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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No.25 and Final Amendment)
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AMP INCORPORATED
(Name of Subject Company)
AMP INCORPORATED
(Name of Person(s) Filing Statement)
Common Stock, no par value
(including Associated Common Stock Purchase Rights)
(Title of Class of Securities)
031897-10-1
(CUSIP Number of Class of Securities)
David F. Henschel
Corporate Secretary
AMP Incorporated
P.O. Box 3608
Harrisburg, Pennsylvania 17105-3608
(717) 564-0100
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement)
With a Copy to:
Peter Allan Atkins
David J. Friedman
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
(212) 735-3000
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This Amendment No.25 and Final Amendment amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9 dated August 21,
1998, as amended (the "Schedule 14D-9"), filed by AMP Incorporated, a
Pennsylvania corporation ("AMP"), in connection with the tender offer by
PMA Acquisition Corporation, a Delaware corporation (the "Purchaser") and
wholly owned subsidiary of AlliedSignal Inc., a Delaware corporation
("AlliedSignal"), to purchase shares of common stock, no par value, of AMP
(the "Common Stock"), including the associated Common Stock Purchase Rights
(the "Rights" and, together with the Common Stock, the "Shares") issued
pursuant to the Rights Agreement, dated as of October 25, 1989, and as
amended on September 4, 1992, August 12, 1998, August 20, 1998 and
September 17, 1998 (the "Rights Agreement"), between AMP and ChaseMellon
Shareholder Services L.L.C., as Rights Agent, at a price of $44.50 per
Share, net to the seller in cash, as disclosed in its Tender Offer
Statement on Schedule 14D-1, dated August 10, 1998, as amended, upon the
terms and subject to the conditions set forth in the Offer to Purchase,
dated August 10, 1998, and as amended on September 14, 1998 and September
21, 1998, and the related Letter of Transmittal.
Unless otherwise indicated, all defined terms used herein shall have
the same meaning as those set forth in the Schedule 14D-9.
ITEM 2. TENDER OFFER OF THE BIDDER.
The AlliedSignal Offer, as amended on September 14, 1998 and September
21, 1998, expired on October 8, 1998 and AlliedSignal announced that it was
purchasing Shares pursuant to the AlliedSignal Offer, as amended.
ITEM 4. SOLICITATION AND RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD OF DIRECTORS.
Subsection (a) of Item 4 is hereby amended by adding the following
paragraph at the end thereof:
In connection with advising the Board and rendering the opinion filed
as Exhibit 10 to the Schedule 14D-9, CSFB performed a variety of financial
and comparative analyses, including (a) an analysis of certain financial
and stock market data relating to AMP; (b) discounted cash flow analyses
based on certain financial projections provided to CSFB by AMP, as well as
additional projections developed for purposes of sensitivity analysis; (c)
a comparable companies analysis which compared certain financial, valuation
and multiple information for AMP to comparable companies; and (d) a
comparable acquisitions analysis which reviewed the transaction values
(based on certain financial indicia) of selected business combination
transactions which involved companies similar to AMP. CSFB also considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria which it deemed relevant. No
limitations were placed on CSFB in connection with the rendering of its
opinion, although CSFB was not requested by AMP to, and did not, contact
third parties to determine whether they would have any interest in a
business combination with AMP.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Subsection (b) of Item 7 is hereby amended by adding the following
paragraph after the last paragraph of text set forth below the subheading
captioned "The AMP Self Tender Offer":
On September 9, 1998, AMP commenced the AMP Self Tender Offer to
purchase up to 30,000,000 Shares at a price per share of $55.00 net to the
seller, in cash. In connection with the commencement of the AMP Self
Tender Offer, on September 28, 1998, AMP issued a press release announcing
the commencement of the AMP Self Tender Offer, the text of which is filed
herewith as Exhibit 88.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(A) SHAREHOLDER RIGHTS PLAN
Subsection (a) of Item 8 is hereby amended by adding the following
paragraph at the end thereof:
The Board believes, based on the opinion of Pennsylvania counsel,
Pepper Hamilton LLP, that the Rights Agreement, including Amendment No. 3
and Amendment No. 4 described above, is valid under Pennsylvania law. In
rendering such opinion, counsel considered applicable provisions of the
Pennsylvania Business Corporation Law, as amended, including, without
limitation, Sections 1525 (which permits broad authority to be exercised by
the Board to fix terms which make a rights plan operative in the event of
certain fundamental corporate changes, including provisions which require
the approval of disinterested directors before certain actions can be taken
under, or changes made in, a rights plan); 2513 (which emphasizes the broad
discretion accorded directors in settling the terms of a rights plan,
including disparate treatment of certain persons, and that such terms are
intended to be cumulative of other measures relating to a change in
control); 1715(d) (granting the presumption of the "business judgment rule"
to a disinterested Board with regard to its actions); the Committee
Comments and Official Source Notes to such sections; and the acknowledgment
of the United States District Court for the Eastern District of
Pennsylvania in the November 19, 1996 bench ruling in the case of Norfolk
Southern Corp. v. Conrail, Inc. that Pennsylvania law expressly authorizes
the Board's adoption of a rights plan. In such opinion, counsel stated,
among other things, that in their view a court of competent jurisdiction
would determine that the Rights Agreement, including Amendment No. 3 and
Amendment No. 4, is valid under Pennsylvania law, although they are not
aware of any Pennsylvania authority addressing the specific provisions in
Amendment No. 3 and Amendment No. 4 and it is not possible to predict with
certainty the outcome of litigation. In this regard, the Board recognized
that the validity of Amendment No. 3 and Amendment No. 4 might be reviewed
and decided by a court. See subsection (f) below.
(F) LITIGATION
Subsection (f) of Item 8 is hereby amended by adding the following
paragraphs at the end thereof:
On October 8, 1998, the Court entered an Order and Memorandum Opinion
in the matters of AMP Incorporated v. AlliedSignal Inc., et al. (Civil
Action No. 98-CV-4405), AlliedSignal Inc. v. AMP Incorporated (Civil Action
No. 98-CV-4058) and In re: AMP Shareholder Litigation (Civil Action No. 98-
CV-4109). The Court granted in part AMP's motion for partial summary
judgment in the nature of a declaratory judgment regarding the Second Claim
for Relief of AMP's complaint that AlliedSignal's consent solicitation
plans are unlawful. The Court enjoined AlliedSignal's board-packing
consent proposals, "until [AlliedSignal] states unequivocally that its
director nominees have a fiduciary duty solely to AMP under Pennsylvania
law and includes a statement from each nominee affirmatively committing
personally to that duty."
The Court denied AlliedSignal's motions for summary judgment,
preliminary injunction and declaratory judgment with respect to the rights
plan in their entirety. The Court held that "AMP's actions in amending its
shareholder rights plan cannot be enjoined as ultra vires acts or breaches
of fiduciary duty." In addition, the Court declared that AlliedSignal's
consent proposal to amend AMP's by-laws in order to place the Board of
Directors' authority over the shareholder rights plan in the hands of
persons not on the Board is unlawful.
The Court further held that the shareholders participating in the
shareholders' litigation against AMP, In re: AMP Shareholder Litigation, do
not have standing to seek an injunction against the actions of the AMP
Board of Directors for not acceding to AlliedSignal's merger proposal. The
Order and Memorandum Opinion is filed herewith as Exhibit 87 hereto and is
incorporated herein by reference, and the foregoing is qualified in its
entirety by reference to such exhibit.
Item 8 is hereby further amended by adding the following subsection at
the end thereof:
(G) PROFIT IMPROVEMENT PLAN
AMP's profit improvement plan (the "Profit Improvement Plan") reflects
its commitment to improve significantly its operating margins and financial
performance. The Profit Improvement Plan was commenced in June of this
year and is currently being implemented. In particular, AMP expects the
Profit Improvement Plan to result in the elimination of costs and expenses
of more than $350 million by the year 2000 and generate an operating margin
of at least 13.5% in 1999 and at least 16.5% in 2000. In addition, after
giving effect to the AMP Self Tender Offer and additional savings from
acceleration and expansion of the Profit Improvement Plan, AMP expects
earnings per share of approximately $2.30 in 1999 and approximately $3.00
in 2000. This enhanced operating performance, taken together with a higher
price/earnings multiple which was historically afforded to AMP, 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 has announced that its support staff would be reduced on a net
basis (gross reductions less new hires) 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 AMP to focus resources on core businesses and provide
flexibility to respond to fluctuations in product demand. As of
October 1, 1998, AMP has exceeded its objectives and identified in
excess of 3,800 support staff reductions worldwide. Approximately
1,500 of the support staff reductions are from international
subsidiaries. In addition, temporary and contract employees have also
been reduced.
