-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LLerKTZj/nehDTEoIybex2b8j/vuSWfJZPbO4n6PpmHgjuzdlK/b6BBZZPwgMGpX p+0zxHOeHVtdzrkMXpKjxg== 0000940180-98-000924.txt : 19980824 0000940180-98-000924.hdr.sgml : 19980824 ACCESSION NUMBER: 0000940180-98-000924 CONFORMED SUBMISSION TYPE: SC 14D9 PUBLIC DOCUMENT COUNT: 20 FILED AS OF DATE: 19980821 SROS: NYSE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AMP INC CENTRAL INDEX KEY: 0000006164 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 230332575 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 SEC ACT: SEC FILE NUMBER: 005-10462 FILM NUMBER: 98695547 BUSINESS ADDRESS: STREET 1: P O 3608 CITY: HARRISBURG STATE: PA ZIP: 17105 BUSINESS PHONE: 7175640100 MAIL ADDRESS: STREET 1: PO BOX 3608 M S 176 41 CITY: HARRISBURG STATE: PA ZIP: 17105 FORMER COMPANY: FORMER CONFORMED NAME: AMP INC & PAMCOR INC DATE OF NAME CHANGE: 19890410 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN METAL PRODUCTS CO DATE OF NAME CHANGE: 19661211 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: AMP INC CENTRAL INDEX KEY: 0000006164 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 230332575 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D9 BUSINESS ADDRESS: STREET 1: P O 3608 CITY: HARRISBURG STATE: PA ZIP: 17105 BUSINESS PHONE: 7175640100 MAIL ADDRESS: STREET 1: PO BOX 3608 M S 176 41 CITY: HARRISBURG STATE: PA ZIP: 17105 FORMER COMPANY: FORMER CONFORMED NAME: AMP INC & PAMCOR INC DATE OF NAME CHANGE: 19890410 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN METAL PRODUCTS CO DATE OF NAME CHANGE: 19661211 SC 14D9 1 SOLICITATION/RECOMMENDATION STATEMENT - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- SCHEDULE 14D-9 SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ---------------- 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) 574-0100 (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 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND SUBJECT COMPANY. The name of the subject company is AMP Incorporated, a Pennsylvania corporation ("AMP"), and the address of the principal executive offices of AMP is P.O. Box 3608, Harrisburg, PA 17105-3608. The title of the class of equity securities to which this statement relates is the common stock, no par value, of AMP (the "Common Stock"), including the associated Common Stock Purchase Rights (the "Rights" and, together with the Common Stock, the "Shares") issued pursuant to the Rights Agreement, dated as of October 28, 1989, and as amended on September 4, 1992, August 12, 1998 and August 20, 1998 (the "Rights Agreement"), between AMP and ChaseMellon Shareholder Services L.L.C., as Rights Agent. ITEM 2. TENDER OFFER OF THE BIDDER. This Schedule 14D-9 relates to a tender offer by PMA Acquisition Corporation, a Delaware corporation (the "Purchaser") and wholly owned subsidiary of AlliedSignal Inc., a Delaware corporation ("AlliedSignal"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated August 10, 1998 (the "Schedule 14D-1"), under which the Purchaser is offering to purchase all Shares at a price of $44.50 per Share (the "Offer Price"), net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 10, 1998, and the related Letter of Transmittal (which, as amended from time to time, together constitute the "AlliedSignal Offer"). None of AlliedSignal, the Purchaser or any of their affiliates are affiliated with AMP and the AlliedSignal Offer was not solicited by AMP. As set forth in the Schedule 14D-1, the principal executive offices of the Purchaser and AlliedSignal are located at 101 Columbia Road, Morristown, New Jersey 07692. In the Offer to Purchase, AlliedSignal indicates that it may seek to solicit consents to increase the size of the Board of Directors of AMP (the "Board") and to elect such number of persons designated by it as would constitute a majority of the members of the Board (the "Consent Solicitation"). THIS SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 DOES NOT CONSTITUTE A SOLICITATION OF CONSENTS OR PROXIES FOR USE AT ANY MEETING OF AMP'S SHAREHOLDERS OR OTHERWISE OR OF REVOCATIONS OF CONSENTS OR PROXIES. ANY SUCH SOLICITATION WHICH AMP MAY MAKE WILL BE MADE ONLY BY MEANS OF SEPARATE PROXY/CONSENT MATERIALS COMPLYING WITH THE REQUIREMENTS OF SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER. ITEM 3. IDENTITY AND BACKGROUND. (a) The name and address of AMP, which is the person filing this Schedule 14D-9, are set forth in Item 1 above. (b) Reference is made to the information contained under the captions "Security Ownership of Directors"; "The Board Of Directors--Compensation," "-- Benefit Plans," and "--Retirement"; "Executive Compensation--Summary Compensation Table," "--Option/SAR Grants in 1997," "--Retirement Benefits," and "--Security Ownership of Executive Officers"; "The Compensation and Management Development Committee Report on Executive Compensation"; "Termination of Employment and Change of Control Arrangements"; and "Proposal For Shareholder Approval of the AMP Incorporated 1998 Employee Stock Purchase Plan" in AMP's Proxy Statement, dated March 16, 1998, relating to AMP's 1998 Annual Meeting of Shareholders . The relevant sections thereof are filed as Exhibit 1 hereto and are incorporated herein by reference. The 1998 Employee Stock Purchase Plan was approved by AMP's shareholders at the 1998 Annual Meeting and became effective on July 1, 1998. At meetings of the Compensation and Management Development Committee (the "Compensation Committee") of the Board or of the entire Board held on the dates set forth below, the Compensation Committee and/or the Board, in connection with certain existing employee benefit plans and arrangements, took the actions described below. Annual Equity Award Grants On July 21, 1998, the Compensation Committee made its customary annual grant of option and Performance Restricted Share awards under AMP's 1993 Long-Term Equity Incentive Plan (the "1993 Plan"). Options to purchase an aggregate of 2,606,200 shares of Common Stock were granted (the "1998 Grant"), each of which vests 100% at the end of three years, has a per share exercise price of $30.375, and a ten year term. The vesting of each such option is subject to acceleration in the event of a Change of Control of AMP (as defined in the 1993 Plan, a "Change of Control"). Of the options awarded in the 1998 Grant, options to purchase an aggregate of 252,000 shares of Common Stock were granted to AMP's executive officers. Messrs. Ripp and Gurski and Dr. Gromer received grants of 41,100, 27,200 and 17,400 options, respectively. Neither Mr. Hudson nor Mr. Marley received a 1998 Grant. In addition to these options, certain of AMP's executive officers received a contemporaneous grant of Performance Restricted Shares under the 1993 Plan. An aggregate of 140,900 Performance Restricted Shares were granted to executive officers of AMP. These shares are subject to a three year performance cycle (ending December 31, 2000) and will vest if AMP achieves certain return on equity and average annual earnings growth targets or if there is a Change of Control during the performance cycle. Messrs. Ripp and Gurski and Dr. Gromer received grants of 27,900, 18,500 and 11,900 Performance Restricted Shares, respectively. Neither Mr. Hudson nor Mr. Marley received such a grant of Performance Restricted Shares. Management Succession Effective as of August 20, 1998, the Board, upon the recommendation of a Board committee regarding CEO succession, elected Mr. Robert Ripp to the Board as its Chairman and to the position of Chief Executive Officer of AMP; elected Mr. Herbert Cole to the position of Senior Vice President-Operations of AMP; and elected Dr. Juergen Gromer as Senior Vice President-Global Industry Businesses of AMP. Messrs. Hudson and Marley retired from their current positions with AMP as of such date and Mr. Marley resigned from his position on the Board. Mr. Hudson has been appointed as Vice Chairman through AMP's 1999 Annual Meeting of Shareholders, after which he will remain employed as AMP's Former President and Chief Executive Officer through his normal retirement date of June 1, 1999, whereupon he shall have the title of Retired President and Chief Executive Officer through the end of his Chairmanship of the National Association of Manufacturers in the Fall of 1999. Mr. Marley will remain employed by AMP until his normal retirement date of August 1, 2000. In connection with the assumption of his new positions with AMP, Mr. Ripp's salary was increased to an annual rate of $600,000 and he was granted (i) options under the 1993 Plan to purchase 60,000 shares of Common Stock at an exercise price equal to $39 per share, the closing price of Common Stock on August 20, 1998, which option will vest 100% after three years, and (ii) a restricted stock award of 25,000 shares of Common Stock, vesting on August 1, 2006 (Mr. Ripp's normal retirement date) or at his earlier death, disability or mutually agreed upon termination of employment. The vesting of the restricted stock award described in the preceding sentence is not subject to acceleration upon a Change of Control. The foregoing description of the restricted stock grant to Mr. Ripp is qualified in its entirety by reference to the Restricted Stock Agreement, a copy of which is filed as Exhibit 2 hereto and incorporated herein by reference. The Compensation Committee also authorized an amendment to Mr. Ripp's Executive Severance Agreement (as hereinafter defined) to provide for an increase in the severance multiplier from 2 to 3 and to provide that the restricted stock award described above would not be subject to the terms of Mr. Ripp's Executive Severance Agreement. The foregoing description of the amendment of Mr. Ripp's Executive Severance Agreement is qualified in its entirety by reference to the amendment, a copy of which is filed as Exhibit 3 hereto and incorporated herein by reference. Mr. Cole has previously elected to participate in AMP's Voluntary Early Retirement Program (as more fully described below, the "VERP"). Pursuant to the terms of the VERP, AMP has elected to require Mr. Cole to remain in the service of AMP until the earlier of (a) January 1, 2001 and (b) the date of any involuntary termination of employment, in order to receive benefits under the VERP. Mr. Cole will continue to remain 2 eligible for certain benefits under his Executive Severance Agreement, according to the terms of such agreement, as modified by his election to participate in the VERP. Each of Messrs. Hudson and Marley will continue to be paid salary at the current annual rate and will continue to receive existing employee benefits. Mr. Hudson will also be entitled to receive office space (separate from the executive management area) and support staff services through the end of his Chairmanship of the National Association of Manufacturers in the Fall of 1999. Further, AMP and each of Messrs. Hudson and Marley have agreed that each executive's Executive Severance Agreement will remain in effect until the executive's retirement date. Each executive has agreed not to claim "Good Reason" (as defined in his agreement) to terminate his employment with AMP prior to the occurrence of a Change of Control (as defined in his agreement). AMP has agreed that if a Change of Control occurs prior to the Executive's retirement date, such executive can terminate his employment with AMP between the Change of Control date and his retirement date and such termination will be treated as a "Good Reason" termination pursuant to the terms of his agreement. Voluntary Early Retirement Program Employees of AMP (other than Messrs. Hudson and Marley) who will be 55 years of age and who will have 10 years' service with AMP as of October 1, 1998 were given the opportunity until August 15, 1998 to elect early retirement under the VERP. Participants in the VERP receive, among other things, the following benefits: (i) credit for an additional 3 years of service for purposes of AMP's pension plans; (ii) calculation of retirement benefits using the employee's final year's pay rate (and, under supplemental retirement plans, the employee's final bonus); (iii) immediate commencement of retirement benefits without actuarial reduction for early retirement and (iv) the right to elect to take the value of their entire pension benefit, or the value of the benefit which is attributable to the VERP enhancements, in a lump sum cash payment. In addition, an employee participating in the VERP will be entitled to continued medical benefits until his or her 65th birthday as if he or she remained an active employee. Most participants in the VERP will be required to retire as of October 1, 1998, but certain otherwise eligible employees (which may include participants who are executive officers of AMP) will be required to remain employed by AMP for a longer period of time in order to qualify for VERP benefits. As noted above, AMP has required Mr. Cole to remain in employment until the earlier of January 1, 2001 or an involuntary termination of employment in order to qualify for VERP benefits. Of the 5 executive officers of AMP who were eligible to participate in the VERP, 3 elected to participate (the "Electing Executives"). The Executive Severance Agreements to which each of the Electing Executives is a party will continue in effect in accordance with their respective terms, except that the Electing Executive will no longer be entitled to any termination-related benefits should a Change of Control occur during the term of the agreement. As a result of his election to participate in the VERP, at the time of his retirement, an Electing Executive will forfeit the award of Performance Restricted Shares made within the preceding 12 months. Any remaining Performance Restricted Shares granted to any Electing Executive will remain outstanding in accordance with their terms and subject to the applicable Executive Severance Agreement. All options held by any Electing Executive will, following retirement, remain outstanding for the entire term of such options and will vest as set forth in the applicable option agreement, subject to the terms of the applicable option plan and Executive Severance Agreement. Electing Executives currently hold options to acquire an aggregate of 222,700 shares. Rabbi Trust AMP has previously established the Supplemental Benefit Trust Agreement (the "Rabbi Trust") for the purpose of funding the Executive Severance Agreements, and AMP's SERPs (the Pension Restoration Plan and the Supplemental Executive Pension Plan), Deferred Compensation Plan, Split-Dollar Life Insurance Agreements, Deferred Stock Accumulation Plan for Outside Directors (a directors phantom stock plan), the Retirement Plan for Outside Directors, and the Deferred Compensation Plan for Non-Employee Directors. The 3 Rabbi Trust must be funded upon the occurrence of a Change of Control and may be funded at an earlier time, except that the Executive Severance Agreements entered into between AMP and its executive officers require AMP to contribute to the Rabbi Trust, within 30 days following the occurrence of a Pending Change of Control (as defined in such agreements), assets sufficient to provide for payment of all amounts under such agreements. The announcement by AlliedSignal of its intention to make the AlliedSignal Offer constituted a Pending Change of Control for these purposes. Accordingly, AMP intends to contribute to the Rabbi Trust, as required by the terms of the Executive Severance Agreements, an irrevocable letter of credit in the amount of at least $78,000,000, the minimum amount required for the purposes of funding the benefits under such agreements. Executive Severance Agreements AMP has entered into severance agreements with its executive officers (the "Executive Severance Agreements"), the terms of which are described in AMP's annual proxy statement, except that certain executive officers with such agreements have severance multipliers of one. On August 20, 1998, the Compensation Committee authorized certain amendments to the Executive Severance Agreements. Each of the Executive Severance Agreements had provided that (1) "Stock plus Cash" awards (stock bonus units) would be fully cashed out on a Change of Control and (2) if the executive is party to a restricted stock agreement, in the event of a Change of Control a cash payment would be made for restricted shares on the date(s) the shares would otherwise have vested. As a result of these amendments, the Executive Severance Agreements will provide that if these cashout provisions would adversely affect AMP's ability to consummate a transaction which is to be accounted for as a pooling of interests, (i) stock bonus units would be paid out in stock rather than cash, (ii) restricted stock would not be cashed out; rather, the shares would be canceled and the appropriate number of unrestricted shares would be delivered on the otherwise applicable vesting dates. The foregoing description of the amendments to the Executive Severance Agreements is qualified in its entirety by reference to a form of such amendment, a copy of which is filed as Exhibit 4 hereto and incorporated herein by reference. On August 20, 1998, the Compensation Committee authorized amendments to certain restricted stock agreements. Two executives of AMP who are not parties to an Executive Severance Agreement are parties to restricted stock agreements. These restricted stock agreements provide that they will terminate upon the occurrence of certain events, including the occurrence of certain mergers or the date on which AMP's stock is no longer listed for trading on a national securities exchange. If the restricted stock agreements terminate for one of the reasons specified above, any unvested shares would be cashed out, with payments being made on the applicable vesting dates. As a result of these amendments, the restricted stock agreements will provide that, in the event these cashout provisions would preclude AMP from entering into a transaction which would be accounted for as a pooling of interests, the restricted stock would not be cashed out; rather, the shares would be canceled and the appropriate number of unrestricted shares would be delivered on the otherwise applicable vesting dates. The foregoing description of the amendments to the restricted stock agreements is qualified in its entirety by reference to a form of such amendment, a copy of which is filed as Exhibit 5 hereto and incorporated herein by reference. Employee Severance Plan On August 20, 1998, the Compensation Committee approved an Employee Severance Plan (the "Severance Plan") covering most AMP employees, who for purposes of the Severance Plan are classified into four different tiers, as described below (hereinafter Tier I, Tier II, Tier III and Tier IV employees). Tier I is comprised of approximately 50 divisional officers and management designated corporate staff directors; Tier II is comprised of approximately 350 director level and manager level executives who have been granted options to purchase Common Stock; Tier III is comprised of approximately 1,000 employees (other than members of Tier I and Tier II) who are in AMP's salary band M; and Tier IV is comprised of all other exempt employees, numbering approximately 4,300. The following employees are excluded from participation in the Severance Plan: (1) executives who are parties to Executive Severance Agreements; (2) employees who are covered by a collective 4 bargaining agreement; and (3) employees who have elected to participate in the VERP or who, prior to the occurrence of a Change of Control, receive notice pursuant to any other reduction in force program of AMP. Benefits are generally paid to Severance Plan participants upon any involuntary termination of employment with AMP (other than for cause) within two years following a Change of Control. The Severance Plan also provides benefits for Tier I and II employees upon voluntary terminations of employment for "Good Reason" (as defined below) within two years following such Change of Control. Good Reason is defined as a reduction in salary (other than across- the-board salary reductions generally applicable to all employees of both AMP and the entity effecting the Change of Control) or a workplace relocation of more than 50 miles. Upon a qualifying termination of employment, benefits are paid to participants as follows: Tier I employees are paid two week's compensation per year of service with a 6 month minimum and a one year maximum; Tier II employees are paid two week's compensation per year of service with a 3 month minimum and a one year maximum; Tier III employees are paid two week's compensation per year of service with a two month minimum and a 9 month maximum; and Tier IV employees are paid one week's compensation per year of service with a one month minimum and a 9 month maximum. Severance is paid in a lump sum. For purposes of the Severance Plan, "compensation" means (1) a participant's weekly rate of salary plus (2) 1/52 of such participant's target bonus for the year of termination or the year of the Change of Control, whichever is higher. Benefits under the Severance Plan also include health care coverage continuation during the severance periods described above and outplacement assistance for Tiers I, II and III. Severance payments are subject to offset for similar benefits received (e.g., severance benefits payable pursuant to foreign law) and are reduced to the extent required to ensure that participants do not receive "excess parachute payments" from AMP. AMP may generally amend or terminate the Severance Plan; however, no termination or adverse amendment may be effected during the existence of a Pending Change of Control (as defined in the Severance Plan), or for six months thereafter, or for two years following a Change of Control. The foregoing description of the Severance Plan is qualified in its entirety by reference to the Severance Plan, a copy of which is filed as Exhibit 6 hereto and incorporated herein by reference. Retention Bonus Program On August 20, 1998 the Compensation Committee authorized AMP's management to pay retention bonuses to certain key employees (other than employees who are parties to Executive Severance Agreements), provided such employees remain in AMP's employment for a designated retention period. Retention bonuses shall be for a minimum of three month's salary and a maximum of twelve month's salary and shall be subject to the approval of Messrs. Ripp, Cole or Urkiel or Dr. Gromer. AMP Pension AMP maintains the AMP Incorporated Pension Plan (the "Pension Plan"), a tax- qualified defined benefit plan. Upon the occurrence of a Change of Control (as defined in the Pension Plan), certain enhanced benefits are provided to plan participants. On August 20, 1998, the Board, upon the recommendation of the Compensation Committee, authorized an amendment to the Pension Plan to conform the Change of Control definition in the Pension Plan to that used in AMP's other benefit and compensation plans. The foregoing description of the amendment to the Pension Plan is qualified in its entirety by reference to the amendment to the Pension Plan, a copy of which is filed as Exhibit 7 hereto and incorporated herein by reference. Except as described in this Schedule 14D-9 or incorporated herein by reference, to the knowledge of AMP, as of the date of this Schedule 14D-9, there are no material contracts, agreements, arrangements or understandings and no actual or potential conflicts of interest between AMP and its affiliates and (i) its executive officers, directors or affiliates or (ii) the Purchaser or AlliedSignal or their respective, executive officers, directors or affiliates. 5 ITEM 4. THE SOLICITATION OR RECOMMENDATION. (a) RECOMMENDATION OF THE BOARD OF DIRECTORS. THE AMP BOARD OF DIRECTORS HAS DETERMINED, BY THE UNANIMOUS VOTE OF THOSE PRESENT, THAT THE ALLIEDSIGNAL OFFER IS INADEQUATE, DOES NOT REFLECT THE VALUE OR PROSPECTS OF AMP AND IS NOT IN THE BEST INTERESTS OF AMP AND ITS RELEVANT CONSTITUENCIES, INCLUDING ITS SHAREHOLDERS, AS DESCRIBED IN MORE DETAIL BELOW. ACCORDINGLY, THE BOARD BY SUCH UNANIMOUS VOTE RECOMMENDS THAT AMP'S SHAREHOLDERS REJECT THE ALLIEDSIGNAL OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE ALLIEDSIGNAL OFFER. (b) BACKGROUND; REASONS FOR THE RECOMMENDATION. A little over a year ago, Mr. Lawrence A. Bossidy, Chairman of the Board and Chief Executive Officer of AlliedSignal, telephoned a director of AMP to inquire as to whether AMP had an interest in exploring a possible combination of the two companies. The inquiry was referred to the Finance Committee of the Board of Directors for consideration. Upon consideration, it was the conclusion of the Finance Committee that such a combination did not offer any benefits to AMP's businesses and, accordingly, that there was no interest in pursuing such a combination. The Finance Committee's determination was communicated through the director by telephone to Mr. Bossidy. Until July 29, 1998, there were no further communications from Mr. Bossidy with respect to a potential business combination. On Wednesday, July 29, 1998, Mr. Bossidy placed a phone call to Mr. William J. Hudson, Chief Executive Officer and President of AMP, who was out of the country visiting some of AMP's facilities. This was followed up with a letter delivered in the afternoon of Friday, July 31, 1998. Mr. Hudson first read the letter on Sunday, August 2, 1998, following his return to his home. In the letter, Mr. Bossidy expressed his belief that a business combination made business sense and requested that a meeting be set up to discuss a combination of the two companies. Mr. Bossidy indicated that AlliedSignal was prepared to offer $43.50 per share in cash for all outstanding Shares, but would consider a higher price if all or a significant portion of the consideration were AlliedSignal's shares rather than cash. On Monday, August 3, 1998, Mr. Hudson shared the letter with other members of management, as well as with AMP's legal and financial advisors and several members of the Board of Directors. A telephonic meeting of the Board of Directors was called for Wednesday, August 5, 1998, to consider the letter. On Tuesday, August 4, 1998, Mr. Bossidy placed another call to Mr. Hudson. Mr. Hudson's office returned the call to let Mr. Bossidy know that Mr. Hudson was out of the office and would be in touch on the following day. Later in the day, a letter from Mr. Bossidy addressed to the Board of Directors of AMP was telecopied to AMP headquarters. In the August 4th letter, Mr. Bossidy indicated that AlliedSignal had decided to commence a tender offer for all outstanding Shares at a price of $44.50 per share in cash. Mr. Bossidy reiterated his belief that a combination was in the best interests of both companies and all of their constituencies and that AlliedSignal was committed to completing the combination. In that regard, Mr. Bossidy stated that if AMP was unwilling to enter into negotiations, AlliedSignal would be prepared to initiate a consent solicitation to increase the size of the AMP Board of Directors and to add a majority of directors who would be responsive to its proposal. The complete texts of these letters are contained in the Offer to Purchase. At the August 5, 1998 meeting, the Board of Directors, among other things, reviewed preliminarily the various letters sent by AlliedSignal, heard presentations as to their fiduciary responsibilities and duties in considering acquisition proposals such as the one set forth in those letters and were advised as to the work to be performed by AMP's advisors to assist the Board in its consideration of the AlliedSignal Offer and the various alternatives available to AMP. 6 On August 10, 1998, Mr. Bossidy sent Mr. Hudson another letter to request a meeting to discuss a possible business combination and to advise AMP of AlliedSignal's intention to file materials shortly with the Securities and Exchange Commission with respect to its Consent Solicitation. By letter dated August 11, 1998, Mr. Hudson indicated to Mr. Bossidy that since the Board had not yet reviewed AlliedSignal's offer or Mr. Bossidy's request for a meeting, it would be premature for a meeting. Mr. Bossidy, nonetheless, called Mr. Hudson later on August 11, at which time Mr. Hudson reiterated the essence of his letter. Also, on August 11, 1998, AlliedSignal delivered a letter to AMP requesting the Board of Directors set a record date for purposes of determining those shareholders entitled to consent in connection with AlliedSignal's Consent Solicitation. On August 12, 1998, the Board held a meeting at which the Board reviewed with AMP management and Credit Suisse First Boston, AMP's financial advisor ("CSFB"), Skadden, Arps, Slate, Meagher & Flom LLP, AMP's principal legal advisor ("Skadden Arps"), and other legal advisors, the AlliedSignal Offer and its terms and conditions. The Board also received and considered, among other things, a review and update by AMP's management of AMP's business strategy and the steps being taken by AMP to improve the profitability of its businesses, a presentation by Pennsylvania counsel as to fiduciary duties and responsibilities and a presentation from CSFB regarding its preliminary analysis relating to the AlliedSignal Offer and various alternatives. On August 12, 1998, AlliedSignal filed with the Securities and Exchange Commission preliminary copies of its consent solicitation materials. On August 13, 1998, AMP filed with the Securities and Exchange Commission preliminary copies of its consent revocation materials. On August 18, 1998, Mr. Bossidy contacted a number of AMP's directors and communicated to them his desire to proceed on a "non-hostile" basis and AlliedSignal's willingness to include AlliedSignal stock as part of the consideration. On August 20, 1998, the Board held a meeting at which the Board again reviewed the AlliedSignal Offer and its terms and conditions with AMP management, CSFB, Skadden Arps and other legal advisors. At such meeting, CSFB presented its financial analysis of the AlliedSignal Offer and reviewed various alternatives available to AMP. AMP's senior management also reviewed the potential impact of the AlliedSignal Offer on AMP's various constituencies including its shareholders, employees, customers, suppliers and the communities served by it. After lengthy discussions, and the presentations from CSFB, Skadden Arps, other legal advisors and AMP's senior management, the Board determined, based in part on the recommendation of all of the independent directors present, that the best course of action under all prevailing circumstances was for AMP to continue aggressively to pursue its strategic initiatives and business plans. The Board concluded that, given the values inherent in AMP's businesses and the steps being taken to improve the profitability of these businesses, the AlliedSignal Offer was not in the best interests of AMP and its relevant constituencies. In particular, the Board determined that AMP's current strategic initiatives and business plans offer the potential for greater benefits for AMP's various constituencies, including its shareholders, than the AlliedSignal Offer. A copy of a letter to shareholders communicating the Board of Directors' recommendation and a form of press release announcing such recommendation are filed as Exhibits 8 and 9 hereto, respectively, and are incorporated herein by reference. Also, following the recommendation, reached prior to the AlliedSignal Offer, of a Board committee formed several months ago, effective as of August 20, 1998, the Board appointed Robert Ripp as Chairman and Chief Executive Officer to lead AMP in its efforts aggressively to implement its profit improvement program on a timely and successful basis. The Board also appointed Herbert Cole, formerly Corporate Vice President and President, Global Terminal and Connector Operations, as Senior Vice President for Operations and Dr. Juergen Gromer, formerly Corporate Vice President, Global Automotive Division, as Senior Vice President, Global Industry Businesses. James E. Marley has retired as Chairman, and William J. Hudson has assumed the position of Vice Chairman. ACCORDINGLY, THE AMP BOARD OF DIRECTORS, BY THE UNANIMOUS VOTE OF THOSE PRESENT, RECOMMENDS THAT AMP'S SHAREHOLDERS REJECT THE ALLIEDSIGNAL OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE ALLIEDSIGNAL OFFER. 7 Factors Considered. The Board's determination, which was reached at the meeting held on August 20, 1998 and took into account the unanimous recommendation of those independent directors present, was based on the Board's review and consideration of the interests of AMP and its shareholders and all other factors permitted by applicable law, including the interests of employees, suppliers, customers, creditors and the communities in which offices or other AMP establishments are located; the short-term and long-term interests of AMP, including benefits that may accrue to AMP from its long-term plans and the possibility that these interests may be best served by the continued independence of AMP; and the intentions of AlliedSignal with respect to AMP as publicly expressed by AlliedSignal as well as its past conduct. In reaching its determinations and recommendations described above, the Board considered a number of factors, including, without limitation, the following: (i) the Board's belief, based on the factors described below, that the AlliedSignal Offer is inadequate and does not reflect the inherent value of AMP as the world's largest supplier of electrical and electronic connectors; (ii) the Board's familiarity with, and management's review of, AMP's business, financial condition, results of operations, business strategy and future prospects, as well as the steps being taken to improve the profitability of AMP, including: . reshaping AMP's manufacturing into a "global manufacturing competency", including the consolidation and redeployment of manufacturing operations; . reshaping AMP's focus on customer services and pricing policies to enhance AMP's competitiveness; and . reducing costs, including through a redeployment and reduction in work force representing approximately 14% of AMP's professional and support services work force; (iii) the Board's strong commitment to this program for improving significantly AMP's operating and financial performance, and the Board's concomitant belief that the market price of a Share should increase significantly as the strategic initiatives announced prior to the commencement of the AlliedSignal Offer start to take effect; (iv) the Board's belief that the new management team is well suited to implement the profit improvement program; (v) the depressing effect which the disruption in the Asian market and the overall decline in the stock market has had on the trading price of the Shares; (vi) the fact that the Offer Price is significantly less than the highest price at which the Shares traded in the last twelve months; (vii) the fact that AlliedSignal had solicited AMP's interest a little over a year ago, but waited until the Shares were trading at their lowest levels in years before making the AlliedSignal Offer so as to create an impression that the offer is at a premium; (viii) the written opinion, dated August 20, 1998, of CSFB that, as of such date, the AlliedSignal Offer was inadequate, from a financial point of view, to the holders of Shares (other than AlliedSignal and its affiliates); the full text of the opinion of CSFB, setting forth the assumptions made, matters considered and limitations on the reviews undertaken, is included as Exhibit 10 hereto and should be read in its entirety; (ix) the numerous conditions to which the AlliedSignal Offer is subject; (x) the apparent lack of overlap and potential synergies between the respective businesses of AMP and AlliedSignal, evidenced in the Board's view, by AlliedSignal's disposition of Amphenol, a competitor of AMP, in 1987, as well as the market's reaction to the Offer as reflected in the significant decline in the trading value of AlliedSignal's shares following its announcement of the AlliedSignal Offer; 8 (xi) the Board's belief that AlliedSignal, with its lower growth rate, is seeking to acquire AMP as a means to enhance its own growth opportunities; (xii) the disruption that consummation of the AlliedSignal Offer could have on AMP's employees, suppliers, customers and the communities where AMP operates, as well as concerns expressed by a number of these constituencies to AMP; (xiii) the impact that the consummation of the AlliedSignal Offer may have on the credit rating of AMP; and (xiv) the Board's commitment to protecting the best interests of AMP and enhancing the value of AMP for the benefit of shareholders and other relevant constituencies. In light of the numerous factors evaluated in connection with its consideration of the AlliedSignal Offer, the Board determined that the AlliedSignal Offer is not in the best interests of AMP and its various constituencies. The foregoing discussion of the information and factors considered by the AMP Board is not intended to be exhaustive but includes all material factors considered by the Board. In reaching its determination to recommend rejection of the AlliedSignal Offer, the Board of Directors did not assign any relative or specific weights to the foregoing factors, and individual directors may have given differing weights to different factors. Throughout its deliberations, the Board of Directors received the advice of CSFB, Skadden Arps and other advisors who were retained to advise the Board in connection with the AlliedSignal Offer. ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. AMP has retained CSFB to act as its lead financial advisor with respect to the AlliedSignal Offer pursuant to a letter agreement, dated August 5, 1998 (the "CSFB Engagement Letter"), between CSFB and AMP. The CSFB Engagement Letter provides for the payment to CSFB of an initial advisory fee of $2,500,000, payable upon execution of the CSFB Engagement Letter (the "Initial Advisory Fee"), plus a fee of $5,000,000, payable every 90 calendar days (not to exceed $20,000,000 in the aggregate), provided that AlliedSignal does not acquire more than 50% of the outstanding voting securities of AMP during such 90 day period, with the first payment payable 90 days after the date of the CSFB Engagement Letter (the "Quarterly Advisory Fees"). In addition, if during the term of the CSFB Engagement Letter or within two years after termination of the CSFB Engagement Letter by AMP, AMP or substantially all of its assets are acquired by AlliedSignal or any third party or AMP enters into an agreement providing for such an acquisition, a transaction fee equal to 0.3% of the Aggregate Consideration (as defined below) involved in the sale (the "Transaction Fee") shall be payable to CSFB. If during the term of the CSFB Engagement Letter or within two years after termination of the CSFB Engagement Letter by AMP, in response to the AlliedSignal Offer another transaction is consummated, a customary transaction fee shall be payable to CSFB as determined by mutual agreement between CSFB and AMP (the "Alternate Transaction Fee") based on the Aggregate Consideration of the transaction. The CSFB Engagement Letter also provides for the payment to CSFB of a fee of $2,500,000 upon CSFB rendering, whether in oral or written form, an opinion as to the adequacy from a financial point of view of the consideration offered in the AlliedSignal Offer (the "Opinion Fee"). The Initial Advisory Fee and the Opinion Fee will be credited (to the extent paid) against any fees payable pursuant to the Quarterly Advisory Fees; the Initial Advisory Fee, the Opinion Fee and the Quarterly Advisory Fees will be credited (to the extent paid) against any fees payable pursuant to the Transaction Fee; and the Initial Advisory Fee will be credited (to the extent paid) against any fees payable pursuant to the Alternate Transaction Fee. All fees and expenses payable to CSFB pursuant to the CSFB Engagement Letter shall be net of any applicable withholding and similar taxes. "Aggregate Consideration" is defined in the CSFB Engagement Letter to mean the total fair market value (on the date of payment) of all consideration (including cash, securities, property, all debt remaining on AMP's financial statements and other indebtedness and obligations assumed and any other form of consideration) received or receivable, directly or indirectly, by AMP or its shareholders in connection with the sale. 9 In addition to the fees described above, AMP has agreed to reimburse CSFB for CSFB's out-of-pocket expenses, including fees and expenses of CSFB's legal counsel, if any, and any other advisor retained by CSFB (which, except in the case of legal counsel, shall only be retained with the prior approval of AMP), resulting from or arising out of the CSFB Engagement Letter. AMP has also agreed to indemnify CSFB and its affiliates against certain liabilities incurred in connection with its performance under the CSFB Engagement Letter. In addition to the services to be provided by CSFB pursuant to the CSFB Engagement Letter, AMP has agreed to (i) offer CSFB the role of lead arranger or principal counterparty, as applicable, in connection with any external financing, foreign exchange or derivatives transaction undertaken by AMP in connection with services provided by CSFB pursuant to the CSFB Engagement Letter; (ii) offer CSFB the role of lead managing underwriter or exclusive placement agent, as the case may be, in connection with an offering of securities to the public or a private placement of securities during the term of the CSFB Engagement Letter; and (iii) continue to retain CSFB as its share repurchase agent. The fees and terms applicable to the performance of any such additional services by CSFB shall be set forth in separate letter agreements containing terms and provisions mutually agreed upon by CSFB and AMP. CSFB has provided certain investment banking services to AMP from time to time for which CSFB has received customary compensation. In the ordinary course of its business, CSFB and its affiliates may actively trade the debt and equity securities of both AMP and AlliedSignal on their own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. AMP has retained Innisfree M&A Incorporated to distribute information (including this Statement on Schedule 14D-9) on behalf of AMP in connection with the AlliedSignal Offer and related matters. AMP has also retained Abernathy MacGregor Frank and Hill & Knowlton as public relations advisors in connection with the AlliedSignal Offer and related matters. Such firms will receive customary compensation for services rendered and also will be reimbursed for their out-of-pocket expenses. Except as set forth above, neither AMP nor any person acting on its behalf has employed, retained or compensated any persons to make solicitations or recommendations to shareholders with respect to the AlliedSignal Offer. ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES. (a) To the best of AMP's knowledge, except for the transactions in Shares set forth on Exhibit 11 hereto, no transactions in the Shares have been effected during the past 60 days by AMP or by any executive officer, director, affiliate or subsidiary of AMP. (b) To the extent currently known to AMP, no executive officer, director, affiliate or subsidiary of AMP currently intends to tender, pursuant to the AlliedSignal Offer, any Shares which are held of record or beneficially owned by such person or to otherwise sell any such Shares. ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY. (a) For the reasons discussed in Item 4 above, the Board has concluded that the AlliedSignal Offer is inadequate and not in the best interests of AMP and that the interests of its shareholders and other constituencies would best be served if AMP were to pursue aggressively the implementation of its business strategy. The Board also has instructed management, with the assistance of AMP's financial and legal advisors, to seek to develop financial or other alternatives, on a basis consistent with the pursuit of its business strategy, for enhancing value in the nearer term. Except as described herein, AMP is not engaged in any negotiation in response to the AlliedSignal Offer that relates to or would result in (i) an extraordinary transaction, such as a merger or reorganization, involving AMP or any subsidiary of AMP; (ii) a purchase, sale or transfer of a material amount of assets by AMP or any subsidiary of AMP; (iii) a tender offer for or other acquisition of securities by or of AMP; or (iv) any material change in the present capitalization or dividend policy of AMP. 10 Notwithstanding the foregoing, the Board could in the future engage in negotiations in response to the AlliedSignal Offer that could have one of the effects specified in the preceding sentence, and the Board has determined that disclosure with respect to the parties to, and the possible terms of, any transactions or proposals of the type referred to in the preceding paragraph might jeopardize any discussions or negotiations that AMP might conduct. Accordingly, the AMP Board has adopted a resolution instructing management not to disclose the possible terms of any such transactions or proposals, or the parties thereto, unless and until an agreement in principle relating thereto has been reached or, upon the advice of counsel, as may be required by law. (b) To the best of AMP's knowledge, there are currently no transactions, board resolutions, agreements in principle or signed contracts in response to the AlliedSignal Offer, other than as described herein, that relate to or would result in one or more of the matters referred to in Item 7(a). ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED. (a) SHAREHOLDER RIGHTS PLAN Each Right issued pursuant to the Rights Agreement entitles the holder thereof to purchase from AMP one share of Common Stock at an exercise price of $87.50 per share (the "Purchase Price"), subject to adjustment in accordance with the terms of the Rights Agreement. Upon the earliest of (i) the close of business on the tenth business day following a public announcement that a person (an "Acquiring Person") has become an "interested shareholder" as defined in Section 2553 of the Pennsylvania Business Corporation Law (i.e., has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding Shares) other than pursuant to a Qualifying Offer (as defined below), (ii) the close of business on the tenth business day (or such later date as may be determined by the Board) following the commencement of a tender offer or exchange offer that would result in a person becoming an Acquiring Person or (iii) a merger or other business combination transaction involving AMP (the earliest of such dates being the "Distribution Date"), the Rights become exercisable and trade separately from the Shares. A Qualifying Offer is an acquisition of shares of Common Stock pursuant to a tender offer or an exchange offer for all outstanding shares of Common Stock at a price and on terms determined by at least a majority of the members of the Board who are not officers of AMP and who are not representatives, nominees, or affiliates or associates of any person making the offer, after receiving advice from one or more investment banking firms, to be fair to the shareholders and otherwise in the best interest of AMP and its shareholders, provided such offer is consummated at a time when the Rights are redeemable. In the event that a person becomes an Acquiring Person, each holder of a Right (other than Rights held by an Acquiring Person which are voided) will thereafter have the right to receive, upon exercise, shares of Common Stock (and, in certain circumstances other consideration) having a value equal to two times the exercise price of the Right. In addition, in the event that, (i) AMP is acquired in a merger or other business combination transaction in which AMP is not the surviving corporation, (ii) AMP is a party to a merger in which AMP is the surviving company, but its shares are exchange for other consideration or remain outstanding, but constitute less than 50% of the shares outstanding immediately following consummation of the merger (other than, with respect to clause (i) or (ii), a merger which follows a Qualifying Offer), or (iii) more than 50% of AMP's assets or earning power is sold or transferred, each holder of a Right (except Rights that previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the surviving company (or a related party in certain cases) having a value equal to two times the exercise price of the Right (a "Transaction Exercise Right"). The Rights may be redeemed until ten business days following the day on which any person becomes an Acquiring Person, provided, however, that the Rights shall become nonredeemable if there is a change in the Board of Directors occurring at any time following receipt of an unsolicited acquisition proposal such that the disinterested directors (as such term is defined under Pennsylvania law) in office prior to the first such unsolicited acquisition proposal, together with their successors as may be approved by the Board of Directors prior to their election, no longer constitute a majority of the Board of Directors. 