Exhibit 10.2

EMPLOYEE MATTERS AGREEMENT

BY AND BETWEEN

COVIDIEN PLC

AND

MALLINCKRODT PLC

DATED AS OF JUNE 28, 2013

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TABLE OF CONTENTS

 

ARTICLE I GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

     1   

Section 1.1

 

General Principles

     1   

Section 1.2

 

Service Credit

     2   

Section 1.3

 

Transition Services

     3   

Section 1.4

 

No Duplication or Acceleration of Benefits

     3   

Section 1.5

 

No Expansion of Participation

     3   

Section 1.6

 

Non-U.S. Regulatory Compliance

     3   

ARTICLE II DEFINITIONS

     4   

Section 2.1

 

Definitions

     4   

Section 2.2

 

Interpretation

     9   

ARTICLE III ASSIGNMENT OF EMPLOYEES

     9   

Section 3.1

 

Active Employees

     9   

Section 3.2

 

Employee Records

     10   

Section 3.3

 

Non-Solicitation

     11   

ARTICLE IV INCENTIVE COMPENSATION PLANS

     11   

Section 4.1

 

General Principles

     11   

Section 4.2

 

Treatment of Stock Options

     12   

Section 4.3

 

Restricted Units

     13   

Section 4.4

 

Performance Units

     14   

Section 4.5

 

Liabilities for Settlement of Awards

     15   

Section 4.6

 

Annual Incentive Plan Payments

     16   

Section 4.7

 

Equity Plan Approval

     16   

ARTICLE V U.S. QUALIFIED RETIREMENT PLANS

     16   

Section 5.1

 

Pension Plans

     16   

Section 5.2

 

Defined Contribution Plans

     17   

Section 5.3

 

Employee Benefit Plan Governance Structure

     18   

ARTICLE VI U.S. NON-QUALIFIED DEFERRED COMPENSATION PLANs

     19   

Section 6.1

 

Mallinckrodt Non-Qualified Deferred Compensation Plans

     19   

Section 6.2

 

Covidien Non-Qualified Deferred Compensation Plan

     19   

Section 6.3

 

Participation; Distributions

     20   

ARTICLE VII U.S. HEALTH, WELFARE AND FRINGE BENEFIT PLANS

     20   

Section 7.1

 

Health Plans

     20   

Section 7.2

 

Section 125 Plans

     20   

Section 7.3

 

Fringe Benefits

     21   

Section 7.4

 

Workers’ Compensation

     21   

Section 7.5

 

Indemnification

     21   

Section 7.6

 

Termination of Participation

     21   

ARTICLE VIII NON-U.S. EMPLOYEES

     21   

 

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ARTICLE IX GENERAL PROVISIONS

     22   

Section 9.1

 

Preservation of Rights to Amend

     22   

Section 9.2

 

Fiduciary Matters

     22   

Section 9.3

 

Entire Agreement

     22   

Section 9.4

 

Binding Effect; No Third-Party Beneficiaries; Assignment

     22   

Section 9.5

 

Amendment

     22   

Section 9.6

 

Remedies Cumulative

     23   

Section 9.7

 

Notices

     23   

Section 9.8

 

Counterparts

     23   

Section 9.9

 

Severability

     23   

Section 9.10

 

Governing Law

     23   

Section 9.11

 

Dispute Resolution

     23   

Section 9.12

 

Performance

     23   

Section 9.13

 

Construction

     24   

Section 9.14

 

Effect if Distribution Does Not Occur

     24   

 

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EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT, made and entered into effective as of June 28,
2013 (this “Agreement”), is by and between Covidien plc, an Irish public limited
company (“Covidien”), and Mallinckrodt plc, an Irish public limited company
(“Mallinckrodt”). Covidien and Mallinckrodt are also referred to in this
Agreement individually as, a “Party” and collectively, as the “Parties.”
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to them in Article II.

RECITALS

WHEREAS, Covidien has determined that it would be appropriate, desirable and in
the best interests of Covidien and its shareholders to separate the Mallinckrodt
Business from Covidien;

WHEREAS, Covidien and Mallinckrodt have entered into the Separation and
Distribution Agreement, dated June 28, 2013 (the “Separation Agreement”), in
connection with the separation of the Mallinckrodt Business from Covidien and
the Distribution of Mallinckrodt Ordinary Shares to shareholders of Covidien;

WHEREAS, the Separation Agreement also provides for the execution and delivery
of certain other agreements, including this Agreement, in order to facilitate
and provide for the separation of Mallinckrodt and its Subsidiaries from
Covidien; and

WHEREAS, in order to ensure an orderly transition under the Separation
Agreement, it will be necessary for the Parties to allocate between them certain
Assets and Liabilities with respect to certain employee compensation and benefit
plans and programs, and to address certain other employment matters.

NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth below and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 1.1 General Principles. (a) Except as otherwise provided in this
Agreement, the Separation Agreement or any Ancillary Agreement, effective as of
the Distribution Date or earlier, one or more members of the Mallinckrodt Group
(as determined by Mallinckrodt) shall assume or continue the sponsorship of, and
shall pay, perform and discharge, and no Covidien Entity shall have any
Liability with respect to or under, the following agreements, obligations and
Liabilities, and Mallinckrodt shall indemnify each Covidien Entity, and the
officers, directors, and employees of each Covidien Entity, and hold them
harmless with respect to such agreements, obligations and Liabilities:

(i) any and all wages, salaries, incentive compensation (as the same may be
modified by this Agreement), commissions, bonuses, and any other employee

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compensation or benefits payable to or on behalf of any Mallinckrodt Group
Employees after the Distribution Date, without regard to when such wages,
salaries, incentive compensation, commissions, bonuses, or other employee
compensation or benefits are or may have been earned;

(ii) any and all immigration-related, visa, work application or similar rights,
obligations and Liabilities related to any Mallinckrodt Group Employees; and

(iii) any and all Liabilities and obligations whatsoever with respect to claims
made by or with respect to any Mallinckrodt Group Employees in connection with
any employee benefit plan, program or policy not retained or assumed by any
Covidien Entity pursuant to this Agreement, the Separation Agreement or any
Ancillary Agreement, including any such Liabilities relating to actions or
omissions of or by any Mallinckrodt Entity or any officer, director, employee or
agent thereof prior to, on or after the Distribution Date.

(b) Except as otherwise provided in this Agreement, effective as of the
Effective Time, no Mallinckrodt Entity shall have any Liability for, and
Covidien shall indemnify each Mallinckrodt Entity, and the officers, directors,
and employees of each Mallinckrodt Entity, and hold them harmless with respect
to any and all Liabilities and obligations whatsoever with respect to, claims
made by or with respect to any Covidien Group Employees or Former Covidien Group
Employees in connection with any employee benefit plan, program or policy not
retained or assumed by any Mallinckrodt Entity pursuant to this Agreement,
including such Liabilities relating to actions or omissions of or by any
Covidien Entity or any officer, director, employee or agent thereof on, prior to
or after the Distribution Date.

Section 1.2 Service Credit.

(a) Service for Eligibility, Vesting, and Benefit Purposes. Except as otherwise
provided in any other provision of this Agreement, the Mallinckrodt Benefit
Plans shall, and Mallinckrodt shall cause each Mallinckrodt Entity to, recognize
each Mallinckrodt Group Employee’s and each Former Mallinckrodt Group Employee’s
full service with any Covidien Entity on or prior to the Effective Time, to the
same extent such service would be credited if it had been performed for a
Mallinckrodt Entity, for purposes of eligibility, vesting and determination of
level of benefits under any such Mallinckrodt Benefit Plan.

(b) Evidence of Prior Service. Notwithstanding anything to the contrary, but
subject to applicable Law, upon reasonable request by either Party (the
“Requesting Party”), the other Party (the “Providing Party”) will provide to the
Requesting Party copies of any records available to the Providing Party to
document the service, plan participation and membership of former Employees of
the Providing Party who are then Employees of the Requesting Party, and will
cooperate with the Requesting Party to resolve any discrepancies or obtain any
missing data for purposes of determining benefit eligibility, participation,
vesting and calculation of benefits with respect to any such Employee.

