Document:

Exhibit 10.1

 

TYCO INTERNATIONAL (US) INC.

 

 

CHANGE IN CONTROL SEVERANCE PLAN
FOR CERTAIN

U.S. OFFICERS AND EXECUTIVES

 

 

 

 

TABLE OF CONTENTS

 

	
   

  

 

	
  ARTICLE
  I

  	
  BACKGROUND,
  PURPOSE AND TERM OF PLAN

  
	
  Section 1.01

  	
  Purpose of the Plan

  
	
  Section 1.02

  	
  Term of the Plan

  
	
  ARTICLE II

  	
  DEFINITIONS

  
	
  Section 2.01

  	
  “Annual Bonus”

  
	
  Section 2.02

  	
  “Base Salary”

  
	
  Section 2.03

  	
  “Board”

  
	
  Section 2.04

  	
  “Cause”

  
	
  Section 2.05

  	
  “Change in
  Control”

  
	
  Section 2.06

  	
  “Change in
  Control Termination”

  
	
  Section 2.07

  	
  “COBRA”

  
	
  Section 2.08

  	
  “Code”

  
	
  Section 2.09

  	
  “Committee”

  
	
  Section 2.10

  	
  “Company”

  
	
  Section 2.11

  	
  “Effective
  Date”

  
	
  Section 2.12

  	
  “Eligible
  Employee”

  
	
  Section 2.13

  	
  “Employee”

  
	
  Section 2.14

  	
  “Employer”

  
	
  Section 2.15

  	
  “ERISA”

  
	
  Section 2.16

  	
  “Exchange Act”

  
	
  Section 2.17

  	
  “Executive
  Severance Plan”

  
	
  Section 2.18

  	
  “Good Reason
  Resignation”

  
	
  Section 2.19

  	
  “Involuntary
  Termination”

  
	
  Section 2.20

  	
  “Notice Pay”

  
	
  Section 2.21

  	
  “Officer”

  
	
  Section 2.22

  	
  “Participant”

  
	
  Section 2.23

  	
  “Permanent
  Disability”

  
	
  Section 2.24

  	
  “Plan”

  
	
  Section 2.25

  	
  “Plan
  Administrator”

  
	
  Section 2.26

  	
  “Potential
  Change in Control”

  
			

 

 

i

	
  Section 2.27

  	
  “Release”

  
	
  Section 2.28

  	
  “Segment
  President”

  
	
  Section 2.29

  	
  “Service”

  
	
  Section 2.30

  	
  “Severance
  Benefit”

  
	
  Section 2.31

  	
  “Severance
  Period”

  
	
  Section 2.32

  	
  “Subsidiary”

  
	
  Section 2.33

  	
  “Successor”

  
	
  Section 2.34

  	
  “Termination
  Date”

  
	
  Section 2.35

  	
  “Voluntary
  Resignation”

  
	
  ARTICLE
  III

  	
  PARTICIPATION
  AND ELIGIBILITY FOR BENEFITS

  
	
  Section 3.01

  	
  Participation

  
	
  Section 3.02

  	
  Conditions

  
	
  ARTICLE
  IV

  	
  DETERMINATION
  OF SEVERANCE BENEFITS

  
	
  Section 4.01

  	
  Amount of
  Severance Benefits Upon Involuntary Termination and Good Reason Resignation

  
	
  Section 4.02

  	
  Voluntary
  Resignation; Termination for Death or Permanent Disability

  
	
  Section 4.03

  	
  Termination for
  Cause

  
	
  Section 4.04

  	
  Reduction of
  Severance Benefits

  
	
  Section 4.05

  	
  Non-Duplication
  of Benefits

  
	
  ARTICLE
  V

  	
  METHOD,
  DURATION AND LIMITATION OF SEVERANCE BENEFIT PAYMENTS

  
	
  Section 5.01

  	
  Method of
  Payment

  
	
  Section 5.02

  	
  Other
  Arrangements

  
	
  Section 5.03

  	
  Termination of
  Eligibility for Benefits

  
	
  Section 5.04

  	
  Limitation on
  Benefits

  
	
  ARTICLE
  VI

  	
  CONFIDENTIALITY
  AND NON-DISPARAGEMENT

  
	
  Section 6.01

  	
  Confidential
  Information

  
	
  Section 6.02

  	
  Non-Disparagement

  
	
  Section 6.03

  	
  Reasonableness

  
	
  Section 6.04

  	
  Equitable
  Relief

  
			

 

ii

 

	
   

  	
   

  
	
   

  	
   

  
	
  Section 6.05

  	
  Survival of
  Provisions

  
	
  ARTICLE VII

  	
  THE PLAN
  ADMINISTRATOR

  
	
  Section 7.01

  	
  Authority and
  Duties

  
	
  Section 7.02

  	
  Compensation of
  the Plan Administrator

  
	
  Section 7.03

  	
  Records,
  Reporting and Disclosure

  
	
  ARTICLE
  VIII

  	
  AMENDMENT,
  TERMINATION AND DURATION

  
	
  Section 8.01

  	
  Amendment,
  Suspension and Termination

  
	
  Section 8.02

  	
  Duration

  
	
  ARTICLE
  IX

  	
  DUTIES
  OF THE COMPANY AND THE COMMITTEE

  
	
  Section 9.01

  	
  Records

  
	
  Section 9.02

  	
  Payment

  
	
  Section 9.03

  	
  Discretion

  
	
  ARTICLE X

  	
  CLAIMS PROCEDURES

  
	
  Section 10.01

  	
  Claim

  
	
  Section 10.02

  	
  Initial Claim

  
	
  Section 10.03

  	
  Appeals of
  Denied Administrative Claims

  
	
  Section 10.04

  	
  Appointment
  of the Named Appeals Fiduciary

  
	
  Section 10.05

  	
  Arbitration;
  Expenses

  
	
  ARTICLE XI

  	
  MISCELLANEOUS

  
	
  Section 11.01

  	
  Nonalienation
  of Benefits

  
	
  Section 11.02

  	
  Notices

  
	
  Section 11.03

  	
  Successors

  
	
  Section 11.04

  	
  Other
  Payments

  
	
  Section 11.05

  	
  No Mitigation

  
	
  Section 11.06

  	
  No Contract
  of Employment

  
	
  Section 11.07

  	
  Severability
  of Provisions

  
	
  Section 11.08

  	
  Heirs,
  Assigns, and Personal Representatives

  
	
  Section 11.09

  	
  Headings and
  Captions

  
	
  Section 11.10

  	
  Gender and
  Number

  
	
  Section 11.11

  	
  Unfunded Plan

  
			

 

iii

 

	
  Section 11.12

  	
  Compliance
  with Code Section 409A

  
	
  Section 11.13

  	
  Payments to Incompetent
  Persons

  
	
  Section 11.14

  	
  Lost Payees

  
	
  Section 11.15

  	
  Controlling
  Law

  
	
  SCHEDULE
  A   SEVERANCE BENEFITS

  

 

 

 

 

ARTICLE I

BACKGROUND, PURPOSE AND TERM OF PLAN

Section 1.01         Purpose
of the Plan.    The
purpose of the Plan is to provide Eligible Employees with certain compensation
and benefits as set forth in the Plan in the event the Eligible Employee’s
employment with the Company or a Subsidiary is terminated due to a Change in
Control Termination.  The Plan is not
intended to be an “employee pension benefit plan” or “pension plan” within the
meaning of Section 3(2) of ERISA. 
Rather, this Plan is intended to be a “welfare benefit plan” within the
meaning of Section 3(1) of ERISA and to meet the descriptive requirements of a
plan constituting a “severance pay plan” within the meaning of regulations
published by the Secretary of Labor at Title 29, Code of Federal Regulations,
section 2510.3-2(b).  Accordingly, the
benefits paid by the Plan are not deferred compensation and no employee shall
have a vested right to such benefits.

Section 1.02         Term
of the Plan.    The
Plan shall generally be effective as of the Effective Date, but subject to
amendment from time to time in accordance with Section 8.01.  The Plan shall continue until terminated
pursuant to Article VIII of the Plan.