11 At a meeting held on August 12, 1998, the Board resolved that the Distribution Date shall not occur until the earlier of (i) the day immediately prior to the date on which an Acquiring Person becomes such and (ii) such date as may be determined by action of the Board prior to the time any person or group becomes an Acquiring Person. As a result of such action, the commencement of the AlliedSignal Offer will not, in and of itself, result in the occurrence of a Distribution Date. The Board also authorized Amendment No. 2 to the Rights Agreement, which ratified the appointment of ChaseMellon Shareholder Services L.L.C., AMP's transfer agent, as the successor Rights Agent. At the meeting held on August 20, 1998, the Board approved Amendment No. 3 to the Rights Agreement (which is reflected in the summary description set forth above) to provide that (i) unless the Rights are redeemed prior thereto, a merger or other business combination transaction will be an event triggering a Transaction Exercise Right, irrespective of whether other events have previously occurred to cause the Rights Certificates to have been distributed, (ii) the Rights shall become nonredeemable upon a change in the Board occurring at any time following receipt of an unsolicited acquisition proposal such that the disinterested directors (as such term is defined under Pennsylvania law) in office prior to the first such unsolicited acquisition proposal, together with their successors as may be approved by the Board of Directors prior to their election, no longer constitute a majority of the Board of Directors, (iii) the Qualifying Offer exception shall be applicable unless and until the Rights become nonredeemable under clause (ii) above, and (iv) the Rights Agreement generally may not be amended when the Rights are not redeemable. The Board of Directors also adopted a resolution providing that, following the expiration of the Rights Agreement on November 6, 1999, and for a period of six months thereafter, AMP shall neither adopt nor have in place a shareholder rights plan. The foregoing description of the Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement and Amendment No. 1 thereto, which are filed, respectively, as exhibits to AMP's Annual Report on Form 10-K for the year ended December 31, 1994 and AMP's Annual Report on Form 10-K for the year ended December 31, 1997, each as filed with the Securities and Exchange Commission, and to Amendment No. 2 and Amendment No. 3 to the Rights Agreement which are filed as Exhibits 12 and 13 hereto, respectively, and are incorporated herein by reference. (b) PENNSYLVANIA BUSINESS COMBINATION STATUTE Subchapter F of Chapter 25 (Sections 2551-2556) of the Pennsylvania Business Corporation Law prohibits certain business combination transactions, including a merger, between a Pennsylvania registered domestic corporation (such as AMP) and any "Interested Shareholder" (defined generally as any person that, directly or indirectly, beneficially owns 20% or more of the voting power of the outstanding stock of a Pennsylvania registered domestic corporation) for a period of five years after the date the person becomes an Interested Shareholder. After such five-year period, a business combination transaction between a Pennsylvania registered domestic corporation and such Interested Shareholder is prohibited unless (i) the transaction meets certain minimum requirements as to price and terms or (ii) the business combination transaction is approved by the vote of the holders of a majority of the voting stock not beneficially owned by the Interested Shareholder. The foregoing restrictions do not apply to a business combination transaction with an Interested Shareholder if either (x) the Interested Shareholder's acquisition of the corporation's shares, or (y) the business combination transaction, is approved by the board of directors of the corporation prior to the date on which the Interested Shareholder became an Interested Shareholder. In addition, a business combination transaction with an Interested Shareholder may be consummated during the five-year period if the business combination transaction is either (u) approved by the holders of all outstanding Shares or (v) approved by a majority of the outstanding Shares not held by the Interested Shareholder in a transaction which complies as to certain minimum requirements as to price and certain other terms provided that at the time of approval the Interested Shareholder owns at least 80% of the outstanding Shares. A short-form merger under Section 1924(b)(1)(ii) of the Pennsylvania Business 12 Corporation Law can only be implemented under Subchapter D of Chapter 25 of the Pennsylvania Business Corporation Law if it is consistent with all applicable requirements of Subchapter F of Chapter 25 of the Pennsylvania Business Corporation Law. In light of the Board's determinations with respect to the AlliedSignal Offer (as described in Item 4), the Board of Directors has determined, based, in part, on the unanimous recommendation of all independent directors present, to take no action at this time which would render Subchapter F of the Pennsylvania Business Corporation Law inapplicable to AlliedSignal. (c) PENNSYLVANIA CONTROL SHARE ACQUISITION STATUTE Subchapter G of Chapter 25 (Sections 2561-2568) of the Pennsylvania Business Corporation Law generally provides that any Shares beneficially held by a shareholder, which causes such shareholder to be the beneficial owner of 20% or more of the outstanding Shares, shall not be entitled to be voted unless voting rights are granted to such Shares by the holders of a majority of the outstanding Shares and the holders of a majority of the "disinterested shares" (as defined in the Pennsylvania Business Corporation Law), each voting as a separate class. (d) PENNSYLVANIA CONTROL TRANSACTIONS STATUTE Subchapter E of Chapter 25 (Sections 2541-2548) of the Pennsylvania Business Corporation Law governs "control transactions" (defined generally as a transaction in which a person acquires at least 20% of the voting power of a corporation) and provides that following a control transaction the shareholders are entitled to demand that they can be paid the fair value of their shares. Pursuant to Subchapter E, the minimum value the shareholders can receive may not be less than the highest price paid per share by the control person within the 90-day period ending on and including the date of the control transaction. (e) REGULATORY FILING On August 14, 1998, AlliedSignal filed a Notification and Report Form with respect to the AlliedSignal Offer under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). AMP intends to file its Notification and Report Form with respect to the AlliedSignal Offer. Under the provisions of the HSR Act applicable to the AlliedSignal Offer, the purchase of shares pursuant to the AlliedSignal Offer may not be consummated until the expiration of a fifteen-calendar day waiting period following AlliedSignal's filing under such HSR Act. Accordingly, assuming the filing made by AlliedSignal was not deficient, the waiting period with respect to the AlliedSignal Offer will expire at 11:59 p.m., New York City time, on August 29, 1998, unless AlliedSignal receives a request for additional information or documentary material or the Antitrust Division and the Federal Trade Commission terminate the waiting period prior thereto. (f) LITIGATION On August 4, 1998, AlliedSignal filed a complaint against AMP in the United States District Court for the Eastern District of Pennsylvania (AlliedSignal Corporation v. AMP Incorporated, Civil Action No. 98-CV-4058). In the complaint, AlliedSignal seeks a declaratory judgment as to, among other things, the applicability and/or validity of the Continuing Director provisions contained in AMP's Rights Agreement and the constitutionality of certain provisions of the Pennsylvania Business Corporation Law under the Commerce Clause and Supremacy Clause of the United States Constitution. In addition, AlliedSignal seeks to enjoin AMP from, among other things, (i) fixing a record date for determining the shareholders entitled to vote on the proposals in AlliedSignal's Consent Solicitation more than ten days after the date of AlliedSignal's written notice requesting that a record date be set; (ii) increasing the size of AMP's Board and filling the new seats with Board nominees after commencement of AlliedSignal's Consent Solicitation; (iii) refusing to redeem AMP's shareholder rights plan (the "Rights Plan") or amending the Rights Plan so as to make the Rights inapplicable to the AlliedSignal Offer, and refusing to grant prior approval of the AlliedSignal Offer and second-step merger for purposes of the Pennsylvania Business Combination Statute; (iv) amending its By-laws to in any way impede the effective 13 exercise of the shareholder franchise; or (v) taking any steps to impede or frustrate the ability of AMP's shareholders to consider or make their own determination as to whether to accept the terms of the AlliedSignal Offer and the proposals in AlliedSignal's Consent Solicitation, or taking any other action to thwart or interfere with the AlliedSignal Offer or Consent Solicitation. Four purported shareholder class action lawsuits have been filed by AMP shareholders against AMP and its Board of Directors in the United States District Court for the Eastern District of Pennsylvania on or about August 6 and 7, 1998 (Blum v. William J. Hudson, Jr. et al, Civil Action No. 98-CV- 4109; Silver v. AMP, Incorporated et al, Civil Action No. 98-CV-4120; Goldstein v. AMP, Incorporated, et al, Civil Action No. 98-CV-4127; Margolis Partnership v. AMP, Incorporated, et al, Civil Action No. 98-CV-4187). These complaints allege similar acts of misconduct, i.e., that AMP and its directors improperly refused to consider AlliedSignal's Offer and wrongfully relied upon provisions of AMP's Rights Plan and the Pennsylvania Business Corporation law to block AlliedSignal's Offer. Plaintiffs in these suits seek, among other things, a declaratory judgment that (i) the continuing director provisions contained in AMP's Rights Agreement violate Pennsylvania law and the Board's fiduciary duties; (ii) certain provisions of the Pennsylvania Business Corporation Law are unconstitutional under the Commerce, Supremacy and Due Process Clauses of the United States Constitution; and (iii) establishes the proper record date for the Consent Solicitation. In addition, plaintiff seeks to enjoin AMP and the Board from, among other things, (i) refusing to redeem the Rights Plan, to amend the Plan so as to eliminate the Continuing Director provisions, or to render the Rights inapplicable to the AlliedSignal Offer and second-step merger for purposes of the Pennsylvania Business Combination Law; (ii) amending AMP's By-laws to impede the effective exercise of the shareholder franchise; (iii) taking any other steps to impede or frustrate the ability of AMP's shareholders to consider or make their own determination as to whether to accept the terms of the AlliedSignal Offer or the proposals in AlliedSignal's Consent Solicitation; (iv) increasing the size of AMP's Board and filling the new seats with Board nominees after commencement of AlliedSignal's Consent Solicitation; (v) fixing a record date for determining the shareholders entitled to vote on the proposals in AlliedSignal's Consent Solicitation more than ten days after the date of AlliedSignal's written notice to AMP. Plaintiffs further requests that the Court order AMP's Board to (i) cooperate fully with any entity or person, including AlliedSignal, having a bona fide interest in proposing any transaction that would maximize shareholder value; (ii) immediately undertake an appropriate evaluation of AMP's worth as a merger or acquisition candidate; (iii) take all appropriate steps to effectively expose AMP to the marketplace in an effort to create an active auction of AMP; (iv) act independently so that the interests of AMP's public shareholders will be protected; and (v) adequately ensure that no conflicts of interest exist between the Individual Defendants' own interest and their fiduciary obligation. Given the similarities of their suits, the four alleged shareholder plaintiffs agreed to consolidate their suits and, accordingly, will file an Amended Consolidated Complaint. AMP intends to defend vigorously against these actions. Copies of each of the complaints described above are filed as Exhibits 14 through 18 hereto and incorporated herein by reference, and the foregoing is qualified in its entirety by reference to such exhibits. 14 ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION ------- ----------- 1 Excerpts from AMP's Proxy Statement dated March 16, 1998. 2 Restricted Stock Agreement, dated as of August 20, 1998, between AMP and Robert Ripp. 3 Amendment to Executive Severance Agreement between AMP and Robert Ripp. 4 Form of Amendment to Executive Severance Agreement. 5 Form of Amendment to Restricted Stock Agreement. 6 AMP Incorporated Employee Severance Plan. 7 Amendment to the AMP Incorporated Pension Plan, dated as of August 20, 1998. 8 Letter to Shareholders, dated August 21, 1998.* 9 Text of Press Release issued by AMP, dated August 21, 1998. 10 Opinion of CSFB dated August 20, 1998.* 11 Securities Transaction Chart.* 12 Amendment No. 2, dated August 12, 1998, to the Rights Agreement. 13 Amendment No. 3, dated August 20, 1998, to the Rights Agreement. 14 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in AlliedSignal Corporation v. AMP Incorporated (Civil Action No. 98-CV-4058). 15 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in Claire Blum v. William J. Hudson, Jr., et al. (Civil Action No. 98-CV-4109). 16 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in Scott Silver v. AMP, Inc., et al. (Civil Action No. 98-CV-4120). 17 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in Sue Goldstein v. AMP, Inc., et al. (Civil Action No. 98-CV-4127). 18 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in Margolis Partnership v. AMP, Inc., et al. (Civil Action No. 98-CV-4187). 19 Excerpts from AMP's Annual Report on Form 10-K for the year ended December 31, 1997.
- -------- * Included in copies of the Schedule 14D-9 mailed to shareholders. * * * 15 This document and the exhibits attached hereto contain certain "forward- looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, which are intended to be covered by the safe harbors created thereby. Such statements should be considered as subject to risks and uncertainties that exist in AMP's operations and business environment and 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 is filed as Exhibit 19 hereto. 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 has been distracted by the AlliedSignal Offer and whose numbers will have been reduced as a result of these initiatives. 16 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. AMP Incorporated /s/ Robert Ripp By: _________________________________ Name: Robert Ripp Title: Chairman and Chief Executive Officer Dated: August 21, 1998 17 EXHIBIT INDEX The following exhibits are filed herewith:
EXHIBIT NO. DESCRIPTION ------- ----------- 1 Excerpts from AMP's Proxy Statement dated March 16, 1998. Restricted Stock Agreement, dated as of August 20, 1998, between AMP 2 and Robert Ripp. Amendment to Executive Severance Agreement between AMP and Robert 3 Ripp. 4 Form of Amendment to Executive Severance Agreement. 5 Form of Amendment of Restricted Stock Agreement. 6 AMP Incorporated Employee Severance Plan. Amendment to the AMP Incorporated Pension Plan, dated as of August 20, 7 1998. 8 Letter to Shareholders, dated August 21, 1998.* 9 Text of Press Release issued by AMP, dated August 21, 1998. 10 Opinion of CSFB dated August 20, 1998.* 11 Securities Transaction Chart.* 12 Amendment No. 2, dated August 12, 1998, to the Rights Agreement. 13 Amendment No. 3, dated August 20, 1998, to the Rights Agreement. 14 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in AlliedSignal Corporation v. AMP Incorporated (Civil Action No. 98-CV-4058). 15 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in Claire Blum v. William J. Hudson, Jr., et al. (Civil Action No. 98-CV-4109). 16 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in Scott Silver v. AMP, Inc., et al. (Civil Action No. 98-CV-4120). 17 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in Sue Goldstein v. AMP, Inc., et al. (Civil Action No. 98-CV-4127). 18 Complaint filed in the United States District Court for the Eastern District of Pennsylvania in Margolis Partnership v. AMP, Inc., et al. (Civil Action No. 98-CV-4187). 19 Excerpts from AMP's Annual Report on Form 10-K for the year ended December 31, 1997.
- -------- * Included in copies of the Schedule 14D-9 mailed to shareholders. EX-99.1 2 EXCERPTS FROM AMP'S 1998 PROXY STATEMENT EXHIBIT 1 EXCERPTS FROM AMP'S 1998 ANNUAL MEETING PROXY STATEMENT SECURITY OWNERSHIP OF DIRECTORS The Corporation's Corporate Governance guidelines encourage each member of the Board of Directors to hold the Corporation's Common Stock in an amount having a market value of at least four times the annual retainer fee. The following table identifies the total Common Stock ownership for each Nominee for director as of March 3, 1998.
Amount of Beneficial Amount of Phantom Total Beneficial and Phantom Ownership Ownership Name of Owner (shares)(1)(2) (shares)(3) (shares) - -------------------------- ------------------------- --------------------- ----------------------------- Ralph D. DeNunzio......... 8,000(5) 3,170 11,170 Barbara H. Franklin....... 5,400(6) 1,879 7,279 Joseph M. Hixon III....... 1,653,385(7) 7,897 1,661,282 William J. Hudson, Jr..... 359,885(14)(15) 35,040(4) 394,925 Joseph M. Magliochetti.... 2,000(8) 1,945 3,945 James E. Marley........... 270,062(9)(14)(15) 25,737(4) 295,799 Harold A. McInnes......... 43,071 0 43,071 Jerome J. Meyer........... 5,300(10) 2,811 8,111 John C. Morley............ 7,400(11) 6,554 13,954 Paul G. Schloemer......... 8,000(12) 0 8,000 Takeo Shiina.............. 6,120(13) 2,628 8,748
(1) Each Director owns less than 1% of the Corporation's outstanding Common Stock. (2) Unless otherwise indicated, each Nominee for director possesses sole voting and dispositive power (beneficial ownership) with respect to the shares set forth opposite his or her name. Numbers shown in this column include options the director has the right to acquire as beneficial owner within 60 days after March 3, 1998. (3) Numbers shown in this column include phantom shares: (i) credited to outside directors under the Outside Directors Deferred Stock Accumulation Plan, as described on page 8 of this Proxy Statement; and (ii) credited to outside and non-employee directors for compensation deferred at the election of the director, as described on page 7 of this Proxy Statement. (4) Designated executive officers of the Corporation may defer up to 50% of their base salary and all officers are entitled to defer receipt of all or a portion of their annual cash bonus. Deferred compensation may be allocated to a phantom AMP Common Stock account under the Corporation's Deferred Compensation Plan, as described in footnote 1 to the Summary Compensation Table on page 11 of this Proxy Statement. Such phantom shares are reported in this number. This number also includes phantom shares of Common Stock credited to the designated executive officer in an amount equal to the dividend earned on Performance Restricted Shares, as described in footnote 3 to the Summary Compensation Table on page 12 and footnote 3 to the Security Ownership of Executive Officers Table on page 20 of this Proxy Statement. (5) Mr. DeNunzio also holds 2,000 options granted under the Corporation's Stock Option Plan for Outside Directors that are not exercisable until on or after July 1, 1998. (6) Ms. Franklin also holds 2,000 options granted under the Corporation's Stock Option Plan for Outside Directors that are not exercisable until on or after July 1, 1998. (7) Mr. Hixon holds 15,791 and 122,192 of these shares in two limited partnerships and shares voting and dispositive powers. In addition to the beneficial ownership shown in the table, Mr. Hixon has a 2% residual beneficial interest but no voting or dispositive powers in a trust that holds 7,392 shares of Common Stock of the Corporation. He also holds 2,000 options granted under the Corporation's Stock Option Plan for Outside Directors that are not exercisable until on or after July 1, 1998. (8) Mr. Magliochetti also holds 2,000 options granted under the Corporation's Stock Option Plan for Outside Directors that are not exercisable until on or after July 1, 1998. (9) In addition, 211 shares of Common Stock of the Corporation are owned by members of the immediate family of the Nominee: Mr. Marley disclaims beneficial ownership of this stock. Additionally, 499 shares of Common Stock of the Corporation are owned by a member of the immediate family of Mr. Marley in a custodial account over which the Nominee has voting and dispositive powers; Mr. Marley disclaims beneficial ownership of this stock. (10) Mr. Meyer also holds 2,000 options granted under the Corporation's Stock Option Plan for Outside Directors that are not exercisable until on or after July 1, 1998. (11) Mr. Morley also holds 2,000 options granted under the Corporation's Stock Option Plan for Outside Directors that are not exercisable until on or after July 1, 1998. (12) Mr. Schloemer holds 1,400 of these shares of Common Stock of the Corporation in a family trust of which he is co-trustee with his wife and shares voting and dispositive powers. In addition to the beneficial ownership shown in the table, he holds 2,000 options granted under the Corporation's Stock Option Plan for Outside Directors that are not exercisable until on or after July 1, 1998. (13) Mr. Shiina also holds 2,000 options granted under the Corporation's Stock Option Plan for Outside Directors that are not exercisable until on or after July 1, 1998. (14) A portion of the shares reported for Messrs. Hudson and Marley are Performance Restricted Shares granted under the Corporation's 1993 Long-Term Equity Incentive Plan. Further, a portion of the shares reported for Messrs. Hudson and Marley are held in the Corporation's Employee Savings and Thrift Plan. (15) Under the Corporation's former Bonus Plan (Stock Plus Cash), at December 31, 1997 Mr. Hudson also had 17,402 Stock Bonus Units. Some of the Stock Bonus Units held by Mr. Hudson will convert within 60 days after March 3, 1998 and are reported in this number. Under the current 1993 Long-Term Equity Incentive Plan, Mr. Hudson has 419,500 Stock Options, including 61,800 Stock Options transferred to a family limited partnership for the benefit of Mr. Hudson's immediate family; some of these Stock Options are exercisable within 60 days after March 3, 1998 and are reported in this number. Mr. Marley has 303,600 Stock Options; some of these Stock Options are exercisable within 60 days after March 3, 1998 and are reported in this number. Although the Board of Directors does not contemplate that any of the Nominees for director will be unable to serve, in the event a vacancy in the original slate of nominees is occasioned by death or other unexpected occurrence, (a) shares of stock represented by the proxies shall be voted for the election of such other nominee as may be designated by the Board of Directors, or (b) prior to the meeting, the Board of Directors will amend the Corporation's Bylaws in order to eliminate that office of director for which such nominee is unable to accept 2 election, or (c) in the event that neither (a) nor (b) occurs, the Proxy Committee shall nominate other persons in their discretion and vote the proxies for the election of such persons as directors. THE BOARD OF DIRECTORS COMPENSATION A director who is not an employee of the Corporation is paid $26,000 per year for services as a director and also $1,000 for each day in attendance at a meeting of the Board. Additionally, a director is paid $1,000 for attendance at each meeting of any committee of the Board on which he or she serves. The chairperson of any such committee is paid an annual retainer of $2,500. An outside or non-employee director may also be paid $1,000 per day for special services or assignments requested by either the Chairman or the Chief Executive Officer and President of the Corporation. A director who is also an employee of the Corporation does not receive any director or committee fees. During 1997 the Board of Directors held six meetings. In 1997 total compensation earned by the directors was as follows: Total Director Director Compensation Dexter F. Baker........... $ 40,500 (1) Ralph D. DeNunzio......... 43,500 Barbara H. Franklin....... 41,500 Joseph M. Hixon III....... 41,000 (1) William J. Hudson, Jr..... 0 (2) Joseph M. Magliochetti.... 37,000 (1) James E. Marley........... 0 (2) Harold A. McInnes......... 134,000 (3) Jerome J. Meyer........... 35,000 (1) John C. Morley............ 43,500 (1) Paul G. Schloemer......... 37,000 Takeo Shiina.............. 36,000 (1) ___________________ (1) This compensation includes amounts with respect to which the Director elected to defer receipt under the terms of the Corporation's deferred compensation plan for outside and non-employee directors, described below. 3 (2) Messrs. Hudson and Marley were employees as well as directors of the Corporation and therefore did not receive any separate director or committee fees. (3) This compensation includes consulting fees paid to Mr. McInnes, a former Chairman of the Board and Chief Executive Officer of the Corporation, under a consulting agreement with the Corporation. Under the agreement Mr. McInnes was paid a monthly fee of $8,333 for services other than in his capacity as a director. The consulting agreement expired on December 31, 1997. Outside and non-employee directors are permitted to defer receipt of all or a portion of the annual retainer and the meeting fees. The period of the deferral is within the discretion of each director, provided however that payment must be made or commenced no later than the earliest of the death of the director, a change in control and termination of the director's services, or the year following the year in which he or she reaches the age of 72. Deferred compensation may be allocated to either or both of the following investment options: i) an interest-bearing account with interest credited monthly based on 120% of the Long Term Applicable Federal Rate as published by the Internal Revenue Service and adjusted quarterly; and ii) a phantom AMP Common Stock account in which phantom dividends are reinvested in further phantom stock units. Allocations or changes in allocations can be made annually and apply prospectively to compensation earned in future years. Payments of deferred director compensation can be made in a lump sum or in up to ten annual installments. The Stock Option Plan for Outside Directors provides that the outside directors shall receive a grant of 2,000 stock options in the Corporation's Common Stock when they are first elected to the Board and in each July thereafter. Up to a maximum of 10 awards may be made to any one director and up to 300,000 shares may be awarded to all outside directors in the aggregate during the 10-year term of the plan. These options vest after 1 year and remain exercisable for 9 years. BENEFIT PLANS The Corporation provides benefits to the directors, the amount of which varies dependent upon whether the director is presently or was ever employed by the Corporation. The Corporation provides Director and Officer Liability and Indemnification insurance coverage for all directors. Directors who are not presently and have never been employed by the Corporation (an "Outside Director"), are provided with life insurance coverage. Travel accident insurance coverage is provided to directors who are not currently employed by the Corporation. All directors are eligible to participate in the Corporation's Employee Gift Matching Program. Under this program, the Corporation will match qualifying charitable contributions made by directors to accredited public and private schools, colleges, universities and graduate schools in the United States. The maximum aggregate of a director's gifts to all institutions during a calendar year that will be matched is $5,000. 4 RETIREMENT Currently there are two plans that provide retirement-oriented deferred compensation for Outside Directors (as defined above), conditioned upon 5 years of service as a member of the Board. Outside Directors elected to the Board on or after January 1, 1996 generally receive "retirement" compensation under the Outside Director Deferred Stock Accumulation Plan ("Accumulation Plan"). Outside Directors who joined the Board prior to January 1, 1996 were provided a one-time election to continue participation in the retirement plan in place prior to adoption of the Accumulation Plan or convert to the Accumulation Plan. Under the Accumulation Plan, each Outside Director will receive 300 shares of phantom AMP Common Stock when first elected to the Board, and on the first day of each of the nine subsequent calendar years of Board service. The phantom share awards are credited to a deferred phantom stock account and have no voting rights. On each dividend payment date, phantom dividends corresponding to the number of accumulated phantom shares are credited to the phantom stock account and deemed to be invested in additional phantom shares. An Outside Director's deferred phantom stock account vests upon the earlier of the date the director has at least 5 years of service on the Board, the date of the director's death while serving on the Board, or the date of the director's 72nd birthday. If the director terminates Board service with less than 5 years of service (other than on account of death or attainment of age 72), the account is forfeited. The vested balance in the deferred phantom stock account is paid to the Outside Director in cash upon termination of Board service. Under the retirement plan in effect prior to adoption of the Accumulation Plan, an Outside Director who has either reached the normal retirement date (the end of the calendar year in which the director reaches age 72) or retired early due to disability, and who has served a minimum of five years on the Board, is eligible for an annual retirement benefit. The annual retirement benefit is equal to a percentage of the Outside Director's annual base retainer at the time of retirement, with the actual percentage being based on the Outside Director's years of service. In the event of a "change of control", the annual retirement benefit to which an Outside Director would be entitled based on his or her years of service at the date service to the Board ceases for any reason shall be fully vested and payable immediately, without regard to the Outside Director's then attained age. A "change of control" as that term is used in this Proxy Statement, unless otherwise indicated, would generally be deemed to have occurred if (a) any person or group directly or indirectly acquires beneficial ownership of 30% or more of the Corporation's issued and outstanding shares of Common Stock, or (b) there occurs a change in the Board such that the directors constituting the Board at a given point in time (the "Incumbent Board") and any 5 subsequently elected directors (other than directors whose initial assumption of office is in connection with an election contest) who were approved by a vote of at least two-thirds of the directors still in office who either were directors on the Incumbent Board or whose assumption of office was previously so approved, no longer constitute a majority of the Board, or (c) a merger or consolidation of the Corporation or the issuance of voting securities of the Corporation in connection therewith, other than i) a merger or consolidation resulting in the voting securities of the Corporation continuing to represent at least 66-2/3% of the combined voting power of the voting securities of the surviving entity, or ii) a merger or consolidation effected to implement a recapitalization of the Corporation in which no person or group directly or indirectly acquires beneficial ownership of 30% or more of the Corporation's issued and outstanding shares of Common Stock, or (d) the shareholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation or there is consummated an agreement for the sale or disposition of all or substantially all of the assets of the Corporation, other than such a sale or disposition to an entity of which at least 70% of the combined voting power of the voting securities are held by shareholders in substantially the same proportions as their ownership of the Corporation immediately prior to such sale. COMMITTEES AND MEETINGS The Board of Directors has five standing committees: the Audit Committee, the Compensation and Management Development Committee, the Nominating and Governance Committee, the Finance Committee and the Executive Committee. The Audit Committee of the Board of Directors consults with the Corporation's management regarding selection of the independent public accountant; concurs in the appointment or dismissal of the Director, Internal Audit; holds periodic meetings with the Corporation's internal and independent auditors and financial officers as appropriate to monitor control of the Corporation's financial resources and audit functions; reviews the arrangements and related fees for and the scope of the independent auditor's examination; considers the audit findings and management response; reviews the independent public accountant's non-audit fees; reviews significant accounting issues, regulatory changes and accounting or reporting developments and the impact of such on the Corporation's financial statements; reviews the status of special investigations; reviews the financial statements; oversees the quarterly reporting process; discusses with the Corporation's management, the Director, Internal Audit and in-house legal counsel significant issues relating to litigation or compliance with environmental or governmental regulations; reviews the Corporation's electronic data processing procedures and controls; and reviews the Corporate Code of Conduct and Conflict of Interest policies and receives reports of disclosures of any deviations from these policies. During 1997 the Audit Committee held five meetings. The Compensation and Management Development Committee of the Board of Directors makes recommendations to the Board regarding successors to and the salaries of the Chairman and the Chief Executive Officer and President; conducts annual performance reviews of the Chairman and the Chief Executive Officer and President; reviews the salary budget for the 6 executive officers as a group and salary recommendations made by the Chief Executive Officer and President for the named executive officers; makes recommendations to the Board regarding changes to the Corporation's incentive compensation plans, executive-only benefit plans and tax-qualified pension and thrift plans; and reviews participation in, establishes certain targets for, and acts on awards under the Corporation's incentive compensation plans for management and key employees. During 1997 the Compensation and Management Development Committee held five meetings. The Nominating and Governance Committee of the Board of Directors establishes the criteria for selecting candidates for nomination to the Board; actively seeks candidates who meet those criteria, are highly qualified and have diverse backgrounds, including qualified female and minority candidates; makes recommendations to the Board of nominees to fill vacancies on, or as additions to, the Board; makes recommendations to the Board on changes in the size, composition and structure of the Board; makes recommendations to the Board on compensation and benefit programs for the Board; as appropriate, reviews the performance of the directors and reports its findings to the Chairman and, in its discretion, to the Board itself; and considers matters relating to corporate governance and makes decisions concerning those matters that should be recommended for action by the Board in executive session. The Nominating and Governance Committee will consider nominees for election to the Board that are recommended by shareholders provided that a complete description of the nominees' qualifications, experience and background, together with a statement signed by each nominee in which he or she consents to act as such, accompany the recommendations. Such recommendations should be submitted in writing to the attention of the Chairman of the Corporation, and should not include self- nominations. During 1997 the Nominating and Governance Committee held one meeting. The Finance Committee of the Board of Directors reviews and considers key financial objectives and measures in the AMP Global Strategic Plan, the Corporation's cost of capital, cash generation, cash balance objectives and balance sheet objectives. The Committee also reviews strategic transactions valued in excess of $10 million; receives periodic reports on the portfolio of equity/venture capital investments; reviews and assesses the performance and results of acquisitions and related finance and accounting practices; reviews management's recommendations regarding public stock issues and public and private debt issues; advises management and the Board on the Corporation's share repurchase strategies; periodically reviews the Corporation's dividend policy, dividend-recommendations, stock split proposals and investor relations plans; reviews periodically the Corporation's risk management policies and practices (not including internal operating controls and financial reporting procedures relating to risk management policies and practices); reviews periodic reports from the Corporation's Pension Committee concerning the investment status, investment policy guidelines and accounting treatment of the Corporation's benefit plans involving funds held in trust or otherwise managed and invested on behalf of the participants in the benefit plans; reviews and approves the investment policy guidelines for the AMP Foundation's assets; and reviews the annual charitable giving by the AMP Foundation and the Corporation, and the policy guidelines governing such charitable giving. During 1997 the Finance Committee held three meetings. 7 The Executive Committee of the Board of Directors has been delegated the authority to act on behalf of the Board with respect to any matter within the ordinary course of the business of the Corporation. The Committee typically acts on proposed capital expenditures and financial transactions that require immediate Board action at times that are not near to the regularly scheduled Board meetings. Certain matters, including those that under the Pennsylvania Business Corporation Law cannot be delegated by the Board, are specifically excluded from the authority of the Executive Committee. All actions taken by the Committee are reported at the next meeting of the Board for concurrence by the full Board. During 1997 the Executive Committee did not meet and took no action either in a meeting of the Committee or by written consent in lieu of a meeting. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE Long-Term Compensation ------------------------------------- Annual Compensation Awards ---------------------------------------------- ------------------------------------- Other Annual Restricted Securities Underlying All Other Name and principal Salary Bonus Compensation Stock Awards Options/SARs Compensation position Year ($) ($) ($) ($) ($) ($) - --------------------------- ----- ------- ----- ------------ ----------- ------------------- ----------- (a) (b) (c)(1) (d)(1) (e)(2) (f)(3) (g)(4) (h) - -------------------------- ---- ------- ------- ------------ ----------- ------------------- ------------ William J. Hudson, Jr. 1997 810,000 534,600 35,608 1,861,200 63,900 126,940 (5) Chief Executive Officer 1996 810,000 0 32,548 1,717,713 75,600 110,640 and President, and a 1995 700,000 437,000 17,947 1,071,875 60,000 173,380 Director James E. Marley 1997 648,000 429,624 57,707 1,489,900 51,100 99,852 (6) Chairman 1996 648,000 0 26,018 1,373,438 60,500 85,952 1995 560,000 291,000 40,707 857,500 45,000 83,840 Robert Ripp 1997 400,008 198,804 3,440 733,200 25,100 71,915 (7) Executive Vice President 1996 375,000 46,875 24,157 578,675 25,500 67,000 1995 325,008 137,933 13,560 390,163 16,700 61,001 Juergen Gromer(9) 1997 393,189 176,111 28,141 437,100 15,000 0 Vice President 1996 425,626 67,975 19,018 0 22,400 0 1995 412,917 63,687 13,517 0 21,200 0 John E. Gurski 1997 370,008 183,894 165,623 620,400 21,200 49,680 (8) Vice President 1996 350,004 46,200 225,067 538,388 23,800 40,000 1995 285,000 124,315 172,587 317,275 13,600 55,357
______________ (1) Under the Deferred Compensation Plan, designated executive officers are permitted to defer receipt of up to 50% of their annual base salary and all officers of the Corporation are entitled to defer receipt of all or a portion of their annual cash bonus. The period of deferral is within the discretion of the executive, but is generally until the year following termination of employment. During the period of deferral, the deferred compensation may be allocated or reallocated by the executive between and among the following investment options: i) an interest- bearing account with interest credited monthly based on 120% of the 8 Mid-Term Applicable Federal Rate as published by the Internal Revenue Service, adjusted monthly and ii) a phantom AMP Common Stock Account in which the phantom dividends are reinvested in the phantom stock units. Payments of the deferred compensation can be made at the executive's election in either a lump sum or up to ten annual installments. Amounts of salary or bonus attributable to 1995, 1996 and 1997, the receipt of which has been deferred under this plan, are nevertheless included in columns (c) and (d), as appropriate, of the Summary Compensation Table. (2) Unless otherwise indicated, no executive officer named in the Summary Compensation Table received personal benefits or perquisites in excess of the lesser of $50,000 or 10% of his total compensation reported in columns (c) and (d). Reported in this column is annual compensation related to: (i) the Cash bonus paid under the Corporation's former Bonus Plan (Stock Plus Cash) to cover United States income taxes as described in footnote 1 to the "Aggregated Option/SAR Exercises in 1997 and FY-End Option/SAR Values" table, pages 15-16, and fractional shares of the Bonus Plan Stock Bonus; and (ii) reimbursement of relocation expenses and payments of estimated income taxes relating to reimbursement of relocation expenses to Mr. Ripp in 1995 through 1997 and Mr. Gurski in 1996 and 1997; (iii) overseas allowances for Mr. Gurski in 1995 and 1996, and (iv) certain payments of estimated taxes relating to Mr. Gurski's assignment overseas during 1995 and 1996, including payments made in 1996 and 1997 with regard to previous years' tax obligations and reimbursements or refunds received by the Corporation for tax payments made in previous years. (3) During 1997, 180,900 shares of restricted stock were granted by the Corporation, resulting in a total of 438,620 shares of restricted stock held at December 31, 1997. These shares had an aggregate value of $18,422,040 based upon a $42.00 per share closing price of the Corporation's Common Stock as reported on the New York Stock Exchange Composite Tape on December 31, 1997, and dividends are paid on 43,120 of these shares to the same extent as any other shares of the Corporation's Common Stock. The number of shares of restricted stock includes certain time-vesting restricted shares as well as Performance Restricted Shares awarded under the Corporation's 1993 Long-Term Equity Incentive Plan, which vest in 3 years based on achievement of minimum average annual return on equity and average annual earnings growth objectives for the Corporation. Dividends earned on Performance Restricted Shares, of which 395,500 were held at December 31, 1997, are credited to the executive officer's account and are deemed to be invested in phantom shares of Common Stock. These phantom shares vest only when, and to the extent the associated Performance Restricted Shares vest. (4) Includes awards made pursuant to the Corporation's 1993 Long-Term Equity Incentive Plan. The Long-Term Equity Incentive Plan is described in footnote 1 to the "Option/SAR Grants in 1997" table on pages 13-14 of this Proxy Statement. (5) Includes $3,840 as the company-matching contribution under the Employee Savings and Thrift Plan; $15,600 as the company-matching contribution under the Deferred Compensation Plan; and $107,500 as the total premium paid by the Corporation in 1997 under a split-dollar insurance plan, including both the portion of the premium that is attributable to term life insurance coverage for Mr. Hudson and the full dollar value of the remainder of the premium. The split-dollar insurance plan provides life insurance coverage for Mr. Hudson equal to twice his base salary (in lieu of the coverage available under the Corporation's group-term life insurance plan), and a substantial portion of the value of the advances made to pay the premium as shown in this table will be repaid to the Corporation from policy proceeds. (6) Includes $3,840 as the company-matching contribution under the Employee savings and Thrift Plan; $11,712 as the company-matching contribution under the Deferred Compensation Plan; $4,800 as total director fees paid to Mr. Marley in 1997 by two wholly-owned subsidiaries of the Corporation; and $79,500 as the total premium paid by the Corporation in 1997 under a split-dollar insurance plan, including both the portion of the premium that is attributable to term life insurance coverage for Mr. Marley and the full dollar value of the remainder of the premium. The split-dollar insurance plan provides life insurance 9 coverage for Mr. Marley equal to twice his base salary (in lieu of the coverage available under the Corporation's group-term life insurance plan), and a substantial portion of the value of the advances made to pay the premium as shown in this table will be repaid to the Corporation from policy proceeds. (7) Includes $3,840 as the company-matching contribution under the Employee Savings and Thrift Plan; $5,760 as the company-matching contribution under the Deferred Compensation Plan; $4,800 as total director fees paid to Mr. Ripp in 1997 by two wholly-owned subsidiaries of the Corporation; and $57,515 as the total premium paid by the Corporation in 1997 under a split-dollar insurance plan, including both the portion of the premium that is attributable to term life insurance coverage for Mr. Ripp and the full dollar value of the remainder of the premium. The split-dollar insurance plan provides life insurance coverage for Mr. Ripp equal to twice his base salary (in lieu of the coverage available under the Corporation's group-term life insurance plan), and a substantial portion of the value of the advances made to pay the premium as shown in this table will be repaid to the Corporation from policy proceeds. (8) Includes $3,840 as the company-matching contribution under the Employee Savings and Thrift Plan; $5,040 as the company-matching contribution under the Deferred Compensation Plan; and $40,800 as the total premium paid by the Corporation in 1997 under a split-dollar insurance plan, including both the portion of the premium that is attributable to term life insurance coverage for Mr. Gurski and the full dollar value of the remainder of the premium. The split-dollar insurance plan provides life insurance coverage for Mr. Gurski equal to twice his base salary (in lieu of the coverage available under the Corporation's group-term life insurance plan), and a substantial portion of the value of the advances made to pay the premium as shown in this table will be repaid to the Corporation from policy proceeds. (9) Mr. Gromer's compensation was paid in German marks. The amounts reported for Mr. Gromer have been converted to U.S. dollars based on the average monthly conversion rate calculated using the daily conversion rates listed by Bloomberg Financial Markets Commodities News.