 

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(c) Accrued Time Off. Mallinckrodt shall recognize and assume all Liability for
all unused vacation, holiday, sick leave, flex days, personal days and paid-time
off and other time-off benefits with respect to Mallinckrodt Group Employees
which accrued on or prior to the Effective Time, and Mallinckrodt shall credit
each Mallinckrodt Group Employee with such accrual.

(d) Leaves of Absence. Mallinckrodt will continue to apply the appropriate leave
of absence policies applicable to inactive Mallinckrodt Group Employees who are
on an approved leave of absence as of the Effective Time. Leaves of absence
taken by Mallinckrodt Group Employees prior to the Effective Time shall be
deemed to have been taken as employees of a Mallinckrodt Entity.

Section 1.3 Transition Services. The Parties acknowledge that the Covidien Group
or the Mallinckrodt Group may provide administrative services for certain of the
other Party’s benefit plans, programs or arrangements for a transitional period
under the terms of a Transition Services Agreement. The Parties hereby agree to
enter into any agreement necessary to implement a Transition Services Agreement,
including but not limited to a business associate agreement (if required by
HIPAA or other applicable health information privacy Laws).

Section 1.4 No Duplication or Acceleration of Benefits. Notwithstanding anything
to the contrary in this Agreement, the Separation Agreement or any Ancillary
Agreement, no participant in the Mallinckrodt 401(k) Plan, Mallinckrodt Health
Plans or any other Mallinckrodt Benefit Plan shall receive benefits to the
extent that receipt of such benefits would result in duplication of benefits
provided by the corresponding Covidien Benefit Plan or any other plan, program
or arrangement sponsored or maintained by a Covidien Entity. Furthermore, unless
expressly provided for in this Agreement, the Separation Agreement or in any
Ancillary Agreement or required by applicable Law, no provision in this
Agreement shall be construed to create any right to accelerate vesting or
entitlements under any compensation or Benefit Plan, program or arrangement
sponsored or maintained by a Covidien Entity or Mallinckrodt Entity on the part
of any Employee.

Section 1.5 No Expansion of Participation. Unless otherwise expressly provided
in this Agreement, as otherwise determined or agreed to by Covidien and
Mallinckrodt, as required by applicable Law, or as explicitly set forth in a
Mallinckrodt Benefit Plan, a Mallinckrodt Group Employee shall be entitled to
participate in the Mallinckrodt Benefit Plans on the Distribution Date only to
the extent that such Mallinckrodt Group Employee was entitled to participate in
the corresponding Covidien Benefit Plan as in effect immediately prior to the
Distribution Date (to the extent such Mallinckrodt Group Employee is not
currently participating in the respective Mallinckrodt Benefit Plan immediately
prior to the Distribution Date), it being understood that this Agreement does
not expand (a) the number of Mallinckrodt Group Employees entitled to
participate in any Mallinckrodt Benefit Plan or (b) the participation rights of
Mallinckrodt Group Employees in any Mallinckrodt Benefit Plans beyond the rights
of such Mallinckrodt Group Employees under the corresponding Covidien Benefit
Plans, in each case, following the Effective Time.

Section 1.6 Non-U.S. Regulatory Compliance. Covidien shall have the authority to
adjust the treatment described in this Agreement with respect to Mallinckrodt
Group

 

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Employees who are located outside of the U.S. in order to ensure compliance with
the applicable laws or regulations of countries outside the U.S. or to preserve
the tax benefits provided under local tax law or regulation prior to the
Distribution.

ARTICLE II

DEFINITIONS

Section 2.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth in this Section 2.1:

“Adjusted Covidien Option” shall have the meaning set forth in Section 4.2.

“Adjusted Covidien PSU” shall have the meaning set forth in Section 4.4.

“Adjusted Covidien RSU” shall have the meaning set forth in Section 4.3.

“Affiliate” shall have the meaning set forth in the Separation Agreement.

“Agreement” shall mean this Employee Matters Agreement, together with all
Schedules hereto and all amendments, modifications, and changes hereto entered
into pursuant to Section 9.5.

“Ancillary Agreements” shall have the meaning set forth in the Separation
Agreement.

“Assets” shall have the meaning set forth in the Separation Agreement.

“Benefit Management Records” shall have the meaning set forth in Section 3.2(b).

“Benefit Plan” shall mean any contract, agreement, policy, practice, program,
plan, trust, commitment or arrangement providing for benefits, perquisites or
compensation of any nature from an employer to any Employee, or to any family
member, dependent, or beneficiary of any such Employee, including pension plans,
thrift plans, supplemental pension plans and welfare plans, and contracts,
agreements, policies, practices, programs, plans, trusts, commitments and
arrangements providing for terms of employment, fringe benefits, severance
benefits, change in control protections or benefits, travel and accident, life,
accidental death and dismemberment, disability and accident insurance, tuition
reimbursement, travel reimbursement, vacation, sick, personal or bereavement
days, leaves of absences and holidays; provided, however, the term “Benefit
Plan” does not include any government sponsored benefits, such as workers’
compensation, unemployment or any similar plans, programs or policies.

“COBRA” shall mean the U.S. Consolidated Omnibus Budget Reconciliation Act of
1985, as codified at Section 601 et seq. of ERISA and at Section 4980B of the
Code.

“Code” shall have the meaning set forth in the Separation Agreement.

“Covidien” shall have the meaning set forth in the preamble to this Agreement.

 

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“Covidien Adjusted Exercise Price” shall have the meaning set forth in
Section 4.2(a)(i).

“Covidien Benefit Plan” shall mean any Benefit Plan sponsored or maintained by a
Covidien Entity immediately prior to the Effective Time.

“Covidien Entity” shall mean any member of the Covidien Group.

“Covidien Equity Plan” shall mean any equity compensation plan sponsored or
maintained by Covidien immediately prior to the Distribution Date, including the
Covidien Stock and Incentive Plan, the Covidien Employee Stock Purchase Plan,
and the Covidien Savings Related Share Plan.

“Covidien 401(k) Plan” shall mean the Covidien Retirement Savings and Investment
Plan.

“Covidien Group” shall have the meaning set forth in the Separation Agreement.

“Covidien Group Employee” shall have the meaning set forth in Section 3.1(b).

“Covidien Health Plan” shall mean the Covidien Health & Welfare Benefits Plan.

“Covidien Non-qualified Plans” shall mean the Covidien Supplemental Savings and
Retirement Plan, the Covidien Supplemental Executive Retirement Plan, The
Kendall Company Senior Executive Supplemental Retirement Plan, the Batts Inc.
Supplemental Retirement and Death Benefit Agreement and the Batts Inc.
Non-qualified Deferred Compensation Plan.

“Covidien Options” shall mean exercisable and non-exercisable stock options to
purchase Covidien Ordinary Shares granted pursuant to the Covidien Stock and
Incentive Plan or a predecessor plan.

“Covidien Ordinary Shares” shall mean the ordinary shares, par value $0.20 per
share, of Covidien.

“Covidien Pension Plan” shall mean the Kendall Pension Plan.

“Covidien Post-Distribution Stock Value” shall mean the volume weighted average
per share price of Covidien Ordinary Shares trading on an ex-dividend basis on
the NYSE during Regular Trading Hours on the Distribution Date.

“Covidien Pre-Distribution Stock Value” shall mean the volume weighted average
per share price of Covidien Ordinary Shares trading “regular way with due bills”
on the NYSE during Regular Trading Hours on the Distribution Date.

“Covidien Price Ratio” shall mean the quotient obtained by dividing the Covidien
Post-Distribution Stock Value by the Covidien Pre-Distribution Stock Value,
rounded to the nearest one ten-thousandth.

 

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“Covidien PSUs” shall mean performance units granted under the Covidien Stock
and Incentive Plan or a predecessor plan.

“Covidien Retained Savings Plans” shall have the meaning set forth in
Section 5.2(b).

“Covidien RSUs” shall mean restricted units granted under the Covidien Stock and
Incentive Plan or a predecessor plan.

“Covidien Share Ratio” shall mean the quotient obtained by dividing the Covidien
Pre-Distribution Stock Value by the Covidien Post-Distribution Stock Value,
rounded to the nearest one-ten-thousandth.

“Distribution” shall have the meaning set forth in the Separation Agreement.

“Distribution Date” shall have the meaning set forth in the Separation
Agreement.

“Effective Time” shall have the meaning set forth in the Separation Agreement.

