<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
TYCO INTERNATIONAL LTD.
(Name of Registrant as Specified In Its Charter)
[ ]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
REVISED PRELIMINARY COPY (FEBRUARY 12, 1998)
[TYCO LOGO]
-- --, 1998
Dear Shareholder,
I am pleased to invite you to attend our 1998 Annual General Meeting of
Shareholders, which will be held at 9:30 a.m., Bermuda time, on March 26, 1998,
at Marriott's Castle Harbor Resort, 2 South Road, St. George, SN 02, Bermuda.
As discussed in the accompanying proxy statement, you will be asked at the
Annual General Meeting to re-elect the Board of Directors and approve their
remuneration, re-appoint the Company's auditors and authorize the Board of
Directors to fix their remuneration, approve an increase of the Company's
authorized share capital by the creation of an additional 750,000,000 common
shares and approve the conversion of 3,750,000 of the Company's unissued
preference shares into common shares and to consider a shareholder proposal.
As I wrote to you on December 15, 1997, we will actually be holding two
annual general meetings on March 26. In order to comply with the requirements of
Bermudian law, at 9:00 a.m., we will first be holding the 1997 annual general
meeting that was adjourned from December 30, 1997. Immediately following, we
will be holding the 1998 annual general meeting, at which we will consider the
matters that I mentioned above. The accompanying notices of meeting enumerate
the matters to be brought before each of the two meetings and the accompanying
proxy statement discusses these matters in detail.
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 card at your earliest convenience.
Thank you for your cooperation.
Yours sincerely,
L. Dennis Kozlowski
Chairman and Chief Executive Officer
the gibbons building, 10 queen street, hamilton, hm 11, bermuda
incorporated in bermuda with limited liability
<PAGE> 3
NOTICE OF ADJOURNED 1997 ANNUAL GENERAL MEETING OF SHAREHOLDERS
TYCO INTERNATIONAL LTD.
(Incorporated in Bermuda with limited liability)
Notice is hereby given that the adjourned 1997 Annual General Meeting of
Tyco International Ltd. (the "Company") will be held on March 26, 1998 at 9.00
a.m., local time, at Marriott's Castle Harbor Resort, 2 South Road, St. George,
SN 02, Bermuda for the following purposes:
1. to re-elect the Board of Directors of the Company;
2. to re-appoint Coopers & Lybrand as the independent auditors of the
Company and to authorize the directors to fix the auditors' remuneration;
and
3. to receive the Company's audited consolidated financial statements
for the year ended December 31, 1996.
The 1997 Annual General Meeting was originally convened for December 30,
1997 but was adjourned without consideration of any of the above business. All
holders of record of the Company's common shares at the close of business on
January 28, 1998, which has been fixed as the record date for notice of the
adjourned meeting, are entitled to notice of the meeting. All holders of record
of the Company's common shares on the date of the meeting will be entitled to
attend, and to vote at, the meeting.
Shareholders are cordially invited to attend the meeting in person. Whether
or not you plan to attend the meeting, please sign, date and return the enclosed
proxy to ensure that your shares are represented at the meeting. Shareholders
who attend the meeting may vote their shares personally, even though they have
sent in proxies.
By Order of the Board of Directors,
John D. Campbell, Secretary
The Gibbons Building
10 Queen Street
Hamilton, HM 11
Bermuda
- -- --, 1998
IMPORTANT: PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY AS SOON AS
POSSIBLE. THE PROXY IS REVOCABLE AND IT WILL NOT BE USED IF YOU GIVE WRITTEN
NOTICE OF REVOCATION TO THE SECRETARY OF THE COMPANY PRIOR TO THE VOTE TO BE
TAKEN AT THE MEETING, IF YOU LODGE A LATER-DATED PROXY OR IF YOU ATTEND AND VOTE
AT THE MEETING.
<PAGE> 4
NOTICE OF 1998 ANNUAL GENERAL MEETING OF SHAREHOLDERS
TYCO INTERNATIONAL LTD.
(Incorporated in Bermuda with limited liability)
Notice is hereby given that the Annual General Meeting (the "Meeting") of
Tyco International Ltd. (the "Company") for 1998 will be held on March 26, 1998
at 9.30 a.m., local time (or so soon thereafter as the adjourned Annual General
Meeting for 1997 is concluded) at Marriott's Castle Harbor Resort, 2 South Road,
St. George, SN 02, Bermuda, for the following purposes:
1. to re-elect the Board of Directors of the Company and to approve
remuneration for services as director in an amount not to exceed US$100,000
per annum;
2. to re-appoint Coopers & Lybrand as the independent auditors of the
Company and to authorize the directors to fix the auditors' remuneration;
3. to convert and sub-divide all of the Third Preference Shares,
Fourth Preference Shares and Fifth Preference Shares (as defined in the
Company's Bye-Laws) into 3,750,000 new common shares of US$0.20 each; to
increase the authorized capital of the Company by the creation of an
additional 750,000,000 common shares of US$0.20 each; and to approve
consequential changes to the Bye-Laws of the Company;
4. to consider a shareholder proposal concerning the composition of
the Board of Directors of the Company; and
5. to receive the Company's audited consolidated financial statements
for the period of nine months ended September 30, 1997.
All holders of record of the Company's common shares at the close of
business on January 28, 1998, which has been fixed as the record date for notice
of the Meeting, are entitled to notice of the Meeting. All holders of record of
the Company's common shares on the date of the Meeting will be entitled to
attend, and to vote at, the Meeting.