OPTION/SAR GRANTS IN 1997 Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Individual Grants Option Term(3) ----------------------------------------------------------------------- ---------------------------- % of Total Number of Options/ Securities SARs Underlying Granted Exercise Market Options/SARs to or Base Price at Granted(1) Employees Price Expiration Grant 0% 5% 10% Name Date (#) in 1997 ($/share) Date(2) ($/share) ($) ($) ($) - -------------------------- ------- ------------ --------- --------- ---------- --------- --- --- ---- William J. Hudson, Jr..... 7/22/97 63,900 3.16 47.0 7/22/07 47.0 0 1,888,759 4,786,487 Chief Executive Officer and President, and a Director James E. Marley........... 7/22/97 51,100 2.53 47.0 7/22/07 47.0 0 1,510,416 3,827,691 Chairman Robert Ripp................ 7/22/97 25,100 1.24 47.0 7/22/07 47.0 0 741,907 1,880,138 Executive Vice President Juergen W. Gromer.......... 7/22/97 15,000 0.74 47.0 7/22/07 47.0 0 443,370 1,123,588 Vice President John E. Gurski............. 7/22/97 21,200 1.05 47.0 7/22/07 47.0 0 626,631 1,588,005 Vice President
10 _____________________________ (1) The Corporation's 1993 Long-Term Equity Incentive Plan ("1993 Plan") became effective on July 1, 1993 and is a long-term incentive compensation program that is based on stock price appreciation in the form of stock options (either incentive or non-qualified stock options) and infrequently, in the discretion of the Corporation, in the form of freestanding SARs payable in the Corporation's Common Stock or from time to time, in the Corporation's sole discretion, in cash. The 1993 Plan also provides for the award of performance-based restricted stock ("Performance Restricted Shares"). The 1993 Plan is administered by the Compensation and Management Development Committee of the Corporation's Board of Directors ("Committee"). Under the 1993 Plan, each employee designated by the Committee to participate is credited with stock options having an option price per share of Common Stock that is not less than 100% of the closing price of the Common Stock on the New York Stock Exchange Composite Tape on the award date, and/or stock bonus units (SARs) having a designated value per unit of not less than 95% of the average closing price of the Common Stock on the New York Stock Exchange Composite Tape for the 10 trading days immediately prior to the award date, and/or Performance Restricted Shares. No SAR awards were made under the 1993 Plan in 1997. Awards of Performance Restricted Shares and stock options that were made to the named executive officers in 1997 are shown in columns (f) and (g), respectively, of the Summary Compensation Table, on page 11 of this Proxy Statement. With respect to stock options, all options granted in 1997 to the named executive officers will vest 3 years from the date of award and will expire 7 years after vesting. They have an exercise price equal to 100% of the closing price of the Common Stock on the New York Stock Exchange on the award date. Under the authorization of the Committee, all options granted in 1997 include a term that permits their transfer to immediate family members, trusts for the exclusive benefit of such members, or partnerships in which such members are the only partners. Transferred options may not be further transferred by immediate family members except by will or by the laws of descent and distribution, and the named executive officers remain responsible for the income taxes and tax withholding requirements arising upon the exercise of transferred options. When SAR awards are made, bonus computations with respect to the stock bonus units are made on the 4th through 6th anniversaries of the award date for one-third of each participant's bonus units and are based on the increase in the market price of the Common Stock over the designated value, as established on the award date. The bonus typically paid in stock ("Stock Bonus") is the number of shares of Common Stock having an aggregate market value on the computation date equivalent to the one-third of the participant's bonus units multiplied by the increase in market price described above. A cash bonus ("Supplemental Cash Bonus") is also paid under the 1993 Plan in conjunction with Stock Bonuses. The Supplemental Cash Bonus is paid at the same time that payment of the Stock Bonus is made and is a percentage of the value of the Stock Bonus that is designated at the time of award and is no greater than that calculated to provide a payout sufficient to pay the anticipated United States income tax at a maximum rate for the highest taxable bracket with respect to the aggregate of the Stock Bonus and the Supplemental Cash Bonus. Supplemental Cash Bonus awards are not included in this table when stock bonus unit (SAR) awards are made in the reported year and disclosed in this table. (2) The expiration date for stock options under the 1993 Plan is the date determined by the Committee at the time of the award of such options. When SARs are granted in the reported year and disclosed in this table, the 6th anniversary date is designated as the "expiration date" because computations of the Stock Bonus are made on the 4th through 6th anniversaries of the award date for one- third of each participant's bonus units granted in the award. 11 (3) In 1997 the named executive officers received awards under the 1993 Plan entirely in either stock options or Performance Restricted Shares awards, and therefore assumed values contained in this table relate only to the options. These values are based on assumed appreciation rates set by the Securities and Exchange Commission and are not intended to forecast possible future appreciation, if any, of the Corporation's stock price. The values are based on the difference between the exercise price and the exercise price as increased by the assumed annual appreciation rate over the 10-year term of the options, compounded annually, with said difference multiplied by the number of options granted as shown in the table. AGGREGATED OPTION/SAR EXERCISES(1) IN 1997 AND FY-END OPTION/SAR VALUES
Number of Securities Underlying Value of Unexercised Shares Unexercised Options/SARs on In-The-Money Options/SARs Acquired Value December 31, 1997 (#) On December 31, 1997 ($) on Exercise Realized ----------------------------- ------------------------------ Name (#) ($)(2) Exercisable/Unexercisable(3) Exercisable/Unexercisable(3)(4) - ---------------------------- ---------- -------- ----------------------------- ------------------------------ William J. Hudson, Jr. ..... 4,861 118,880 220,000 / 218,902 1,980,350 / 643,799 Chief Executive Officer and President, and a Director James E. Marley............. 2,520 115,290 157,000 / 156,600 1,447,813 / 325,188 Chairman Robert Ripp................. 0 0 40,000 / 67,300 252,500 / 137,063 Executive Vice President Juergen W. Gromer........... 11,103 282,606 15,600 / 64,200 98,475 / 120,400 Vice President John E. Gurski.............. 621 21,425 44,800 / 58,600 402,425 / 127,925 Vice President
____________________ (1) Exercises shown in this table relate to stock bonus units (SARs) granted under the Corporation's Bonus Plan (Stock Plus Cash) ("Bonus Plan"), which preceded the 1993 Plan, and to both stock bonus units (SARs) and stock options awarded under the 1993 Plan. With respect to stock bonus units granted under the Bonus Plan and the 1993 Plan, the incentive compensa tion is based on stock price appreciation in the form of freestanding SARs payable in the Corporation's Common Stock or occasionally, in the discretion of the Corporation, in cash. Each employee designated by the Board of Directors to participate in the Bonus Plan was credited with stock bonus units having a designated value per unit of not less than 95% of the average closing price of the Common Stock on the New York Stock Exchange on the award date. Under the 1993 Plan, the stock bonus units have a designated value per unit of not less than 95% of the average closing price of the Common Stock on the New York Stock Exchange Composite Tape for the 10 trading days immediately prior to the award date. The 1993 Plan is more fully described in footnote 1 to the table entitled "Options/SAR Grants in 1997" on pages 13-14 of this Proxy Statement. 12 Bonus computations are made on the 4th through 6th anniversaries of the award date for one-third of each participant's stock bonus units. Bonus computations for stock bonus units granted under the Bonus Plan are made using the greater of the increase in the market price of the Common Stock (a) over the designated value, as established on the award date, or (b) over an adjusted designated value. The adjusted designated value is 95% of an amount determined by discounting the market price of the Common Stock on the computation date by a percentage (not to exceed 7.5% per year) equal to one-half of the Corporation's compound average annual growth rate in earnings per share during the period between the award date and the computation date. Bonus computations for stock bonus units granted under the 1993 Plan are made by simply using the increase in the market price of the Common Stock over the designated value as established on the award date. The bonus typically paid in stock under either plan ("Stock Bonus") is the number of shares of the Common Stock having an aggregate market value on the computation date equivalent to the amount computed as described above. A cash bonus is also paid under both the Bonus Plan and the 1993 Plan. For awards under the Bonus Plan that were made between January 27, 1988 and June 30, 1993, the cash bonus is an amount sufficient to pay the anticipated United States income tax with respect to both the Bonus Plan Stock Bonus and the cash bonus as determined at the time of the distribution of the bonuses, not to exceed an amount that is 50% of the value of the Bonus Plan Stock Bonus. The cash bonus under the 1993 Plan is described in footnote 1 of the table entitled "Options/SAR Grants in 1997" on pages 13-14 of this Proxy Statement. The amounts of the cash bonus paid in 1997 based on distributions made in that year under these plans are included in column (e), "Other Annual Compensation", of the Summary Compensation Table on page 11 of this Proxy Statement. In view of the foregoing, "exercises" for purposes of this table are deemed to be the Stock Bonus computations that are made on the 4th through 6th anniversaries of the award date for one-third of each participant's stock bonus units granted in an award under the Corporation's Bonus Plan and 1993 Plan, together with stock options under the 1993 Plan that were exercised during 1997. The stock options awarded under the 1993 Plan are described in footnote 1 of the table entitled "Options/SAR Grants in 1997" on pages 13-14 of this Proxy Statement. (2) "Valued Realized" includes the amount of appreciation realized upon exercise of stock options under the 1993 Plan, together with the Stock Bonus paid under the Bonus Plan and the 1993 Plan based on stock price appreciation. The figures reported in this column do not include the cash bonus as described in footnote 1 above. (3) The stock bonus units (SARs) awarded under the Bonus Plan and the 1993 Plan are not exercised by the participants, but are paid based on bonus computations made on the 4th through 6th anniversaries of the award date for one-third of each participant's stock bonus units. (4) These values relate only to stock options granted under the 1993 Plan and the Stock Bonus described in footnote 1 above under both the Bonus Plan and the 1993 Plan. A cash bonus under the Bonus Plan and the 1993 Plan is also paid as previously described, but is not included in the values disclosed in this column. With respect to Stock Bonuses under the Bonus Plan, these values also have been calculated based on the designated values for the respective awards and without regard to adjusted designated values, as those terms are defined under the Bonus Plan and described in footnote 1 above. 13 RETIREMENT BENEFITS The Corporation maintains a pension plan ("Pension Plan") for its employees that is designed and administered to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended ("Code"). The Pension Plan has been noncontributory since January 1, 1991. Prior to January 1, 1994 the Pension Plan was a career average defined benefit plan under which, for each year of covered service with the Corporation, an employee accrued a benefit equal to 1.67% of his or her current base earnings. The Pension Plan also included an alternative formula that updated pension benefits for prior service based on most-recent 3 years average base earnings rates. An employee received the greater of the benefit the employee had otherwise earned under the Pension Plan or the benefit calculated under the alternative formula based on most-recent average base earnings and years of credited service. Effective as of January 1, 1994 the Corporation amended the Pension Plan to provide benefits based on final average base earnings and total years of credited service at retirement. The final average base earnings is determined based on the average of the year-end annual earnings rates for the 3 years that represent the employee's highest 3 years average during such employee's last 10 years of service. The benefit is calculated by adding (1) 1.0% of such final average base earnings, up to the then-current Social Security covered compensation level ($31,128 in 1998), multiplied by the employee's credited years of past service (not to exceed 35 years), (2) 1.5% of such final average base earnings in excess of the Social Security covered compensation level, multiplied by the employee's credited years of past service (not to exceed 35 years), and (3) 1.2% of such final average base earnings, multiplied by the number of employee's credited years of past service in excess of 35 years. Credited years of past service are counted back to age 21 and one year of service for participants who joined the Pension Plan when first eligible, otherwise back to the date of actual enrollment in the Pension Plan. Employees who were age 60 or older as of January 1, 1994 will receive the higher of the benefit under the prior career average defined benefit approach or the benefit under the new final average base earnings method. Earnings used to calculate benefits under the Pension Plan are restricted to (a) annual base salary, including amounts deferred under the Corporation's Employee Savings and Thrift Plan, amounts applied to the employee portion of the welfare benefit plan premiums pursuant to a salary reduction agreement, and amounts credited to health care and dependent care flexible spending accounts pursuant to a salary reduction agreement and (b) for individuals paid on a commission basis, annual base salary (as described above) plus commissions, but commissions are included only to the extent that the sum of the annual base salary and commissions does not exceed a designated amount. Normal Retirement Date under the Pension Plan is defined as age 65, but there is no actuarial reduction of a participant's pension for early retirement between the ages of 60 and 65. The Pension Plan also provides for a special pension benefit formula that would be used to recalculate benefits in the event of a change in control of the Corporation. The special 14 formula, which the Corporation plans to review and modify from time to time as the funding status of the Pension Plan warrants, is intended to ensure that excess Pension Plan assets at the time of a change in control are used to provide increased retirement benefits for covered employees. The special formula is similar in design to the final average earnings formula described above under the amended Pension Plan, with the 1%, 1.5% and 1.2% factors replaced by 1.25%, 1.75%, and 1.67%, respectively. In accordance with Code requirements, the Pension Plan limits the maximum amount of annual compensation that may be taken into account under the Pension Plan ($160,000 in 1998) and the maximum annual employer provided benefit that can be paid under the Pension Plan ($130,000 in 1998). The Corporation maintains a supplemental employee retirement program ("SERP") pursuant to which certain employees whose retirement benefits otherwise payable under the Pension Plan are limited by these Code restrictions will receive payment of a supplemental pension from non-Pension Plan sources. The total benefit payable under both the Pension Plan and the SERP is calculated without regard to the Code limitations applicable to the Pension Plan using the same pension formula(s) applicable under the Pension Plan and using a 3 years average of both base earnings and annual cash bonus (whether paid or deferred). The total benefit thus calculated, reduced by the restricted benefit actually payable from the Pension Plan, is the benefit payable from the SERP. The following table shows the combined annual retirement benefit payable to the Corporation's executive officers named in the Summary Compensation Table, except Mr. Gromer, under both the Pension Plan and the SERP, as amended effective January 1, 1994, upon normal retirement, based on the indicted amount of final average remuneration and number of credited years of service./(1)/ Mr. Gromer's annual retirement benefit is calculated under the terms of a retirement plan maintained by AMP Deutschland that is similar in design to the U.S. Pension Plan described above. As of January 1, 1998, Mr. Gromer's accrued annual retirement benefit payable upon normal retirement (age 65) under the AMP Deutschland plan was $271,118, based upon the average monthly conversion rate for January 1998, calculated as described in footnote 9 to the Summary Compensation table on page 13 of this Proxy Statement. 15 PENSION PLAN TABLE(4) YEARS OF SERVICE(3) REMUNERATION(2) 15 20 25 30 35 40 $ 400,000 87,665 116,887 146,109 175,331 204,553 228,553 450,000 98,915 131,887 164,859 197,831 230,803 257,803 500,000 110,165 146,887 183,609 220,331 257,053 287,053 550,000 121,415 161,887 202,359 242,831 283,303 316,303 600,000 132,665 176,887 221,109 265,331 309,553 345,553 650,000 143,915 191,887 239,859 287,831 335,803 374,803 700,000 155,165 206,887 258,609 310,331 362,053 404,053 750,000 166,415 221,887 277,359 332,831 388,303 433,303 800,000 177,665 236,887 296,109 355,331 414,553 462,553 850,000 188,915 251,887 314,859 377,831 440,803 491,803 900,000 200,165 266,887 333,609 400,331 467,053 521,053 950,000 211,415 281,887 352,359 422,831 493,303 550,303 1,000,000 222,665 296,887 371,109 445,331 519,553 579,553 1,050,000 233,915 311,887 389,859 467,831 545,803 608,803 1,100,000 245,165 326,887 408,609 490,331 572,053 638,053 1,150,000 256,415 341,887 427,359 512,831 598,303 667,303 1,200,000 267,665 356,887 446,109 535,331 624,553 696,553 1,250,000 278,915 371,887 464,859 557,831 650,803 725,803 1,300,000 290,165 386,887 483,609 580,331 677,053 755,053 1,350,000 301,415 401,887 502,359 602,831 703,303 784,303 1,400,000 312,665 416,887 521,109 625,331 729,553 813,553 1,450,000 323,915 431,887 539,859 647,831 755,803 842,803 1,500,000 335,165 446,887 558,609 670,331 782,053 872,053 1,550,000 346,415 461,887 577,359 692,831 808,303 901,303 1,600,000 357,665 476,887 596,109 715,331 834,553 930,553 1,650,000 368,915 491,887 614,859 737,831 860,803 959,803 1,700,000 380,165 506,887 633,609 760,331 887,053 989,053 16 (1) Effective in April 1997, Mr. Ripp became a participant under the newly- created AMP Incorporated Supplemental Executive Pension Plan, which was implemented to provide a competitive annual retirement benefit to executives, such as Mr. Ripp, who are first employed by the Corporation mid-to late-career. Under this plan, Mr. Ripp's annual retirement benefit at Normal Retirement Date is the greater of the combined annual retirement benefit payable under the Pension Plan and the SERP, as described above, or 30% of his highest 3 years average of base compensation and annual cash bonuses. (2) The compensation covered by the combination of the Pension Plan and SERP includes the employee's final average earnings, as determined by the average of the 3 years that represents the employee's highest base earnings during such employee's last 10 years of service, together with the average of the employee's annual cash bonus payments also paid in such 3 years. In the case of the named executive officers other than Mr. Gromer, the annual base earnings considered in such a determination includes the amount of salary and bonus shown in columns (c) and (d) of the Summary Compensation Table on page 11 of this Proxy Statement. (3) The current estimated credited years of service for the named executive officers, except J. Gromer, discussed above, are as follows: W. J. Hudson, Jr. - 32 years; J. E. Marley - 33.5 years; R. Ripp - 3.3 years and J. Gurski - 24.5 years. The estimated credited years of service for the named executive officers, except J. Gromer, discussed above, at the Normal Retirement Date are as follows: W. J. Hudson, Jr. - 33.42 years; J. E. Marley - 36.08 years; R. Ripp - 11.92 years and J. Gurski - 32.5 years. (4) The retirement benefit shown in the Pension Plan Table is a straight life annuity amount and is not subject to any reduction for Social Security or other offset amounts. However, as required by law, the form of payment for married employees under the Pension Plan is a 50% joint and survivor annuity, which is typically less than the straight life annuity amount. SECURITY OWNERSHIP OF EXECUTIVE OFFICERS In order to further align the interests of the Corporation's executives with increasing the long-term value of the Corporation, in January 1995 the Corporation implemented Stock Ownership Guidelines for Senior Management ("Stock Guidelines"). The Stock Guidelines apply to approximately 130 executives presently participating in the Stock Option or SAR segment of the 1993 Long-Term Equity Incentive Plan. Affected executives are encouraged to directly own a minimum number of real or phantom shares of stock, the value of which is expressed as a multiple of the executive's annualized base salary. The multiplier ranges from 4 times salary for the Chairman and the CEO and President, to .5 times base salary for executives in less senior management positions. Executives are expected to comply with the Stock Guidelines within a 5-year period. The AMP equity security ownership as of March 3, 1998 by the named executive officers and the executive officers of the Corporation on that date is as follows: 17
Amounts and Nature Beneficial Amount of Total Beneficial of Beneficial Ownership Phantom and Phantom Name and Address Ownership as a Percent Ownership Ownership Title of Class of Beneficial Owner (shares) of Class (shares) (shares) Common Stock...... William J. Hudson, Jr. 359,885 (1)(2)(4) less than 1 35,040 394,925 Harrisburg, Pennsylvania Common Stock...... James E. Marley 270,062 (2)(4) less than 1 25,737 295,799 Harrisburg, Pennsylvania Common Stock...... Robert Ripp 101,028 (4) less than 1 6,024 107,052 Harrisburg, Pennsylvania Common Stock...... Juergen W. Gromer 39,942 (4) less than 1 158 40,100 Langen, Germany Common Stock...... John E. Gurski 84,073 (4) less than 1 12,129 96,202 Harrisburg, Pennsylvania Common Stock...... all Executive Officers 2,896,211 (1)(2)(4) 1.31 142,215 3,038,426 (18 persons) and Directors as a Group - ---------------------------------------------------------------------------------------------------------------
_______________ (1) Three executive officers have the right to acquire an undeterminable number of shares under the Corporation's Bonus Plan (Stock Plus Cash) within 60 days after March 3, 1998. (2) A portion of the shares reported for 17 executive officers are held in the Corporation's Employee Savings and Thrift Plan. Through further contributions to this plan, all 17 executive officers may acquire an undeterminable number of additional shares within 60 days after March 3, 1998. (3) Numbers in this column include phantom shares credited to executive officers under a deferred compensation plan and/or in association with dividend reinvestment of Performance Restricted Shares issued to designated officers. Pursuant to the deferred compensation plan, designated executive officers may defer receipt of up to 50% of their annual base salary and all officers of the Corporation may defer receipt of all or a portion of their annual cash bonus. Deferred compensation may be allocated to a phantom AMP Common Stock account, as described in footnote 1 to the Summary Compensation Table on page 11 of this Proxy Statement. Dividends earned on Performance Restricted Shares are credited to the executive officer's account and are deemed to be invested in phantom shares of Common Stock. These phantom shares vest only when, and to the extent the associated Performance Restricted Shares vest, as described in footnote 3 to the Summary Compensation Table on page 12 of this Proxy Statement. (4) In addition, a total of 8,782 shares are held by immediate family members of four executive officers, either directly or in a custodial account over which the executive officer has voting and dispositive powers; the executive officers disclaim beneficial ownership. Additionally, a director has a 2% residual beneficial interest, but no voting or dispositive powers in a trust that holders 7,392 shares of Common Stock of the Corporation. Of the beneficial ownership reported in this number, 15,791 and 122,192 shares are held by a director in two limited partnerships over which he shares voting and dispositive powers, and another director holds 1,400 shares in a family trust of which he is co-trustee with his wife and shares voting and dispositive powers. Also, nine directors hold a total of 64,000 options, some of which are exercisable within 60 days after March 3, 1998 and are reported in this number, and eighteen executive officers hold a total of 1,606,145 options, some of which are exercisable within 60 days after March 3, 1998 and are reported in this number, and 44,304 Stock Bonus Units, some of which will convert within 60 days after March 3, 1998 and are reported in this number. Of the total number of options held by executive officers and described above, 419,500 are held by Mr. Hudson, of which 61,800 have been transferred to a family limited partnership. 18 THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation and Management Development Committee of the Board of Directors, among other responsibilities, has responsibility for the Corporation's executive compensation program. The Committee, which is composed entirely of outside directors, is chaired by Mr. Ralph D. DeNunzio, President, Harbor Point Associates, Inc. The other Committee members are Mr. Dexter F. Baker, Retired Chairman and CEO, Air Products and Chemicals, Inc.; Mr. John C. Morley, President of Evergreen Ventures, Ltd. and Retired President and CEO, Reliance Electric Company; and Mr. Paul G. Schloemer, Retired President and CEO, Parker Hannifin Corporation. Included within the Committee's executive compensation oversight charter are the review and approval of salary levels and salary increases for executive officers, annual Management Incentive Plan cash bonus awards for officers and other key executives, performance restricted stock and stock option awards under the 1993 Long-Term Equity Incentive Plan, and any special benefit programs affecting officers and key executives such as supplemental retirement plans, deferred compensation plans, change of control agreements and other plans. The Committee in appropriate cases makes recommendations to the Board of Directors on matters involving executive compensation. The overriding objectives of the Corporation's executive compensation program are to attract and retain qualified executive leadership and to reward performance that creates shareholder value. In furtherance of these objectives, the Corporation's executive compensation philosophy is (1) to deliver base salary compensation that is kept competitive with the executive's counterparts in the electrical/electronics industry and industry in general and (2) to provide short-, intermediate-, and long-term incentive compensation plans that supplement base salary and that correlate to the growth, success and profitability of the Corporation. As explained below in greater detail, these at-risk, performance-based incentive compensation plans directly align the interests of the Corporation's executives with its shareholders and form a significant portion of the total compensation opportunity for all officers and key executives. The Corporation annually reviews for the Committee's consideration compensation surveys and other published compensation data covering comparably- sized companies in both the electrical/electronics industry and industry in general to assess whether its executive base salary ranges and total compensation opportunities remain competitive. Where they do not remain competitive, appropriate adjustments are made. In this process of comparing the Corporation's executive compensation levels and practices against those of other companies, the compensation levels and practices at the companies comprising the New Peer Group Index in the Performance Graph on pages 20-22 of this Proxy Statement are periodically reviewed separately, but due to the small sample size the New Peer Group data alone is not used as the primary comparative benchmark. Rather, the comparative data relied upon by the Committee is drawn from broader 19 surveys of comparably-sized companies in the electrical/electronic industry and industry in general, which surveys include 7 of the 13 new Peer Group companies. The salaries, and any periodic increases thereof, of the Chairman and the CEO are determined by the Board of Directors of the Corporation based on recommendations made by the Committee. These officers in turn recommend the salary adjustments for the other executive officers, with the review and oversight of the Committee. The level of base salary compensation for officers and key executives is determined by both their scope of responsibility and the competitive salary ranges established by the survey process described above. Periodic increases in base salary are dependent on the individual's performance in his or her position for a given period, on the individual's competency, skill and experience, and on the growth of salary levels both inside and outside the Corporation. The AMP Management Incentive Plan provides opportunity for annual cash bonuses based on two or more of the following weighted performance components: (1) overall corporate performance for a given year, adjusted to net out extraordinary, non-recurring gains or losses and then compared against corporate performance targets for the year (this component is weighted 80% for named executive officer participants such as the CEO with corporate-wide responsibilities and 60% for those named executive officers with specific unit responsibilities); (2) operating unit performance for a given year measured against operating unit income and AMP value added (AVA) targets for the year (this component is weighted 20% for named executive officer participants with specific operating unit responsibilities); and (3) individual performance for a given year measured against individual performance objectives for such year (this component is weighted 20% for all named executive officer participants). For the named executive officers, the corporate performance component of the Management Incentive Plan annual cash bonus is based on attainment of an earnings per share (EPS) target. The Committee sets the EPS target for the year at the start of each year, with the review of the Board of Directors, and also sets the individual performance objectives of the chairman and the CEO. In addition to setting the EPS target, the Committee assigns to each participant under the Management Incentive Plan minimum, target and maximum bonus percentages, which vary from participant to participant to reflect competitive practice and the scope of the participant's responsibility. Actual corporate and unit performance between 90% and 120% of the target performance levels results in a bonus calculation that ranges between the participant's assigned minimum and maximum bonus percentages. The EPS target for 1997 was set for $2.25, which target performance was to be exclusive of any EPS impact resultant from planned 1997 changes in accounting methods. The actual EPS performance for 1997 (adjusted for plan purposes) was $2.23. In keeping with the pay-for- performance design and intent of the Management Incentive Plan, this 1997 EPS performance resulted in a bonus being paid for 1997 under the Management Incentive Plan's corporate performance component to the named executive officers at a level that fell between their respective minimum and target bonus levels. The unit and individual performance targets for 1997 and the actual unit and individual performance results for 1997 varied widely between units and individuals. 20 In granting long-term incentive awards during 1997, the Committee gave considerable weight to the annual long-term incentive award levels and practices of a diverse range of over 350 major companies that participated in the Towers Perrin survey of long-term incentive compensation practices. Of the 13 companies comprising the New Peer Group Index in the Performance Graph on pages 20-22 of this Proxy Statement, 7 were included in this Towers Perrin survey. The Corporation's long-term incentive award levels for 1997 were generally set at between the 50th and the 75th percentile of the award levels reflected in the Towers Perrin Survey. Long-term incentive compensation awards in the form of performance restricted shares and stock options were made by the Committee in 1997 under the 1993 Long-Term Equity Incentive Plan. The named executive officers and the other officers who comprise the Corporation's Global Planning Committee received a 1997 long-term incentive award that was split so that approximately 50% of the value of the 1997 award was provided in the form of performance restricted shares, with the balance provided in the form of stock options. All other recipients of a 1997 long-term incentive award received 100% of the award in the form of stock options. The performance restricted shares granted in 1997 will be forfeited at the end of 1999 if the Corporation fails to attain for the three-year period from January 1, 1997 through December 31, 1999 a minimum average annual level of return on equity ("ROE") that was set by the Committee at the beginning of 1997. For this purpose, the Corporation's annual ROE result for each of the three years will be separately determined, totaled, and divided by three to determine the average annual ROE. If the average annual ROE over the three-year period is at least equal to this minimum level, then the extent to which the performance restricted shares granted in 1997 will become vested at the end of 1999 will be determined by the Corporation's average annual earnings growth rate over the same three-year period. A target level of average annual earnings growth over the three-year period was set by the Committee at the beginning of 1997, and average annual earnings growth between 0% and this target level will result in vesting of the performance restricted shares that ranges proportionately from 0% to 100%. The Committee also set a super-target level of average annual earnings growth at the beginning of 1997, and average annual earnings growth between the target level and the super-target level will result in vesting of the performance restricted shares that ranges proportionately from 100% to 200%. Performance restricted shares that are forfeited at the end of 1999 either because of the Corporation's failure to attain the minimum average annual ROE level or to attain the target level of average annual earnings growth will be canceled and revert to the Corporation. In general, the stock options granted in 1997 vest on the third anniversary of the grant date, are exercisable thereafter until the tenth anniversary of the award date, and have an exercise price equal to the award date fair market value of a share of the Corporation's Common Stock. In 1995, with the review and approval of the Committee, the Corporation implemented formal share ownership guidelines applicable to its key executives. By the end of a phase-in period, the guidelines require that the Chairman and the CEO each own real or phantom shares of Corporation Common Stock with a value of at least four times annual base salary. The guideline 21 applicable to the other named executive officers is ownership of shares with a value of at least three times annual base salary. The primary intent of these guidelines is to significantly increase the extent to which the personal wealth of the Corporation's executives is directly linked to the performance of the Corporation's Common Stock, thereby materially expanding the community of interest between the executives and the Corporation's shareholders. Section 162(m) of the Internal Revenue Code imposes a $1,000,000 per year per named executive officer limitation on the amount of non-performance based compensation that can be paid and deducted by the Corporation. The Corporation's policy with respect to this limitation is to maximize the deductibility of all compensation paid to each named executive officer by (1) delivering compensation to named executive officers that to a substantial extent meets the Code Section 162(m) definition of performance-based compensation and (2) affording the named executive officers the opportunity to defer receipt of compensation to years after their retirement. In furtherance of this policy, the Corporation's Management Incentive Plan, under which the named executive officers have an opportunity to earn an annual cash bonus, and the 1993 Long- Term Equity Incentive Plan, under which the named executive officers receive long-term incentive compensation awards, have been designed and are administered so that all or a significant portion of the compensation received pursuant to such plans will qualify as performance-based compensation within the meaning of Section 162(m). In addition, the Corporation has implemented a Deferred Compensation Plan under which the named executive officers may defer receipt of up to 50% of annual base salary and up to 100% of annual cash bonus amounts. All compensation paid to the named executive officers in 1997 was deductible and it is anticipated that all compensation to be paid to named executive officers in 1998 will be deductible. 1997 CEO COMPENSATION Mr. Hudson's base salary rate per annum for 1997 remained at the same level that was in effect for 1996, $810,000. In deciding not to adjust Mr. Hudson's salary for 1997, the Committee considered primarily the Corporation's disappointing growth and performance in 1996. Mr. Hudson's assigned minium, target, and maximum annual cash bonus percentages under the Management Incentive Plan for 1997 were 10%, 65% and 100%, respectively. Accordingly, Mr. Hudson had the potential to earn an annual bonus of up to 100% of base annual salary if the Corporation were to attain 120% or more of the $2.25 EPS target and Mr. Hudson were to fully accomplish his individual performance targets. Based on the Corporation's adjusted EPS performance for 1997 and the Committee's assessment of Mr. Hudson's individual performance, Mr. Hudson's aggregate bonus under the Plan for 1997 was 66% of his base salary, or $534,600. On July 22, 1997 Mr. Hudson was awarded 63,900 stock options (2,100 incentive stock options and 61,800 non-qualified stock options) under the 1993 Long-Term Equity Incentive Plan, all with an exercise price of $47.00. These options will first be exercisable July 22, 2000 and remain exercisable to July 22, 2007. On the same date, Mr. Hudson was also awarded 22 39,600 performance restricted shares of Common Stock of the Corporation under the 1993 Long-Term Equity Incentive Plan. These shares will either vest or be forfeited at the end of 1999 based on the Corporation's performance in 1997, 1998 and 1999 with respect to average annual return on equity and average annual earnings growth targets that were set by the Committee. In making these long- term incentive awards, the Committee's intent was to continue a practice begun in 1993, when the Corporation's first stock option plan became effective, of increasing the proportion of stock-based compensation in the total compensation package of the Corporation's senior executive officers, particularly the CEO, thereby further increasing the executives' community of interest with the Corporation's shareholders. The aggregate long-term incentive award levels set for Mr. Hudson in 1997 were at approximately the 60/th/ percentile of comparable long-term incentive award recipients reflected in Towers Perrin survey data relied upon by the Committee. Since the 1993 inception of the Long-Term Equity Incentive Plan, Mr. Hudson has been granted a total of 425,500 stock options and 111,500 performance restricted shares of Common Stock of the Corporation. As of the end of 1997, a portion of the initial performance restricted share grant made to Mr. Hudson in 1995 under the 1993 Long-Term Equity Incentive Plan was vested based on the Corporation's performance over the three-year period of 1995, 1996 and 1997. The Corporation's average annual ROE over the three-year period, adjusted for Plan purposes, exceeded the minimum threshold that had been set by the Committee in 1995, and the Corporation's average earnings growth rate over the three-year period, as defined for Plan purposes, of 8.42% resulted in Mr. Hudson becoming vested in 56.13%, or 14,033, of the 25,000 performance restricted shares (plus 56.13%, or 869, of the related dividend reinvestment shares) that had been granted to him in 1995. The unvested 10,967 share balance of the 25,000 share grant (along with the 679 share balance of the related dividend reinvestment shares) was forfeited back to the Corporation. In April 1992, Mr. Hudson had been awarded 12,200 stock bonus units under the Corporation's former Stock Plus Cash Bonus Plan, with a designated value of $27.88 and an unspecified cash bonus percentage (not in excess of 50%) to cover United States taxes on the payout, and in April 1993, Mr. Hudson had been awarded 20,000 stock bonus units under the Corporation's former Stock Plus Cash Bonus Plan, with a designated value of $28.50 and an unspecified cash bonus percentage (not in excess of 50%) to cover United States taxes on the payout. In April 1997, when the fair market value of a share of the Corporation's Common Stock had increased to $34.50, 4,066 of the 12,200 1992 stock bonus units and 6,666 of the 20,000 1993 stock bonus units matured, resulting in a stock bonus payment to Mr. Hudson of 2,061 shares of Common Stock of the Corporation and a cash payment of $35,608. In making these payout calculations, the award date designated value of $28.50 per stock bonus unit was used to determine the spread applicable to the maturing April 1993 stock bonus units in lieu of the alternative designated value defined under the Plan, but the alternative designated value defined under the Plan of $26.84 was used to determine the spread applicable to the maturing April 1992 stock bonus units in lieu of the April 1992 award date designated value of $27.88. The Plan's alternative designated value, which is based on earnings per share growth between the award date and the maturity date, is used in payout calculations whenever it would result in a greater stock bonus payout than would the award date designated value. (For an explanation of the alternative 23 designated value, see footnote 1 to the Aggregated Option/SAR Exercises in 1997 and FY-End Option/SAR Values Table, pages 15-16). The Compensation and Management Development Committee: Dexter F. Baker Ralph D. DeNunzio, Chairman John C. Morley Paul G. Schloemer TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS The Corporation has entered into agreements with the named executive officers to assure their unbiased counsel and continued dedication in the event of an unsolicited tender offer or other occurrence that may result in a change of control. The terms of the agreements provide that, in the event of a change of control, as previously defined on pages 8-9 of this Proxy Statement, and the termination of the executive's employment at any time during the 2-year period thereafter, the executive will be paid a lump sum equal to a multiplier of 2 or 3 times the sum of his highest salary rate in effect during the 12 months prior to termination of employment and his highest annual bonus paid during the prior 3-year period, together with payment of an amount necessary to pay any excise tax, and any taxes thereon, due on the lump sum or other payment. Additionally, upon a change of control: (i) all awards that the executive has received under any bonus plans he is participating in will be immediately vested and either paid or exercisable, as appropriate; (ii) the executive will be paid in cash installments per the terms of the applicable contract for all restricted stock, if any, issued by contract; (iii) he will be vested in deferred compensation matching amounts; and (iv) he will receive continuation of any existing split dollar life insurance policy until the latter of the policy anniversary date following the executive's 65/th/ birthday or the 15/th/ anniversary of the policy. Upon a change of control and termination of the executive's employment within 2 years thereafter, the executive also shall be vested in all pension benefits based on the highest annual salary rate in effect during the 12 months prior to termination of employment with respect to the pension plan and, with respect to the pension restoration plan, the amount of compensation on which the lump sum severance payment described above is calculated, plus an additional accrual for 2 or 3 years; shall receive the conversion of the executive's group term life insurance policy, if any, to a fully paid permanent life insurance policy remaining in effect for 2 or 3 years at the Corporation's cost; and shall receive continuation of health, dental, and disability benefits until the latter of 2 or 3 years, attainment of the age or other condition at which the benefits discontinue according to the terms of the related plan, reduced to the extent of comparable benefits provided by a new employer without cost. 24 PROPOSAL FOR SHAREHOLDER APPROVAL OF THE AMP INCORPORATED 1998 EMPLOYEE STOCK PURCHASE PLAN INTRODUCTION On October 22, 1997 the Board of Directors unanimously approved the Corporation's 1998 Employee Stock Purchase Plan (the "ESPP"), subject to the approval of the shareholders at the 1998 Annual Meeting. If approved by the shareholders, the ESPP would become effective July 1, 1998 and assist eligible employees of the Corporation and certain subsidiaries of the Corporation in the purchase of the common stock of the Corporation (the "Common Stock"). Through this acquisition of an increased proprietary interest in the Corporation, participating employees will have an additional incentive to share in the growth and prosperity of the Corporation. The Board of Directors believes that employee participation in ownership of the Corporation is to the combined benefit of the employee, the Corporation, its subsidiaries and the Corporation's shareholders. The ESPP is intended to qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). MATERIAL FEATURES OF THE ESPP Beginning July 1, 1998, eligible employees (as defined below) would have the right (an "Option") to purchase shares of Common Stock under the ESPP at discounted prices through automatic payroll deductions. An eligible employee electing to participate in the ESPP may authorize payroll deductions at the rate of any whole percentage of the employee's base cash compensation, not to exceed 25% of such compensation or such lesser percentage as designated by the committee appointed to administer the ESPP, as described below (the "Committee"). All payroll deductions will be held by the Corporation and commingled with its other corporate funds, but shall be credited to an individual stock purchase account that will be established for each participating employee. No interest will be paid on the amounts credited to such accounts pending investment, except where required by local law. The purchase of Common Stock under the ESPP may only be made through payroll deductions, and additional payments to the individual accounts will not be accepted. Unless a different purchase period is determined by the Committee, Options to purchase shares of Common Stock under the ESPP will be automatically exercised for each participant on the last business day of each calendar quarter, that is, March 31, June 30, September 30 and December 31. All amounts accumulated in a participant's individual stock purchase account as of those dates will be used to purchase the number of shares of Common Stock (including fractional shares) that can be acquired at an option price that is the lower of: (i) the fair market value of the Common Stock on the first business day of the applicable calendar quarter, or such other purchase period as may be determined by the Committee, less a percentage discount as established by the Committee, but in no event more than 15% (the "Designated Discount"), or (ii) the fair market value on the last business day of each calendar quarter, or such other purchase period as may be determined by the Committee, less the applicable Designated Discount. 