 

 

ARTICLE II

DEFINITIONS

Section 2.01         “Annual Bonus”  shall mean 100% of the Participant’s target
annual bonus.

Section 2.02         “Base Salary”  shall mean the annual base salary in effect as
of the Participant’s Termination Date.

Section 2.03         “Board”  shall mean the Board of Directors of the
Company, or any successor thereto, or a committee thereof specifically
designated for purposes of making determinations hereunder.

Section 2.04         “Cause”  shall mean (i) a material violation of any
fiduciary duty owed to the Company, (ii) conviction of, or entry of
a plea of nolo contendere with respect to, a felony or misdemeanor,
(iii) dishonesty, (iv) theft, or (v) other egregious conduct, that is likely to
have a materially detrimental impact on the Company and its employees.  Whether an Eligible Employee’s termination is
as a result of Cause shall be determined in the discretion of the Plan
Administrator.

Section 2.05         “Change in Control”  shall mean any of the following events:

                                (i)            any “person” (as defined in Section
13(d) and 14(d) of the Exchange Act, excluding for this purpose, (i) the Company
or any subsidiary company (wherever incorporated) of the Company as defined by
Section 86 of the Companies Act 1981 of Bermuda, as amended or (ii) any
employee benefit plan of the Company or any such subsidiary company (or any
person or entity organized, appointed or established by the Company for or
pursuant to the terms of any such plan that acquires beneficial ownership of
voting securities of the Company), is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act) directly or indirectly of
securities of the Company representing more than 30 percent of the combined
voting power of the Company’s then outstanding securities; provided, however,
that no Change in Control will be deemed to have occurred as a result of a change
in ownership percentage resulting solely from an acquisition of securities by
the Company;

                                (ii)           persons who, as of the Effective
Date, constitute the Board (the “Incumbent Directors”) cease for any reason
(including without limitation, as a result of a tender offer, proxy contest,
merger or similar transaction) to constitute at least a majority thereof,
provided that any person becoming a Director of the Company subsequent to the
Effective Date shall be considered an Incumbent Director if such person’s
election or nomination for election was approved by a vote of at least 50
percent of the Incumbent Directors; but provided further, that any such person
whose initial assumption of office is in connection with an actual or
threatened proxy contest relating to the election of members of the Board or
other actual or threatened solicitation of proxies or consents by or on behalf
of a “person” (as defined in Section 13(d) and 14(d) of the Exchange Act) other
than the Board, including by reason of agreement intended to avoid or settle
any such actual or threatened contest or solicitation, shall not be considered
an Incumbent Director;

 

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                (iii)          consummation
of a reorganization, merger or consolidation or sale or other disposition of at
least 80 percent of the assets of the Company (a “Business Combination”), in
each case, unless, following such Business Combination, all or substantially
all of the individuals and entities who were the beneficial owners of
outstanding voting securities of the Company immediately prior to such Business
Combination beneficially own directly or indirectly more than 50 percent of the
combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors, as the case may be, of the company
resulting from such Business Combination (including, without limitation, a
company which, as a result of such transaction, owns the Company or all or
substantially all of the Company’s assets either directly or through one or
more subsidiary companies (wherever incorporated) of the Company as defined by
Section 86 of the Companies Act 1981 of Bermuda, as amended) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination, of the outstanding voting securities of the Company; or

                                (iv)           approval by the stockholders of the
Company of a complete liquidation or dissolution of the Company.

Section 2.06         “Change in Control Termination”  shall mean a Participant’s Involuntary
Termination or Good Reason Resignation that occurs during the period beginning
60 days prior to the date of a Change in Control and ending two years after the
date of such Change in Control.

Section 2.07         “COBRA”  shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.

Section 2.08         “Code”  shall mean the Internal Revenue Code of 1986,
as amended.

Section 2.09         “Committee”  shall mean the Compensation and Human
Resources Committee of the Board or such other committee appointed by the Board
to assist the Company in making determinations required under the Plan in
accordance with its terms.  The “Committee”
may delegate its authority under the Plan to an individual or another
committee.

Section 2.10         “Company”  shall mean Tyco International Ltd.  Unless it is otherwise clear from the
context, Company shall generally include participating Subsidiaries.

Section 2.11         “Effective Date”  shall mean January 1, 2005.

Section 2.12         “Eligible Employee”  shall mean an Employee who is an Officer, a
Segment President or a Corporate Vice-President who is in Career Band 1 or 2.
If there is any question as to whether an Employee is deemed an Eligible
Employee for purposes of the Plan, the Plan Administrator shall make the
determination.

Section 2.13         “Employee”  shall mean an individual employed by an
Employer as a common law employee on the United States payroll of Tyco
International Ltd. or a Subsidiary, and shall not include any person working
for the Company through a temporary service or on a leased basis or who is
hired by the Company as an independent contractor, consultant, or otherwise as
a person who is not an employee for purposes of withholding federal employment
taxes, as evidenced by payroll records or a written agreement with the
individual, regardless of 

 

3

 

any contrary governmental or judicial determination or
holding relating to such status or tax withholding.

Section 2.14         “Employer”  shall mean the Company or any Subsidiary with
respect to which this Plan has been adopted.

Section 2.15         “ERISA”  shall mean the Employee Retirement Income
Security Act of 1974, as amended, and regulations thereunder.

Section 2.16         “Exchange Act”  shall mean the Securities Exchange Act of
1934, as amended.

Section 2.17         “Executive Severance Plan”  shall mean the Tyco International (US) Inc.
Severance Plan for U.S. Officers and Executives, which plan is superseded by
this Plan in the event of any Participant’s Change in Control Termination.

Section 2.18         “Good Reason Resignation”  shall mean any retirement or termination of
employment by a Participant that is not initiated by the Company or any
Subsidiary and that is caused by any one or more of the following events which
occurs during the period beginning 60 days prior to the date of a Change in
Control and ending two years after the date of such Change in Control:

                                (1)  Without the Participant’s written consent,
the Company (a) assigns or causes to be assigned to the Participant any duties
inconsistent in any material respect with his or her position as in effect
immediately prior to the Change in Control, (b) makes or causes to be made any
material adverse change in the Participant’s position (including titles and
reporting relationships and level), authority, duties or responsibilities, or
(c) takes or causes to be taken any other action which, in the reasonable
judgment of the Participant, would cause him or her to violate his or her
ethical or professional obligations (after written notice of such judgment has
been provided by the Participant to the Committee and the Company has been
given a 15-day period within which to cure such action), or which results in a
significant diminution in such position, authority, duties or responsibilities;

                                (2)  Without the Participant’s written consent,
the Participant’s being required to relocate to a principal place of employment
more than sixty (60) miles from his or her existing principal place of
employment;

                                (3)  Without the Participant’s written consent,
the Company  (a) reduces the Participant’s
Base Salary or Annual Bonus, or  (b)
reduces the Participant’s retirement, welfare, stock incentive, perquisite and
other benefits, taken as a whole; or

                                (4)  The Company fails to obtain a satisfactory
agreement from any Successor to assume and agree to perform the Company’s
obligations to the Participant under this Plan, as contemplated in Section
11.03 herein.

provided, that if the Participant remains in employment for more than one
hundred and eighty (180) days following the occurrence of (or, if later, the
Participant’s gaining knowledge of) any event set forth above, any subsequent
retirement or termination of employment by a Participant 

 

4

 

that is not initiated by the Company or any Subsidiary
shall not constitute a Good Reason Resignation. Whether a Participant’s
termination is as a result of a Good Reason Resignation shall be determined in
the discretion of the Plan Administrator.

Section 2.19         “Involuntary Termination”  shall mean a termination of the Participant
initiated by the Company or a Subsidiary for any reason other than Cause,
Permanent Disability or death, as provided under and subject to the conditions
of Article III.

Section 2.20         “Notice Pay”  shall mean the amounts that a Participant is
eligible to receive pursuant to Article IV of the Plan.

Section 2.21         “Officer”  shall mean any individual who is an officer of
an Employer, and who is considered an officer for purposes of Rule 16a-1(f) as
promulgated under the Exchange Act immediately before the Change in Control.

