SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No.11)
---------------
AMP INCORPORATED
(Name of Subject Company)
AMP INCORPORATED
(Name of Person(s) Filing Statement)
Common Stock, no par value
(including Associated Common Stock Purchase Rights)
(Title of Class of Securities)
031897-10-1
(CUSIP Number of Class of Securities)
David F. Henschel
Corporate Secretary
AMP Incorporated
P.O. Box 3608
Harrisburg, Pennsylvania 17105-3608
(717) 564-0100
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
With a Copy to:
Peter Allan Atkins
David J. Friedman
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
(212) 735-3000
This Amendment No.11 amends and supplements the
Solicitation/Recommendation Statement of Schedule 14D-9 dated August 21,
1998, as amended, (the "Schedule 14D-9") filed by AMP Incorporated, a
Pennsylvania corporation ("AMP"), in connection with the tender offer by
PMA Acquisition Corporation, a Delaware corporation (the "Purchaser") and
wholly owned subsidiary of AlliedSignal Inc., a Delaware corporation
("AlliedSignal"), to purchase all of the issued and outstanding shares of
common stock, no par value, of AMP (the "Common Stock"), including the
associated Common Stock Purchase Rights (the "Rights" and, together with
the Common Stock, the "Shares") issued pursuant to the Rights Agreement,
dated as of October 28, 1989, and as amended on September 4, 1992, August
12, 1998 and August 20, 1998 (the "Rights Agreement"), between AMP and
ChaseMellon Shareholder Services L.L.C., as Rights Agent, at a price of
$44.50 per Share, net to the seller in cash, as disclosed in its Tender
Offer Statement on Schedule 14D-1, dated August 10, 1998, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated
August 10, 1998, and the related Letter of Transmittal.
Unless otherwise indicated, all defined terms used herein shall have
the same meaning as those set forth in the Schedule 14D-9.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Subsection (f) of Item 8 is hereby amended by adding the following
paragraph at the end thereof:
On September 11, 1998, AMP filed a motion for summary judgment in the
United States District Court for the Eastern District of Pennsylvania on
the Second Claim for Relief of its complaint against AlliedSignal and the
Purchaser. The Second Claim for Relief is based upon the fact that
AlliedSignal's attempt to pack the AMP Board with AlliedSignal's directors
and senior management would create pervasive, irreconcilable conflicts of
interest. These AlliedSignal nominees have an undivided duty of loyalty to
AlliedSignal that would conflict with their ability to fulfill their
fiduciary duties to AMP under Pennsylvania law. AMP's motion seeks an order
declaring that the AlliedSignal consent solicitation plan is in violation
of Pennsylvania law. A copy of the motion for summary judgment and the
accompanying brief and proposed order are filed as Exhibit 40 hereto and
are incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
Exhibit
No. Description
------- -----------
40 Motion of AMP Incorporated for Partial Summary Judgment,
Memorandum of Law in Support of Motion of AMP
Incorporated for Partial Summary Judgment and proposed
Order, filed on September 11, 1998 in the United States
District Court for the Eastern District of Pennsylvania
in AMP Incorporated v. AlliedSignal Inc., et. al. (Civil
Action No. 98-CV-4405).
41 Text of a press release issued by AMP on September
11, 1998.
42 Form of letter sent by AMP to certain of its
shareholders on September 11, 1998.
o o o
This document and the exhibits attached hereto contain certain
"forward-looking" statements which AMP believes are within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The safe harbors intended to be created thereby are
not available to statements made in connection with a tender offer and AMP
is not aware of any judicial determination as to the applicability of such
safe harbor to forward- looking statements made in proxy solicitation
materials when there is a simultaneous tender offer. However, shareholders
should be aware that any such forward-looking statements should be
considered as subject to the risks and uncertainties that exist in AMP's
operations and business environment which could render actual outcomes and
results materially different than predicted. For a description of some of
the factors or uncertainties which could cause actual results to differ,
reference is made to the section entitled "Cautionary Statements for
Purposes of the 'Safe Harbor'" in AMP's Annual Report on Form 10-K for the
year ended December 31, 1997, a copy of which was also filed as Exhibit 19
to AMP's Schedule 14D-9 Filed with the SEC. In addition, the realization of
the benefits anticipated from the strategic initiatives will be dependent,
in part, on management's ability to execute its business plans and to
motivate properly the AMP employees, whose attention may have been
distracted by the AlliedSignal Offer and whose numbers will have been
reduced as a result of these initiatives.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true,
complete and correct.
Dated:September 11, 1998 AMP Incorporated
By: /s/ Robert Ripp
-----------------------------
Name: Robert Ripp
Title: Chairman and Chief
Executive Officer
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit
No. Description
------- -----------
40 Motion of AMP Incorporated for Partial Summary Judgment,
Memorandum of Law in Support of Motion of AMP
Incorporated for Partial Summary Judgment and proposed
Order, filed on September 11, 1998 in the United States
District Court for the Eastern District of Pennsylvania
in AMP Incorporated v. AlliedSignal Inc., et. al. (Civil
Action No. 98-CV-4405).
41 Text of a press release issued by AMP on September
11, 1998.
42 Form of letter sent by AMP to certain of its
shareholders on September 11, 1998.
Exhibit 40
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
____________________________________
:
AMP INCORPORATED, :
:
Plaintiff, :
:
v. : C.A. No. 98-CV-4405 (JTG)
:
ALLIEDSIGNAL INC., :
:
and :
:
PMA ACQUISITION CORPORATION, :
:
Defendants. :
____________________________________:
MOTION OF AMP INCORPORATED FOR PARTIAL SUMMARY
JUDGMENT IN THE NATURE OF A DECLARATORY JUDGMENT
Pursuant to Fed. R. Civ. P. 56, plaintiff AMP Incorporated
("AMP") moves for summary judgment on the Second Claim for Relief of its
complaint against AlliedSignal Inc. and PMA Acquisition Corporation; and
that the judgment rendered be in the nature of a judgment declaring that
AlliedSignal's consent solicitation, as set forth in its August 12, 1998
Schedule 14A, is unlawful and in violation of Pennsylvania law and public
policy.
The grounds for and reasons in support of this Motion are set
forth in the accompanying Memorandum of Law.
Respectfully submitted,
/s/ John G. Harkins, Jr.
----------------------------------
JOHN G. HARKINS, JR. (04441)
ELEANOR MORRIS ILLOWAY (40632)
GAY PARKS RAINVILLE (53192)
STEVEN A. REED (60145)
Harkins Cunningham
2800 One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
(215) 851-6700
and
JON A. BAUGHMAN (14043)
LAURENCE Z. SHIEKMAN (31290)
SETH A. ABEL (75561)
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
(215) 981-4000
Attorneys for Plaintiff,
AMP Incorporated
Dated: September 11, 1998
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
______________________________
:
AMP INCORPORATED, :
:
Plaintiff, :
:
v. : C.A. No. 98-CV-4405 (JTG)
:
ALLIEDSIGNAL INC., :
:
and :
:
PMA ACQUISITION CORPORATION, :
:
Defendants. :
______________________________:
MEMORANDUM OF LAW IN SUPPORT OF MOTION
OF AMP INCORPORATED FOR PARTIAL SUMMARY
JUDGMENT IN THE NATURE OF A DECLARATORY JUDGMENT
INTRODUCTION
Plaintiff AMP Incorporated files this memorandum in support of
its motion for summary judgment on the Second Claim for Relief of its
complaint against AlliedSignal Inc. and PMA Acquisition Corporation
(collectively referred to as "AlliedSignal"). It asks that the judgment
rendered be in the nature of a judgment declaring that AlliedSignal's
consent solicitation plan, as set forth in its August 12, 1998 Schedule
14A, is unlawful and in violation of Pennsylvania law and public policy.
AMP's claim and this motion are based on the principle that "no
man can serve two masters." Onorato v. Wissahickon Park, Inc., 244 A.2d
22, 25 (Pa. 1968) (citing Matthew 6:24 and the Restatement of Agency 2d,
Section 389). As the Pennsylvania Supreme Court has explained:
An agent to a certain extent, occupies a fiduciary
relation, and to permit him to be placed in a position
where he inevitably must be subjected to the demands of
conflicting duties is not only harmful to the business
in which he is engaged, but also against sound morals
and public policy. Onorato, 244 A.2d at 26.
