REVISED PRELIMINARY COPY - SUBJECT TO COMPLETION - DATED SEPTEMBER 29, 1998
SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
CONSENT REVOCATION STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 3)
Filed by the Registrant {X}
Filed by a Party other than the Registrant {_}
Check the appropriate box:
{X} Preliminary Proxy Statement (Consent Revocation Statement)
{_} Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
{_} Definitive Proxy Statement (Consent Revocation Statement)
{_} Definitive Additional Materials
{_} Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
AMP INCORPORATED
----------------------------
(Name of Registrant as specified in its charter)
----------------------------
(Name of person(s) filing proxy statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
{X} No fee required.
{ } Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to
Exchange Act Rule 0-
11:
(4) Proposed maximum aggregate value of transactions:
(5) Total fee paid.
- -----
{_} Fee paid previously with preliminary materials.
{_} Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
REVISED PRELIMINARY COPY-SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 1998
AMP LETTERHEAD
October __, 1998
Dear Fellow Shareholder:
As you know, AlliedSignal Inc. commenced an unsolicited
tender offer for the ultimate purpose of acquiring all shares of common
stock of AMP Incorporated. After careful consideration, your Board of
Directors, by unanimous vote of the directors present, has determined that
AlliedSignal's offer is inadequate, does not reflect the value or prospects
of your Company and is not in the best interests of AMP and its relevant
constituencies, including its shareholders. The Board's reasons for
rejecting AlliedSignal's offer and other important information is set forth
in the enclosed Consent Revocation Statement.
Now, in an acknowledged effort to facilitate its own
inadequate offer, AlliedSignal is trying to take complete control of your
Company's Board by more than doubling its size and "packing" your Board
with seventeen of its own directors and executive officers. They propose to
do this through a solicitation of consents. In considering AlliedSignal's
consent proposals, we believe it is essential to keep in mind that these
proposals are designed to benefit the interests of AlliedSignal and its own
shareholders--and are not in the interests of AMP and its relevant
constituencies, including its shareholders.
Your Board believes that if AlliedSignal succeeds in
electing its nominees as a majority of your Company's directors,
irreconcilable conflicts of interest are inevitable and can only be
detrimental to the interests of AMP. Given that it is in AlliedSignal's
interest to acquire AMP by paying the lowest possible price for your
shares, the Board believes that it is extremely unlikely that
AlliedSignal's nominees would have any incentive to develop other value
creation alternatives. In this connection, it is significant that
AlliedSignal's nominees will be indemnified by AlliedSignal "to the fullest
extent permitted by Delaware law" even if they breach their fiduciary
duties to AMP.
Your Board is acutely aware of its fiduciary duties and will
at all times continue to act in a manner consistent with those duties.
Unlike the seventeen AlliedSignal directors and executive officers who
AlliedSignal wants to put on your Board, our sole obligation is to protect
the interests of AMP.
While AlliedSignal has pressed forward with its inadequate
offer and attempt to pack your Board, your Board of Directors has taken
decisive steps to deliver current value and increase future value. On
October , 1998, AMP commenced a self-tender offer to purchase up
to 30 million shares of AMP common stock at a price of $55 per share in
cash. AMP's self- tender offer will provide shareholders with an
opportunity to sell a portion of their shares at a price far in excess of
the price per share being offered to you by AlliedSignal.
You can reject AlliedSignal and its efforts to pack your
Board and take control of your Company. Simply be sure not to sign
AlliedSignal's blue consent card. If you have already signed a blue consent
card, you can easily revoke that consent by signing, dating and mailing the
enclosed WHITE consent revocation card immediately.
As always, we will keep you fully informed as events unfold
in the coming weeks and months. In the meantime, you can best protect your
investment and your Company by not consenting to any of AlliedSignal's
consent proposals and by not tendering any of your shares.
We thank you for your continued trust and support.
Sincerely,
Robert Ripp
Chairman and Chief Executive Officer
IF YOU HAVE ANY QUESTIONS ABOUT GIVING YOUR
REVOCATION OF CONSENT OR REQUIRE ANY ASSISTANCE,
PLEASE CALL OUR PROXY SOLICITOR:
INNISFREE M&A INCORPORATED
CALL TOLL FREE: (888) 750-5834
BANKS AND BROKERS CALL COLLECT: (212) 750-5833
IF YOU DO NOT SUPPORT THE ALLIEDSIGNAL CONSENT PROPOSALS AND HAVE
NOT SIGNED AN ALLIEDSIGNAL CONSENT, YOU MAY SHOW YOUR OPPOSITION TO THE
ALLIEDSIGNAL CONSENT PROPOSALS BY SIGNING, DATING AND RETURNING THE
ENCLOSED WHITE CONSENT REVOCATION CARD. THIS WILL BETTER ENABLE AMP TO KEEP
TRACK OF HOW MANY SHAREHOLDERS OPPOSE THE ALLIEDSIGNAL CONSENT PROPOSALS.
REVISED PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 1998
AMP INCORPORATED
P.O. BOX 3608
HARRISBURG, PENNSYLVANIA
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CONSENT REVOCATION STATEMENT
BY THE BOARD OF DIRECTORS OF AMP INCORPORATED
IN OPPOSITION TO THE SOLICITATION OF CONSENTS
BY ALLIEDSIGNAL INC. AND PMA ACQUISITION CORPORATION
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OCTOBER __, 1998
This Consent Revocation Statement and the accompanying WHITE
Consent Revocation Card are being furnished by the Board of Directors (the
"Board") of AMP Incorporated, a Pennsylvania corporation ("AMP" or the
"Company"), to the holders of outstanding shares of AMP's common stock,
without par value (the "Common Stock"), in opposition to the solicitation
by AlliedSignal Inc. ("AlliedSignal") and its wholly owned subsidiary, PMA
Acquisition Corporation ("PMA"), of written consents from the shareholders
of AMP.
On August 4, 1998, AlliedSignal publicly announced its intention to
commence an unsolicited offer to purchase all outstanding shares of Common
Stock of AMP at a price of $44.50 per share in cash. On August 10, 1998,
AlliedSignal through PMA commenced its unsolicited tender offer to purchase
all outstanding shares of Common Stock at a price of $44.50 per share (the
"Original AlliedSignal Offer"). On August 20, 1998, AMP's Board, by
unanimous vote of the directors present, determined that the Original
AlliedSignal Offer was inadequate, did not reflect the value or prospects
of AMP and was not in the best interests of AMP and its relevant
constituencies, including its shareholders. On September 14, 1998,
AlliedSignal amended the Original AlliedSignal Offer and disclosed that it
had reduced the number of shares of AMP Common Stock sought to be purchased
and was offering to purchase 40,000,000 shares of AMP Common Stock at a
price of $44.50 per share in cash (the "Amended AlliedSignal Offer"). On
September 17, 1998, the Board, by unanimous vote of the directors present,
determined that the Amended AlliedSignal Offer is inadequate, does not
reflect the value or prospects of AMP and is not in the best interests of
AMP and its relevant constituencies, including its shareholders.
Accordingly, the Board, by unanimous vote of the directors present, is
recommending that AMP shareholders reject the Amended AlliedSignal Offer
and not tender any of their shares to AlliedSignal. On September 21, 1998,
AlliedSignal modified the Amended AlliedSignal Offer to reduce from
40,000,000 to 20,000,000 the number of shares of AMP Common Stock sought to
be purchased for $44.50 per share in the Amended AlliedSignal Offer.
AlliedSignal has stated that it will commence, following
consummation of the Amended Allied Signal Offer, another tender offer to
purchase the shares of AMP Common Stock not purchased in the Amended
AlliedSignal Offer at a price of $44.50 per share in cash (the "Second
Offer"). According to AlliedSignal, the Second Offer would be made upon
essentially the same terms and subject to the same conditions set forth in
the Original AlliedSignal Offer. AlliedSignal has also stated that
depending on circumstances prevailing at the time of the Second Offer,
including then prevailing interest rates, stock market, financial and other
economic conditions and the Company's business and financial condition,
including any actions taken by the Company, the price per share in the
Second Offer could be higher or lower and the other terms and conditions of
the Second Offer may be amended.
On September 28, 1998, AMP announced that it would commence a
self-tender offer to repurchase up to 30 million shares of AMP Common Stock
at a price of $55 per share in cash (the "AMP Self-Tender Offer"). The AMP
Self-Tender Offer commenced on October __, 1998 and is scheduled to expire
on November , 1998. The AMP Self- Tender Offer will provide AMP
shareholders with an opportunity to sell a portion of their shares of
Common Stock at a price far in excess of AlliedSignal's $44.50 per share
offer. Also on September 28, 1998, the Company created a new Flexitrust
that will hold 25 million shares of AMP Common Stock to fund, among other
things, cash benefit and compensation requirements. On October , 1998, the
Flexitrust was funded with 25 million newly issued shares of AMP Common
Stock. Shares of Common Stock held in the Flexitrust will be voted in the
same proportion that all other shares of Common Stock are voted. See "The
Flexitrust Arrangement."
AlliedSignal is also seeking to take control of your Company's
Board of Directors by placing 17 of its own directors and executive
officers (the "AlliedSignal Nominees") on your Company's Board. The
AlliedSignal Nominees, if elected, would constitute a substantial majority
of AMP's directors. AlliedSignal proposes to do this by soliciting consents
from shareholders of the Company to amend certain provisions of the
Company's By-laws, including a proposed By-law amendment that would require
the Board to consist of 28 directors (the "Board-Packing Proposal"),
thereby more than doubling the size of the Board. At present, AMP's Board
consists of 11 directors, so the AlliedSignal Board- Packing Proposal, if
approved, would create 17 new vacancies on the Board. AlliedSignal is also
soliciting consents to seek to elect the AlliedSignal Nominees to fill all
of these 17 new vacancies. If the AlliedSignal Board-Packing Proposal is
approved, the AlliedSignal Nominees would run unopposed by any candidate
nominated by your Board. Accordingly, a consent in favor of the
AlliedSignal proposals is a consent to turn over control of your Board to
AlliedSignal. AMP'S BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE ALLIEDSIGNAL
CONSENT SOLICITATION AND URGES YOU NOT TO SIGN THE BLUE CONSENT CARD SENT
TO YOU BY ALLIEDSIGNAL.
EVEN IF YOU PREVIOUSLY SIGNED AND RETURNED ALLIEDSIGNAL'S BLUE
CONSENT CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE. WE URGE YOU TO
SIGN, DATE AND MAIL THE ENCLOSED WHITE CONSENT REVOCATION CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED. EVERY SHARE COUNTS, AND YOUR PROMPT ACTION
IS IMPORTANT. PLEASE RETURN THE WHITE CONSENT REVOCATION CARD TODAY.
IF YOU DO NOT SUPPORT THE ALLIEDSIGNAL CONSENT PROPOSALS AND HAVE
NOT SIGNED AN ALLIEDSIGNAL CONSENT, YOU MAY SHOW YOUR OPPOSITION TO THE
ALLIEDSIGNAL CONSENT PROPOSALS BY SIGNING, DATING AND RETURNING THE
ENCLOSED WHITE CONSENT REVOCATION CARD. THIS WILL BETTER ENABLE AMP TO KEEP
TRACK OF HOW MANY SHAREHOLDERS OPPOSE THE ALLIEDSIGNAL CONSENT PROPOSALS.
IF YOUR SHARES ARE HELD IN "STREET NAME," ONLY YOUR BROKER OR
BANKER CAN VOTE YOUR SHARES. PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND INSTRUCT HIM OR HER TO VOTE A WHITE CONSENT REVOCATION CARD ON
YOUR BEHALF TODAY.
This Consent Revocation Statement and the enclosed WHITE Consent
Revocation Card are first being mailed to shareholders on or about October
, 1998.
If you have any questions about giving your revocation of consent
or require assistance, please call Innisfree M&A Incorporated
("Innisfree"), the firm assisting AMP in this solicitation, at the phone
numbers shown below:
INNISFREE M&A INCORPORATED
501 MADISON AVENUE, 20TH FLOOR
NEW YORK, NEW YORK 10022
CALL TOLL FREE: (888) 750-5834
BANKS & BROKERS CALL COLLECT: (212) 750-5833
-----------
REASONS FOR OPPOSING
THE ALLIEDSIGNAL SOLICITATION
AlliedSignal is soliciting consents (the "AlliedSignal Consent
Solicitation") in favor of six separate proposals, including the
Board-Packing Proposal and the proposal to elect the AlliedSignal Nominees
to constitute a majority of the members of AMP's Board. Each of the
AlliedSignal proposals (the "AlliedSignal Consent Proposals") is set forth
below and the text of the proposed amendments to the Company's By-laws
(AlliedSignal Consent Proposals 1, 2, 3 and 6) is set forth in Annex 1
hereto. AlliedSignal Consent Proposals 1 through 5 are sometimes referred
to herein as the "Nominee Election Proposals," and AlliedSignal Consent
Proposal 6 is sometimes referred to herein as the "Rights Plan Proposal."
The AlliedSignal Consent Proposals are as follows:
AlliedSignal PROPOSAL 1.:
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Amend Section 2.2 of Article II of the Company's By-laws to fix the
number of directors of the Company at twenty-eight and to provide that
Section 2.2 may be amended or repealed only with the approval of
shareholders of the Company holding a majority of the Company's outstanding
voting shares;
AlliedSignal PROPOSAL 2.:
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Amend Section 2.4 of Article II of the Company's By-laws to provide
that vacancies on the Board created as a result of a shareholder amendment
to the Company's By-laws may be filled only with the approval of
shareholders of the Company holding a majority of the Company's outstanding
voting shares and that this amendment to Section 2.4 may be further amended
or repealed only with the approval of shareholders of the Company holding a
majority of the Company's outstanding voting shares;
AlliedSignal PROPOSAL 3.:
- ------------------------
Amend Section 1.7.2 of Article I of the Company's By-laws to
clarify that a shareholder seeking to nominate persons for election to the
Board by shareholder action by written consent need not comply with the
Advance Notification Provisions and to provide that this amendment to
Section 1.7.2 may be further amended or repealed only with the approval of
shareholders of the Company holding a majority of the Company's outstanding
voting shares;
AlliedSignal PROPOSAL 4.:
- ------------------------
Elect Hans W. Becherer, Lawrence A. Bossidy, Ann M. Fudge, Paul X.
Kelley, Peter M. Kreindler, Robert P. Luciano, Robert B. Palmer, Russell E.
Palmer, Frederic M. Posses, Donald J. Redlinger, Ivan G. Seidenberg, Andrew
C. Sigler, John R. Stafford, Thomas P. Stafford, Richard F. Wallman, Robert
C. Winters and Henry T. Yang, the AlliedSignal Nominees, to serve as
directors of the Company (or, if any AlliedSignal Nominee is unable to
serve as a director of the Company due to death, disability or otherwise,
any other person designated as an AlliedSignal Nominee by the remaining
AlliedSignal Nominee or Nominees);
AlliedSignal PROPOSAL 5.:
- ------------------------
Repeal each provision of and amendment to the Company's By-laws
adopted subsequent to July 22, 1998 and prior to the effectiveness of the
AlliedSignal Consent Proposals and the seating of a sufficient number of
AlliedSignal Nominees so that the AlliedSignal Nominees constitute a
majority of the Board; and
AlliedSignal PROPOSAL 6.:
- ------------------------
Amend Section 2.1 of Article II of the Company's By-laws to provide
that all powers of the Company and rights and duties of the Board with
respect to the Rights Agreement (as defined below) and any other plan,
agreement, contract, security, warrant or other instrument of a type or
kind authorized by or referred to in Section 2513 of the Pennsylvania
Business Corporation Law will not be vested in or exercised by the Board
and will instead be exclusively vested in and exercised by three
individuals selected by AlliedSignal (which individuals have not yet been
identified by AlliedSignal) and to provide that such provisions of Section
2.1 may be amended or repealed only with the approval of shareholders of
the Company holding a majority of the Company's outstanding voting shares.
AlliedSignal has stated that the effectiveness of each of the
Nominee Election Proposals is subject to, and conditioned upon, the
adoption of each of the other Nominee Election Proposals, provided that if
AlliedSignal Consent Proposal 5 is not adopted, AlliedSignal has claimed
that it has the right to waive, but only with respect to such proposal,
this condition. AlliedSignal also has stated that the Rights Plan Proposal
is not conditioned upon the approval of the Nominee Election Proposals and
the Nominee Election Proposals are not conditioned upon the approval of the
Rights Plan Proposal.
AlliedSignal Consent Proposals 1, 2, 3 and 4, taken together, are
designed to enable AlliedSignal to take control of your Company's Board.
AlliedSignal Proposal 5 is designed to nullify unspecified By-laws which
may be adopted by your Board in its efforts to act in and protect the
interests of the Company. As of the date of this Consent Revocation
Statement, AMP has not adopted or amended any By-laws subsequent to July
22, 1998. The Rights Plan Proposal (AlliedSignal Proposal 6) is designed to
strip the Board of all authority, rights and duties with respect to the
Rights Agreement, or any similar agreement, and to vest such rights, powers
and duties in three individuals (who have not yet been identified) selected
by AlliedSignal.
As discussed below under the caption "Background," your Board, by
unanimous vote of the directors present, has determined that the Amended
AlliedSignal Offer is inadequate, does not reflect the value or prospects
of AMP and is not in the best interests of AMP and its relevant
constituencies, including its shareholders. AlliedSignal's acknowledged
purpose in pursuing the AlliedSignal Consent Solicitation is to place
seventeen of its own directors and executive officers on your Board, with
such AlliedSignal Nominees constituting a significant majority of the
members of your Company's Board. AlliedSignal also acknowledges that the
AlliedSignal Nominees, if elected, intend to cause your Company to be
acquired by AlliedSignal. While the Board recognizes that the AlliedSignal
Nominees, if elected, would have certain state law fiduciary obligations to
AMP, the Board firmly believes that the AlliedSignal Nominees, particularly
in light of the fact that all of them are directors or executive officers
of AlliedSignal, could be expected to act in furtherance of the interests
of AlliedSignal.
The Board believes that if AlliedSignal succeeds in its effort to
elect the AlliedSignal Nominees as a majority of your Company's directors,
irreconcilable conflicts of interest are inevitable and can only be
detrimental to the interests of AMP. Given that it is in AlliedSignal's
interest to acquire AMP at the lowest possible cost to AlliedSignal by
paying the lowest possible price for AMP's shares, the Board believes that
it is extremely unlikely that the AlliedSignal Nominees would have any
incentive to develop other value creation alternatives for AMP and its
relevant constituencies, including its shareholders. In fact, during the
period while AlliedSignal is trying to acquire AMP, it is completely
contrary to the interests of AlliedSignal and the AlliedSignal Nominees to
take any steps to enhance the value of AMP, including by implementation of
the profit improvement plan announced by AMP in June 1998 prior to any
recent contacts from AlliedSignal and the commencement of the Original
AlliedSignal Offer. In this connection, it is significant that the
AlliedSignal Nominees, if elected to AMP's Board, will be indemnified by
AlliedSignal "to the fullest extent permitted by Delaware law" if they
breach their fiduciary duties to AMP. While the current members of AMP's
Board are entitled to certain indemnification rights under AMP's Bylaws and
Pennsylvania law, they are not entitled to be indemnified by AMP unless
they have met the requisite standard of conduct under Pennsylvania law.
At this critical time for the future of AMP and the value of AMP's
shareholders' investment, it is vital that AMP continue to have in place an
independent Board of Directors - one that will continue to act in the best
interests of AMP and its relevant constituencies, including its
shareholders, and not be influenced by AlliedSignal's goals or be
financially protected by AlliedSignal's indemnification commitments.
Even if AlliedSignal's Board-Packing Proposal is adopted and the
AlliedSignal Nominees are elected, as a result of the amendments to the
Company's Shareholder Rights Plan adopted by the Board on August 20, 1998
and September 17, 1998, AlliedSignal will not, prior to November 6, 1999,
be able to purchase more than 10% of the shares of the Company's Common
Stock without triggering the exercise of the Rights under the Company's
Shareholder Rights Plan. See the section captioned "Shareholder Rights
Plan" below. AlliedSignal has stated that one of the conditions to the
Amended AlliedSignal Offer is, and one of the conditions to the Second
Offer will be, that the Rights have either been invalidated or are
otherwise inapplicable. Consequently, if the AlliedSignal Nominees are
elected to the Company's Board, AlliedSignal could gain complete control of
your Company and your Board without being in a position to acquire more
than 10% of the shares of the Company's Common Stock or effect any
acquisition of, or business combination with, the Company prior to November
6, 1999.
The Board believes that the Company should continue to be managed
by its present directors and officers, who will continue to execute AMP's
profit improvement program, and not by the AlliedSignal Nominees. This
program, which is fully designed and in the process of being implemented,
is expected to result in estimated cost savings of at least $200 million
during 1999, and in excess of $300 million annually in the ensuing years.
The Board believes that there are substantially higher values inherent in
AMP, as the world's largest manufacturer of electrical and electronic
connectors, which should be realizable in the near term and beyond as the
profit improvement program takes effect. See the section caption "Profit
Improvement Plan" below.
GIVEN THESE REASONS, YOUR BOARD OF DIRECTORS UNANIMOUSLY OPPOSES THE
ALLIEDSIGNAL CONSENT SOLICITATION AND URGES YOU NOT TO SIGN THE BLUE CONSENT
CARD SENT TO YOU BY ALLIEDSIGNAL.
EVEN IF YOU PREVIOUSLY SIGNED AND RETURNED ALLIEDSIGNAL'S BLUE
CONSENT CARD, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE. WE URGE YOU TO
SIGN, DATE AND MAIL THE ENCLOSED WHITE CONSENT REVOCATION CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
IF YOU HAVE ANY QUESTIONS, PLEASE CALL INNISFREE TOLL-FREE AT (888)
750-5834. BANKS AND BROKERS SHOULD CALL COLLECT AT (212) 750-5833.
BACKGROUND
A little over a year ago, Mr. Lawrence A. Bossidy, Chairman of the
Board and Chief Executive Officer of AlliedSignal, telephoned a director of
AMP to inquire as to whether AMP had an interest in exploring a possible
combination of the two companies. The inquiry was referred to the Finance
Committee of the Board for consideration. Upon consideration, it was the
conclusion of the Finance Committee that such a combination did not offer
any benefits to AMP's businesses and, accordingly, that there was no
interest in pursuing such a combination. The Finance Committee's
determination was communicated through the director by telephone to Mr.
Bossidy. Until July 29, 1998, there were no further communications from Mr.
Bossidy with respect to a potential business combination.
On Wednesday, July 29, 1998, Mr. Bossidy placed a phone call to Mr.
William J. Hudson, Chief Executive Officer and President of AMP, who was
out of the country visiting some of AMP's facilities. This was followed up
with a letter delivered in the afternoon of Friday, July 31, 1998. Mr.
Hudson first read the letter on Sunday, August 2, 1998, following his
return to his home.
In the letter, Mr. Bossidy expressed his belief that a business
combination made business sense and requested that a meeting be set up to
discuss a combination of the two companies. Mr. Bossidy indicated that
AlliedSignal was prepared to offer $43.50 per share in cash for all
outstanding Shares, but would consider a higher price if all or a
significant portion of the consideration were AlliedSignal's shares rather
than cash.
On Monday, August 3, 1998, Mr. Hudson shared the letter with other
members of management, as well as with AMP's legal and financial advisors
and several members of the Board. A telephonic meeting of the Board was
called for Wednesday, August 5, 1998, to consider the letter.
On Tuesday, August 4, 1998, Mr. Bossidy placed another call to Mr.
Hudson. Mr. Hudson's office returned the call to let Mr. Bossidy know that
Mr. Hudson was out of the office and would be in touch on the following
day. Later in the day, a letter from Mr. Bossidy addressed to the Board of
Directors of AMP was telecopied to AMP headquarters. In the August 4th
letter, Mr. Bossidy indicated that AlliedSignal had decided to commence a
tender offer for all outstanding Shares at a price of $44.50 per share in
cash. Mr. Bossidy reiterated his belief that a combination was in the best
interests of both companies and all of their constituencies and that
AlliedSignal was committed to completing the combination. In that regard,
Mr. Bossidy stated that if AMP was unwilling to enter into negotiations,
AlliedSignal would be prepared to initiate a consent solicitation to
increase the size of the AMP Board of Directors and to add a majority of
directors who would be responsive to its proposal.
At the August 5, 1998 meeting, the Board, among other things,
reviewed preliminarily the various letters sent by AlliedSignal, heard
presentations as to their fiduciary responsibilities and duties in
considering acquisition proposals such as the one set forth in those
letters and were advised as to the work to be performed by AMP's advisors
to assist the Board in its consideration of the Original AlliedSignal Offer
and the various alternatives available to AMP.
On August 10, 1998, AlliedSignal through PMA commenced the Original
AlliedSignal Offer. Also, on August 10, 1998, Mr. Bossidy sent Mr. Hudson
another letter to request a meeting to discuss a possible business
combination and to advise AMP of AlliedSignal's intention to file materials
shortly with the Securities and Exchange Commission with respect to the
AlliedSignal Consent Solicitation. By letter dated August 11, 1998, Mr.
