Executive Employment Agreement - Tyco International Ltd. and Edward D. Breen
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of July 25, 2002 (the
"Effective Date"), between Tyco International Ltd., a Bermuda corporation (the
"Company"), and Edward D. Breen (the "Executive").
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive as Chairman, President
and Chief Executive Officer of the Company;
WHEREAS, the Company and the Executive desire to enter into the Agreement as
to the terms of his employment by the Company;
NOW THEREFORE, in consideration of the foregoing, of the mutual promises
contained herein and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. POSITION/DUTIES.
(a) During the Employment Term (as defined in Section 2 below), the
Executive shall serve as the Chairman (subject to the provisions of
Section 1(c) below), President and Chief Executive Officer of the Company. In
this capacity the Executive shall have such duties, authorities and
responsibilities commensurate with the duties, authorities and responsibilities
of persons in similar capacities in similarly sized companies and such other
duties and responsibilities as the Board of Directors of the Company (the
"Board") shall designate that are consistent with the Executive's position as
Chairman, President and Chief Executive Officer of the Company. The Executive
shall report exclusively to the Board.
(b) During the Employment Term, the Executive shall devote substantially all
of his business time (excluding periods of vacation and other approved leaves of
absence) to the performance of his duties with the Company, provided the
foregoing shall not prevent the Executive from (i) participating in charitable,
civic, educational, professional, community or industry affairs or, with prior
written approval of the Board, serving on the board of directors or advisory
boards of other companies; and (ii) managing his and his family's personal
investments so long as such activities do not materially interfere with the
performance of his duties hereunder or create a potential business conflict or
the appearance thereof. If at any time service on any board of directors or
advisory board would, in the good faith judgment of the Board, conflict with the
Executive's fiduciary duty to the Company or create any appearance thereof, the
Executive shall promptly resign from such other board of directors or advisory
board after written notice of the conflict is received from the Board. Service
on the boards of directors or advisory boards disclosed by the Executive to the
Company on which he is serving as of the Effective Date are hereby approved.
(c) The Board shall take such action as may be necessary to appoint or elect
the Executive as a member of the Board as soon as there is a legal vacancy on
the Board. Thereafter, during the Employment Term, the Board shall nominate the
Executive for re-election as a member of the Board at the expiration of his then
current term. The Company shall use its best efforts to expedite the process of
creating a vacancy on the Board, in accordance with Bermuda law, as a result of
the prior Chairman's resignation.
(d) The Executive further agrees to serve without additional compensation as
an officer and director of any of the Company's subsidiaries and agrees that any
amounts received from such corporation may be offset against the amounts due
hereunder. In addition, it is agreed that the Company may assign the Executive
to one of its subsidiaries for payroll purposes.
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2. EMPLOYMENT TERM. The Executive's term of employment under this Agreement
(such term of employment, as it may be extended or terminated, is herein
referred to as the "Employment Term") shall be for a term commencing on the
Effective Date and, unless terminated earlier as provided in Section 7 hereof,
ending on the third anniversary of the Effective Date (the "Original Employment
Term"), provided that the Employment Term shall be automatically extended,
subject to earlier termination as provided in Section 7 hereof, for successive
additional one (1) year periods (the "Additional Terms"), unless, at least
30 days prior to the end of the Original Employment Term or the then Additional
Term, the Company or the Executive has notified the other in writing that the
Employment Term shall terminate at the end of the then current term.
3. BASE SALARY. The Company agrees to pay the Executive a base salary (the
"Base Salary") at an annual rate of not less than US $1,500,000, payable in
accordance with the regular payroll practices of the Company, but not less
frequently than monthly. The Executive's Base Salary shall be subject to annual
review by the Board (or a committee thereof) and may be increased, but not
decreased, from time to time by the Board. No increase to Base Salary shall be
used to offset or otherwise reduce any obligations of the Company to the
Executive hereunder or otherwise. The base salary as determined herein from time
to time shall constitute "Base Salary" for purposes of this Agreement.
4. BONUSES.
(a) SIGN-ON BONUS. Within three days after the Effective Date, the Company
shall pay the Executive a one-time lump sum cash payment in the amount of US
$3,500,000 (the "Sign-On Bonus"). In the event the Executive's employment with
the Company terminates as a result of a termination by the Company for Cause (as
defined in Section 7(c)) or by the Executive without Good Reason (as defined in
Section 7(e)) at any time during the 12-month period commencing on the Effective
Date, the Executive shall be required to return a portion of the Sign-On Bonus
equal to the net after-tax amount of the Sign-On Bonus (after application of all
refunds and credits as a result of such repayment) multiplied by the difference
of one minus a fraction, the numerator of which is the number of completed
months since the Effective Date and the denominator of which is 12. Such amount
shall be returned to the Company no later than 30 days following such
termination date.
(b) PRO-RATED FISCAL YEAR 2002 BONUS. The Executive shall receive a cash
bonus on account of, and subject to, his employment with the Company through the
end of the Company's fiscal year ending September 30, 2002 equal to US
$1,500,000 multiplied by a fraction, determined by dividing the number of days
from the Effective Date through September 30, 2002 by 365, payable in accordance
with the Company's policy for annual bonuses (the "Guaranteed 2002 Bonus").
(c) ANNUAL BONUS. During the Employment Term, except as otherwise provided
in Section 4(b), the Executive shall be eligible to participate in the Company's
bonus and other incentive compensation plans and programs for the Company's
senior executives at a level commensurate with his position. The Executive shall
have the opportunity to earn an annual target bonus measured against objective
financial criteria to be determined by the Board (or a committee thereof) of at
least 100% of Base Salary.
(d) FISCAL YEAR 2003 BONUS. The Executive shall be entitled to receive a
minimum cash bonus, pursuant to Section 4(c) above, on account of, and subject
to, his continued employment with the Company through the end of the fiscal year
ending September 30, 2003, equal to 100% of Base Salary, payable in accordance
with the Company's policy for annual bonuses (the "Guaranteed 2003 Bonus").
5. EQUITY AWARDS.
(a) SIGN-ON OPTION GRANT. The Board or the committee of the Board (the
"Committee") appointed to administer the Company's Long Term Incentive Plan, as
amended May 12, 1999 and as
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may be amended from time to time (the "Long Term Incentive Plan") shall award
the Executive as of the Effective Date, an option under the Long Term Incentive
Plan (the "Sign-On Option") to purchase 3,350,000 shares of the Company's common
stock (the "Common Stock"). The exercise price shall be equal to US $10. Subject
to accelerated vesting as set forth in this Agreement, the Sign-On Option shall
vest and become exercisable in three (3) equal amounts on the first, second and
third anniversaries of the Effective Date, provided that the Executive is
employed on each vesting date. The Sign-On Option shall be for a term of
10 years, subject to earlier termination as provided in the Long Term Incentive
Plan and herein.
(b) SIGN-ON DEFERRED STOCK UNITS. (i) The Board or the Committee shall award
the Executive as of the Effective Date 350,000 deferred stock units (the
"Sign-On DSUs") pursuant to Section 6(e) of the Long Term Incentive Plan.
Subject to accelerated vesting as set forth in this Agreement, the Sign-On DSUs
shall vest in three (3) equal amounts on the first, second and third
anniversaries of the Effective Date, provided that the Executive is employed on
each vesting date.
