<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 ON FORM 10-K/A
TO FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
0-16979
(COMMISSION FILE NUMBER)
TYCO INTERNATIONAL LTD.
(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 NEW YORK STOCK EXCHANGE
RIGHTS
</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 $39,636,878,846 as of November 6, 1998.
The number of shares of common stock outstanding as of November 6, 1998 was
647,323,419.
DOCUMENTS INCORPORATED BY REFERENCE
See pages 18 to 21 in the original Form 10-K filed on December 10, 1998 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.
AMENDMENT NO. 1 ON FORM 10-K/A TO THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED SEPTEMBER 30, 1998
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 part of this Annual 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, 1999
2
<PAGE> 3
ATTACHMENT A
DIRECTORS
Set forth below are the names, ages, positions and certain other
information concerning the current Directors of Tyco as of November 30, 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.................................... 52 1997 3,170,954(2) (13)
Chairman of the Board, President and Chief Executive
Officer, Tyco (July 1997-present); Chairman of the
Board, Former Tyco (January 1993-July 1997); Chief
Executive Officer, Former Tyco (July 1992-present);
President, Former Tyco (1989-present); Chief
Operating Officer, Former Tyco (1989-1995);
President, Grinnell Corporation (January 1984-
February 1997); Director, Applied Power Inc. (control
products) (July 1994-present); Director, Raytheon
Company (electronic systems and equipment) (June
1995-present); Director, US Office Products (office
products) (June 1998 to present); Director, Dynatech
Corporation (voice, video and data products)
(September 1995-May 1998); Director, RJR Nabisco
Holdings Corp. (consumer products) (June 1996-May
1998)
Michael A. Ashcroft.................................... 52 1984 4,141,666(3) (13)
Chairman, BHI Corporation (services company) (1987-
present); Chairman, Carlisle Holdings Limited
(services company) (1998-present); Chairman of the
Board and Chief Executive Officer of Tyco (then
called ADT) (1984-July 1997); Chairman of the Board
and Chief Executive Officer, Hawley Group PLC
(predecessor to ADT) (1977-1984)
Joshua M. Berman(4).................................... 60 1997 72,090(4) (13)
Counsel to Kramer Levin Naftalis & Frankel LLP
(counselors at law) (April 1985-present); Vice
President, Tyco (July 1997-present); Director, Former
Tyco (1967-November 1997)
Richard S. Bodman*+.................................... 60 1997 35,056(5) (13)
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, Internet Security Systems Group (May
1997-present); Director, Lin Television
(broadcasting) (May 1996-December 1997); Director,
National Housing Partnerships Inc. (real estate)
(August 1995-December 1997); Director, Former Tyco
(1992-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>
John F. Fort, III*+.................................... 57 1997 123,860(6) (13)
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**...................................... 56 1997 66,792(7) (13)
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................................... 54 1997 29,682(8) (13)
President of Tyco Healthcare Group (October
1998-present); Chairman, President and Chief
Executive Officer of Physician's Resource Group, Inc.
(December 1997-September 1998); President and Chief
Executive Officer, AMSCO International, Inc.
(healthcare) (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, Physician's Resource Group,
Inc. (physician practice management services) (June
1995-September 1998); Director, Remington Arms
Company, Inc. (firearms and ammunition) (March
1994-present); Director, Former Tyco (1994-November
1997)
Philip M. Hampton**+++................................. 66 1997 54,376(9) (13)
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 and Vice Chairman, Bankers
Trust New York Corporation (banking) (1986-1989);
Director, Former Tyco (1985-November 1997)
James S. Pasman, Jr.*.................................. 68 1992 8,157(10) (13)
President and Chief Operating Officer, National
Intergroup, Inc. (industrial holding company)
(1989-1991); Chairman, Permian Oil Corporation
(1989-1991); Chairman and Chief Executive Officer,
Kaiser Aluminum and Chemical Corp. (aluminum and
chemicals) (1987-1989); Director, BEA Income Fund,
Inc. (1988-present); BEA Strategic Global Income
Fund, Inc. (1988-present); BT Insurance Funds Trust
(March 1996-present); Education Management Corp.
(August 1997-present).
