SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting material Pursuant to Sec.240.141-11(C) or Sec.240.14a-12
TYCO International Ltd.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
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or Item 22(a)(2) of Schedule 14A
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14a-6(I)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(I)(4) and 0-11.
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<PAGE>
TYCO INTERNATIONAL LTD.
ONE TYCO PARK
EXETER, NEW HAMPSHIRE 03833
September 20, 1996
Dear Stockholder:
I am pleased to invite you to attend our Annual Meeting of Stockholders
which will be held at 9:00 a.m. on October 22, 1996, at the corporate
headquarters of the Company, Tyco Park, Exeter, New Hampshire 03833.
As the accompanying Notice and Proxy Statement describe, you are being asked
to elect directors for the coming year and to approve an amendment to our
Restated Articles of Organization, as amended, to increase the number of
authorized shares of the Company's Common Stock from 180,000,000 to 500,000,000.
The additional authorized shares would be available for acquisitions, stock
splits or dividends, employee benefit plans, future financings, or other
corporate purposes.
I look forward to the opportunity of meeting as many of our stockholders as
possible and hope you can be present on October 22nd.
Whether or not you are able to attend, it is important that your shares be
represented at the meeting. Accordingly, please sign, date, and return the
enclosed proxy at your earliest convenience.
Thank you for your cooperation.
Sincerely,
L. DENNIS KOZLOWSKI
Chairman and Chief Executive Officer
<PAGE>
TYCO INTERNATIONAL LTD.
-------------------
ANNUAL MEETING OF STOCKHOLDERS
-------------------
To the Stockholders of Tyco International Ltd.:
The Annual Meeting of Stockholders of Tyco International Ltd. will be held
at the corporate headquarters of Tyco International Ltd., Tyco Park, Exeter, New
Hampshire 03833, on October 22, 1996, at 9:00 a.m. for the following purposes:
(1) to elect eight directors for the ensuing year;
(2) to amend the Restated Articles of Organization, as amended, of the
Company to increase the number of authorized shares of the Company's Common
Stock from 180,000,000 shares to 500,000,000 shares; and
(3) to consider and act upon any other matter which may properly come
before the meeting or any adjournment or postponement thereof.
By Order of the Board of Directors
DAVID P. BROWNELL
Clerk
Exeter, New Hampshire
September 20, 1996
YOU ARE REQUESTED BY THE BOARD OF DIRECTORS OF THE COMPANY TO EXECUTE THE
ENCLOSED PROXY AND RETURN IT TO THE COMPANY IN THE ENVELOPE PROVIDED. NO POSTAGE
IS NECESSARY IF IT IS MAILED IN THE UNITED STATES. THE 1996 ANNUAL REPORT OF THE
COMPANY IS ENCLOSED HEREWITH.
<PAGE>
TYCO INTERNATIONAL LTD.
-------------------
PROXY STATEMENT FOR THE 1996 ANNUAL MEETING OF STOCKHOLDERS
-------------------
This statement, which is being mailed to stockholders on or about September
20, 1996, is furnished in connection with the solicitation of proxies on behalf
of the Board of Directors of Tyco International Ltd. (the "Company") for use at
the Annual Meeting of Stockholders to be held at the principal executive offices
of the Company, Tyco Park, Exeter, New Hampshire, 03833 on October 22, 1996, and
at any adjournment or postponement thereof. Persons holding stock for others,
such as brokers and nominees, are being asked to forward proxy soliciting
material to their principals at the Company's expense. Further solicitation of
proxies may be made personally, or by telephone, by regularly employed officers
and other employees of the Company, who will receive no additional compensation
for so doing. The Company has also retained MacKenzie Partners, Inc. to assist
in the solicitation of proxies. The Company will bear the entire cost of proxy
solicitation, including the fees and out-of-pocket expenses of MacKenzie
Partners, Inc. which are estimated to be $9,500.
A stockholder who gives a proxy may revoke it at any time before it is
exercised.
The Board of Directors has fixed the close of business on September 10, 1996
as the record date for the determination of stockholders who are entitled to
notice of and to vote at the meeting or any adjournment thereof. At the close of
business on that date there were 153,454,010 outstanding shares of Common Stock,
par value $0.50 per share. Holders of the Common Stock are entitled to one vote
for each share held. The stock transfer books will not be closed.
The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. In accordance with the provisions of Massachusetts law, the Company
will treat abstentions and broker non-votes as present at the Annual Meeting
solely for the purpose of determining whether or not a quorum exists.
Abstentions and broker non-votes will have no effect on the outcome of the
election of directors. Further, with respect to the proposal to amend the
Company's Restated Articles of Organization, as amended, abstentions and broker
non-votes will have the same effect as votes against such amendment.
The affirmative vote of the holders of a majority of the shares of Common
Stock present or represented at the Annual Meeting is required for the election
of the directors. The affirmative vote of the holders of a majority of the
shares of Common Stock entitled to vote at the Annual Meeting is required for
the approval of the amendment to the Company's Restated Articles of
Organization, as amended.
