SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(mark one)
[XX] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _________ to _________
********************************
Commission File No. 1-4235
AMP INCORPORATED
(Exact Name of Registrant as Specified in Charter)
********************************
Commonwealth of Pennsylvania 23-0332575
(State or Other Jurisdiction of Incorporation IRS Employer Identification No.
or Organization)
Harrisburg, Pennsylvania 17105-3608
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (717) 574-0100
********************************
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X]. NO [ ].
The number of shares of AMP Common Stock (without Par Value) outstanding at July
27, 1998 was 218,601,033 (excluding shares held in the treasury of the
Corporation, all of which are issued but not outstanding and are not entitled to
vote).
Includes an Exhibit Index.
AMP Incorporated & Subsidiaries
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Consolidated Statements of Income for the three months and the six
months ended June 30, 1998 and 1997, the Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 and 1997, and the Consolidated Balance
Sheets at June 30, 1998 and December 31, 1997, are presented below. See the
notes to these condensed consolidated financial statements at the end thereof.
AMP Incorporated & Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands,
except per share data)
For the Three Months
Ended June 30,
1998 1997
----------- -----------
Net Sales .................... $ 1,352,762 $ 1,468,005
Cost of Sales (See Note 2).... 978,184 995,617
----------- -----------
Gross income ............. 374,578 472,388
Selling, General and
Administrative Expenses
(See Note 2)............. 284,157 283,105
----------- -----------
Income from operations ... 90,421 189,283
Interest Expense ............. (7,078) (8,964)
Other Deductions, net
(See Note 3) ............. (2,160) (21,366)
----------- -----------
Income before income taxes 81,183 158,953
Income Taxes ................. 26,386 51,660
----------- -----------
Net Income ................... $ 54,797 $ 107,293
=========== ===========
Per Share Amounts:
Basic and Diluted Earnings
Per Share .............. $.25 $.49
Cash Dividends............ $.27 $.26
=========== ===========
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
AMP Incorporated & Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(dollars in thousands,
except per share data)
For the Six Months
Ended June 30,
1998 1997
----------- -----------
Net Sales .................... $ 2,747,651 $ 2,860,872
Cost of Sales (See Note 2).... 1,937,155 1,966,580
----------- -----------
Gross income ............. 810,496 894,292
Selling, General and
Administrative Expenses
(See Note 2).............. 560,036 544,340
----------- -----------
Income from operations ... 250,460 349,952
Interest Expense ............. (14,976) (17,062)
Other Deductions, net
(See Note 3) ............. (2,336) (23,823)
----------- -----------
Income before income taxes 233,148 309,067
Income Taxes ................. 75,775 100,446
----------- -----------
Net Income before cumulative
effect of accounting changes $ 157,373 $ 208,621
Cumulative effect of accounting
changes, net of income taxes
(See Note 2)................. -- 15,450
----------- -----------
Net Income ................... $ 157,373 $ 224,071
=========== ===========
Per Share Amounts:
Basic and Diluted Earnings
Per Share -
Net income before cumulative
effect of accounting changes $0.72 $0.95
Cumulative effect of accounting
changes .................. -- $0.07
----------- -----------
Net income................ $0.72 $1.02
=========== ===========
Cash Dividends............... $0.54 $0.52
=========== ===========
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
AMP Incorporated & Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and Unaudited)
(dollars in thousands)
For the Six Months
Ended June 30,
1998 1997
--------- ---------
Cash and Cash Equivalents at January 1 ...............$ 350,320 $ 223,779
Operating Activities:
Net Income ..................................... 157,373 224,071
Noncash adjustments -
Depreciation and amortization ............... 207,675 220,059
Cumulative effect of accounting changes
(See Note 2)............................... -- (22,889)
Changes in operating assets and liabilities . (124,449) (72,621)
Other, net ..................................... 7,932 13,417
--------- ---------
Cash provided by operating activities ....... 248,531 362,037
========= =========
Investing Activities:
Additions to property, plant and equipment ..... (246,338) (230,234)
Other, net ..................................... 18,520 27,603
--------- ---------
Cash used for investing activities .......... (227,818) (202,631)
--------- ---------
Financing Activities:
Changes in short-term debt ..................... (662) 17,119
Proceeds from long-term debt ................... 50,497 35,355
Repayments of long-term debt ................... (29,362) (35,221)
Purchases of treasury stock .................... (45,519) (981)
Dividends paid ................................. (118,370) (113,998)
--------- ---------
Cash used for financing activities .......... (143,416) (97,726)
--------- ---------
Effect of Exchange Rate Changes on Cash .............. (6,174) (1,411)
--------- ---------
Cash and Cash Equivalents at June 30 .................$ 221,443 $ 284,048
========= =========
Changes in Operating Assets and Liabilities:
Receivables .................................... 5,974 (118,296)
Inventories .................................... (4,562) (28,814)
Other current assets ........................... (1,797) (10,223)
Payables, trade and other ...................... (72,147) (2,392)
Accrued payrolls and employee benefits ......... 17,384 33,197
Other accrued liabilities ...................... (69,301) 53,907
--------- ---------
(124,449) (72,621)
========= =========
Interest paid during the periods was approximately equal to amounts charged to
expense.
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
AMP Incorporated & Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Condensed)
(dollars in thousands)
June 30, December 31,
1998 1997
---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents ......... $ 221,443 $ 350,320
Securities available for sale ..... 80,618 79,350
Receivables ....................... 1,013,370 1,051,422
Inventories
Finished goods and work in
process ....................... 504,760 491,688
Purchased and manufactured parts. 280,556 314,375
Raw materials.................... 112,708 102,156
---------- ----------
Total inventories................ 898,024 908,219
Other Current Assets .............. 262,384 260,489
---------- ----------
Total current assets .......... 2,475,839 2,649,800
---------- ----------
Property, Plant and Equipment ....... 4,686,214 4,627,419
Less - Accumulated depreciation ... 2,788,746 2,711,434
---------- ----------
Property, plant and equipment,
net .......................... 1,897,468 1,915,985
---------- ----------
Investments and Other Assets ........ 296,333 282,318
---------- ----------
TOTAL ASSETS ........................ $4,669,640 $4,848,103
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt ................... $ 442,793 $ 465,233
Payables, trade and other ......... 397,057 487,863
Accrued liabilities ............... 466,550 492,200
---------- ----------
Total current liabilities...... 1,306,400 1,445,296
Long-Term Debt ...................... 168,010 159,695
Other Liabilities and
Deferred Credits .................. 296,748 291,577
---------- ----------
Total liabilities ............. 1,771,158 1,896,568
Shareholders' Equity ................ 2,898,482 2,951,535
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ............................. $4,669,640 $4,848,103
========== ==========
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
AMP Incorporated & Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(June 30, 1998, Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in conjunction with
the financial statements and the notes thereto included in the Company's latest
annual report and Form 10-K.
The information furnished reflects all adjustments, which are, in the
opinion of management, necessary for a fair statement of the results for the
interim periods.
The following table presents a reconciliation of the shares used to
calculate earnings per share as well as per share amounts:
<TABLE>
<CAPTION>
For the Three Months Ended June 30, For the Six Months Ended June 30,
- --------------------------------------------------------------------- ---------------------------------------------
1998 1997 1998 1997
- --------------------------------------------------------------------- ---------------------------------------------
Shares EPS Shares EPS Shares EPS Shares EPS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Basic Calculation 219,189,167 $0.25 219,622,835 $0.49 219,400,081 $0.72 219,611,371 $1.02
Dilutive Securities -
Primarily Options 339,913 256,858 378,160 282,277
- --------------------------------------------------------------------- --------------------------------------------
Diluted Calculation 219,529,080 $0.25 219,879,693 $0.49 219,778,241 $0.72 219,893,648 $1.02
===================================================================== ============================================
</TABLE>
2. ACCOUNTING CHANGES
Effective January 1, 1998, AMP Incorporated, the United States parent
company, consolidated the majority of its operating divisions and reorganized
into functional organizations, including manufacturing, materials management,
engineering, and finance. As a result of this change, certain manufacturing
administrative functions are now included in general and administrative
expenses, a classification that is consistent with the Company's subsidiaries.
The prior period amounts have been reclassified to provide for consistent data
comparisons.
In the first quarter of 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130").
For interim periods, SFAS No. 130 permits footnote presentation of a description
of the impact of SFAS No. 130 on the Company, total comprehensive income, any
material components of total comprehensive income for the periods presented, and
cumulative other comprehensive income. Under SFAS No. 130, comprehensive income
is defined as the total of net income and all other non-owner changes in equity.
The Company's non-owner changes in equity include: unrealized holding
gains/(losses) on securities classified as available-for-sale under FASB
Statement No. 115 and foreign currency translation adjustments accounted for
under FASB Statement No. 52. The adoption of SFAS No. 130 involves new
disclosure requirements only and did not impact the reported financial position
or results of operations.
Total comprehensive income and its components are as follows:
<TABLE>
<CAPTION>
For the Three Months Ended: For the Six Months Ended:
---------------------------- -----------------------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
---------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net income $54,797 $107,293 $157,373 $224,071
Unrealized losses on securities (5,563) (195) (1,813) (4,018)
Cumulative translation adjustment (13,155) 9,494 (49,837) (46,838)
---------------------------- -----------------------------
Total comprehensive income $36,079 $116,592 $105,723 $173,215
============================ =============================
</TABLE>
Cumulative other comprehensive (loss)/income was ($24,944) and $26,706 at
June 30, 1998 and December 31, 1997, respectively.
During the first quarter of 1997, the Company made two changes to the
accounting practices used to develop its inventory costs. The first change was
made to standardize globally the definition of capacity used to determine volume
assumptions for overhead rates. The new definition more properly reflects the
Company's objectives for plant and equipment utilization and provides for
consistent measurements of AMP facilities.
In an effort to provide increased focus on engineering efforts for both
product development and manufacturing cost reductions, the Company also changed
its inventory costing methodology to include manufacturing engineering costs in
inventory costs. Previously, these costs were expensed in the period incurred
and included in Cost of Sales on the Consolidated Statement of Income.
The net benefit of the preceding changes in accounting for inventory of
$15.5 million, or $.07 per share, was presented as a cumulative effect of
accounting changes on the Consolidated Statement of Income for the six months
ended June 30, 1997.
3. IMT/CONNECTWARE LITIGATION
In the second quarter of 1997, the Company recorded a litigation reserve of
$17.7 million pretax ($0.05 per share) through Other Deductions, net, in
connection with the IMT/Connectware arbitration decision of July 1, 1997. This
litigation was settled on September 12, 1997 and resulted in a payment to IMT in
the third quarter of 1997.
4. SUBSEQUENT EVENTS
The Company announced, on June 26, 1998, a voluntary early retirement
program to approximately 2,200 U.S. employees who are at least 55 years of age
and have ten years of service. The enrollment period is in effect from July 6,
1998 through August 15, 1998. The specific financial impact of the early
retirement program will be recorded as a restructuring charge in the third
quarter when the Company is able to estimate the cost of the program based upon
those who elected to enroll. This program involves relatively little immediate
cash outlay by the Company since it is primarily funded by an existing defined
benefit pension plan.
The Company also announced, in July 1998, several additional actions that
will take place over the remainder of 1998. These actions include reduction of
staff support functions by approximately 3,500 employees worldwide, outsourcing
of selected support functions, plant consolidations, certain divestitures of
product lines, and sales initiatives. The product line divestitures are not
material to the related charges to be taken.
The reduction of staff support functions will be through a combination of
the previously announced early retirement program, attrition, and the
involuntary separation of employees. Examinations of the Company's primary
business processes for streamlining continue and will result in the
identification of the specific positions to be eliminated or outsourced.
A restructuring charge for plant consolidations will also be recorded in
the third quarter related to the Company's globalization of its Terminal and
Connector manufacturing operations. Key elements of the globalization plan are
the transfer of manufacturing to the regions where the product is sold and/or
where costs are lowest, and the consolidation of plants into larger scale,
integrated facilities. The execution of this plan will extend beyond 1998.
The sales initiatives include a change in the Company's business practices
with certain distributors, the simplification of product pricing, 24-hour
customer service, guaranteed 24-hour shipment of selected parts, and the
establishment of customer support teams and large account enterprise agreements.
These changes are being made to make the Company more competitive and responsive
to customers.
Currently, revenues are recognized upon shipments to distributors in
accordance with contractual terms. The Company has announced a new program to
qualifying distributors whereby most inventory will be owned by the Company and
managed in an integrated fashion, regardless of the channel through which it is
sold. The Company will maintain ownership of inventory at certain distributor
sites and record revenue at the time the product is shipped to the distributor's
customer. Upon initial implementation, there will be a reduction in sales for
the transfer of the inventory from the distributors to the Company. Both the
sales reduction and the associated charge to profit will be recorded in the
second half of 1998 as the distributors accept and qualify for these new terms.
In addition, a cash outlay for the amount of the inventory return offset by any
amounts due to the Company may be required.
As a result of the above actions, special charges of approximately $200
million to $250 million are expected to be recorded by the Company in the second
half of the year, with most charges anticipated in the third quarter. The cash
impact of the special charges is currently estimated at $100 million to $130
million. As a significant portion of these charges and the related cash impact
is associated with the reduction of indirect headcount, these estimates could
vary significantly depending on the number of individuals terminating under the
early retirement program or involuntary separation. The expected future
annualized benefit to operating income as a result of these actions is
approximately $200 million.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales for the second quarter of 1998 were $1.353 billion, down 7.9% in
U.S. dollars and 4.5% in local currencies from the $1.468 billion in the
corresponding prior year quarter. For the six months ended June 30, 1998, net
sales were $2.748 billion, representing a decrease of 4.0% in U.S. dollars from
the $2.861 billion for the six months ended June 30, 1997. On a local currency
basis, sales for the six months ended June 30, 1997, were essentially flat with
the comparable prior year period. The continued strength of the U.S. dollar
reduced sales by approximately $50 million in the quarter and $108 million for
the six months ended June 30, 1998.
Bookings for the second quarter were $1.306 billion, down 8.4% from first
quarter bookings of $1.426 billion. The Company's order backlog stood at $921
million at June 30, 1998, representing a $49 million, or 5.1% decrease from
March 31, 1998.
Sales in the Americas Region, approximately 49% of total sales, were down
8.9% for the quarter ended June 30, 1998 as compared to the corresponding prior
year quarter. U.S. net sales decreased 9.7%, while Canada, Mexico, and Argentina
also saw a decrease in sales from the comparable prior year quarter. Local
currency sales in Brazil saw double digit growth over the second quarter of
1997. For the six months ending June 30, 1998, net sales were down 5.1% from the
comparable prior year period. This downturn was driven by weakness in the
Communications and Personal Computer industries.
Asia/Pacific sales, approximately 18% of total sales, were down 7.1% in
local currencies and 17.3% in U.S. dollars for the quarter ended June 30, 1998
as compared to the corresponding prior year quarter. For the six months ending
June 30, 1998, net sales were down 2.7% in local currencies and 11.5% in U.S.
dollars from the comparable prior year period. Sales in Japan were down 9.8% in
local currency and 20.7% in U.S. dollars from the comparable prior year quarter
and 7.3% in local currency and 14.9% in U.S. dollars from the six months ended
June 30, 1997. Weakening sales throughout the Asia/Pacific region, primarily
caused by the economic slowdown in Japan and throughout the region, has had a
negative impact on the Communications, Motor Vehicles, and the Consumer,
Industrial, and Power industries, while sales in the Personal Computer industry
were up slightly.
Europe, Middle East and Africa sales, approximately 33% of total sales,
increased 3.6% in local currencies, but were flat in U.S. dollars for the
quarter ended June 30, 1998 as compared to the corresponding prior year quarter.
