ADT 2011 Annual Report Download - page 70

Our executive life insurance program typically provides a death benefit equal to approximately two
times base salary, and allows the named executive officer to elect to pay additional premiums into the
plan. Our executive disability insurance program ensures salary continuation above the $15,000 monthly
benefit limit provided by our broad based disability plan. The executive long-term care insurance
program covers certain executives 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.
On January 1, 2010, Tyco ceased the practice of paying tax gross-ups for its senior executives on
life insurance and long-term disability insurance programs, as the Compensation Committee determined
that this benefit was not in line with best practices. Senior executives 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 if he is
terminated, as set forth in his employment agreement. In December 2010, the Company ceased making
premium payments for the supplemental life, disability and long-term care benefits described above for
newly hired or promoted executives.
Cash perquisite allowance plan. The cash perquisite plan provided named executive officers with a
cash payment equal to 10% of their annual base salary, up to a maximum annual benefit of $70,000, in
lieu of more traditional perquisite benefits. As noted above, the Committee discontinued this plan as of
January 2012. In connection with the discontinuance of this plan, existing officers who were receiving
the benefit at the time of termination, the Company made a one-time grant of restricted stock units
with a fair value equal to two times the annual value of the cash allowance.
Executive physicals. During fiscal 2011, the Compensation Committee instituted coverage for an
annual executive physical. Tyco strongly believes in investing in the health and well being of our
executives as an important component in providing continued effective leadership for the Company.
Use of corporate aircraft. Mr. Breen and the other senior executives may use corporate aircraft or
chartered aircraft for business travel. Mr. Breen is the only executive pre-approved to use Company
aircraft for non-business purposes, although other named executive officers may do so, by exception, if
expressly approved by Mr. Breen. There are no gross-ups paid with respect to Mr. Breen’s personal use
of aircraft.
Change in Control and Severance Benefits
We believe that our employment and severance arrangements are essential in attracting and retaining
the executive talent necessary to manage our diverse businesses, and are competitive with those provided to
executive officers at other large companies publicly traded in the U.S. Mr. Breen’s employment agreement
provides for benefits if he is terminated in connection with a change in control or under other specified
circumstances, and the information in the tables below reflects the terms of the agreement. As discussed
below, the definition of a ‘‘Good Reason’’ termination under Mr. Breen’s employment agreement includes
a change in duties that results in a significant diminution in his position, authority, duties or responsibilities.
Upon completion of the Separation, if Mr. Breen were to continue as the Company’s chief executive
officer, we believe that these provisions would apply. As a result, upon his resignation in connection with
the Separation, Mr. Breen is expected to receive severance benefits consistent with a Good Reason
termination, except that Mr. Breen has waived the acceleration of a portion of his fiscal 2012 annual equity
grant, and these awards are expected to be forfeited.
For our other named executive officers, who do not have employment agreements, the Tyco
International Severance Plan for U.S. Officers and Executives (the ‘‘Severance Plan’’) and the Tyco
International Change in Control Severance Plan for Certain U.S. Officers and Executives (the ‘‘CIC
Severance Plan’’) generally govern the benefits that accrue upon termination. As described below, a
‘‘double trigger’’ is required under the CIC Severance Plan before most benefits become available to
the executives covered by that plan.
56 2012 Proxy Statement