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTORS
The individuals named in the enclosed form of proxy will vote, if so
authorized, to elect as directors the eight persons named in the following
table, each of whom has served as a director of the Company for the period
indicated. Each such person is to be elected to hold office until the next
succeeding Annual Meeting of Stockholders and thereafter until his successor is
chosen and qualified. The management of the Company is not aware of any reason
why any of the nominees for directors will not be able to serve. If any one or
more of the nominees should be unable to serve, the individuals named in the
enclosed form of proxy will vote either (a) in favor of such other person or
persons as the Board of Directors may at the time recommend or (b) to fix the
number of directors at such lesser number as will equal the number of nominees
as are able to serve.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE NOMINEES.
1
<PAGE>
Information regarding the nominees, including their principal occupations
during the past five years, is set forth below:
<TABLE>
<CAPTION>
OUTSTANDING % OF SHARES
COMMON OF COMMON
NAME, PRINCIPAL OCCUPATION AND DIRECTOR STOCK BENEFICIALLY STOCK BENEFICIALLY
POSITION WITH THE COMPANY AGE SINCE OWNED(1) OWNED
- ----------------------------------------------- --- -------- ------------------ -------------------
<S> <C> <C> <C> <C>
L. Dennis Kozlowski............................ 49 1987 1,010,058(2) (4)
Chairman of the Board of the Company (January
1993--present); Chief Executive Officer of
the Company (July 1992--present); President
of the Company (December 1989-- present);
President, Grinnell Corporation (January
1984--present); Director, Thiokol Corp.,
(aerospace and defense products) (August
1993--present); Director, Applied Power Inc.
(control products) (July 1994-- present);
Director, Raytheon Company (electronic
systems and equipment) (June 1995--present);
Director, RJR Nabisco Holdings Corp. (June
1996-present)
Joshua M. Berman++............................. 58 1967 36,000 (4)
Counsel to Kramer, Levin, Naftalis & Frankel
(counselors at law); Secretary of the
Company(3)
Richard S. Bodman*............................. 58 1992 12,578 (4)
Managing General Partner, AT&T Ventures LLC
(May 1996--present); Senior Vice President,
Corporate Strategy and Development, AT&T
Corporation (communications) (August
1990--May 1996)
John F. Fort, III+............................. 54 1982 79,528 (4)
Chairman of the Board of the Company
(1982--December 1992); Chief Executive
Officer of the Company (1982--June 1992);
Director, Dover Corporation (diversified
manufacturer) (November 1989--present);
Director, Roper Industries (diversified
products) (December 1995--present)
Stephen W. Foss+............................... 54 1983 28,486 (4)
President, Foss Manufacturing Company Inc.
(manufacturer of non-woven fabrics)
Richard A. Gilleland........................... 52 1994 2,611 (4)
Chairman and Director, Quest Medical Products
(medical products) (July 1996--present);
Director, DePuy International (medical
products) (July 1996--present); President and
Chief Executive Officer, AMSCO International,
Inc. (infection control products) (July
1995-- July 1996); Senior Vice President of
the Company (October 1994--July 1995);
President
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDING % OF SHARES
COMMON OF COMMON
NAME, PRINCIPAL OCCUPATION AND DIRECTOR STOCK BENEFICIALLY STOCK BENEFICIALLY
POSITION WITH THE COMPANY AGE SINCE OWNED(1) OWNED
- ----------------------------------------------- --- -------- ------------------ -------------------
<S> <C> <C> <C> <C>
and Chief Executive Officer, The Kendall
Company (July 1990--July 1995); Director
OrNda Health Corp. (health care services
management) (November 1991--present);
Director, Remington Arms Company, Inc.
(firearms and ammunition) (March 1994--
present); Director, Physicians Resource Group
(physician practice management services)
(June 1995--present)
Philip M. Hampton*@++.......................... 63 1985 25,000 (4)
Chairman of the Board, Metzler Corporation
(investment bank) (October 1989--present);
Director and Vice Chairman (Retired), Bankers
Trust New York Corporation (1986--1989)
Frank E. Walsh, Jr.+*.......................... 55 1992 51,481 (4)
Chairman, Sandyhill Foundation (charitable
organization) (August 1996--present);
Chairman, Wesray Capital Corporation
(investment bank) (October 1989--January
1996); Director, Outlet Communications, Inc.
(broadcasting) (1986--1996)
</TABLE>
- ------------
+ Member of Audit Committee
* Member of Compensation Committee
@ Lead Director
++ Member of Nominating Committee
(1) The amounts shown are the number of shares of Common Stock owned
beneficially as of September 10, 1996, based on information furnished by
the persons named. For purposes hereof, a person is deemed to be the
beneficial owner of shares if such person, either alone or with others, has
the power to vote or to dispose of such shares.