The Company's 1997 Annual Report, which includes the audited consolidated
financial statements of the Company for the period of nine months ended
September 30, 1997, is being mailed to shareholders along with the attached
proxy statement.
Shareholders are cordially invited to attend the Meeting in person. Whether
or not you plan to attend the Meeting, please sign, date and return the enclosed
proxy to ensure that your shares are represented at the Meeting. Shareholders
who attend the Meeting may vote their shares personally, even though they have
sent in proxies.
By Order of the Board of Directors,
John D. Campbell, Secretary
The Gibbons Building
10 Queen Street
Hamilton, HM 11
Bermuda
- -- --, 1998
IMPORTANT: PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY AS SOON AS
POSSIBLE. THE PROXY IS REVOCABLE AND IT WILL NOT BE USED IF YOU GIVE WRITTEN
NOTICE OF REVOCATION TO THE SECRETARY OF THE COMPANY PRIOR TO THE VOTE TO BE
TAKEN AT THE MEETING, IF YOU LODGE A LATER-DATED PROXY OR IF YOU ATTEND AND VOTE
AT THE MEETING.
1
<PAGE> 5
ADJOURNED 1997 ANNUAL GENERAL MEETING AND
1998 ANNUAL GENERAL MEETING
MARCH 26, 1998
INTRODUCTION
Solicitation of Proxies
This proxy statement and accompanying form of proxy are furnished in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of Tyco International Ltd. (the "Company") in connection with the
Adjourned 1997 Annual General Meeting of the Company and the 1998 Annual General
Meeting of the Company, both to be held on March 26, 1998, and any adjournment
thereof. (References to the "Meeting" are to either or both the Adjourned 1997
Annual General Meeting and the 1998 Annual General Meeting, as the context
requires.) This proxy statement and the accompanying form of proxy are being
mailed to shareholders of the Company on or about -- --, 1998.
Costs of Solicitation
The cost of solicitation of proxies will be paid by the Company. In
addition to the use of the mails, certain directors, officers or employees of
the Company may solicit proxies by telephone or personal contact. Upon request,
the Company will reimburse brokers, dealers, banks and trustees, or their
nominees, for reasonable expenses incurred by them in forwarding proxy materials
to beneficial owners of common shares.
Registered and Principal Executive Offices
The registered and principal executive offices of the Company are located
at The Gibbons Building, 10 Queen Street, Hamilton, HM 11, Bermuda. The
telephone number there is 441-292-8674. The executive offices of the Company'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.
Outstanding Voting Shares
Notice of the Meeting has been sent to all holders of record of common
shares at the close of business on January 28, 1998, which has been fixed as the
record date for notice of the Meeting. All holders of record of common shares on
the date of the Meeting will be entitled to attend and vote at the Meeting. As
of the record date for notice of the Meeting, there were outstanding and
entitled to vote -- common shares, including
common shares owned by a subsidiary of the Company. All holders of record of the
Company's common shares on the date of the Meeting are entitled to vote at the
Meeting and, on a poll, each common share is entitled to one vote on each
proposal. Not less than two holders of common shares present in person or by
proxy shall form a quorum for the transaction of business.
Common shares will vote together as a single class with respect to the
re-election of directors and approval of their remuneration, the re-appointment
of independent auditors of the Company and authorization for the Board of
Directors to fix the auditors' remuneration, the increase in authorized common
share capital and conversion of preference shares into common shares and a
shareholder proposal concerning the composition of the Board of Directors of the
Company.
The affirmative vote of a majority of common shares represented and voting
at the Meeting is required for the re-election of directors and the approval of
the other proposals. Pursuant to Bermudian law, shares represented at the
Meeting whose votes are withheld on any matter, which are represented by "broker
non-votes" (as discussed below) or which abstain from voting on any matter are
not included in the determination of the shares voting on such matter but are
counted for quorum purposes.
Shares represented by "broker non-votes" (shares held by brokers or
nominees which are represented at the Meeting but with respect to which the
broker or nominee is not empowered to vote on a particular proposal) will be
counted for the purposes of determining whether there is a quorum but will be
considered to be voted only as to those matters actually voted on. In accordance
with New York Stock Exchange rules,
2
<PAGE> 6
brokers and nominees are precluded from exercising their voting discretion with
respect to the approval and adoption of non-routine matters.
Voting Your Proxy
Shares represented by properly executed proxies will be voted as directed
therein on any poll that may be called for. In the event of a poll being called
for and in the absence of direction from a shareholder, proxies held by the
chairman of the Meeting will be voted FOR the re-election of eleven (11)
directors and approval of their compensation, FOR the re-appointment of the
independent auditors of the Company and authorization for the Board of Directors
to fix the auditors' remuneration, FOR the increase in authorized common share
capital and conversion of preference shares into common shares and AGAINST the
shareholder proposal.
You may revoke your proxy by giving written notice of revocation to the
Secretary of the Company at the registered office at any time before it is
voted, by submitting a later-dated proxy or by attending the Meeting and voting
your shares in person.
A proxy has been enclosed with this document.
Shareholders should complete and return the proxy as soon as possible. In
order to be valid, the proxy must be completed in accordance with the
instructions on it and received at any of the offices set forth below by the
times and dates specified:
In Bermuda:
by 8:30 a.m. (Bermuda Time) on March 26, 1998 by hand or mail at:
A.S. & K. Services Ltd.