Hudson indicated to Mr. Bossidy that since the Board had not yet reviewed
the Original AlliedSignal Offer or Mr. Bossidy's request for a meeting, it
would be premature for a meeting. Mr. Bossidy, nonetheless, called Mr.
Hudson later on August 11, at which time Mr. Hudson reiterated the essence
of his letter.
On August 12, 1998, the Board held a meeting at which the Board
reviewed with AMP management and Credit Suisse First Boston, AMP's
financial advisor ("CSFB"), Skadden, Arps, Slate, Meagher & Flom LLP, AMP's
principal legal advisor ("Skadden Arps"), and other legal advisors, the
Original AlliedSignal Offer and its terms and conditions. The Board also
received and considered, among other things, a review and update by AMP's
management of AMP's business strategy and the steps being taken by AMP to
improve the profitability of its businesses, a presentation by Pennsylvania
counsel as to fiduciary duties and responsibilities and a presentation from
CSFB regarding its preliminary analysis relating to the Original
AlliedSignal Offer and various alternatives.
On August 18, 1998, Mr. Bossidy contacted a number of AMP's
directors and communicated to them his desire to proceed on a "non-hostile"
basis and AlliedSignal's willingness to include AlliedSignal stock as part
of the consideration.
On August 20, 1998, the Board held a meeting at which the Board
again reviewed the Original AlliedSignal Offer and its terms and conditions
with AMP management, CSFB, Skadden Arps and other legal advisors. At such
meeting, CSFB presented its financial analysis of the Original AlliedSignal
Offer and reviewed various alternatives available to AMP. AMP's senior
management also reviewed the potential impact of the Original AlliedSignal
Offer on AMP's various constituencies including its shareholders,
employees, customers, suppliers and the communities served by it. After
lengthy discussions, and the presentations from CSFB, Skadden Arps, other
legal advisors and AMP's senior management, the Board determined, based in
part on the recommendation of all of the independent directors present,
that the best course of action under all prevailing circumstances was for
AMP to continue aggressively to pursue its strategic initiatives and
business plans. The Board concluded that, given the values inherent in
AMP's businesses and the steps being taken to improve the profitability of
these businesses, the Original AlliedSignal Offer was not in the best
interests of AMP and its relevant constituencies. In particular, the Board
determined that AMP's current strategic initiatives and business plans
offer the potential for greater benefits for AMP's various constituencies,
including its shareholders, than the Original AlliedSignal Offer.
Also, following the recommendation, reached prior to the Original
AlliedSignal Offer, of a Board committee formed several months ago,
effective as of August 20, 1998, the Board appointed Robert Ripp as
Chairman and Chief Executive Officer to lead AMP in its efforts
aggressively to implement its profit improvement plan on a timely and
successful basis. The Board also appointed Herbert Cole, formerly Corporate
Vice President and President, Global Terminal and Connector Operations, as
Senior Vice President for Operations and Dr. Juergen Gromer, formerly
Corporate Vice President, Global Automotive Division, as Senior Vice
President, Global Industry Businesses. James E. Marley retired as Chairman,
and William J. Hudson assumed the position of Vice Chairman.
In rejecting the Original AlliedSignal Offer, the Board considered
a number of factors, including, without limitation, the following:
(i) the Board's belief, based on the factors described
below, that the Original AlliedSignal Offer is inadequate and does
not reflect the inherent value of AMP as the world's largest
supplier of electrical and electronic connectors;
(ii) the Board's familiarity with, and management's review
of, AMP's business, financial condition, results of operations,
business strategy and future prospects, as well as the steps being
taken to improve the profitability of AMP, including:
o reshaping AMP's manufacturing into a "global manufacturing
competency", including the consolidation and redeployment of
manufacturing operations;
o reshaping AMP's focus on customer services and pricing
policies to enhance AMP's competitiveness; and
o reducing costs, including through a redeployment and
reduction in work force representing approximately 14% of
AMP's professional and support services work force;
(iii) the Board's strong commitment to this program for
improving significantly AMP's operating and financial performance,
and the Board's concomitant belief that the market price of AMP's
Common Stock should increase significantly as the strategic
initiatives announced prior to the commencement of the Original
AlliedSignal Offer start to take effect;
(iv) the Board's belief that the new management team is well
suited to implement the profit improvement plan;
(v) the depressing effect which the disruption in the Asian
market and the overall decline in the stock market has had on the
trading price of AMP's Common Stock;
(vi) the fact that the price of $44.50 is significantly less
than the highest price at which AMP's Common Stock traded in the
last twelve months;
(vii) the fact that AlliedSignal had solicited AMP's
interest a little over a year ago, but waited until shares of AMP's
Common Stock were trading at their lowest levels in years before
making the Original AlliedSignal Offer so as to create an
impression that the offer is at a premium;
(viii) the written opinion, dated August 20, 1998, of CSFB
that, as of such date, the Original AlliedSignal Offer was
inadequate, from a financial point of view, to the holders of
shares of AMP's Common Stock (other than AlliedSignal and its
affiliates); the full text of the opinion of CSFB, setting
forth the assumptions made, matters considered and limitations on
the reviews undertaken, is included as Annex 2 to this Consent
Revocation Statement and should be read in its entirety;
(ix) the numerous conditions to which the Original
AlliedSignal Offer is subject;
(x) the apparent lack of overlap and potential synergies
between the respective businesses of AMP and AlliedSignal,
evidenced in the Board's view, by AlliedSignal's disposition of
Amphenol, a competitor of AMP, in 1987, as well as the market's
reaction to the Original AlliedSignal Offer as reflected in the
significant decline in the trading value of AlliedSignal's shares
following its announcement of the Original AlliedSignal Offer;
(xi) the Board's belief that AlliedSignal, with its lower
growth rate, is seeking to acquire AMP as a means to enhance its
own growth opportunities;
(xii) the disruption that consummation of the Original
AlliedSignal Offer could have on AMP's employees, suppliers,
customers and the communities where AMP operates, as well as
concerns expressed by a number of these constituencies to AMP;
(xiii) the impact that the consummation of the Original
AlliedSignal Offer may have on the credit rating of AMP; and
(xiv) the Board's commitment to protecting the best
interests of AMP and enhancing the value of AMP for the benefit of
shareholders and other relevant constituencies.
Additional information relating to the Board's position with
respect to the Original AlliedSignal Offer is set forth in AMP's Schedule
14D-9, dated August 21, 1998, a copy of which has been filed with the
Securities and
Exchange Commission.
On September 14, 1998, AlliedSignal amended the Original
AlliedSignal Offer to reduce the number of shares of AMP Common Stock
sought to be purchased to 40,000,000 shares of AMP Common Stock at a price
of $44.50 per share in cash.
At a meeting held on September 17, 1998, the Board, by unanimous
vote of the directors present, determined that the Amended AlliedSignal
Offer is not in the best interests of AMP and its relevant constituencies,
including its shareholders. In reaching its determination, the Board
considered a number of factors, in addition to the factors described above
relating to the Original AlliedSignal Offer, including the following:
(i) the Board's belief that the purpose of the Amended
AlliedSignal Offer and other actions announced by AlliedSignal on
September 14, 1998 is to further an acquisition of AMP which the
Board has rejected as inadequate, not reflective of the value or
prospects of AMP and not in the best interests of AMP and its
relevant constituencies, including its shareholders;
(ii) the Amended AlliedSignal Offer is a partial offer,
which offers no new value to AMP and its relevant constituencies,
including its shareholders;
(iii) there is no assurance that AlliedSignal would
consummate a second-step transaction after November 6, 1999, when
the Rights Agreement expires, and if it does, that the
consideration paid would not be inadequate;
(iv) the Board's belief that the presence of AlliedSignal as
a significant minority shareholder intent on taking control of AMP
is likely to be a deterrent to any third party interest in a
business combination transaction with AMP in the future, and likely
to have a serious and immediate dampening effect on the ability of
AMP to carry out its profit improvement plan;
(v) the Board's belief that the implementation of the profit
improvement plan should provide over time greater value than the
Amended AlliedSignal Offer, the Original AlliedSignal Offer and any
other offer which AlliedSignal has indicated that it may commence;
(vi) the Board's concern that shares of Common Stock
tendered and purchased pursuant to the Amended AlliedSignal Offer
will not receive the benefit of any value enhancement action
undertaken by AMP or of any higher price offered by AlliedSignal or
any other party in a subsequent offer; and
(vii) the Board's belief, after having reviewed the matter
with counsel, that AlliedSignal's actions in connection with the
Amended AlliedSignal Offer and its future offer to purchase any
shares of Common Stock not purchased pursuant to the Amended
AlliedSignal Offer raise serious concerns under the federal
securities laws regulating tender offers.
Additional information relating to the Board's position with
respect to the Amended AlliedSignal Offer is set forth in Amendment No 15
to AMP's Schedule 14D-9, dated September 18, 1998, a copy of which has been
filed with the Securities and Exchange Commission.
On September 21, 1998, AlliedSignal modified the Amended
AlliedSignal Offer to reduce from 40,000,000 to 20,000,000 the number of
shares of AMP Common Stock sought to be purchased for $44.50 per share in
the Amended AlliedSignal Offer.
AlliedSignal has stated that it will commence, following
consummation of the Amended Allied Signal Offer, the Second Offer.
According to AlliedSignal, the Second Offer would be made upon essentially
the same terms and subject to the same conditions set forth in the Original
AlliedSignal Offer. AlliedSignal has also stated that depending on
circumstances prevailing at the time of the Second Offer, including then
prevailing interest rates, stock market, financial and other economic
conditions and the Company's business and financial condition, including
any actions taken by the Company, the price per share in the Second Offer
could be higher or lower and the other terms and conditions of the Second
Offer may be amended.
On September 28, 1998, AMP announced that it intended to commence
the AMP Self-Tender Offer. The AMP Self-Tender Offer commenced on October
__, 1998 and is scheduled to expire on November __, 1998. The AMP Self-Tender
Offer will provide AMP shareholders with an opportunity to sell a portion
of their shares of Common Stock at a price far in excess of AlliedSignal's
$44.50 per share offer. Also on September 28, 1998, the Company created a
new Flexitrust that will hold 25 million shares of AMP Common Stock to
fund, among other things, cash benefit and compensation requirements. On
October __, 1998, the Flexitrust was funded with 25 million newly issued
shares of AMP Common Stock. Shares of Common Stock held in the Flexitrust
will be voted in the same proportion that all other shares of Common Stock
are voted. See "The Flexitrust Arrangement."
PROFIT IMPROVEMENT PLAN
The profit improvement plan, the first elements of which
were announced in June 1998, reflects AMP's commitment to improve
significantly its operating margins and financial performance. In
particular, AMP expects the profit improvement plan to generate an
operating margin of 13.5% in 1999 with earnings per share of at least $2.30
and an operating margin of 16.5% in the year 2000 with an earnings per
share of at least $3.00. After giving effect to the AMP Self-Tender Offer,
AMP remains confident in achieving earnings per share of approximately
$2.30 in 1999 and in excess of $3.00 in 2000 because the estimated interest
expense of the financing associated with the AMP Self-Tender Offer is
anticipated to be offset by the reduction in shares outstanding and the
additional savings resulting from the acceleration of the Profit
Improvement Plan. This enhanced operating performance, taken together with
a higher price/earnings multiple anticipated to result therefrom, should,
in the judgment of the Board of Directors, significantly enhance
shareholder value.
Key elements of the profit improvement plan include:
o Reducing costs through reductions in support staff and support
functions
--------------------------------------------------------------
AMP's support staff is being reduced by at least 3,500
worldwide through a combination of early retirement,
attrition and layoffs. As part of this program, AMP will
outsource certain support activities to allow the Company to
focus resources on core businesses and provide flexibility
to respond to fluctuations in product demand.
o Simplifying AMP's operating structure and providing for greater
accountability
---------------------------------------------------------------
Robert Ripp has been appointed Chairman and CEO with overall
responsibility for implementing the plan. Direct reports
have been cut in half from 22 to 11 and each of a limited
number of executives has been charged with the
responsibility of achieving a specified portion of the $320
million in expected cost savings.
o AMP's focus on customer service and pricing policies to enhance
its competitiveness in the marketplace and responsiveness to
customer demands
---------------------------------------------------------------
New customer-focused programs are being launched to make the
ordering, pricing, and delivery systems simpler and more
responsive to customers The programs, which have begun in
the United States, will be replicated in other regions of
the world. These include 24-hour customer service and
shipment on more than 10,000 widely used part numbers,
simplified pricing and a larger sales force to improve
account coverage and presence at customer facilities.
o Reshaping AMP's manufacturing into a "global manufacturing
competency" through plant closings, consolidations and other
activities
------------------------------------------------------------
The streamlining and consolidation of the Terminal and
Connector operation, which represents the majority of AMP's
sales, will result in the closing of five plants in 1998.
Additionally, AMP is stepping up activities to support the
fast growing marketplace outside the United States by
shifting production closer to customers, thereby reducing
transportation and other costs, and relying on simpler,
manual operations in each region for high-volume, quick
turnaround orders.
The profit improvement plan is designed to provide AMP with
a more simplified, results-oriented structure focused on enhancing
performance and creating value.
THE FLEXITRUST ARRANGEMENT
On September 28, 1998, the Board authorized AMP to enter into a
Trust Agreement to establish a grantor trust (the "Trust") to hold shares
of Common Stock. The Trust is targeted to free operating cash flow, which
would otherwise be used to fund, among other things, cash benefit and
compensation requirements, of approximately $1 billion over the next ten
years. The Trust will not affect AMP's employee benefit and compensation
plans. Pursuant to the terms of the Trust, the shares will periodically be
released from the Trust, at which time they may be used in kind to satisfy
certain stock-based obligations or sold to raise the cash necessary to fund
certain cash-based obligations. The Trust will be administered by a
committee consisting of AMP's Chief Financial Officer, General Legal
Counsel (or, prior to November 1, 1998, AMP's Associate General Legal
Counsel) and Chief Human Resource Officer (the "Trust Committee"). Assets
of the Trust remain subject to the claims of AMP's creditors.
In connection with the establishment of the Trust, on October __,
1998, pursuant to a Stock Purchase Agreement, AMP sold to the Trust an
aggregate of 25 million authorized but unissued shares of Common Stock (the
"Trust Shares") for a purchase price of $393/16 per share, the closing
price per share on the New York Stock Exchange on September 25, 1998. The
Trust issued to AMP, as payment for the Trust Shares, a 10-year note
payable to AMP in the principal amount of approximately $980 million. AMP
will make future contributions to the Trust which, together with dividends
paid in respect of the Trust Shares, will be sufficient to allow the Trust
to make principal and interest payments due on such note. As principal
payments are made on such note, a proportionate number of Trust Shares will
become available for use by the Trust in satisfaction of certain benefit
and compensation obligations of AMP.
Generally, Trust Shares held by the Trust will be voted or
consented on any matter or tendered in the same proportion that all other
shares of Common Stock are voted, consented or tendered. However, in the
case of a self- tender offer made by AMP or in the case of a third party
tender or exchange offer for less than a majority of all outstanding shares
of Common Stock, Trust Shares will be tendered only upon directions of the
Trust Committee. The Trust Committee is expected to instruct the trustee of
the Trust not to tender the Trust Shares pursuant to the AMP Self-Tender
Offer or the Amended Allied Signal Offer. Accordingly, after taking into
account the repurchase of 30 million shares of AMP Common Stock pursuant to
the AMP Self-Tender Offer, the Trust is expected to hold approximately
11.7% of the outstanding shares of Common Stock. Prior to giving effect to
the repurchase of any shares in the AMP Self-Tender Offer, the Trust holds
approximately 10.3% of the outstanding shares of Common Stock. See
"Principal Shareholders" The formation of the Trust and issuance of Trust
Shares will have no effect on AMP's earnings per share calculation and will
not change the number of shares of Common Stock to be issued under AMP's
existing stock-based plans. Creation of the Trust will add no debt to AMP's
balance sheet, will increase AMP's equity base over time and will bolster
AMP's credit position.
THE CONSENT PROCEDURE
Under Pennsylvania law, the unrevoked consent of the holders of not
less than a majority of the shares of Common Stock outstanding and entitled
to vote on the Record Date (as defined below) must be obtained, within the
time limits specified in the Company's By-laws, to adopt each of the
AlliedSignal Consent Proposals. Each share of Common Stock is entitled to
one vote per share. Since consents are required from the holders of record
of a majority of the shares of Common Stock outstanding on the applicable
Record Date in order for each of the AlliedSignal Consent Proposals to be
adopted, a failure to give consent or a broker non-vote will have the same
effect as a vote against such proposals.
Under Section 1.7.1 of AMP's By-laws, for the purpose of any
consent, the Board may fix a record date, which record date shall not be
more than 90 days prior to the date of the action or actions for which
consents are being solicited.
Section 1.7.2 of AMP's By-laws establishes orderly procedures for
the setting of a record date for consent solicitations. Such section of the
By-laws provides that any shareholder of AMP seeking to have AMP's
shareholders authorize or take corporate action by written consent shall,
by written notice to AMP's Secretary, request the Board to fix a record
date. The Board is required to promptly, but in all events within ten days
after the date on which such request is received, adopt a resolution fixing
the record date. On August 11, 1998, AlliedSignal requested that the Board
fix a record date for the Nominee Election Proposals. On August 20, 1998,
the Board fixed a record date of October 15, 1998 (the "Nominee Election
Record Date") for the Nominee Election Proposals. On September 14, 1998,
AlliedSignal requested the Board to fix a record date for the Rights Plan
Proposal. On September 22, 1998, the Board fixed a record date of November
16, 1998 for the Rights Plan Proposal (the "Rights Plan Proposal Record
Date" and together with the Nominee Election Record Date, the "Record
Dates") . Only shares of Common Stock that were owned on the Nominee
Election Record Date will be entitled to vote on the Nominee Election
Proposals and only shares of Common Stock owned on the Rights Plan Proposal
Record Date will be entitled to vote on the Rights Plan Proposal. As of the
Nominee Election Record Date, there were ______ shares of Common Stock issued
and outstanding. Following the Rights Plan Proposal Record Date, AMP will
announce the number of shares of Common Stock issued and outstanding as of
the Rights Plan Proposal Record Date.
A shareholder may revoke any previously signed consent by signing,
dating and returning a WHITE Consent Revocation Card. If no direction is
made on the Consent Revocation Card with respect to one or more of the
AlliedSignal Consent Proposals, or if a shareholder marks either the
"revoke consent" or "abstain" box on the Consent Revocation Card with
respect to one or more of the AlliedSignal Consent Proposals, all
previously executed consents with respect to such AlliedSignal Consent
Proposals will be revoked. A consent may also be revoked by delivery of a
written consent revocation to AMP or AlliedSignal. SHAREHOLDERS ARE URGED,
HOWEVER, TO DELIVER ALL CONSENT REVOCATIONS TO INNISFREE M&A INCORPORATED
("INNISFREE"), THE FIRM ASSISTING AMP IN THIS SOLICITATION, AT 501 MADISON
AVENUE, 20TH FLOOR, NEW YORK, NEW YORK 10022. AMP requests that if a
consent revocation is instead delivered to AlliedSignal, a photostatic copy
of the revocation also be delivered to AMP, c/o Innisfree, at the address
set forth above, so that AMP will be aware of all revocations. Any consent
revocation may itself be revoked at any time by signing, dating and
returning to AlliedSignal a subsequently dated blue consent card sent to
you by AlliedSignal, or by delivery of a written revocation of such consent
revocation to AMP or AlliedSignal.
If any shares of Common Stock that you owned on the applicable
Record Date were held for you in an account with a stock brokerage firm,
bank nominee or other similar "street name" holder, you are not entitled to
vote such shares directly, but rather must give instructions to the stock
brokerage firm, bank nominee or other "street name" holder to grant or
revoke consent for the shares of Common Stock held in your name.
Accordingly, you should contact the person responsible for your account and
direct him or her to execute the enclosed WHITE Consent Revocation Card on
your behalf. You are urged to confirm in writing your instructions to the
person responsible for your account and provide a copy of those
instructions to AMP, c/o Innisfree, at the address set forth above so that
AMP will be aware of your instructions and can attempt to ensure such
instructions are followed.
YOU HAVE THE RIGHT TO REVOKE ANY CONSENT YOU MAY HAVE PREVIOUSLY
GIVEN TO ALLIEDSIGNAL. TO DO SO, YOU NEED ONLY SIGN, DATE AND RETURN IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE THE WHITE CONSENT REVOCATION CARD WHICH
ACCOMPANIES THIS CONSENT REVOCATION STATEMENT. IF YOU DO NOT INDICATE A
SPECIFIC VOTE ON THE WHITE CONSENT REVOCATION CARD WITH RESPECT TO ONE OR
MORE OF THE ALLIEDSIGNAL CONSENT PROPOSALS, THE CONSENT REVOCATION CARD
WILL BE USED IN ACCORDANCE WITH THE AMP BOARD'S RECOMMENDATION TO REVOKE
ANY CONSENT WITH RESPECT TO SUCH PROPOSALS.
AMP has retained Innisfree to assist in communicating with
shareholders in connection with the AlliedSignal Consent Solicitation and
to assist in our efforts to obtain consent revocations. If you have any
questions about how to complete or submit your WHITE Consent Revocation
Card or any other questions, Innisfree will be pleased to assist you. You
may call Innisfree toll-free at (888) 750-5834. Banks and brokers should
call collect at (212) 750-5833.
SHAREHOLDER RIGHTS PLAN
Each Right issued pursuant to AMP's Shareholder Rights Agreement
(the "Rights Agreement") entitles the holder thereof to purchase from AMP
one share of Common Stock at an exercise price of $87.50 per share (the
"Purchase Price"), subject to adjustment in accordance with the terms of
the Rights Agreement. Upon the earliest of (i) the close of business on the
tenth business day following a public announcement that a person (an
"Acquiring Person") has become an "interested shareholder" as defined in
Section 2553 of the Pennsylvania Business Corporation Law (i.e., has
acquired, or obtained the right to acquire, beneficial ownership of 20% or
more of the outstanding Shares) other than pursuant to a Qualifying Offer
(as defined below), (ii) the close of business on the tenth business day
(or such later date as may be determined by the Board) following the
commencement of a tender offer or exchange offer that would result in a
person becoming an Acquiring Person or (iii) a merger or other business
combination transaction involving AMP (the earliest of such dates being the
"Distribution Date"), the Rights become exercisable and trade separately
from the Shares. A Qualifying Offer is an acquisition of shares of Common
Stock pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined by at least a
majority of the members of the Board who are not officers of AMP and who
are not representatives, nominees, or affiliates or associates of any
person making the offer, after receiving advice from one or more investment
banking firms, to be fair to the shareholders and otherwise in the best
interest of AMP and its shareholders, provided such offer is consummated at
a time when the Rights are redeemable.
In the event that a person becomes an Acquiring Person, each holder
of a Right (other than Rights held by an Acquiring Person which are voided)
will thereafter have the right to receive, upon exercise, shares of Common
Stock (and, in certain circumstances other consideration) having a value
equal to two times the exercise price of the Right. In addition, in the
event that, (i) AMP is acquired in a merger or other business combination
transaction in which AMP is not the surviving corporation, (ii) AMP is a
party to a merger in which AMP is the surviving company, but its shares are
exchanged for other consideration or remain outstanding, but constitute
less than 50% of the shares outstanding immediately following consummation
of the merger (other than, with respect to clause (i) or (ii), a merger
which follows a Qualifying Offer), or (iii) more than 50% of AMP's assets
or earning power is sold or transferred, each holder of a Right (except
Rights that previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common stock of the
surviving company (or a related party in certain cases) having a value
equal to two times the exercise price of the Right (a "Transaction Exercise
Right").
The Rights may be redeemed until ten business days following the
day on which any person becomes an Acquiring Person, provided, however,
that the Rights shall become nonredeemable if there is a change in the
Board of Directors occurring at any time following receipt of an
unsolicited acquisition proposal such that the disinterested directors (as
such term is defined under Pennsylvania law) in office prior to the first
such unsolicited acquisition proposal, together with their successors as
may be approved by the Board of Directors prior to their election, no
longer constitute a majority of the Board of Directors.
At a meeting held on August 12, 1998, the Board resolved that the
Distribution Date shall not occur until the earlier of (i) the day
immediately prior to the date on which an Acquiring Person becomes such and
(ii) such date as may be determined by action of the Board prior to the
time any person or group becomes an Acquiring Person. As a result of such
action, the commencement of the AlliedSignal Offer will not, in and of
itself, result in the occurrence of a Distribution Date. The Board also
authorized Amendment No. 2 to the Rights Agreement, which ratified the
appointment of ChaseMellon Shareholder Services L.L.C., AMP's transfer
agent, as the successor Rights Agent.
At the meeting held on August 20, 1998, the Board approved
Amendment No. 3 to the Rights Agreement (which is reflected in the summary
description set forth above) to provide that (i) unless the Rights are
redeemed prior thereto, a merger or other business combination transaction
will be an event triggering a Transaction Exercise Right, irrespective of
whether other events have previously occurred to cause the Rights
Certificates to have been distributed, (ii) the Rights shall become
nonredeemable upon a change in the Board occurring at any time following
receipt of an unsolicited acquisition proposal such that the disinterested
directors (as such term is defined under Pennsylvania law) in office prior
to the first such unsolicited acquisition proposal, together with their
successors as may be approved by the Board of Directors prior to their
election, no longer constitute a majority of the Board of Directors, (iii)
the Qualifying Offer exception shall be applicable unless and until the
Rights become nonredeemable under clause (ii) above, and (iv) the Rights
Agreement generally may not be amended when the Rights are not redeemable.