(2) The amounts shown include 338,000 shares awarded Mr. Kozlowski under the
Company's 1994 Restricted Stock Ownership Plan for Key Employees on which
restrictions have not yet lapsed.
(3) The law firm of Kramer, Levin, Naftalis & Frankel has performed and will
perform legal services for the Company during the current fiscal year.
(4) Less than 1%.
The Board of Directors held eleven meetings during the 1996 fiscal year.
Directors received a fee of $40,000. Effective for fiscal year 1997, directors
will receive an annual fee of $60,000. Fees are not paid for membership on any
committee of the Board. Directors may make an irrevocable election each year to
defer all or a portion of their annual fees into an account containing phantom
shares of the Company's stock. The account is also credited with an amount equal
to the dividends which would have been earned on the shares if owned.
Participants will receive payments from their account in cash, in either a lump
sum or annual installments, beginning five years after the original deferral or
at the termination of service on the Board, if earlier.
The Board has an Audit Committee which reviews the internal controls of the
Company. It meets with appropriate Company financial personnel as well as the
Company's independent accountants. The
3
<PAGE>
Audit Committee reviews the scope and results of the professional services
provided by the Company's independent accountants and the fees charged for such
services and makes such recommendations to the Board as it deems appropriate,
including recommendations as to the appointment of independent accountants. The
Audit Committee met two times in fiscal 1996.
The Board has a Compensation Committee which oversees the compensation and
benefits of executive officers and key managers of the Company and administers
the 1978, 1983 and 1994 Restricted Stock Ownership Plans for Key Employees, the
Tyco Incentive Compensation Plan, the 1995 Stock Option Plan and the Key
Employee Loan Program. The Committee met once in fiscal 1996.
The position of Lead Director, held by an outside director, is responsible
for coordinating with the Chairman to establish the Board's agenda and the
nomination of new directors and their committee assignments, coordinating the
evaluation of the Chairman and all directors, and acting as the lead non-
employee director.
The Board has a Nominating Committee which makes recommendations to the full
Board regarding nominations of individuals for election to the Board of
Directors. The Nominating Committee will consider nominations submitted by
stockholders. To submit a nomination, a stockholder should write to the Clerk of
the Company at the Company's corporate headquarters in Exeter, New Hampshire in
time to be received not less than 60 calendar days in advance of the date (in
the current year) of the Company's proxy statement issued in connection with the
Annual Meeting of Stockholders. Any such recommendation should include the name
and address of the candidate, a brief biographical description or statement of
the qualifications of the candidate and the candidate's signed consent to being
named as a nominee in the Company's Proxy Statement, if nominated, and to serve
as a director if elected. Committee members communicated with one another
informally but did not hold a formal meeting in fiscal 1996.
Each director who served during fiscal 1996 attended at least 75% of the
aggregate of the total number of meetings of the Board and the total number of
meetings of all committees on which he served.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY
The following table sets forth, as of September 10, 1996, the beneficial
ownership of Tyco Common Stock by (i) those persons known by the Company to own
beneficially more than 5% of the outstanding shares; (ii) each of the executive
officers named under "Executive Compensation" below (other than Mr. Kozlowski);
and (iii) all directors and officers of the Company as a group. See "Nominees
for Directors" above for the beneficial ownership of Tyco Common Stock by Mr.
Kozlowski and the other directors of the Company.
<TABLE>
<CAPTION>
OUTSTANDING % OF OUTSTANDING
COMMON STOCK COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED BENEFICIALLY OWNED
- ----------------------------------------------------------- ------------------ ------------------
<S> <C> <C>
FMR Corp.(1)............................................... 22,514,270 14.7%
82 Devonshire Street
Boston, Massachusetts 02109
J.P. Morgan & Co. Incorporated(2).......................... 10,344,332 6.7%
60 Wall Street New York, New York 10260
Jerry R. Boggess(3)........................................ 55,239 *
Robert P. Mead(4).......................................... 104,653 *
Richard J. Meelia(5)....................................... 82,794 *
Mark H. Swartz(6).......................................... 225,225 *
All directors and officers as a group (15 persons)......... 1,925,193 1.3%
</TABLE>
- ------------
* Less than 1%
(1) In a Schedule 13G, with information as of December 31, 1995, FMR Corp., the
parent company of the Fidelity Investments organization, reported that such
shares were not acquired for the purpose of acquiring or influencing control
of the Company and that it has sole dispositive power over 22,514,270 shares
and sole voting power over 1,349,104 shares.
(2) In a Schedule 13G, with information as of December 31, 1995, J.P. Morgan &
Co. Incorporated reported that such shares were not acquired for the purpose
of acquiring or influencing control of the Company and that it has sole
dispositive power over 9,993,172 shares, shared dispositive power over
293,560 shares, sole voting power over 5,581,277 shares, and shared voting
power over 182,060 shares, all of which shares are held for the benefit of
its separate accounts.
(3) Includes 21,000 shares awarded to Mr. Boggess under the 1983 Restricted
Stock Plan on which restrictions have not yet lapsed.