This is precisely the kind of irreconcilable conflict that
AlliedSignal is trying to create. Through its consent solicitation, it
seeks to place its own agents (all of its directors and most of its senior
executive officers who individually and collectively owe a fiduciary duty
of absolute undivided loyalty to AlliedSignal) on AMP's Board of Directors
where, if allowed to be seated, they would owe an undivided duty of loyalty
to AMP. AlliedSignal's purpose in doing so is unequivocal: once seated,
AlliedSignal's nominees are instructed to disarm AMP's hostile takeover
protection and then bring about a merger of AlliedSignal and AMP on the
terms desired by AlliedSignal. The ancient Greeks would have recognized
the strategy instantly. AlliedSignal wants to place its Trojan horse
within AMP's walls.
The facts are straightforward and not subject to reasonable
dispute. They are drawn from AlliedSignal's filings with the Securities
and Exchange Commission ("SEC") and its Certificate of Incorporation, and
from AMP's corporate records and its SEC filings. (See Affidavit of David
F. Henschel, AMP's Corporate Secretary.(1)) While AlliedSignal may attempt
to offer a variety of arguments in favor of its plan, it will not be able
to point to a genuine issue as to any material fact that would prevent the
Court from ruling on AMP's motion as a matter of law.
THE FACTS
AMP is a Pennsylvania corporation, headquartered in Harrisburg,
Pennsylvania. AlliedSignal is a Delaware corporation, headquartered in
Morristown, New Jersey.
AMP's Board of Directors is composed of eleven individuals, eight
of whom have never been employed by AMP. One present director was formerly
employed by AMP and served as its Chairman and Chief Executive Officer.
Two directors are employed by AMP. None of them has any connection with
AlliedSignal. (Henschel Aff. paragraph 2.) AlliedSignal's Board is
composed of fourteen directors, two of whom also serve as officers of
AlliedSignal. None of them appears to have any connection with AMP.
(AlliedSignal's Schedule 14D-1, Offer to Purchase at 39-45.) AlliedSignal
owns 100 shares of AMP stock, but otherwise has no ties to AMP.
(AlliedSignal's Amendment No. 12 to Schedule 14D-1 at 5.)
______________________
1 The Affidavit, relevant SEC filings, certain
statutory provisions and several unpublished opinions are
contained in the Appendix which accompanies this memorandum.
On August 4, 1998 AlliedSignal announced its intention to make a
hostile tender offer for all of AMP's outstanding common stock at $44.50
per share. (AlliedSignal's Schedule 14D-1, Offer to Purchase at 24;
AlliedSignal's Schedule 14D-1, Press Release dated August 4, 1998.) On
August 10, 1998, AlliedSignal filed its Tender Offer Statement with the SEC
on Schedule 14D-1 and launched its bid, using a wholly owned Delaware
subsidiary (defendant PMA Acquisition Corporation) as the vehicle for the
stock acquisition. (AlliedSignal's Schedule 14D-1 at 1.)
According to the Schedule 14D-1, the purpose of the offer is to
enable AlliedSignal to acquire control of, and the entire equity interest
in, AMP. (AlliedSignal's Schedule 14D-1, Offer to Purchase at 25.) Since
AlliedSignal would be unlikely to acquire all outstanding AMP shares
through the tender offer, it stated that it would thereafter acquire the
balance of the shares not tendered by proposing a merger between
AlliedSignal's subsidiary and AMP, with each remaining AMP share to be
cashed out for the same $44.50 per share. The tender offer will expire on
September 11, 1998 at midnight EDT, unless extended by AlliedSignal.
(AlliedSignal's Schedule 14D-1, Offer to Purchase at 5.)
There are important conditions to the offer beyond the minimum
condition that at least a majority of AMP's shares on a fully diluted basis
must be tendered. (AlliedSignal's Schedule 14D-1, Offer to Purchase at 2.)
First, the rights under AMP's Shareholder Rights Plan must be redeemed by
AMP's Board of Directors or AlliedSignal must be satisfied in its sole
discretion that the rights have been invalidated or are otherwise
inapplicable to the offer and the proposed merger. (Id. at 3.) Second,
the acquisition of the AMP shares must be approved pursuant to Chapter 25,
Subchapter F (the "Business Combinations Statute") of the Pennsylvania
Business Corporation Law, 15 Pa. Cons. Stat. Ann. section 1101 et seq.
(West 1995) (the "BCL"), or AlliedSignal must be satisfied in its sole
discretion that Subchapter F is invalid or otherwise inapplicable. (Id. at
3.) And third, AlliedSignal must be accorded the right to vote any AMP
shares acquired pursuant to the offer under Chapter 25, Subchapter G of the
BCL (the "Control-Share Acquisitions Statute"). (Id. at 4.)
As a practical matter, when it launched the tender offer,
AlliedSignal did not expect -- and clearly does not now expect -- to buy
any shares under the tender offer unless (a) the AMP Board were to agree to
accept a merger with AlliedSignal and to opt out of the protection against
hostile takeovers found both in the Pennsylvania BCL and in AMP's
Shareholder Rights Plan; or (b) the Court were to invalidate the
Shareholder Rights Plan and the Pennsylvania statutory safeguards against a
hostile takeover; or (c) some end run could be made around the Shareholder
Rights Plan and the carefully constructed protective provisions of the BCL.
In fact, AlliedSignal has adopted the "end run" strategy, and not simply to
make the tender offer feasible, but to take the place of the tender offer.
The tender offer is, in reality, a stalking horse. The "end run" is, of
course, the consent solicitation process.
On August 20, 1998, the AMP Board rejected the AlliedSignal
tender offer as not in the best interests of AMP. (Henschel Aff. paragraph
4, AMP's Schedule 14D-9 at 7.) Ten of the eleven directors were present at
the time of the vote and unanimously voted in favor of this resolution.
(Henschel Aff. paragraph 3.) At the same meeting, the AMP Board (1)
deleted from the AMP Shareholder Rights Plan what AlliedSignal had called
the "dead hand" provision in its initial complaint against AMP; (2)
declined to redeem the rights under the Shareholder Rights Plan; and (3)
amended the Shareholder Rights Plan to address the AlliedSignal board
packing scheme described below. (Id. paragraph 5.) The Board also
declined to opt out of the protection afforded by the BCL against hostile
takeovers. (AMP's Schedule 14D-9 at 12-13.) The Board further determined
that AMP's interests would be best served by pursuit of AMP's strategic
plan to improve its profits, a plan which had been adopted by AMP's Board
well before AlliedSignal's intention to make a tender offer was first
announced. (Id. at 7-9; Henschel Aff. paragraph 4.) The AMP Board also
set a record date for the consent solicitation of October 15, 1998.
Recognizing that it would not be able to acquire control of AMP
through the tender offer, AlliedSignal had already devised an alternative
strategy -- the consent solicitation which it described in a filing with
the SEC on Schedule 14A on August 12, 1998. Under this strategy,
AlliedSignal proposes to solicit "consents" from AMP shareholders in favor
of five resolutions designed to more than double the size of AMP's Board
from its present size of eleven members to twenty-eight, to obtain control
of AMP's Board by placing seventeen AlliedSignal directors and key
executive officers on AMP's Board, and to make any further change in the
size or composition of AMP's Board or in its bylaws impossible without
further shareholder vote. (AlliedSignal's Schedule 14A Consent
Solicitation at 6-7.) Once seated on the AMP Board, the newly elected
"majority" directors are then, "subject to their fiduciary duties,"
supposed to bring about the merger of AMP into AlliedSignal or its
subsidiary on the terms proposed by AlliedSignal, including the payment of
$44.50 per share. (Id. at 3, 6, 14-15.) To whom the fiduciary duties are
owed, or how they would apply, or how AMP and its constituencies, including
its shareholders, would be protected is nowhere explained.
The AlliedSignal nominees to AMP's board need not worry about
their legal exposure to AMP based on any actions they may take as AMP Board
members. Article Eleventh (2)(A) of the AlliedSignal Restated Certificate
of Incorporation requires AlliedSignal to indemnify them to the fullest
extent permitted by Delaware law for any liability arising out of their
"serving at the request of [AlliedSignal] as a director, officer, employee
or agent of another corporation . . ." (AlliedSignal's Certificate of
Incorporation Art. Eleventh 2(A).) Delaware law contains no limitation on
this indemnification, and the AlliedSignal nominees should therefore have
no personal financial concerns about a breach of their duty of loyalty to
AMP. On the other hand, Delaware law does provide that the AlliedSignal
directors cannot be shielded from liability arising out of "any breach of
the director's duty of loyalty to [AlliedSignal] or its stockholders . . ."