“Employee” shall mean any Covidien Group Employee, Former Covidien Group
Employee, Mallinckrodt Group Employee or Former Mallinckrodt Group Employee.

“ERISA” shall mean the U.S. Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.

“Former Covidien Group Employee” shall mean a former employee of the Covidien
Group whose employment with the Covidien Group was terminated before the
Effective Time (and who is not actively employed by the Covidien Group as of the
Effective Time).

“Former Employees” shall mean Former Covidien Group Employees and Former
Mallinckrodt Group Employees.

“Former Mallinckrodt Group Employee” shall mean a former employee of the
Mallinckrodt Business whose employment was terminated before the Effective Time
(and who is not actively employed by the Mallinckrodt Group immediately
following the Effective Time).

“Government Entity” shall mean any instrumentality, subdivision, court,
administrative agency, commission, official or other authority of any country,
state, province, prefect, municipality, locality or other government or
political subdivision thereof, or any quasi-governmental or private body
exercising any regulatory, taxing, importing or other governmental or
quasi-governmental authority.

“HIPAA” shall mean the U.S. Health Insurance Portability and Accountability Act
of 1996, as amended, and the regulations promulgated thereunder.

“IRS” shall mean the U.S. Internal Revenue Service.

 

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“Law” shall have the meaning set forth in the Separation Agreement.

“Liabilities” shall have the meaning set forth in the Separation Agreement.

“Mallinckrodt” shall have the meaning set forth in the preamble to this
Agreement.

“Mallinckrodt Annual Incentive Plan” shall have the meaning set forth in
Section 4.6.

“Mallinckrodt Benefit Plan” shall mean any Benefit Plan sponsored or maintained
by a Mallinckrodt Entity.

“Mallinckrodt Business” shall have the meaning set forth in the Separation
Agreement.

“Mallinckrodt Deferred Compensation Plans” shall have the meaning set forth in
Section 6.1(a).

“Mallinckrodt Entity” shall mean any member of the Mallinckrodt Group.

“Mallinckrodt Exercise Price” shall have the meaning set forth in
Section 4.2(b).

“Mallinckrodt 401(k) Plan” shall mean the Mallinckrodt Pharmaceuticals
Retirement Savings and Investment Plan.

“Mallinckrodt Group” shall have the meaning set forth in the Separation
Agreement.

“Mallinckrodt Group Employee” shall have the meaning set forth in
Section 3.1(a).

“Mallinckrodt Health Plan” shall mean the Mallinckrodt Pharmaceuticals Health &
Welfare Benefits Plan.

“Mallinckrodt New Equity Plan” shall mean the Mallinckrodt Pharmaceuticals Stock
and Incentive Plan adopted by Mallinckrodt prior to the Effective Time and
approved by Mallinckrodt’s shareholders, under which the Mallinckrodt
equity-based awards described in Article IV shall be issued.

“Mallinckrodt Non-qualified Plan” shall mean the Mallinckrodt Pharmaceuticals
Supplemental Savings and Retirement Plan.

“Mallinckrodt Options” shall have the meaning set forth in Section 4.2.

“Mallinckrodt Ordinary Shares” shall mean the ordinary shares, par value $0.20
per share, of Mallinckrodt.

“Mallinckrodt Pension Plans” shall have the meaning set forth in Section 5.1(a).

 

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“Mallinckrodt Price Ratio” shall mean the quotient obtained by dividing the
Mallinckrodt Stock Value by the Covidien Pre-Distribution Stock Value rounded to
the nearest one ten-thousandth.

“Mallinckrodt PRC Nationals” shall have the meaning set forth in Section 4.1(d).

“Mallinckrodt PSUs” shall have the meaning set forth in Section 4.4.

“Mallinckrodt RSUs” shall have the meaning set forth in Section 4.3.

“Mallinckrodt Savings Plans” shall have the meaning set forth in Section 5.2(a).

“Mallinckrodt Share Ratio” shall mean the quotient obtained by dividing the
Covidien Pre-Distribution Stock Value by the Mallinckrodt Stock Value, rounded
to the nearest one ten-thousandth.

“Mallinckrodt Stock Value” shall mean the volume weighted average per share
price of Mallinckrodt Ordinary Shares trading on the “when issued” market on the
NYSE during Regular Trading Hours on the Distribution Date.

“Non-Covidien Option Holders” shall mean individuals who hold Covidien Options
as of the Effective Time who are not Employees.

“NYSE” shall mean the New York Stock Exchange.

“Party” or “Parties” shall have the meaning set forth in the preamble to this
Agreement.

“Person” shall have the meaning set forth in the Separation Agreement.

“Providing Party” shall have the meaning set forth in Section 1.2(b).

“Regular Trading Hours” shall mean the period beginning at 9:30 A.M., New York
City time and ending at 4:00 P.M., New York City time.

“SAYE” shall have the meaning set forth in Section 4.1(d).

“Separation Agreement” shall have the meaning set forth in the recitals to this
Agreement.

“Subsidiary” shall have the meaning set forth in the Separation Agreement.

“Transition Services Agreement” shall have the meaning set forth in the
Separation Agreement.

“U.S.” means the United States of America.

 

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Section 2.2 Interpretation. The provisions of Section 11.15 of the Separation
Agreement are hereby incorporated by reference.

ARTICLE III

ASSIGNMENT OF EMPLOYEES

Section 3.1 Active Employees.

(a) Mallinckrodt Group Employees. Effective no later than immediately prior to
the Effective Time, the applicable Covidien Entity shall have taken such actions
as are necessary to ensure that each individual who is intended to be an
employee of the Mallinckrodt Group immediately following the Effective Time
(collectively, the “Mallinckrodt Group Employees”) is employed by a Mallinckrodt
Entity. Each of the Parties agrees to execute, and to seek to have the
applicable employees execute, such documentation, if any, as may be necessary to
reflect such assignment and/or transfer.

(b) Covidien Group Employees. Effective no later than immediately prior to the
Effective Time, the applicable Covidien Entity shall have taken such actions as
are necessary to ensure that each individual who is intended to be an employee
of the Covidien Group immediately following the Effective Time (collectively,
the “Covidien Group Employees”) is employed by a Covidien Entity. Each of the
Parties agrees to execute, and to seek to have the applicable employees execute,
such documentation, if any, as may be necessary to reflect such assignment
and/or transfer.

(c) At-Will Status. Notwithstanding the above or any other provision of this
Agreement, nothing in this Agreement shall create any obligation on the part of
any Covidien Entity or any Mallinckrodt Entity to (i) continue the employment of
any Employee or permit the return from a leave of absence for any period
following the date of this Agreement or the Distribution Date (except as
required by applicable Law) or (ii) change the employment status of any Employee
from “at-will,” to the extent such Employee is an “at-will” employee under
applicable Law.

(d) Severance. The Parties acknowledge and agree that the Distribution and the
assignment, transfer or continuation of the employment of Employees as
contemplated by this Section 3.1 shall not be deemed an involuntary termination
of employment entitling any Mallinckrodt Group Employee or Covidien Group
Employee to severance payments or benefits.

(e) Not a Change of Control/Change in Control. The Parties acknowledge and agree
that neither the consummation of the Distribution nor any transaction in
connection with the Distribution shall be deemed a “change of control,” “change
in control,” or term of similar import for purposes of any Benefit Plan
sponsored or maintained by any Covidien Entity or Mallinckrodt Entity.

(f) Confidentiality. The provisions of this Section 3.1 shall be in addition to,
and not in derogation of, the provisions of Article IV and Article VII of the
Separation Agreement. Except as otherwise set forth in this Agreement, all
records and data relating to Employees shall, in each case, be subject to the
confidentiality provisions of the Separation Agreement and any other applicable
agreement and applicable Law.

 

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Section 3.2 Employee Records.

(a) Sharing of Information. Subject to any limitations imposed by applicable
Law, Covidien and Mallinckrodt (acting directly or through members of the
Covidien Group or the Mallinckrodt Group, respectively) shall provide to the
other and their respective authorized agents and vendors all information
necessary for the Parties to perform their respective duties under this
Agreement. The Parties also hereby agree to enter into any business associate
arrangement that may be required for the sharing of any Information pursuant to
this Agreement to comply with the requirements of HIPAA.

