Severance Agreement - Tyco International Ltd. and Mark H. Swartz
MEMO SUMMARIZING MARK H. SWARTZ'S SEVERANCE ARRANGEMENT
Attached as Exhibit 10.2 is Mark H. Swartz's January 22, 2001 Retention
Agreement which, with the following modifications, was reinstated as of August
1, 2002: Section 3 of the Agreement will provide for a lump sum cash payment
equal to the annual consulting payments he would have received; the Continuing
Benefits as described in Section 3 have been modified to only include health
insurance coverage and tax gross-up for New York City and State taxes; and
Section 5(a) will provide a lump sum payment of the current value of the premium
payment the Company is obligated to make on behalf of Mr. Swartz under his
Executive Life Insurance Plan. These modifications reflect a reduction in the
benefits Mr. Swartz could claim, and at this time, Mr. Swartz has agreed to not
request payment from the Executive Retirement Arrangement.
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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.
(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
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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 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
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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 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
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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 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
Section 10 hereof, during the Consulting Period Executive shall
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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 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
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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.
(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
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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 "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
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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.
(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.
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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 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.
(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.
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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 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
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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.
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.
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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.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
<Table>
<S> <C> <C>
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
</Table>
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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.
IN WITNESS WHEREOF, the parties have executed this Amendment as of this 1st
day of August, 2001.
<Table>
<S> <C> <C>
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
</Table>
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