REVISED
AMP MANAGEMENT INCENTIVE PLAN
INTRODUCTION
The Board of Directors of the Corporation, upon the recommendation of
the Compensation and Management Development Committee (the "Committee") of
the Board, approved on January 25, 1995 the AMP Management Incentive Plan
as amended (the "Incentive Plan") and recommended that the Incentive Plan
be submitted for shareholder approval at the 1995 Annual Meeting of
Shareholders.
25
The Incentive Plan, which has been in effect in substantially the same
form since 1992, has as its purpose the rewarding of the Corporation's
officers and key senior executives for the achievement of both corporate-
wide and business unit-specific financial performance targets and
individual nonfinancial performance objectives. The targeted levels of
corporate-wide and unit-specific performance and the weighting between
corporate, business unit and individual factors are predetermined by the
Committee at the beginning of each year.
The Board of Directors believes that the Incentive Plan is an
important means of allowing those officers and key senior executives who
are in the best position to make significant contributions to the success
of the Corporation and its businesses to share in the financial achievements
of the Corporation. The Incentive Plan also provides a critical component of
the competitive compensation package necessary to attract and retain such
executives. The Board of Directors is seeking shareholder approval for the
objective, performance-based corporate-wide and unit-specific components of
the Incentive Plan in order to preserve the Corporation's Federal tax
deduction, in light of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), for all compensation paid to its five highest paid
executive officers pursuant to those components of the Incentive Plan.
THE INCENTIVE PLAN
The Incentive Plan is administered by the Committee, which is comprised
of directors who are considered "outside" directors for purposes of Section
162(m) of the Code. The Incentive Plan authorizes the Committee to designate
officers and certain senior executives of the Corporation and its subsidiaries
and affiliates who will have the opportunity to receive annual incentive
compensation in the form of lump sum cash bonus awards. The Committee has
designated 36 participants for 1995.
Prior to January 25, 1995 the Incentive Plan focused on the Corporation's
earnings on a per share basis ("EPS") as the corporate-wide measure of
financial performance and on combinations of operating income, sales, velocity
and/or inventory turns as the unit-specific measures. On January 25, 1995 the
Board of Directors approved the recommendation of the Committee that an
amendment to the Incentive Plan be adopted that allows the Committee to
establish the appropriate financial measure or measures of performance of the
Corporation and each business unit annually at the time the participants are
designated. This change will permit the Committee to utilize, in lieu of or
in addition to EPS and the prevailing unit-specific measures, value added and
other new objective financial performance measures as they are developed and
deemed appropriate, and to tailor these measures to each business unit
dependent on the nature of its business operations and the stage of its
business development.
A threshold, target and maximum Incentive Plan award level is annually
set for each participant by the Committee at the beginning of each year,
expressed as percentages of the participant's base salary. The range of
the potential award, and specifically the target and maximum award levels,
is based on the participant's level of responsibility and achievement of
the targeted goals pre-established by the Committee. For the purpose of
conforming the terms of the Incentive Plan to the provisions of Section
162(m) of the Code governing the deductibility of executive compensation as
a business expense, the Corporation is amending the Incentive Plan to
establish an individual limit on the amount of incentive compensation that
is payable under the Incentive Plan. Effective January 25, 1995, no
participant may receive more than $1.5 million in any annual award under
the Incentive Plan.
In addition to setting the potential award levels for each participant,
the Committee sets the corporate-wide and, if applicable, unit-specific
financial performance targets of each participant at the start of each year,
as well as the individual performance objectives of the Chairman of the Board
and the Chief Executive Officer and President. The individual performance
objectives of other
26
participants are developed in discussions between the participant and his or
her manager. Once these performance goals are established, corresponding
threshold and maximum levels of performance for such goals are determined.
The threshold level is always 90 percent of the performance goal and
represents the minimum level that must be achieved for any bonus to be paid.
The maximum level is always 120 percent of the performance goal and is the
level of performance beyond which no additional bonus is earned.
Finally, the Committee sets at the beginning of each year the relative
weight to be applied to each performance goal of a participant. For example,
if a participant has both corporate-wide and unit-specific financial
performance targets and individual performance objectives, the corporate-wide
and unit-specific bonus calculations may each be weighted 2/5 and the
individual performance 1/5 for purposes of the aggregate annual award
calculation, or each performance objective could be weighted evenly in
determining the amount of the aggregate annual award.
Once the financial performance objectives, the potential award levels
and the relative weightings are set for each participant, they are not
adjusted during the performance year absent extraordinary circumstances
beyond the control of the Corporation. The actual amount of each
participant's award depends on the degree to which the pre-set goals are
achieved. Bonuses for performance between the threshold, target and
maximum objectives are determined by straight-line interpolation.
INCENTIVE PLAN BENEFITS
Awards are either paid in cash, subject to applicable income tax
withholding, in the first quarter of the year following the performance year
and after the performance year results have been determined by the
Corporation and certified by the Committee, or deferred for future payment
under the terms of the deferred compensation plan for designated executive
officers. Awards payable under the Incentive Plan for the year 1995 are not
determinable until completion of the performance year. Amounts paid to named
executive officers under the Incentive Plan for performance years 1992
through 1994 are shown in the "Bonus" column of the "Summary Compensation
Table" set forth on page 10 of this Proxy Statement.
TERMINATION OF EMPLOYMENT
A participant forfeits participation in the Incentive Plan if the
participant terminates employment before the end of the performance year
for reasons other than retirement, disability or death, unless the
Committee in its sole discretion decides otherwise. In the case of
retirement, disability or death during the performance year, the
participant or the participant's estate is entitled to receive pro rata
awards.
AMENDMENT AND TERMINATION OF THE INCENTIVE PLAN
The Committee has the right to amend, suspend or terminate the
Incentive Plan at any time for any reason. Such actions may be necessary
if there are changes in the laws, regulations or accounting practices,
mergers, acquisitions, divestitures, or other extraordinary, unusual or non-
recurring events.
SECTION 162(m)
In general, Section 162(m) of the Code precludes a publicly held
corporation from taking a deduction for Federal income tax purposes for
compensation in excess of $1 million per year that is paid after January 1,
1994 to the named executive officers whose compensation is disclosed in its
proxy statement unless that compensation qualifies for one of the
statutorily prescribed exceptions.
27
The components of the Incentive Plan that are based on objective corporate-
wide and unit-specific financial performance measures are intended to qualify
under one of these exceptions that excludes from the $1 million limit
performance-based compensation payable as the result of the achievement of one
or more objective, pre-set performance goals. Because of the more subjective
nature of the individual performance objectives, we expect that component of
the Incentive Plan will be subject to the $1 million deduction limit. In
order for a plan to qualify for the exception identified above, a person
knowledgeable of the relevant terms and performance results must be able to
calculate the maximum amount payable to a participant under the plan, and the
plan must be approved by the corporation's shareholders before any awards are
made. Finally, the compensation committee must certify the performance goals
have been met before payment occurs, and it may exercise its discretion only
to pay an award that is less than the amount calculated in accordance with the
terms of the plan.
SHAREHOLDER APPROVAL
The affirmative vote of a majority of the votes cast by the holders of
shares of Common Stock of the Corporation entitled to vote at the 1995
Annual Meeting of Shareholders and either present in person or represented
by proxy is required for approval of the Incentive Plan. Abstentions and
broker non-votes do not count as votes cast and will have no effect on the
vote. Approval of the Incentive Plan by the shareholders is necessary in
order to exclude compensation payable under the objective, performance-
based components of the Incentive Plan from the deduction limitations
imposed by Section 162(m) of the Code.
BOARD OF DIRECTORS' RECOMMENDATION
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
CORPORATION'S REVISED MANAGEMENT INCENTIVE PLAN.
ITEM 3:
PROPOSAL FOR SHAREHOLDER APPROVAL OF THE AMP INCORPORATED
1993 LONG-TERM EQUITY INCENTIVE PLAN AS AMENDED
INTRODUCTION
At the 1993 Annual Meeting of Shareholders the Corporation's 1993 Long-
Term Equity Incentive Plan (the "Plan") was approved by a vote of the
shareholders. The Plan as approved provides for awards of up to 10,000,000
shares of Common Stock of the Corporation (the "Common Stock") (subject to
adjustment in certain circumstances as described therein and as adjusted
for the 2-for-1 stock split in 1995) to employees of the Corporation and its
subsidiaries, partnerships and joint ventures during the 10-year term of the
Plan. Awards under the Plan may be in the form of Stock Options, Stock Bonus
Units and/or Supplemental Cash Bonus awards.
The Compensation and Management Development Committee (the
"Committee") of the Board of Directors has continued to evaluate the
effectiveness of the Plan in not only attracting and retaining key
employees, but in motivating them to contribute to the Corporation's growth
in earnings and revenues and in aligning their interests with the interests
of the shareholders of the Corporation. The Committee believes that the
Plan as currently written provides adequate levels of incentive
compensation to participants, but the Committee has concluded the Plan
could be enhanced by adding a performance-based restricted stock award
feature (the "Restricted Stock") that is based on achievement of average
annual earnings growth targets over multiple year periods and affords
greater flexibility to the Committee in deciding how the incentive
compensation will be earned and paid. In addition, in order for payment of
certain incentive awards made under the Plan
28
to be deductible to the Corporation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), the awards must be performance-
based and the Plan must be approved by the shareholders of the Corporation.
On January 25, 1995 the Board of Directors unanimously approved the amended
Plan that is now being proposed, subject to the approval of the shareholders
at the 1995 Annual Meeting. Subject to such approval by the shareholders,
awards of Restricted Stock either alone or in combination with Stock
Options, Stock Bonus Units and/or Supplemental Cash Bonuses, could be made
beginning in 1995.
THE PLAN AS IT CURRENTLY EXISTS
The principal features of the Plan as approved by the shareholders at
the 1993 Annual Meeting are described below. A more complete description
of the Plan was set forth in the Proxy Statement in connection with that
Annual Meeting.
ADMINISTRATION. The Plan became effective July 1, 1993 and provides
that awards under the Plan may be made through January 25, 2003. The Plan
is administered by the Committee, consisting of "disinterested" directors
within the meaning of that term under Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and "outside" directors as
that term is defined in Section 162(m) of the Code. The Plan vests broad
powers in the Committee to administer and interpret the Plan and, under
certain circumstances, to delegate specified aspects of its authority to
one or more officers of the Corporation.
ELIGIBILITY AND AWARDS. Any officer or other key employee of the
Corporation is eligible to be a participant in the Plan, but actual
participation is determined by the Committee. Outside and non-employee
directors of the Corporation are not entitled to participate. Currently
approximately 150 employees have been designated as participants under the
Plan. The terms of the Plan do not limit the amount of awards that may be
granted or the frequency of such awards, and such decisions are in the
discretion of the Committee in each instance. However, generally such
awards, in any combination of the forms of awards permitted, are made in
July of each year and have a total value intended to equal a specific
percentage of the participant's annual base salary, which percentage is
typically set between the 50th and 75th percentile of incentive pay
practices of Fortune 500 companies based on surveys of those practices.
29
The following table sets forth the awards that were made under the
Plan to the indicated class of persons in 1994, adjusted for the 2-for-1
stock split in 1995:
Plan Benefits
-----------------
AMP Incorporated 1993 Long-Term Equity Incentive Plan
Number of Units
------------------------------------------------------------------
Stock Bonus
w/Supplemental
Options Cash Bonus
------------------------------------------------------------------
William J. Hudson, Jr. 114,000 0
Chief Executive Officer
and President, and a
Director
------------------------------------------------------------------
James E. Marley, 83,000 0
Chairman of the Board
------------------------------------------------------------------
Javad K. Hassan, 26,200 0
Vice President
------------------------------------------------------------------
Jean Gorjat, 25,600 0
Vice President
------------------------------------------------------------------
John Gurski, 22,800 0
Vice President
------------------------------------------------------------------
Benjamin Savidge, 14,000 0
Retired Executive Vice
President and Chief
Financial Officer,
and a Director
------------------------------------------------------------------
Executive Officers as 445,200 6,800
a Group
------------------------------------------------------------------
Non-Executive Directors N/A N/A
as a Group
------------------------------------------------------------------
All Employees, excluding 417,000 146,000
Executive Officers, as a
Group
------------------------------------------------------------------
The following are the types of awards that may be granted under the Plan:
1. STOCK OPTIONS. The Committee may award stock options that
are either Incentive Stock Options ("ISOs") granted in conformance
with Code requirements or Non-Qualified Stock Options ("NQSOs") that
are not qualified for special tax treatment. The Committee determines
the number of shares to be covered by each Stock Option award, the
option price, the term of the options, the period of time for options
to vest after grant, and other terms and limitations applicable to the
exercise of an option. The option price per share of Common Stock
cannot be less than 100% of the fair market value of the Common Stock
on the date of the Stock Option award. The closing market price of
the Common Stock as reported on the New York Stock Exchange Composite
Transactions listing on March 10, 1995 was $37.50 per share.