(b) Transfer of Personnel Records and Authorization. Subject to any limitation
imposed by applicable Law and to the extent that it has not done so before the
Distribution Date, on the Distribution Date, Covidien shall transfer and assign
to Mallinckrodt all personnel records, all immigration documents, including I-9
forms and work authorizations, all payroll deduction authorizations and
elections, whether voluntary or mandated by Law, including but not limited to
W-4 forms, W-8BEN forms and deductions for benefits under the applicable
Mallinckrodt Benefit Plan and all absence management records, Family and Medical
Leave Act records, insurance beneficiary designations, flexible spending account
enrollment confirmations, attendance, and return to work information (“Benefit
Management Records”) relating to participants in Mallinckrodt Benefit Plans.
Subject to any limitations imposed by applicable Law, Covidien, however, may
retain originals of, copies of, or access to, personnel records, immigration
records, payroll forms and Benefit Management Records as long as necessary to
comply with its obligations under applicable Law or to provide services to
Mallinckrodt (acting on its behalf pursuant to any Transition Services Agreement
entered into by and between the Parties). Immigration records will, if and as
appropriate, become a part of Mallinckrodt’s public access file. Mallinckrodt
will use personnel records, payroll forms and Benefit Management Records for
lawful purposes only, including calculation of withholdings from wages and
personnel management. It is understood that following the Distribution Date,
Covidien records so transferred and assigned may be maintained by Mallinckrodt
(acting directly or through one of its Subsidiaries) pursuant to Mallinckrodt’s
applicable records retention policy.

(c) Access to Records. To the extent not inconsistent with this Agreement, the
Separation Agreement or any applicable privacy protection Laws or regulations,
reasonable access to Employee-related records after the Distribution Date will
be provided to members of the Covidien Group and members of the Mallinckrodt
Group pursuant to the terms and conditions of Section 7.6 of the Separation
Agreement.

(d) Maintenance of Records. With respect to retaining, destroying, transferring,
sharing, copying and permitting access to all Employee-related information,
Covidien and Mallinckrodt shall comply with all applicable Laws, regulations and
internal policies, and shall indemnify and hold harmless each other from and
against any and all Liability, claims, actions, and damages that arise from a
failure (by the indemnifying party or its Subsidiaries or their respective
agents) to so comply with all applicable Laws, regulations and internal policies
applicable to such information.

 

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(e) Cooperation. Each Party shall use commercially reasonable efforts to
cooperate and work together to unify, consolidate and share (to the extent
permissible under applicable privacy/data protection laws) all relevant
documents, Board resolutions, government filings, data, payroll, employment and
benefit plan Information on regular timetables, make certain that each
applicable entity’s data and records are correct and updated on a timely basis,
and cooperate as needed with respect to (i) any litigation with respect to any
employee benefit plan, policy or arrangement contemplated by this Agreement,
(ii) an audit of any employee benefit plan, policy or arrangement contemplated
by this Agreement by the IRS, U.S. Department of Labor or any other Government
Entity, (iii) seeking a determination letter, private letter ruling or advisory
opinion from the IRS or U.S. Department of Labor on behalf of any employee
benefit plan, policy or arrangement contemplated by this Agreement, and (iv) any
filings that are required to be made or supplemented to the IRS, U.S. Pension
Benefit Guaranty Corporation, U.S. Department of Labor or any other Government
Entity; provided, however, that requests for cooperation must be reasonable and
not interfere with daily business operations.

Section 3.3 Non-Solicitation. Each Party agrees that, for a period of two years
from the Distribution Date, such party will not solicit for employment any
employee of the other Party; provided, however, that this Section 3.3 shall not
prohibit: (a) generalized solicitations which are not directed to specific
individuals or employees of the other party (for the avoidance of doubt,
including solicitations resulting from actions initiated by employees through
the Covidien or Mallinckrodt internal posting system); (b) solicitations of
persons whose employment was involuntarily terminated by the other Party; or
(c) solicitations expressly permitted in writing by the Senior Vice President,
Human Resources of the Party which employs the person who is to be solicited.

ARTICLE IV

INCENTIVE COMPENSATION PLANS

Section 4.1 General Principles.

(a) Covidien and Mallinckrodt shall take any and all reasonable actions as shall
be necessary and appropriate to further the provisions of this Article IV,
including, to the extent practicable, providing written notice or similar
communication to each Employee who holds one or more equity awards granted under
any of the Covidien Equity Plans informing such Employee of (i) the actions
contemplated by this Article IV with respect to such awards and (ii) whether
(and during what time period) any “blackout” period shall be imposed upon
holders of awards granted under any of the Covidien Equity Plans during which
time awards may not be exercised or settled, as the case may be.

(b) Following the Distribution, a grantee who has outstanding awards under one
or more of the Covidien Equity Plans or replacement awards pursuant to this
Agreement shall be considered to have been employed by Covidien or Mallinckrodt,
as applicable, before and after the Distribution for purposes of vesting. For
purposes of the equity awards and except as otherwise provided in Section 4.1(d)
below, the Distribution shall not result in a termination of employment or
service for any Employee, rather the date of termination of employment or
service with the applicable plan sponsor following the Distribution shall be the
termination date for the purposes of any outstanding equity awards.

 

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(c) No award described in this Article IV, whether outstanding or to be issued,
adjusted, substituted or cancelled by reason of or in connection with the
Distribution, shall be adjusted, settled, cancelled, or exercisable, until in
the judgment of the administrator of the applicable plan or program such action
is consistent with all applicable Laws, including U.S. securities Laws. Neither
the period of exercisability nor the term of any award will be extended on
account of a period during which such an award is not exercisable pursuant to
the preceding sentence.

(d) Notwithstanding anything to the contrary in this Agreement, Covidien Options
which are intended to be “approved options” and that were issued pursuant to the
Covidien Stock and Incentive Plan HMRC Approved Sub-Plan for the United Kingdom
and options to purchase Covidien Ordinary Shares which were offered by
invitation pursuant to the Covidien Savings Related Share Plan (“SAYE”) will not
be adjusted as described below and any Covidien Options, Covidien PSUs or
Covidien RSUs held by a Mallinckrodt Group Employee who is a resident of the
People’s Republic of China (“Mallinckrodt PRC Nationals”) will not be adjusted
as described below. Notwithstanding the provisions of Section 4.1(b), the
Distribution shall be treated as a termination of employment from a Covidien
Entity for Mallinckrodt PRC Nationals and any Mallinckrodt Group Employee in the
United Kingdom who hold options to purchase Covidien Ordinary Shares through the
SAYE. The applicable terms and conditions of equity awards held by Mallinckrodt
PRC Nationals and the terms of the SAYE shall govern the vesting and
exercisability of the applicable awards upon the Distribution.

(e) The adjustment or conversion of Covidien Options, Covidien PSUs, Covidien
RSUs, Mallinckrodt Options, Mallinckrodt RSUs and Mallinckrodt PSUs shall be
effectuated in a manner that is intended to avoid the imposition of any penalty
or other taxes on the holders thereof pursuant to Code Section 409A.

Section 4.2 Treatment of Stock Options.

(a) Covidien Options Held by Covidien Group Employees; Former Employees;
Non-Covidien Option Holders. Except as otherwise provided in Section 4.1(d),
each Covidien Option that is outstanding as of the Effective Time that is held
by a Covidien Group Employee, a Former Employee or a Non-Covidien Option Holder
shall remain an option to purchase Covidien Ordinary Shares and shall be
adjusted as described below to reflect the Distribution (each such option, an
“Adjusted Covidien Option”). Each Adjusted Covidien Option shall be subject to
the same terms and conditions after the Effective Time as the terms and
conditions applicable to the corresponding Covidien Option immediately prior to
the Effective Time; provided, however, that from and after the Effective Time:

(i) the per-share exercise price of each such Adjusted Covidien Option shall be
equal to the product of (i) the per-share exercise price of the corresponding
Covidien Option immediately prior to the Effective Time multiplied by (ii) the
Covidien Price Ratio, rounded up to the nearest whole cent (the “Covidien
Adjusted Exercise Price”); and

 

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(ii) the number of Covidien Ordinary Shares subject to each such Adjusted
Covidien Option shall be equal to the product of (i) the number of Covidien
Ordinary Shares subject to the corresponding Covidien Option immediately prior
to the Effective Time multiplied by (ii) the Covidien Share Ratio, with any
fractional shares rounded down to the nearest whole share.

