Retention Agreement - Tyco International Ltd. and Mark H. Swartz
RETENTION AGREEMENT
AGREEMENT by and between Tyco International Ltd., a Bermuda corporation
(the "Company") and Mark H. Swartz (the "Executive"), effective as of the
Effective Date (as hereinafter defined).
W I T N E S S E T H
WHEREAS, in recognition of Executive's significant contribution to the
creation of shareholder value during his tenure as Executive Vice President and
Chief Financial Officer of the Company, the Compensation Committee of the Board
of Directors of the Company (the "Committee") wishes to obtain his commitment to
serve as Chief Financial Officer of the Company through January 22, 2006 and his
commitment to serve after his termination of employment as a consultant to the
Company for three years, at the direction of the then Chief Executive Officer of
the Company; and
WHEREAS, the Committee has determined to offer Executive the benefits
described in this Agreement to provide an incentive to encourage Executive to
remain in the employ of the Company so that the Company may receive his
continued dedication and assure the continued availability of his advice and
counsel and to assure that he will not provide services for a competing business
in accordance with the terms hereof; and
WHEREAS, Executive has agreed to serve the Company pursuant to the
terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Company and Executive hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
(a) "Cause" means Executive's conviction of a felony that is materially
and demonstrably injurious to the Company or any of its subsidiaries or
affiliates, monetarily or otherwise. Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Cause for purposes of this
Agreement unless and until there shall have been delivered to him a copy of a
resolution, duly adopted by a vote of three-quarters (3/4) of the entire Board
of Directors of the Company (the "Board") at a meeting of the Board called and
held (after reasonable notice to Executive and an opportunity for Executive and
his counsel to be heard before the Board) for the purpose of considering
whether Executive has been convicted of a felony as justifies termination for
Cause hereunder and specifying the particulars thereof. The Company must notify
Executive of an event constituting Cause within 90 days following the Board's
knowledge of its existence or such event shall not constitute Cause under this
Agreement.
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(b) "Change in Control" means the first to occur of any of the
following events:
(1) Any "person" (as that term is used in Sections 13 and
14(d)(2) of the Securities Exchange Act of 1934 ("Exchange Act"))
becomes the beneficial owner (as that term is used in Section 13(d) of
the Exchange Act), directly or indirectly, of 30% or more of the
Company's capital stock entitled to vote in the election of directors;
(2) 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 three-quarters 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
that term is used in Sections 13 and 14(d)(2) 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;
(3) The shareholders of the Company approve any consolidation
or merger of the Company, other than a merger of the Company in which
the holders of the common stock of the Company immediately prior to the
merger hold more than 50% of the common stock of the surviving
corporation immediately after the merger;
(4) The shareholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company; or
(5) Substantially all of the assets of the Company are sold or
otherwise transferred to parties that are not within a "controlled
group of corporations" (as defined in Section 1563 of the Internal
Revenue Code of 1986, as amended (the "Code")) in which the Company is
a member.
(c) "Change in Reporting Relationship" means if Executive is required
during the Retention Period to (i) report to anyone other than the Chief
Executive Officer of the Company or (ii) report to a Chief Executive Officer who
is other than L. Dennis Kozlowski.
(d) "Company" means Tyco International Ltd., a Bermuda corporation,
and, the successor to, or transferee of all or substantially all of the assets
of, the Company.
(e) "Date of Termination" means (1) the effective date on which
Executive's employment by the Company terminates as specified in a Notice of
Termination by the Company or Executive, as the case may be, or (2) if
Executive's employment by the Company terminates by reason of death, the date of
death of Executive. Notwithstanding the previous sentence, (i) if Executive's
employment is terminated for Disability (as defined in Section 4(b)), then such
Date of Termination shall be no earlier than 30 days following the date on which
a Notice of
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Termination is received, and (ii) if Executive's employment is terminated by the
Company other than for Cause or by Executive other than for Good Reason, then
such Date of Termination shall be no earlier than 30 days following the date on
which a Notice of Termination is received.
(f) "Effective Date" means January 22, 2001.
