<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM JANUARY 1, 1997 TO SEPTEMBER 30, 1997
0-16979
(COMMISSION FILE NUMBER)
TYCO INTERNATIONAL LTD.
(FORMERLY ADT LIMITED)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
BERMUDA NOT APPLICABLE
(JURISDICTION OF INCORPORATION) (IRS EMPLOYER
IDENTIFICATION NUMBER)
</TABLE>
THE GIBBONS BUILDING, 10 QUEEN STREET, SUITE 301, HAMILTON, HM11, BERMUDA
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
441-292-8674*
(REGISTRANT'S TELEPHONE NUMBER)
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<S> <C>
Name of each exchange
Title of each class on which registered
COMMON STOCK, PAR VALUE $0.20 NEW YORK STOCK EXCHANGE
SERIES A FIRST PREFERENCE SHARE PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III or this Form 10-K or any amendment to this
Form 10-K. [X].
The aggregate market value of voting common stock held by nonaffiliates of
registrant was $21,264,547,978 as of November 30, 1997.
The number of shares of common stock outstanding as of November 30, 1997
was 549,690,687.
DOCUMENTS INCORPORATED BY REFERENCE
See pages 19 and 22 in the original Form 10-K filed on December 24, 1997
for the Exhibit Index.
------------------------
* The executive offices of registrant's principal United States subsidiary, Tyco
International (US) Inc., are located at One Tyco Park, Exeter, New Hampshire
03833. The telephone number there is (603) 778-9700.
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<PAGE> 2
TYCO INTERNATIONAL LTD. (FORMERLY ADT LIMITED)
AMENDMENT NO. 1 ON FORM 10-K/A TO THE TRANSITION REPORT ON FORM 10-K FOR THE
NINE MONTHS
ENDED SEPTEMBER 30, 1997
Part III, Item 10. Directors and Executive Officers of the Registrant
Part III, Item 11. Executive Compensation
Part III, Item 12. Security Ownership of Certain Beneficial Owners and
Management
Part III, Item 13. Certain Relationships and Related Transactions
In compliance with General Instruction G(3) to Form 10-K, the information
required under these items is contained in the following Attachment A, which is
included herein and made a part of this Transition Report on Form 10-K, not
later than 120 days after the end of the fiscal year.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 on
Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly
authorized.
TYCO INTERNATIONAL LTD.
By /s/ MARK H. SWARTZ
-----------------------------------
MARK H. SWARTZ
Executive Vice President and Chief
Financial Officer
(Principal Financial and Accounting
Officer)
Date: January 28, 1998
2
<PAGE> 3
ATTACHMENT A
DIRECTORS
Set forth below are the names, ages, positions and certain other
information concerning the current Directors of the Company as at January 16,
1998
<TABLE>
<CAPTION>
% OF
OUTSTANDING
NAME, PRINCIPAL NUMBER OF COMMON
OCCUPATION AND COMMON SHARES
POSITION WITH DIRECTOR SHARES OWNED OWNED
THE COMPANY AGE SINCE BENEFICIALLY(1) BENEFICIALLY
- -------------------------------------------------------- --- --------- ------------- -----------
<S> <C> <C> <C> <C>
L. Dennis Kozlowski..................................... 51 1997 1,364,916(2) (5)
Chairman of the Board, President and Chief Executive
Officer of the Company (July 1997-present), Chairman
of the Board, Former Tyco (January 1993-present);
Chief Executive Officer, Former Tyco (July
1992-present); President, Former Tyco (December
1989-present); President, Grinnell Corporation
(January 1984-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. (consumer products) (June 1996-present)
Michael A. Ashcroft..................................... 51 1984 8,739,114(3) 1.58%
Chairman of the Board and Chief Executive Officer of
the Company (1984-July 1997); Chairman of the Board
and Chief Executive Officer, Hawley Group PLC
(predecessor to the Company) (1977-1984); Chairman,
BHI Corporation (services company) (1987-present)
Joshua M. Berman(4)..................................... 59 1997 72,000 (5)
Counsel to Kramer, Levin, Naftalis, & Frankel
(counselors at law) (1985-present); Director, Former
Tyco (1965-November 1997); Vice President of the
Company (July 1997-present)
Richard S. Bodman*+..................................... 59 1997 26,925 (5)
