ADT 2006 Annual Report Download - page 41

full term and 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 Tyco 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 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 universal 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.
In the event that Mr. Breen’s employment is terminated by Tyco other than for cause or disability
or upon termination 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 Mr. Breen is unable to continue participating in Tyco’s health and welfare 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 representations made by Tyco, if such breach has a material adverse impact on Tyco. 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. or its successors have agreed, pursuant to the agreement, to
indemnify Mr. Breen to the fullest extent permitted by law and under Tyco’s Bye-laws.
On January 13, 2006, Tyco announced that its Board has approved a plan to separate the Company
into three separate, publicly traded companies—Tyco Healthcare, Tyco Electronics and a combination
of Tyco Fire & Security and Engineered Products and Services. In connection with the Proposed
Separation, Mr. Breen delivered a letter to the Board waiving any and all claims that any change in
position, authority, duties or responsibilities contemplated by and directly resulting from the Proposed
Separation constitutes ‘‘Good Reason’’ under Section 7(e)(i) of the Employment Agreement or a
transfer of employment from the Company to an affiliate of the Company in connection with such
transactions constitutes a termination of employment for purposes of the Employment Agreement. The
Proposed Separation is not deemed a change in control of Tyco.
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
2007 Proxy Statement 29