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
- ---------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- ---------------------------------------------------------------------------
(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 24, 1996
__________
AMP
AMP Incorporated
Harrisburg, Pennsylvania
AMP Incorporated
Harrisburg, PA 17105-3608
AMP
Executive Offices
March 25, 1996
Dear Shareholder:
You are invited to attend the AMP Incorporated 1996 Annual Meeting of
Shareholders. This year the Annual Meeting will be held at the AMP
Incorporated Global Executive Leadership Center, 411 South Fortieth Street,
Harrisburg, Pennsylvania, on Wednesday, April 24, 1996, at 10:30 a.m.,
local time.
If you plan to attend the Annual Meeting, please mark the appropriate
box on the right-hand side 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
Global Executive Leadership 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.
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 24, 1996
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 AMP Incorporated Global Executive
Leadership Center, 411 South Fortieth Street, Harrisburg, Pennsylvania, on
Wednesday, April 24, 1996, 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, twelve in number, to serve
until the next Annual Meeting of Shareholders and until their
respective successors are elected and qualified.
2. 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 8,
1996 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 25, 1996.
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 24, 1996,
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 25, 1996. 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 25, 1996.
Shareholders of record at the close of business on March 8, 1996 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 8, 1996 the Corporation had 219,313,134 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. 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 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.
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 of the Commonwealth of Pennsylvania, attendance at the
Annual Meeting by a shareholder who has given a proxy does not have the
effect of revoking such proxy 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, with a portion of his or her plan account invested in
the plan's AMP Stock Fund on March 8, 1996, the Proxy
1
card received by the shareholder will cover his or her pro rata
portion of the AMP Stock Fund's shares. The Proxy card must be
returned or the shares will be voted by the plan's Trustee in its
sole and absolute discretion. If a shareholder is a participant in
the MERIT Plan of Benefits of M/A-COM, Inc., with a portion of his
or her plan account invested in the plan's fund containing AMP
Common Stock on March 8, 1996, the Proxy card received by the
shareholder will cover his or her pro-rata portion of the AMP Stock
Fund's shares. The Proxy card must be returned or the shares will
be voted by the plan's Trustee in the proportion established by the
directions received by the Trustee from all other participants
in this plan. If a shareholder is a participant in the M/A-COM, Inc.
Employee Stock Ownership Plan on March 8, 1996, the Proxy card received
by the shareholder will cover his or her pro-rata portion of the Trust
Fund's shares. The Proxy card must be returned or the shares will be
voted by the plan's Trustees in the proportion established by the
directions received by the Trustees from all other participants in
this plan.
ITEM 1:
ELECTION OF DIRECTORS
A Board of Directors, twelve 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 ("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. Jerome J. Meyer was elected a director of the
Corporation at the January 23, 1996 meeting of the Board of Directors.
The following information is supplied as to each person nominated for
election as a director.
<TABLE>
<CAPTION>
Nominee, Age and
Year First Principal Occupation and
Elected Director Business Experience
- ---------------- ------------------------
<S> <C>
Retired Chairman of the Board and Chief Executive Officer of
Air Products and Chemicals, Inc., Allentown, Pennsylvania, a
supplier of industrial gases, chemicals, and related
equipment and technology. Mr. Baker has served as a director
[portrait of Air Products and Chemicals, Inc. for more than the past
photograph five years and he is a former chief executive officer of that
of Dexter cmpany, having served in that capacity for more than five
F. Baker] years. He also serves as a director of Eastman Chemical.
Dexter F. Baker
Age 68
1990<F3><F4>
[portrait President of Harbor Point Associates, Inc., New York, New
photograph York, a private investment and consulting firm. Mr. DeNunzio
of Ralph also serves as a director of Harris Corporation, Federal
D. DeNunzio] Express Corporation, and NIKE, Inc.
Ralph D. DeNunzio
Age 64
1977<F3><F4>
2
Nominee, Age and
Year First Principal Occupation and
Elected Director Business Experience
- ---------------- ------------------------
President and Chief Executive Officer of Barbara 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 Certified
[portrait Public Accountants, chaired AICPA's audit committee, and
photograph received the John J. McCloy Award from the Public Oversight
of Barbara Board for excellence in auditing. She also serves as a director
H. Franklin] of Aetna Life & Casualty, The Dow Chemical Company and
MedImmune, Inc.
Barbara Hackman Franklin
Age 56
1993<F2>
Chairman of the Board of Hixon Properties Incorporated, San
Antonio, Texas, maintaining real estate holdings and other
[reference investments. Mr. Hixon has served as a director of Hixon
Appendix] Properties Incorporated for more than the past five years.
Joseph M. Hixon III
Age 57
1988<F2><F4>
[portrait Chief Executive Officer and President of the Corporation.
photograph Mr. Hudson has served as an officer of the Corporation for more
of William than the past five years. He also serves as a director of
J. Hudson, Carpenter Technology Corporation and The Goodyear Tire &
Jr.] Rubber Company.
William J. Hudson, Jr.
Age 61
1992<F1>
Chairman of the Board of Directors of the Corporation.
[portrait Mr. Marley has served as an officer of the Corporation for more
photograph than the past five years. He also serves as a director of
of James Armstrong World Industries, Inc., Dauphin Deposit Corporation
E. Marley] and Harsco Corporation.
James E. Marley
Age 60
1986<F1>
3
Nominee, Age and
Year First Principal Occupation and
Elected Director Business Experience
- ---------------- ------------------------
[portrait Retired Chairman of the Board of Directors and Chief Executive
photograph Officer of the Corporation. Mr. McInnes served as an officer
of Harold of the Corporation for more than five years. He also serves
A. McInnes] as a director of PPG Industries, Inc.
Harold A. McInnes
Age 68
1981<F1><F4>
Chairman of the Board and Chief Executive Officer of Tektronix,
Inc., Beaverton, Oregon, an electronic equipment manufacturer.
[portrait Mr. Meyer has served as Chairman of the Board and Chief
photograph Executive Officer and as a director of Tektronix for more than
of Jerome J. the past five years. He also serves as a director of Esterline
Meyer] Technologies Corporation and Portland General Corporation.
Jerome J. Meyer
Age 58
1996<2>
President of Evergreen Ventures, Ltd., Cleveland, Ohio, a
family-owned investment company, since August 1995. Mr. Morley
is the retired President, Chief Executive Officer and director
[portrait of Reliance Electric Company, Cleveland, Ohio, a manufacturer
photograph of electrical, mechanical power transmission, and telecom-
of John C. munications equipment and systems, having served in that
Morley] capacity for more than five years. He also serves as a
director of KeyCorp, Ferro Corporation, and Cleveland-Cliffs,
Inc.