Managing General Partner, AT&T Ventures LLC (venture
capital) (May 1996-present); Senior Vice President,
Corporate Strategy and Development, AT&T Corporation
(communications) (August 1990-May 1996); Director,
Reed Elsevier, plc (publishing) (June 1996-present);
Director, Lin Television (broadcasting) (May
1996-present); Director, National Housing Partnerships
Inc. (real estate) (August 1995-present); Director,
Former Tyco (1992-November 1997)
John F. Fort, III*+..................................... 56 1997 159,795 (5)
Chairman of the Board, Former Tyco (1982-December
1992); Chief Executive Officer, Former Tyco (1982-June
1992); Director, Dover Corporation (diversified
manufacturer) (November 1989-present); Director, Roper
Industries (diversified products) (December
1995-present); Director, Former Tyco (1982-November
1997)
Stephen W. Foss**....................................... 55 1997 59,160 (5)
Chairman, President and Chief Executive Officer, Foss
Manufacturing Company, Inc. (manufacturer of synthetic
fibers and non-woven fabrics) (1969-present);
Director, Ameron International (diversified
manufacturer) (1994-present); Director, Former Tyco
(1983-November 1997)
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
% OF
OUTSTANDING
NAME, PRINCIPAL NUMBER OF COMMON
OCCUPATION AND COMMON SHARES
POSITION WITH DIRECTOR SHARES OWNED OWNED
THE COMPANY AGE SINCE BENEFICIALLY(1) BENEFICIALLY
- -------------------------------------------------------- --- --------- ------------- -----------
<S> <C> <C> <C> <C>
Richard A. Gilleland*................................... 53 1997 6,701 (5)
Chairman, President and Chief Executive Officer,
Physician's Resource Group, Inc., (physician practice
management services) (December 1997-present);
President and Chief Executive Officer, AMSCO
International, Inc. (infection control products) (July
1995 -- July 1996); Senior Vice President, Former Tyco
(October 1994 -- July 1995); Chairman, President and
Chief Executive Officer, The Kendall Company (July
1990 -- July 1995); Director, DePuy International
(medical products) (July 1996-present); Director,
Remington Arms Company, Inc. (firearms and ammunition)
(March 1994-present); Director, Former Tyco
(1994-November 1997)
Philip M. Hampton**+++.................................. 65 1997 50,000 (5)
Co-Managing Director, R. H. Arnold & Co. (investment
bank) (April 1997-present); Chairman of the Board,
Metzler Corporation (investment bank) (October
1989-March 1997); Director & Vice Chairman, Bankers
Trust New York Corporation (banking) (1986-1989);
Director, Former Tyco (1985-November 1997)
James S. Pasman, Jr.*................................... 67 1992 1,924 (5)
President and Chief Operating Officer, National
Intergroup, Inc. (industrial holding company)
(1989-1991); Chairman and Chief Executive Officer
Kaiser Aluminum and Chemical Corp. (aluminum and
chemicals) (1987-1989); Director, BEA Income Fund,
Inc., BEA Strategic Income Fund, Inc., BT Insurance
Funds Trust and Education Management Corp.
W. Peter Slusser**...................................... 68 1992 3,368 (5)
President, Slusser Associates, Inc. (private
investment firm) (1988-present); Managing Director and
Head of Mergers and Acquisitions, Paine Webber
Incorporated (1976-1988); Director, Ampex Corporation
(high performance television and data storage
recording systems) (1992-present); Director, Sparton
Corporation (anti-submarine warfare products and
electronics) (1997-present)
Frank E. Walsh, Jr.**................................... 56 1997 105,127 (5)
Chairman, Sandyhill Foundation (charitable
organization) (August 1996-present); Director, Former
Tyco (1992-November 1997); Chairman Wesray Capital
Corporation (private investment firm) (1989-1996)
</TABLE>
- ---------------
* Member of Audit Committee
** Member of Compensation Committee
+ Member of Corporate Governance and Nominating Committee
++ Lead director
(1) The amounts shown are the number of common shares owned beneficially as of
January 16, 1998, 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. There were 550,182,802 common shares of the Company
outstanding as of January 16, 1998.
