Document:

Exhibit
10.42

 

TORNIER N.V.

2010 EMPLOYEE STOCK PURCHASE PLAN

 

1.                                       Purpose.  This Tornier N.V. 2010 Employee Stock
Purchase Plan (the “Plan”) is intended to advance the interests of
Tornier N.V., a public limited liability company (naamloze
vennootschap) organized under the laws of The Netherlands, or any
successor thereto (the “Company”) and its stockholders by providing
Eligible Employees of the Company and each Designated Subsidiary with
opportunities to acquire shares of Stock on favorable terms through payroll
deductions.  The Plan is intended to
qualify as an “employee stock purchase plan” under Section 423 of the
Internal Revenue Code of 1986, as amended (the “Code”), and will be
construed so as to extend and limit participation in a manner consistent with
the requirements of Section 423 of the Code.

 

2.                                       Definitions.  For purposes of the Plan, the following terms
shall be defined as set forth below:

 

(a)                                  “Board” shall mean the Board of
Directors of the Company.

 

(b)                                 “Committee” shall mean the Compensation
Committee of the Board or a subcommittee thereof consisting solely of not less
than two members of the Board who are “non-employee directors” within the
meaning of Rule 16b-3 under the Exchange Act.

 

(c)                                  “Company Group” shall mean the Company,
together with each Designated Subsidiary.

 

(d)                                 “Compensation” shall mean regular
straight-time earnings and commissions that are included in regular
compensation, including amounts that would have constituted compensation but
for a Participant’s election to defer or reduce compensation pursuant to any
deferred compensation, cafeteria, capital accumulation or any other similar
plan of the Company and excluding all other amounts such as amounts
attributable to overtime, shift premium, incentive compensation and bonuses
(except to the extent that the inclusion of any such item is specifically
directed by the Committee), determined in a manner consistent with the
requirements of Section 423 of the Code.

 

(e)                                  “Designated Subsidiary” shall mean a
Subsidiary that has been designated by the Board from time to time, in its sole
discretion, as eligible to participate in the Plan.

 

(f)                                    “Eligible Employee” shall mean an
Employee of the Company or a Designated Subsidiary (i) who would not,
immediately after an option is granted to him hereunder, own shares possessing
five percent (5%) or more of the total combined voting power or value of all
classes of shares of the Company or any Subsidiary (as determined under
Section 423(b)(3) of the Code); (ii) whose customary employment
is for more than twenty (20) hours per week; and (iii) whose customary
employment is for more than five (5) months in any calendar year.  For purposes of clause (i) of this
subsection (f), the rules of Section 424(d) of the Code
with regard to the attribution of share ownership shall apply in determining
the share ownership of an individual, and shares which an Employee may purchase
under outstanding options shall be treated as shares owned by the
Employee.  Notwithstanding anything
herein to the contrary, Employees who are citizens or residents of a foreign
jurisdiction (without regard to 

 

 

whether they are citizens
of the United States or resident aliens (within the meaning of
Section 7701(b)(1)(A) of the Code)) shall not be considered Eligible
Employees for purposes of the Plan if (x) the grant of an option hereunder
or any Offering to a citizen or foreign resident of such foreign jurisdiction
is prohibited by the laws of such jurisdiction, or (y) compliance with the
laws of such foreign jurisdiction would cause the Plan or any Offering to
violate the requirements of Section 423 of the Code.

 

(g)                                 “Employee” shall mean any person,
including an officer, who renders services to the Company or a Designated
Subsidiary in the status of an employee within the meaning of Section 3401(c) of
the Code.  “Employee” shall not include
any director of the Company or a Designated Subsidiary who does not render
services to the Company or a Designated Subsidiary in the status of an employee
within the meaning of Section 3401(c) of the Code.  For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual is on
sick leave or other leave of absence approved by the Company or Designated
Subsidiary and meeting the requirements of Treasury Regulation Section 1.421-7(h)(2).  Where the period of leave exceeds ninety (90)
days and the individual’s right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the ninety first (91st) day of such leave.

 

(h)                                 “Employer” shall mean, with respect to
a Participant, the member of the Company Group by which the Participant is
principally employed.

 

(i)                                     “Enrollment Date” shall mean the first
Trading Day of each Offering Period.

 

(j)                                     “Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended.

 

(k)                                  “Exercise Date” shall mean the last
Trading Day of each Offering Period.

 

(l)                                     “Fair Market Value” shall mean, with
respect to the Stock, as of any date: (i) the closing sale price of the
Stock as of such date at the end of the regular trading session, as reported by
the Nasdaq Stock Market, the New York Stock Exchange, the American Stock
Exchange or any national securities exchange on which the Stock is then listed
or quoted (or, if no shares were traded on such date, as of the next preceding
date on which there was such a trade); (ii) if the Stock is not so listed,
admitted to unlisted trading privileges, or reported on any national securities
exchange, the closing sale price as of such date at the end of the regular
trading session, as reported by the OTC Bulletin Board or the Pink Sheets, LLC,
or other comparable service (or, if no shares were traded or quoted on such
date, as of the next preceding date on which there was such a trade or quote);
or (iii) if the Stock is not so listed or reported, such price as the
Committee determines in its sole discretion in a manner acceptable under
Section 423 of the Code.

 

(m)                               “Offering” means any of the offerings
to Participants of options to purchase Stock under the Plan, as described in
Section 4 below.

 

(n)                                 “Participant” shall mean an Eligible
Employee who participates in the Plan pursuant to Section 5 hereof.

 

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(o)                                 “Purchase Price” shall mean eighty five
percent (85%) of the Fair Market Value of one share of Stock on the Exercise
Date; provided, however, that the Purchase Price may be
adjusted by the Committee pursuant to Section 19 hereof; provided, further,
that the Purchase Price shall not be less than the par value of one share of
Stock.