Growth was steady in Germany, France, and Spain, while down in Great Britain and
Italy. For the six months ending June 30, 1998, net sales increased 8.5% in
local currencies and 2.7% in U.S. dollars from the comparable prior year period.
Growth was led primarily by the Motor Vehicles and Consumer, Industrial, and
Power industries, while the Personal Computer and Communications industries
weakened further.
Gross income decreased to 27.7% of net sales for the quarter ended June 30,
1998, from 32.2% in the year-earlier quarter. The primary driver of this
decrease was increased volume variances associated with significantly lower
levels of production resulting from less demand and the use of inventory on hand
for order fulfillments. For the six months ending June 30, 1998, gross income
decreased to 29.5% of net sales from 31.3% in the comparable prior year period.
Selling, general and administrative expenses (S,G&A) increased to 21.0% of
net sales for the quarter ended June 30, 1998 from 19.3% in the year earlier
quarter. The increase is primarily due to the lower level of sales in the second
quarter of 1998 as expenses are flat in reported dollars and up approximately 3%
in local currencies. For the six months ending June 30, 1998, S,G&A increased 6%
in local currencies to 20.4% of net sales from 19.0% in the comparable prior
year period due to flat sales.
Net income for the second quarter of 1998 was $54.8 million, down $52.5
million from $107.3 million in the year-earlier quarter. Basic and diluted
earnings per share were $0.25, down 49.0% compared to $0.49 in the second
quarter 1997. Earnings per share in the second quarter of 1997 were negatively
impacted by a $17.7 million pretax charge ($0.05 per share) for a litigation
reserve recorded in Other Deductions, net.
Capital expenditures for the second quarter 1998 were $ 139.2 million, up
27.4% from $109.3 million in the prior year quarter. For the six months ending
June 30, 1998, capital expenditures were $246.3 million, up 7.0% from $230.2
million in the comparable prior year period. Although capital expenditures have
increased over 1997 levels, the Company continues to focus on improving existing
asset utilization and productivity.
MANAGEMENT ACTIONS
In order to position the Company to achieve its strategic financial
objectives and in light of recent business performance, management announced
several actions to provide sales growth and reduce infrastructure costs.
The Company announced, on June 26, 1998, a voluntary early retirement
program to approximately 2,200 U.S. employees who are at least 55 years of age
and have ten years of service. The enrollment period is in effect from July 6,
1998 through August 15, 1998. The specific financial impact of the early
retirement program will be recorded as a restructuring charge in the third
quarter when the Company is able to estimate the cost of the program based upon
those who elected to enroll. This program involves relatively little immediate
cash outlay by the Company since it is primarily funded by an existing defined
benefit pension plan.
The Company also announced, in July 1998, several additional actions that
will take place over the remainder of 1998. These actions include reduction of
staff support functions by approximately 3,500 employees worldwide, outsourcing
of selected support functions, plant consolidations, certain divestitures of
product lines, and sales initiatives. The product line divestitures are not
material to the related charges to be taken.
The reduction of staff support functions will be through a combination of
the previously announced early retirement program, attrition, and the
involuntary separation of employees. Examinations of the Company's primary
business processes for streamlining continue and will result in the
identification of the specific positions to be eliminated or outsourced.
A restructuring charge for plant consolidations will also be recorded in
the third quarter related to the Company's globalization of its Terminal and
Connector manufacturing operations. Key elements of the globalization plan are
the transfer of manufacturing to the regions where the product is sold and/or
where costs are lowest, and the consolidation of plants into larger scale,
integrated facilities. The execution of this plan will extend beyond 1998.
The sales initiatives include a change in the Company's business practices
with certain distributors, the simplification of product pricing, 24-hour
customer service, guaranteed 24-hour shipment of selected parts, and the
establishment of customer support teams and large account enterprise agreements.
These changes are being made to make the Company more competitive and responsive
to customers.
Currently, revenues are recognized upon shipments to distributors in
accordance with contractual terms. The Company has announced a new program to
qualifying distributors whereby most inventory will be owned by the Company and
managed in an integrated fashion, regardless of the channel through which it is
sold. The Company will maintain ownership of inventory at certain distributor
sites and record revenue at the time the product is shipped to the distributor's
customer. Upon initial implementation, there will be a reduction in sales for
the transfer of the inventory from the distributors to the Company. Both the
sales reduction and the associated charge to profit will be recorded in the
second half of 1998 as the distributors accept and qualify for these new terms.
In addition, a cash outlay for the amount of the inventory return offset by any
amounts due to the Company may be required.
As a result of the above actions, special charges of approximately $200
million to $250 million are expected to be recorded by the Company in the second
half of the year, with most charges anticipated in the third quarter. The cash
impact of the special charges is currently estimated at $100 million to $130
million. As a significant portion of these charges and the related cash impact
is associated with the reduction of indirect headcount, these estimates could
vary significantly depending on the number of individuals terminating under the
early retirement program or involuntary separation. The expected future
annualized benefit to operating income as a result of these actions is
approximately $200 million.
YEAR 2000
The Company's estimates regarding incremental S,G&A and capital expenses in
1998 specific to the completion of the information systems phase of Year 2000
compliance remain unchanged from the estimates stated in the Company's Report on
Form 10-K for the year ended December 31, 1997 and Annual Report to
Shareholders. With respect to operational Year 2000 compliance issues, the vast
majority of the Company's products are, by their nature, not date dependent.
However, certain of the Company's manufacturing, logistics, administrative and
facility systems and equipment use embedded computer technology. The Company is
working with an outside consultant and using a specific methodology to identify
necessary actions and develop a plan for addressing embedded technology issues
within the Company. Further, this plan includes an assessment of suppliers and
customers. Thus far, the incremental internal costs and external expenses for
the operational compliance phase in 1998 have not been significant due to the
use of existing Company resources for inventorying assets and contacting
suppliers. The total additional incremental internal costs and external expenses
for the operational compliance phase cannot be determined until the assessment
of embedded technology is complete. At this time the Company does not anticipate
any material negative impacts related to Year 2000 issues; however, the Company
is reliant in part on the effective execution by customers and suppliers in
dealing with these issues. Accordingly, recognizing the many factors affecting
the Company which are outside of the Company's control, such as suppliers of
goods and services (including municipalities and utilities), the Company is not
able to state it will be completely unaffected by the Year 2000.
CONVERSION TO THE EURO
Since 1997 the Company has been assessing the potential impact of the
January 1, 1999 conversion in European Union countries to a common currency -
the Euro. By the end of 1998, the Company anticipates being capable, in Europe,
of accepting orders and invoicing in the Euro. At this time, the Company does
not anticipate any material negative impacts related to the conversion to the
Euro.
DIVIDEND ACTION
On July 22, 1998, the Board of Directors declared a regular quarterly
dividend of 27 cents per share, payable Tuesday, September 1, 1998 to
shareholders of record at the close of business on Monday, August 3, 1998.
FUTURE ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
SFAS No. 133 is effective for fiscal years beginning after June 15, 1999.
Early adoption at the beginning of any quarter after issuance is permitted, but
cannot be applied retroactively. The provisions of the statement must be applied
to derivative instruments and certain derivative instruments embedded in hybrid
contracts that were issued, acquired, or substantively modified after December
31, 1997.
The Company has not yet quantified the impacts of adopting SFAS No. 133 on
its financial statements and has not determined the timing of or method of
adoption. However, the Statement could increase volatility in earnings and
comprehensive income.
ITEM 3. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in quantitive and qualitative
disclosures in 1998. Reference is made to Item 7A in the Annual Report on Form
10-K for the year ended December 31, 1997.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR"
- --------------------------------------------------------
Statements in this Report on Form 10-Q that are not strictly historical
facts are "forward-looking" statements that should be considered as subject to
the many uncertainties that exist in the Company's operations and business
environment. These uncertainties, which include economic and currency
conditions, market demand and pricing, competitive and cost factors, and the
like, are set forth in the Company's Report on Form 10-K for the year ended
December 31, 1997 filed with the Securities and Exchange Commission on March 30,
1998.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Notice of Deadlines for Shareholder Proposals for 1999 Proxy Statement
The deadline for submitting a shareholder proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's 1999 annual
meeting of shareholders pursuant to Rule 14a-8, "Shareholder Proposals," of the
Securities and Exchange Commission's Regulation 14A is November 16, 1998.
The date after which notice of a shareholder proposal submitted outside
the procedures of Rule 14a-8 is considered untimely is January 29, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits --
Exhibit
Number Description
------- -----------
3(ii) - Bylaws of the Company, as amended July 22, 1998
10.A - Executive Severance Agreements dated October 22, 1997
between the Company and certain of the Company's Executive
Officers; with amended Appendix listing the Executive
Officers and noting differences between the agreements
entered with each Executive Officer.
10.B - Employee Share Purchase Plan, effective July 1, 1998
27 - Financial Data Schedule
(B) Reports on Form 8-K --
There were no reports on Form 8-K for the three months ended June
30, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 31, 1998 AMP INCORPORATED
(Registrant)
By: /s/ William S. Urkiel
----------------------------------
William S. Urkiel
Vice President and Chief Financial Officer
By: /s/ Mark E. Lang
----------------------------------
Mark E. Lang
Controller
EXHIBIT INDEX
-------------
Exhibit
Number Description
------- -----------
3(ii) - Bylaws of the Company, as amended July 22, 1998
10.A - Executive Severance Agreements dated October 22, 1997
between the Company and certain of the Company's Executive
Officers; with amended Appendix listing the Executive
Officers and noting differences between the agreements
entered with each Executive Officer.
10.B - Employee Share Purchase Plan, effective July 1, 1998
27 - Financial Data Schedule
EX-3.ii
July 22, 1998
AMP INCORPORATED
BYLAWS
ARTICLE 1
SHAREHOLDERS
Section 1.1. PLACE OF HOLDING MEETINGS.
Meetings of shareholders of AMP Incorporated ("Corporation")
may be held at such place, within or without the Commonwealth of
Pennsylvania, as may be fixed by the Board of Directors
("Board"). Unless otherwise fixed by the Board, meetings of
shareholders shall be held at the registered office of the
Corporation in the Commonwealth of Pennsylvania.
Section 1.2. NOTICE OF SHAREHOLDERS' MEETINGS.
Except as otherwise provided by law or these bylaws, written
notice of the time, date, place and purpose or purposes of every
meeting of shareholders, including Annual Meetings, shall be
given not less than 5 days (or such longer period as may be
required by law) before the date of the meeting, either
personally or by first-class or express mail, postage prepaid, or
by telegram (with messenger service specified), telex or TWX
(with answerback received) or courier service, charges prepaid,
or by facsimile transmission or in such other manner as permitted
by law, to each shareholder of record entitled to vote at the
meeting. When given by mail, telegraph or courier service,
notice shall be deemed to have been given when deposited in the
United States mail in a postpaid envelope addressed to the
shareholder at such address as appears on the books of the
Corporation or when deposited with a telegraph office or courier
service for delivery to that person or, in the case of telex or
TWX, when dispatched.
Section 1.3. WAIVER.
Whenever written notice of a meeting is required to be
given, a waiver thereof in writing, signed by the person entitled
to the notice, whether before or after the meeting, shall be
deemed equivalent to the giving of the notice. Attendance of a
person at any meeting shall constitute a waiver of notice of the
meeting except where a person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully
called or convened.
Section 1.4. VOTING LIST.
The officer or agent having charge of the stock transfer
records of the Corporation shall make a complete list of the
shareholders entitled to vote at each shareholders' meeting or
any adjournment thereof or, in lieu of such a list the
Corporation may make the information therein available at the
shareholders' meeting by any other means. Such list shall (a) be
arranged alphabetically, with the address of and the number of
shares held by each shareholder; (b) be produced and kept open at
the time and place of the meeting; (c) be subject to the
inspection of any shareholder during the whole time of the
meeting; and (d) be prima facie evidence as to who are the
shareholders entitled to examine such list or to vote at such
meeting.
Section 1.5. ANNUAL MEETING OF SHAREHOLDERS.
1.5.1 Date and Time. The Annual Meeting of the
Shareholders, for the election of Directors and the transaction
of other business, if any, shall be held on the fourth Wednesday
in April of each year (or on such other date as may be fixed by
the Board and stated in the notice of the meeting) at such hour
as shall be fixed by the Board and stated in the notice of the
meeting, at the place fixed in accordance with Section 1.1 of
this Article. Failure to hold such meeting at the designated
time or on the designated date or to elect some or all of the
members of the Board at such meeting or any adjournment thereof
shall not affect otherwise valid corporate acts or work a
forfeiture or dissolution of the Corporation.
1.5.2 Business to be Conducted. To be properly
brought before the Annual Meeting, business must be either (a)
specified in the notice of Annual Meeting (or any supplement
thereto) given by or at the direction of the Board, (b) otherwise
properly brought before the Annual Meeting by or at the direction
of the Board, or (c) otherwise properly brought before the Annual
Meeting by a shareholder. In addition to any other applicable
requirements, for business to be properly brought before an
Annual Meeting by a shareholder, the shareholder must have given
timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be
delivered to or mailed to and received at the principal executive
office of the Corporation at least 45 days in advance of the date
in the then-current year that corresponds to the date on which the
Corporation first mailed its Notice of Annual Meeting, PRoxy Statement
and proxy card for the prior year's annual meeting of shareholders;
provided, however, that if the meeting in the then-current year is
held more than 30 days before or after the date on which the previous
year's annual meeting was held, then such notice shall be delivered to
or mailed to and received by the Secretary at the principal executive
office of the Corporation at least 90 days in advance of the actual
date of the Annual Meeting in the then-current year unless fewer than
100 days' notice or prior public disclosure of the date of the meeting
is given or made to shareholders, in which event notice by the
shareholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the
date of the Annual Meeting was mailed or such public disclosure
was made, whichever first occurs. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder
proposes to bring before the Annual Meeting (i) a brief
description of the business desired to be brought before the
Annual Meeting and the reasons for conducting such business at
the Annual Meeting, (ii) the name and record address of the
shareholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the
shareholder, and (iv) any material interest of the shareholder in
such business. No business shall be conducted at the Annual
Meeting except in accordance with the procedures set forth in
this Section 1.5.2, provided, however, that nothing in this
Section 1.5.2 shall be deemed to preclude discussion by any
shareholder of any business properly brought before the Annual
Meeting. The Chairman of an Annual Meeting shall, if the facts
warrant, determine and declare to the meeting that business was
not properly brought before the meeting in accordance with the
foregoing procedure, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
1.5.3 Nominations of Directors. Only persons who
are nominated in accordance with the following procedures shall
be eligible for election by the shareholders as directors.
Nominations of persons for election to the Board may be made by
the Board, at the direction of the Board by any nominating
committee or person(s) appointed by the Board, by the persons
named as proxies in the proxy card in the event an unexpected
vacancy arises in the original slate of nominees and the Board
neither designates a replacement nominee nor amends these Bylaws
to eliminate that office of director for which the vacancy arose,
or by any shareholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice
procedures set forth in this Section 1.5.3. Such nominations,
other than those made by or at the direction of the Board or by
the persons named as proxies in the proxy card, shall be made
pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice shall be
delivered to or mailed to and received by the Secretary at the
principal executive office of the Corporation with respect to (i)
an election to be held at an annual meeting of shareholders, at
least 45 days in advance of the date in the then-current year
that corresponds to the date on which the Corporation first mailed
its Notice of Annual Meeting, Proxy Statement and proxy card for
the prior year's annual meeting; provided, however, that if the
Annual Meeting in the then-current year is held more than 30 days
before or after the date on which the previous year's annual meeting
was held, then such notice shall be delivered to or mailed to and
received by the Secretary at least 90 days in advance of the actual
date of the Annual Meeting in the then-current year, or (ii) an election
to be held at a special meeting of shareholders for the election
of directors, the close of business on the 10th day following
the day on which notice of the date of the meeting was mailed to
shareholders or public disclosure was made, whichever first
occurs. Such shareholder's notice to the Secretary shall set
forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director, (i) the name,
age, business address and residence address of the person, (ii)
the principal occupation or employment of the person, (iii) the
class and number of shares of capital stock of the Corporation
which are beneficially owned by the person, (iv) a description of
all arrangements or understandings between the shareholder and
the person pursuant to which the nomination is proposed to be
made, and (v) any other information relating to the person that
is required to be disclosed in solicitations for proxies for
election of directors pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (or any successor act
or regulation); and (b) as to the shareholder giving the notice,
(i) the name and record address of such shareholder, (ii) the
class and number of shares of capital stock of the Corporation
which are beneficially owned by such shareholder, and (iii) a
representation that the shareholder intends to appear in person
or by proxy at the meeting to nominate the person. The
Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee
to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth herein.
The Chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not
made in accordance with the foregoing procedure, and if he should
so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
Section 1.6. SPECIAL MEETINGS OF SHAREHOLDERS.
Special meetings of shareholders may be called at any time
by the Chairman of the Board, the Chief Executive Officer, or by
resolution of the Board of Directors.
Section 1.7. RECORD DATES.
1.7.1 Meetings and Other Purposes. In order that
the Corporation may determine the shareholders entitled to notice
of or to vote at any meeting of shareholders or any adjournment
thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any consent, the Board may fix a
record date, which record date shall not be more than 90 days
before the date of such meeting, nor more than 90 days prior to
any such other action. If no record date is fixed, the record
date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of
business on the day next preceding the day on which notice is
given. The record date for any other purpose other than
shareholder action by written consent shall be at the close of
business on the day on which the Board adopts the resolution
relating thereto. The determination of shareholders of record
entitled to notice of or to vote at a meeting of shareholders
shall apply to any adjournment of the meeting; provided, however,
that the Board may fix a new record date for the adjourned
meeting.
1.7.2 Written Consents. In order that the
Corporation may determine the shareholders entitled to consent to
corporate action in writing without a meeting, the Board may fix
a record date. Any shareholder of record seeking to have the
shareholders authorize or take corporate action by written
consent shall, by written notice to the Secretary of the
Corporation, request the Board to fix a record date. The Board
shall promptly, but in all events within 10 days after the date
on which such a request is received, adopt a resolution fixing
the record date. If no record date has been fixed by the Board
within 10 days of the date on which such a request is received,
the record date for determining shareholders entitled to consent
to corporate action in writing without a meeting, when no prior
action by the Board is required by applicable law, shall be the
first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the
Corporation by delivery to its registered office in the
Commonwealth of Pennsylvania, its principal place of business, or
an officer or agent of the Corporation having custody of the
books in which proceedings of shareholders' meetings are
recorded, to the attention of the Secretary of the Corporation.
Delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by
the Board and prior action by the Board is required by applicable
law, the record date for determining shareholders entitled to
consent to corporate action in writing without a meeting shall be
at the close of business on the date on which the Board adopts
the resolution taking such prior action.
1.7.3 Validation and Certification of Written
Consents. In the event of the delivery to the Corporation of a
written consent or consents purporting to authorize or take
corporate action and/or related revocations (each such written
consent and any revocation thereof is referred to in this Section
1.7.3 as a "Consent"), the Secretary of the Corporation shall
provide for the safekeeping of such Consents and shall as soon as
practicable thereafter conduct such reasonable investigation as
he deems necessary or appropriate for the purpose of ascertaining
the validity of such Consents and all matters incident thereto,
including without limitation whether the holders of shares having
the requisite voting power to authorize or take the action
specified in the Consents have given consent; provided, however,
that if the corporate action to which the Consents relate is the
removal or election of one or more members of the Board, the
Secretary of the Corporation shall designate an independent,
qualified inspector with respect to such Consents and such
inspector shall discharge the functions of the Secretary of the
Corporation under this Section 1.7.3. If after such
investigation the Secretary or the inspector (as the case may be)
shall determine that any action purportedly taken by such
Consents has been validly taken, that fact shall be certified on
the records of the Corporation kept for the purpose of recording
the proceedings of meetings of the shareholders and the Consents
shall be filed with such records. In conducting the
investigation required by this Section 1.7.3, the Secretary or
the inspector may, at the expense of the Corporation, retain to
assist them special legal counsel and any other necessary or
appropriate professional advisors, and such other personnel as
they may deem necessary or appropriate.
Section 1.8. QUORUM.
The presence in person or by proxy of the holders of shares
entitled to cast a majority of the votes that all shareholders
are entitled to cast on a particular matter to be acted upon at a
meeting shall constitute a quorum at such meeting for purposes of
acting on such matter. The shareholders present at a duly
organized meeting may continue to do business until adjournment
notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. The determination of what constitutes a
quorum at a shareholders' meeting that has been previously
adjourned for lack of a quorum shall be made as provided under
Section 1756 of the Pennsylvania Business Corporation Law or any
successor provision thereto.
Section 1.9. ADJOURNMENT OF SHAREHOLDERS' MEETING.
When a meeting of shareholders is adjourned to another time,
date or place, it shall not be necessary to give any notice of
the adjourned meeting or of the business to be transacted at the
adjourned meeting, other than by announcement of the new time,
date or place at the meeting at which the adjournment is taken,
unless the Board fixes a new record date for the adjourned
meeting and provided that at the adjourned meeting only such
business is transacted as might have been transacted at the
original meeting. Any regular, special or Annual Meeting of the
shareholders, including one at which directors are to be elected,
may be adjourned for such period as the shareholders present in
person or by proxy, and entitled to vote, shall direct.
Section 1.10. VOTING.
(a) Except as otherwise provided herein or in the Articles
of Incorporation or by law, each outstanding share shall entitle
the holder to one vote on each matter submitted to a vote at a
meeting of shareholders.
(b) Whenever any action is to be taken by a vote of the
shareholders, it shall be authorized by a majority of the votes
cast at the meeting by holders of shares entitled to vote
thereon, unless a greater number or percentage of votes is
required by law or the Articles of Incorporation.
(c) Shares of the Corporation owned, directly or
indirectly, by it and controlled, directly or indirectly, by the
Board of Directors of this Corporation, as such, shall not be
voted at any meeting and shall not be counted in determining the
total number of outstanding shares for voting purposes at any
given time.
(d) Shares standing in the name of another corporation may
be voted by any officer or agent or by proxy appointed by any
officer or agent of such other corporation unless the Secretary
of the Corporation is furnished with a certified copy of a
resolution of the corporation's board of directors or of a
provision of its Articles or bylaws, designating another person
to vote, and then the shares shall be voted only by that
designated person.
(e) Shares standing in the name of a trustee or other
fiduciary, and shares held by an assignee for the benefit of
creditors or by a receiver, may be voted by the trustee,
fiduciary, assignee or receiver.
(f) Where shares are held jointly or as tenants in common
by two or more persons, as fiduciaries or otherwise, if only one
or more of such persons is present in person or by proxy, all of
the shares standing in the names of such persons shall be deemed
to be represented for the purpose of determining a quorum and the
Corporation shall accept as the vote of all the shares the vote
cast by him or a majority of them; and if such persons are
equally divided upon whether to vote the shares or upon the
manner of voting, the voting of the shares shall be divided
equally among them; provided, that if there has been filed with
the Secretary of the Corporation a copy, certified by an attorney
to be correct, of the relevant portions of the agreement under
which the shares are held, or the instrument by which the trust
or estate was created, or an Order of Court, the person or
persons specified as having such voting power in the latest
document so filed shall be entitled to vote the shares but only
in accordance therewith.
(g) A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been
transferred into the name of the pledgee or a nominee of the
pledgee.
(h) A shareholder may vote either in person or by proxy
executed in writing by the shareholder or his duly authorized
attorney in fact and filed with the Secretary of the Corporation.
Where two or more proxies of a shareholder are present, the
Corporation shall, unless otherwise expressly provided for in the
proxy, accept as the vote of all shares represented thereby the
vote cast by a majority of them and, if a majority of the proxies
cannot agree whether the shares represented shall be voted or
upon the manner of voting the shares, the voting of the shares
shall be divided equally among those persons. No proxy shall be
valid after three years from the date of its execution unless a
longer time is expressly provided therein. Unless coupled with
an interest, a proxy shall be revocable at will, but the
revocation shall not be effective until written notice thereof
has been given to the Secretary of the Corporation. A proxy
shall not be revoked by the death or incapacity of the maker but
shall continue in force, subject to the foregoing limitations,
unless before the vote is counted or the authority is exercised
written notice of such death or incapacity is given to the
Secretary of the Corporation.
(i) Except as otherwise provided by law or these bylaws,
any matter submitted to a vote of shareholders shall be by
ballot.
Section 1.11. ELECTION OF DIRECTORS.
Election of directors shall be by ballot. At such elections
every shareholder entitled to vote at such election shall have
the right to vote the number of shares held by him for as many
persons as there are directors to be elected, but he shall not
have the right to cumulate his votes.
Section 1.12. SELECTION OF JUDGES OF ELECTION.
(a) The Board may in advance of any shareholders' meeting
appoint one or three judges of election to act at the meeting or
any adjournment thereof. If judges of election are not so
appointed or shall fail to qualify, the person presiding at the
shareholders' meeting may, and upon the request of any
shareholder entitled to vote thereat shall, make such
appointment.
(b) In case any person appointed as judge fails to appear or
act, the vacancy may be filled by appointment made by the Board
in advance of the meeting or at the meeting by the person
presiding.
(c) No person shall be elected a director at a meeting at
which he has served as a judge.
Section 1.13. DUTIES OF JUDGES OF ELECTION.
The judges of election shall determine the number of shares
outstanding and the voting power of each, the shares represented
at the meeting, the existence of a quorum, and the validity and
effect of proxies, and shall receive votes or ballots, hear and
determine all challenges and questions arising in connection with
the right to vote, count and tabulate all votes or ballots,
determine the result, and do such acts as are proper to conduct
the election or vote with fairness to all shareholders. If there
are three judges, the act of a majority shall govern. On request
of the person presiding at the meeting or any shareholder, the
judge or judges shall make a report in writing of any challenge,
question or matter determined by him or them. Any report made by
him or them shall be prima facie evidence of the facts therein
stated, and such report shall be filed with the minutes of the
meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. BOARD QUALIFICATIONS.
The business and affairs of the Corporation shall be managed
under the direction of a Board of Directors ("Board"). Directors
shall be at least 18 years of age and need not be United States
citizens or residents of Pennsylvania or shareholders of the
Corporation.
Section 2.2. NUMBER.
The number of directors of the Corporation shall be at least
three, with the actual number of directors to be determined from
time to time by the Board.
Section 2.3. TERM OF DIRECTORS.
Each director shall hold office until the next succeeding
annual meeting of shareholders and until his successor shall have
been elected and qualified or until his earlier death,
resignation or removal. A director may resign by written notice
to the Corporation. The resignation shall be effective upon
receipt thereof by the Corporation or at such subsequent time as
shall be specified in the notice of resignation. A decrease in
the number of directors shall not have the effect of shortening
the term of any incumbent director.
Section 2.4. VACANCIES.
Vacancies in the Board, however caused, including vacancies
resulting from an increase in the number of directors, may be
filled by the affirmative vote of a majority of the remaining
directors even though less than a quorum of the Board, or by a
sole remaining director. When one or more directors shall resign
from the Board effective at a future date, the directors then in
office, including those who have so resigned, shall have power to
fill such vacancy or vacancies, the vote thereon to take effect
when such resignation or resignations shall become effective. A
director elected by the Board to fill any such directorship shall
serve for the balance of the unexpired term and until his
successor shall have been elected and qualified.
Section 2.5. REMOVAL OF DIRECTORS.
(a) A director of the Corporation may be removed only for
cause by the shareholders by the affirmative vote of the
shareholders entitled to cast at least a majority of the votes
which all shareholders would be entitled to cast at any annual
election of directors. The Board of Directors may be removed at
any time with or without cause by the unanimous vote or consent
of shareholders entitled to vote thereon.
(b) The Board by the affirmative vote of a majority of the
directors in office may remove a director if he or she be
declared of unsound mind by an order of court, or convicted of
felony, or for any other proper cause, or if, within 60 days
after notice of his or her election, he or she does not accept
such office either in writing or by attending a meeting of the
Board of Directors and fulfill such other requirements of
qualification as the bylaws may specify.
Section 2.6. QUORUM OF DIRECTORS AND COMMITTEES.
A majority of the directors in office, or of those directors
in office serving on any committee of the Board, shall constitute
a quorum for the transaction of business by the Board or by the
committee, respectively. The act of a majority present and
voting at a meeting at which a quorum is present shall be the act
of the Board or of the committee, unless the act of a greater
number is required by law or by the Articles of Incorporation.
Less than a quorum may adjourn.
Section 2.7. ACTION OF BOARD AND COMMITTEES WITHOUT A MEETING.
Any action required or permitted to be taken at a meeting of
the Board or any committee of the Board may be taken without a
meeting if, prior or subsequent to such action, all members of
the Board or of such committee, as the case may be, consent
thereto in writing and such written consents are filed with the
Secretary of the Corporation.
Section 2.8. EXECUTIVE COMMITTEE AND OTHER COMMITTEES.
(a) The Board, by resolution adopted by a majority of the
entire Board, may appoint from among its members an Executive
Committee and one or more other committees, each of which shall
have one or more members. The Board may fill any vacancy in any
committee; abolish any committee at its pleasure; and remove any
director from membership on any committee at any time, with or
without cause.
(b) No committee of the Board shall have authority to make,
alter or repeal any bylaw of the Corporation; create or fill
vacancies in the Board; submit to shareholders any action that
requires shareholders' approval; act on matters committed by the
bylaws or resolution of the Board to another committee of the
Board; or amend or repeal any resolution theretofore adopted by
the Board that by its terms is amendable or repealable only by
the Board.
(c) Subject to the foregoing, the Executive Committee
shall, during the intervals between meetings of the Board, have
and may exercise all of the powers and authority of the Board,
and any other committee of the Board shall have authority to the
extent provided in the resolution adopted by the Board.
(d) The Executive Committee of the Board shall consist of
at least three directors, including the Chairman of the Board,
the Chief Executive Officer if a director of the Corporation, and
such other number of directors as the Board may appoint.
(e) Actions taken at a meeting of any committee or by
written consent shall be reported to the Board at its next
regular meeting following such committee meeting.
(f) The Board may designate one or more directors as
alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee or for the
purposes of any written action by the committee.
Section 2.9. MEETINGS OF BOARD AND COMMITTEES.
(a) Regular meetings of the Board shall be held on the
fourth Wednesday of January, April, June, July, September, and
October at 8:00 o'clock, local time, in the morning at the
General Offices of the Corporation at Harrisburg, Pennsylvania,
or at such other time, date or place, within or without the
Commonwealth of Pennsylvania, as may be determined from time to
time by resolution of the Board at a duly convened meeting, or by
unanimous written consent of the Board. Upon such action being
taken by the Board, no further notice shall be required for the
regular meetings of the Board and any business that comes before
such meetings may be transacted.
(b) Special meetings of the Board may be called at any time
by the Chairman of the Board, the Chief Executive Officer, or by
any three directors, and may be held at any time, date and place,
within or without the Commonwealth of Pennsylvania, as the notice
of meeting shall provide. Notice of each special meeting shall
be given to each director in the manner provided for in these
bylaws.