John C. Morley
Age 64
1991<F3>
[portrait Retired Chairman of the Board of Directors and Chief Executive
photograph Officer of the Corporation. Mr. Raab served as an officer of
of Walter the Corporation for more than five years. He also serves as a
F. Raab] director of Dauphin Deposit Corporation and Harris Corporation.
Walter F. Raab
Age 71
1975<F1><F4>
4
Nominee, Age and
Year First Principal Occupation and
Elected Director Business Experience
- ---------------- ------------------------
Retired President and Chief Executive Officer of Parker Hannifin
Corporation, Cleveland, Ohio, an international manufacturer of
hydraulic, pneumatic and electromechanical components.
Mr. Schloemer has served as a director of Parker Hannifin
[portrait Corporation for more than the past five years and he is a former
photograph president and chief executive officer of that company, having
of Paul G. served in that capacity for more than five years. He also
Schloemer] serves as a director of Esterline Technologies Corporation and
Rubbermaid Inc.
Paul G. Schloemer
Age 67
1991<F3>
Chairman of the Advisory Council of IBM Japan, Ltd., a
manufacturer of computer systems located in Japan. Mr. Shiina
served as a board member of IBM Japan, Ltd. from 1962 until his
[portrait retirement as chief executive officer in 1992, having served in
photograph the capacity as CEO for more than five years. He also serves
of Takeo as a director of Air Products and Chemicals, Inc. and HOYA Corp.
Shiina] and as a member of the European Advisory Board of Bankers Trust
Company.
Takeo Shiina
Age 66
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.
</TABLE>
SECURITY OWNERSHIP OF DIRECTORS
The Corporation's Corporate Governance guidelines encourage each member
of the Board of Directors to hold the Corporation's Common Stock in an
amount having a market value of at least two times the annual retainer fee.
The following table identifies the total Common Stock ownership for each
Nominee for director as of March 8, 1996.
<TABLE>
<CAPTION>
Amount of Beneficial Amount of Phantom Total Beneficial
Ownership Ownership and Phantom Ownership
Name of Owner (shares) <F1><F2> (shares) <F3> (shares)
- ------------------ -------------------- ------------------ ---------------------
<S> <C> <C> <C>
Dexter F. Baker . . . . . 4,000 <F5> 2,683 6,683
Ralph D. DeNunzio . . . . 4,000 <F6> 3,018 7,018
Barbara H. Franklin . . . 1,291 <F7> 1,207 2,498
Joseph M. Hixon III . . .1,572,645 <F8> 5,294 1,577,939
William J. Hudson, Jr.. . 51,426 <F14><F15> 21,491<F4> 72,917
James E. Marley . . . . . 52,762 <F9><F14><F15> 19,304<F4> 72,066
Harold A. McInnes . . . . 50,371 <F15> 0 50,371
Jerome J. Meyer . . . . . 0 <F16> 351 351
John C. Morley . . . . . 3,400 <F10> 3,621 7,021
Walter F. Raab . . . . . 60,983 <F11> 0 60,983
Paul G. Schloemer . . . . 3,400 <F12> 0 3,400
Takeo Shiina . . . . . . 2,116 <F13> 1,052 3,168
- ------------
<F1> Each Director owns less than 1% of the Corporation's outstanding
Common Stock.
5
<F2> 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. Numbers shown in this
column include options the director has the right to exercise as
beneficial owner within 60 days after March 8, 1996.
<F3> Numbers shown in this column include Phantom shares: (i) credited to
outside directors under the Outside Directors Deferred Stock
Accumulation Plan, as described on page 8-9 of this Proxy Statement;
and (ii) credited to outside and non-employee directors for compensation
deferred at the election of the director, as described on page 8 of
this Proxy Statement.
<F4> Designated executive officers of the Corporation may defer up to a
specific percentage of their base salary and all officers are entitled
to defer receipt of all or a portion of their annual cash bonus.
Deferred compensation may be allocated to a phantom AMP Common Stock
account of the Corporation's Deferred Compensation Plan, as described
in footnote 9 to the Summary Compensation Table on pages 12-13 of this
Proxy Statement. This number also includes phantom shares of Common
Stock credited to the designated executive officer in an amount equal
to the dividend earned on Performance Restricted Shares, as described
in footnote 2 to the Summary Compensation Table on page 11 and footnote
3 to the Security Ownership of Executive Officers Table on page 19 of
this Proxy Statement.
<F5> Mr. Baker holds 2,000 of these shares of the Corporation's Common Stock
in a charitable foundation in which he shares voting and dispositive
powers. In addition to the options included in the number shown, he
holds 2,000 options granted under the Corporation's Stock Option Plan
for Outside Directors which are not exercisable until on or after
July 1, 1996.
<F6> Mr. DeNunzio also holds 2,000 options granted under the Corporation's
Stock Option Plan for Outside Directors which are not exercisable until
on or after July 1, 1996.
<F7> Ms. Franklin also holds 2,000 options granted under the Corporation's
Stock Option Plan for Outside Directors which are not exercisable until
on or after July 1, 1996.
<F8> In addition, 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. He also holds 2,000 options granted
under the Corporation's Stock Option Plan for Outside Directors which
are not exercisable until on or after July 1, 1996.
<F9> In addition, 202 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, 475
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.
<F10>Mr. Morley also holds 2,000 options granted under the Corporation's
Stock Option Plan for Outside Directors which are not exercisable
until on or after July 1, 1996.
<F11>In addition, 10,000 shares of Common Stock of the Corporation are
owned by a member of the immediate family of the Nominee; Mr. Raab
disclaims beneficial ownership of such stock.
<F12>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. In addition, he holds
2,000 options granted under the Corporation's Stock Option Plan for
Outside Directors which are not exercisable until on or after July 1,
1996.
<F13>Mr. Shiina also holds 2,000 options granted under the Corporation's
Stock Option Plan for Outside Directors which are not exercisable
until on or after July 1, 1996.
<F14>A portion of the shares reported for Messrs. Hudson and Marley are
Performance Restricted Shares granted under the Corporation's 1993
Long-Term Equity Incentive Plan. Further, 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 8, 1996.