The Board of Directors also adopted a resolution providing that,
following the expiration of the Rights Agreement on November 6, 1999, and
for a period of six months thereafter, AMP shall neither adopt nor have in
place a shareholder rights plan.
At a meeting held on September 17, 1998, the Board approved
Amendment No. 4 to the Rights Agreement which will amend the definition of
the term "Acquiring Person" to reduce from 20% to 10% the threshold at
which a person who has made an unsolicited acquisition proposal may become
an Acquiring Person and thereby trigger a number of the provisions of the
Rights Agreement. Amendment No. 4 also provides that the Rights Agreement
shall not be amendable, the Rights shall not be redeemable and the Board
will not be entitled to exercise certain discretionary authority otherwise
available or take certain other actions, upon the adoption of a By-law
intended to limit the authority of the Board and/or confer authority on any
person other than the Board to take action with respect to the Rights
Agreement and the Rights issued thereunder. The Rights Plan Proposal
(AlliedSignal Proposal 6) is such a By-law. Amendment No. 4 became
effective on September 24, 1998, but applies to all actions which shall
have occurred on or after September 17, 1998 (the date of the amendment).
The amendments to the Rights Agreement described above were adopted
to enhance AMP's ability to implement the profit improvement plan through
November 6, 1999, the expiration date of the Rights Agreement, and thereby
protect the value expected to be generated by the profit improvement plan
for AMP and its relevant constituencies, including its shareholders. The
amendments seek to accomplish this by making the rights nonredeemable if,
following receipt of an unsolicited acquisition proposal (such as the
AlliedSignal offer), there is a change in the Board of Directors of AMP,
such that directors who qualify as "disinterested directors" under
Pennsylvania law at the time of receipt of such a proposal, together with
their successors as may be approved by the Board of Directors in advance,
no longer constitute a majority of the Board of Directors. Prior to the
adoption of the amendments, the Rights could have been redeemed, even if
there is a change in a majority of the directors, with the concurrence of a
majority of the "continuing" directors. As a result, if the 17 AlliedSignal
Nominees are elected to the AMP Board of Directors, the Rights Agreement
will become nonredeemable and, as an ongoing agreement, will result in the
conditions to the Second Offer relating to the Rights Agreement not being
satisfied prior to November 6, 1999.
Based on the Board's confidence in management's ability to
implement the profit improvement plan, the Board has determined that AMP
would not have a shareholder rights plan at any time during the six-month
period following November 6, 1999. This is intended to provide assurance to
AMP shareholders that once a substantial portion of the benefits of the
profit improvement plan have been realized, the condition relating to the
Rights Agreement contained in the Amended AlliedSignal Offer or in the
Second Offer or any similar condition contained in any other offer which
may be made will be satisfied at such time.
Amendment No. 4 to the Rights Agreement was adopted by the Board in
response to the Amended AlliedSignal Offer and the Rights Plan Proposal,
which the Board believes were intended to "end-run" the amendments to the
Rights Agreement previously adopted by the Board at its August 20, 1998
meeting and reflected in Amendment No. 3. As previously described, one of
the proposals for which AlliedSignal intends to seek consents is the Rights
Plan Proposal, a proposal which would have the effect of stripping the
Board of all authority, rights and duties with respect to the Rights
Agreement and vest such authority, rights and duties in individuals hand
picked by AlliedSignal. By reducing the threshold at which the Rights will
be triggered and by making the Rights nonredeemable and limiting the
discretionary authority of directors if the Rights Plan Proposal is
adopted, Amendment No. 4, like Amendment No. 3, is intended to enhance
AMP's ability to implement the profit improvement plan through November 6,
1999, the expiration date of the Rights Agreement, and thereby protect the
value expected to be generated by the profit improvement plan for AMP and
its relevant constituencies, including its shareholders.
The Board believes, based on the advice of Pennsylvania counsel,
that the Rights Agreement, including Amendment No. 3 and Amendment No. 4
described above, is valid under Pennsylvania laws. In this regard, the
Board recognized that such actions are likely to be challenged by
AlliedSignal or others and that the ultimate validity of such amendments
may be reviewed and decided by a court.
CERTAIN LITIGATION
On August 4, 1998, AlliedSignal filed a complaint against AMP in
the United States District Court for the Eastern District of Pennsylvania
(AlliedSignal Corporation v. AMP Incorporated, Civil Action No.
98-CV-4058). In its initial complaint, AlliedSignal sought a declaratory
judgment as to, among other things, the applicability and/or validity of
the Continuing Director provisions contained in AMP's Rights Agreement and
the constitutionality of certain provisions of the Pennsylvania Business
Corporation Law under the Commerce Clause and Supremacy Clause of the
United States Constitution. In addition, AlliedSignal sought to enjoin AMP
from, among other things, (i) fixing a record date for determining the
shareholders entitled to vote on the proposals in the AlliedSignal Consent
Solicitation more than ten days after the date of AlliedSignal's written
notice requesting that a record date be set; (ii) increasing the size of
AMP's Board and filling the new seats with Board nominees after
commencement of the AlliedSignal Consent Solicitation; (iii) refusing to
redeem the Rights issued under AMP's Rights Agreement or amending the
Rights Agreement so as to make the Rights inapplicable to the AlliedSignal
Offer, and refusing to grant prior approval of the Original AlliedSignal
Offer and second-step merger for purposes of the Pennsylvania Business
Combination Statute; (iv) amending its By-laws to in any way impede the
effective exercise of the shareholder franchise; or (v) taking any steps to
impede or frustrate the ability of AMP's shareholders to consider or make
their own determination as to whether to accept the terms of the Original
AlliedSignal Offer and the proposals in the AlliedSignal Consent
Solicitation, or taking any other action to thwart or interfere with the
AlliedSignal Offer or the AlliedSignal Consent Solicitation.
On August 24, 1998, AMP filed its answer to the complaint filed by
AlliedSignal on August 4, 1998 in the United States District Court for the
Eastern District of Pennsylvania. In its answer, AMP denied that
AlliedSignal is entitled to any relief under its complaint and raised
several affirmative defenses.
On September 14, 1998, AlliedSignal filed a motion to amend its
complaint. The proposed amended complaint seeks (i) declaratory and
injunctive relief declaring Amendment No. 3 to the Rights Agreement,
approved by the Board on August 20, 1998, to be invalid under Pennsylvania
law; or to the extent that Amendment No. 3 is permitted under Pennsylvania
law, declaring the law as so applied unconstitutional under the Supremacy
and Commerce Clauses of the United States Constitution and (ii) declaratory
and injunctive relief prohibiting AMP's Board from taking any further
action which might interfere with the Amended AlliedSignal Offer or the
AlliedSignal Consent Solicitation. AMP has agreed that it will not oppose
AlliedSignal's motion to amend the complaint. On the same day, AlliedSignal
also filed a motion for (1) partial summary judgment on the claim for a
declaratory judgment set forth in the amended complaint that Amendment No.
3 is invalid, or, in the alternative, a preliminary injunction restraining
enforcement of Amendment No. 3; and (2) a preliminary injunction
prohibiting AMP's Board from taking any action that would make the
shareholder vote on the AlliedSignal Consent Solicitation invalid.
On September 22, 1998, AlliedSignal filed a motion for leave to
file a second amended complaint in the United States District Court for the
Eastern District of Pennsylvania. The proposed second amended complaint
seeks to broaden AlliedSignal's claim regarding AMP's Amendment No. 3 to
the Rights Agreement to incorporate a challenge to AMP's Amendment No. 4 to
the Rights Agreement. Among other things, it seeks (i) a declaratory
judgment that certain provisions of Amendment No. 4 to the Rights Agreement
which make the Shareholder Rights Plan non-amendable are in violation of
Pennsylvania law, (ii) a declaratory judgment that, to the extent that
Pennsylvania law authorizes the amendment, such law is unconstitutional
under the Supremacy Clause of the United States Constitution because it
violates the Commerce Clause and the Williams Act, (iii) an order enjoining
the enforcement of Amendment No. 4 to the Rights Agreement, and (iv) an
order enjoining AMP and all persons acting on AMP's behalf from taking
action to interfere with the AlliedSignal Consent Solicitation.
AlliedSignal is also seeking summary judgment with respect to its expanded
claim regarding AMP's amendments to the Rights Plan.
On September 25, 1998, AlliedSignal filed a motion for leave to
file a third amended complaint in the United States District Court for the
Eastern District of Pennsylvania. Adding to the claims asserted in its
earlier complaints, AlliedSignal's proposed third amended complaint
challenges the November 16, 1998 record date set by AMP's Board of
Directors for the solicitation of consents regarding AlliedSignal's new
Rights Plan Proposal. AlliedSignal asks the Court either to fix a record
date of October 15, 1998 for the consent solicitation on the Rights Plan
Proposal or to order AMP to fix October 15, 1998 as the record date for
that proposal.
Four purported shareholder class action lawsuits were filed by AMP
shareholders against AMP and its Board of Directors in the United States
District Court for the Eastern District of Pennsylvania on or about August
6 and 7, 1998 (Blum v. William J. Hudson, Jr. et al, Civil Action No.
98-CV-4109; Silver v. AMP, Incorporated et al, Civil Action No. 98-CV-4120;
Goldstein v. AMP, Incorporated, et al, Civil Action No. 98-CV-4127;
Margolis Partnership v. AMP, Incorporated, et al, Civil Action No.
98-CV-4187). These complaints alleged similar acts of misconduct, i.e.,
that AMP and its directors improperly refused to consider the Original
AlliedSignal Offer and wrongfully relied upon provisions of AMP's Rights
Agreement and the Pennsylvania Business Corporation law to block the
Original AlliedSignal Offer. Plaintiffs in these suits seek, among other
things, a declaratory judgment that (i) the continuing director provisions
contained in AMP's Rights Agreement violate Pennsylvania law and the
Board's fiduciary duties; (ii) certain provisions of the Pennsylvania
Business Corporation Law are unconstitutional under the Commerce, Supremacy
and Due Process Clauses of the United States Constitution; and (iii)
establishes the proper record date for the AlliedSignal Consent
Solicitation. In addition, plaintiffs seek to enjoin AMP and the Board
from, among other things, (i) refusing to redeem the Rights, to amend the
Rights Agreement so as to eliminate the Continuing Director provisions, or
to render the Rights inapplicable to the Original AlliedSignal Offer and
second-step merger for purposes of the Pennsylvania Business Combination
Law; (ii) amending AMP's By-laws to impede the effective exercise of the
shareholder franchise; (iii) taking any other steps to impede or frustrate
the ability of AMP's shareholders to consider or make their own
determination as to whether to accept the terms of the Original
AlliedSignal Offer or the proposals in the AlliedSignal Consent
Solicitation; (iv) increasing the size of AMP's Board and filling the new
seats with Board nominees after commencement of the AlliedSignal Consent
Solicitation; and (v) fixing a record date for determining the shareholders
entitled to vote on the proposals in the AlliedSignal Consent Solicitation
more than ten days after the date of AlliedSignal's written notice to AMP.
Plaintiffs further requested that the Court order AMP's Board to (i)
cooperate fully with any entity or person, including AlliedSignal, having a
bona fide interest in proposing any transaction that would maximize
shareholder value; (ii) immediately undertake an appropriate evaluation of
AMP's worth as a merger or acquisition candidate; (iii) take all
appropriate steps to effectively expose AMP to the marketplace in an effort
to create an active auction of AMP; (iv) act independently so that the
interests of AMP's public shareholders will be protected; and (v)
adequately ensure that no conflicts of interest exist between the
individual defendants' own interest and their fiduciary obligations. On
August 19, 1998, the Court ordered the consolidation of the four
shareholder actions, and further ordered that the consolidated action be
coordinated with the AlliedSignal action for purposes of discovery.
Plaintiffs in the consolidated action were to file a consolidated amended
complaint on or before September 28, 1998.
AMP intends to defend vigorously against these actions.
On August 21, 1998, AMP filed a complaint in the United States
District Court for the Eastern District of Pennsylvania against
AlliedSignal and PMA (AMP Incorporated v. AlliedSignal Corporation, et al.,
Civil Action No. 98-CV-4405). The complaint seeks declaratory and
injunctive relief to prevent AlliedSignal from pursuing its attempt to pack
the AMP Board of Directors with AlliedSignal executive officers and
directors who would have an irreconcilable conflict of interest were they
to serve as directors of AMP. The complaint alleges that the Schedule 14D-1
filed by AlliedSignal and PMA with the Securities and Exchange Commission
is false and misleading because it fails to disclose that AlliedSignal's
representatives on the AMP Board of Directors would have a conflict of
interest and how AlliedSignal would propose to deal with such conflict, and
that AlliedSignal's attempt to pack the Board would prevent the current
members of the Board from fulfilling their fiduciary duties to AMP under
Pennsylvania law.
On September 11, 1998, AMP filed a motion for summary judgment on
the Second Claim for Relief of its complaint against AlliedSignal and PMA.
The Second Claim for Relief is based upon the fact that AlliedSignal's
attempt to pack the AMP Board with AlliedSignal's directors and senior
management would create pervasive, irreconcilable conflicts of interest.
The AlliedSignal Nominees have an undivided duty of loyalty to AlliedSignal
that would conflict with their ability to fulfill their fiduciary duties to
AMP under Pennsylvania law. AMP's motion seeks an order declaring that the
AlliedSignal Consent Solicitation is in violation of Pennsylvania law.
On September 22, 1998, AMP filed an amended complaint against
AlliedSignal in the United States District Court for the Eastern District
of Pennsylvania. The amended complaint broadens the claims asserted by AMP
in its initial complaint. It seeks, among other things, (i) an order
declaring that the Pennsylvania Control-Share Acquisitions statute bars
AlliedSignal from voting any shares it may acquire pursuant to the Amended
AlliedSignal Offer and (ii) a declaratory judgment that AlliedSignal's
Rights Plan Proposal, which purports to delegate to non- directors
authority relating to the Shareholder Rights Plan violates Pennsylvania
law. The amended complaint also alleges violations of certain requirements
of the federal securities laws relating to tender offers.
The Court heard arguments on AMP's and AlliedSignal's
motions on September 28, 1998. The Court denied AlliedSignal's request to
fix October 15, 1998 as the record date for the Rights Plan Proposal, and
accordingly the record date for the Rights Plan Proposal will remain
November 16, 1998 as set by the Board. The Court has not yet issued a
decision on the other matters heard by the Court.
BOARD OF DIRECTORS
The following table identifies the current members of the Board.
Director, Age and Year
First Elected Director Principal Occupation and Business Experience
- ----------------------- --------------------------------------------
Ralph D. DeNunzio President of Harbor Point Associates, Inc., New
Age 66 York, New York, aprivate investment and consulting
1977 (3)(5) firm, having served in that capacity for more than
the past five years. Mr. DeNunzio also serves as a
director of Harris Corporation, Federal Express
Corporation, and NIKE, Inc.
Barbara Hackman President and Chief Executive Officer of Barbara
Franklin Franklin Enterprises, Washington, D.C., a private,
Age 58 international consulting and investment firm, since
1993(2)(4) 1995. Ms. Franklin served as the U.S. Secretary of
Commerce in the Bush Administration. She also
serves as a director of Aetna, Inc., Cincinnati
Milacron Inc., The Dow Chemical Company, and
MedImmune, Inc.
Joseph M. Hixon III Retired Chairman of the Board of Hixon Properties
Age 60 Incorporated, San Antonio, Texas, maintaining real
1988(2)(5) estate holdings and other investments. Mr. Hixon
served as Chairman of Hixon Properties Incorporated
for more than five years.
William J. Hudson, Jr. Vice Chairman of the Company since August 20, 1998
Age 64 and prior thereto served as Chief Executive Officer
1992(1)(5) and President of the Company. Mr. Hudson has served
as an officer of the Company for more than the past
five years. He also serves as a director of
Carpenter Technology Corporation and The Goodyear
Tire & Rubber Company.
Joseph M. Magliochetti President, Chief Operating Officer and a director
Age 56 of Dana Corporation, Toledo, Ohio, a manufacturer
1996(2) of automotive components and systems. Mr.
Magliochetti has served as President of Dana
Corporation since 1995, prior to which he was
President of Dana's North American operations. He
was elected a director of Dana Corporation in 1996
and elected Chief Operating Officer in 1997.
Robert Ripp Chairman of the Board of Directors and Chief
Age 57 Executive Officer of the Company since August 20,
1998 1998. Mr. Ripp has served as an officer of the
Company since 1994. Mr. Ripp was previously Vice
President and Treasurer of IBM since July 1989.
Harold A. McInnes Retired Chairman of the Board of Directors and
Age 71 Chief Executive Officer of the Company. Mr. McInnes
1981(1)(4) served as an officer of the Company for more than
five years.
Jerome J. Meyer Chairman of the Board and Chief Executive Officer
Age 60 of Tektronix, Inc., Wilsonville, Oregon, an
1996(2) electronic equipment manufacturer. Mr. Meyer has
served as Chairman of the Board and Chief Executive
Officer and as a director of Tektronix for more
than the past five years. He also serves as a
director of Esterline Technologies Corporation and
Enron, Corp.
John C. Morley President of Evergreen Ventures, Ltd., Cleveland,
Age 67 Ohio, a family-owned investment company, since
1991(3)(5) 1995. Mr. Morley is a former President, Chief
Executive Officer and director of Reliance Electric
Company, Cleveland, Ohio, a manufacturer of
electrical, mechanical power transmission, and
telecommunications equipment and systems, having
served in that capacity for more than five years.
He also serves as a director of Cleveland Cliffs,
Inc., Ferro Corporation, and Lamson & Sessions,
Inc.
Paul G. Schloemer Retired President and Chief Executive Officer of
Age 70 Parker Hannifin Corporation, Cleveland, Ohio, an
1991(3)(4) international manufacturer of hydraulic, pneumatic
and electromechanical components. Mr. Schoemer has
served as a director of Parker Hannifin Corporation
for more than the past five years and he is a
former President and Chief Executive Officer of
that company, having served in that capacity for
more than five years. He also serves as a director
of Esterline Technologies Corporation and
Rubbermaid Inc.
Takeo Shiina Chairman of the Advisory Council of IBM Japan,
Age 69 Ltd., a manufacturer of computer systems located in
1995(2) Japan. Mr. Shiina served as a board member of IBM
Japan, Ltd. from 1962 until his retirement as Chief
Executive Officer in 1992, having served in the
capacity as Chief Executive Officer for more than
five years. He also serves as a director of Air
Products and Chemicals, Inc. and as a member of the
European Advisory Board of Bankers Trust Company.
___________
(1) Member of the Executive Committee of the Board.
(2) Member of the Audit Committee of the Board.
(3) Member of the Compensation and Management Development Committee of
the Board.
(4) Member of the Nominating and Governance Committee of the Board.
(5) Member of the Finance Committee of the Board.
SECURITY OWNERSHIP OF DIRECTORS
The Company's Corporate Governance guidelines encourage each member
of the Board to hold Common Stock in an amount having a market value of at
least four times the annual retainer fee. The following table sets forth,
as of September 15, 1998, the number of shares of Common Stock beneficially
owned by each director.
<TABLE>
<CAPTION>
Amount of Beneficial Amount of Phantom Total Beneficial and
Ownership Ownership Phantom Ownership
Name of Owner (shares)(1)(2) (shares)(3) (shares)
- ------------------------------- ---------------------- ------------------- --------------------
<S> <C> <C> <C>
Ralph D. DeNunzio 10,000 3,192 13,192
Barbara Hackman Franklin 7,410 1,892 9,302
Joseph M. Hixon III 1,651,114(5) 8,305 1,659,419
William J. Hudson, Jr. 409,138(8)(9) 35,957(4) 445,095
Joseph M. Magliochetti 4,000 2,183 6,183
Harold A. McInnes 42,689 0 42,689
Jerome J. Meyer 7,300 3,160 10,460
John C. Morley 9,400 6,969 16,369
Robert Ripp 170,645(6)(8)(9) 16,314(4) 186,959
Paul G. Schloemer 10,000(7) 0 10,000
Takeo Shiina 8,120 2,811 10,931
</TABLE>
(1) Each director owns less than 1% of the Company's outstanding
Common Stock.
(2) Unless otherwise indicated, each director possesses sole voting
and dispositive power (beneficial ownership) with respect to
the shares set forth opposite his or her name. Numbers shown
in this column include options the director has the right to
acquire as beneficial owner within sixty days after
September 15, 1998.
(3) Numbers shown in this column include phantom shares: (i)
credited to outside directors under the Outside Directors
Deferred Stock Accumulation Plan; and (ii) credited to
outside and non-employee directors for compensation deferred
at the election of the director as described on page __ of
this Consent Revocation Statement.
(4) Designated executive officers of the Company may defer up to
50% of their base salary and all officers are entitled to
defer receipt of all or a portion of their annual cash
bonus. Deferred compensation may be allocated to a phantom
AMP Common Stock account under the Company's Deferred
Compensation Plan as described in footnote 1 to the Summary
Compensation Table on page of this Consent Revocation
Statement. Such phantom shares are reported in this number.
This number also includes phantom shares of Common Stock
credited to the designated executive officer in an amount
equal to the dividend earned on Performance Restricted
Shares, as described in footnote 3 to the Summary
Compensation Table on page and footnote 3 to the Security
Ownership of Executive Officers Table on page of this
Consent Revocation Statement.
(5) Mr. Hixon holds 15,791 and 120,000 of these shares in two
limited partnerships and shares voting and dispositive
powers. In addition to the beneficial ownership shown in the
table, Mr. Hixon has a 2% residual beneficial interest but
no voting or dispositive powers in a trust that holds 7,392
shares of Common Stock of the Company.
(6) In connection with the assumption of his new positions with
AMP, Mr. Ripp was granted (i) options under the 1993
Long-Term Equity Incentive Plan to purchase 60,000 shares of
Common Stock at an exercise price equal to $44.85 per share,
which options will vest 100% after three years, and (ii) a
restricted stock award of 25,000 shares of Common Stock,
vesting on August 1, 2006 (Mr. Ripp's normal retirement
date) or at his earlier death, disability or mutually agreed
upon termination of employment. The restricted stock award
made to Mr. Ripp provided that (A) upon the occurrence of a
Change of Control a cash payment would be made for any then
outstanding restricted shares on the date such shares would
otherwise have vested (i.e., on Mr. Ripp's normal retirement
date or at his earlier death, disability or mutually agreed
upon termination of employment); provided, that if this
cashout provision would adversely affect AMP's ability to
consummate a transaction which is to be accounted for as a
pooling of interests, the restricted shares would not be
cashed out, but rather the shares would be cancelled and the
appropriate number of unrestricted shares would be delivered
on the otherwise applicable vesting date, and (B) such
restricted stock award would be subject to the terms of Mr.
Ripp's Executive Severance Agreement.
(7) Mr. Schloemer holds 1,400 of these shares of Common Stock of
the Company in a family trust of which he is co-trustee with
his wife and shares voting and dispositive powers.
(8) A portion of the shares reported for Messrs. Hudson and Ripp
are Performance Restricted Shares granted under the
Company's 1993 LongTerm Equity Incentive Plan. Further, a
portion of the shares reported for Messrs. Hudson and Ripp
are held in the Company's Employee Savings and Thrift Plan.
(9) Under the Company's former Bonus Plan (Stock Plus Cash), at
August 20, 1998, Mr. Hudson also had 6,668 Stock Bonus
Units. Under the current 1993 Long-Term Equity Incentive
Plan, Mr. Hudson has 419,500 Stock Options, including 61,800
Stock Options transferred to a family limited partnership
for the benefit of Mr. Hudson's immediate family; Mr. Ripp
has 208,400 Stock Options. Vesting of stock options will
accelerate upon a change of control.
THE BOARD OF DIRECTORS
COMPENSATION
A director who is not an employee of the Company is paid $26,000
per year for services as a director and also $1,000 for each day in
attendance at a meeting of the Board. Additionally, a director is paid
$1,000 for attendance at each meeting of any committee of the Board on
which he or she serves. The chairperson of any such committee is paid an
annual retainer of $2,500. An outside or non-employee director may also be
paid $1,000 per day for special services or assignments requested by the
Chairman and the Chief Executive Officer of the Company. A director who is
also an employee of the Company does not receive any director or committee
fees. During 1997 the Board of Directors held six meetings.
In 1997, total compensation earned by the directors was as follows:
Director Total Director
Compensation
- ------------------------------------------- ---------------
Ralph D. DeNunzio.......................... $ 43,500
Barbara Hackman Franklin................... 41,500
Joseph M. Hixon III........................ 41,000(1)
William J. Hudson, Jr...................... 0(2)
Joseph M. Magliochetti..................... 37,000(1)
James E. Marley............................ 0(2)
Harold A. McInnes.......................... 134,000(3)
Jerome J. Meyer............................ 35,000(1)
John C. Morley............................. 43,500(1)
Paul G. Schloemer.......................... 37,000
Takeo Shiina............................... 36,000(1)
---------------
(1) This compensation includes amounts with respect to which the
director elected to defer receipt under the terms of the
Company's deferred compensation plan for outside and
non-employee directors, described below.
