Performance Restricted Share Agree

AMP Incorporated


PERFORMANCE RESTRICTED SHARE AGREEMENT


For the purpose of (a) encouraging key employees to acquire a proprietary interest in the Common Stock of AMP Incorporated (the "Corporation"), thereby aligning their interests with the interests of the shareholders, (b) providing added incentive to key employees to contribute to the future growth and profitability of the Corporation, and (c) attracting and retaining exceptionally qualified employees, the Corporation, pursuant to the terms and conditions of the AMP Incorporated 1993 Long-Term Equity Incentive Plan (as amended and restated effective January 1, 1995) (the "Plan"), will award Performance Restricted Shares of Common Stock to certain participants.


This Agreement, entered into pursuant to the terms of the Plan, is to evidence that effective as of July 25, 1995 the Committee has designated James E. Marley ("Participant") as a participant under the Plan, has awarded 20,000 Performance Restricted Shares to Participant, has designated January 1, 1995 to December 31, 1997 as the Performance Vesting Period for such Performance Restricted Shares, has designated 16% as the minimum average annual return on equity ("ROE") to be attained by the Corporation over the Performance Vesting Period, has designated 15% as the target average annualized earnings growth rate to be attained by the Corporation over the Performance Vesting Period, and has designated 18% as the super-target average annualized earnings growth rate to be attained by the Corporation over the Performance Vesting Period.


The grant, holding, and vesting of such Performance Restricted Shares shall be subject to the terms and conditions of the Plan and the following:


Article I. Definitions.


1.1. "Agreement" means this "Performance Restricted Share Agreement" between the Corporation and Participant.


1.2. "Award" shall mean any grant of Performance Restricted Shares made to Participant under the Plan and this Agreement.


1.3. "Award Date" means the date designated by the Committee as of which Performance Restricted Shares are awarded to Participant under the Plan.


1.4. "Board" shall mean the Board of Directors of the Corporation.


1.5. "Change in Control" shall have the meaning set forth in Section 12 of the Plan.


1.6. "Committee" means the committee of the Board as described in Section 2(h) of the Plan.


1.7. "Common Stock" means common stock of the Corporation, no par value.


1.8. "Competing Business" means, as applied to a particular period of time, a business that at such time is engaged in the manufacture, sale or other disposition of a product or products that is in competition to a product or products of the Corporation or its subsidiaries, partnerships or joint ventures.


1.9. "Corporation" shall have the meaning set forth in the first paragraph of this Agreement.


1.10. "Exchange Act" means the Securities Exchange Act of 1934, as amended.


1.11. "Fair Market Value" means the closing sales price of a Share as reflected on the New York Stock Exchange Composite Tape for the relevant date.


1.12. "Participant" shall have the meaning set forth in the second paragraph of this Agreement.


1.13. "Performance Restricted Share" shall mean a restricted Share granted under the Plan that will either become an unrestricted Share or be forfeited based on the Corporation's financial performance during the Performance Vesting Period.


1.14. "Performance Vesting Period" shall mean a period of three or more consecutive fiscal years of the Corporation established by the Committee in conjunction with an Award of Performance Restricted Shares under the Plan and specified in the second paragraph of this Agreement.


1.15. "Plan" shall have the meaning set forth in the first paragraph of this Agreement. 1.16. "ROE" shall have the meaning set forth in the second paragraph of this Agreement.


1.17. "Securities Act" means the Securities Act of 1933, as amended.


1.18. "Share" or "Shares" means a share or shares of Common Stock.


1.19. "Termination of Employment" means the termination of employment by the Corporation or by a subsidiary, but not the transfer of employment from the Corporation to a subsidiary of the Corporation or vice versa or from one subsidiary of the Corporation to another such subsidiary. If the Committee in its sole discretion so determines, employment shall not be considered as terminated for the purposes of Section 3.1 so long as Participant continues to perform services for the Corporation or a subsidiary thereof on either a full or part time basis as an independent contractor or on a consulting basis or otherwise, provided, however, that Participant 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 Competing Business.


Article II. Awards of Performance Restricted Shares.