(ii) The Sign-On DSUs and the 2002/2003 DSUs (as defined in
Section 5(d) below, collectively, the "DSUs") may not be sold, assigned,
exchanged, pledged or otherwise transferred. Except as otherwise provided in
this Agreement, the Long Term Incentive Plan, or the award agreement, in the
event of a termination of employment prior to the vesting of the DSUs, the
Executive shall, for no consideration, forfeit to the Company all unvested
DSUs.
(iii) If on any date the Company shall pay any dividend on the Common
Stock (other than a dividend payable in Common Stock), the number of DSUs
credited to the Executive shall as of such date be increased by an amount
equal to: (x) the product of the number of DSUs credited to the Executive as
of the record date for such dividend multiplied by the per share amount of
any dividend (or, in the case of any dividend payable in property other than
cash, the per share value of such dividend, as determined in good faith by
the Board), divided by (y) the fair market value of a share of Common Stock
on the payment date of such dividend as determined under the Long Term
Incentive Plan.
In the case of any dividend declared on Common Stock which is payable in
Common Stock, the number of DSUs credited to the Executive shall be
increased by a number equal to the product of (x) the aggregate number of
DSUs that have been credited to the Executive through the related dividend
record date multiplied by (y) the number of shares Common Stock (including
any fraction thereof) payable as a dividend on a share of Common Stock. The
number and terms of the DSUs shall be adjusted in accordance with the
provisions of the Long Term Incentive Plan.
(iv) At the earlier of (x) 30 days after any termination of employment
or (y) a Change in Control, the Company shall pay to the Executive a number
of shares of Common Stock equal to the aggregate number of vested DSUs
credited to the Executive as of such date; provided, however, that in the
event that the Company is involved in a transaction in which the shares of
Common Stock will be exchanged for cash, the Company shall pay to the
Executive immediately prior to the consummation of such transaction a number
of shares of Common Stock equal to the aggregate number of DSUs credited to
the Executive (whether vested or unvested) as of such date.
(c) 2002/2003 OPTION GRANT. The Board or the Committee shall award the
Executive as of the Effective Date, an option under the Long Term Incentive Plan
to purchase 4,000,000 shares of Common Stock (the "2002/2003 Option"). The
exercise price shall be equal to US $10. Subject to accelerated vesting as set
forth in this Agreement, the 2002/2003 Option shall vest and become exercisable
in five (5) equal amounts on the first, second, third, fourth and fifth
anniversaries of the Effective Date, provided that the Executive is employed on
each vesting date. The 2002/2003 Option shall be for a term of 10 years, subject
to earlier termination as provided in the Long Term Incentive Plan and herein.
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(d) 2002/2003 DEFERRED STOCK UNITS. The Board or the Committee shall award
the Executive as of the Effective Date 1,000,000 deferred stock units (the
"2002/2003 DSUs") pursuant to Section 6(e) of the Long Term Incentive Plan.
Subject to accelerated vesting as set forth in this Agreement, the 2002/2003
DSUs shall vest in five (5) equal amounts on the first, second, third, fourth
and fifth anniversaries of the Effective Date, provided that the Executive is
employed on each vesting date.
(e) FORM OF AWARDS. The Sign-On Option, Sign-On DSUs, 2002/2003 Option and
2002/2003 DSUs shall be granted pursuant to and, to the extent not contrary to
the terms of this Agreement, shall be subject to all of the terms and conditions
imposed upon such awards granted under the Long Term Incentive Plan. For the
avoidance of doubt, the award agreements for the Sign-On Option, Sign-On DSUs,
2002/2003 Option and 2002/2003 DSUs shall provide for full vesting of such
awards and one year continued exercisability for such options in the event of
the Executive's termination of employment because of death or Disability.
(f) DISCRETIONARY GRANTS. In addition to the equity awards contemplated
under this Section 5, at the sole discretion of the Board or the Committee, the
Executive shall be eligible for additional annual grants of stock options and
other equity awards.
(g) ACCELERATION EVENTS. If (i) the Executive's employment by the Company is
terminated by the Company other than for Cause or Disability or by the Executive
for Good Reason or (ii) Change in Control (as defined in Exhibit A hereto)
occurs, all then outstanding unvested equity awards shall be fully vested and,
in the case of (i), any Company stock option then held by the Executive shall
remain exercisable until the expiration of the initial 10 year term, subject to
earlier termination in accordance with the terms of the Long Term Incentive Plan
(other than those related to termination of employment).
6. EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. The Executive shall be entitled to participate in all
employee benefit plans of the Company including, but not limited to, equity,
pension, thrift, profit sharing, medical coverage, education, or other
retirement or welfare benefits that the Company has adopted or may adopt,
maintain or contribute to for the benefit of its senior executives at a level
commensurate with his positions subject to satisfying the applicable eligibility
requirements. Such benefits, in the aggregate, shall be no less favorable than
the level of benefits in effect on the Effective Date; provided, however, that
in the event there is a reduction of employee benefits applicable to senior
executives generally, nothing herein shall preclude the Company's ability to
reduce the Executive's benefits consistent with such reduction. Without limiting
the generality of the foregoing, during the Employment Term, the Company will
provide the Executive with term life insurance in the amount of at least US
$1,000,000 and accidental death and dismemberment insurance in the amount of at
least US $2,000,000.
(b) SUPPLEMENTAL RETIREMENT BENEFIT.
(i) Subject to the provisions of this Section 6(b), the Executive shall
be entitled to receive an annual supplemental retirement benefit payable at
the later of age 60 and termination of employment in the form of a joint and
50% spousal survivor's annuity (based on the Executive's current spouse's
then actual or would have been age) equal to 50% of the Executive's Final
Average Earnings (as defined below), reduced by (A) benefits from any
defined benefit pension plans (whether or not tax-qualified) maintained (or
formerly maintained) by the Company or its affiliates or by benefits from
any defined benefit pension plans (whether or not tax-qualified) maintained
(or formerly maintained) by any previous employers (in each case converted
into a joint and 50% spousal survivor's annuity (based on the Executive's
current spouse's then actual or would have been age) commencing on the date
of commencement of benefits hereunder, if necessary) and (B) benefits
attributable to employer contributions, including, without limitation,
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matching contributions but not salary reduction contributions, to any
defined contribution plans maintained by the Company or its affiliates
(whether or not tax-qualified) based on theoretical annual earnings after
July 25, 2002 equal in each year to the prime rate (as reported in The Wall
Street Journal) on the first business day of each year and on July 25, 2002
for 2002.
(ii) In the event of the Executive's voluntary termination of employment
without Good Reason or the Executive's termination for Cause prior to age
60, the benefit payable pursuant to subsection (b)(i) shall be reduced by
.25% for each month or partial month the termination date is prior to age
60.
(iii) The Executive shall vest in the benefit payable pursuant to
subsection (b)(i) at the rate of 1.66% per month over 60 months. If the
Executive's employment by the Company is terminated by the Company other
than for Cause or Disability or by the Executive for Good Reason prior to
the first anniversary of the Effective Date, the Executive shall be deemed
to be 20% vested in the benefit payable pursuant to subsection (b)(i).
Notwithstanding the provisions in subsection (i), any offset with regard to
benefits from any previous employer shall vest at the rate of 1.66% per
month over 60 months.
(iv) The Executive shall be fully vested in the benefit payable pursuant
to subsection (b)(i) upon the occurrence of a Change in Control and shall
receive an immediate distribution of such benefit upon the occurrence of a
Change in Control. Such distribution shall be actuarially adjusted using the
then current PBGC interest rate and mortality table for immediate annuities.