4
<PAGE> 5
(2) The amounts shown include 300,000 shares that Mr. Kozlowski has the right to
acquire within 60 days of January 16, 1998, through the exercise of stock
options. The amounts shown exclude 3,000,000 options awarded to Mr.
Kozlowski under the Tyco International Long Term Incentive Plan, which will
become exercisable in three equal annual installments beginning in July
1998, and 655,200 shares held in a charitable remainder trust, as to which
Mr. Kozlowski disclaims beneficial ownership.
(3) The amounts shown include 3,128,626 shares that Mr. Ashcroft has the right
to acquire within 60 days of January 16, 1998, through the exercise of stock
options. The number of common shares beneficially owned by Mr. Ashcroft
includes 5,610,488 common shares held by or on behalf of the trustees of an
irrevocable trust in which Mr. Ashcroft is beneficially interested.
(4) The shares listed are held in two charitable remainder trusts, of which Mr.
Berman is co-trustee and Mr. Berman and members of his immediate family are
life beneficiaries. The law firm of Kramer, Levin, Naftalis & Frankel has
performed and will perform legal services for the Company during the current
fiscal year.
(5) Less than 1%.
The Board of Directors held nine meetings during the nine month period
ended September 30, 1997 ("Fiscal 1997"). The Company is seeking the approval of
shareholders to change the bye-laws and, if approved, Directors will receive an
aggregate of annual and other fees totaling $65,000 during the 1998 fiscal year.
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.
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 serving on the
Company board, if earlier. Non-employee Directors were each granted options to
purchase 3,500 common shares at an exercise price of $38.3125 per share during
Fiscal 1997. These options were granted under the Tyco International Ltd.
Long-Term Incentive Plan. The exercise price approximates the market price of
Tyco's common shares on the date of grant.
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 Audit Committee reviews the scope and
results of the professional services provided by the Company's independent
auditors 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 auditors. The Audit Committee met two times in Fiscal
1997.
The Board has a Compensation Committee which oversees the compensation and
benefits of executive officers and key managers of the Company. The Compensation
Committee met three times in Fiscal 1997.
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 Corporate Governance and Nominating Committee which is
responsible for evaluating the Board's structure, personnel and processes and
makes recommendations to the full Board regarding nominations of individuals for
election to the Board of Directors. The Committee will consider nominations
submitted by shareholders. To recommend a nominee, a shareholder should write to
the Secretary of the Company at the Company's corporate headquarters in
Hamilton, Bermuda. Under the Company's current bye-laws, generally no person
shall be eligible for election to the office of Director at any general meeting
unless, not less than six and not more than twenty-eight clear days before the
day appointed for the meeting, there has been given to the Secretary notice in
writing by some Member (not being the person to be proposed) entitled to attend
and vote at the meeting. 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. Corporate Governance and Nominating Committee members
communicated with one another informally, but did not hold a formal meeting in
Fiscal 1997.
Each director who served during Fiscal 1997 attended at least 75% of the
meetings of the Board and all of the meetings of each committee on which he
served.
5
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TYCO
The following table sets forth, as of January 16, 1998 (except as otherwise
indicated), the beneficial ownership of common shares by (i) those persons known
by the Company to own beneficially more than 5% of the outstanding Tyco common
shares; (ii) each of the executive officers named under "Executive Compensation"
below (other than Mr. Kozlowski and Mr. Ashcroft); and (iii) all directors and
executive officers of the Company as a group. See "Directors" above for the
beneficial ownership of common shares by Mr. Kozlowski, Mr. Ashcroft and other
Directors of the Company.
<TABLE>
<CAPTION>
NUMBER OF % OF OUTSTANDING
COMMON SHARES COMMON SHARES
BENEFICIAL OWNER OWNED BENEFICIALLY(1) OWNED BENEFICIALLY
- ------------------------------------------------------- --------------------- ------------------
<S> <C> <C>
FMR Corp.(2)........................................... 78,190,334 14.2%
82 Devonshire Street
Boston, Massachusetts 02109
Equitable Companies, Inc.(3)........................... 40,311,672 7.3%
1345 Avenues of the Americas
New York, New York 10105
Massachusetts Financial Services Co.(4)................ 35,015,576 6.4%
500 Boylston Street
Boston, Massachusetts 02116
Raymond A. Gross....................................... 3,400 *
Michael J. Richardson (5).............................. 532,192 *
Stephen J. Ruzika...................................... 13,958 *
Mark H. Swartz(6)...................................... 288,452 *
All directors and executive officers as a group (20 12,153,511 2.2%
persons).............................................