(c) Regular meetings of any committee of the Board may be
established by resolution of the Board relating to the
authorization of the committee, or by resolution of the committee
itself, and, provided that the meetings are held at the General
Offices of the Corporation at Harrisburg, Pennsylvania or at such
other place, within or without the Commonwealth of Pennsylvania,
as may be designated in the authorizing resolution of the Board
or by resolution of the committee itself, no further notice shall
be required for such regular committee meetings or of any
business to come before the committee. Other meetings of any
committee of the Board may be called at any time by the Chairman
of Board, the Chief Executive Officer, the chairman of the
committee, any two members of the committee or as provided in the
resolution of the Board relating to the authorization of the
committee, and may be held at any time, date and place as the
notice of meeting shall provide. Notice of each special meeting
shall be given to each member of the committee in the manner
provided for in these bylaws.
(d) Any or all directors may participate in a meeting of
the Board or in a meeting of a committee of the Board by means of
a conference by telephone or any means of communication by which
all persons participating in the meeting are able to hear each
other. Such participation shall constitute presence in person
and a waiver of notice of the meeting by such participating
director or directors except where such director participates for
the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting
was not lawfully called or convened.
Section 2.10. NOTICE OF BOARD AND COMMITTEE MEETINGS.
When the giving of notice of any meeting of the Board or of
a committee of the Board is required, the following shall apply:
(a) the notice shall specify the time, date and place
of the meeting, but need not specify the business to be
transacted at, nor the purpose of, the meeting.
(b) notice may be given in writing (by mail, courier
service, telex, TWX with answerback received, facsimile
transmission, telegraph with messenger service specified, and the
like, postage or other charges prepaid) or orally to the director
in person, by telephone or by means of any other similar
communication equipment.
(c) notice shall be given to each director or member
of a committee at least 5 days before the date of the meeting
when given in writing by first class mail; at least 48 hours in
advance when given by express mail, courier service, or
telegraph; and at least 24 hours in advance when given in person
or by telephone or other similar communication equipment, telex,
TWX or facsimile transmission. When given by mail, telegraph or
courier service, notice shall be deemed to have been given when
deposited in the United States mail in a postpaid envelope
addressed to the director or when deposited with a telegraph
office or courier service for delivery to that director or, in
the case of telex or TWX, when dispatched.
(d) When a meeting is adjourned, notice of the
adjourned meeting need not be given if the time, date and place
are fixed at the meeting at which the adjournment is taken.
(e) notice of a meeting may be waived in writing by
any director before or after the meeting. Attendance of any
director at a meeting, except where such attendance is for the
express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting was not
lawfully called or convened, shall constitute a waiver of notice
by such director. Neither the business to be transacted at, nor
the purpose of, any meeting need be specified in the waiver of
notice of such meeting.
Section 2.11. COMPENSATION OF DIRECTORS.
Directors may receive such salary or other compensation for
their services as directors and as members of a committee of the
Board, and such fees and expenses of attendance at meetings of
the Board or committee, as the Board by resolution shall from
time to time determine. Nothing herein contained shall be
construed to preclude any director from serving the Corporation
in any other capacity as an officer, agent or otherwise and
receiving compensation therefor.
Section 2.12. INTEREST OF DIRECTORS.
No contract or other transaction between the Corporation and
one or more of its directors or between the Corporation and any
other corporation, firm or association of any type or kind in
which one or more of its directors are directors or are otherwise
interested, shall be void or voidable solely by reason of such
common directorship or interest, or solely because such director
or directors are present at or participate in the meeting of the
Board or a committee thereof which authorizes or approves the
contract or transaction, or solely because his or their votes are
counted for such purpose, if (a) the contract or other
transaction is fair as to this Corporation at the time it is
authorized, approved or ratified, or (b) the material facts as to
the common directorship or interest and as to the contract or
transaction are disclosed to or known by the Board or committee
and the Board or committee authorizes, approves or ratifies the
contract or transaction by affirmative vote of a majority of the
disinterested directors, even though the disinterested directors
be less than a quorum, or (c) the material facts as to the common
directorship or interest and as to the contract or transaction
are disclosed to or known by the shareholders and they authorize,
approve or ratify the contract or transaction in good faith.
Section 2.13. STANDARD OF CARE AND JUSTIFIABLE RELIANCE.
Directors and members of any committee of the Board shall
stand in a fiduciary relationship to the Corporation and shall
perform their duties in good faith, in a manner they reasonably
believe to be in the best interests of the Corporation, and with
such care, including reasonable inquiry, skill and diligence, as
a person of ordinary prudence would use under similar
circumstances. In performing their duties, directors and members
of any such committee shall be entitled to rely in good faith on
information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or
presented by any of the following:
(a) One or more officers or employees of the Corporation
whom the directors or members reasonably believe to be reliable
and competent in the matters presented.
(b) Counsel, public accountants or other persons as to
matters which the directors or members reasonably believe to be
within the professional or expert competence of such person.
(c) A committee of the Board upon which they do not serve,
duly designated in accordance with law, as to matters within its
designated authority, which committee the directors or members
reasonably believe to merit confidence.
Directors or members shall not be considered to be acting in
good faith if they have knowledge concerning the matter in
question that would cause their reliance to be unwarranted.
In discharging the duties of their respective positions, the
Board of Directors, committees of the Board, and individual
directors and members may, in considering the best interests of
the Corporation, consider to the extent they deem appropriate:
(1) the effects of any action upon any and all groups affected by
such action, including shareholders, employees, suppliers,
customers and creditors of the Corporation and upon communities
in which offices or other establishments of the Corporation are
located; (2) the short-term and long-term interests of the
Corporation, including benefits that may accrue to the
Corporation from its long-term plans and the possibility that
these interests may be best served by the continued independence
of the Corporation; (3) the resources, intent and conduct (past,
stated and potential) of any person seeking to acquire control of
the Corporation; and (4) all other pertinent factors. The
consideration of those factors shall not constitute a violation
of the standard of care provided above. The Board of Directors,
committees of the Board, and individual directors and members
shall not be required, in considering the best interests of the
Corporation or the effects of any action, to regard any corporate
interest or the interests of any particular group affected by
such action as a dominant or controlling interest or factor.
Absent breach of fiduciary duty, lack of good faith or self-
dealing, actions taken as a director or member of a committee of
the Board or any failure to take any action shall be presumed to
be in the best interest of the Corporation.
Nothing in this Section 2.13 shall be deemed to limit the
rights accorded to the Corporation and the Board of Directors
under Section 1715 of the Pennsylvania Business Corporation Law
or any successor provision thereto.
Section 2.14. PRESUMPTION OF ASSENT TO ACTION TAKEN.
A director who is present at a meeting of the Board or a
committee thereof of which he is a member at which action on any
corporate matter is taken shall be presumed to have concurred in
the action taken unless his dissent is entered in the minutes of
the meeting, or he files a written dissent with the secretary of
the meeting before adjournment or transmits a written dissent to
the Secretary of the Corporation immediately after adjournment.
ARTICLE III
OFFICERS
Section 3.1. ENUMERATION AND ELECTION OR APPOINTMENT OF
OFFICERS.
Unless determined otherwise by the Board (which
determination shall include the failure to elect), the officers
of the Corporation shall be a Chairman of the Board, a Chief
Executive Officer and President, a Chief Financial Officer, one
or more corporate Vice Presidents, a Treasurer, a Controller, a
Secretary and such additional officers as the Board may from time
to time choose, all of whom shall be elected by the Board. Any
number of offices may be held by the same person, unless the
Articles of Incorporation, these Bylaws or the Business
Corporation Law of the Commonwealth of Pennsylvania otherwise
provide. The election of officers by the Board shall occur at
each April meeting of the Board or at such other date as an
individual may be first elected as an officer by the Board.
The Chairman of the Board or the Chief Executive Officer and
President may from time to time, within their respective areas of
responsibility as prescribed by the Board, appoint divisional
Vice Presidents and such other officers or assistant officers as
may be deemed necessary or advisable, who shall hold office for
such period and perform such duties and exercise such powers as
may be delegated to them by the office that appointed them and to
which they report. Any such appointed officer may be removed at
any time, with or without cause, by the Board or by the officer
to whom he/she reports.
Section 3.2. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside at all meetings of
the shareholders and of the Board. In emergency circumstances
where the Chief Executive Officer and President cannot be reached
or in the event of the Chief Executive Officer and President's
incapacity to act, the Chairman of the Board shall perform the
duties of the Chief Executive Officer and President and, when so
acting, shall have all the powers of and be subject to all the
restrictions upon the Chief Executive Officer and President. The
Chairman of the Board shall perform such other duties and have
such other powers as the Board may from time to time prescribe.
Section 3.3. CHIEF EXECUTIVE OFFICER AND PRESIDENT.
The Chief Executive Officer and President shall be the chief
executive officer and president of the Corporation and shall have
such powers, duties and responsibilities as the Board may from
time to time prescribe. In emergency circumstances where the
Chairman of the Board cannot be reached or in the event of the
Chairman of the Board's incapacity to act, the Chief Executive
Officer and President shall preside at all meetings of the
shareholders and of the Board.
Section 3.4. CHIEF FINANCIAL OFFICER.
The Chief Financial Officer shall report to the Chief
Executive Officer and President and shall have such powers,
duties and responsibilities as shall from time to time be
prescribed by the Board or delegated to him/her by the Chief
Executive Officer and President.
Section 3.5. CORPORATE VICE PRESIDENTS.
The Corporate Vice Presidents shall report to either the
Chairman of the Board or the Chief Executive Officer and
President, as designated by the Board, and shall have such
powers, duties and responsibilities as shall from time to time be
prescribed by the Board or delegated to them by the officer to
whom each of them reports.
Section 3.6. TREASURER.
The Treasurer shall report to the Chief Financial Officer
and shall have such powers, duties and responsibilities as may
from time to time be prescribed by the Board or delegated to
him/her by the Chief Executive Officer and President or the Chief
Financial Officer.
Section 3.7. CONTROLLER.
The Controller shall report to the Chief Financial Officer
and shall have such powers, duties and responsibilities as may
from time to time be prescribed by the Board or delegated to
him/her by the Chief Executive Officer and President or the Chief
Financial Officer.
Section 3.8. SECRETARY.
The Secretary shall report to the Chairman of the Board and
shall have such powers, duties and responsibilities as may from
time to time be prescribed by the Board or delegated to him/her
by the Chairman of the Board.
Section 3.9. COMPENSATION.
The salaries of the Chairman of the Board and the Chief
Executive Officer and President shall be determined by the Board
based on recommendations made by the Compensation and Management
Development Committee (the "Committee") of the Board. These
officers in turn shall formulate the salary plan for the other
officers of the Corporation elected by the Board, with the review
and oversight of the Committee.
Section 3.10. TERM, REMOVAL, VACANCIES.
The elected officers of the Corporation shall hold office
for a term of one year and until their successors shall have been
elected and qualified, or otherwise until their death,
resignation, or removal. Any elected officer may resign at any
time by giving written notice of such resignation to the Board or
to the officer to whom they report. Unless otherwise specified
in such written notice, the resignation shall take effect upon
receipt and shall not require acceptance in order to be
effective. Any officer elected by the Board may be removed at
any time, with or without cause, by the affirmative vote of a
majority of the Board. The Board may permit any office of the
Corporation to remain unfilled, except as otherwise required by
law, or the Board may fill any vacancy in such office.
Section 3.11. STANDARD OF CARE.
An officer of this Corporation shall not be liable by reason
of having held such position in the Corporation if the officer
performs his or her duties as an officer in good faith, in a
manner such person 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.
ARTICLE IV
INDEMNIFICATION
Section 4.1. DIRECTORS' AND OFFICERS' RIGHT TO INDEMNIFICATION.
The Corporation, to the extent permitted by applicable law
and the provisions of this Article, shall indemnify any person
who is, was or becomes a director or officer of the Corporation
and who is, was or becomes a party or is threatened to be made a
party to any threatened, pending or completed investigation,
claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action, suit or
proceeding by or in the right of the Corporation to procure a
judgment in its favor) and whether formal or informal, and any
appeal therein in which such person may be involved (a
"Proceeding") by reason of the fact that such person is or was a
director, officer, employee or agent ( a "Representative") of the
Corporation, or a constituent corporation absorbed in a
consolidation or merger ("Constituent Corporation"), or is or was
serving at the request of the Corporation or a Constituent
Corporation as a Representative of another corporation,
partnership, joint venture, trust or other enterprise (including
without limitation, any employee benefit plan) (such other
corporation, partnership, joint venture, trust, or other
enterprise or employee benefit plan hereafter being referred to
as a "Covered Entity"), against all expenses (including
attorneys' fees and disbursements), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by such
person in connection with such Proceeding. Any right of a
director or officer to indemnification shall be a contract right.
Section 4.2. DERIVATIVE PROCEEDINGS
The Corporation, to the extent permitted by applicable law
and the provisions of this Article, shall indemnify any person
who is, was or becomes a director or officer of the Corporation
and may indemnify any person (other than a director or officer of
the Corporation) who is, was or becomes an employee or agent of
the Corporation, when such director, officer, employee or agent
is, was or becomes a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding
by or in the right of the Corporation to procure a judgment in
its favor (a "Derivative Proceeding") by reason of the fact that
such person is or was a Representative of the Corporation or a
Constituent Corporation, or is or was serving at the request of
the Corporation or a Constituent Corporation as a Representative
of a Covered Entity, against all expenses (including attorneys'
fees and disbursements) actually and reasonably incurred by such
person in connection with the defense or settlement of such
Derivative Proceeding.
Indemnification shall not be made in a Derivative Proceeding
in which the person has been adjudged to be liable to the
Corporation unless and only to the extent that a court of
competent jurisdiction determines upon application that the
person is fairly and reasonably entitled to indemnity for the
expenses that such court deems proper.
Section 4.3. INDEMNIFICATION OF EMPLOYEES AND AGENTS.
Notwithstanding any other provision or provisions of this
Article, the Corporation, to the extent permitted by applicable
law, may indemnify any person, other than a director or officer
of the Corporation, who is, was or becomes an employee or agent
of the Corporation and who is, was or becomes a party or is
threatened to be made a party to any threatened, pending or
completed Proceeding by reason of the fact that such person is or
was a Representative of the Corporation or a Constituent
Corporation, or is or was serving at the request of the
Corporation or a Constituent Corporation as a Representative of a
Covered Entity, against all expenses (including attorneys' fees
and disbursements), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such Proceeding.
Section 4.4. SCOPE OF COVERAGE.
The entitlement to indemnification provided in this Article
shall not be exclusive of any other rights to which an Indemnitee
may otherwise be entitled, and the provisions of this Article
shall inure to the benefit of the heirs and legal representatives
of any Indemnitee (as hereinafter defined in Section 4.13 of this
Article) under this Article and shall be applicable to
Proceedings and Derivative Proceedings commenced or continuing
after the adoption of this Article, whether arising from acts or
omissions occurring before or after such adoption.
Notwithstanding any other provision or provisions of this
Article, to the extent that a Representative of the Corporation
or a Constituent Corporation, or a Representative who is or was
serving at the request of the Corporation or a Constituent
Corporation as a Representative of a Covered Entity, has been
successful on the merits or otherwise in defense of any
Proceeding or Derivative Proceeding or in defense of any claim,
issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees and disbursements) actually
and reasonably incurred by said person in connection therewith.
Section 4.5. INSURANCE, CONTRACTS AND SUPPLEMENTARY COVERAGE.
The Board of Directors or its duly authorized committee
shall have the power to (a) authorize the Corporation to purchase
and maintain, at the Corporation's expense, insurance on behalf
of the Corporation, its subsidiaries and affiliates (the
"Corporate Entities") and any person who is or was a
Representative of the Corporation or a Constituent Corporation,
or is or was serving at the request of the Corporation or a
Constituent Corporation as a Representative of a Covered Entity,
against any liability asserted against such person or incurred by
such person in any such capacity, or arising out of said person's
status as such, whether or not the Corporation would have the
power to indemnify such person against that liability under the
provisions of applicable law, (b) enter into contracts with any
Representative of the Corporate Entities or a Constituent
Corporation, and any person serving as a Representative of a
Covered Entity at the request of the Corporation or a Constituent
Corporation, in furtherance of the provisions of this Article,
and (c) give other indemnification to the extent not prohibited
by applicable law.