<F15>Under the Corporation's former Bonus Plan (Stock Plus Cash), at
December 31, 1995 Messrs. Hudson, Marley and McInnes also had 32,200,
10,666, and 13,333 Stock Bonus Units, respectively. Under the current
1993 Long-Term Equity Incentive Plan, Mr. Hudson has 286,000
6
Stock Options and Mr. Marley has 212,000 Stock Options, none of which
are exercisable within 60 days after March 8, 1996.
<F16>Mr. Meyer holds 2,000 options granted under the Corporation's Stock
Option Plan for Outside Directors which are not exerciseable until on
or after January 23, 1997.
</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 is 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. Effective January 1, 1996, the chairperson of any
such committee is also paid an annual retainer of $2,500. An outside or
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
1995 the Board of Directors held eight meetings.
In 1995 total compensation earned by the directors was as follows:
<TABLE>
<CAPTION>
Total Director
Director<F1> Compensation
------------------- --------------
<S> <C>
Dexter F. Baker........... $ 46,750 <F2>
Ralph D. DeNunzio......... 45,250
Barbara H. Franklin....... 45,250
Joseph M. Hixon III....... 44,000 <F2>
William J. Hudson, Jr..... 0 <F3>
James E. Marley........... 0 <F3>
Harold A. McInnes......... 139,000 <F4>
John C. Morley............ 42,000 <F2>
Walter F. Raab............ 40,000
Paul G. Schloemer......... 41,000
Takeo Shiina.............. 30,000 <F2>
- ------------
<FN>
<F1> Mr. Meyer became a member of the Board on January 23, 1996,
therefore he received no director compensation during 1995.
<F2> 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 outside and non-employee directors, described
below.
<F3> Messrs. Hudson and Marley were employees as well as directors of the
Corporation, therefore they did not receive any separate director or
committee fees.
<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, 1997.
</TABLE>
7
Outside and 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 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.
The Stock Option Plan for Outside Directors provides that the outside
directors shall 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.
BENEFIT PLANS
The Corporation provides benefits to the directors, the amount of
which varies dependent upon whether the director is presently, or was
ever employed by the Corporation. The Corporation provides Director
and Officer Liability and Indemnification insurance coverage for all
directors. Directors who are not presently and have never been employed
by the Corporation (an "outside director"), are provided a life insurance
policy. Travel accident insurance coverage is provided to directors who
are not currently employed by the Corporation.
All directors are eligible to participate in the Corporation's Employee
Gift Matching Program. Under this program, the Corporation will match
qualifying charitable contributions made by directors to accredited public
and private schools, colleges, universities and graduate schools in the
United States. The maximum individual gift to a single institution during a
calendar year that will be matched is $5,000.
RETIREMENT
Currently there are two plans that provide retirement-oriented deferred
compensation for outside directors (as defined above), conditioned upon 5
years of service as a member of the Board. Outside directors elected to the
Board on or after January 1, 1996 generally receive "retirement" compensation
under the Outside Director Deferred Stock Accumulation Plan ("Accumulation
Plan"). Outside directors who joined the Board prior to January 1, 1996 were
provided a one-time election to continue participation in the retirement plan
in place prior to adoption of the Accumulation Plan, or convert to the
Accumulation Plan.
Under the Accumulation Plan, each outside director will receive 300
shares of phantom AMP Common Stock when first elected to the Board, and on the
first day of each of the nine subsequent calendar years of Board service.
The phantom share awards are credited to a deferred phantom stock account
and have no voting rights. On each dividend payment date, phantom dividends
corresponding to the number of accumulated phantom shares are credited to
the phantom stock account and deemed to be invested in additional phantom
shares.
An outside director's deferred phantom stock account vests upon the
earlier of the date the director has at least 5 years of service on the Board,
the date of the director's death while serving on the Board, or the date of
the director's 72nd birthday. If the director terminates Board service with
8
less than 5 years of service (other than on account of death or attainment of
age 72), the account is forfeited. The vested balance in the deferred phantom
stock account is paid to the outside director in cash upon termination of
Board service.
Under the retirement plan in effect prior to adoption of the Accumulation
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,
unless otherwise indicated, would 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 of Interest policies and receives reports of disclosures of any
deviations from these policies. During 1995 the Audit Committee held five
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
9
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 1995 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 1995 the Nominating and Governance Committee
held three 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 1995 the
Executive Committee took action on five transactions either in a meeting
of the Committee or by written consent in lieu of a meeting.
ATTENDANCE
During 1995, due to a temporary health problem and governmental
obligations, Mr. Shiina attended less than 75% of the aggregate of the total
number of meetings of the Board of Directors and the total number of meetings
of the committee on which he served, the Audit Committee. Mr. Shiina fully
recovered from his illness and anticipates no similar impediments to attending
Board and Committee meetings during 1996.
10
EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
------------------------- ------------------------------------
Awards <F11>
------------------------------------
Other Annual Restricted Securities Underlying All Other
Name and principal Salary Bonus Compensation Stock Awards Options/SARs Compensation
position Year ($) ($) ($) (#) (#) ($)
- ----------------------- --------- ---------- --------- -------------- ------------ ------------------- -------------
(a) (b) (c)<F9> (d)<F9> (e)<F1> (f)<F2> (g)<F3> (h)
- ----------------------- --------- ---------- --------- -------------- ------------ ------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
William J. Hudson, Jr. 1995 700,000 437,000 17,947 25,000 60,000 173,380<F4>
Chief Executive Officer 1994 600,000 422,400 12,831 - 114,000 73,400
and President, and a 1993 533,333 196,747 8,350 - 112,000 105,196
Director
James E. Marley 1995 560,000 291,000 40,707 20,000 45,000 83,840<F5>
Chairman of the 1994 500,000 311,000 53,746 - 83,000 52,350
Board 1993 475,000 162,023 26,372 - 84,000 54,146
Robert Ripp 1995 325,008 137,933 13,560 9,100 16,700 61,001<F6>
Vice President and Chief 1994 123,128<F10> 150,000 8,042 24,000 40,000 0
Financial Officer
Dennis Horowitz 1995 350,000 142,982 95,380 9,100 16,700 52,400<F7>
Vice President 1994 107,468<F11> 247,060<F12> 85,763 24,000 50,000 0
Javad K. Hassan 1995 300,000 125,702 16,295 9,100 16,700 41,400<F8>
Vice President 1994 271,667 85,195 6,617 - 26,200 20,800
1993 228,750 56,433 7,155 - 34,000 22,438
------------
<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 1995 and FY-End Option/SAR Values"
table, pages 14-15, and fractional shares of the Bonus Plan Stock Bonus;
and (ii) reimbursement of relocation expenses and payments of estimated
income taxes relating to reimbursement of relocation expenses to Messrs.