(g) "Good Reason" means, without Executive's express written consent,
the occurrence of any of the following events:
(1) (i) the assignment to Executive of any duties or
responsibilities inconsistent in any material and adverse respect with
Executive's duties and responsibilities with the Company immediately
prior to the Effective Date (including any material and adverse
diminution of such duties or responsibilities); (ii) a material and
adverse change in Executive's titles or offices with the Company as in
effect immediately prior to the Effective Date or (iii) a Change in
Reporting Relationship described in Section 1(c)(i);
(2) a reduction by the Company in Executive's rate of annual
base salary or annual or long-term incentive compensation opportunity
as in effect immediately prior to the Effective Date or as the same may
be increased from time to time thereafter;
(3) the failure of the Company to (i) continue in effect any
employee benefit plan or compensation plan in which Executive is
participating immediately prior to the Effective Date (including the
taking of any action by the Company which would adversely affect
Executive's participation in or reduce Executive's benefits under any
such plan), unless Executive is permitted to participate in other plans
providing Executive with substantially comparable benefits, (ii)
provide Executive and Executive's dependents with welfare benefits in
accordance with the most favorable plans, practices, programs and
policies of the Company and its affiliated companies in effect for
Executive immediately prior to the Effective Date or provide
substantially comparable benefits at a substantially comparable cost to
Executive, (iii) provide fringe benefits in accordance with the most
favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect for Executive immediately prior to
the Effective Date, or provide substantially comparable fringe
benefits, or (iv) provide Executive with paid vacation in accordance
with the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for Executive
immediately prior to the Effective Date, unless the failure to provide
such paid vacation is a result of a policy uniformly applied by the
Company to its employees;
(4) the failure of the Company to obtain the assumption
agreement from any successor as contemplated in Section 14;
(5) the relocation of Executive's principal place of
employment to a location more than 25 miles from Executive's principal
place of employment immediately prior to the Effective Date or the
Company's requiring Executive to be based anywhere other than such
principal place of employment (or permitted relocation
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thereof) except for required travel on the Company's business to an
extent substantially consistent with Executive's present business
travel obligations; or
(6) the first anniversary of a Change in Reporting
Relationship described in Section 1(c)(ii) (or such shorter period as
may be permitted by the Board).
Notwithstanding the foregoing, an isolated and inadvertent action taken
in good faith and which is remedied by the Company within ten days after receipt
of notice thereof given by Executive shall not constitute Good Reason.
Notwithstanding anything to the contrary contained herein, if Executive remains
employed with the Company until January 22, 2006 and Executive and the Company
have not entered into a new agreement providing for the continued employment of
Executive by the Company, Executive's employment shall be deemed to have
terminated, effective as of January 22, 2006 and Executive shall be treated as
having terminated employment for Good Reason for purposes of Section 5 hereof.
(h) "Notice of Termination" means the written notice described in
Section 15(b).
2. RETENTION PERIOD.
(a) POSITION. Executive agrees to continue to serve as Chief Financial
Officer of the Company from the Effective Date until January 22, 2006 or, if
earlier, the Date of Termination (the "Retention Period"), on terms no less
favorable to him than his conditions of employment immediately prior to the
Effective Date.
(b) CERTAIN EQUITY COMPENSATION. In recognition of Executive's
agreement to continue in the employ of the Company and not seek employment
elsewhere, and as consideration for Executive's agreements contained in Sections
8, 9 and 10 hereof, Executive has been granted, as of the Effective Date,
500,000 restricted common shares of the Company ("Restricted Stock Award")
pursuant to the Company's 1994 Restricted Stock Ownership Plan for Key Employees
(the "Plan"). The Restricted Stock Award shall be subject to the terms of this
Agreement and the Plan. The restrictions on such shares shall lapse with respect
to all of the shares underlying the Restricted Stock Award on the fifth
anniversary date of the Effective Date conditioned on Executive's employment
with the Company on such date except as otherwise provided herein. The shares
included in the Restricted Stock Award may not be transferred by Executive until
such time as the restrictions on such shares lapse. Executive (or in the event
of death, his estate or beneficiary) may choose to sell to the Company or any of
its subsidiaries or affiliates (and the Company or a subsidiary or affiliate
shall be obligated to purchase from Executive (or in the event of death, his
estate or beneficiary)) any such shares that become fully vested and
nonforfeitable at a per share price equal to the average weighted volume share
price of the Company's shares on the New York Stock Exchange on the date
Executive (or in the event of death, his estate or beneficiary) notifies the
Company of his intention to sell such shares to the Company (which notice shall
not be effective until such time as the restrictions on such shares have
lapsed).