Upon such distribution, the Executive shall accrue no further benefits under
this Section 6(b).
(v) In the event of the Executive's termination prior to age 60, the
benefit payable pursuant to this subsection may, at the Executive's
election, commence early, except that the benefit shall be reduced by .25%
per month for each month or partial month the commencement date is prior to
age 60. The benefit will be paid to the Executive for his lifetime and, upon
his death, fifty percent (50%) of his benefit will be paid to his surviving
spouse, if any, for her lifetime, except as otherwise provided herein. The
Executive may elect in writing to receive a distribution of any portion or
all of his benefit payable pursuant to subsection (b)(i) in any form
permitted under the applicable Company's supplemental retirement plan or, if
the Executive elects in the calendar year prior to his termination of
employment (and at least 6 months prior to such termination), in a lump sum
(determined on the basis of the then prevailing PBGC interest and mortality
table rate for immediate annuities).
(vi) In the event of the Executive's death while an employee of the
Company prior to the date of commencement of benefits, a benefit shall be
paid to the Executive's surviving spouse, if any, when the Executive would
have commenced benefits hereunder for her lifetime equal to the benefit
which would have been payable to the spouse assuming the Executive had
terminated the day preceding the date of death, commenced receiving benefits
in the form of a joint and 50% spousal survivor's annuity and then died.
(vii) The calculation of the adjustments for the offset or alternative
forms of benefits payable pursuant to this Section 6(b) (except as provided
in subsections (iv) and (v) above) shall be based upon (x) the actuarial
assumptions used in the Company's defined benefit plans covering the
Executive, (y) if none then exists, those in the last such plan of the
Company or its affiliates (if any) which covered the Executive or (z) if no
such plan ever existed, those selected by the independent actuary described
in the next sentence. If such a plan exists, the calculation shall be made
by the actuary for such plan or, if there is no current plan or actuary, by
an independent actuary selected by the Company and reasonably acceptable to
the Executive. The calculation of the actuary shall be final and binding on
all persons provided it was made in good faith. The benefits payable
pursuant to this Section 6(b) shall be unfunded and the Executive will not
be considered to have received a taxable economic benefit prior to the time
at which benefits are
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actually payable hereunder. Accordingly, the Company or its affiliates shall
not be required to segregate any of its assets for the benefit of the
Executive and the Executive shall have only a contractual right against the
Company for the benefits payable hereunder. The benefits payable pursuant to
this Section 6(b) shall not be subject to alienation, transfer, assignment,
garnishment, execution or levy of any kind, and any attempt to cause any
benefits to be so subjected shall not be recognized and shall be null and
void.
(viii) "Final Average Earnings" shall mean the Executive's highest average
of the sum of the Executive's monthly base salary and actual annual bonus
(spread equally over the bonus period for which it is paid) during any
consecutive 36 month period (or lesser period of actual employment) during
the period of 60 complete months (or lesser period of actual employment)
immediately preceding the Executive's termination of employment, but in no
event less than the sum of the Executive's initial Base Salary and initial
target bonus.
(c) VACATIONS. The Executive shall be entitled to an annual paid vacation in
accordance with the Company's policy applicable to senior executives, but in no
event less than four weeks per year (as prorated for partial years), which
vacation may be taken at such times as the Executive elects with due regard to
the needs of the Company.
(d) PERQUISITES. The Company shall provide to the Executive, at the
Company's cost, all perquisites which other senior executives of the Company are
generally entitled to receive. To the extent that the Executive's permanent
residence is outside of New York and to the extent that the Executive becomes
subject to New York City or New York State taxes because of temporary assignment
or other performance of his duties, the Company shall gross-up the Executive for
tax purposes so that he is in the same position as if he were not subject to
such taxes.
(e) BUSINESS AND ENTERTAINMENT EXPENSES. Upon presentation of appropriate
documentation, the Executive shall be reimbursed in accordance with the
Company's expense reimbursement policy for all reasonable and necessary business
and entertainment expenses incurred in connection with the performance of his
duties hereunder.
(f) TRAVEL. The Company shall provide the Executive and his family with
personal safety and security protection as appropriate and reasonable under the
circumstances. The parties recognize that such security protection may include
use by the Executive and his family of private transportation methods, including
private air travel, for both business and personal purposes. Without limiting
the foregoing, the Executive shall have access to first class commercial air
travel or use of private aircraft for business travel.
(g) RELOCATION. The Executive will relocate to the vicinity of the Company's
principal U.S. headquarters within a time frame mutually agreed upon between the
Executive and the Board (the "Relocation Period"). The Executive shall be
entitled to relocation benefits in accordance with the Company's relocation
policy and such additions thereto as mutually agreed to by the Executive and the
Board (or a committee thereof), including purchase of his current residence
within two years at the appraised value by a relocation company in accordance
with its standard procedures. In addition, the Company shall reimburse the
Executive for the reasonable cost of travel between the Executive's current
residence and the Company's principal U.S. headquarters and, prior to the
Executive's relocation, the Company shall provide suitable temporary housing for
the Executive's use when he is at the Company's principal U.S. headquarters plus
living expenses, as mutually agreed to by the Executive and the Board (or a
committee thereof). The Company shall gross up for tax purposes any deemed
income arising pursuant to the payment or benefits provided under this
Section 6(g) (other than any profit resulting from any sale of the Executive's
residence), so that the economic benefit is the same to the Executive as if such
payment or benefits were provided on a non-taxable basis to the Executive. All
amounts payable under this Section 6(g) shall be subject to the Executive's
presentment to the Company of appropriate documentation.
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7. TERMINATION. The Executive's employment and the Employment Term shall
terminate on the first of the following to occur:
(a) DISABILITY. Upon written notice by the Company to the Executive of
termination due to Disability, while the Executive remains Disabled. For
purposes of this Agreement, "Disability" shall be defined as the inability
of the Executive to have performed his material duties hereunder due to a
physical or mental injury, infirmity or incapacity for 180 days (including
weekends and holidays) in any 365-day period. The existence or nonexistence
of a Disability shall be determined by an independent physician selected by
the Company and reasonably acceptable to Executive.
(b) DEATH. Automatically on the date of death of the Executive.
(c) CAUSE. Immediately upon written notice by the Company to the
Executive of a termination for Cause. "Cause" shall mean:
(i) The Executive shall have been indicted for a felony other than
one based on Limited Vicarious Liability, or
(ii) The termination is evidenced by a resolution adopted in good
faith by at least two-thirds of the members of the Board concluding that
Executive:
(A) intentionally and continually failed substantially to perform
his reasonably assigned duties with the Company (other than a failure
resulting from Executive's incapacity due to physical or mental
illness or from the assignment to Executive of duties that would
constitute Good Reason), which failure has continued for a period of
at least 30 days after a written notice of demand for substantial
performance, signed by a duly authorized member of the Board, has
been delivered to Executive specifying the manner in which Executive
has failed substantially to perform, or
(B) intentionally engaged in conduct which is demonstrably and
materially injurious to the Company; provided, however, that no
termination of Executive's employment shall be for Cause as set forth
in subsection (B) until (1) there shall have been delivered to
Executive a copy of a written notice, signed by a duly authorized
member of the Board, stating that Executive was guilty of the conduct
set forth in subsection (B) and specifying the particulars thereof in
detail, and (2) Executive shall have been provided an opportunity to
be heard in person by the Board (with the assistance of Executive's
counsel if Executive so desires).