Section 2.22         “Participant”  shall mean any Eligible Employee who meets the
requirements of Article III and thereby becomes eligible for salary
continuation and other benefits under the Plan.

Section 2.23         “Permanent Disability”  shall mean that an Employee has a permanent
and total incapacity from engaging in any employment for the Employer for
physical or mental reasons.  A “Permanent
Disability” shall be deemed to exist if the Employee meets the requirements for
disability benefits under the Employer’s long-term disability plan or under the
requirements for disability benefits under the Social Security law (or similar
law outside the United States, if the Employee is employed in that
jurisdiction) then in effect, or if the Employee is designated with an inactive
employment status at the end of a disability or medical leave.

Section 2.24         “Plan”  means the Tyco International (US) Inc. Change
in Control Severance Plan for Certain U.S. Officers and Executives as set forth
herein, and as the same may from time to time be amended.

Section 2.25         “Plan Administrator”  shall mean, for the period prior to a
Potential Change in Control, the individual(s) appointed by the Committee to
administer the terms of the Plan as set forth herein and if no individual is
appointed by the Committee to serve as the Plan Administrator for the Plan, the
Plan Administrator shall be the Senior Vice President — Human Resources, Tyco
International (US) Inc. (or the equivalent). 
In the event of the occurrence of a Potential Change in Control, the
Senior Vice-President, Human Resources — Tyco International (US) Inc. (or the equivalent)
shall appoint a person or entity independent of the Company and any person
operating under the Company’s control or on its behalf to serve as Plan
Administrator (and such person or entity shall be the Plan Administrator for
all purposes after such appointment), and such appointment shall take effect
and become irrevocable as of the date of said appointment (provided that such
appointment shall be revocable if a Change in Control does not occur and the
Potential Change in Control expires in accordance with Section 2.26(y)).  For periods prior to a Potential Change in
Control, the Plan Administrator may delegate all or any portion of its
authority under the Plan to any other person(s).

Section 2.26         “Potential
Change in Control” shall mean the occurrence and continuation of any of the
following: (a) any “person” (as defined in Section 13(d) and 14(d) of the
Exchange

 

5

 

Act), excluding for this purpose, (i) the Company or
any subsidiary company (wherever incorporated) of the Company as defined by Section
86 of the Companies Act 1981 of Bermuda, as amended or (ii) any employee
benefit plan of the Company or any such subsidiary company (or any person or
entity organized, appointed or established by the Company for or pursuant to
the terms of any such plan that acquires beneficial ownership of voting
securities of the Company), is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act) directly or indirectly of securities of the
Company representing more than 5 percent of the combined voting power of the
Company’s then outstanding securities unless such Person has reported or
is required to report such ownership on Schedule 13G under the Exchange Act (or
any comparable or successor report) or on Schedule 13D under the Exchange Act
(or any comparable or successor report), which Schedule 13D does not state any
intention to or reserve the right to control or influence the management or
policies of the Company or engage in any of the actions specified in Item 4 of
such Schedule (other than the disposition of the common stock) so long as such
Person neither reports nor is required to report such ownership other than as
described in this paragraph; provided, however, that a Potential Change in Control will not be
deemed to have occurred as a result of a change in ownership percentage
resulting solely from an acquisition of securities by the Company, (b) the
Company enters into an agreement, the consummation of which would result in the
occurrence of
a Change in Control, (c) any “person” (as defined in subsection(a)) publicly
announces an intention to take or to consider taking actions which, if
consummated, would constitute or result in a Change in Control, (d) any person
( as defined in subsection (a)) commences a solicitation (as defined in Rule
14a-1 of the Exchange Act) of proxies or consents that has the purpose of
effecting or would (if successful) result in a Change in Control, (e) a tender
or exchange offer for at least 30% of the outstanding voting securities of the
Company, made by a “person” (as defined in subsection (a)), is first published
or sent or given (within the meaning of Rule 14d-2(a) of the Exchange Act), or
(f) the Board adopts a resolution to the effect that, for purposes of the Plan,
a Potential Change in Control has occurred. 
The Potential Change in Control shall be deemed in effect until the
earlier of (x) the occurrence of a Change in Control, or (y) the adoption by
the Board of a resolution stating that, for purposes of the Plan, the Potential
Change in Control has expired.

Section 2.27         “Release”  shall mean the Separation of Employment
Agreement and General Release, as provided by the Company.

Section 2.28         “Segment President”  shall mean an Officer who is not employed by
the corporate office, but who is a president of one of the Company’s business
segments.

Section 2.29         “Service”  shall mean the total number of years and
completed months the Participant was an Employee of the Company.  Service with any predecessor employer or with
a Subsidiary prior to the Subsidiary’s becoming part of the Company shall be
recognized only to the extent specified in the merger or acquisition
documentation relating to the Subsidiary or other applicable governing
documents.  Periods of authorized leave
of absence, such as military leave, will be included in Service only to the
extent required by applicable law.  Any
period of employment with the Company, a Subsidiary, or a predecessor employer
for which an Eligible Employee previously received severance benefits, shall be
excluded from Service.

Section 2.30         “Severance Benefit”  shall mean the salary and bonus replacement
amounts and other benefits that a Participant is eligible to receive pursuant
to Article IV of the Plan.

 

6

 

Section 2.31         “Severance Period”  shall mean the period for which a Participant
is entitled to receive Severance Benefits under this Plan, as follows:
Corporate Officers - 36 months; Segment Presidents - 24 months; and Corporate
Vice Presidents - 18 months.

Section 2.32         “Subsidiary”  shall mean (i) a subsidiary company (wherever
incorporated) as defined by section 86 of the Companies Act 1981 of Bermuda (as
amended), (ii) any separately organized business unit, whether or not
incorporated, of the Company, and (iii) any employer that is required to be
aggregated with the Company pursuant to section 414 of the Internal Revenue
Code of 1986, as amended, and regulations issued thereunder.

Section 2.33         “Successor”  shall mean any other corporation or
unincorporated entity or group of corporations or unincorporated entities which
acquires ownership, directly or indirectly, through merger, consolidation,
purchase or otherwise, of all or substantially all of the assets of the
Company.

Section 2.34         “Termination Date” shall mean the date on which the active
employment of the Participant by the Company or a Subsidiary is severed by
reason of an Involuntary Termination or a Good Reason Resignation.

Section 2.35         “Voluntary Resignation”  shall mean any retirement or termination of
employment that is not initiated by the Company or any Subsidiary other than a
Good Reason Resignation.

 

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ARTICLE III

PARTICIPATION AND ELIGIBILITY FOR BENEFITS

Section 3.01         Participation. 
Each Eligible Employee in the Plan who incurs a Change in Control
Termination and who satisfies the conditions of Section 3.02 shall be eligible
to receive the Severance Benefits described in the Plan, subject however, to
the application of the non-duplication provisions of Section 4.05.

Section 3.02         Conditions.

(a)           Eligibility for any Severance
Benefits is expressly conditioned on (i) execution by the Participant of a
Release in the form provided by the Company; (ii) compliance by the Participant
with all the terms and conditions of such Release; (iii) the Participant’s
written agreement to the confidentiality 
and non-disparagement provisions in Article VI during and after the
Participant’s employment with the Company; and (iv) execution of a written
agreement that authorizes the deduction of amounts owed to the Company prior to
the payment of any Severance Benefit (or in accordance with any other schedule
as is agreed between the Participant and the Company).  If the Plan Administrator determines that the
Participant has not fully complied with any of the terms of the Release, the
Plan Administrator may withhold Severance Benefits not yet in pay status or
discontinue the payment of the Participant’s Severance Benefit and may require
the Participant, by providing written notice of such repayment obligation to
the Participant, to repay any portion of the Severance Benefit already received
under the Plan.  If the Plan
Administrator notifies a Participant that repayment of all or any portion of
the Severance Benefit received under the Plan is required, such amounts shall
be repaid within thirty (30) calendar days of the date the written notice is
sent, provided, however, that if the Participant files an appeal of such
determination under the claims procedures described in Article X, then such
repayment obligation shall be suspended pending the outcome of the appeals
procedure.  Any remedy under this
subsection (a) shall be in addition to, and not in place of, any other remedy,
including injunctive relief, that the Company may have.