Section 4.6. PROCEDURE FOR OBTAINING INDEMNIFICATION.
4.6.1 To obtain indemnification under this Article, an
Indemnitee shall submit to the General Legal Counsel of the
Corporation a written request, including such documentation or
information as is reasonably available to the Indemnitee or
reasonably necessary to determine whether and to what extent the
Indemnitee is entitled to indemnification (the "Supporting
Documentation"). The determination of the Indemnitee's
entitlement to indemnification shall be made not later than 60
days after receipt by the Corporation of the written request for
indemnification together with the Supporting Documentation. The
Secretary of the Corporation shall, promptly upon receipt of
notice from the General Legal Counsel of such a request for
indemnification, advise the Board of Directors or its duly
authorized committee in writing that the Indemnitee has requested
indemnification.
4.6.2 The Indemnitee's entitlement to indemnification
under this Article shall be determined in one of the following
ways: (i) by a majority vote of the Disinterested Directors (as
hereinafter defined in Section 4.13 of this Article), if they
constitute a quorum of the Board of Directors; (ii) by a written
opinion of Independent Counsel (as hereinafter defined in Section
4.13 of this Article) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even
if obtainable, a majority of such Disinterested Directors so
directs; or (iii) by the shareholders of the Corporation (but
only if a majority of the Disinterested Directors, if they
constitute a quorum of the Board of Directors, presents the issue
of entitlement to indemnification to the shareholders for their
determination).
4.6.3 In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 4.6.2 of this Article, a majority of such Disinterested
Directors or, if the Disinterested Directors do not constitute a
quorum of the Board of Directors, a majority of the Board of
Directors shall select the Independent Counsel, but only an
Independent Counsel to which the Indemnitee does not reasonably
object; provided, however, that if a Change in Control (as
hereinafter defined in Section 4.13 of this Article) shall have
occurred, the Indemnitee shall select such Independent Counsel to
which a majority of the Disinterested Directors or, if the
Disinterested Directors do not constitute a quorum of the Board
of Directors, a majority of the Board of Directors does not
reasonably object.
Section 4.7. ADVANCEMENT OF EXPENSES.
All reasonable expenses (including attorneys' fees and
disbursements) incurred by or on behalf of an Indemnitee in
connection with any Proceeding or Derivative Proceeding shall be
advanced to the Indemnitee by the Corporation within 20 days
after the receipt by the Corporation of a written statement or
statements from the Indemnitee requesting such advance or
advances from time to time prior to final disposition of such
Proceeding or Derivative Proceeding. Such statement or
statements shall reasonably identify, describe and document the
legal expenses actually and reasonably incurred by the Indemnitee
and, if required by law at the time of such advance, shall
include or be accompanied by an undertaking by or on behalf of
the Indemnitee to repay the amount advanced if ultimately it
should be determined that the Indemnitee is not entitled to be
indemnified against such expenses. Such expenses incurred by
Indemnitee may be paid as provided above upon such terms and
conditions, if any, as the Board of Directors or its duly
authorized committee shall determine to be appropriate.
Section 4.8. LIMITATIONS ON INDEMNIFICATION.
Notwithstanding any other provision of this Article, an
Indemnitee shall not be entitled to indemnification or to the
advancement of expenses under this Article if and to the extent
(a) the Indemnitee did not act in good faith and in a manner the
Indemnitee reasonably believed to be in, or not opposed to, the
best interests of the Corporation and, with respect to any
criminal proceeding, had reasonable cause to believe his or her
conduct was unlawful, or (b) the Corporation, pursuant to Section
4.5(b) of this Article or otherwise, enters into a contract with
Indemnitee which establishes reasonable limitations or conditions
on the indemnification of or advancement of expenses to
Indemnitee and such limitations or conditions preclude
indemnification or advancement of expenses under the
circumstances at hand, or (c) payment to the Indemnitee under the
indemnification or advancement of expenses would result in double
payment to the Indemnitee, or (d) a court having jurisdiction in
the matter shall, by final decision, determine that such
indemnification or advancement of expenses is unlawful.
Section 4.9. EFFECT OF CERTAIN PROCEEDINGS.
The termination of any Proceeding described in Sections 4.1
and 4.3 of this Article or of any claim, issue or matter therein,
by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself,
adversely affect the right of the Indemnitee to indemnification
or create a presumption that the Indemnitee did not act in good
faith and in a manner which the Indemnitee reasonably believed to
be in or not opposed to the best interests of the Corporation or,
with respect to a criminal proceeding, that the Indemnitee had
reasonable cause to believe that such conduct was unlawful.
Section 4.10. PAYMENT OF INDEMNIFICATION.
If a determination shall have been made pursuant to Section
4.6 of this Article that the Indemnitee is entitled to
indemnification, the Corporation shall be obligated to pay the
amounts constituting such indemnification within 5 days after
such determination has been made and shall be conclusively bound
by such determination unless (i) the Indemnitee misrepresented or
failed to disclose a material fact in making the request for
indemnification or in the Supporting Documentation, or (ii) such
indemnification is prohibited by law.
Section 4.11. ENFORCEMENT OF RIGHTS BY INDEMNITEE.
In the event that the Indemnitee seeks to enforce any rights
of mandatory indemnification that may be available to the
Indemnitee under applicable law, or to enforce rights under or to
recover damages for breach of this Article, the Indemnitee shall
be entitled to recover from the Corporation, and shall be
indemnified by the Corporation against, any expenses actually and
reasonably incurred by the Indemnitee if the Indemnitee prevails
in any such proceeding. If it shall be determined that the
Indemnitee is entitled to receive part but not all of the
indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in connection with enforcing rights
under this Article or under applicable law shall be prorated
accordingly.
Section 4.12. EFFECT OF PARTIAL INVALIDITY.
If any provision of this Article shall be held to be
invalid, illegal or unenforceable for any reason whatsoever, (1)
such provision shall be invalid, illegal or unenforceable only to
the extent of such prohibition and the validity, legality and
enforceability of the remaining provisions of this Article shall
not in any way be affected or impaired thereby, and (2) to the
fullest extent possible, the remaining provisions of this Article
shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
Section 4.13. DEFINITIONS.
For purposes of this Article IV:
(i) "Change in Control" means:
(a) the acquisition of beneficial ownership (other
than from the Corporation) by any person, entity or "group"
within the meaning of Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act"), excluding,
for this purpose, the Corporation or its subsidiaries, or any
employee benefit plan of the Corporation or its subsidiaries that
acquires beneficial ownership of voting securities of the
Corporation (within the meaning of Rule 13d-3 promulgated under
the Exchange Act), of 30% or more of either the then outstanding
shares of common stock or the combined voting power of the
Corporation's then outstanding voting securities entitled to vote
generally in the election of directors; or
(b) a change in the persons constituting the Board of
Directors as it existed in the immediately preceding calendar
year (the "Incumbent Board") such that the directors of the
Incumbent Board no longer constitute a majority of the Board of
Directors; provided that any person becoming a director in a
subsequent year whose election, or nomination for election, by
the Corporation's shareholders was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board
(other than an election or nomination of an individual whose
initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of the Corporation, as such terms are used in Rule 14a-
11 of Regulation 14A promulgated under the Exchange Act) shall
be, for purposes of the Plan, considered as though such person
were a member of the Incumbent Board; or
(c) approval by the shareholders of the Corporation of
a reorganization, merger or consolidation, in each case with
respect to which persons who were the shareholders of the
Corporation immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, own more than 50%
of the combined voting power entitled to vote generally in the
election of the reorganized, merger or consolidated corporation's
then outstanding voting securities; or
(d) a liquidation or dissolution of the Corporation or
the sale of all or substantially all of the assets of the
Corporation.
(ii) "Disinterested Director" means a director of the
Corporation who is not or was not a party to, or otherwise
involved in, the Proceeding or Derivative Proceeding in respect
of which indemnification is sought by the Indemnitee.
(iii) "Indemnitee" means any director or officer of the
Corporation entitled to indemnification as provided in Section
4.1 of this Article and any employee or agent of the Corporation
who may become entitled to indemnification as provided in Section
4.3.
(iv) "Independent Counsel" means a law firm, or member of a
law firm, that is experienced in matters of corporation law and
neither presently is, nor in the past 5 years has been, retained
to represent: (A) the Corporation or the Indemnitee in any matter
material to either such party, or (B) any other party to the
Proceeding or Derivative Proceeding giving rise to a claim for
indemnification under this Article. Notwithstanding the
foregoing, the term "Independent Counsel" shall not include any
person who, under the applicable standards of professional
conduct then prevailing under the law of the Commonwealth of
Pennsylvania, would have a conflict of interest in representing
either the Corporation or the Indemnitee in an action to
determine the Indemnitee's rights under this Article.
ARTICLE V
SHARE CERTIFICATES, TRANSFER, LOSS, ETC.
Section 5.1. CERTIFICATES.
(a) Except as otherwise permitted by the Pennsylvania
Business Corporation Law, no share certificate shall be issued
for any share until such share is fully paid. The shares of the
Corporation shall be represented either by book entries under the
Direct Registration System or by certificates signed by, or in
the name of the Corporation by, the Chairman of the Board, the
Chief Executive Officer or a Vice President, and by the Treasurer
or the Secretary of the Corporation, which certificates may be
sealed with the seal of the Corporation or a facsimile thereof.
If the certificate is countersigned by a transfer agent or
registrar, who is not an officer or employee of the Corporation,
any and all other signatures may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon such certificate shall
have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of its issue.
(b) Each certificate shall state upon the face thereof (i)
that the Corporation is organized under the laws of Pennsylvania;
(ii) the name of the person to whom issued; and (iii) the number
and class of shares, and the designation of the series, if any,
which such certificate represents.
Section 5.2. TRANSFER OF SHARES.
Shares of the Corporation shall be transferable in
accordance with the provisions of Chapter 8 of the Uniform
Commercial Code as adopted in Pennsylvania (13 Pa. C.S.A. 8101
et seq.) as amended from time to time, except as otherwise
provided in the Pennsylvania Business Corporation Law.
Section 5.3. LOSS OR DESTRUCTION OF CERTIFICATES.
(a) Where a certificate for shares has been lost, actually
or apparently destroyed, or wrongfully taken and the owner
thereof fails to so notify the Corporation or the transfer agent
within a reasonable time after he has notice of that fact and the
transfer agent or the Corporation registers a transfer of the
shares before receiving such a notification, the owner shall be
precluded from asserting against the Corporation any claim for
registering the transfer of such shares or any claim to a new
certificate.
(b) Subject to the foregoing, where the owner of shares
claims that the certificate representing such shares has been
lost, actually or apparently destroyed or wrongfully taken, the
Corporation shall issue a new certificate in place of the
original certificate if the registered owner thereof, or his
legal representative, requests the issue of a new certificate
before the Corporation has notice that the certificate has been
acquired by a bona fide purchaser; makes proof in affidavit form,
satisfactory to the Secretary of the Corporation and to its
transfer agent, of his ownership of the shares represented by the
certificate and that the certificate has been lost, actually or
apparently destroyed or wrongfully taken; files an indemnity bond
for an open or unspecified amount or if authorized in a specific
case by the Corporation, for such fixed amount as the Chairman of
the Board, the Chief Executive Officer or the Secretary of the
Corporation may specify, in such form and with such surety as may
be approved by the transfer agent and the Secretary of the
Corporation, indemnifying the Corporation and the transfer agent
and registrar of the Corporation against all loss, cost and
damage which may arise from issuance of a new certificate in
place of the original certificate; and satisfies any other
reasonable requirements imposed by the Corporation or transfer
agent. In case of the surrender of the original certificate, in
lieu of which a new certificate has been issued, or the surrender
of such new certificate, for cancellation, the bond of indemnity
given as a condition of the issuance of such new certificate may
be surrendered.
Section 5.4. HOLDERS OF RECORD.
The Corporation shall be entitled to treat the person in
whose name any share or shares of the Corporation stand on the
books of the Corporation as the absolute owner and holder in fact
thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it has actual or
other notice thereof, save as expressly provided by the laws of
the Commonwealth of Pennsylvania.
ARTICLE VI
CORPORATE FUNDS AND CONTRACTS
Section 6.1. DEPOSIT AND WITHDRAWAL OF CORPORATE FUNDS.
The Board by resolution, or one or more officers or
employees of the Corporation authorized by a resolution of the
Board, may from time to time designate a bank or banks in which
the funds of the Corporation shall be deposited and designate the
person or persons authorized to withdraw in the name of the
Corporation the funds so deposited.
Section 6.2. CONTRACTS.
All contracts, deeds and other instruments required to be
made or executed for or on behalf of the Corporation shall be
executed in the name of the Corporation by the Chairman of the
Board, the Chief Executive Officer and President, or such other
person or persons as may be authorized from time to time by the
Chairman of the Board or the Chief Executive Officer and
President within their respective areas of responsibility as
prescribed by the Board, or by resolution of the Board.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.1. CORPORATE SEAL.
The Corporate Seal shall be circular in form and shall
contain the name of the Corporation and the word "PENNSYLVANIA".
The seal or a facsimile thereof may be impressed, printed,
affixed, reproduced or other use made thereof by the Secretary or
Assistant Secretary or any other officer authorized by the Board.
Section 7.2. DELEGATION OF AUTHORITY TO COMMITTEES.
Any provision of these bylaws granting authority to the
Board shall not be construed as indicating that such authority
may not be delegated by the Board to a committee to the extent
authorized by the Pennsylvania Business Corporation Law, or any
successor statute thereto, and these bylaws.
Section 7.3. FISCAL YEAR.
The fiscal year of the Corporation shall begin on the first
day of January and end on the thirty-first day of December of
each year.
ARTICLE VIII
ELIMINATION OF DIRECTORS' MONETARY LIABILITY
A director of this Corporation shall not be personally
liable for monetary damages as such for any action taken, or any
failure to take any action, unless:
(a) the director has breached or failed to perform the
duties of his or her office under Subchapter B of Chapter 17 of
the Pennsylvania Business Corporation Law in good faith, in a
manner he or she 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; and
(b) the breach or failure to perform constitutes self-
dealing, willful misconduct or recklessness. Provided, however,
that this bylaw shall not apply to:
(i) the responsibility or liability of a director
pursuant to any criminal statute; or
(ii) the liability of a director for the payment of
taxes pursuant to local, state or federal law.
ARTICLE IX
AMENDMENTS
Section 9.1. AMENDMENTS.
Any one or more of the foregoing bylaws and, except as
herein otherwise provided, any other bylaws made by the Board or
by shareholders may be altered or repealed by the Board. The
shareholders or the Board may adopt new bylaws except that the
Board may not adopt, alter or repeal bylaws that the Pennsylvania
Business Corporation law, or any successor statute thereto,
specifies may be adopted only by shareholders, and the Board may
not alter or repeal any bylaw adopted by shareholders which
prescribes that such bylaw shall not be altered or repealed by
the Board.
Doc #4819
EX-10.A
EXECUTIVE SEVERANCE AGREEMENT
(the "Agreement")
dated October 22, 1997
The Board of Directors ("Board") of AMP Incorporated, a Pennsylvania
corporation (the "Corporation"), and the Compensation and Management Development
Committee ("Committee") of the Board have determined that it is in the best
interests of the Corporation and its shareholders for the Corporation to agree,
as provided herein, to pay you, the undersigned, an executive of the
Corporation, termination compensation in the event you should leave the employ
of the Corporation under the circumstances described below.