 

(p)                                 “Securities Act” shall mean the
Securities Act of 1933, as amended.

 

(q)                                 “Stock” shall mean the ordinary shares,
par value €0.01 per share, of the Company, or the number and kind of shares of
stock or other securities into which such ordinary shares may be changed in
accordance with Section 13 of the Plan.

 

(r)                                    “Subsidiary” shall mean any subsidiary
corporation of the Company within the meaning of Section 424(f) of
the Code.

 

(s)                                  “Trading Day” shall mean a day on which
the principal exchange on which the Stock is traded is open for trading.

 

3.                                       Eligibility.

 

(a)                                  Any Employee who is an Eligible Employee on
the Enrollment Date for an Offering Period (as defined in Section 4 below)
shall be eligible to participate in the Plan during such Offering Period,
subject to the requirements of Section 3(b) hereof and the
limitations imposed by Section 423(b) of the Code.

 

(b)                                 No Eligible Employee shall be granted an
option under the Plan if the amount of payroll deductions that the Eligible
Employee has elected to have withheld under such option (pursuant to
Section 5 below) would permit the Eligible Employee to purchase shares of
Stock under all “employee stock purchase plans” (within the meaning of
Section 423 of the Code) of the Company or any Subsidiary to accrue (i.e.,
become exercisable) at a rate that exceeds twenty five thousand dollars
($25,000) of the Fair Market Value of such shares of Stock (determined as of
the Enrollment Date) for each calendar year in which such option is outstanding
at any time.

 

4.                                       Offering Periods.  Options to purchase shares of Stock shall be
offered to Participants under the Plan through a continuous series of
Offerings, each continuing for six months and each of which shall commence on January 1
and July 1 of each year, as the case may be, and shall terminate on
June 30 and December 31 of such year, as the case may be (each such
period being, an “Offering Period”); provided, however, that the first Offering Period under the Plan and
any subsequent Offering Period commenced immediately after a suspension of the
Plan shall have an Enrollment Date and Exercise Date as determined by the
Committee in its sole discretion. 
Offerings under the Plan shall continue until either (a) the
Committee decides, in its sole discretion, that no further Offerings shall be
made because the Stock remaining available under the Plan is insufficient to
make an Offering to all Eligible Employees, or (b) the Plan is terminated
under Section 20 below. 
Notwithstanding the foregoing, and without limiting the authority of the
Committee under Section 14, 19 and 20 of the Plan, the Committee, in its
sole discretion, may (a) accelerate the Exercise Date of the then current
Offering Period and provide for the exercise of options thereunder by
Participants in accordance with Section 8 of the Plan, or
(b) accelerate the Exercise Date of the then current Offering Period and
provide that all payroll 

 

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deductions credited to the accounts of Participants
will be paid to Participants as soon as practicable after such Exercise Date
and that all options for such Offering Period will automatically be canceled
and will no longer be exercisable, if such change is announced at least five
(5) days prior to the newly scheduled Exercise Date.

 

5.                                       Participation.

 

(a)                                  Each Eligible Employee may become a
Participant with respect to any Offering Period by completing a subscription
agreement authorizing payroll deductions in a form acceptable to the Committee
and filing it with the Company (or its designated third-party stock plan
administrator) fifteen (15) business days (or a different number of days as may
be determined by the Committee, in its sole discretion) prior to the first day
of such Offering Period.  A Participant’s
completion of a subscription agreement with respect to any Offering Period will
enroll such Participant in the Plan for each subsequent Offering Period on the
terms contained therein until the Participant either submits a new subscription
agreement, withdraws from participation under the Plan as provided in
Section 10 hereof, or otherwise becomes ineligible to participate in the
Plan.

 

(b)                                 Payroll deductions for a Participant shall
commence on the first payday following the Enrollment Date and shall end on the
last payday in the Offering Period with respect to which such authorization is
applicable, unless sooner terminated by the Participant as provided in
Section 10 hereof.

 

(c)                                  During a Participant’s leave of absence
approved by his Employer and meeting the requirements of Treasury Regulation Section 1.421-7(h)(2),
such Participant may continue to participate in the Plan by making cash
payments to the Company on each payday equal to the amount of the Participant’s
payroll deductions under the Plan for the payday immediately preceding the
first day of such Participant’s leave of absence.  If a leave of absence is unapproved or fails
to meet the requirements of Treasury Regulation Section 1.421-7(h)(2), the
Participant will automatically cease to participate in the Plan and may not
make any further contributions to the Plan hereunder.  In such event, the Company will automatically
cease to deduct the Participant’s payroll under the Plan.  The Company will pay to the Participant his
total payroll deductions for the Offering Period, in cash in one lump sum
(without interest), as soon as practicable after the Participant ceases to
participate in the Plan.

 

(d)                                 The subscription agreement(s) used in
connection with the Plan shall be in a form prescribed by the Committee, and
the Committee may, in its sole discretion, determine whether such agreement
shall be submitted in written or electronic form.

 

6.                                       Payroll Deductions.

 

(a)                                  At the time a Participant files his subscription
agreement, such Participant shall elect to have payroll deductions made on each
payday (such amount to be deducted after any applicable deduction for tax and
other withholding) during the Offering Period in an amount from one percent
(1%) to ten percent (10%) of the Compensation which he receives on each pay day
during the Offering Period.

 

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(b)                                 All payroll deductions made for a Participant
shall be credited to his account under the Plan and shall be withheld in whole
percentages only.  Except as described in
Section 5(c) hereof, a Participant may not make any additional
payments into such account.