(b)           An Eligible Employee will not be
eligible to receive severance benefits under any of the following
circumstances:

(i)            The Eligible Employee’s Voluntary
Resignation;

(ii)           The Eligible Employee resigns
employment (other than a Good Reason Resignation) before the job-end date
mutually agreed to in writing between the Participant and the Employer,
including any extension thereto as is mutually agreed to in writing between the
parties;

(iii)          The Eligible Employee’s employment is
terminated for Cause;

 

8

(iv)          The Eligible Employee’s employment is
terminated due to the Eligible Employee’s death or Permanent Disability;

(v)           The Eligible Employee does not return
to work within the period prescribed by law 
(or if there is no such period prescribed by law, then within a
reasonable period as is determined by the Plan Administrator) following  an approved leave of absence,  unless such period is extended by mutual
written agreement of the parties; or

(vi)          The Eligible Employee’s employment
with the Employer terminates as a result of a Change in Control and the
Eligible Employee accepts employment, or has the opportunity to continue
employment, with a Successor (other than under terms and conditions which would
permit a Good Reason Resignation).

(c)           The Plan Administrator has the
discretion to make initial determinations regarding an Eligible Employee’s
eligibility to receive Severance Benefits hereunder.

(d)           An Eligible Employee returning from
approved military leave during the period beginning 60 days before a Change in
Control and ending two years after a Change in Control will be eligible for Severance
Benefits if: (i) he/she is eligible for reemployment under the provisions of
the Uniformed Services Employment and Reemployment Rights Act (USERRA); (ii)
his/her pre-military leave job is eliminated; and (iii) the Employer’s
circumstances are changed so as to make reemployment in another position
impossible or unreasonable, or re-employment would create an undue hardship for
the Employer.  If the Eligible Employee
returning from military leave qualifies for Severance Benefits, his/her
severance benefits will be calculated as if he/she had remained continuously
employed from the date he/she began his/her military leave.  The Eligible Employee must also satisfy any
other relevant conditions for payment, including execution of a Release.

 

9

 

ARTICLE IV

DETERMINATION OF SEVERANCE BENEFITS

Section 4.01         Amount
of Severance Benefits Upon Involuntary Termination and Good Reason Resignation . The Severance Benefits to be provided
to an Eligible Employee who incurs a Change in Control Termination and is
determined to be eligible for Severance Benefits shall be as follows:

(a)           Notice Pay.  Except for Officers, each Eligible Employee
who meets the eligibility requirements for a Severance Benefit under Section
3.01 shall receive 30 calendar days notice as a Notice Period.  In the event that the Company determines that
a Participant’s last day of work shall be prior to the end of his or her Notice
Period, such Employee shall be entitled to pay in lieu of notice for the
balance of such Notice Period.  Notice
Pay paid to an Eligible Employee shall be in addition to, and not offset
against, the Severance Benefits the Participant may be entitled to receive
under this Article IV.  An Eligible
Employee who does not sign, or who revokes his or her signature on, a Release
shall only be eligible for Notice Pay. 
Unless otherwise permitted by the applicable plan documents or laws, an
Eligible Employee will not be eligible to apply for short-term disability,
long-term disability and/or workers’ compensation anytime after the Eligible
Employee’s last active day at work.

(b)           Salary Replacement Benefits.  Salary Replacement Benefits shall be provided
to the Participant in an amount as set forth in Schedule A appended to the
Plan.

(c)           Bonus.

(i)            The Participant shall receive a cash
payment equal to his or her pro rated annual bonus (based on the number of full
months completed from the beginning of the fiscal year through the Termination
Date) for the year in which Participant’s Termination Date occurs, pursuant to
the terms set forth in the applicable incentive plans; provided, however, that
to the extent that a bonus payment for such period is paid as a result of a
Change in Control under the terms of such other incentive plan, then the amount
otherwise payable under this Section 4(c) will be offset by the payment made
under such other incentive plan .

(ii)           The Participant shall also receive a
cash payment equal to his or her Annual Bonus in an amount as set forth in
Schedule A appended to the Plan.

(d)           Medical and Dental Benefits.  The Participant shall continue to be eligible
to participate in the medical and dental coverage in effect at the date of his
or her termination (or generally comparable coverage) for himself or herself
and, where applicable, his or her spouse or domestic partner and dependents, as
the same may be changed from time to time for employees of the Company
generally, as if Participant had continued in employment during the Severance
Period (the “COBRA Continuation Coverage Period”).  The Participant shall be responsible for the
payment of the employee portion of the medical and dental contributions that
are required during the Severance Period and such contributions shall be made
within the time period and in 

 

10

 

the amounts that other employees are required to pay
to the Company for similar coverage.  The
Participant’s failure to pay the applicable contributions shall result in the
cessation of the applicable medical and dental coverage for the Participant and
his or her spouse or domestic partner and dependents.  Notwithstanding any other provision of this
Plan to the contrary, in the event that a Participant commences employment with
another company at any time during the Severance Period, the Participant may cease
receiving coverage under the Company’s medical and dental plans.  Within thirty(30) days of Participant’s
commencement of employment with another company, Participant shall provide the
Company written notice of such employment and provide information to the
Company regarding the medical and dental benefits provided to Participant by
his or her new employer.  The COBRA
Continuation Coverage Period under section 4980B of the Code shall run
concurrently with the Severance Period.

(e)           Stock Options.  All stock options held by the Participant as
of his or her Termination Date that were granted prior to the Change in Control
and that are not already vested and exercisable as of such date shall become
vested and exercisable on the Termination Date. 
All outstanding stock options held by Participant that were granted
prior to the Change in Control and that are vested and exercisable as of the
Termination Date and all stock options held by the Participant that become
vested and exercisable under the preceding sentence shall be exercisable for
the greater of (i) the period set forth in Participant’s option agreement
covering such options, or (ii) twelve (12) months from the Termination
Date.  In no event, however, shall an
option be exercisable beyond its original expiration date.

(f)            Restricted Stock.  All unvested restricted stock and restricted
stock units held by the Participant as of his or her Termination Date that were
granted prior to the Change in Control and that are subject solely to
time-vesting requirements shall accelerate and become immediately vested as of
the Termination Date.  All unvested
restricted stock and restricted stock units held by the Participant as of his
or her Termination Date that were granted prior to the Change in Control and
that are subject to performance-based vesting provisions shall accelerate and
become vested if and to the extent that the plan administrator responsible for
the administration of such awards determines in its sole discretion that the
applicable performance vesting requirements have been or will be attained, or
would have been attained during the Severance Period in the ordinary course but
for the Change in Control and the Participant’s Change in Control Termination.

(g)           Outplacement Services.  The Company will  pay the cost of outplacement services for the
Participant for a period of twelve (12) months from Participant’s Termination
Date.  The Company shall pay the cost of
outplacement services at either (i) the outplacement agency that the Company
regularly uses for such purpose, or (ii) 
the outplacement agency selected by the Participant, provided that the
Company will be responsible to pay no more than the cost that would have been
incurred had the Participant used the outplacement agency that the Company
regularly uses for such purpose.

(h)           Cash in Lieu of Benefit.  In the event that provision of any of the
benefits in (d) above would adversely affect the tax status of the applicable
plan or benefits, the Company, in its sole discretion, may elect to pay to the
Participant cash in lieu of such coverage in an amount equal to the Company’s
premium or average cost of providing such coverage.

11

(i)            Application of Other Plan
Provisions.  If any applicable equity
compensation or incentive plan or grant instrument, without regard to (c), (e)
or (f) above, provides the Participant the right to accelerated vesting or
payment of cash incentive awards,  stock
options, restricted stock, restricted stock units or incentive awards, and/or
an extension of the otherwise applicable option exercise period, in the case of
termination of employment following a Change in Control, then the Participant’s
right to accelerated payment, vesting or extension of the option exercise
period shall be determined by whichever of the plan, grant instrument or the
provisions of (c), (e) or (f) above provides the most favorable vesting or
exercise rights for the Participant in such event.