The Committee determines at the time of grant the terms
under which the options shall vest and become exercisable, provided,
however, that options awarded under the Plan may not vest or be
exercised earlier than twelve months from the date the options were
awarded and will expire no later than ten years from such date. The
Committee may, in its discretion but subject to the terms of the Plan,
accelerate the time at which options awarded under the Plan may first
be exercised.
Options may be exercised by a participant in accordance with
the terms of the related stock option agreement and paid for in cash,
shares of Common Stock (whether by delivery of
30
previously owned shares of Common Stock or by having the Corporation
withhold a portion of the shares of Common Stock to be received) having
a fair market value at time of exercise equal to the option price, or in
a combination thereof, as determined by the Committee.
2. STOCK BONUS UNITS. The Committee may award Stock Bonus
Units to participants with or without a Supplemental Cash Bonus
(described below). Upon grant of a Stock Bonus Unit award, the
Committee will specify the number of Stock Bonus Units awarded to a
participant, the "Designated Value" of each Stock Bonus Unit granted
in such award, and the "Bonus Computation Dates". The "Designated
Value" will be established by the Committee, but in no event be less
than 95% of the average closing price of a share of the Common Stock
on the New York Stock Exchange Composite Transactions listing over the
ten trading days preceding the award of a Stock Bonus Unit. The
average closing price of the Common Stock for the ten trading days
ending on March 10, 1995, as reported on the New York Stock Exchange
Composite Transactions listing, was $37.59 per share, and 95% of that
average price is $35.71 per Stock Bonus Unit.
"Bonus Computation Dates" are the fourth, fifth and sixth
anniversaries of the award date on which a participant may receive a
distribution related to the Stock Bonus Units. On each Bonus
Computation Date one-third of the participant's Stock Bonus Units in
the underlying award are multiplied by the increase, if any, in the
fair market value of the Common Stock as of the Bonus Computation Date
(determined by averaging the closing price of a share of Common Stock
on the New York Stock Exchange Composite Transactions listing over the
ten trading days immediately preceding the Bonus Computation Date)
over the Designated Value for the Stock Bonus Unit award. The
participant receives a distribution of the number of shares of Common
Stock of the Corporation that can be purchased at the fair market
value for such shares on the Bonus Computation Date and that has an
aggregate value equal to the computation previously described.
Distributions to participants are made in whole shares of Common Stock
plus cash for any fractional share computed as of the Bonus
Computation Date. The Committee, in its sole discretion, may provide
that all or a portion of an award shall be paid in cash, and that
payments will be made in lump sum distributions or in installments.
In addition, the Committee has the discretion to accelerate the Bonus
Computation Date at any time or times after the first anniversary of
the Stock Bonus Unit award date.
3. SUPPLEMENTAL CASH BONUS AWARDS. The Committee may, in its
discretion, grant Supplemental Cash Bonus awards to participants in
conjunction with Stock Bonus Unit awards. The Supplemental Cash Bonus
award is paid in cash at the same time that payments in connection
with the Stock Bonus Units are made, and this award is intended to
help satisfy any Federal income tax obligations created by
distributions in connection with both Stock Bonus Unit awards and
Supplemental Cash Bonus awards.
SHARES OF STOCK SUBJECT TO THE PLAN. Shares of Common Stock either
acquired for or held in the treasury of the Corporation or authorized and
unissued are used, in whole or in part, for the Common Stock distributions
made pursuant to awards granted under the Plan. These shares are
registered under the Securities Act of 1933, as amended (the "Securities
Act") by a registration statement on Form S-8 that was filed with the
Securities and Exchange Commission in June 1993. The proposed amendment to
the Plan, once approved by the shareholders, will require this S-8
registration statement to be amended by the filing of a post-effective
amendment to cover the Plan as revised to include Restricted Stock awards.
Those shares that are treasury shares are issued but not outstanding, and
neither the treasury shares nor the authorized but unissued shares are
entitled to vote. After their distribution pursuant to the Plan, these
shares are added to the outstanding shares of Common Stock entitled to vote
but have a minimal dilutive effect.
31
TERMINATION OF EMPLOYMENT. Generally, upon the termination of
employment of a participant for any reason, awards under the Plan will
terminate immediately unless the Committee, in its sole discretion,
determines otherwise. With respect to Stock Bonus Units awarded to a
participant more than one year prior to the participant's death, disability
or retirement, the participant or the participant's estate will receive a
pro-rata portion of the distribution based on the portion of the
performance period during which the participant was employed. Awards that
expire, are terminated or are forfeited in whole or in part, or are paid in
cash rather than in the form of Common Stock, or to the extent the number
of shares distributed is less than the corresponding amount of the award,
will be returned to the Plan and will be available for future awards under
the Plan to the extent permitted by Rule 16b-3 of the Exchange Act.
CHANGE IN CONTROL. In the event of a change in control of the
Corporation as defined in the Plan, all unvested and unexpired Stock
Options will automatically become immediately vested and exercisable for
the period of their remaining terms, and all unvested and unpaid Stock
Bonus Units and Supplemental Cash Bonus awards will become immediately
vested and payable, without action by the Committee.
NON-ASSIGNABILITY. Prior to its settlement in the form of cash or
shares of Common Stock, no right or benefit under the Plan is subject to
assignment or transfer other than by will or the laws of descent and
distribution, and no such right or benefit shall in any manner be liable
for or subject to the debts or liabilities of the participant.
AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors has the
right to amend, suspend or terminate the Plan at any time provided that no
such action will be effective without shareholder approval if shareholder
approval of such amendment, suspension or termination would be required in
order to ensure the Plan, as amended, would continue to meet the
requirements of Rule 16b-3 under the Exchange Act. Except with the
agreement of a participant, no such amendment, suspension or termination of
the Plan will adversely affect the rights of a participant under any award
previously granted and unexpired at the time of such action.
PROPOSED PLAN AMENDMENT - RESTRICTED STOCK
In proposing an amended Plan that adds a Restricted Stock
feature, the Board has no intention to increase the amount of incentive
compensation provided under the Plan. The Board's proposal is to add
restricted stock as a fourth type of award and to make it performance-based by
linking its vesting to attainment by the Corporation of pre-set average
annual earnings growth targets. The design of this new feature is intended
to increase the focus of management on enhancing shareholder value through
annual earnings growth, and to increase management's ownership of Common
Stock so as to further align management's interests with those of the
Corporation's shareholders.
THE RESTRICTED STOCK FEATURE. The new award feature would work in the
following manner. Once a long-term incentive compensation level is
determined for a participant under the Plan for a given year, the Committee
may award Stock Options, Stock Bonus Units with or without a Supplemental
Cash Bonus, or Restricted Stock, or any combination thereof, to provide the
intended level of compensation. Stock Options, Stock Bonus Units and
Supplemental Cash Bonuses are typically awarded in July. To the extent
Restricted Stock is granted, that award will be made later in the year or
at the beginning of the next year after the business unit and corporate-
wide strategic plans are developed. In the initial year, subject to
shareholder approval, it is expected that the grant of restricted shares will
be made in July 1995 based on performance criteria and a pool of participants
established by the Committee in January 1995. With respect to each Restricted
Stock award, the Committee will establish three performance targets covering
the ensuing 3-year period: 1) a minimum average annual return on equity
("ROE") to be attained by the Corporation over the 3-year period; 2) a
target level of average annual earnings growth for the Corporation over
that
32
same period; and 3) a "super-target" level of annual earnings growth
for the Corporation over that period.
At the end of the designated 3-year period, none of the performance-
based Restricted Stock awarded at the outset of the period will vest unless
the minimum average annual ROE target is reached or exceeded. If this
target is not met then the Restricted Stock grant is forfeited and the
shares will be returned to the Plan and available for future awards under
the Plan to the extent permitted by Rule 16b-3 of the Exchange Act.
If the ROE target is met then a calculation of the earn-out of the
Restricted Stock will be made based on the average annual earnings growth
achieved over that same 3-year period. For an average earnings growth
between 0% and the pre-set target level, a direct correlation between 0%
and 100% of the Restricted Stock will be vested. For an average earnings
growth between the pre-set target level and the "super-target" level, a
direct correlation between 100% and 200% of the Restricted Stock awarded
will be vested; the maximum earn-out possible for Restricted Stock is 200%
of the original award.
EXAMPLES. For purposes of illustrating how the Restricted Stock award
feature works, assume that in the late Fall of 1995 the Committee grants
3,000 shares of Restricted Stock to Executive "A" and establishes the
following targets for the 1996-1998 period: 1) 15% average annual ROE; 2)
15% as the average annual earnings growth target level; and 3) 18% as the
average annual earnings growth "super-target" level.
Example 1. If the average annual ROE achieved by the Corporation
over 1996-1998 is 14%, then all 3,000 shares of Restricted Stock awarded to
Executive "A" would be forfeited regardless of what the average annual
earnings growth was for that period.
Example 2. If the average annual ROE achieved by the Corporation
over 1996-1998 is 15.5% and the actual average annual earnings growth is
9%, then a calculation of the earn-out on the Restricted Stock award would
be made since the ROE performance exceeds the 15% pre-set target. In this
instance, the actual average annual earnings growth of 9% is 60% of the 15%
pre-set target, so 60% (1,800 shares) of the 3,000 share Restricted Stock
award will be vested and the balance (1,200 shares) will be forfeited.
Example 3. If the average annual ROE achieved by the Corporation
over 1996-1998 is 15.5% and the actual average annual earnings growth is
16%, then a calculation of the earn-out on the Restricted Stock award would
also be made. In this case, however, the actual average annual earnings
growth of 16% is one-third of the spread between the pre-set target of 15%
and the pre-set "super-target" of 18%, so 133.33% (4,000 shares) of the 3,000
share Restricted Stock award will be vested in Executive "A".
RIGHTS AS A SHAREHOLDER. During the 3-year period that the
Corporation's performance is measured against the pre-set targets with
respect to any given award of Restricted Stock, the participant receiving
such award shall have all the rights of a shareholder of the Corporation as
to the shares of Restricted Stock comprising the original award. The
participant shall be entitled to vote such shares. Cash dividends
attributable to unvested Restricted Stock shall be automatically reinvested
in additional shares of AMP Common Stock under a dividend reinvestment plan
and such additional shares, together with any stock dividends paid on the
shares of Restricted Stock, shall also be deemed Restricted Stock. These
rights of a shareholder will either terminate completely if the Restricted
Stock is forfeited, or they will continue without restriction if the
Restricted Stock is vested and no longer constitutes Restricted Stock.
NEW AWARD BENEFITS. The benefits that were received under the Plan in
1994 are set forth on page 30 of this Proxy Statement, in the table entitled
"Plan Benefits". By reason of the fact that the
33
Committee, in its discretion, determines both the planned amount of incentive
compensation under the Plan and the form or forms of award in which it will
be granted, it is impossible to determine the number of units or corresponding
value of future awards of Restricted Stock, Stock Options, Stock Bonus Units
or Supplemental Cash Bonuses under the Plan to any participant or class of
participants.
PROPOSED PLAN AMENDMENT - LIMIT ON INDIVIDUAL AWARDS
For the purpose of conforming the terms of the Plan to the provisions
of Section 162(m) of the Code governing the deductibility of executive
compensation as a business expense, the Plan must be amended to establish
an individual limit on the amount of awards that a participant can receive
under the Plan. Effective for awards made beginning in 1995, no more
than 4 percent of the 10,000,000 shares of Common Stock approved for
distribution under the Plan during its term will be made subject to awards
made to any one participant under the Plan in a given year.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a discussion of certain Federal income tax
consequences with respect to Restricted Stock, Stock Options (including
incentive stock options, or "ISOs", and nonqualified stock options, or
"NQSOs"), Stock Bonus Units and Supplemental Cash Bonus Awards.
This discussion is based on an analysis of the Code as currently in effect,
existing laws, judicial decisions, administrative rulings and regulations,
and proposed regulations, all of which are subject to change. In addition
to being subject to the Federal income tax consequences described below, an
employee may also be subject to foreign, state and local income or other tax
consequences in the jurisdiction in which he or she works and/or resides.