25 However, the Committee may determine at any time in advance of a purchase period that the option price shall be the price described in (ii) above. For purposes of the ESPP, the "fair market value" is the closing price of shares of Common Stock on the New York Stock Exchange on the trading day that precedes the relevant date of valuation. In accordance with Section 423(b)(8) of the Code, no participant may purchase Common Stock in connection with any Option under the Plan at a rate that exceeds a total of $25,000 in fair market value of Common Stock (based on the fair market value of the Common Stock at the time each Option is granted) for all Options outstanding at any time during each calendar year. If a participant's payroll deductions during a purchase period exceed the purchase price for this maximum number of shares of Common Stock that may be purchased under an Option outstanding in any calendar year, the excess shall be retained in the participant's stock purchase account and applied to the next purchase period. If the total number of shares of Common Stock that would otherwise be issued on the last business day of a calendar quarter or other purchase period designated by the Committee, based on the fair market value of a share of Common Stock on that date, exceeds the maximum number of shares offered on the first business day of such purchase period, based on the fair market value of a share of Common Stock on that date, then the number of shares that may be purchased under Options granted for that purchase period shall be reduced on a pro rata basis in as nearly a uniform manner as shall be practicable and equitable. Payroll deductions shall also be reduced or refunded as appropriate. The Corporation will deliver to each participant a record of the number of shares of Common Stock purchased under the ESPP at the end of each calendar quarter or other purchase period designated by the Committee, together with a statement of the balance of any amount of payroll deductions remaining in the participant's stock purchase account. Shares of Common Stock issued pursuant to the ESPP shall be fully paid and non-assessable, but will be subject to such delivery requirements, holding periods or other restrictions as the Committee may establish from time to time. Once such shares have been purchased on behalf of and delivered to the participant, the participant shall have voting, dividend and all other shareholder rights with respect to those shares. A participant may increase or decrease his or her rate of payroll deductions only effective on the first day of the applicable calendar quarter or other designated purchase period. A participant may, however, discontinue participation in the ESPP at any time during a purchase period, in which case his or her payroll deductions accumulated prior to the end of participation will remain in the ESPP for the purchase of shares of Common Stock at the end of said purchase period. Upon such cessation of participation, the employee also will be subject to any restrictions or waiting periods that the Committee may establish for future resumption or discontinuation of payroll deductions. In the event of a participant's retirement, death or other termination of employment for any reason, all accumulated amounts credited to such participant's share purchase account shall be paid to the participant or the participant's estate without interest (except where required by local law) and his or her participation in the ESPP shall terminate. 26 The ESPP authorizes the grant of options not governed by Section 423 of the Code if approved by the Committee. It is anticipated that this provision will be invoked in connection with employees of affiliates in the United Kingdom, who in the aggregate constitute 4% of the Corporation's eligible employees globally and who will likely be offered participation in a Save-As- You-Earn arrangement qualifying for favorable tax treatment in the United Kingdom. If so authorized, these United Kingdom participants only will be offered the opportunity to purchase shares at no more than 20% discount by entering into three-year or longer contracts with a financial institution that will hold the employees' payroll deductions pending purchase of the shares. Under the provisions of a Save-As-You-Earn arrangement, the purchase price for the Options will be determined at the beginning of the contract period and participants will not be given the choice of designating a purchase price at the end of the period. Participants also will bear the risk of currency fluctuations during the contract period. The Corporation will bear all administrative expenses of the ESPP. TERM OF THE PLAN Upon approval by the shareholders, the ESPP will become effective July 1, 1998 and continue until June 30, 2008 unless previously terminated by the Board of Directors of the Corporation. SHARES RESERVED FOR THE PLAN The ESPP authorizes up to 3,000,000 shares of Common Stock to be purchased under the plan during its term. The Board of Directors may proportionately adjust this number of authorized shares, as well as the price per share of Common Stock covered by each outstanding Option, the number of shares to be purchased pursuant to such Options and the maximum number of shares subject to any individual Option outstanding in a calendar year, as applicable, in the event of any change in the outstanding Common Stock of the Corporation due to one or more reorganizations, recapitalizations, spin-offs, split-ups, rights offerings or reductions of shares. Shares covered by an outstanding Option that is not exercised in whole or in part or is settled in cash shall, to the extent such shares are not issued, be available for future grants under the ESPP. Shares of Common Stock issued under the ESPP will be either treasury shares or authorized and unissued shares. Each share of Common Stock purchased pursuant to the ESPP will be accompanied by a share purchase right issued under the Corporation's Rights Agreement dated as of October 25, 1989, as amended. ELIGIBILITY Any employee is eligible to participate in the ESPP if he or she is regularly employed on a full-time basis by the Corporation or by any subsidiary or affiliate of the Corporation designated by the Board of Directors as covered by the ESPP. Participation in the ESPP is subject to such administrative rules governing waiting periods after commencement of employment as may be established from time to time by the Committee. The Committee also may establish criteria 27 and procedures governing the eligibility of part-time employees to participate in the ESPP. No employee holding 5% or more of the Corporation's outstanding shares of Common Stock may participate in the plan and the Board of Directors, in its discretion, may also determine that highly compensated employees shall be ineligible. Approximately 42,500 employees worldwide would have been eligible to participate in the ESPP as of March 3, 1998. This estimate of eligible employees excluded employees working in countries with laws that prohibit or materially restrict participation in this plan. ADMINISTRATION OF THE PLAN The Board of Directors of the Corporation will designate a Committee of two or more members to administer the ESPP. Initially this Committee will consist of the Chairman, the Chief Executive Officer and the Chief Financial Officer of the Corporation, but the Board may change the members of the Committee at any time. The Committee has the full power in its discretion to promulgate rules for the proper administration of the ESPP, to interpret the provisions of the ESPP, to make factual determinations relevant to ESPP entitlements and to take all action that it deems necessary or advisable for the administration of the ESPP, consistent with the terms of the ESPP. The Committee may adopt rules relating to the operation and administration of the ESPP to accommodate the specific requirements of local laws and procedures in jurisdictions outside the United States. Decisions by the Committee are, in all respects, final and binding on participants under the plan. The Committee may delegate to one or more individuals the day-to-day administration of the ESPP. No member of the Board of Directors or the Committee shall be liable for any action in connection with the administration of the ESPP if such action is taken in good faith. AMENDMENT AND TERMINATION OF THE PLAN The Board of Directors has the right to terminate or suspend the ESPP at any time and for any reason, or to amend it in any respect; provided, however, that in the absence of shareholder approval, the Board may not amend the ESPP in a manner that: (i) materially increases the number of shares subject to the ESPP other than by reason of an adjustment under the circumstances described in "Shares Reserved for the Plan" above; (ii) materially modifies the eligibility requirements for participation in the ESPP, except as provided for under the terms of the plan; (iii) materially increases the benefits under the ESPP; (iv) reduces the share purchase price other than by reason of an adjustment under the circumstances described in "Shares Reserved for the Plan" above; or (v) extends the duration of the ESPP beyond June 30, 2008. NEW PLAN BENEFITS The number of eligible employees that will elect to participate in the ESPP and the extent of their participation cannot be determined either in the future or based on the last completed calendar year as if the ESPP had been in effect. Accordingly, it is not possible to determine with certainty the number of shares of Common Stock or their dollar value that will be distributed under the plan. 28 The Corporation anticipates, however, that an average of approximately 300,000 shares of Common Stock will be issued annually during the 10-year term of the ESPP. Based on a per share price of $43 5/8 (the closing price for Common Stock on the New York Stock Exchange on March 3, 1998) and assuming each executive officer of the Corporation participates to the fullest extent possible, the benefits of the ESPP during 1997 would have been as follows: AMP INCORPORATED 1998 EMPLOYEE STOCK PURCHASE PLAN NEW PLAN BENEFITS
NAME AND POSITION BENEFIT (U.S. $) NUMBER OF SHARES William J. Hudson, Jr. 3,800 575 Chief Executive Officer and President James E. Marley 3,800 575 Chairman Robert Ripp 3,800 575 Executive Vice President Juergen W. Gromer 3,800 575 Vice President John E. Gurski 3,800 575 Vice President Executive Officers 66,800 10,200 as a Group Non-Executive Officer 1,900,000 289,800 Employee Group
NON-ASSIGNABILITY Prior to its settlement in the form of shares of Common Stock or cash, no Option or other right, benefit or accumulated payroll deduction under the ESPP may be voluntarily or involuntarily assigned, transferred, pledged or otherwise disposed of. Options under the ESPP will be exercisable during a participant's lifetime only by the participant or the participant's guardian or legal representative. LIQUIDATION OR CHANGE OF CONTROL In the event of a liquidation of the Corporation, all outstanding Options and the ESPP itself will terminate immediately prior to such liquidation and all accumulated payroll deductions in the stock purchase accounts will be refunded to the participants, without interest. In the event of a change of control of the Corporation by a sale of all or substantially all of its assets or by a merger or consolidation of the Corporation with and into another corporation, then, in the sole discretion of the Board of Directors, either (1) each Option shall be assumed, or an equivalent option shall be substituted, by the successor corporation or its affiliates, (2) all outstanding Options shall be deemed exercisable on a date, as established by the Board, that is on or before the effective date of the change of control, or (3) all outstanding Options and the ESPP itself will 29 terminate and all accumulated payroll deductions in the stock purchase accounts will be refunded to the participants, without interest. CERTAIN INCOME TAX EFFECTS OF PLAN PARTICIPATION Set forth below is a discussion of certain U.S. income tax consequences the Corporation believes will result from the grant and exercise of Options under the ESPP. This discussion is based on an analysis of the Code as currently in effect, existing laws, judicial decisions, administrative rulings and regulations, and proposed regulations, all of which are subject to change. In addition to being subject to the U.S. income tax consequences described below, which is not intended to be a complete description of all U.S. income tax aspects of participation in the ESPP, a participant may also be subject to foreign, state and local income or other tax consequences in the jurisdiction in which he or she works and/or resides. The summary below assumes that the ESPP is approved by the Corporation's shareholders and it qualifies as an employee stock purchase plan within the meaning of Section 423 of the Code; if the ESPP is not so approved or otherwise is not qualified, or in the future becomes non- qualified under Section 423, participants would recognize as ordinary income on each date that the Options are exercised an amount equal to the Designated Discount of the fair market price of the shares of Common Stock purchased upon such exercise. Under the Code, an eligible employee who elects to participate in an offering under the ESPP will recognize income for the amounts withheld from his or her paycheck for the year in which such amounts would otherwise have been paid to the participant. These amounts will also be deductible by the Corporation. Participants will not, however, realize additional taxable income either at the commencement of an offering period and the grant of an Option or when the shares of Common Stock purchased under the plan are delivered to him or her. Each participant's basis in shares purchased will equal the amount paid for such shares. If the shares purchased upon the exercise of an Option under the ESPP are not disposed of within 2 years after the date the Option was granted or, if later, within 1 year after the date of delivery of such shares to the participant, then upon a subsequent disposition of the shares the participant will realize ordinary income for that year in an amount equal to the lesser of (a) the excess of the fair market value of such shares at the time of their disposition over the purchase price of shares, or (b) the Designated Discount of the fair market value of the shares on the date the related Option was granted. The participant's basis in the shares disposed will be increased by an amount equal to the amount of ordinary income determined above, and any gains or losses realized upon the disposition of the shares and based on this adjusted basis will be taxable as long-term capital gain. Neither the Corporation nor any of its subsidiaries and affiliates will be entitled to any deduction upon the disposition of the shares under the foregoing circumstances. If the shares are disposed of before the end of either the 2-year or 1-year periods discussed above (a "disqualifying disposition"), the participant will realize ordinary income in the year of disposition on an amount equal to the excess of the fair market value of such shares on the date of purchase over their purchase price. The participant's basis in the shares disposed of 30 will be increased by an amount equal to the amount of ordinary income determined above, and any gains or losses realized upon the disposition of the shares and based on this adjusted basis will be taxable as either long-term or short-term capital gain or loss, depending on the holding period for such shares. The Corporation (or the subsidiary or affiliate for which the participant is employed) will be entitled to a tax deduction for the amount the participant is required to include in ordinary income as a result of such disposition. In the event of the death of a participant prior to the disposition of the shares (whether or not within the 2-year or 1-year periods described above), a participant will be subject to ordinary income tax in an amount equal to the lesser of (a) the Designated Discount of the fair market value of the shares on the first business day of the purchase period, or (b) the amount, if any, by which the fair market value of the shares as of the date of death exceeds the amount actually paid for the shares. A participant who is neither a citizen nor a resident of the United States generally will not be subject to the U.S. income tax rules described above with respect to the shares of Common Stock purchased under the ESPP. The ESPP is not subject to any provision of the Employee Retirement Income Security Act of 1974 ("ERISA"). 31 EX-99.2 3 RESTRICTED STOCK AGREEMENT EXHIBIT 2 RESTRICTED STOCK AGREEMENT AGREEMENT dated this 20th day of August, 1998, by and between AMP Incorporated, a Pennsylvania corporation with its principal offices located in Harrisburg, Pennsylvania ("AMP") and Robert M. Ripp, of Harrisburg, Pennsylvania ("Ripp"). WHEREAS, Ripp has been appointed as of the date hereof to the positions of Chairman of the Board and Chief Executive Officer of AMP and, in connection with such appointment, AMP has agreed to make the grant of restricted stock on the terms set forth herein; WHEREAS, both AMP and Ripp desire to set forth in writing the nature of the above described grant of restricted stock and its contractual limitations. NOW THEREFORE, in consideration of the mutual covenants and obligations hereinafter set forth, and intending to be legally bound hereby, the parties hereto agree as follows: 1. GRANT. 1.1. AMP hereby grants to Ripp 25,000 shares of common stock of AMP, subject to the restrictions set forth under Sections 2 and 3 hereof (the "Shares"). The Shares distributed to Ripp hereunder will be issued shares reacquired on the open market by and held in the treasury of AMP. No Shares distributed pursuant to this Agreement will have been registered under the Securities Act of 1933, as amended (the "Securities Act"). The Shares include the 25,000 shares granted hereunder, as adjusted in the event of any subsequent stock dividend, dividend reinvestment, recapitalization, merger, consolidation, split-up, combination, exchange of shares or similar event. 2. RESTRICTIONS. 2.1. The Shares are subject to the following restrictions: a. Ripp's ownership of the Shares shall vest on August 1, 2006 (his normal retirement date), or on the date of Ripp's earlier death, disability or other termination of Ripp's employment with AMP that is mutually agreed upon by the parties. b. Any Shares not vested as of the date of Ripp's death, disability, retirement or other mutually agreed upon termination of employment with AMP shall be forfeited and promptly returned to AMP without further consideration. For purposes of this Agreement, termination of employment means the termination of employment by AMP or by a subsidiary of AMP, but not the transfer of employment from AMP to a subsidiary or vice versa, or from one subsidiary of AMP to another such subsidiary. For purposes of this Agreement, employment shall not be considered as terminated if Ripp continues to perform services for AMP or a subsidiary thereof on either a full or part-time basis either as an independent contractor or on a consulting basis or otherwise, provided, however, that Ripp during such period does not, whether full time or part time, engage in or perform any services as an employee, independent contractor, consultant, advisor or otherwise for a business that is engaged in the manufacture, sale or other disposition of a product or products that are in competition to a product or products of AMP or its subsidiaries, partnerships or joint ventures. c. Except as provided hereafter, no Shares may be transferred by Ripp prior to the vesting of such shares as set forth in Section 2.1(a) above. "Transferred" means any change of ownership of a Share, including without limitation being sold, assigned, exchanged, gifted or granted, pledged or hypothecated. 3. COMPLIANCE WITH SEC REGULATIONS. 3.1. Separate and apart from the restrictions contained in Section 2 hereof, the Federal securities laws and the rules and regulations thereunder impose certain restrictions on the resale, reoffer or other disposition of shares of Page 2 AMP common stock that are unregistered under the Securities Act and/or are held by persons who are "affiliates" of AMP, as that term is defined in Rule 405 promulgated under the Securities Act. In view of the fact that the grant of Shares under this Agreement consists of unregistered AMP common stock and, further, because Ripp is an "affiliate" of AMP, an effective registration statement must be filed under the Securities Act covering the resale or reoffer of the Shares, or he must comply with the requirements of Rule 144 under the Securities Act before he can publicly sell or reoffer the Shares, or he must otherwise rely on one of the other exemptions from registration that may be available. None of the provisions of this Agreement shall relieve Ripp of his obligations to comply with applicable Federal and state securities laws in connection with the Shares and transactions related to the Shares. 4. LEGENDS. 4.1. Each certificate evidencing the Shares shall bear three legends in the following forms: a. "The securities represented by this certificate have not been registered under the Securities Act of 1933, as amended (the "Act"), or under the securities laws of any state. These shares may not be sold, offered for sale, transferred, pledged or hypothecated in the absence of an effective registration statement for the shares under the Act and applicable state securities laws, or an opinion of counsel and other assurances satisfactory to AMP Incorporated, prior to the transaction, that registration is not required under the Act or under the securities laws of any state." b. "The registered holder of the shares represented by this certificate may, at the time of issuance thereof, be deemed an affiliate of the issuer under the Securities Act of 1933, as amended." c. "The shares represented by this certificate are subject to, and may not be transferred except in compliance with, a Restricted Stock Agreement dated August 20, 1998 between AMP Incorporated and Robert M. Ripp. These shares are subject to forfeiture in the event of a breach of the terms and conditions of said Restricted Stock Agreement. A copy of that Agreement is available without cost from Page 3 AMP Incorporated, Harrisburg, Pennsylvania." 4.2. In order to facilitate any sale or other disposition of the Shares by Ripp to persons entitled to take the Shares free and clear of the restrictions of this Agreement, AMP agrees to promptly issue, in exchange for legended certificates for the Shares, unlegended certificates upon written request therefor from Ripp. Any such request shall contain a representation in reasonable detail that the Shares represented by such legended certificates are being transferred in conformance with the terms of this Agreement. 5. TAX WITHHOLDING. 5.1. AMP may deduct from any payment to be made to Ripp any amount that Federal, state, local or foreign tax laws requires to be withheld with respect to the Shares upon the vesting of, or the lapse of restrictions on, all or any part of the Shares. As additional methods of accomplishing such withholding, Ripp may elect to have AMP withhold from the Shares, or he may surrender previously acquired shares of common stock, in a number of whole shares up to but not exceeding that number that has a then-current fair market value sufficient to cover the amount of taxes required to be withheld at such time. 6. WAIVER OF SECTION 83(B) ELECTION. 6.1. Ripp acknowledges his knowing waiver of his right under Section 83(b) of the Internal Revenue Code of 1986, as amended, to elect to have the Shares treated as taxable income for the calendar year 1998, the year in which the Shares were received by Ripp, which tax would have been based on the fair market valuation of the Shares as of the date of the grant of the Shares to Ripp. 7. DIVIDENDS. 7.1. Cash dividends paid on the Shares shall, at the election of Ripp, either be paid directly to Ripp or be automatically reinvested in additional shares of AMP common stock under AMP's Enhanced Dividend Reinvestment Plan. Any such additional shares, together with any stock dividends paid on the Shares, shall not be subject to the terms, conditions and restrictions set Page 4 forth in this Agreement and shall be acquired by Ripp notwithstanding that the Shares with respect to which such dividend was paid may have been forfeited under the terms of this Agreement prior to the payment date for such dividend. 8. STOCK POWER. 8.1. Upon the request of AMP from time to time, Ripp agrees to execute and deliver to AMP one or more stock powers in such form as may be specified by the Corporate Secretary of AMP, authorizing the transfer of the Shares to AMP. 9. GOVERNING LAW. 9.1. This Agreement shall be governed by and construed in all respects in accordance with the laws of the Commonwealth of Pennsylvania and applicable Federal law. 10. SEVERABILITY. 10.1. In the event any one or more of the provisions, or portions thereof, contained or referenced in this Agreement shall for any reason be or be deemed to be invalid, illegal or unenforceable, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without materially altering the intent of the Agreement, such provision shall be stricken and the remaining provisions shall continue in full force and effect and be construed as if such provision, to the extent it is invalid, illegal or unenforceable, had never been contained herein. 11. NON-WAIVER. 11.1. The failure of any party to enforce the provisions hereof or to exercise the rights granted hereunder, or the Agreement of the parties to waive enforcement thereof, at any time or for any period of time shall not constitute or be construed to be a waiver of any other failure or breach of Page 5 such provisions or rights, or any other provision of this Agreement, or of the right of such party thereafter to enforce each and every such provision or right, nor shall such failure or agreement be deemed to be an amendment to this Agreement. Each waiver under this Agreement shall be express and in writing. 12. NOTICES. 12.1. Any notice or demand hereunder or under statute, to be effective, must be in writing and delivered personally or sent to telegram, facsimile, express carrier or other delivery that provides a written confirmation, or by certified or registered mail, postage or other expenses prepaid, to: AMP at: Corporate Secretary AMP Incorporated P.O. Box 3608 M/S 176-48 Harrisburg, PA 17105 Ripp at: Robert M. Ripp AMP Incorporated P.O. Box 3608 M/S 176-40 Harrisburg, PA 17105 The above addresses may be changed at any time by giving prompt written notice as provided above. 13. SUCCESSORS. 13.1. This Agreement shall be binding on the heirs, executors, administrators and successors of the parties hereto. 14. COUNTERPARTS. 14.1. This Agreement may be executed in one or more counterparts, each of Page 6 which shall be deemed an original but all of which together shall constitute but one and the same Agreement. 15. ENTIRE AGREEMENT. 15.1. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings either written or oral. This Agreement may be modified or amended only by an instrument in writing duly executed by Ripp and an authorized representative of AMP. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. AMP INCORPORATED By: ______________________ By: ________________________ [Title] Robert M. Ripp Page 7 EX-99.3 4 AMENDMENT TO EXEC. SEVERANCE AGREEMENT EXHIBIT 3 AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT WITH MR. RIPP This Amendment is made to that certain Executive Severance Agreement, dated as of August 8, 1996 as thereafter amended prior to the date hereof (the "Agreement"), between AMP Incorporated (the "Company") and Robert Ripp (the "Executive"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement. WHEREAS, the Company has determined that it is in its best interest and that of its stockholders to amend the Agreement as set forth herein; NOW THEREFORE, in accordance with Section 16 of the Agreement, the Company and the Executive agree that the Agreement shall be amended as follows, effective as of August 20, 1998: 1. The second paragraph of Section 1(a) of the Agreement is amended to delete the number "two" wherever it appears therein and to replace it with the number "three". 2. The first sentence of Section 2(d) of the Agreement is amended to insert immediately following the phrase "a Restricted Stock Agreement with the Corporation" the phrase "(other than the Restricted Stock Agreement dated as of August 20, 1998)". 3. The last word of the first sentence of Section 3(a) of the Agreement shall be changed from "two" to "three". 4. Clause (i) of Section 3(c) of the Agreement is amended in its entirety to read as follows: "(i) a period of thirty-six months after termination or". 5. The Agreement is amended by adding the following as a new Section 19, as follows: 19. Pooling of Interests Transaction Provisions. If it is determined ------------------------------------------- that application of the provisions of Sections 2(a) and (d) of this Agreement would adversely affect the Company's ability to consummate a Change of Control transaction that is intended to be accounted for as a "pooling of interests," such provisions shall not be implemented and, in lieu thereof, in connection with such Change of Control transaction, (i) all outstanding Stock Bonus Units shall be distributed to you, immediately prior to such Change of Control, in the form of shares of the common stock of the Corporation (computed in the manner otherwise provided under Section 2(a) of this Agreement) and (ii) all unvested restricted shares, if any, granted to you pursuant to the terms of a Restricted Stock Agreement with the Corporation (other than the Restricted Stock Agreement dated as of August 20, 1998), which would otherwise have been paid in cash in accordance with Section 2(d) of this Agreement, shall be cancelled, and unrestricted shares of common stock of the Corporation or other entity effecting the Change of Control transaction (in either case, appropriately adjusted to reflect such Change of Control transaction) shall be delivered to you in equal installments on the date designated in such Restricted Stock Agreement for the vesting of unrestricted shares granted thereunder. The effective date of this Amendment shall be August 20, 1998. Except as herein modified, the Agreement shall remain in full force and effect. 2 IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment as of the date first set forth above. AMP INCORPORATED By:_____________________ Title: ________________________ Robert Ripp APPROVED: By:__________________________ Chairman, Compensation and Management Development Committee 3 EX-99.4 5 FORM OF AMENDMENT - EXEC. SEVERANCE AGMNT EXHIBIT 4 FORM OF AMENDMENT TO EXECUTIVE SEVERANCE AGREEMENT This Amendment is made to the Executive Severance Agreement , dated as of August 8, 1996, as thereafter amended prior to the date hereof (the "Agreement"), between AMP Incorporated (the "Company") and [_________] (the "Executive"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement. WHEREAS, the Company has determined that it is in its best interest and that of its stockholders to amend the Agreement as set forth herein; NOW THEREFORE, in accordance with Section 16 of the Agreement, the Company and the Executive agree that the Agreement shall be amended as follows, effective as of August 20, 1998: 1. The Agreement is amended by adding a new Section 19, as follows: 19. Pooling of Interests Transaction Provisions. If it is determined ------------------------------------------- that application of the provisions of Sections 2(a) and (d) of this Agreement would adversely affect the Company's ability to consummate a Change of Control transaction that is intended to be accounted for as a "pooling of interests," such provisions shall not be implemented and, in lieu thereof, in connection with such Change of Control transaction, (i) all outstanding Stock Bonus Units shall be distributed to you, immediately prior to such Change of Control, in the form of shares of the common stock of the Corporation (computed in the manner otherwise provided under Section 2(a) of this Agreement) and (ii) all unvested restricted shares, if any, granted to you pursuant to the terms of a Restricted Stock Agreement with the Corporation, which would otherwise have been paid in cash in accordance with Section 2(d) of this Agreement, shall be cancelled, and unrestricted shares of common stock of the Corporation or other entity effecting the Change of Control transaction (in either case, appropriately adjusted to reflect such Change of Control transaction) shall be delivered to you in equal installments on the date designated in such Restricted Stock Agreement for the vesting of unrestricted shares granted thereunder. The effective date of this Amendment shall be August 20, 1998. Except as herein modified, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment as of the date first set forth above. AMP INCORPORATED By:_____________________ Title: ________________________ [Executive] APPROVED: By:____________________________ Chairman, Compensation and Management Development Committee 2 EX-99.5 6 FORM OF AMENDMENT - RESTRICTED STOCK AGMNT. EXHIBIT 5 FORM OF AMENDMENT TO RESTRICTED STOCK AGREEMENT This Amendment is made to that certain Restricted Stock Agreement (the "Agreement"), dated as of [________], between AMP Incorporated (the "Company") and [________] ("Executive"). Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Agreement. WHEREAS, the Company has determined that it is in its best interest and that of its stockholders to amend the Agreement as set forth herein; NOW THEREFORE, in accordance with Section 17 of the Agreement, the Company and the Executive agree that the Agreement shall be amended as follows, effective as of August 20, 1998: 1. The Agreement is amended by inserting the following as a new Section 18: 18. Pooling of Interests Transaction Provisions. 18.1 If it is determined that application of the provisions of Subsection [10.2] [7.2] of this Agreement would adversely affect the Company's ability to consummate a Change of Control transaction that is intended to be accounted for as a "pooling of interests," such provision shall not be implemented and, in lieu thereof, in connection with such Change of Control transaction, all remaining unvested restricted Shares, which would otherwise have been paid in cash in accordance with such Subsection [10.2] [7.2], shall be cancelled, and unrestricted shares of common stock of the Corporation or other entity effecting the Change of Control transaction (in either case, appropriately adjusted to reflect such Change of Control transaction) shall be delivered to [name] in equal installments on each of the remaining vesting dates provided for in Subsection 2.1(c) of this Agreement. The effective date of this Amendment shall be August 20, 1998. Except as herein modified, the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the Company and the Executive have executed this Amendment as of the date first set forth above. AMP INCORPORATED By:_____________________ Title: ________________________ [Executive] APPROVED: By:___________________________ Chairman, Compensation and Management Development Committee 2 EX-99.6 7 AMP INCORP. EMPLOYEE SEVERANCE PLAN EXHIBIT 6 AMP INCORPORATED EMPLOYEE SEVERANCE PLAN The Company hereby adopts the AMP Incorporated Employee Severance Plan for the benefit of certain employees of the Company and its subsidiaries, on the terms and conditions hereinafter stated. SECTION 1.DEFINITIONS. As hereinafter used: ----------- 1.1 "Board" means the Board of Directors of the Company. ----- 1.2 "Cause" means (i) the willful and continued failure by the ----- Eligible Employee to substantially perform the Eligible Employee's duties with the Employer (other than any such failure resulting from the Eligible Employee's incapacity due to physical or mental illness), or (ii) the willful engaging by the Eligible Employee in conduct which is demonstrably injurious to the Company, or its subsidiaries, monetarily or otherwise. For purposes of this definition, no act, or failure to act, on the Employee's part shall be deemed "willful" unless done, or omitted to be done, by the Employee not in good faith and without reasonable belief that the Employee's act, or failure to act, was in the best interest of the Company. 1.3 "Change of Control." For the purpose of this Agreement, a change ----------------- of control of the Company ("Change of Control") shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (i) any Person is or becomes the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing 30% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved; or (iii) there is consummated a merger or consolidation of the Company with any other corporation or the issuance of voting securities of the Company in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (A) a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 66 2/3% of the combined voting power of the voting securities of the Company, or such surviving entity or any parent thereof, outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the beneficial owner (as defined in Rule 13d- 3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing 30% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities; or (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least 70% of the combined voting power of the voting securities of which are owned by Persons in 2 substantially the same proportions as their ownership of the Company immediately prior to such sale. 1.4 "Code" means the Internal Revenue Code of 1986, as it may be ---- amended from time to time. 1.5 "Company" means AMP Incorporated or any successors thereto. ------- 1.6 "Compensation" means, with respect to a Severed Employee, such ------------ employee's (1) weekly rate of salary immediately prior to the Severance Date, plus (2) 1/52nd of such employee's target bonus for the year in which such employee incurs a Severance or for the year in which a Change of Control occurs, whichever is higher. For purposes of the Plan, Compensation shall be determined without regard to any salary reductions occurring following a Change of Control which constitute Good Reason hereunder. 1.7 "Eligible Employee" means any employee of the Employer who is a ----------------- Tier 1 Employee, Tier 2 Employee, Tier 3 Employee or Tier 4 Employee. An Eligible Employee becomes a "Severed Employee" once he or she incurs a ---------------- Severance. 1.8 "Employer" means the Company or any of its subsidiaries. -------- 1.9 "Effective Date" shall mean the effective date of the Plan, which -------------- shall be August 20, 1998. 1.10 "Exchange Act" shall mean the Securities Exchange Act of 1943, as ------------ amended from time to time. 1.11 "Excluded Employee" means each employee of the Employer (i) who, ----------------- as of the date of a Change of Control, is a party to an Executive Severance Agreement with the Company; (2) who is covered by a collective bargaining agreement; or (3) who has elected to participate in the Company's 1998 Voluntary Early Retirement Program or who, prior to a Change of Control, has received notice of inclusion in any other Company reduction in force programs. 1.12 "Good Reason" means the occurrence, on or after the date of a ----------- Change of Control and without the affected Eligible Employee's written consent, of (i) a reduction in the Eligible Employee's annual base salary from that in effect 3 immediately prior to the Change of Control other than as part of a general reduction applicable to employees of the Company, any Person whose actions result in a Change of Control and all affiliates of such Person; or (ii) the relocation of the Eligible Employee's principal place of employment to a location which increases his or her one way commuting distance by more than 50 miles. 1.13 "Plan" means the AMP Incorporated Employee Severance Plan, as set ---- forth herein, as it may be amended from time to time. 1.14 "Plan Administrator" means, prior to a Change in Control, a ------------------ committee consisting of the Chief Financial Officer, Treasurer and Chief Human Resources Officer of the Company and following a Change of Control, a committee consisting of three persons, at least two of whom were directors or executive officers of the Company immediately prior to the Change of Control. 1.15 "Pending Change of Control" shall be deemed to have occurred, ------------------------- whether before or after the Effective Date, if: (i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change of Control; (ii) the Company or any Person publicly announces an intention to take or to consider actions, including but not limited to proxy contests or consent solicitations, which, if consummated, would constitute a Change of Control; (iii) any Person becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company's then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or (iv) the Board adopts a resolution to the effect that, for purposes of this Plan, a Pending Change of Control has occurred. 4 1.16 "Person" shall have the meaning given in Section 3(a)(9) of the ------ Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 1.17 "Severance" means the termination of an Eligible Employee's --------- employment with the Employer on or within two years following the date of a Change of Control, (i) by the Employer other than for Cause, or (ii) in the case of a Tier 1 Employee or a Tier 2 Employee, for Good Reason. An Eligible Employee will not be considered to have incurred a Severance if his or her employment is discontinued by reason of the Eligible Employee's death or a physical or mental condition causing such Eligible Employee's inability to substantially perform his or her duties with the Employer, including, without limitation, such condition entitling him or her to benefits under any sick pay or disability income policy or program of the Employer. 1.18 "Severance Date" means the date on or after the date of the -------------- Change of Control on which an Eligible Employee incurs a Severance. 1.19 "Severance Pay" means the payment determined pursuant to Section ------------- 2.1, 2.2, 2.3 or 2.4 hereof, as applicable. 1.20 "Tier 1 Employee" means any employee of the Employer listed on --------------- Schedule A attached hereto. 1.21 "Tier 2 Employee" means any employee of the Employer listed on --------------- Schedule B attached hereto. 1.22 "Tier 3 Employee" means any employee of the Employer who (i) is --------------- not a Tier 1 or Tier 2 Employee and (ii) is, immediately prior to a Change of Control, in the Company's salary band M. 1.23 "Tier 4 Employee" means an employee of the Employer (other than --------------- an Excluded Employee) who (i) is not a Tier 1 Employee, Tier 2 Employee or 5 Tier 3 Employee, and (ii) is an exempt employee immediately prior to a Change of Control. 1.24 "Year of Service" means, with respect to a Severed Employee, each --------------- twelve month period of actual service with the Company, whether or not continuous, prior to such employee's Severance Date, rounded down to the nearest whole number. SECTION 2.BENEFITS -------- 2.1 Each Tier 1 Employee who incurs a Severance shall be entitled, subject to Section 2.10, to receive Severance Pay equal to two week's Compensation per Year of Service, provided, however, that in no event shall a Tier 1 Employee who incurs a Severance receive less than six month's Compensation nor more than one year's Compensation. 