The Board and the Committee recognize that as is the case with many
publicly held corporations, the possibility of a change of control of the
Corporation exists and is unsettling to you and other executives of the
Corporation. Therefore, these arrangements are being made to help assure a
continuing dedication by you to your duties to the Corporation notwithstanding
the occurrence of such an event. In particular, the Board believes it important
that you be able to perform your duties under such circumstances without being
influenced by the uncertainties of your own situation, to assess and advise the
Board whether any proposed transaction that would constitute a change of control
would be in the best interests of the Corporation and its shareholders and to
take such other action as the Board might determine to be appropriate. The Board
also wishes to demonstrate to you and other executives of the Corporation that
the Corporation is concerned with the welfare of its executives and intends to
see that the executives are treated fairly.
1.
(a) Severance Payment upon Change of Control. In view of the foregoing and
in further consideration of your continued employment with the
Corporation, the Corporation will promptly pay you as termination
compensation a lump sum amount, determined as provided below, in the
event that any time within two years after a "Change of Control" (as
defined below) of the Corporation your employment with the Corporation
(i) is terminated by the Corporation for any reason, other than death,
disability, or "Cause" (as defined below), or (ii) is terminated by
you for "Good Reason" (also as defined below). For the purpose of this
Section, any good faith determination of Good Reason made by you shall
be conclusive.
The termination compensation so payable in a lump sum amount (the
"Severance Payment") shall be equal to (Year) times the sum of (1)
your highest annual base salary rate in effect during the twelve
months prior to your termination plus (2) the highest amount of annual
cash incentive compensation earned by you in respect of the three
years prior to your termination or the Change of Control, whichever is
greater.
(b) Change of Control. For the purpose of this Agreement, a change of
control of the Corporation ("Change of Control") shall be deemed to
have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (as defined below) is or becomes the beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), directly or indirectly,
of securities of the Corporation (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Corporation or its affiliates) representing 30%
or more of either the then outstanding shares of common stock of
the Corporation or the combined voting power of the Corporation's
then outstanding securities; or
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Corporation) whose
appointment or election by the Board or nomination for election
by the Corporation's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved;
or
(iii)there is consummated a merger or consolidation of the
Corporation with any other corporation or the issuance of voting
securities of the Corporation in connection with a merger or
consolidation of the Corporation (or any direct or indirect
subsidiary of the Corporation) pursuant to applicable stock
exchange requirements, other than (A) a merger or consolidation
that would result in the voting securities of the Corporation
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
any parent thereof) at least 66 2/3% of the combined voting power
of the voting securities of the Corporation, or such surviving
entity or any parent thereof, outstanding immediately after such
merger or consolidation, or (B) a merger or consolidation
effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Corporation or
its affiliates) representing 30% or more of either the then
outstanding shares of common stock of the Corporation or the
combined voting power of the Corporation's then outstanding
securities; or
(iv) the stockholders of the Corporation approve a plan of complete
liquidation or dissolution of the Corporation or there is
consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets, other than a sale or disposition by the Corporation of
all or substantially all of the Corporation's assets to an
entity, at least 70% of the combined voting power of the voting
securities of which are owned by Persons in substantially the
same proportions as their ownership of the Corporation
immediately prior to such sale.
(c) Person. For the purpose of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include:
(i) the Corporation or any of its subsidiaries;
(ii) a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any of its subsidiaries;
(iii) an underwriter temporarily holding securities pursuant to an
offering of such securities; or
(iv) a corporation owned, directly or indirectly, by the stockholders
of the Corporation in substantially the same proportions as their
ownership of stock of the Corporation.
(d) Good Reason. For the purpose of this Agreement, "Good Reason" shall
mean the occurrence (without your written consent) after any Change of
Control or during any Pending Change of Control (as defined below), as
the case may be, of any one of the following acts by the Corporation,
or failures by the Corporation to act, unless, in the case of any act
or failure to act described in paragraph (i), (v), (vi) or (vii)
below, such act or failure to act is corrected prior to the Date of
Termination specified in the Notice of Termination given in respect
thereof:
(i) the assignment to you of any duties inconsistent in any respect
with your position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities
immediately before the Change of Control or Pending Change of
Control, as the case may be, or any other action by the
Corporation that results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in
bad faith and that is remedied by the Corporation promptly after
receipt of notice thereof given by you;
(ii) the Corporation requiring you to be based at any office or
location that is more than 30 miles from your principal place of
employment immediately before the Change of Control or Pending
Change of Control, as the case may be, except for travel
reasonably required in the performance of your responsibilities;
(iii)any diminution in your rate of annual base salary or incentive
compensation opportunity immediately before the Change of Control
or Pending Change of Control, as the case may be;
(iv) the failure by the Corporation, without your consent, to pay to
you any portion of your current compensation, or to pay to you
any portion of an installment of deferred compensation under any
deferred compensation program of the Corporation, within 7 days
of the date such compensation is due;
(v) the failure by the Corporation to continue in effect any
compensation plan in which you participate immediately prior to
the Change of Control or Pending Change of Control, as the case
may be, which is material to your total compensation, including
but not limited to the Corporation's Management Incentive Plan,
1993 Long-Term Equity Incentive Plan, and Deferred Compensation
Plan, or any substitute plans adopted prior to the Change of
Control or Pending Change of Control, as applicable, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the
failure by the Corporation to continue your participation therein
(or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of
benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change of
Control or Pending Change of Control, as applicable;
(vi) the failure by the Corporation to continue to provide you with
benefits substantially similar to those enjoyed by you under any
of the Corporation's pension, life insurance, medical, health and
accident, or disability plans in which you were participating at
the time of the Change of Control or Pending Change of Control,
as the case may be, the taking of any action by the Corporation
that would directly or indirectly materially reduce any of such
benefits or deprive you of any material fringe benefit enjoyed by
you at the time of the Change of Control or Pending Change of
Control, as applicable, or the failure by the Corporation to
provide you with the number of paid vacation days to which you
are entitled on the basis of years of service with the
Corporation in accordance with the Corporation's normal vacation
policy in effect at the time of the Change of Control or Pending
Change of Control, as applicable; or
(vii)any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Section 5 hereof; for purpose of this Agreement,
no such purported termination shall be effective.
2. Compensation Other Than Severance Payment - Payable upon Change of Control.
In addition to the Severance Payment, in the event of a Change of Control:
(a) All outstanding Stock Bonus Units awarded to you under the Bonus Plan
(Stock plus Cash) ("Bonus Plan"), the 1993 Long-Term Equity Incentive
Plan ("1993 Plan") or any successor plan thereto with respect to which
a Stock and Supplemental Cash Bonus has not been previously computed
and distributed to you, including any 1993 Plan awards granted to you
subsequent to the date of any Change of Control but prior to your
termination, shall fully and irrevocably vest and shall be computed
and distributed to you in cash as if the date of the Change of Control
were a Bonus Computation Date with respect to all of such outstanding
Stock Bonus Units; and the Fair Market Value applicable to such
computation shall be either (i) the highest price paid for a share of
the common stock of the Corporation in a transaction constituting a
Change of Control, if applicable, or (ii) the highest trading price
for a share of common stock of the Corporation during the 30-day
period immediately preceding a Change of Control.
(b) All unvested and unexpired Stock Options awarded to you under the 1993
Plan or any successor plan thereto will automatically become
immediately vested and exercisable for the period of their remaining
terms.
(c) All unvested Performance Restricted Shares awarded to you under the
1993 Plan or any successor plan thereto will automatically become
immediately vested, the designated minimum average annual ROE target
for such Performance Restricted Shares shall be deemed to have been
attained, and the actual average annualized earnings growth rate over
the Performance Vesting Period applicable to each award comprising
such Performance Restricted Shares shall be deemed to be the
respective super- target level, with 200% of each such award
immediately vesting and being paid to you by either the issuance of
the appropriate number of shares of the common stock of the
Corporation or an amount in cash equal to the Fair Market Value of
such shares, calculated as set forth in Section 2(a) above.
(d) All unvested restricted shares, if any, granted to you pursuant to the
terms of a Restricted Stock Agreement with the Corporation shall be
paid in cash in equal installments on the date designated in such
Agreement for the vesting of restricted shares granted thereunder. The
price used to determine the amount of such cash payments for the
unvested restricted shares shall be closing price of the Corporation's
common stock on a nationally-recognized securities exchange on the day
prior to a Change of Control.
(e) Your interest in Matching Amounts, together with the amount of
investment return credited thereto, paid by the Corporation under its
Deferred Compensation Plan or any successor plan thereto immediately
shall be 100% vested.
(f) If you are, immediately prior to a Pending Change of Control, a
participant in the Corporation's Split Dollar Life Insurance Program,
the Corporation shall, upon a Pending Change of Control, create an
irrevocable grantor trust holding an amount of assets sufficient to
pay scheduled annual premiums owed by the Corporation (which trust
will be required to pay such premiums, whether or not employment with
the Corporation is terminated in the interim) for the period extending
until either the policy anniversary date following your 65th birthday
or the 15th anniversary of the policy, whichever occurs last;
provided, however, that if a Pending Change of Control shall occur
prior to a Change of Control and the Corporation has contributed the
required amount pursuant to the foregoing provisions and if a Change
of Control does not occur within the twelve-month period following the
most recent Pending Change of Control, the trustee of such grantor
trust shall, upon receipt of a written request by the Corporation,
return to the Corporation the assets contributed on account of such
Pending Change of Control. The Corporation further agrees to assign
its interest in such policy or policies to said grantor trust.
(g) You shall retain in confidence any confidential information known to
you concerning the Corporation and its business so long as such
information is not publicly disclosed.
3. Compensation Other Than Severance Payment - Payable upon Change of Control
and Termination of Employment. In addition to the Severance Payment and the
additional compensation provided for in Section 2 above in the event of a
Change of Control, in the event of the termination of your employment at
any time within two years after a Change of Control in accordance with
Section 1(a) above:
(a) All pension benefits credited to you under the provisions of the
Corporation's tax-qualified Pension Plan and Pension Restoration Plan
in effect immediately prior to the Change of Control shall thereupon
fully vest, together with the additional pension benefit that results
under the provisions of each such plan in which you are a participant
using (as applicable) your highest annual base salary rate in effect
during the twelve months prior to termination as your high consecutive
three year compensation amount under the Pension Plan formula and the
sum of (1) your highest annual base salary rate in effect during the
twelve months prior to your termination plus (2) the highest amount of
annual cash incentive compensation earned by you in respect of the
three years prior to either your termination or the Change of Control,
whichever is greater, as your high consecutive three year average
compensation amount under the Pension Restoration Plan, and using a
years of service multiplier under the plans' formulas equal to your
actual years of credited pension service at termination plus (Year).
Such pension shall be payable to you in accordance with the provisions
of the plans, including the election, at the time of your retirement
date, of a joint annuity option; provided that the additional amounts
provided for under this Section 2(f) (including vesting of accrued
benefits under the Pension Plan) shall be provided on an unfunded
basis, are not intended to meet the qualification requirements of
Section 401 of the Internal Revenue Code of 1986, as amended ("Code"),
and shall be payable solely from the general assets of the
Corporation.
(b) The principal amount of your group term life insurance, if any, under
the provisions of the Corporation's group contract for such insurance
in effect immediately prior to the Change of Control, will be
immediately converted in a like principal amount to a fully paid-up
permanent life insurance policy incorporating your designation of
owner and beneficiary and remaining in effect for a period of (Months)
months at the sole cost of the Corporation.
(c) You shall be entitled to a continuation of all hospital, major
medical, medical, dental and other insurance or benefits not otherwise
addressed in this Agreement in substantially the same manner and
amount to which you were entitled at the time of your employment with
the Corporation, at the sole cost of the Corporation, until the later
of (i) a period of (Months) months after termination or (ii) your
reaching the age or other circumstances under which such insurance or
benefits, to the extent they are normal post-termination insurance or
benefits afforded by the Corporation, would have been discontinued in
accordance with the terms of the related plan, program or arrangement
as in effect immediately prior to the Change of Control; provided,
that benefits payable under this Section 3(c) shall be reduced to the
extent comparable benefits are actually received by you from a new
employer without cost (and you shall report to the Corporation any
such benefits actually received).
4. Severance Payment Upon Pending Change of Control.
(a) The Corporation will promptly pay you as termination compensation the
Severance Payment in the event that any time during a "Pending Change
of Control" (as defined below) of the Corporation your employment with
the Corporation (i) is terminated by the Corporation for any reason,
other than death, disability, or Cause, or (ii) is terminated by you
for Good Reason; provided, however, that said termination compensation
shall only be paid to you by the Corporation if either (1) a Change of
Control occurs within one year of the last event constituting a
Pending Change of Control, or (2) you reasonably demonstrate that your
termination of employment either occurred at the request of a third
party whose actions gave rise to the Pending Change of Control or
otherwise occurred in connection with or in anticipation of a Change
of Control.
(b) Pending Change of Control. For the purpose of this Agreement, a
"Pending Change of Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have
occurred:
(i) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a Change of Control;
(ii) the Corporation or any Person publicly announces an intention to
take or to consider actions, including but not limited to proxy
contests or consent solicitations, which, if consummated, would
constitute a Change of Control;
(iii)any Person becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 15% or more of either
the then outstanding shares of common stock of the Corporation or
the combined voting power of the Corporation's then outstanding
securities (not including in the securities beneficially owned by
such Person any securities acquired directly from the Corporation
or its affiliates); or
(iv) the Board adopts a resolution to the effect that, for purposes of
this Agreement, a Pending Change of Control has occurred.
(c) Compensation Other Than Severance Payment. In addition to the lump sum
payment provided in Section 4(a) above, in the event your employment
with the Corporation terminates in accordance with Section 4(a), you
shall receive the additional compensation and benefits described in
Sections 2 and 3 above; provided, however, that with respect to
Section 3, the compensation and benefits provided in that Section
shall not be further conditioned on a termination of your employment
in accordance with Section 1(a) above; and further provided, however,
that all references to "Change of Control" appearing in Sections 2 and
3 shall, for purposes of this Section 4(c), be deemed to mean Pending
Change of Control as defined herein.
5. Excise Tax Gross-Up Payment.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payments or benefits from the
Corporation to you or for your benefit in connection with a Change of
Control or your termination of employment, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or otherwise (such payments or benefits, excluding the Gross-up
Payment (as defined below), being hereinafter referred to as the
"Total Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then you shall be entitled to receive an additional payment (a
"Gross- up Payment") in an amount such that the net amount retained by
you, after deduction of any Excise Tax on the Total Payments and any
Federal, state and local income and employment taxes and Excise Tax
upon the Gross-up Payment, shall be equal to the Total Payments.
(b) Subject to the Provisions of Section 5(c), all determinations required
to be made under this Section 5, including whether a Gross-up Payment
is required and the amount of such Gross-up Payment, shall be made by
Arthur Andersen LLP (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Corporation and you
within 15 business days after a Change of Control or your Date of
Termination, if applicable, or such earlier time as is requested by
the Corporation. The initial Gross-up Payment, if any, as determined
pursuant to this Section 5(b), shall be paid to you within 5 days of
the receipt of the Accounting Firm's determination. If the Accounting
Firm determines that no Excise Tax is payable by you, it shall furnish
you with an opinion that you have substantial authority not to report
any excise tax on your Federal income tax return. Any determination by
the Accounting Firm shall be binding upon the Corporation and you. As
a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-up Payments that will not have
been made by the Corporation should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that the Corporation exhausts its remedies pursuant to Section
5(c) and you thereafter are required to make a payment of any excise
tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Corporation to you or for your benefit.