</TABLE>
- ---------------
* Less than 1%
(1) The amounts shown are amounts owned beneficially as of January 16, 1998
(except for FMR, Equitable Companies and Massachusetts Financial Services,
where the amount is as of September 30, 1997), 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, had the power to vote or to dispose of such shares. There were
550,182,802 common shares of the Company outstanding as of January 16, 1998.
(2) In a Form 13F, with information as of September 30, 1997, 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 78,190,334
shares, and sole voting power over 2,241,372 shares.
(3) In a Form 13F, with information as of September 30, 1997, Equitable
Companies, Inc. 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 39,846,576 shares, sole voting power over 29,393,152
shares, and shared voting power over 465,096 shares, all of which shares are
held for the benefit of its separate accounts.
(4) In a Form 13F, with information as of September 30, 1997, Massachusetts
Financial Services Co. 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 35,015,576 shares and sole voting power over
34,887,318 shares.
(5) Includes 216,598 shares that Mr. Richardson has the right to acquire within
60 days of January 16, 1998, through the exercise of stock options. The
amounts shown exclude 86,638 options awarded to Mr. Richardson under the ADT
1993 Long-Term Incentive Plan, which become exercisable over periods from
May 1998 through 2001.
6
<PAGE> 7
(6) Includes 100,000 shares that Mr. Swartz has the right to acquire within 60
days of January 16, 1998, through the exercise of stock options. The amounts
shown exclude 1,000,000 options awarded to Mr. Swartz under the Tyco Long
Term Incentive Plan, which will become exercisable in three equal annual
installments beginning in July 1998, and 91,000 shares held in a charitable
remainder trust, as to which Mr. Swartz disclaims beneficial ownership.
EXECUTIVE COMPENSATION
Summary Compensation Table
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 served
as the Chief Executive Officer during Fiscal 1997 and the other four most highly
compensated executive officers of the Company (the "Named Officers").
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
INCENTIVE
---------------------------
AWARDS PAYOUTS
------ -------
ANNUAL COMPENSATION SHARES
--------------------------------- UNDERLYING LONG-TERM
FISCAL STOCK INCENTIVE ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS PLAN PAYOUTS COMPENSATION
- ------------------------------ ------- ---------- ---------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Ashcroft(2)........ 1997 $ 578,812 $ 0 $ 0 $ $19,750,000(2)
Prior Chairman of the Board 1996 1,143,844 2,344,880 4,813,300 1,330,380(3)
and Chief Executive Officer 1995 1,089,378 2,233,219 1,443,990 1,921,939(3)
Raymond A. Gross(4)........... 1997 204,275 75,992 0 728,984(4)
Senior Vice President of 1996 183,353 82,500 96,266 0
ADT Security Services, Inc. 1995 0 0 0 0
Michael J. Richardson(5)...... 1997 253,053 242,219 0 5,403(6)
Chief Executive Officer 1996 335,000 222,705 38,506 6,461(6)
of ADT Automotive, Inc. 1995 314,000 145,245 48,132 6,461(6)
Stephen J. Ruzika(7).......... 1997 579,217 3,225,000(8) 0 5,166,516(9)
President ADT Security 1996 686,306 1,100,000(8) 200,552 40,323(9)
Services, Inc. 1995 653,625 250,000(8) 481,330 37,432(9)
L. Dennis Kozlowski(10)....... 1997 312,500 2,544,260 3,300,000 6,508,125 108,125(11)
Chairman of the Board and
Chief Executive Officer
Mark H. Swartz(12)............ 1997 139,875 1,272,130 1,100,000 2,169,375 31,994(13)
Executive Vice President
and Chief Financial Officer
</TABLE>
- ---------------
(1) On July 2, 1997, a wholly-owned subsidiary of ADT Limited ("ADT") merged
with Tyco International Ltd. (the "Former Tyco"). Upon consummation of the
merger, ADT (the surviving corporation) changed its name to Tyco
International Ltd. (the "Company" or "Tyco"). Former Tyco became a
wholly-owned subsidiary of the Company and changed its name to Tyco
International (US) Inc. ("Tyco US"). In conjunction with the merger on July
2, 1997, L. Dennis Kozlowski and Mark H. Swartz were named Chairman of the
Board/Chief Executive Officer and Executive Vice President/Chief Financial
Officer, respectively. The compensation data presented herein for Messrs.