(4) Includes 20,534 shares awarded to Mr. Mead under the 1994 Restricted Stock
Plan on which restrictions have not yet lapsed.
(5) Includes 50,858 shares awarded to Mr. Meelia under the 1994 Restricted Stock
Plan on which restrictions had not yet lapsed.
(6) Includes 144,000 shares awarded to Mr. Swartz under the 1994 Restricted
Stock Plan on which restrictions have not yet lapsed.
5
<PAGE>
EXECUTIVE COMPENSATION
The table below presents the annual and long-term compensation for services
in all capacities to the Company and its subsidiaries for those persons who
were, at June 30, 1996, the Chief Executive Officer and the other four most
highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(2) COMPENSATION
------------------------------------------------------ ----------------------------
BONUS AWARDS PAYOUTS
--------------------- ---------- ---------------
RESTRICTED LONG-TERM
NAME AND PRINCIPAL FISCAL CASH STOCK(3) STOCK INCENTIVE ALL OTHER
POSITION YEAR SALARY BONUS BONUS OTHER(4) AWARDS(5) PLAN PAYOUTS(6) COMPENSATION(7)
- ------------------ ------ ---------- ---------- -------- -------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
L. Dennis 1996 $1,000,000 $1,000,000 $ $183,359 $ 6,578,750 $ 146,988
Kozlowski......... 1995 1,000,000 1,000,000 77,638 1,375,000 39,695
Chairman of the 1994 1,000,000 585,000 40,000 11,990
Board and Chief
Executive Officer
Jerry R. 1996 343,750 707,804 50,855 7,515 54,260
Boggess...........
Vice President--
President, Tyco
Fire and Safety
Services
Robert P. Mead.... 1996 393,750 1,000,000 427,042 10,742 85,278
Vice President-- 1995 325,000 739,700 231,385 3,207 17,457
President, Tyco 1994 322,913 587,000 14,430
Flow Control
Richard J. 1996 458,077 877,590 643,956 84,984
Meelia............
Vice President--
President, The
Kendall Company
Mark H. Swartz.... 1996 347,500 500,000 4,929 2,510,313 46,289
Vice President-- 1995 275,000 550,000 550,000 6,713
Chief Financial
Officer
</TABLE>
- ------------
(1) The table presents compensation data for Messrs. Kozlowski and Mead for all
three fiscal years, for Mr. Swartz, who first became an executive officer of
the Company in fiscal 1995, for fiscal 1996 and 1995, and for Messrs.
Boggess and Meelia, who first became executive officers of the Company in
fiscal 1996, for fiscal 1996, but not for any prior year.
(2) Under the Tyco International Ltd. Deferred Compensation Plan, the amount of
total salary and bonus that has been deferred for fiscal 1996 is as follows:
Mr. Kozlowski--$250,000, Mr. Boggess--$228,902, Mr. Mead--$200,000, Mr.
Meelia--$829,353 and Mr. Swartz--$375,000.
(3) For fiscal 1996, bonuses were payable as follows: Mr. Boggess--1,175 shares
and Mr. Mead-- 9,867 shares. The amount listed in the table above for fiscal
1996 reflects the fair market value of the shares ($43.28125 per share) on
the date of payment. Mr. Meelia received 10,000 shares at $43.28125 per
share and 5,142 shares at $41.0625 per share.
(4) Amount includes director's fees of $40,000 for Mr. Kozlowski and, for all
applicable persons, the imputed interest on loans under the Key Employee
Loan Program reflecting the difference between the interest rate thereunder
and the average prime rate for the year.
(5) Recipients of restricted shares have the right to vote such shares and to
receive dividends. The number and value of shares held at June 30, 1996 on
which restrictions have not lapsed were as follows: Mr. Kozlowski--190,000
shares, $7,742,500; Mr. Boggess--21,000 shares, $855,750; Mr. Mead--24,000
shares, $978,000; Mr. Meelia--66,000 shares, $2,689,500; and Mr. Swartz--
82,000 shares, $3,341,500. The market value at June 30, 1996 was $40.75 per
share, which was the
(Footnotes continued on following page)
6
<PAGE>
(Footnotes continued from preceding page)
closing price on that date. For fiscal 1996, the number and value (as of the
date of vesting) of shares on which restrictions lapsed were (excluding
those shares described in footnote 6 below): Mr. Boggess--6,000 shares,
$221,625; Mr. Mead--4,000 shares, $151,000; and Mr. Swartz--1,000 shares,
$40,719.
(6) For performance in fiscal 1996 under the Tyco Incentive Compensation Plan,
Mr. Kozlowski and Mr. Swartz earned 152,000 and 58,000 shares, respectively.
The amounts listed in the table above of $6,578,750 and $2,510,313 reflect
the fair market value of the 152,000 and 58,000 shares, respectively, on the
date of payment ($43.28125 per share).