(c) PROVISIONS RELATING TO RESTRICTED STOCK AWARD. The Company
represents and warrants to Executive that all actions necessary to exempt the
grant of the Restricted Stock
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Award under Rule 16b-3(d) under the Securities Exchange Act of 1934, as amended,
were taken by the Company. The Company shall, at its sole expense, cause the
common shares included in the Restricted Stock Award to be registered under the
Securities Act of 1933, as amended and registered or qualified under applicable
state securities laws, so that such common shares shall be freely tradable. The
Company shall thereafter maintain the continuing effectiveness of such
registration and qualification for so long as Executive holds any of the common
shares in the Restricted Stock Award (whether or not the restrictions thereon
have lapsed), or until such earlier date as counsel to the Company, reasonably
acceptable to Executive, provides the Company a written opinion (a copy of which
shall promptly be provided to Executive) satisfactory to Executive to the effect
that all such common shares may otherwise be freely sold under United States
federal and other applicable law once the restrictions have lapsed. As soon as
practicable after the Effective Date, the Company shall, at its sole expense,
cause the common shares included in the Restricted Stock Award to be listed on
all exchanges on which the common shares are from time to time listed. The
Company shall thereafter maintain the continued listing of such common shares
for so long as Executive holds any of the Restricted Stock Award (whether or not
the restrictions thereon have lapsed).
3. CONSULTING.
Executive agrees that, following his termination of employment from the
Company (other than a termination due to Executive's death, a termination by the
Company for Cause or a termination by Executive other than for Good Reason), and
when and as requested by the Chief Executive Officer of the Company (subject to
his reasonable availability), he will provide consulting and advice to the
Company for up to 30 days per year for a period of three years from the Date of
Termination (the "Consulting Period"). During the Consulting Period Executive
shall be paid an annual consulting fee equal to 1/36th of the amount set forth
in Section 5(b)(i). Subject to the provisions of Section 11(e) hereof, during
the Consulting Period the Company shall provide Executive with all welfare and
fringe benefits provided to Executive immediately prior to the Date of
Termination, including but not limited to relocation benefits, security,
sponsorships and events, grossed-up payments for New York state and city taxes,
if applicable, health insurance coverage (including coverage for spouse (or
domestic partner) and eligible dependents), life insurance coverage and
continued access to Company facilities and services, including access to Company
aircraft, cars, office (with secretarial and administrative support), apartments
and financial planning (tax, accounting and legal) services (hereinafter, the
"Continuing Benefits"). Executive shall also continue to receive contribution
credits under the Company's Supplemental Executive Retirement Plan during the
Consulting Period and shall be eligible to participate in the Company's Deferred
Compensation Plan during such period. The Consulting Period shall end upon
Executive's death during the Consulting Period (in which case Section 5(d)
hereof shall not apply) and, in the event of Executive's death during the
Consulting Period, the Company shall continue to provide health insurance
coverage to Executive's spouse (or domestic partner) and eligible dependents,
based on the coverage that was in effect as of the date of Executive's death,
for the greater of (i) the period of time which would otherwise have remained in
the Consulting Period and (ii) 18 months from the date of Executive's death.
After such period, the Company shall cause Executive's surviving spouse (or
domestic partner) or dependents to be able to acquire from the Company such
health insurance coverage at a cost based upon the incremental cost to the
Company of providing coverage to Executive's spouse (or domestic partner) and
dependents immediately prior to his death. Subject to the provisions of
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Section 10 hereof, during the Consulting Period Executive shall be permitted to
engage in any employment, business or other activities he may choose, so long as
such activities do not unreasonably interfere with the performance of his duties
under this Section 3.