Ripp and Horowitz in 1994 and 1995.
<F2> During 1995, 97,100 shares of restricted stock were granted by the
Corporation, resulting in a total of 142,096 shares of restricted stock
held at December 31, 1995. These shares had an aggregate value of
$5,435,172 based upon a $38.25 per share closing price of the
Corporation's Common Stock as reported on the New York Stock Exchange
Composite Tape on December 29, 1995, and dividends are paid on these
shares to the same extent as any other shares of the Corporation's
Common Stock. These Performance Restricted Shares vest in 3 years
based on achievement of minimum average annual return on equity and
average annual earnings growth objectives for the Corporation. The
restricted stock awards to Messrs. Ripp and Horowitz in 1994 were
made in connection with commencing employment and vest upon the lapse
of a period of continued employment.
<F3> Includes awards made pursuant to the Corporation's 1993 Long-Term
Equity Incentive Plan and include options, SARs and awards to
Messrs. Ripp and Horowitz in connection with commencing employment in
1994. The Long-Term Equity Incentive Plan is described in footnote
(1) to the "Option/SAR Grants in 1995" table on pages 13-14 of this
Proxy Statement.
<F4> Includes $3,600 as the company-matching contribution under the Employee
Savings and Thrift Plan; $13,200 as the company-matching contribution
under the Deferred Compensation Plan;
11
and $156,580 as the total premium paid by the Corporation in 1995 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.
<F5> Includes $3,600 as the company-matching contribution under the Employee
Savings and Thrift Plan; $9,840 as the company-matching contribution
under the Deferred Compensation Plan; $4,800 as total director fees paid
to Mr. Marley in 1995 by two wholly-owned subsidiaries of the Corporation;
and $65,600 as the total premium paid by the Corporation in 1995 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.
<F6> Includes $1,200 as the company-matching contribution under the Employee
Savings and Thrift Plan; $6,600 as the company-matching contribution
under the Deferred Compensation Plan; and $53,201 as the total premium
paid by the Corporation in 1995 under a split-dollar insurance plan,
including both the portion of the premium that is attributable to term
life insurance coverage for Mr. Ripp and the full dollar value of the
remainder of the premium. The split-dollar insurance plan provides life
insurance coverage for Mr. Ripp 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 $900 as the company-matching contribution under the Employee
Savings and Thrift Plan; $7,500 as the company-matching contribution
under the Deferred Compensation Plan; and $44,000 as the total premium
paid by the Corporation in 1995 under a split-dollar insurance plan,
including both the portion of the premium that is attributable to term
life insurance coverage for Mr. Horowitz and the full dollar value of
the remainder of the premium. The split-dollar insurance plan provides
life insurance coverage for Mr. Horowitz 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; $3,600 as the company-matching contribution
under the Deferred Compensation Plan; and $34,200 as the total premium
paid by the Corporation in 1995 under a split-dollar insurance plan,
including both the portion of the premium that is attributable to term
life insurance 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.
<F9> Under the Deferred Compensation Plan, designated executive officers are
permitted to defer receipt of up to a specified percentage of their annual
base salary and all officers of the Corporation are entitled to defer
receipt of 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
12
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 1995, 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.
<F10>Mr. Ripp's employment with the Corporation commenced on August 15, 1994.
<F11>Mr. Horowitz's employment with the Corporation commenced on September
12, 1994.
<F12>Includes amounts awarded based on performance and payment of $75,000 as
a signing bonus.
</TABLE>
Option/SAR Grants in 1995
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term<F3>
-------------------------------------------------------------- ------------------------------
Number of
Securities % of Total
Underlying Options/SARs Exercise Market
Options/SARs Granted to or Base Price at
Granted<F1> Employees in Price Expiration Grant 0% 5% 10%
Name Date (#) 1995 ($/share) Date<F2> ($/share) ($) ($) ($)
- ----------------------- --------- ------------ ------------ ---------- ----------- ---------- ----- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William J. Hudson, Jr. .. 7/25/95 60,000 6.08 42.875 7/25/05 42.875 0 1,617,831 4,099,902
Chief Executive
Officer and President,
and a Director
James E. Marley.......... 7/25/95 45,000 4.56 42.875 7/25/05 42.875 0 1,213,374 3,074,927
Chairman of the Board
Robert Ripp.............. 7/25/95 16,700 1.69 42.875 7/25/05 42.875 0 450,296 1,141,140
Vice President and
Chief Financial Officer
Dennis Horowitz.......... 7/25/95 16,700 1.69 42.875 7/25/05 42.875 0 450,296 1,141,140
Vice President
Javad K. Hassan......... 7/25/95 16,700 1.69 42.875 7/25/05 42.875 0 450,296 1,141,140
Vice President
- ---------------
<FN>
<F1> The Corporation's 1993 Long-Term Equity Incentive Plan ("1993 Plan")
became effective on July 1, 1993 and is a long-term incentive
compensation program that is based on stock price appreciation in
the form of stock options (either incentive or non-qualified stock
options) and infrequently, in the discretion of the Corporation, in the
form of freestanding SARs payable in the Corporation's Common Stock or
from time to time, in the Corporation's sole discretion, in cash. The
1993 Plan also provides for the award of performance-based restricted
stock ("Performance Restricted Shares"). The 1993 Plan is administered
by the Compensation and Management Development Committee of the
Corporation's Board of Directors ("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. No SAR awards were made under the 1993 Plan in 1995.
Awards of stock options that were made to the named executive officers in
1995 are shown in column (g) of the Summary Compensation Table, on page 11
of this Proxy Statement.
With respect to stock options, all options granted in 1995 to the named
executive officers 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.