(7) Amount includes contributions to a Supplemental Executive Retirement Plan
("SERP") of $114,500 for Mr. Kozlowski, $33,745 for Mr. Boggess, $68,841 for
Mr. Mead, $63,757 for Mr. Meelia and $33,729 for Mr. Swartz and amounts
contributed or accrued under the Company's defined contribution retirement
plan as follows: Mr. Kozlowski--$15,000, Mr. Boggess--$15,750, Mr.
Mead--$15,750, Mr. Meelia--$12,040, and Mr. Swartz--$10,298. Amount also
includes interest credited on deferred compensation in excess of 120% of the
applicable federal long-term rate as follows: Mr. Kozlowski--$17,477, Mr.
Boggess $4,765, Mr. Mead--$6,897, Mr. Meelia-- $9,187 and Mr.
Swartz--$2,262.
The following table sets forth certain information regarding long-term
incentive plan awards during fiscal 1996 to certain of the individuals named in
the Summary Compensation Table:
LONG TERM INCENTIVE PLAN AWARDS IN MOST RECENT FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED PLANS
------------------------------------------
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD UNTIL
NAME OR OTHER RIGHTS MATURATION OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
- -------------------------- --------------- -------------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
L. Dennis Kozlowski....... 300,000 3 years 0 240,000 300,000
Mark H. Swartz............ 120,000 3 years 0 80,000 120,000
</TABLE>
The above table reflects shares awarded under the 1994 Restricted Stock
Ownership Plan for Key Employees, which will be earned in accordance with
performance criteria specified under the Company's Incentive Compensation Plan.
The performance plan encompasses a three-year cycle tied principally to earnings
per share growth of the Company. If the maximum number of shares are earned
prior to the end of the three-year cycle, additional awards can be provided at
the discretion of the Compensation Committee, subject to annual grant
limitations established by the Tyco Incentive Compensation Plan.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company (the
"Compensation Committee") sets the level of compensation and benefits for the
Company's executive officers and key managers and oversees the administration of
executive compensation programs. The Compensation Committee is composed solely
of independent directors, and none of these directors has any interlocking or
other relationships with the Company that are subject to disclosure under the
Securities and Exchange Commission rules relating to proxy statements.
The Compensation Committee's executive compensation policies are designed
to:
. Attract and retain senior executives who will contribute to the long-term
success and growth of the Company;
7
<PAGE>
. Reward executives for increased profitability and resulting increased
stockholder value by closely aligning the financial interests of senior
executives with those of stockholders;
. Provide equitable compensation within a competitive framework of
comparable industrial companies; and
. Emphasize the importance of stockholder interests through heavily
weighting the top executives' compensation with grants of restricted stock.
The Compensation Committee seeks to achieve these goals through a
compensation program applicable to all corporate officers and to the operating
unit officers reporting directly to the Chief Executive Officer. The program
consists primarily of the following:
. Base Pay: Based upon levels that reflect the degree of responsibility
associated with the executive's position and the executive's past
achievements;
. Annual Incentive Bonuses: Paid in cash and/or stock based upon achievement
of annual earnings and working capital targets established for the relevant
business unit and/or the overall performance of the Company; and
. Long-term, Equity-based Incentive Compensation: Tied to stockholder return
in that the value of the executive's stockholdings fluctuates with the
movement in stock price. The restricted stock program consists of grants
which vest annually over periods of three to ten years. The lapse of
restrictions occurs either as a result of attaining certain
performance-based criteria, if subject to the Tyco Incentive Compensation
Plan, or through passage of time for awards not subject to the Tyco
Incentive Compensation Plan. The number of shares awarded is based upon
certain financial and management performance targets as well as the
individual's potential for future contribution to the Company. The principal
purpose of the restricted stock program is to encourage executives to
enhance the value of the Company and, therefore, the price of the Company's
stock and the return to stockholders. Additionally, this component of the
compensation program creates an incentive for the individual to remain with
the Company until restrictions on all shares have lapsed.
In determining competitive compensation levels, the Compensation Committee
analyzes information from several independent surveys, which include information
regarding comparably-sized industrial companies. Since the Company's market for
executive talent extends beyond its own industries, the survey data include
companies outside the industrial classifications represented in the Dow Jones
Industrial--Diversified Index referred to below under "Stockholder Return
Performance Presentation."
The named executive officers in the Company's annual Proxy Statement are
participants in the Tyco Incentive Compensation Plan (the "Incentive Plan").
Through the Incentive Plan, the named executives can each earn a cash bonus, as
well as vest in shares subject to restricted stock grants, based on the
attainment of certain performance goals. These performance goals are based on
three business criteria for the chief executive officer and named corporate
officers: (i) the Company's growth in earnings per share; (ii) increases in
earnings before tax; and (iii) improvement in operating cash flow, each as
defined. For those named executives who have divisional operating
responsibilities, the performance targets are measured through improvement in
division earnings before interest and tax as defined, as well as achieving
certain working capital goals. Specific annual targets for the performance
measures under the Incentive Plan are established in writing by the Compensation
Committee within 90 days of the beginning of the fiscal year to which the
performance goals relate. Prior to any payments from the Incentive Plan, the
Compensation Committee will certify that the performance goals have been
satisfied.