(b) Covidien Options Held by Mallinckrodt Group Employees. Except as otherwise
provided in Section 4.1(d), each Covidien Option that is outstanding as of the
Effective Time that is held by a Mallinckrodt Group Employee who continues to be
employed by the Mallinckrodt Group immediately after the Distribution shall be
converted into an option to purchase Mallinckrodt Ordinary Shares pursuant to
the terms of the Mallinckrodt New Equity Plan and shall be adjusted as described
below to reflect the Distribution (each such option, a “Mallinckrodt Option”).
Each Mallinckrodt Option shall be subject to the same terms and conditions after
the Effective Time as the terms and conditions applicable to the corresponding
Covidien Option immediately prior to the Effective Time; provided, however, that
from and after the Effective Time:

(i) the per-share exercise price of each such Mallinckrodt Option shall be equal
to the product of (A) the per-share exercise price of the corresponding Covidien
Option immediately prior to the Effective Time multiplied by (B) the
Mallinckrodt Price Ratio, rounded up to the nearest whole cent (the
“Mallinckrodt Exercise Price”); and

(ii) the number of Mallinckrodt Ordinary Shares subject to each such
Mallinckrodt Option shall be equal to the product of (A) the number of Covidien
Ordinary Shares subject to the corresponding Covidien Option immediately prior
to the Effective Time multiplied by (B) the Mallinckrodt Share Ratio, with any
fractional share rounded down to the nearest whole share.

Section 4.3 Restricted Units.

(a) Each award of Covidien RSUs held by a Covidien Group Employee or Former
Employee immediately prior to the Effective Time shall be adjusted, effective as
of the Effective Time, by multiplying the number of Covidien Ordinary Shares
subject to such Covidien RSU award by the Covidien Share Ratio, which product
shall be rounded down to the nearest whole number of units with a cash payment
for any fractional units to be made as soon as administratively practicable
after the Effective Time but in any event no later than September 1, 2013 (each
such adjusted Covidien RSU, an “Adjusted Covidien RSU”); provided, however, that
for any Covidien Group Employee who has satisfied the requirements for Normal
Retirement (as defined in the applicable terms and conditions) as of the
Effective Time, such product shall be subject to regular rounding in lieu of a
cash payment for fractional units. Each Adjusted Covidien RSU shall be subject
to the same terms and conditions after the Effective Time as the terms and
conditions applicable to the corresponding Covidien RSU immediately prior to the
Effective Time.

 

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(b) Except as otherwise provided in Section 4.1(d), each award of Covidien RSUs
held by a Mallinckrodt Group Employee immediately prior to the Effective Time
who continues to be employed by the Mallinckrodt Group immediately after the
Distribution shall be converted to a restricted unit award relating to a number
of Mallinckrodt Ordinary Shares (the “Mallinckrodt RSUs”) determined by
multiplying the number of Covidien Ordinary Shares subject to each Covidien RSU
award by the Mallinckrodt Share Ratio, which product shall be rounded down to
the nearest whole number of Mallinckrodt RSUs with a cash payment for any
fractional units to be made as soon as administratively practicable after the
Effective Time but in any event no later than September 1, 2013; provided,
however, that for any Mallinckrodt Group Employee who has satisfied the
requirements for Normal Retirement (as defined in the applicable terms and
conditions) as of the Effective Time, such product shall be subject to regular
rounding in lieu of a cash payment for fractional units. Except as otherwise
provided herein, each Mallinckrodt RSU shall be subject to the same terms and
conditions after the Distribution as the terms and conditions applicable to the
corresponding Covidien RSUs immediately prior to the Distribution.

Section 4.4 Performance Units.

(a) Each award of Covidien PSUs held by a Covidien Group Employee or Former
Employee shall be adjusted, effective as of the Effective Time, by multiplying
the number of Covidien Ordinary Shares subject to such Covidien PSU award by the
Covidien Share Ratio which product shall be rounded down to the nearest whole
number of units with a cash payment for any fractional units to be made as soon
as administratively practicable after the Effective Time but in any event no
later than September 1, 2013 (each such adjusted Covidien PSU, an “Adjusted
Covidien PSU”); provided, however, that for any Covidien Group Employee who has
satisfied the requirements for Normal Retirement (as defined in the applicable
terms and conditions) as of the Effective Time, such product shall be subject to
regular rounding in lieu of a cash payment for fractional units. Each Adjusted
Covidien PSU shall be subject to the same terms and conditions after the
Effective Time as the terms and conditions applicable to the corresponding
Covidien PSU immediately prior to the Effective Time, taking into account the
adjustments to the performance measures relating to Covidien PSUs granted in
fiscal years 2011 and 2012 that were approved by the Compensation Committee of
the Covidien board of directors prior to the date hereof and that will be
effective as of the Effective Time, as described below. The Covidien PSUs
granted in fiscal year 2011 will be adjusted at the Effective Time to provide
for the early conclusion of the performance cycle, resulting in such Covidien
PSUs being subject to vesting based solely upon continued service through
September 27, 2013. The 2012 Covidien PSUs granted in fiscal year 2012 will be
adjusted at the Effective Time to provide for an updated Healthcare Industry
Index (an index used for calculating total shareholder return or TSR) in order
to reflect the changes in Covidien’s peer group following the distribution of
the pharmaceuticals business.

(b) Except as otherwise provided in Section 4.1(d), each award of Covidien PSUs
held by a Mallinckrodt Group Employee immediately prior to the Effective Time
who continues to be employed by the Mallinckrodt Group immediately after the
Effective Time shall be converted to a performance unit award relating to a
number of Mallinckrodt Ordinary Shares determined by multiplying the number of
Covidien Ordinary Shares with respect to the Covidien PSU award by the
Mallinckrodt Share Ratio, which product shall be rounded down to the nearest

 

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whole number of units with a cash payment for any fractional units to be made as
soon as administratively practicable after the Effective Time but in any event
no later than September 1, 2013 (the “Mallinckrodt PSUs”); provided, however,
that for any Covidien Group Employee who has satisfied the requirements for
Normal Retirement (as defined in the applicable terms and conditions) as of the
Effective Time, such product shall be subject to regular rounding in lieu of a
cash payment for fractional units. The respective performance period for each
award of Mallinckrodt PSUs shall cease as of the Effective Time and the
performance multiplier for such award shall be determined by Covidien’s total
shareholder return throughout the performance period, as determined pursuant to
the amended terms and conditions of the applicable award. To the extent that
there is any vesting of performance units under the applicable amended terms and
conditions for Mallinckrodt PSUs, such vesting shall be subject to the
Mallinckrodt Group Employee’s continued employment through the last day of the
initial three-year performance period as in effective immediately prior to the
Effective Time. Other than with respect to the foregoing, Mallinckrodt PSUs
shall be subject to the same terms and conditions after the Distribution as the
terms and conditions applicable to the corresponding Covidien PSUs immediately
prior to the Distribution.

Section 4.5 Liabilities for Settlement of Awards.

(a) Settlement of Covidien Options. Covidien shall be responsible for all
Liabilities associated with Covidien Options (regardless of the holder of such
awards) including any option exercise, share delivery, registration or other
obligations related to the exercise of the Covidien Options. Covidien shall be
responsible for all Liabilities associated with amounts payable to Covidien
Group Employees or Mallinckrodt Group Employees who hold UK approved options or
options through the SAYE; provided, however, that Mallinckrodt shall be
responsible for paying to each Mallinckrodt Group Employee, through the payroll
of the applicable Mallinckrodt Entity, all compensatory payments attributable to
the non-conversion of UK approved options and SAYE options in connection with
the Distribution upon receipt from Covidien of a list of Mallinckrodt Group
Employees eligible to receive such compensatory payment and the amount payable
to such Mallinckrodt Group Employee, listed individually, with such amount to be
paid no later than the second regularly scheduled pay period that occurs after
Covidien provides such list and amounts. Covidien (or any Covidien Entity) shall
reimburse to Mallinckrodt (or the applicable Mallinckrodt Entity) the total
amount payable to Mallinckrodt Group Employees pursuant to the previous sentence
within sixty (60) days after receipt of an invoice from Mallinckrodt requesting
reimbursement for such payment.