(iii) Notwithstanding anything in the foregoing to the contrary, if
the Executive has been terminated ostensibly for Cause because he has
been indicted for a felony (other than one involving Limited Vicarious
Liability), and he is not convicted of, or does not plead guilty or nolo
contendere to, such felony or a lesser offense (based on the same
operative facts), such termination shall be deemed to be a termination
without Cause as of the date of the termination; provided, however, that,
in the event that the Executive has been terminated ostensibly for Cause
because he has been indicted for a felony (other than one involving
Limited Vicarious Liability) (A) the Executive's ability to exercise
outstanding stock options shall be suspended and stock options will only
be forfeited in the event that the Executive is convicted of or pleads
guilty or nolo contendere to a felony or a lesser offense and any vesting
shall be suspended until a final determination in such proceeding is
reached; (B) unvested deferred stock units shall only be forfeited in the
event that the Executive is convicted of or pleads guilty or nolo
contendere to a felony or a lesser offense and any vesting or
distribution shall be suspended until a final determination in such
proceeding is reached; (C) any cash payments shall be paid after a final
determination in such proceeding is reached; and (D) the Company will pay
the Executive an amount equal to the value of health and welfare benefits
that would otherwise been provided to the Executive as a result of the
termination, if any,
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after a final determination in such proceeding is reached. The Company
shall gross up for tax purposes the amount paid pursuant to subsection
(D) hereof, so that the economic benefit is the same to the Executive as
if such payment or benefits were provided on a non-taxable basis to the
Executive.
(iv) For purposes of the foregoing, the term Limited Vicarious
Liability shall mean any liability which is based on acts of the Company
for which Executive is responsible solely as a result of his office(s)
with the Company; provided that (A) he was not directly involved in such
acts and either had no prior knowledge of such intended actions or, upon
obtaining such knowledge, promptly acted reasonably and in good faith to
attempt to prevent the acts causing such liability or (B) after
consulting with the Company's counsel, he reasonably believed that no law
was being violated by such acts.
(d) WITHOUT CAUSE. Upon written notice by the Company to the Executive
of an involuntary termination without Cause, other than for death or
Disability.
(e) GOOD REASON. Upon written notice by the Executive to the Company of
a termination for Good Reason, unless such events are corrected in all
material respects by the Company within 30 days following written
notification by the Executive to the Company that he intends to terminate
his employment hereunder for one of the reasons set forth below. "Good
Reason" shall mean, without the express written consent of the Executive,
the occurrence of any of the following events:
(i) assignment to the Executive of any duties inconsistent in any
material respect with the Executive's position (including titles and
reporting relationships), authority, duties or responsibilities as
contemplated by this Agreement, or any other action by the Company which
results in a significant diminution in such position, authority, duties
or responsibilities;
(ii) any failure by the Company to comply with any of the material
provisions regarding Executive's Base Salary, bonus, annual equity
incentive, benefits and perquisites, retirement benefit, relocation, and
other benefits and amounts payable to Executive under this Agreement;
(iii) the Executive being required to relocate to a principal place of
employment more than 60 miles from his principal place of employment with
the Company once it is established;
(iv) the delivery by the Company of a notice of non-renewal pursuant
to Section 2 hereof;
(v) the failure by the Company to elect or to reelect the Executive
as a Director and as Chairman of the Board, or the removal of the
Executive from either such position;
(vi) any breach of the Company's representations set forth in
Section 23 hereof which has a material adverse impact on the Company; or
(vii) any termination by the Executive during the 30-day period
immediately following the first anniversary of the date of any Change in
Control.
(f) WITHOUT GOOD REASON. Upon 30 days' prior written notice by the
Executive to the Company of the Executive's voluntary termination of
employment without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice date).
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8. CONSEQUENCES OF TERMINATION. Any termination payments made and benefits
provided under this Agreement to the Executive shall be in lieu of any
termination or severance payments or benefits for which the Executive may be
eligible under any of the plans, policies or programs of the Company or its
affiliates. Subject to Section 9, the following amounts and benefits shall be
due to the Executive.
(a) DISABILITY. Upon such termination, the Company shall pay or provide
the Executive (i) any unpaid Base Salary through the date of termination and
any accrued vacation in accordance with Company policy; (ii) any unpaid
bonus earned with respect to any fiscal year ending on or preceding the date
of termination; (iii) reimbursement for any unreimbursed expenses incurred
through the date of termination; and (iv) all other payments, benefits or
fringe benefits to which the Executive may be entitled under the terms of
any applicable compensation arrangement or benefit, equity or fringe benefit
plan or program or grant or this Agreement (collectively, "Accrued
Amounts").
(b) DEATH. In the event the Employment Term ends on account of the
Executive's death, the Executive's estate shall be entitled to any Accrued
Amounts.
(c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If the Executive's
employment should be terminated (i) by the Company for Cause, or (ii) by the
Executive without Good Reason, the Company shall pay to the Executive any
Accrued Amounts.
(d) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If the Executive's
employment by the Company is terminated by the Company other than for Cause
(other than a termination for Disability) or by the Executive for Good
Reason, the Company shall pay or provide the Executive with (i) Accrued
Amounts; (ii) a pro-rata portion of the Executive's bonus for the
performance year in which the Executive's termination occurs at the time
that annual bonuses are paid to other senior executives (determined by
multiplying the amount the Executive would have received had employment
continued through the end of the performance year by a fraction, the
numerator of which is the number of days during the performance year of
termination that the Executive is employed by the Company and the
denominator of which is 365); (iii) a lump sum in cash in an amount equal to
the product of (A) the sum of (1) the then Base Salary and (2) the then
target annual bonus or, if higher, the most recent annual bonus payment
multiplied by (B) three; and (iv) subject to the Executive's continued
copayment of premiums, continued participation for three years in all health
and welfare plans which cover the Executive (and eligible dependents) upon
the same terms and conditions (except for the requirements of the
Executive's continued employment) in effect on the date of termination. In
the event the Executive obtains other employment that offers substantially
similar or improved benefits, as to any particular health or welfare plan,
such continuation of coverage by the Company for such similar or improved
benefit under such plan under this subsection shall immediately cease. To
the extent such coverage cannot be provided under the Company's health or
welfare plans without jeopardizing the tax status of such plans, for
underwriting reasons (e.g., disability benefits) or because of the tax
impact on the Executive, the Company shall pay the Executive an amount equal
to the amount the Executive has to pay for comparable benefits (but in no
event greater than two times the amount the Company would have paid for such
benefits on behalf of the Executive if the benefits were provided to him as
an employee) and gross-up for tax purposes any deemed income arising
pursuant to the payments or benefits provided under this sentence, so that
the economic benefit is the same to the Executive as if such payment or
benefits were provided on a non-taxable basis to the Executive. The
continuation of health benefits under this subsection shall reduce and count
against the Executive's rights under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA").
9. RELEASE. Any and all amounts payable and benefits or additional rights
provided pursuant to this Agreement beyond Accrued Amounts shall only be payable
if the Executive delivers to the
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Company a general release of all claims of the Executive occurring up to the
release date in the form of Exhibit B hereto (with such changes therein as may
be necessary to make it valid and encompassing under applicable law) within
21 days of presentation thereof by the Company to the Executive.
10. EXCISE TAX. In the event that the Executive becomes entitled to payments
and/or benefits which would constitute "parachute payments" within the meaning
of Section 280G(b)(2) of the Code, the provisions of Exhibit C shall apply.