8
<PAGE>
During fiscal 1994, the Board of Directors adopted the 1994 Restricted Stock
Ownership Plan for Key Employees (the "1994 Restricted Stock Plan"). This Plan
allows the Compensation Committee to continue its emphasis on long-term,
equity-based compensation by granting restricted stock to the named executive
officers as well as other key members of the Company management. The 1994
Restricted Stock Plan is an integral part of the Incentive Plan because
a significant component of the compensation thereunder may result from the
vesting of shares with respect to stock grants if the stated performance goals
are met.
The Internal Revenue Code, as amended by the Omnibus Budget Reconciliation
Act of 1993, requires stockholder approval to assure continued tax deductibility
of performance-based compensation over $1 million paid to the Chief Executive
Officer and the four other highest paid executive officers. In light of this,
the Compensation Committee has determined, where practicable, to modify
executive incentive plans so as to maximize the tax deductibility of
compensation paid to its top executive officers. The Compensation Committee has
structured the performance-based portion of its executive officers' compensation
(which currently consists of the Tyco Incentive Compensation Plan approved by
the stockholders at the Company's Annual Meeting on October 19, 1994) in a
manner intended to comply with these Internal Revenue Code provisions. The
fiscal 1996 incentive awards were granted in accordance with the Tyco Incentive
Compensation Plan.
The Compensation Committee believes that the overall performance of its most
senior executives cannot in all cases be reduced to a fixed formula and that the
prudent use of discretion in determining pay levels is in the best interest of
the Company and its stockholders. While achieving certain predetermined goals is
fundamental to earning incentive payments, neither the Compensation Committee
nor management can anticipate unusual events which may have a material effect on
the ability to achieve the desired results, but which may be entirely beyond the
control of management. Under certain circumstances, the Compensation Committee's
use of discretion in determining amounts of compensation may be appropriate. In
those situations, compensation may not be fully deductible on the Company's tax
return. However, the Compensation Committee does not believe that such loss of
deductibility will have a material effect on the results of operations or the
financial condition of the Company.
Annually, the Compensation Committee reviews with the Chief Executive
Officer the individual performance of each of the other executive officers and
his recommendations with respect to the appropriate compensation awards. The
Compensation Committee also reviews with the Company's Chief Executive Officer
the financial and other objectives for each of the executive officers for the
following year.
The Compensation Committee meets shortly after the end of each fiscal year
to consider and make its determination regarding the total compensation of the
Chief Executive Officer for the ensuing year. The Compensation Committee
determines such compensation based on its assessment of the individual
performance of the Chief Executive Officer, a review of the Company's operating
performance (including such factors as revenues, operating income, earnings per
share and cash flow generation), an analysis of total returns to stockholders
relative to total returns with respect to the shares of comparable companies and
a review of compensation of the chief executive officers of companies in similar
businesses and of comparable size. In accordance with the Tyco Incentive
Compensation Plan, the Compensation Committee awarded Mr. Kozlowski a cash bonus
of $1,000,000 and allowed the restrictions to lapse on 152,000 shares of
restricted stock awarded under the 1994 Restricted Stock Ownership Plan for Key
Employees. In reviewing the appropriateness of Mr. Kozlowski's overall
compensation package, the Compensation Committee considered the specific
9
<PAGE>
performance criteria provided in the Tyco Incentive Plan as well as the
following factors: (i) the Company's strong operating performance in fiscal 1996
as reflected by the fact that, excluding transaction costs and extraordinary
item, income before income taxes increased by $101.8 million, or approximately
24%, over fiscal 1995, and for the same period earnings per share increased by
24% and (ii) stockholders had a total return of 51% on their Tyco shares during
fiscal 1996, while the S&P 500 Index reflected a return of approximately 26%.
MEMBERS OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF THE COMPANY
RICHARD S. BODMAN, CHAIRMAN
PHILIP M. HAMPTON
FRANK E. WALSH, JR.
KEY EMPLOYEE CORPORATE LOAN PROGRAM
The Board of Directors has established the 1983 Key Employee Corporate Loan
Program, as amended (the "Loan Program"), with loan proceeds to be used for the
payment of taxes due as a result of the vesting of ownership of shares of Common
Stock under the 1983 or 1994 Restricted Stock Ownership Plans.
The Loan Program is administered by the Compensation Committee. The
Compensation Committee may authorize a maximum amount of loans per participant
up to a maximum of five times the participant's annual salary (base salary plus
bonus) determined at the date of the loan application. The loans are unsecured.