</TABLE>
4
<PAGE> 5
<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>
W. Peter Slusser**..................................... 69 1992 8,741(11) (13)
President, Slusser Associates, Inc. (investment firm)
(1988-present); Managing Director and Head of Merger
and Acquisitions, PaineWebber 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.**.................................. 57 1997 113,231(12) (13)
Chairman, Sandyhill Foundation (charitable
organization) (August 1996-present); Chairman, Wesray
Capital Corporation (investment firm) (1989-1996);
Director, Former Tyco (1992-November 1997)
</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
November 30, 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, had the power to vote or to
dispose of such shares. There were 649,140,278 Tyco common shares
outstanding as of November 30, 1998.
(2) The amount shown includes 500,000 shares which are held by a family
partnership of which Mr. Kozlowski is the sole general partner and
2,096,000 shares that Mr. Kozlowski has the right to acquire within 60 days
of November 30, 1998 through the exercise of stock options. The amount
shown excludes 2,000,000 options awarded to Mr. Kozlowski under the Tyco
International Ltd. Long Term Incentive Plan, which will become exercisable
in two equal annual installments ending on July 17, 2000, and 401,200
shares held in a charitable remainder trust, as to which Mr. Kozlowski
disclaims beneficial ownership.
(3) The amount shown consists of 4,137,290 shares held by or on behalf of the
trustees of an irrevocable trust in which Mr. Ashcroft is beneficially
interested and 4,376 shares that Mr. Ashcroft has the right to acquire
within 60 days of November 30, 1998 through the exercise of stock options.
The amount shown excludes 2,000 options awarded to Mr. Ashcroft under the
Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999.
(4) The amount shown includes 64,000 shares 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 amount shown also includes
8,090 shares that Mr. Berman has the right to acquire within 60 days of
November 30, 1998 through the exercise of stock options. The amount shown
excludes 2,000 options awarded to Mr. Berman under the Tyco International
Ltd. Long Term Incentive Plan, which will become exercisable on October 1,
1999. The law firm of Kramer Levin Naftalis & Frankel LLP has performed and
will perform legal services for Tyco during the current fiscal year.
(5) The amount shown includes 8,090 shares that Mr. Bodman has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Bodman
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable on October 1, 1999.
(6) The amount shown includes 4,376 shares that Mr. Fort has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Fort under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999. The amount shown also includes 1,080 shares
which are held by Mr. Fort as custodian for his child.
(7) The amount shown includes 8,090 shares that Mr. Foss has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Foss under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999. The amount shown also includes 21,428
shares which are held by the Foss Manufacturing Company Pension Plan and
7,500 shares which are held by the A.S. Foss Foundation.
(8) The amount shown includes 4,376 shares that Mr. Gilleland has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 1,000,000 options awarded to Mr.
Gilleland under the Tyco International Ltd. Long Term Incentive Plan, which
will become exercisable in two equal annual
5
<PAGE> 6
installments ending on October 1, 2000. The amount shown also includes 628
shares which are held in accounts for the benefit of Mr. Gilleland's
immediate family.
(9) The amount shown includes 4,376 shares that Mr. Hampton has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Hampton
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable on October 1, 1999.
(10) The amount shown includes 6,233 shares that Mr. Pasman has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Pasman
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable on October 1, 1999.
(11) The amount shown includes 4,976 shares that Mr. Slusser has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Slusser
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable on October 1, 1999.
(12) The amount shown includes 8,090 shares that Mr. Walsh has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 2,000 options awarded to Mr. Walsh under
the Tyco International Ltd. Long Term Incentive Plan, which will become
exercisable on October 1, 1999.
(13) Less than 1%.
The Board of Directors held 7 meetings during the fiscal year ended
September 30, 1998. Each director attended at least 75% of the meetings of the
Tyco Board and the meetings of each committee on which he served.
The Board has an Audit Committee which reviews the internal controls of the
Company. It meets with appropriate Tyco 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
1998.
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 1998.
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 principal executive offices 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 1998.
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.
SUMMARY OF DIRECTORS' COMPENSATION
Directors receive an annual cash fee in the amount of $65,000. In addition,
all non-employee directors receive stock options valued at $35,000 (utilizing
the Black-Scholes option pricing model). Directors may make an irrevocable
election each year to receive some or all of their annual cash fee in one or
more of the following forms: (i) phantom Tyco common shares under a deferred
compensation plan, (ii) a director's trust that is invested in Tyco common
shares, or (iii) stock options (valued utilizing the Black-Scholes option
6
<PAGE> 7
pricing model). Under the deferred compensation plan, each account is credited
with an amount equal to the dividends that would have been earned on the shares
if owned. Participants receive payments from their account in cash, in either a
lump sum or up to ten annual installments. The lump sum is payable, at the prior
election of the director, a minimum of 5 years after deferral while a director
remains a member of the Tyco Board. For a director who has ceased to be a member
of the Tyco Board, the lump sum is payable, or the annual installments will
commence, at the election of a director, at any time after termination of
service (or upon termination of service if a director is age 70 or older).