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. Additional sites have been
announced for consolidation and/or closing, including AMP's
manufacturing facilities in Harlow, Great Britain and in Hsin-Chu,
Taiwan. 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.
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 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.
The Profit Improvement Plan is designed to provide AMP with a more
simplified, results-oriented structure focused on enhancing performance and
creating value. AMP is committed to accelerating the implementation of,
and enhancing the steps being taken in connection with, the Profit
Improvement Plan.
Management Financial Plan. The above estimates of earnings for 1999
and 2000 are based on management's financial plan, after giving effect to
the reduction of costs and expenses associated with the Profit Improvement
Plan, the repurchase of shares pursuant to the AMP Self Tender Offer,
including the interest expense associated with additional debt of $1.75
billion and the incremental shares issued as a result of the use of the
grantor trust established by AMP on September 28, 1998 (the "Flexitrust").
The Profit Improvement Plan has assumed that revenues will grow 3% in
constant dollars in 1999 over the current estimate of 1998 revenue and grow
7% in constant dollars in 2000 over the 1999 planned revenue.
Management's plan for 1999 and 2000 was first disclosed publicly in
August of 1998. Since that time, the impact of certain key events has been
added to the assumptions; however, the estimated earnings have remained
consistent. These events include: (i) financing of $1.75 billion to fund
the AMP Self Tender Offer resulting in $143 million ($.44 per share) in
incremental interest expense, including amortization of deferred financing
fees, in 1999 and 2000, (ii) additional cost savings identified for 1999 of
approximately $50 million ($.15 per share), (iii) the reduction in shares
outstanding of 30,000,000 due to the purchase of such shares pursuant to
the AMP Self Tender Offer offset in 1999 by 2,500,000 shares issued
pursuant to the Flexitrust and offset in 2000 by 5,000,000 shares issued
pursuant to the Flexitrust. The impact of the reduction in shares
outstanding increases earnings by $.29 per share and $.34 per share in 1999
and 2000, respectively.
The incremental cost savings identified in 1999 relates to additional
support staff personnel identified for elimination, inclusion of several
additional facilities in AMP's consolidation plans and the divestiture of
certain non-Terminal and Connector operations. The incremental cost
savings in 2000 includes additional savings related to the expiration of
extensions for various key support staff positions and additional savings
for facility consolidations and divestitures.
AMP does not as a matter of course publicly disclose projections or
estimates as to future revenues or earnings. AMP's projections were
prepared in conjunction with the development of AMP's Profit Improvement
Plan and assume that the revenue growth described above and the cost
savings anticipated to be realized from the Profit Improvement Plan will be
realized. The projections, while presented with numerical specificity, are
based upon a variety of estimates and assumptions (including estimates and
assumptions utilized in developing the Profit Improvement Plan), and, as
such, actual results may differ from the projections.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
Exhibit
No. Description
------- -----------
84 Letter Agreement, dated August 20, 1998, by and between AMP
and James E. Marley.
85 Letter Agreement, dated August 20, 1998, by and between AMP
and William J. Hudson.
86 Text of a press release issued by AMP on October 8, 1998.
87 Order and Memorandum Opinion of the Court, dated October 8,
1998, in the matters of AMP Incorporated v. AlliedSignal
Inc., et al. (Civil Action No. 98-CV-4405), AlliedSignal
Inc. v. AMP Incorporated (Civil Action No. 98-CV-4058) and
In re: AMP Shareholder Litigation (Civil Action No. 98-CV-
4109).
88 Text of a press release issued by AMP on October 9, 1998.
o o o
This document and the exhibits attached hereto contain certain
"forward-looking" statements which AMP believes are within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. The safe harbors intended to be created thereby are
not available to statements made in connection with a tender offer and AMP
is not aware of any judicial determination as to the applicability of such
safe harbor to forward-looking statements made in proxy solicitation
materials when there is a simultaneous tender offer. However, shareholders
should be aware that any such forward-looking statements should be
considered as subject to the risks and uncertainties that exist in AMP's
operations and business environment which could render actual outcomes and
results materially different than predicted. For a description of some of
the factors or uncertainties which could cause actual results to differ,
reference is made to the section entitled "Cautionary Statements for
Purposes of the 'Safe Harbor'" in AMP's Annual Report on Form 10-K for the
year ended December 31, 1997, a copy of which was also filed as Exhibit 19
to the Schedule 14D-9 filed with the Securities and Exchange Commission.
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 offers and
whose numbers will have been reduced as a result of these initiatives.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete
and correct.
Dated: October 9, 1998 AMP Incorporated
By: /s/ Robert Ripp
-------------------------------------
Name: Robert Ripp
Title: Chairman and Chief
Executive Officer
EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit
No. Description
------- -----------
84 Letter Agreement, dated August 20, 1998, by and between AMP
and James E. Marley.
85 Letter Agreement, dated August 20, 1998, by and between AMP
and William J. Hudson.
86 Text of a press release issued by AMP on October 8, 1998.
87 Order and Memorandum Opinion of the Court, dated October 8,
1998, in the matters of AMP Incorporated v. AlliedSignal
Inc., et al. (Civil Action No. 98-CV-4405), AlliedSignal
Inc. v. AMP Incorporated (Civil Action No. 98-CV-4058) and
In re: AMP Shareholder Litigation (Civil Action No. 98-CV-
4109).
88 Text of a press release issued by AMP on October 9, 1998.
Exhibit 84
August 20, 1998
James E. Marley
AMP Incorporated
P.O. Box 3608
Harrisburg, PA 17105-3608
Dear Jim:
This Letter Agreement is being entered into to evidence our agreement that,
as of the date hereof, you shall step down from your position as Chairman
of AMP Incorporated (the "Company") and shall resign from the Company's
Board of Directors. You shall remain employed by the Company until August
1, 2000, your normal retirement date (your "Retirement Date"), performing
such services of an executive nature as may be requested by the Company 's
Chief Executive Officer. During your period of employment, your annual
salary and employee benefits shall remain unchanged from those in effect as
of the date hereof; however, you shall not be eligible for participation in
any of the Company's equity- and cash-based incentive compensation
programs.
With respect to the effect of the foregoing actions on the terms of your
Executive Severance Agreement, dated as of October 22, 1997, as amended
through the date hereof (your "Executive Severance Agreement"), you and the
Company agree as specified below. These agreements shall supersede any
provisions of the Executive Severance Agreement inconsistent therewith.
Capitalized terms used below but not defined herein shall have the meaning
ascribed to such term in the Executive Severance Agreement.
The Term of the Executive Severance Agreement shall continue until your
Retirement Date.
You agree that, notwithstanding the provisions of Section 4(a) of the
Executive Severance Agreement, which gives you the right to terminate your
employment for Good Reason during a Pending Change of Control and thereby
trigger certain Executive Severance Agreement benefits if a Change of
Control occurs within one year of the last event that constituted the
Pending Change of Control, you shall not so act to terminate your
employment for Good Reason unless and until there occurs a Change of
Control during the term of your Executive Severance Agreement.
The Company acknowledges that in the event a Change of Control occurs on or
prior to your Retirement Date (a) the occurrence of the Change of Control
will entitle you to the benefits set forth in Section (2) of your Executive
Severance Agreement, and (b) you have the right to terminate your
employment during the period from the date of such Change of Control
through and including your Retirement Date, which termination will
constitute a termination for Good Reason following a Change of Control
entitling you to the benefits set forth in Sections 1(a) and 3 of your
Executive Severance Agreement (and without limitation to any other benefits
to which you are entitled under such Agreement).
In keeping with the consistent practice followed by the Compensation and
Management Development Committee (the "Committee), any Company stock
options held by you at your Retirement Date will vest in accordance with
their terms and will remain outstanding for the full remaining portion of
each option's original 10-year exercise period. Also in keeping with the
Committee's consistent prior practice, any such options held by you at your
date of death prior to your Retirement Date will vest immediately and will
remain outstanding for a period of two years beyond your date of death or,
if shorter, for the remaining portion of the option's original 10-year
exercise period. The option treatment described in the two prior sentences
is contingent upon your full compliance with the terms of your
confidentiality, intellectual property, and limited non-competition
agreements with the Company and upon your refraining from engaging in any
conduct deemed by the Committee to be materially adverse to the best
interests of the Company.
If you are in agreement with the foregoing, please execute both copies of
this Letter Agreement and return one to Dave Henschel.
Very truly yours:
AMP Incorporated
By: /s/ Ralph D. DeNunzio
-----------------------------------
Ralph D. DeNunzio
Chairman, Compensation and Management
Development Committee
ACKNOWLEDGED AND AGREED:
/s/ James E. Marley
--------------------------------------
James E. Marley
Exhibit 85
August 20, 1998
William J. Hudson, Jr.