13
When SAR 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 ("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 ("Supplemental Cash
Bonus") is also paid under the 1993 Plan in conjunction with Stock
Bonuses. The Supplemental Cash Bonus is paid 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 1995 the named executive officers received awards under the 1993 Plan
entirely in either stock options or Performance Restricted Shares awards,
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 1995 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, 1995 (#) on December 31, 1995 ($)
on Exercise Realized ------------------------------ -----------------------------------
Name (#) ($)<F2> Exercisable/Unexercisable<F3> Exercisable/Unexercisable<F3><F4>
- ------------------------- ---------------- ----------- ------------------------------ -----------------------------------
<S> <C> <C> <C> <C>
William J. Hudson, Jr. ........ 1,004 35,830 0 / 318,200 0 / 1,509,700
Chief Executive Officer
and President, and a
Director
James E. Marley................ 2,066 81,349 0 / 222,666 0 / 1,035,345
Chairman of the Board
Robert Ripp.................... 0 0 0 / 56,700 0 / 102,500
Vice President and Chief
Financial Officer
Dennis Horowitz................ 0 0 0 / 66,700 0 / 128,125
Vice President
Javad K. Hassan................ 813 32,520 0 / 81,166 0 / 396,729
Vice President
- --------------
<FN>
<F1> All exercises shown in this table relate to stock bonus units (SARs)
granted under the Corporation's Bonus Plan (Stock Plus Cash) ("Bonus
Plan"), which preceded the 1993 Plan. The Corporation first awarded
stock options in 1993, under the 1993 Plan. Because these options
14
generally will not vest until 3 years after the date of award, no
exercises occurred in 1995. 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 1995.
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 ("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 ("Cash Bonus") is also paid under the Bonus Plan. 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 1995 based on distributions made in that year are included in
column (e), "Other Annual Compensation", of the Summary Compensation
Table on page 11 on this Proxy Statement.
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> "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.
<F3> 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.
<F4> 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 1995" on pages 13-14 of this Proxy Statement. 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 based on most-recent 3-year average base earnings rates. 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 most-recent 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 ($27,576 in 1996),
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 through 1996) and the maximum annual employer-
provided benefit that can be paid under the Pension Plan ($118,800 in 1994 and
$120,000 in 1995 and 1996). 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 (whether paid or deferred). The total benefit
thus calculated, reduced by the restricted benefit actually payable from the
Pension Plan, is the benefit payable from the SERP.
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 remuneration and number of credited years of service:
<TABLE>
<CAPTION>
PENSION PLAN TABLE <F3>
Years of Service <F2>
-----------------------------------------------------------
Remuneration<F1> 15 20 25 30 35 40
- ----------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$ 400,000......... $ 87,930 $117,240 $146,550 $175,860 $205,170 $229,170
450,000......... 99,180 132,240 165,300 198,360 231,420 258,420
500,000......... 110,430 147,240 184,050 220,860 257,670 287,670
550,000......... 121,680 162,240 202,800 243,360 283,920 316,920
600,000......... 132,930 177,240 221,550 265,860 310,170 346,170
650,000......... 144,180 192,240 240,300 288,360 336,420 375,420
700,000......... 155,430 207,240 259,050 310,860 362,670 404,670
750,000......... 166,680 222,240 277,800 333,360 388,920 433,920
800,000......... 177,930 237,240 296,550 355,860 415,170 463,170
850,000......... 189,180 252,240 315,300 378,360 441,420 492,420
900,000......... 200,430 267,240 334,050 400,860 467,670 521,670
950,000......... 211,680 282,240 352,800 423,360 493,920 550,920
1,000,000......... 222,930 297,240 371,550 445,860 520,170 580,170
1,050,000......... 234,180 312,240 390,300 468,360 546,420 609,420
1,100,000......... 245,430 327,240 409,050 490,860 572,670 638,670
1,150,000......... 256,680 342,240 427,800 513,360 598,920 667,920
1,200,000......... 267,930 357,240 446,550 535,860 625,170 697,170
1,250,000......... 279,180 372,240 465,300 558,360 651,420 726,420
1,300,000......... 290,430 387,240 484,050 580,860 677,670 755,670
1,350,000......... 301,680 402,240 502,800 603,360 703,920 784,920
1,400,000......... 312,930 417,240 521,550 625,860 730,170 814,170
- ---------------
<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 earned 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 11.
17
<F2> The current estimated credited years of service for the named executive
officers are as follows: W. J. Hudson, Jr. - 30 years; J. E. Marley -
31.5 years; R. Ripp - 1.33 years; D. Horowitz - 1.25 years; and
J. K. Hassan - 6.75 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;
R. Ripp - 11.92 years; D. Horowitz - 30.58 years (adjusted for credited
years and earned retirement benefit at previous employer); and J. K.
Hassan - 16.58 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
In order to further align the interests of the Corporation's executives
with increasing the long-term value of the Corporation, in January 1995 the
Corporation implemented Stock Ownership Guidelines for Senior Management
("Stock Guidelines"). The Stock Guidelines apply to approximately 75
executives presently participating in the Stock Option or SAR segment of the
1993 Long-Term Equity Incentive Plan. Affected executives are encouraged to
directly own a minimum number of shares of stock, expressed as a multiple of
the executive's annualized base salary. The multiplier ranges from 4 times
salary for the Chairman, CEO and President, to 1 time base salary for
executives in less senior management positions. Executives are expected to
comply with the Stock Guidelines within a 5-year period.
The AMP equity security ownership as of March 8, 1996 by officers of the
Corporation who were executive officers during 1995 is as follows:
</TABLE>
<TABLE>
<CAPTION>
Amount and Nature Amount of Total Beneficial
Name and Address of Beneficial Ownership Beneficial Ownership Phantom Ownership and Phantom Ownership
Title of Class of Beneficial Owner (shares) as a Percent of Class (shares)<F3> (shares)
- -------------- ------------------------ ----------------------- --------------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
Common Stock....William J. Hudson, Jr. 51,426<F1> less than 1 21,491 72,917
Harrisburg, Pennsylvania <F2>
<F4>
Common Stock....James E. Marley 52,762<F2> less than 1 19,304 72,066
Harrisburg, Pennsylvania <F4>
Common Stock....Robert Ripp 35,100<F4> less than 1 158 35,258
Harrisburg, Pennsylvania
Common Stock....Dennis Horowitz 30,869<F4> less than 1 158 31,027
Harrisburg, Pennsylvania
Common Stock....Javad K. Hassan 11,327<F1> less than 1 158 11,485
Harrisburg, Pennsylvania <F4>
Common Stock....all Executive Officers 1,956,806<F1><F2><F4> .92 55,414 2,012,220
(15 persons) and Directors
as a Group
- -----------------
<FN>
<F1> Seven 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 8, 1996.
<F2> A portion of the shares reported for 5 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 8, 1996.