4. TERMINATION OF EMPLOYMENT.
Executive's employment hereunder may be terminated on or prior to
January 22, 2006 under the following circumstances:
(a) DEATH. Executive's employment with the Company shall
terminate upon his death.
(b) DISABILITY. If, as a result of Executive's incapacity due
to physical or mental illness, Executive shall have been absent from his duties
for the Company on a full-time basis for 180 calendar days in the aggregate in
any 12-month period, the Company may terminate Executive's employment with the
Company for Disability. Any question as to the existence of any physical or
mental illness referred to above which the Company and Executive cannot agree
shall be determined by a qualified independent physician selected by the Company
and reasonably acceptable to Executive. The determination of such a physician
made in writing to the Company and to Executive shall be final and conclusive
for purposes of this Agreement.
(c) TERMINATION BY COMPANY FOR CAUSE. Subject to the
provisions of Section 1(b) hereof and upon a Notice of Termination to Executive,
the Company may terminate Executive's employment with the Company for Cause.
(d) TERMINATION BY COMPANY WITHOUT CAUSE. Upon a Notice of
Termination to Executive, the Company may terminate Executive's employment with
the Company without Cause.
(e) TERMINATION BY EXECUTIVE. Upon a Notice of Termination to
the Company, Executive may terminate his employment with the Company for any
reason, including but not limited to Good Reason.
5. COMPENSATION UPON TERMINATION.
(a) TERMINATION GENERALLY. If Executive's employment with the
Company is terminated for any reason on or prior to January 22, 2006, the
Company shall pay or provide to Executive (or to his authorized representatives
or estate) any earned but unpaid base salary, incentive compensation earned but
not yet paid, unpaid expense reimbursements, accrued but unused vacation and any
vested benefits that Executive may have under any employee benefit plan of the
Company, including without limitation, executive compensation, insurance and
retirement plans or arrangements (the "Accrued Benefits").
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE OR UPON
EXECUTIVE'S DISABILITY OR BY EXECUTIVE FOR GOOD Reason. In the event of a
termination of Executive's employment by the Company on or prior to January 22,
2006 without Cause or upon Executive's Disability or by Executive for Good
Reason, the Company shall pay to Executive (in addition to the Accrued Benefits)
not later than ten (10) days following the Date of Termination, (i) an
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amount equal to three times the sum of (x) Executive's then current annual base
salary (without giving effect to any reductions thereof following the Effective
Date) plus (y) the highest annual proxy cash bonus earned by Executive with
respect to the six fiscal years preceding the year in which the Date of
Termination occurs, and (ii) an amount equal to the product of (A) the maximum
annual bonus that Executive would have been eligible to earn under the Company's
annual bonus plan for the bonus measurement period during which the Date of
Termination occurs, and (B) a fraction, the numerator of which is the number of
days from the first day of such period through the Date of Termination and the
denominator of which is the total number of days in such measurement period,
together with a similarly pro rated bonus with respect to any applicable long
term incentive plan then in effect. Notwithstanding the preceding provisions of
this Section 5(b), Executive may elect (X) to receive the foregoing cash
payments over a three year period commencing upon the Date of Termination or (Y)
to defer the receipt of such payments in a manner consistent with the manner in
which deferrals are made under the Company's deferred compensation plan for
executives (in which case the deferred amounts shall be treated in a manner
consistent with amounts deferred under such plan, including but not limited to
accrual of interest thereon).
(c) TREATMENT OF EQUITY UPON TERMINATION. Immediately upon the
occurrence of any termination of Executive's employment with the Company on or
prior to January 22, 2006 (other than a termination by the Company for Cause or
a termination by Executive without Good Reason), (i) any remaining restrictions
on the Restricted Stock Award granted under Section 2(b) shall immediately lapse
and all shares underlying the Restricted Stock Award shall become fully vested
and nonforfeitable, (ii) all outstanding options to acquire common shares of the
Company held by Executive shall become immediately exercisable and shall remain
outstanding for their full terms notwithstanding the termination of Executive's
employment and (iii) all other shares of common stock of the Company held by
Executive that are subject to risk of forfeiture shall become fully vested and
nonforfeitable.