Loans under the Loan Program generally bear interest at the Company's
incremental short-term borrowing rate, with some loans granted prior to January
1, 1993 bearing interest at 8%. A potential participant's creditworthiness will
be considered before a loan is authorized. Loans are generally repayable in ten
years or when the participant reaches age 69, whichever occurs first, except
that earlier payments must be made in the event that the participant's
employment with the Company or its subsidiaries terminates. The participant is
also required to make loan payments upon the sale or other disposition of shares
(other than gifts to certain family members) with respect to which loans have
been granted.
At June 30, 1996, the amount of loans outstanding under the Loan Program
totaled $12,620,723 of which $6,901,191 was loaned to Mr. Kozlowski, $207,927 to
Mr. Boggess, $413,797 to Mr. Mead and $316,513 to Mr. Swartz.
10
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a graph comparing the cumulative total stockholder return
on the Company's Common Stock against the cumulative total return of the S&P 500
Index and the Dow Jones Industrial--Diversified Index for each of the five years
in the period ended June 30, 1996.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG TYCO INTERNATIONAL LTD., THE S & P 500 INDEX
AND THE DOW JONES INDUSTRIAL-DIVERSIFIED INDEX
250
200
DOLLARS 150 [GRAPH]
100
50
0
6/91 6/92 6/93 6/94 6/95 6/96
- ---------------------------------------------------------------------------
6/91 6/92 6/93 6/94 6/95 6/96
- ---------------------------------------------------------------------------
Tyco International Ltd 100 72 88 99 117 177
S&P 500 100 111 129 131 164 206
Dow Jones Industrial-
Diversified 100 113 133 138 165 208
- ---------------------------------------------------------------------------
* $100 invested on 6/30/91 in stock or index -
Including reinvestment of dividends.
Fiscal year ending June 30.
The graph below shows the cumulative total return to the Company's
stockholders since July 1992, the point at which Mr. Kozlowski became Chief
Executive Officer, compared with the same indices shown in the previous graph,
thus illustrating the relative performance of the Company during the period of
his leadership as Chief Executive Officer.
COMPARISON OF 4 YEAR CUMULATIVE TOTAL RETURN*
AMONG TYCO INTERNATIONAL LTD., THE S & P 500 INDEX
AND THE DOW JONES INDUSTRIAL-DIVERSIFIED INDEX
300
250
DOLLARS 200 [GRAPH]
150
100
50
0
6/92 6/93 6/94 6/95 6/96
- ------------------------------------------------------------------
6/92 6/93 6/94 6/95 6/96
- ------------------------------------------------------------------
Tyco International Ltd 100 123 138 163 248
S&P 500 100 120 125 148 186
Dow Jones Industrial-
Diversified 100 114 115 145 183
- ------------------------------------------------------------------
* $100 invested on 6/30/92 in stock or index -
Including reinvestment of dividends.
Fiscal year ending June 30.
11
<PAGE>
PROPOSAL NUMBER TWO
PROPOSAL TO AMEND THE RESTATED ARTICLES OF ORGANIZATION OF THE COMPANY TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK, PAR
VALUE $0.50 PER SHARE, TO 500,000,000 SHARES
The Board of Directors recommends that the Company's Restated Articles of
Organization, as amended, be further amended to increase the number of
authorized shares of the Company's Common Stock, par value $0.50 per share, from
180,000,000 to 500,000,000 shares. Currently there are 180,000,000 shares of the
Company's Common Stock, $0.50 par value per share, authorized. The Company's
2,000,000 shares of authorized Preferred Stock, none of which has been issued,
would not be affected by the proposed amendment.
As of September 10, 1996, 169,533,336 shares of Common Stock were issued, of
which 16,079,326 shares were held in the Company's Treasury, leaving a total of
10,466,664 shares authorized but unissued. Of these unissued shares, 1,620,565
shares have been reserved for issuance under the 1994 Restricted Stock Ownership
Plan and 8,241,867 shares have been reserved for issuance under the 1995 Stock
Option Plan, leaving 604,232 unissued shares plus 16,079,326 Treasury shares
available for other purposes. Under the proposed amendment, an additional
320,000,000 shares of Common Stock would be available for issuance.
The Board believes it is desirable to have the additional authorized shares
of Common Stock available for stock splits or dividends, employee benefit plans,
future financings, acquisitions, or other corporate purposes. On November 14,
1995, the Company declared a two-for-one stock split in the form of a 100% stock
dividend. In the event the Board of Directors should decide to declare another
stock split, there are not sufficient shares currently available to be able to
accomplish such a distribution. The Company has no present plan to issue shares
of the Common Stock proposed to be authorized. Pursuant to the By-Laws of the
Company, the Board would have the sole discretion to issue the additional shares
of Common Stock from time to time for any corporate purpose without further
action by stockholders, except as may be required by law or stock exchange
rules, and without first offering such shares to stockholders.
The Board of Directors recommends that stockholders vote FOR Proposal Number
Two.
