SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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AN OPEN MEMO TO ALLIEDSIGNAL'S NOMINEES
[AMP Incorporated Letterhead]
October 12, 1998
TO: Hans W. Becherer Robert B. Palmer John R. Stafford
Lawrence A. Bossidy Russell E. Palmer Thomas P. Stafford
Ann M. Fudge Frederic M. Poses Richard F. Wallman
Paul X. Kelley Donald J. Redlinger Robert C. Winters
Peter M. Kreindler Ivan G. Seidenberg Henry T. Yang
Robert P. Luciano Andrew C. Sigler
FROM: AMP Incorporated
Each of you, as a director or an executive officer of AlliedSignal, has
agreed to stand as an AlliedSignal nominee in its effort to take majority
control of AMP's Board to facilitate AlliedSignal's attempted takeover of
AMP.
Because it is essential that AMP be protected from the irreconcilable
conflicts presented by these dual roles -- which, if elected, you would
face every day until at least November 1999 in every decision before you as
an AMP director -- we brought this matter to the attention of the United
States District Court for the Eastern District of Pennsylvania.
In its decision on October 8, 1998, the Court confirmed and underscored the
burden you would carry as AMP directors:
"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." (Opinion paragraph 73)
The decision contained a good deal more about the conflicts of interest and
potential personal liability of the AlliedSignal nominees. AlliedSignal's
consent solicitation was enjoined unless and until each nominee -- in his
or her individual capacity -- signs a statement affirmatively committing
that he or she has a fiduciary duty solely to AMP. The Court observed,
among other things, that:
o You, as an AlliedSignal nominee, "have fiduciary duties to
AlliedSignal's board's merger directives that may be completely
antithetical to the interests of AMP." (Opinion paragraph 74)
o Your serving on AMP's board is an "invitation to protracted
litigation on each and every action that relates to
acquisition[s] or AMP corporate independence." (Opinion
paragraph 76)
o The Pennsylvania law will not "operate to excuse conflicts of
interest that are breaches of fiduciary duty." (Opinion
paragraph 79)
o AMP shareholders cannot ratify your actions "which are breaches
of fiduciary duty [to AMP], in the absence of unanimous
shareholder agreement." (Opinion paragraph 78)
o Your "breaches of fiduciary duty are subject to injunctive relief
claims by other directors and shareholder derivative actions."
(Opinion paragraph 80)
o If you are sued for breach of fiduciary duty, you will not have
the benefit of the presumption of the business judgment rule and
your conduct will be "judged by a preponderance standard and not
a clear and convincing evidence standard." (Opinion paragraph 71)
AMP's disinterested directors have already determined that AlliedSignal's
$44.50 per share cash offer for AMP is inadequate, does not reflect the
value or prospects of AMP and is not in the best interests of AMP and its
constituencies. AMP's disinterested directors also have determined that
the best course for AMP is to continue to pursue developing value through
its Profit Improvement Plan as an independent company. Since the Board
made these determinations, the Profit Improvement Plan has been performing
better than projected.
Under these circumstances, any effort by AlliedSignal's nominees, if seated
on AMP's Board as conflicted directors, to cause AMP to enter into a merger
agreement with AlliedSignal at $44.50 per share, or to put AMP up for sale
now, could, in and of itself, be a violation of a fiduciary duty owed soley
to AMP. Moreover, the conflicted AlliedSignal directors would not be free
to effect a sale of AMP until after November 6, 1999, when AMP's Rights
Plan expires. Throughout that period, every decision, both substantive and
procedural, taken or omitted by a conflicted AlliedSignal majority, if
seated on AMP's Board, would be subject to challenge as violating your sole
fiduciary duty to AMP.
This would include decisions regarding whether to retain or discharge
officers and employees of AMP, the authorizing of actions in furtherance of
AMP's Profit Improvement Plan, the proper levels of compensation to provide
maximum incentive for maximum operating performance, the date of AMP's 1999
annual meeting, and the slate of Board nominees for election as directors
at the 1999 annual meeting.
And any different position taken by AMP's disinterested directors from that
taken by the conflicted AlliedSignal directors could be substantial
evidence of a violation of your duty which "may well compel legal
challenge." (Opinion paragraph 77)
From the standpoint of AMP and its constituencies, including its
shareholders, this obviously is a poor and potentially very disruptive model
for a Board of Directors to oversee the business and affairs of AMP. We
certainly hope that AMP shareholders would not choose this governance morass
over the continuing focused effort to enhance AMP's value through its Profit
Improvement Plan, while retaining the flexibility for a business combination
or acquisition at reasonable
value levels.
However, if such a choice were made, in view of the Court's decision it is
clear that each AlliedSignal nominee would be making a significant
commitment of his or her personal time, money and reputation -- in light of
the pervasiveness of the conflict issues, the extended time over which they
will be presented and the virtual certainty of well-founded suits for
breach of fiduciary duty, especially if you pursue AlliedSignal's platform.
And you should not necessarily assume that you will be protected by any
corporate indemnification or director's liability insurance.
We trust you are well advised and well prepared.
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 Exchange Act of 1934, as amended, in the
solicitation, or that Schedule 14A requires the disclosure of certain
information concerning either CSFB or DLJ. In connection with CSFB's role
as financial advisor to AMP, CSFB and the following investment banking
employees of CSFB may communicate in person, by telephone or otherwise with
a limited number of institutions, brokers or other persons who are
stockholders of AMP: Alan Howard, Steven Koch, Scott Lindsay, and Lawrence
Hamdan. In connection with DLJ's role as financial advisor to AMP, DLJ and
the following investment banking employees of DLJ may communicate in
person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are stockholders of AMP: Douglas V. Brown and
Herald L. Ritch. In the normal course of its business, each of CSFB and
DLJ regularly buys and sells securities issued by AMP for its own account
and for the accounts of its customers, which transactions may result in
CSFB, DLJ or the associates of either of them having a net "long" or net
"short" position in AMP securities, or option contracts or other
derivatives in or relating to such securities. As of September 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.