(d) DEATH. If Executive's employment is terminated by reason
of his death on or prior to January 22, 2006, the Company shall pay Executive's
estate the Accrued Benefits. In the event Executive is survived by a surviving
spouse (or domestic partner) or eligible dependents who are provided health
benefits by the Company or any of its affiliates at the time of his death, such
surviving spouse (or domestic partner) and eligible dependents shall be provided
with health benefits, based on a health plan of the Company or any of its
affiliates made available to Executive immediately prior to the date of death,
for a three-year period following his death and in the case of the dependents,
until such dependents cease to be eligible because of attained ages, if earlier.
After such period, the Company shall cause Executive's surviving spouse (or
domestic partner) or dependents to be able to acquire from the Company such
health insurance coverage at a cost based upon the incremental cost to the
Company of providing coverage to Executive's spouse and dependents immediately
prior to his death.
(e) TERMINATION BY COMPANY WITH CAUSE OR BY EXECUTIVE WITHOUT
GOOD REASON. If Executive's employment is terminated on or prior to January 22,
2006 by the Company with Cause under Section 4(c) or by Executive without Good
Reason under Section 4(e), the Company shall have no further obligation to
Executive other than for the Accrued Benefits.
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(f) BENEFITS FOLLOWING CONSULTING PERIOD. For a period of
three years following the end of the Consulting Period, the Company shall
provide Executive with the Continuing Benefits. At the end of the three-year
period, Executive may acquire from the Company life and health insurance
coverage and any of the other Continuing Benefits at a cost based upon the
incremental cost to the Company of providing such benefits to Executive
immediately prior to the termination of the Consulting Period. In the event of
Executive's death during the three-year period following the end of the
Consulting Period, if Executive is survived by a surviving spouse (or domestic
partner) or eligible dependents who are provided health benefits by the Company
or any of its affiliates at the time of Executive's death, such surviving spouse
(or domestic partner) and eligible dependents shall be provided with such health
benefits under a health plan of the Company or any of its affiliates for the
remainder of the three-year period and in the case of the dependents, until such
dependents cease to be eligible because of attained ages, if earlier. After such
period, the Company shall cause Executive's surviving spouse (or domestic
partner) or dependents to be able to acquire from the Company such health
insurance coverage at a cost based upon the incremental cost to the Company of
providing coverage to Executive's spouse and dependents immediately prior to his
death.
6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) GROSS-UP PAYMENT. If it shall be determined that any
payment or distribution of any type to or in respect of Executive, by the
Company or any other person, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the "Total
Payments"), is or will be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code") or any interest or
penalties are incurred by Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are collectively referred to
as the "Excise Tax"), then Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by Executive
of all taxes (including any interest or penalties imposed with respect to such
taxes) imposed upon the Gross-Up Payment, Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments.
(b) DETERMINATION BY ACCOUNTANT.
(1) All computations and determinations relevant to
this Section shall be made by a national accounting firm selected by
the Company from among the five (5) largest accounting firms in the
United States (the "Accounting Firm"), and reasonably acceptable to
Executive, which firm may be the Company's accountants. All fees and
expenses of the Accounting Firm shall be borne solely by the Company.
Such determinations shall include whether any of the Total Payments are
"parachute payments" (within the meaning of Section 280G of the Code).