 

(c)                                  A Participant may discontinue his
participation in the Plan as provided in Section 10 hereof, or may
increase or decrease the rate of his payroll deductions during the Offering
Period by completing or filing with the Company (or its designated third-party
stock plan administrator) a new subscription agreement authorizing a change in
payroll deduction rate.  The Committee
may, in its discretion, limit the number of participation rate changes per
Participant during any Offering Period. 
The change in rate shall be effective with the first full payroll period
following five business (5) days (or a different number of days as may be
determined by the Committee, in its sole discretion) after the Company’s (or
its designated third-party stock plan administrator’s) receipt of the new
subscription agreement.

 

(d)                                 Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) hereof,
a Participant’s payroll deductions may be decreased to zero percent (0%) at any
time during an Offering Period.

 

(e)                                  At the time an option is exercised, in whole
or in part, or at the time some or all of the shares of Stock issued under the
Plan are disposed of, the Participant must make adequate provision for any
federal, state, or other tax obligations, if any, which arise upon the exercise
of the option or the disposition of the shares of Stock.  At any time, the Company may, but shall not
be obligated to, withhold from all of the Participant’s compensation the amount
necessary for the Company to meet applicable withholding obligations, including
any withholding required to make available to the Company any tax deductions or
benefits attributable to the sale or early disposition of shares of Stock by
the Participant.

 

7.                                       Grant of Option.  On the Enrollment Date of each Offering
Period, each Participant in such Offering Period shall be granted an option to
purchase on the Exercise Date with respect to such Offering Period (at the
applicable Purchase Price) up to a number of the shares of Stock determined by
dividing such Participant’s payroll deductions accumulated prior to such Exercise
Date and retained in the Participant’s account as of the Exercise Date by the
applicable Purchase Price; provided, however,
that (i) such purchase shall be subject to the limitations set forth in
Sections 3 and 13 hereof, and (ii) in no event may more than two thousand
five hundred (2,500) shares of Stock be purchased by any Participant during any
Offering Period.  Exercise of the option
shall occur as provided in Section 8 hereof, unless the Participant has
withdrawn from participation pursuant to Section 10 hereof or otherwise
becomes ineligible to participate in the Plan. 
The option shall expire on the last day of the Offering Period.

 

8.                                       Exercise of Option.

 

(a)                                  Unless a Participant withdraws from the Plan
as provided in Section 10 hereof or otherwise becomes ineligible to
participate in the Plan, such Participant’s option for the purchase of Stock
shall be exercised automatically on the Exercise Date, and the maximum number
of full shares of Stock subject to the option shall be purchased for such
Participant at the applicable Purchase Price with the accumulated payroll
deductions in his account.  No fractional
shares of Stock shall be purchased, and any payroll deductions accumulated in a
Participant’s 

 

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account which are not
sufficient to purchase a full share of Stock shall be retained in such
Participant’s account for the subsequent Offering Period.  During a Participant’s lifetime, a
Participant’s option to purchase Stock hereunder is exercisable only by him.

 

(b)                                 If the Committee determines that, on a given
Exercise Date, the number of shares of Stock with respect to which options are
to be exercised may exceed either (i) the number of shares of Stock that
were available for sale under the Plan on the Enrollment Date of the applicable
Offering Period (notwithstanding any authorization of additional shares of
Stock for issuance under the Plan by the Company’s shareholders subsequent to
such Enrollment Date); or (ii) the number of shares of Stock available for
sale under the Plan on such Exercise Date, the Committee shall provide that the
Company (or its designated third-party stock plan administrator) shall make a
pro rata allocation of the Stock available for purchase on such Enrollment Date
or Exercise Date, as applicable, in as uniform a manner as shall be practicable
and as it shall determine in its sole discretion to be equitable among all
Participants exercising options to purchase Stock on such Exercise Date, and
shall decide, in its sole discretion, to either (x) continue all Offering
Periods then in effect or (y) terminate any or all Offering Periods then
in effect pursuant to Section 20 hereof. 
In the event of such a pro rata allocation of Stock pursuant to this
Section 8(b), the balance of the amount credited to the account of each
Participant that has not been applied to the purchase of Stock shall be paid to
each such Participant in one lump sum in cash as soon as reasonably practicable
after the Exercise Date, without any interest thereon.

 

9.                                       Deposit of Stock.  As promptly as practicable after each
Exercise Date on which a purchase of Stock occurs, the Company may arrange for
the deposit, into each Participant’s account with any broker designated by the
Company to administer this Plan, of the number of shares of Stock purchased
upon exercise of each such Participant’s option.

 

10.                                 Withdrawal.

 

(a)                                  At any time prior to the Exercise Date, a
Participant, by giving written notice to the Company (or its designated
third-party stock plan administrator) in a form acceptable to the Committee,
may withdraw all but not less than all of the payroll deductions credited to
his account and not yet used to exercise an option under the Plan.  All of the Participant’s payroll deductions
credited to his account during the Offering Period, plus any balance retained
in his account from a prior Offering Period, if any, shall be paid to such
Participant as soon as reasonably practicable after receipt of notice of
withdrawal, and such Participant’s option for the Offering Period shall be
automatically terminated, and no further payroll deductions for the purchase of
Stock shall be made for such Offering Period. 
If a Participant withdraws from an Offering Period, payroll deductions
shall not resume at the beginning of any subsequent Offering Period unless the
Participant delivers to the Company (or its designated third-party stock plan
administrator) a new subscription agreement in accordance with the terms of
Section 5(a) hereof.

 

(b)                                 A Participant’s withdrawal from an Offering
Period shall not have any effect upon his eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in Offering
Periods which commence after the termination of the Offering Period from which
the Participant withdraws.