AMP Incorporated
P.O. Box 3608
Harrisburg, PA 17105-3608
Dear Bill:
This Letter Agreement is being entered into to evidence our agreement that,
as of the date hereof, you shall step down from your position as President
and Chief Executive Officer of AMP Incorporated (the "Company") and shall
be employed as Vice Chairman of the Company through the Company's 1999
Annual Meeting of Shareholders, after which you shall remain employed as
Former President and Chief Executive Officer through June 1, 1999, your
normal retirement date (your "Retirement Date"). During the period
commencing on your Retirement Date through the end of your Chairmanship of
the National Association of Manufacturers, you shall have the title of
Retired President and Chief Executive Officer. During your remaining
period of employment, your annual salary and employee benefits shall remain
unchanged from those in effect as of the date hereof; however, you shall
not be eligible for participation in any of the Company's equity- and cash-
based incentive compensation programs. In addition, you shall be entitled
to continued office space, secretarial support, and reasonable access to
corporate support services to facilitate your activities as Chairman of the
National Association of Manufacturers through the end of that Chairmanship
in the Fall of 1999.
With respect to the effect of the foregoing actions on the terms of your
Executive Severance Agreement, dated as of October 22, 1997, as amended
through the date hereof (your "Executive Severance Agreement"), you and the
Company agree as follows, which agreements shall supersede any provisions
of the Executive Severance Agreement inconsistent therewith (capitalized
terms used below but not defined herein shall have the meaning ascribed to
such term in the Executive Severance Agreement):
The Term of the Executive Severance Agreement shall continue until your
Retirement Date.
You agree that, notwithstanding the provisions of Section 4(a) of the
Executive Severance Agreement, which gives you the right to terminate your
employment for Good Reason during a Pending Change of Control and thereby
trigger certain Executive Severance Agreement benefits if a Change of
Control occurs within one year of the last event that constituted the
Pending Change of Control, you shall not so act to terminate your
employment for Good Reason unless and until there occurs a Change of
Control during the term of your Executive Severance Agreement.
The Company acknowledges that in the event a Change of Control occurs on or
prior to your Retirement Date (a) the occurrence of the Change of Control
will entitle you to the benefits set forth in Section (2) of your Executive
Severance Agreement, and (b) you have the right to terminate your
employment during the period from the date of such Change of Control
through and including your Retirement Date, which termination will
constitute a termination for Good Reason following a Change of Control
entitling you to the benefits set forth in Sections 1(a) and 3 of your
Executive Severance Agreement (and without limitation to any other benefits
to which you are entitled under such Agreement).
In keeping with the consistent practice followed by the Compensation and
Management Development Committee (the "Committee), any Company stock
options held by you at your Retirement Date will vest in accordance with
their terms and will remain outstanding for the full remaining portion of
each option's original 10-year exercise period. Also in keeping with the
Committee's consistent prior practice, any such options held by you at your
date of death prior to your Retirement Date will vest immediately and will
remain outstanding for a period of two years beyond your date of death or,
if shorter, for the remaining portion of the option's original 10-year
exercise period. The option treatment described in the two prior sentences
is contingent upon your full compliance with the terms of your
confidentiality, intellectual property, and limited non-competition
agreements with the Company and upon your refraining from engaging in any
conduct deemed by the Committee to be materially adverse to the best
interests of the Company.
If you are in agreement with the foregoing, please execute both copies of
this Letter Agreement and return one to Dave Henschel.
Very truly yours:
AMP Incorporated
By:/s/ Ralph D. DeNunzio
-----------------------------------
Ralph D. DeNunzio
Chairman, Compensation and Management
Development Committee
ACKNOWLEDGED AND AGREED:
/s/ William J. Hudson Jr.
-------------------------------------
William J. Hudson Jr.
EXHIBIT 86
FOR IMMEDIATE RELEASE
Contacts:
Richard Skaare Dan Katcher / Joele Frank
AMP Corporate Communication Abernathy MacGregor Frank
717/592-2323 212/371-5999
Doug Wilburne
AMP Investor Relations
717/592-4965
COURT RULES ON ALLIEDSIGNAL'S CONSENT SOLICITATION
RULING CITES ALLIEDSIGNAL'S CONFLICTED DIRECTORS
COURT UPHOLDS AMP'S AMENDMENTS TO SHAREHOLDER RIGHTS PLAN
HARRISBURG, Pennsylvania (October 8, 1998) - AMP Incorporated (NYSE: AMP)
announced today that the United States District Court for the Eastern
District of Pennsylvania has issued an order enjoining AlliedSignal Inc.'s
(NYSE: ALD) consent solicitation to pack AMP's board of directors unless it
proposes a slate of nominees, each of whom personally, affirmatively
represents that he or she has a fiduciary duty solely to AMP. The Court
also rejected AlliedSignal's challenge to AMP's Shareholder Rights Plan.
AMP issued the following statement:
"We are pleased that the Court has clearly recognized the conflicted nature
of the AlliedSignal slate of nominees."
In its ruling, the Court stated:
"If AlliedSignal's directors and officers are elected to AMP's board of
directors, they will have an inherent conflict that will necessarily put
them at risk of violating Pennsylvania's fiduciary duty standard."
"The Court also reaffirmed the actions of AMP's Board of Directors with
respect to the Shareholders Rights Plan. AMP's Shareholder Rights Plan was
amended by the Board to better protect the interests of AMP and its
relevant constituencies and to help ensure AMP shareholders the opportunity
to assess the success of AMP's Profit Improvement Plan and judge it against
AlliedSignal's inadequate bid."
Headquartered in Harrisburg, PA, AMP is the world's leading manufacturer of
electrical, electronic, fiber-optic and wireless interconnection devices
and systems. The Company has 48,300 employees in 53 countries serving
customers in the automotive, computer, communications, consumer, industrial
and power industries. AMP sales reached $5.75 billion in 1997.
# # #
AMP and certain other persons named below may be deemed to be participants
in the solicitation of revocations of consents in response to
AlliedSignal's consent solicitation. The participants in this solicitation
may include the directors of AMP (Ralph D. DeNunzio, Barbara H. Franklin,
Joseph M. Hixon III, William J. Hudson, Jr., Joseph M. Magliochetti, Harold
A. McInnes, Jerome J. Meyer, John C. Morley, Robert Ripp, Paul G. Schloemer
and Takeo Shiina); the following executive officers of AMP: Robert Ripp
(Chairman and Chief Executive Officer), William J. Hudson (Vice Chairman),
James E. Marley (former Chairman), William S. Urkiel (Corporate Vice
President and Chief Financial Officer), Herbert M. Cole (Senior Vice
President for Operations), Juergen W. Gromer (Senior Vice President, Global
Industry Businesses), Richard P. Clark (Divisional Vice President, Global
Wireless Products Group), Thomas DiClemente (Corporate Vice President and
President, Europe, Middle East, Africa), Rudolf Gassner (Corporate Vice
President and President, Global Personal Computer Division), Charles W.
Goonrey (Corporate Vice President and General Legal Counsel), John E.
Gurski (Corporate Vice President and President, Global Value-Added
Operations and President, Global Operations Division), David F. Henschel
(Corporate Secretary), John H. Kegel (Corporate Vice President,
Asia/Pacific), Mark E. Lang (Corporate Controller), Philippe Lemaitre
(Corporate Vice President and Chief Technology Officer), Joseph C.
Overbaugh (Corporate Treasurer), Nazario Proietto (Corporate Vice President
and President, Global Consumer, Industrial and Power Technology Division);
and the following other members of management and employees of AMP: Merrill
A. Yohe, Jr. (Vice President, Public Affairs), Richard Skaare (Director,
Corporate Communication), Douglas Wilburne (Director, Investor Relations),
Suzanne Yenchko (Director, State Government Relations), Mary Rakoczy
(Manager, Shareholder Services), Dorothy J. Hiller (Assistant Manager,
Shareholder Services), Melissa E. Witsil (Communications Assistant) and
Janine M. Porr (Executive Secretary). As of the date of this communication,
none of the foregoing participants individually beneficially own in excess
of 1% of AMP's common stock or in the aggregate in excess of 2% of AMP's
common stock.