18
<F3> Numbers in this column include phantom shares credited to executive
officers under a deferred compensation plan and/or in association with
dividend reinvestment of Performance Restricted Shares issued to
designated officers. Pursuant to the deferred compensation plan,
designated executive officers may defer receipt of up to a specific
percentage of their annual base salary and all officers of the Corporation
may defer receipt of all or a portion of their annual cash bonus.
Deferred compensation may be allocated to a phantom AMP Common Stock
account, as described in footnote 9 to the Summary Compensation Table on
pages 12-13 of this Proxy Statement.
Dividends earned on Performance Restricted Shares are credited to the
executive officer's account and are deemed to be invested in phantom
shares of Common Stock. These phantom shares vest only when and to the
extent the associated Performance Restricted Shares vest, as described
in footnote 2 to the Summary Compensation Table on page 11 of this
Proxy Statement.
<F4> In addition, a total of 10,887 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 also hold a total of 26,302 options
and fifteen executive officers hold a total of 1,029,600 options and
94,467 Stock Bonus Units.
PERFORMANCE GRAPH
The graph shown on the following page depicts the cumulative total
shareholder return (assuming a $100 investment and dividend reinvestment)
during the 5-year period from 1990 - 1995 for the Common Stock of the
Corporation compared to the cumulative total return during the same
period for the Standard & Poor's 500 Stock Index, the peer group index
contained in the Corporations 1995 Proxy Statement ("Prior Peer Group")
and the peer group index to be included in this and future Proxy
Statements ("New Peer Group"). The Prior Peer Group essentially consists
of all companies included in the following Standard and Poor's industrial
classifications: Electrical Equipment, Electronics (Instrumentation),
Office Equipment, Computer Systems, and Electronics (Semiconductors),
with the exception of the Corporation, which is one of the companies
listed in the Electrical Equipment classification, and General Electric
Company and International Business Machines Corporation because of their
dissimilar market capitalizations.
The Prior Peer Group was devised when the Performance Graph was first
introduced as a requirement for proxy statements. The Corporation
decided at that time to rely on existing industry indexes to the extent
practical in order to arrive at a peer group that was as objective as
possible. From the outset it was apparent, however, that certain
publicly-held competitors of the Corporation were not included in the
indexes relied on and that some companies in very different industries
serving different customers were mixed in with peer companies. With
the changes that have occurred to the Standard and Poor's industrial
classifications since the selection of the Prior Peer Group, the
Corporation has decided to modify the peer group to make it more
representative of its industries and the basis for a more valid
comparison of performance. The New Peer Group contains the
companies included in the Electrical Equipment industrial
classification of Standard & Poor, together with publicly-held
competitors of the Corporation that are not included in such
classification and were not included in the Prior Peer Group.
</TABLE>
19
<TABLE>
<CAPTION>
Performance Graph
CUMULATIVE TOTAL SHAREHOLDER RETURN
1990-95
<S> <C> <C>
$300 |
|
|
$275 |
| Base Period Indexes/Cumulative Returns
| Company/Index Name 1990 1991 1992 1993 1994 1995
$250 | ------------------ ----------- ------ ------ ------ ------ ------
| AMP Incorporated 100 138.58 140.71 157.25 185.75 199.91
| S&P 500 100 130.47 140.41 154.56 156.60 215.45
$225 | Prior Peer Group 100 127.08 152.37 184.27 209.85 288.14
| New Peer Group 100 124.25 126.03 139.50 145.16 192.24
|
$200 |
|
TOTAL |
SHAREHOLDER $175 |
RETURN<F3> |
(DOLLARS) |
$150 |
| AMP _________
| S&P 500 ..........
$125 | PRIOR PEER GROUP<F1> _ _ _ _
| NEW PEER GROUP <F2> ____ . ____
$100 |___________________________________________________________
90 91 92 93 94 95
YEARS
- -------------
<FN>
<F1> The Prior Peer Group includes the following companies:
Advanced Micro Devices 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.
Grainger (W W)Inc. Thomas & Betts Corporation
Hewlett-Packard Company Unisys Corporation
Honeywell Inc. Wang Laboratories Inc.
Intel Corporation Westinghouse Electric Corporation
Intergraph Corporation Xerox Corporation
<F2> The New Peer Group includes the following companies:
ADC Telecommunications Inc. Honeywell Inc.
Altron Inc. Hubbell Inc. - CL B
Amphenol Corp. Methode Electronics - CL A
Augat Inc. Molex Inc.
Elexsys Intl. Inc. Raychem Corp.
Emerson Electric Co. Robinson Nugent Inc.
General Signal Corp. Thomas & Betts Corp.
Grainger (W W) Inc. Westinghouse Electric Corp.
<F3> 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, which is
composed entirely of outside directors, is chaired by Mr. Ralph D. DeNunzio,
President, Harbor Point Associates, Inc. The other Committee members are
Mr. Dexter F. Baker, Retired Chairman and CEO, Air Products and Chemicals,
Inc.; Mr. John C. Morley, President of Evergreen Ventures, Ltd. and Retired
President and CEO, Reliance Electric Company; and Mr. Paul G. Schloemer,
Retired President and CEO, Parker Hannifin Corporation.
Included within the Committee's executive compensation oversight
charter are the review and approval of salary levels and salary increases
for executive officers, annual Management Incentive Plan cash bonus awards
for officers and other key executives, performance restricted stock and
stock option awards under the 1993 Long-Term Equity Incentive Plan, and any
special benefit programs affecting officers and key executives such as
supplemental retirement plans, deferred compensation 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 overriding objectives of the Corporation's executive compensation
program are to attract and retain qualified executive leadership and to
reward performance that creates shareholder value. In furtherance of these
objectives, the Corporation's executive compensation philosophy is (1) to
deliver base salary compensation that is kept competitive with the
executive's counterparts in the electrical/electronics industry and industry
in general and (2) to provide both short- and long-term incentive
compensation plans that supplement base salary and that correlate to the
growth, success and profitability of the Corporation. These at-risk,
performance-based incentive compensation plans, which directly align the
interests of the Corporation's executives with its shareholders, form a
significant portion of the total compensation opportunity for all officers
and key executives.