EACH EMPLOYEE IS URGED TO CONSULT HIS OR HER PERSONAL TAX ADVISOR TO
DETERMINE THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PLAN (OR ANY
COMPONENT THEREOF).
RESTRICTED STOCK
Under present Federal income tax regulations, there will be no Federal
income tax consequences to either the Corporation or a participant upon a
grant of Restricted Stock under the Plan. If the Restricted Stock vests at
the end of the 3-year, performance-based vesting period, then the value of
such Restricted Stock at the time of vesting will be taxable to a
participant as ordinary income and deductible by the Corporation as
compensation provided the Corporation satisfies reporting and deduction
requirements. Upon a subsequent disposition of such vested Restricted
Stock, the participants realize short- or long-term capital gain depending
on their holding period, and the Corporation receives no further deduction.
STOCK OPTIONS
Under present Federal income tax regulations, there are no Federal
income tax consequences to either the Corporation or the participant upon
the grant of an ISO, nor will the participant's exercise of an ISO result
in Federal income tax consequences to the Corporation. Although the
participant will not realize ordinary income upon his or her exercise of an
ISO, the excess of the fair market value of the Common Stock acquired at
the time of exercise over the option price may constitute an adjustment in
computing alternative minimum taxable income under Section 56 of the Code
and, thus, may result in the imposition on the participant of the
"alternative minimum tax" pursuant to Section 55 of the Code. If the
participant does not dispose of Common Stock acquired through an ISO within
two years of the date of grant or within one year of the ISO's date of
exercise, any gain realized upon a subsequent disposition of Common Stock
will constitute long-term capital gain to the participant. If the
participant disposes of the Common Stock within the
34
holding periods described above, an amount equal to the lesser of (i) the
excess of the fair market value of the Common Stock on the date of exercise
over the option price or (ii) the actual gain realized upon such disposition
will constitute ordinary income to the participant in the year of disposition.
Any additional gain upon such disposition will be taxed as short-term
capital gain. The Corporation will receive a deduction in an amount equal
to the amount constituting ordinary income to the participant.
Under present Federal income tax regulations, there are no Federal
income tax consequences to either the Corporation or the participant upon
the grant of a NQSO. However, the participant generally will realize
ordinary income upon the exercise of a NQSO in an amount equal to the
excess of the fair market value of the Common Stock acquired upon the
exercise of such option over the option price, and the Corporation will
receive a corresponding deduction. The gain, if any, realized upon a
subsequent disposition of such Common Stock will constitute short- or long-
term capital gain, depending on the participant's holding period.
STOCK BONUS UNITS
Under present Federal income tax regulations, for Federal tax purposes
distributions on Stock Bonus Units, whether in shares of Common Stock or in
cash, are recognized as ordinary income by the participant, and the
Corporation is entitled to a corresponding deduction, provided the
Corporation satisfies reporting and deduction requirements. The amount
of the income (and corresponding deduction) is equal to the fair market
value of the shares on the date they are transferred to the participant
plus the amount of cash paid attributable to fractional shares.
SUPPLEMENTAL CASH BONUS AWARDS
Payment of a Supplemental Cash Bonus results in the participant
recognizing ordinary income in the year in which the award is paid. The
Corporation is generally entitled to a corresponding deduction.
SHAREHOLDER APPROVAL
Approval of the amended Plan requires the affirmative vote of a majority
of the holders of shares of Common Stock entitled to vote at the 1995 Annual
Meeting of Shareholders and either present in person or represented by proxy.
Broker non-votes (i.e., the inability of a broker or other nominee holding
shares for a beneficial owner to vote on behalf of such beneficial owner on a
particular non-routine matter because such broker or nominee is not permitted,
without receiving instructions from the beneficial owner, to vote such owner's
shares on that matter, notwithstanding that the broker or nominee has
discretionary authority on another routine, non-controversial matter and has
voted on such matter on behalf of the beneficial owner) are not counted as
votes cast. Abstentions are counted in determining the total number of shares
present in person or represented by proxy and entitled to vote.
Shareholder approval is being sought for purposes of excluding
incentive compensation payable under the Plan from the deduction
limitations imposed by Section 162(m) of the Code and for reasons related
to Section 16 of the Exchange Act. If such approval is obtained, it is
expected that the Stock Option and Restricted Stock awards under the Plan
will not be subject to the $1 million limit of Section 162(m). We believe
that certain terms of the Stock Bonus Unit and Supplemental Cash Bonus
awards will preclude them from qualifying under an exception to the limit
imposed by Section 162(m). Subject to compliance with the limitations set
forth in regulations promulgated under Section 16, transactions with
respect to Stock Options, Stock Bonus Units and Restricted Stock under the
Plan will be exempt from Section 16(b) of the Exchange Act.
35
BOARD OF DIRECTORS' RECOMMENDATION
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF
THE CORPORATION'S 1993 LONG-TERM EQUITY INCENTIVE PLAN AS AMENDED.
1995 SHAREHOLDER PROPOSAL
ITEM 4:
The Dominican Sisters of Adrian, Michigan, 1257 East Siena Heights Drive,
Adrian, Michigan 49221, the beneficial owners of 100 shares of Common Stock
of the Corporation as of October 20, 1994, have submitted the shareholder
proposal and supporting statement set forth below for inclusion in this Proxy
Statement and presentation at the Corporation's 1995 Annual Meeting of the
Shareholders. This proposal is co-sponsored by three other shareholders under
the guidance of the Interfaith Center on Corporate Responsibility (ICCR) in
New York, including the Women's Division of the General Board of Global
Ministries of the United Methodist Church of New York, New York; the
Benedictine Sisters of San Antonio, Texas; and the Sisters of Charity of
Saint Vincent dePaul, of Halifax, Nova Scotia. We are relying on Rule 14a-
8(c)(11) of Regulation 14A of the Securities and Exchange Commission in
only including the proposal of the Dominican Sisters of Adrian, Michigan in
this Proxy Statement inasmuch as it was the first of four identical
shareholder proposals to be received by the Corporation. The proposal is
as follows:
"AMP INCORPORATED - INCLUSIVENESS ON THE BOARD OF DIRECTORS 1994"
WHEREAS:
We believe that the Board of Directors of many publicly-owned
corporations have benefited from the perspective brought to their
decision-making process by their well-qualified Board members and
senior executives of both genders and various racial heritages;
AMP Incorporated currently has a distinguished Board of thirteen
Directors all of whom but one are of the same gender. All thirteen
are of the same racial heritage;
AMP Incorporated has listed twelve officers in the 1993 Annual Report
who are all of the same gender;
The Board of AMP Incorporated has established a number of standing
committees, but NO Nominating Committee;
We believe that the Directors should take every reasonable step to be
sure that women and persons of various racial heritages are in the
pool from which Directors and senior managers are chosen.
The office of Federal Contract Compliance mandates that all companies
selected for Federal contracts must not discriminate on the basis of
gender or race;
THEREFORE, BE IT RESOLVED:
That shareholders recommend that the Board of Directors:
1. Publicly commit the company to a policy a greater diversity in
senior management and Board positions;
2. Report to shareholders a plan to implement this public commitment,
including time line expectations, and to periodically report
progress on this implementation;
36
3. Establish a standing Nominating Committee of the Board to assist in
the greater effort to review women and multiracial/multicultural
candidates to the Board consonant with this public commitment.
Statement of Support
Racial and gender diversification among the work force and the
purchasing population has increased enormously. This diversification
has more slowly seeped into decision-making positions in large public
corporations. AMP Incorporated has not benefited as greatly from this
movement as it could.
On March 29, 1994, The Wall Street Journal published an article with
some interesting data related to participation on women managers at
200 large companies in 1992. Ranking is based on percentage of women
officials and managers, with one (1) being the highest, two-hundred
(200) the lowest. AMP'S RATING IS GIVEN AS ONE HUNDRED FIFTY-TWO (152).
We ask those shareholders who agree that the judgments and
perspectives offered by a more diversified Board and management signal
this agreement by voting YES on this recommendation to the Board of
Directors."
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THE
RESOLUTION, FOR THE FOLLOWING REASONS:
Your Board recognizes the benefits gained from a qualified and
diversified Board of Directors and management, and shares an interest in
the goals of the resolution. AMP currently benefits from the ideas and
perspectives provided by the diversity in our existing management team and
Board of Directors. Of the eleven directors on the Board, one is a woman
and a second is a Japanese national. Within AMP's global operations
covering more than 35 countries, the management staff consists primarily of
nationals. In addition to the representatives from our global operations, our
senior management team in the U.S. operations recently has been enhanced by a
minority and a female officer. Qualified persons of diverse backgrounds,
race, culture and gender provide varying perspectives, guidance and
direction to AMP on the wide-ranging issues and interests addressed by the
Corporation.
Contrary to what the proponents have stated in their proposal resolution,
AMP has had a Nominating Committee of the Board of Directors since April 1993.
This Committee actively seeks candidates for director that have diverse
backgrounds and the requisite practical experience and functional skills,
including female and minority candidates. The efforts of the Nominating
Committee have resulted in the election of Barbara Franklin effective in
1993 and Takeo Shiina in 1995. Barbara Franklin's extensive experience in
international trade, developed through her public service under the past
five presidential administrations including a term as U.S. Secretary of
Commerce for the Bush Administration, has proven particularly valuable in
our growing emphasis on globalization. Takeo Shiina, Chairman of the
Advisory Council of IBM Japan, Ltd. and former CEO of that company, brings
to the Board considerable experience in the electronics industry and
international expertise and prestige. The Nominating and Governance
Committee will continue to search for highly qualified candidates exhibiting
the operational and cultural diversity to guide the Corporation's global
operations and expansion plans into the next century.
AMP is also achieving progress in increasing the diversity of its
workforce. Although the number of minorities and women interested in the
engineering discipline has not grown significantly over recent years, AMP
has created several programs and measures to further develop a pool of
qualified women and minority engineering professionals in our employ. In
time these individuals will grow with the Corporation and assume higher
level professional and management positions as
37
those positions become available. Examples of these efforts include increased
recruiting programs at universities with greater minority enrollment,
sponsorship of up to five minority students in Drexel University's engineering
program through the AMP Diversity Scholarship Program, establishment of
recruiting relationships with the Society of Women Engineers and the National
Society of Black Engineers, increased participation of minorities and women
on the Corporation's Rotational Engineering Program, and sponsorship of
various summer programs for minority high school students. These types of
outreach programs will continue the positive trend of increasing the cultural,
racial and gender diversity of AMP's management team.
As AMP has grown, the complexity and sophistication of its business and
operations has created new demands for expertise in such areas as global
marketing and contracting, mergers and acquisitions, regulatory compliance,
legal, and computer systems. These demands in turn have created opportunities
for professionals outside of the engineering discipline, which positions have
been filled increasingly by minorities and women. The professional category
of AMP's workforce, as defined by the EEO job classifications, is very often
the source from which our future officers and managers are chosen. Since 1991
the percentage of minority professionals has increased from 4.9% to 7.7% and
the percentage of female professionals has jumped from 13.8% to 18.5%. While
we are not yet satisfied with the level of participation of minorities and
women in our workforce, we believe we have made significant progress as shown
by these numbers and we feel we have the foundation for continued progress in
our efforts to diversify the workforce. We will continue to report on the
annual EEO category results and our outreach efforts in order to chart this
progress over time.
AMP is and always has been firmly committed to equal employment
opportunity at all levels of the Corporation, including membership on the
Board of Directors. As described above, we continue in our efforts to improve
our employment of minorities and women because we recognize and value the
broadened perspective on our business and business decisions that is made
possible through enhanced diversity in our workforce and on our management
team and Board of Directors. EEO reports are published that will be updated
annually, we have a purchasing policy regarding minority and women-owned
vendors, and we have an independent Nominating and Governance Committee in
place that was instrumental in adding both a woman and a Japanese national
as a director of AMP. In short, we have already undertaken virtually all
of the actions contemplated by the resolution and we believe the resolution
is unnecessary. WE URGE YOU TO VOTE AGAINST THIS RESOLUTION. We believe
the concerns of the proponents should be raised directly with the Chairman of
the Board of Directors and not through the process of the Annual Meeting and
the related Proxy Statement. We encourage shareholders with thoughts and
concerns on complex social issues such as the ones raised in the resolution
to address your communications to Jim Marley, Chairman of the Board of
Directors.