Shares held in a director's account of the director's trust are owned by the
director, may be voted by him and may be withdrawn or sold at any time. Any
shares remaining in the account at the time the director terminates his service
on the Tyco Board will be distributed to him at that time.
Pursuant to such arrangements, in July 1997, all directors other than Mr.
Kozlowski were granted options (valued at $35,000) to purchase 3,500 Tyco common
shares at an exercise price of $38.3125 per share, one quarter of which was
attributable to compensation in fiscal 1997, and three quarters of which were
attributable to compensation for the 1998 fiscal year. In October 1997, all
directors other than Mr. Kozlowski were granted options (valued at $8,750) to
purchase 876 Tyco common shares at an exercise price of $41.625, all of which
were granted in respect of compensation for the 1998 fiscal year.
In October 1998, each director other than Messrs. Kozlowski and Gilleland
was granted a stock option (valued at $35,000), in respect of compensation for
fiscal 1999, consisting of an option to purchase 2,000 Tyco common shares at an
exercise price of $44.87735. Messrs. Berman, Bodman, Foss, Pasman, Slusser and
Walsh elected to receive all or a portion of their cash fees for fiscal 1999 in
stock options, and were granted options to purchase 3,714, 3,714, 3,714, 1,857,
600 and 3,714 Tyco common shares, respectively, at an exercise price of
$44.87735. Options are granted under the Tyco International Ltd. Long Term
Incentive Plan and have a term of ten years from date of grant. The options
valued at $35,000 that all non employee directors receive each year vest and
become exercisable one year from the date of grant; the options that directors
elect to receive in lieu of cash fees are immediately vested and exercisable.
The exercise price of all such options is equal to the average market price of
Tyco common shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF TYCO
The following table sets forth, as of November 30, 1998 (except as
otherwise indicated), the beneficial ownership of Tyco common shares by (i)
those person known by the Company to own beneficially more than 5% of the
outstanding Tyco common shares; (ii) each of the current executive officers
named under "Executive Compensation" below (other than Mr. Kozlowski); 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 and other
Directors of Tyco.
<TABLE>
<CAPTION>
% OF
NUMBER OF TYCO OUTSTANDING
COMMON SHARES COMMON SHARES
NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP OWNED BENEFICIALLY(1) OWNED BENEFICIALLY
--------------------------------------------- --------------------- ------------------
<S> <C> <C>
FMR Corp.(2).............................................. 72,852,000 12.4%
82 Devonshire Street
Boston, Massachusetts 02109
Equitable Companies, Inc.(3).............................. 46,938,000 8.0%
1345 Avenue of the Americas, 39th Floor
New York, New York 10105
Massachusetts Financial Services Co.(4)................... 33,439,000 5.7%
500 Boylston Street
Boston, Massachusetts 02116
Jerry R. Boggess.......................................... 198,771(5) *
Neil R. Garvey............................................ 178,961(6) *
Richard Meelia............................................ 221,797(7) *
Mark H. Swartz............................................ 1,296,001(8) *
All directors and executive officers as a group (17
persons)................................................ 10,122,912(9) 1.6%
</TABLE>
7
<PAGE> 8
- - ---------------
* Less than one percent.
(1) The amounts and percentages shown are amounts and percentages owned
beneficially as of November 30, 1998 (except for FMR, Equitable Companies
and Massachusetts Financial Services, where the amounts and percentages are
as of September 30, 1998), based on information furnished or publicly
disclosed 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
649,140,278 Tyco common shares outstanding as of November 30, 1998.
(2) In a Form 13F, with information as of September 30, 1998, 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 had sole dispositive power over 72,282,042 shares
and sole voting power over 1,845,396 shares.
(3) In a Form 13F, with information as of September 30, 1998, Equitable
Companies, Inc. reported that such shares were not acquired for the purpose
of acquiring or influencing control of the Company and that it had sole
dispositive power over 46,568,467 shares, sole voting power over 25,102,295
shares and shared voting power over 9,833,007 shares, all of which shares
were held for the benefit of its separate accounts.
(4) In a Form 13F, with information as of September 30, 1998, 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 had
sole dispositive power over 33,045,915 shares and sole voting power over
32,918,183 shares.