2.2 Each Tier 2 Employee who incurs a Severance shall be entitled, subject to Section 2.10, to receive Severance Pay equal to two week's Compensation per Year of Service, provided, however, that in no event shall a Tier 2 Employee who incurs a Severance receive less than three month's Compensation nor more than one year's Compensation. 2.3 Each Tier 3 Employee who incurs a Severance shall be entitled, subject to Section 2.10, to receive Severance Pay equal to two week's Compensation per Year of Service, provided, however, that in no event shall a Tier 3 Employee who incurs a Severance receive less than two month's Compensation nor more than nine month's Compensation. 2.4 Each Tier 4 Employee who incurs a Severance shall be entitled, subject to Section 2.10, to receive Severance Pay equal to one week's Compensation per Year of Service, provided, however, that in no event shall a Tier 4 Employee who incurs a Severance receive less than one month's Compensation nor more than nine month's Compensation. 2.5 Severance Pay shall be paid to a Severed Employee in a cash lump sum, as soon as practicable (but in no event more than five business days) following the Severance Date. 6 2.6 The Company shall provide (i) each Severed Employee with continued health care coverage, and (ii) each Tier 1, Tier 2 and Tier 3 Employee who is a Severed Employee with outplacement services for a period of time equal to the number of weeks of Compensation to which such Severed Employee is entitled pursuant to Sections 2.1 through 2.4 hereof, as applicable. Health care coverage shall be provided on the same basis as such coverage was provided to the Severed Employee immediately prior to the Change of Control. Outplacement services shall be provided on an individual basis for Tier 1 Employees and Tier 2 Employees and on a group basis for Tier 3 Employees. 2.7 In the event of a claim by an Eligible Employee as to the amount or timing of any payment or benefit, such Eligible Employee shall present the reason for his or her claim in writing to the Plan Administrator. The Plan Administrator shall, within fourteen (14) days after receipt of such written claim, send a written notification to the Eligible Employee as to its disposition. In the event the claim is wholly or partially denied, such written notification shall state the specific reason or reasons for the denial. In the event an Eligible Employee wishes to appeal the denial of his or her claim, the Eligible Employee may request a review of such denial by making application in writing to the Plan Administrator, within sixty (60) days after receipt of such denial or the expiration of the applicable fourteen day period, as applicable. The Plan Administrator shall send a written notification to the Eligible Employee of the final disposition of his or her appeal within 30 days of the receipt of such written appeal. 2.8 The Company will pay to each Eligible Employee all reasonable legal fees and expenses incurred by such Eligible Employee in pursuing any claim under the Plan in which such Eligible Employee prevails in all material respects. 2.9 The Company shall be entitled to withhold from amounts to be paid to the Severed Employee hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. 2.10 Notwithstanding anything in the Plan to the contrary, in the event that any payment or benefit received or to be received by a Severed Employee in connection with a Change of Control or such employee's Severance (whether pursuant to the terms of this Plan, or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change of Control or any Person affiliated with the Company or such Person) (all such payments and benefits, including the Severance Payments, being hereinafter called "Total Payments") would not be 7 deductible (in whole or part), by the Company, an affiliate or Person making such payment or providing such benefit by reason of section 280G of the Code, then, to the extent necessary to avoid such portion of the Total Payments being nondeductible for such reason, the Severance Pay and, thereafter, the benefits provided under Section 2.6 hereof, shall be reduced. SECTION 3.PLAN ADMINISTRATION. ------------------- 3.1 The Plan Administrator shall administer the Plan and may interpret the Plan, prescribe, amend and rescind rules and regulations under the Plan and make all other determinations necessary or advisable for the administration of the Plan, subject to all of the provisions of the Plan. 3.2 The Plan Administrator may delegate any of its duties hereunder to such person or persons from time to time as it may designate. 3.3 The Plan Administrator is empowered, on behalf of the Plan, to engage accountants, legal counsel and such other personnel as it deems necessary or advisable to assist it in the performance of its duties under the Plan. The functions of any such persons engaged by the Plan Administrator shall be limited to the specified services and duties for which they are engaged, and such persons shall have no other duties, obligations or responsibilities under the Plan. Such persons shall exercise no discretionary authority or discretionary control respecting the management of the Plan. All reasonable expenses thereof shall be borne by the Employer. SECTION 4.PLAN MODIFICATION OR TERMINATION. -------------------------------- The Plan may be amended or terminated by the Board or a duly appointed committee of the Board at any time; provided, however, that during the -------- ------- pendency of and within six (6) months following the cessation of a Pending Change of Control and within two years following a Change of Control, the Plan may not be terminated nor may any amendment be adopted which is in any manner adverse to the interests of Eligible Employees. SECTION 5.GENERAL PROVISIONS. ------------------ 5.1 Except as otherwise provided herein or by law, no right or interest of any Eligible Employee under the Plan shall be assignable or transferable, in whole 8 or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any manner; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Eligible Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Eligible Employee. When a payment is due under this Plan to a Severed Employee who is unable to care for his or her affairs, payment may be made directly to his or her legal guardian or personal representative. 5.2 If the Employer is obligated by law or by contract to pay severance pay, a termination indemnity, notice pay, or the like, or if the Employer is obligated by law to provide advance notice of separation ("Notice Period"), then any Severance Pay hereunder shall be reduced by the amount of any such severance pay, termination indemnity, notice pay or the like, as applicable, and by the amount of any compensation received during any Notice Period. 5.3 Neither the establishment of the Plan, nor any modification thereof, nor the creation of any fund, trust or account, nor the payment of any benefits shall be construed as giving any Eligible Employee, or any person whomsoever, the right to be retained in the service of the Employer, and all Eligible Employees shall remain subject to discharge to the same extent as if the Plan had never been adopted. 5.4 If any provision of this Plan shall be held invalid or unenforceable such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included. 5.5 This Plan shall be binding upon the heirs, executors, administrators successors and assigns, including each Eligible Employee, present and future, and any successors to the Employer. 5.6 The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan. 5.7 The Plan shall not be funded. No Eligible Employee shall have any right to, or interest in, any assets of any Employer which may be applied by the Employer to the payment of benefits or other rights under this Plan. 5.8 Any notice or other communication required or permitted pursuant to the terms hereof shall have been duly given when delivered or mailed by United 9 States Mail, first class, postage prepaid, addressed to the intended recipient at his, her or its last known address. 5.9 This Plan shall be construed and enforced according to the laws of the Commonwealth of Pennsylvania to the extent not preempted by federal law, which shall otherwise control. 10 EX-99.7 8 AMENDMENT TO AMP PENSION PLAN EXHIBIT 7 AMENDMENT TO AMP INCORPORATED PENSION PLAN This Amendment is made to the AMP Incorporated Pension Plan (the "Plan"), amended and restated effective January 1, 1989, and incorporating further amendments through January 1, 1995. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Plan. WHEREAS, the Company has determined that it is in its best interest and that of its stockholders to amend the Plan as set forth herein; NOW THEREFORE, in accordance with Section 10.1 of the Plan, the Plan shall be amended as follows, effective as of August 20, 1998: 1. The definition of "change in control" contained in the Plan is amended in its entirety as follows: For purposes of this Plan, a change in control of the Corporation ("Change in Control") shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred: (a) any Person (as defined below) is or becomes the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")), directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its affiliates) representing 30% or more of either the then outstanding shares of common stock of the Corporation or the combined voting power of the Corporation's then outstanding securities; or (b) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on on August 20, 1998, constitute the Board of Directors of the Corporation (the "Board") and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Corporation) whose appointment or election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved; or (c) there is consummated a merger or consolidation of the Corporation with any other corporation or the issuance of voting securities of the Corporation in connection with a merger or consolidation of the Corporation (or any direct or indirect subsidiary of the Corporation) pursuant to applicable stock exchange requirements, other than (A) a merger or consolidation that would result in the voting securities of the Corporation outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) at least 66 2/3% of the combined voting power of the voting securities of the Corporation, or such surviving entity or any parent thereof, outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Corporation (or similar transaction) in which no Person is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation (not including in the securities beneficially owned by such Person any securities acquired directly from the Corporation or its affiliates) representing 30% or more of either the then outstanding shares of common stock of the Corporation or the combined voting power of the Corporation's then outstanding securities; or (d) the stockholders of the Corporation approve a plan of complete liquidation or dissolution of the Corporation or there is consummated an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets, other than a sale or disposition by the Corporation of all or substantially all of the Corporation's assets to an entity, at 2 least 70% of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportions as their ownership of the Corporation immediately prior to such sale. For the purpose of this definition, "Person" shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include: (i) the Corporation or any of its subsidiaries; (ii) a trustee or other fiduciary holding securities under an em ployee benefit plan of the Corporation or any of its subsidiaries; (iii) an underwriter temporarily holding securities pursuant to an offering of such securities; or (iv) a corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation. The effective date of this Amendment shall be August 20, 1998. Except as herein modified, the Plan shall remain in full force and effect. 3 IN WITNESS WHEREOF, the Company has executed this Amendment as of the date first set forth above. AMP INCORPORATED By:_________________________ Title: Chairman of the Board And: ______________________ Title: Corporate Secretary 4 EX-99.8 9 LETTER TO SHAREHOLDERS EXHIBIT 8 LOGO LOGO August 21, 1998 Dear Fellow Shareholders: On August 20, 1998, your Board of Directors took a number of important steps, including the following two, to provide to all AMP constituencies, including our shareholders, the opportunity to realize the full benefit of the values inherent in AMP. First, the Board determined to reject AlliedSignal's cash tender offer as inadequate, not reflective of the value or prospects of AMP-- particularly in light of AMP's recently announced profit improvement program, and not in the best interests of AMP and its relevant constituencies, including its shareholders. Second, the Board of Directors, approving a basic recommendation of its Board committee regarding CEO succession reached before AlliedSignal announced its offer, appointed a new management team committed to lead aggressively the timely implementation of AMP's program to improve its operating and financial performance. THE OFFER As you know, on August 10, 1998, AlliedSignal Inc. announced that its wholly owned subsidiary, PMA Acquisition Corporation, commenced an unsolicited tender offer for all outstanding shares of common stock of AMP Incorporated at $44.50 per share in cash. AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS, BY UNANIMOUS VOTE OF THE DIRECTORS PRESENT, HAS UNANIMOUSLY DETERMINED THAT ALLIEDSIGNAL'S OFFER IS INADEQUATE, DOES NOT REFLECT THE VALUE OR PROSPECTS OF AMP AND IS NOT IN THE BEST INTERESTS OF AMP AND ITS RELEVANT CONSTITUENCIES, INCLUDING ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD BY SUCH UNANIMOUS VOTE RECOMMENDS THAT YOU REJECT ALLIEDSIGNAL'S OFFER AND NOT TENDER ANY OF YOUR SHARES TO ALLIEDSIGNAL. AMP's Board of Directors, assisted by Credit Suisse First Boston, its financial advisor, Skadden, Arps, Slate, Meagher & Flom LLP, its principal legal advisor, and other legal advisors, has reviewed AlliedSignal's offer carefully. In particular, the offer was weighed against the expected benefits of the profit improvement program announced by AMP in June prior to any recent contacts from AlliedSignal and the commencement of the offer. As we announced, this program, which is fully designed and in the process of being implemented, is expected to result in estimated cost savings of at least $200 million during 1999, and in excess of $300 million annually in the ensuing years. Your Board believes that there are substantially higher values inherent in AMP, as the world's largest manufacturer of electrical and electronic connectors, which should be realizable in the near term and beyond as the profit improvement program takes effect. It is clear to your Board of Directors that AlliedSignal's offer is an opportunistic attempt by AlliedSignal to capture for its own shareholders the significant benefits of this program that AMP expects to deliver to you. With no apparent overlap or synergies between the two companies, AlliedSignal is simply trying to adopt our program for its own benefit. AlliedSignal has launched its offer at a time when AMP's business, like those of other companies similarly situated, was under pressure from a significant, but ultimately temporary, economic downturn in the Asia/Pacific region and, accordingly, when AMP's stock price was near the low point of the past twelve years. By launching its offer now, AlliedSignal is also seeking to move hurriedly before the positive impact of our fully designed profit improvement program, which was recently put in place, can even begin to be felt. Although AlliedSignal is touting its offer as at a "premium" to AMP's pre-offer market price, the "market" is temporarily depressed and, in reality, AlliedSignal's tactic is designed to acquire AMP on the cheap. Simply put, as directors responsible to AMP, we strongly believe that AlliedSignal's opportunistic offer clearly is not in the best interest of AMP, its shareholders and other constituencies. In reaching its determination and recommendation, the Board of Directors took into account a variety of factors, including the opinion of its financial advisor, Credit Suisse First Boston, that the AlliedSignal offer is inadequate, from a financial point of view, to AMP shareholders. Your Board of Directors was also concerned about the effect that this offer might have on other relevant AMP constituencies, including our customers, suppliers, employees and the communities being served by AMP. A more detailed description of the reasons for your Board of Directors' recommendation and the factors considered by the Board is contained in the enclosed Schedule 14D-9. We urge you to read it carefully and in its entirety so that you will be fully informed as to the Board of Directors' recommendation. Your Board of Directors is convinced that continuing actively to pursue our strategic goals is in the best interests of AMP and the best way for AMP to realize its inherent values. This does not mean that your Board will not consider offers that reflect the full value of your company or steps to enhance the delivery of value. In fact, the Board has instructed management, with the assistance of AMP's financial and legal advisors, to seek to develop financial or other alternatives, on a basis consistent with the pursuit of its recently announced business strategy, for enhancing the value of AMP in the nearer term. In addition, the Board of Directors has resolved not to adopt a new rights plan for a period of at least six months following the expiration of the existing plan on November 6, 1999, as, by such time, a substantial portion of AMP's profit improvement plan is expected to have been implemented and the benefits reflected in the value of AMP. NEW MANAGEMENT TEAM Effective as of today, I was elected Chairman and Chief Executive Officer of AMP. James E. Marley and William J. Hudson are retiring from their roles as Chairman, and Chief Executive Officer and President, respectively. Mr. Hudson is assuming the position of Vice Chairman of the Board. In addition, Herbert Cole, formerly Corporate Vice President and President, Global Terminal and Connector Operations, has been elected Senior Vice President for Operations, and Dr. Juergen Gromer, formerly Corporate Vice President, Global Automotive Division, has been elected Senior Vice President, Global Industry Businesses. Having been a leader in the creation and structuring of AMP's efforts to reshape itself as a more competitive and profitable company, I look forward to taking full responsibility for the successful implementation of our profit improvement program. With the appointment of Herbert Cole and Dr. Juergen Gromer as senior executives, I believe we have the management team in place with the focus and skills to implement this program. We, as a team, are committed to moving AMP further and faster to unlock its inherent value. I am confident that greater value for AMP and all its constituencies, including its shareholders, will result. Your Board of Directors and I greatly appreciate your continued support and encouragement. Sincerely, /s/ Robert Ripp Robert Ripp Chairman and Chief Executive Officer EX-99.9 10 TEXT OF PRESS RELEASE EXHIBIT 9 FOR IMMEDIATE RELEASE Contacts: Richard Skaare Dan Katcher / Judith Wilkinson AMP Corporate Communication Abernathy MacGregor Frank 717/592-2323 212/371-5999 Doug Wilburne AMP Investor Relations 717/592-4965 AMP BOARD OF DIRECTORS REJECTS ALLIEDSIGNAL'S UNSOLICITED OFFER ------------------------------------------ HARRISBURG, Pennsylvania (August 21, 1998) -- AMP Incorporated (NYSE: AMP) announced today that its Board of Director, by unanimous vote of the directors present, has recommended that shareholders reject the unsolicited tender offer by AlliedSignal, Inc. (NYSE: ALD) for $44.50 in cash per share for all of the outstanding shares of AMP as not in the best interests of the Company, its shareholders, employees, customers, suppliers and other relevant constituencies. In its recommendation to AMP shareholders, the Board cited, among other things: - - the Board's belief that the AlliedSignal offer is inadequate and does not reflect the inherent value of AMP as the world's largest supplier of electrical and electronic connectors; - - the Board's commitment to revitalizing AMP and its belief that the Company's stock price should increase significantly as the strategic initiatives announced in June, prior to the commencement of the AlliedSignal offer, start to take effect; - - the depressing effect the disruption in the Asian market has had on AMP and the trading price of its shares; - - the written opinion dated August 20, 1998 of Credit Suisse First Boston that the AlliedSignal offer is inadequate, from a financial point of view, to the holders of shares of AMP (other than AlliedSignal and its affiliates); - more - -2- - - the lack of synergies between the respective businesses of AMP and AlliedSignal; and - - the numerous conditions to which the AlliedSignal offer is subject. Accordingly, the Board recommends that AMP shareholders not tender their shares to AlliedSignal. Robert Ripp, AMP's newly elected chairman and chief executive officer, said, "AlliedSignal has launched its offer at a time when AMP's business, like those of other companies similarly situated, is under pressure from a significant, but ultimately temporary, economic downturn in the Far East and, accordingly, when AMP's stock price was near the low point of the past twelve years. Moreover, AlliedSignal is seeking to move hurriedly before the positive impact of our fully designed profit improvement plan, which was recently put in place, can even begin to be felt. The offer is nothing more then than an attempt to buy AMP on the cheap. AlliedSignal's offer is more than 20% below AMP's peak price and 10% below our share price just a few months ago. It is clearly an opportunistic attempt to grab a world industry leader at a bargain price." After an in-depth review of AlliedSignal's offer by financial advisor Credit Suisse First Boston and legal counsel Skadden, Arps, Slate, Meagher & Flom LLP, the Board weighed the offer against the expected benefits to AMP and its relevant constituencies, including shareholders, of the Company's profit improvement plan, which was first announced in June 1998, a month prior to the AlliedSignal offer. The plan is on track and 3500 employees are expected to leave the Company through a combination of early retirement, attrition and layoffs by year-end. Savings from those actions and others, combined with expected improvement in sales, should generate 11% operating margins in the fourth quarter, 13.5% operating margins in 1999 and 16.5% in 2000. Earnings per share are expected to be $2.30 in 1999 and approximately $3.00 in 2000. "I intend aggressively to pursue the implementation of AMP's profit improvement initiatives, of which I am a principal architect," said Mr. Ripp. "I am sharply focused on enhancing the value of AMP for the benefit of all its stakeholders. AMP's business is best run by those who understand the industry and how to best meet customers' needs. All of us at AMP are committed to moving the Company further and faster to unlock its inherent value. I am confident that our plan will create greater value than AlliedSignal's low-ball bid for AMP and all of its constituencies in both the near and long-term. In addition, we have asked our advisors to explore additional ways to enhance shareholder value while we aggressively pursue our business strategy," he said. AMP's profit improvement program during 1998 has included many actions to simplify, focus, and grow the business, including: eliminating unprofitable businesses such as the Connectware ATM business; announcing plans for selling the sensor and touch screen businesses; reorganizing the radio frequency coax connector business; closing and consolidating plants; expanding production in China and increasing capacity in the cable business through a joint venture in Asia/Pacific. - more - -3- Other initiatives include: . REDUCTIONS IN SUPPORT STAFF AND OUTSOURCING OF SUPPORT FUNCTIONS AMP's support staff is being reduced by 3,500 worldwide though a combination of early retirement, attrition and layoffs. In addition, AMP will outsource certain support activities to allow the Company to focus resources on core businesses and provide flexibility to respond to fluctuations in product demand. . PLANT CLOSINGS AND CONSOLIDATIONS The streamlining and consolidation of the Terminal and Connector operation, which represents the majority of AMP sales, will result in the closing of five plants in 1998. Additionally, AMP is stepping up activities to support the fast growing marketplace outside the United States by shifting production closer to customers, thereby reducing transportation and other costs, and relying on simpler, manual operations in each region for high-volume, quick turnaround orders. . SALES INITIATIVES New customer-focused programs are being launched to make the ordering, pricing, and delivery system simpler and more responsive to customers. The programs, which will begin in the U.S., 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. AMP also announced today that it is filing with the Securities and Exchange Commission, and will mail to shareholders, a Solicitation/Recommendation Statement on Schedule 14D-9 setting forth the Board's recommendation with respect to AlliedSignal's offer and the reasons therefor. Additional information with respect to the Board's decision to recommend that shareholders reject the AlliedSignal offer is contained in the Schedule 14D-9. The Company also announced that the Board of Directors has authorized certain amendments to AMP's Shareholder Rights Plan to enhance the Company's ability to implement its profit improvement program. The amendments, which, among other things, will make the rights nonredeemable following a majority change of disinterested directors, in the Board of Directors, are described in the Company's Statement on Schedule 14D-9 being filed with the Securities and Exchange Commission. The Board of Directors also resolved not to adopt a new rights plan for a period of at least 6 months following the expiration of the existing plan on November 6, 1999, as a substantial portion of AMP's profit improvement plan is expected to have been implemented and the benefits reflected in the value of AMP. 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. - more - -4- This press release contains certain "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, which are intended to be covered by the safe harbors created thereby. Such statements should be considered as subject to risks and uncertainties that exist in AMP's operations and business environment and 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 10K for the year ended December 31, 1997. In addition, the realization of the benefits anticipated from the strategic initiatives described above will be dependent, in part, on management's ability to execute its business plans and to motivate properly the AMP employees, whose attention has been distracted by the AlliedSignal offer and whose numbers will have been reduced as a result of these initiatives. # # # 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), 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 of AMP: Richard Skaare (Director, Corporate Communication), Douglas Wilburne (Director, Investor Relations) and Mary Rakoczy (Manager, Shareholder Services). 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") to act as its financial advisor in connection with the AlliedSignal Offer, for which CSFB will receive customary fees, as well as reimbursement of reasonable out-of-pocket expenses. In addition, AMP has agreed to indemnify CSFB and certain related persons against certain liabilities, including certain liabilities under the federal securities laws, arising out of its engagement. CSFB is an investment banking firm that provides a full range of financial services for institutional and individual clients. CSFB does not admit 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 CSFB. 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 the normal course of its business, CSFB 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 and its associates 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 August 19, 1998, CSFB had a net long position of 124,466 shares of AMP common stock. EX-99.10 11 OPINION OF CSFB EXHIBIT 10 LOGO August 20, 1998 Board of Directors AMP Incorporated 470 Friendship Road Harrisburg, PA 17111 Members of the Board: On August 10, 1998, PMA Acquisition Corporation (the "Purchaser"), a wholly owned subsidiary of AlliedSignal Inc. ("Parent"), commenced a tender offer for all outstanding shares of common stock, no par value (the "Shares"), of AMP Incorporated ("AMP"), including the associated common stock purchase rights, for $44.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 10, 1998, and the related letter of transmittal (which together constitute the "AlliedSignal Offer"). You have asked us to advise you with respect to the adequacy of the AlliedSignal Offer to the holders of Shares (other than Parent and its affiliates), from a financial point of view. In arriving at our opinion, we have reviewed and considered the AlliedSignal Offer and the related Tender Offer Statement on Schedule 14D-1 filed by Parent and the Purchaser with the Securities and Exchange Commission (the "Commission") and the Solicitation/Recommendation Statement on Schedule 14D-9 which we understand may be filed by AMP with the Commission. We have also reviewed certain publicly available business and financial information relating to AMP and certain other information, including financial forecasts, provided to us by AMP, and have met with the management of AMP to discuss the business and prospects of AMP. We have also considered certain financial and stock market data relating to AMP, and we have compared such data with similar data for other publicly held companies in businesses similar to AMP. In addition, we have considered the financial terms of certain other transactions which have recently been effected. We have also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which we deemed relevant. In connection with our review, we have not assumed any responsibility for independent verification of any of the foregoing information, including the information in the AlliedSignal Offer, and we have relied on all such information being complete and accurate in all material respects. With respect to the financial forecasts, including operating cost savings projected to be realized through AMP's various cost reduction plans, we have assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of AMP's management as to the future financial performance of AMP. In addition, we have not been requested to make, and have not made, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of AMP, nor have we been furnished with any such evaluations or appraisals. Our opinion is necessarily based upon financial, economic, market and other conditions as they exist and can be evaluated on the date hereof. LOGO We are acting as financial advisor to AMP in connection with the AlliedSignal Offer and will receive a fee from AMP for our services. We will also receive a fee for rendering this opinion. We have also in the past performed financial advisory services for AMP and have received customary fees for such services. In the ordinary course of our business, we and our affiliates may actively trade the debt and equity securities of both AMP and Parent for our and such affiliates' own accounts and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. It is understood that this letter is for the information of the Board of Directors in connection with its consideration of the AlliedSignal Offer, does not constitute a recommendation to any shareholder as to whether or not such shareholder should tender Shares pursuant to the AlliedSignal Offer or vote in favor of any proposal presented to shareholders in connection therewith, and is not to be quoted or referred to, in whole or in part, in any registration statement, prospectus, or proxy statement, or in any other written document used in connection with the offering or sale of securities, nor shall this letter be used for any other purposes, without our prior written consent, provided that this letter may be included in its entirety in, and referred to in, the Schedule 14D-9 required to be filed by AMP with the Commission. Based upon and subject to the foregoing, it is our opinion that, as of the date hereof, the AlliedSignal Offer is inadequate, from a financial point of view, to the holders of Shares (other than Parent and its affiliates). Very truly yours, CREDIT SUISSE FIRST BOSTON CORPORATION EX-99.11 12 SECURITIES TRANSACTION CHART EXHIBIT 11 SECURITIES TRANSACTION CHART I. SHARES PURCHASED BY AMP INCORPORATED. The following numbers of Shares have been purchased on behalf of AMP in brokerage transactions in the past 60 days:
PURCHASER TRADE DATE # SHARES COST/SHARE --------- ---------- -------- ---------- AMP....................................... 6/11/98 20,000 $37.581 AMP....................................... 6/12/98 20,000 37.230 AMP....................................... 6/15/98 5,000 36.728 AMP....................................... 6/16/98 3,000 36.332 AMP....................................... 6/18/98 5,000 37.165 AMP....................................... 6/19/98 5,000 36.674 AMP....................................... 6/22/98 30,000 35.514 AMP....................................... 6/23/98 4,500 34.978 AMP....................................... 6/24/98 20,000 35.806 AMP....................................... 6/25/98 10,000 35.456 AMP....................................... 6/29/98 2,000 35.353 AMP....................................... 6/30/98 16,600 34.849 AMP....................................... 7/1/98 30,000 34.5750 AMP....................................... 7/6/98 20,000 34.2359 AMP....................................... 7/7/98 20,000 34.2628 AMP....................................... 7/8/98 20,000 33.6375 AMP....................................... 7/9/98 20,000 33.0713 AMP....................................... 7/10/98 20,000 32.9356 AMP....................................... 7/13/98 20,000 32.1769 AMP....................................... 7/14/98 20,000 31.8466 AMP....................................... 7/15/98 5,500 31.6534 AMP....................................... 7/16/98 15,000 31.7604 AMP....................................... 7/27/98 50,000 29.6188 AMP....................................... 7/28/98 50,000 29.2456 AMP....................................... 7/29/98 5,000 29.2500 AMP....................................... 7/30/98 21,000 29.5685 AMP....................................... 7/31/98 5,000 29.6250 AMP....................................... 8/3/98 19,000 29.0553 AMP....................................... 8/4/98 3,500 28.4643
II. OPEN MARKET TRANSACTIONS. Set forth below is a list of open market transactions in Shares conducted by executive officers and directors of AMP within the past 60 days: 1. Thomas DiClemente purchased, in the open market on July 28, 1998, 900 Shares at a price of $29.375 per share and 100 Shares at a price of $29.3125 per share. 2. Mark Lang purchased, 172.0436 Shares on August 8, 1998, pursuant to a voluntary cash payment through AMP's Dividend Reinvestment Plan, at a price of $29.0625 per share and 300 Shares, on July 27, 1998, in the open market, at a price of $29.75 per share. 3. Hal McInnes disposed of 382 Shares by way of a gift of such shares made on June 17, 1998. III. 401K FUNDING. Set forth below are transactions in Shares with respect to purchases made by executive officers and directors of AMP pursuant to AMP's 401(k) Plan in the past 60 days: 1. Mark Lang purchased, by investing in the AMP stock fund, 1,683.03 Shares at a price of $29.625 per share on July 27, 1998. 2. Joseph Overbaugh purchased, by investing in the AMP stock fund, 508.475 Shares at a price of $29.50 per share on July 28, 1998. IV. DEFERRED COMPENSATION PLAN. The following are transactions in Shares under AMP's Deferred Compensation Plan in the past 60 days: 1. On July 28, 1998, Thomas DiClemente reallocated previously deferred compensation into an AMP stock account, in an amount equal to the value of 990.86 Shares at a price of $29.50 per share. 2. On July 27, 1998, Philippe Lemaitre reallocated previously deferred compensation into an AMP stock account, in an amount equal to the value of 5,817.5 Shares at a price of $29.625 per share. 3. On July 29, 1998, Joseph Overbaugh reallocated previously deferred compensation into an AMP stock account, in an amount equal to the value of 508.48 Shares at a price of $29.50 per share. 4. On July 27, 1998, Robert Ripp reallocated previously deferred compensation into an AMP stock account, in an amount equal to the value of 10,000 Shares at a price of $29.625 per share. 5. On July 27, 1998, William Urkiel reallocated previously deferred compensation into an AMP stock account, in an amount equal to the value of 2,000 Shares at a price of $29.625 per share. V. STOCK OPTION AWARDS. (a) On July 1, 1998, AMP granted a total of 16,000 Non-Qualified Options ("NQOs") to purchase Shares at an exercise price of $34.5625 per share to the directors identified below in the amounts indicated below: 1. Ralph DeNunzio received an NQO award to purchase 2,000 Shares. 2. Barbara Franklin received an NQO award to purchase 2,000 Shares. 3. Joseph Hixon received an NQO award to purchase 2,000 Shares. 4. Joseph Magliochetti received an NQO award to purchase 2,000 Shares. 5. Jerome Meyer received an NQO award to purchase 2,000 Shares. 6. John Morley received an NQO award to purchase 2,000 Shares. 7. Paul Schloemer received an NQO award to purchase 2,000 Shares. 8. Takeo Shiina received an NQO award to purchase 2,000 Shares. (b) On July 21, 1998, AMP granted 1,664,900 NQOs and 906,500 Incentive Stock Options ("ISOs") to purchase Shares at an exercise price of $30.375 per share. Included in the July 21, 1998 option grants were grants to the AMP executive officers identified below: 1. Richard Clark received an ISO award to purchase 3,200 Shares and an NQO award to purchase 6,500 Shares. 2. Herbert Cole received an ISO award to purchase 3,200 Shares and an NQO award to purchase 25,400 Shares. 3. Thomas DiClemente received an ISO award to purchase 3,200 Shares and an NQO award to purchase 10,500 Shares. 2 4. Rudolf Gassner received an ISO award to purchase 3,200 Shares and an NQO award to purchase 10,000 Shares. 5. Charles Goonrey received an ISO award to purchase 3,200 Shares and an NQO award to purchase 8,900 Shares. 6. Juergen Gromer received an NQO award to purchase 17,400 Shares. 7. John Gurski received an ISO award to purchase 3,200 Shares and an NQO award to purchase 24,000 Shares. 8. David Henschel received an ISO award to purchase 3,200 Shares and an NQO award to purchase 3,700 Shares. 9. John Kegel received an ISO award to purchase 3,200 Shares and an NQO award to purchase 7,300 Shares. 10. Mark Lang received an ISO award to purchase 3,200 Shares and an NQO award to purchase 10,800 Shares. 11. Philippe Lemaitre received an ISO award to purchase 3,200 Shares and an NQO award to purchase 11,400 Shares. 12. Nazario Proietto received an ISO award to purchase 3,200 Shares and an NQO award to purchase 9,800 Shares. 13. Joseph Overbaugh received an ISO award to purchase 3,200 Shares and an NQO award to purchase 8,800 Shares. 14. Robert Ripp received an ISO award to purchase 3,200 Shares and an NQO award to purchase 37,900 Shares. 15. William Urkiel received an ISO award to purchase 3,200 Shares and an NQO award to purchase 15,000 Shares. (c) In addition to the option grants identified above, on June 23, 1998, AMP Canada, a subsidiary of AMP, granted 14,600 NQOs to purchase Shares at an exercise price of $35.8125 and on June 25, 1998, AMP-Holland B.V., a subsidiary of AMP, granted 34,800 NQOs to purchase Shares at an exercise price of $35.3125 per share. VI. STOCK BONUS DISTRIBUTION. On July 27, 1998, AMP issued a total of 3,417 Shares pursuant to the conversion of previously awarded stock bonus units. Included among recipients of Shares upon conversion of the stock bonus units were the following executive officers: 1. Thomas DiClemente received 111 Shares upon conversion of his stock bonus units. 2. Rudolf Gassner received 141 Shares upon conversion of his stock bonus units. 3. Juergen Gromer received 212 Shares upon conversion of his stock bonus units. VII. PERFORMANCE RESTRICTED SHARES. As of August 6, 1998, AMP has reserved 158,200 shares of common stock for issuance in connection with performance restricted stock awards issued on July 21, 1998. Included in the July 21, 1998 performance restricted stock awards were awards to the AMP executive officers identified below: 1. On July 21, 1998, AMP awarded to Robert Ripp 27,900 restricted shares. 2. On July 21, 1998, AMP awarded to William Urkiel 12,400 restricted shares. 3. On July 21, 1998, AMP awarded to John Gurski 18,500 restricted shares. 4. On July 21, 1998, AMP awarded to Herbert Cole 19,500 restricted shares 5. On July 21, 1998, AMP awarded to Thomas DiClemente 9,300 restricted shares. 6. On July 21, 1998, AMP awarded to John Kegel 7,100 restricted shares. 7. On July 21, 1998, AMP awarded to Juergen Gromer 11,900 restricted shares. 8. On July 21, 1998, AMP awarded to Rudolf Gassner 9,000 restricted shares. 9. On July 21, 1998, AMP awarded to Nazario Proietto 8,800 restricted shares. 10. On July 21, 1998, AMP awarded to Richard Clark 6,600 restricted shares. 11. On July 21, 1998, AMP awarded to Philippe Lemaitre 9,900 restricted shares. 3 EX-99.12 13 AMENDMENT NO. 2 - REG. RIGHTS AGREEMENT EXHIBIT 12 AMENDMENT No. 2 TO THE RIGHTS AGREEMENT --------------------------------------- Amendment No. 2 to the Rights Agreement, dated as of August 12, 1998 (the "Amendment No. 2"), by and between AMP Incorporated, a Pennsylvania corporation (the "Company"), and ChaseMellon Shareholder Services L.L.C., a limited liability company organized under the laws of the State of New Jersey (the "Rights Agent"). WHEREAS, on October 28, 1989 the Company and Manufacturers Hanover Trust Company, a New York corporation ("MHTCo"), entered into a Rights Agreement ("the Original Agreement") and, on September 4, 1992, the Company and Chemical Bank (as successor to MHTCo.) entered into an amendment thereto (the Original Agreement, as amended by such amendment, is hereinafter referred to as the "Agreement"), the terms of which are incorporated herein by reference and made a part hereof; WHEREAS, effective January, 1995, Chemical Bank and Mellon Bank Corp. formed a joint venture, ChaseMellon Shareholder Services L.L.C., that was assigned and assumed all responsibilities of Chemical Bank under the Agreement; and WHEREAS, the Company, with the approval of the Board of Directors of the Company, and the Rights Agent have mutually agreed to modify the terms of the Agreement in certain respects. NOW, THEREFORE, in consideration of the premises and mutual agreements herein set forth, and intending to be legally bound hereby, the parties hereto agree that the Agreement shall be and hereby is amended in the following manner: Section 1. Recognition of ChaseMellon Shareholder Services L.L.C. as --------------------------------------------------------- Successor Rights Agent. ChaseMellon Shareholder Services L.L.C., as the - ---------------------- successor Rights Agent to Chemical Bank, is substituted as the party that entered into the Agreement with the Company and is hereby entitled to all the privileges and immunities afforded to the Rights Agent under the terms and conditions of the Agreement, as amended hereby, and that, unless and until a successor is appointed, all reference in the Agreement to the Rights Agent shall be deemed to refer to ChaseMellon Shareholder Services L.L.C. Section 2. Amendment of "Concerning the Rights Agent" Section. Section -------------------------------------------------- 18(a) is hereby modified and amended by inserting the following sentence at the end of such subsection: "Anything to the contrary notwithstanding, in no event shall the Rights Agent be liable for special, indirect, consequential or incidental loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such loss or damage." Section 3. Amendment of "Change of Rights Agent" Section. Section 21 of --------------------------------------------- the Rights Agreement is hereby modified and amended by deleting the fifth sentence in its entirety and replacing it with: "Any successor Rights Agent, whether appointed by the company or by such a court, shall be either (a) a corporation organized and doing business under the laws of the United States or of any state of the United States, in good standing, which is authorized under such laws to exercise corporate trust powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $100,000,000 or (b) an affiliate of such a corporation." Section 4. Amendment of "Notices" Section. Section 25 is amended to ------------------------------ substitute the following name and address for the Rights Agent: ChaseMellon Shareholder Services L.L.C. 450 West 33rd Street, 15th Floor New York, New York 10001-2697 Attention: Stock Transfer Administration Section 5. Rights Agreement as Amended. The term "Agreement" as used in --------------------------- the Agreement shall be deemed to refer to the Agreement as amended hereby and shall be effective as of the date hereof. All references hereinafter to Amendment No. 2 shall be deemed to refer to this Amendment No. 2. It is expressly understood and agreed that except as provided above, all terms, conditions and provisions contained in the Agreement shall remain in full force and effect without any further change or modification whatsoever. 