2.1. "Performance Restricted Shares": Performance Restricted Shares awarded under the Plan shall be evidenced by Share certificates issued in the name of Participant at the time of the Award. These Performance Restricted Shares shall be subject to terms and conditions specified in this Agreement and in the Plan, and shall bear such legend or legends as the Corporation deems necessary or appropriate, including but not necessarily limited to the following:


(a) "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".


(b) "The shares represented by this certificate are subject to, and may not be transferred except in compliance with, a Performance Restricted Share Agreement dated [enter the date of the underlying Agreement] between AMP Incorporated and [enter the name of Participant]. These shares are subject to forfeiture in the event of a breach of the terms and conditions of said Performance Restricted Share Agreement. A copy of the Agreement is available without cost from AMP Incorporated, Harrisburg, Pennsylvania".


2.2. "Performance Criteria": The second paragraph of this Agreement specifies the performance criteria that will govern the vesting of the Performance Restricted Shares awarded to Participant hereunder. Vesting will depend on the following performance criteria over the Performance Vesting Period: (a) the minimum average annual ROE to be attained by the Corporation over the Performance Vesting Period as a pre-condition to any of the Performance Restricted Shares becoming vested at the end of the Performance Vesting Period, (b) a target average annualized earnings growth rate to be attained by the Corporation over the Performance Vesting Period, and (c) a super-target average annualized earnings growth rate to be attained by the Corporation over the Performance Vesting Period. For purposes hereof, average annual ROE for a Performance Vesting Period shall be the arithmetic average of the annual ROE numbers reported for each fiscal year in the Performance Vesting Period, and the average annualized earnings growth rate for a Performance Vesting Period shall be the constant rate of year-to-year earnings growth that, were it to occur consistently over the Performance Vesting Period, would generate the actual aggregate earnings realized during the Performance Vesting Period.


2.3. "Vesting of Performance Restricted Shares": At the end of the Performance Vesting Period, all Performance Restricted Shares awarded with respect to the Performance Vesting Period shall be forfeited, canceled, and returned to the Corporation if the minimum average annual ROE target designated in the second paragraph of this Agreement has not been attained. If the ROE target has been attained or exceeded, the number of Performance Restricted Shares awarded to Participant hereunder that become vested will be determined by the actual average annualized earnings growth rate attained over the Performance Vesting Period, as follows:


(a) If the actual average annualized earnings growth rate over the Performance Vesting Period is 0% or less, all Performance Restricted Shares awarded with respect to the Performance Vesting Period shall be forfeited, canceled, and returned to the Corporation.


(b) If the actual average annualized earnings growth rate over the Performance Vesting Period is between 0% earnings growth and the target average annualized earnings growth rate specified in the second paragraph of this Agreement, the actual growth rate stated as a percentage of the target growth rate will determine the percentage of the Performance Restricted Shares of Participant that will be vested, with the balance of the Performance Restricted Shares to be forfeited, canceled and returned to the Corporation.


(c) If the actual average annualized earnings growth rate over the Performance Vesting Period is between the target level and the super-target level of average annualized earnings growth applicable to the Performance Vesting Period, Participant will be vested in between 100% and 200% of the Performance Restricted Shares awarded hereunder, with the applicable vesting percentage determined using direct proportions (e.g., if the earnings growth rate is 1/4 of the spread between the target and the super-target, the vesting percentage would be 125%; if the earnings growth rate is 8/10 of the spread between the target and the super-target, the vesting percentage would be 180%).


(d) If the actual average annualized earnings growth rate over the Performance Vesting Period is at or above the super-target level, Participant will be vested in 200% of the Performance Restricted Shares awarded hereunder.


2.4. "Stock Power": Upon request of the Corporation from time to time, Participant agrees to execute and deliver to the Corporation one or more stock powers in such form as may be specified by the Corporate Secretary of the Corporation, authorizing the transfer of the Performance Restricted Shares to the Corporation. After the Performance Vesting Period has ended and the number of Performance Restricted Shares that vested, if any, is known, these executed stock power forms will be used to transfer back to the Corporation the certificate that evidences the Performance Restricted Shares and is held in safekeeping by the Corporation. Thereafter a new certificate will be issued and delivered to Participant representing the vested Shares.


2.5. "Voting of ...