11. (a) CONFIDENTIALITY. The Executive agrees that he shall not, directly or
indirectly, use, make available, sell, disclose or otherwise communicate to any
person, other than in the course of the Executive's assigned duties and for the
benefit of the Company, either during the period of the Executive's employment
or at any time thereafter, any nonpublic, proprietary or confidential
information, knowledge or data relating to the Company, any of its subsidiaries,
affiliated companies or businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company. The foregoing shall
not apply to information that (i) was known to the public prior to its
disclosure to the Executive; (ii) becomes known to the public subsequent to
disclosure to the Executive through no wrongful act of the Executive or any
representative of the Executive; or (iii) the Executive is required to disclose
by applicable law, regulation or legal process (provided that the Executive
provides the Company with prior notice of the contemplated disclosure and
reasonably cooperates with the Company at its expense in seeking a protective
order or other appropriate protection of such information). Notwithstanding
clauses (i) and (ii) of the preceding sentence, the Executive's obligation to
maintain such disclosed information in confidence shall not terminate where only
portions of the information are in the public domain.
(b) NONSOLICITATION. During the Executive's employment with the Company and
for the one year period thereafter, the Executive agrees that he will not,
directly or indirectly, individually or on behalf of any other person, firm,
corporation or other entity, knowingly solicit, aid or induce (i) any managerial
level employee of the Company or any of its subsidiaries or affiliates to leave
such employment in order to accept employment with or render services to or with
any other person, firm, corporation or other entity unaffiliated with the
Company or knowingly take any action to materially assist or aid any other
person, firm, corporation or other entity in identifying or hiring any such
employee or (ii) any customer of the Company or any of its subsidiaries or
affiliates to purchase goods or services then sold by the Company or any of its
subsidiaries or affiliates from another person, firm, corporation or other
entity or assist or aid any other persons or entity in identifying or soliciting
any such customer.
(c) NONCOMPETITION. The Executive acknowledges that he performs services of
a unique nature for the Company that are irreplaceable, and that his performance
of such services to a competing business will result in irreparable harm to the
Company. Accordingly, during the Executive's employment hereunder and for the
one year period thereafter, the Executive agrees that the Executive will not,
directly or indirectly, own, manage, operate, control, be employed by (whether
as an employee, consultant, independent contractor or otherwise, and whether or
not for compensation) or render services to any person, firm, corporation or
other entity, in whatever form, engaged in any business of the same type as any
business in which the Company or any of its subsidiaries or affiliates is
engaged on the date of termination or in which they have proposed, on or prior
to such date, to be engaged in on or after such date and in which the Executive
has been involved to any extent (other than DE MINIMIS) at any time during the
12-month period ending with the date of termination, in any locale of any
country in which the Company conducts business. This Section 11(c) shall not
prevent the Executive from owning not more than one percent of the total shares
of all classes of stock outstanding of any publicly held entity engaged in such
business, nor will it restrict the Executive from rendering services to
charitable organizations, as such term is defined in Section 501(c) of the Code.
(d) NONDISPARAGMENT. Each of the Executive and the Company (for purposes
hereof, the Company shall mean only the executive officers and directors thereof
and not any other employees)
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agrees not to make any public statements that disparage the other party, or in
the case of the Company, its respective affiliates, employees, officers,
directors, products or services. Notwithstanding the foregoing, statements made
in the course of sworn testimony in administrative, judicial or arbitral
proceedings (including, without limitation, depositions in connection with such
proceedings) shall not be subject to this Section 11(d).
(e) EQUITABLE RELIEF AND OTHER REMEDIES. The Executive acknowledges and
agrees that the Company's remedies at law for a breach or threatened breach of
any of the provisions of this Section would be inadequate and, in recognition of
this fact, the Executive agrees that, in the event of such a breach or
threatened breach, in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to obtain equitable relief in the form of
specific performance, temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.
(f) REFORMATION. If it is determined by a court of competent jurisdiction in
any state that any restriction in this Section 11 is excessive in duration or
scope or is unreasonable or unenforceable under the laws of that state, it is
the intention of the parties that such restriction may be modified or amended by
the court to render it enforceable to the maximum extent permitted by the law of
that state.
(g) SURVIVAL OF PROVISIONS. The obligations contained in this Section 11
shall survive the termination or expiration of the Executive's employment with
the Company and shall be fully enforceable thereafter.
12. ATTORNEY'S FEES.
(a) In the event of any dispute arising out of or under this Agreement or
the Executive's employment with the Company, if the arbitrator or court of
competent jurisdiction, whichever is hearing the matter, determines that the
Executive has prevailed on the issues in the arbitration or court proceeding, as
the case may be, the Company shall, upon presentment of appropriate
documentation, at the Executive's election, pay or reimburse the Executive for
all reasonable legal and other professional fees, costs of arbitration and other
reasonable expenses incurred in connection therewith by the Executive.
(b) The Company shall promptly pay the Executive's reasonable costs of
entering into this Agreement, including the reasonable fees and expenses of his
counsel and other professionals, up to a maximum of US $100,000 (based on such
counsel's and professionals' standard hourly rates). The Company shall gross up
for tax purposes any deemed income to the Executive arising pursuant to the
payments provided under this Section 12(b), so that the economic benefit is the
same to the Executive as if such payments were provided on a non-taxable basis
to the Executive.
13. NO ASSIGNMENTS.
(a) This Agreement is personal to each of the parties hereto. Except as
provided in Section 13(b) below, no party may assign or delegate any rights or
obligations hereunder without first obtaining the written consent of the other
party hereto.
(b) The Company may assign this Agreement to any successor to all or
substantially all of the business and/or assets of the Company provided the
Company shall require such successor to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
14. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given (i) on the date of delivery if delivered by hand,
(ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on
the first business day following the date of deposit if delivered by guaranteed
overnight delivery
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service, or (iv) on the fourth business day following the date delivered or
mailed by United States registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
<Table>
<S> <C>
If to the Executive:
At the address (or to the facsimile number) shown
on the records of the Company
If to the Company:
Tyco International Ltd.
The Zurich Centre
Second Floor
90 Pitts Bay Road
Pembroke, HMO8, Bermuda
Attention: Corporate Secretary
with a copy to:
Tyco International Ltd.
One Town Center Road
P.O. Box 5035
Boca Raton, Florida 33486
Attention: General Counsel
</Table>
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15. SECTION HEADINGS; INCONSISTENCY. The section headings used in this
Agreement are included solely for convenience and shall not affect, or be used
in connection with, the interpretation of this Agreement. In the event of any
inconsistency between the terms of this Agreement and any form, award, plan or
policy of the Company, the terms of this Agreement shall control.
16. SEVERABILITY. The provisions of this Agreement shall be deemed severable
and the invalidity of unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
17. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instruments.
18. ARBITRATION. Any dispute or controversy arising under or in connection
with this Agreement, other than injunctive relief under Section 11(e) hereof or
damages for breach of Section 11, shall be settled exclusively by arbitration,
conducted before a single arbitrator in New York, New York in accordance with
the J*A*M*S/ENDISPUTE Streamlined Arbitration Rules and Procedures or
J*A*M*S/ENDISPUTE Comprehensive Arbitration Rules and Procedures, as applicable,
but expressly excluding Rule 28 of the J*A*M*S/ENDISPUTE Streamlined Rules
(Final Offer (or Baseball) Arbitration Option) and Rule 33 of the
J*A*M*S/ENDISPUTE Comprehensive Rules (Final Offer (or Baseball) Arbitration
Option), as the case may be (or any successor provisions). The arbitrator will
be a former or retired judge selected from a list of those affiliated with
J*A*M*S/ ENDISPUTE. The arbitrator will have the authority to permit discovery
and to follow the procedures that he or she determines to be appropriate. The
arbitrator will have no power to award consequential (including lost profits),
punitive or exemplary damages. The decision of the arbitrator will be final and
binding upon the parties hereto. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. Subject to Section 12, each party shall
bear its own legal fees and costs and equally divide the forum fees and cost of
the arbitrator.