(2) Messrs. Hudson and Marley were employees as well as
directors of the Company in 1997, and therefore did not
receive any separate director or committee fees.
(3) This compensation includes consulting fees paid to Mr.
McInnes, a former Chairman of the Board and Chief Executive
Officer of the Company, under a consulting agreement with
the Company.
Under the agreement Mr. McInnes was paid a monthly fee of
$8,333 for services other than in his capacity as a
director. The consulting agreement expired on December 31,
1997.
Outside and non-employee directors are permitted to defer receipt
of all or a portion of the annual retainer and the meeting fees. The period
of the deferral is within the discretion of each director, provided however
that payment must be made or commenced no later than the earliest of the
death of the director, a change in control and termination of the
director's services, or the year following the year in which he or she
reaches the age of 72. Deferred compensation may be allocated to either or
both of the following investment options: (i) an interest- bearing account
with interest credited monthly based on 120% of the Long Term Applicable
Federal Rate as published by the Internal Revenue Service and adjusted
quarterly; and (ii) a phantom AMP Common Stock account in which phantom
dividends are reinvested in further phantom stock units. Allocations or
changes in allocations can be made annually and apply prospectively to
compensation earned in future years. Payments of deferred director
compensation can be made in a lump sum or in up to ten annual installments.
The Stock Option Plan for Outside Directors provides that the
outside directors shall receive a grant of 2,000 stock options in the
Company's Common Stock when they are first elected to the Board and in each
July thereafter. Up to a maximum of 10 awards may be made to any one
director and up to 300,000 shares may be awarded to all outside directors
in the aggregate during the 10-year term of the plan. These options vest
after 1 year and remain exercisable for 9 years.
BENEFIT PLANS
The Company provides benefits to the directors, the amount of which
varies dependent upon whether the director is presently or was ever
employed by the Company. The Company provides Director and Officer
Liability and Indemnification insurance coverage for all directors.
Directors who are not presently and have never been employed by the Company
(an "Outside Director") are provided with life insurance coverage. Travel
accident insurance coverage is provided to directors who are not currently
employed by the Company.
All directors are eligible to participate in the Company's Employee
Gift Matching Program. Under this program, the Company will match
qualifying charitable contributions made by directors to accredited public
and private schools, colleges, universities and graduate schools in the
United States. The maximum aggregate of a director's gifts to all
institutions during a calendar year that will be matched is $5,000.
RETIREMENT
Currently there are two plans that provide retirement-oriented
deferred compensation for Outside Directors (as defined above), conditioned
upon 5 years of service as a member of the Board. Outside Directors elected
to the Board on or after January 1, 1996 generally receive "retirement"
compensation under the Outside Director Deferred Stock Accumulation Plan
("Accumulation Plan"). Outside Directors who joined the Board prior to
January 1, 1996 were provided a one-time election to continue participation
in the retirement plan in place prior to adoption of the Accumulation Plan
or convert to the Accumulation Plan.
Under the Accumulation Plan, each Outside Director will receive 300
shares of phantom AMP Common Stock when first elected to the Board, and on
the first day of each of the nine subsequent calendar years of Board
service. The phantom share awards are credited to a deferred phantom stock
account and have no voting rights. On each dividend payment date, phantom
dividends corresponding to the number of accumulated phantom shares are
credited to the phantom stock account and deemed to be invested in
additional phantom shares.
An Outside Director's deferred phantom stock account vests upon the
earlier of the date the director has at least 5 years of service on the
Board, the date of the director's death while serving on the Board, or the
date of the director's 72nd birthday. If the director terminates Board
service with less than 5 years of service (other than on account of death
or attainment of age 72), the account is forfeited. The vested balance in
the deferred phantom stock account is paid to the Outside Director in cash
upon termination of Board service.
Under the retirement plan in effect prior to adoption of the
Accumulation Plan, an Outside Director who has either reached the normal
retirement date (the end of the calendar year in which the director reaches
age 72) or retired early due to disability, and who has served a minimum of
five years on the Board, is eligible for an annual retirement benefit. The
annual retirement benefit is equal to a percentage of the Outside
Director's annual base retainer at the time of retirement, with the actual
percentage being based on the Outside Director's years of service.
In the event of a "change of control", the annual retirement
benefit to which an Outside Director would be entitled based on his or her
years of service at the date service to the Board ceases for any reason
shall be fully vested and payable immediately, without regard to the
Outside Director's then attained age.
A "change of control" as that term is used in this Consent
Revocation Statement, unless otherwise indicated, would generally be deemed
to have occurred if (a) any person or group directly or indirectly acquires
beneficial ownership of 30% or more of the Company 's issued and
outstanding shares of Common Stock, or (b) there occurs a change in the
Board such that the directors constituting the Board at a given point in
time (the "Incumbent Board") and any subsequently elected directors (other
than directors whose initial assumption of office is in connection with an
election contest) who were approved by a vote of at least two-thirds of the
directors still in office who either were directors on the Incumbent Board
or whose assumption of office was previously so approved, no longer
constitute a majority of the Board, or (c) a merger or consolidation of the
Company or the issuance of voting securities of the Company in connection
therewith, other than (i) a merger or consolidation resulting in the voting
securities of the Company continuing to represent at least 66 2/3% of the
combined voting power of the voting securities of the surviving entity, or
(ii) a merger or consolidation effected to implement a recapitalization of
the Company in which no person or group directly or indirectly acquires
beneficial ownership of 30% or more of the Company's issued and outstanding
shares of Common Stock, or (d) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition of all or
substantially all of the assets of the Company, other than such a sale or
disposition to an entity of which at least 70% of the combined voting power
of the voting securities are held by shareholders in substantially the same
proportions as their ownership of the Company immediately prior to such
sale. If the Second Offer is consummated or if the AlliedSignal Nominees
are elected, a "change in control" will occur.
COMMITTEES AND MEETINGS
The Board of Directors has five standing committees: the Audit
Committee, the Compensation and Management Development Committee, the
Nominating and Governance Committee, the Finance Committee and the
Executive Committee.
The Audit Committee of the Board of Directors consults with the
Company's management regarding selection of the independent public
accountant; concurs in the appointment or dismissal of the Director,
Internal Audit; holds periodic meetings with the Company's internal and
independent auditors and financial officers as appropriate to monitor
control of the Company's financial resources and audit functions; reviews
the arrangements and related fees for and the scope of the independent
auditor's examination; considers the audit findings and management
response; reviews the independent public accountant's non-audit fees;
reviews significant accounting issues, regulatory changes and accounting or
reporting developments and the impact of such on the Company's financial
statements; reviews the status of special investigations; reviews the
financial statements; oversees the quarterly reporting process; discusses
with the Company's management, the Director, Internal Audit and in-house
legal counsel significant issues relating to litigation or compliance with
environmental or governmental regulations; reviews the Company's electronic
data processing procedures and controls; and reviews the Corporate Code of
Conduct and Conflict of Interest policies and receives reports of
disclosures of any deviations from these policies. During 1997 the Audit
Committee held five meetings.
The Compensation and Management Development Committee of the Board
of Directors makes recommendations to the Board regarding successors to and
the salaries of the Chairman and the Chief Executive Officer and President;
conducts annual performance reviews of the Chairman and the Chief Executive
Officer and President; reviews the salary budget for the executive officers
as a group and salary recommendations made by the Chief Executive Officer
and President for the named executive officers; makes recommendations to
the Board regarding changes to the Company's incentive compensation plans,
executive-only benefit plans and tax-qualified pension and thrift plans;
and reviews participation in, establishes certain targets for, and acts on
awards under the Company's incentive compensation plans for management and
key employees. During 1997 the Compensation and Management Development
Committee held five meetings.
The Nominating and Governance Committee of the Board of Directors
establishes the criteria for selecting candidates for nomination to the
Board; actively seeks candidates who meet those criteria, are highly
qualified and have diverse backgrounds, including qualified female and
minority candidates; makes recommendations to the Board of nominees to fill
vacancies on, or as additions to, the Board; makes recommendations to the
Board on changes in the size, composition and structure of the Board; makes
recommendations to the Board on compensation and benefit programs for the
Board; as appropriate, reviews the performance of the directors and reports
its findings to the Chairman and, in its discretion, to the Board itself;
and considers matters relating to corporate governance and makes decisions
concerning those matters that should be recommended for action by the Board
in executive session. The Nominating and Governance Committee will consider
nominees for election to the Board that are recommended by shareholders
provided that a complete description of the nominees' qualifications,
experience and background, together with a statement signed by each nominee
in which he or she consents to act as such, accompany the recommendations.
Such recommendations should be submitted in writing to the attention of the
Chairman of the Company, and should not include self-nominations. During
1997 the Nominating and Governance Committee held one meeting.
The Finance Committee of the Board of Directors reviews and
considers key financial objectives and measures in the AMP Global Strategic
Plan, the Company's cost of capital, cash generation, cash balance
objectives and balance sheet objectives. The Committee also reviews
strategic transactions valued in excess of $10 million; receives periodic
reports on the portfolio of equity/venture capital investments; reviews and
assesses the performance and results of acquisitions and related finance
and accounting practices; reviews management's recommendations regarding
public stock issues and public and private debt issues; advises management
and the Board on the Company's share repurchase strategies; periodically
reviews the Company's dividend policy, dividend recommendations, stock
split proposals and investor relations plans; reviews periodically the
Company's risk management policies and practices (not including internal
operating controls and financial reporting procedures relating to risk
management policies and practices); reviews periodic reports from the
Company's Pension Committee concerning the investment status, investment
policy guidelines and accounting treatment of the Company's benefit plans
involving funds held in trust or otherwise managed and invested on behalf
of the participants in the benefit plans; reviews and approves the
investment policy guidelines for the AMP Foundation's assets; and reviews
the annual charitable giving by the AMP Foundation and the Company, and the
policy guidelines governing such charitable giving. During 1997 the Finance
Committee held three meetings.
The Executive Committee of the Board of Directors has been
delegated the authority to act on behalf of the Board with respect to any
matter within the ordinary course of the business of the Company. The
Committee typically acts on proposed capital expenditures and financial
transactions that require immediate Board action at times that are not near
to the regularly scheduled Board meetings. Certain matters, including those
that under the Pennsylvania Business Corporation Law cannot be delegated by
the Board, are specifically excluded from the authority of the Executive
Committee. All actions taken by the Committee are reported at the next
meeting of the Board for concurrence by the full Board. During 1997 the
Executive Committee did not meet and took no action either in a meeting of
the Committee or by written consent in lieu of a meeting.
EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
------------------------------------ -------------------------
Awards
-------------------------
Restricted Securities All Other
Other Annual Stock Underlying Compensation
Name and principal Salary Bonus Compensation Awards Options/ ($)
position (1) Year ($) ($) ($) ($) SARs (#)
- --------------------------- ----- ------- ------ ------------- ----------- ------------- ------------
(a) (b) (c)(2) (d)(2) (e)(3) (f)(4) (g)(5) (h)
- --------------------------- ----- ------- ------ ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
William J. Hudson, Jr. 1997 810,000 534,600 35,608 1,861,200 63,900 126,940(6)
Chief Executive Officer 1996 810,000 0 32,548 1,717,713 75,600 110,640
and President, and a 1995 700,000 437,000 17,947 1,071,875 60,000 173,380
Director
James E. Marley 1997 648,000 429,624 57,707 1,489,900 51,100 99,852(7)
Chairman 1996 648,000 0 26,018 1,373,438 60,500 85,952
1995 560,000 291,000 40,707 857,500 45,000 83,840
Robert Ripp 1997 400,008 198,804 3,440 733,200 25,100 71,915(8)
Executive Vice President 1996 375,000 46,875 24,157 578,675 25,500 67,000
1995 325,008 137,933 13,560 390,163 16,700 61,001
Juergen Gromer(10) 1997 393,189 176,111 28,141 437,100 15,000 0
Vice President 1996 425,626 67,975 19,018 0 22,400 0
1995 412,917 63,687 13,517 0 21,200 0
John E. Gurski 1997 370,008 183,894 165,623 620,400 21,200 49,680(9)
Vice President 1996 350,004 46,200 225,067 538,388 23,800 40,000
1995 285,000 124,315 172,587 317,275 13,600 55,357
</TABLE>
- -----------------------------
(1) Indicated positions are as of December 31, 1997. Effective
August 20, 1998, (i) Mr. Hudson retired as Chief Executive
Officer and President of the Company and was appointed Vice
Chairman of the Company, (ii) Mr. Marley retired as Chairman of
the Board, (iii) Mr. Ripp was appointed Chairman and Chief
Executive Officer of the Company, and (iv) Dr. Juergen Gromer
was appointed to the position of Senior Vice President - Global
Industry Businesses. In connection with the assumption of his
new position with AMP, Mr. Ripp's salary was increased to an
annual rate of $600,000.
(2) Under the Deferred Compensation Plan, designated executive
officers are permitted to defer receipt of up to 50% of their
annual base salary and all officers of the Company are entitled
to defer receipt of all or a portion of their annual cash
bonus. The period of deferral is within the discretion of the
executive, but is generally until the year following
termination of employment. During the period of deferral, the
deferred compensation may be allocated or reallocated by the
executive between and among the following investment options:
(i) an interest-bearing account with interest credited monthly
based on 120% of the Mid-Term Applicable Federal Rate as
published by the Internal Revenue Service, adjusted monthly and
(ii) a phantom AMP Common Stock Account in which the phantom
dividends are reinvested in the phantom stock units. Payments
of the deferred compensation can be made at the executive's
election in either a lump sum or up to ten annual installments.
Amounts of salary or bonus attributable to 1995, 1996 and 1997,
the receipt of which has been deferred under this plan, are
nevertheless included in columns (c) and (d), as appropriate,
of the Summary Compensation Table.
(3) Unless otherwise indicated, no executive officer named in the
Summary Compensation Table received personal benefits or
perquisites in excess of the lesser of $50,000 or 10% of his
total compensation reported in columns (c) and (d). Reported in
this column is annual compensation related to: (i) the Cash
Bonus paid under the Company's former Bonus Plan (Stock Plus
Cash) to cover United States income taxes as described in
footnote 1 to the Aggregated Option/SAR Exercises in 1997 and
FY-End Option/SAR Values table, pages , and fractional shares
of the Bonus Plan Stock Bonus; and (ii) reimbursement of
relocation expenses and payments of estimated income taxes
relating to reimbursement of relocation expenses to Mr. Ripp in
1995 through 1997 and Mr. Gurski in 1996 and 1997; (iii)
overseas allowances for Mr. Gurski in 1995 and 1996, and (iv)
certain payments of estimated taxes relating to Mr. Gurski's
assignment overseas during 1995 and 1996, including payments
made in 1996 and 1997 with regard to previous years' tax
obligations and reimbursements or refunds received by the
Company for tax payments made in previous years.
(4) During 1997, 180,900 shares of restricted stock were granted by
the Company, resulting in a total of 438,620 shares of
restricted stock held at December 31, 1997. These shares had an
aggregate value of $18,422,040 based upon a $42.00 per share
closing price of the Company's Common Stock as reported on the
New York Stock Exchange Composite Tape on December 31, 1997,
and dividends are paid on 43,120 of these shares to the same
extent as any other shares of the Company's Common Stock. The
number of shares of restricted stock includes certain
time-vesting restricted shares as well as Performance
Restricted Shares awarded under the Company's 1993 Long-Term
Equity Incentive Plan, which vest in 3 years based on
achievement of minimum average annual return on equity and
average annual earnings growth objectives for the Company.
Dividends earned on Performance Restricted Shares, of which
395,500 were held at December 31, 1997, are credited to the
executive officer's account and are deemed to be invested in
phantom shares of Common Stock. These phantom shares vest only
when, and to the extent, the associated Performance Restricted
Shares vest.
(5) Includes awards made pursuant to the Company's 1993 Long-Term
Equity Incentive Plan. The Long- Term Equity Incentive Plan is
described in footnote 1 to the "Option/SAR Grants in 1997"
table on pages of this Consent Revocation Statement.
(6) Includes $3,840 as the company-matching contribution under the
Employee Savings and Thrift Plan; $15,600 as the
company-matching contribution under the Deferred Compensation
Plan; and $107,500 as the total premium paid by the Company in
1997 under a split-dollar insurance plan, including both the
portion of the premium that is attributable to term life
insurance coverage for Mr. Hudson and the full dollar value of
the remainder of the premium. The split-dollar insurance plan
provides life insurance coverage for Mr. Hudson equal to twice
his base salary (in lieu of the coverage available under the
Company 's group-term life insurance plan), and a substantial
portion of the value of the advances made to pay the premium as
shown in this table will be repaid to the Company from policy
proceeds.
(7) Includes $3,840 as the company-matching contribution under the
Employee Savings and Thrift Plan; $11,712 as the
company-matching contribution under the Deferred Compensation
Plan; $4,800 as total director fees paid to Mr. Marley in 1997
by two wholly-owned subsidiaries of the Company; and $79,500 as
the total premium paid by the Company in 1997 under a
split-dollar insurance plan, including both the portion of the
premium that is attributable to term life insurance coverage
for Mr. Marley and the full dollar value of the remainder of
the premium. The split-dollar insurance plan provides life
insurance coverage for Mr. Marley equal to twice his base
salary (in lieu of the coverage available under the Company's
group-term life insurance plan), and a substantial portion of
the value of the advances made to pay the premium as shown in
this table will be repaid to the Company from policy proceeds.
(8) Includes $3,840 as the company-matching contribution under the
Employee Savings and Thrift Plan; $5,760 as the
company-matching contribution under the Deferred Compensation
Plan; $4,800 as total director fees paid to Mr. Ripp in 1997 by
two wholly-owned subsidiaries of the Company; and $57,515 as
the total premium paid by the Company in 1997 under a
split-dollar insurance plan, including both the portion of the
premium that is attributable to term life insurance coverage
for Mr. Ripp and the full dollar value of the remainder of the
premium. The split-dollar insurance plan provides life
insurance coverage for Mr. Ripp equal to twice his base salary
(in lieu of the coverage available under the Company's group
term life insurance plan), and a substantial portion of the
value of the advances made to pay the premium as shown in this
table will be repaid to the Company from policy proceeds.
(9) Includes $3,840 as the company-matching contribution under the
Employee Savings and Thrift Plan; $5,040 as the
company-matching contribution under the Deferred Compensation
Plan; and $40,800 as the total premium paid by the Company in
1997 under a split-dollar insurance plan, including both the
portion of the premium that is attributable to term life
insurance coverage for Mr. Gurski and the full dollar value of
the remainder of the premium. The split-dollar insurance plan
provides life insurance coverage for Mr. Gurski equal to twice
his base salary (in lieu of the coverage available under the
Company's group-term life insurance plan), and a substantial
portion of the value of the advances made to pay the premium as
shown in this table will be repaid to the Company from policy
proceeds.
(10)Mr. Gromer's compensation was paid in German marks. The amounts
reported for Mr. Gromer have been converted to U.S. dollars
based on the average monthly conversion rate calculated using
the daily conversion rates listed by Bloomberg Financial
Markets Commodities News.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN 1997
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for
Individual Grants Option Term(3)
-------------------------------------------------- ---------------------------
Number % of
of Securi- Total
ties Un- Options/
derlying SARs
Options/ Granted Exercise Market
SARs to Em- or Base Expira- Price at
Granted ployees Price tion Grant
Name Date (3)(1) in 1997 ($/share) Date(2) ($/share) 0%($) 5%($) 10%($)
---- ---- ------- -------- --------- ------- ---------- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
William J. Hudson, 7/22/97 63,900 3.16 47.0 7/22/07 47.0 0 1,888,759 4,786,487
Jr................
James E. Marley... 7/22/97 51,100 2.53 47.0 7/22/07 47.0 0 1,510,416 3,827,691
Robert Ripp....... 7/22/97 25,100 1.24 47.0 7/22/07 47.0 0 741,907 1,880,138
Juergen W. Gromer. 7/22/97 15,000 0.74 47.0 7/22/07 47.0 0 443,370 1,123,588
John E. Gurski.... 7/22/97 21,200 1.05 47.0 7/22/07 47.0 0 626,631 1,588,005
</TABLE>
_____________________
(1) The Company's 1993 Long-Term Equity Incentive Plan ("1993
Plan") became effective on July 1, 1993 and is a long-term
incentive compensation program that is based on stock price
appreciation in the form of stock options (either incentive or
non-qualified stock options) and infrequently, in the
discretion of the Company, in the form of freestanding SARs
payable in the Company's Common Stock or from time to time, in
the Company's sole discretion, in cash. The 1993 Plan also
provides for the award of performance-based restricted stock
("Performance Restricted Shares"). The 1993 Plan is
administered by the Compensation and Management Development
Committee of the Company's Board of Directors ("Committee").
Under the 1993 Plan, each employee designated by the Committee
to participate is credited with stock options having an option
price per share of Common Stock that is not less than
100% of the closing price of the Common Stock on the New York
Stock Exchange Composite Tape on the award date, and/or stock
bonus units (SARS) having a designated value per unit of not
less than 95% of the average closing price of the Common Stock
on the New York Stock Exchange Composite Tape for the 10
trading days immediately prior to the award date, and/or
Performance Restricted Shares. No SAR awards were made under
the 1993 Plan in 1997. Awards of Performance Restricted Shares
and stock options that were made to the named executive
officers in 1997 are shown in columns (f) and (g),
respectively, of the Summary Compensation Table, on page of
this Consent Revocation Statement.
With respect to stock options, all options granted in 1997 to
the named executive officers will vest 3 years from the date of
award and will expire 7 years after vesting. They have an
exercise price equal to 100% of the closing price of the Common
Stock on the New York Stock Exchange on the award date. Under
the authorization of the Committee, all options granted in 1997
include a term that permits their transfer to immediate family
members, trusts for the exclusive benefit of such members, or
partnerships in which such members are the only partners.
Transferred options may not be further transferred by immediate
family members except by will or by the laws of descent and
distribution, and the named executive officers remain
responsible for the income taxes and tax withholding
requirements arising upon the exercise of transferred options.
When SAR awards are made, bonus computations with respect to
the stock bonus units are made on the 4th through 6th
anniversaries of the award date for one-third of each
participant's bonus units and are based on the increase in the
market price of the Common Stock over the designated value, as
established on the award date. The bonus typically paid in
stock ("Stock Bonus") is the number of shares of Common Stock
having an aggregate market value on the computation date
equivalent to one-third of the participant's bonus units
multiplied by the increase in market price described above. A
cash bonus ("Supplemental Cash Bonus") is also paid under the
1993 Plan in conjunction with Stock Bonuses. The Supplemental
Cash Bonus is paid at the same time that payment of the Stock
Bonus is made and is a percentage of the value of the Stock
Bonus that is designated at the time of award and is no greater
than that calculated to provide a payout sufficient to pay the
anticipated United States income tax at a maximum rate for the
highest taxable bracket with respect to the aggregate of the
Stock Bonus and the Supplemental Cash Bonus. Supplemental Cash
Bonus awards are not included in this table when stock bonus
unit (SAR) awards are made in the reported year and disclosed
in this table.
(2) The expiration date for stock options under the 1993 Plan is
the date determined by the Committee at the time of the award
of such options. When SARs are granted in the reported year and
disclosed in this table, the 6th anniversary date is designated
as the "expiration date" because computations of the Stock
Bonus are made on the 4th through 6th anniversaries of the
award date for one-third of each participant's bonus units
granted in the award.
(3) In 1997 the named executive officers received awards under the
1993 Plan entirely in either stock options or Performance
Restricted Shares awards, and therefore assumed values
contained in this table relate only to the options. These
values are based on assumed appreciation rates set by the
Securities and Exchange Commission and are not intended to
forecast possible future appreciation, if any, of the Company's
stock price. The values are based on the difference between the
exercise price and the exercise price as increased by the
assumed annual appreciation rate over the 10-year term of the
options, compounded annually, with said difference multiplied
by the number of options granted as shown in the table.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES (1) IN 1997 AND FY-END OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised In-The-
Options/SARs on Money Options/SARs on
December 31, 1997(#) December 31, 1997($)
--------------------- -------------------------------
Shares
Acquired Value Realized Exercis-
Name on Exercise(#) ($)(2) able/Unexercisable(3) Exercisable/Unexercisable(3)(4)
- ----------------------- ------------- ------------ ---------------------- -------------------------------
<S> <C> <C> <C> <C>
William J. Hudson, Jr.. 4,861 118,880 220,000 / 216,902 1,980,350 / 643,799
James E. Marley........ 2,520 115,290 157,000 / 156,600 1,447,813 / 325,188
Robert Ripp............ 0 0 40,000 / 67,300 252,500 / 137,063
Juergen W. Gromer...... 11,103 282,606 15,600 / 64,200 98,475 / 120,400
John E. Gurski......... 621 21,425 44,800 / 58,600 402,425 / 127,925
</TABLE>
(1) Exercises shown in this table relate to stock bonus units
(SARS) granted under the Company's Bonus Plan (Stock Plus Cash)
("Bonus Plan"), which preceded the 1993 Plan, and to both stock
bonus units (SARS) and stock options awarded under the 1993 Plan.