(5) The amount shown includes 90,785 shares that Mr. Boggess has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 208,333 options awarded to Mr. Boggess
under the Tyco International Ltd. Long-Term Incentive Plan, which will
become exercisable over a period ending on October 1, 2001.
(6) The amount shown includes 64,250 shares that Mr. Garvey has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 175,000 options awarded to Mr. Garvey
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable over a period ending on October 1, 2001.
(7) The amount shown includes 86,949 shares that Mr. Meelia has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 208,333 options awarded to Mr. Meelia
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable over a period ending on October 1, 2001.
(8) The amount shown includes 1,043,001 shares that Mr. Swartz has the right to
acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 999,999 options awarded to Mr. Swartz
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable over a period ending on October 28, 2000.
(9) The amount shown includes 3,526,975 shares that the persons have the right
to acquire within 60 days of November 30, 1998 through the exercise of stock
options. The amount shown excludes 5,322,974 options awarded to the persons
under the Tyco International Ltd. Long Term Incentive Plan, which will
become exercisable over periods ranging from July 1999 through October 2001.
8
<PAGE> 9
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 1998 and the other four most
highly compensated executive officers of the Company (the "Named Officers").
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(2) LONG-TERM INCENTIVE
--------------------------------------------- -------------------------------------
NUMBER OF
SHARES
RESTRICTED UNDERLYING LONG-TERM
FISCAL CASH STOCK STOCK STOCK INCENTIVE
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(3) BONUS(4) AWARDS(5) OPTIONS PAYOUTS
- - --------------------------- ------ ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
L. Dennis Kozlowski......... 1998 $1,250,000 $2,500,000 $20,140,000 1,916,400
Chairman & CEO, Tyco 1997 1,250,000 2,544,260 3,300,000 $6,508,125
International Ltd. 1996 n/a
Jerry R. Boggess............ 1998 450,000 2,610,000 $1,332,520 50,000 559,875(7)
President, Tyco Fire & 1997 375,000 542,093 150,000
Security 1996 n/a
Mark H. Swartz.............. 1998 559,500 1,250,000 10,070,000 1,382,333
EVP & CFO, Tyco 1997 559,500 1,272,130 1,100,000 2,169,375
International Ltd. 1996 n/a
Neil Garvey................. 1998 400,000 1,675,000 787,313
President, Tyco Submarine 1997 256,000 501,500 150,000
Systems Ltd. 1996 n/a
Richard Meelia.............. 1998 500,000 1,064,013 1,163,068 50,000
President, The Kendall 1997 500,000 395,153 150,000
Company 1996 n/a
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION(6)
- - --------------------------- ---------------
<S> <C>
L. Dennis Kozlowski......... $ 901,002
Chairman & CEO, Tyco 108,125
International Ltd.
Jerry R. Boggess............ 143,621
President, Tyco Fire &
Security
Mark H. Swartz.............. 256,878
EVP & CFO, Tyco 31,994
International Ltd.
Neil Garvey................. 84,761
President, Tyco Submarine 2,850
Systems Ltd.
Richard Meelia.............. 149,477
President, The Kendall
Company
</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 for fiscal 1997 salary
information presented herein reflect their individual annual salaries as of
July 2, 1997 and other additional compensation and long-term incentives for
the period from July 2, 1997 through the end of the fiscal year, as they
were not employees of ADT prior to the merger.
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 1998, fiscal 1997 and 1996 refer to the twelve
months ended September 30, 1998, the nine month transition period ended
September 30, 1997 and the calendar year ended December 31, 1996.
(2) Under the Tyco International Ltd. Deferred Compensation Plan, the amount of
total salary and bonus shown above that has been deferred for fiscal 1998 is
as follows: Mr. Kozlowski: $1,250,000, Mr. Boggess: $1,305,000, Mr. Swartz:
$1,484,812; Mr. Garvey: $837,500, and Mr. Meelia: $864,809. None of the
Named Officers had "Other Annual Compensation" in excess of $50,000.
(3) The bonus amounts shown in the table for all of the named executive officers
reflect annual bonus payments that were based solely on Company performance
during 1998 as determined using performance objectives established early in
the fiscal year.
(4) For fiscal 1998, bonuses were payable in the form of shares of stock as
follows: Mr. Boggess -- 24,118 shares, Mr. Garvey -- 14,250 shares, and Mr.