AMP has retained Credit Suisse First Boston Corporation ("CSFB") and
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to act as its
financial advisors in connection with the AlliedSignal Offer, for which
CSFB and DLJ will receive customary fees, as well as reimbursement of
reasonable out-of-pocket expenses. In addition, AMP has agreed to indemnify
CSFB, DLJ and certain related persons against certain liabilities,
including certain liabilities under the federal securities laws, arising
out of their engagement. CSFB and DLJ are investment banking firms that
provide a full range of financial services for institutional and individual
clients. Neither CSFB nor DLJ admits that it or any of its directors,
officers or employees is a "participant" as defined in Schedule 14A
promulgated under the Securities Ex-change Act of 1934, as amended, in the
solicitation, or that Schedule 14A requires the disclosure of certain
information concerning either CSFB or DLJ. In connection with CSFB's role
as financial advisor to AMP, CSFB and the following investment banking
employees of CSFB may communicate in person, by telephone or otherwise with
a limited number of institutions, brokers or other persons who are
stockholders of AMP: Alan Howard, Steven Koch, Scott Lindsay, and Lawrence
Hamdan. In connection with DLJ's role as financial advisor to AMP, DLJ and
the following investment banking employees of DLJ may communicate in
person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are stockholders of AMP: Douglas V. Brown and
Herald L. Ritch. In the normal course of its business, each of CSFB and
DLJ regularly buys and sells securities issued by AMP for its own account
and for the accounts of its customers, which transactions may result in
CSFB, DLJ or the associates of either of them having a net "long" or net
"short" position in AMP securities, or option contracts or other
derivatives in or relating to such securities. As of September 25, 1998,
DLJ held no shares of AMP common stock for its own account and CSFB had a
net long position of 132,266 shares of AMP common stock.
This press release 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. 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.
EXHIBIT 87
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
AMP INCORPORATED : CIVIL ACTION
:
v. :
:
ALLIEDSIGNAL INC., et al. : NO. 98-4405
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ALLIEDSIGNAL INC. : CIVIL ACTION
:
v. :
:
AMP INCORPORATED : NO. 98-4058
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
IN RE: AMP SHAREHOLDER : CIVIL ACTION
LITIGATION :
: NO. 98-4109
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ORDER
AND NOW, this 8th day of October 1998, upon consideration of the
motions of AMP Incorporated ("AMP") for partial summary judgment in the
nature of a declaratory judgment, and responses of AlliedSignal Inc. and
PMA Acquisition Corporation ("AlliedSignal") thereto, it is hereby ORDERED
that AMP's motion is GRANTED, in part, and DENIED, in part.
1. AMP's motion for partial summary judgment, in the nature of
a declaratory judgement that AlliedSignal's consent solicitation plan is
unlawful in that it attempts to have AMP shareholders amend AMP's by-laws
in order to place the board of director's authority over the shareholder
rights plan in the hands of persons not on the board, is granted.
2. AMP's motion for summary judgment, in the nature of a
declaratory judgment that AlliedSignal's consent solicitation plan is
unlawful in that it seeks to have AMP shareholders amend the by-laws in
order to expand the size of the board of directors and elect new directors
is granted, in part, and denied, in part. AlliedSignal's consent
solicitation proposal is enjoined until it states unequivocally that its
director nominees have a fiduciary duty solely to AMP under Pennsylvania
law and includes a statement from each nominee affirmatively committing
personally to that duty.
FURTHER, upon consideration of the motions of AlliedSignal for
summary judgment, immediate declaratory judgment and preliminary injunction
and AMP Incorporated's responses thereto, it is ORDERED that AlliedSignal's
motions are DENIED.
1. AlliedSignal's motion for summary judgment, immediate
declaratory judgment and preliminary injunction, relating to AMP's
amendments to its shareholder rights plan making it non-redeemable and non-
amendable until November 6, 1999 if the disinterested board majority loses
control of the board following receipt of an unsolicited acquisition
proposal or if shareholders take action to place the board's authority
relating to the shareholder rights plan in the hands of persons not on the
board, is denied. AMP's actions in amending its shareholder rights plan
cannot be enjoined as ultra vires acts or breaches of fiduciary duty.
2. AlliedSignal's motion for summary judgment, immediate
declaratory judgment and preliminary injunction, as to the record date for
AlliedSignal's consent solicitation proposal to place the board's authority
over the shareholder rights plan in the hands of persons not on the board,
is denied.
FURTHER, to the extent that the Shareholders Group (parties to
Consolidated Civil Action 98-4109) move for preliminary injunction against
the actions of the AMP board for not acceding to the proposal of
AlliedSignal for merger, it is hereby ORDERED that said motion is DENIED
for lack of shareholder standing.
BY THE COURT:
/s/ James T. Giles
-----------------------------
JAMES T. GILES, J.
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
AMP INCORPORATED : CIVIL ACTION
:
v. :
:
ALLIEDSIGNAL INC., et al. : NO. 98-4405
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ALLIEDSIGNAL INC. : CIVIL ACTION
:
v. :
:
AMP INCORPORATED : NO. 98-4058
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
IN RE: AMP SHAREHOLDER : CIVIL ACTION
LITIGATION :
: NO. 98-4109
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
MEMORANDUM
Giles, J. OCTOBER 8, 1998
A. Introduction
1. AMP Incorporated ("AMP") is a Pennsylvania corporation with
its principal place of business in Harrisburg, Pennsylvania, and a
registered corporation within the meaning of Section 2502 of the
Pennsylvania Business Corporation Law ("BCL"), 15 Pa. Cons. Stat. Ann.
section 2501, et al. AMP designs, manufactures and markets worldwide
electronic, electrical and electro-optic connection devices,
interconnection systems and connector assemblies.
2. AlliedSignal, Inc. ("AlliedSignal") is a Delaware
corporation with its principal place of business in Morristown, New Jersey,
and the beneficial and record owner of one hundred (100) shares of AMP
common stock. AlliedSignal is an advanced technology and manufacturing
company with worldwide operations in the aerospace, automotive and
engineered materials businesses.
3. This court has jurisdiction over these actions pursuant to
28 U.S.C. sections 1331, 1332 and 1367. The amount in controversy is in
excess of $75,000, exclusive of interest and cost. Venue is proper under
28 U.S.C. section 1391 (b) and (c). The court is empowered to grant
declaratory relief under 287 U.S.C. section 2201 because there is a case of
actual controversy among the parties.
4. Prior to August 20, 1998, AlliedSignal made various
overtures and a proposal to AMP for a negotiated merger transaction. On
August 20th, the AMP directors formally rejected this proposal of merger as
inadequate and not in AMP's best interest, preferring its own recently
adopted plan of economic growth.
5. On August 4, 1998, AlliedSignal had announced that it would
commence an unsolicited conditional tender offer for all of the outstanding
shares of the common stock of AMP at $44.50 in cash per share, pursuant to
federal securities laws. AlliedSignal's tender offer price represented a
premium over the trading price of AMP common stock immediately prior to the
announcement of the tender offer. AlliedSignal proposed to acquire,
through a second-step merger for the same $44.50 per share in cash, any
shares of AMP not tendered.
6. AlliedSignal also announced that it was prepared to initiate
a consent solicitation among AMP shareholders to amend AMP by-laws in order
to expand the board so that a majority of directors would be elected who
would cause AMP to accept AlliedSignal's takeover bid.
7. On August 10, 1998, AlliedSignal filed a tender offer
statement on Schedule 14D-1 with the Securities Exchange Commission ("SEC")
setting forth the terms of the tender offer and other information. The
Schedule 14D-1 described AlliedSignal's proposed consent solicitation and
five proposals as to which AlliedSignal intends to solicit consents from
AMP's shareholders. AMP chose October 15, 1998 as the record date for
these consent solicitation proposals.
8. On August 12, 1998, AlliedSignal filed with the SEC a
preliminary Consent Statement on Schedule 14A under Section 14(a) of the
Securities Exchange Act of 1934 in connection with the consent
solicitation.
9. AlliedSignal's announced plan of action is to have
shareholders (a) amend the AMP by-laws to expand the number of directors on
the board from eleven (11) to twenty-eight (28) and (b) elect as a majority
of the AMP board seventeen (17) persons nominated by AlliedSignal who are
its directors and executive officers.
10. One of the apparent objectives of AlliedSignal's takeover
plan is to dismantle AMP's shareholder rights plan, or "poison pill," which
is a major hurdle to a merger transaction.
11. A poison pill is an anti-takeover device permitted under
Pennsylvania law designed to repel, or at least delay, takeover attempts
that are not approved by a target company's board of directors. If an
acquiring entity acquires more than a specified percentage of a target
company's stock, each share of the stock (other than stock held by the
acquiror) carries with it a "right" to acquire at half-price newly issued
shares of the company's stock. The effect of the right is to place half-
price stock in the hands of the target's shareholders, thereby diluting the
interest of the acquiror and making it economically prohibitive for the
acquiror to complete the acquisition of control.