(b) Settlement of Outstanding Covidien RSUs. Covidien shall be responsible for
all Liabilities associated with Covidien RSUs including any share delivery,
registration or other obligations related to the settlement of the Covidien
RSUs.

(c) Settlement of Outstanding Covidien PSUs. Covidien shall be responsible for
all Liabilities associated with Covidien PSUs, including any share delivery,
registration or other obligations related to the settlement of Covidien PSUs.

(d) Settlement of Mallinckrodt Options. Mallinckrodt shall be responsible for
all Liabilities associated with Mallinckrodt Options (regardless of the holder
of such awards) including any option exercise, share delivery, registration or
other obligations related to the exercise of the Mallinckrodt Options.

 

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(e) Settlement of Outstanding Mallinckrodt RSUs. Mallinckrodt shall be
responsible for all Liabilities associated with Mallinckrodt RSUs including any
share delivery, registration or other obligations related to the settlement of
the Mallinckrodt RSUs.

(f) Settlement of Outstanding Mallinckrodt PSUs. Mallinckrodt shall be
responsible for all Liabilities associated with Mallinckrodt PSUs, including any
share delivery, registration or other obligations related to the settlement of
Mallinckrodt PSUs.

Section 4.6 Annual Incentive Plan Payments.

(a) Not later than the Effective Time, Mallinckrodt shall, or shall cause
another Mallinckrodt Entity to, assume or adopt a plan (the “Mallinckrodt Annual
Incentive Plan”) for the fiscal year in which the Distribution occurs that will
contain terms that are identical to the terms provided to Mallinckrodt Group
Employees under the Covidien Annual Incentive Plan immediately prior to the
Effective Time, subject to Mallinckrodt’s right to amend such plan after the
Effective Time in accordance with the terms thereof.

(b) For the avoidance of doubt, (i) the Covidien Group shall be solely
responsible for funding, paying, and discharging all obligations relating to any
annual incentive bonus awards that any Covidien Group Employee is eligible to
receive under any Covidien annual incentive plan with respect to payments made
beginning at or after the Effective Time, and no Mallinckrodt Entity shall have
any obligations with respect thereto; and (ii) the Mallinckrodt Group shall be
solely responsible for funding, paying, and discharging all obligations relating
to any annual incentive bonus awards that any Mallinckrodt Group Employee is
eligible to receive under any Mallinckrodt Group annual incentive plan or other
short-term incentive compensation plan with respect to payments made at or after
the Effective Time, including, but not limited to, the Mallinckrodt Annual
Incentive Plan, and no Covidien Entity shall have any obligations with respect
thereto.

Section 4.7 Equity Plan Approval. Covidien and Mallinckrodt shall take all
actions as may be necessary or advisable to adopt and obtain shareholder
approval of any stock-based employee benefit plans of Mallinckrodt (and the
grants of adjusted awards over Covidien shares by Covidien and of awards over
Mallinckrodt shares by Mallinckrodt) in order to satisfy the requirement of Rule
16b-3 under the Exchange Act, and the applicable rules and regulations of the
NYSE.

ARTICLE V

U.S. QUALIFIED RETIREMENT PLANS

Section 5.1 Pension Plans.

(a) Mallinckrodt Pension Plans.

(i) To the extent not completed before the Effective Time, effective as of the
Distribution Date, a Mallinckrodt Entity shall assume sponsorship of and be
solely

 

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responsible for the management and administration of, and except as otherwise
provided below, be responsible for all Assets and Liabilities under the pension
plans listed in Schedule 5.1(a) (the “Mallinckrodt Pension Plans”). Mallinckrodt
and Covidien shall reasonably cooperate with each other in order to facilitate
all actions contemplated by this Section 5.1(a). Nothing contained in this
Agreement shall alter in any way the right of Mallinckrodt, subsequent to the
Distribution Date, to amend or terminate any of the Mallinckrodt Pension Plans
in accordance with its terms and applicable Law.

(ii) Effective as of the Distribution Date, a Mallinckrodt Entity shall be
solely responsible for the adjudication of any claims filed by Mallinckrodt
Group Employees or Former Mallinckrodt Group Employees under a Mallinckrodt
Pension Plan including, but not limited to, claims filed before the Distribution
Date under such plans as in effect as of the date such claim was filed, provided
that (A) the claim relates to Assets or Liabilities assumed by Mallinckrodt
under Section 5.1(a)(i); (B) the claim has not been finally adjudicated by
Covidien on the day immediately preceding the Distribution Date; and (C) under
the applicable claims procedure, the applicable Mallinckrodt Entity’s plan
administrator or other authorized person or committee will have at least a sixty
(60)-day period after the Distribution Date to respond to such claim. Covidien
shall be solely responsible for the adjudication of any claim that satisfies
subsections (A) and (B) but not (C); provided, however, that if Covidien’s
response to such claim does not finally adjudicate the claim, Covidien shall
immediately transfer administration of such claim to Mallinckrodt for final
adjudication upon sending its response to the claimant.

(b) Covidien Pension Plan. Following the Distribution Date, a Covidien Entity
shall retain sole responsibility for all benefits accrued prior to the
Distribution Date, Assets and Liabilities for the Covidien Pension Plan and
Mallinckrodt shall have no obligation with respect thereto. Nothing contained in
this Agreement shall alter in any way the right of Covidien, subsequent to the
Distribution Date, to amend or terminate the Covidien Pension Plan in accordance
with its terms and applicable Law.

(c) To the extent it is determined by mutual agreement of the Parties following
the Distribution Date that any assets relating to the Mallinckrodt Pension Plans
or the Covidien Pension Plan either (1) were not transferred to the master trust
established on behalf of the Mallinckrodt Pension Plans or Covidien Pension
Plan, respectively, by the Distribution Date or (2) were acquired after the
Distribution Date by a Party’s master trust and such assets should have been or
should be allocated to the other Party’s master trust, the Parties shall
cooperate to ensure that such assets are allocated to the appropriate Party’s
master trust as soon as practicable following such determination. The
determination of which Party’s trust shall be the appropriate trust for assets
shall be governed by ERISA and shall be made by the named fiduciaries for the
respective plans.

Section 5.2 Defined Contribution Plans.

(a) Mallinckrodt Savings Plans.

(i) To the extent not completed before the Effective Time, effective as of the
Distribution Date, a Mallinckrodt Entity shall assume sponsorship of and be
solely

 

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responsible for the management and administration of all Assets and Liabilities
under the Mallinckrodt 401(k) Plan and any other defined contribution plan in
the U.S. covering Mallinckrodt Group Employees or Former Mallinckrodt Group
Employees as of the Distribution Date and listed in Schedule 5.2(a) (the
“Mallinckrodt Savings Plans”). Nothing contained in this Agreement shall alter
in any way the right of Mallinckrodt, subsequent to the Distribution Date, to
amend or terminate the Mallinckrodt Savings Plans in accordance with its terms
and applicable Law.

(ii) Effective as of the Distribution Date, a Mallinckrodt Entity shall be
solely responsible for the adjudication of claims filed by Mallinckrodt Group
Employees or Former Mallinckrodt Group Employees under a Mallinckrodt Savings
Plan, including, but not limited to, claims filed before the Distribution Date
under such plans as in effect on the date such claim was filed provided that
(A) the claim relates to Assets or Liabilities assumed by Mallinckrodt under
this Section 5.2(a); (B) the claim has not been finally adjudicated by Covidien
on the day immediately preceding the Distribution Date; and (C) under the
applicable claims procedure, the applicable Mallinckrodt Entity’s plan
administrator or other authorized person or committee will have at least a sixty
(60)-day period after the Distribution Date to respond to such claim. Covidien
shall be solely responsible for the adjudication of any claim that satisfies
subsections (A) and (B) but not (C); provided, however, that if Covidien’s
response to such claim does not finally adjudicate the claim, Covidien shall
immediately transfer administration of such claim to Mallinckrodt for final
adjudication upon sending its response to the claimant.