With respect to stock bonus units granted under the Bonus Plan
and the 1993 Plan, the incentive compensation is based on stock
price appreciation in the form of freestanding SARs payable in
the Company's Common Stock or occasionally, in the discretion
of the Company, in cash. Each employee designated by the Board
of Directors to participate in the Bonus Plan was credited with
stock bonus units having a designated value per unit of not
less than 95% of the closing price of the Common Stock on the
New York Stock Exchange on the award date. Under the 1993 Plan,
the stock bonus units have a designated value per unit of not
less than 95% of the average price of the Common Stock on the
New York Stock Exchange Composite Tape for the 10 trading days
immediately prior to the award date. The 1993 Plan is more
fully described in footnote 1 to the table entitled
"Options/SAR Grants in 1997" on pages of this Consent
Revocation Statement.
Bonus computations are made on the 4th through 6th
anniversaries of the award date for one-third of each
participant's stock bonus units. Bonus computations for stock
bonus units granted under the Bonus Plan are made using the
greater of the increase in the market price of the Common Stock
(a) over the designated value, as established on the award
date, or (b) over an adjusted designated value. The adjusted
designated value is 95% of an amount determined by discounting
the market price of the Common Stock on the computation date by
a percentage (not to exceed 7.5% per year) equal to one-half of
the Company's compound average annual growth rate in earnings
per share during the period between the award date and the
computation date. Bonus computations for stock bonus units
granted under the 1993 Plan are made by simply using the
increase in the market price of the Common Stock over the
designated value as established on the award date. The bonus
typically paid in stock under either plan ("Stock Bonus") is
the number of shares of the Common Stock having an aggregate
market value on the computation date equivalent to the amount
computed as described above.
A cash bonus is also paid under both the Bonus Plan and the
1993 Plan. For awards under the Bonus Plan that were made
between January 27, 1988 and June 30, 1993, the cash bonus is
an amount sufficient to pay the anticipated United States
income tax with respect to both the Bonus Plan Stock Bonus and
the cash bonus as determined at the time of the distribution of
the bonuses, not to exceed an amount that is 50% of the value
of the Bonus Plan Stock Bonus. The cash bonus under the 1993
Plan is described in footnote 1 of the table entitled
"Options/SAR Grants in 1997" on pages of this Consent
Revocation Statement. The amounts of the cash bonus paid in
1997 based on distributions made in that year under these plans
are included in column (e), "Other Annual Compensation", of the
Summary Compensation Table on page of this Consent Revocation
Statement.
In view of the foregoing, "exercises" for purposes of this
table are deemed to be the Stock Bonus computations that are
made on the 4th through 6th anniversaries of the award date for
one-third of each participant's stock bonus units granted in an
award under the Company's Bonus Plan and 1993 Plan, together
with stock options under the 1993 Plan that were exercised
during 1997. The stock options awarded under the 1993 Plan are
described in footnote 1 of the table entitled "Options/SAR
Grants in 1997" on pages of this Consent Revocation Statement.
(2) "Value Realized" includes the amount of appreciation realized
upon exercise of stock options under the 1993 Plan, together
with the Stock Bonus paid under the Bonus Plan and the 1993
Plan based on stock price appreciation. The figures reported in
this column do not include the cash bonus as described in
footnote 1 above.
(3) The stock bonus units (SARS) awarded under the Bonus Plan and
the 1993 Plan are not exercised by the participants, but are
paid based on bonus computations made on the 4th through 6th
anniversaries of the award date for one-third of each
participant's stock bonus units.
(4) These values relate only to stock options granted under the
1993 Plan and the Stock Bonus described in footnote 1 above
under both the Bonus Plan and the 1993 Plan. A cash bonus under
the Bonus Plan and the 1993 Plan is also paid as previously
described, but is not included in the values disclosed in this
column. With respect to Stock Bonuses under the Bonus Plan,
these values also have been calculated based on the designated
values for the respective awards and without regard to adjusted
designated values, as those terms are defined under the Bonus
Plan and described in footnote 1 above.
RETIREMENT BENEFITS
The Company maintains a pension plan ("Pension Plan") for its
employees that is designed and administered to qualify under Section 401(a)
of the Internal Revenue Code of 1986, as amended ("Code"). The Pension Plan
has been noncontributory since January 1, 1991. Prior to January 1, 1994
the Pension Plan was a career average defined benefit plan under which, for
each year of covered service with the Company, an employee accrued a
benefit equal to 1.67% of his or her current base earnings. The Pension
Plan also included an alternative formula that updated pension benefits for
prior service based on most-recent 3 years average base earnings rates. An
employee received the greater of the benefit the employee had otherwise
earned under the Pension Plan or the benefit calculated under the
alternative formula based on most-recent average base earnings and years of
credited service.
Effective as of January 1, 1994 the Company amended the Pension
Plan to provide benefits based on final average base earnings and total
years of credited service at retirement. The final average base earnings is
determined based on the average of the year-end annual earnings rates for
the 3 years that represent the employee's highest 3 years average during
such employee's last 10 years of service. The benefit is calculated by
adding (1) 1.0% of such final average base earnings, up to the then-current
Social Security covered compensation level ($31,128 in 1998), multiplied by
the employee's credited years of past service (not to exceed 35 years), (2)
1.5% of such final average base earnings in excess of the Social Security
covered compensation level, multiplied by the employee's credited years of
past service (not to exceed 35 years), and (3) 1.2% of such final average
base earnings, multiplied by the number of the employee's credited years of
past service in excess of 35 years. Credited years of past service are
counted back to age 21 and one year of service for participants who joined
the Pension Plan when first eligible, otherwise back to the date of actual
enrollment in the Pension Plan. Employees who were age 60 or older as of
January 1, 1994 will receive the higher of the benefit under the prior
career average defined benefit approach or the benefit under the new final
average base earnings method.
Earnings used to calculate benefits under the Pension Plan are
restricted to (a) annual base salary, including amounts deferred under the
Company's Employee Savings and Thrift Plan, amounts applied to the employee
portion of the welfare benefit plan premiums pursuant to a salary reduction
agreement, and amounts credited to health care and dependent care flexible
spending accounts pursuant to a salary reduction agreement and (b) for
individuals paid on a commission basis, annual base salary (as described
above) plus commissions, but commissions are included only to the extent
that the sum of the annual base salary and commissions does not exceed a
designated amount. Normal Retirement Date under the Pension Plan is defined
as age 65, but there is no actuarial reduction of a participant's pension
for early retirement between the ages of 60 and 65.
The Pension Plan also provides for a special pension benefit
formula that would be used to recalculate benefits in the event of a change
in control of the Company. The special formula, which the Company plans to
review and modify from time to time as the funding status of the Pension
Plan warrants, is intended to ensure that excess Pension Plan assets at the
time of a change in control are used to provide increased retirement
benefits for covered employees. The special formula is similar in design to
the final average earnings formula described above under the amended
Pension Plan, with the 1%, 1.5% and 1.2% factors replaced by 1.25%, 1.75%,
and 1.67%, respectively.
In accordance with Code requirements, the Pension Plan limits the
maximum amount of annual compensation that may be taken into account under
the Pension Plan ($160,000 in 1998) and the maximum annual employer
provided benefit that can be paid under the Pension Plan ($130,000 in
1998). The Company maintains a supplemental employee retirement program
("SERP") pursuant to which certain employees whose retirement benefits
otherwise payable under the Pension Plan are limited by these Code
restrictions will receive payment of a supplemental pension from
non-Pension Plan sources. The total benefit payable under both the Pension
Plan and the SERP is calculated without regard to the Code limitations
applicable to the Pension Plan using the same pension formula(s) applicable
under the Pension Plan and using a 3 years average of both base earnings
and annual cash bonus (whether paid or deferred). The total benefit thus
calculated, reduced by the restricted benefit actually payable from the
Pension Plan, is the benefit payable from the SERP.
The following table shows the combined annual retirement benefit
payable to the Company's executive officers named in the Summary
Compensation Table, except Mr. Gromer, under both the Pension Plan and the
SERP, as amended effective January 1, 1994, upon normal retirement, based
on the indicated amount of final average remuneration and number of
credited years of service. Mr. Gromer's annual retirement benefit is
calculated under the terms of a retirement plan maintained by AMP
Deutschland that is similar in design to the U.S. Pension Plan described
above. As of January 1, 1998, Mr. Gromer's accrued annual retirement
benefit payable upon normal retirement (age 65) under the AMP Deutschland
plan was $271,118, based upon the average monthly conversion rate for
January 1998, calculated as described in footnote 9 to the Summary
Compensation table on page of this Consent Revocation Statement.
<TABLE>
<CAPTION>
PENSION PLAN TABLE (4)
YEARS OF SERVICE (1)(3)
--------------------------------------------------
Remuneration (2) 15 20 25 30 35 40
- ----------------
------- ------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
$400,000..................................... 87,665 116,887 146,109 175,331 204,553 228,553
450,000...................................... 98,915 131,887 164,859 197,831 230,803 257,803
500,000...................................... 110,165 146,887 183,609 220,331 257,053 287,053
550,000...................................... 121,415 161,887 202,359 242,831 283,303 316,303
600,000...................................... 132,665 176,887 221,109 265,331 309,553 345,553
650,000...................................... 143,915 191,887 239,859 287,831 335,803 374,803
700,000...................................... 155,165 206,887 258,609 310,331 362,053 404,053
750,000...................................... 166,415 221,887 277,359 332,831 388,303 433,303
800,000...................................... 177,665 236,887 296,109 355,331 414,553 462,553
850,000...................................... 188,915 251,887 314,859 377,831 440,803 491,803
900,000...................................... 200,165 266,887 333,609 400,331 467,053 521,053
950,000...................................... 211,415 281,887 352,359 422,831 493,303 550,303
1,000,000.................................... 222,665 296,887 371,109 445,331 519,553 579,553
1,050,000.................................... 233,915 311,887 389,859 467,831 545,803 608,803
1,100,000.................................... 245,165 326,887 408,609 490,331 572,053 638,053
1,150,000.................................... 256,415 341,887 427,359 512,831 598,303 667,303
1,200,000.................................... 267,665 356,887 446,109 535,331 624,553 696,553
1,250,000.................................... 278,915 371,887 464,859 557,831 650,803 725,803
1,300,000.................................... 290,165 386,887 483,609 580,331 677,053 755,053
1,350,000.................................... 301,415 401,887 502,359 602,831 703,303 784,303
1,400,000.................................... 312,665 416,887 521,109 625,331 729,553 813,553
1,450,000.................................... 323,915 431,887 539,859 647,831 755,803 842,803
1,500,000.................................... 335,165 446,887 558,609 670,331 782,053 872,053
1,550,000.................................... 346,415 461,887 577,359 692,831 808,303 901,303
1,600,000.................................... 357,665 476,887 596,109 715,331 834,553 930,553
1,650,000.................................... 368,915 491,887 614,859 737,831 860,803 959,803
1,700,000.................................... 380,165 506,887 633,609 760,331 887,053 989,053
</TABLE>
(1) Effective in April 1997, Mr. Ripp became a participant under
the newly created AMP Incorporated Supplemental Executive
Pension Plan, which was implemented to provide a competitive
annual retirement benefit to executives, such as Mr. Ripp, who
are first employed by the Company mid-to late- career. Under
this plan, Mr. Ripp's annual retirement benefit at Normal
Retirement Date is the greater of the combined annual
retirement benefit payable under the Pension Plan and the SERP,
as described above, or 30% of his highest 3 years average of
base compensation and annual cash bonuses.
(2) The compensation covered by the combination of the Pension Plan
and SERP includes the employee's final average earnings, as
determined by the average of the 3 years that represents the
employee's highest base earnings during such employee's last 10
years of service, together with the average of the employee's
annual cash bonus payments also paid in such 3 years. In the
case of the named executive officers other than Mr. Gromer, the
annual base earnings considered in such a determination
includes the amount of salary and bonus shown in columns (c)
and (d) of the Summary Compensation Table on page of this
Consent Revocation Statement.
(3) The current estimated credited years of service for the named
executive officers, except J. Gromer, discussed above, are as
follows: W. J. Hudson, Jr. - 32 years; J. E. Marley - 33.5
years; R. Ripp - 3.3 years; and J. Gurski - 24.5 years. The
estimated credited years of service for the named executive
officers, except J. Gromer, discussed above, at the Normal
Retirement Date are as follows: W. J. Hudson, Jr. - 33.42
years; J. E. Marley - 36.08 years; R. Ripp - 11.92 years; and
J. Gurski - 32.5 years.
(4) The retirement benefit shown in the Pension Plan Table is a
straight life annuity amount and is not subject to any
reduction for Social Security or other offset amounts. However,
as required by law, the form of payment for married employees
under the Pension Plan is a 50% joint and survivor annuity,
which is typically less than the straight life annuity amount.
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS
In order to further align the interests of the Company's executives
with increasing the long-term value of the Company, in January 1995 the
Company implemented Stock Ownership Guidelines for Senior Management
("Stock Guidelines"). The Stock Guidelines apply to approximately 130
executives presently participating in the Stock Option or SAR segment of
the 1993 Long-Term Equity Incentive Plan. Affected executives are
encouraged to directly own a minimum number of real or phantom shares of
stock, the value of which is expressed as a multiple of the executive's
annualized base salary. The multiplier ranges from 4 times salary for the
Chairman and the CEO and President, to .5 times base salary for executives
in less senior management positions. Executives are expected to comply with
the Stock Guidelines within a 5-year period.
The AMP equity security ownership as of September 15, 1998 by the
named executive officers and all the executive officers and directors of
the Company on that date is as follows:
<TABLE>
<CAPTION>
Total
Amount of Beneficial
Beneficial Phantom and
Amounts and Nature Ownership Ownership Phantom
Name and Address of Beneficial as a Percent (shares) Ownership
Title of Class of Beneficial Owner Ownership (shares) of Class (2) (shares)
- ---------------- ----------------------- ------------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Common Stock William J. Hudson, Jr. 409,138(1)(3) less than 1 35,957 445,095
Harrisburg,
Pennsylvania
Common Stock James E. Marley 315,100(4) less than 1 26,453 341,553
Harrisburg,
Pennsylvania
Common Stock Robert Ripp 170,645(3) less than 1 16,314 186,959
Harrisburg,
Pennsylvania
Common Stock Juergen W. Gromer 70,454(3) less than 1 226 70,680
Langen, Germany
Common Stock John E. Gurski 116,198(3) less than 1 12,826 129,024
Harrisburg,
Pennsylvania
Common Stock All Executive Officers 2,893,373(1)(3)(4) 1.32 129,379 3,022,752
(16 persons)
and Directors as a
Group
</TABLE>
- --------------
(1) A portion of the shares reported for 16 executive officers are
held in the Company's Employee Savings and Thrift Plan. Through
further contributions to this plan, all 16 executive officers
may acquire an undeterminable number of additional shares
within 60 days after September 15, 1998.
(2) Numbers in this column include phantom shares credited to
executive officers under a deferred compensation plan and/or in
association with dividend reinvestment of Performance
Restricted Shares issued to designated officers. Pursuant to
the deferred compensation plan, designated executive officers
may defer receipt of up to 50% of their annual base salary and
all officers of the Company may defer receipt of all or a
portion of their annual cash bonus. Deferred compensation may
be allocated to a phantom AMP Common Stock account, as
described in footnote 1 to the Summary Compensation Table on
page of this Consent Revocation Statement. Dividends earned on
Performance Restricted Shares are credited to the executive
officer's account and are deemed to be invested in phantom
shares of Common Stock. These phantom shares vest only when,
and to the extent the associated Performance Restricted Shares
vest, as described in footnote 3 to the Summary Compensation
Table on page of this Consent Revocation Statement.
(3) In addition, a total of 8,631 shares are held by immediate
family members of three executive officers, either directly or
in a custodial account over which the executive officer has
voting and dispositive powers; the executive officers disclaim
beneficial ownership. Additionally, a director has a 2%
residual beneficial interest, but no voting or dispositive
powers in a trust that holds 7,392 shares of Common Stock of
the Company. Of the beneficial ownership reported in this
number, 15,791 and 120,000 shares are held by a director in two
limited partnerships over which he shares voting and
dispositive powers, and another director holds 1,400 shares in
a family trust of which he is co-trustee with his wife and
shares voting and dispositive powers. Also, eight directors
hold a total of 80,000 options, some of which are exercisable
within 60 days after September 15, 1998 and are reported in
this number, and sixteen executive officers hold a total of
1,607,745 options, some of which are exercisable within 60 days
after September 15, 1998 and are reported in this number.
Vesting of stock options will accelerate upon a change of
control. The number includes 27,602 Stock Bonus Units granted
to the executives, of which 1,878 Stock Bonus Units will
convert within 60 days of September 15, 1998. Of the total
number of options held by executive officers and described
above, 419,500 are held by Mr. Hudson, of which 61,800 have
been transferred to a family limited partnership.
(4) Shares owned by all executive officers and directors as a group
do not include shares owned by Mr. Marley, who retired as an
executive officer and director on August 20, 1998. Members of
the immediate family of Mr. Marley own 215 shares of Common
Stock of the Company; Mr. Marley disclaims beneficial ownership
of this stock. Additionally, 506 shares of Common Stock of the
Company are owned by a member of the immediate family of Mr.
Marley in a custodial account over which Mr. Marley has voting
and dispositive powers; Mr. Marley disclaims beneficial
ownership of this stock.
PERFORMANCE GRAPH
The graph shown below depicts the cumulative total shareholder
return (assuming a $100 investment and dividend reinvestment) during the
5-year period from 1992--1997 for the Common Stock of the Company compared
to the cumulative total return during the same period for the Standard &
Poor's 500 Stock Index, the peer group index contained in the Company's
1997 Proxy Statement ("Prior Peer Group") and the peer group index to be
included in this Consent Revocation Statement and future Proxy Statements
("New Peer Group"). The Prior Peer Group was established in 1996 and
essentially consisted of the companies included in the Electrical Equipment
industrial classification of Standard & Poor's, together with the
publicly-held competitors of the Company that were not included in that
classification.
The New Peer Group also contains the companies included in the
Electrical Equipment industrial classification of Standard & Poor, together
with publicly-held competitors of the Company that are not included in such
classification. The New Peer Group does not include one company listed in
Standard & Poor's Electrical Equipment industrial classification, General
Electric Co. ("GE"), because of GE's dissimilar market capitalization and
overall product offering. GE also was not part of the Prior Peer Group.
Differences between the Prior Peer Group and the New Peer Group are: the
addition of Berg Electronics Corp., a competitor of the Company that became
publicly-held in 1996; the addition of Belden, Inc., a competitor in one of
the Company's emerging product lines; the removal of Augat Inc. due to
Thomas & Betts Corp.'s acquisition of Augat Inc. in 1997; the deletion of
Elexsys Intl. Inc. due to Sanmina Company's acquisition of Elexsys Intl.
Inc. in 1997; and the deletion of Westinghouse Electric Corp. (now part of
CBS Corp.) because it no longer is included in Standard & Poor's Electrical
Equipment industrial classification. Further, ADC Telecommunications, Inc.
and Altron Inc. are not part of the New Peer Group because they are not
included in Standard & Poor's Electrical Equipment industrial
classification and, while these companies have some product lines that
compete with some of the Company's product lines, overall the Company
believes these companies do not adequately represent the Company's
industries and do not provide a valid comparison of performance. The
Company believes the New Peer Group is representative of the Company's
industries and provides a valid comparison of performance.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL SHAREHOLDER RETURN
1992-97
$300
Base Period Indexes / Cumulative Returns
$275 Company/Index Name 1992 1993 1994 1995 1996 1997
------------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
AMP Incorporated 100 111.76 132.01 142.08 146.24 163.85
S&P 500 100 110.08 111.53 153.45 188.68 251.63
$250 New Peer Group 100 109.55 115.65 151.96 192.19 226.39
Prior Peer Group 100 110.69 115.17 115.17 195.09 241.93
$225
$200
TOTAL
SHAREHOLDER
RETURNS(3) $175
(DOLLARS)
$150
AMP _______________
S&P 500..............
New Peer Group ___.___ (2)
$125 Prior Peer Group __ __ __(1)
$100
----------------------------------------------------------------
92 93 94 9596 97
</TABLE>
- -----------
(1) The Prior Peer Group includes the following companies:
ADC Telecommunications Inc. Honeywell, Inc.
Altron Inc. Hubbell Inc., -- CL B
Amphenol Corp. Methode Electronics -- CL A
Augat Inc. Molex Inc.
Elexsys Intl. Inc. Raychem Corp.
Emerson Electric Co. Robinson Nugent Inc.
General Signal Corp. Thomas & Betts Corp.
Grainger (W W) Inc. Westinghouse Electric Corp.
(2) The New Peer Group includes the following companies:
Amphenol Corp. Hubbell Inc.-- CL B
Belden, Inc. Methode Electronics-- CL A
Berg Electronics Corp. Molex Inc.
Emerson Electric Co. Raychem Corp.
General Signal Corp. Robinson Nugent Inc.
Grainger (W W) Inc. Thomas & Betts Corp.
Honeywell Inc.
(3) The Total Shareholder Return assumes a fixed investment of $100 in
the AMP Common Stock or indicated index, and a reinvestment of
dividends. The total return of each company included in the S&P
500, the Prior Peer Group and the New Peer Group indexes has been
weighted in accordance with the company's market capitalization as
of the beginning of the year reported. The weighting was
accomplished by: (i) calculating the market capitalization for each
company at the beginning of the respective calendar year based on
the closing stock price and outstanding shares; (ii) determining
the percentage that each such market capitalization represents
against the total of such market capitalizations for all companies
included in the index; and (iii) multiplying the percentage
determined in (ii) above by the total shareholder return of the
company in question for the year being reported.
THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Management Development Committee of the Board
of Directors (the "Compensation Committee"), among other responsibilities,
has responsibility for the Company's executive compensation program. The
Committee, which is composed entirely of outside directors, is chaired by
Mr. Ralph D. DeNunzio, President, Harbor Point Associates, Inc. The other
Committee members in 1997 were Mr. Dexter F. Baker (who served as director
of AMP until April 22, 1998), Retired Chairman and CEO, Air Products and
Chemicals, Inc.; Mr. John C. Morley, President of Evergreen Ventures, Ltd.
and Retired President and CEO, Reliance Electric Company; and Mr. Paul G.
Schloemer, Retired President and CEO, Parker Hannifin Corporation.
Included within the Committee's executive compensation oversight
charter are the review and approval of salary levels and salary increases
for executive officers, annual Management Incentive Plan cash bonus awards
for officers and other key executives, performance restricted stock and
stock option awards under the 1993 Long-Term Equity Incentive Plan, and any
special benefit programs affecting officers and key executives such as
supplemental retirement plans, deferred compensation plans, change of
control agreements and other plans. The Committee in appropriate cases
makes recommendations to the Board of Directors on matters involving
executive compensation.
The overriding objectives of the Company's executive compensation
program are to attract and retain qualified executive leadership and to
reward performance that creates shareholder value. In furtherance of these
objectives, the Company's executive compensation philosophy is (1) to
deliver base salary compensation that is kept competitive with the
executive's counterparts in the electrical/electronics industry and
industry in general and (2) to provide short-, intermediate-, and long-term
incentive compensation plans that supplement base salary and that correlate
to the growth, success and profitability of the Company. As explained below
in greater detail, these at-risk, performance-based incentive compensation
plans directly align the interests of the Company's executives with its
shareholders and form a significant portion of the total compensation
opportunity for all officers and key executives.
The Company annually reviews for the Committee's consideration
compensation surveys and other published compensation data covering
comparably-sized companies in both the electrical/electronics industry and
industry in general to assess whether its executive base salary ranges and
total compensation opportunities remain competitive. Where they do not
remain competitive, appropriate adjustments are made. In this process of
comparing the Company's executive compensation levels and practices against
those of other companies, the compensation levels and practices at the
companies comprising the New Peer Group Index in the Performance Graph on
pages _______ of this Consent Revocation Statement are periodically
reviewed separately, but due to the small sample size the New Peer Group
data alone is not used as the primary comparative benchmark. Rather, the
comparative data relied upon by the Committee is drawn from broader surveys
of comparably-sized companies in the electrical/electronics industry and
industry in general, which surveys include 7 of the 13 New Peer Group
companies.
The salaries, and any periodic increases thereof, of the Chairman
and the CEO are determined by the Board of Directors of the Company based
on recommendations made by the Committee. These officers in turn recommend
the salary adjustments for the other executive officers, with the review
and oversight of the Committee. The level of base salary compensation for
officers and key executives is determined by both their scope of
responsibility and the competitive salary ranges established by the survey
process described above. Periodic increases in base salary are dependent on
the individual's performance in his or her position for a given period, on
the individual's competency, skill and experience, and on the growth of
salary levels both inside and outside the Company.