Meelia -- 21,051 shares. The amount listed in the table reflects the fair
market value of the shares ($55.25 per share) on the date shares were earned
(September 30,1998).
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<PAGE> 10
(5) Restricted stock in which specific performance criteria (i.e. increase in
earnings per share (EPS) over the prior year) determines the number of
shares that vest for the fiscal year. Any shares not vested within three
years are forfeited. Recipients of all restricted shares have the right to
vote such shares and receive dividends. The value shown is the value on the
date of the grant ($53.00 per share on May 14, 1998). As of the end of the
fiscal year, the value of these shares based on the $55.25 year-end closing
price was $20,995,000 for Mr. Kozlowski and $10,497,500 for Mr. Swartz.
(6) The amounts shown in the table reflect Company contributions made on behalf
of the named individuals under the Company's qualified and non-qualified
defined contribution plans, as follows:
<TABLE>
<CAPTION>
COMPANY
CONTRIBUTION
COMPANY MATCHING (NON-
CONTRIBUTION QUALIFIED
NAME (QUALIFIED PLAN) PLAN)
---- ---------------- ------------
<S> <C> <C>
Mr. Kozlowski............................................. $12,658 $771,217
Mr. Boggess............................................... 11,216 121,414
Mr. Swartz................................................ 8,000 213,063
Mr. Garvey................................................ 9,582 72,646
Mr. Meelia................................................ 8,000 120,969
</TABLE>
Non-qualified contributions were credited to the Supplemental Executive
Retirement Plan as of December 31, 1997. The amount shown in the table for
Mr. Kozlowski also includes interest credited on deferred compensation in
excess of 120% of the applicable federal long-term rate of $52,127 and
director's fees of $65,000. The amounts shown in the table for Messrs.
Boggess, Swartz, Garvey and Meelia also include interest credited on
deferred compensation in excess of 120% of the applicable federal
long-term rate of $10,991, $35,815, $2,533, and $20,508, respectively.
(7) Mr. Bogges vested in 12,000 shares of Restricted Stock granted in 1990 under
a time-based vesting program. The value shown above is the value on the date
of vesting ($46.66 on 2/13/98).
Option Grants in Last Fiscal Year
The following table shows all grants of stock options to the Named Officers
during fiscal 1998 under the Tyco Long-Term Incentive Plan (LTIP).
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------
% OF TOTAL EXERCISE
OPTIONS OR
GRANTED TO BASE
OPTIONS EMPLOYEES IN PRICE GRANT DATE
NAME GRANTED FISCAL YEAR(4) ($/SHARE) EXPIRATION DATE PRESENT VALUE(5)
---- --------- -------------- ----------- ------------------ ----------------
<S> <C> <C> <C> <C> <C>
L. Dennis Kozlowski......... 100,000(1) 1.14% $45.639 n/a n/a
83,200(1) 0.95% 55.084 n/a n/a
483,200(2) 5.50% 68.097 July 23, 2007 $ 6,982,240
1,000,000(2) 11.38% 68.220 July 17, 2007 14,470,000
250,000(1) 2.85% 68.220 July 17, 2008 3,617,500
Jerry R. Boggess............ 50,000(3) 0.57% 39.375 October 28, 2007 375,500
Mark H. Swartz.............. 500,000(3) 5.69% 39.375 October 28, 2007 3,755,000
162,000(1) 1.84% 40.500 n/a n/a
262,000(2) 2.98% 68.097 July 23, 2007 3,785,900
333,333(2) 3.79% 68.220 July 17, 2007 4,823,329
125,000(1) 1.42% 68.220 July 17, 2008 1,808,750
Neil R. Garvey.............. 0
Richard Meelia.............. 50,000(3) 0.57% 39.375 October 28, 2007 375,500
</TABLE>
- - ---------------
(1) These are Reload Options with the following terms: granted at fair market
value; immediately vested, but not exercisable for two months; and have a
term equal to ten years. Reload options are issued when an
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<PAGE> 11
executive uses shares of Company stock to repay Company indebtedness (which
occurs principally for taxes on the vesting of Restricted Stock) as a means
to retain their equity position in the Company.
(2) These are Reload Options with the following terms: granted at fair market
value; immediately vested, but not exercisable for two months; and have a
term equal to the remaining term of the options they replaced.
(3) These options were granted at fair market value on the date of the grant,
vest one-third each year over a period of three years, and expire ten years
from the date of grant.
(4) The percentages shown in this column represent the percentage of all options
granted in 1998 under the Tyco LTIP.