12. A "redemption" provision allows the target company to redeem
the rights at any time prior to a "triggering event," usually an
acquisition of a certain percentage of the stock of the target or a merger
in which the target is not the surviving entity. With a redemption
provision, if the target company's board of directors approves an
acquisition of control, it can extinguish the rights in order to permit the
sale or merger of the company.
13. AMP's board had a poison pill with a trigger of twenty
percent (20%) common stock acquisition at the time of the tender offer
announcement. It also had a "dead-hand" provision which provided that, if
a new majority was elected, only the directors who were on the board prior
to the change in majority could vote to redeem the poison pill.
14. On August 20, 1998, in response to AlliedSignal's proposed
consent solicitations, AMP's board amended its poison pill to remove the
"dead-hand" provision and to make the pill non-redeemable and non-amendable
should AMP's disinterested board majority be replaced as a result of the
acquisition of control of the board by a majority of directors nominated by
an unsolicited acquiring company. The pill could remain non-redeemable and
non-amendable until November 6, 1999, the date of the expiration of the
shareholder rights plan.
15. The board also concluded by resolution that the shareholder
rights plan would not be renewed for a least six months after its
expiration.
16. AlliedSignal represents that by September 14, 1998, seventy-
two percent (72%) of AMP's total outstanding shares had been tendered in
response to its tender offer. However, AlliedSignal determined that it
would not buy any shares under that tender offer.
17. Instead, on that date, to avoid AMP's amended poison pill,
AlliedSignal amended its initial offer to permit it to purchase less than
twenty percent (20%) of AMP's common stock.
18. On that same date, AlliedSignal also announced that it was
amending its consent solicitation to add a new proposal. AlliedSignal
proposed that the AMP shareholders amend the AMP by-laws to remove from the
AMP board of directors all power, rights and duties with respect to the
poison pill and place this authority in the hands of a designated three
person committee. The AMP board set the record date for the amended
consent solicitation proposal for November 16, 1998.
19. On September 17, 1998, in response to AlliedSignal's new
consent solicitation proposal to transfer the authority of the board to a
committee, the AMP board further amended the poison pill to lower the
trigger from twenty percent (20%) to ten percent (10%) of AMP stock and to
provide that the poison pill would also become non-redeemable and non-
amendable if AlliedSignal's three person committee proposal were
implemented.
20. AlliedSignal again amended the tender offer, to buy
approximately nine percent (9%) of AMP's outstanding shares at $44.50.
B. Relief Sought by the Parties
21. AMP seeks partial summary judgment in the nature of a
declaratory judgment that the consent solicitation plans of AlliedSignal,
aimed at expanding the AMP board and replacing the disinterested directors
with AlliedSignal affiliated nominees, is unlawful and in violation of
Pennsylvania law and public policy. More generally, AMP requests this
court to enjoin AlliedSignal from carrying out any plans to seize control
of AMP without affording the AMP board the opportunity to consider its
various constituencies and to act in what it believes to be the best
interest of the corporation.
22. AlliedSignal seeks summary judgment, immediate declaratory
judgment and preliminary injunction. Specifically, AlliedSignal seeks a
declaration that 1) AMP's amendment to the shareholder rights plan on
August 20, 1998, making the poison pill non-redeemable and non-amendable by
any directors upon a change in the control of AMP's board from that of the
present disinterested majority to a majority of an acquiring company's
nominees, and 2) AMP's amendments to the plan on September 17 1998,
providing that AMP's poison pill becomes non-redeemable and non-amendable
if AMP's shareholders vote to place control of the poison pill in the hands
of persons other than the board of directors, are illegal and void under
Pennsylvania law. AlliedSignal requests that the court permanently enjoin
AMP from enforcing these provisions. Generally, AlliedSignal requests that
this court enjoin the AMP board, from directly or indirectly, taking any
steps to impede or frustrate the ability of AMP shareholders to determine
whether they want to accept AlliedSignal's tender offer, or to manipulate
and interfere with AlliedSignal's tender offers or consent solicitation.
23. AlliedSignal also seeks declaratory judgment that the AMP
board's action, setting November 16, 1999 as the record date for
AlliedSignal's consent solicitation proposal to transfer the AMP board's
authority relating to the poison pill to a committee outside of the board,
is illegal and inequitable. AlliedSignal asserts that the action of the
AMP directors in setting this record date is ultra vires and a
fundamentally unfair manipulation of the shareholder voting process.
24. Shareholders participating In re: Amp Shareholder
Litigation, Civil Action 98-4019 (the "Shareholders Group") filed an amicus
curiae memorandum in support of AlliedSignal's motion for declaratory
judgment and preliminary injunction. In addition, the Shareholders Group
requests that the court order AMP to disclose all material facts considered
by the AMP board in weighing the potential value of AMP stock against the
offer by AlliedSignal to purchase AMP common stock at $44.50 per share.
C. Relevant Pennsylvania Registered Corporation Statutes
25. In addition to statutory authority in Pennsylvania's general
business provisions, Chapter 25 of the Business Corporation Law ("BCL")
provides broad authority to registered corporations to resist unsolicited
takeovers.
26. In 1989, AMP's shareholders by registering the corporation
in Pennsylvania, specifically chose to be bound by the BCL.
27. Title 15 Pa. Cons. Stat. Ann. section 2501(a) reads, in
part, "[e]xcept as otherwise provided . . . this chapter shall be
applicable to any business corporation that is a registered corporation as
defined in Section 2502 . . . ."
28. Title 15 Pa. Cons. Stat. Ann. section 2501(b) reads, in
part, "[e]xcept as otherwise provided . . . this subpart shall be generally
applicable to all registered corporations. The specific provisions of this
chapter shall control over the general provisions of this subpart."
29. AMP had the right and opportunity to opt out of Chapter 25.
15 Pa. Cons. Stat. Ann. section 2501(c). As AMP did not state in its
articles of incorporation that these provisions were not applicable, the
articles adopted the anti-takeover provisions by operation of law.
30. Having chosen to be bound, AMP is subject to these laws as
they are incorporated by reference in its articles of incorporation.
31. Shareholders of a registered corporation are not entitled to
propose amendments to the corporation's articles of incorporation. 15 Pa.
Cons. Stat. Ann. section 2535.
32. Title 15 Pa. Cons. Stat. Ann. section 2513, as part of AMP's
articles of incorporation, grants to the board of directors broad power to
adopt shareholder rights plans designed, inter alia, to impose conditions
that preclude or limit persons owning or offering to acquire a specified
number or percentage of outstanding shares.
33. The 1988 Committee Comment to Section 2513 states, "[t]his
section, in conjunction with 15 [Pa. Cons. Stat. Ann.] section 1525, is
intended to validate expressly as a matter of state corporation law the
adoption of shareholder rights plans or 'poison pills' . . . ."
34. The exercise of authority given to the registered
corporation's board of directors by Section 2513(a) is circumscribed by
the standard of care set forth in Section 1525(c).
35. Section 1525(c) states that "[t]he provisions of . . .
section 2513 shall not be construed to effect a change in the fiduciary
relationship between a director and a business corporation or to change the
standard of care of a director provided for in subchapter B of Chapter 17
(relating to fiduciary duty.)." That is, directors shall perform their
duties in good faith and in a manner reasonably believed to be in the best
interests of the corporation. 15 Pa. Cons. Stat. Ann. section 1712(a).
36. The directors of a Pennsylvania corporation owe a fiduciary
duty solely to the corporation and must act according to the corporation's
best interest. 15 Pa. Cons. Stat. Ann. section 1717.
37. While the BCL states that directors may weigh the interests
of the shareholders against the interests of other constituencies, it
asserts no specific duty to shareholders above or beyond those owed to
those other constituencies. See 15 Pa. Cons. Stat. Ann. section 1715(a)
("In discharging the duties of their respective positions, the board of
directors . . . may, in considering the best interests of the corporation,
consider to the extent they deem appropriate: (1) The effect of any action
upon any or all groups affected by such action, including shareholders,
employees, suppliers, customers and creditors of the corporation, and upon
communities in which offices or other establishments of the corporation are
located.") (emphasis added).
38. In addition, 15 Pa. Cons. Stat. Ann. section 1715(b)
provides that "[t]he board of directors . . . shall not be required, in
considering the best interests of the corporation or the effects of any
action, to regard any corporate interest or the interests of any particular
group affected by such action as a dominant or controlling interest or
factor. The consideration of interests and factors in the manner de-
scribed . . . shall not constitute a violation of section 1712. . . ."
39. In defining a director's fiduciary duty as solely to the
corporation, Pennsylvania's BCL authorizes the directors to consider the
short-term and long-term interests of the corporation and the potential
benefit of these interests to the continued independence of the
corporation. 15 Pa. Cons. Stat. Ann. section 1715(a)(2). In taking
action, the directors may also consider the "resources, intent and conduct
(past, stated and potential) of any person seeking to acquire control of
the corporation." 15 Pa. Cons. Stat. Ann. section1715(a)(3).