The AMP Management Incentive Plan provides opportunity for annual
cash bonuses based on two or more of the following weighted performance
components: (1) overall corporate performance for a given year, adjusted to
net out extraordinary, non-recurring gains or losses and then compared
against corporate performance targets for the year (this component is
weighted 80% for named executive officer participants such as the CEO with
corporate-wide responsibilities and 60% for those named executive officers
with specific unit responsibilities); (2) operating unit performance for a
given year measured against operating unit income and AMP value added (AVA)
targets for the year (this component is weighted 20% for named executive
officer participants with specific operating unit responsibilities); and
(3) individual performance for a given year measured against individual
performance objectives for such year (this component is weighted 20% for
all named executive officer participants). For the named executive
officers, the corporate performance component of the Management Incentive
Plan annual cash bonus is based on attainment of an earnings per share
(EPS) target. The Committee sets the EPS target for the year at the start
of each year, with the review of the Board of Directors, and also sets the
individual performance objectives of the Chairman and the CEO. In addition
to setting the EPS target, the Committee assigns to each participant under
the Management Incentive Plan minimum, target and maximum bonus
percentages, which vary from participant to participant to reflect
competitive practice and the scope of the participant's responsibility.
Actual corporate and unit performance between 90% and 120% of the target
performance levels results in a bonus calculation that ranges between the
participant's assigned minimum and maximum bonus percentages. The EPS
target for 1997 was set at $2.25, which target performance was to be
exclusive of any EPS impact resultant from planned 1997 changes in
accounting methods. The actual EPS performance for 1997 (adjusted for plan
purposes) was $2.23. In keeping with the pay-for-performance design and
intent of the Management Incentive Plan, this 1997 EPS performance resulted
in a bonus being paid for 1997 under the Management Incentive Plan's
corporate performance component to the named executive officers at a level
that fell between their respective minimum and target bonus levels. The
unit and individual performance targets for 1997 and the actual unit and
individual performance results for 1997 varied widely between units and
individuals.
In granting long-term incentive awards during 1997, the Committee
gave considerable weight to the annual long-term incentive award levels and
practices of a diverse range of over 350 major companies that participated
in the Towers Perrin survey of long-term incentive compensation practices.
Of the 13 companies comprising the New Peer Group Index in the Performance
Graph on pages _______ of this Consent Revocation Statement, 7 were
included in this Towers Perrin survey. The Company's long-term incentive
award levels for 1997 were generally set at between the 50th and the 75th
percentile of the award levels reflected in the Towers Perrin Survey.
Long-term incentive compensation awards in the form of performance
restricted shares and stock options were made by the Committee in 1997
under the 1993 Long-Term Equity Incentive Plan. The named executive
officers and the other officers who comprise the Company's Global Planning
Committee received a 1997 long-term incentive award that was split so that
approximately 50% of the value of the 1997 award was provided in the form
of performance restricted shares, with the balance provided in the form of
stock options. All other recipients of a 1997 long-term incentive award
received 100% of the award in the form of stock options.
The performance restricted shares granted in 1997 will be forfeited
at the end of 1999 if the Company fails to attain for the three-year period
from January 1, 1997 through December 31, 1999 a minimum average annual
level of return on equity ("ROE") that was set by the Committee at the
beginning of 1997. For this purpose, the Company's annual ROE result for
each of the three years will be separately determined, totaled, and divided
by three to determine the average annual ROE. If the average annual ROE
over the three-year period is at least equal to this minimum level, then
the extent to which the performance restricted shares granted in 1997 will
become vested at the end of 1999 will be determined by the Company's
average annual earnings growth rate over the same three-year period. A
target level of average annual earnings growth over the three-year period
was set by the Committee at the beginning of 1997, and average annual
earnings growth between 0% and this target level will result in vesting of
the performance restricted shares that ranges proportionately from 0% to
100%. The Committee also set a super-target level of average annual
earnings growth at the beginning of 1997, and average annual earnings
growth between the target level and the super- target level will result in
vesting of the performance restricted shares that ranges proportionately
from 100% to 200%. Performance restricted shares that are forfeited at the
end of 1999 either because of the Company's failure to attain the minimum
average annual ROE level or to attain the target level of average annual
earnings growth will be canceled and revert to the Company.
In general, the stock options granted in 1997 vest on the third
anniversary of the grant date, are exercisable thereafter until the tenth
anniversary of the award date, and have an exercise price equal to the
award date fair market value of a share of the Company's Common Stock.
In 1995, with the review and approval of the Committee, the Company
implemented formal share ownership guidelines applicable to its key
executives. By the end of a phase-in period, the guidelines require that
the Chairman and the CEO each own real or phantom shares of Company Common
Stock with a value of at least four times annual base salary. The guideline
applicable to the other named executive officers is ownership of shares
with a value of at least three times annual base salary. The primary intent
of these guidelines is to significantly increase the extent to which the
personal wealth of the Company's executives is directly linked to the
performance of the Company's Common Stock, thereby materially expanding the
community of interest between the executives and the Company's
shareholders.
Section 162(m) of the Internal Revenue Code imposes a $1,000,000
per year per named executive officer limitation on the amount of
non-performance based compensation that can be paid and deducted by the
Company. The Company's policy with respect to this limitation is to
maximize the deductibility of all compensation paid to each named executive
officer by (1) delivering compensation to named executive officers that to
a substantial extent meets the Code Section 162(m) definition of
performance-based compensation and (2) affording the named executive
officers the opportunity to defer receipt of compensation to years after
their retirement. In furtherance of this policy, the Company's Management
Incentive Plan, under which the named executive officers have an
opportunity to earn an annual cash bonus, and the 1993 Long-Term Equity
Incentive Plan, under which the named executive officers receive long-term
incentive compensation awards, have been designed and are administered so
that all or a significant portion of the compensation received pursuant to
such plans will qualify as performance-based compensation within the
meaning of Section 162(m). In addition, the Company has implemented a
Deferred Compensation Plan under which the named executive officers may
defer receipt of up to 50% of annual base salary and up to 100% of annual
cash bonus amounts. All compensation paid to the named executive officers
in 1997 was deductible and it is anticipated that all compensation to be
paid to named executive officers in 1998 will be deductible.
1997 CEO COMPENSATION
Mr. Hudson's base salary rate per annum for 1997 remained at the
same level that was in effect for 1996, $810,000. In deciding not to adjust
Mr. Hudson's salary for 1997, the Committee considered primarily the
Company's disappointing growth and performance in 1996.
Mr. Hudson's assigned minimum, target, and maximum annual cash
bonus percentages under the Management Incentive Plan for 1997 were 10%,
65% and 100%, respectively. Accordingly, Mr. Hudson had the potential to
earn an annual bonus of up to 100% of base annual salary if the Company
were to attain 120% or more of the $2.25 EPS target and Mr. Hudson were to
fully accomplish his individual performance targets. Based on the Company's
adjusted EPS performance for 1997 and the Committee's assessment of Mr.
Hudson's individual performance, Mr. Hudson's aggregate bonus under the
Plan for 1997 was 66% of his base salary, or $534,600.
On July 22, 1997 Mr. Hudson was awarded 63,900 stock options (2,100
incentive stock options and 61,800 non-qualified stock options) under the
1993 Long-Term Equity Incentive Plan, all with an exercise price of $47.00.
These options will first be exercisable July 22, 2000 and remain
exercisable to July 22, 2007.
On the same date, Mr.
Hudson was also awarded 39,600 performance restricted shares of Common
Stock of the Company under the 1993 Long-Term Equity Incentive Plan. These
shares will either vest or be forfeited at the end of 1999 based on the
Company's performance in 1997, 1998 and 1999 with respect to average annual
return on equity and average annual earnings growth targets that were set
by the Committee. In making these long-term incentive awards, the
Committee's intent was to continue a practice begun in 1993, when the
Company's first stock option plan became effective, of increasing the
proportion of stock-based compensation in the total compensation package of
the Company's senior executive officers, particularly the CEO, thereby
further increasing the executives' community of interest with the Company's
shareholders. The aggregate long-term incentive award levels set for Mr.
Hudson in 1997 were at approximately the 60th percentile of comparable
long-term incentive award recipients reflected in Towers Perrin survey data
relied upon by the Committee. Since the 1993 inception of the Long-Term
Equity Incentive Plan, Mr. Hudson has been granted a total of 425,500 stock
options and 111,500 performance restricted shares of Common Stock of the
Company.
As of the end of 1997, a portion of the initial performance
restricted share grant made to Mr. Hudson in 1995 under the 1993 Long-Term
Equity Incentive Plan was vested based on the Company's performance over
the three-year period of 1995, 1996 and 1997. The Company's average annual
ROE over the three-year period, adjusted for Plan purposes, exceeded the
minimum threshold that had been set by the Committee in 1995, and the
Company's average earnings growth rate over the three-year period, as
defined for Plan purposes, of 8.42% resulted in Mr. Hudson becoming vested
in 56.13%, or 14,033, of the 25,000 performance restricted shares (plus
56.13%, or 869, of the related dividend reinvestment shares) that had been
granted to him in 1995. The unvested 10,967 share balance of the 25,000
share grant (along with the 679 share balance of the related dividend
reinvestment shares) was forfeited back to the Company.
In April 1992, Mr. Hudson had been awarded 12,200 stock bonus units
under the Company's former Stock Plus Cash Bonus Plan, with a designated
value of $27.88 and an unspecified cash bonus percentage (not in excess of
50%) to cover United States taxes on the payout, and in April 1993, Mr.
Hudson had been awarded 20,000 stock bonus units under the Company's former
Stock Plus Cash Bonus Plan, with a designated value of $28.50 and an
unspecified cash bonus percentage (not in excess of 50%) to cover United
States taxes on the payout. In April 1997, when the fair market value of a
share of the Company's Common Stock had increased to $34.50, 4,066 of the
12,200 1992 stock bonus units and 6,666 of the 20,000 1993 stock bonus
units matured, resulting in a stock bonus payment to Mr. Hudson of 2,061
shares of Common Stock of the Company and a cash payment of $35,608. In
making these payout calculations, the award date designated value of $28.50
per stock bonus unit was used to determine the spread applicable to the
maturing April 1993 stock bonus units in lieu of the alternative designated
value defined under the Plan, but the alternative designated value defined
under the Plan of $26.84 was used to determine the spread applicable to the
maturing April 1992 stock bonus units in lieu of the April 1992 award date
designated value of $27.88. The Plan's alternative designated value, which
is based on earnings per share growth between the award date and the
maturity date, is used in payout calculations whenever it would result in a
greater stock bonus payout than would the award date designated value. (For
an explanation of the alternative designated value, see footnote 1 to the
Aggregated Option/SAR Exercises in 1997 and FY-End Option/SAR Values Table,
pages ________).
The Compensation and Management Development Committee:
Dexter F. Baker Ralph D. DeNunzio, Chairman
John C. Morley Paul G. Schloemer
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS AND RELATED MATTERS
Executive Severance Agreements
The Company has entered into agreements (the "Executive Severance
Agreements") with the named executive officers and certain other executive
officers to assure their unbiased counsel and continued dedication in the
event of an unsolicited tender offer or other occurrence that may result in
a change of control. The terms of the agreements provide that, in the event
of a change of control, as previously defined on page ____ of this Consent
Revocation Statement, and the termination of the executive's employment at
any time during the 2-year period thereafter, the executive will be paid a
lump sum equal to a multiplier of 1, 2 or 3 times the sum of his highest
salary rate in effect during the 12 months prior to termination of
employment and his highest annual bonus paid during the prior 3-year
period, together with payment of an amount necessary to pay any excise tax,
and any taxes thereon, due on the lump sum or other payment. If the
AlliedSignal Offer is consummated or if the AlliedSignal Nominees are
elected, a "change in control" within the meaning of such agreements will
occur.
Additionally, upon a change of control: (i) all awards that the
executive has received under any bonus plans he is participating in will be
immediately vested and either paid or exercisable, as appropriate; (ii) the
executive will be paid in cash installments per the terms of the applicable
contract for all restricted stock, if any, issued by contract; (iii) he
will be vested in deferred compensation matching amounts; and (iv) he will
receive continuation of any existing split dollar life insurance policy
until the latter of the policy anniversary date following the executives
65th birthday or the 15th anniversary of the policy. Upon a change of
control and termination of the executive's employment within 2 years
thereafter, the executive also shall be vested in all pension benefits
based on the highest annual salary rate in effect during the 12 months
prior to termination of employment with respect to the pension plan and,
with respect to the pension restoration plan, the amount of compensation on
which the lump sum severance payment described above is calculated, plus an
additional accrual for 1, 2 or 3 years; shall receive the conversion of the
executives group term life insurance policy, if any, to a fully paid
permanent life insurance policy remaining in effect for 1, 2 or 3 years at
the Company's cost; and shall receive continuation of health, dental, and
disability benefits until the latter of 1, 2 or 3 years, attainment of the
age or other condition at which the benefits discontinue according to the
terms of the related plan, reduced to the extent of comparable benefits
provided by a new employer without cost.
On August 20, 1998, the Compensation Committee authorized certain
amendments to the Executive Severance Agreements. Each of the Executive
Severance Agreements had provided that (1) "Stock plus Cash" awards (stock
bonus units) would be fully cashed out on a change of control and (2) if
the executive is party to a restricted stock agreement, in the event of a
change of control a cash payment would be made for restricted shares on the
date(s) the shares would otherwise have vested. As a result of these
amendments, the Executive Severance Agreements will provide that if these
cashout provisions would adversely affect AMP's ability to consummate a
transaction which is to be accounted for as a pooling of interests, (i)
stock bonus units would be paid out in stock rather than cash, and (ii)
restricted stock would not be cashed out; rather, the shares would be
canceled and the appropriate number of unrestricted shares would be
delivered on the otherwise applicable vesting dates.
On August 20, 1998, the Compensation Committee authorized
amendments to certain restricted stock agreements. Two executives of AMP
who are not parties to an Executive Severance Agreement are parties to
restricted stock agreements. These restricted stock agreements provide that
they will terminate upon the occurrence of certain events, including the
occurrence of certain mergers or the date on which AMP's stock is no longer
listed for trading on a national securities exchange. If the restricted
stock agreements terminate for one of the reasons specified above, any
unvested shares would be cashed out, with payments being made on the
applicable vesting dates. As a result of these amendments, the restricted
stock agreements will provide that, in the event these cashout provisions
would preclude AMP from entering into a transaction which would be
accounted for as a pooling of interests, the restricted stock would not be
cashed out; rather, the shares would be canceled and the appropriate number
of unrestricted shares would be delivered on the otherwise applicable
vesting dates.
Related Matters
At meetings of the Compensation Committee of the Board or of the
entire Board held on the dates set forth below, the Compensation Committee
and/or the Board, in connection with certain existing employee benefit
plans and arrangements, took the actions described below.
Annual Equity Award Grants
On July 21, 1998, the Compensation Committee made its customary
annual grant of option and Performance Restricted Share awards under AMP's
1993 Long-Term Equity Incentive Plan (the "1993 Plan"). Options to purchase
an aggregate of 2,606,200 shares of Common Stock were granted (the "1998
Grant"), each of which vests 100% at the end of three years, has a per
share exercise price of $30.375, and a ten year term. The vesting of each
such option is subject to acceleration in the event of a Change of Control
of AMP (as defined in the 1993 Plan, a "Change of Control"). Of the options
awarded in the 1998 Grant, options to purchase an aggregate of 252,000
shares of Common Stock were granted to AMP's executive officers. Messrs.
Ripp and Gurski and Dr. Gromer received grants of 41,100, 27,200 and 17,400
options, respectively. Neither Mr. Hudson nor Mr. Marley received a 1998
Grant.
In addition to these options, certain of AMP's executive officers
received a contemporaneous grant of Performance Restricted Shares under the
1993 Plan. An aggregate of 140,900 Performance Restricted Shares were
granted to executive officers of AMP. These shares are subject to a three
year performance cycle (ending December 31, 2000) and will vest if AMP
achieves certain return on equity and average annual earnings growth
targets or if there is a change of control during the performance cycle.
Messrs. Ripp and Gurski and Dr. Gromer received grants of 27,900, 18,500
and 11,900 Performance Restricted Shares, respectively. Neither Mr. Hudson
nor Mr. Marley received such a grant of Performance Restricted Shares.
Management Succession
Effective as of August 20, 1998, the Board, upon the recommendation
of a Board committee regarding CEO succession, elected Mr. Robert Ripp to
the Board as its Chairman and to the position of Chief Executive Officer of
AMP; elected Mr. Herbert Cole to the position of Senior Vice
President-Operations of AMP; and elected Dr. Juergen Gromer as Senior Vice
President-Global Industry Businesses of AMP. Messrs. Hudson and Marley
retired from their current positions with AMP as of such date and Mr.
Marley resigned from his position on the Board. Mr. Hudson has been
appointed as Vice Chairman through AMP's 1999 Annual Meeting of
Shareholders, after which he will remain employed as AMP's Former President
and Chief Executive Officer through his normal retirement date of June 1,
1999, whereupon he shall have the title of Retired President and Chief
Executive Officer through the end of his Chairmanship of the National
Association of Manufacturers in the Fall of 1999. Mr. Marley will remain
employed by AMP until his normal retirement date of August 1, 2000.
In connection with the assumption of his new positions with AMP,
Mr. Ripp's salary was increased to an annual rate of $600,000 and he was
granted (i) options under the 1993 Plan to purchase 60,000 shares of Common
Stock at an exercise price equal to $44.85 per share, which option will
vest 100% after three years, and (ii) a restricted stock award of 25,000
shares of Common Stock, vesting on August 1, 2006 (Mr. Ripp's normal
retirement date) or at his earlier death, disability or mutually agreed
upon termination of employment. The restricted stock award made to Mr. Ripp
provided that (A) upon the occurrence of a Change of Control a cash payment
would be made for any then outstanding restricted shares on the date such
shares would otherwise have vested (i.e., on Mr. Ripp's normal retirement
date or at his earlier death, disability or mutually agreed upon
termination of employment); provided, that if this cashout provision would
adversely affect AMP's ability to consummate a transaction which is to be
accounted for as a pooling of interests, the restricted shares would not be
cashed out, but rather the shares would be cancelled and the appropriate
number of unrestricted shares would be delivered on the otherwise
applicable vesting date, and (B) such restricted stock award would be
subject to the terms of Mr. Ripp's Executive Severance Agreement. The
Compensation Committee also authorized an amendment to Mr. Ripp's Executive
Severance Agreement to provide for an increase in the severance multiplier
from 2 to 3.
Mr. Cole has previously elected to participate in AMP's Voluntary
Early Retirement Program (as more fully described below, the "VERP").
Pursuant to the terms of the VERP, AMP has elected to require Mr. Cole to
remain in the service of AMP until the earlier of (a) January 1, 2001 and
(b) the date of any involuntary termination of employment, in order to
receive benefits under the VERP. Mr. Cole will continue to remain eligible
for certain benefits under his Executive Severance Agreement, according to
the terms of such agreement, as modified by his election to participate in
the VERP.
Each of Messrs. Hudson and Marley will continue to be paid salary
at the current annual rate and will continue to receive existing employee
benefits. Mr. Hudson will also be entitled to receive office space
(separate from the executive management area) and support staff services
through the end of his Chairmanship of the National Association of
Manufacturers in the Fall of 1999. Further, AMP and each of Messrs. Hudson
and Marley have agreed that each executive's Executive Severance Agreement
will remain in effect until the executive's retirement date. Each executive
has agreed not to claim "Good Reason" (as defined in his agreement) to
terminate his employment with AMP prior to the occurrence of a Change of
Control (as defined in his agreement). AMP has agreed that if a Change of
Control occurs prior to the executive's retirement date, such executive can
terminate his employment with AMP between the Change of Control date and
his retirement date and such termination will be treated as a "Good Reason"
termination pursuant to the terms of his agreement.
Voluntary Early Retirement Program
Employees of AMP (other than Messrs. Hudson and Marley) who will be
55 years of age and who will have 10 years' service with AMP as of October
1, 1998 were given the opportunity until August 15, 1998 to elect early
retirement under the VERP. Participants in the VERP receive, among other
things, the following benefits: (i) credit for an additional 3 years of
service for purposes of AMP's pension plans; (ii) calculation of retirement
benefits using the employee's final year's pay rate (and, under
supplemental retirement plans, the employee's final bonus); (iii) immediate
commencement of retirement benefits without actuarial reduction for early
retirement and (iv) the right to elect to take the value of their entire
pension benefit, or the value of the benefit which is attributable to the
VERP enhancements, in a lump sum cash payment. In addition, an employee
participating in the VERP will be entitled to continued medical benefits
until his or her 65th birthday as if he or she remained an active employee.
Most participants in the VERP will be required to retire as of October 1,
1998, but certain otherwise eligible employees (which may include
participants who are executive officers of AMP) will be required to remain
employed by AMP for a longer period of time in order to qualify for VERP
benefits. As noted above, AMP has required Mr. Cole to remain in employment
until the earlier of January 1, 2001 or an involuntary termination of
employment in order to qualify for VERP benefits.
Of the five executive officers of AMP who were eligible to
participate in the VERP, 3 elected to participate (the "Electing
Executives"). The Executive Severance Agreements to which each of the
Electing Executives is a party will continue in effect in accordance with
their respective terms, except that the Electing Executive will no longer
be entitled to any termination-related benefits should a Change of Control
occur during the term of the agreement. As a result of his election to
participate in the VERP, at the time of his retirement, an Electing
Executive will forfeit the award of Performance Restricted Shares made
within the preceding 12 months. Any remaining Performance Restricted Shares
granted to any Electing Executive will remain outstanding in accordance
with their terms and subject to the applicable Executive Severance
Agreement. All options held by any Electing Executive will, following
retirement, remain outstanding for the entire term of such options and will
vest as set forth in the applicable option agreement, subject to the terms
of the applicable option plan and Executive Severance Agreement. Electing
Executives currently hold options to acquire an aggregate of 222,700 shares
of Common Stock.
Rabbi Trust
AMP has previously established the Supplemental Benefit Trust
Agreement (the "Rabbi Trust") for the purpose of funding the Executive
Severance Agreements, and AMP's SERPs (the Pension Restoration Plan and the
Supplemental Executive Pension Plan), Deferred Compensation Plan,
Split-Dollar Life Insurance Agreements, Deferred Stock Accumulation Plan
for Outside Directors (a directors phantom stock plan), the Retirement Plan
for Outside Directors, and the Deferred Compensation Plan for Non-Employee
Directors. The Rabbi Trust must be funded upon the occurrence of a Change
of Control and may be funded at an earlier time, except that the Executive
Severance Agreements entered into between AMP and its executive officers
require AMP to contribute to the Rabbi Trust, within 30 days following the
occurrence of a Pending Change of Control (as defined in such agreements),
assets sufficient to provide for payment of all amounts under such
agreements. The announcement by AlliedSignal of its intention to make the
Original AlliedSignal Offer constituted a Pending Change of Control for
these purposes. On August 27, 1998, AMP contributed to the Rabbi Trust an
irrevocable letter of credit in an amount equal to $120 million (which
amount represents the total contribution currently estimated to be
necessary to fund the benefits in the Executive Severance Agreements and
the other plans and programs described in this Section with respect to the
Rabbi Trust).
Employee Severance Plan
On August 20, 1998, the Compensation Committee approved an Employee
Severance Plan (the "Severance Plan") covering most AMP employees, who for
purposes of the Severance Plan are classified into four different tiers, as
described below (hereinafter Tier I, Tier II, Tier III and Tier IV
employees). Tier I is comprised of approximately 50 divisional officers and
management designated corporate staff directors; Tier II is comprised of
approximately 350 director level and manager level executives who have been
granted options to purchase Common Stock; Tier III is comprised of
approximately 1,000 employees (other than members of Tier I and Tier II)
who are in AMP's salary band M; and Tier IV is comprised of all other
exempt employees, numbering approximately 4,300. The following employees
are excluded from participation in the Severance Plan: (1) executives who
are parties to Executive Severance Agreements; (2) employees who are
covered by a collective bargaining agreement; and (3) employees who have
elected to participate in the VERP or who, prior to the occurrence of a
Change of Control, receive notice pursuant to any other reduction in force
program of AMP.
Benefits are generally paid to Severance Plan participants upon any
involuntary termination of employment with AMP (other than for cause)
within two years following a Change of Control. The Severance Plan also
provides benefits for Tier I and II employees upon voluntary terminations
of employment for "Good Reason" (as defined below) within two years
following such Change of Control. Good Reason is defined as a reduction in
salary (other than across-the-board salary reductions generally applicable
to all employees of both AMP and the entity effecting the Change of
Control) or a workplace relocation of more than 50 miles.
Upon a qualifying termination of employment, benefits are paid to
participants as follows: Tier I employees are paid two week's compensation
per year of service with a 6 month minimum and a one year maximum; Tier II
employees are paid two week's compensation per year of service with a 3
month minimum and a one year maximum; Tier III employees are paid two
week's compensation per year of service with a two month minimum and a 9
month maximum; and Tier IV employees are paid one week's compensation per
year of service with a one month minimum and a 9 month maximum. Severance
is paid in a lump sum. For purposes of the Severance Plan, "compensation"
means (1) a participant's weekly rate of salary plus (2) 1/52 of such
participant's target bonus for the year of termination or the year of the
Change of Control, whichever is higher.
Benefits under the Severance Plan also include health care coverage
continuation during the severance periods described above and outplacement
assistance for Tiers I, II and III. Severance payments are subject to
offset for similar benefits received (e.g., severance benefits payable
pursuant to foreign law) and are reduced to the extent required to ensure
that participants do not receive "excess parachute payments" from AMP.
