ADT 2005 Annual Report Download - page 53

employment in connection with a change in control of Tyco. Upon termination of Mr. Lynch’s
employment by Tyco or a subsidiary for any reason other than cause (as defined in the plan), disability
or death, or upon resignation by Mr. Lynch within 180 days following an event that constitutes good
reason (as defined in the plan), in each case occurring within 60 days before or two years after a
change in control of Tyco, Mr. Lynch is entitled to the following under the Plan: (i) 24 months of:
(a) continued base salary, (b) target bonus, and (c) continued participation under Tyco’s medical, dental
and health care reimbursement account plans as in effect on the date of termination of employment (or
generally comparable coverage and subject to payment of premiums applicable to active employees);
(ii) pro-rated annual bonus for the year in which the termination of employment occurs; (iii) full
vesting of all stock options; (iv) continued exercisability of all stock options for the greater of the
period set forth in each option agreement covering such options, or 12 months following termination of
employment, but in no event beyond the original expiration date of the option; (v) full vesting of
time-based restricted stock and restricted stock units; (vi) full vesting of performance-based restricted
stock and restricted stock units, subject to the plan administrator’s determination that applicable
performance requirements have been or would be attained; and (vii) in Tyco’s discretion, up to
12 months of outplacement services. Cash severance benefits are paid in a single lump sum payment
following Mr. Lynch’s execution of a general release of claims. Mr. Lynch also must agree to
noncompetition, confidentiality and nonsolicitation provisions, and benefits may be cancelled or
recovered if he does not comply with those provisions or violates the release of claims. In the event
that payments to Mr. Lynch would be subject to Internal Revenue Code Section 4999 excise taxes as a
result of the change in control, Mr. Lynch’s benefits would be reduced to the maximum amount
payable without triggering excise tax liability, but only if Mr. Lynch’s after-tax benefits applying the
reduction exceed his after-tax benefits without the reduction.
Agreement and General Release with David J. FitzPatrick
Tyco entered into an Agreement and General Release with Mr. FitzPatrick on March 24, 2005,
providing for Mr. FitzPatrick’s retirement from the Company effective December 31, 2005, and
resignation from the position of Executive Vice President and Chief Financial Officer of the Company
effective March 7, 2005. The agreement is filed as an exhibit to our current Report on Form 8-K filed
on March 30, 2005. The agreement provides that from March 7, 2005 through December 31, 2005,
Mr. FitzPatrick will serve as a Special Advisor to the Chairman and Chief Executive Officer with the
same base salary and benefits as in effect for Mr. FitzPatrick as of March 7, 2005. However,
Mr. FitzPatrick’s employment will terminate before December 31, 2005 if he begins employment with
another company, provides services to another company without our consent, or fails or refuses to
perform his duties under the agreement (and does not cure such failure or refusal within five days of
written notice). Tyco may, in its sole discretion, terminate Mr. FitzPatrick’s employment on or after
September 30, 2005 without cause or earlier due to cause, and in such case his earlier date of
termination will apply in determining his right to other benefits, but his base salary will continue to be
paid through December 31, 2005.
Under the agreement, Mr. FitzPatrick is entitled to an annual bonus for fiscal 2005, calculated
under the terms of the Tyco International Ltd. 2004 Stock and Incentive Plan without discretionary
adjustment for personal performance. No annual incentive bonus will be payable to Mr. FitzPatrick for
the 2006 fiscal year. He will not receive a long-term incentive award for the 2005 or 2006 fiscal years,
and the unvested portion of his 2004 stock option grant will be forfeited on the date he terminates
employment. Mr. FitzPatrick’s 2004 restricted stock grant will vest on March 26, 2007, as if
Mr. FitzPatrick had remained employed through that date, provided that Mr. FitzPatrick complies with
all the terms of the agreement (including all of the restrictive covenants contained therein). All other
outstanding equity awards will be governed by their terms.
The agreement provides that Mr. FitzPatrick’s supplemental retirement benefit, as set forth in his
Executive Employment Agreement dated September 18, 2002, will be paid on July 1, 2006 as a lump
2006 Proxy Statement 35