GENERAL AND OTHER MATTERS
The Corporation knows of no matter that will be brought before the
meeting other than the matters expressly mentioned in the Notice of Annual
Meeting of Shareholders. However, if any further matters properly come before
the meeting or any of its adjournments, the person or persons voting the
proxies will vote them in accordance with their best judgment on such matters.
The Corporation will bear the expense of preparing, printing, and mailing
this proxy material, as well as the cost of any required solicitation. In
addition, the Corporation has retained Georgeson & Company Inc. to aid in the
solicitation of proxies from brokers, banks and other nominees as well as
institutional holders, at a fee of $8,500 plus expenses. The Corporation may
also use regular employees, without additional compensation, to solicit
proxies by personal solicitation, telephone or otherwise.
38
You are urged to mark, sign and return your proxy promptly to make
certain your shares will be voted at the meeting. For your convenience, a
stamped self-addressed envelope is enclosed.
The Annual Report of the Corporation for the year 1994, including
financial statements, was mailed recently to shareholders. Such Annual Report
is not incorporated in this Proxy Statement by reference, and is not deemed a
part of the proxy soliciting material.
UPON THE WRITTEN REQUEST OF ANY PERSON WHOSE PROXY IS SOLICITED
HEREUNDER, THE CORPORATION WILL FURNISH WITHOUT CHARGE TO SUCH PERSON A COPY
OF ITS ANNUAL REPORT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FORM
10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR THE
CALENDAR YEAR 1994. SUCH WRITTEN REQUEST IS TO BE DIRECTED TO J. E. MARLEY,
CHAIRMAN OF THE BOARD OF DIRECTORS, P.O. BOX 3608, HARRISBURG, PENNSYLVANIA
17105-3608.
Dated: March 24, 1995.
39
(Recycled Symbol) Printed on Recycled Paper
APPENDIX
--------
[front side of first proxy card]
PROXY
AMP INCORPORATED
The undersigned hereby appoints W. J. Hudson, J. E. Marley and D. F.
Henschel, and each of them, his or her proxy, with full power of substitution,
to vote all stock of the undersigned at the ANNUAL MEETING OF THE SHAREHOLDERS
OF THE CORPORATION TO BE HELD ON WEDNESDAY, APRIL 26, 1995, AT 10:30 a.m.,
LOCAL TIME, at the M. C. Benton, Jr. Convention and Civic Center, 301 West
5th Street, Winston-Salem, North Carolina, and at any adjournment or
adjournments thereof, hereby revoking any proxy previously given and
ratifying all that said proxy or proxies may do pursuant hereto.
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(Continued and to be signed on reverse side)
[example of reverse side of first proxy card]
__________________________________
| |
| |
| |
| (1) (2) |
| |
| |
| |
| (3) |
|__________________________________|
[part (1) information is as follows:]
_________ _________
Common D.R.S.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR ALL NOMINEES" IN ITEM 1 AND "FOR"
ITEMS 2.
Item 1--Election of the following For all Withheld
Nominees as Directors: D.F. Nominees for all
Baker, R. D. DeNunzio, Nominees
B. H. Franklin, J. M. Hixon,
W. J. Hudson, J. E. Marley, [ ] [ ]
H. A. McInnes, J.C. Morley,
W. F. Raab, P. G. Schloemer
and T. Shiina.
Withheld for the following only (Write the name of the
Nominee(s) in the space below)
------------------------------------------------------
Item 2--Proposal to approve the For Against Abstain
revised AMP Management
Incentive Plan. [ ] [ ] [ ]
[part (2) information is as follows:]
[X]Please mark your
votes like this
in black or blue
ink
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ITEM 3 AND "AGAINST" ITEM 4.
Item 3--Proposal to approve the For Against Abstain
AMP Incorporated 1993
Long-Term Equity Incentive [ ] [ ] [ ]
Plan as amended.
Item 4--Shareholder proposal For Against Abstain
relating to minority [ ] [ ] [ ]
and gender inclusiveness
in senior management
and on the Board of
Directors.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby acknowledges receipt of the Notice
of the Annual Meeting dated March 24, 1995.
The shares represented by this proxy will
be voted as directed by the shareholder.
If no direction is made and there is no
discretionary broker vote, the shares will
be voted as to each proposal in accordance
with the recommendations of your Board of
Directors. Abstentions are not counted
as votes cast with respect to Items 1, 2
and 4, but are counted as votes present and
entitled to vote for Item 3. Broker
non-votes have no effect on the vote on any
of the Items.
Yes
[ ] I PLAN TO ATTEND THE ANNUAL MEETING
--please send me an admission card.
[part (3) information is as follows:]
Signature(s)___________________________Date____________
NOTE: Please date and sign exactly as name appears
hereon. Each joint owner should sign. When signing
as attorney, executor, trustee, guardian or corporate
officer, please give full title as such. Corporations
should indicate full corporate name and have a duly
authorized officer sign.
[front side of second proxy card]
PROXY
AMP INCORPORATED
TO: The Vanguard Fiduciary Trust Company as Trustee under the Trust Agreement
for the AMP Incorporated Employee Savings and Thrift Plan-401(k).
The Trustee named above is hereby instructed to vote by proxy, in the
form solicited by the Board of Directors, all the shares or fractional
shares of Common Stock of AMP Incorporated that are credited to the
undersigned's account as of the latest available processing date on or
before March 10, 1995 at the ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
WEDNESDAY, APRIL 26, 1995, AT 10:30 a.m., LOCAL TIME, at the M. C.
Benton, Jr. Convention and Civic Center, 301 West 5th Street, Winston-
Salem, North Carolina, and any adjournment or adjournments thereof, on
the items set forth on the reverse hereof, as described in the
accompanying Proxy Statement, and upon such other business as may
properly come before the meeting.
Voting rights will be exercised by the Trustee as directed on the
reverse, provided instructions are timely received by the Trustee. Under
the Employee Savings and Thrift Plan, the Trustee will vote, in its sole
and absolute discretion, those shares as to which no timely instructions
are received. Abstentions are not counted as votes cast with respect to
Items 1, 2 and 4, but are counted as votes present and entitled to vote
for Item 3.
(Continued and to be signed on reverse
side)
[example of reverse side of second proxy card]
__________________________________
| |
| |
| |
| (1) (2) |
| |
| |
| |
| (3) |
|__________________________________|
[part (1) information is as follows:]
____________
SHARES
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR ALL NOMINEES" IN ITEM 1 AND "FOR"
ITEMS 2.
Item 1--Election of the following For all Withheld
Nominees as Directors: D.F. Nominees for all
Baker, R. D. DeNunzio, Nominees
B. H. Franklin, J. M. Hixon,
W. J. Hudson, J. E. Marley, [ ] [ ]
H.A. McInnes, J.C. Morley,
W.F. Raab, P. G. Schloemer
and T. Shiina.
Withheld for the following only (Write the name of the
Nominee(s) in the space below)
-------------------------------------------------------
Item 2--Proposal to approve the For Against Abstain
revised AMP Management
Incentive Plan. [ ] [ ] [ ]
[part (2) information is as follows:]
[X]Please mark your
votes like this
in black or blue
ink
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" ITEM 3 AND "AGAINST" ITEM 4.
Item 3--Proposal to approve the For Against Abstain
AMP Incorporated 1993
Long-Term Equity Incentive [ ] [ ] [ ]
Plan as amended.
Item 4--Shareholder proposal For Against Abstain
relating to minority [ ] [ ] [ ]
and gender inclusiveness
in senior management
and on the Board of
Directors.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby acknowledges receipt of the Notice
of the Annual Meeting dated March 24 1995.
The shares represented by this voting
instruction card are those held under the
AMP Incorporated Employee Savings and
Thrift Plan.
Yes
[ ] I PLAN TO ATTEND THE ANNUAL MEETING
--please send me an admission card.
[part (3) information is as follows:]
Signature(s)___________________________Date____________
NOTE: Please mark, date and sign exactly as your name appears
hereon and return in the enclosed envelope.
[advance reservation ticket]
ADMISSION CARD
The shareholder bearing this ticket is entitled
to attend the Annual Meeting of Shareholders of
AMP Incorporated
DATE:
Wednesday, April 26, 1995
TIME:
10:30 a.m.
LOCATION:
M. C. Benton, Jr. Convention and Civic Center
301 West Fifth Street
South Main Hall (Main Level)
Winston-Salem, North Carolina
APPENDIX
AMP INCORPORATED
HARRISBURG, PA 17105
------------------------------------------------------------------------------
AMP INCORPORATED
AMP INCORPORATED
MANAGEMENT INCENTIVE PLAN
Plan Document Effective January 25, 1995
------------------------------------------------------------------------------
AMP INCORPORATED
HARRISBURG, PA 17105
------------------------------------------------------------------------------
TABLE OF CONTENTS
Section
-------
A. Plan Summary........................................................1
B. Plan Objectives.....................................................1
C. Plan Administration.................................................1
D. Plan Participation..................................................2
E. Plan Measures and Targets...........................................2
F. Participant Incentive Opportunities.................................3
G. Award Payouts and Timing............................................6
H. Administrative Information..........................................6
APPENDICES
A. PLAN YEAR TOTAL AWARD SCHEDULE
AMP INCORPORATED
HARRISBURG, PA 17055
------------------------------------------------------------------------------
AMP INCORPORATED
MANAGEMENT INCENTIVE PLAN
A. PLAN SUMMARY
The AMP Incorporated (AMP) Management Incentive Plan (the "Plan") allows
officers and key senior executives to share in the financial achievements of
AMP on an annual basis. The Plan recognizes and rewards for the achievement
of both financial results, focusing on key objective, financial performance
targets at the corporate and business unit levels, and individual nonfinancial
objectives.
The financial measures of performance, including the corporate-wide and
unit-specific targets, together with the individual nonfinancial objectives
are established at the beginning of each year at the time the participants are
designated. The weighting between corporate, business unit and individual
factors is also predetermined at that time. A range of incentive award levels
is set for each participant at the beginning of each year, with the threshold
award level requiring 90 percent performance of the respective goal and the
maximum award level reached if 120 percent of the performance goal is
attained. The extent to which goals are achieved is certified at the end of
the plan year to determine the actual award for each participant.
B. PLAN OBJECTIVES
The objectives of the Plan are to:
-- Stimulate and reward outstanding performance.
-- Link the business plan process, including the attainment of key
corporate priorities and financial objectives, with the compensation
system.
-- Provide competitive total compensation opportunities to attract and
retain key executives.
C. PLAN ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors of AMP composed of two or more directors, each of whom is
an "outside director" within the meaning of Section 162(m) of the Internal
Revenue Code of 1986, as amended. No member of the Committee shall be a
current employee of AMP, a former officer of AMP, a former employee of AMP
still receiving compensation for prior services other than benefits under a
tax-qualified retirement plan, or a person receiving direct or indirect
remuneration from AMP in any capacity other than as a director.
The Committee shall have full and final authority in its discretion and
in acccordance with the provisions of the Plan, to: i) interpret the
provisions of the Plan and to decide all questions of fact arising in its
application, and the Committee's interpretation and decisions shall be in all
respects final, conclusive and binding; ii) determine the employees who will
be participants; iii) annually determine the threshold, target and
------------------------------------------------------------------------------
-1-
maximum award levels for each participant; iv) establish at the beginning of
each year objective, performance-based corporate-wide and business unit-
specific financial goals, together with the weighting between corporate,
business unit and individual goals for each participant; v) certify in writing
the level of performance of the corporate-wide and unit-specific financial
goals following the end of the plan year; vi) impose such conditions on the
grant of awards or decrease the amount of the payout, as it deems appropriate;
and vii) make all other determinations, rules and regulations necessary or
advisable for the administration of this Plan. No member of the Committee
shall be personally liable for any action or determination in respect to
administration of the Plan if made in good faith.
D. PLAN PARTICIPATION
AMP officers and key senior executives are eligible to participate in the
Plan. The Committee and the Chief Executive Officer and President believe
that AMP's officers and key senior executives are in the best position to make
significant contributions to the success of the Company and its businesses.
Participants for each plan year are designated by the Committee during the
first quarter of the plan year.
E. PLAN MEASURES AND TARGETS
The corporate-wide financial measure(s) are determined in the first
quarter of each year by the Committee based on the financial target(s) best
suited, in the judgment of the Committee in its sole discretion, to provide
the desired direction for AMP during the ensuing year. The goals for the plan
year could be an earnings per share target, a value added goal, or any other
existing or newly devised objective financial performance measure(s), or any
combination thereof.