Cedar House
41 Cedar Avenue
P.O. Box, HM 1179
Hamilton, HM 12
Bermuda
In the United Kingdom:
by [5:00 p.m.] (Greenwich Mean Time) on [March 25], 1998 by hand or mail at:
Tyco International
Airsystems Couriers Ltd.
Unit 5A, Ascot Road
Bedfont Feltham
Middlesex TW14 8Q11
United Kingdom
In Australia
by 5:00 p.m. (Australia Time) on [March 25, 1998] by mail at:
Tyco International
P.O. Box 5608
Chatswood NSW 2057
Australia
In the United States and All Others:
by [5:00 p.m.] (Eastern Daylight Time) on [March 25], 1998 by mail at:
Tyco International
Midtown Station
P.O. Box 946
New York, NY 10138-0746
3
<PAGE> 7
For shareholder questions, please call 1-800-685-4509.
THE ADJOURNED 1997 ANNUAL GENERAL MEETING
Reason for the Adjourned 1997 Annual General Meeting
The Adjourned 1997 Annual General Meeting will be held at 9:00 a.m. on
March 26, 1998.
Under the Company's Bye-Laws and Bermudian law, the Company is required to
hold an annual general meeting each year at which certain business must be
conducted. This business includes the election of directors, appointment of the
Company's auditors and presentation of audited financial statements for the
preceding fiscal year. The Company did not hold an annual general meeting in
1997 at which any such actions were taken, although the Company did hold a
special general meeting on July 2, 1997 at which, following the removal of all
but three of the Company's then current directors, an additional eight directors
were elected.
In order to formally comply with the requirements of the Bye-Laws and
Bermudian law with respect to an annual general meeting for 1997, the Company
noticed such a meeting for December 30, 1997. As indicated in the letter to
shareholders that accompanied the notice, no action was proposed to be taken or
was taken on December 30, 1997, other than to adjourn the 1997 Annual General
Meeting to a time immediately preceding the 1998 Annual General Meeting.
Matters to be Considered by Shareholders at the Adjourned 1997 Annual General
Meeting
At the Adjourned 1997 Annual General Meeting, shareholders will be asked to
elect directors to serve for the nominal period of time until the election of
directors at the 1998 Annual General Meeting to immediately follow. The nominees
for election are the same as the nominees for election at the 1998 Annual
General Meeting, who, technically will retire and stand for re-election at the
later meeting. Unless a shareholder indicates otherwise on the proxy card, a
vote FOR the election of directors will constitute a vote for the election of
such directors at both the Adjourned 1997 Annual General Meeting and at the 1998
Annual General Meeting.
Shareholders at the Adjourned 1997 Annual General Meeting will also be
asked to re-appoint the independent auditors of the Company and to authorize the
directors to fix their remuneration for the nominal period of time until
appointment of the independent auditors of the Company at the 1998 Annual
General Meeting to immediately follow. Unless a shareholder indicates otherwise
on the proxy, a vote FOR the appointment of the Company's independent auditors
will constitute a vote for the appointment of such auditors at both the
Adjourned 1997 Annual General Meeting and at the 1998 Annual General Meeting.
Presentation of Financial Statements
Under the Company's Bye-Laws and Bermudian law, audited financial
statements must be presented to shareholders at an annual general meeting. In
fulfillment of this requirement, historic audited financial statements in
respect of the year ended December 31, 1996 will be presented at the Adjourned
1997 Annual General Meeting. Copies of these financial statements were sent to
shareholders of the Company in April 1997. Copies are also available on request
from the Secretary, Tyco International Ltd., The Gibbons Building, 10 Queen
Street, Suite 301, Hamilton, HM 11, Bermuda (telephone: 441-292-8674).
The historic 1996 audited financial statements present information with
respect to ADT Limited ("ADT"; renamed "Tyco International Ltd.") only and do
not reflect the business combination between ADT and Tyco International Ltd.
(the Massachusetts company; "Former Tyco") on July 2, 1997, or certain stock
splits and other transactions that occurred in connection with or since the
consummation of such business combination. The Company's 1997 Annual Report,
which accompanies this proxy statement, includes the Company's audited financial
information for the year ended December 31, 1996 on a pooled basis, as if ADT
and Former Tyco were combined for that period. The Company's audited financial
statements for the nine month transition period ended September 30, 1997, which
are contained in the 1997 Annual Report and which also reflect the combination
of ADT and Former Tyco, will be presented at the 1998 Annual General Meeting.
The remainder of this proxy statement discusses the matters to be presented
at the 1998 Annual General Meeting.
4
<PAGE> 8
PROPOSAL NUMBER ONE -- ELECTION OF DIRECTORS
Nominees for Directors
The election of directors will take place at the Meeting. Each of the
directors elected will serve until the 1999 Annual General Meeting. All nominees
are presently members of the Board of Directors. The management of the Company
is not aware of any reason why any of the nominees for director will not be able
to serve.
Approval of the nominees for election to the Board of Directors will
require the affirmative vote of a majority of the votes cast by holders of
common shares represented at the Meeting in person or by proxy.
Information regarding the nominees, including their principal occupations
during the past five years, is set forth below.
<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) 1.6%
Chairman of the Board and Chief Executive Officer of
ADT (1984-July 1997); Chairman of the Board and Chief
Executive Officer, Hawley Group PLC (predecessor to
ADT) (1977-1984); Chairman, BHI Corporation (services
company) (1987-present)
Joshua M. Berman......................................... 59 1997 72,000(4) (5)
Counsel to Kramer, Levin, Naftalis, & Frankel
(counselors at law) (1985-present); Director, Former
Tyco (1967-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)
</TABLE>
6
<PAGE> 9
<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>
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)
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
7
<PAGE> 10
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.