(b) Covidien Retained Savings Plans. Following the Distribution Date, a Covidien
Entity shall retain sole responsibility for all benefit obligations incurred
prior to the Distribution Date and Liabilities under the Covidien 401(k) Plan
and the Covidien Retirement Savings and Investment Plan for Puerto Rico
Employees and any other defined contribution plan in the U.S. covering Covidien
Group Employees (the “Covidien Retained Savings Plans”). Nothing contained in
this Agreement shall alter in any way the right of Covidien, subsequent to the
Distribution Date, to amend or terminate a Covidien Retained Savings Plan in
accordance with its terms and applicable Law.

Section 5.3 Employee Benefit Plan Governance Structure. To the extent not
completed before the Effective Time, effective as of the Distribution Date, a
Mallinckrodt Entity shall take all such actions as are necessary to
(a) establish an employee benefit plan governance structure that includes, at a
minimum, an investment committee and administrative committee authorized to
serve as named fiduciaries of any Benefit Plan sponsored or maintained by a
Mallinckrodt Entity that is governed by ERISA; (b) appoint members of such
investment and administrative committees; and (c) establish a new trust or
trusts to hold tax-qualified retirement plan assets as required by ERISA and
applicable Law. Effective as of the Effective Time, Mallinckrodt shall assume
and shall be solely responsible for all fiduciary responsibilities pursuant to
ERISA and applicable Law that are associated with the Mallinckrodt Savings Plans
and Mallinckrodt Pension Plans.

 

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ARTICLE VI

U.S. NON-QUALIFIED DEFERRED COMPENSATION PLANS

Section 6.1 Mallinckrodt Non-Qualified Deferred Compensation Plans.

(a) To the extent not completed before the Effective Time, effective as of the
Distribution Date, a Mallinckrodt Entity shall assume sponsorship of and be
solely responsible for the management, administration and satisfaction of all
Assets and Liabilities under any non-qualified deferred compensation plan in the
U.S. maintained by Covidien or any Subsidiary of Covidien and each other Person
that is controlled directly or indirectly by Covidien (including, to the extent
applicable, any member of the Mallinckrodt Group) as of the day prior to the
Distribution Date, other than the Covidien Non-qualified Plans (the
“Mallinckrodt Deferred Compensation Plans”). This Agreement hereby authorizes
the transfer of sponsorship of any Mallinckrodt Deferred Compensation Plan that
has not been transferred to a Mallinckrodt Entity by the Distribution Date, with
Covidien authorizing the transfer of sponsorship on behalf of the applicable
Covidien Entity and Mallinckrodt authorizing the acceptance of plan sponsorship
on behalf of the applicable Mallinckrodt Entity. Nothing contained in this
Agreement shall alter in any way the right of Mallinckrodt, subsequent to the
Distribution Date, to amend or terminate a Mallinckrodt Deferred Compensation
Plan in accordance with its terms and applicable Law.

(b) All elections by Mallinckrodt Group Employees, and Former Mallinckrodt Group
Employees that were in effect immediately prior to the Distribution Date shall
continue in effect from and after the Distribution Date until a new election
that by its terms supersedes the prior election is made by such Mallinckrodt
Group Employee or Former Mallinckrodt Group Employee in accordance with the
terms of the applicable Mallinckrodt Deferred Compensation Plan and consistent
with the provisions of Code Section 409A, to the extent applicable.

(c) As of the Distribution Date, a Mallinckrodt Entity shall be solely
responsible for the adjudication of claims filed by Mallinckrodt Group Employees
or Former Mallinckrodt Group Employees under a Mallinckrodt Deferred
Compensation Plan before the Distribution Date, provided that (A) the claim
relates to Assets or Liabilities assumed by Mallinckrodt under this Section 6.1;
(B) the claim has not been finally adjudicated by Covidien as of the day
immediately preceding the Distribution Date; and (C) under the applicable claims
procedure Mallinckrodt’s plan administrator or other authorized person or
committee will have at least a sixty (60)-day period after the Distribution Date
to respond to such claim. Covidien shall be solely responsible for the
adjudication of any claim that satisfies subsections (A) and (B) but not (C);
provided, however, that if Covidien’s response to such claim does not finally
adjudicate the claim, Covidien shall immediately transfer administration of such
claim to Mallinckrodt for final adjudication upon sending its response to the
claimant.

(d) Payments to Mallinckrodt Group Employees and Former Mallinckrodt Group
Employees under a Mallinckrodt Deferred Compensation Plan shall be made by a
Mallinckrodt Entity as determined in the sole discretion of Mallinckrodt.

Section 6.2 Covidien Non-Qualified Deferred Compensation Plan. Following the
Distribution Date, Covidien shall retain sole responsibility for the
satisfaction of all Liabilities under Covidien Non-qualified Plans and all

 

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Liabilities with respect to non-qualified deferred compensation plan benefits
for Covidien Group Employees and Former Covidien Group Employees.

Section 6.3 Participation; Distributions. Covidien and Mallinckrodt acknowledge
that none of the transactions contemplated by the Separation Agreement or any
Ancillary Agreement will trigger a payment or distribution of compensation under
any of the Covidien Non-qualified Plans or Mallinckrodt Deferred Compensation
Plans for any participant and, consequently, that the payment or distribution of
any compensation to which such participant is entitled under any of the Covidien
Non-qualified Plans or Mallinckrodt Deferred Compensation Plans will occur upon
such participant’s separation from service from the Mallinckrodt Group or at
such other time as provided in the applicable Mallinckrodt Deferred Compensation
Plan or participant’s deferral election.

ARTICLE VII

U.S. HEALTH, WELFARE AND FRINGE BENEFIT PLANS

Section 7.1 Health Plans.

(a) Effective as of January 1, 2013, a Mallinckrodt Entity established or caused
to be established the Mallinckrodt Health Plan. After the Distribution Date, a
Mallinckrodt Entity shall be solely responsible for the management and
administration of the Mallinckrodt Health Plan, including compliance with COBRA
continuation coverage requirements, and solely responsible for the payment of
all employer-related costs associated with establishing, administering and
maintaining the Mallinckrodt Health Plan, and for the collection and remittance
of participant contributions and premium payments.

Except as provided below, a Mallinckrodt Entity shall be solely responsible for
the adjudication of any claims filed by a Mallinckrodt Group Employee or Former
Mallinckrodt Group Employee before the Distribution Date under the Mallinckrodt
Health Plan. Notwithstanding the previous sentence, a Covidien Entity shall be
solely responsible for the adjudication of any claims filed by a Mallinckrodt
Group Employee or Former Mallinckrodt Group Employee under the Mallinckrodt
Health Plan before the Distribution Date that (A) has not been finally
adjudicated by a Covidien Entity on the day immediately preceding the
Distribution Date; and (B) under the applicable claims procedure, the applicable
Covidien Entity’s plan administrator or other authorized person or committee
will have a less than sixty (60)-day period after the Distribution Date to
respond to such claim. Notwithstanding the previous sentence, if Covidien’s
response to such claim does not finally adjudicate the claim, Covidien shall
immediately upon sending its response to the claimant transfer administration of
such claim to Mallinckrodt for final adjudication. Any determination made or
settlements entered into by a Covidien Entity prior to the Distribution Date
with respect to claims incurred under the Mallinckrodt Health Plan by
Mallinckrodt Group Employees or Former Mallinckrodt Group Employees shall be
final and binding.

Section 7.2 Section 125 Plans. Effective as of January 1, 2013, a Mallinckrodt
Entity established or caused to be established a Mallinckrodt Section 125 Plan.
After the Distribution Date, a Mallinckrodt Entity shall be solely responsible
for the management and administration of the Mallinckrodt Section 125 Plan.

 

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Section 7.3 Fringe Benefits. Effective as of the Distribution Date and to the
extent it is not part of the Mallinckrodt Health Plan, Mallinckrodt shall be
responsible for establishing (as necessary) and maintaining its own U.S. fringe
benefit plans, policies and arrangements, including any employee assistance
program, educational assistance program, adoption assistance program and any
other fringe benefit plans, programs and arrangements. Mallinckrodt shall be
solely responsible for the management and administration of and assume financial
and administrative Liability and all related obligations and responsibilities
with respect to claims for such fringe benefits incurred by Mallinckrodt Group
Employees and Former Mallinckrodt Group Employees (but not paid by Covidien)
prior to the Distribution Date.