AMP may generally amend or terminate the Severance Plan; however,
no termination or adverse amendment may be effected during the existence of
a Pending Change of Control (as defined in the Severance Plan), or for six
months thereafter, or for two years following a Change of Control.
Retention Bonus Program
On August 20, 1998 the Compensation Committee authorized AMP's
management to pay retention bonuses to certain key employees (other than
employees who are parties to Executive Severance Agreements), provided such
employees remain in AMP's employment for a designated retention period.
Retention bonuses shall be for a minimum of three month's salary and a
maximum of twelve month's salary and shall be subject to the approval of
Messrs. Ripp, Cole or Urkiel or Dr. Gromer.
AMP Pension
AMP maintains the AMP Incorporated Pension Plan (the "Pension
Plan"), a tax-qualified defined benefit plan. Upon the occurrence of a
Change of Control (as defined in the Pension Plan), certain enhanced
benefits are provided to plan participants. On August 20, 1998, the Board,
upon the recommendation of the Compensation Committee, authorized an
amendment to the Pension Plan to conform the Change of Control definition
in the Pension Plan to that used in AMP's other benefit and compensation
plans.
DISSENTERS' RIGHTS
Shareholders of AMP are not entitled to dissenters' rights in
connection with the AlliedSignal Consent Proposals.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997 there were: (a) no transactions between the Company and
management, the Directors or related third parties; (b) no business
relationship between the Company and a Director; and (c) no indebtedness to
the Company by management, the Directors or related third parties or
entities, that must be
disclosed.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers, directors, and persons owning more than
ten percent of a registered class of the Company's equity securities file
reports of ownership and changes in ownership of all equity and derivative
securities of the Company with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. The SEC regulations also require
that a copy of all such Section 16(a) forms filed must be furnished to the
Company by the officers, directors and greater than ten percent
shareholders.
Based solely on a review of the copies of such forms and amendments
thereto received by the Company, or written representations from the
Company's officers and directors that no Forms 5 were required to be filed,
the Company believes that during 1997 all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent
beneficial owners were met with the exception of Richard P. Clark, for whom
inadvertently 153 shares of Common Stock held by one son rather than two
sons were reported in a Form 3 as beneficially owned, and Juergen W.
Gromer, for whom an exercise of stock options was incorrectly reported as a
"same day sale" rather than a "cashless for stock" exercise whereby his
holdings were increased by a net of 4,299 shares of Common Stock. Late or
amended filings were made promptly upon discovery of the oversight.
PRINCIPAL SHAREHOLDERS
As of October , 1998, except as set forth below no person was known
to management to own beneficially more than 5% of the outstanding shares of
Common Stock of the Company.
Name No. of Shares Percentage of Shares
---- ------------- --------------------
Wachovia Bank, N.A. (1) 25,000,000 10.3 (2)
(1) Wachovia Bank, N.A. is the trustee under AMP's new Flexitrust and
may be deemed to beneficially own the 25,000,000 shares of AMP
Common Stock to be held in the trust. See "The Flexitrust
Arrangement"
(2) After giving effect to the issuance of the 25,000,000 shares to be
issued to the trust.
SOLICITATION OF REVOCATIONS
The cost of the solicitation of revocations of consent will be
borne by AMP. AMP estimates that the total expenditures in connection with
such solicitation (including the fees and expenses of AMP's attorneys,
public relations advisers and solicitors, and advertising, printing,
mailing, travel and other costs, but excluding salaries and wages of
officers and employees), will be approximately $______, of which $______
has been spent to date. Directors, officers and other AMP employees may,
without additional compensation, solicit revocations by mail, in person, by
telecommunication or by other electronic means.
AMP has retained Innisfree, at an estimated fee of $250,000 plus
reasonable out-of-pocket expenses, to assist in the solicitation of
revocations, as well as to assist AMP with its communications with its
shareholders with respect to, and to provide other services to AMP in
connection with, AMP's opposition to the AlliedSignal Consent Solicitation.
Approximately 50 persons will be utilized by Innisfree in its efforts. AMP
will reimburse brokerage houses, banks, custodians and other nominees and
fiduciaries for out-of-pocket expenses incurred in forwarding AMP's consent
revocation materials to, and obtaining instructions relating to such
materials from, beneficial owners of Common Stock. AMP has agreed to
indemnify Innisfree against certain liabilities and expenses in connection
with its engagement, including certain liabilities under the federal
securities laws.
PARTICIPANTS IN THE SOLICITATION
Under applicable regulations of the SEC, each member of the Board,
certain executive officers of AMP, certain other members of management and
employees of AMP and certain other persons may be deemed to be a
"participant" in AMP's solicitation of revocations of consent. The
principal occupations and business addresses of each participant are set
forth in Schedule A. Information about the present ownership by directors
and the named executive officers of AMP of AMP's securities is provided in
this Consent Revocation Statement and the present ownership of AMP's
securities by other participants is listed on Schedule A.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in AMP's proxy materials
for the 1999 Annual Meeting, shareholder proposals must be received by AMP
at its headquarters office not later than November 16, 1998 and must have
satisfied the conditions established by the SEC under Rule 14a-8 for
shareholder proposals to be included in AMP's proxy materials for that
meeting. In order for a shareholder proposal made outside of Rule 14a-8 to
be considered "timely" within the meaning of Rule 14a-4(c), such proposal
must be received by AMP at its headquarters office not later than January
29, 1999.
FORWARD - LOOKING STATEMENTS
This Consent Revocation Statement contains certain
"forward-looking" statements which AMP believes are within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The safe harbors intended to be created thereby are
not available to statements made in connection with a tender offer and AMP
is not aware of any judicial determination as to the applicability of such
safe harbor to forward-looking statements made in proxy solicitation
materials when there is a simultaneous tender offer. However, shareholders
should be aware that any such forward-looking statements should be
considered as subject to the risks and uncertainties that exist in AMP's
operations and business environment which could render actual outcomes and
results materially different than predicted. For a description of some of
the factors or uncertainties which could cause actual results to differ,
reference is made to the section entitled "Cautionary Statements for
Purposes of the 'Safe Harbor'" in AMP's Annual Report on Form 10-K for the
year ended December 31, 1997, a copy of which was also filed as Exhibit 19
to AMP's Schedule 14D-9 filed with the SEC. In addition, the realization of
the benefits anticipated from the strategic initiatives will be dependent,
in part, on management's ability to execute its business plans and to
motivate properly the AMP employees, whose attention may have been
distracted by AlliedSignal's tender offer and whose numbers will have been
reduced as a result of these initiatives.
AMP INCORPORATED
October ___, 1998
IMPORTANT
1. If your shares are registered in your own name, please sign, date and
mail the enclosed WHITE Consent Revocation Card to Innisfree in the
postage-paid envelope provided.
2. If you have previously signed and returned a blue consent card to
AlliedSignal, you have every right to change your vote. Only your
latest dated card will count. You may revoke any blue consent card
already sent to AlliedSignal by signing, dating and mailing the
enclosed WHITE Consent Revocation Card in the postage-paid envelope
provided.
3. If your shares are held in the name of a brokerage firm, bank nominee
or other institution, only it can sign a WHITE Consent Revocation Card
with respect to your shares and only after receiving your specific
instructions. Accordingly, please sign, date and mail the enclosed
WHITE Consent Revocation Card in the postage-paid envelope provided.
To ensure that your shares are voted, you should also contact the
person responsible for your account and give instructions for a WHITE
Consent Revocation Card to be issued representing your shares.
4. After signing the enclosed WHITE Consent Revocation Card, do not sign
or return the blue consent card. Do not even use AlliedSignal's blue
consent card to indicate your opposition to the AlliedSignal Consent
Proposals.
If you have any questions about giving your revocation of consent or
require assistance, please call:
INNISFREE M&A INCORPORATED
501 MADISON AVENUE, 20TH FLOOR
NEW YORK, NEW YORK 10022
CALL TOLL FREE: (888) 750-5834
BANKS & BROKERS CALL COLLECT: (212) 750-5833
SCHEDULE A
INFORMATION CONCERNING THE DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OF AMP
AND CERTAIN EMPLOYEES OF AMP AND OTHER PARTICIPANTS WHO MAY ALSO SOLICIT
REVOCATIONS OF CONSENTS
The following table sets forth the name, principal business address
and the present office or other principal occupation or employment, and the
name, principal business and the address of any corporation or other
organization in which such employment is carried on, of the directors and
certain executive officers of AMP and certain employees and other
representatives of AMP who may also solicit revocations of consents from
shareholders of AMP. Unless otherwise indicated, the principal occupation
refers to such person's position with AMP and the business address is AMP
Incorporated, P. O. Box 3608, Harrisburg, Pennsylvania 17105.
DIRECTORS
The principal occupations of the Company's directors who are deemed
participants in the solicitation are set forth on pages __ and __ of this
Consent Revocation Statement. The principal business address of Messrs.
Hudson, Ripp and McInnes is that of the Company. The name, business and
address of the other director - participants' organization of employment
are as follows:
Name Address
---- -------
Ralph D. DeNunzio Harbor Point Associates, Inc.
Suite 2602
375 Park Avenue
New York, NY 10152
Barbara Hackman Franklin Barbara Franklin Enterprises
2600 Virginia Avenue NW, Suite 506
Washington, DC 20037
Joseph M. Hixon III Hixon Investments
4400 Marsh Landing Boulevard, Suite 7
Ponte Vedra Beach, FL 32082-1287
Joseph M. Magliochetti Dana Corporation
4500 Dorr Street
Toledo, OH 43615
Jerome J. Meyer Tektronix, Inc.
26600 SW Parkway
Wilsonville, OR 97070-1000
John C. Morley Evergreen Ventures, Ltd.
30195 Chagrin Boulevard, Suite 210N
Pepper Pike, OH 44124
Paul G. Schloemer Parker Hannifin Corporation
18321 Jamboree Road
P.O. Box C 19510
Irvine, CA 92612
Takeo Shiina IBM Japan, Ltd.
2-12 Roppongi 3-chome
Minato-tu, Tokyo 106-8711
Japan
EXECUTIVE OFFICERS AND MANAGEMENT
The principal occupation of the Company's executive officers and
certain other members of management and employees who are deemed
participants in the solicitation are set forth below. Except as otherwise
specified below, the principal business address of each of such persons is
that of the Company.
Name Principal Occupation
---- --------------------
Robert Ripp Chairman of the Board and Chief
Executive Officer
William S. Urkiel Corporate Vice President and Chief
Financial Officer
Richard P. Clark Divisional Vice President, Global
Wireless Products Group
Herbert M. Cole Senior Vice President for Operations
Thomas J. DiClemente Corporate Vice President and
President, Europe, Middle East,
Africa
Rudolf Gassner Corporate Vice President and
President, Global Personal Computer
Division
Charles W. Goonrey Corporate Vice President and
General Legal Counsel
Juergen W. Gromer Senior Vice President, Global Industry
AMP Deutschland Businesses
Ampere Str. 7-11
63225 Langen
Germany
John E. Gurski Corporate Vice President and
President, Global Value-Added
Operations and President, Global
Operating Division
David F. Henschel Corporate Secretary
William J. Hudson, Jr. Vice Chairman
John H. Kegel Corporate Vice President, Asia/Pacific
c/o Asia Pacific Operations Office,
KSP C-7F No. 725
3-2-1 Sakado, Takatsu-Ku
Kawasaki, Japan
Mark E. Lang Corporate Controller
Philippe Lemaitre Corporate Vice President and Chief
Technology Officer
James E. Marley Former Chairman
Joseph C. Overbaugh Corporate Treasurer
Nazario Proietto Corporate Vice President and
President, Global Consumer,
Industrial and Power Technology
Division
Douglas Wilburne Director, Investor Relations
Mary Rakoczy Manager, Shareholder Services
Richard Skaare Director, Corporate Communications
Dorothy J. Hiller Assistant Manager, Shareholder Services
Melissa E. Witsil Communications Assistant
Janine M. Porr Executive Secretary
Merrill A. Yohe Vice President, Public Affairs
Suzanne Yenchko Director, State Government Relations
CREDIT SUISSE FIRST BOSTON AND DONALDSON, LUFKIN & JENRETTE
Certain employees of Credit Suisse First Boston Corporation
("CSFB") and Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
each may also assist in the solicitation of proxies, including by
communicating in person, by telephone, or otherwise with limited number of
institutions, brokers, or other persons who are shareholders of AMP.
Neither CSFB nor DLJ will receive any separate fee for its solicitation
activities. Credit Suisse First Boston and DLJ are each investment banking
firms that provides a full range of financial services for institutional
and individual clients. Although neither CSFB nor DLJ admits that it or any
of its directors, officers, employees or affiliates are a "participant," as
defined in Schedule 14A promulgated under the Securities Exchange Act of
1934 by the Securities and Exchange Commission, or that such Schedule 14A
requires the disclosure of certain information concerning CSFB or DLJ, CSFB
and DLJ may assist AMP in such a solicitation. CSFB and DLJ each engage in
a full range of investment banking, securities trading, market-making and
brokerage services for institutional and individual clients. In the normal
course of their business, each of CSFB and DLJ may trade securities of AMP
for its own account and the account of its customers and, accordingly, may
at any time hold a long or short position in such securities. As of
September 11, 1998, CSFB held a net long position of 103,966 shares of AMP
Common Stock and DLJ held no shares of AMP Common Stock for its own
account. Additionally, in the normal course of its business, CSFB and DLJ
may finance their securities positions by bank and other borrowings and
repurchase and securities borrowing transactions.
Information with respect to the employees of CSFB who may be
deemed "participants" is set forth below. None of the individuals named
below owns any shares of AMP Common Stock or has engaged in any transaction
involving AMP Common Stock during the past two years. The principal
business address of each of the persons listed below is Eleven Madison
Avenue, New York, New York 10010, except that Mr. Koch's principal business
is Credit Suisse First Boston, AT&T Corporate Center, 227 West Monroe
Street, Chicago, IL 60606.
Name Principal Occupation
---- --------------------
Alan H. Howard Managing Director, Investment Banking
Steven Koch Co-Head of M&A Group and Managing Director
D. Scott Lindsay Co-Head of M&A Group and Managing Director
Lawrence Hamdan Director, M&A Group
Information with respect to the employees of DLJ who may be deemed
"participants" is set forth below. None of the individuals named below owns
any shares of AMP Common Stock or has engaged in any transaction involving
AMP Common Stock during the past two years. The principal business address
of each of the persons listed below is 277 Park Avenue, New York, New York
10172.
Name Principal Occupation
---- --------------------
Douglas Brown Managing Director
Herald L. Ritch Managing Director
AMP has retained CSFB to act as its lead financial advisor with
respect to the AlliedSignal Offer pursuant to a letter agreement, dated
August 5, 1998 (the "CSFB Engagement Letter"), between CSFB and AMP. The
CSFB Engagement Letter provides for the payment to CSFB of an initial
advisory fee of $2,500,000, payable upon execution of the CSFB Engagement
Letter (the "Initial Advisory Fee"), plus a fee of $5,000,000, payable
every 90 calendar days (not to exceed $20,000,000 in the aggregate),
provided that AlliedSignal does not acquire more than 50% of the
outstanding voting securities of AMP during such 90 day period, with the
first payment payable 90 days after the date of the CSFB Engagement Letter
(the "Quarterly Advisory Fees"). In addition, if during the term of the
CSFB Engagement Letter or within two years after termination of the CSFB
Engagement Letter by AMP, AMP or substantially all of its assets are
acquired by AlliedSignal or any third party or AMP enters into an agreement
providing for such an acquisition, a transaction fee equal to 0.3% of the
Aggregate Consideration (as defined below) involved in the sale (the
"Transaction Fee") shall be payable to CSFB. If during the term of the CSFB
Engagement Letter or within two years after termination of the CSFB
Engagement Letter by AMP, in response to the AlliedSignal Offer another
transaction is consummated, a customary transaction fee shall be payable to
CSFB as determined by mutual agreement between CSFB and AMP (the "Alternate
Transaction Fee") based on the Aggregate Consideration of the transaction.
The CSFB Engagement Letter also provides for the payment to CSFB of a fee
of $2,500,000 upon CSFB rendering, whether in oral or written form, an
opinion as to the adequacy from a financial point of view of the
consideration offered in the AlliedSignal Offer (the "Opinion Fee"). The
Initial Advisory Fee and the Opinion Fee will be credited (to the extent
paid) against any fees payable pursuant to the Quarterly Advisory Fees; the
Initial Advisory Fee, the Opinion Fee and the Quarterly Advisory Fees will
be credited (to the extent paid) against any fees payable pursuant to the
Transaction Fee; and the Initial Advisory Fee will be credited (to the
extent paid) against any fees payable pursuant to the Alternate Transaction
Fee. All fees and expenses payable to CSFB pursuant to the CSFB Engagement
Letter shall be net of any applicable withholding and similar taxes.
"Aggregate Consideration" is defined in the CSFB Engagement Letter to mean
the total fair market value (on the date of payment) of all consideration
(including cash, securities, property, all debt remaining on AMP's
financial statements and other indebtedness and obligations assumed and any
other form of consideration) received or receivable, directly or
indirectly, by AMP or its shareholders in connection with the sale.
In addition to the fees described above, AMP has agreed to
reimburse CSFB for CSFB's out-of-pocket expenses, including fees and
expenses of CSFB's legal counsel, if any, and any other advisor retained by
CSFB (which, except in the case of legal counsel, shall only be retained
with the prior approval of AMP), resulting from or arising out of the CSFB
Engagement Letter. AMP has also agreed to indemnify CSFB and its affiliates
against certain liabilities incurred in connection with its performance
under the CSFB Engagement Letter.
In addition to the services to be provided by CSFB pursuant to the
CSFB Engagement Letter, AMP has agreed to (i) offer CSFB the role of lead
arranger or principal counterparty, as applicable, in connection with any
external financing, foreign exchange or derivatives transaction undertaken
by AMP in connection with services provided by CSFB pursuant to the CSFB
Engagement Letter; (ii) offer CSFB the role of lead managing underwriter or
exclusive placement agent, as the case may be, in connection with an
offering of securities to the public or a private placement of securities
during the term of the CSFB Engagement Letter; and (iii) continue to retain
CSFB as its share repurchase agent. The fees and terms applicable to the
performance of any such additional services by CSFB shall be set forth in
separate letter agreements containing terms and provisions mutually agreed
upon by CSFB and AMP.
CSFB has provided certain investment banking services to AMP from
time to time for which CSFB has received customary compensation.
AMP has retained DLJ to act as its financial advisor for a period
of twelve months with respect to the AlliedSignal Offer and the Consent
Solicitation pursuant to a letter agreement, dated August 26, 1998 (the
"DLJ Engagement Letter"), between DLJ and AMP. The DLJ Engagement Letter
provides for the payment to DLJ of an initial advisory fee of $750,000,
payable upon execution of the DLJ Engagement Letter (the "DLJ Initial
Advisory Fee"), plus a fee of $1,500,000, payable every 90 calendar days
(not to exceed $6,000,000 in the aggregate) with the first payment payable
90 days after the date of the DLJ Engagement Letter (the "DLJ Quarterly
Advisory Fees"); provided, however, that no additional DLJ Quarterly Fees
shall be payable after a Transaction (as defined below) has been
consummated. In addition, if during the term of the DLJ Engagement Letter
or within two years after expiration or termination of the DLJ Engagement
Letter AMP consummates a sale, merger, consolidation or any other business
combination with AlliedSignal or any third party, in one or a series of
transactions, involving all or a substantial amount of the business,
securities or assets of AMP (a "Transaction") or enters into an agreement
providing for a Transaction which is subsequently consummated, a
transaction fee equal to 0.09% of the Transaction Consideration (as defined
below) involved in the Transaction (the "DLJ Transaction Fee") shall be
payable to DLJ. If during the term of the DLJ Engagement Letter or within
two years after the expiration or termination of the DLJ Engagement Letter,
in response to the AlliedSignal Offer AMP shall (i) conduct a repurchase of
a significant amount of its securities, a recapitalization or a spin-off,
split-off or other extraordinary dividend of cash, securities or other
assets to its shareholders or (ii) acquire all or a substantial amount of
the business, securities or assets of another company, in one or a series
of transactions, by purchase, merger, consolidation or any other business
combination (each such transaction, an "Alternate Transaction"), a
customary transaction fee shall be payable to DLJ as shall be determined by
mutual agreement between DLJ and AMP (the "DLJ Alternate Transaction Fee")
based on the total consideration paid or payable in such transaction and
such other factors as AMP and DLJ shall mutually agree. The DLJ Initial
Advisory Fee will be credited (to the extent paid) against any fees payable
pursuant to the DLJ Quarterly Advisory Fees; and the DLJ Initial Advisory
Fee and the DLJ Quarterly Advisory Fees will be credited (to the extent
paid) against any fees payable pursuant to the DLJ Transaction Fee. The
term "Transaction Consideration" shall mean the total fair market value (on
the date of payment) of all consideration (including cash, securities,
property, all debt remaining on AMP's financial statements and other
indebtedness and obligations assumed and any other form of consideration)
received or receivable, directly or indirectly, by AMP or its shareholders
in connection with a Transaction.
In the event of a change in the composition of the Board such that
a majority or more of the members of the Board holding such position were
not nominated by the directors in office as of the date of the DLJ
Engagement Letter, all remaining unpaid DLJ Quarterly Advisory Fees shall
immediately become due and payable. In such event, DLJ shall continue to be
entitled to a DLJ Transaction Fee.
In addition to the fees described above, AMP has agreed to
reimburse DLJ for DLJ's out-of-pocket expenses (including fees and expenses
of counsel) incurred by DLJ in connection with its engagement under the DLJ
Engagement Letter. AMP has also agreed to indemnify DLJ and its affiliates
against certain liabilities incurred in connection with its performance
under the DLJ Engagement Letter.
In addition to the services to be provided by DLJ pursuant to the
DLJ Engagement Letter, AMP has agreed to (i) offer DLJ the role of
co-arranger or counterparty, as applicable, in connection with any external
financing, foreign exchange or derivatives transactions undertaken by AMP
in connection with services provided by DLJ pursuant to the DLJ Engagement
Letter; and (ii) offer DLJ the role of co-managing underwriter,
co-placement agent, co-initial purchaser or co-dealer manager, as the case
may be, in connection with any offering of debt or equity securities to the
public, any private placement of debt or equity securities or any tender
offer or exchange offer for debt or equity securities during the term of
the DLJ Engagement Letter; provided, however, that DLJ shall not be
obligated to accept such role. The fees and terms applicable to the
performance of any such additional services by DLJ shall be set forth in
separate letter agreements containing terms and provisions mutually agreed
upon by DLJ and AMP.
INFORMATION REGARDING OWNERSHIP OF THE COMPANY'S SECURITIES BY PARTICIPANTS
None of the participants owns any of the Company's securities of
record but not beneficially. The number of shares of Common Stock held by
directors and the named executive officers is set forth on pages __ and __
of this Consent Revocation Statement. The number of shares of Common Stock
held by the other participants is set forth below:
Name Share Ownership
---- ---------------
William S. Urkiel 23,067
Richard P. Clark 34,135
Herbert M. Cole 87,893
Thomas J. DiClemente 32,937
Rudolf Gassner 53,134
Charles W. Goonrey 16,819
David F. Henschel 5,187
John H. Kegel 36,697
Mark E. Lang 4,316
Philippe Lemaitre 16,446
James E. Marley 315,100
Joseph C. Overbaugh 24,030
Nazario Proietto 42,244
Douglas Wilburne 316
Mary Rakoczy 110
Richard Skaare 438
Dorothy J. Hiller 2
Melissa E. Witsil 106
Janine M. Porr 83
Merrill A. Yohe, Jr. 7,044
Suzanne Yenchko 246
INFORMATION REGARDING TRANSACTIONS IN THE COMPANY'S SECURITIES BY PARTICIPANTS
The following table sets forth purchases and sales of AMP's equity
securities by the participants listed below during the past two years.
Unless otherwise indicated, all transactions are in the public market.