For each participant directly involved with a business unit of AMP, a
financial target or targets is also established by the Committee for that
business unit in the first quarter of each plan year. These targets are
tailored to each business unit dependent on the nature of its business
operations and the stage of its business development.
Finally, individual nonfinancial objectives are established in the first
quarter of each plan year for each participant. These objectives are based on
the duties and responsibilities of the participant in support of the overall
financial and strategic goals of AMP and, with the exception of the Chairman
of the Board and the Chief Executive Officer and President, are developed in
discussions and agreement between the participant and the participant's
manager. The individual objectives of the Chairman of the Board and the Chief
Executive Officer and President are predetermined by the Committee.
Once the financial goals are determined by the Committee at the beginning
of the plan year, they are not adjusted throughout the plan year absent
extraordinary circumstances beyond the control of AMP. Examples of such
extraordinary circumstances include unanticipated significant currency
fluctuations and tax changes.
When the corporate-wide and unit-specific (if applicable) targets are
set, a performance range is also established around each of these targets.
The range includes a threshold--the minimum level of performance against the
target that must be achieved before any payments are made, and the maximum--
the performance level beyond which no additional awards are earned. The
relationship between the targets, maximums and thresholds (expressed as a
percentage of target) is fixed for plan purposes and is as follows:
THRESHOLD TARGET MAXIMUM
--------- ------ -------
90% 100% 120%
Performance of the individual nonfinancial objectives, expressed as a
percentage, is applied directly to the maximum incentive award level described
in Section F below and is not subject to a threshold-maximum performance range.
------------------------------------------------------------------------------
-2-
The relative weighting between corporate, business unit and individual
goals is predetermined by the Committee for each participant in the first
quarter of each plan year. Examples of such weighting for a participant with
corporate-wide, unit-specific and individual performance goals are weighting
all three goals equally at 1/3, or weighting the corporate-wide and unit-
specific bonus calculations at 2/5 each and the individual performance goal at
1/5. A participant with no business unit responsibility may have the
corporate-wide bonus calculation made at 2/3 or 4/5 and the individual
performance at 1/3 or 1/5, respectively, or any other similar combination.
F. PARTICIPANT INCENTIVE OPPORTUNITIES
The incentive award for plan participants is based on the extent to which
financial and individual goals are achieved, and on the target incentive award
profile for each participant, the latter of which varies based on the
participant's level of responsibility. The target incentive award level
(expressed as a percentage of base earnings) and corresponding threshold and
maximum incentive award levels (also expressed as a percentage of base
earnings) are established in the first quarter of each plan year by the
Committee. Actual participant incentive awards may vary from the target
incentive awards dependent on the degree to which corporate-wide, unit-
specific (if applicable) and individual goals are achieved. The annual award
for each participant is the product of the participant's actual calculated
incentive award and his or her base earnings actually earned during the plan
year. In no event may a participant receive more than $1.5 million in any
annual award made under the Plan.
The following two examples illustrate how the achievement of financial
and individual goals impact actual participant incentive awards, using
hypothetical plan participants:
ILLUSTRATIVE ASSUMPTIONS AND CALCULATIONS
-----------------------------------------
GOALS:
-----
Corporate-wide: Earnings Per Share Goal = $3.00
Unit -specific: Executive A is the general manager of Business
Unit A that has an operating income objective of
$2 million;
Executive B is the director of corporate
environmental compliance
Individual: Executive A has four individual nonfinancial
goals;
Executive B has five individual nonfinancial goals
FINANCIAL AND INDIVIDUAL PERFORMANCE RANGE:
-------------------------------------------
Goal Threshold Target Maximum
---- --------- ------ -------
Corporate EPS $2.70 $3.00 $3.60
Business Unit A $1.8 million $2 million $2.4 million
in operating in operating in operating
income income income
Individual M A N A G E M E N T D I S C R E T I O N
PARTICIPANTS' BASE EARNINGS AND INCENTIVE AWARD LEVELS:
-------------------------------------------------------
Executive A:
------------
Base Earnings for Executive A = $100,000
Threshold for Executive A = 10% ($10,000)
Target for Executive A = 35% ($35,000)
Maximum for Executive A = 53% ($53,000)
Weighting = Corporate-wide: 2/5
Unit-specific: 2/5
Individual: 1/5
------------------------------------------------------------------------------
-3-
Executive B:
------------
Base Earnings for Executive B = $50,000
Threshold for Executive B = 10% ($5,000)
Target for Executive B = 20% ($10,,000)
Maximum for Executive B = 30% ($15,000)
Weighting = Corporate-wide: 2/3
Individual: 1/3
CORRESPONDING INCENTIVE RANGE:
------------------------------
Executive A:
-----------
Incentive Range Based on Achievement of Goals
---------------------------------------------
Below
Threshold Threshold Target Maximum
Goal (weight) Performance Performance Performance Performance
------------- ----------- ----------- ----------- -----------
Corporate (2/5) $0 $4,000 $14,000 $21,200
Business Unit A (2/5) $0 $4,000 $14,000 $21,200
Individual (1/5) $0 $2,000 $ 7,000 $10,600
--------- --------- ---------- ---------
Total $0 $10,000 $35,000 $53,000
Executive B:
------------
Incentive Range Based on Achievement of Goals
---------------------------------------------
Below
Threshold Threshold Target Maximum
Goal (weight) Performance Performance Performance Performance
------------- ----------- ----------- ----------- -----------
Corporate (2/3) $ 0 $3,333 $6,667 $10,000
Individual (1/3) $ 0 $1,667 $3,333 $ 5,000
--------- --------- --------- ---------
Total $ 0 $5,000 $10,000 $15,000
For financial performance between threshold, target and maximum,
straight-line interpolation is applied. Appendix A summarizes the incentive
levels based on performance scenarios between threshold and maximum for
several of the currently applicable target levels. The incentive levels shown
are applied to each financial goal and weighted appropriately. Because the
applicable target levels are established annually and their relationships with
the corresponding threshold and maximum levels will vary dependent on the
target levels designated, Appendix A may change annually.
The following illustrates how the hypothetical participants' awards are
calculated using Appendix A, based on illustrative performance levels:
ILLUSTRATIVE ACTUAL PERFORMANCE:
--------------------------------
Executive A:
------------
Actual Percent
Plan Year of Target
Goals Performance Achieved
--------------- ----------- --------
Corporate EPS $2.90 97%(1)
Business Unit A $2.1 million 105%(2)
Individual 4 of 4 goals met N/A(3)
(1) $2.90 (hypothetical actual EPS) divided by $3.00 (hypothetical target)
------------------------------------------------------------------------------
-4-
(2) $2.1 million (hypothetical actual operating income) divided by $2.0
million (hypothetical target)
(3) Full attainment of individual goals earns the participant the maximum
available incentive award level. For Executive A, this is 53% before
being weighted
Executive B:
------------
Actual Percent
Plan Year of Target
Goals Performance Achieved
------------- ----------- --------
Corporate EPS $2.90 97%(1)
Individual 4 of 5 goals met N/A(2)
(1) $2.90 (hypothetical actual EPS) divided by $3.00 (hypothetical target)
(2) 4 of 5 individual goals performed represents 80% achievement of the
30% maximum incentive award level for Executive B, or 24% before being
weighted
ILLUSTRATIVE PARTICIPANTS' INCENTIVE CALCULATION:
-------------------------------------------------
Executive A:
------------
Total Award Based Actual
Goals On Performance(1) Incentive Award(2)
-------------- ----------------- ------------------
Corporate EPS 27.5% 11.0%
Business Unit A 39.5% 15.8%
Individual 53% 10.6%
-----------
Total 37.4%
Total Incentive $37,400(3)
(1) Based on the hypothetical target award level of 35% for Executive A
and derived from Appendix A using the corresponding "Percent of Target
Achieved" calculated above
(2) The Total Award % multiplied by the weighted factor, which is 2/5 for
Corporate EPS, 2/5 for Business Unit profits and 1/5 for individual
goals
(3) The Total Incentive Award as a percentage of the actual earnings for
the plan year, which in the case of hypothetical Executive A is 37.4%
of $100,000
Executive B:
------------
Total Award Based Actual
Goals On Performance(1) Incentive Award(2)
------------- ----------------- ------------------
Corporate EPS 17.0% 11.3%
Individual 24.0% 8.0%
------------
Total 19.3%
Total Incentive $9,650(3)
(1) Based on the hypothetical target award level of 20% for Executive B
and derived from Appendix A using the corresponding "Percent of Target
Achieved" calculated above
(2) The Total Award % multiplied by the weighted factor, which is 2/3 for
Corporate EPS and 1/3 for individual goals
(3) The Total Incentive Award as a percentage of the actual earnings for
the plan year, which in the case of hypothetical Executive B is 19.3% of
$50,000
Performance against corporate, business unit ( if applicable) and
individual goals and the calculation of the earned incentive awards are
certified by the Committee in the first quarter of the year following the
plan year. The Committee has the authority to adjust participant awards
downward, if appropriate.
------------------------------------------------------------------------------
-5-
G. AWARD PAYOUTS AND TIMING
Awards are paid in cash, subject to applicable withholding, after AMP's
results have been verified by the Company and certified by the Committee.
Typically, awards are paid before the end of the first quarter of the year
following each plan year.
To receive awards, participants must be active employees in good standing
at AMP on December 31 of the plan year. However, different guidelines apply
for those participants who retire, become disabled or die during the plan
year. See Section H, subsections a) through c) below for details on these
guidelines. The Committee has the authority to make exceptions to these rules
and guidelines.
H. ADMINISTRATIVE INFORMATION
This section contains important information about changes in employment
status, plan provisions for promotions, transfers and new hires, tax
provisions and other administrative matters.
a) Termination Before Year-End For Reasons Other Than Retirement,
Disablement or Death
---------------------------------------------------------------
Participants who leave AMP on or before December 31 of the plan
year forfeit all award opportunities for the current plan year under
this plan. If, however, employment is terminated after the
completion of the plan year, participants are eligible to receive
an award for the prior plan year. The Committee has the authority
to make exceptions to this guideline.
b) Retirement, Disablement and Death
---------------------------------
Participants who retire, become disabled or die during the plan
year are eligible to receive pro rata awards. For retirement and
disablement, awards are paid after that plan year--regardless of
the date of change--to enable the appropriate calculations to be
made. For estate purposes, awards to employees who die are paid as
soon as possible following death and will be based on anticipated
performance. The Committee has the authority to make exceptions
to this guideline.
c) Promotions, Transfers and New Hires
-----------------------------------
Participants who are promoted into the Plan, hired into the Plan,
or transferred into or out of the Plan, are eligible to receive
pro rata awards based on the period of active employment while
under the Plan. For participants who transfer from one eligible
position to another eligible position, awards are prorated and
determined jointly by the former and new managers. The Committee
has the authority to make exceptions to this guideline.
d) Taxes on Awards
---------------
Participant awards are taxed as ordinary income, in keeping with
current U.S. and local tax laws.
e) Amendment
---------
The Committee also has the right to amend, suspend or terminate the
Plan at any time for any reason. Such changes may be necessary if
there are changes in laws, regulations or accounting practices,
mergers, acquisitions, divestitures, or other extraordinary,
unusual or nonrecurring items.
f) Employment
----------
Participation in the Plan does not guarantee continued employment
by AMP.
g) Management, Accounting and Financial Decisions
----------------------------------------------
Nothing in this Plan shall affect the authority of the management
of AMP to make management, business, accounting and financial
decisions concerning the Company.
h) Non-Assignability
-----------------
Prior to its payment in cash, no right or benefit under this Plan
shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge the same whether
voluntary, involuntary or by
------------------------------------------------------------------------------
-6-
operation of law, shall be void except by will or by the laws of
descent and and distribution or by such other means as the
Committee may approve from time to time. No right or benefit
under the Plan shall in any manner be liable for or subject to the
debts, contracts, liabilities, or torts of the person entitled to
such benefit. If any participant under the Plan should become
bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right or benefit under the Plan, then such
right or benefit shall, in the sole discretion of the Committee,
cease and determine, and in such event, AMP may hold or apply the
same or any part thereof for the benefit of the participant, the
participant's spouse, children or other dependents, or any of them,
in such manner and in such proportion as the Committee may
determine.
i) Non-Uniform Determinations
--------------------------
The Committee's determinations under the Plan (including without
limitation determinations of the persons to participate under the
Plan, award levels, objective performanced-based goals, relative
weighting between goals, and the terms of such awards) need not
be uniform and may be made by it selectively among persons who
participate, or are eligible to participate, under the Plan,
whether or not such persons are similarly situated.
j) Effect on Other Plans
---------------------
Nothing in this Plan shall be construed to limit the right of AMP
to establish any other forms of incentives or compensation for
employees of the Company, whether payable in cash or otherwise,
in connection with any proper corporate purpose.
k) Severability
------------
If any provision of the Plan is or becomes or is deemed to be
invalid, illegal, or unenforceable in any jurisdiction, or as to
any person or award, or would disqualify the Plan or any award
under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to applicable laws,
or if it cannot be so construed or deemed amended without, in the
determination of the Committee, materially altering the intent of
the Plan or an award, such provision shall be stricken as to such
jurisdiction, person, or award, and the remainder of the Plan and
any such award shall remain in full force and effect.
l) Construction
------------
Wherever any words are used in this Plan in the masculine gender
they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and
wherever any words are used herein in the singular form they shall
be construed as though they were also used in the plural form in
all cases where they would so apply.
m) Headings
--------
Headings are given to the sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction
or interpretation of the Plan or any provision thereof.
n) Governing Law
-------------
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance
with the laws of the Commonwealth of Pennsylvania and applicable
Federal law.