Section 4.02         Voluntary
Resignation; Termination Due to Death or Permanent Disability. 
If the Eligible Employee’s employment terminates on account of (i) the
Eligible Employee’s Voluntary Resignation, (ii) death, or (iii) Permanent
Disability, then the Eligible Employee shall not be entitled to receive
Severance Benefits under this Plan and shall be entitled only to those benefits
(if any) as may be available under the Company’s then-existing benefit plans
and policies at the time of such termination.

Section 4.03         Termination
for Cause.  (a)  If
any Eligible Employee’s employment terminates on account of termination by the
Company for Cause, the Eligible Employee shall not be entitled to receive
Severance Benefits under this Plan and shall be entitled only to those benefits
that are legally required to be provided to the Eligible Employee.  Notwithstanding any other provision of the
Plan to the contrary, if the Committee or the Plan Administrator determines
that an Eligible Employee has engaged in conduct that constitutes Cause at any
time prior to the Eligible Employee’s Termination Date, any Severance Benefit
payable to the Eligible Employee under Section 4.01 of the Plan shall
immediately cease, and the Eligible Employee shall be required to return any
Severance Benefits paid to the Eligible Employee prior to such
determination.  The Company may withhold
paying Severance Benefits under the Plan pending resolution of any good faith
inquiry that is likely to lead to a finding resulting in Cause.  If the Company has offset other payments owed
to the Eligible Employee under any other plan or program, it may, in its sole discretion,
waive its repayment right solely with respect to the amount of the offset so
credited.

(b)            Any dispute regarding a termination
for Cause will be resolved by the Plan Administrator.  Such determination will be based
on all of the facts and circumstances presented to the Plan Administrator by
the Company.  If the Plan Administrator
determines that the Eligible Employee’s termination of employment is for Cause,
then the Plan Administrator will notify the Eligible Employee in writing of
such determination, describing in detail the reason for such determination,
including without limitation the specific conduct that constituted the basis
for the determination.  The Eligible
Employee shall have the right to contest the determination of the Plan Administrator
in accordance with the Appeals Procedure described in Section 10.03.

Section 4.04         Reduction
of Severance Benefits.  The Plan Administrator
reserves the right to make deductions in accordance with applicable law for any
monies owed to the Company by the Participant or the value of Company property
that the Participant has retained in his/her possession.

 

12

 

Section 4.05         Non-Duplication
of Benefits.  The Plan is intended to supersede, and
not to duplicate, the provisions of the Tyco International (US) Inc. Severance
Plan for U.S. Officers and Executives (“Executive Severance Plan”) in any case
in which an Eligible Employee would otherwise be entitled to severance or
related benefits under both this Plan and the Executive Severance Plan arising
out of the Eligible Employee’s Change in Control Termination. However, the Plan
is not intended to supersede any other plan, program, arrangement or agreement
providing an Eligible Employee with severance or related benefits in the case
of an Eligible Employee’s Change in Control Termination.  In the event that an Eligible Employee
becomes entitled to receive benefits under this Plan and any such benefit
duplicates a benefit that would otherwise be provided under any other plan,
program, arrangement or agreement as a result of the Eligible Employee’s Change
in Control Termination, then the Eligible Employee shall be entitled to receive
the greater of the benefit available under the Plan, on the one hand, and the
benefit available under such other plan, program, arrangement or agreement, on
the other.

 

13

 

ARTICLE V

METHOD, DURATION AND LIMITATION OF SEVERANCE BENEFIT PAYMENTS

Section 5.01         Method
of Payment.  The cash Severance Benefits to which a
Participant is entitled, as determined pursuant to Section 4.01, shall be paid
in a single lump sum payment.  In no
event will interest be credited on the unpaid balance for which a Participant
may become eligible.  Payment shall be
made by mailing to the last address provided by the Participant to the Company
or such other reasonable method as determined by the Plan Administrator.  In general, the payment shall be made as
promptly as practicable after the Participant’s Termination Date, the execution
of the Release required under Section 3.02, and the expiration of the required
revocation period specified in the Release. 
In no event will the payment be made later than the date that is two and
one-half (2-1/2) months following the end of the calendar year in which occurs
the Termination Date, unless (a) the Participant has failed to deliver the
Release required under Section 3.02 or (b) such date is prior to the expiration
of the required revocation period specified in the Release.  All payments of Severance Benefits are
subject to applicable federal, state and local taxes and withholdings.  In the event of the Participant’s death prior
to payment being made, the amount of such payment shall be paid to the
Participant’s estate.

Section 5.02         Other
Arrangements.  The provisions of this Plan may provide for
payments to the Eligible Employee under certain compensation or bonus plans
under circumstances where such plans would not otherwise provide for payment
thereof.  It is the specific intention of
the Company that the provisions of this Plan shall supersede any provisions to the
contrary in such plans, to the extent permitted by applicable law, and such
plans shall be deemed to be have been amended to correspond with this Plan
without further action by the Company or the Board.

Section 5.03         Termination
of Eligibility for Benefits.

(a)           All Eligible Employees shall cease to
be eligible to participate in the Plan, and all Severance Benefit payments
shall cease upon the occurrence of the earlier of:

(i)            Subject to Article VIII, termination
or modification of the Plan; or

(ii)           Completion of payment to the
Participant of the Severance Benefit for which the Participant is eligible
under Article IV.

(b)           Notwithstanding anything herein to
the contrary, the Company shall have the right to cease all Severance Benefit
payments and to recover payments previously made to the Participant should the
Participant at any time breach the Participant’s undertakings under the terms
of the Plan, the Release the Participant executed to obtain the Severance
Benefits under the Plan or the confidentiality and non-disparagement provisions
of Article VI.

Section 5.04         Limitation
on Benefits

(a)           Subject to Section 5.04(b), in the
event it shall be determined that any payment or distribution by the Company or
its Subsidiaries to or for the benefit of a Participant (whether paid or
provided pursuant to the terms of this Plan or otherwise) (a “Payment”) would 

 

14

 

be nondeductible by the Company for Federal income tax
purposes because of Section 280G of the Code, then the aggregate present value
of the benefits provided to the Participant pursuant to the rights granted
under this Plan (such benefits are hereinafter referred to as “Plan Payments”)
shall be reduced to the Reduced Amount. 
The “Reduced Amount” shall be an amount expressed in present value which
maximizes the aggregate present value of Plan Payments without causing any
Payment to be nondeductible by the Company because of Section 280G of the
Code.  For purposes of this Section 5.04,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code.

(b)           If the Firm (as defined in Section
5.04(c)) determines that the payments to the Participant (before any reductions
as described in Section 5.04(a)) on an after-tax basis (i.e., after federal,
state and local income and excise taxes and federal employment taxes) would
exceed the Reduced Amount on an after-tax basis (i.e., after federal, state and
local income and federal employment taxes) then such payments will not be
reduced as is described in Section 5.04(a).

(c)           All determinations required to be
made under this Section 5.04 shall be made by a nationally recognized
accounting or consulting firm selected by the Senior Vice-President, Human
Resources Tyco International (US) Inc. (or the equivalent)  upon the occurrence of a Potential Change in
Control (the “ Firm”), which shall provide detailed supporting calculations
both to the Company and the Participant within fifteen (15) business days of
the Termination Date or such earlier time as is requested by the Company.  Any such determination by the Firm shall be
binding upon the Company, its successors and the Participant (subject to (e)
below).  Within five (5) business days of
the determination by the Firm as to the Reduced Amount, the Company shall
provide to the Participant such Payments as are then due to the Participant in
accordance with the rights afforded under this Plan or any other applicable
plan.  If Plan Payments are to be
reduced, the Participant shall determine which Plan Payments shall be reduced
to comply with this Section 5.04.