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<PAGE>
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Coopers & Lybrand L.L.P. to be the
independent public accountants to audit the consolidated financial statements of
the Company for the fiscal year ending June 30, 1997. Coopers & Lybrand L.L.P.
was first appointed during fiscal 1994. Audit services performed by Coopers &
Lybrand L.L.P. for fiscal 1996 included the examination of the consolidated
financial statements of the Company and its subsidiaries.
Representatives of Coopers & Lybrand L.L.P. do not expect to be present at
the meeting, but any stockholder who wishes to communicate with representatives
of Coopers & Lybrand L.L.P. should communicate directly with the Engagement
Partner, John O'Connor, One International Place, Boston, Massachusetts 02110.
AMENDMENT TO BY-LAWS
The Board of Directors of the Company, at a meeting held on July 31, 1996,
amended Article I, Section 3(b) of the By-Laws of the Company to lengthen the
period of advance notice of a stockholder proposal or nomination from 20
business days to 60 calendar days.
FUTURE STOCKHOLDER PROPOSALS
In accordance with the rules established by the Securities and Exchange
Commission, any stockholder proposal intended for inclusion in next year's Proxy
Statement should be sent to the Clerk of the Company at One Tyco Park, Exeter,
New Hampshire 03833, and must be received by June 24, 1997. Such proposal must
also comply with the requirements as to form and substance established by the
Securities and Exchange Commission in order to be included in the Proxy
Statement.
In addition, the Company's By-Laws provide that any stockholder of record
wishing to nominate a director or have a stockholder proposal considered at an
annual meeting must provide written notice of such nomination or proposal and
appropriate supporting documentation, as set forth in the By-Laws, to the
Company at its principal executive offices not less than 60 calendar days prior
to the scheduled date of the annual meeting.
ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
Copies of the Annual Report (Form l0-K) of the Company for the year ended
June 30, 1996, as filed with the Securities and Exchange Commission (without
exhibits), are available to stockholders free of charge by writing to: Investor
Relations, Tyco International Ltd., One Tyco Park, Exeter, New Hampshire 03833.
GENERAL
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. Unless otherwise directed, the individuals named in the enclosed
proxy will vote to elect the directors named herein.
The Board of Directors of the Company is not aware of any other matter which
is to be presented for action at the meeting. If any matter other than those
described herein does properly come before the meeting, the individuals named in
the enclosed proxy will vote the shares represented thereby in accordance with
their best judgment.
13
<PAGE>
TYCO INTERNATIONAL LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints L. Dennis Kozlowski and Mark H. Swartz, and
each of them, proxies with power of substitution to vote for and on behalf of
the undersigned at the Annual Meeting of Stockholders of Tyco International Ltd.
(the "Company") to be held at the principal executive offices of the Company,
Tyco Park, Exeter, New Hampshire 03833 on Tuesday, October 22, 1996, at 9:00
a.m. and at any adjournment or postponement thereof, all shares of Common Stock
of record in the name of the undersigned, hereby granting full power and
authority to act on behalf of the undersigned at the said meeting, and any
adjournment or postponement thereof.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED "FOR" THE EIGHT NOMINEES
PROPOSED IN THE ELECTION OF DIRECTORS, "FOR" THE PROPOSED AMENDMENT OF THE
RESTATED ARTICLES OF ORGANIZATION, AS AMENDED, TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK TO 500,000,000 SHARES, AND IN
THE DISCRETION OF THE PROXIES NAMED HEREIN, ACT UPON ANY OTHER MATTERS WHICH MAY
PROPERLY COME BEFORE THE MEETING.
(1) TO ELECT EIGHT DIRECTORS FOR THE ENSUING YEAR;
<TABLE>
<S> <C> <C>
FOR all nominees listed: WITHHOLD AUTHORITY TO L. D. Kozlowski, J. M. Berman, R. S. Bodman, J.
(EXCEPT AS MARKED TO THE VOTE FOR ALL NOMINEES F. Fort, III, S. W. Foss, R. A. Gilleland, P. M.
CONTRARY) LISTED Hampton, F. E. Walsh, Jr.
/ / / /
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
- --------------------------------------------------------------------------------
(Continued on reverse side)
<PAGE>
(2) TO AMEND THE RESTATED ARTICLES OF ORGANIZATION OF THE COMPANY, AS AMENDED,
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK TO
500,000,000 SHARES; AND
FOR / / AGAINST / / ABSTAIN / /
(3) TO CONSIDER AND ACT UPON ANY OTHER MATTER WHICH MAY PROPERLY COME BEFORE THE
MEETING.
Please sign exactly as your name
appears on this card. If shares
are registered in the names of
two or more persons, each should
sign. Executors, administrators,
guardians, attorneys and
corporate officers should add
their titles.
The undersigned hereby revokes
any proxy previously given and
acknowledges receipt of written
notice of, and the Proxy
Statement for, the 1996 Annual
Meeting of Stockholders and the
1996 Annual Report of the
Company.
Dated: __________________, 1996
_______________________________
_______________________________
Signature
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD
YOUR VOTES"