January 25, 1995
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-7-
AMP INCORPORATED
HARRISBURG, PA 17105
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APPENDIX A - PLAN YEAR TOTAL AWARD SCHEDULE
(For Use in Converting Percents of Corporate-Wide and Unit-Specific
Financial Target Achievement Into Non-Weighted Incentive
Award Percents)
Percent of
Financial ______________________Incentive Profile__________________________
Target
Achieved 10%-35%-53% 10%-30%-45% 10%-25%-38% 10%-20%-30%
120% 53.0% 45.0% 38.0% 30.0%
119% 52.1% 44.3% 37.4% 29.5%
118% 51.2% 43.5% 36.7% 29.0%
117% 50.3% 42.8% 36.1% 28.5%
116% 49.4% 42.0% 35.4% 28.0%
115% 48.5% 41.3% 34.8% 27.5%
114% 47.6% 40.5% 34.1% 27.0%
113% 46.7% 39.8% 33.5% 26.5%
112% 45.8% 39.0% 32.8% 26.0%
111% 44.9% 38.3% 32.2% 25.5%
110% 44.0% 37.5% 31.5% 25.0%
109% 43.1% 36.8% 30.9% 24.5%
108% 42.2% 36.0% 30.2% 24.0%
107% 41.3% 35.3% 29.6% 23.5%
106% 40.4% 34.5% 28.9% 23.0%
105% 39.5% 33.8% 28.3% 22.5%
104% 38.6% 33.0% 27.6% 22.0%
103% 37.7% 32.3% 27.0% 21.5%
102% 36.8% 31.5% 26.3% 21.0%
101% 35.9% 30.8% 25.7% 20.5%
100% 35.0% 30.0% 25.0% 20.0%
99% 32.5% 28.0% 23.5% 19.0%
98% 30.0% 26.0% 22.0% 18.0%
97% 27.5% 24.0% 20.5% 17.0%
96% 25.0% 22.0% 19.0% 16.0%
95% 22.5% 20.0% 17.5% 15.0%
94% 20.0% 18.0% 16.0% 14.0%
93% 17.5% 16.0% 14.5% 13.0%
92% 15.0% 14.0% 13.0% 12.0%
91% 12.5% 12.0% 11.5% 11.0%
90% 10.0% 10.0% 10.0% 10.0%
Note: After the total award is attained, it is multiplied by the
appropriate financial goal weight.
January 25, 1995
AMP INCORPORATED
----------------
1993 LONG-TERM EQUITY INCENTIVE PLAN
------------------------------------
(As Amended and Restated Effective January 1, 1995)
1993 LONG-TERM EQUITY INCENTIVE PLAN
------------------------------------
January 1995 2
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1. PURPOSE. The purposes of the AMP Incorporated 1993 Long-Term Equity
Incentive Plan (the "Plan") are to encourage selected employees of AMP
Incorporated (the "Company") to acquire a proprietary interest in the
Common Stock of the Company, thereby aligning their interests with the
interests of the shareholders; to generate an increased incentive to
contribute to the Company's future growth and profitability, thus
enhancing the value of the Company for the benefit of its shareholders;
and to strengthen the ability of the Company to attract and retain
exceptionally qualified individuals upon whom the sustained progress,
growth and profitability of the Company depend.
2. DEFINITIONS. As used in the Plan, the following terms shall have the
meanings set forth below:
a) "Agreement" shall mean any agreement, contract, certificate or
other instrument or document that is in writing and evidences any
Award granted under the Plan.
b) "Award" shall mean any Option, Stock Bonus Unit, Supplemental Cash
Bonus, Performance Restricted Share or other grant made under the
Plan.
c) "Award Date" shall mean the date on which an Award is made under
the Plan.
d) "Board" shall mean the board of directors of the Company.
January 1995 3
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e) "Bonus Computation Date" shall mean the Award anniversaries for
payment of a portion of Stock Bonus Unit and/or Supplemental Cash
Bonus as described in Section 8 a).
f) "Change in Control" shall mean those events and conditions that
may occasion a change in control in the Company as defined in
Section 12.
g) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
h) "Committee" shall mean a committee of the Board designated by such
Board to administer the Plan and composed of two or more directors,
each of whom is a "disinterested person" within the meaning of
Rule 16b-3. No member of the Committee shall be a current or former
employee of the Company or shall have received an Award under the
Plan within a one-year period prior to his or her appointment to
the Committee. No member of the Committee shall participate in
any decisions of the Committee that will or could affect their own
distributions or other participation under the Plan.
i) "Common Stock" shall mean the Common Stock of the Company, no par
value.
j) "Company" or "Corporation" shall mean AMP Incorporated, a
corporation organized under the laws of the Commonwealth of
Pennsylvania, and any of its subsidiaries, partnerships and joint
ventures.
January 1995 4
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k) "Competing Business" shall mean, as applied to a particular period
of time, a business that at such time is engaged in the
manufacture, sale or other disposition of a product or products
that is in competition with a product or products of the Company.
l) "Designated Value" shall mean the amount designated by the
Committee with respect to a Stock Bonus Unit as defined in
Section 8 b).
m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
n) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities),
the fair market value of such property determined by such methods
or procedures as set forth in Sections 7 a), 7 d), 8 b), and 8 c)
or otherwise established from time to time by the Committee.
o) "Incentive Stock Option" (ISO) shall mean an option granted under
Section 7 of the Plan that is intended to meet the requirements
of Section 422 of the Code, or any successor provision thereto.
p) "Nonqualified Stock Option" (NQSO) shall mean an option granted
under Section 7 of the Plan that is not intended to be an
Incentive Stock Option or does not qualify as an Incentive Stock
Option.
January 1995 5
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q) "Option" shall be a right to purchase a specified number of Shares
at a given price within a specified period of time, and shall be
either an Incentive Stock Option or a Nonqualified Stock Option.
r) "Participant" shall mean those officers and other key employees
designated to be granted an Award under the Plan as defined in
Section 5.
s) "Performance Restricted Share" shall mean a restricted Share
granted under Section 10 of the Plan that will either become an
unrestricted Share or be forfeited based on Company performance
during the Performance Vesting Period.
t) "Performance Vesting Period" shall mean a period of three or more
consecutive fiscal years of the Company specified by the Committee
in conjunction with an Award of Performance Restricted Shares under
Section 10 of the Plan.
u) "Person" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated
organization, or government or political subdivision thereof.
v) "Plan" shall mean the AMP Incorporated 1993 Long-Term Equity
Incentive Plan.
January 1995 6
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w) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934,
as amended, or any successor rule or regulation thereto.
x) "Securities Act" means the Securities Act of 1933, as amended.
y) "Share" or "Shares" shall mean the shares of Common Stock.
z) "Stock Bonus Unit" shall mean any Award granted subject and
pursuant to Section 8.
aa) "Supplemental Cash Bonus" shall mean any Award granted under
Section 9 in conjunction with a Stock Bonus Unit.
3. Administration. The Plan shall be administered by the Committee in
accordance with its provisions.
The Committee shall have full and final authority in its discretion to:
i) interpret the provisions of the Plan and to decide all questions of
fact arising in its application, and its interpretation and decisions
shall be in all respects final, conclusive and binding; ii) determine
the employees who will be Participants; iii) determine the type of
Award to be made and the amount, size and terms of each such Award;
iv) determine the time when Awards will be granted; v) impose such
conditions on the grant of Awards as it deems appropriate; and
vi) make all other determinations, rules and regulations necessary or
advisable for the administration of this Plan.
January 1995 7
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No member of the Committee shall be personally liable for any action
or determination in respect to the administration of the Plan if made
in good faith.
4. Shares Subject to Plan. The shares of stock subject to Options, Stock
Bonus Units and Performance Restricted Shares shall be the Shares.
Subject to the below-noted provisions, the maximum number of Shares
that may be awarded under the Plan during its term shall be 5,000,000
Shares, subject to adjustment in accordance with Section 20 hereof.
Such Shares may, in whole or part, be authorized and unissued shares or
issued Shares reacquired by the Company. In addition to this number of
Shares that may be awarded under the Plan during its term, to the
extent permitted by Rule 16b-3 promulgated under the Exchange Act and
any interpretations of the Securities and Exchange Commission Staff
thereunder: i) if the total available Shares in any year are not
awarded, the remaining balance of Shares shall be available for use in
ensuing years; ii) similarly, if Awards which have been made under the
Plan for any reason expire, terminate or are forfeited with all or any
portion thereof remaining unexercised or unpaid, then the Shares
corresponding to such unexercised or unpaid Awards will again be
available for award under the Plan; and iii) to the extent Awards of
Stock Bonus Units are paid in cash rather than Shares, or are paid in
Shares and the number of Shares distributed is less than the number of
Stock Bonus Units awarded, the remaining balance of Shares will be
available for future awards under the Plan.
5. Participants. Persons eligible to receive Awards under the Plan shall
be limited to those officers and other key employees of the Company
who, in the opinion of the
January 1995 8
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Committee, are in positions in which their decisions, actions, and
counsel significantly impact upon the growth and financial success of
the Company. The Committee's decisions with respect to participation
shall be final and binding.
6. Awards Under the Plan. Awards under the Plan may be in the form of
Options (both Nonqualified Stock Options and Incentive Stock Options),
Stock Bonus Units with or without Supplemental Cash Bonuses,
Performance Restricted Shares, or any combination of the above. Awards
shall be made in such frequency and on such date as the Committee shall
determine for each Participant. Effective for awards made beginning in
1995, no more than 2 percent of the 5,000,000 shares of Common Stock
approved for distribution under the Plan during its term may be made
subject to awards made to any one participant under the Plan in a given
year.
7. Options. Options shall be evidenced by Option Agreements in such form
and containing such terms and conditions as the Committee shall approve
from time to time, consistent with this Plan. Option Agreements shall
contain in substance, but not be limited to, the following terms and
conditions:
a) Option Price. The Option exercise price for each Share shall be
equal to 100% of the Fair Market Value of a Share on the Award
Date, as determined by the closing sale price reported on the
New York Stock Exchange Composite Tape or such higher price as
may be determined by the Committee in respect to any Option.
January 1995 9
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b) Number of Shares. Each Option Agreement shall state the number
of Shares covered by each Option Award.
c) Exercise of Option. Each Option Agreement shall state the period
or periods of time, as may be determined by the Committee, within
which the Option may be exercised by the Participant, in whole or
in part, provided that, subject to the provisions of the next
sentence, the Option may not vest or be exercised earlier than
twelve months after the Award Date of the Option nor later than
ten years after the Award Date of the Option. Notwithstanding
the previous sentence, the Committee shall have the power to
permit, in its discretion, an acceleration of the previously
determined exercise terms, subject to the terms of this Plan,
under such circumstances and upon such terms and conditions as
it deems appropriate. Each Option Agreement shall state the
minimum number of Options that can be exercised in the event a
Participant chooses to exercise fewer than the total number of
Options that are exercisable, and the procedures and methods that
must be followed in order to exercise an Option. During the life
of a Participant, Options shall be exercisable only by such
person or, if disabled, by such person's guardian or legal
representative. After the death of a Participant, Options may
be exercised, subject to the terms of the Plan, by the
Participant's personal representative or by any person empowered
to do so by will or by the laws of descent and distribution.
d) Payment for Shares. Shares purchased pursuant to an Option
Agreement shall be paid for in full at the time of exercise,
either in the form of cash,
January 1995 10
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Common Stock (whether by previously owned Shares or by having
the Company withhold a portion of the Shares to be received)
valued at Fair Market Value on the date of payment as determined
by the closing sales price of the New York Stock Exchange
Composite Tape, or in a combination thereof, as the Committee
may determine.
e) Rights upon Termination of Employment. In the event that a
Participant ceases to be an employee of the Company for any
cause, all Options will terminate immediately or as the
Committee may determine in its sole discretion. Furthermore,
if the Committee in its sole discretion so determines, the
period within which an Option may be exercised may be extended
beyond the date of termination of employment if a Participant
continues to perform services for the Company or a subsidiary
thereof on either a full or part time basis either as an
independent contractor or on a consulting basis or otherwise.