(d)           The Company shall reimburse the Participant
for any costs or expenses of tax counsel incurred by the Participant in
connection with any audit or investigation by the Internal Revenue Service, or
any state or local tax authorities, concerning the application of Code Section
280G to any Payments (provided, that the Participant retains tax counsel
acceptable to the Company).  In the event that as a result of any such
audit or investigation, the reduction in Plan Payments under (a) above is
finally determined not to be sufficient in amount to permit the deduction by
the Company of all Payments under Code Section 280G, then the Company shall pay
the Participant an additional amount which shall be sufficient to put the
Participant, after payment of any additional income, employment and excise taxes,
interest and penalties, in substantially the same economic position as if the
reduction had been sufficient.

(e)           In the event that the Firm determines
that a reduction effected pursuant to (a) above was excessive in amount due to
changes in relevant data or information following its original determination
under (c) above (including, without limitation, any recalculation regarding the
value of stock options as contemplated under Rev. Proc. 2003-68, Section 3.04),
and that additional Plan Payments could have been made thereunder, the Company
shall promptly make such additional payments to the Participant.

 

15

 

ARTICLE VI

CONFIDENTIALITY AND NON-DISPARAGEMENT

Section 6.01         Confidential Information. 
The Eligible Employee agrees that he or she shall not, directly or
indirectly, use, make available, sell, disclose or otherwise communicate to any
person, other than in the course of the Eligible Employee’s assigned duties and
for the benefit of the Company, either during the period of the Eligible
Employee’s employment or at any time thereafter, any nonpublic, proprietary or
confidential information, knowledge or data relating to the Company, any of its
Subsidiaries, affiliated companies or businesses, which shall have been
obtained by the Eligible Employee during the Eligible Employee’s employment by
the Company or a Subsidiary.  The
foregoing shall not apply to information that (i) was known to the public prior
to its disclosure to the Eligible Employee; (ii) becomes known to the public
subsequent to disclosure to the Eligible Employee through no wrongful act of
the Eligible Employee or any representative of the Eligible Employee; or (iii)
the Eligible Employee is required to disclose by applicable law, regulation or
legal process (provided that the Eligible Employee provides the Company with
prior notice of the contemplated disclosure and reasonably cooperates with the
Company at its expense in seeking a protective order or other appropriate
protection of such information). 
Notwithstanding clauses (i) and (ii) of the preceding sentence, the
Eligible Employee’s obligation to maintain such disclosed information in
confidence shall not terminate where only portions of the information are in
the public domain.

Section 6.02         Non-Disparagement. 
Each of the Eligible Employee and the Company (for purposes hereof, the
Company shall mean only the executive officers and directors thereof and not
any other employees) agrees not to make any statements that disparage the other
party, or in the case of the Company or its Subsidiaries, their respective
affiliates, employees, officers, directors, products or services.  Notwithstanding the foregoing, statements
made in the course of sworn testimony in administrative, judicial or arbitral proceedings
(including, without limitation, depositions in connection with such
proceedings) shall not be subject to this Section 6.02.

Section 6.03         Reasonableness. 
In the event the provisions of this Article VI shall ever be deemed to
exceed the time, scope or geographic limitations permitted by applicable laws,
then such provisions shall be reformed to the maximum time, scope or geographic
limitations, as the case may be, permitted by applicable laws.

Section 6.04         Equitable
Relief.

(a)           By participating in the Plan, the
Eligible Employee acknowledges that the restrictions contained in this Article
VI are reasonable and necessary to protect the legitimate interests of the
Company, its Subsidiaries and its affiliates, that the Company would not have
established this Plan in the absence of such restrictions, and that any
violation of any provision of this Article will result in irreparable injury to
the Company.  By agreeing to participate
in the Plan, the Eligible Employee represents that his or her experience and
capabilities are such that the restrictions contained in this Article VI will
not prevent the Eligible Employee from obtaining employment or otherwise
earning a living at the same general level of economic benefit as is currently
the case.  The Eligible Employee further
represents and acknowledges that (i) he or she has been advised by the Company
to consult his or her own legal counsel in respect 

 

16

 

of this Plan, and (ii) that he or she has had full
opportunity, prior to agreeing to participate in this Plan, to review
thoroughly this Plan with his or her counsel. 
The Company likewise acknowledges that the restrictions contained in
Section 6.02 are necessary to protect the legitimate interests of the Participant,
and that any violation of Section 6.02 by the Company will result in
irreparable injury to the Participant.

(b)           Each party agrees that the other
party shall be entitled to preliminary and permanent injunctive relief, without
the necessity of proving actual damages, as well as an equitable accounting of
all earnings, profits and other benefits arising from any violation of this
Article VI, which rights shall be cumulative and in addition to any other
rights or remedies to which such aggrieved party may be entitled.  In the event that any of the provisions of
this Article VI should ever be adjudicated to exceed the time, geographic,
service, or other limitations permitted by applicable law in any jurisdiction,
then such provisions shall be deemed reformed in such jurisdiction to the maximum
time, geographic, service, or other limitations permitted by applicable law.

(c)           The Eligible Employee irrevocably and
unconditionally (i) agrees that any suit, action or other legal proceeding
arising out of this Article VI, including without limitation, any action
commenced by the Company for preliminary and permanent injunctive relief or
other equitable relief, may be brought in the United States District Court for
the District of New York, or if such court does not have jurisdiction or will
not accept jurisdiction, in any court of general jurisdiction in New York, (ii)
consents to the non-exclusive jurisdiction of any such court in any such suit,
action or proceeding, and (iii) waives any objection which Participant may have
to the laying of venue of any such suit, action or proceeding in any such
court.  Participant also irrevocably and
unconditionally consents to the service of any process, pleadings, notices or
other papers in a manner permitted by the notice provisions of Section 11.02.

Section 6.05         Survival
of Provisions. 
The obligations contained in this Article VI shall survive the
termination of Eligible Employee’s employment with the Company or a Subsidiary
and shall be fully enforceable thereafter.

 

17

 

ARTICLE VII

THE PLAN ADMINISTRATOR

Section 7.01         Authority
and Duties.  It shall be the duty of the Plan
Administrator, on the basis of information supplied to it by the Company and
the Committee, to properly administer the Plan. 
The Plan Administrator shall have the full power, authority and
discretion to construe, interpret and administer the Plan, to make factual
determinations, to correct deficiencies therein, and to supply omissions.  All decisions, actions and interpretations of
the Plan Administrator shall be final, binding and conclusive upon the parties
with respect to denied claims for Severance Benefits, except in those cases
where such determination is subject to review by the Named Appeals Fiduciary
(as defined in Section 10.04).  The Plan
Administrator may adopt such rules and regulations and may make such decisions
as it deems necessary or desirable for the proper administration of the Plan.

Section 7.02         Compensation
of the Plan Administrator.  The Plan
Administrator appointed for periods prior to a Potential Change in Control
shall receive no compensation for services as such .  The Plan Administrator appointed for periods
on and after a Potential Change in Control will be entitled to receive
reasonable compensation as is mutually agreed upon between the parties.  All reasonable expenses of the Plan
Administrator shall be paid or reimbursed by the Company upon proper
documentation.  The Plan Administrator
shall be indemnified by the Company against personal liability for actions
taken in good faith in the discharge of the Plan Administrator’s duties.

Section 7.03         Records,
Reporting and Disclosure.  The Plan
Administrator shall keep a copy of all records relating to the payment of
Severance Benefits to Participants and former Participants and all other
records necessary for the proper operation of the Plan.  All Plan records shall be made available to
the Committee, the Company and to each Participant for examination during
business hours except that a Participant shall examine only such records as
pertain exclusively to the examining Participant and to the Plan.  The Plan Administrator shall prepare and
shall file as required by law or regulation all reports, forms, documents and
other items required by ERISA, the Code, and every other relevant statute, each
as amended, and all regulations thereunder (except that the Company, as payor
of the Severance Benefits, shall prepare and distribute to the proper
recipients all forms relating to withholding of income or wage taxes, Social
Security taxes, and other amounts that may be similarly reportable).