Kozlowski and Swartz reflect their earnings for the period from July 2,
1997 through the end of the fiscal year. Mr. Kozlowski and Mr. Swartz are
also Chairman of the Board/Chief Executive Officer and Vice President/Chief
Financial Officer of Tyco US, respectively.
In September 1997 the Company changed its fiscal year end from December 31
to September 30. The change in year end resulted in a short fiscal year
covering the nine month transition period from January 1 to September 30,
1997. References to Fiscal 1997, 1996 and 1995 refer to the nine months
ended September 30, 1997 and the calendar years ended December 31, 1996 and
1995, respectively.
7
<PAGE> 8
(2) Concurrent with the merger of ADT and Former Tyco, Mr. Ashcroft's services
as Chairman of the ADT Board and Chief Executive Officer were terminated.
At the time of his termination, Mr. Ashcroft was paid in full and final
settlement of severance payments to which he was entitled under his
employment agreement in respect of salary, bonus payment and pension
payments and also in lieu of compensation to the end of 1997 as well as in
satisfaction of certain other future commitments and benefits due him.
The salary, bonus and all other compensation shown in 1995 represents Mr.
Ashcroft's entitlement to those amounts. Mr. Ashcroft utilized $2,500,000
of the compensation due to him for 1995, being the whole of his bonus
entitlement of $2,233,219 and $266,781 of his other compensation to
subscribe for options, at a rate of $2.50 per option, for ADT common
shares.
(3) The other compensation due to Mr. Ashcroft in respect of 1996 and 1995 (a
portion of which for 1995 is referred to in note (2)) represents the US
dollar equivalent of L851,344 and L1,217,341, respectively, being an amount
in lieu of providing Mr. Ashcroft with retirement and death benefits under
a defined pension plan.
(4) Mr. Gross joined ADT Security Services, Inc. in March 1996 and left the
Company in October 1997. Other compensation of $728,984 represents amounts
paid under a severance agreement with the Company in accordance with a
"Severance Change in Control" event, as defined.
(5) The salary amount shown for 1996 represents Mr. Richardson's entitlement to
salary in the year. Prior to becoming entitled to receive certain salary,
however, Mr. Richardson elected to receive options at the rate of $2.50 per
option, to subscribe for ADT common shares at an exercise price of $8.956
per share, in lieu of receiving $69,444 and $83,333 in salary in 1996 and
1995, respectively.
(6) Includes $3,600, $4,500 and $4,500 contributed for 1997, 1996 and 1995,
respectively, to a defined contribution 401(k) pension benefit plan and
$1,803, $1,961 and $1,961 for 1997, 1996 and 1995, respectively, which is
the aggregate incremental cost to the Company of providing Mr. Richardson
with enhanced group term life insurance benefits.
(7) Concurrent with the merger of ADT and Former Tyco, Mr. Ruzika's services as
Chief Financial Officer of the Company were terminated, but he retained his
position of President, ADT Security Services, Inc. At the time of his
termination as Chief Financial Officer, Mr. Ruzika was paid $2,000,000 in
severance to which he was entitled under his employment agreement in
respect of salary and bonus plan payments. In October 1997, Mr. Ruzika
resigned from his position as President, ADT Security Services, Inc. and
received a severance payment of $710,520. Such severance amounts are
included in the All Other Compensation column. He is no longer employed by
the Company.