 

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11.                                 Termination of Employment.  Upon a Participant’s ceasing to be an
Eligible Employee, for any reason, such Participant shall be deemed to have
elected to withdraw from the Plan, and the payroll deductions credited to such
Participant’s account during the Offering Period, plus any balance retained in
his account from a prior Offering Period, if any, shall be paid to him, or in
the case of his death, to the person or persons entitled thereto under Section 15
hereof, as soon as reasonably practicable, and such Participant’s option for
the Offering Period shall be automatically terminated.

 

12.                                 Interest.  No interest shall accrue on the payroll
deductions or lump sum contributions of a Participant in the Plan.

 

13.                                 Stock Subject to Plan.

 

(a)                                  Subject to adjustment upon changes in
capitalization of the Company as provided in Section 19 hereof, a maximum
of one million (1,000,000) shares of Stock shall be made available for sale
under the Plan.  If any option granted
under the Plan shall for any reason terminate without having been exercised,
the shares of Stock not purchased under such option shall again become
available for issuance under the Plan. 
The shares of Stock subject to the Plan may be unissued shares or
reacquired shares bought on the market or otherwise.

 

(b)                                 Except as otherwise provided herein, with
respect to Stock subject to an option granted under the Plan, a Participant
shall not be deemed to be a shareholder of the Company, and the Participant
shall not have any of the rights or privileges of a shareholder, until such
Stock has been issued to the Participant or his nominee following exercise of
the Participant’s option.  No adjustments
shall be made for dividends (ordinary or extraordinary, whether in cash
securities, or other property) or distributions or other rights for which the
record date occurs prior to the date of such issuance, except as otherwise
expressly provided herein.

 

14.                                 Administration.  The Plan will be administered by the
Committee.  To the extent consistent with
corporate law, the Committee may delegate to any officers of the Company the
duties, power and authority of the Committee under the Plan pursuant to such
conditions or limitations as the Committee may establish; provided,
however, that only the Committee may
exercise such duties, power and authority with respect to Participants who are
subject to Section 16 of the Exchange Act. 
The Committee may exercise its duties, power and authority under the
Plan in its sole discretion without the consent of any Participant or other
party, unless the Plan specifically provides otherwise.  Each determination, interpretation or other
action made or taken by the Committee pursuant to the provisions of the Plan
will be final, conclusive and binding for all purposes and on all persons,
including, without limitation, the Company, the stockholders of the Company,
the Participants and their respective successors-in-interest.  No member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan or
any option granted under the Plan.

 

15.                                 Designation of Beneficiary.

 

(a)                                  A Participant may file a written designation
of a beneficiary who is to receive any Stock and cash, if any, from such
Participant’s account under the Plan in the event of such Participant’s death
subsequent to an Exercise Date on which the option is exercised but 

 

7

 

prior to delivery to such
Participant of such Stock and cash.  In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant’s account under the Plan in the event
of such Participant’s death prior to exercise of the option.  To the extent required under applicable law,
spousal consent shall be required for such designation to be effective if the
Participant is married and the designated beneficiary is not the Participant’s
spouse.

 

(b)                                 Such beneficiary designation may be changed by
the Participant at any time by written notice to the Company.  In the event of the death of a Participant
and in the absence of a beneficiary validly designated under the Plan who is
living at the time of such Participant’s death, the Company shall deliver such
Stock and/or cash to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company may, in its discretion, deliver such
Stock and/or cash to the spouse or to any one or more dependents or relatives
of the Participant, or if no spouse, dependent, or relative is known to the
Company, then to such other person as the Company may designate.

 

16.                                 Transferability.  Neither payroll deductions credited to a
Participant’s account nor any rights with regard to the exercise of an option
or to receive Stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the Participant (other than by will, the
laws of descent and distribution, or as provided in Section 15
hereof).  Any such attempt at assignment,
transfer, pledge, or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds from an Offering
Period in accordance with Section 10 hereof.

 

17.                                 Use of Funds.  All payroll deductions received or held by
the Company under the Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.

 

18.                                 Reports.  Individual accounts shall be maintained for
each Participant in the Plan.  Statements
of account shall be given to Participants following each Offering Period, which
statements shall set forth the amounts of payroll deductions, the Purchase
Price, the number of shares of Stock purchased, and the remaining cash balance,
if any.

 

19.                                 Adjustments Upon Changes in Capitalization, Merger, Amalgamation, Asset
Sale, Dissolution or Liquidation.

 

(a)                                  Changes in Capitalization.  The
number of shares of Stock which have been authorized for issuance under the
Plan but not yet placed under option, the maximum number of shares of Stock
each Participant may purchase in each Offering Period (pursuant to Section 7
hereof), as well as the price per share of Stock and the number of shares of
Stock covered by each option under the Plan which has not yet been exercised
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Stock resulting from a stock split, reverse stock split, stock
dividend, combination, or reclassification of the Stock, or any other increase
or decrease in the number of shares of Stock effected without receipt of
consideration by the Company; provided,
however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.”  Such 

 

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adjustment shall be made
by the Committee, whose determination in that respect shall be final, binding,
and conclusive on all Participants and the Company.  Except as expressly provided herein, no
issuance by the Company of shares of any class, or securities convertible into
shares of any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of Stock subject to an
option.

