Executive Employment Agreement - Tyco International Ltd. and William B. Lytton
EXECUTIVE EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of September 30, 2002
(the "Effective Date") between Tyco International Ltd., a Bermuda corporation
(the "Company"), and William B. Lytton (the "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company desires to employ the Executive as Executive Vice
President and General Counsel 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 Executive Vice President and General Counsel 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 Chairman, President and Chief Executive
Officer of the Company (the "CEO") shall designate that are consistent with the
Executive's position as Executive Vice President and General Counsel. The
Executive shall report to the CEO.
(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 CEO, 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 CEO, 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 CEO. 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 Executive further agrees to serve without additional
compensation as an officer and/or 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 second 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 $650,000, 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 CEO and may be increased, but not decreased, from time to time by
the Company. 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 thirty days after the Effective Date, the
Company shall pay the Executive a one-time lump sum cash payment in the amount
of US $250,000 (the "Sign-On Bonus").
(b) ANNUAL BONUS. During the Employment Term, 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.
(c) FISCAL YEAR 2003 BONUS. The Executive shall be entitled to receive
a minimum cash bonus, pursuant to Section 4(b) 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 at least 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 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 315,000
shares of the Company's common stock (the "Common Stock"). The exercise price
shall be equal to $13.75 per share. Subject to accelerated vesting as
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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 73,000 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
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credited to the Executive (whether vested or unvested) as of such date.
Any fractional shares shall be paid in cash.
(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 350,000 shares of Common Stock (the "2002/2003 Option"). The
exercise price shall be equal to $13.75 per share. Subject to accelerated
vesting as set forth in this Agreement, the 2002/2003 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 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.
(d) 2002/2003 DEFERRED STOCK UNITS. The Board or the Committee shall
award the Executive as of the Effective Date 77,000 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 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.
(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 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, all then outstanding unvested equity awards granted
pursuant to Sections 5(a), 5(b), 5(c) and 5(d) above shall be fully vested and
any Company stock option then held by the Executive shall remain exercisable for
three years following his termination of employment, 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 and programs of the Company including, but not
limited to, equity, pension, thrift, profit sharing, medical coverage, group
life insurance, 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
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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.
(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 62 and termination of
employment in the form of a single-life annuity (or optional form of
benefit provided below) equal to 6.25% multiplied by the number
(expressed in whole numbers and fractions) of completed and partial
years of service after the Effective Date times the Executive's Final
Average Earnings (as defined below), which product shall be 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, (B) benefits from any defined benefit pension plans
(whether or not tax-qualified) maintained (or formerly maintained) by
the Executive's immediately preceding employer, with such offset
starting at zero and growing 1/8th per completed year of service since
the Effective Date until it becomes a full offset on the eighth
anniversary of the Effective Date and (C) benefits attributable to
employer contributions, including, without limitation, 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 (1) actual account balances under such
defined contribution plans if paid on or after commencement of the
supplemental retirement benefit hereunder, or (2) theoretical annual
earnings after September 30, 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 September 30, 2002 for 2002, if paid or commenced to
be paid prior to the commencement of such supplemental retirement
benefit. For purposes of determining the offset in the immediately
preceding sentence, the benefits described in (A), (B) and (C) above
shall be converted into the form of a single-life annuity payable at
the later of age 62 and termination of employment.
(ii) 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).
(iii) 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).
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(iv) In the event of the Executive's termination prior to age
62, 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 62. The benefit will be paid to the
Executive for his 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) or this
subsection (b)(iv) in any form of an annuity that is actuarially
equivalent to such benefit, including without limitation, any joint and
survivor annuity or term certain and life annuity or, if the Executive
elects in the calendar year prior to his termination of employment (and
at least 6 months prior to such termination), an actuarially equivalent
lump sum payment which is cost neutral to the Company.
(v) 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, elected to receive and commenced receiving benefits in the form
of a joint and 50% spousal survivor's annuity and then died.
(vi) 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 (iii) and (iv) 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 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.
(vii) "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.
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(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 AND FRINGE BENEFITS. The Company shall provide to the
Executive, at the Company's cost, all perquisites and fringe benefits which
other senior executives of the Company who report directly to the CEO are
generally entitled to receive, including without limitation, an automobile in
accordance with the Company's automobile policy applicable to senior executives.