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19. INDEMNIFICATION. The Company hereby agrees to indemnify the Executive
and hold him harmless to the fullest extent permitted by law and under the
by-laws of the company against and in respect to any and all actions, suits,
proceedings, claims, demands, judgments, costs, expenses (including reasonable
attorney's fees), losses, and damages resulting from the Executive's good faith
performance of his duties and obligations with the Company. The Company shall
cause the entities listed on Exhibit D hereto to execute indemnity commitments
in the form of Exhibit E hereto.
20. LIABILITY INSURANCE. The Company shall cover the Executive under
directors and officers liability insurance both during and, while potential
liability exists, after the term of this Agreement in the same amount and to the
same extent as the Company covers its other officers and directors.
21. MISCELLANEOUS. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing
and signed by the Executive and such officer or director as may be designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement together with all exhibits hereto sets forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York without regard to its conflicts of law
principles.
22. FULL SETTLEMENT. Except as set forth in this Agreement, the Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any circumstances,
including without limitation, set-off, counterclaim, recoupment, defense or
other claim, right or action which the Company may have against the Executive or
others, except to the extent any amounts are due the Company or its subsidiaries
or affiliates pursuant to a judgment against the Executive; provided, however,
that notwithstanding the foregoing, the Company shall have the right to offset
any payment provided for in this Agreement or any accrued obligation or other
payments (if any) by any outstanding portion of the Sign-On Bonus which is
required to be returned to the Company pursuant to Section 4(a) that has not
otherwise been timely returned. In no event shall the Executive be obliged to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
nor shall the amount of any payment hereunder be reduced by any compensation
earned by the Executive as a result of employment by another employer.
23. REPRESENTATIONS.
(a) The Company represents and warrants that, as of the Effective Date, all
financial statements for each quarter and fiscal year since October 1, 1999
fairly present in all material respects the financial position of the Company in
conformity with Generally Accepted Accounting Principles as of the applicable
reporting dates except as reported in the notes to those financial statements.
(b) The Executive represents and warrants to the Company that he has the
legal right to enter into this Agreement and to perform all of the obligations
on his part to be performed hereunder in accordance with its terms and that he
is not a party to any agreement or understanding, written or oral, which could
prevent him form entering into this Agreement or performing all of his
obligations hereunder.
24. WITHHOLDING. The Company may withhold from any and all amounts payable
under this Agreement such federal, state and local taxes as may be required to
be withheld pursuant to any applicable law or regulation.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
<Table>
<S> <C>
TYCO INTERNATIONAL LTD.
By: /s/STEPHEN W. FOSS
Name: Stephen W. Foss
Its: Chairman of the Compensation Committee
By: /s/JOHN F. FORT, III
Name John F. Fort, III
Its: Lead Director
EDWARD D. BREEN
/s/ EDWARD D. BREEN
--------------------------------------------
</Table>
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EXHIBIT A
DEFINITION OF CHANGE IN CONTROL
"Change in Control" shall mean the first to occur of any of the following
events:
(a) any "person" (as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding
for this purpose, (i) the Company or any subsidiary of the Company, or
(ii) any employee benefit plan of the Company or any subsidiary of the
Company, or any person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan which acquires
beneficial ownership of voting securities of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly of securities of the Company representing more than
30% of the combined voting power of the Company's then outstanding
securities; provided, however, that no Change in Control will be deemed to
have occurred as a result of a change in ownership percentage resulting
solely from an acquisition of securities by the Company; or
(b) persons who, as of the Effective Date constitute the Board (the
"Incumbent Directors") cease for any reason, including without limitation,
as a result of a tender offer, proxy contest, merger or similar transaction,
to constitute at least a majority thereof, provided that any person becoming
a director of the Company subsequent to the Effective Date shall be
considered an Incumbent Director if such person's election or nomination for
election was approved by a vote of at least 50% of the Incumbent Directors;
but provided further, that any such person whose initial assumption of
office is in connection with an actual or threatened election contest
relating to the election of members of the Board or other actual or
threatened solicitation of proxies or consents by or on behalf of a "person"
(as defined in Section 13(d) and 14(d) of the Exchange Act) other than the
Board, including by reason of agreement intended to avoid or settle any such
actual or threatened contest or solicitation, shall not be considered an
Incumbent Director; or
(c) consummation of a reorganization, merger or consolidation or sale or
other disposition of at least 80% of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business Combination,
all or substantially all of the individuals and entities who were the
beneficial owners of outstanding voting securities of the Company
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the company resulting from such Business
Combination (including, without limitation, a company which, as a result of
such transaction, owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination, of the outstanding voting securities of the
Company; or
(d) approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
<Page>
EXHIBIT B
FORM OF RELEASE
AGREEMENT AND GENERAL RELEASE
Tyco International Ltd., its affiliates, subsidiaries, divisions, successors
and assigns and the current, future and former employees, officers, directors,
trustees and agents thereof (collectively referred to throughout this Agreement
as "Employer") and Edward D. Breen, his heirs, executors, administrators,
successors and assigns (collectively referred to throughout this Agreement as
"Employee") agree:
1. LAST DAY OF EMPLOYMENT. Employee's last day of employment with Employer
is DATE. In addition, effective as of DATE, Employee resigns from his position
as Chairman, President and Chief Executive Officer of Tyco International Ltd.
and will not be eligible for any benefits or compensation after DATE, other than
as specifically provided in Sections 5 and 8 of the employment agreement between
Tyco International Ltd. and Employee dated as of July 25, 2002 (the "Employment
Agreement"), subject to the Employee's executing, delivering and not revoking
Appendix 1 hereto. Employee further acknowledges and agrees that, after DATE, he
will not represent himself as being a director, employee, officer, trustee,
agent or representative of the Employer for any purpose and will not make any
public statements relating to the Employer, other than general statements
relating to his position, title or experience with the Employer, subject to the
confidentiality provision under Section 11(a) of the Employment Agreement and in
no event will the Employee make any statements as an agent or representative of
the Employer. In addition, effective as of DATE, Employee resigns from all
offices, directorships, trusteeships, committee memberships and fiduciary
capacities held with, or on behalf of, the Employer or any benefit plans of the
Employer. These resignations will become irrevocable as set forth in Section 3
below.
2. CONSIDERATION. The parties acknowledge that this Agreement and General
Release is being executed in accordance with Section 9 of the Employment
Agreement.
3. REVOCATION. Employee may revoke this Agreement and General Release for a
period of seven (7) calendar days following the day he executes this Agreement
and General Release. Any revocation within this period must be submitted, in
writing, to Tyco and state, "I hereby revoke my acceptance of our Agreement and
General Release." The revocation must be personally delivered to SENIOR VICE
PRESIDENT OF HUMAN RESOURCES' NAME, or her designee, or mailed to Tyco, One Tyco
Park, Exeter, New Hampshire, 03833 and postmarked within seven (7) calendar days
of execution of this Agreement and General Release. This Agreement and General
Release shall not become effective or enforceable until the revocation period
has expired. If the last day of the revocation period is a Saturday, Sunday, or
legal holiday in New York, then the revocation period shall not expire until the
next following day which is not a Saturday, Sunday, or legal holiday.