 

(b)                                 Merger, Amalgamation, Asset Sale, Dissolution
or Liquidation.  In the event of a proposed merger or
amalgamation of the Company with or into another corporation or a proposed sale
of all or substantially all of the assets of the Company, each outstanding
option shall be assumed or an equivalent option substituted by the successor
corporation or a parent or subsidiary of the successor corporation.  In the event that the successor corporation
or a parent or subsidiary of the successor corporation refuses to assume or
substitute for the option, or in the event of the proposed dissolution, or
liquidation of the Company, the Offering Period then in progress shall be
shortened by the Committee by setting a new Exercise Date (the “New Exercise
Date”), which shall occur no later than immediately prior to the effective
date of such proposed merger, amalgamation, sale, dissolution or liquidation,
as applicable.  The Company shall notify
each Participant in writing, at least ten (10) business days prior to the
New Exercise Date, that the Exercise Date for the Participant’s option has been
changed to the New Exercise Date and that the Participant’s option shall be
exercised automatically on the New Exercise Date, unless prior to such New
Exercise Date the Participant has withdrawn from the Offering Period as
provided in Section 10 hereof.

 

20.                                 Amendment or Termination.

 

(a)                                  The Board may at any time and for any reason
terminate or amend the Plan.  Except as
provided in Section 19 hereof, no such termination shall affect options
previously granted, provided that
an Offering Period may be terminated by the Board if the Board determines that
the termination of the Offering Period or the Plan is in the best interests of
the Company and its shareholders.  Except
as provided in Section 19 hereof and this Section 20, no amendment
may make any change in any option theretofore granted which adversely affects
the rights of any Participant without the consent of such Participant.  To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation, or stock exchange rule), the Company shall
obtain shareholder approval of any amendment in such a manner and to such a
degree as required.

 

(b)                                 Without shareholder consent and without regard
to whether any Participant’s rights may be considered to have been “adversely
affected,” the Committee shall be entitled to change the Offering Periods (but
in no event may an Offering Period have a duration in excess of twenty seven
(27) months), limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a Participant in order to
adjust for delays or mistakes in the Company’s processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Stock for each Participant properly correspond with
amounts withheld from the Participant’s Compensation, and establish such other
limitations or procedures as the Committee determines in its sole discretion
advisable which are consistent with the Plan.

 

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(c)                                  In the event the Board determines that the
ongoing operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify, or amend the Plan to reduce or eliminate such financial
accounting consequences, including, but not limited to:

 

(i)                                     altering the Purchase Price for any Offering Period including an Offering
Period underway at the time of the change in Purchase Price;

 

(ii)                                  shortening any Offering Period so that the Offering Period ends on a new
Exercise Date, including an Offering Period underway at the time of the
Committee action; and

 

(iii)                               allocating shares.

 

Such
modifications or amendments shall not require shareholder approval or the
consent of any Participants.

 

21.                                 Notices.  All notices or other communications by a
Participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received in the form specified by the Company at
the location, or by the person, designated by the Company for the receipt
thereof.

 

22.                                 Conditions to Issuance of Stock.

 

(a)                                  The Company shall not be required to issue or
deliver to a Participant any certificate or certificates for shares of Stock
purchased upon the exercise of options prior to fulfillment of all the
following conditions:

 

(i)                                     The admission of such shares of Stock to listing on all stock exchanges,
if any, on which the Stock is then listed;

 

(ii)                                  The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;

 

(iii)                               Such Participant’s payment to the Company of all amounts which it is
required to withhold under federal, state or local law upon exercise of the
option; and

 

(iv)                              The lapse of such reasonable period of time following the exercise of the
option as the Committee may from time to time establish for reasons of
administrative convenience.

 

(b)                                 The obligation of the Company to make a
payment of Stock or otherwise shall be subject to all applicable laws, rules and
regulations, and to such approvals by governmental agencies as may be
required.  Notwithstanding any terms or
conditions of any option to the contrary, the Company shall be under no
obligation to offer to sell or to sell and shall be prohibited from offering to
sell or selling any Stock pursuant to an option unless such Stock has been
properly registered for sale with the Securities and Exchange Commission 

 

10

 

pursuant to the
Securities Act or unless the Company has received an opinion of counsel,
satisfactory to the Company, that such Stock may be offered or sold without
such registration pursuant to an available exemption therefrom and the terms
and conditions of such exemption have been fully complied with.  The Company shall be under no obligation to
register for sale or resale under the Securities Act any of the Stock to be
offered or sold under the Plan or any Stock issued upon exercise or settlement
of options.  If the Stock offered for
sale or sold under the Plan is offered or sold pursuant to an exemption from
registration under the Securities Act, the Company may restrict the transfer of
such Stock and may legend the share certificates representing such Stock in
such manner as it deems advisable to ensure the availability of any such
exemption.

 

23.                                 Term of Plan.  The Plan shall become effective as of the
Effective Date.  The Plan shall be deemed
to be approved by the Company’s shareholders if it receives the affirmative
vote of the Company’s shareholders in accordance with the by-laws of the
Company.  Subject to approval by the
shareholders of the Company in accordance with this Section 23, the Plan
shall be in effect until the tenth (10th) anniversary of the date of the initial
adoption of the Plan by the Board, unless sooner terminated under Section 20
hereof.  In the event the Company’s
shareholders do not approve this Plan pursuant to this Section 23, neither
this Plan nor any elections made hereunder shall be of any force or effect, any
outstanding option shall be cancelled for no consideration, and all amounts
deducted from each Participant’s paycheck shall be repaid to such Participant
as soon as practicable without interest.

 

24.                                 Equal Rights and Privileges.  All Eligible Employees will have equal rights
and privileges under this Plan so that this Plan qualifies as an “employee
stock purchase plan” within the meaning of Section 423 of the Code.  Any provision of this Plan that is
inconsistent with this requirement to provide equal rights and privileges will,
without further act or amendment by the Company, the Board or the Committee, be
reformed to comply with the equal rights and privileges requirement of Section 423
of the Code.