(2) The amount shown includes 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 amount shown excludes 3,000,000 options awarded to Mr.
Kozlowski under the Tyco International Ltd. 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 amount shown consists of 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 and 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 amount shown is 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"). Messrs. Ashcroft, Pasman and Slusser,
who served as directors of the Company for all of Fiscal 1997, received during
this period compensation of $16,250, $36,250 and $36,250, respectively, for
their services as directors and for other services to the Company. (All
references in this proxy statement to "$" are to US dollars.) Each of the other
current directors, who served for only the last three months of Fiscal 1997,
received during this period compensation of $16,250. The Bye-Laws of the Company
provide for shareholder approval of payment for services as a non-employee
director in an amount exceeding $25,000 per annum. Shareholders are being asked
to approve remuneration for services as director in an amount not to exceed
$100,000 per annum, [until such time as a different limit is approved by
shareholders]. In this regard, directors are receiving in the 1998 fiscal year a
total compensation package consisting of $65,000 in cash and, for all directors
other than Mr. Kozlowski, stock options valued at $35,000 (utilizing the
Black-Scholes option pricing model). Directors may make an irrevocable election
each year to defer all or a portion of their annual cash fees into an account
containing phantom shares of the Company. The account is 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 Board of Directors of the Company, if
earlier. In July 1997, all directors other than Mr. Kozlowski were granted
options to purchase 3,500 common shares at an exercise price of $38.3125 per
share. One quarter of such options was attributable to compensation in Fiscal
1997, and the balance is attributable to compensation in the 1998 fiscal year.
In October 1997, all directors other than Mr. Kozlowski were granted options to
purchase 876 common shares at an exercise price of $41.625, all of which options
were granted in respect of compensation for the 1998 fiscal year. All such
director options were granted under the Tyco International Ltd. Long Term
Incentive Plan, have a term of ten years from date of grant and become
exercisable one year from the date of grant. The exercise price of all such
options equals the market price of the 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 auditors. 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 sets 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
7
<PAGE> 11
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. Any such recommendation must 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. Under the Company's Bye-Laws, generally no person is
eligible for election to the office of director at any general meeting unless,
not less than six and not more than twenty-eight calendar days before the day
appointed for the meeting, there has been given to the Secretary notice in
writing by a shareholder (not being the person to be proposed) entitled to
attend and vote at the meeting and the signed consent of the nominee to serve as
a director. 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION
OF THE NOMINEES LISTED ABOVE AND TO APPROVE REMUNERATION FOR SERVICES AS A
DIRECTOR IN AN AMOUNT NOT TO EXCEED $100,000 PER ANNUM.
8
<PAGE> 12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE COMPANY
The following table sets forth the beneficial ownership of common shares by
(i) those persons known by the Company to own beneficially more than 5% of the
Company's outstanding common shares; (ii) each of the executive officers named
under "Executive Compensation" below (other than Messrs. Kozlowski and
Ashcroft); and (iii) all directors and executive officers of the Company as a
group. See "Nominees for Directors" above for the beneficial ownership of common
shares by Mr. Kozlowski, Mr. Ashcroft and other directors of the Company.
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES % OF OUTSTANDING
OWNED COMMON SHARES
BENEFICIAL OWNER 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 persons)................................... 12,153,511 2.2%
</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 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 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 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
amount shown excludes 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) 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 amount
shown excludes 1,000,000 options awarded to Mr. Swartz under the Tyco
International Ltd. Long Term Incentive Plan, which will become exercisable
10
<PAGE> 13
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 LONG-TERM
FISCAL UNDERLYING 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 of ADT 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)
Prior Vice President and Chief
Financial 1996 686,306 1,100,000(8) 200,552 40,323 (9)
Officer; President ADT Security 1995 653,625 250,000(8) 481,330 37,432 (9)
Services, Inc.
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 merged with Former Tyco.
Upon consummation of the merger, ADT (the continuing public company)
changed its name to Tyco International Ltd. Former Tyco became a
wholly-owned subsidiary of the Company and changed its name to Tyco
International (US) Inc. 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 of
the Company, 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 Former Tyco, 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.
(2) Concurrent with the merger of ADT and Former Tyco, Mr. Ashcroft's services
as Chairman of the ADT Board and Chief Executive Officer of ADT 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
11
<PAGE> 14
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
Vice President and 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
were related directly to the performance of the ADT 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 of Former Tyco, the proceeds of which were used for payment of
taxes due on the vesting of restricted shares of common stock of Former
Tyco. The loans to Mr. Kozlowski are unsecured and bear interest at the
Company's incremental short term borrowing rate. The loans are repayable
upon the earliest to occur of (i) the expiration of ten years from the date
of borrowing, (ii) the termination of Mr. Kozlowski's employment with the
Company or (iii) the sale or other disposition (other than gifts to certain
family members) of the shares with respect to which the loans were granted.
(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
<PAGE> 15
(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
The following table shows all grants of stock 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 $.025 per share; and the vesting of all
options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------
% OF TOTAL
OPTIONS EXERCISE
GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(1) IN FISCAL YEAR ($/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. These latter options were granted under
a re-load feature of the Tyco International Ltd. Long Term Incentive 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.