40. Directors are not required to redeem any rights under a
shareholder rights plan adopted under section2513 or to act as the board
solely because of the effect such action might have on a potential or
proposed acquisition of control of a corporation. 15 Pa. Cons. Stat. Ann.
section 1715(c).
41. Nor are directors required to act under Pennsylvania's BCL
solely because of the consideration that might be offered or paid to
shareholders in such an acquisition. 15 Pa. Cons. Stat. Ann. section
1715(c).
42. Furthermore, the BCL protects the actions of a majority
board of disinterested directors in resisting unsolicited takeovers by
retaining the ordinary business judgment rule with respect to the adoption
of defensive measures. 15 Pa. Cons. Stat. Ann. section 1715(d).
D. Legal Analysis
(a) AlliedSignal's Consent Solicitation Proposal to Take
Authority Over the Poison Pill Away from AMP's Board of
Directors is Unlawful.
43. AlliedSignal's consent solicitation proposal to have
shareholders transfer power from AMP's board of directors to a committee of
three designated persons violates BCL Section 2513. That section provides
that a registered corporation may set forth "such terms as are fixed by the
board of directors," including, but not limited to "conditions that
preclude or limit any person or persons owning or offering to acquire a
specified number or percentage of the outstanding common shares . . . from
exercising, converting, transferring or receiving the shares . . . . " 15
Pa. Cons. Stat. Ann. section 2513 (a) (emphasis added). The board of
directors is authorized to take action in the context of an unsolicited
takeover attempt pursuant to this provision. The AMP shareholders are
bound by this provision and have no power to take away the board's
authority pursuant to it through amendment of AMP's by-laws or otherwise,
as AMP's articles adopted Pennsylvania's anti-takeover provisions by
operation of law.
44. AMP's action in amending its poison pill is presumed to be
in the best interests of the corporation. Since such action relates to or
affects a potential acquisition of control, the actions adopted by a
majority of disinterested directors cannot be overcome except by proof,
meeting the standard of clear and convincing evidence that the
disinterested majority did not assent in good faith after reasonable
investigation. See 15 Pa. Cons. Stat. Ann. section 1715(d).
45. The attempt by AMP's disinterested director majority to
counter an anticipated unlawful act by AlliedSignal and other shareholders
to take away statutory board authority is not a breach of fiduciary duty to
the corporation. Nor is it an infringement upon shareholder rights.
46. Further, the attempted adoption of a by-law to this effect
by AlliedSignal or AMP shareholders constitutes an attempt to propose an
amendment to AMP's articles of incorporation. This cannot be done by
shareholders.
47. Accordingly, declaratory judgment is granted in favor of AMP
as to this aspect of AlliedSignal's proposed consent solicitation.
(a) AMP's Amendment of the Poison Pill was Within the AMP
Board's Statutory Authority and was not an Ultra Vires Act
or Breach of Fiduciary Duty.
48. AlliedSignal requests declaratory judgment that the AMP
board's poison pill amendments of August 20, 1998 and September 17, 1998,
providing that the poison pill become non-redeemable and non-amendable
until November 6, 1999 if the disinterested majority loses control of the
board following receipt of an unsolicited acquisition proposal or if the
shareholders take action to transfer authority relating to AMP's poison
pill to persons outside of the board, are invalid.
49. Section 2513 provides that a registered corporation may
adopt poison pills, and may set forth "such terms as are fixed by the board
of directors." 15 Pa. Cons. Stat. Ann. section 2513(a). Furthermore, the
fiduciary duty of directors, provided in Section 1712, shall not require
them to redeem any rights under, or modify or render inapplicable, any
shareholder rights plan, including a plan adopted pursuant to Section 2513.
15 Pa. Cons. State. Ann. section 1715(c). As previously stated, the AMP
board is not required to act solely because of the consideration that might
be paid to shareholders in the event of an acquisition. Id. Thus, in
amending the poison pill and fixing it as non-amendable and non-redeemable,
AMP did not act beyond the scope of its statutory authority.
50. AMP's amendment of the pill was not an ultra vires action,
as AMP was responding to AlliedSignal's attempt as a shareholder to propose
a plan of merger. Such action is beyond the powers of the shareholders
and, therefore, is unlawful. Only the board of directors of a registered
corporation may propose a plan of merger. 15 Pa. Cons. Stat. Ann. sections
2539; section 1924(a); section 1922(c).
51. The AMP board could properly consider the intent and conduct
(past, stated or potential) of any person seeking to acquire control of the
corporation. Pa. Cons. Stat. Ann. section 1715(a)(3).
52. The stated intent of AlliedSignal is to acquire control of
AMP. The conduct of AlliedSignal, in part, has been to nominate for a
board majority persons who are not only clearly "interested" as that phrase
will be later discussed, but who are directors and executive officers of
AlliedSignal who are bound by AlliedSignal's corporate decision to acquire
AMP.
53. The stated plan of AlliedSignal is to elect "interested
directors" for the hopeful purpose of removing the poison pill in whatever
form it exists as a financial obstacle to acquisition of AMP. The further
conduct of AlliedSignal has been to induce shareholder support for its
interested nominees and other parts of its takeover plan with premium
payments for AMP shares.
54. The totality of the conduct of AlliedSignal is such that the
existing AMP board could reasonably anticipate that, if elected, the action
of AlliedSignal's interested director majority with respect to the poison
pill would be tantamount to a vote on merger.
55. Despite AlliedSignal's statements that if elected its
interested majority would fulfill their director responsibilities, the
present disinterested AMP board is not required to disregard experience and
believe that a Trojan Horse brought within their walls is intended as a
gift to corporate governance.
56. AMP directors have imposed upon any attempt by an interested
shareholder, like AlliedSignal, to redeem the poison pill voting
disqualifications for interested directors. Such disqualifications have
been expressed by the Pennsylvania Legislature with respect to interested
directors in the context of voting on a merger transaction. 15 Pa. Cons.
Stat. Ann. section 2538(b). Only disinterested directors may vote to
approve a plan of merger if the board were asked to adopt or reject the
same. Id.
57. Interested directors are defined as persons who are
"directors or officers of, or have a material equity interest in, the
interested shareholder," or persons who have been "nominated for election
as a director by the interested shareholder, and first elected as a
director, within 24 months of the date of the vote of the proposed
transaction." 15 Pa. Cons. Stat. Ann. section 2538(b). Disinterested
directors are those who do not have these disqualifications. Id.; see
also 15 Pa. Cons. Stat. Ann. section 1715 (e).
58. All of AlliedSignal's nominees to AMP's board of directors
meet the definition of interested director under Section 2538(b).
59. Under similar circumstances, a federal district court has
approved import of the concept that only disinterested directors may vote
to redeem or amend shareholder rights plans. Invacare Corp. v. Healthdyne
Technologies, Inc., 968 F. Supp.1578, 1581 (N.D. Ga. 1997). Where the
concept is an integral part of a state's permitted statutory defense
against hostile takeovers, it cannot be said to be contrary to public
policy. Id.
60. Similarly, Pennsylvania has adopted the disinterested
majority director defense in BCL Sections 2538 and 1715(d) and (e). This
court finds that the AMP board's importation of the disinterested majority
director concept into the redemption of its poison pill is not contrary to
the public policy of Pennsylvania.
61. The non-redemption and non-amendable features of the AMP
shareholder rights plan are finite in time. Were this not so, it would
mitigate towards a finding of lack of good faith or self-dealing. Being
finite in time, the duration must be viewed in light of the ordinary
business judgment rule that is allowed directors, as well as the
presumptions of good faith for disinterested majorities established in
Section 1715(d) In matters dealing with potential or proposed acquisition
of control of the corporation.
62. Here, it cannot be said at this stage of proceedings by
clear and convincing evidence that the action of the directors in amending
the poison pill to its present form until November 6, 1999, was done in bad
faith and breach of fiduciary duty to AMP, where the objective is to resist
a takeover by AlliedSignal, where AMP had rejected AlliedSignal's merger
bid prior to the present consent solicitation as contrary to AMP's best
interests, and where AMP's board has determined that its own previously
adopted business plan is superior to AlliedSignal's merger plan for the
future growth of AMP.
(c) AlliedSignal's Consent Solicitation to Expand the Size of
the Board and to Elect New Directors is Enjoined Until It
States Unequivocally That Directors Have a Fiduciary Duty
Solely to AMP.
63. An existing board of directors has no statutory power to
preclude expanding the board. Shareholders have the right to elect
directors who are aligned with an acquiring corporation.