Delaware General Corporation Law, 8 Del. C. section 102(b)(7) (West,
WESTLAW through 1998 Second Reg. Sess.).
It is against this background that AMP filed the present action
on August 24, 1998, making clear its view that AlliedSignal's scheme to
pack AMP's Board is illegal under Pennsylvania law and that AlliedSignal
has violated its disclosure obligations under federal law by failing to set
forth the nature and consequences of the irreconcilable, pervasive conflict
position in which its nominees will be placed.
ARGUMENT
I. THE STANDARDS FOR SUMMARY JUDGMENT AND A
DECLARATORY JUDGMENT ARE MET
AMP's motion seeks summary judgment under Rule 56; and in the
particular circumstances of this case, the judgment must also satisfy the
standards for a declaratory judgment under 28 U.S.C. section 2201.
a. SUMMARY JUDGMENT
Rule 56(c) of the Federal Rules of Civil Procedure requires that
summary judgment "be rendered forthwith if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of law."
The substantive law identifies which facts are material, i.e., those that
determine the outcome on the merits. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248 (1986).
The party seeking summary judgment has the initial burden of
"informing the district court of the basis for its motion, and identifying
those portions of the pleadings, depositions, answers to interrogatories,
and admissions on file, together with the affidavits, if any, which it
believes demonstrate the absence of a genuine issue of material fact."
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quotation marks
omitted). Once the moving party has carried its burden, the nonmovant
"must set forth specific facts showing that there is a genuine issue for
trial." Fed. R. Civ. P. 56(e). Only "genuine" disputes over "material"
facts -- facts which might affect the outcome of the suit under the
governing law -- will properly preclude summary judgment. Anderson, 477
U.S. at 248. If the evidence proffered by the nonmovant is merely
colorable or not significantly probative, there is no issue for trial and
summary judgment is appropriate. Id. at 249-50.
Because the material facts that support AMP's motion cannot
reasonably be in dispute, summary judgment is warranted.
b. DECLARATORY JUDGMENT
A declaratory judgment may be issued if there is a "case of
actual controversy" between the parties, 28 U.S.C. section 2201, one that
is "ripe" for decision. Travelers Ins. Co. v. Obusek, 72 F.3d 1148, 1153-
54 (3d Cir. 1995). There is no question that there is an actual
controversy between AMP and AlliedSignal as to the legality of
AlliedSignal's consent solicitation plan; but the Court must be satisfied
that the ripeness requirement is met.
In the Third Circuit, a controversy is ripe if (1) the
probability of future harm is real and substantial; (2) the legal status of
the parties will be changed by the declaration; and (3) the declaratory
judgment will have utility, that is, it will be of some practical help to
the parties. Id. at 1154-55.(2) Those criteria are satisfied here.
________________________
2 Recently, in Philadelphia Federation of Teachers
v. Ridge, Nos. 97-1553, 97-1589, 1998 WL 427419, at *7
n.4 (3d Cir. July 30, 1998), the Third Circuit noted that
its three-part inquiry is a refinement of the Supreme
Court's two-pronged test set forth in Abbott Labs. v.
Gardner, 387 U.S. 136, 149 (1967), overruled on other
grounds, Califano v. Sanders, 430 U.S. 99 (1977), which
focuses on (1) "the fitness of the issues for judicial
decision" and (2) "the hardship to the parties of with-
holding court consideration." The Third Circuit ini-
tially "offered a three-part inquiry as a refinement of
the Supreme Court's test" in Step-Saver Data Sys., Inc.
v. Wyse Tech., 912 F.2d 643 (3d Cir. 1990). Ridge, 1998
WL 427419, at *7 n.4. The Ridge court explained that
"[o]ur refinement simply alters the headings under which
various factors are grouped, and since Step-Saver, we
have employed both tests." Id. (collecting cases apply-
ing three-part test and cases applying two-part test
since Step-Saver). Here, the three-part test probably
better accommodates the ripeness examination; but the
result would be the same under either formulation.
There is no requirement that the threatened injury must actually
occur before relief can be granted. See, e.g., Freehold Cogeneration
Assocs. L.P. v. Board of Regulatory Comm'rs. 44 F.3d 1178, 1189 (3d Cir.),
cert. denied, 516 U.S. 815 (1995); Armstrong World Indus. v. Adams, 961
F.2d 405, 415 (3d Cir. 1992). Quite the contrary, the purpose of a
declaratory judgment is to avoid the cost and injury (often irreparable, as
here) that would occur if the judgment were not issued. See Dow Chem. Co.
v. Exxon Chem. Patents, Inc., Civ. A. No. 94-572-SLR, 1995 WL 562289, at *5
(D. Del. Aug. 16, 1995). AlliedSignal clearly understands these rules.
See Interfaith Community Org. v. Allied Signal, Inc., 928 F. Supp. 1339,
1348-49 (D.N.J. 1996).(3)
i. THERE IS PRESENT HARM, AND THE PROBABILITY OF
FURTHER SUBSTANTIAL HARM IS REAL
AlliedSignal seeks to take control of AMP's Board by means of the
consent solicitation process. And it must believe there is a good prospect
of achieving its goal to justify the considerable expenditures of money,
time and effort it is investing in the process. AlliedSignal has filed its
consent solicitation materials with the SEC, hired lawyers, engaged a
professional proxy solicitation firm to solicit consents, and retained
public relations specialists. (AlliedSignal's Schedule 14A Consent
______________________
3 There is no case precisely like the present one;
but a close analogy can be found in cases in which share-
holders are being asked to vote in the context of an
illegal proxy solicitation. Courts do not hesitate to
grant relief in such cases in advance of the shareholder
meeting. See, e.g., Invacare Corp. v. Healthdyne Tech.,
Inc., 968 F. Supp. 1578, 1581-82 (N.D. Ga. 1997) (grant-
ing motion for summary judgment on counterclaim seeking
declaration as to validity of proposed bylaw and seeking
to enjoin solicitation of proxies in support of bylaw in
advance of meeting); American General Corp. v. Torchmark
Corp., C.A. No. H-90-1068, 1990 WL 595282 (S.D. Tex. Apr.
11, 1990), appeal dismissed, 903 F.2d 825 (5th Cir. 1990)
(granting preliminary injunction to enjoin solicitation
of proxies based on invalid nominations in advance of
meeting); see also Pennwalt Corp. v. Centaur Partners,
710 F. Supp. 111, 117 (E.D. Pa. 1989) (granting temporary
restraining order and preliminary injunction to stop
shareholders' meeting called pursuant to invalid solici-
tation).
Solicitation at 17.) And it has been conducting an active communications
campaign with institutional investors and others.
Meanwhile, AMP's duly elected directors (including a majority of
"disinterested" directors, see BCL section 1715(e)), having examined the
AlliedSignal proposal and its prospective impact upon AMP and its various
constituencies, have rejected the AlliedSignal plan. (Henschel Aff.
paragraph 4; AMP's Schedule 14D-9 at 7-9.) AMP's Board has concluded that
for all concerned, greater value can be achieved from pursuit of AMP's own
profit improvement plan, which was adopted by AMP's Board and announced
before AlliedSignal gave any indication of its hostile bid for AMP.
(Henschel Aff. paragraph 4.) As shown below, this was a legitimate
decision, entirely consistent with the Pennsylvania BCL.
Yet AlliedSignal's campaign threatens not only AMP's ability to
implement its own strategy; it threatens AMP's very existence as an
independent entity. It also has forced AMP to spend large amounts of
money, effort and time in attempting to fend off what it believes is an
illegal scheme. (Henschel Aff. paragraph 8.) The harm, in other words, is
not off in the distance, nor is it theoretical. It is already occurring
every hour, every day.
The problem for AMP and all those dependent upon it is
exacerbated because, if the consent solicitation is allowed to go forward,
no one knows exactly when the campaign might succeed. Beginning with the
record date of October 15, 1998 and for ninety days thereafter, on any date
that AlliedSignal obtains unrevoked consents from holders of a majority of
AMP shares, it can present them and, upon tabulation and certification of
the consents, seat its nominees on AMP's Board. (AlliedSignal's 14A
Consent Solicitation at 4.) Unlike a shareholder meeting, in other words,
there is no present way to determine within the ninety days when the
consent process might come to fruition. In the meantime, in the words of
Justice Holmes, it is a "brooding omnipresence in the sky,"(4) one that
creates uncertainty and confusion in AMP's corporate governance process,
among investors who are uncertain as to the legality of the AlliedSignal
plan and among all the other constituencies dependent upon AMP.