13
<PAGE> 16
Option Exercises and Year-End 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 stock options held by them at September 30, 1997.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED FISCAL YEAR END AT FISCAL YEAR END(1)(2)
ON VALUE --------------------------- ------------------------------
NAME EXERCISE REALIZED 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>
- ---------------
(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 were 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, the Company and its subsidiaries do not maintain
any defined benefit or actuarial retirement plans ("pension plans") in which the
Named 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.
14
<PAGE> 17
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 provided for Mr. Richardson's services 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 through July 31, 1998.
Mr. Richardson's initial annual base salary was $300,000 and is subject to
annual review for possible increases. Mr. Richardson is also eligible for annual
bonus payments at the discretion of the Company. 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.
Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors of the Company 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, none of
whom have any interlocking relationships with the Company that are subject to
disclosure under the Securities and Exchange Commission rules relating to proxy
statements.
During Fiscal 1997, compensation was earned by the Named Officers based on
arrangements approved at the beginning of the year by the respective
Remuneration Committee of ADT and/or by the Compensation Committee of Former
Tyco. Consistent with the Former Tyco philosophy, going forward, 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;
- reward executives for increased profitability and resulting increased
shareholder value by closely aligning the financial interest of senior
executives with those of shareholders;
- provide equitable compensation within a competitive framework of
comparable industrial companies; and
- emphasize the importance of stockholder interest through heavily weighing
the top executives' compensation with grants of restricted stock and
options.
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 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 shareholder
return in that the value of the executive's shareholding fluctuates with
the movement in the share price. The restricted stock program consists of
grants in which the lapse of restrictions generally occurs as a result of
obtaining certain performance based criteria. The stock option program
consists of grants which exercise pro rata over three years and are
exercisable in periods up to ten years. The number of shares and options
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 equity program is to encourage
executives to enhance the value of the Company and therefore, the price
of the Company's shares and
15
<PAGE> 18
the return to shareholders. Additionally, this component of the
compensation program creates an incentive for the individual to remain
with the Company until restrictions on all shares or option exercise
periods have lapsed.
Any person who is a named executive officer for proxy reporting purposes
will be a participant in the Tyco Incentive Compensation Plan (the "Incentive
Plan"). Through the Incentive Plan, the named executives can each earn a cash
bonus, vest in shares subject to restricted stock grants, and earn stock option
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 divisional 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.
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
interests of the Company and its shareholders. While achieving certain
predetermined goals is fundamental to earning incentive payments, neither the
Compensation Committee nor management can anticipate unusual events entirely
beyond the control of management which may have a material effect on the ability
to achieve desired results. Under certain circumstances, the Compensation
Committee's use of discretion in determining amounts of compensation may be
appropriate.
Annually, the Compensation Committee reviews with the Chief Executive
Officer the individual performance of each of the other executive officers and
receives his recommendations with regard to the appropriate compensation awards.
The Compensation Committee also reviews with the 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, earning per
share and cash flow generation), an analysis of total returns to shareholders
relative to total returns generated by comparable quoted companies and a review
of compensation of the chief executive officers of companies with similar
businesses of comparable size.
Submitted by the Compensation Committee,
Stephen W. Foss
Philip M. Hampton
W. Peter Slusser
Frank E. Walsh, Jr.
16
<PAGE> 19
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a graph comparing the cumulative total shareholder
return on the Company's common shares against the cumulative total return of the
S&P Services (Commercial and Consumer) Index, the Dow Jones
Industrial-Diversified Index and the S&P 500 Index. In September 1997, the
Company changed its fiscal year end from December 31 to September 30. Therefore,
the graph below sets forth the cumulative total return for each of the four
years in the period ended December 31, 1996 and for the nine-month transition
period ended September 30, 1997. Also shown is the cumulative total return as of
July 2, 1997, the consummation date of the merger between ADT and Former Tyco.
[THE PERFORMANCE GRAPH IS BEING FILED IN TABULAR FORM PURSUANT TO
ITEM 304(d) OF REGULATION S-T.]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------------------------------
12/92 12/93 12/94 12/95 12/96 7/2/97 9/97
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Tyco International Ltd. (formerly ADT
Limited) (1).......................... ADT, TYC 100.00 114.52 138.71 193.55 295.16 467.74 529.76
S&P Services (Commercial & Consumer).... ISSV 100.00 96.90 88.71 119.82 123.74 134.13 154.28
Dow Jones Industrial-Diversified........ IIDD 100.00 122.19 112.07 146.76 190.60 238.00 247.97
S&P 500................................. I500 100.00 110.08 111.53 153.45 188.68 227.57 244.61
</TABLE>
- ---------------
(1) On July 2, 1997, a wholly-owned subsidiary of ADT merged with Former Tyco.
Upon consummation of the merger, ADT (the continuing public company) changed
its name to Tyco International Ltd. Former Tyco became a wholly-owned
subsidiary of the Company and changed its name to Tyco International (US)
Inc. This performance presentation shows the cumulative total return for ADT
from December 31, 1992 through July 2, 1997 and for the Company for the
periods thereafter.
PROPOSAL NUMBER TWO -- APPOINTMENT OF INDEPENDENT AUDITORS
In accordance with Section 89 of the Companies Act, 1981 of Bermuda, the
Company's shareholders have the authority to appoint the independent auditors of
the Company and to authorize the Board of Directors to fix the auditors'
remuneration. Shareholders will be asked to make a re-appointment at the Meeting
of Coopers & Lybrand, who have been approved by the Board to be the independent
auditors of the Company for the fiscal year ending September 30, 1998. A
predecessor of Coopers & Lybrand was first appointed to be the independent
auditors of the Company in 1984. Audit services performed by Coopers & Lybrand
for the Company in Fiscal 1997 included the examination of the consolidated
financial statements of the Company and its subsidiaries. Appointment of the
independent auditors requires the affirmative vote of a majority of the votes
cast by the holders of outstanding common shares represented at the Meeting in
person or by proxy. If shareholders do not approve such appointment, it will be
reconsidered by the Board.