2 IN WITNESS WHEREOF, the parties have caused this Amendment No. 2 to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Attest: AMP Incorporated /s/ D.F. Henschel /s/ William J. Hudson By: _____________________________ By: _____________________________ Name: D.F. Henschel Name: William J. Hudson Title: Corporate Secretary Title: Chief Executive Officer and Associate General and President Legal Counsel Attest: ChaseMellon Shareholder Services L.L.C. /s/ Laura R. Picone /s/ Frances A. Wixted By: _____________________________ By: ______________________________ Name: Laura R. Picone Name: Frances A. Wixted Title: Vice President Title: Vice President 3 EX-99.13 14 AMENDMENT NO. 3 - REG. RIGHTS AGREEMENT EXHIBIT 13 AMENDMENT No. 3 TO THE RIGHTS AGREEMENT --------------------------------------- Amendment No. 3 to the Rights Agreement, dated as of August 20, 1998 (the "Amendment No. 3"), by and between AMP Incorporated, a Pennsylvania corporation (the "Company"), and ChaseMellon Shareholder Services L.L.C., a limited liability company organized under the laws of the State of New Jersey (the "Rights Agent"). WHEREAS, on October 28, 1989 the Company and Manufacturers Hanover Trust Company, a New York corporation ("MHTCo"), entered into a Rights Agreement ("the Original Agreement"); WHEREAS, on September 4, 1992, the Company and Chemical Bank (as successor to MHTCo.) entered into Amendment No. 1 to the Rights Agreement and on August 12, 1998, the Company and ChaseMellon Shareholder Services L.L.C. (as successor to Chemical Bank) entered into Amendment No. 2 to the Rights Agreement (the Original Agreement, as amended by each of the amendments is hereinafter referred to as the "Agreement" and the terms of which are incorporated herein by reference and made a part hereof); and WHEREAS, the Company, with the approval of the Board of Directors of the Company, and the Rights Agent have mutually agreed to modify the terms of the Agreement in certain respects. NOW, THEREFORE, in consideration of the premises and mutual agreements herein set forth, and intending to be legally bound hereby, the parties hereto agree that the Agreement shall be and hereby is amended in the following manner: Section 1. Amendment of "Certain Definitions" Section. ------------------------------------------ (a) The definition of "Qualifying Offer" contained in Section 1 of the Agreement is hereby amended by adding after the word "shareholders" and before the period, the following: ", provided that the offer shall have been consummated at a time when the Rights are redeemable in accordance with Section 23(a) hereof. Section 2. Amendment of "Issue of Rights Certificates" Section. The first --------------------------------------------------- sentence of paragraph (a) of Section 3 of the Agreement is hereby amended, in its entirety, to read as follows: "Until the earliest of (i) the close of business on the tenth Business Day after the Stock Acquisition Date, (ii) the close of business on the tenth Business Day (or such later date as the Board shall determine) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any Person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan) is first published or sent or given within the meaning of Rule 14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon consummation thereof, such Person would be an Acquiring Person, or (iii) the date on which the Rights Certificates (as hereinafter defined) are distributed in accordance with Section 13(e) hereof (the earliest of (i), (ii), and (iii) being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph (b) of this Section 3) by the holders of the Common Stock (which Certificates for common Stock shall be deemed also to be certificates for Rights) and not by separate certificates, and (y) the Rights will be transferable only in connection with the transfer of the underlying shares of Common Stock (including a transfer to the Company)." Section 3. Amendment of "Consolidation, Merger or Sale or Transfer of ---------------------------------------------------------- Assets, Cash Flow or Earning Power" Section. The first sentence of paragraph - ------------------------------------------- (a) of Section 13 of the Agreement is hereby amended by deleting the phrase "following the Stock Acquisition Date and by adding in clause (y) of such paragraph after the word "property" and before the comma the following: "or the shares of Common Stock held by stockholders of the Company immediately prior to the consummation of the transaction which remain outstanding shall constitute less than 50% of the total number of shares of Common Stock outstanding immediately following consummation of the transaction". Section 13 is further amended by adding at the end thereof a new paragraph (e) to read as follows: "(e) The Company covenants and agrees not to consummate a transaction constituting a Section 13 Event, unless a Distribution Date shall have occurred as a 2 result of the actions described in clauses (i) or (ii) of Section 3(a) hereof or as a result of the Board of Directors taking all actions as may be necessary to cause Rights Certificates to be distributed as contemplated by clause (iii) of Section 3(a) hereof." Section 4. Amendment of "Redemption and Termination" Section. Paragraph ------------------------------------------------- (a) of Section 23 of the Agreement is hereby amended, in its entirety, to read as follows: "(a) The Board of Directors of the Company may, at its option, at any time prior to the earliest of (i) the close of business on the tenth Business Day following the Stock Acquisition Date (or, if the Stock Acquisition Date shall have occurred prior to the Record Date, the close of business on the tenth Business Day following the Record Date), (ii) the Final Expiration Date, or (iii) if any Person shall have announced an intention to engage in a transaction which, if successful, would have resulted in (A) such Person becoming an Acquiring Person or (B) a Section 13 Event (in either case which was not solicited in advance by the Board of Directors) (collectively, an "Unsolicited Acquisition Proposal"), the first time thereafter at which there is a change in the directors in office (including as a result, in whole or in part, of an increase in the size of the Board and the election of new directors) such that persons who were disinterested directors (as such term is defined in Section 1715(e) of the Pennsylvania BCL) immediately prior to the first such Unsolicited Acquisition Proposal (together with any successors thereto who were approved by the Board of Directors prior to their election) do not constitute a majority of the members of the Board of Directors, redeem all but not less than all the then outstanding Rights at a redemption price of $.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). Notwithstanding anything contained in this Agreement to the contrary, the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event until such time as the Company's right of redemption hereunder has expired. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the Current Market Price as defined in Section 11(d) hereof, of the Common Stock at the time of redemption) or any other form of consideration deemed appropriate by the Board of Directors of the Company." Section 5. Amendment to "Supplements and Amendments" Section. Section 26 ------------------------------------------------- of the Agreement is amended, in its entirety, to read as follows: 3 "Prior to the Distribution Date and subject to the penultimate sentence of this Section 26, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of certificates representing shares of Common Stock. In addition, the Company and the Rights Agent shall at any time, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Rights Certificates (other than an Acquiring Person). Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 26, the Rights Agent shall execute such supplement or amendment. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of Common Stock. The foregoing notwithstanding, no amendment of this Agreement may be effected at a time when the Rights are not redeemable, except as permitted by clauses (i) or (ii) of the second sentence of this Section 26." Section 6. Rights Agreement as Amended. The term "Agreement" as used in --------------------------- the Agreement shall be deemed to refer to the Agreement as amended hereby and shall be effective as of the date hereof. All references hereinafter to Amendment No. 3 shall be deemed to refer to this Amendment No. 3. It is expressly understood and agreed that except as provided above, all terms, conditions and provisions contained in the Agreement shall remain in full force and effect without any further change or modification whatsoever. 4 IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be duly executed and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. Attest: AMP Incorporated /s/ David F. Henschel /s/ Robert Ripp By:__________________________ By:_______________________________ Name: David F. Henschel Name: Robert Ripp Title: Corporate Secretary Title: Chairman and Chief Executive Officer Attest: ChaseMellon Shareholder Services L.L.C. /s/ Laura R. Picone /s/ Frances A. Wixted By:_________________________ By:______________________________ Name: Laura R. Picone Name: Frances A. Wixted Title: Vice President Title: Vice President 5 EX-99.14 15 COMPLAINT FILED (98-CV-4058) EXHIBIT 14 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA - - - - - - - - - - - - - - - - - - - X ALLIEDSIGNAL CORPORATION, a Delaware Corporation, : P.O. Box 3000 : Morristown, NJ 07962-2496 : Plaintiff, : -against- : C.A. No. 98-CV-4058 AMP, INC., : a Pennsylvania Corporation, 470 Friendship Road : Harrisburg, PA 17111 : Defendant. - - - - - - - - - - - - - - - - - - - X COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF --------------------------------- Plaintiff AlliedSignal Corporation ("AlliedSignal"), by its undersigned attorneys, as and for its Complaint, alleges upon knowledge with respect to itself and its own acts, and upon information and belief as to all other matters, as follows: Nature of the Action -------------------- 1. AlliedSignal has today announced that it will commence a tender offer for the stock of defendant AMP, Inc. ("AMP") at $44.50 per share, a price representing a premium of approximately 50% over the closing trading price of AMP common stock on August 3, 1998. This action for injunctive and declaratory relief is brought to ensure that AlliedSignal's statutory and constitutional rights to make its tender offer to AMP stockholders and to exercise its rights under the federal proxy rules are protected, while also ensuring the rights of all AMP stockholders to consider AlliedSignal's offer. AlliedSignal also seeks to prevent AMP from manipu lating or otherwise subverting the process of corporate democracy by impermissibly taking action to frustrate the consent solicitation that AlliedSignal will have to conduct to gain majority representation on the AMP Board of Directors if AMP attempts to obstruct AlliedSignal's tender offer. This action also seeks relief declar ing AMP's so- called "dead hand" poison pill to be inapplicable or legally impermissi ble. Parties ------- 2. Plaintiff AlliedSignal is a Delaware corporation with its principal executive offices in Morristown, New Jersey. AlliedSignal is a manufactur ing company with operations in the aerospace, automotive and engineered materials 2 businesses. AlliedSignal's 1997 revenues were nearly $15 billion. AlliedSignal is the beneficial owner of 100 shares of AMP common stock. 3. Defendant AMP is a Pennsylvania corporation with its principal executive offices in Harrisburg, Pennsylvania. AMP designs, manufactures and markets electronic, electrical and electro-optic connection devices, interconnec tion systems and connector-intensive assemblies. Jurisdiction and Venue ---------------------- 4. This Court has jurisdiction over this action pursuant to 28 U.S.C. (S)(S) 1331, 1332 and 1367. The amount in controversy is in excess of $75,000. 5. Venue is proper in this District under 28 U.S.C. (S) 1391 (b) and (c). AlliedSignal's Offer -------------------- 6. On July 29, 1998, AlliedSignal Chairman and Chief Executive Officer ("CEO") Larry Bossidy telephoned AMP's CEO and President William J. Hudson, to determine whether AMP would be interested in pursuing a business combination with AlliedSignal. Mr. Hudson was unavailable to speak with Mr. Bossidy, and he did not thereafter return Mr. Bossidy's telephone call. 7. On July 30, 1998, Mr. Bossidy sent a letter to Mr. Hudson proposing a combination of AlliedSignal and AMP. The letter stated that 3 AlliedSignal was prepared to offer $43.50 per share in cash for all of AMP's out standing shares, at a premium of approximately 50% over the market value. 8. AMP has not responded to Mr. Bossidy's July 30 letter. 9. On August 4, 1998, AlliedSignal announced that it will commence within five (5) business days a tender offer for the stock of defendant AMP at $44.50 per share (the "Tender Offer"), which, as stated in Mr. Bossidy's July 30, 1998 letter, represents approximately a 50% premium over the closing trading price of AMP common stock on August 3, 1998. The Tender Offer gives AMP shareholders the opportunity to accept the Offer if they determine it is in their best interests. Upon consummation of the Tender Offer, AlliedSignal intends to acquire the remaining shares of AMP in a second-step merger in which AMP shareholders will receive $44.50 in cash for each AMP share they own. 10. AlliedSignal's Tender Offer and second-step merger cannot be consummated unless the AMP Board -- voluntarily or by direction of a court -- removes or makes inapplicable various anti-takeover devices, including AMP's "poison pill" and certain provisions of the Pennsylvania Business Corporation Law ("PBCL"). 11. In light of AMP's failure to respond to AlliedSignal's July 30, 1998 letter, the current AMP Board cannot be expected to facilitate AlliedSignal's Tender Offer and second-step merger, but can be expected, instead, to maintain 4 AMP's anti-takeover devices in place and actively oppose the Tender Offer and merger. For this reason, AlliedSignal is preparing to conduct a consent solicitation (the "Consent Solicitation") to gain majority representation on the AMP Board of Directors by electing individuals nominated by AlliedSignal who will support a sale of AMP to AlliedSignal, subject to their fiduciary duties to AMP shareholders. AMP's Anti-Takeover Devices --------------------------- 12. The "Dead Hand" Poison Pill. Foremost among the numerous anti- takeover devices at AMP's disposal is its shareholders' "rights plan," better known as a "poison pill" (the "Poison Pill"). As part of the Poison Pill, the Board authorized and declared a dividend of one common share purchase right (a "Right") per outstanding share of common stock of AMP, payable to shareholders of record as of the close of business on November 6, 1989. 13. The Poison Pill provides that the Rights do not become exercisable until ten business days following the first public announcement that a person (an "Acquiring Person") has acquired beneficial ownership of 20% or more of the outstanding shares of AMP common stock (the "Stock Acquisition Date"), at which time each holder of a Right, other than an Acquiring Person, is entitled, upon exercise of the Right to receive common stock having a market value equal to two times the Purchase Price. The effect of this provision (the "Flip-In Provision") thus 5 would be a massive dilution of the value of the holdings of an unwanted acquiror like AlliedSignal. 14. The Dead Hand Restriction. The Board may redeem the Poison Pill until -------------------------- 10 business days after a person becomes an Acquiring Person. The Board's ability to redeem the Rights, however, is purportedly restricted by a provision of the Poison Pill that serves no purpose other than to entrench the current Board (the "Dead Hand Restriction"). 15. Under the Dead Hand Restriction, redemption of the Poison Pill requires the approval of a majority of Continuing Directors (i.e., members of the Board who are not Acquiring Persons or representatives of an Acquiring Person, and either (x) were directors prior to the institution of the Poison Pill or (y) are nominated by a majority of Continuing Directors) if effected (i) after a person becomes an Acquiring Person but prior to the expiration of a ten business day period, or (ii) after a change (resulting from a proxy or consent solicitation) in a majority of the directors in office at the time of the commencement of a proxy or consent solicitation. Furthermore, the Dead Hand Restriction provides that the Poison Pill can be amended only by Continuing Directors. 16. Under the Dead Hand Restriction, directors, other than Continuing Directors, elected pursuant to a consent or proxy solicitation in which an Acquiring Person (or a person who intends to become an Acquiring Person) 6 participates, are purportedly without power or authority to redeem the Rights so that the Tender Offer may go forward. 17. Because the Dead Hand Restriction purports to prevent newly-elected, insurgent-nominated directors from redeeming the Poison Pill and thus removing a key obstacle to the accomplishment of the very purpose for which they were elected, the Dead Hand Restriction effectively disenfranchises shareholders. In effect, it denies the shareholders of AMP the opportunity to replace the current Board and prevent any person intending to become an Acquiring Person, such as AlliedSignal, from soliciting votes to replace the current Board. It represents an intentional effort by the Board to manipulate the corporate machinery so as to prevent the effectiveness of a shareholder vote. 18. The Pennsylvania Anti-Takeover Statutes. Among other provisions, ---------------------------------------- Defendant AMP also has the anti-takeover protections PBCL (S)(S) 2551-2556 (the "Business Combination Statute"). 19. Under the Business Combination Statute, an interested shareholder cannot engage in a business combination with AMP for five years unless the acquisition of the shares or the business combination is approved by the AMP Board before an "Interested Shareholder" becomes the beneficial owner, directly or indirectly, of at least 20% of AMP's shares. 7 20. The Business Combination Statutes will delay or make more difficult acquisitions or changes of control of AMP, have the effect of preventing changes in the management of AMP, and make it more difficult to accomplish transactions which AMP shareholders may otherwise deem to be in their best interests. 21. Fixing the Consent Solicitation Record Date. AlliedSignal cannot -------------------------------------------- obtain shareholder consents to its proposals without a record date for the determination of the shareholders entitled to vote on the proposals. AMP's by- laws (the "By-laws") provide that any shareholder seeking to have shareholders take action by consent must, by written notice, request that the Board fix a record date. The By-laws require the Board to fix the record date no later than 10 days after receipt of the request. (If not fixed within 10 days, the record date will be the day on which the first consent is received by the company.) 22. It is anticipated that the Board will seek to delay shareholder consent action on AlliedSignal's proposals by fixing a record date outside the required time period to impede its shareholders from exercising their franchise. First Claim For Relief ---------------------- (Declaratory Judgment and Injunctive Relief) 23. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 8 24. Fixing a record date beyond the required ten (10) days would violate AMP's Articles and By-laws and constitute an illegal interference with the shareholder franchise, in violation of the PBCL and fundamental principles of corporate governance. 25. Plaintiffs have no adequate remedy at law. Second Claim for Relief ----------------------- (Declaratory Judgment) 26. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 27. The Dead Hand Restriction is invalid per se under Pennsylvania statutory law, in that it purports to limit the discretion of future Boards of AMP by denying any directors other than the Continuing Directors the power or authority to redeem the Poison Pill so that the Tender Offer and Merger may go forward. PBCL (S) 1721 requires that any such limitation on Board discretion be set forth in a by-law adopted by the shareholders. Since the shareholders of AMP have adopted no such by-law provision, the Board was without power to so limit the discretion of future Boards of AMP by adopting the Dead Hand Restriction. 28. Moreover, PBCL (S) 1729 provides that unless otherwise provided in a by-law adopted by the shareholders, every director shall be entitled to one vote. The Dead Hand Restriction creates different classes of directors with different voting rights -- those who have the power to redeem the Poison Pill, and 9 those who do not. Since the shareholders of AMP have adopted no by-law provision creating such distinctions in the voting powers of directors, the Board was without power to adopt the Dead Hand Restriction. 29. Additionally, the Dead Hand Restriction is invalid under AMP's By- laws. Under Section 2.1 of AMP's By-laws, the power to manage the business and affairs of the Corporation is broadly vested in its duly elected board of directors. Insofar as the Dead Hand Restriction purports to restrict the power of AMP's Board to redeem or amend the Poison Pill, it conflicts with Section 2.1 of AMP's By-laws and is therefore of no cause or effect. 30. Furthermore, the Dead Hand Restriction purposefully interferes with the shareholder voting franchise without any compelling justification. Moreover, the Dead Hand Restriction is an unreasonable and disproportionate defensive measure, because it either precludes or materially abridges the sharehold ers' rights to receive tender offers and wage proxy contests to replace the Board. Third Claim for Relief ---------------------- (Declaratory Judgment) 31. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 32. To the extent that the Dead Hand Restriction and other anti-takeover devices that preclude tender offers and consent solicitations are permitted under Pennsylvania law, such law is unconstitutional under the Commerce 10 Clause because it impermissibly burdens interstate commerce far in excess of local benefits. The Dead Hand Restriction renders futile the Consent Solicitation and other contests for corporate control, because the shareholders will be powerless to elect a board that is both willing and able to accept an insurgent's bid. If Pennsylvania law is deemed to permit the Dead Hand Restriction, such law thus gives a Pennsylvania corporation's pre-existing board of directors a de facto veto power over tender offers and mergers, and therefore thwarts shareholder democracy and impermissibly burdens interstate commerce. 33. To the extent the Dead Hand Restriction is permissible under Pennsylvania law, such law injures and will continue to injure Plaintiff because it deprives Plaintiff of its right to proceed with its Proposed Business Combination. Fourth Claim for Relief ----------------------- (Declaratory Judgment) 34. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 35. To the extent that the Dead Hand Restriction and other anti-takeover devices that preclude tender offers and consent solicitations are permitted under Pennsylvania law, such law is preempted by the Williams Act and thereby violates the Supremacy Clause of the United States Constitution. It frustrates the full purpose and objectives of Congress in enacting the Williams Act by: (a) giving intransigent management the ability to defeat a noncoercive proposal without 11 a vote by shareholders, (b) impermissibly tilting the balance between management and a potential acquirer in the context of a noncoercive proposal, and (c) depriving Plaintiff of its right to have AMP shareholders consider the Proposed Business Combination under federal law. 36. To the extent the Dead Hand Restriction is permissible under Pennsylvania law, such law injures and will continue to injure Plaintiff because it deprives Plaintiff of its right to proceed with its Proposed Business Combination as contemplated by the Williams Act and other applicable law. Fifth Claim for Relief ---------------------- (Injunctive Relief) 37. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 38. The effect of AMP's anti-takeover devices is to frustrate and impede the ability of AMP shareholders to decide for themselves whether they wish to receive the benefits of the AlliedSignal Tender Offer and proposed second-step merger. These devices unreasonably and inequitably frustrate and impede the ability of AlliedSignal to proceed with its Tender Offer and Consent Solicitation. The failure of AMP and its board to (i) redeem the AMP Poison Pill or to amend the Poison Pill by removing the Dead Hand Restriction, and (ii) adopt a resolution approving the AlliedSignal Tender Offer for purposes of the Business Combination 12 Statute is clearly a breach of their fiduciary duty and thus a violation of Pennsylvania law. 39. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff respectfully requests that this Court enter judgment against Defendant as follows: A. Declaring pursuant to the Declaratory Judgment Act, 28 U.S.C. (S) 2201(a), that: (a) if the Board should fail to fix a record date for the Consent Solicitation within 10 days of its receipt of AlliedSignal's written notice requesting such a record date, the record date for the Consent Solicitation shall be the date such written notice is delivered to AMP in accordance with AMP's By-laws; (b) the fixing of a record date more than ten (10) days after the date of AlliedSignal's written notice is impermissible because it would effectively prevent AMP's shareholders from exercising their franchise; (c) the Dead Hand Restriction is inapplicable or, to the extent applicable, is in violation of Pennsylvania law and the fiduciary duties owed to AlliedSignal and all other AMP shareholders; (d) to the extent Pennsylvania law authorizes the Dead Hand Restriction, it (i) constitutes an impermissible burden on interstate commerce in violation of the Commerce Clause of the United States Constitution, and (ii) is 13 preempted by the Williams Act and therefore unconstitutional under the Supremacy Clause of the United States Constitution; and (e) AlliedSignal's tender offer and consent solicitation comply with all applicable laws, obligations and agreements. B. Preliminarily and permanently enjoining the Defendant, its directors, officers, partners, employees, agents, subsidiaries and affiliates, and all other persons acting in concert with or on behalf of the Defendant directly or indirectly, from: (a) fixing a record date for determining the shareholders entitled to vote on the proposals in AlliedSignal's Consent Solicitation more than ten (10) days after the date of AlliedSignal's written notice; (b) increasing the size of AMP's Board and filling the new seats with Board nominees after commencement of AlliedSignal's Consent Solicita tion; (c) refusing to redeem AMP's Poison Pill or amending the Poison Pill so as to make the Rights inapplicable to AlliedSignal's Tender Offer, and refusing to grant prior approval of the Tender Offer and Merger for purposes of the Pennsylvania Business Combination Statute; (d) amending its By-laws to in any way impede the effective exercise of the stockholder franchise; or 14 (e) taking any other steps to impede or frustrate the ability of AMP's shareholders to consider or make their own determination as to whether to accept the terms of AlliedSignal's Tender Offer and the proposals in AlliedSignal's Consent Solicitation, or taking any other action to thwart or interfere with the Tender Offer or Consent Solicitation. C. Granting compensatory damages for all incidental injuries suffered as a result of defendant's unlawful conduct. D. Awarding plaintiff the costs and disbursements of this action, including attorney's fees. 15 E. Granting plaintiff such other and further relief as the court deems just and proper. /s/ Alexander R. Sussman -------------------------------------------------- Alexander R. Sussman Barry G. Sher Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004 (212) 859-8000 and: /s/ Mary A. McLaughlin -------------------------------------------------- Mary A. McLaughlin George G. Gordon Dechert, Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103 (215) 994-4000 Attorneys for Plaintiff DATED: 8/14/98 ________________ CERTIFICATE OF SERVICE ---------------------- I hereby certify that I caused this day the foregoing Complaint for Declaratory and Injunctive Relief to be served on the following by Federal Express: Charles Goonrey, Esq. General Counsel AMP Incorporated 47 Friendship Road Harrisburg, PA 17111 /s/ Joseph A. O'Connor, Esq. Dated: August 4, 1998 ---------------------------- Joseph A. O'Connor, Esq. 16 EX-99.15 16 COMPLAINT FILED (98-CV-4109) EXHIBIT 15 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA CLAIRE BLUM, : C.A. No. 98CV-4109 Plaintiff, : - against - : CLASS ACTION WILLIAM J. HUDSON, JR., : JAMES E. MARLEY, HAROLD A. MCINNES, RALPH D. : DENUNZIO, BARBARA HACKMAN FRANKLIN, JOSEPH M. HIXON, III, : JOSEPH M. MAGLIOCHETTI, : JEROME J. MEYER, JOHN C. MORLEY, PAUL G. SCHLOEMER, : TAKEO SHINNA, and AMP INC., : Defendants. PLAINTIFF'S CLASS ACTION COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF Plaintiff, by her knowledge as to her own acts and upon information and belief as to all other matters, alleges as follows: NATURE OF THE ACTION 1. This is a stockholders' class action lawsuit brought on behalf of the public stockholders of AMP, Inc. ("AMP" or the "Company") who have been, and continue to be, deprived of the opportunity to realize fully the benefits of their investment in the Company. The individual defendants have wrongfully refused to take the steps necessary to maximize stockholder value, including properly considering a bona fide offer for the Company from AlliedSignal, Inc. ("Allied"). By failing and refusing to take such steps, including adequately considering the Allied offer, defendants have breached their fiduciary duties to plaintiff and the class. The individual defendants are using their fiduciary positions of control over AMP to thwart others in their legitimate attempts to acquire AMP, and the individual defendants are trying to entrench themselves in their positions with the Company. 2. The directors of AMP have wrongfully relied upon various other anti-takeover devices, including a "poison pill" shareholder rights plan and certain provisions of the Pennsylvania Business Corporation Law ("PBCL") in attempt to block Allied's offer to acquire the Company. AMP's "poison pill" shareholder rights plan contains an unusual and illegal redemption and amendment restriction, commonly known as a dead hand provision. The dead hand provision prevents shareholders from electing new directors not approved by the incumbent management - all designed to impede, delay, or prevent consummation of any offer not previously approved of by AMP management and to improperly entrench the incumbent directors. 2 PARTIES 3. Plaintiff Claire Blum, a New York citizen, is and, at all relevant times, has been the owner of shares of AMP common stock. 4. AMP is a corporation duly organized and existing under the laws of the Commonwealth of Pennsylvania. AMP designs, manufactures, and markets electronic cables and connectors. AMP maintains its principal executive offices at 470 Friendship Road, Harrisburg, Pennsylvania. As of March 3, 1998, AMP has 219,559,875 shares of common stock outstanding and thousands of stockholders of record. AMP's stock trades over the New York Stock Exchange. 5. Defendant William J. Hudson, Jr. ("Hudson") is the Chief Executive Officer, President, and a director of AMP. In 1997, Reynolds received from AMP more than $1.380 million in compensation. 6. Defendant James J. Marley ("Marley") is the Chairman of the AMP Board of Directors. In 1997, Marley received from AMP more than $1.135 million in compensation. 7. Harold A. McInnes ("McInnes") served as an executive officer of AMP for more than five years and is the retired Chairman of the Board, retired Chief Executive Officer, and a sitting director of the Company. In 1997, McInnes received from AMP more than $134,000 in compensation as a director of the Company. 3 8. Defendants Ralph D. Denunzio, Barbara Hackman Franklin, Joseph M. Hixon, III, Joseph M. Magliochetti, Jerome J. Meyer, John C. Morley, Paul G. Schloemer, and Takeo Shinna are directors of AMP. 9. The defendants named in paragraphs 5 through 8 are hereinafter referred to as the "Individual Defendants." 10. Because of their positions as officers/directors of the Company, the Individual Defendants owe a fiduciary duty of loyalty and due care to plaintiff and the other members of the class. 11. Each defendant herein is sued individually as a conspirator and aider and abetter, as well as in his/her capacity as an officer and/or director of the Company, and the liability of each arises from the fact that he or she has engaged in all or part of the unlawful acts, plans, schemes, or transactions complained of herein. JURISDICTION AND VENUE 12. The Court has jurisdiction of the subject matter of this action pursuant to 28 U.S.C. (S)(S) 1331, 1332(a), and 1367(a). The matter in controversy exceeds the sum of $75,000, exclusive of interest and costs. 13. Venue is proper in this district pursuant to 28 U.S.C. (S)(S) 1391(a)-(c). 4 CLASS ACTION ALLEGATIONS 14. Plaintiff brings this case on her own behalf and as a class action, pursuant to Fed. R. Civ P. 23(b)(2), on behalf of all stockholders of the Company, except defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the defendants, who will be threatened with injury arising from defendants' actions as is described more fully below (the "Class"). 15. This action is properly maintainable as a class action. 16. The Class is so numerous that joinder of all members is impracticable. The Company has hundreds of stockholders who are scattered throughout the United States. 17. There are questions of law and fact common to the Class that predominate over questions affecting any individual class member. The common questions include, inter alia, whether: a. defendants have breached their fiduciary duties owed by them to plaintiff and other members of the Class by failing and refusing to attempt in good faith to maximize stockholder value, including considering the sale of AMP; b. defendants have breached or aided and abetted the breach of the fiduciary duties owed by them to plaintiff and other members of the Class; 5 c. defendants engaged in a plan and scheme to thwart and reject offers and proposals from third parties, including the one made by Allied; and d. plaintiff and the other members of the Class are being and will continue to be injured by the wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. 18. Plaintiff is committed to prosecuting the action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Plaintiff is an adequate representative of the Class. 19. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 20. The defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class are appropriate. 6 SUBSTANTIVE ALLEGATIONS 21. By the acts, transactions, and courses of conduct alleged herein, defendants, individually and as part of a common plan and scheme and/or aiding and abetting one another in total disregard of their fiduciary duties, are attempting to deprive plaintiff and the Class unfairly of the opportunity to maximize the value of their investment in AMP. 22. In late July 1998, Allied management initiated contact with AMP management to discuss a strategic business combination. Specifically, Larry Bossidy ("Bossidy"), Chairman and Chief Executive Officer of Allied, made several attempts by telephone to speak with defendant Hudson. Every attempted contact by Bossidy was rebuffed. 23. On July 30, 1998, Allied sent a letter to AMP proposing the terms of a formal offer. Allied indicated that it was prepared to enter into a $9.8 billion transaction whereby Allied would pay $43.50 per share for each outstanding share of AMP. Further Allied let it be known that it was prepared to be "flexible" on the proposed price and terms of the transaction depending upon due diligence and AMP's willingness to negotiate. 24. AMP's response to the Allied offer was to do nothing until August 4, 1998 when Allied publicly announced that it has made an all cash offer for 7 AMP. At that time, AMP simply issued a terse statement advising shareholders not to make any tender to Allied until the Board of Directors reviewed the offer. 25. Allied's August 4, 1998 press release disclosed the terms of Allied's latest offer, including the payment of $44.50 per share in cash, and disclosed that, in light of AMP's unreasonable defensive measures such as the poison pill, it would commence a hostile consent solicitation under which it would be able to take control of AMP's board if it obtained 50.1% of AMP's stock. Following the consent solicitation, Allied would obtain the remaining shares in a second-step merger in which AMP shareholders will received $44.50. 26. Allied's $44.50 offer constituted a 50% premium over the trading price of the stock just prior to the public announcement of Allied's offer. 27. AMP has continued to stonewall by refusing to even meet with representatives of Allied. Instead, Allied has relied upon its anti-takeover devices which are wholly unreasonable in light of Allied's offer. 28. On August 4, 1998, it was further disclosed that Allied has commenced litigation against AMP seeking to declare illegal certain of AMP's defense mechanisms, including a poison pill rights plan, containing the dead- hand provision. 29. Despite the significant interest of AMP stockholders, defendants have acted without regard to the fiduciary duties they owe them by, inter alia, 8 failing to take the steps necessary to maximize stockholder value, including, but not limited to, agreeing to meet with and negotiate with Allied. Defendants have done so without business justification and without negotiation. 30. Defendants' failure to act promptly upon Allied's offer has no valid business purpose, and simply evidences their disregard for the premium being offered to AMP stockholders. By failing to meet promptly and negotiate, or offer to meet and negotiate, with Allied, defendants are depriving plaintiff and the Class of their right to share in the assets and businesses of AMP - and receive the maximum value for their AMP shares. 31. AMP represents a highly attractive acquisition candidate. Defendants' conduct is depriving AMP's public stockholders of the control premium that Allied are prepared to pay, or of the enhanced premium that further negotiation or exposure of AMP to the market could provide. 32. Defendants owe fundamental fiduciary obligations to AMP's stockholders to take all necessary and appropriate steps to maximize the value of their shares. In addition, the Individual Defendants have the responsibility to act independently so that the interests of AMP's public stockholders will be protected, to seriously consider all bona fide offers for the Company, and to conduct fair and active bidding procedures or other mechanisms for checking the market to assure that the highest possible price is achieved. Further, the directors of AMP must ade- 9 quately ensure that no conflict of interest exists between the Individual Defendant's own interests and their fiduciary obligations to maximize stockholder value or, if such conflicts exist, to insure that all such conflicts will be resolved in the best interests of the Company's stockholders. 33. Because defendants dominate and control the business and corporate affairs of AMP and because they are in possession of private corporate information concerning AMP's assets, businesses and future prospects, there exists an imbalance and disparity of knowledge of economic power between defendants and the public shareholders of AMP. This discrepancy makes it grossly and inher ently unfair for defendants to refrain from taking those steps necessary to maximize stockholder value. Defendants have refused to seriously consider Allied's offer, and have failed to announce any active auction or open bidding procedures that would maximize stockholder value by entertaining offers to purchase the Company. 34. The Individual Defendants have breached their fiduciary and other common law duties owed to plaintiff and other members of the Class in that they have not and are not exercising independent business judgment and have acted and are acting to the detriment of the Class. 35. The Individual Defendants are acting to entrench themselves in their offices and positions and maintain their substantial salaries and perquisites, all at the expense and to the detriment of the public stockholders of AMP. 10 Irreparable Injury 36. AMP's and the Individual Defendant's reliance upon and refusal to remove or nullify AMP's anti-takeover devices and other defensive measures so as to obstruct the Allied's offer will (a) deny plaintiff and the Class the meaningful right to decide for themselves whether or not to tender their shares and accept Allied's offer; (b) hinder or prevent plaintiff and the Class from exercising their fundamental shareholder rights under Pennsylvania law and (c) cause plaintiff irreparable injury as a result of the loss of the unique opportunity to sell their interest in AMP to Allied at a substantial premium. These injuries will be suffered directly by plaintiff and the Class and are separate and distinct from the injuries that such actions will cause Allied, who will be deprived of the fundamental right to acquire control of AMP. 37. Plaintiff has no adequate remedy at law. Only through the exercise of the Court's equitable powers will plaintiff be protected from immediate and irreparable injury. Unless the court enjoins the application of AMP's anti-takeover devices to the Allied's offer and enjoins AMP and the Individual Defendants from impeding the offer by any other defensive measures, including litigation in other forums, plaintiff will be (a) precluded from participation in the Allied offer, which can only be consummated upon the invalidation of AMP's wrongful anti-takeover devices, (b) denied any meaningful control over the assets of AMP, and (c) 11 hindered in or prevented from exercising their fundamental shareholder rights under Pennsylvania law. Should that occur, plaintiff and the Class will have lost the unique opportunity to tender their shares for a 50% premium over the market price of AMP's shares on the trading day prior to Allied's offer. Declaratory And Injunctive Relief 38. The Court may grant the declaratory and injunctive relief sought herein pursuant to 28 U.S.C. (S) 2201 and Fed. R. Civ. P. 57 and 65. A substantial controversy exists between the parties, as demonstrated by (a) the defendants' rejection of Allied's initial offers, (b) defendants' unwillingness even to meet with Allied to consider or discuss a combination or merger despite Allied's premium, all-cash offer, and (c) the defendants' failure to redeem or amend the poison pill. The adverse legal interests of the parties are real and immediate. The existence of this controversy is causing confusion and uncertainty in the market for public securities because investors do not know whether they will be able to avail themselves of an advantageous financial offer. The granting of the requested declaratory and injunctive relief will serve the public interest by affording relief from such uncertainty and by avoiding delay. 12 COUNT I INJUNCTIVE AND DECLARATORY RELIEF -- DEAD HAND PROVISION -- COMMERCE CLAUSE VIOLATION 39. Plaintiff repeats and realleges each allegation contained above as if fully set forth herein. 40. AMP's shares are widely held outside Pennsylvania. Therefore, Allied's offer constitutes a substantial securities transaction in interstate commerce, employing interstate instrumentalities and facilities in the communication of Allied's offer and in transactions for the purchase and sale of AMP's securities occurring across state lines. 41. The Commerce Clause of the United States Constitution provides that: "Congress shall have the power . . . [t]o regulate commerce . . . among the several states." U.S. Const., art. 1, (S) 8, cl. 3. 42. To the extent the dead hand provision is applied to prevent Allied's offer, it violates the Commerce Clause by imposing a substantial and adverse burden on interstate commerce. Specifically, AMP's dead hand provision: a. deters and/or substantially eliminates nationwide tender offers for Pennsylvania corporations with such provisions, except offers that are approved by incumbent management; b. burdens AMP shareholders throughout the United States in their efforts to sell their shares at a premium; 13 c. burdens Allied and other prospective tender offerors in their efforts to buy securities from willing sellers of AMP stock located throughout the United States; d. substantially interferes with and diminishes access to the national securities market; and e. impedes the injection into interstate commerce of millions of dollars by means of Allied's offer and interferes with the efficient allocation of economic resources. 43. These burdens imposed on interstate commerce far outweigh any purported local benefits. To the extent that the dead hand provision reduces or eliminates shareholder autonomy and entrenches existing management, it is detrimental to the interests of shareholders. 44. The undue burden on interstate commerce created by the dead hand provision has a direct and substantial impact in this case. 45. Plaintiff has no adequate remedy at law. COUNT II INJUNCTIVE AND DECLARATORY RELIEF -- POISON PILL -- BREACH OF FIDUCIARY DUTY 46. Plaintiff repeats and realleges each allegation contained above as if fully set forth herein. 14 47. Allied's offer is non-coercive, non-discriminatory; fair to AMP's shareholders; and represents a substantial premium over the market price of AMP shares as of the trading date prior to the public announcement of Allied's offer. 48. Allied's offer complies with all applicable laws, obligations, and agreements and pose no threat to the interests of AMP's shareholders or to AMP's corporate policy or effectiveness. Defendants' use of or reliance upon the Poison Pill, including its Dead Hand Provision, to prevent AMP's shareholders from deciding for themselves whether or not to accept Allied's offer is not proportionate to any threat posed, nor within the range of reasonable responses to Allied's offer, forecloses effective shareholder action, and is in breach of the Individual Defendants' fiduciary duties. Plaintiff seeks declaratory injunctive relief against such breaches of fiduciary duties. 