In making the initial determination hereunder as to whether a Gross-Up
Payment is required, the Accounting Firm shall be required to determine
that no Gross-Up Payment is required if, but only if, the Accounting
Firm (A) concludes that (i) there has not occurred a change in the
ownership or effective control of the Company or a change in the
ownership of a substantial portion of the assets of the Company (as
such terms are defined in Section 280G of the Code) or (ii) no portion
of the Total Payments constitutes "parachute payments" (within the
meaning of said Section 280G), in either case on the basis of
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"substantial authority" (within the meaning of Section 6230 of the
Code), and (B) provides an opinion to that effect to both the Company
and Executive, including the reasons therefor and an opinion that
Executive has substantial authority not to report any Excise Tax on his
federal income tax return. If the Accounting Firm determines that a
Gross-Up Payment is required, the Accounting Firm shall provide its
determination (the "Determination"), together with detailed supporting
calculations regarding the amount of any Gross-Up Payment and any other
relevant matter both to the Company and Executive by no later than ten
(10) days following the Date of Termination, or such earlier time as is
requested by the Company or Executive (if Executive reasonably believes
that any of the Total Payments may be subject to the Excise Tax).
(2) If a Gross-Up Payment is determined to be
payable, it shall be paid to Executive within 20 days after the
Determination is delivered to the Company by the Accounting Firm. Any
determination by the Accounting Firm shall be binding upon the Company
and Executive, absent manifest error. Notwithstanding the foregoing, a
Gross-up Payment shall be made as soon as practicable following a
determination by the Internal Revenue Service that any portion of the
Total Payments is subject to the Excise Tax.
(3) As a result of 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
not made by the Company should have been made ("Underpayment"), or that
Gross-Up Payments will have been made by the Company which should not
have been made ("Overpayments"). In either such event, the Accounting
Firm shall determine the amount of the Underpayment or Overpayment that
has occurred. In the case of an Underpayment, the amount of such
Underpayment (together with any interest and penalties payable by
Executive as a result of such Underpayment) shall be promptly paid by
the Company to or for the benefit of Executive.
(4) In the case of any Overpayment, Executive shall,
at the direction and expense of the Company, take such steps as are
reasonably necessary (including the filing of returns and claims for
refund), follow reasonable instructions from, and procedures
established by, the Company, and otherwise reasonably cooperate with
the Company to correct such Overpayment, provided, however, that (i)
Executive shall not in any event be obligated to return to the Company
an amount greater than the net after-tax portion of the Overpayment
that he has retained or has recovered as a refund from the applicable
taxing authorities and (ii) this provision and all other provisions in
this Agreement shall be interpreted in a manner consistent with the
intent of this Section, which is to make Executive whole, on an
after-tax basis, from the application of the Excise Taxes, it being
acknowledged and understood that the correction of an Overpayment may
result in Executive repaying to the Company an amount which is less
than the Overpayment.
(5) Executive shall notify the Company in writing of
any claim by the Internal Revenue Service relating to the possible
application of the Excise Tax under Section 4999 of the Code to any of
the payments and amounts referred to herein and shall afford the
Company, at its expense, the opportunity to control the defense of such
claims.
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(6) Executive shall cooperate with any reasonable
requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax and
shall be reimbursed by the Company, on an after-tax basis, for all
costs, expenses, interest and penalties incurred by Executive in
connection with any such contest or dispute.
7. WITHHOLDING TAXES.
The Company may withhold from all payments due to Executive (or his
beneficiary or estate) hereunder all taxes which, by applicable federal, state,
local or other law, the Company is required to withhold therefrom.
8. CONFIDENTIAL INFORMATION.
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 Executive's assigned duties and for the benefit of the Company,
either during the period of 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 Executive during 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 Executive; (ii) becomes known
to the public subsequent to disclosure to Executive through no wrongful act of
Executive or any representative of Executive; or (iii) Executive is required to
disclose by applicable law, regulation or legal process (provided that 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, Executive's obligation to
maintain such disclosed information in confidence shall not terminate where only
portions of the information are in the public domain.
9. NON-SOLICITATION AGREEMENT.
During Executive's employment with the Company and continuing for the
three-year period following the Date of Termination, 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 (a) 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 (b) 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.
10. NONCOMPETITION AGREEMENT.
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
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result in irreparable harm to the Company. Accordingly, during Executive's
employment hereunder, and continuing for the three-year period following the
Date of Termination, Executive agrees that 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 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 10 shall not
prevent 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 Executive from rendering services to charitable
organizations, as such term is defined in Section 501(c) of the Code.