 

25.                                 Section 409A.  The options to purchase Stock under the Plan
are not intended to constitute “nonqualified deferred compensation” within the
meaning of Section 409A of the Code. 
However, if at any time the Committee determines that the options may be
subject to Section 409A of the Code, the Committee shall have the right,
in its sole discretion, to amend the Plan and any outstanding options as it may
determine is necessary or desirable either to exempt the options from the
application of Section 409A of the Code or to cause the options to comply
with the requirements of Section 409A of the Code.

 

26.                                 No Employment Rights.  Nothing in the Plan shall be construed to
give any person (including any Eligible Employee or Participant) the right to
remain in the employ of the Company or a Subsidiary, or to affect the right of
the Company or any Subsidiary to terminate the employment of any person
(including any Eligible Employee or Participant) at any time, with or without
cause.

 

27.                                 Notice of Disposition of Stock; Transfer Restrictions.  If required by the Company, each
Participant shall give prompt notice to the Company (at its local Human
Resources office), or cause a designated third-party stock administrator to
give prompt notice to the Company, of any disposition or other transfer of any
Stock purchased upon exercise of an 

 

11

 

option hereunder if such disposition or transfer is
made either (a) within two (2) years from the Enrollment Date of the
Offering Period in which the Stock was purchased or (b) within one (1) year
after the Exercise Date on which such Stock was purchased.  Such notice shall specify the date of such
disposition or other transfer and the amount realized, in cash, other property,
assumption of indebtedness, or other consideration, by the Participant in such
disposition or other transfer. 
Notwithstanding anything herein to the contrary, no Participant shall be
permitted to dispose of or transfer any Stock purchased pursuant to an option
hereunder prior to the date that is twelve (12) months following the date upon
which such Stock was so purchased.  The
Committee may provide, in its sole discretion, that the Stock purchased
pursuant to an option hereunder shall be held in book entry form, rather than
delivered to the Participant, through the expiration of such twelve (12) month
period.  If certificates representing the
shares of Stock are registered in the name of the Participant, the Committee
may require that such certificates bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Stock and that the
Company retain physical possession of the certificates.

 

28.                                 Governing Law.  Subject to any applicable provisions of
United States federal law (including, without limitation, Section 423(b) of
the Code), the validity and enforceability of this Plan shall be governed by
and construed in accordance with the laws of the State of Delaware, without
regard to otherwise governing principles of conflicts of law.

 

*                                         *                                         *

 

12Exhibit 10.15

 

Tyco International Ltd 

2004 Stock and Incentive Plan (the “Plan”)

 

TERMS AND CONDITIONS

OF

OPTION AWARD

 

OPTION AWARD made in Princeton, New Jersey, as
of
[                ]
(the “Grant Date”).

 

1.             Grant of Option.  Tyco International Ltd. (the “Company”)
has granted you an Option to purchase Shares of Common Stock of the Company, as
described in the grant notification letter issued to you (“Grant Letter”),
subject to the provisions of these Terms and Conditions.  This Option is a Non-Qualified Option.

 

2.             Exercise Price.  The purchase price of the
Shares covered by the Option is set forth in your Grant Letter.

 

3.             Vesting.  Except in the event of your
Normal Retirement (Termination of Employment on or after age 60 if the sum of
your age and full years of service with the Company is at least 70), Retirement
(Termination of Employment on or after age 55 if the sum of your age and full
years of service with the Company is at least 60), Termination of Employment,
Death, Disability or a Change in Control, the Option will become exercisable in
installments of one fourth (1/4) of the Shares specified in your Grant Letter
per year over four (4) years.  Your
vested right will be calculated on the anniversary of the Grant Date.  No credit will be given for periods following
Termination of Employment, except as specifically provided herein.

 

4.             Term of Option.  Unless the Option has been
terminated or cancelled on an earlier date, the Option must be exercised prior
to the close of the New York Stock Exchange (“NYSE”) on the day prior to the 10th anniversary of the Grant
Date.  If the NYSE is not open for
business on the expiration date specified, the Option will expire at the close
of the NYSE’s previous business day.

 

5.             Payment of Exercise Price.  You may pay the Exercise Price
by cash, certified check, bank draft, wire transfer or postal or express money
order. Alternatively, payment may be made by one or more of the following
methods: (i) delivering to UBS Financial Services, or such other Stock
Option Administrator as selected by the Company, a properly executed exercise
notice, together with irrevocable instructions to a broker to deliver promptly
(within the typical settlement cycle for the sale of equity securities on the
relevant trading market, or otherwise in accordance with Regulation T issued by
the Federal Reserve Board) to the Company sale or loan proceeds adequate to
satisfy the portion of the Exercise Price being so paid; (ii) if expressly
approved by the Board of Directors, tendering to the Company (by physical
delivery or attestation) certificates of Common Stock that you have held for
six (6) months or longer (unless the Compensation and Human Resources
Committee (the “Committee”), in its sole discretion, waives this 6-month
period) that have an aggregate Fair Market Value as of the day prior to the 

 

1

 

date of exercise equal to the portion of the
Exercise Price being so paid; or (iii) if such form of payment is
expressly authorized by the Board of Directors or the Committee, instructing
the Company to withhold Shares that would otherwise be issued were the Exercise
Price to be paid in cash that have an aggregate Fair Market Value as of the
date of exercise equal to the portion of the Exercise Price being so paid.  Notwithstanding the foregoing, you may not
tender any form of payment that the Company determines, in its sole and
absolute discretion, could violate any law or regulation. You are not required to
purchase all Shares subject to the Option at one time, but you must pay the
full Exercise Price for all Shares that you elect to purchase before they will
be delivered.

