ADT 2005 Annual Report Download - page 49

are paid by Tyco beginning on the date elected by the participant, which must be either after
termination of employment or at least five years after the participant enters the plan. Payment is in
cash, and may be in a single lump sum or annual installments over a period up to 15 years, per the
participant’s election. Upon the participant’s death or disability, all remaining amounts are paid to the
beneficiary in a single lump sum.
Employment, Retention and Severance Agreements
Tyco has entered into employment agreements with Messrs. Breen, Lytton and FitzPatrick and
Tyco has entered into a retention agreement with Mr. Meelia. Tyco Electronics Logistics AG, a
subsidiary of the Company, has entered into an employment agreement with Dr. Gromer. Mr. Lynch
does not have an employment agreement, but is a participant in the Tyco International (US) Inc.
Severance Plan for U.S. Officers and Executives and the Tyco International (US) Inc. Change in
Control Severance Plan for Certain U.S. Officers and Executives.
Employment Agreement with Edward D. Breen
Our employment agreement with Mr. Breen is dated as of July 25, 2002 and is filed as an exhibit
to our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002. The agreement
provides for Mr. Breen to serve as our President, Chief Executive Officer and Chairman for an initial
term of three years and, thereafter, for additional successive terms of one year each unless terminated
by us or Mr. Breen at the end of the initial term or any additional term. Under the agreement,
Mr. Breen is entitled to an annual base salary of at least $1,500,000 and is eligible to earn an annual
bonus of at least 100% of his base salary, subject to Tyco’s satisfaction of pre-established, objective
financial performance criteria to be determined by the Board. Mr. Breen also received a sign-on bonus
of $3,500,000, a guaranteed pro-rated annual bonus for fiscal 2002 based upon his base salary and a
guaranteed annual bonus for fiscal 2003 of at least 100% of his base salary.
Under the agreement, Mr. Breen received a sign-on option to purchase 3,350,000 common shares
of Tyco at an exercise price of $10 per share and a sign-on grant of 350,000 deferred stock units, both
of which vest in three equal annual installments over the first three anniversaries of the agreement, as
well as an option to purchase 4,000,000 common shares of Tyco at an exercise price of $10 per share
and a grant of 1,000,000 deferred stock units, both of which vest in five equal annual installments over
the first five anniversaries of the agreement. The agreement provides the following terms for the
foregoing awards: (i) all awards are subject to the terms and conditions of the long-term incentive plan;
(ii) upon a change in control of Tyco, all of the awards vest in full and are exercisable for their full
term and the 1,350,000 deferred stock units granted upon hire become immediately payable; (iii) upon
termination of Mr. Breen’s employment due to death or disability, all of the awards fully vest and
options remain exercisable for one year; and (iv) upon termination of Mr. Breen’s employment by us
for reasons other than cause or disability, or upon termination by Mr. Breen with good reason, all
awards vest in full and the options remain exercisable for the remainder of their term notwithstanding
the termination of employment, and the 1,350,000 deferred stock units granted upon hire become
immediately payable. Cause, disability, change in control and good reason are each defined in the
agreement.
Mr. Breen is also entitled to participate in all of our employee benefit plans available to senior
executives at a level commensurate with his position, and to have premium payments made with respect
to a term life insurance policy with a death benefit of at least $1,000,000 and accidental death and
dismemberment insurance of at least $2,000,000, supplemental retirement benefits (as described under
the ‘‘Retirement Plans’’ section above), certain tax gross-up payments, including a gross-up for
relocation expenses, a gross-up for New York City or New York State taxes incurred due to temporary
assignment or the performance of his duties and a full gross-up payment for any excise taxes he must
pay as a result of receiving compensation that is contingent upon a change in control, and certain
relocation, travel and other perquisites.
2006 Proxy Statement 31