64. However, AlliedSignal's consent solicitation fails to state
completely and, therefore, accurately that the directors of a registered
corporation owe a fiduciary duty solely to the corporation. While it
states that nominees, if elected, will have conflicts of interests and
recites the general standard of care applicable to the discharge of a
director's duty, the duty itself is not stated.
65. In material respects, the consent solicitation reads:
Shareholders are being asked to elect as directors of
the Company each of seventeen Nominees named in the table
below, each of whom has consented to serve as a director
until the next annual meeting of shareholders or until his
or her successor has been elected and qualified.
AlliedSignals's primary purpose in seeking to elect the
nominees to the Company Board is to facilitate the
consummation of the Second Offer and Proposed Merger.
However, if elected, the Nominees, along with the other
directors of the Company, would be responsible for managing
the affairs of the Company. The Nominees understand that,
as directors of the Company, each of them has an obligation
under Pennsylvania law to discharge his or her duties as a
director in good faith, in a manner he or she reasonably
believes to be in the best interests of the Company and
with such care, including reasonable inquiry skill and
diligence, as a person of ordinary prudence would use under
similar circumstances. Circumstances may arise (which
circumstances include the proposed Merger as well as any
proposal a third party might make to acquire or combine
with the Company) in which the interests of AlliedSignal,
PMA and their affiliates, on the one hand, and the
interests of other shareholders of the Company, on the
other hand, may differ. In these circumstances, while the
Nominees currently do not have plans with respect to actions
they would take, they intend to discharge their obligations
owing to the Company under Pennsylvania law and in light of
the prevailing circumstances, taking into account the
effects of any actions taken on the Company's shareholders
and other stakeholders. In addition, it is likely that,
after the Nominees are seated on the Company Board, a large
minority of directors on the Company Board will not be
AlliedSignal nominees, but rather continuing AMP directors
who will not have this type of conflict of interest.
In this regard, Section 1728 of the PBCL and the
Company By-laws expressly provide that a transaction
between interested parties is not void or voidable if one
of three tests, set forth in Section 1728 and the Company
By-laws, is satisfied. These tests are: (i) disclosure of
the material facts concerning the conflict to the Company
Board and approval of the transaction by a majority of the
disinterested Company directors; (ii) disclosure of the
material facts concerning the conflict to the Company
shareholders and approval in good faith by the requisite
vote of the Company shareholders; or (iii) the transaction
is fair to the Company. The Nominees, if elected, intend to
comply with Section 1728 and the Company By-laws in all
applicable circumstances.
* * *
It is contemplated that each Nominee will be reimbursed
for his or her reasonable out-of-pocket expenses
incurred in the performance of his or her service as a
Nominee. Under AlliedSignal's Certificate of Incorporation,
AlliedSignal is obligated to indemnify and hold harmless
against all expenses, liabilities and losses each person
who is made a party to any action or proceeding by reason
of the fact that he or she is a director, officer or
employee of AlliedSignal or is serving at the request of
AlliedSignal as a director, officer or employee of another
company, to the fullest extent permitted by Delaware law.
66. The failure of AlliedSignal to clearly state that the
unequivocable fiduciary duty of a director is solely to the corporation, is
material to AMP's motion that the consent solicitation should be enjoined.
While AlliedSignal has asserted on behalf of the nominees that they can
discharge their duties to AMP, the nominees, themselves, have not.
67. Neither the AlliedSignal nominees nor the AMP shareholders
should misapprehend the fiduciary standard to which Pennsylvania directors
are held. Indeed, adherence to that duty could delay and not facilitate
consummation of a merger.
68. An injunction requiring AlliedSignal to state accurately the
fiduciary duty in the consent solicitation does no harm to AlliedSignal but
conveys great benefit upon AMP shareholders and the public who may be
required to suffer the consequences of the electing to AMP's board a
majority of interested directors. The foreseeable practical consequence of
electing AlliedSignal's nominees as proposed in its consent solicitation,
is to embroil some court continually in determining whether, in voting on
matters of corporate governance, let alone corporation independence, the
interested AlliedSignal nominees have breached their fiduciary duties, as a
group or individually. Therefore, the burden upon AlliedSignal by reason
of this injunction is far outweighed by the public interest in avoiding
unnecessary costs of litigation.
69. While the AMP shareholders have a right to elect
AlliedSignal's nominees as a majority to AMP's board to attempt to
consummate a merger for the profit objectives of AlliedSignal and AMP
shareholders, the public should be satisfied, before its courts may become
the regular final arbiters of disputes about fiduciary duty, that AMP
shareholders have knowingly chosen that path.
70. Any action by an interested director has to be analyzed in
light of the fiduciary duty standard set forth in Section 1712 and, keeping
in mind that, on a claim of breach of fiduciary duty, there is no
presumption that the action is in the best interest of the target
corporation.
71. There is no presumption that the action of an interested
director is in the best interest of the corporation and such conduct is
judged by a preponderance standard, and not a clear and convincing evidence
standard.
72. If elected, interested directors stand in a fiduciary
relation to the target corporation, owing undivided loyalty thereto, and
must perform their duties in good faith, in a manner reasonably believed to
be in the best interests of the corporation. 15 Pa. Cons. Stat. Ann.
section 1712(a). Thus, if AlliedSignal's nominees were elected to the AMP
board, their fiduciary duty would have to be to AMP, not to shareholders,
and not to AlliedSignal.
73. AlliedSignal is a Delaware corporation subject to Delaware
corporate law. Under Delaware law, officers and directors of AlliedSignal
owe a fiduciary duty to AlliedSignal and its shareholders to act in their
best interest. If AlliedSignal's directors and officers are elected to
AMP's board of directors, they will have an inherent conflict that will
necessarily put them at risk of violating Pennsylvania's fiduciary duty
standard. AlliedSignal has not suggested how their interested nominees may
discharge their duty of exclusive loyalty to AMP.
74. The court cannot speculate that interested directors will
not respect their fiduciary duty. However, it is imperative that the
nominees state that each is committed to discharging that duty, which is
solely to AMP. This is particularly acute where the nominees have
fiduciary duties to AlliedSignal's board's merger directives that may be
completely antithetical to the interests of AMP.
75. The reality not clearly spelled out in AlliedSignal's
consent solicitation is that, because of the nominees' fiduciary duties to
AlliedSignal, they may be disqualified as AMP directors by self-restraint
or by judicial restraint, from voting on or implementing acquisition
related transactions.
76. This lack of specificity alone would not invalidate the
consent solicitation. Common sense should inform shareholders that an
invitation of an interested board majority to a target corporation is an
invitation to protracted litigation on each and every action that relates
to acquisition or AMP corporate independence.
77. Unless a majority of the disinterested minority assents to
the action of the interested majority on all matters having to do with
corporate independence, the fiduciary duty of AMP directors to the
corporation may well compel legal challenge to the actions of the
interested majority, especially where AMP has determined that Allied's
merger proposal is not in the best interests of the corporation.
78. While the shareholders have the right to elect interested
directors by majority vote, they cannot ratify director actions which are
breaches of fiduciary duty, in the absence of unanimous shareholder
agreement.
79. Contrary to AlliedSignal's suggestion in its proposed
consent solicitation, Title 15 Pa. Cons. Stat. Ann. section 1728(a) which
permits shareholders to approve contracts or transactions between
corporations that have some common directors or officers if the
shareholders are aware of all material facts, would not operate to excuse
conflicts of interest that are breaches of fiduciary duty. Under Section
2538, interested directors are prohibited from voting on merger
transactions. Any pre-merger actions by interested directors would not
qualify as transactions between corporations.
80. Actions of interested directors that are breaches of
fiduciary duty are subject to injunctive relief claims by other directors
and shareholder derivative actions.
81. Accordingly, AMP's claim for declaratory relief that
AlliedSignal's consent solicitation to elect their slate of interested
nominees as AMP's board majority is invalid and should be presently
enjoined because of inherent, irreconcilable conflicts of interest is
denied, in part. The claim is premature, as the nominees have not been
elected. However, the consent solicitation shall be enjoined until the
duty of directors is stated as being solely to the corporation and each
nominee undertakes to be bound personally by that duty, if elected.
(d) The AMP Board was within its Authority When it Set the
Record Date at November 16, 1998 for AlliedSignal's New
Consent Solicitation Proposal.
82. AlliedSignal seeks declaratory judgment that the AMP board's
action in setting November 16, 1998 as the record date for AlliedSignal's
consent solicitation proposal to transfer the AMP board's authority
relating to the poison pill to a group outside of the board, is illegal and
inequitable. AlliedSignal asserts that the action of the AMP directors in
setting this record date is ultra vires and a fundamentally unfair
manipulation of the shareholder voting process.