The salary amount shown for 1996 represents Mr. Ruzika's entitlement to
salary in the year. Prior to becoming entitled to receive certain salary,
however, Mr. Ruzika elected to receive options at the rate of $2.50 per
option, to subscribe for ADT common shares at an exercise price of $8.956
per share, in lieu of receiving $80,1316 and $104,167 in 1996 and 1995,
respectively.
(8) Mr. Ruzika earned these amounts under a bonus arrangement by which payments
are related directly to the performance of the ADT's common share price.
(9) Includes $19,056, $37,639 and $35,777 contributed to Mr. Ruzika's
retirement income plan in 1997, 1996 and 1995, respectively, and $2,013,
$2,684 and $1,655 for 1997, 1996 and 1995, respectively, which is the
estimated aggregate incremental cost to the Company of providing Mr. Ruzika
with supplemental term life insurance. Also, in conjunction with his
termination as Chief Financial officer and resignation as President, ADT
Security Services, Inc., (referred to in note 7 above), Mr. Ruzika was paid
$698,246 under his retirement income plan, $643,318 under a pension plan
and $1,112,419 under a supplemental pension plan.
(10) Included in the Bonus and Long-Term Incentive Plan Payouts for Mr.
Kozlowski is $4,526,193 of compensation that has been deferred under the
Tyco International Ltd. Deferred Compensation Plan. At September 30, 1997,
Mr. Kozlowski had $11,866,675 outstanding under the Key Employee Loan
Program with Tyco US.
8
<PAGE> 9
(11) Includes contributions to a Supplemental Executive Retirement Plan of
$91,875, interest credited on deferred compensation in excess of 120% of
the applicable federal long-term rate of $13,025, and director's fees of
$16,250.
(12) Included in the Salary, Bonus and Long-Term Incentive Plan Payouts for Mr.
Swartz is $3,466,505 of compensation that has been deferred under the Tyco
International Ltd. Deferred Compensation Plan.
(13) Includes contributions to a Supplemental Executive Retirement Plan of
$31,994, and interest credited on deferred compensation in excess of 120%
of the applicable federal long-term rate of $8,747.
Option Grants in Last Fiscal Year
The following table shows all grants of share options to the Named Officers
during Fiscal 1997. All options expire ten years after the date of grant. The
grant date present values were determined using the Black-Scholes option pricing
model applied as of the grant date using the following assumptions: an interest
rate of 6.07 percent that represents the interest rate on a long-term U.S.
Treasury security; an assumed annual volatility of underlying stock of 22.0
percent; quarterly dividend payments of $.025 per share; and the vesting of all
options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------
% OF TOTAL
OPTIONS EXERCISE
GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(1) IN FISCAL YEAR ($/SHARE) DATE VALUE
- ------------------------- --------- --------------- --------- -------------- -----------
<S> <C> <C> <C> <C> <C>
L. Dennis Kozlowski...... 3,000,000 35.2% $38.31250 July 17, 2007 $69,783.845
L. Dennis Kozlowski...... 300,000 3.5% $40.96875 July 23, 2007 $ 6,653,793
Mark H. Swartz........... 1,000,000 11.7% $38.31250 July 17, 2007 $23,261,281
Mark H. Swartz........... 100,000 1.2% $40.96875 July 23, 2007 $ 2,217,931
</TABLE>
- ---------------
(1) The 3,000,000 and 1,000,0000 options granted to Mr. Kozlowski and Mr.
Swartz, respectively, become exercisable in three equal annual installments
beginning in July 1998. The 300,000 and 100,000 options granted to Mr.
Kozlowski and Mr. Swartz, respectively, become exercisable on January 23,
1998, six months from date of grant. The July 23 options were granted under
a re-load feature of the plan that provides for issuance of stock options to
replace restricted shares returned to the Company to satisfy income tax
withholding obligations on stock vestings.
Aggregate Option Exercises in Last Fiscal Year and Year-End Option Values
Shown below is information with respect to aggregate option exercises by
the Named Officers in the fiscal year ended September 30, 1997 and with respect
to unexercised options to purchase common shares granted in Fiscal 1997 and
prior years to the Named Officers and held by them at September 30, 1997.