(5) The grant date present values were determined using the Black-Scholes option
pricing model applied as of the grant date using the following assumptions:
expected life of three years; interest rates of 5.42% -- 5.82%, which
represent the yield of a zero coupon Treasury strip with a maturity date
similar to the assumed exercise period; assumed annual volatility of
underlying stock of 19.07% -- 21.08%, calculated based on 36 months of
historical Tyco share price movement; quarterly dividend payment of $0.25
per share; and the vesting of all options "n/a" indicated that these options
were exercised during the year so a present value is not applicable.
However, the grant date present value for these options was $918,000 and
$955,968 for Mr. Kozlowski and $1,339,740 for Mr. Swartz.
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, 1998 and with respect
to unexercised stock options held by them at September 30, 1998.
<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)
OPTIONS IN EXERCISE OF OPTIONS --------------------------- ---------------------------
NAME FISCAL YEAR IN FISCAL YEAR EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
L. Dennis Kozlowski.... 1,483,200 $41,374,391 1,733,200 2,000,000 $ 0 $33,875,000
Jerry R. Boggess....... 0 0 50,000 150,000 846,875 2,487,500
Mark H. Swartz......... 595,333 17,152,765 720,333 1,166,667 0 19,229,172
Neil R. Garvey......... 0 0 50,000 100,000 846,875 1,693,750
Richard Meelia......... 0 0 50,000 150,000 846,875 2,487,500
</TABLE>
- - ---------------
(1) Based on the closing price of $55.25 on September 30, 1998.
Certain Defined Benefit Plans
Except for Messrs. Kozlowski and Swartz, the Company and its subsidiaries
do not maintain any defined benefit or actuarial retirement plans ("pension
plans") in which the Named Officers participate. Messrs. Kozlowski and Swartz
participate in individual Executive Retirement Arrangements maintained by Tyco
International Ltd. (the "ERA"). Under the ERA, Mr. Kozlowski has a fixed
lifetime benefit commencing at his normal retirement age of 65 that has a
present value of $72,842 monthly. Mr. Swartz's fixed lifetime benefit at his
normal retirement age of 65 has a present value of $32,857 monthly. Retirement
benefits are available at earlier ages and alternative forms of benefits can be
elected. Any such variations would be actuarially equivalent to the fixed
lifetime benefit starting at age 65.
Employment Contracts, Termination Agreements, Change of Control Arrangements
None of the Named Officers has an employment contract, termination
agreement, or change of control arrangement.
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<PAGE> 12
RELATED PARTY TRANSACTIONS
Former Tyco established the Former Tyco 1983 Key Employee Corporate Loan
Program, as amended, to encourage ownership of Tyco common shares on favorable
terms. Loans made by subsidiaries of Tyco are primarily used for the payment of
taxes due as a result of the vesting of ownership of shares granted under Former
Tyco's restricted stock ownership plans.
The Compensation Committee administers the loan program and authorizes
loans, which may not exceed the amount allowable as provided by any regulation
of the United States Treasury or other state or federal statute. Loans may be
required to be secured by Tyco common shares owned by the employee or may be
unsecured. Loans under the loan program generally bear interest at Tyco's
incremental short-term borrowing rate (5.75% for 1998). Loans are generally
repayable in ten years or when the participant reaches age 69, whichever occurs
first, except that earlier payments must be made in the event that the
participant's employment with Tyco or its subsidiaries terminates. The
participant is also required to make loan payments upon the sale or other
disposition of Tyco common shares (other than gifts to certain family members)
with respect to which loans have been granted.
At September 30, 1998, the amount of loans outstanding under the Loan
Programs totaled $22,162,828 of which $4,821,982 was loaned to Mr. Kozlowski,
$2,524,004 to Mr. Boggess, $2,750,000 to Mr. Swartz, $461,680 to Mr. Garvey, and
$607,291 to Mr. Meelia. The largest amount of indebtedness since October 1, 1997
for each of these individuals is: Mr. Kozlowski, $22,474,345; Mr. Boggess,
$2,541,004; Mr. Swartz, $12,538,406; Mr. Garvey, $461,680; and Mr. Meelia,
$1,509,054. In addition, the Company made short-term loans to Mr. Kozlowski and
Mr. Swartz in the amounts of $59,750,014 and $23,428,695, respectively, to
assist in the exercise of stock options. Interest of 5.75% was charged and the
loans were repaid within 3 days.
12