In no event may the Committee continue the term of the Option
beyond its term as stipulated in the Option Agreement.
Notwithstanding the foregoing, any extension of the term of an
Option beyond the date of termination of employment shall be
contingent on such conditions as the Committee, in its sole
discretion, may determine, including but not limited to the
requirement that the Participant shall not, whether full time
or part time, as an employee, independent contractor, consultant,
advisor or otherwise, engage in or perform any services prior to
the exercise and payment of such Option for a business that is a
Competing Business, or otherwise act in a manner that is inimical
or contrary to the best interests of
January 1995 11
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the Company. In the event that any of such conditions shall not
be fulfilled, the extension of the term of the Option and the
obligations of the Company under this Section 7 shall forthwith
terminate and the Participant's rights hereunder shall be
canceled.
f) Individual Limitations. Option Agreements evidencing Incentive
Stock Options shall contain such terms and conditions as may be
necessary to qualify such Options as Incentive Stock Options,
including but not limited to the following:
i) Notwithstanding anything herein to the contrary, the
aggregate Fair Market Value (determined as of the time the
Option(s) is granted) of the Shares that may become first
exercisable in any calendar year with an Incentive Stock
Option shall not exceed $100,000 for each Participant;
options exercised in excess of $100,000 in a given year
shall be treated as Nonqualified Stock Options.
ii) Notwithstanding anything herein to the contrary, no
Incentive Stock Option shall be granted to any individual if
at the time the Option is to be granted the individual owns
stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company unless
at the time such Option is granted the Option price is at
least 110 percent of the Fair Market Value of
January 1995 12
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the Shares subject to Option and such Option by its terms
is not exercisable after the expiration of five years from
the Award Date.
iii) The Committee may require Participants to give the Company
prompt notice of any disposition of Shares acquired by
exercise of an Incentive Stock Option if such disposition
occurs within 2 years from the Award Date of such Option or
1 year from the date of transfer of such Shares to
Participant. These requirements to give prompt notice of
disposition may be referred to in legends contained on the
certificates evidencing such Shares.
g) Other Terms. Each Incentive Stock Option Agreement shall
contain such other terms, conditions and provisions as the
Committee may determine to be necessary or desirable in order to
qualify such Option as a tax-favored Option within the meaning of
Section 422 of the Code, or any amendment thereof, substitute
therefor, or regulation thereunder. No Incentive Stock Option
shall be granted unless such Option, when granted, qualifies as
an Incentive Stock Option. Subject to the limitations of
Section 22 below, the Committee shall have the power to amend
the terms of any Option.
8. Stock Bonus Units. Stock Bonus Units granted under the Plan shall be
evidenced by Agreements in such form and containing such terms and
conditions as the Committee shall approve from time to time, consistent
with this Plan. The Agreements shall specify, but not be limited to,
the number of Stock Bonus Units
January 1995 13
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awarded to a Participant, the Designated Value of the Shares as of the
Award Date, and the Bonus Computation Dates:
a) Bonus Computation Dates. At the time of the Award of Stock Bonus
Units, the Committee shall establish with respect to each such
Award, Bonus Computation Dates that are the fourth, fifth and
sixth anniversaries of the Award Date and at which time one-third
of the Stock Bonus Units shall be calculated and paid.
b) Designated Value. The Designated Value shall be an amount
designated by the Committee on the Award Date, but in no event
less than 95% of the Fair Market Value as determined by the
average closing sales price as reflected on the New York Stock
Exchange Composite Tape for the 10 trading days immediately prior
to such Award Date.
c) Payment Determination. The amount of payment, if any, shall be
determined on each of the specified Bonus Computation Dates by
subtracting the Designated Value from the Fair Market Value as
determined by the average closing sales price as reflected on the
New York Stock Exchange Composite Tape for the 10 trading days
immediately prior to such Bonus Computation Date, and multiplying
such difference by the number of Stock Bonus Units maturing on the
Bonus Computation Date.
d) Form of Payment. Subject to the provisions of the next sentence,
Awards shall be paid in Shares with the exception that fractional
Shares shall be paid
January 1995 14
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in cash. The Committee, in its sole discretion, may
determine that Awards or any portion thereof may be paid in cash.
e) Time of Payment . Awards shall be paid as of each Bonus
Computation Date, or as soon thereafter as practical, taking into
consideration effects of any short-swing profit liability imposed
by Section 16 of the Exchange Act in a manner determined by the
Committee. Payments may, in the sole discretion of the Committee,
be made in lump sum distributions and/or installments.
Notwithstanding the foregoing, the Committee may, in its sole
discretion at any time or times after the first anniversary of
the Award Date, accelerate the date that is the Bonus
Computation Date under such circumstances and upon such terms and
conditions as it deems appropriate.
f) Termination Prior to Award Being Fully Earned. Unless the
Committee, in its sole discretion, determines otherwise, an Award
granted to a Participant shall terminate for all purposes when a
Participant terminates employment with the Company except in the
case of death, disability, or retirement. A Participant, or the
estate of a Participant, whose employment was terminated due to
death, disability or retirement occurring more than one year
after the Award Date shall be eligible to receive a pro rata
portion of the payment of his or her Award based upon the portion
of the performance period during which the Participant was
employed, in such amount and manner and with such conditions as
the Committee shall determine.
January 1995 15
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If the Committee in its sole discretion so determines,
employment shall not be considered as terminated for the purposes
of this Section 8 f) so long as a Participant continues to
perform services for the Company or a subsidiary thereof on either
a full or part time basis either as an independent contractor or
on a consulting basis or otherwise, provided, however, that
Participant during such period does not, whether full time or
part time, engage in or perform any services as an employee,
independent contractor, consultant, advisor or otherwise, for a
Competing Business.
9. Supplemental Cash Bonus Awards. The Committee may, in its sole
discretion, grant Supplemental Cash Bonus Awards to Participants in
conjunction with payments with respect to Stock Bonus Units. The
Supplemental Cash Bonus Award shall be paid in cash and shall be a
percentage no greater than that calculated to provide an Award
sufficient to pay the anticipated United States Federal income tax at
a maximum rate for the highest taxable bracket with respect to both
the payment for Stock Bonus Units and the Supplemental Cash Bonus
Award rounded up to the next highest whole percentage point. Payment
of the Supplemental Cash Bonus shall be made at the same time as
payment of the Stock Bonus Units.
10. Performance Restricted Shares. Performance Restricted Shares awarded
under the Plan shall be evidenced by Share certificates issued to the
Participant at the time of the Award that bear such legend or legends
as the Company deems necessary or appropriate. These Performance
Restricted Shares shall be
January 1995 16
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governed by Agreements in such form and containing such terms and
conditions as the Committee shall approve from time to time,
consistent with the Plan. These Agreements shall also contain in
substance, but not be limited to, the following terms and conditions:
a) Performance Vesting Period. At the time of an Award of
Performance Restricted Shares, the Committee shall establish
with respect to such Award a Performance Vesting Period equal to
three or more consecutive fiscal years of the Company. Awards of
Performance Restricted Shares applicable to a Performance Vesting
Period shall be made by the Committee no later than the end of
the first calendar quarter of the first fiscal year in the
Performance Vesting Period.
b) Terms of an Award. In making an Award of Performance Restricted
Shares, the Committee shall specify i) a number of Performance
Restricted Shares covered by the Award, ii) the applicable
Performance Vesting Period, iii) the minimum average annual ROE
to be attained by the Company over the Performance Vesting Period
as a pre-condition to any of the Performance Restricted Shares
becoming vested at the end of the Performance Vesting Period,
iv) a target average annualized earnings growth rate to be
attained by the Company over the Performance Vesting Period,
v) and a super-target average annualized earnings growth rate to
be attained by the Company over the Performance Vesting Period.
For purposes hereof, 1) average annual ROE for a Performance
Vesting Period shall be the arithmetic average of the annual
ROE numbers
January 1995 17
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reported for each fiscal year in the Performance Vesting Period,
and 2) the average annualized earnings growth rate for a
Performance Vesting Period shall be the constant rate of year-to-
year earnings growth that, were it to occur consistently over the
Performance Vesting Period, would generate the actual aggregate
earnings realized during the Performance Vesting Period.
c) Vesting of Performance Restricted Shares. At the end of a
Performance Vesting Period, all Performance Restricted Shares
awarded with respect to the Performance Vesting Period shall be
forfeited, canceled and returned to the Company if the minimum
average annual ROE target applicable to the Performance Vesting
Period has not been attained. If the ROE target has been
attained or exceeded at such point in time, the number of
Performance Restricted Shares awarded to a Participant at the
outset of the Performance Vesting Period that become vested will
be determined by the actual average annualized earnings growth
rate attained over the Performance Vesting Period, as follows:
i) If the actual average annualized earnings growth rate over
the Performance Vesting Period is 0% or less, all
Performance Restricted Shares awarded with respect to the
Performance Vesting Period shall be forfeited, canceled,
and returned to the Company.
ii) If the actual average annualized earnings growth rate over
the Performance Vesting Period is between 0% earnings growth
and
January 1995 18
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the target average annualized earnings growth rate
applicable to the Performance Vesting Period, the actual
growth rate stated as a percentage of the target growth rate
will determine the percentage of the Performance Restricted
Shares of each Participant that will be vested, with the
balance of the Performance Restricted Shares to be
forfeited, canceled and returned to the Company.
iii) If the actual average annualized earnings growth rate over
the Performance Vesting Period is between the target level
and the super-target level of average annualized earnings
growth applicable to the Performance Vesting Period, the
Participant will be vested in between 100% and 200% of the
Performance Restricted Shares awarded at the outset of the
Performance Vesting Period, with the applicable vesting
percentage determined using direct proportions (e.g., if
the earnings growth rate is 1/4 of the spread between the
target and the super-target, the vesting percentage would be
125%; if the earnings growth rate is 8/10 of the spread
between the target and the super-target, the vesting
percentage would be 180%).
iv) If the actual average annualized earnings growth rate over
the Performance Vesting Period is at or above the super-
target level, the Participant will be vested in 200% of the
Performance Restricted Shares awarded at the outset of the
Performance Vesting Period.
January 1995 19
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d) Voting of Performance Restricted Shares. During the Performance
Vesting Period applicable to an Award of Performance Restricted
Shares, all voting rights appurtenant to the Performance
Restricted Shares shall be fully exercisable by the Participant
notwithstanding the performance vesting restrictions. However,
during the Performance Vesting Period, no voting rights shall
exist or be exercisable with respect to Performance Restricted
Shares credited to the dividend reinvestment account described
in Section 10 e) below.
e) Dividends. All dividends (cash or stock) payable on non-vested
Performance Restricted Shares during the Performance Vesting
Period applicable to such Award shall be held by the Company in a
phantom dividend reinvestment account. Cash dividends will be
deemed to have been invested in further Performance Restricted
Shares using the closing price on the New York Stock Exchange on
the dividend payment date. Dividends that would be payable on
such dividend reinvestment account Performance Restricted Shares
will also be credited to the account and deemed invested in
further Performance Restricted Shares. At the end of the
Performance Vesting Period, the Participant shall be vested in
the same percentage of the balance of the Performance Restricted
Shares credited to the dividend reinvestment account as the
percentage the Participant is vested, in accordance with the
terms of the Plan, for the Award of the Performance Restricted
Shares applicable to the Performance Vesting Period. The
Participant's vested Performance Restricted Shares under the
dividend reinvestment account shall be paid
January 1995 20
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out to the Participant in actual Shares, without further
restriction, plus cash for any fractional Share.
f) Form and Time of Payment. As soon as practical after the end of
a Performance Vesting Period, the Company shall issue to each
Participant with Performance Restricted Shares that vested with
respect to the Performance Vesting Period a certificate for the
number of such vested Shares plus the related number of vested
Shares attributable to the dividend reinvestment account. The
Company shall concurrently cancel the Share certificate issued at
the outset of the Performance Vesting Period to evidence the
Performance Restricted Share Award.
g) Termination Prior to Award Being Fully Earned. Unless the
Committee, in its sole discretion, determines otherwise, an
Award granted to a Participant shall terminate for all purposes
when a Participant terminates employment with the Company except
in the case of death, disability, or retirement. A Participant,
or the estate of a Participant, whose employment was terminated
due to death, disability or retirement occurring more than one
year after the Award Date shall be eligible to receive a pro rata
portion of the payment of his or her Award based upon the portion
of the Performance Vesting Period during which the Participant
was employed, in such amount and manner and with such conditions
as the Committee shall determine.