The Corporation annually reviews compensation surveys and other
published compensation data covering comparably-sized companies in both the
electrical/electronics industry and industry in general to assess whether
its executive base salary ranges and total compensation opportunities remain
competitive. Where they do not remain competitive, appropriate adjustments
are made. In this process of comparing the Corporation's executive
compensation levels and practices against those of other companies, the
compensation levels and practices at the companies comprising the Peer Group
index in the Performance Graph on pages 19-20 are reviewed separately, but due
to the small sample size the Peer Group data alone is not used as the
primary comparative benchmark. Rather, the comparative data relied upon by
the Committee is drawn from a broader survey of comparably-sized companies
in the electrical/electronic industry and industry in general, which survey
includes 19 of the 28 Prior Peer Group companies and 6 of the 16 New Peer
Group companies.
The salaries, and any periodic increases thereof, of the Chairman of
the Board and the CEO are determined by the Board of Directors of the
Corporation based on recommendations made by the Committee. These officers
in turn recommend the salary adjustments 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 competitive salary ranges established by the
survey 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
the growth of salary levels both inside and outside the Corporation.
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 per
21
share (EPS) performance for a given year, adjusted to net out extraordinary,
non-recurring gains or losses and then compared against an EPS target for
the year (this component is 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 and sales
targets for the year (this component is 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 (this component is weighted one-fifth
for named executive officer participants). For 1996, the corporate
performance component of the annual cash bonus of Management Incentive Plan
participants below the level of the named executive officers will be based
on attainment of global revenue, operating income, and value added targets,
and the operating unit component will be based on operating unit attainment
of similar targets. 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 1995 was $2.10 and the actual EPS performance
(adjusted for plan purposes) was $2.10. The unit and individual performance
targets for 1995 and the actual unit and individual performance results for
1995 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 minimum, target and maximum bonus percentages,
which vary from participant to participant to reflect competitive practice
and the scope of the participant's responsibility. Actual corporate and
unit performance between 90% and 120% of the target performance levels
results in a bonus calculation that ranges between the participant's
assigned minimum and maximum bonus percentages.
In granting long-term incentive awards during 1995, the Committee gave
considerable weight to the annual long-term incentive award levels and
practices of a diverse range of 376 major companies that participated in a
recent Towers Perrin survey of long-term incentive compensation practices.
Of the 28 companies comprising the Prior Peer Group Index in the Performance
Graph on pages 19-20, 19 were included in this Towers Perrin survey and 6 of
the 16 companies in the New Peer Group were included in the Towers Perrin
survey. The Corporation's long-term incentive award levels for 1995 were
generally set at between the 50th and the 75th percentile of the award levels
reflected in the Towers Perrin survey.
Long-term incentive compensation awards in the form of performance
restricted shares and stock options were made by the Committee in 1995 under
the 1993 Long-Term Equity Incentive Plan. Seven individuals, including the
five active named executive officers, received a 1995 long-term incentive
award that was split so that approximately 50% of the value of the 1995
award was provided in the form of performance restricted shares, with the
balance provided in the form of stock options. All other recipients of a
1995 long-term incentive award received 100% of the award in the form of
stock options.
The performance restricted shares granted in 1995 will be forfeited at
the end of 1997 if the Corporation fails to attain for the three-year period
from January 1, 1995 through December 31, 1997 a minimum average annual
level of return on equity (ROE) that was set by the Committee at the
beginning of 1995. For this purpose, the Corporation's annual ROE result
for each of the three years will be separately determined, totaled, and
divided by three to determine the average annual ROE. If the average annual
ROE over the three-year period is at least equal to this minimum level, then
the extent to which the performance restricted shares granted in 1995 will
become vested at the end of 1997 will be determined by the Corporation's
average annual earnings growth rate over the same three-year period. A
target level of average annual earnings growth over the three-year period
was set by the Committee at the beginning of 1995, and average annual
earnings growth between 0% and this target level will result in vesting of
the performance restricted shares that ranges proportionately from 0% to
100%. The Committee also set a super-target level of average annual
earnings growth at the
22
beginning of 1995, and average annual earnings growth between the target
level and the super-target level will result in vesting of the
performance restricted shares that ranges proportionately from 100%
to 200%. Performance restricted shares that are forfeited at the end of
1997 either because of the Corporation's failure to attain the minimum
average annual ROE level or to attain the target level of average annual
earnings growth will be canceled and revert to the Corporation.
In general, the stock options granted in 1995 vest on the third
anniversary of the grant date, are exercisable thereafter until the tenth
anniversary of the award date, and have an exercise price equal to the award
date fair market value of a share of the Corporation's Common Stock.
In 1995, with the review and approval of the Committee, the Corporation
implemented formal share ownership guidelines applicable to its key
executives. By the end of a phase-in period, the guidelines require that
the Chairman of the Board and the CEO each own real or phantom shares of
Corporation Common Stock with a value of at least four times annual base
salary. The guideline applicable to the other named executive officers is
ownership of shares with a value of at least three times annual base salary.
The primary intent of these guidelines is to significantly increase the
extent to which the personal wealth of the Corporation's executives is
directly linked to the performance of the Corporation's Common Stock,
thereby materially expanding the community of interest between the
executives and the Corporation's shareholders.
Section 162(m) of the Internal Revenue Code imposes a $1,000,000 per
year per named executive officer limitation on the amount of non-performance
based compensation that can be paid and deducted by the Corporation. The
Corporation's policy with respect to this limitation is to maximize the
deductibility of all compensation paid to each named executive officer by
(1) delivering compensation to named executive officers that to a
substantial extent meets the Code Section 162(m) definition of performance-
based compensation and (2) affording the named executive officers the
opportunity to defer receipt of compensation to years after their
retirement. In furtherance of this policy, the Corporation's Management
Incentive Plan, under which the named executive officers have an opportunity
to earn an annual cash bonus, and the 1993 Long-Term Equity Incentive Plan,
under which the named executive officers receive long-term incentive
compensation awards, have been designed and are administered so that all or
a significant portion of the compensation received pursuant to such plans
will qualify as performance-based compensation within the meaning of Section
162(m). In addition, the Corporation has implemented a Deferred
Compensation Plan under which the named executive officers may defer receipt
of up to a specified percentage of annual base salary, currently set at 25%,
and up to 100% of annual cash bonus amounts. All compensation paid to the
named executive officers in 1995 was deductible and it is anticipated that all
compensation to be paid to named executive officers in 1996 will be deductible.