_____________________
4 Southern Pacific Co. v. Jensen, 244 U.S. 205, 222
(1917) (Holmes, J., dissenting).
In fact, the threat does not suddenly materialize only on October
15. According to AlliedSignal's own Chief Executive Officer,
AlliedSignal's effort to put seventeen AlliedSignal directors and executive
officers on AMP's Board, which could occur at any time after October 15 is
calculated to put such pressure on AMP's directors as to cause them to
abandon their independently chosen business strategy before October 15.(5)
Neither AMP, nor its shareholders, nor the employees, suppliers,
communities and others dependent upon AMP should be put in this position
if, as alleged, the AlliedSignal scheme to pack AMP's Board is illegal.
And it is especially important that the uncertainty not continue until
whatever moment in time the solicitations might yield a majority of
consents.
If the AlliedSignal nominees are seated without an earlier
determination of the legality of the scheme, AMP's governance process will
be paralyzed. The AlliedSignal nominees would try to take immediate
control of the decisions of the Board and the direction of the company, but
without any judicial declaration of their right to do so. Their interests
would be antagonistic to those of the current Board members and management,
and there would be no certainty as to who legitimately could give
directions with respect to the conduct of AMP's business affairs. It is no
answer to say that the judicial system could ultimately straighten out the
chaos. The intervening cost would be enormous and entirely unnecessary.
______________________
5 AlliedSignal's Amendment No. 7 to its Schedule
14D-1, filed on August 24, 1998, contains slides being
used by AlliedSignal's Chief Executive Officer and others
in their presentations to various audiences. The slide,
entitled "Legal Strategy," describes the consent solici-
tation objective to place the seventeen AlliedSignal
nominees on AMP's Board, and states: "In our view, AMP
Board will sell to the highest bidder before it permits
[Allied] nominees to take control." (AlliedSignal's
Amendment No. 7 to Schedule 14D-1 at 25.) AlliedSignal,
of course, hopes to be the only bidder.
The probability of harm standard under the ripeness analysis is
plainly satisfied.
ii. THE LEGAL STATUS OF THE PARTIES WILL BE CHANGED BY
A DECLARATORY JUDGMENT
The entry of a judgment will change the parties' legal status.
It will be conclusive as to the legality of the present AlliedSignal board
packing plan. Since the legality of the proposal is clearly a legal
question, not one that must await further factual development, it is ripe
for judicial review so that all concerned will know their rights. See Pic-
A-State Pa., Inc. v. Reno, 76 F.3d 1294, 1299-1300 (3d Cir.), cert. denied,
517 U.S. 1246 (1996).
iii. A DECLARATORY JUDGMENT WILL SERVE A USEFUL PURPOSE
The issue posed by AMP's motion is important as a matter of
public policy. It is serious and deserves to be resolved. Moreover, its
resolution is important in a very practical way to all those involved with
AMP and AlliedSignal. Satisfaction of the utility requirement is not in
doubt.
II. ALLIEDSIGNAL'S PLAN TO PACK AMP'S BOARD WILL CREATE A PERVASIVE AND
IRRECONCILABLE CONFLICT OF INTEREST -- ONE THAT IS ABHORRENT TO THE
LAW AND PUBLIC POLICY OF THE COMMONWEALTH
This is not a case where AlliedSignal has a substantial financial
interest in AMP which it seeks to protect. Aside from owning 100 shares of
AMP stock, it has no present stake in AMP at all. (AlliedSignal's
Amendment No. 12 to Schedule 14D-1 at 5.) Cases involving two
corporations, one owning a majority of the stock of the other and which
share directors and officers, are therefore not applicable. Neither is
this a case where directors may have a conflict only as to a particular
issue or specific vote. The problem is not going to be solved, in other
words, by abstentions or disinterested versus interested director votes on
discrete resolutions. Rather, AlliedSignal wishes to bring about a
situation in which the conflict is pervasive, a conflict which would find
its way into virtually every question that would come before the AMP
Board.(6)
AlliedSignal stands in the position of an uninvited buyer. It
proposes to take control of AMP and make it an unwilling seller, but a
seller nonetheless, notwithstanding the decision made by AMP's
disinterested directors that AMP's better course is to remain independent
and to pursue its own strategic plan to build value. Since it would be
months before AlliedSignal's nominees could bring about a merger, the
problem is how is AMP to be governed in the meantime and who will determine
its course of business? On behalf of the buyer, AlliedSignal's nominees
must favor completing the merger at the lowest possible price and on the
best terms available to AlliedSignal. Otherwise, they violate their duty
of undivided loyalty to AlliedSignal and its shareholders. At the same
time, AMP's current independent directors have determined that every effort
should be made to increase AMP's profits and thereby its share price. That
means that before any merger could occur, every question likely to come
before the Board of Directors will have an impact in one way or another on
AMP's value, now or in the future.
Confrontation arising out of the conflict will be constant. As
examples:
O At the outset, how do the AlliedSignal nominees deal
with AMP's decision to reject AlliedSignal's offer as not in AMP's best
interest and the related decision that AMP should remain independent?
Wearing their AlliedSignal hats, they have already determined that a merger
_____________________
6 The seventeen AlliedSignal directors and executive officers, if
seated on AMP's Board, could take no comfort from the "interested
directors" provisions of BCL section 1728. That statutory provision
is transactionally oriented, and provides that under certain
specified circumstances a contract or transaction is not void or
voidable solely because it involves interested parties or is
approved by interested directors. BCL section 1728 does not
contemplate or address a situa- tion where a majority of the
directors, at all times and under all circumstances, are permeated
with irreconcil- able conflicts of interests.
between AlliedSignaland AMP on AlliedSignal's terms is in the best
interests of AlliedSignal.
O How would the nominees look upon a new suitor for AMP,
if one were to appear? Would they actively seek another buyer at a higher
price? As AlliedSignal directors and officers, they have already decided
that AlliedSignal should be the buyer and they have set the terms.
O How would the nominees, who would be unable to effect
any merger for some period of time, deal with the continued implementation
of AMP's profit improvement plan? The consequence of that plan will be to
increase AMP's profitability and, therefore, increase the value (and price)
of its shares. Every dollar, however, by which AMP becomes more valuable is
a dollar taken away from AlliedSignal and its shareholders.
O Would the AlliedSignal nominees actively bargain with
AlliedSignal for a price higher than $44.50 per share? How could they do
so while owing undivided loyalty to AlliedSignal?
O If the nominees were to negotiate a business
combination between AMP and AlliedSignal, who would decide what terms were
fair to AMP? Obviously, the loyalty of the AlliedSignal nominees to
AlliedSignal would dictate an agreement as favorable to that company as
possible.
O Do the nominees try to install their own officers to
insure control of AMP's day to day affairs? Are AMP's interests not
thereby made subservient to those of AlliedSignal? Or if there is
resistance, is not AMP's day to day management thrown into chaos?
The fact is that AlliedSignal's interests and AMP's interests
would be opposed at every important juncture. No matter what words of
virtuous intent may be spoken by AlliedSignal, the temptation would be too
overwhelming and the conflict too deep and pervasive to be ignored. The
situation is rendered even more unseemly by the fact that the AlliedSignal
nominees are indemnified fully by AlliedSignal against liability to AMP
arising in connection with their service on AMP's Board, but cannot be
shielded from a breach of the fiduciary duty of loyalty they each owe to
AlliedSignal.