Section 7.4 Workers’ Compensation. With respect to claims for workers’
compensation in the U.S., (a) the Covidien Group shall be responsible for claims
in respect of Covidien Group Employees and Former Covidien Group Employees,
whether occurring prior to, on or following the Distribution Date and (b) the
Mallinckrodt Group shall be responsible for all claims in respect of
Mallinckrodt Group Employees and Former Mallinckrodt Group Employees occurring
on or following the Distribution Date. For purposes of this Section 7.4, claims
shall be deemed to be incurred upon the occurrence of the injury giving rise to
such claim.

Section 7.5 Indemnification. Mallinckrodt agrees to hold Covidien harmless with
respect to any Liabilities related to actions taken to establish any Benefit
Plans and related third party administrative agreements prior to the
Distribution Date.

Section 7.6 Termination of Participation. Except as otherwise provided under
this Agreement or in any Transition Services Agreements and to the extent that
Mallinckrodt Group Employees have not previously ceased participating in a
Covidien Benefit Plan, effective as of the Effective Time, Mallinckrodt Group
Employees shall cease participating in any Covidien Benefit Plan and shall,
thereafter, be ineligible for benefits under any Covidien Benefit Plan.

ARTICLE VIII

NON-U.S. EMPLOYEES

To the extent not completed before the Effective Time, as of the Distribution
Date, a Mallinckrodt Entity shall take such steps as are necessary or
appropriate to adopt and provide benefit plan coverage to Mallinckrodt Group
Employees working in Non-U.S. jurisdictions that is similar to the benefit plan
coverage provided by a Covidien Entity immediately prior to the date that such
Mallinckrodt Entity provides such benefit plan coverage; provided, however, that
given the limited number of Mallinckrodt Group Employees in certain
jurisdictions and the practical limitations of establishing similar benefit plan
coverage in such jurisdictions, such arrangements may be different than benefit
plan coverage provided by a Covidien Entity and may be determined by
Mallinckrodt in its sole discretion. Mallinckrodt shall indemnify Covidien for
any and all claims made by any Mallinckrodt Group Employee that relates to the
transition of employment in Non-U.S. jurisdictions in connection with the
Distribution and resulting changes to benefit plan coverage.

 

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ARTICLE IX

GENERAL PROVISIONS

Section 9.1 Preservation of Rights to Amend. The rights of each Covidien Entity
and each Mallinckrodt Entity to amend, waive, or terminate any plan,
arrangement, agreement, program, or policy referred to herein shall not be
limited in any way by this Agreement.

Section 9.2 Fiduciary Matters. Covidien and Mallinckrodt each acknowledges that
actions required to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards of conduct under ERISA or other applicable Law,
and no Party shall be deemed to be in violation of this Agreement if it fails to
comply with any provisions hereof based upon its good-faith determination (as
supported by advice from counsel experienced in such matters) that to do so
would violate such a fiduciary duty or standard. Each Party shall be responsible
for taking such actions as are deemed necessary and appropriate to comply with
its own fiduciary responsibilities and shall fully release and indemnify the
other Party for any Liabilities caused by the failure to satisfy any such
responsibility.

Section 9.3 Entire Agreement. This Agreement, together with the documents
referenced herein (including the Separation Agreement, the Ancillary Agreements
and the plans and agreements referenced herein), constitutes the entire
agreement and understanding among the Parties with respect to the subject matter
hereof and supersedes all prior written and oral and all contemporaneous oral
agreements and understandings with respect to the subject matter hereof. To the
extent any provision of this Agreement conflicts with the provisions of the
Separation Agreement, the provisions of this Agreement shall be deemed to
control with respect to the subject matter hereof.

Section 9.4 Binding Effect; No Third-Party Beneficiaries; Assignment. This
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, this Agreement is solely for the benefit of the
Parties and should not be deemed to confer upon any third parties any remedy,
claim, Liability, reimbursement, cause of action, or other right in excess of
those existing without reference to this Agreement. Nothing in this Agreement is
intended to amend any employee benefit plan or affect the applicable plan
sponsor’s right to amend or terminate any employee benefit plan pursuant to the
terms of such plan. The provisions of this Agreement are solely for the benefit
of the Parties, and no current or former Employee, officer, director, or
independent contractor or any other individual associated therewith shall be
regarded for any purpose as a third-party beneficiary of this Agreement. This
Agreement may not be assigned by any Party, except with the prior written
consent of the other Parties.

Section 9.5 Amendment. No provisions of this Agreement shall be deemed waived,
amended, supplemented or modified by any party, unless such waiver, amendment,
supplement or modification is in writing and signed by the authorized
representative of the party against whom it is sought to enforce such waiver,
amendment, supplement or modification.

 

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Section 9.6 Remedies Cumulative. All rights and remedies existing under this
Agreement or the Schedules attached hereto are cumulative to, and not exclusive
of, any rights or remedies otherwise available.

Section 9.7 Notices. Unless otherwise expressly provided herein, all notices,
claims, certificates, requests, demands and other communications hereunder shall
be made or given in accordance with the provisions of Section 11.5 of the
Separation Agreement.

Section 9.8 Counterparts. This Agreement, including the Schedules hereto and the
other documents referred to herein, may be executed in multiple counterparts,
each of which when executed shall be deemed to be an original but all of which
together shall constitute one and the same agreement.

Section 9.9 Severability. If any provision of this Agreement or any Ancillary
Agreement or the application thereof to any Person or circumstance is determined
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof or thereof, or the application of such provision to
Persons or circumstances or in jurisdictions other than those as to which it has
been held invalid or unenforceable, shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby. Upon such
determination, the parties shall negotiate in good faith in an effort to agree
upon such a suitable and equitable provision to effect the original intent of
the parties.

Section 9.10 Governing Law. The construction, interpretation and performance of
this Agreement shall be governed and construed according to the laws of the
State of New York, without regard to conflicts of laws principles (other than
Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of
New York).

Section 9.11 Dispute Resolution. The dispute resolution procedures set forth in
Article VIII of the Separation Agreement shall apply to any dispute, controversy
or claim (whether sounding in contract, tort or otherwise) that arises out of or
relates to this Agreement, any breach or alleged breach hereof, the transactions
contemplated hereby (including all actions taken in furtherance of the
transactions contemplated hereby on or prior to the date hereof), or the
construction, interpretation, enforceability, or validity hereof.

Section 9.12 Performance. Covidien will cause to be performed, and hereby
guarantees the performance of, all actions, agreements and obligations set forth
in this Agreement to be performed by any member of the Covidien Group.
Mallinckrodt will cause to be performed, and hereby guarantees the performance
of, all actions, agreements and obligations set forth in this Agreement to be
performed by any member of the Mallinckrodt Group. Each party (including its
permitted successors and assigns) further agrees that it will (a) give timely
notice of the terms, conditions and continuing obligations contained in this
Section 9.12 to all of the other members of its Group, and (b) cause all of the
other members of its Group not to take any action or fail to take any such
action inconsistent with such party’s obligations under this Agreement or the
transactions contemplated hereby.

 

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Section 9.13 Construction. This Agreement shall be construed as if jointly
drafted by the Parties and no rule of construction or strict interpretation
shall be applied against any Party.

Section 9.14 Effect if Distribution Does Not Occur. Notwithstanding anything in
this Agreement to the contrary, if the Separation Agreement is terminated prior
to the Effective Time, this Agreement shall be of no further force and effect.

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in
their names by a duly authorized officer as of the date first written above.

 

COVIDIEN PLC By:  

/s/ John W. Kapples

  Name: John W. Kapples   Title: Vice President and Secretary MALLINCKRODT PLC
By:  

/s/ Matthew K. Harbaugh

  Name: Matthew K. Harbaugh   Title: Director

[Signature Page to Employee Matters Agreement]

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Schedule 5.1(a)

LIST OF MALLINCKRODT PENSION PLANS

Mallinckrodt Inc. Retirement Plan

Mallinckrodt Inc. Cash Balance Pension Plan

Mallinckrodt St. Louis Union Pension Plan

Mallinckrodt Greenville Union Pension Plan

Liebel-Flarsheim Salaried Pension Plan

Liebel-Flarsheim Union Pension Plan

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Schedule 5.2(a)

LIST OF MALLINCKRODT SAVINGS PLANS

Mallinckrodt Pharmaceuticals Savings and Investment Plan

CNS Therapeutics 401(k) Savings Plan