NUMBER OF
SHARES OF
COMMON STOCK
PURCHASED
NAME (OR SOLD) FOOTNOTE DATE
- ----------------------------------------------------------------------
DIRECTORS
- ---------
Ralph D. DeNunzio 2,000 (1) 07/01/96
2,000 (1) 07/01/97
2,000 (1) 07/01/98
Barbara Hackman Franklin 2,000 (1) 07/01/96
2,000 (1) 07/01/97
52 (10) 12/31/97
300 (8) 02/10/98
6.7 (10) 03/02/98
10 (10) 06/01/98
2,000 (1) 07/01/98
10.26 (10) 09/01/98
Joseph M. Hixon III 2,000 (1) 07/01/96
(51,133) (3) 09/30/96
2,000 (1) 07/01/97
(510) (3) 12/24/97
(490) (3) 12/30/97
(2,079) (3) 04/02/98
2,000 (1) 07/01/98
William J. Hudson, Jr. 2,500 (1) 07/23/96
73,100 (1) 07/23/96
46,900 (12) 07/23/96
902 (5) 04/21/97
1,159 (5) 04/21/97
(4,040) (3) 04/23/97
2,100 (1) 07/22/97
61,800 (1) 07/22/97
39,600 (12) 07/22/97
906 (4) 07/30/97
9,956 (13) 01/27/98
(3,398) (7) 01/27/98
(61,800) (3) 02/03/98
1,306 (5) 04/21/98
2,039 (5) 04/21/98
(3,406) (3) 04/22/98
1,940.31 (6) 08/31/98
Joseph M. Magliochetti 2,000 (1) 07/24/96
2,000 (1) 07/01/97
2,000 (1) 07/01/98
Harold A. McInnes (5,315) (11) 10/28/96
5,315 (5) 10/28/96
(1,000) (3) 11/26/96
(6,000) (9) 04/28/97
(300) (3) 06/12/97
(382) (3) 06/17/98
Jerome J. Meyer 2,000 (1) 07/01/96
1,300 (8) 08/02/96
2,000 (1) 07/01/97
2,000 (1) 07/01/98
John C. Morley (300) (9) 06/12/96
2,000 (1) 07/01/96
2,000 (1) 07/01/97
2,000 (1) 07/01/98
Robert Ripp 2,500 (1) 07/23/96
23,000 (1) 07/23/96
15,800 (12) 07/23/96
2,100 (1) 07/22/97
23,000 (1) 07/22/97
15,600 (12) 07/22/97
3,624 (13) 01/27/98
(1,800) (7) 01/27/98
3,200 (1) 07/21/98
37,900 (1) 07/21/98
27,900 (12) 07/21/98
60,000 (1) 08/20/98
25,000 (12) 08/20/98
17.09 (6) 08/31/98
Paul G. Schloemer 2,000 (1) 07/01/96
600 (8) 01/28/97
2,000 (1) 07/01/97
2,000 (1) 07/01/98
Takeo Shiina 2,000 (1) 07/01/96
2,000 (1) 07/01/97
4.60 (10) 12/31/97
0.62 (10) 03/02/98
.73 (10) 06/01/98
2,000 (1) 07/01/98
.75 (10) 09/01/98
OFFICERS
- --------
Richard P. Clark 2,500 (1) 07/23/96
14,300 (1) 07/23/96
326 (5) 10/28/96
2,100 (1) 07/22/97
5,500 (1) 07/22/97
4,700 (12) 07/22/97
535 (5) 10/28/97
3,200 (1) 07/21/98
6,500 (1) 07/21/98
6,600 (12) 07/21/98
3,565.60 (6) 08/31/98
Herbert M. Cole 2,500 (1) 07/23/96
19,800 (1) 07/23/96
13,800 (12) 07/23/96
460 (5) 10/28/96
1,138 (4) 07/16/97
2,100 (1) 07/22/97
19,800 (1) 07/22/97
13,600 (12) 07/22/97
917 (4) 08/06/97
756 (5) 10/28/97
2,770 (13) 01/27/98
(1,183) (7) 01/27/98
3,200 (1) 07/21/98
25,400 (1) 07/21/98
19,500 (12) 07/21/98
17.09 (6) 08/31/98
Thomas J. DiClemente 2,500 (1) 07/23/96
10,900 (1) 07/23/96
2,100 (1) 07/22/97
7,800 (1) 07/22/97
6,100 (12) 07/22/97
6 (10) 12/31/97
3.57 (10) 03/02/98
4.21 (10) 06/01/98
3,200 (1) 07/21/98
10,500 (1) 07/21/98
111 (5) 07/27/98
900 (8) 07/28/98
100 (8) 07/28/98
9,300 (12) 07/21/98
242.60 (6) 08/31/98
5.125 (10) 09/01/98
Rudolf Gassner 2,500 (1) 07/23/96
14,500 (1) 07/23/96
2,100 (1) 07/22/97
7,000 (1) 07/22/97
5,700 (12) 07/22/97
(500) (9) 08/05/97
1,684 (10) 12/31/97
58.85 (10) 03/02/98
(2,139) (9) 04/27/98
15.30 (10) 06/01/98
3,200 (1) 07/21/98
10,000 (1) 07/21/98
141 (5) 07/27/98
9,000 (12) 07/21/98
17.09 (6) 08/31/98
15.01 (10) 09/01/98
Charles W. Goonrey 2,500 (1) 07/23/96
8,000 (1) 07/23/96
303 (5) 04/21/97
2,100 (1) 07/22/97
7,200 (1) 07/22/97
1,348 (4) 07/31/97
(7,538) (3) 07/31/97
439 (5) 04/21/98
(439) (4) 04/21/98
3,200 (1) 07/21/98
8,900 (1) 07/21/98
17.09 (6) 08/31/98
Mary Goonrey (wife) 7,538 (14) 07/31/97
46.4674 (10) 03/02/98
439 (14) 04/21/98
57.9258 (10) 06/01/98
59.4241 (10) 09/01/98
Juergen W. Gromer 22,400 (1) 07/23/96
15,000 (1) 07/22/97
9,300 (12) 07/22/97
1,103 (5) 07/27/97
1,922 (4) 07/30/97
1,377 (4) 07/30/97
17,400 (1) 07/21/98
212 (5) 07/27/98
11,900 (12) 07/21/98
John E. Gurski 2,500 (1) 07/23/96
21,300 (1) 07/23/96
14,700 (12) 07/23/96
621 (5) 04/21/97
2,100 (1) 07/22/97
19,100 (1) 07/22/97
13,200 (12) 07/22/97
2,947 (13) 01/27/98
(1,464) (7) 01/27/98
3,200 (1) 07/21/98
24,000 (1) 07/21/98
18,500 (12) 07/21/98
703.74 (6) 08/31/98
John E. Gurski Cust.
for Kevin (Son) .5538 (10) 03/02/98
.6530 (10) 06/01/98
.6699 (10) 08/31/98
David F. Henschel 2,500 (1) 07/23/96
2,300 (1) 07/23/96
306 (5) 10/28/96
2,100 (1) 07/22/97
2,400 (1) 07/22/97
235 (4) 07/28/97
504 (5) 10/28/97
130 (14) 12/16/97
224 (10) 12/31/97
19.26 (10) 03/02/98
22.71 (10) 06/01/98
3,200 (1) 07/21/98
3,700 (1) 07/21/98
2,058.47 (6) 08/31/98
23.30 (10) 09/01/98
John H. Kegel 2,500 (1) 07/23/96
8,200 (1) 07/23/96
325 (5) 04/21/97
2,100 (1) 07/22/97
8,100 (1) 07/22/97
1,259 (4) 07/24/97
406 (10) 12/31/97
25.85 (10) 03/02/98
471 (5) 04/21/98
33.85 (10) 06/01/98
3,200 (1) 07/21/98
7,300 (1) 07/21/98
7,100 (12) 07/21/98
2,076.73 (6) 08/31/98
34.72 (10) 09/01/98
Mark E. Lang 2,500 (1) 07/23/96
4,000 (1) 07/23/96
1 (15) 06/17/97
229 (8) 07/01/97
2,100 (1) 07/22/97
4,400 (1) 07/22/97
.006 (10) 03/02/98
.007 (10) 06/01/98
3,200 (1) 07/21/98
10,800 (1) 07/21/98
300 (8) 07/27/98
172.0436 (10) 08/03/98
1,713.20 (6) 08/31/98
.0075 (10) 09/01/98
Philippe Lemaitre 17,500 (1) 03/12/97
2,100 (1) 07/22/97
8,100 (1) 07/22/97
6,300 (12) 07/22/97
3,200 (1) 07/21/98
11,400 (1) 07/21/98
9,900 (12) 07/21/98
245.49 (6) 08/31/98
James E. Marley 2,500 (1) 07/23/96
58,000 (1) 07/23/96
31,700 (12) 07/23/96
260 (3) 10/15/96
260 (3) 10/16/96
500 (3) 10/28/96
1,536 (5) 10/28/96
2,100 (1) 07/22/97
39,000 (1) 07/22/97
31,700 (12) 07/22/97
10,000 (3) 07/28/97
10,000 (3) 07/28/97
2,520 (5) 10/28/97
7,965 (13) 01/27/98
(3,957) (7) 01/27/98
1,411.16 (6) 08/31/98
Judy Marley (Wife) .3936 (10) 03/02/98
.4642 (10) 06/01/98
149 (6) 08/31/98
.4761 (10) 09/01/98
Joseph C. Overbaugh 2,500 (1) 07/23/96
8,200 (1) 07/23/96
301 (5) 04/21/97
2,100 (1) 07/22/97
7,400 (1) 07/22/97
3,200 (1) 07/21/98
8,800 (1) 07/21/98
1,289.19 (6) 08/31/98
Nazario Proietto 2,500 (1) 07/23/96
11,300 (1) 07/23/96
426 (5) 10/28/96
2,100 (1) 07/22/97
5,000 (1) 07/22/97
4,400 (12) 07/22/97
617 (5) 10/28/97
86 (6) 12/31/97
24.91 (10) 03/02/98
29.37 (10) 06/01/98
3,200 (1) 07/21/98
9,800 (1) 07/21/98
8,800 (12) 07/21/98
17.09 (6) 08/31/98
30.13 (10) 09/01/98
William S. Urkiel 2,500 (1) 07/23/96
16,200 (1) 07/23/96
2,100 (1) 07/22/97
18,500 (1) 07/22/97
561 (10) 12/31/97
64.4 (10) 03/02/98
75.9 (10) 06/01/98
3,200 (1) 07/21/98
15,000 (1) 07/21/98
12,400 (12) 07/21/98
17.09 (6) 08/31/98
77.8889 (10) 09/01/98
OTHERS
- ------
Mary J. Rakoczy 5 (10) 10/15/96
8.42 (10) 05/01/97
5.79 (10) 02/17/98
.6276 (10) 03/02/98
.7816 (10) 06/01/98
5.54 (6) 08/31/98
.8018 (10) 09/01/98
Richard Skaare 900 (1) 7/23/96
2,500 (1) 7/23/96
1400 (1) 7/22/97
2100 (1) 7/22/97
1,900 (1) 7/21/98
3,200 (1) 7/21/98
425.8 (6) 7/31/98
.0075 (10) 09/01/98
Douglas Wilburne 8,100 (1) 11/02/96
1 (15) 06/01/97
.0061 (10) 03/02/98
.0071 (10) 06/01/98
4,000 (1) 07/21/98
3,100 (1) 07/22/97
110 (8) 10/29/97
205.11 (6) 08/31/98
.0075 (10 09/01/98
John Dean Wilburne (Son) 1.16 (10) 02/17/98
1.21 (10) 03/16/98
.02 (10) 06/01/98
.02 (10) 09/01/98
Douglas James Wilburne (Son) 1.16 (10) 02/17/98
1.21 (10) 03/16/98
.02 (10) 06/01/98
.02 (10) 09/01/98
Dorothy J. Hiller 1.716 (6) 08/31/98
John P. Naylor (Spouse) 25.91 (6) 08/31/98
Janine M. Porr .1416 (10) 09/03/96
.1383 (10) 12/02/96
.1438 (10) 03/03/97
.1373 (10) 06/02/97
.1103 (10) 09/02/97
.1264 (10) 12/01/97
.1344 (10) 03/02/98
.1583 (10) 06/01/98
61 (6) 08/31/98
.1623 (10) 09/01/98
Melissa E. Witsil 106 (6) 08/31/98
Suzanne Yenchko 1,400 (1) 07/23/96
1,600 (1) 07/22/97
2,00 (1) 07/21/98
9.55 (6) 08/31/98
Merrill A. Yohe, Jr. 2,500 (1) 07/23/96
4,300 (1) 07/23/96
422 (5) 10/28/96
(422) (9) 05/15/97
1,088 (2) 07/14/97
800 (2) 07/16/97
2,100 (1) 07/22/97
6,100 (1) 07/22/97
915 (2) 08/15/97
(400) (3) 08/27/97
694 (5) 10/28/97
(694) (11) 10/28/97
3,200 (1) 07/21/98
8,000 (1) 07/21/98
17.086 (6) 08/31/98
FOOTNOTES:
- ---------
(1) Stock option award.
(2) Acquisition pursuant to the exercise of stock options.
(3) Disposition pursuant to a bona fide gift.
(4) Cashless exercise of stock options.
(5) Conversion of derivative security.
(6) The aggregate number of Shares owned, as of the date indicated,
which were purchased through periodic payments to the Company's
401(k) plan.
(7) Shares withheld for tax purposes in connection with the vesting
of restricted stock.
(8) Open market purchase.
(9) Open market sale.
(10) Shares purchased through the Dividend Reinvestment Plan.
(11) Shares sold back to AMP.
(12) Award of performance restricted shares.
(13) Acquisition of vested performance shares.
(14) Acquired pursuant to a bona fide gift.
(15) Company award.
MISCELLANEOUS INFORMATION CONCERNING PARTICIPANTS
Except as described in this Schedule A or in the Consent Revocation
Statement, none of the participants nor any of their respective affiliates
or associates (together, the "Participant Affiliates"), (i) directly or
indirectly beneficially owns any shares of Common Stock of the Company or
any securities of any subsidiary of the Company or (ii) has had any
relationship with the Company in any capacity other than as a stockholder,
employee, officer and director. Furthermore, except as described in this
Schedule A or in the Consent Revocation Statement, no Participant Affiliate
is either a party to any transaction or series of transactions since
January 1, 1997, or has knowledge of any currently proposed transaction or
series of transactions, (i) to which the Company or any of its subsidiaries
was or is to be a party, (ii) in which the amount involved exceeds $60,000,
and (iii) in which any Participant Affiliate had, or will have, a direct or
indirect material interest.
Except for the employment agreements described in the Consent
Revocation Statement, no Participant Affiliate has entered into any
agreement or understanding with any person respecting any future employment
by the Company or its affiliates or any future transactions to which the
Company or any of its affiliates will or may be a party. Except as
described in this Schedule A or in the Consent Revocation Statement, there
are no contracts, arrangements or understandings by any Participant
Affiliate within the past year with any person with respect to the
Company's securities.
ANNEX 1
FORM OF ALLIEDSIGNAL PROPOSED AMENDMENTS
TO THE COMPANY BY-LAWS
1. AlliedSignal Proposed Amendment to Section 2.2 of Article II
Section 2.2 of Article II of the Company's By-laws is amended, in
its entirety, to read as follows:
'The number of directors of the Corporation shall be
twenty-eight. This Section 2.2 may be repealed or amended only with the
affirmative vote of holders of a majority of the shares of the Corporation
entitled to vote thereon.'
2. AlliedSignal Proposed Amendment to Section 2.4 of Article II
Section 2.4 of Article II of the Company's By-laws is
amended by replacing the first sentence thereof with the following:
'Vacancies in the Board, however caused, 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 the sole remaining director,
provided, however, that any vacancies in the Board created by an amendment
by shareholders of these By-laws shall be filled only by the affirmative
vote of holders of a majority of the shares entitled to vote thereon. The
preceding sentence may be repealed or amended only with the affirmative
vote of holders of a majority of the shares entitled to vote thereon.'
3. AlliedSignal Proposed Amendment to Section 1.7.2 of Article I
Section 1.7.2 of Article I is amended by adding the
following sentences after the last sentence thereof:
'Notwithstanding anything contained in any other provision
of these By-laws, any shareholder seeking to nominate candidates for
election to the Board pursuant to the shareholder action by written consent
need not comply with any advance notification provisions contained in these
By-laws, including, without limitation, Section 1.5.3 hereof. The preceding
sentence may be repealed or amended only with the affirmative vote of
holders of a majority of the shares entitled to vote thereon.'
4. AlliedSignal Proposed Amendment to Section 2.1 of Article II
Section 2.1 of Article II of the By-laws of the Company is
amended by adding the following sentences after the last sentence thereof:
'Notwithstanding anything contained in any other provision
of these By-laws to the contrary, all powers of the Corporation and rights
and duties of the Board with respect to the Rights Agreement, dated as of
October 25, 1989, as amended from time to time, between the Corporation and
Chase Mellon Shareholder Services L.L.C. (successor to Manufacturers
Hanover Trust Company), as Rights Agent, and any other plan, agreement,
contract, security, warrant or other instrument of a type or kind
authorized by or referred to in Section 2513 of the Pennsylvania Business
Corporation Law (each a "Rights Agreement"), including the right or duty to
adopt, amend, redeem, terminate or change any and all Rights Agreements
(and any securities or other instruments issued or issuable thereunder),
shall not be vested in or exercised by the Board and shall instead be
exclusively vested in and exercised by a group of three persons consisting
of ____________________, ____________________ and ____________________ (the
"Rights Agreement Managing Agents") or, if any Rights Agreement Managing
Agent is unable to serve due to death, disability or otherwise, any
other person designated by the remaining Rights Agreement Managing Agents.
Each Rights Agreement Managing Agent will be indemnified by the Company to the
full extent permitted by applicable law as provided in Article IV of these
By-laws. The preceding two sentences may be repealed or amended only with
the affirmative vote of holders of a majority of the shares of the
Corporation entitled to vote thereon.'
ANNEX 2
[LOGO] CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue Telephone 212 325 2000
New York, NY 10010-3629
August 20, 1998
Board of Directors
AMP Incorporated
470 Friendship Road
Harrisburg, PA 17111
Members of the Board:
On August 10, 1998, PMA Acquisition Corporation (the "Purchaser"), a wholly
owned subsidiary of AlliedSignal Inc. ("Parent"), commenced a tender offer
for all outstanding shares of common stock, no par value (the "Shares"), of
AMP Incorporated ("AMP"), including the associated common stock purchase
rights, for $44.50 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated August
10, 1998, and the related letter of transmittal (which together constitute
the "AlliedSignal Offer").
You have asked us to advise you with respect to the adequacy of the
AlliedSignal Offer to the holder of Shares (other than Parent and its
affiliates), from a financial point of view.
In arriving at our opinion, we have reviewed and considered the
AlliedSignal Offer and the related Tender Offer Statement on Schedule 14D-1
filed by Parent and the Purchaser with the Securities and Exchange
Commission (the "Commission") and the Solicitation/Recommendation Statement
on Schedule 14D-9 which we understand may be filed by AMP with the
Commission. We have also reviewed certain publicly available business and
financial information relating to AMP and certain other information,
including financial forecasts, provided to us by AMP, and have met with the
management of AMP to discuss the business and prospects of AMP.
We have also considered certain financial and stock market data relating to
AMP, and we have compared such data with similar data for other publicly
held companies in businesses similar to AMP. In addition, we have
considered the financial terms of certain other transactions which have
recently been effected. We have also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information, including the
information in the AlliedSignal Offer, and we have relied on all such
information being complete and accurate in all material respects. With
respect to the financial forecasts, including operating cost savings
projected to be realized through AMP's various cost reduction plans, we
have assumed that they have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of AMP's management as
to the future financial performance of AMP. In addition, we have not been
requested to make, and have not made, an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of AMP,
nor have we been furnished with any such evaluations or appraisals. Our
opinion is necessarily based upon financial, economic, market and other
conditions as they exist and can be evaluated on the date hereof.
We are acting as financial advisor to AMP in connection with the
AlliedSignal Offer and will receive a fee from AMP for our services. We
will also receive a fee for rendering this opinion.
We have also in the past performed financial advisory services for AMP and
have received customary fees for such services.
In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both AMP and Parent for our and
such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such
securities.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the AlliedSignal Offer,
does not constitute a recommendation to any shareholder as to whether or
not such shareholder should tender Shares pursuant to the AlliedSignal
Offer or vote in favor of any proposal presented to shareholders in
connection therewith, and is not to be quoted or referred to, in whole or
in part, in any registration statement, prospectus, or proxy statement, or
in any other written document used in connection with the offering or sale
of securities, nor shall this letter be used for any other purposes,
without our prior written consent, provided that this letter may be
included in its entirety in, and referred to in, the Schedule 14D-9
required to be filed by AMP with the Commission.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the AlliedSignal Offer is inadequate, from a financial point
of view, to the holders of Shares (other than Parent
and its affiliates).
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
REVISED PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 1998
[FORM OF CONSENT REVOCATION CARD -- WHITE]
AMP INCORPORATED
THIS REVOCATION OF CONSENT IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF AMP INCORPORATED
IN OPPOSITION TO THE SOLICITATION BY
ALLIEDSIGNAL INC.
The undersigned, a holder of shares of Common Stock, without
par value (the "Common Stock"), of AMP Incorporated ("AMP"), acting with
respect to all of the shares of Common Stock held by the undersigned,
hereby revokes any and all consents that the undersigned may have given
with respect to each of the following proposals:
THE BOARD OF DIRECTORS OF AMP UNANIMOUSLY RECOMMENDS THAT
YOU "REVOKE CONSENT" ON EACH PROPOSAL SET FORTH BELOW. PLEASE SIGN,
DATE AND MAIL THIS CONSENT REVOCATION CARD TODAY.
IF NO DIRECTION IS MADE WITH RESPECT TO ONE OR MORE OF THE
FOLLOWING PROPOSALS, OR IF YOU MARK EITHER THE "REVOKE CONSENT" OR
"ABSTAIN" BOX WITH RESPECT TO ONE OR MORE OF THE FOLLOWING PROPOSALS, THIS
REVOCATION CARD WILL REVOKE ALL PREVIOUSLY EXECUTED CONSENTS WITH RESPECT
TO SUCH PROPOSALS.
1. Proposal made by AlliedSignal to amend AMP's By-laws to require
that AMP's Board of Directors consist of 28 members, more than
double its current size (the "Board-Packing Proposal"). (For
complete text, see AlliedSignal Proposal 1 in AMP's Consent
Revocation
Statement.)
[ ] REVOKE CONSENT [ ] DO NOT REVOKE CONSENT [ ] ABSTAIN
2. Proposal made by AlliedSignal to amend AMP's By-laws so that AMP's
shareholders may fill vacancies in AMP's Board of Directors,
including the seventeen vacancies which would be created if
AlliedSignal's Board-Packing Proposal is approved. (For complete
text, see AlliedSignal Proposal 2 in AMP's Consent Revocation
Statement.)
[ ] REVOKE CONSENT [ ] DO NOT REVOKE CONSENT [ ] ABSTAIN
3. Proposal made by AlliedSignal to amend AMP's By-laws to specify
that the advance notice provisions of AMP's By-laws are not
applicable to nominations of directors for election by written
consent of shareholders. (For complete text, see AlliedSignal
Proposal 3 in AMP's Consent Revocation Statement.)
[ ] REVOKE CONSENT [ ] DO NOT REVOKE CONSENT [ ] ABSTAIN
4. Proposal made by AlliedSignal to elect the following seventeen
directors and executive officers of AlliedSignal to fill the
seventeen vacancies on AMP's Board of Directors which would be
created if AlliedSignal's Board-Packing Proposal is approved: Hans
W. Becherer, Lawrence A. Bossidy, Ann M. Fudge, Paul X. Kelley,
Peter M. Kreindler, Robert P. Luciano, Robert B. Palmer, Russell E.
Palmer, Frederic M. Poses, Donald J. Redlinger, Ivan G. Seidenberg,
Andrew C. Sigler, John R. Stafford, Thomas P. Stafford, Richard F.
Wallman, Robert C. Winters and Henry T. Yang (collectively, the
"AlliedSignal Nominees"). (For complete text, see AlliedSignal
Proposal 4 in AMP's Consent Revocation Statement.)
[ ] REVOKE CONSENT [ ] DO NOT REVOKE CONSENT [ ] ABSTAIN
INSTRUCTIONS: TO REVOKE CONSENT, WITHHOLD REVOCATION OF CONSENT OR ABSTAIN
FROM CONSENTING TO THE ELECTION OF ALL THE ALLIEDSIGNAL
NOMINEES, CHECK THE APPROPRIATE BOX. IF YOU WISH TO REVOKE
THE CONSENT TO THE ELECTION OF CERTAIN OF SUCH NOMINEES, BUT
NOT ALL OF THEM, CHECK THE "REVOKE CONSENT" BOX AND WRITE
THE NAME OF EACH SUCH PERSON AS TO WHOM YOU DO NOT WISH TO
REVOKE CONSENT IN THE FOLLOWING SPACE:
----------------------------------------------------
5. Proposal made by AlliedSignal to repeal each provision of AMP's
By-laws or any amendment(s) to AMP's By-laws adopted subsequent to
July 22, 1998 and prior to the effectiveness of AlliedSignal's
consent proposals. (For complete text, see AlliedSignal Proposal 5
in AMP's Consent Revocation Statement.)
[ ] REVOKE CONSENT [ ] DO NOT REVOKE CONSENT [ ] ABSTAIN
6. Proposal made by AlliedSignal to amend AMP's By-laws which would
strip the Board of all authority, rights and duties with respect to
the Rights Agreement (or similar agreement) and vest such
authority, rights and duties in three individuals selected by
AlliedSignal. (For complete text, see AlliedSignal Proposal 6 in
AMP's Consent Revocation Statement.)
[ ] REVOKE CONSENT [ ] DO NOT REVOKE CONSENT [ ] ABSTAIN
Please sign your name below exactly as it appears hereon. If
shares are held jointly, each shareholder should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated: __________________, 1998
________________________________
Signature:
________________________________
Signature: (if held jointly)
Title((s):______________________
PLEASE SIGN, DATE AND RETURN THIS CONSENT REVOCATION
CARD PROMPTLY