83. In subsection (a), this court found that AlliedSignal's
proposal to transfer the board's power relating to the poison pill to a
group outside of the board, was unlawful. Nevertheless, this court
addresses AlliedSignal's request for declaratory judgment that the November
16, 1998 record date set by the AMP board for this proposal, was an ultra
vires act and a fundamentally unfair manipulation of the shareholder voting
process. Part of AlliedSignal's complaint was that this record date was
different from the October 15, 1998 record date, set for AlliedSignal's
earlier consent solicitation proposals.
84. Pennsylvania BCL Section 1763(a) provides that unless
otherwise restricted in the by-laws, the board of directors may fix a time
not more than ninety days prior to the date of any meeting of shareholders
as a record date. This section provides that the board may similarly fix a
record date for the determination of shareholders for any other purpose.
15 Pa. Cons. Stat. Ann. section 1763.
85. AMP's by-laws, at Section 1.7.2., provide that a record date
must be fixed by the board within ten days of a request to fix a record
date, but do not restrict the date a board may choose.
86. AMP's decision to set a record date of November 16, 1999 did
not violate Pennsylvania's BCL or AMP's by-laws. Furthermore, AlliedSignal
has not demonstrated by clear and convincing evidence, that the AMP board's
actions in setting the record date did not satisfy the directors' fiduciary
duty standard pursuant to Section 1712. Under Section 1715(d), because the
record date relates to a proposed acquisition, AMP's board is entitled to
the presumption that its actions were in the best interests of the
corporation.
(e) The Shareholders Group May Not Bring a Claim for Breach of
Fiduciary Duty against the AMP Board on their Own Behalf.
87. The Shareholders Group has requested that the court order
AMP's board to disclose all material facts considered by the AMP board
concerning the valuation and potential value of AMP or its common stock, as
compared to AlliedSignal's tender offer for AMP common stock for $44.50 per
share.
88. In essence, the Shareholders Group is challenging the AMP
board's decision making process in weighing constituency interests pursuant
to Section 1715 and in concluding that acceptance of AlliedSignal's tender
offer was not in the best interest of the AMP corporation. Thus, the
Shareholders Group is questioning whether the directors acted in accordance
with the fiduciary standard set forth in Section 1712.
89. Directors of Pennsylvania corporations owe a fiduciary duty
solely to the corporation. 15 Pa. Cons. Stat. Ann. section 1717. Section
1717 provides that shareholders do not have standing to bring a direct
cause of action for an alleged breach of fiduciary duty.
90. As the Shareholders Group is directly challenging whether
the AMP directors breached their fiduciary duty to the corporation, its
request for preliminary injunction is hereby denied for lack of standing.
An appropriate order follows.
EXHIBIT 88
Contacts:
Richard Skaare Dan Katcher /Joele Frank
AMP Corporate Communication Abernathy MacGregor Frank
717/592-2323 212/371-5999
Doug Wilburne
AMP Investor Relations
717/592-4965
AMP COMMENCES SELF-TENDER OFFER FOR UP TO 30 MILLION SHARES OF COMMON STOCK
AT $55.00 PER SHARE IN CASH
HARRISBURG, PENNSYLVANIA (October 9, 1998) AMP Incorporated (NYSE: AMP)
announced today it is commencing its self-tender offer to repurchase up to
30 million shares of AMP Common Stock at a price of $55.00 per share in
cash.
The self-tender offer, proration period and withdrawal rights are scheduled
to expire at 12:00 midnight New York City time on Friday, November 20,
1998, unless extended.
Robert Ripp, chairman and chief executive officer of AMP, said, "Our self-
tender offer will provide AMP shareholders the opportunity to sell a
portion of their shares at a price far in excess of AlliedSignal's price of
$44.50 per share. We chose the $55 price because it gives AMP the ability
to deliver value to shareholders today while the Company continues to take
the necessary steps to increase value for tomorrow. The self-tender is our
'down payment' on the inherent value of AMP's Profit Improvement Plan."
The full terms and conditions of the offer are set forth in the Offer to
Purchase which will be filed with the Securities and Exchange Commission
later today and mailed to AMP shareholders.
Credit Suisse First Boston and Donaldson, Lufkin & Jenrette Securities
Corporation will serve as Dealer Managers for the self-tender offer, and
Innisfree M&A Incorporated will serve as the Information Agent.
Headquartered in Harrisburg, PA, AMP is the world's leading manufacturer of
electrical, electronic and fiber optic wireless interconnection devices and
systems. The Company has 48,300 employees in 53 countries serving
customers in the automotive, computer, communications, consumer, industrial
and power industries. AMP sales reached $5.75 billion in 1997.
# # #
AMP and certain other persons named below may be deemed to be participants
in the solicitation of revocations of consents in response to
AlliedSignal's consent solicitation. The participants in this solicitation
may include the directors of AMP (Ralph D. DeNunzio, Barbara H. Franklin,
Joseph M. Hixon III, William J. Hudson, Jr., Joseph M. Magliochetti, Harold
A. McInnes, Jerome J. Meyer, John C. Morley, Robert Ripp, Paul G. Schloemer
and Takeo Shiina); the following executive officers of AMP: Robert Ripp
(Chairman and Chief Executive Officer), William J. Hudson (Vice Chairman),
James E. Marley (former Chairman), William S. Urkiel (Corporate Vice
President and Chief Financial Officer), Herbert M. Cole (Senior Vice
President for Operations), Juergen W. Gromer (Senior Vice President, Global
Industry Businesses), Richard P. Clark (Divisional Vice President, Global
Wireless Products Group), Thomas DiClemente (Corporate Vice President and
President, Europe, Middle East, Africa), Rudolf Gassner (Corporate Vice
President and President, Global Personal Computer Division), Charles W.
Goonrey (Corporate Vice President and General Legal Counsel), John E.
Gurski (Corporate Vice President and President, Global Value-Added
Operations and President, Global Operations Division), David F. Henschel
(Corporate Secretary), John H. Kegel (Corporate Vice President,
Asia/Pacific), Mark E. Lang (Corporate Controller), Philippe Lemaitre
(Corporate Vice President and Chief Technology Officer), Joseph C.
Overbaugh (Corporate Treasurer), Nazario Proietto (Corporate Vice President
and President, Global Consumer, Industrial and Power Technology Division);
and the following other members of management and employees of AMP: Merrill
A. Yohe, Jr. (Vice President, Public Affairs), Richard Skaare (Director,
Corporate Communication), Douglas Wilburne (Director, Investor Relations),
Suzanne Yenchko (Director, State Government Relations), Mary Rakoczy
(Manager, Shareholder Services), Dorothy J. Hiller (Assistant Manager,
Shareholder Services), Melissa E. Witsil (Communications Assistant) and
Janine M. Porr (Executive Secretary). As of the date of this communication,
none of the foregoing participants individually beneficially own in excess
of 1% of AMP's common stock or in the aggregate in excess of 2% of AMP's
common stock.
AMP has retained Credit Suisse First Boston Corporation ("CSFB") and
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ") to act as its
financial advisors in connection with the AlliedSignal Offer, for which
CSFB and DLJ will receive customary fees, as well as reimbursement of
reasonable out-of-pocket expenses. In addition, AMP has agreed to indemnify
CSFB, DLJ and certain related persons against certain liabilities,
including certain liabilities under the federal securities laws, arising
out of their engagement. CSFB and DLJ are investment banking firms that
provide a full range of financial services for institutional and individual
clients. Neither CSFB nor DLJ admits that it or any of its directors,
officers or employees is a "participant" as defined in Schedule 14A
promulgated under the Securities Ex-change Act of 1934, as amended, in the
solicitation, or that Schedule 14A requires the disclosure of certain
information concerning either CSFB or DLJ. In connection with CSFB's role
as financial advisor to AMP, CSFB and the following investment banking
employees of CSFB may communicate in person, by telephone or otherwise with
a limited number of institutions, brokers or other persons who are
stockholders of AMP: Alan Howard, Steven Koch, Scott Lindsay, and Lawrence
Hamdan. In connection with DLJ's role as financial advisor to AMP, DLJ and
the following investment banking employees of DLJ may communicate in
person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are stockholders of AMP: Douglas V. Brown and
Herald L. Ritch. In the normal course of its business, each of CSFB and
DLJ regularly buys and sells securities issued by AMP for its own account
and for the accounts of its customers, which transactions may result in
CSFB, DLJ or the associates of either of them having a net "long" or net
"short" position in AMP securities, or option contracts or other
derivatives in or relating to such securities. As of September 25, 1998,
DLJ held no shares of AMP common stock for its own account and CSFB had a
net long position of 132,266 shares of AMP common stock.
This press release 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. 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.