11. ACKNOWLEDGEMENTS RESPECTING RESTRICTIVE COVENANTS.
(a) NO ADEQUATE REMEDY AT LAW. Executive acknowledges that it
is impossible to measure in money the damages that will accrue to the Company in
the event that Executive breaches any of the restrictive covenants and that any
such damages, in any event, would be inadequate and insufficient. Therefore, if
Executive breaches any restrictive covenant, the Company and any of its
subsidiaries or affiliates shall be entitled to an injunction restraining
Executive from violating such restrictive covenant. If the Company or any of its
subsidiaries or affiliates shall institute any action or proceeding to enforce a
restrictive covenant, Executive hereby waives, and agrees not to assert in any
such action or proceeding, the claim or defense that the Company or any of its
respective subsidiaries or affiliates have an adequate remedy at law.
(b) INJUNCTIVE RELIEF NOT EXCLUSIVE REMEDY. In the event of a
breach of any of the restrictive covenants, Executive agrees that, in addition
to any injunctive relief as described in Section 11(b), the Company shall be
entitled to any other appropriate legal or equitable remedy.
(c) THIS SECTION REASONABLE, FAIR AND EQUITABLE. Executive
agrees that this Section 11 is reasonable, fair and equitable in light of his
duties and responsibilities under this Agreement and the benefits to be provided
to him under this Agreement and that it is necessary to protect the legitimate
business interests of the Company and that Executive has had independent legal
advice in so concluding.
(d) CONSTRUCTION. If any of the restrictions contained in
Sections 8, 9 or 10 hereof are deemed by a court of competent jurisdiction to be
unenforceable by reason of their extent, duration or geographical scope or
otherwise, Executive and Company contemplate that the court shall revise such
extent, duration, geographical scope or other provision but only to the extent
required in order to render such restrictions enforceable, and enforce any such
restriction in its revised form for all purposes in the manner contemplated
hereby.
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(e) CHANGE IN CONTROL. The parties hereto agree that the
restrictive covenants contained in Sections 9, 10 and 12 of this Agreement shall
be null and void and shall not be enforceable against Executive following any
termination of Executive's employment on or after a Change in Control of the
Company. Notwithstanding anything to the contrary contained herein, in the event
that Executive's employment with the Company is terminated following a Change in
Control, each Continuing Benefit shall be provided to him at a level no less
favorable that provided to him immediately prior to the Change in Control.
12. NONDISPARAGEMENT.
Each of 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 12.
13. INDEMNIFICATION.
To the fullest extent permitted by law, the Company shall indemnify
Executive (including the advancement of expenses) for any judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees,
incurred by Executive in connection with the defense of any lawsuit or other
claim to which he is made a party by reason of being an officer, director,
employee or consultant of the Company or any of its subsidiaries or affiliates.
For at least three years following Executive's ceasing to be employed by or a
consultant for the Company, the Company shall make every reasonable effort to
maintain customary director and officer liability insurance covering Executive
for acts and omissions prior to Executive's ceasing to be employed by, or a
consultant to, the Company. The provisions of this Section 13 shall survive the
termination of this Agreement.
14. SUCCESSORS; BINDING AGREEMENT.
(a) The provisions of this Agreement shall be binding upon the
surviving or resulting corporation in any merger, consolidation,
recapitalization or similar corporate transaction or the person or entity to
which all or substantially all of the Company's assets are transferred.
(b) In addition to any obligations imposed by law upon any
successor to the Company, the Company shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company 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.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable
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to Executive hereunder had Executive continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to such person or persons appointed in writing by Executive to receive
such amounts or, if no person is so appointed, to Executive's estate.
15. NOTICE.
(a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five days after deposit in the
United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to Executive:
To the most recent address set forth in the personnel records of the Company;
If to the Company:
Tyco International Ltd.
The Zurich Centre
Second Floor
90 Pitts Bay Road
Pembroke, HM08, Bermuda
Attention: Corporate Secretary
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.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the Date of Termination. Except as provided in
Section 1(b) hereof, the failure by Executive or the Company to set forth in
such notice any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of Executive or the Company hereunder
or preclude Executive or the Company from asserting such fact or circumstance in
enforcing Executive's or the Company's rights hereunder.