Representatives of Coopers & Lybrand do not expect to be present at the
Meeting, but any shareholder who wishes to communicate with representatives of
Coopers & Lybrand should communicate directly with the Engagement Partner at
Dorchester House, 7 Church Street West, Hamilton, HM 11, Bermuda.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
RE-APPOINTMENT OF COOPERS & LYBRAND AS THE COMPANY'S INDEPENDENT AUDITORS AND TO
AUTHORIZE THE BOARD OF DIRECTORS TO FIX THE AUDITORS' REMUNERATION.
PROPOSAL NUMBER THREE -- INCREASE IN AUTHORIZED COMMON SHARES
AND CONVERSION OF PREFERENCE SHARES
A resolution will be proposed at the Meeting to increase the Company's
authorized share capital by the creation of an additional 750,000,000 common
shares; to simplify the Company's authorized share capital through the
conversion of certain authorized preference shares into common shares; and to
approve certain consequential changes to the Bye-Laws of the Company (the "Share
Capital Proposal").
16
<PAGE> 20
Increase in Authorized Common Share Capital
The Company's authorized share capital is currently US$275,750,000, divided
into certain preference shares, as described below (none of which is in issue),
and 750,000,000 common shares of US$0.20 each. As of January 16, 1998, there
were 550,182,802 common shares in issue and approximately 55,000,000 common
shares were reserved for issue under stock options, warrants and other existing
entitlements. The number of common shares in issue was significantly increased
by the 2 for 1 stock split effected as a stock dividend in October 1997.
The Board believes that it is desirable to have available additional
authorized common shares for future stock splits and dividends, employee benefit
plans, financings, acquisitions and other corporate purposes. The passing of the
resolution to approve the Share Capital Proposal would confer on the Board the
power to issue these additional shares in its discretion without further
approval by shareholders, except as may be required by any applicable stock
exchange rules.
The Company has filed a registration statement with the United States
Securities and Exchange Commission (the "SEC") pursuant to which it may publicly
offer common shares and other securities of the Company from time to time. The
Company presently has available a sufficient number of authorized but unissued
common shares to offer and sell common shares under the registration statement
whether or not the Share Capital Proposal is approved. The Company contemplates
offering and selling common shares in one or more underwritten public offerings,
which may take place prior or subsequent to the Meeting. However, the timing,
number of common shares to be offered and offering price of any such public
offering of shares has not yet been determined. Other than as the aforesaid, the
Company has no present plans to issue the new common shares to be authorized
pursuant to the Share Capital Proposal.
Conversion of Preference Shares into Common Shares
Although the Company's issued and outstanding share capital consists of a
single class of common shares, the authorized share capital of the Company also
includes four classes of preference shares, representing various capital issues
previously made by the Company and now redeemed in full. One of these classes
consists of 125 million convertible cumulative redeemable preference shares
("First Preference Shares") which, subject to certain limitations, the Board is
empowered to issue in one or more series. The Board is also empowered to
determine the designation of, and the number of shares constituting each series
and the rights and restrictions attaching to each series, including the dividend
rate, the terms and conditions of any voting and conversion rights, the amounts
payable on redemption or return of capital, and the preference and relative
rights among each series of First Preference Shares. At present, none of these
shares is in issue, but 7,500,000 First Preference Shares have been designated
as Series A First Preference Shares and are reserved for issue upon exercise of
rights under the Company's Shareholder Rights Plan.
It is proposed to retain the First Preference Shares but to convert and
sub-divide all the other authorized preference shares into common shares. This
will result in the creation of an additional 3,750,000 common shares, so that
the share capital will be comprised of the common shares and a single class of
preference shares (being the First Preference Shares, which will then simply be
designated as "Preference Shares").
Consequential Bye-Law Amendment
The Schedule to the Company's Bye-Laws currently sets forth particulars of
the Company's authorized share capital and of the rights attaching to each class
of preference shares. As part of the Share Capital Proposal the Schedule will be
revised to reflect the increase in common shares and the conversion of
preference shares, as set forth above. The adoption of the revised Schedule will
not alter the Board's powers to issue the remaining preference shares in one or
more series and to determine the designation of, and the rights and restrictions
attaching to, those shares or any series of them.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE SHARE
CAPITAL PROPOSAL.
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SHAREHOLDER PROPOSAL -- COMPOSITION OF BOARD OF DIRECTORS
The International Brotherhood of Electrical Workers' Pension Benefit Fund,
1125 Fifteenth Street, N.W., Washington, D.C. 20005, which, as of January 8,
1998, owned 39,200 common shares, has given notice that it intends to present
the following resolution at the Meeting for the reasons stated.
"BE IT RESOLVED: That the shareholders of Tyco International ("Company")
hereby request that the Company's Board of Directors take the steps
necessary to amend the company's bylaws, effective after the 1998 Annual
Meeting, to provide that the Board of Directors shall consist of a Majority
of Independent Directors. For these purposes, the definition of independent
director shall mean a director whom:
- has not been employed by the Company or an affiliate in an executive
capacity within the last five years;
- was not, and is not a member of a corporation or firm that is one of
the Company's paid advisers or consultants;
- is not employed by a significant customer, supplier or provider of
professional services;
- has no personal services contract with the Company;
- is not employed by a foundation or university that receives
significant grants or endowments from the Company;
- is not a relative of the management of the Company;
- is not a shareholder who has signed shareholder agreements legally
binding him to vote with management; and
- is not the chairman of a company on which Tyco International's
Chairman or Chief Executive Officer is also a board member.
