ADT 2008 Annual Report Download - page 55

Other Supplemental Insurance Benefits
These programs provide life insurance, long-term disability insurance and long-term care insurance
to certain Senior Officers. Our executive life insurance program typically provides a death benefit equal
to approximately two times base salary, and allows the Senior Officer to elect to pay additional
premiums into the plan. Our executive disability insurance program ensures salary continuation above
the $15,000 monthly benefit provided by our broad-based disability plan. The executive long-term care
insurance program covers certain Senior Officers and their spouses in the event of chronic illness or
disability. Under the program, Tyco pays the long-term care premium for 10 years, after which the
insurance is fully paid. If the executive leaves prior to the end of the 10-year payment period, he or she
has the option to continue making the premium payments to maintain the coverage.
In connection with the life insurance and long-term disability insurance programs, Tyco also
provides tax gross-ups for the Senior Officers on the imputed income attributable to these plans. In
addition, our Senior Officers can elect to continue to receive supplemental insurance benefits at their
expense when they leave the Company. In limited instances, Tyco is responsible for paying the
Company’s cost of the supplemental insurances for Mr. Breen in connection with his termination, as set
forth in his employment agreement.
Cash Perquisite Allowance Plan
Our cash perquisite allowance plan, implemented in 2003, replaced our prior executive perquisite
programs. Those programs had provided a number of benefits to our executives (including company
cars, club dues and tax preparation services) that were costly and administratively burdensome. The
current plan provides our Senior Officers with a cash payment equal to 10% of their annual base
salary, up to a maximum annual benefit of $70,000. Senior Officers receive their cash perquisite
allowance in four quarterly installments. We do not restrict the types of expenses to which the
allowance can be applied. There are no gross-ups paid with respect to this benefit.
Use of Corporate Aircraft
Mr. Breen and the other Senior Officers are permitted to use corporate aircraft or chartered
aircraft for business travel. Mr. Breen is the only executive currently pre-approved to use Company
aircraft for non-business purposes, although other named executive officers may do so, by exception, if
expressly approved by the Board or Mr. Breen.
Tax Deductibility of Executive Compensation
Section 162(m) of the Internal Revenue Code imposes a limit of $1.0 million on the amount of
compensation that can be deducted by Tyco with respect to each named executive officer (other than
Mr. Coughlin, our chief financial officer). This limitation does not apply to compensation that qualifies
as ‘‘performance-based’’ under federal tax law. It is our policy to structure compensation arrangements
with our executive officers to qualify as performance-based so that compensation payments are
deductible under U.S. federal tax law, unless the benefit of such deductibility is outweighed by the need
for flexibility or the attainment of other corporate objectives. Non-deductible forms of compensation
include payments in connection with the recruitment and retention of key employees, base salary in
excess of $1.0 million, discretionary bonus payments and grants of time-based RSUs. In addition, stock
options granted to Mr. Breen when he was hired in July 2002 may not qualify for deduction under
Section 162(m).
Change-in-Control and Severance Benefits
We believe that our severance arrangements are competitive with those provided to executive
officers at other large publicly traded U.S. companies. Mr. Breen’s employment agreement provides for
38 2009 Proxy Statement