4. GENERAL RELEASE OF CLAIM. Employee knowingly and voluntarily releases
and forever discharges Employer from any and all claims, causes of action,
demands, fees and liabilities of any kind whatsoever, whether known and unknown,
against Employer, Employee has, has ever had or may have as of the date of
execution of this Agreement and General Release, including, but not limited to,
any alleged violation of:
- The National Labor Relations Act, as amended;
- Title VII of the Civil Rights Act of 1964, as amended;
- The Civil Rights Act of 1991;
- Sections 1981 through 1988 of Title 42 of the United States Code, as
amended;
- The Employee Retirement Income Security Act of 1974, as amended;
- The Immigration Reform and Control Act, as amended;
- The Americans with Disabilities Act of 1990, as amended;
<Page>
- The Age Discrimination in Employment Act of 1967, as amended;
- The Older Workers Benefit Protection Act of 1990;
- The Worker Adjustment and Retraining Notification Act, as amended;
- The Occupational Safety and Health Act, as amended;
- The Family and Medical Leave Act of 1993;
- The STATE Civil Rights Act, as amended;
- The STATE Minimum Wage Law, as amended;
- Equal Pay Law for STATE, as amended;
- Any other federal, state or local civil or human rights law or any other
local, state or federal law, regulation or ordinance;
- Any public policy, contract, tort, or common law; or
- Any allegation for costs, fees, or other expenses including attorneys'
fees incurred in these matters.
Notwithstanding anything herein to the contrary, the sole matters to which
the Agreement and General Release do not apply are: (i) the Employee's rights of
indemnification and directors and officers liability insurance coverage to which
he was entitled immediately prior to DATE with regard to his service as an
officer of the Employer (including, without limitation, under Sections 19 and 20
of the Employment Agreement); (ii) the Employee's rights under any tax-qualified
pension or claims for accrued vested benefits under any other employee benefit
plan, policy or arrangement maintained by the Employer or under COBRA;
(iii) the Employee's rights under the provisions of the Employment Agreement
which are intended to survive termination of employment; or (iv) the Employee's
rights as a stockholder.
5. NO CLAIMS PERMITTED. Employee waives his right to file any charge or
complaint against Employer arising out of his employment with or separation from
Employer before any federal, state or local court or any state or local
administrative agency, except where such waivers are prohibited by law. This
Agreement, however, does not prevent Employee from filing a charge with the
Equal Employment Opportunity Commission, any other federal government agency,
and/or any government agency concerning claims of discrimination, although
Employee waives his right to recover any damages or other relief in any claim or
suit brought by or through the Equal Employment Opportunity Commission or any
other state or local agency on behalf of Employee under the Age Discrimination
in Employment Act, Title VII of the Civil Rights Act of 1964 as amended, the
Americans with Disabilities Act, or any other federal or state discrimination
law, except where such waivers are prohibited by law.
6. AFFIRMATIONS. Employee affirms he has not filed, has not caused to be
filed, and is not presently a party to, any claim, complaint, or action against
Employer in any forum or form. Employee further affirms that he has been paid
and/or has received all compensation, wages, bonuses, commissions, and/or
benefits to which he may be entitled and no other compensation, wages, bonuses,
commissions and/or benefits are due to him, except as provided in Sections 5 and
8 of the Employment Agreement. Employee also affirms he has no known workplace
injuries.
7. CONFIDENTIALITY; COOPERATION; RETURN OF PROPERTY. Employee agrees not to
disclose any information regarding the circumstances surrounding the cessation
of his employment, or the existence, terms, or conditions of this Agreement and
General Release, to any person or entity whatsoever, including without
limitation, any members of the media (including, but not limited to, print
journalists, newspapers, radio, television, cable, satellite programs, or
Internet media) or any Internet web page or "chat room," or any other entity or
person, with the exception of Employee's spouse, accountant, tax
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advisor, and/or attorneys. Notwithstanding the aforementioned provision, nothing
herein shall preclude Employee from divulging any information to any agency of
the federal, state, or local government pursuant to an official request by such
government agency or pursuant to court order (provided that the Executive
provides the Employer with prior notice of the contemplated disclosure and
reasonably cooperates with the Employer at its expense in seeking a protective
order or other appropriate protection of such information). Employee agrees to
reasonably cooperate with the Employer and its counsel in connection with any
investigation, administrative proceeding or litigation relating to any matter
that occurred during his employment in which he was involved or of which he has
knowledge. The Employer will reimburse the Employee for any reasonable
pre-approved out-of-pocket travel, delivery or similar expenses incurred in
providing such service to the Employer. Employee represents that he has returned
to the Employer all property belonging to the Employer, including but not
limited to any leased vehicle, laptop, cell phone, keys, access cards, phone
cards and credit cards.
8. GOVERNING LAW AND INTERPRETATION. This Agreement and General Release
shall be governed and conformed in accordance with the laws of the State of New
York without regard to its conflict of laws provision. In the event Employee or
Employer breaches any provision of this Agreement and General Release, Employee
and Employer affirm either may institute an action to specifically enforce any
term or terms of this Agreement and General Release. Should any provision of
this Agreement and General Release be declared illegal or unenforceable by any
court of competent jurisdiction and should the provision be incapable of being
modified to be enforceable, such provision shall immediately become null and
void, leaving the remainder of this Agreement and General Release in full force
and effect. Nothing herein, however, shall operate to void or nullify any
general release language contained in the Agreement and General Release.
9. NONADMISSION OF WRONGDOING. Employee agrees neither this Agreement and
General Release nor the furnishing of the consideration for this Release shall
be deemed or construed at any time for any purpose as an admission by Employer
of any liability or unlawful conduct of any kind.
10. AMENDMENT. This Agreement and General Release may not be modified,
altered or changed except upon express written consent of both parties wherein
specific reference is made to this Agreement and General Release.
11. ENTIRE AGREEMENT. This Agreement and General Release sets forth the
entire agreement between the parties hereto and fully supersedes any prior
agreements or understandings between the parties; provided, however, that
notwithstanding anything in this Agreement and General Release, the provisions
in the Employment Agreement which are intended to survive termination of the
Employment Agreement, including but not limited to those contained in
Section 11 thereof, shall survive and continue in full force and effect.
Employee acknowledges he has not relied on any representations, promises, or
agreements of any kind made to him in connection with his decision to accept
this Agreement and General Release.
EMPLOYEE HAS BEEN ADVISED THAT HE HAS UP TO TWENTY-ONE (21) CALENDAR DAYS TO
REVIEW THIS AGREEMENT AND GENERAL RELEASE AND HAS BEEN ADVISED IN WRITING TO
CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF THIS AGREEMENT AND GENERAL
RELEASE.
EMPLOYEE AGREES ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS
AGREEMENT AND GENERAL RELEASE DO NOT RESTART OR AFFECT IN ANY MANNER THE
ORIGINAL TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD.
HAVING ELECTED TO EXECUTE THIS AGREEMENT AND GENERAL RELEASE, TO FULFILL THE
PROMISES SET FORTH HEREIN, AND TO RECEIVE THE SUMS AND BENEFITS IN SET FORTH IN
THE EMPLOYMENT AGREEMENT, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE
CONSIDERATION, ENTERS INTO THIS AGREEMENT AND GENERAL RELEASE INTENDING TO
WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST EMPLOYER.