(c) You shall notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would require the
payment by the Corporation of the Gross-up Payment. Such notification
shall be given as soon as practicable but no later than 10 business
days after you know of such claim and shall apprise the Corporation of
the nature of such claim and the date on which such claim is requested
to be paid. You shall not pay such claim prior to the expiration of
the 30-day period following the date on which you give such notice to
the Corporation (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Corporation notifies you in writing prior to the expiration of such
period that it desires to contest such claim, you shall:
(i) give the Corporation any information reasonably requested by the
Corporation relating to such claim,
(ii) take such action in connection with contesting such claim as the
Corporation shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Corporation,
(iii) cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) permit the Corporation to participate in any proceedings relating
to such claim;
provided, however, that the Corporation shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and shall
indemnify and hold you harmless, on an after-tax basis, for any
Excise Tax or income tax, including interest and penalties with
respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 5(c), the Corporation shall
control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct you to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and
you agree to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Corporation shall
determine; provided further, however, that if the Corporation
directs you to pay such claim and sue for a refund, the
Corporation shall advance the amount of such payment to you, on
an interest-free basis, and shall indemnify and hold you
harmless, on an after-tax basis, from any Excise Tax or income
tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided
further, that any extension of the statute of limitations
relating to payment of taxes for your taxable year with respect
to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Corporation's
control of the contest shall be limited to issues with respect to
which a Gross-up Payment would be payable hereunder and you shall
be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by you of an amount advanced by the Corporation
pursuant to Section 5(c), you become entitled to receive any refund
with respect to such claim, you shall (subject to the Corporation's
complying with the requirements of Section 5(c)) promptly pay to the
Corporation the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the
receipt by you of an amount advanced by the Corporation pursuant to
Section 5(c), a determination is made that you are not entitled to any
refund with respect to such claim and the Corporation does not notify
you in writing of its intent to contest such denial or refund prior to
the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount
of Gross-up Payment required to be paid.
6.
(a) Notice of Termination. Any purported termination of your employment
(other than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other party hereto.
For the purpose of this Agreement, a "Notice of Termination" shall
mean a notice that shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination
of your employment under the provision so indicated.
(b) Cause. "Cause" for termination by the Corporation of your employment
shall mean (i) your willful and continued failure to substantially
perform your duties with the Corporation (other than any such failure
resulting from your incapacity due to physical or mental illness or
any such actual or anticipated failure after your issuance of a Notice
of Termination for Good Reason pursuant to Section 6(a) hereof) after
a written demand for substantial performance is delivered to you by
the Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your
duties, or (ii) your willful engaging in conduct that is demonstrably
and materially injurious to the Corporation or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on your part shall be deemed
"willful" unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your act, or failure to act, was in
the best interest of the Corporation. Your employment will not be
deemed to be terminated for Cause under this Section 6 unless there
has been duly adopted by the affirmative vote of not less than
three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board that was called and held for the purpose of
considering such termination (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before
the Board) a resolution that finds that you were guilty of conduct
constituting Cause, and specifying the particulars thereof in detail,
a copy of which resolution shall be delivered to you. Notwithstanding
the foregoing, in the event of a dispute concerning the application of
this provision, no claim by the Corporation that Cause exists shall be
given effect unless the Corporation establishes by clear and
convincing evidence that Cause exists.
(c) Date of Termination. "Date of Termination" shall mean (i) if your
employment is terminated for disability, 30 days after Notice of
Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such 30 day period), and
(ii) if your employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a
termination by the Corporation, shall not be less than 30 days (except
in the case of a termination for Cause) and, in the case of a
termination by you, shall not be less than 15 days nor more than 60
days, respectively, from the date such Notice of Termination is
given).
(d) Extension For Disputes. If within fifteen (15) days after any Notice
of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 6(d)), the
party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of
Termination shall be extended until the date on which the dispute is
finally resolved, either by mutual written agreement of the parties or
by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been
perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given by you only if such notice is
given in good faith and you pursue the resolution of such dispute with
reasonable diligence.
(e) Compensation During Extension. If a purported termination occurs and
the Date of Termination is extended in accordance with Section 6(d)
hereof, the Corporation shall continue to pay you the full
compensation in effect when the notice giving rise to the dispute was
given (including, but not limited to, salary) and continue you as a
participant in all compensation, benefit and insurance plans in which
you were participating when the notice giving rise to the dispute was
given, until the Date of Termination, as determined in accordance with
Section 6(d) hereof. Amounts paid under this Section 6(e) are in
addition to all other amounts due under this Agreement and shall not
be offset against or reduce any other amounts due under this
Agreement.
7. Term of Agreement. This Agreement shall commence on the date hereof and
shall continue in effect through December 31, 1997; provided, however, that
commencing January 1, 1998 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year unless,
not later than October 31 of the preceding year, the Corporation or you
shall have given notice not to extend this Agreement or a Change of Control
shall have occurred prior to such January 1; and further provided, however,
that if a Pending Change of Control or a Change of Control shall have
occurred during the term of this Agreement, this Agreement shall continue
in effect for a period of not less than one year beyond the month in which
such Pending Change of Control occurred and for a period of not less than
two years beyond the month in which such Change of Control occurred.
8. Reimbursement of Legal Fees to Enforce Agreement. The Corporation shall
indemnify and hold you harmless against any loss or damage, and shall
reimburse you for all legal fees and expenses, incurred by you in disputing
in good faith any issue hereunder relating to the termination of your
employment or in seeking in good faith to enforce any provision of this
Agreement or to receive any benefit or distribution or right under this
Agreement (including in connection with the application of the provisions
of Section 5 hereof) or any other Agreement or arrangement contemplated by
this Agreement. The Corporation further agrees to pay interest on any
amounts unpaid to you from 7 days after the date of your demand for
payment, calculated at the prime rate of The Chase Manhattan Bank N.A. for
its most credit-worthy customers in effect from time to time.
9. Absolute Right; No Mitigation. The Corporation agrees that, if your
employment with the Corporation terminates pursuant to the terms of this
Agreement, you are not required to seek other employment or to attempt in
any way to reduce any amounts payable to you by the Corporation pursuant to
Section 1(a), 2 or 3 hereof or Section 6(e) hereof. Further, except as set
forth herein, the amount of any payment or benefit provided for in this
Agreement shall not be reduced by any compensation earned by you as the
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by you to the Corporation, or
otherwise. The Corporation's obligation to pay you under this Agreement
shall be absolute and unconditional and shall not be affected by any
circumstances, including without limitation any set-off, counterclaim,
defense or other rights the Corporation may have against you or anyone
else.
10. Funding of Obligations. The Severance Payment and other compensation
payable to you pursuant to the terms of this Agreement shall be payable to
you from the general assets of the Corporation or, to the extent not so
paid, from the assets of an irrevocable grantor trust (or comparable asset
repository) established by the Corporation for the purpose of securing
payment of such liabilities. The Corporation shall, as soon as practicable
but in no event later than 30 days after the occurrence of a Change of
Control or Pending Change of Control giving rise to your entitlement to the
Severance Payment or other compensation hereunder, transfer sufficient
assets to such grantor trust (or comparable repository) to provide for
payment to you in full of all unpaid amounts due hereunder.
11. Entire Obligation. In the event of termination of employment under the
circumstances described above, the arrangements provided for by this
Agreement, or any other agreement between the Corporation and you in effect
at the time, and by any other applicable plan of the Corporation shall
constitute the entire obligation of the Corporation to you and performance
thereof shall constitute full settlement of any claim that you might
otherwise assert against the Corporation on account of such termination.
12. Successors; No Assignment. This Agreement shall be binding upon and inure
to the benefit of you and your estate, and the Corporation and any
successor of the Corporation, but neither this Agreement nor any rights
arising hereunder may be assigned or pledged by you.
13. Mandatory Assumption by Successor. In addition to any obligations imposed
by law upon any successor to the Corporation, the Corporation will require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business
and/or assets of the Corporation to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Corporation in the
same amount and on the same terms as you would be entitled to hereunder if
you were to terminate your employment for Good Reason after a Change of
Control, except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed the Date of
Termination.
14. Continuance of Employment. This Agreement shall not be construed as
creating an express or implied contract of employment or continued
employment in any position or at any compensation and, except as otherwise
agreed in writing between you and the Corporation, nothing herein contained
shall in any way restrict the right of the Corporation or any subsidiary
thereof to terminate your employment at any time.
15. Waiver. The failure of either party to enforce the provisions hereof or to
exercise the rights granted hereunder, or the agreement of the parties to
waive enforcement thereof, at any time or for any period of time shall not
constitute or be construed to be a waiver of any other failure or breach of
such provisions or rights, or any other provision of this Agreement, or of
the right of such party thereafter to enforce each and every such provision
or right, nor shall such failure or agreement be deemed to be an amendment
to this Agreement. Each waiver under this Agreement must be in writing and
signed by the party against whom enforcement is sought.
16. Entire Agreement. This Agreement represents the entire understanding and
agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings either
written or oral. This Agreement may be modified or amended only by an
instrument in writing duly executed by you and an authorized representative
of the Corporation.
17. Severability. Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction where it is sought to be enforced, shall
be ineffective only to the extent of such prohibition or unenforceability,
without invalidating or affecting the remaining provisions of this
Agreement or invalidating or rendering unenforceable such provision in any
other jurisdiction. 18. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be duly executed as of the date first
above written.
AMP Incorporated
By:______________________________________
Signature
Name:____________________________________
Title:___________________________________
APPENDIX
--------
<TABLE>
<CAPTION>
Name Year Months Signature Title
<S> <C> <C> <C> <C>
Herbert M. Cole two twenty-four William J. Hudson Chief Executive Officer and President
David C. Cornelius one twelve William J. Hudson Chief Executive Officer and President
Thomas J. DiClemente two twenty-four William J. Hudson Chief Executive Officer and President
Rudolf Gassner two twenty-four William J. Hudson Chief Executive Officer and President
Charles W. Goonrey one twelve James E. Marley Chairman
Juergen W. Gromer two twenty-four William J. Hudson Chief Executive Officer and President
John E. Gurski two twenty-four William J. Hudson Chief Executive Officer and President
Javad K. Hassan two twenty-four William J. Hudson Chief Executive Officer and President
David F. Henschel one twelve James E. Marley Chairman
William J. Hudson three thirty-six James E. Marley Chairman
Philippe Lemaitre two twenty-four William J. Hudson Chief Executive Officer and President
John Kegel two twenty-four William J. Hudson Chief Executive Officer and President
James E. Marley three thirty-six William J. Hudson Chief Executive Officer and President
Joseph C. Overbaugh one twelve William J. Hudson Chief Executive Officer and President
Nazario Proietto two twenty-four William J. Hudson Chief Executive Officer and President
Robert Ripp two twenty-four William J. Hudson Chief Executive Officer and President
William S. Urkiel two twenty-four William J. Hudson Chief Executive Officer and President
Merrill A. Yohe one twelve William J. Hudson Chief Executive Officer and President
</TABLE>
EX-10.B
AMP INCORPORATED
EMPLOYEE SHARE PURCHASE PLAN
TABLE OF CONTENTS
Page
I. Purpose 1
2. Definitions 1
3. Eligibility 2
4. Participation 3
5. Offering 4
6. Purchase of Stock 6
7. Payment and Delivery 6
8. Recapitalization 6
9. Merger, Liquidation, Other Corporation Transactions 7
10. Transferability 7
11. Amendment or Termination of the Plan 7
12. Administration 8
13. Committee Rules for Foreign Jurisdictions 8
14. Securities Laws Requirements 9
15. Government Regulations 9
16. No Enlargement of Employee Rights 9
17. Governing Law 9
18. Effective Date 9
AMP INCORPORATED
EMPLOYEE SHARE PURCHASE PLAN
1. PURPOSE.
The purpose of this Plan is to provide an opportunity for Employees of AMP
Incorporated (the "Corporation") and its Designated Subsidiaries, to purchase
Common Stock of the Corporation and thereby to have an additional incentive to
contribute to the prosperity of the Corporation. It is the intention of the
Corporation that the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended, although the
Corporation makes no undertaking nor representation to maintain such
qualification. In addition, this Plan authorizes the grant of options and
issuance of Common Stock which do not qualify under section 423 of the Code
pursuant to sub-plans adopted by the Committee designed to achieve desired tax
or other objectives in particular locations outside the United States.
2. DEFINITIONS.
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Code" shall mean the Internal Revenue Code of 1986, of the USA as
amended.
(c) "Committee" shall mean the committee appointed by the Board in
accordance with Section 12 of the Plan.
(d) "Common Stock" shall mean the Common Stock of the Corporation, or any
stock into which such Common Stock may be converted.
(e) "Compensation" shall mean an Employee's base cash compensation
including non-variable cash payments paid on account of personal services
rendered by the Employee to the Corporation or a Designated Subsidiary plus
pre-tax contributions of the Employee which are part of deferred compensation or
benefit plans maintained by the Corporation or a Designated Subsidiary, with any
modifications determined by the Committee. The Committee shall have the
authority to determine and approve all forms of pay (such as commissions) to be
included in the definition of Compensation and may change the definition on a
prospective basis.
(f) "Corporation" shall mean AMP Incorporated, a Pennsylvania corporation.
(g) "Designated Subsidiary" shall mean a Subsidiary which has been
designated by the Committee as eligible to participate in the Plan with respect
to its Employees.
(h) "Employee" shall mean an individual classified as an employee (within
the meaning of Code Section 3401(c) and the regulations thereunder) by the
Corporation or a Designated Subsidiary on the Corporation's payroll records
during the relevant participation period.
(i) "Entry Date" shall mean the first business day of each Purchase Period.
(j) "Fair Market Value" shall mean the value of one (1) share of Common
Stock on the relevant date, determined as follows:
(1) If the shares are traded on an exchange, the reported "closing price"
on the trading day which precedes the relevant day (e.g., the Entry Date or
Purchase Date);
(2) If the shares are traded over-the-counter on the NASDAQ System or on
the NASDAQ National Market System, the mean between the highest bid and the
highest asked prices on said System on the trading day which precedes the
relevant day (e.g., the Entry Date or Purchase Date); and
(3) If neither (1) nor (2) applies, the fair market value as determined by
the Committee in good faith. Such determination shall be conclusive and binding
on all persons.
(k) "Participant" shall mean a participant in the Plan as described in
Section 4 of the Plan.
(l) "Plan" shall mean this Employee Share Purchase Plan.
(m) "Purchase Date" shall mean the last business day of each Purchase
Period.
(n) "Purchase Period" shall mean a three-month, six-month or other period
as determined by the Committee. The first Purchase Period shall commence on the
Plan's Effective Date. Subsequent Purchase Periods, if any, shall run
consecutively after the termination of the preceding Purchase Period.
(o) "Shareholder" shall mean a record holder of shares entitled to vote
shares of Common Stock under the Corporation's by-laws.
(p) "Subsidiary" shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, as described
in Code Section 424(f).
3. ELIGIBILITY.
Any Employee regularly employed on a full-time or part-time basis by the
Corporation or by any Designated Subsidiary on an Entry Date shall be eligible
to participate in the Plan with respect to the Purchase Period commencing on
such Entry Date, provided that the Committee may establish administrative rules
requiring that employment commence some minimum period (e.g., one pay period)
prior to an Entry Date to be eligible to participate with respect to the
Purchase Period beginning on that Entry Date and provided further that (1) the
Committee may exclude part-time employees from participation pursuant to
criteria and procedures established by the Committee and (2) the Committee may
impose an eligibility period on participation of up to two years with respect to
participation on any prospective Entry Date. The Board may also determine that a
designated group of highly compensated Employees are ineligible to participate
in the Plan so long as the excluded category fits within the definition of
"highly compensated employee" in Code section 414(g). An Employee shall be
considered employed on a full-time basis unless his or her customary employment
is less than 20 hours per week or five months per year. No Employee may
participate in the Plan if immediately after an option is granted the Employee
owns or is considered to own (within the meaning of Code Section 424(d)), shares
of stock, including stock which the Employee may purchase by conversion of
convertible securities or under outstanding options granted by the Corporation,
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Corporation or of any of its Subsidiaries. All
Employees who participate in the Plan shall have the same rights and privileges
under the Plan except for differences which may be mandated by local law and
which are consistent with Code Section 423(b)(5); provided, however, that
Employees participating in a sub-plan adopted pursuant to Section 13 which is
not designed to qualify under Code section 423 need not have the same rights and
privileges as Employees participating in the Code section 423 Plan. The Board
may impose restrictions on eligibility and participation of Employees who are
officers and directors to facilitate compliance with federal or state securities
laws or foreign laws.