18

ARTICLE VIII

AMENDMENT, TERMINATION AND DURATION

Section 8.01         Amendment,
Suspension and Termination.  Except as
otherwise provided in this Section 8.01, the Board or its delegee shall have
the right, at any time and from time to time prior to the occurrence of a
Potential Change in Control (and after the Potential Change in Control has
expired in accordance with Section 2.26(y)), to amend, suspend or terminate the
Plan in whole or in part, for any reason or without reason, and without either
the consent of or the prior notification to any Participant, by a formal
written action.  After the occurrence of
a Potential Change in Control, the Board or its delegee shall have the right to
amend the Plan, provided however, that (a) in no event shall any amendment give
the Company the right to recover any amount paid to a Participant prior to the
date of such amendment or to cause the cessation of Severance Benefits already
approved for a Participant who has executed a Release as required under Section
3.02 and (b) the Plan may not be amended in any manner that adversely affects
any right of a Participant or Eligible Employee without the written consent of
such Participant or Eligible Employee.

Section 8.02         Duration. 
The Plan shall continue in full force and effect until termination of
the Plan pursuant to Section 8.01; provided, however, that after the
termination of the Plan, if any Participants terminated employment on account
of an Involuntary Termination prior to the termination of the Plan and are
still receiving Severance Benefits under the Plan, the Plan shall remain in
effect until all of the obligations of the Company are satisfied with respect
to such Participants.

19

ARTICLE IX

DUTIES OF THE COMPANY AND THE COMMITTEE

Section 9.01         Records. 
The Company or a Subsidiary thereof shall supply to the Committee all
records and information necessary to the performance of the Committee’s duties.

Section 9.02         Payment. Payments of Severance Benefits to
Participants shall be made in such amount as determined by the Committee under
Article IV, from the Company’s general assets or from a supplemental
unemployment benefits trust, in accordance with the terms of the Plan, as
directed by the Committee.

Section 9.03         Discretion. 
Any decisions, actions or interpretations to be made under the Plan by
the Board, the Committee and the Plan Administrator, acting on behalf of
either, shall be made in each of their respective sole discretion, not in any
fiduciary capacity and need not be uniformly applied to similarly situated
individuals and such decisions, actions or interpretations shall be final,
binding and conclusive upon all parties. 
As a condition of participating in the Plan, the Eligible Employee acknowledges
that all decisions and determinations of the Board, the Committee and the Plan
Administrator taken in good faith shall be final and binding on the Eligible
Employee, his or her beneficiaries and any other person having or claiming an
interest under the Plan on his or her behalf.

 

 

20

 

ARTICLE X

CLAIMS PROCEDURES

 

Section 10.01       Claim. 
Each Participant under this Plan may contest any action taken or
determination made by the Company, the Board, the Committee or the Plan
Administrator that affects  the rights of
such Participant hereunder by completing and filing with the Plan Administrator
a written request for review in the manner specified by the Plan
Administrator.  No person may bring an
action for any alleged wrongful denial of Plan benefits in a court of law
unless the claims procedures described in this Article X are exhausted and a
final determination is made by the Plan Administrator and/or the Named Appeals
Fiduciary, except in circumstances where the Participant has a reasonable basis
to conclude that the pursuit of his/her claim through the claims procedure
would be futile.  If the terminated
Participant or interested person challenges a decision by the Plan
Administrator and/or Named Appeals Fiduciary, a review by the court of law will
be limited to the facts, evidence and issues presented to the Plan
Administrator during the claims procedure set forth in this Article X.  Facts and evidence that become known to the
terminated Participant or other interested person after having exhausted the
claims procedure must be brought to the attention of the Plan Administrator for
reconsideration of the claims administrator. 
Issues not raised with the Plan Administrator and/or Named Appeals
Fiduciary will be deemed waived.

Section 10.02       Initial
Claim.  Before the date on which payment of a
Severance Benefit commences, each application for benefits must be supported by
such information as the Plan Administrator deems relevant and appropriate.  In the event that any claim relating to the
administration of Severance Benefits is denied in whole or in part, the
terminated Participant or his or her beneficiary (“claimant”) whose claim has
been so denied shall be notified of such denial in writing by the Plan
Administrator within thirty (30) days after the receipt of the claim for
benefits.  This period may be extended an
additional thirty (30) days if the Plan Administrator determines such extension
is necessary and the Plan Administrator provides notice of extension to the
claimant prior to the end of the initial thirty (30) day period.  The notice advising of the denial shall
specify the following: (i) the reason or reasons for denial, (ii) make specific
reference to the Plan provisions on which the determination was based, (iii)
describe any additional material or information necessary for the claimant to
perfect the claim (explaining why such material or information is needed), and
(iv) describe the Plan’s review procedures and the time limits applicable to
such procedures, including a statement of the claimant’s right to bring a civil
action under section 502(a) of ERISA following an adverse benefit determination
on review.

Section
10.03       Appeals of Denied Administrative
Claims.  All appeals shall be made by the following
procedure:

(a)           A claimant whose claim has been
denied shall file with the Plan Administrator a notice of appeal of the
denial.  Such notice shall be filed
within sixty (60) calendar days of notification by the Plan Administrator of
the denial of a claim, shall be made in writing, and shall set forth all of the
facts upon which the appeal is based.

(b)           The Named Appeals Fiduciary shall
consider the merits of the claimant’s written presentations, the merits of any
facts or evidence in support of the denial of benefits, and such other facts
and circumstances as the Named Appeals Fiduciary shall deem relevant.

 

21

 

(c)           The Named Appeals Fiduciary shall
render a determination upon the appealed claim which determination shall be
accompanied by a written statement as to the reasons therefor.  The determination shall be made to the
claimant within thirty (30) days of the claimant’s request for review, unless
the Names Appeals Fiduciary determines that special circumstances requires an
extension of time for processing the claim. 
In such case, the Named Appeals Fiduciary shall notify the claimant of
the need for an extension of time to render its decision prior to the end of
the initial thirty (30) day period, and the Named Appeals Fiduciary shall have
an additional thirty (30) day period to make its determination.  The determination so rendered shall be
binding upon all parties as long as it is made in good faith.  If the determination is adverse to the
claimant, the notice shall provide (i) the reason or reasons for denial, (ii)
make specific reference to the Plan provisions on which the determination was
based, (iii) a statement that the claimant is entitled to receive, upon request
and free of charge, reasonable access to, and copies of, all documents, records
and other information relevant to a the claimant’s claim for benefits, and (iv)
state that the claimant has the right to bring an action under section 502(a)
of ERISA.

Section 10.04       Appointment
of the Named Appeals Fiduciary.  The Named
Appeals Fiduciary shall be the person or persons named as such by the Board or
Committee, or, if no such person or persons be named, then the person or
persons named by the Plan Administrator as the Named Appeals Fiduciary,
provided however, that effective on the date of a Change in Control, the Plan
Administrator shall also serve as the Named Appeals Fiduciary.  For periods before the date of a Change in
Control, Named Appeals Fiduciaries may at any time be removed by the Board or
Committee, and any Named Appeals Fiduciary named by the Plan Administrator may
be removed by the Plan Administrator. 
All such removals may be with or without cause and shall be effective on
the date stated in the notice of removal. 
The Named Appeals Fiduciary shall be a “Named Fiduciary” within the
meaning of ERISA, and unless appointed to other fiduciary responsibilities,
shall have no authority, responsibility, or liability with respect to any
matter other than the proper discharge of the functions of the Named Appeals
Fiduciary as set forth herein.

Section 10.05       Arbitration;
Expenses.  In the event of any dispute under the
provisions of this Plan, other than a dispute in which the primary relief
sought is an equitable remedy such as an injunction, the parties shall have the
dispute, controversy or claim settled by arbitration in New York, New York (or
such other location as may be mutually agreed upon by the Employer and the
Participant) in accordance with the National Rules for the Resolution of
Employment Disputes then in effect of the American Arbitration Association,
before a panel of three arbitrators, two of whom shall be selected by the
Company and the Participant, respectively, and the third of whom shall be
selected by the other two arbitrators. 
Any award entered by the arbitrators shall be final, binding and
nonappealable and judgment may be entered thereon by either party in accordance
with applicable law in any court of competent jurisdiction.  This arbitration provision shall be
specifically enforceable.  The
arbitrators shall have no authority to modify any provision of this Plan or to
award a remedy for a dispute involving this Plan other than a benefit
specifically provided under or by virtue of the Plan.  If the Participant substantially prevails on
any material issue, which is the subject of such arbitration or lawsuit, the
Company shall be responsible for all of the fees of the American Arbitration
Association and the arbitrators and any expenses relating to the conduct of the
arbitration (including the Company’s and Participant’s reasonable attorneys’
fees and expenses).  Otherwise, each
party shall be 

22

 

responsible for its own expenses relating to the
conduct of the arbitration (including reasonable attorneys’ fees and expenses)
and shall share the fees of the American Arbitration Association.