49. Defendant's refusal to redeem or amend the poison pill so as to block Allied's offer also violates the Individual Defendants' fiduciary duties because such action will deny plaintiff meaningful access to or control over the assets of AMP and will hinder or prevent plaintiff and the Class from exercising their fundamental shareholder rights under Pennsylvania law. 50. Plaintiff has no adequate remedy at law. 15 COUNT III INJUNCTIVE AND DECLARATORY RELIEF -- OTHER ATTEMPTS TO IMPEDE OFFER AND PROPOSED MERGER -- BREACH OF FIDUCIARY DUTY 51. Plaintiff repeats and realleges each allegation contained above as if fully set forth herein. 52. Allied's offer is all-cash, non-coercive, non-discriminatory, and complies with all applicable laws, obligations, and agreements. AMP and the Individual Defendants should not be permitted to manipulate the existing corporate machinery or to adopt new defensive measures that would have the effect of delaying, impeding, or blocking consideration of Allied's offer, the election of the New Individuals, or that would have the effect of preventing AMP's shareholders from freely considering whether to accept Allied's offer. This matter is now before this Court, when is fully capable of resolving all issues relating to Allied's offer. 53. Thus, AMP and the Individual Defendants should be enjoined from using such devices for the improper purpose of impeding shareholder consideration of Allied's offer. 54. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff respectfully requests that this Court enter an order: A. declaring this to be a proper class action and certifying plaintiff as a Class representative; 16 B. declaring and adjudging that the dead hand provision is invalid and is in violation of the Individual Defendants' fiduciary duties; compelling the Individual Defendants to amend the poison pill to delete the Dead Hand Provision and enjoining AMP, the Individual Defendants, and AMP's officers, successors, agents, servants, subsidiaries, employees and attorneys from taking any actions to enforce to apply the dead hand provision that (i) would interfere with plaintiff's voting rights, (ii) discriminate in any way against plaintiff in the exercise of their rights with respect to their AMP stock, (iii) impede or frustrate the ability of AMP's shareholders to consider and make their own determination as to whether to elect new individuals and/or accept the terms of Allied's offer, or (iv) otherwise interfere, impede, or delay the commencement, continuation, or consummation of Allied's offer; C. declaring, in the event the dead hand provision is adjudged permissible under PBCL, that it is unconstitutional as applied to Allied's offer to the extent that it permits the dead hand provision because it violates the Commerce Clause of the United States Constitution; D. enjoining AMP, the Individual Defendants, and AMP's officers, successors, agents, servants, subsidiaries, employees and attorneys from taking any steps to impede or frustrate the ability of AMP's shareholders to consider 17 and make their own determination as to whether to accept the terms of Allied's offer or taking any other action to thwart or interfere with Allied's offer; E. declaring and adjudging that AMP, the Individual Defendants, and AMP's officers, successors, agents, servants, subsidiaries, employees and attorneys may not commence, and enjoining them from commencing, in any forum other than this Court, any judicial proceedings that would require litigation, by way of claim, defense, or counterclaim, of any of the claims, defenses, or counterclaims which may be asserted in this lawsuit and that would delay or impede commencement, continuation, or consummation or Allied's offer, including, without limitation, any proceedings challenging Allied's offer or seeking to enforce, apply, or declare the validity of any of AMP's anti-takeover devices or other defensive measures; F. ordering the Individual Defendants to carry out their fiduciary duties to plaintiff and the other members of the Class by announcing their intention to: (i) cooperate fully with any entity or person, including Allied, having a bona fide interest in proposing any transaction that would maximize stockholder value including, but not limited to, a merger or acquisition of AMP; (ii) immediately undertake an appropriate evaluation of AMP's worth as a merger/acquisition candidate; 18 (iii) take all appropriate steps to enhance AMP's value and attractiveness as a merger/acquisition candidate; (iv) take all appropriate steps to effectively expose AMP to the marketplace in an effort to create an active auction of the Company; (v) act independently so that the interests of the Company's public stockholders will be protected; and (vi) adequately ensure that no conflicts of interest exist between the Individual Defendants' own interest and their fiduciary obligation to maximize stockholder value or, in the event such conflicts exist, to ensure that all conflicts of interest are resolved in the best interests of the public stockholders of AMP; 19 G. awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; and H. granting such other and further relief as may be just and proper. Dated: August 6, 1998 SAVETT, FRUTKIN, PODELL & RYAN, P.C. /s/ Stuart H. Savett By:_________________________________ Stuart H. Savett (I.D. No. 03699) Robert P. Frutkin (I.D. No. 21366) 325 Chestnut Street, Suite 700 Philadelphia, Pennsylvania 19160 (215) 923-5400 Attorneys for Plaintiff Of Counsel: WECHSLER HARWOOD HALEBIAN & FEFFER LLP 488 Madison Avenue New York, New York 10022 (212) 935-7400 20 EX-99.16 17 COMPLAINT FILED (98-CV-4120) EXHIBIT 16 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA - - - - - - - - - - - - - - - - - - - - - - - x SCOTT SILVER : 547 Phillip Road Huntington Valley, PA 19006 : CLASS ACTION COMPLAINT Plaintiff, : -v- : CIVIL ACTION NO. 98-CV-4120 AMP, INC. : A Pennsylvania Corporation, 470 Friendship Road : Harrisburg, PA 17111 : WILLIAM J. HUDSON, JR.; JAMES E. MARLEY; HAROLD A. McINNES; RALPH D. : DeNUNZIO; BARBARA HACKMAN FRANK LIN; JOSEPH M. HIXON, III; JOSEPH M. : MAGLIOCHETTI; JEROME J. MEYER; JOHN C. MORLEY; PAUL G. SCHLOEMER; and : TAKEO SHIINA : Defendants. - - - - - - - - - - - - - - - - - - - - - - - x COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF ----------------------------------------------- Plaintiff, a shareholder of defendant AMP, Inc., individually and on behalf of the class of shareholders described herein, by undersigned attorneys, as and for his Complaint, alleges upon knowledge with respect to himself and his own acts, and upon information and belief as to all other matters, as follows: NATURE OF THE ACTION -------------------- 1. On August 4, 1998, Allied Signal Corporation ("AlliedSignal"), a Delaware corporation with its principal executive offices in Morristown, New Jersey, announced that it will commence a tender offer for the stock of defendant AMP, Inc. ("AMP") at $44.50 per share, a price representing a premium of approximately 50% over the closing trading price of AMP common stock on August 3, 1998. This action for injunctive and declaratory relief is brought to ensure that the common law, statutory, and constitutional rights of plaintiff and the class of AMP stockholders to exercise the inherent voting and property rights incident to their ownership of AMP stock, to ensure that their rights under the federal proxy rules are protected, to preserve their right to receive tender offers, while also ensuring the rights to all AMP stockholders to consider AlliedSignal's offer or any other offer by any third party to acquire their shares and/or to merge with AMP. Plaintiff also seeks to prevent AMP from manipulating or otherwise subverting the process of corporate democracy by impermissibly taking action to frustrate the consent solicitation that AlliedSignal or any other bidder will have to conduct to gain majority representation on the AMP Board of Directors if AMP attempts to obstruct AlliedSignal's or any other tender offer. This action also seeks relief declaring AMP's so-called "dead hand" poison pill to be inapplicable or legally invalid. JURISDICTION AND VENUE ---------------------- 2. This Court has jurisdiction over this action pursuant to 28 U.S.C. (S)(S)1331 and 1367. 1 3. Venue is proper in this district under 28 U.S.C. (S)1391(b) and (c). PARTIES ------- 4. Plaintiff Scott Silver, 547 Phillip Road, Huntington Valley, Pennsylvania 19006, is and at all times relevant hereto has been the owner of shares of AMP. 5. (a) Defendant AMP is a Pennsylvania corporation with its principal executive offices in Harrisburg, Pennsylvania. AMP designs, manufactures and markets electronic, electrical and electro-optic connection devices, interconnection systems and connector-intensive assemblies. (b) Defendant William J. Hudson ("Hudson") is Chief Executive Officer and President of the corporation. Mr. Hudson has served as an officer of the corporation for more than the past five years. (c) Defendant James E. Marley ("Marley"), is Chairman of the Board of Directors of the corporation. Mr. Marley has serves as an officer of the corporation for more than the past five years. (d) Defendant Harold A. McInnes ("McInnes"), is retired Chairman of the Board of Directors and Chief Executive Officer of the corporation. Mr. McInnes served as an officer of the corporation for more than five years. 2 (e) Defendants Ralph D. DeNunzio, Barbara Hackman Franklin, Joseph M. Hixon, III, Joseph M. Magliochetti, Jerome J. Meyer, John C. Morley, Paul G. Schloemer and Takeo Shiina are directors of AMP. 6. The defendants identified in subparagraphs (b) through (e) above are referred to herein as the "Individual Defendants." CLASS ACTION ALLEGATIONS ------------------------ 7. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of himself and all AMP shareholders as of August 4, 1998 or their successors in interest (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related, to affiliated with, or controlled by any of the defendants. 8. This action is properly maintainable as a class action. 9. The class is so numerous that joinder of all members is impracticable. As of March 3, 1998, there were approximately 219,559,875 shares of AMP common stock outstanding. It is unknown prior to discovery how many shareholders are in the Class, but such information is known by or available to defendants, and it is believed that the number of shareholders comprising the Class is in the hundreds. 10. There are questions of law and fact which are common to the Class and which predominate over questions affecting any individual class members. The common questions include, inter alia, the following: ----- ---- 3 (a) Whether defendants have engaged in conduct constituting breaches of their fiduciary duties and other common law and statutory duties to the detriment of the Class; (b) Whether the Dead Hand Poison Pill is illegal, invalid, unconstitutional, or otherwise improper and operates to the detriment of the Class; (c) Whether defendants have acted to impair the corporate franchise rights of plaintiff and the other members of the Class in breach of their fiduciary duties; and (d) Whether defendants are engaging in a scheme to entrench and benefit themselves to the detriment of the Class; (e) Whether plaintiff and the other members of the Class would be irreparably harmed were the actions of defendants complained of herein not enjoined. 11. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. The plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 12. Plaintiff anticipates that there will be no difficulty in the management of this litigation as a class action. 13. Defendants have acted on grounds generally applicable to the Class with respect to the matters complained of herein, thereby making appropriate the relief sought herein with respect to the Class as a whole. 4 14. The prosecution of separate actions by individual members of the Class would create a risk of adjudications which would, as a practical matter, be dispositive of the interests of Class members who are not parties to such adjudications or substantially impair or impede their ability to protect their interests. 15. A class action is superior to other available methods for the fair and efficient adjudication of the controversy. ALLIEDSIGNAL'S OFFER -------------------- 16. On July 29, 1998, AlliedSignal Chairman and Chief Executive Officer ("CEO") Larry Bossidy telephoned AMP's CEO and President, William J. Hudson, to determine whether AMP would be interested in pursuing a business combination with Allied Signal. Mr. Hudson was unavailable to speak with Mr. Bossidy, and he did not thereafter return Mr. Bossidy's telephone call. 17. On July 30, 1998, Mr. Bossidy sent a letter to Mr. Hudson proposing a business combination of AlliedSignal and AMP. The letter stated that AlliedSignal was prepared to offer $43.50 per share in cash for all of AMP's outstanding shares, at a premium of approximately 50% over the market value. 18. AMP did not respond to Mr. Bossidy's July 30 letter. 19. On August 4, 1998, AlliedSignal announced that it will commence within five (5) business days a tender offer for the stock of defendant AMP at $44.50 per share (the "Tender Offer"), which, as stated in Mr. Bossidy's July 30, 1998 letter, represents approximately 5 a 50% premium over the closing trading price of AMP common stock on August 3, 1998. The Tender Offer gives AMP shareholders the opportunity to accept the Offer if they determine it is in their best interests. Upon consummation of the Tender Offer, AlliedSignal intends to acquire the remaining shares of AMP in a second-step merger in which AMP shareholders will receive $44.50 in cash for each AMP share they own. 20. AlliedSignal's Tender Offer and second-step merger cannot be consummated unless the AMP Board -- voluntarily or by the direction of a court -- removes or makes inapplicable various anti-takeover devices, including AMP's "poison pill" and certain provisions of the Pennsylvania Business Corporation Law ("PBCL"). 21. In light of AMP's failure to respond to AlliedSignal's July 30, 1998 letter, the current AMP Board cannot be expected to facilitate AlliedSignal's Tender Offer and second-step merger, but can be expected, instead, to maintain AMP's anti-takeover devices in place and actively oppose the Tender Offer and merger. For this reason, AlliedSignal is preparing to conduct a consent solicitation (the "Consent Solicitation") to gain majority representation on the AMP Board of Directors by electing individuals nominated by AlliedSignal who will support a sale of AMP to AlliedSignal, subject to their fiduciary duties to AMP shareholders. AMP'S ANTI-TAKEOVER DEVICES --------------------------- 22. The "Dead Hand" Poison Pill. Foremost among the numerous anti-takeover devices at AMP's disposal is its shareholders' "rights plan," better known as a "poison pill" (the "Poison Pill"). As part of the Poison Pill, the Board authorized and declared a dividend 6 of one common share purchase right (a "Right") per outstanding share of common stock of AMP, payable to shareholders of record as of the close of business on November 6, 1998. 23. The Poison Pill provides that the Rights do not become exercisable until ten business days following the first public announcement that a person (an "Acquiring Person") has acquired beneficial ownership of 20% or more of the outstanding shares of AMP common stock (the "Stock Acquisition Date"), at which time each holder of a Right, other than an Acquiring Person, is entitled, upon exercise of the Right, to receive common stock having a market value equal to two times the Purchase Price. The Effect of this provision (the "Flip-In Provision") thus would be a massive dilution of the value of the holdings of an unwanted acquiror like AlliedSignal. 24. The Dead Hand Restriction. The Board may redeem the Poison Pill until 10 business days after a person becomes an Acquiring Person. The Board's ability to redeem the Rights, however, is purportedly restricted by a provision of the Poison Pill that serves no purpose other than to entrench the current Board (the "Dead Hand Restriction") and the Individual Defendants. 25. Under the Dead Hand Restriction, redemption of the Poison Pill requires the approval of a majority of Continuing Directors (i. e., members of the Board who are not Acquiring Persons or representatives of an Acquiring Persons, either (x) were directors prior to the institution of the Poison Pill or (y) are nominated by a majority of Continuing Directors) if effected (i) after a person becomes an Acquiring Person but prior to the expiration of a ten 7 business day period, or (ii) after a change (resulting from a proxy or consent solicitation) in a majority of the directors in office at the time of the commencement of a proxy or consent solicitation. Furthermore, the Dead Hand restriction provides that the Poison Pill can be amended only by Continuing Directors. 26. Under the Dead Hand Restriction, directors, other than Continuing Directors, elected pursuant to a consent or proxy solicitation in which among Acquiring Person (or a person who intends to become a Acquiring Person) participates, are purportedly without power or authority to redeem the Rights so that the Tender Offer or any other proposed business combination not endorsed by the Continuing Directors may go forward. 27. Because the Dead Hand Restriction purports to prevent newly-elected, insurgent-nominated directors from redeeming the Poison Pill and thus removing a key obstacle to the accomplishment of the very purpose for which they were elected, the Dead Hand Restriction effectively disenfranchises shareholders. In effect, it denies the shareholders of AMP the opportunity to replace the current Board and undermines corporate democracy, which is a fundamental right inherent in share ownership. It also constrains any person intending to become an Acquiring Person, such as AlliedSignal, from soliciting votes or proxies to replace the current Board. It represents an intentional effort by the Board to manipulate the corporate machinery so as to frustrate the effectiveness of a shareholder vote and to impair the lawful authority of directors freely chosen by AMP's shareholders. 8 28. The Pennsylvania Anti-Takeover Statutes. Among other provisions, defendant AMP also has the anti-takeover protections PBCL (S)(S)2551-2556 (the "Business Combination Statute"). 29. Under the Business Combination Statute, an interested shareholder cannot engage in a business combination with AMP for five years unless the acquisition of the shares or the business combination is approved by the AMP Board before an "Interested Shareholder" becomes the beneficial owner, directly or indirectly, of at least 20% of AMP's shares. 30. The Business Combination Statutes will delay or make more difficult acquisitions or changes of control of AMP, have the effect of preventing changes in the management of AMP, and make it more difficult to accomplish transactions which AMP shareholders may otherwise deem to be in their best interests. 31. Fixing the Consent Solicitation Record Date. AlliedSignal cannot obtain shareholder consents to its proposals without a record date for the determination of the shareholders entitled to vote on the proposals. AMP's by- laws (the "By-laws") provide that any shareholder seeking to have shareholders take action by consent must, by written notice, request that the Board fix a record date. The By-laws require the Board to fix the record date no late than 10 days after receipt of the request. (If not fixed within 10 days, the record date will be the day on which the first consent is received by the company.) 9 32. It is anticipated that the Board will seek to delay shareholder consent action on AlliedSignal's proposals by fixing a record date outside the required time period to impede its shareholders from exercising their franchise. First Claim for Relief ---------------------- (Declaratory Judgment) 33. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 34. The Dead Hand Restriction is invalid and unlawful because it purposefully abridges and interferes with the shareholder voting franchise without any compelling justifica tion. In particular, it precludes or materially abridges the shareholders' rights to receive tender offers and wage proxy contests to replace the Board, and it purports to tie the hands and restrict the lawful authority of directors duly elected by the shareholders. Morever, the Dead Hand Restriction is an unreasonable and disproportionate defensive measure, because it improperly serves to entrench the Individual Defendants. 35. Furthermore, the Dead Hand Restriction is invalid per se under Pennsylvania statutory law, in that it purports to limit the discretion of future Boards of AMP by denying any directors other than the Continuing Directors the power or authority to redeem the Poison Pill so that the Tender Offer and Merger or any other business combination not endorsed by the Continuing Directors may go forward. PBCL (S)1721 requires that any such limitation on Board discretion be set forth in a by-law adopted by the shareholders. Since the shareholders of AMP 10 have adopted no such by-law provision, the Board was without power to so limit the discretion of future Boards of AMP by adopting the Dead Hand Restriction. 36. Moreover, PBCL (S)1729 provides that unless otherwise provided in a by- law adopted by the shareholders, every director shall be entitled to one vote. The Dead Hand Restriction creates different classes of directors with different voting rights--those who have the power to redeem the Poison Pill, and those who do not. Since the shareholders of AMP have adopted no by-law provision creating such distinctions in the voting powers of directors, the Board was without power to adopt the Dead Hand Restriction. 37. Additionally, the Dead Hand Restriction is invalid under AMP's By-laws. Under Section 2.1 of the AMP's By-laws, the power to manage the business and affairs of the Corporation is broadly vested in its duly elected board of directors. Insofar as the Dead Hand Restriction purports to restrict the power of AMP's Board to redeem or amend the Poison Pill, it conflicts with Section 2.1 of AMP's By-laws and is therefore of no cause or effect. Second Claim for Relief ----------------------- (Declaratory Judgment) 38. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 39. To the extent that the Dead Hand Restriction and other anti-takeover devices that preclude tender offers and consent solicitations are permitted under Pennsylvania law, such law is unconstitutional under the commerce Clauses because it impermissibly burdens interstate commerce far in excess of local benefits. The Dead Hand Restriction renders futile the 11 Consent Solicitation and other contests for corporate control, because the shareholders will be powerless to elect a board that is both willing and able to accept an insurgent's bid. If Pennsylvania law is deemed to permit the Dead Hand Restriction, such law thus gives a Pennsylvania corporation's pre-existing board of directors a de facto veto power over tender offers and mergers, and therefore thwarts shareholder democracy and impermissibly burdens interstate commerce. 40. To the extent the Dead Hand Restriction is permissible under Pennsylvania law, such law injures and will continue to injure plaintiff because it deprives plaintiff of his right to proceed with its Proposed Business Combination. Third Claim for Relief ---------------------- (Declaratory Judgment) 41. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 42. To extent that the Dead Hand Restriction and other anti-takeover devices that preclude tender offers and consent solicitations are permitted under Pennsylvania law, such law is preempted by the Williams Act and thereby violates the Supremacy Clause of the United States Constitution. It frustrates the full purpose and objectives of Congress in enacting the Williams Acts by: (a) giving the Individual Defendants and intransigent management the ability to defeat a noncoercive proposal without a vote by shareholders, (b) impermissibly tilting the balance between the Individual Defendants and a potential acquirer in the context of a 12 noncoercive business combination proposal, and (c) depriving Plaintiff and the Class of AMP shareholders of their right to consider the Proposed Business Combination under federal law. 43. To the extent the Dead Hand Restriction is permissible under the Pennsylvania law, such law injures and will continue to injure plaintiff and the Class because it deprives plaintiff and the Class of their right to obtain the benefits of the Proposed Business Combination or any other competing offer as contemplated by the Williams Act and other applicable law. Fourth Claim for Relief ----------------------- (Injunctive Judgment) 44. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 45. The effect of AMP's anti-takeover devices is to frustrate and impede the ability of AMP shareholders to decide for themselves whether they wish to receive the benefits of the AlliedSignal Tender Offer and proposed second-step merger or any other business combination proposed by a third party. These devices unreasonably and inequitably frustrate and impede the ability of AlliedSignal to proceed with its Tender Offer and Consent Solicitation. The failure of AMP and its board to (i) redeem the AMP Poison Pill or to amend the Poison Pill by removing the Dead Hand Restriction, and (ii) adopt a resolution permitting the AlliedSignal Tender Offer or an alternative business combination to go forward for purposes of the Business Combination Statute is clearly a breach of their fiduciary duty and thus a violation of Pennsylva nia law. 46. Plaintiff has no adequate remedy at law. Fifth Claim for Relief ---------------------- 13 (Declaratory Judgment and Injunctive Relief) 47. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 48. Fixing a record date beyond the required ten (10) days would violate AMP's Articles and By-laws and constitute an illegal interference with the shareholder franchise, in violation of the PBCL and fundamental principles of corporate governance. 49. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff respectfully requests that this Court enter judgment against Defendant, as follows: A. Declaring pursuant to the Declaratory Judgment Act, 28 U.S.C. (S)2201(a), that: (a) the Dead Hand Restriction is inapplicable or, to the extent applicable, is in violation of Pennsylvania law and the fiduciary duties owed to AlliedSignal and all other AMP shareholders; (b) to the extent Pennsylvania law authorizes the Dead Hand Restriction, it (i) constitutes an impermissible burden on interstate commerce in violation of the Commerce Clause of the United States Constitution, and (ii) is preempted by the Williams Act and therefore unconstitutional under the Supremacy Clause of the United States Constitution; (c) if the Board should fail to fix a record date for the Consent Solicitation within 10 days of its receipt of AlliedSignal's written notice requesting such a record 14 date, the record date for the Consent Solicitation shall be the date such written notice is delivered to AMP in accordance with AMP's By-laws; and (d) the fixing of a record date more than ten (10) days after the date of AlliedSignal's written notice is impermissible because it would effectively prevent AMP's shareholders from exercising their franchise. B. Preliminarily and permanently enjoining the Defendants, their directors, officers, partners, employees, agents, subsidiaries and affiliates, and all other persons acting in concert with or on behalf of the defendants directly or indirectly, from: (a) refusing to redeem AMP's Poison Pill or amend the Poison Pill so as to eliminate the Dead Hand Provision or to make the Rights inapplicable to AlliedSignal's Tender Offer or other proposed alternative business combinations, and refusing to grant prior approval of the Tender Offer and Merger or another business combination for purposes of the Pennsylvania Business Combination Statute. (b) amending its By-laws to in any way impede the effective exercise of the stockholder franchise; or (c) taking any other steps to impede or frustrate the ability of AMP's shareholders to consider or make their own determination as to whether to accept the terms of AlliedSignal's Tender Offer, the proposals in AlliedSignal's Consent Solicitation, or any other alternative business combination or taking any other action to thwart or interfere with the Tender Offer or Consent Solicitation or any alternative proposal; 15 (d) fixing a record date for determining the shareholders entitled to vote on the proposals in AlliedSignal's Consent Solicitation more than ten (10) days after the date of AlliedSignal's written notice; or (e) increasing the size of AMP's Board and filling the new seats with Board nominees after commencement of AlliedSignal's Consent Solicitation. C. A declaration that this action is a proper Class Action and that plaintiff is an appropriate representative of the Class. D. Granting compensatory damages for all injuries suffered as a result of defendant's unlawful conduct. E. Awarding plaintiff the costs and disbursements of this action, including attorney's fees and expert fees. F. Granting plaintiffs such other and further relief as the court deems just and proper. 16 Dated: August 6, 1998 BERGER & MONTAGUE, P.C. /s/ Stephen D. Ramos ------------------------------- Stephen D. Ramos 1622 Locust Street Philadelphia, PA 19103 (215) 875-3000 Jerold B. Hoffman HOFFMAN & EDELSON 45 West Court Street Dolyestown, PA 18901 (215) 230-8043 Attorneys for Plaintiff 17 EX-99.17 18 COMPLAINT FILED (98-CV-4127) EXHIBIT 17 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA _______________________________________x : : SUE GOLDSTEIN, individually : CLASS ACTION COMPLAINT and on behalf of all those : similarly situated, : : Plaintiff, : Civil Action : No. 98-4127 v. : : AMP, INC., : A Pennsylvania Corporation, : 470 Friendship Road : Harrisburg, PA 17111 : WILLIAM J. HUDSON, JR.; : JAMES E. MARLEY; HAROLD A. : McINNES; RALPH D. DeNUNZIO; : BARBARA HACKMAN FRANKLIN; : JOSEPH M. HIXON, III; : JOSEPH M. MAGLIOCHETTI; : JEROME J. MEYER; JOHN C. : MORLEY; PAUL G. SCHLOEMER; : and TAKEO SHIINA : : Defendants. _______________________________________x COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF ----------------------------------------------- Plaintiff, a shareholder of defendant AMP, Inc., individually and on behalf of the class of shareholders described herein, by undersigned attorneys, as and for her Complaint, alleges upon knowledge with respect to herself and her own acts, and upon information and belief as to all other matters, as follows: NATURE OF THE ACTION -------------------- 1. On August 4, 1998, Allied Signal Corporation ("AlliedSignal"), a Delaware corporation with its principal executive offices in Morristown, New Jersey, announced that it would commence a tender offer for the stock of defendant AMP, Inc. ("AMP") at $44.50 per share, a price representing a premium of approximately 50% over the closing trading price of AMP common stock on August 3, 1998. This action for injunctive and declaratory relief is brought to ensure that the common law, statutory, and constitutional rights of plaintiff and the class of AMP stockholders to exercise the inherent voting and property rights incident to their ownership of AMP stock, to ensure that their rights under the federal proxy rules are protected, to preserve their right to receive tender offers, while also ensuring the rights to all AMP stockholders to consider AlliedSignal's offer or any other offer by any third party to acquire their shares and/or to merge with AMP. Plaintiff also seeks to prevent AMP from manipulating or otherwise subverting the process of corporate democracy by impermissibly taking action to frustrate the consent solicitation that AlliedSignal or any other bidder will have to conduct to gain majority representation on the AMP Board of Directors if AMP attempts to obstruct AlliedSignal's or any other tender offer. This action also seeks relief declaring AMP's so-called "dead hand" poison pill to be inapplicable or legally invalid. 2 JURISDICTION AND VENUE ---------------------- 2. This Court has jurisdiction over this action pursuant to 28 U.S.C. (S)(S)1331 and 1387. 3. Venue is proper in this district under 28 U.S.C. (S)1391(b) and (c). PARTIES ------- 4. Plaintiff Sue Goldstein, is and at all times relevant hereto has been the owner of shares of AMP. 5. (a) Defendant AMP is a Pennsylvania corporation with its principal executive offices in Harrisburg, Pennsylvania. AMP designs, manufacturers and markets electronic, electrical and electro-optic connection devices, interconnection systems and connector-intensive assemblies. (b) Defendant William J. Hudson ("Hudson"), is Chief Executive Officer and President of the corporation. Mr. Hudson has served as an officer of the corporation for more than the past five years. (c) Defendant James E. Marley ("Marley"), is Chairman of the Board of Directors of the corporation. Mr. Marley has served as an officer of the corporation for more than the past five years. (d) Defendant Harold A. McInnes ("McInnes"), is retired Chairman of the Board of Directors and Chief Executive Officer of the corporation. Mr. McInnes served as an officer of the corporation for more than five years. 3 (e) Defendants Ralph D. DeNunzio, Barbara Hackman Franklin, Joseph M. Hixon, III, Joseph M. Magliochetti, Jerome J. Meyer, John C. Morley, Paul G. Schloemer and Takeo Shiina are directors of AMP. 6. The defendants identified in subparagraphs (b) through (e) above are referred to herein as the "Individual Defendants." CLASS ACTION ALLEGATIONS ------------------------ 7. Plaintiff brings this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of himself and all AMP shareholders as of August 4, 1998 or their successors in interest (the "Class"). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related, to affiliated with, or controlled by any of the defendants. 8. This action is properly maintainable as a class action. 9. The class is so numerous that joinder of all members is impracticable. As of March 3, 1998, there were approximately 219,559,875 shares of AMP common stock outstanding. It is unknown prior to discovery how many shareholders are in the Class, but such information is known by or available to defendants, and it is believed that the number of shareholders comprising the Class is in the hundreds. 10. There are questions of law and fact which are common to the Class and which predominate over questions affecting any individual class members. The common questions include, inter alia, the following: ----- ---- 4 (a) Whether defendants have engaged in conduct constituting breaches of their fiduciary duties and other common law and statutory duties to the detriment of the Class; (b) Whether the Dead Hand Poison Pill is illegal, invalid, unconstitutional, or otherwise improper and operates to the detriment of the Class; (c) Whether defendants have acted to impair the corporate franchise rights of plaintiff and the other members of the Class in breach of their fiduciary duties; (d) Whether defendants are engaging in a scheme to entrench and benefit themselves to the detriment of the Class; (e) Whether plaintiff and the other members of the Class would be irreparably harmed were the actions of defendants complained of herein not enjoined. 11. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. The plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 12. Plaintiff anticipates that there will be no difficulty in the management of this litigation as a class action. 5 13. Defendants have acted on grounds generally applicable to the Class with respect to the matters complained of herein, thereby making appropriate the relief sought herein with respect to the Class as a whole. 14. The prosecution of separate actions by individual members of the Class would create a risk of adjudications which would, as a practical matter, be dispositive of the interests of Class members who are not parties to such adjudications or substantially impair or impede their ability to protect their interests. 15. A class action is superior to other available methods for the fair and efficient adjudication of the controversy. ALLIEDSIGNAL'S OFFER -------------------- 16. On July 29, 1996, AlliedSignal Chairman and Chief Executive Officer ("CEO") Larry Bossidy telephoned AMP's CEO and President, William J. Hudson, to determine whether AMP would be interested in pursuing a business combination with AlliedSignal. Mr. Hudson was unavailable to speak with Mr. Bossidy, and he did not thereafter return Mr. Bossidy's telephone call. 17. On July 30, 1998, Mr. Bossidy sent a letter to Mr. Hudson proposing a business combination of AlliedSignal and AMP. The letter stated that AlliedSignal was prepared to offer $43.50 per share in cash for all of AMP's outstanding shares, at a premium of approximately 50% over the market value. 18. AMP did not respond to Mr. Bossidy's July 30 letter. 6 19. On August 4, 1998, AlliedSignal announced that it will commence within five (5) business days a tender offer for the stock of defendant AMP at $44.50 per share (the "Tender Offer"), which, as stated in Mr. Bossidy's July 30, 1998 letter, represents approximately a 50% premium over the closing trading price of AMP common stock on August 3, 1998. The Tender Offer gives AMP shareholders the opportunity to accept the Offer if they determine it is in their best interests. Upon consummation of the Tender Offer, AlliedSignal intends to acquire the remaining shares of AMP in a second-step merger in which AMP shareholders will receive $44.50 in cash for each AMP share they own. 20. AlliedSignal's Tender Offer and second-step merger cannot be consummated unless the AMP Board - voluntarily or by the direction of a court - removes or makes inapplicable various anti-takeover devices, including AMP's "poison pill" and certain provisions of the Pennsylvania Business corporation Law ("PBCL"). 21. In light of AMP's failure to respond to AlliedSignal's July 30, 1998 letter, the current AMP Board cannot be expected to facilitate AlliedSignal's Tender Offer and second-step merger, but can be expected, instead, to maintain AMP's anti-takeover devices in place and actively oppose the Tender Offer and merger. For this reason, AlliedSignal is preparing to conduct a consent solicitation (the "Consent Solicitation") to gain majority representation on the AMP Board of Directors by electing individuals nominated by AlliedSignal who will support a sale of AMP to AlliedSignal, subject to their fiduciary duties to AMP shareholders. 7 AMP'S ANTI-TAKEOVER DEVICES --------------------------- 22. The "Dead Hand" Poison Pill. Foremost among the numerous anti- takeover devices at AMP's disposal is its shareholders' "rights plan," better known as a "poison pill" (the "Poison Pill"). As part of the Poison Pill, the Board authorized and declared a divided of one common share purchase right (a "Right") per outstanding share of common stock of AMP, payable to shareholders of record as of the close of business on November 6, 1998. 23. The Poison Pill provides that the Rights do not become exercisable until ten business days following the first public announcement that a person (an "Acquiring Person") has acquired beneficial ownership of 20% or more of the outstanding shares of AMP common stock (the "Stock Acquisition Date"), at which time each holder of a Right, other that an Acquiring Person, is entitled, upon exercise of the Right, to receive common stock having a market value equal to two times the Purchase Price. The Effect of this provision (the "Flip-In Provision") thus would be a massive dilution of the value of the holdings of an unwanted acquiror like AlliedSignal. 24. The Dead Hand Restriction. The Board may redeem the Poison Pill until 10 business days after a person becomes an Acquiring Person. The Board's ability to redeem the Rights, however, is purportedly restricted by a provision of the Poison Pill that serves no purpose other than to entrench the current Board (the "Dead Hand Restriction") and the Individual Defendants. 8 25. Under the Dead Hand Restriction, redemption of the Poison Pill requires the approval of a majority of Continuing Directors (i.e., members of the Board who are not Acquiring Persons or representatives of an Acquiring Persons, either (x) were directors prior to the institution of the Poison Pill or (y) are nominated by a majority of Continuing Directors) if effected (i) after a person becomes an Acquiring Person but prior to the expiration of a ten business day period, or (ii) after a change (resulting from a proxy or consent solicitation) in a majority of the directors in office at the time of the commencement of a proxy or consent solicitation. Furthermore, the Dead Hand restriction provides that the Poison Pill can be amended only by Continuing Directors. 26. Under the Dead Hand Restriction, directors, other than Continuing Directors elected pursuant to a consent or proxy solicitation in which among Acquiring Person (or a person who intends to become a Acquiring Person) participates, are purportedly without power or authority to redeem the Rights so that the Tender Offer or any other proposed business combination not endorsed by the Continuing Directors may go forward. 27. Because the Dead Hand Restriction purports to prevent newly- elected, insurgent-nominated directors from redeeming the Poison Pill and thus removing a key obstacle to the accomplishment of the very purpose for which they were elected, the Dead Hand Restriction effectively disenfranchises shareholders. In effect, it denies the shareholders of AMP the opportunity to replace the current Board and undermines corporate democracy, which is a fundamental right inherent in share ownership. It also constrains any 9 person intending to become an Acquiring Person, such as AlliedSignal, from soliciting votes or proxies to replace the current Board. It represents an intentional effort by the Board to manipulate the corporate machinery so as to frustrate the effectiveness of a shareholder vote and to impair the lawful authority of directors freely chosen by AMP's shareholders. 28. The Pennsylvania Anti-Takeover Statutes. Among other provisions, defendant AMP also has the anti-takeover protections PBCL (S)(S)2551-2556 (the "Business Combination Statute"). 29. Under the Business Combination Statute, an interested shareholder cannot engage in a business combination with AMP for five years unless the acquisition of the shares or the business combination is approved by the AMP Board before an "Interested Shareholder" becomes the beneficial owner, directly or indirectly, of at least 20% of AMP's shares. 30. The Business Combination Statutes will delay or make more difficult acquisitions or changes of control of AMP, have the effect of preventing changes in the management of AMP, and make it more difficult to accomplish transactions which AMP shareholders may otherwise deem to be in their best interests. 31. Fixing The Consent Solicitation Record Date. AlliedSignal cannot obtain shareholder consents to its proposals without a record date for the determination of the shareholders entitled to vote on the proposals. AMP's by- laws (the "By-laws") provide that any shareholder seeking to have shareholders take action by consent must, by written 10 notice, request that the Board fix a record date. The By-laws require the Board to fix the record date no later than 10 days after receipt of the request. (If not fixed within 10 days, the record date will be the day on which the first consent is received by the company). 32. It is anticipated that the Board will seek to delay shareholder consent action on AlliedSignal's proposals by fixing a record date outside the required time period to impede its shareholders from exercising their franchise. FIRST CLAIM FOR RELIEF ---------------------- (DECLARATORY JUDGMENT) 33. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 34. The Dead Hand Restriction is invalid and unlawful because it purposefully abridges and interferes with the shareholder voting franchise without any compelling justification. In particular, it precludes or materially abridges the shareholders' rights to receive tender offers and wage proxy contests to replace the Board, and it purports to tie the hands and restrict the lawful authority of directors duly elected by the shareholders. Moreover, the Dead Hand Restriction is an unreasonable and disproportionate defensive measure, because it improperly serves to entrench the Individual Defendants. 35. Furthermore, the Dead Hand Restriction is invalid per se under ------ Pennsylvania statutory law, in that it purports to limit the discretion of future Boards of AMP by denying any directors other than the Continuing Directors the power or authority to redeem the Poison Pill so that the Tender Offer and Merger or any other business 11 combination not endorsed by the Continuing Directors may go forward. PBCL (S)1721 requires that any such limitation on Board discretion be set forth in a by-law adopted by the shareholders. Since the shareholders of AMP have adopted no such by-law provision, the Board was without power to so limit the discretion of future Boards of AMP by adopting the Dead Hand Restriction. 36. Moreover, PBCL (S)1729 provides that unless otherwise provided in a by-law adopted by the shareholders, every director shall be entitled to one vote. The Dead Hand Restriction creates different classes of directors with different voting rights-those who have the power to redeem the Poison Pill, and those who do not. Since the shareholders of AMP have adopted no by-law provision creating such distinctions in the voting powers of directors, the Board was without power to adopt the Dead Hand Restriction. 37. Additionally, the Dead Hand Restriction is invalid under AMP's By-laws. Under Section 2.1 of the AMP's By-laws, the power to manage the business and affairs of the Corporation is broadly vested in its duly elected board of directors. Insofar as the Dead Hand Restriction purports to restrict the power of AMP's Board of redeem or amend the Poison Pill, it conflicts with Section 2.1 of AMP's By-laws and is therefore of no cause or effect. SECOND CLAIM FOR RELIEF ----------------------- (DECLARATORY JUDGMENT) 12 38. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 39. To the extent that the Dead Hand Restriction and other anti- takeover devices that preclude tender offers and consent solicitations are permitted under Pennsylvania law, such law is unconstitutional under the commerce Clauses because it impermissibly burdens interstate commerce far in excess of local benefits. The Dead Hand Restriction renders futile the Consent Solicitation and other contests for corporate control, because the shareholders will be powerless to elect a board that is both willing and able to accept an insurgent's bid. If Pennsylvania law is deemed to permit the Dead Hand Restriction, such law thus gives a Pennsylvania corporation's pre-existing board of directors a de facto veto power over tender offers and merges, and therefore -- ----- thwarts shareholder democracy and impermissibly burdens interstate commerce. 40. To the extent the Dead Hand Restriction is permissible under Pennsylvania law, such law injures and will continue to injure plaintiff because it deprives plaintiff of his right to proceed with its Proposed Business Combination. THIRD CLAIM FOR RELIEF ---------------------- (DECLARATORY JUDGMENT) 41. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 13 42. To the extent that the Dead Hand Restriction and other anti- takeover devices that preclude tender offers and consent solicitations are permitted under Pennsylvania law, such law is preempted by the Williams Act and thereby violates the Supremacy Clause of the United States Constitution. It frustrates the full purpose and objectives of Congress in enacting the Williams Acts by: (a) giving the Individual Defendants and intransigent management the ability to defeat a noncoercive proposal without a vote by shareholders, (b) impermissibly tilting the balance between the Individual Defendants and a potential acquirer in the context of a noncoercive business combination proposal, and (c) depriving Plaintiff and the Class of AMP shareholders of their right to consider the Proposed Business Combination under federal law. 43. To the extent the Dead Hand Restriction is permissible under Pennsylvania law, such law injures and will continue to injure plaintiff and the Class because it deprives plaintiff and the Class of their right to obtain the benefits of the Proposed Business Combination or any other competing offer as contemplated by the Williams Act and other applicable law. FOURTH CLAIM FOR RELIEF ----------------------- (INJUNCTIVE RELIEF) 44. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 14 45. The effect of AMP's anti-takeover devices is to frustrate and impede the ability of AMP shareholders to decide for themselves whether they wish to receive the benefits of the AlliedSignal Tender Offer and proposed second-step merger or any other business combination proposed by a third party. These devices unreasonably and inequitably frustrate and impede the ability of AlliedSignal to proceed with its Tender Offer and Consent Solicitation. The failure of AMP and its board to (i) redeem the AMP Poison Pill or to amend the Poison Pill by removing the Dead Hand Restriction, and (ii) adopt a resolution permitting the AlliedSignal Tender Offer or an alternative business combination to go forward for purposes of the Business Combination Statute is clearly a breach of their fiduciary duty and thus a violation of Pennsylvania law. 46. Plaintiff has no adequate remedy at law. FIFTH CLAIM FOR RELIEF ---------------------- (DECLARATORY JUDGMENT AND INJUNCTIVE RELIEF) 47. Plaintiff repeats and realleges the allegations contained in each of the preceding paragraphs as if fully set forth herein. 48. Fixing a record date beyond the required ten (10) days would violate AMP's Articles and By-laws and constitute an illegal interference with the shareholder franchise in violation of the PBCL and fundamental principles of corporate governance. 49. Plaintiff has no adequate remedy of law. WHEREFORE, plaintiff respectfully requests that this Court enter judgment against Defendant, as follows: 15 A. Declaring pursuant to the Declaratory Judgment Act, 28 U.S.C. (S)2201(a), that: (a) the Dead Hand Restriction is inapplicable or, to the extent applicable, is in violation of Pennsylvania law and the fiduciary duties owed to AlliedSignal and all other AMP shareholders; (b) to the extent Pennsylvania law authorizes the Dead Hand Restriction, it (i) constitutes an impermissible burden on interstate commerce in violation of the Commerce Clause of the United States Constitution, and (ii) is preempted by the Williams Act and therefore unconstitutional under the Supremacy Clause of the United States Constitution; (c) if the Board should fail to fix a record date for the Consent Solicitation within 10 days of its receipt of AlliedSignal's written notice requesting such a record date, the record date for the Consent Solicitation shall be the date such written notice is delivered to AMP in accordance with AMP's By-laws; and (d) the fixing of a record date more than ten (10) days after the date of AlliedSignal's written notice is impermissible because it would effectively prevent AMP's shareholders from exercising their franchise. B. Preliminarily and permanently enjoining the Defendants, their directors, officers, partners, employees, agents, subsidiaries, and affiliates, and all other persons acting in concert with or on behalf of the defendants directly or indirectly, from: 16 (a) refusing to redeem AMP's Poison Pill or amend the Poison Pill so as to eliminate the Dead Hand Provision or to make the Rights inapplicable to AlliedSignal's Tender Offer or other proposed alternative business combinations, and refusing to grant prior approval of the Tender Offer and Merger or another business combination for purposes of the Pennsylvania Business Combination Statute; (b) amending its By-laws to in any way impede the effective exercise of the stockholder franchise; or (c) taking any other steps to impede or frustrate the ability of AMP's shareholders to consider or make their own determination as to whether to accept the terms of AlliedSignal's Tender Offer, the proposals in AlliedSignal's Consent Solicitation, or any other alternative business combination or taking any other action ro thwart or interfere with the Tender Offer or Consent Solicitation or any alternative proposal; (d) fixing a record date for determining the shareholders entitled to vote on the proposals in AlliedSignal's Consent Solicitation more than ten (10) days after the date of AlliedSignal's written notice; or (e) increasing the size of AMP's Board and filling the new seats with Board nominees after commencement of AlliedSignal's Consent Solicitation. C. A declaration that this action is a proper Class Action and that plaintiff is an appropriate representative of the Class; 17 D. Granting compensatory damages for all injuries suffered as a result of defendant's unlawful conduct. E. Awarding plaintiff the costs and disbursements of this action, including attorney's fees and expert fees. 18 F. Granting plaintiffs such other and further relief as the court deems just and proper. Dated: August 7, 1998 LAW OFFICES Bernard M. Gross, P.C. /s/ Deborah R. Gross __________________________________ DEBORAH R. GROSS (I.D.# 44542) CHRISTOPHER T. REYNA (I.D.# 46488) 1500 Walnut Street, Sixth Floor Philadelphia, PA 19102 (215) 561-3600 Myron Harris, Esq. (I.D.# 14798) S106 Parktowne Place 22/nd/ and Ben Franklin Parkway Philadelphia, PA 19130 Attorneys for Plaintiff 19 EX-99.18 19 COMPLAINT FILED (98-CV-4187) Exhibit 18 UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x MARGOLIS PARTNERSHIP, CIVIL ACTION Plaintiff, NO. 98-CV-4187 V. AMP, INC., JAMES E. MARLEY, WILLIAM J. HUDSON, JR., JOSEPH M. HIXON, III, JO CLASS ACTION COMPLAINT SEPH M. MAGLIOCHETTI, JOHN C. MORLEY , HAROLD A McINNES, JEROME J. MEYER, PAUL ---------------------- G. SCHLOEMER, BARBARA H. FRANKLIN, RALPH D. DeNUNZIO, and TAKEO SHIINA, Defendants. JURY TRIAL DEMANDED - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x
Plaintiff, by its attorneys, for its complaint against defendants, alleges upon personal knowledge with respect to paragraph 9, and upon information and belief based, inter alia, upon the investigation of counsel, as to all other ----- ---- allegations herein, as follows: NATURE OF THE ACTION -------------------- 1. Plaintiff brings this action as a class action on behalf of itself and all other stockholders of AMP Inc. ("AMP" or the "Company") who are similarly situated, against the directors and/or senior officers of AMP to enjoin certain actions of the Individual Defendants (as defined herein) which are intended to thwart any takeover of the Company, as more fully described below. 2. In particular, these shareholders are currently being deprived of the opportunity to realize the full benefits of their investment in AMP. Among other things, the defendants have failed to adequately consider a premium offer to acquire control of AMP by AlliedSignal, Inc. ("Allied"), and are, on information and belief, preparing to use and using their fiduciary positions of control over AMP to thwart Allied and any others in any legitimate attempts to acquire AMP. 3. In addition, defendants, in anticipation of such unsolicited bids, have implemented or are using several anti-takeover devices, including, but not limited to, a "poison pill." Unless the defendants are prevented from using these anti-takeover devices improperly, Allied and other potential suitors will effectively be prevented from consummating any legitimate offers for AMP. Also, the Pennsylvania Anti-Takeover Statute, as alleged below, will similarly thwart any legitimate offer or other offers from any potential acquirer, unless AMP takes affirmative steps to avoid the impact of this statute, and thus violates the Commerce Clause, the Supremacy Clause, and the Due Process Clause of the United States Constitution. 4. Defendants' action and inaction represents an effort by the Individual Defendants to entrench themselves in office so that they may continue to receive the substantial salaries, compensation and other benefits and perquisites of their offices. 5. The Individual Defendants are abusing their fiduciary positions of control over AMP to thwart legitimate attempts at acquiring the Company and are seeking 2 to entrench themselves in the management of the Company. The actions of the Individual Defendants constitute a breach of their fiduciary duties to maximize shareholder value to not consider their own interests over those of the public shareholders, and to respond reasonably and on an informed basis to bona ---- fide offers for the Company. These actions are contrary to federal and state - ---- law and policy. JURISDICTION AND VENUE ---------------------- 6. This action is brought pursuant to the Supremacy Clause (art. VI, cl. 2), the Commerce Clause (art. I, (S) 8, cl. 3) and the Due Process Clause (amends. V and XIV) of the United States Constitution; principles of common law; and the federal Declaratory Judgments Act, 28 U.S.C. (S) 2201. In accordance with Federal Rule of Civil Procedure 24(c), plaintiffs direct Court to U.S.C. (S) 2403, pursuant to which the Court shall notify the state attorney general of any action in which the constitutionality of any statute of a state is drawn into question. 7. This Court has subject-matter jurisdiction of this action pursuant to 28 U.S.C. (S)(S) 1331 and 1367(a). 8. Venue is proper in this District pursuant to 28 U.S.C. (S)(S) 1391(b) and (c). THE PARTIES ----------- 9. Plaintiff Margolis Partnership is a Maryland general partnership. At all relevant times, plaintiff has been the owner of common stock of defendant AMP. 3 10. Defendant AMP is a Pennsylvania corporation with its principal executive offices located in Harrisburg, Pennsylvania. AMP designs, engineers, develops, integrates, installs and operates aerospace and automotive products. 11. The Individual Defendants, and their positions, are as follows: Ralph D. DeNunzio Director of the Company and President of Harbor Point Associates, Inc., New York, New York, a private investment consulting firm. Barbara H. Franklin Director of the Company, President and Chief Executive Officer of Barbara Franklin Enterprises, Washington, D.C., a private, international consulting and investment firm, since 1995. Joseph M. Hixon, III Director of the Company and Retired Chairman of the Board of Hixon Properties Incorporated, San Antonio, Texas. William J. Hudson, Jr. Director of the Company and Chief Executive Officer and President of the Company. Joseph M. Magliochetti Director of the Company and President, Chief Operating Officer and a director of Dana Corporation, Toledo, Ohio. James E. Marley Chairman of the Board of Directors of the Company. Harold A. McInnes Director of the Company, Retired Chairman of the Board of Directors and Chief Executive Officer of the Company. Jerome J. Meyer Director of the Company and Chairman of the Board and Chief Executive Officer of Tektronix, Inc., Wilsonville, Oregon. John C. Morley Director of the Company and President of Evergreen Ventures, Ltd., Cleveland, Ohio. 4 Paul G. Schloemer Director of the Company, Retired President and Chief Executive Officer of Parker Hannifin Corporation, Cleveland, Ohio. Takeo Shiina Director of the Company and Chairman of the Advisory Council of IBM Japan, Ltd. 12. By virtue of their positions as directors and/or officers of AMP and their exercise of control over the business and corporate affairs of AMP, the AMP officers and directors named as defendants herein (the "Individual Defendants") have and at all relevant times had the power to control and influence, and did control and influence, and cause AMP to engage in the practices complained of herein. All Individual Defendants owed and owe AMP and its public stockholders fiduciary obligations and were and are required to: (a) use their ability to control and manage AMP in a fair, just and equitable manner; (b) act in furtherance of the best interests of AMP and its stockholders; (c) act to maximize shareholder value; (d) refrain from abusing their positions of control; and (e) not favor their own interests at the expense of AMP and its stockholders. By reason of their fiduciary relationships, these defendants owed and owe plaintiffs and other members of the Class (as herein defined) the highest obligations of good faith, fair dealing, loyalty and due care. 13. By virtue of the acts and conduct alleged herein, the Individual Defendants, who control the actions of AMP, are breaching their fiduciary duties to the public shareholders of AMP. 14. Each defendant herein is sued individually as a conspirator and/or aider and abettor, or, as appropriate, in his or her capacity as a director of the Company, and 5 the liability of each arises from the fact that he, she or it has engaged in all or part of the unlawful acts, plans, schemes or transactions complained of herein. CLASS ACTION ALLEGATIONS ------------------------ 15. Plaintiff brings this action pursuant to Rule 23 of the Federal Rules of Civil Procedure on its own behalf and as a class action on behalf of all shareholders of AMP (except defendants herein and any person, firm, trust, corporation or other entity related to, controlled by or affiliated with any of the defendants) and their successors in interest (the "Class"). 16. This action is properly maintainable as a class action for the following reasons: a. The Class is so numerous and geographically dispersed that joinder of all members is impracticable. As of August, 1998, AMP reported that there were more than 214 million shares of common stock outstanding. b. There are questions of law and fact common to members of the Class which predominate over any questions affecting only individual members. The common questions include, inter alia: ----- ---- (1) whether the anti-takeover protections of sections 2551 through 2556 of the Pennsylvania Business Corporation Law ("PBCL") are unconstitutional on their face or as applied; 6 (2) whether the Individual Defendants are unlawfully impeding a potential acquisition of AMP to the detriment of the shareholders of the Company, and have breached their fiduciary and other common law duties owed by them to plaintiffs and other members of the Class by failing and refusing to attempt in good faith to maximize shareholder value by adopting strategies, policies and plans designed to thwart offers for AMP and entrench defendants in their positions of control and a failing to act with complete candor; (3) whether the Individual Defendants have engaged and are continuing to engage in an unlawful plan or scheme to perpetuate their control over and enjoyment of the perquisites of office at the expense of AMP public shareholders; (4) whether defendants have breached and/or aided and abetted the breach of fiduciary duties and other common law duties owed by them to plaintiffs and other members of the Class; and (5) whether plaintiff and other members of the Class are being and will continue to be irreparably injured by the wrongful conduct alleged herein and, if so, what is the proper remedy and/or measure of damages. c. The claims of plaintiff are typical of the claims of other members of the Class and plaintiffs has no interests that are adverse or antagonistic to the interests of the Class. 7 d. Plaintiffs are committed to the vigorous prosecution of this action and have retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. e. Plaintiff anticipates that there will not be any difficulty in the management of this litigation as a class action. 17. Defendants are acting in a manner which affects all shareholders in the same or similar fashion and would be subjected to potentially differing legal requirements or standards of conduct if this litigation were not certified to proceed as a class action. 18. For the reasons stated herein, a class action is superior to other available methods for the fair and efficient adjudication of this action and the claims asserted herein. Because of the size of the individual Class members' claims, few, if any, Class members could afford to seek legal redress individually for the wrongs complained of herein. Absent a class action, the Class members will continue to suffer damage and defendants' violations of law will proceed without remedy. SUBSTANTIVE ALLEGATIONS ----------------------- 19. Defendant AMP designs, manufactures and markets a broad range of electronic, electrical and electro-optic connection devices and an expanding number of interconnection systems and connector-intensive assemblies. 8 20. Allied employs approximately 70,000 people worldwide and is a component of the Dow Jones Industrial Average and S&P 500 index. A. Preliminary Overtures --------------------- 21. On July 29, 1998, Allied's Chairman and Chief Executive Officer, Larry Bossidy, telephoned AMP's CEO and President, Individual Defendant William J. Hudson, to determine whether AMP would be interested in pursuing a business combination with Allied. Defendant Hudson was unavailable to speak with Mr. Bossidy, and did not thereafter return Mr. Bossidy's telephone call. 22. On July 30, 1998, Mr. Bossidy sent a letter to defendant Hudson proposing a combination of Allied and AMP. The letter stated that Allied was prepared to offer $43.50 per share in cash for all AMP's outstanding shares, at a premium of approximately 50% over the market value. 23. AMP has not responded to Mr. Bossidy's July 30 letter. Upon information and relief, AMP has not responded in any meaningful fashion to Allied's overture. B. The Tender Offer ---------------- 24. On August 4, 1998, Allied announced that it would commence within five business days a tender offer for the stock of defendant AMP at $44.50 per share (the "Tender Offer"), which, as stated in Mr. Bossidy's July 30, 1998 letter, represents a premium of approximately 50% over the closing trading price of AMP common stock on August 3, 9 1998. As described by Allied, the Tender Offer would give AMP shareholders the opportunity to accept the offer if they determine it is in their best interests to do so. Upon consummation of the Tender Offer, Allied intends to acquire the remaining shares of AMP in second-step merger in which AMP shareholders will receive $44.50 in cash for each AMP share they own. 25. Allied's Tender Offer and second-step merger cannot be consummated unless the AMP Board - voluntarily or by direction of the Court - removes or makes inapplicable various anti-takeover devices, including AMP's "poison pill" and certain provisions of the PBCL. 26. In light of AMP's failure to respond to Allied's July 30, 1998 letter, the current AMP Board cannot be expected to facilitate Allied's Tender Offer and second-step merger, but can be expected, instead, to maintain AMP's anti-takeover devices in place and actively oppose the Tender Offer and merger. For this reason, Allied is preparing to conduct a consent solicitation (the "Consent Solicitation") to gain majority representation on the AMP Board of Directors by electing individual directors nominated by Allied who will support a sale of AMP to Allied, subject to their fiduciary duties to AMP shareholders. AMP'S ANTI-TAKEOVER DEVICES --------------------------- 27. The "Dead Hand" Poison Pill. Foremost among the numerous anti- --------------------------- takeover devices at AMP'S disposal is its shareholders' rights plans, better known as a "Poison Pill." On October 25, 1989, AMP's Board of Directors declared a dividend 10 distribution of one right for each outstanding share of common stock (non par value), of the Company's shareholders of record at the close of business on November 6, 1989. Each Right entitled the registered holder to purchase from the Company one share of common stock at a purchase price of $175 per share, subject to adjustment. 28. Initially, the Rights were attached to all common stock certificates representing shares then outstanding, and no separate Rights certificates were distributed. The Rights will separate from the Common Stock and a Registration Date will occur upon the earlier of (1) 10 business days ------- following a public announcement that a person (an "Acquiring Person") has become an "Interested Shareholder" as defined in Section 2553 of the PBCL (i.e. has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding shares of common stock), except pursuant to a qualifying offer (as defined elsewhere in the Rights Plan but inapplicable to this discussion) or (ii) 10 business days (or such later date as the Board shall -- determine) following the commencement of a tender offer or exchange that would result in a person becoming an Acquiring Person. 29. Upon the occurrence of either circumstance (as described and ------ defined above), each holder of a Right, other than an Acquiring Person, is entitled, upon exercise of the Right, to receive common stock having a market value equal to two times the purchase prices of the common stock. The effect of this provision (the "Flip-In Provision") would be a massive dilution of the value of the holding of an unwanted acquiror like Allied. 11 30. The Dead Hand Restriction. The Board May redeem the Poison Pill ------------------------- until 10 business days after a person because an Acquiring Person. The Board's ability to redeem the rights, however, is purportedly restricted by a provision of the Poison Pill that serves no purpose other than to entrench the current Board (the "Dead Hand Restriction"). 31. Under the Dead Hand Restriction, redemption of the Poison Pill is possible but can only be accomplished by satisfying numerous conditions. Specifically, at any time until ten (10) business days following the stock acquisition date, the Company may redeem the right, in whole or in part. The decision to redeem requires the concurrence of a majority of the "Continuing Directors" -- meaning any member of the Board of Directors of AMP who was a member of the Board prior to the date of the Rights Agreement, and any person who was subsequently elected to the Board but shall not include an Acquiring --------------------- Person, or any affiliate or associate of any Acquiring Person. 32. Under the Dead Hand Restriction, directors, other than Continuing Directors, elected pursuant to a consent or proxy solicitation in which an Acquiring Person (or a person who intends to become an Acquiring Person) participates, are purportedly without power or authority to redeem the Rights so that the Tender Offer may go forward. 33. Because the Dead Hand Restriction purports to prevent newly- elected, insurgent-nominated directors from redeeming the Poison Pill and thus removing a key obstacle to the accomplishment of the very purpose for which they were elected, the Dead Hand Restriction effectively disenfranchises shareholders. In effect, it denies the 12 shareholders of AMP the opportunity to replace the current Board and prevent any person intended to become an Acquiring Person, such as Allied, from soliciting votes to replace the current Board. It represents an intentional effort by the Board to manipulate the corporate machinery so as to prevent the effectiveness of a shareholder vote. 34. The Pennsylvania Anti-Takeover Statute. Among other provisions, -------------------------------------- Defendant AMP also has adopted the anti-takeover protections of PBCL (S)(S) 2551-2556 (the "Business Combination Statute"). 35. Under the Business Combination Statute, an interested shareholder cannot engage in a business combination with AMP for five years unless the acquisition of the shares or the business combination is approved by the AMP Board before an "Interested Shareholder" becomes the beneficial owner, directly or indirectly , of at least 20% of AMP's shares. 36. The Business Combination Statute will delay or make more difficult acquisitions or changes of control of AMP, have the effect of preventing changes in the management of AMP, and make it more difficult to accomplish transactions which AMP shareholders may otherwise deem to be in their best interests. 37. Fixing the Consent Solicitation Record Date. Allied cannot ------------------------------------------- obtain shareholder consents to its proposals without a record date for the determination of the shareholders entitled to vote on the proposals. AMP's by- laws (the "By-laws") provide that any shareholder seeking to have shareholders take action by consent must, by written notice, 13 request that the Board fix a record date. The By-laws require the board to fix the record date no later than 10 days after receipt of the request. (If not fixed within 10 days, the record date will be the day on which the first consent is received by the company.) 38. It is anticipated that the Board will seek to delay shareholder consent action on Allied's proposals by fixing a record date outside the required time period to impede its shareholders from exercising their franchise. DECLARATORY AND INJUNCTIVE RELIEF --------------------------------- 39. The Court may grant the declaratory and injunctive relief sought herein pursuant to 28 U.S.C. (S) 2201 and Fed. R. Civ. P.57 and 65. A substantial controversy presently exists, as demonstrated by: (a) AMP's rebuff of Allied's overtures of July 29, 1997 and July 30, 1998 for the acquisition of AMP; (b) AMP's unwillingness to meet with Allied to consider or discuss a combination or merger with Allied or any other possible acquirer; and (c) AMP's failure to redeem or amend the poison pill and/or retract any of its other takeover defenses and those unconstitutionally and impermissibly afforded by the Business Combination Stature or use those defenses in a proper way. 40. The shareholders' interests in maximizing the value of their AMP holdings is adverse to the interests of the Individual Defendants in their desire to retain their positions on the AMP Board. The existence of this controversy is causing confusion and uncertainty in the market for public securities because investors do not know whether they will be able to avail themselves of an advantageous financial offer. 14 41. The granting of the requested declaratory and injunctive relief will serve the public interest affording relief from such uncertainty and by avoiding delay. COUNT I ------- FOR INJUNCTIVE AND DECLARATORY RELIEF - UNCONSTITUTIONALITY OF THE BUSINESS COMBINATION STATUTE ------------------------------------------------------- 42. Plaintiff incorporates by reference paragraphs 1 through 41 as if set forth herein. 43. This claim arises under the Commerce, Supremacy, and Due Process Clauses of the United States Constitution. 44. The Tender Offer constitutes a substantial securities transaction in interstate commerce, employing interstate instrumentalities and facilities in the communication of the Offer, and in transactions for the purchase and sale of AMP securities occurring across state lines. 45. The Business Combination Statute violates the Commerce Clause because it imposes direct, substantial and adverse burdens on interstate commerce that are excessive in relation to the local interests purportedly served by the statutes. Among other things, the Statute may make it more difficult to accomplish transactions which AMP shareholders may otherwise deem to be in their best interest, because the Statute vests the boards of Pennsylvania companies with ultimate power to thwart potential business combinations. 15 46. The Business Combination Statute is unconstitutional and null and void on its face under the Commerce Clause. In addition, the Business Combination Statute is unconstitutional and null and void under the Commerce Clause in its application under the circumstances of this case. AMP's shareholders may be prevented from accepting the Tender Offer or any other offer to the extent the Board of AMP exercises its rights under the Business Combination Statute in furtherance of its course of entrenchment. Accordingly, the undue burden on interstate commerce that is created by these statutes has a direct and substantial impact in this case. 47. The Business Combination Statute also violates the Supremacy Clause of the United States Constitution. The Tender Offer is subject to, among other things, the federal laws and regulations governing tender offers, including the Williams Act amendments to the Securities Exchange Act, 15 U.S.C. (S)(S) 78m and 78n, and the rules and regulations of the Securities and Exchange Commission ("SEC") promulgated thereunder. The Williams Act is intended to establish even-handed regulation of tender offers which favors neither the offeror nor incumbent management of the target, but leaves the decision concerning the merits of the offer to the target's stockholders. 48. By establishing policies, standards and procedures that conflict with and are obstacles to the policies implemented by Congress through the Williams Act and the rules and regulations of the SEC promulgated thereunder, the Business Combination Statute is invalid and unconstitutional as applied to the Tender Offer under the Supremacy Clause 16 of the United States Constitution, art. VI, cl. 2, which accords supremacy to federal law over conflicting state law, and violates and is preempted by Section 28(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. (S) 78bb, which prohibits and preempts state regulation that conflicts with the provisions of the Exchange Act and the rules and regulations thereunder. 49. The Business Combination Statute also violates the Due Process Clause of the United States Constitution. The statute prevents plaintiff and the Class from maximizing the value of their AMP holdings due to the Individual Defendant's entrenching efforts. Thus, those persons, acting under color of state law, are diminishing the property interest of all class members. The class members are thus being deprived of fundamental freedoms and property interests guaranteed by the Due Process Clause of the United States Constitution. 50. Plaintiff seeks declaratory relief with respect to the unconstitutionality of the Business Combination Statute pursuant to the Federal Declaratory Judgments Act, 28 U.S.C. (S) 2201, and injunctive relief against the application and enforcement of this unconstitutional Statute. Plaintiffs and the Class members are or will be irreparably and imminently injured by the wrongs alleged herein. 51. Plaintiff and the Class have no adequate remedy at law for this claim. 17 COUNT II -------- AGAINST ALL DEFENDANTS FOR BREACH OF FIDUCIARY DUTIES ------------------------------ 52. Plaintiff incorporates by reference paragraphs 1 through 41 as if set forth herein. 53. Defendants, acting in concert, have violated their fiduciary duties owed to the public shareholders of AMP and put their own personal interests ahead of the interests of the AMP public shareholders and are using their control positions as officers and/or directors of AMP for the purpose of retaining their positions and perquisites as Board members or executives at the expense of AMP's public shareholders. 54. The Individual Defendants are engaged in a course of conduct which evidences their failure to: (a) seriously evaluate the benefits to the Company's shareholders of the Offer; (b) undertake an adequate evaluation of AMP's worth as a potential acquisition candidate; (c) take adequate steps to enhance AMP's value and/or attractiveness as an acquisition candidate; (d) effectively expose AMP to the marketplace in an effort to create an open auction for AMP; or (e) act independently so that the interests of public shareholders would be protected. Instead, defendants have sought to chill or block any potential offers for AMP. 55. The Individual Defendants have taken no affirmative steps to facilitate Allied's premium Tender Offer and thus far have been content to remain behind the 18 protections of the Company's defenses, including its poison pill, from unwanted takeovers. To act consistent with their fiduciary duties, the Individual Defendants should evaluate all available alternatives, including negotiating with Allied and any other potential suitors, which they have failed to do. 56. The Individual Defendants owe fundamental fiduciary obligations under the present circumstances to take all necessary and appropriate steps to maximize shareholder value and explore in good faith the Allied proposal. In addition, the Individual Defendants have the responsibility to act independently so that the interests of AMP's public stockholders will be protected, to seriously consider all bona fide offers for the Company, and to conduct fair and --- ---- ---- active bidding procedures or other mechanisms for checking the market to assure that the highest possible price is achieved. Further, the directors of the Company must adequately ensure that no conflict of interest exists between defendants' own interests and their fiduciary obligations to maximize stockholder value and act in the shareholders' best interests or, if such conflicts exist, to ensure that they will be resolved in the best interests of the Company's public stockholders. 57. AMP represents a highly attractive acquisition candidate. Defendants' conduct has deprived and will continue to deprive the Company's public shareholders of the very substantial control premium which Allied is prepared to pay or of the enhanced premium which further exposure of the Company to the market could provide. Defendants are precluding the shareholders' enjoyment of the full economic value of their investment 19 by failing to proceed expeditiously and in good faith to evaluate and pursue a premium acquisition proposal which would provide for an acquisition for all shares at a very attractive price. 58. AMP's Board and its top management have frustrated Allied's current acquisition overtures and offers; even though these proposals would result in AMP's shareholders receiving a substantial premium over recent market- prices of AMP stock. The Individual Defendants have done this because they know that in the event AMP were acquired by any potential bidders, most or all of the directors of AMP and its senior management would, either in connection with the acquisition or shortly thereafter, be removed from the Board of the surviving company because their services would not be necessary and they would be mere surplusage and thus an acquisition would bring an end to their power, prestige and profit. In so acting, AMP's directors and those in management allied with them have been aggrandizing their own personal positions and interests over those of AMP and its broader shareholder community to whom they owe fundamental fiduciary duties not to entrench themselves in office. 59. The poison pill is wrongfully being used in a discriminatory manner to preclude AMP's premium acquisition proposal or any other competing bid. Given the premium and non-coercive nature of the Offer, and its substantial value to AMP's stockholders, the Individual Defendants should not be permitted to deny the Company's stockholders this opportunity. Defendants' use of AMP's poison pill or other anti-takeover 20 devices to block the Offer constitute an unreasonable and draconian response thereto in violation of the fiduciary duties owed to AMP's stockholders. 60. By virtue of the acts and conduct alleged herein, the Individual Defendants, who control the actions of the Company, have carried out a preconceived plan and scheme to place their own personal interests ahead of the interests of the shareholders of AMP and thereby entrench themselves in their offices and positions within the Company. The Individual Defendants have violated their fiduciary duties owed to plaintiffs and the Class in that they have not and are not exercising independent business judgment and have acted and are acting to the detriment of the Company's public shareholders for their own personal benefit. 61. Plaintiff seeks preliminary and permanent injunctive relief and declaratory relief preventing defendants from inequitably and unlawfully depriving plaintiffs and the Class of their rights to realize a full and fair value for their stock at a substantial premium over the market price and to compel defendants to carry out their fiduciary duties to maximize shareholder value in selling AMP. 62. Only through the exercise of this Court's equitable powers can plaintiffs be fully protected from the immediate and irreparable injury which defendants' actions threaten to inflict. 63. Unless enjoined by the Court, defendants will continue to breach their fiduciary duties owed to plaintiffs and the members of the Class, and/or aid and abet and 21 participate in such breaches of duty, will continue to entrench themselves in office, and will prevent the sale of AMP at a substantial premium, all to the irreparable harm of plaintiffs and the other members of the Class, who are or will be imminently injured by such misconduct. 64. Plaintiff and the Class have no adequate remedy at law for this claim. PRAYER FOR RELIEF ----------------- WHEREFORE, plaintiff demands judgment as follows: A. Declaring this to be a proper class action and certifying plaintiff as class representative; B. Declaring that the Business Combination Statute either generally or as applied herein, are unconstitutional; C. Ordering the Individual Defendants to carry out their fiduciary duties to plaintiffs and the other members of the Class by announcing their intention to: (i) cooperate fully with any entity or person, including, but not limited, to Allied, having a bona fide interest in proposing any transaction ---- ---- which would maximize shareholder value, including, but not limited to, a buy-out or takeover of the Company; (ii) immediately undertake an appropriate evaluation of AMP's worth as a merger or acquisition candidate; (iii) take all appropriate steps to effectively expose AMP to the marketplace in an effort to create an active auction of the Company; 22 (iv) act independently so that the interests of the Company's public shareholders will be protected; and (v) adequately ensure that no conflicts of interest exist between the Individual Defendants' own interest and their fiduciary obligation to maximize shareholder value or, in the event such conflicts exist, to ensure that all conflicts of interest are resolved in the best interests of the public shareholders of AMP. D. Declaring that the Individual Defendants have violated their fiduciary duties to the Class; E. Enjoining defendants from abusing the corporate machinery of the Company for the purpose of entrenching themselves in office or to unduly impeded the Offer, including, without limitation, any by-law amendments that impair the Company's stockholders' existing rights to amend the by-laws and/or to call a special stockholders' meeting; F. Ordering the Individual Defendants to take steps to facilitate a premium acquisition by utilizing the Company's anti-takeover defenses, including the Rights Plan and the Pennsylvania Business Combination Statute (if they are not stricken) exclusively in a manner designed to maximize shareholder value; G. Ordering the Individual Defendants, jointly and severally, to account to plaintiffs and the Class for all damages suffered and to be suffered by them as a result of the acts and transactions alleged herein; 23 H. Awarding plaintiff the costs and disbursements of this action, including a reasonable allowance for plaintiffs' attorneys' and experts' fees; and I. Granting such other and further relief as may be just and proper. JURY DEMAND ----------- Pursuant to Federal Rule of Civil Procedure 38, plaintiff demands a trial by jury of all issues so triable. DATED: August 7, 1998 GREENFIELD & RIFKIN LLP By: /s/ Mark C. Rifkin ---------------------------------------- Mark C. Rifkin 800 Times Building Ardmore, PA 19003 (610) 649-3900 Fred T. Isquith Jeffrey G. Smith Gregory Nespole WOLF HALDENSTEIN ADLER FREEMAN & HERZ LLP 270 Madison Avenue New York, NY 10016 (212) 545-4600 Charles J. Piven, Esq. LAW OFFICES OF CHARLES J. PIVEN 111 S. Calvert Street - Suite 2700 Baltimore, MD 21202 (410) 332-0030 24 EX-99.19 20 EXCERPTS FROM AMP'S ANNUAL REPORT EXHIBIT 19 EXCERPTS FROM AMP'S ANNUAL REPORT ON FORM 10-K Cautionary Statements for Purposes of the "Safe Harbor" Statements made by AMP Incorporated in written or oral form to various persons, including statements made in filings with the SEC, that are not strictly historical facts are "forward-looking" statements that are based on current expectations about the markets in which the Company does business and assumptions made by management. Such statements should be considered as subject to risks and uncertainties that exist in the Company's operations and business environment and could render actual outcomes and results materially different than predicted. The following includes some, but not all, of the factors or uncertainties that could cause AMP to miss its projections: . The effects of extreme changes in monetary and fiscal policies, in the U.S. and abroad. This would include extreme currency fluctuations in the Japanese Yen and German Mark, continued strengthening of the U.S. dollar, and unforeseen inflationary pressure. . The threat of a global economic slowdown in any one, or all, of our market segments. . Drastic and unforeseen price pressure throughout the business. Currently the most noticeable pressure is in the personal computer industry where OEMs are passing the price pressure through to their suppliers. Similar price pressure can also be seen in the cellular/mobile phone industry. . Increased difficulties in obtaining a consistent supply of basic materials like copper, gold, or plastic resins at stable pricing levels. . Unpredictable difficulties or delays in the development of key new product programs, particularly in some of the Company's non-traditional businesses. . Unforeseen interruptions to AMP's markets due to strikes that have regional or multi-industry impacts, such as recent situations in Korea, France and Spain. . Rapid escalation of the cost of regulatory compliance and litigation. . Unpredictable governmental policies and actions including, but not limited to, protectionism, sourcing requirements, confiscation of assets, and reductions in public spending. . Unforeseen intergovernmental conflicts or actions, including but not limited to, armed conflict and trade wars. For example, the possibility of armed conflict with Iraq, and the conflict between North Korea and South Korea or China and Taiwan could escalate and have a substantial impact on our business in Asia/Pacific. . During an unforeseen business downturn or a period of less-than-anticipated growth, under-utilization of AMP's factories and plants could have a negative impact on our business. . Greater than anticipated startup expenses and delays related to bringing new plants on-line could impact our projections. . Greater than anticipated difficulties and delays in assimilating newly- acquired businesses into our business portfolio resulting in unanticipated expenses and unrealized savings. . Any difficulties in obtaining the human resource competencies that AMP needs to achieve its business objectives; includes skilled-labor shortages in the U.S. and abroad. This also assumes that we will be able to retain key talent, both managerial and technical. . Risks associated with any disruptive changes in our customer, supplier, and competitor relations as a consequence of AMP's and others' movement along the vertical product chain. . The risks associated with any technological shifts away from AMP technologies or core competencies. . Unforeseen Year 2000 compliance issues, both within AMP and among our customers and suppliers and in general among the business and governmental communities, could negatively impact our business results. . The risk of not recovering research and development expenses relating to a limited ability to enforce patents and copyright laws in certain parts of the world. . While AMP has traditionally been a leader in environmental compliance, unforeseen and drastic changes to governmental environmental policies and related government action could impact our projections. 2 . Standardization, while often viewed as a positive for AMP, could have a substantial impact on our business. . Risks associated with market acceptance of our customers' end-products such as technology winners in the converging computer, consumer electronics and communications industries. . Unforeseen interruptions to AMP's business with our largest customers, resulting from, but not limited to, strikes, cash flow, or inventory problems at the account. 3 -----END PRIVACY-ENHANCED MESSAGE-----