<TABLE>
<CAPTION>
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON OPTIONS AT IN-THE MONEY OPTIONS
EXERCISE OF VALUE REALIZED ON FISCAL YEAR END AT FISCAL YEAR END(1)(2)
OPTION IN EXERCISE OF OPTIONS ------------------------- ---------------------------
NAME FISCAL YEAR IN FISCAL YEAR EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- ------------------- ---------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Michael A. Ashcroft(3)... 0 $ 0 10,829,906 0 $290,450,144 $ 0
Raymond A. Gross(4)...... 0 0 0 96,266 0 2,299,914
Michael J. Richardson.... 0 0 303,232 86,638 9,357,488 2,313,615
Stephen J. Ruzika(5)..... 160,442 5,131,240 1,371,722 64,176 39,650,744 1,795,602
L. Dennis Kozlowski...... 0 0 0 3,300,000 0 8,175,000
Mark H. Swartz........... 0 0 0 1,100,000 0 2,725,000
</TABLE>
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<PAGE> 10
- ---------------
(1) Based on the closing price of $41.03125 on September 30, 1997 (after giving
effect to the two-for-one stock split effective on October 22, 1997).
(2) Messrs. Ashcroft, Richardson and Ruzika have been granted certain options
for which they have paid a subscription price of $2.50 per option which has
been taken into account for the purpose of valuing these options.
(3) On November 10, 1997, Mr. Ashcroft exercised 7,701,280 options with a value
of $210,475,982 based on a Black-Scholes valuation. In connection with this
exercise, a subsidiary of the Company provided a guarantee through December
3, 1997 of Mr. Ashcroft's short-term margin loan of approximately $120
million to an investment broker in return for managing an orderly
disposition of the shares on behalf of Mr. Ashcroft.
(4) Upon Mr. Gross' resignation as Senior Vice President of ADT Security
Services, Inc. subsequent to year end, his unexercisable options became
vested. On October 2, 1997, Mr. Gross exercised all his remaining options
(96,266) for a value of $2,320,973.
(5) Upon Mr. Ruzika's resignation as President of ADT Security Services, Inc.
subsequent to year end, his unexercisable options became vested. On October
22, 1997, Mr. Ruzika exercised all his remaining options (1,435,898) for a
value of $41,969,748.
Certain Defined Benefit Plans
Except for Mr. Richardson, Tyco International Ltd. and its subsidiaries do
not maintain any defined benefit or actuarial retirement plans ("pension plans")
in which the Named Executive Officers participate. Mr. Richardson participates
in a pension plan maintained by ADT Group PLC (the ADT Group Plan"). Mr.
Richardson is the only Named Officer who participates in the ADT Group Plan. The
ADT Group Plan provides Mr. Richardson an annual benefit payable for life
beginning at age 60. The annual benefit is equal to 66.7 percent of base salary
for the three years of the most recent ten years prior to retirement that
produce the highest average. Mr. Richardson's annual benefit payable at age 60
for life is L146,095. Since Mr. Richardson has already attained age 60, the
benefit payable to him upon his actual retirement will be adjusted based upon
his actual retirement date. Benefits payable under the ADT Group Plan are not
offset by United States social security benefits.
Employment Contracts and Termination of Employment Arrangements
Mr. Richardson entered into an employment agreement with ADT Automotive
Holdings, the corporate parent of ADT Automotive, as of November 30, 1993. The
agreement provides that Mr. Richardson will serve as Chief Executive Officer of
ADT Automotive Holdings and its subsidiaries from December 1, 1993 until July
31, 1996, subject to renewal for additional one-year terms thereafter. The
agreement was renewed on a year-to-year basis as of July 31, 1996. The agreement
provides that the term will be extended for an additional one year period
thereafter unless either ADT Automotive Holdings or Mr. Richardson shall have
given the other notice of intention not to extend the term six months prior to
July 31, 1998.
Mr. Richardson's initial annual base salary will be $300,000 and will be
subject to annual review for possible increases. Mr. Richardson will also be
eligible for annual bonus payments at the discretion of Tyco. The termination
provisions of this agreement include a term to the effect that, in the event
that the agreement is terminated by ADT Automotive Holdings without cause or by
Mr. Richardson with cause, Mr. Richardson will be entitled to receive his base
salary and certain fringe benefits for two years or the remaining term of the
agreement, whichever is longer.
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