23

 

ARTICLE XI

MISCELLANEOUS

Section 11.01       Nonalienation
of Benefits.  None of the payments, benefits or rights of
any Participant shall be subject to any claim of any creditor of any
Participant, and, in particular, to the fullest extent permitted by law, all
such payments, benefits and rights shall be free from attachment, garnishment
(if permitted under applicable law), trustee’s process, or any other legal or
equitable process available to any creditor of such Participant.  No Participant shall have the right to
alienate, anticipate, commute, plead, encumber or assign any of the benefits or
payments that he may expect to receive, continently or otherwise, under this
Plan, except for the designation of a beneficiary as set forth in Section 5.01.

Section 11.02       Notices. 
All notices and other communications required hereunder shall be in
writing and shall be delivered personally or mailed by registered or certified
mail, return receipt requested, or by overnight express courier service.  In the case of the Participant, mailed
notices shall be addressed to him or her at the home address which he or she
most recently communicated to the Company in writing.  In the case of the Company, mailed notices
shall be addressed to the Plan Administrator.

Section 11.03       Successors. 
Any Successor shall assume the obligations under this Plan and expressly
agree to perform the obligations under this Plan.

Section 11.04       Other
Payments.  Except as otherwise provided in this Plan, no
Participant shall be entitled to any cash payments or other severance benefits
under any of the Company’s then current severance pay policies for a
termination that is covered by this Plan for the Participant, including,
without limitation, the Executive Severance Plan.

Section 11.05       No
Mitigation.  Except as otherwise provided in Section
4.01(d) and Section 4.04, Participants shall not be required to mitigate the
amount of any Severance Benefit provided for in this Plan by seeking other
employment or otherwise, nor shall the amount of any Severance Benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise, except if the Participant is re-employed by Company, in which case
Severance Benefits shall cease.

Section 11.06       No
Contract of Employment.  Neither the
establishment of the Plan, nor any modification thereof, nor the creation of
any fund, trust or account, nor the payment of any benefits shall be construed
as giving any Eligible Employee or any person whosoever, the right to be
retained in the service of the Company, and all Eligible Employees shall remain
subject to discharge to the same extent as if the Plan had never been adopted.

Section 11.07       Severability
of Provisions.  If any provision of this Plan shall be held
invalid or unenforceable by a court of competent jurisdiction, such invalidity
or unenforceability shall not affect any other provisions hereof, and this Plan
shall be construed and enforced as if such provisions had not been included.

 

24

 

Section 11.08       Heirs,
Assigns, and Personal Representatives.  This Plan
shall be binding upon the heirs, executors, administrators, successors and
assigns of the parties, including each Participant, present and future.

Section 11.09       Headings
and Captions.  The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.

Section 11.10       Gender
and Number.  Where the context admits: words in any gender
shall include any other gender, and, except where otherwise clearly indicated
by context, the singular shall include the plural, and vice-versa.

Section 11.11       Unfunded
Plan  The Plan shall not be funded.  No Participant shall have any right to, or
interest in, any assets of the Company that may be applied by the Company to
the payment of Severance Benefits.

Section 11.12       Compliance
with Code Section 409A.  The terms of
this Plan are intended to, and shall be interpreted and applied so as to,
comply in all respects with the provisions of Code Section 409A and regulations
and rulings thereunder.  Any provision of
this Plan governing the timing or form of payment of benefits hereunder may be
modified by the Plan Administrator if and to the extent required in order to
ensure such compliance (by way of example and not limitation, to delay
commencement of any benefits payable hereunder that are subject to Code Section
409A until at least six months following a Participant’s termination of
employment).  Nothing in this provision
shall be construed as an admission that any of the benefits payable hereunder
constitute “deferred compensation” subject to the provisions of Code Section
409A.

Section 11.13       Payments
to Incompetent Persons.  Any benefit
payable to or for the benefit of a minor, an incompetent person or other person
incapable of receipting therefor shall be deemed paid when paid to such person’s
guardian or to the party providing or reasonably appearing to provide for the
care of such person, and such payment shall fully discharge the Company, the
Committee and all other parties with respect thereto.

Section 11.14       Lost
Payees.  A benefit shall be deemed forfeited if the
Committee is unable to locate a Participant to whom a Severance Benefit is
due.  Such Severance Benefit shall be
reinstated if application is made by the Participant for the forfeited
Severance Benefit while this Plan is in operation.

Section 11.15       Controlling
Law.  This Plan shall be construed and enforced
according to the laws of the State of New York to the extent not superseded by
Federal law.

25

SCHEDULE A

SEVERANCE BENEFITS

SALARY
REPLACEMENT AND ANNUAL BONUS

 

 

	
  Officers

  	
  2.99 times annual base salary and annual bonus

  
	
  Segment Presidents

  	
  2 times annual base salary and annual bonus

  
	
  Corporate Vice Presidents

  	
  1.5 times annual base salary and annual bonus

  

 

 

A-1Exhibit
10.12

 

SUMMARY OF
COMPENSATION OF NON-EMPLOYEE DIRECTORS

 

Prior to June 1, 2004, the annual compensation of each director who was
not an employee of the Company or a subsidiary (a “Non-employee Director”)
consisted of (1) an annual retainer of $10,000, up to half of which could be
paid in unrestricted shares of Common Stock and (2) a grant of non-qualified
stock options to purchase 3,000 shares of Common Stock.  The shares of Common Stock and options for
Common Stock were issued pursuant to the Edge Petroleum Corporation Incentive
Plan.

 

Effective beginning June 1, 2004, the annual compensation for
Non-employee Directors was revised to eliminate the stock option grant
component and increase the annual retainer, all or a portion of which may be
paid in shares of Common Stock.  If the
Board elects to pay all or some of the retainer in shares of Common Stock, all
or a portion of those shares may be subject to restriction, in the discretion
of the Board.  The Edge Petroleum
Corporation Incentive Plan was amended and restated effective June 1, 2004
accordingly (as amended and restated, the “Incentive Plan”).  Under the Incentive Plan, the Board has the
discretion to reinstate the annual option grant.  In accordance with the new annual
compensation arrangement, in 2004 Non-Employee Directors were paid an annual
retainer equal to the sum of (1) $10,000 (paid in cash) and (2) the value of
2,400 shares of Common Stock (paid in kind). 
The shares vest ratably over three years beginning on the first
anniversary of the grant date.  The fair
market value of the shares on the June 1, 2004 award date was $32,640 per
director.  No option awards were made to
Non-Employee Directors in 2004.

 

In addition, each Non-employee Director is to receive a $1,000 cash
payment for in-person attendance at a meeting of the Board of Directors ($400
if such attendance is telephonic) and $750 ($1,200 in the case of a chairman of
a Committee even if such attendance is telephonic) for each meeting of a
Committee of the Board of Directors attended ($400 if telephonic).  All directors are reimbursed for out-of-pocket
expenses incurred in attending meetings of the Board or Board committees and
for other expenses incurred in their capacity as directors.

 

At its February 2005 meeting, the Corporate Governance/Nominating
Committee reviewed the director’s compensation and determined that such
compensation should be increased in light of the increased duties,
responsibilities and complexities of Board service.  The committee deferred taking any action to
increase director compensation, however, until after reviewing certain
competitive information and surveys of director compensation of the Company’s
peers and competitors.  Increases, if
any, in director compensation will be finally reviewed and approved by the
Corporate Governance/Nominating Committee at a meeting later in 2005 submitted
to the full Board for approval and reported in the proxy statement for the 2006
annual meeting.

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