16. FULL SETTLEMENT.
The Company's obligation to make any payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against Executive or others. In no event
shall Executive be obligated to seek other employment or take other action by
way of mitigation of the amounts payable to Executive under any of the
provisions of this Agreement, and such amounts shall not be reduced whether or
not Executive obtains other employment.
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17. GOVERNING LAW; VALIDITY.
The validity, interpretation, and enforcement of this Agreement shall
be governed by the laws of the State of New York. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
18. ARBITRATION; LEGAL FEES.
Any dispute or controversy under this Agreement shall be settled
exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitration award in any court having jurisdiction. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 18 (including, without limitation, all reasonable legal
fees incurred by Executive in connection with such arbitration). Promptly
following the execution of this Agreement, the Company shall reimburse Executive
for all legal fees and expenses incurred by Executive in negotiating and
entering into this Agreement.
19. STATUS POST-EMPLOYMENT.
During the Consulting Period, Executive shall be an independent
contractor under this Agreement, and, except as otherwise provided herein, no
provision of, or action under, this Agreement shall affect in any way
Executive's rights under any Company compensation, employee benefit and welfare
plans, programs or practices, including, without limitation, Company executive
compensation, insurance and retirement plans or arrangements.
20. AMENDMENT.
No provision of this Agreement may be amended, waived or discharged
except by the mutual written agreement of the parties.
21. COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 22nd day of January, 2001.
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THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
EXECUTIVE TYCO INTERNATIONAL LTD.
/s/ Mark H. Swartz By: /s/ Philip M. Hampton
----------------------------------- ---------------------------
Mark H. Swartz Philip M. Hampton, Director
By: /s/ Stephen W. Foss
---------------------------
Stephen W. Foss, Director
By: /s/ James S. Pasman
---------------------------
James S. Pasman, Director
By: /s/ W. Peter Slusser
---------------------------
W. Peter Slusser, Director
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AMENDMENT TO RETENTION AGREEMENT
A. The Retention Agreement dated January 22, 2001 by and between Tyco
International Ltd., a Bermuda corporation, and Mark H. Swartz is hereby amended
as follows:
1. By deleting clause (y) of Section 5(b)(i) and substituting
therefor the following new clause (y):
"(y) the highest annual bonus (including cash, shares and
other forms of consideration) earned by Executive with respect
to the six fiscal years preceding the year in which the Date
of Termination occurs; and"
2. By deleting the first three sentences of Section 2(b) and
substituting the following:
"In recognition of Executive's agreement to continue in the
employ of the Company and not seek employment elsewhere, and
as consideration for Executive's agreements contained in
Sections 8, 9 and 10 hereof, Executive will be granted, as of
January 22, 2002, 500,000 restricted common shares of the
Company (`Restricted Stock Award') pursuant to the Company's
1994 Restricted Stock Ownership Plan for Key Employees (the
`Plan'). The Restricted Stock Award shall be subject to the
terms of this Agreement and the Plan. The restrictions on
such shares shall lapse with respect to all of the shares
underlying the Restricted Stock Award on January 22, 2006,
conditioned on Executive's employment with the Company on
such date except as otherwise provided herein."
B. Except as otherwise amended herein, the Retention Agreement is
hereby confirmed in all other respects.
THIS AGREEMENT MAY BE EXECUTED IN COUNTERPARTS, EACH OF WHICH SHALL BE
DEEMED TO BE AN ORIGINAL AND ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE
SAME INSTRUMENT.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of this
1st day of August, 2001.
EXECUTIVE TYCO INTERNATIONAL LTD.
/s/ Mark H. Swartz
_______________________ By: /s/ Stephen W. Foss
____________________________
Mark H. Swartz Stephen W. Foss, Director
By: /s/ James S. Pasman
____________________________
James S. Pasman, Director
By: /s/ W. Peter Slusser
____________________________
W. Peter Slusser, Director
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