 

6.             Exercise of Option.  Subject to these Terms and
Conditions, the Option may be exercised by contacting (i) UBS Financial Services
Inc. at
[                  ]
if calling from within the U.S. or
[                  ]
if calling from outside the U.S., or (ii) such other stock option
administrator as is selected by the Company. 
If the Option is exercised after your death, the Company will deliver
Shares only after the Committee has determined that the person exercising the
Option is the duly appointed executor or administrator of your estate or the
person to whom the Option has been transferred by your will or by the applicable
laws of descent and distribution.

 

7.             Retirement,
Termination of Employment, Disability or Death.  The Option will vest and remain exercisable
as set forth below (or as set forth in sections 8, 9 or 10 as applicable), in
the case of Termination of Employment, Retirement, Normal Retirement,
Disability or Death:

 

	
  Event

  	
   

  	
  Vesting

  	
   

  	
  Exercise

  
	
  Voluntary Termination of Employment (other than
  Retirement or Normal Retirement)

  	
   

  	
  Unvested Awards are forfeited as of Termination
  of Employment.

  	
   

  	
  Vested Awards expire on earlier of
  (i) original expiration date, or (ii) 90 days after Termination of
  Employment.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Involuntary Termination of Employment not for Cause

  	
   

  	
  Unvested Awards are forfeited as of Termination
  of Employment, except as otherwise provided in sections 8, 9 or 10.

  	
   

  	
  Vested Awards expire on earlier of
  (i) original expiration date, or (ii) 90 days after Termination of
  Employment, except as otherwise provided in sections 8, 9 or 10.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Termination of Employment for Cause

  	
   

  	
  Unvested Awards are immediately forfeited as of
  Termination of Employment.

  	
   

  	
  Vested Awards are immediately cancelled upon
  Termination of Employment.

  

 

2

 

	
  Retirement (as defined in section 3)

  	
   

  	
  Unvested Awards are forfeited if your Retirement
  occurs less than 12 months after the Grant Date. On or after the 1st anniversary of the Grant Date,
  Awards vest pro rata based on the number of full years of service you complete commencing
  on the Grant Date and ending on your Termination of Employment divided by the
  number of years required to achieve complete vesting (with an offset for
  shares previously vested).

  	
   

  	
  Vested Awards expire earlier of (i) original
  expiration date, or (ii) 3 years after Termination of Employment.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Normal Retirement (as defined in section 3)

  	
   

  	
  Unvested Awards are forfeited if your Normal
  Retirement occurs less than 12 months after the Grant Date. On or after the 1st anniversary of the Grant Date,
  Awards become fully vested as of your Termination of Employment.

  	
   

  	
  Vested Awards expire earlier of (i) original
  expiration date, or (ii) 3 years after your Termination of Employment.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Disability or Death

  	
   

  	
  Unvested Awards become fully vested as of your
  Termination of Employment.

  	
   

  	
  Vested Awards expire earlier of (i) original
  expiration date, or (ii) 3 years after your Termination of Employment.

  

 

Termination of Employment means the date of
cessation of an Employee’s employment relationship with the Company or a
subsidiary for any reason, with or without Cause, as determined by the Company.
The Severance & Retention Plan for Headquarters Group Move Program
shall not apply to this Award.

 

8.             Change in Control.  In the event of a Change in
Control of Tyco International Ltd.,  and
your Change in Control Termination,  or a
Termination of Employment by reason of a “Good Reason Resignation” which
qualifies you for severance benefits under the Tyco International Ltd. Change
in Control Severance Plan for Certain U. S. Officers and Executives (the “CIC
Severance Plan”) within two (2) years following a Change in Control, your
Option will immediately become fully vested. 
Your Option will expire on the earlier of (i) the original
expiration date or (ii) three (3) years from the effective date of
your Change in Control 

 

3

 

Termination or your Termination of Employment
by reason of a Good Reason Resignation, as described in the preceding sentence.

 

9.             Termination of Employment
as a Result of Divestiture or Outsourcing.  Notwithstanding any provision to the contrary
in section 7, if your involuntary Termination of Employment other than for
Cause is as a result of a Disposition of Assets, Disposition of a Subsidiary or
Outsourcing Agreement, your Option Award will vest on a pro-rata basis
based on the following formula: (i) the number of whole months of service
that you have completed from the Grant Date through the closing date of the
applicable transaction divided by original number of months of the vesting
period, times the difference between (a) the total number of shares
awarded under the Option, and (b) the number of shares previous vested.
The vested portion of your Option Award will expire on the earlier of the
original expiration date of the Award or three (3) years after the date of
your Termination of Employment.

 

Notwithstanding
the foregoing, you shall not be eligible for such pro-rata vesting and extended
expiration date if, (i) your Termination of Employment occurs on or prior
to the closing date of such Disposition of Assets or Disposition of a Subsidiary,
as applicable, or on such later date as is specifically provided in the
applicable transaction agreement or related agreements, or on the effective
date of such Outsourcing Agreement applicable to you (the “Applicable
Employment Date”), and (ii) you are offered Comparable Employment with the
buyer, successor company or outsourcing agent, as applicable, but do not
commence such employment on the Applicable Employment Date.

 

For
purposes of this section 9, “Comparable Employment” is defined as employment at
a base salary rate and bonus target that is at least equal to the base salary
rate and bonus target in effect immediately prior to your termination of
employment and at a location that is no more than 50 miles from your job
location in effect immediately prior to your termination of employment;  “Disposition of Assets” shall mean the
disposition by the Company or a Subsidiary by which you are employed of all or
a portion of the assets used by the Company or Subsidiary in a trade or
business to an unrelated corporation or entity; “Disposition of a Subsidiary”
shall mean the disposition by the Company or a Subsidiary of its interest in a
subsidiary or controlled entity to an unrelated individual or entity, provided
that such subsidiary or entity ceases to be an affiliated company as a result
of such disposition; and “Outsourcing Agreement” shall mean a written agreement
between the Company or a Subsidiary and an unrelated third party (“Outsourcing
Agent”) pursuant to which (i) the Company transfers the performance of
services previously performed by employees of the Company or Subsidiary to the
Outsourcing Agent, and (ii) the Outsourcing Agent is obligated to offer
employment to any employee whose employment is being terminated as a result of
or in connection with said Outsourcing Agreement.