SUPPORTING STATEMENT
The purpose of this proposal is to incorporate within the Board of
Directors a basic standard of independence that we believe will permit
clear and objective decision-making in the best long-term interests of
shareholders. A Board of Directors must formulate corporate policies and
monitor the activities of management in implementing those policies. Given
those functions, we believe that it is in the best interest of all
stockholders if at least a majority of our representatives be independent.
The benefits of such independence, we think, are well accepted. The
New York Stock Exchange for instance, requires each of its listed companies
to have at least two members of the Board of Directors and all members of
the audit committee who meet New York Stock Exchange standards of
independence. We also note studies, which reflect that a majority of
directors of publicly held companies are not employees of the companies on
whose boards they serve. This trend is supported by the Business Roundtable
in its publication Corporate Governance and American Competitiveness
prepared by a committee of the Roundtable, which states, in part, that:
Board of Directors of large publicly held public corporations should
be composed predominately of independent directors who do not hold
management responsibilities within the corporation. In order to
underscore their independence, non-management directors should not be
dependent financially on the companies on whose boards they serve.
WE URGE YOU TO VOTE FOR THIS PROPOSAL."
RECOMMENDATION OF THE BOARD OF DIRECTORS AGAINST SHAREHOLDER PROPOSAL
The Board of Directors believes that the shareholder proposal is not in the
best interests of the Company and its shareholders and therefore unanimously
recommends a vote "AGAINST" the proposal.
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<PAGE> 22
The Board agrees with the principle underlying the shareholder proposal and
recognizes the benefits of having independent, non-management individuals on the
Board of Directors. The Company has implemented the practice of maintaining a
board of directors that is comprised of a majority of independent directors, as
the concept of independence is commonly understood. In fact, a majority of the
Company's directors for the last five years, including the Company's current
directors, have been independent even under the standards of the shareholder
proposal. A majority of the nominees for election to the Board of Directors at
the Meeting are also independent by the same standards. For these reasons, the
Board believes that its long-standing corporate governance practices and
policies with respect to director independence already achieve the important
objectives of the shareholder proposal.
The Board of Directors is of the view, however, that the shareholder
proposal is unreasonably restrictive and, as such, would impair the ability of
the Company to retain the most qualified and experienced individuals to serve on
the Board of Directors. The Company operates in multiple product and service
segments, in numerous countries around the world. With this diversity of
operations, the Board believes it is critical to retain the flexibility to
recruit those directors who it believes will provide the judgment, guidance and
expertise necessary to foster the Company's future growth and success. The
shareholder proposal, with its restricted definition of independence, would
impair this flexibility. For example, under the shareholder proposal an
individual who has been employed by the Company or an affiliate in an executive
capacity within the last five years is not independent. The current Board
includes three directors who are former executives of the Company or its
subsidiaries. In certain cases, it was a condition of a major acquisition by the
Company that a former executive of an acquired public company be elected to the
Company's Board following consummation of the acquisition. In such cases, the
former executives have been highly qualified directors, with independent and
objective viewpoints and with large equity stakes in the Company, who have made
valuable contributions to the governance of the Company. The prior experience of
these individuals with the Company's operations has only enhanced their
effectiveness and perspective as directors. Under the shareholder proposal,
however, these directors would unjustifiably be deemed to be non-independent.
Adopting a policy that precludes otherwise qualified individuals from
serving on the Board of Directors because they do not meet selection criteria
that are not relevant in the circumstances could handicap shareholders' ability
to elect individuals whom the Board believes are best suited to be directors of
the Company. Accordingly, the Board believes that the shareholder proposal is
not in the best interests of the Company and its shareholders and recommends
that shareholders vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE AGAINST THE
SHAREHOLDER PROPOSAL.
RECEIPT OF FINANCIAL STATEMENTS
In accordance with Section 84 of the Companies Act, 1981 of Bermuda, the
audited financial statements of the Company [for the year ended December 31,
1996 and] for the nine month period ended September 30, 1997 will be presented
at the Meeting. These statements have been approved by the directors of the
Company. There is no requirement under Bermudian law that such statements be
approved by shareholders, and no such approval will be sought at the Meeting.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL GENERAL MEETING
In accordance with the rules established by the SEC, any shareholder
proposal intended for inclusion in the proxy statement for next year's annual
general meeting of shareholders must be received by the Company no later than
[October 29, 1998]. Such proposal should be sent to the Secretary of the Company
at The Gibbons Building, 10 Queen Street, Suite 301, Hamilton, HM 11, Bermuda.
To be included in the proxy statement, the proposal must comply with the
requirements as to form and substance established by the SEC and must be a
proper subject for shareholder action under the Company's Bye-Laws and Bermudian
law.
Under the Companies Act, 1981 of Bermuda, any shareholders who represent
not less than 5 per cent of the total voting rights of shareholders having the
right to vote at the meeting, or who are 100 or more in number, may requisition
any resolution which may properly be moved at an annual general meeting. A
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<PAGE> 23
shareholder wishing to move a resolution at an annual general meeting is
generally required to give notice to the Company of the resolution at the
aforementioned address at least six weeks before the meeting.
REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
Copies of the Company's Transition Report on Form 10-K for Fiscal 1997, as
filed with the SEC (without exhibits), are available to shareholders free of
charge by writing to Investor Relations: Tyco International Ltd., The Gibbons
Building, 10 Queen Street, Suite 301, Hamilton, HM 11, Bermuda.
GENERAL
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. Unless otherwise directed, proxies held by the chairman will be voted
to elect the directors named therein, FOR the other proposed resolutions
proposed by the Board of Directors and AGAINST the shareholder proposal. If any
matter other than those described herein properly comes before the Meeting, the
chairman will vote the shares represented by such proxies in accordance with his
best judgment.
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<PAGE> 24
PROXY
TYCO INTERNATIONAL LTD.
A PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Form of Proxy for use at the adjourned 1997 Annual General Meeting of
Tyco International Ltd., a company organized under the laws of Bermuda (the
"Company"), to be held on March 26, 1998 at 9:00 a.m. at Marriott's Castle
Harbour Resort, 2 South Road, St. George SN 02, Bermuda and at the 1998 Annual
General Meeting of the Company to be held immediately afterwards at the same
place (together the "Meetings").
The undersigned, being a holder of Common Shares of the Company, hereby
appoints as his/her proxy at the Meetings (and at any adjournment thereof) the
Chairman of the relevant Meeting and directs such proxy to vote (or abstain from
voting) at the Meetings as indicated on the reverse of this card or, to the
extent that no such indication is given, as set forth herein.
Please indicate on the reverse of this card how your shares are to be
voted. If this card is returned duly signed but without any indication as to how
your shares are to be voted in respect of any of the resolutions described on
the reverse, you will be deemed to have directed the proxy to vote FOR
Resolutions 1 through 3 and AGAINST Resolution 4.
In order to be effective, completed proxy cards should be received at the
offices of one of the addresses and by the time specified below:
In Bermuda: A.S.&K. Services Ltd., Cedar House, 41 Cedar Avenue, PO
Box HM 1179, Hamilton HM 12, Bermuda, by 8:30 a.m. (Bermuda Time) on
March 26, 1998;
In the United Kingdom: Tyco International, Airsystems Couriers Ltd.,
Unit 5A, Ascot Road, Bedfont Feltham, Middlesex TW14 8Q11, United
Kingdom, by [5:00] p.m. (Greenwich Mean Time) on March [25], 1998;
In Australia: Tyco International, P.O. Box 5608, Chatswood NSW 2057,
Australia, by 5:00 p.m. (Australia time) on March [25], 1998;
In the United States and All Others: Tyco International, Midtown
Station, P.O. Box 946, New York, NY 10138-0746, by [5:00] p.m. (Eastern
Daylight Time) on March [25], 1998.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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<PAGE> 25
Please mark your votes
as indicated in this
example. /x/
Please indicate with an "X" in the appropriate space how you wish your votes to
be cast. If no indication is given, proxies held by the Chairman of the relevant
Meeting will be voted in favour of resolutions 1 through 3 and against
resolution 4.
FOR BOTH THE ADJOURNED 1997 ANNUAL GENERAL MEETING AND THE 1998 ANNUAL GENERAL
MEETING
1. To re-elect the 11 nominees listed at the right to the Board of Directors
and approve their remuneration
L. Dennis Kozlowski Richard A. Gilleland
Michael A. Ashcroft Philip M. Hampton
Joshua M. Berman James S. Pasman, Jr.
Richard S. Bodman W. Peter Slusser
John F. Fort, III Frank E. Walsh, Jr.
Stephen W. Foss
FOR / / AGAINST / / ABSTAIN / /
To vote against or abstain from voting with respect to any nominee(s) at either
or both of the Meetings, indicate below the names of such nominee(s), whether
direction is given to vote against or abstain from voting with respect to such
nominee(s) and the Meeting(s) for which such direction is being made.
2. To re-appoint Coopers & Lybrand as the independent auditors of the Company
and to authorise the Board of Directors to fix the auditors' remuneration
FOR / / AGAINST / / ABSTAIN / /
To vote against or abstain from voting with respect to this proposal at one but
not both of the Meetings, indicate below whether direction is given to vote
against or abstain from voting on the proposal and the Meeting for which such
direction is being made.
FOR THE 1998 ANNUAL GENERAL MEETING ONLY
3. To approve the conversion of the Third, Fourth and Fifth Preference Shares
into Common Shares; to approve the increase in the authorised Common Share
capital of the Company; and to approve consequential changes to the
Company's Bye-Laws
FOR / / AGAINST / / ABSTAIN / /
4. To request that the Board of Directors take steps to amend the bye-laws,
effective after the Meeting, to provide that the Board of Directors shall
consist of a majority of independent directors.
FOR / / AGAINST / / ABSTAIN / /
Signature(s)__________________________________ Date___________________________
NOTE: Please sign as name appears hereon. When signing as attorney, executor,
administrator, trustee or guardian please give full title as such.
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FOLD AND DETACH HERE
Notes:
1. In the case of a corporation, this proxy must be under its Common Seal or
signed by a duly authorised officer or director whose designation must be
stated.
2. In the case of joint holders, any may sign but the vote of the senior who
tenders a vote, whether in person or by proxy, will be accepted to the
exclusion of the votes of the other joint holders and for this purpose
seniority will be determined by the order in which the names stand in the
Register of the Shareholders.