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IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed
this Agreement and General Release as of the date set forth below:
<Table>
<S> <C> <C>
Tyco International Ltd.
------------------------------------------- By: -----------------------------------------
EDWARD D. BREEN SENIOR VICE PRESIDENT OF
HUMAN RESOURCES' NAME
</Table>
<Table>
<S> <C> <C> <C>
Date: Date:
-------------------------------------- --------------------------------------
</Table>
B-4
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MR. EDWARD D. BREEN
Re: Agreement and General Release
Dear Ed:
This letter confirms that on DATE, I personally sent to you the enclosed
Agreement and General Release. You have until DATE to consider this Agreement
and General Release, in which you waive important rights, including those under
the Age Discrimination in Employment Act of 1967. To this end, we advise you to
consult with an attorney of your choosing prior to executing this Agreement and
General Release.
Regards,
SENIOR VICE PRESIDENT OF
HUMAN RESOURCES' NAME
Tyco International Ltd.
B-5
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APPENDIX 1
SENIOR VICE PRESIDENT OF
HUMAN RESOURCES' NAME
Tyco International Ltd.
Re: Agreement and General Release
Dear NAME,
On [date] I executed an Agreement and General Release between
Tyco International Ltd. and me. I was advised by Tyco International Ltd., in
writing, to consult with an attorney of my choosing, prior to executing this
Agreement and General Release.
More than seven (7) calendar days have expired since I executed the
above-mentioned Agreement and General Release. I have at no time revoked my
acceptance or execution of that Agreement and General Release and hereby
reaffirm my acceptance of it. Therefore, in accordance with the terms of our
Agreement and General Release, I request payment of the monies and benefits
described in Sections 5 and 8 of the Employment Agreement.
Regards,
Signed: ______________________________
EDWARD D. BREEN
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EXHIBIT C
GROSS-UP PROVISIONS
(a) Anything in this Agreement to the contrary notwithstanding, in the event
it shall be determined that the Executive shall become entitled to payments
and/or benefits provided by this Agreement or any other amounts in the "nature
of compensation" (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company or any affiliate, any person
whose actions result in a change of ownership or effective control of the
Company covered by Section 280G(b)(2) of the Code or any person affiliated with
the Company or such person) as a result of such change in ownership or effective
control of the Company (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of paragraph (c), all determinations required
to be made under this Exhibit C, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a nationally
recognized accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. The Accounting Firm shall
be jointly selected by the Company and the Executive and shall not, during the
two years preceding the date of its selection, have acted in any way on behalf
of the Company or its affiliated companies. If the Company and the Executive
cannot agree on the firm to serve as the Accounting Firm, then the Company and
the Executive shall each select a nationally recognized accounting firm and
those two firms shall jointly select a nationally recognized accounting firm to
serve as the Accounting Firm. All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Exhibit C, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion, based upon "substantial authority" (within the
meaning of Section 6230 of the Code), that failure to report the Excise Tax on
the Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive, absent
manifest error. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to paragraph (c) hereof and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which he gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If
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the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and
(iv) permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without limitation
on the foregoing provisions of this paragraph (c), the Company shall control
all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall advance the amount of
such payment to the Executive, on an interest-free basis, and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided the Executive
shall not be required by the Company to agree to any extension of the
statute of limitations relating to the payment of taxes for the taxable year
of the Executive with respect to which such contested amount is claimed to
be due unless such extension is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to paragraph (c) hereof, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
paragraph (f) hereof and subject to the Company's complying with the
requirements of paragraph (c) hereof) promptly pay to the Company the amount of
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph (c) hereof, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
(e) If, pursuant to regulations issued under Section 280G or 4999 of the
Code, the Company and the Executive were required to make a preliminary
determination of the amount of an excess parachute payment and thereafter a
redetermination of the Excise Tax is required under the applicable regulations,
the parties shall request the Accounting Firm to make such redetermination. If
as a result of such redetermination an additional Gross-Up Payment is required,
the amount thereof shall be paid
C-2
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by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. If the redetermination of the Excise Tax
results in a reduction of the Excise Tax, the Executive shall take such steps as
the Company may reasonably direct in order to obtain a refund of the excess
Excise Tax paid. If the Company determines that any suit or proceeding is
necessary or advisable in order to obtain such refund, the provisions of
paragraph (c) hereof relating to the contesting of a claim shall apply to the
claim for such refund, including, without limitation, the provisions concerning
legal representation, cooperation by the Executive, participation by the Company
in the proceedings and indemnification by the Company. Upon receipt of any such
refund, the Executive shall (subject to paragraph (f) hereof) promptly pay the
amount of such refund to the Company. If the amount of the income taxes
otherwise payable by the Executive in respect of the year in which the Executive
makes such payment to the Company is reduced as a result of such payment, the
Executive shall, no later than the filing of his income tax return in respect of
such year, pay the amount of such tax benefit to the Company (subject to
paragraph (f) hereof). In the event there is a subsequent redetermination of the
Executive's income taxes resulting in a reduction of such tax benefit, the
Company shall, promptly after receipt of notice of such reduction, pay to the
Executive the amount of such reduction. If the Company objects to the
calculation or recalculation of the tax benefit, as described in the preceding
two sentences, the Accounting Firm shall make the final determination of the
appropriate amount. The Executive shall not be obligated to pay to the Company
the amount of any further tax benefits that may be realized by him as a result
of paying to the Company the amount of the initial tax benefit.
(f) Each provision of this Exhibit C shall be interpreted in a manner
consistent with the overall intent of this Exhibit C, which is to make the
Executive whole, on an after-tax basis, from any imposition of (or claim to
impose) the Excise Tax, it being acknowledged and understood that the reversal
of any advance made by the Company pursuant to paragraph (c) hereof, or the
correction of any other type of overpayment of a Gross-Up Payment to the
Executive by the Company, may result in the Executive paying to the Company an
amount which is less than the related advance or other overpayment by the
Company. In particular and not by way of limitation, any other provision of this
Exhibit C notwithstanding, the Executive shall not in any event be obligated, in
connection with repaying any refund as described in paragraphs (d) and
(e) hereof, to pay the Company an amount greater than the net after-tax portion
of any advance or other type of Gross-Up Payment that he has retained or has
recovered as a refund from the applicable taxing authorities; but the Executive
shall not be relieved of his obligation hereunder to recover certain amounts as
a refund or credit.
C-3
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EXHIBIT D
INDEMNIFIERS
Tyco International (US) Inc.
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EXHIBIT E
INDEMNITY COMMITMENT
August , 2002
Mr. Edward D. Breen
c/o Tyco International Ltd.
One Towne Center Road
Boca Raton, Florida 33486
Dear Ed:
Reference is made to Section 19 of the employment agreement (the
"Agreement"), dated as of July 25, 2002, between you and Tyco
International Ltd. The purpose of this letter is to confirm that Tyco
International (US) Inc. will indemnify you and hold you harmless to the fullest
extent permitted by law and under the by-laws of the company against and in
respect to any and all actions, suits, proceedings, claims, demands, judgments,
costs, expenses (including reasonable attorney's fees), losses, and damages
resulting from the good faith performance of your duties and obligations under
the Agreement.
TYCO INTERNATIONAL (US) INC.
By:___________________________________
Name:_________________________________
Title:________________________________