So far as counsel has been able to determine, there has never
been a case exactly like the present case. No one has apparently come
forward with a plan creating so blatant a conflict. And no legislator, in
considering the terms of Pennsylvania's BCL, would have imagined such an
abuse of the consent solicitation process. But even though the
circumstances here are unique, there is no doubt that Pennsylvania courts
would strike down AlliedSignal's plan as contrary to public policy and
inconsistent with principles of corporate governance in the Commonwealth.(7)
First, it is clear that as a matter of Pennsylvania corporate law
and public policy, the AMP Board, after weighing the factors set forth in
the BCL, was fully justified in concluding that AMP should pursue an
independent course and should reject the AlliedSignal tender offer. The
General Assembly's policy decision in amending and expanding the BCL was to
recognize the corporation in Pennsylvania as an institution important in
its own right in social and economic terms and to make it clear that
corporations could legitimately reject hostile takeover efforts. It is
because the members of a board of directors of a Pennsylvania corporation
are permitted to evaluate the best interests of the corporation in light of
---------------------
7 The Second Claim for relief is before the Court under its
diversity jurisdiction. 28 U.S.C. section 1332. In such cases, a
court must apply the substantive law of the state whose law governs
the claim. Greater New York Mut. Ins. Co. v. North River Ins. Co.,
85 F.3d 1088, 1091 (3d Cir. 1996) (citing Erie R.R. Co. v. Tompkins,
304 U.S. 64, 78 (1938)). Here, AMP's Second Claim sounds under
Pennsylvania law. Because the facts are unique and the Pennsylvania
Supreme Court has not issued "an authoritative pronouncement, the
task of [this] federal tribunal is to predict how that court would
rule." Erie Castings Co. v. Grinding Supply, Inc., 736 F.2d 99, 100
(3d Cir. 1984). In reaching this deter- mination, the court must
give proper regard to the opin- ions of Pennsylvania's intermediate
appellate courts. Wassall v. DeCaro, 91 F.3d 443, 445 (3d Cir.
1996). "`The policies underlying the applicable legal doctrines, the
doctrinal trends indicated by these policies, and the decisions of
other courts may . . . inform [the court's] analysis.'" Erie
Castings, 736 F.2d at 100 (quoting Pennsylvania Glass Sand Corp. v.
Caterpiller Tractor Co., 652 F.2d 1165, 1167 (3d Cir. 1981)).
its various constituencies and from a variety of perspectives, see BCL
section 1715, that the present interests of AMP and AlliedSignal have
become diametrically opposed.
Second, as in virtually every state, the law in Pennsylvania
regarding fiduciaries requires of such fiduciaries an undivided loyalty to
their principals. This is true in corporate law, in agency law, in the law
of trusts and estates, in the law of partnerships and in the law governing
every other form of fiduciary relationship. It is a matter of fundamental
public policy. The AlliedSignal plan cannot be squeezed into those few
narrow exceptions recognized in the case of the duty of undivided loyalty.
And finally, Pennsylvania recognizes that one who aids and abets
a breach of fiduciary duty is liable to the person or entity to whom the
duty is owed, and because this is precisely the position in which
AlliedSignal has placed itself, there is no doubt that relief can be
granted to AMP against AlliedSignal now.
A. AS A MATTER OF PUBLIC POLICY, PENNSYLVANIA HAS CONCLUDED THAT
DISINTERESTED DIRECTORS SHOULD DETERMINE THE BEST INTERESTS
OF THE CORPORATION
AlliedSignal's strategy is bottomed on the mistaken proposition
that it has a "right" to force a takeover of AMP. It piggy-backs that
position on the assumption that AMP's Board must afford AMP's shareholders
the "right" to maximize their short term financial interest and that
shareholder democracy demands that any obstacle to that end must be
overcome. AlliedSignal's premises are in error and so is its conclusion.
A key purpose of the modernization of the BCL in the 1980's and thereafter
was to allow corporations domiciled in Pennsylvania to resist effectively
the takeover pressures which had become a fact of corporate life at that
time.
The Pennsylvania BCL has a number of features which support
rejection of a hostile takeover attempt and which serve to distinguish
Pennsylvania law from that of Delaware and many other states. Directors
owe a fiduciary duty not to shareholders, but to the corporation. BCL
sections 1712, 1715, and 1717 (and Draftsmen's Comment thereto).(8) See also
Norfolk Southern Corp. v. Ferrara, D.C. Civil Nos. 96-CV-7167 and 96-CV-
7350 (E.D. Pa. Nov. 19, 1996), aff'd, Nos. 96-2025, 96-2026, 97-1006 and
97-1009 (3d Cir. 1997) ("Conrail") and Franceski v. Larsen, Dec. Term 1997
Nos. 9712-0369 and 9712-1777 (Pa. C.P. Phila. Co. 1998) ("CoreStates").(9)
In discharging their duty to the corporation, the directors are permitted
to take into account the interests of employees, the communities in which
the corporation has its facilities, and those with whom it does business,
as well as shareholders. BCL section 1715 (and Draftsmen's Comment
thereto). See also Conrail. They may take account of the long term
interests and opportunities of the corporation and not simply short term
interests. BCL section 1715(a)(2) (and Draftsmen's Comment thereto).
Contrary to the notion that only shareholders ultimately count, the
corporation in Pennsylvania is recognized to be a critical part of the
economic and social fabric of the Commonwealth. See Conrail.
Anti-takeover protection is strongly supported by the statute.
Directors are under no duty to sell to the highest bidder or to conduct an
auction. BCL section 1715 (and Draftsmen's Comment thereto). They are
expressly authorized to set the terms and conditions of shareholder rights
plans, without any requirement of shareholder approval. BCL section 2513.
They are not required to redeem the rights under a shareholder rights plan
in the face of a hostile offer. BCL section 1715(c)(1) (and Draftsmen's
Comment thereto). See also Conrail.
The Pennsylvania BCL also includes statutory anti-takeover
defenses which automatically limit the ability of insurgent directors to
vote on matters which are critical to the consummation of an acquisition
---------------------
8 Copies of these sections of the BCL and the Draftmen's Comments
are contained in the Appendix.
9 Copies of the transcript of Judge VanArtsdalen's
November 19, 1996 Bench Opinion in Conrail and the Court of Appeals'
Memorandum Opinion affirming Judge VanArtsdalen's Opinion, which has
been marked "not for publication," are contained in the Appendix. A
copy of Judge Levin's January 23, 1998 Order of Court in CoreStates
is contained in the Appendix.
(BCL sections 2551-2556) and limit the voting rights of shares held by a
potential acquiror (BCL sections 2561-2568). Thus, the Pennsylvania
General Assembly has embraced limitations on voting rights and other
measures necessary to allow a board to fulfill its duty to examine all
interests of the corporation.
Against this background, there is no doubt that the AMP Board of
Directors, after weighing all the appropriate factors, was entitled to
conclude that the AlliedSignal offer is not in AMP's best interests. And
it is that determination which sets up the conflict with AlliedSignal.(10)
B. THE FIDUCIARY'S DUTY OF UNDIVIDED LOYALTY
IS BEDROCK PUBLIC POLICY IN PENNSYLVANIA
Under both Pennsylvania statutory and common law, directors of a
corporation stand in a fiduciary relation to the corporation. See BCL
section 1712(a); In re Allegheny Int'l, Inc., 954 F.2d 167, 180 (3d Cir.
1992) (Pennsylvania common law imposes duty of loyalty and duty of care on
all corporate fiduciaries such as officers and directors); see also Enterra
Corp. v. SGS Assoc., 600 F. Supp. 678, 684 (E.D. Pa. 1985) (directors owe a
corporation a duty of care and duty of loyalty). Section 1712 of the BCL
specifies that directors' fiduciary duties run only to the corporation:
A director of a business corporation shall stand in a
fiduciary relation to the corporation and shall perform
his duties as a director . . . in good faith, in a
manner he reasonably believes to be in the best
interests of the corporation and with such care,
including reasonable inquiry, skill and diligence, as a
person of ordinary prudence would use under similar
circumstances. . . BCL section 1712(a) (emphasis
added).
- ---------------------
10 The Pennsylvania BCL recognizes the importance
to the governance process of objective decision-making by
disinterested directors when it created a presumption that action
approved by a majority of disinterested directors has met the
standards set forth in the statute, absent clear and convincing
evidence to the contrary. The great majority of AMP Board members is
made up of "disinterested" directors. BCL section 1715(e)(1)(i)
makes it obvious that not one of AlliedSignal's nominees qualifies
as a disinterested director, in that they all have been "nominated
or designated as a director by a person acquiring or seeking to
acquire control of the corporation."