1995 CEO Compensation
Effective January 1, 1995, Mr. Hudson's base salary rate per annum was
adjusted to $700,000, representing an increase of $100,000 over his prior
base salary rate. In adjusting Mr. Hudson's salary, the Committee
considered the Corporation's growth and performance in 1994, Mr. Hudson's
individual performance since his prior increase, his competency, skill and
experience, and salary range survey data relating to his counterparts at
comparably-sized companies in the electrical/electronic industry and
industry in general. The salary level of $700,000 set for Mr. Hudson for
1995 brought his salary to the median annual salary that was paid in 1994 to
CEOs of comparably-sized companies in the electrical/electronics industry
and industry in general.
Mr. Hudson's assigned minimum, target, and maximum bonus percentages
under the Management Incentive Plan for 1995 were 10%, 60% and 90%,
respectively. Accordingly, Mr. Hudson had the potential to earn an annual
bonus of up to 90% of base annual salary if the Corporation were to attain
120% or more of the $2.10 EPS target and Mr. Hudson were to fully accomplish
his
23
individual performance targets. Based on the Corporation's adjusted EPS
performance for 1995 and the Committee's assessment of Mr. Hudson's
individual performance, Mr. Hudson's aggregate bonus under the Plan for 1995
was 62.43% of his base salary, or $437,000.
On July 25, 1995 Mr. Hudson was awarded 60,000 stock options (2,300
incentive stock options and 57,700 nonqualified stock options) under the
1993 Long-Term Equity Incentive Plan, all with an exercise price of $42.875.
These options will first be exercisable July 25, 1998 and remain exercisable
to July 25, 2005. On the same date, Mr. Hudson was also awarded 25,000
performance restricted shares of Common Stock of the Corporation under the
1993 Long-Term Equity Incentive Plan. These shares will either vest or be
forfeited at the end of 1997 based on the Corporation's performance in 1995,
1996 and 1997 with respect to average annual return on equity and average
annual earnings growth targets that were set by the Committee. In making
these long-term incentive awards, the Committee's intent was to continue a
practice begun in 1993, when the Corporation's first stock option plan
became effective, of increasing the proportion of stock-based compensation
in the total compensation package of the Corporation's senior executive
officers, particularly the CEO, thereby further increasing the executives'
community of interest with the Corporation's shareholders. The aggregate
long-term incentive award levels set for Mr. Hudson in 1995 were at the
75th percentile of comparable long-term incentive award recipients reflected
in Towers Perrin survey data relied upon by the Committee. Since the 1993
inception of the Long-Term Equity Incentive Plan, Mr. Hudson has been
granted a total of 286,000 stock options and 25,000 performance restricted
shares of Common Stock of the Corporation.
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 1995, when the fair market
value of a share of the Corporation's Common Stock had increased to $71.375,
1,334 of these 4,000 bonus units matured, resulting in a stock bonus payment
to Mr. Hudson of 502 shares of Common Stock of the Corporation (1,004 shares
when taking into account the 2-for-1 stock split in 1995) and a cash
payment of $17,946.63. 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 1995 and FY-End Option/SAR Values Table, pages 14-15.)
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 Messrs. Horowitz and Ripp) 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 on page 9 of this Proxy Statement, 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
24
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, one executive officer has an agreement
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 1995 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
As of march 8, 1996, the only persons known to management to own
beneficially more than 5% of the outstanding Common Stock of the Corporation
are named below(1):
Amount
and Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership of Class
-------------- ------------------- -------------- ---------
Common Stock FMR Corp. 14,108,588 6.5
82 Devonshire Street
Boston, MA 02109
The Nature of ownership is as follows:
Sole Voting Powers . . . . . . . . . . . . . . . . . . 794,631
Shared Voting Powers . . . . . . . . . . . . . . . . . None
Sole Dispositive Powers . . . . . . . . . . . . . . . 14,108,588
Shared Dispositive Powers . . . . . . . . . . . . . . None
- ---------
(1) All of the above information was obtained from a Schedule 13G filing by
FMR Corp. for the calendar year ending December 31, 1995.
INDEPENDENT ACCOUNTANTS
The selection of Arthur Andersen LLP as the independent accountants for
previous years has continued during the year 1996. Arthur Andersen LLP has
no financial interest, direct or indirect, in the Corporation or any of its
subsidiaries.
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.
1997 SHAREHOLDER PROPOSALS
Any shareholder, whether of record or a beneficial owner, desiring to
submit a proposal for consideration to appear in the Corporation's 1997 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
25
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 26, 1996.
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 30 days and not more than 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 10 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
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 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.
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.
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 1995, including
financial statements, was mailed with this Proxy Statement. 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 1995. 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 25, 1996.
26
(Recycled Symbol) Printed on Recycled Paper
APPENDIX
- --------
[front side of 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 24, 1996, AT 10:30 A.M.,
LOCAL TIME, at the AMP Global Executive Leadership Center, 411 South Fortieth
Street, Harrisburg, Pennsylvania, 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. Shares not held in Plan
accounts will be voted in accordance with the recommendations of your Board
of Directors. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
For those participants who hold accounts with Common Stock through the
AMP Incorporated Employee Savings and Thrift Plan -- 401(k) ("401(k)"), the
MERIT Plan of Benefits of M/A-COM, Inc. ("MERIT"), and the M/A-COM, Inc.
Employee Stock Ownership Plan ("ESOP"): The undersigned instructs Vanguard
Fiduciary Trust Company, as Trustee under the identified Plans, to vote all
shares or fractions of shares credited to the undersigned's account as of the
latest available processing date on or before March 8, 1996 as directed on the
reverse side of this Proxy card. Those shares in 401(k) accounts for which
no directions are received will be voted by the Trustee in its sole and
absolute discretion. Those shares in MERIT and ESOP accounts for which no
directions are received will be voted by the Trustee in the proportion
established by all directions received from the other participants in the
applicable Plan.
(Continued and to be signed on reverse side)
[example of reverse side of proxy card]
__________________________________
| |
| |
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| (1) (2) |
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| (3) |
|__________________________________|
[part (1) information is as follows:]
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR ALL NOMINEES" IN ITEM 1.
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. J. Meyer,
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)
- --------------------------------------------------------
[part (2) information is as follows:]
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 25, 1996.
The shares represented by this proxy will be voted as
directed by the shareholder. Abstentions are not counted
as votes cast with respect to Item 1.
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.
ADMISSION CARD
The shareholder bearing this ticket is entitled
to attend the Annual Meeting of Shareholders of
AMP Incorporated
DATE:
Wednesday, April 24, 1996
TIME:
10:30 A.M.
LOCATION:
Global Executive Leadership Center
411 South Fortieth Street
Harrisburg, Pennsylvania