4. PARTICIPATION.
4.1 An Employee who is eligible to participate in the Plan in accordance
with Section 3 may become a Participant by filing, on a date prescribed by the
Committee prior to an applicable Entry Date, a completed payroll deduction
authorization and Plan enrollment form provided by the Corporation or by
following an electronic or other enrollment process as prescribed by the
Committee. An eligible Employee may authorize payroll deductions at the rate of
any whole percentage of the Employee's base salary, not to exceed fifteen
percent (15%) of the Employee's Compensation, or such greater percentage, not to
exceed 25%,as specified by the Committee as applied to a Purchase Period. All
payroll deductions may be held by the Corporation and commingled with its other
corporate funds. No interest shall be paid or credited to the Participant with
respect to such payroll deductions except where required by local law as
determined by the Committee. A separate bookkeeping account for each Participant
shall be maintained by the Corporation under the Plan and the amount of each
Participant's payroll deductions shall be credited to such account. A
Participant may not make any additional payments into such account.
4.2 Under procedures established by the Committee, a Participant may
discontinue participation in the Plan at any time during a Purchase Period by
completing and filing a new payroll deduction authorization and Plan enrollment
form with the Corporation or by following electronic or other procedures
prescribed by the Committee. A Participant may increase or decrease his or her
rate of payroll deductions only effective on an Entry Date by filing a new
payroll deduction authorization and Plan enrollment form or by following
electronic or other procedures prescribed by the Committee. If a Participant has
not followed such procedures to discontinue or change the rate of payroll
deductions, the rate of payroll deductions shall continue at the originally
elected rate throughout the Purchase Period and future Purchase Periods unless
the Committee determines to change the maximum permissible rate.
If a Participant discontinues participation during a Purchase Period, his
or her accumulated payroll deductions will remain in the Plan for purchase of
shares as specified in Section 6 on the following Purchase Date, but the
Participant will not again participate until he or she re-enrolls in the Plan.
Alternatively, participants may request a cash distribution of monies
accumulated but not yet distributed by processing such request through their
Human Resource organization. The Committee may establish rules limiting the
frequency with which Participants may discontinue and resume payroll deductions
under the Plan and may impose a waiting period on Participants wishing to resume
payroll deductions following discontinuance. The Committee may also change the
rules regarding discontinuance of participation or changes in participation in
the Plan. In the event any Participant terminates employment with the
Corporation or any Subsidiary for any reason (including death) prior to the
expiration of a Purchase Period, the Participant's participation in the Plan
shall terminate and all amounts credited to the Participant's account shall be
paid to the Participant or the Participant's estate without interest (except
where required by local law). Whether a termination of employment has occurred
shall be determined by the Committee. The Committee may also establish rules
regarding when leaves of absence or change of employment status (e.g., from
full-time to part-time) will be considered to be a termination of employment,
and the Committee may establish termination of employment procedures for this
Plan which are independent of similar rules established under other benefit
plans of the Corporation and its Subsidiaries.
In the event of a Participant's death, any accumulated payroll deductions
will be paid, without interest, to the estate or legal representative of the
Participant.
5. OFFERING.
5.1 The maximum number of shares of Common Stock which may be issued
pursuant to the Plan shall be 3,000,000 shares
5.2 Each Purchase Period shall be determined by the Committee. Unless
otherwise determined by the Committee, the Plan will operate with successive
quarterly Purchase Periods commencing at the beginning of each calendar quarter.
The Committee shall have the power to change the duration of future Purchase
Periods, without shareholder approval, and without regard to the expectations of
any Participants.
5.3 With respect to each Purchase Period, each eligible Employee who has
elected to participate as provided in Section 4.1 shall be granted an option to
purchase that number of shares of Common Stock which may be purchased with the
payroll deductions accumulated on behalf of such Employee (assuming payroll
deductions at a rate of 15% of base salary or such greater percentage of base
salary as determined by the Committee) during each Purchase Period at the
purchase price specified in Section 5.4 below, subject to the following
additional limitations:
(a) The number of shares which may be purchased by any eligible Employee on
the first Purchase Date to occur in any calendar year may not exceed the number
of shares determined by dividing $25,000 by the Fair Market Value of a share of
Common Stock on the first day of the Purchase Period in which such Purchase Date
occurs.
(b) The number of shares which may be purchased by an Eligible Employee on
any subsequent Purchase Date which occurs in the same calendar year (as referred
to in subsection (a) above) shall not exceed the number of shares determined by
performing the calculation below:
Step One: The number of shares purchased by the Employee during any
Purchase Period whose Purchase Date occurred in the same calendar year
shall be multiplied by the Fair Market Value of a share of Common
Stock on the first day of such previous Purchase Period in which such
shares were purchased.
Step Two: The amount determined in Step One shall be subtracted from
$25,000.
Step Three: The amount determined in Step Two shall be divided by the Fair
Market Value of a share of Common Stock on the first day of the
Purchase Period in which the subsequent Purchase Date (for which the
maximum number of shares which may be purchased is being determined by
this calculation) occurs. The quotient thus obtained shall be the
maximum number of shares which may be purchased by any eligible
Employee on such subsequent Purchase Date.
5.4 The option price under each option shall be the lower of: (i) a
percentage (not less than eighty-five percent (85%)) established by the
Committee ("Designated Percentage") of the Fair Market Value of the Common Stock
on the Entry Date on which an option is granted, or (ii) the Designated
Percentage of the Fair Market Value on the Purchase Date on which the Common
Stock is purchased. The Committee may change the Designated Percentage with
respect to any future Purchase Period, but not below eighty-five percent (85%),
and the Committee may determine with respect to any prospective Purchase Period
that the option price shall be the Designated Percentage of the Fair Market
Value of the Common Stock on the Purchase Date.
5.5 Notwithstanding any other provision of the Plan to the contrary, no
Employee participating in the section 423 Plan shall be granted an option to
purchase Common Stock under the Plan at a rate which exceeds $25,000 of the Fair
Market Value of such Common Stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any time.
The foregoing sentence shall be interpreted so as to comply with Code section
423(b)(8).
6. PURCHASE OF STOCK.
Upon the expiration of each Purchase Period, a Participant's option shall
be exercised automatically for the purchase of that number of full and
fractional shares of Common Stock which the accumulated payroll deductions
credited to the Participant's account at that time shall purchase at the
applicable price specified in Section 5.4.
7. PAYMENT AND DELIVERY.
Upon the exercise of an option on each Purchase Date, the Corporation shall
deliver to the Participant a record of the Common Stock purchased and the
balance of any amount of payroll deductions credited to the Participant's
account not used for the purchase, except as specified below. The Committee may
permit or require that shares be deposited directly with a broker designated by
the Committee (or a broker selected by the Committee) or to a designated agent
of the Company, and the Committee may utilize electronic or automated methods of
share transfer. The Committee may require that shares be retained with such
broker or agent for a designated period of time (and may restrict dispositions
during that period) and/or may establish other procedures to permit tracking of
disqualifying dispositions of such shares or to restrict transfer of such
shares. The Committee may require that shares purchased under the Plan shall
automatically participate in a dividend reinvestment plan or program maintained
by the Corporation. The Corporation shall retain the amount of payroll
deductions used to purchase Common Stock as full payment for the Common Stock
and the Common Stock shall then be fully paid and non- assessable. No
Participant shall have any voting, dividend, or other shareholder rights with
respect to shares subject to any option granted under the Plan until the shares
subject to the option have been purchased and delivered to the Participant as
provided in Section 7.
8. RECAPITALIZATION.
If after the grant of an option, but prior to the purchase of Common Stock
under the option, there is any increase or decrease in the number of outstanding
shares of Common Stock because of a stock split, stock dividend, combination or
recapitalization of shares subject to options, the number of shares to be
purchased pursuant to an option, the share limit of Section 5.3 and the maximum
number of shares specified in Section 5.1 shall be proportionately increased or
decreased, the terms relating to the purchase price with respect to the option
shall be appropriately adjusted by the Board, and the Board shall take any
further actions which, in the exercise of its discretion, may be necessary or
appropriate under the circumstances.
The Board, if it so determines in the exercise of its sole discretion, also
may adjust the number of shares specified in Section 5.1, as well as the price
per share of Common Stock covered by each outstanding option and the maximum
number of shares subject to any individual option, in the event the Corporation
effects one or more reorganizations, recapitalizations, spin-offs, split-ups,
rights offerings or reductions of shares of its outstanding Common Stock.
The Board's determinations under this Section 8 shall be conclusive and
binding on all parties.
9. MERGER, LIQUIDATION, OTHER CORPORATION TRANSACTIONS.
In the event of the proposed liquidation or dissolution of the Corporation,
the Purchase Period will terminate immediately prior to the consummation of such
proposed transaction, unless otherwise provided by the Board in its sole
discretion, and all outstanding options shall automatically terminate and the
amounts of all payroll deductions will be refunded without interest to the
Participants.
In the event of a proposed sale of all or substantially all of the assets
of the Corporation, or the merger or consolidation of the Corporation with or
into another corporation, then in the sole discretion of the Board, (1) each
option shall be assumed or an equivalent option shall be substituted by the
successor corporation or parent or subsidiary of such successor corporation, (2)
a date established by the Board on or before the date of consummation of such
merger, consolidation or sale shall be treated as an Exercise Date, and all
outstanding options shall be deemed exercisable on such date or (3) all
outstanding options shall terminate and the accumulated payroll deductions shall
be returned to the Participants, without interest.
10. TRANSFERABILITY.
Options granted to Participants may not be voluntarily or involuntarily
assigned, transferred, pledged, or otherwise disposed of in any way, and any
attempted assignment, transfer, pledge, or other disposition shall be null and
void and without effect. If a Participant in any manner attempts to transfer,
assign or otherwise encumber his or her rights or interest under the Plan, other
than as permitted by the Code, such act shall be treated as an election by the
Participant to discontinue participation in the Plan pursuant to Section 4.2.
11. AMENDMENT OR TERMINATION OF THE PLAN.
11.1 The Plan shall continue until, June 30, 2008 unless previously
terminated in accordance with Section 11.2.
11.2 The Board may, in its sole discretion, insofar as permitted by law,
terminate or suspend the Plan, or revise or amend it in any respect whatsoever,
except that, without approval of the shareholders, no such revision or amendment
shall:
(a) materially increase the number of shares subject to the Plan, other
than an adjustment under Section 8 of the Plan;
(b) materially modify the requirements as to eligibility for participation
in the Plan, except as otherwise specified in this Plan;
(c) materially increase the benefits accruing to Participants;
(d) reduce the purchase price specified in Section 5.4, except as specified
in Section 8;
(e) extend the term of the Plan beyond the date specified in Section 11.1;
or
(f) amend this Section 11.2 to defeat its purpose.
12. ADMINISTRATION.
The Board shall appoint a Committee consisting of at least two members who
will serve for such period of time as the Board may specify and who may be
removed by the Board at any time. The Committee will have the authority and
responsibility for the day-to-day administration of the Plan, the authority and
responsibility specifically provided in this Plan and any additional duties,
responsibility and authority delegated to the Committee by the Board, which may
include any of the functions assigned to the Board in this Plan. The Committee
may delegate to one or more individuals the day-to-day administration of the
Plan. The Committee shall have full power and authority to promulgate any rules
and regulations which it deems necessary for the proper administration of the
Plan, to interpret the provisions and supervise the administration of the Plan,
to make factual determinations relevant to Plan entitlements, to adopt sub-plans
applicable to specified Subsidiaries or locations and to take all action in
connection with administration of the Plan as it deems necessary or advisable,
consistent with the delegation from the Board. Decisions of the Board and the
Committee shall be final and binding upon all participants. Any decision reduced
to writing and signed by a majority of the members of the Committee shall be
fully effective as if it had been made at a meeting of the Committee duly held.
The Corporation shall pay all expenses incurred in the administration of the
Plan. No Board or Committee member shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
thereunder.
13. COMMITTEE RULES FOR FOREIGN JURISDICTIONS.
The Committee may adopt rules or procedures relating to the operation and
administration of the Plan to accommodate the specific requirements of local
laws and procedures. Without limiting the generality of the foregoing, the
Committee is specifically authorized to adopt rules and procedures regarding
handling of payroll deductions, payment of interest, conversion of local
currency, payroll tax, withholding procedures and handling of stock certificates
which vary with local requirements.
The Committee may also adopt sub-plans applicable to particular
Subsidiaries or locations, which sub-plans may be designed to be outside the
scope of Code section 423. The rules of such sub-plans may take precedence over
other provisions of this Plan, with the exception of Section 5.1, but unless
otherwise superseded by the terms of such sub-plan, the provisions of this Plan
shall govern the operation of such sub- plan.
14. SECURITIES LAWS REQUIREMENTS.
The Corporation shall not be under any obligation to issue Common Stock
upon the exercise of any option unless and until the Corporation has determined
that: (i) it and the Participant have taken all actions required to register the
Common Stock under the Securities Act of 1933, or to perfect an exemption from
the registration requirements thereof; (ii) any applicable listing requirement
of any stock exchange on which the Common Stock is listed has been satisfied;
and (iii) all other applicable provisions of state, federal and applicable
foreign law have been satisfied.
15. GOVERNMENTAL REGULATIONS.
This Plan and the Corporation's obligation to sell and deliver shares of
its stock under the Plan shall be subject to the approval of any governmental
authority required in connection with the Plan or the authorization, issuance,
sale, or delivery of stock hereunder.
16. NO ENLARGEMENT OF EMPLOYEE RIGHTS.
Nothing contained in this Plan shall be deemed to give any Employee the
right to be retained in the employ of the Corporation or any Designated
Subsidiary or to interfere with the right of the Corporation or Designated
Subsidiary to discharge any Employee at any time.
17. GOVERNING LAW.
This Plan shall be governed by Pennsylvania law.
18. EFFECTIVE DATE.
This Plan shall be effective July 1, 1998, subject to approval of the
shareholders of the Corporation within 12 months of its adoption by the Board of
Directors.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS
CONTAINED IN THE COMPANY'S 1998
SECOND QUARTER 10Q AND IS
QUALIFIED BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 221,443
<SECURITIES> 80,618
<RECEIVABLES> 1,013,370
<ALLOWANCES> 0
<INVENTORY> 898,024
<CURRENT-ASSETS> 2,475,839
<PP&E> 4,686,214
<DEPRECIATION> 2,788,746
<TOTAL-ASSETS> 4,669,640
<CURRENT-LIABILITIES> 1,306,400
<BONDS> 0
<COMMON> 81,727
0
0
<OTHER-SE> 2,816,755
<TOTAL-LIABILITY-AND-EQUITY> 4,669,640
<SALES> 2,747,651
<TOTAL-REVENUES> 2,747,651
<CGS> 1,937,155
<TOTAL-COSTS> 1,937,155
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,976
<INCOME-PRETAX> 233,148
<INCOME-TAX> 75,775
<INCOME-CONTINUING> 157,373
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 157,373
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