Pennsylvania law has long mandated that directors furnish the
corporation with "undivided loyalty." Seaboard Indus., Inc. v. Monaco, 276
A.2d 305, 309 (Pa. 1971); Howell v. McCloskey, 99 A.2d 610, 613 (Pa. 1953);
Lutherland, Inc. v. Dahlen, 53 A.2d 143, 147 (Pa. 1947); CST, Inc. v. Mark,
520 A.2d 469, 471 (Pa. Super.), alloc. denied, 539 A.2d 811 (Pa. 1987);
Hill v. Hill, 420 A.2d 1078, 1081 (Pa. Super. 1980); In re Gailey, Inc.,
119 B.R. 504, 512 (Bankr. W.D. Pa. 1990). Directors are required to devote
themselves to the corporate affairs with a view toward promoting the common
interests of the corporation rather than their own. Seaboard Indus., 276
A.2d at 309; Howell, 99 A.2d at 613; Lutherland, 53 A.2d at 147; Committee
of Unsecured Creditors of Specialty Plastic v. Doemling, 127 B.R. 945, 951
(W.D. Pa.), aff'd without opinion, 952 F.2d 1391 (3d Cir. 1991). The duty
of loyalty holds directors liable if "they act in such a way as to profit
their individual and other corporate enterprises at the expense of the
corporation." In re Truco, Inc., 110 B.R. 150, 152 (Bankr. M.D. Pa. 1989)
(emphasis added).
The duties of AlliedSignal's directors and officers to that
corporation are of the same character. Delaware law similarly places
directors in a fiduciary relation to the corporation, imposing a duty of
care and a duty of loyalty. Mills Acquisition Co. v. Macmillan, Inc., 559
A.2d 1261, 1280 (Del. 1989). The duty of loyalty owed by directors in
Delaware to the corporation must be "undivided and unselfish." Guth v.
Loft, Inc., 5 A.2d 503, 510 (Del. 1939); see Cede & Co. v. Technicolor,
Inc., 634 A.2d 345, 360 (Del. 1993) (recognizing that directors are charged
with "unyielding fiduciary duty to protect the interests of the corporation
and to act in the best interests of its shareholders"), modified on other
grounds, 636 A.2d 956 (Del. 1994).
Moreover, the absolute duty of loyalty owed by directors to the
Delaware corporation is an essential principal of public policy:
A public policy, existing through the years, and
derived from a profound knowledge of human
characteristics and motives, has established a rule
that demands of a corporate officer or director,
peremptorily and inexorably, the most scrupulous
observance of his duty, not only affirmatively to
protect the interests of the corporation committed to
his charge, but also to refrain from doing anything
that would work injury to the corporation, or to
deprive it of profit or advantage which his skill and
ability might properly bring to it, or to enable it to
make in the reasonable and lawful exercise of its
powers. The rule that requires an undivided and
unselfish loyalty to the corporation demands that there
shall be no conflict between duty and self-interest.
Guth, 5 A.2d at 510. Thus, directors must "absolutely refrain from any act
which breaches the trust reposed in them, but also. . . affirmatively
protect and defend those interests entrusted to them. Officers and
directors must exert all reasonable and lawful efforts to ensure that the
corporation is not deprived of any advantage to which it is entitled."
Mills Acquisition, 559 A.2d at 1280. And they are required "to demonstrate
both their utmost good faith and the most scrupulous inherent fairness of
transactions in which they possess a financial, business or other personal
interest which does not devolve upon the corporation or all stockholders
generally." Id. at 1280 (citations omitted).
The law regarding the fiduciary duty of corporate officers and
directors is really a subset of the broader law regarding agents in
general. Under Pennsylvania law, an agent owes a duty of loyalty to his
principal and must "`act with the utmost good faith in the furtherance and
advancement of the interests of his principal.'" SHV Coal, Inc. v.
Continental Grain Co., 545 A.2d 917, 920 (Pa. Super. 1988) (quoting
Sylvester v. Beck, 178 A.2d 755, 757 (Pa. 1962)), rev'd on other grounds,
587 A.2d 702 (Pa. 1991). The ancient maxim that "no [one] can serve two
masters" (i.e., no agent can represent two principals) is deeply rooted in
Pennsylvania's agency jurisprudence. See, e.g., Onorato, 244 A.2d at 25;
Claughton v. Bear Stearns & Co., 156 A.2d 314, 319-20 (Pa. 1959); SHV Coal,
545 A.2d at 921.
The Pennsylvania Supreme Court has made clear that this
prohibition serves a fundamental public policy of the Commonwealth:
As a rule of public policy, it is distinctly recognized
in our text-books on agency, and in numerous
adjudicated cases * * *. It forbids that any one
intrusted with the interests of others shall in any
manner make the business an object of personal interest
to himself, because, from a frailty of nature, one who
has the power will be too readily seized with the
inclination to use the opportunity for serving his own
interests at the expense of his principal. * * * It
matters not that no fraud was meditated, and no injury
done. The rule is not intended to be remedial of
actual wrong, but preventative of the possibility of
it.
Claughton, 156 A.2d at 320 (quotation marks and citation omitted;
alteration in original; emphasis added).(11)
Pennsylvania courts have recognized two exceptions to the general
rule that no agent can serve two principals. Onorato, 244 A.2d at 25.
First, it does not apply "`where the duties of the agent to the two
principals are of such a nature that there can be no conflict between his
duty of loyalty to the one and his duty of loyalty to the other.'"
Faramelli v. Potomac Ins. Co., 29 A.2d 674, 675-76 (Pa. 1943) (quoting
Rossi v. Fireman's Ins. Co., 165 A. 16, 18 (Pa. 1932)); John Conlon Coal
Co. v. Westchester Fire Ins. Co. of New York, 16 F. Supp. 93, 95-96 (M.D.
Pa. 1936), aff'd, 92 F.2d 160 (3d Cir. 1937). That exception plainly has
no application here. A second exception exists where the principal is
aware of the representation and consents to it. Onorato, 244 A.2d at 26;
Claughton, 156 A.2d at 320; Betz v. Sykes, 118 A.2d 219, 221 (Pa. Super.
1955). That exception cannot apply here unless AlliedSignal's deeply
conflicted nominees to AMP's Board were allowed to override the
determination by AMP's disinterested directors as to what course would best
serve AMP's interests. Were such a result permitted, the exception would
have completely swallowed the rule.
- -----------------------
11 Pennsylvania courts have applied the venerable
maxim that "no man can serve two masters" in a variety of other
contexts. See, e.g., Jedwabny v. Philadelphia Transp. Co., 135 A.2d
252, 254-55 (Pa. 1957) (attorney- client) ("`No attorney can serve
two opposing litigants any more than one man can serve two masters.
Upon this point the law of the Commonwealth is in harmony with the
Holy Writ'") (quoting Bossler v. Wilson, 65 D. & C. 164, 171
(1948)), cert. denied, 355 U.S. 966 (1958); Hill v. Whiteside, 85 A.
425, 425 (Pa. 1912) (trust guardian) ("No man can serve two masters.
No one can properly serve a trust when his personal interests are
antagonistic to it.").
C. ALLIEDSIGNAL'S PLAN TO PACK AMP'S BOARD WITH ITS OWN CONFLICTED
NOMINEES WOULD VIOLATE PENNSYLVANIA LAW AND PUBLIC POLICY IF
ALLOWED TO PROCEED
AlliedSignal cannot overcome three basic facts. First, as a
matter of Pennsylvania corporate law and the decisions of the AMP Board of
Directors, the interests of AlliedSignal and AMP are squarely in
opposition. Second, AlliedSignal's conflicted nominees, if seated on the
AMP Board, would never be able to fully discharge their fiduciary duties of
undivided loyalty to both AlliedSignal and AMP. And third, the
pervasiveness of the conflict which AlliedSignal seeks to create would, if
allowed to succeed, paralyze AMP's corporate governance and interfere with
the ability of AMP's existing directors to fulfill their obligations of
loyalty and care to AMP.
Public policy in Pennsylvania and legal precedent created in a
variety of situations condemns this kind of conduct. There is no redeeming
virtue to be found here. There is no excuse based on ignorance or
innocence. Here, there is a calculated plan to extract the value from AMP
for the benefit of AlliedSignal on terms and conditions dictated by
AlliedSignal. What is worse, AlliedSignal fully recognizes -- indeed
expects -- that its conduct may, even before October 15, 1998, drive AMP's
Board of Directors from their chosen course to pursue an auction of the
company in light of the ongoing disruption and confusion caused by the
pendency of the AlliedSignal campaign. This comes as close to intentional
infliction of damage on AMP as might be found in any case.