If the Committee in its sole discretion so determines, employment
shall not be considered as terminated for the purposes of this
Section 10 g) so
January 1995 21
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long as a Participant continues to perform services for the
Company or a subsidiary thereof on either a full or part time
basis either as an independent contractor or on a consulting
basis or otherwise, provided, however, that Participant during
such period does not, whether full time or part time, engage in
or perform any services as an employee, independent contractor,
consultant, advisor or otherwise, for a Competing Business, or
otherwise act in a manner that is inimical or contrary to the
best interests of the Company.
11. Non-Registration. In the event the Shares to be issued hereunder have
not been registered under the Securities Act or a registration is not
then currently effective with respect to such Shares, the Committee
shall require, as a condition to the exercise of any Option and the
award or vesting of any Performance Restricted Shares under this Plan,
that the Participant deliver to the Company at the time of such
exercise, award or vesting a bona fide written representation and
agreement, in a form satisfactory to the Committee, signed by the
Participant or other person then entitled to exercise such Option or
receive vested Performance Restricted Shares, stating that the
Shares are being acquired for his or her own account, for investment
and without any present intention of distribution or reselling said
Shares, or any of them, except as may be permitted under the
Securities Act and then applicable rules and regulations thereunder,
and that the Participant or other person then entitled to exercise
such Option or receive vested Performance Restricted Shares will
indemnify the Company against and hold it free and harmless from any
loss, damages, expense or liability resulting to the Company if any
sale or distribution of the Shares by such person is contrary to the
January 1995 22
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representation and agreement referred to above. The Committee may
take whatever additional actions it reasonably deems appropriate to
ensure the observance and performance of such representation and
agreement and to effect compliance with the Securities Act and any
other Federal or state securities laws or regulations, including but
not limited to Rule 144 promulgated under the Securities Act. Without
limiting the generality of the foregoing, the Committee may require an
opinion of counsel acceptable to it to the effect that any subsequent
transfer of Shares acquired on an Option exercise or upon vesting of
Performance Restricted Shares does not violate the Securities Act, and
may issue stop-transfer orders covering such Shares. Share
certificates evidencing Shares issued on exercise of such Option or
vesting of such Performance Restricted Shares shall bear an
appropriate legend referring to the provisions of this Section 11 and
the agreements herein.
12. Change in Control. For the purposes of this Section, "Change in
Control" shall mean the first to occur of any one of four events
described below:
a) The acquisition of beneficial ownership (other than from the
Company) by any person, entity or "group" within the meaning of
Section 13 d) 3) or Section 14 d) 2) of the Exchange Act
excluding, for this purpose, the Company or its subsidiaries, or
any employee benefit plan of the Company or its subsidiaries that
acquires beneficial ownership of voting securities of the Company
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act), of 30% or more of either the then outstanding shares of
Common Stock or the combined voting power of the Company's then
January 1995 23
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outstanding voting securities entitled to vote generally in the
election of directors; or
b) A change in the persons constituting the Board as it existed in
the immediately preceding calendar year (the "Incumbent Board")
such that the directors of the Incumbent Board no longer
constitute a majority of the Board; provided that any person
becoming a director in a subsequent year whose election, or
nomination for election, by the Company's shareholders was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is
in connection with an actual or threatened election contest
relating to the election of the directors of the Company, as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act) shall be, for purposes of the Plan, considered
as though such person were a member of the Incumbent Board; or
c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case with respect to which
persons who were the shareholders of the Company immediately prior
to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the combined voting
power entitled to vote generally in the election of the
reorganized, merged or consolidated corporation's then outstanding
voting securities; or
January 1995 24
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d) A liquidation or dissolution of the Company or the sale of all or
substantially all of the assets of the Company.
Notwithstanding the provisions of Sections 7, 8, 9, and 10 hereof and
the terms of each Agreement, upon the occurrence of a Change of
Control as defined above, all Options that are unexercised and
unexpired shall become immediately and automatically vested for the
period of their remaining terms, and all Stock Bonus Units,
Supplemental Cash Bonus Awards, Performance Restricted Shares and
other applicable Awards granted under the Plan that are unvested and
unpaid shall automatically become immediately vested and payable,
without any further action by the Committee.
13. General Restrictions. The Plan and each Award under the Plan shall be
subject to the condition that, if at any time the Committee shall
determine that the Plan, an Award under the Plan or the issuance or
purchase of Shares in connection therewith requires or it is desirable
that it has i) the listing, registration or qualification of the
Shares subject or related to the Plan upon any securities exchange or
under any state or Federal law or under the rules and regulations of
the Securities and Exchange Commission or any other governmental
regulatory body, or ii) the consent or approval of any government
regulatory body, or iii) an Agreement by the recipient of an Award
with respect to the disposition of Shares, then such Plan will not
be effective and the Award may not be consummated in whole or in part
unless such listing, registration, qualification, consent, approval or
agreement shall have been effected or obtained free of any conditions
not acceptable to the Committee.
January 1995 25
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14. Rights of a Shareholder. The recipient of any Award under the Plan
shall not be, nor have any of the rights of, a shareholder with
respect thereto unless and until certificates for Shares are issued to
such Participant.
15. Rights to Terminate Employment. Nothing in the Plan or in any
Agreement entered into pursuant to the Plan shall confer upon any
Participant the right to continue in the employment of the Company or
affect any right that the Company may have to terminate the
employment of such Participant for any reason whatsoever, with or
without good cause.
16. Management, Accounting and Financial Decisions. Nothing in this Plan
shall affect the authority of the management of the Company to make
management, business, accounting and financial decisions concerning
the Company.
17. Withholding of Taxes; Withholding of Shares.
a) Whenever the Company proposes or is required to issue or transfer
Shares under the Plan, the Company shall have the right to require
the recipient to remit to the Company an amount sufficient to
satisfy any Federal, state and/or local withholding tax
requirements prior to the delivery of any certificate or
certificates for such Shares. Withholding requirements may be
satisfied by cash payments or, at the election of a Participant,
by having the Company withhold a portion of the Shares or
Supplemental Cash Bonus to be received, or by delivering
previously owned Shares, having a value equal
January 1995 26
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to the amount to be withheld (or such portion thereof as the
Participant may elect).
b) Any election to have Shares withheld under this Section or, if so
determined by the Committee, under Section 7 d), may be subject,
in the Committee's discretion, to one or more of the following
restrictions in accordance with Section 16(b) of the Exchange Act:
i) the election shall be irrevocable;
ii) the election shall be subject, in whole or in part, to the
approval of the Committee and to such rules as it may adopt;
iii) the Option that may be part of the transaction must not be
exercised within six months following the election; and
iv) the election shall be made during the time period specified
in Rule 16b-3(e) promulgated under the Exchange Act.
Whenever payments under the Plan are to be made in cash, such payments
shall be net of an amount sufficient to satisfy any Federal, state
and/or local withholding tax requirements.
18. Non-Assignability. Prior to its settlement in the form of cash or
fully vested Shares, no right or benefit under this Plan shall be
subject to anticipation, alienation, sale,
January 1995 27
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assignment, pledge, encumbrance or charge, and any attempt to
anticipate, alienate, sell, assign, pledge, encumber or charge the
same whether voluntary, involuntary or by operation of law, shall be
void except by will or by the laws of descent and distribution or by
such other means as the Committee may approve from time to time.
No right or benefit under the Plan shall in any manner be liable for
or subject to the debts, contracts, liabilities, or torts of the person
entitled to such benefit. If any Participant under the Plan should
become bankrupt or attempt to anticipate, alienate, sell, assign,
pledge, encumber or charge any right or benefit under the Plan, then
such right or benefit shall, in the sole discretion of the Committee,
cease and determine, and in such event, the Company may hold or apply
the same or any part thereof for the benefit of the Participant,
Participant's spouse, children or other dependents, or any of them, in
such manner and in such proportion as the Committee may determine.
The Committee may impose such restrictions on the transferability of
the Shares as it deems appropriate. Any such restrictions shall be set
forth in the respective Agreement and may be referred to in legends
contained on the certificates evidencing such Shares.
19. Non-Uniform Determinations. The Committee's determinations under the
Plan (including without limitation determinations of the persons to
receive Awards, the form, amount and timing of such Awards, the terms
and provisions of such Awards and the Agreements evidencing same, and
the establishment of values and performance targets) need not be
uniform and may be made by it selectively
January 1995 28
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among persons who receive, or are eligible to receive, Awards under
the Plan, whether or not such persons are similarly situated.
20. Adjustments. In the event of any change in the outstanding Shares of
the Company by reason of a stock dividend or distribution,
recapitalization, merger, consolidation, split-up, combination,
exchange of shares or the like, the Committee shall adjust the
maximum number of Shares that may be issued under the Plan and shall
provide for an equitable adjustment of any outstanding and unexercised
Award or any Shares issuable pursuant to an outstanding and
unexercised Award under this Plan, to the end that after such event
the Participant's proportionate interest shall be maintained as before
the occurrence of such event.
21. Delegation. The Committee may delegate to one or more officers or
managers of the Company, or a committee of such officers or managers,
the authority, subject to such terms and limitations as the Committee
shall determine, to: i) grant Awards to Participants; ii) cancel,
modify, waive rights with respect to Participants; or iii) alter,
discontinue, suspend, or terminate Awards held by Participants;
provided, however, that no such Participants shall be an officer,
director or ten percent shareholder of the Company within the meaning
of those terms under Section 16 of the Exchange Act.
22. Amendment. The Board may amend, suspend or terminate the Plan at any
time or from time to time, except that no amendment shall be effective
without shareholder approval if shareholder approval of such
amendment, suspension or termination would be required in order to
ensure that the Plan, as amended, would continue to
January 1995 29
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meet the requirements of Rule 16b-3 promulgated under the Exchange
Act. Except as may be provided in any Agreement, the termination or
any modification or amendment of the Plan shall not, without the
consent of a Participant, affect a Participant's rights under an Award
previously granted.
23. Effect on Other Plans. Nothing in this Plan shall be construed to
limit the right of the Company to establish any other forms of
incentives or compensation for employees of the Company, or to grant
or assume Options or restricted stock otherwise than under this Plan
in connection with any proper corporate purpose.
24. Duration of the Plan. The Plan shall remain in effect until all
Awards under the Plan either have been satisfied by the issuance of
Shares or the payment of cash, or have expired or been forfeited by
their terms, but no Award shall be granted more than ten years after
the date the Plan is adopted by the Board or the date the Plan
receives shareholder approval, whichever is earlier.
25. Funding of the Plan. This Plan shall be unfunded. The Company shall
not be required to establish any special or separate fund or to make
any other segregation of assets to assure the payment of any Award
under this Plan and payment of Awards shall be subordinate to the
claims of the Company's general creditors.
26. Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or as to any Person or Award, or would disqualify the
Plan or any Award under any law deemed
January 1995 30
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applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the
Award, such provision shall be stricken as to such jurisdiction,
Person, or Award, and the remainder of the Plan and any such Award
shall remain in full force and effect.
27. Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used
in the feminine gender in all cases where they would so apply, and
wherever any words are used herein in the singular form they shall be
construed as though they were also used in the plural form in all
cases where they would so apply.
28. Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
29. Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the Commonwealth of Pennsylvania and
applicable Federal law.
January 1995 31
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30. Effective Date. The Plan was duly approved by the stockholders of
the Company at the 1993 Annual Meeting of Stockholders and was
effective on July 1, 1993. Subject to the provisions of Section 31,
this amendment and restatement of the Plan as amended shall be
effective on January 1, 1995.
31. Approval of Stockholders. Notwithstanding anything herein to the
contrary, the Plan as amended and restated herein shall be effective
only if it is approved by holders of a majority of the outstanding
Shares entitled to vote and either present in person or represented by
proxy at an Annual Meeting of Stockholders to be held in 1995.
