ADT 2005 Annual Report Download - page 50

In the event that Mr. Breen’s employment is terminated by us other than for cause or by
Mr. Breen for good reason, then, provided that Mr. Breen executes a general release in favor of Tyco
in the form provided in the agreement, Tyco is obligated to pay Mr. Breen a lump sum of three times
his base salary and target annual bonus (or, if higher, his most recent annual bonus), as well as a pro
rata portion of any annual bonus for the year in which such termination occurs, and to offer him
continued participation in our health and welfare plans for a period of three years. If we are unable to
continue him in our plans, we are required to reimburse the amount Mr. Breen pays for individual
coverage, up to two times the amount we would have paid to provide the benefits if Mr. Breen had
been an employee, with a tax gross-up on the amount of such reimbursement. ‘‘Good reason’’ includes
any termination by the executive during the 30-day period immediately following the first anniversary of
the date of a change in control or the breach of the following representation made by us if such breach
has a material adverse impact on Tyco. Tyco has represented in Mr. Breen’s employment agreement
that, as of the effective date of the agreement, all financial statements for each quarter and fiscal year
since October 1, 1999 fairly present in all material respects Tyco’s financial position in conformity with
generally accepted accounting principles as of the applicable reporting dates, except as reported in the
notes to those financial statements. The agreement restricts Mr. Breen from soliciting Tyco’s managerial
employees and customers or competing with Tyco during the term of his employment and for a period
of one year following termination. Both Tyco and Tyco International (US) Inc. have agreed, pursuant to
the agreement, to indemnify Mr. Breen to the fullest extent permitted by law and under Tyco’s
Bye-laws.
Employment Agreement with William B. Lytton
Our employment agreement with Mr. Lytton is dated as of September 30, 2002 and is filed as an
exhibit to our Annual Report on Form 10-K for the fiscal year ended September 30, 2002. On
September 30, 2004, the agreement was amended to make several administrative changes. A copy of
the amendment is filed as an exhibit to our Annual Report on Form 10-K for the fiscal year ended
September 30, 2004. The agreement provides for Mr. Lytton to serve as our Executive Vice President
and General Counsel for an initial term of two years and, thereafter, for additional successive terms of
one year each unless terminated by us or Mr. Lytton at the end of the initial term or any additional
term. Under the agreement, as amended, Mr. Lytton is entitled to an annual base salary of at least
$675,000. He also received a sign-on bonus of $250,000 and a guaranteed annual bonus for fiscal 2003
of at least 100% of his base salary. Thereafter, Mr. Lytton 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.
Under the agreement, Mr. Lytton received a sign-on option to purchase 315,000 common shares of
Tyco at an exercise price of $13.75 per share and a sign-on grant of 73,000 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 350,000 common shares of Tyco at an exercise price of $13.75 per share and a
grant of 77,000 deferred stock units, both of which vest in three equal annual installments over the first
three anniversaries of the agreement. All of the awards vest in full in the event of the termination of
Mr. Lytton’s employment due to death or disability, by us other than for cause or disability or by
Mr. Lytton for good reason (each as defined therein). Mr. Lytton 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 receive supplemental retirement benefits and certain relocation, travel and tax gross-up benefits. He
also receives an annual allowance of $67,500 under our Flexible Perquisite Plan for U.S. Executives,
payable quarterly, to be used to cover items not otherwise covered under our benefit programs or
expense reimbursement policies.
In the event that Mr. Lytton’s employment is terminated by us other than for cause or by
Mr. Lytton for good reason, then, provided that Mr. Lytton executes a general release in favor of Tyco
in the form provided in the agreement, Tyco is obligated to pay Mr. Lytton a lump sum of two times
32 2006 Proxy Statement