AlliedSignal cannot hide from liability while it is directing
others as its agents to carry out the plan aimed against AMP. Anyone in
Pennsylvania who aids and abets a breach of fiduciary duty is just as
liable to the person harmed as is the unfaithful fiduciary. E.g., Kaiser
v. Stewart, No. 96-6643, 1997 WL 476455, at *17 (E.D. Pa. Aug. 19, 1997)
(Bartle, J.); Schuylkill Skyport Inn, Inc. v. Rich, No. 95-3128, 1996 WL
502280, at *38 (E.D. Pa. Aug. 21, 1996) (Cahn, C.J.); SDK Investments, Inc.
v. Ott, No. 94-1111, 1996 WL 69402, at *12 (E.D. Pa. Feb. 15, 1996) (Giles,
J.); Thompson v. Glenmede Trust Co., No. 92-5233, 1994 WL 675186, at *5
(E.D. Pa. Nov. 23, 1994) (Hutton, J.); Pierce v. Rossetta Corp., No. 88-
5873, 1992 WL 165817, at *8 (E.D. Pa. June 12, 1992) (DuBois, J.). And
there is authority in this District for the proposition that in
Pennsylvania one who interferes with the ability of others to carry out
their fiduciary duties may be liable for that interference. See Thompson,
1994 WL 675186, at *6 (granting plaintiffs' motion for leave to amend
complaint to add, inter alia, interference with fiduciary duty claim);
Total Care Sys., Inc. v. Coons, 860 F. Supp. 236, 243 (E.D. Pa. 1994)
(Joyner, J.) (denying motion to dismiss counterclaims asserting, inter
alia, tortious interference with CEO's fiduciary obligations owed to
corporation).
To end where we began, "no man can serve two masters." That is
fundamental Pennsylvania public policy. And its recognition is especially
important where the conflicts to be created are as broad and pervasive as
those threatened here. Violation of that principle requires a remedy.
CONCLUSION
AMP respectfully requests that the Court enter summary judgment
against the defendants on AMP's second claim for relief, the judgment to be
in the form of a declaration that defendants' consent solicitation plan, as
set forth in its August 12, 1998 Schedule 14A, is unlawful and in violation
of Pennsylvania law and public policy.
Respectfully submitted,
/s/ JOHN G. HARKINS, JR.
____________________________
JOHN G. HARKINS, JR. (04441)
ELEANOR MORRIS ILLOWAY (40632)
GAY PARKS RAINVILLE (53192)
STEVEN A. REED (60145)
Harkins Cunningham
2800 One Commerce Square
2005 Market Street
Philadelphia, PA 19103-7042
(215) 851-6700
and
JON A. BAUGHMAN (14043)
LAURENCE Z. SHIEKMAN (31290)
SETH A. ABEL (75561)
Pepper Hamilton LLP
3000 Two Logan Square
18th & Arch Streets
Philadelphia, PA 19103-2799
(215) 981-4000
Attorneys for Plaintiff,
AMP Incorporated
Dated: September 11, 1998
CERTIFICATE OF SERVICE
I hereby certify that on this 11th day of September 1998, I have
caused to be served the foregoing Motion of AMP Incorporated for Partial
Summary Judgment in the Nature of a Declaratory Judgment, Memorandum of Law
and Appendix in support thereof on the parties listed below, by the
following means:
BY HAND DELIVERY:
Mary A. McLaughlin
Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Stuart H. Savett
Savett, Frutkin, Podell & Ryan
325 Chestnut Street
Suite 700
Philadelphia, PA 19160
MOTION AND MEMORANDUM BY FACSIMILE
AND APPENDIX BY FEDERAL EXPRESS
Arthur Fleischer, Jr.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
/s/ ELEANOR MORRIS ILLOWAY
______________________________
ELEANOR MORRIS ILLOWAY
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
___________________________________
:
AMP INCORPORATED, :
:
Plaintiff, :
:
v. : C.A. No. 98-CV-4405 (JTG)
:
ALLIEDSIGNAL INC., :
:
and :
:
PMA ACQUISITION CORPORATION, :
:
Defendants. :
___________________________________:
ORDER
AND NOW, on this day of , 1998, upon consideration
of the Motion of AMP Incorporated for Partial Summary Judgment in the
Nature of a Declaratory Judgment, and the response of AlliedSignal Inc. and
PMA Acquisition Corporation thereto, it is hereby ORDERED and DECREED that
the Motion is GRANTED, and that defendants' consent solicitation plan, as
described in defendants' Schedule 14A filed on August 12, 1998, is declared
to be unlawful and in violation of Pennsylvania law and public policy.
____________________________
JAMES T. GILES
United States District Judge
Exhibit 41
FOR IMMEDIATE RELEASE
Contacts:
Richard Skaare Dan Katcher / Joele
Frank
AMP Corporate Communication Abernathy MacGregor
Frank 717/592-2323 212/371-5999
Doug Wilburne
AMP Investor Relations
717/592-4965
AMP FILES MOTION FOR PARTIAL SUMMARY JUDGMENT
AGAINST ALLIEDSIGNAL
HARRISBURG, Pennsylvania (September 11, 1998) - AMP Incorporated (NYSE:
AMP) announced today that it has filed a motion for summary judgment on the
Second Claim for Relief of its complaint against AlliedSignal Inc. (NYSE:
ALD) and its wholly owned subsidiary, PMA Acquisition Corporation. An
early hearing has been requested.
As filed in the United States District Court for the Eastern District of
Pennsylvania on August 24, 1998, the Second Claim for Relief is based
upon the fact that AlliedSignal's attempt to pack the AMP Board with
AlliedSignal's directors and senior management would create pervasive,
irreconcilable conflicts of interest. These AlliedSignal nominees have
an undivided duty of loyalty to AlliedSignal that would conflict with
their ability to fulfill their fiduciary duties to AMP under
Pennsylvania law. AMP's motion seeks an order declaring that the
AlliedSignal consent solicitation plan is in violation of
Pennsylvania law.
Headquartered in Harrisburg, PA, AMP is the world's leading manufacturer of
electrical, electronic, fiber-optic and wireless interconnection devices
and systems. The Company has 48,300 employees in 53 countries serving
customers in the automotive, computer, communications, consumer, industrial
and power industries. AMP sales reached $5.75 billion in 1997.
# # #
AMP and certain other persons named below may be deemed to be participants
in the solicitation of revocations of consents in response to
AlliedSignals consent solicitation. The participants in this solicitation
may include the directors of AMP (Ralph D. DeNunzio, Barbara H. Franklin,
Joseph M. Hixon III, William J. Hudson, Jr., Joseph M. Magliochetti, Harold
A. McInnes, Jerome J. Meyer, John C. Morley, Robert Ripp, Paul G. Schloemer
and Takeo Shiina); the following executive officers of AMP: Robert Ripp
(Chairman and Chief Executive Officer), William J. Hudson (Vice Chairman),
James E. Marley (former Chairman), William S. Urkiel (Corporate Vice
President and Chief Financial Officer), Herbert M. Cole (Senior Vice
President for Operations), Juergen W. Gromer (Senior Vice President, Global
Industry Businesses), Richard P. Clark (Divisional Vice President, Global
Wireless Products Group), Thomas DiClemente (Corporate Vice President and
President, Europe, Middle East, Africa), Rudolf Gassner (Corporate Vice
President and President, Global Personal Computer Division),
Charles W. Goonrey (Corporate Vice President and General Legal Counsel),
John E. Gurski (Corporate Vice President and President, Global Value-Added
Operations and President, Global Operations Division), David F. Henschel
(Corporate Secretary), John H. Kegel (Corporate Vice President,
Asia/Pacific), Mark E. Lang (Corporate Controller), Philippe Lemaitre
(Corporate Vice President and Chief Technology Officer), Joseph C.
Overbaugh (Corporate Treasurer), Nazario Proietto (Corporate Vice President
and President, Global Consumer, Industrial and Power Technology Division);
and the following other members of management and employees of AMP: Richard
Skaare (Director, Corporate Communication), Douglas Wilburne (Director,
Investor Relations), Mary Rakoczy (Manager, Shareholder Services), Dorothy
J. Hiller (Assistant Manager, Shareholder Services) and Melissa E. Witsil
(Communications Assistant). As of the date of this communication, none of
the foregoing participants individually beneficially own in excess of 1%
of AMP's common stock or in the aggregate in excess of 2% of AMP's common
stock.