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. If the Company and the Executive agree that the
Executive will relocate to the vicinity of the Company's principal U.S.
headquarters, then the Executive shall be entitled to relocation benefits in a
manner consistent with the Company's relocation policy and such additions
thereto as mutually agreed to by the Executive and the CEO, including purchase
of his current residence at the appraised value (based on the average of three
independent appraisals) by a relocation company in accordance with its standard
procedures and a relocation allowance in an amount equal to one month's Base
Salary. The Executive's right to have his current residence purchased as
described in the preceding sentence shall be effective until September 1, 2004.
If the Executive waives in writing his right to have his current residence
purchased as described above, and the Executive purchases a residence in the
vicinity of New York City or in the vicinity of the Company's principal U.S.
headquarters, the Company will reimburse the Executive for the closing costs
relating to such purchase and for the moving expenses related to occupying such
residence in accordance with the Company's relocation policy. 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
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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.
(h) FINANCIAL COUNSELING AND TAX PREPARATION. The Company shall
reimburse executive for personal financial counseling and tax preparation fees
and expenses with a provider selected by the Executive, up to a maximum of US$
20,000 per year.
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 this 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 this subsection (B) and specifying the
particulars thereof in detail, and (2) Executive shall have
been provided an opportunity to be heard in
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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, 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 outside
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),
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authority, duties or responsibilities as contemplated by this
Agreement, or any other action by the Company which, in the reasonable
judgment of the Executive, would cause him to violate his ethical or
professional obligations (after written notice of such judgment has
been provided by the Executive to the Board's audit committee and the
Company has been given a 15 day period within which to cure such
action), or 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) any breach of the Company's representations set forth in
Section 23 hereof which has a material adverse impact on the Company or
(vi) any termination by the Executive during the 30-day period
immediately following the fifteen-month 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).
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.
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(c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON. If the Executive's
employment is 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,
in addition to the acceleration provisions of Section 5(g), 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) two; (iv) two additional years of service for purposes of calculating his
Supplemental Retirement Benefit under Section 6(b) above, and (v) 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").
(e) TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL. If the
Executive's employment is terminated in connection with or following the
occurrence of a Change in Control (as defined in Exhibit A hereto), in addition
to the acceleration provisions of Section 6(b)(iv), (i) the Company shall pay or
provide the Executive with (A) Accrued Amounts and (B) a cash lump sum payment
in an amount equal to the product of (1) the sum of (a) the then Base Salary and
(b) the then target annual bonus or, if higher, the most recent annual bonus
payment multiplied by (2) three, (ii) the Executive shall be credited with three
additional years of service for purposes of calculating his Supplemental
Retirement Benefit under Section 6(b) above, and (iii) all of the Executive's
then outstanding equity awards shall be fully vested and any stock option then
held by the Executive shall remain exercisable for the remainder of its stated
term.
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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 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,
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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 minimus) 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) NONDISPARAGEMENT. 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) 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.
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(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 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:
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
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Attention: Chief Executive Officer
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.
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
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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 results of operations, financial
position and cash flows 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 from entering into this Agreement or performing all of
his obligations hereunder.
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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.
TYCO INTERNATIONAL LTD.
By: /s/ EDWARD D. BREEN
--------------------------------------
Name: Edward D. Breen
Title: Chairman and Chief Executive Officer
WILLIAM B. LYTTON
/s/ William B. Lytton
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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.
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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 William B. Lytton, 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 Executive Vice President and General Counsel 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 September 30, 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,
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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;
- 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
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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 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
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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:
Tyco International Ltd.
By:
----------------------------------- ------------------------------------
WILLIAM B. LYTTON SENIOR VICE PRESIDENT OF
HUMAN RESOURCES' NAME
Date: Date:
------------------------------ ----------------------------------
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MR. WILLIAM B. LYTTON
Re: Agreement and General Release
Dear Bill:
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-6
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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:___________________________
WILLIAM B. LYTTON
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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
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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 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
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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. Notwithstanding anything
contained in this subsection (c) to the contrary, if at the time that
the Company would otherwise advance an amount to the Executive with
direction to pay any such claim and sue for a refund, the Executive is
an executive officer of the Company and such advancement would be
prohibited under applicable law, then the Company shall contest the
claim in lieu of directing the Executive to pay such claim and sue for
a refund.
(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 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
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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.
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<PAGE>
EXHIBIT D
INDEMNIFIERS
Tyco International (US) Inc.
D-1
<PAGE>
EXHIBIT E
INDEMNITY COMMITMENT
September 30, 2002
Mr. William B. Lytton
c/o Tyco International Ltd.
One Towne Center Road
Boca Raton, Florida 33486
Dear Bill:
Reference is made to Section 19 of the employment agreement (the
"Agreement"), dated as of September 30, 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:
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Name:
--------------------------------
Title:
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E-1