AMP has retained Credit Suisse First Boston Corporation ("CSFB") and
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to act as its
financial advisors in connection with the AlliedSignal Offer, for which
CSFB and DLJ will receive customary fees, as well as reimbursement of
reasonable out-of-pocket expenses. In addition, AMP has agreed to indemnify
CSFB, DLJ and certain related persons against certain liabilities,
including certain liabilities under the federal securities laws, arising
out of their engagement. CSFB and DLJ are investment banking firms that
provide a full range of financial services for institutional and individual
clients. Neither CSFB nor DLJ admits that it or any of its directors,
officers or employees is a "participant" as defined in Schedule 14A
promulgated under the Securities Ex-change Act of 1934, as amended, in the
solicitation, or that Schedule 14A requires the disclosure of certain
information concerning either CSFB or DLJ. In connection with CSFB's role
as financial advisor to AMP, CSFB and the following investment banking
employees of CSFB may communicate in person, by telephone or otherwise with
a limited number of institutions, brokers or other persons who are
stockholders of AMP: Alan Howard, Steven Koch, Scott Lindsay, and Lawrence
Hamdan. In connection with DLJ's role as financial advisor to AMP, DLJ and
the following investment banking employees of DLJ may communicate in
person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are stockholders of AMP: Douglas V. Brown and
Herald L. Ritch. In the normal course of its business, each of CSFB and
DLJ regularly buys and sells securities issued by AMP for its own account
and for the accounts of its customers, which transactions may result in
CSFB, DLJ or the associates of either of them having a net "long" or net
"short" position in AMP securities, or option contracts or other
derivatives in or relating to such securities. As of September 1, 1998,
DLJ held no shares of AMP common stock for its own account and CSFB had a
net long position of 118,566 shares of AMP common stock.
Exhibit 42
September 11, 1998
Dear [Shareholder Name],
As the new Chairman and Chief Executive Officer of AMP, it is
important to me that you understand AMP's Profit Improvement Plan and our
overall approach to producing greater shareholder value than AlliedSignal's
opportunistic offer in the near, mid and long-term. I am enclosing a copy
of our new analyst presentation. We have made every effort to make it as
informative as possible and I trust that you will find it valuable.
The message is simple WE BELIEVE THAT THE RISK REWARD PROSPECTS OF
POSSIBLY RECEIVING $44.50 IN LATE 1999 ARE INFERIOR TO THE SIGNIFICANT
UPSIDE INHERENT IN AMP'S PROFIT IMPROVEMENT PLAN. Here's a brief
explanation why:
O AMP's Profit Improvement Plan is ahead of schedule, and expected
to generate at least $2.30 EPS in 1999 and at least $3.00 EPS in
2000, yielding significantly more value than $44.50.
O Substantial cost savings from AMP's Profit Improvement Plan will
yield an expected $320 million by 2000, with $205 million in
expected savings in 1999. These savings will come from four
targeted areas, each led by an experienced executive with the
responsibility of achieving a specified portion of those cost
savings.
O The multiples paid by Framatone in the recent Berg transaction
confirm a significantly higher value for AMP than AlliedSignal's
inadequate offer.
O AMP's Profit Improvement Plan is based on cost savings -- so any
upside sales potential is a bonus, with each 1% increase in sales
yielding $0.05 EPS.
O AMP is exploring ways to increase value further in the nearer
term as a down payment on the benefits of our Profit Improvement
Plan.
I look forward to discussing with you over the next several weeks the
details of our Profit Improvement Plan and our specific blueprint for its
successful and rapid implementation.
Sincerely,
Robert Ripp
AMP and certain other persons named below may be deemed to be participants
in the solicitation of revocations of consents in response to
AlliedSignal's consent solicitation. The participants in this solicitation
may include the directors of AMP (Ralph D. DeNunzio, Barbara H. Franklin,
Joseph M. Hixon III, William J. Hudson, Jr., Joseph M. Magliochetti, Harold
A. McInnes, Jerome J. Meyer, John C. Morley, Robert Ripp, Paul G. Schloemer
and Takeo Shiina); the following executive officers of AMP: Robert Ripp
(Chairman and Chief Executive Officer), William J. Hudson (Vice Chairman),
James E. Marley (former Chairman), William S. Urkiel (Corporate Vice
President and Chief Financial Officer), Herbert M. Cole (Senior Vice
President for Operations), Juergen W. Gromer (Senior Vice President, Global
Industry Businesses), Richard P. Clark (Divisional Vice President, Global
Wireless Products Group), Thomas DiClemente (Corporate Vice President and
President, Europe, Middle East, Africa), Rudolf Gassner (Corporate Vice
President and President, Global Personal Computer Division), Charles W.
Goonrey (Corporate Vice President and General Legal Counsel), John E.
Gurski (Corporate Vice President and President, Global Value-Added
Operations and President, Global Operations Division), David F. Henschel
(Corporate Secretary), John H. Kegel (Corporate Vice President,
Asia/Pacific), Mark E. Lang (Corporate Controller), Philippe Lemaitre
(Corporate Vice President and Chief Technology Officer), Joseph C.
Overbaugh (Corporate Treasurer), Nazario Proietto (Corporate Vice President
and President, Global Consumer, Industrial and Power Technology Division);
and the following other members of management and employees of AMP: Richard
Skaare (Director, Corporate Communication), Douglas Wilburne (Director,
Investor Relations), Mary Rakoczy (Manager, Shareholder Services), Dorothy
J. Hiller (Assistant Manager, Shareholder Services) and Melissa E. Witsil
(Communications Assistant). As of the date of this communication, none of
the foregoing participants individually beneficially own in excess of 1% of
AMP's common stock or in the aggregate in excess of 2% of AMP's common
stock.
AMP has retained Credit Suisse First Boston Corporation (''CSFB'') and
Donaldson, Lufkin & Jenrette Securities Corporation (''DLJ'') to act as its
financial advisors in connection with the AlliedSignal Offer, for which
CSFB and DLJ will receive customary fees, as well as reimbursement of
reasonable out-of-pocket expenses. In addition, AMP has agreed to indemnify
CSFB, DLJ and certain related persons against certain liabilities,
including certain liabilities under the federal securities laws, arising
out of their engagement. CSFB and DLJ are investment banking firms that
provide a full range of financial services for institutional and individual
clients. Neither CSFB nor DLJ admits that it or any of its directors,
officers or employees is a ''participant'' as defined in Schedule 14A
promulgated under the Securities Exchange Act of 1934, as amended, in the
solicitation, or that Schedule 14A requires the disclosure of certain
information concerning either CSFB or DLJ. In connection with CSFB's role
as financial advisor to AMP, CSFB and the following investment banking
employees of CSFB may communicate in person, by telephone or otherwise with
a limited number of institutions, brokers or other persons who are
stockholders of AMP: Alan Howard, Steven Koch, Scott Lindsay, and Lawrence
Hamdan. In connection with DLJ's role as financial advisor to AMP, DLJ and
the following investment banking employees of DLJ may communicate in
person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are stockholders of AMP: Douglas V. Brown and
Herald L. Ritch. In the normal course of its business, each of CSFB and DLJ
regularly buys and sells securities issued by AMP for its own account and
for the accounts of its customers, which transactions may result in CSFB,
DLJ or the associates of either of them having a net ''long'' or net
''short'' position in AMP securities, or option contracts or other
derivatives in or relating to such securities. As of September 1, 1998, DLJ
held no shares of AMP common stock for its own account and CSFB had a net
long position of 118,566 shares of AMP common stock.
This letter contains certain "forward-looking" statements which AMP
Incorporated ("AMP") believes are within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. The safe harbors intended to be created thereby are not available to
statements made in connection with a tender offer and AMP is not aware of
any judicial determination as to the applicability of such safe harbor to
forward-looking statements made in proxy solicitation materials when there
is a simultaneous tender offer. However, shareholders should be aware that
any such forward-looking statements should be considered as subject to the
risks and uncertainties that exist in AMP's operations and business
environment which could render actual outcomes and results materially
different than predicted. For a description of some of the factors or
uncertainties which could cause actual results to differ, reference is made
to the section entitled "Cautionary Statements for Purposes of the 'Safe
Harbor'" in AMP's Annual Report on Form 10-K for the year ended December
31, 1997. In addition, the realization of the benefits anticipated from
the strategic initiatives will be dependent, in part, on management's
ability to execute its business plans and to motivate properly the AMP
employees, whose attention may have been distracted by AlliedSignal's
tender offer and whose numbers will have been reduced as a result