 

10.          Termination
of Employment — Executives.  If (i) your
Termination of Employment occurs twelve months or later after the Grant Date, (ii) upon
your Termination of Employment you are a Section 16 Officer or employed in
a job classification Band 1 or Band 2, and (iii) you are involuntarily
terminated for reasons other than Cause, you will continue to vest in any
portion of your Award that had not vested as of the date of your Termination of
Employment for a period of twelve months following your termination date, and
the vested portion of your Award will expire on the earlier of (i) the
original expiration date of the Award 

 

4

 

or
(ii) twelve months after the date of your Termination of Employment or
such later date as is applicable under section 7.  If your Termination of Employment occurs less
than twelve months after the Grant Date your unvested Options will be forfeited
as of your Termination of Employment.

 

11.          Withholdings; Tax
Recovery.  The Company will have the right, prior to the
issuance or delivery of any Shares in connection with the exercise of the
Option, to withhold or demand from you payment of the amount necessary to
satisfy applicable tax requirements, as determined by the Committee.  The methods described in section 5 may also
be used to pay your withholding tax obligation.

 

12.          Transfer of Option.  You may not transfer the Option
or any interest in the Option except by will or the laws of descent and distribution.  Notwithstanding the foregoing, you may
transfer the Option to members of your immediate family or to one or more
trusts for the benefit of family members or to one or more partnerships in
which the family members are the only partners, provided that (i) you do
not receive any consideration for the transfer, (ii) you furnish the
Committee or its designee with detailed written notice of the transfer at least
three (3) business days in advance, and (iii) the Committee or its
designee consents in writing.  For this
purpose, “family member” means any spouse, children, grandchildren, parents,
grandparents, siblings, nieces, nephews and grandnieces and grandnephews,
including adopted, in-laws and step family members. Any Option transferred
pursuant to this provision will continue to be subject to the same terms and
conditions that were applicable to the Option immediately prior to
transfer.  The Option may be exercised by
the transferee only to the same extent that you could have exercised the Option
had no transfer occurred.

 

13.          Covenant; Forfeiture of
Award; Agreement to Reimburse Company.

 

(a)           If you have been
terminated from employment for Cause, including without limitation a
termination as a result of your violation of the Company’s Code of Ethical
Conduct, any outstanding vested or unvested stock options shall be immediately
rescinded and you will forfeit any rights you have with respect to those
Options.  Furthermore, by not declining
this Award you agree and promise immediately to deliver to the Company Shares
(or, in the discretion of the Committee, cash) equal in value to the amount of
any profit you realized upon an exercise of the Option during the period
beginning six (6) months prior to your Termination of Employment for Cause
and ending on the 6 month anniversary of your Termination of Employment for
Cause, including, without limitation, a termination as a result of your
violation of the Company’s Code of Ethical Conduct.

 

(b)           If the Committee
determines, in its sole discretion, that at any time after the Grant Date and
prior to the second anniversary of your Termination of Employment you (i) disclosed
business confidential or proprietary information related to any business of the
Company or Subsidiary or (ii) have entered into an employment or
consultation arrangement (including any arrangement for employment or service
as an agent, partner, stockholder, consultant, officer or director) with any
entity or person engaged in a business, which arrangement would likely (in the
sole judgment of the Committee) result in the disclosure of business
confidential or proprietary information related to any business of the Company
or a Subsidiary to a business that is competitive with any Company or
Subsidiary business as to 

 

5

 

which you have had access to business strategic
or confidential information, and the Committee has not approved the arrangement
in writing, then any Option that you have not exercised (whether vested or
unvested) will immediately be rescinded, and you will forfeit any rights you
have with respect to these Options as of the date of the Committee’s
determination.

 

14.          Adjustments.  In the event of any stock
split, reverse stock split, dividend or other distribution (whether in the form
of cash, Shares, other securities or other property), extraordinary cash
dividend, recapitalization, merger, consolidation, split-up, spin-off,
reorganization, combination, repurchase or exchange of Shares or other
securities, the issuance of warrants or other rights to purchase Shares or
other securities, or other similar corporate transaction or event, the
Committee shall adjust the number and kind of Shares covered by the Option, the
Exercise Price and other relevant provisions to the extent necessary to prevent
dilution or enlargement of the benefits or potential benefits intended to be
provided by the Option.  Any such
determinations and adjustments made by the Committee will be binding on all
persons.

 

15.          Restrictions on Exercise.  Exercise of the Option is
subject to the conditions that, to the extent required at the time of exercise,
(a) the Shares covered by the Option will be duly listed, upon official
notice of issuance, on the NYSE, and (b) a Registration Statement under
the Securities Act of 1933 with respect to the Shares will be effective or an
exemption from registration will apply. 
The Company will not be required to deliver any Common Stock until all
applicable federal and state laws and regulations have been complied with and
all legal matters in connection with the issuance and delivery of the Shares
have been approved by the appropriate counsel of the Company.

 

16.          Disposition of Securities.  By not declining the Award, you
acknowledge that you have read and understand the Company’s Insider Trading
Policy, and are aware of and understand your obligations under federal
securities laws with respect to trading in the Company’s securities, and you
agree not to exercise your option at any time when doing so would result in a
violation of securities law.  You also
acknowledge that the Company will have the right to recover, or receive
reimbursement for, any compensation or profit realized on the exercise of the
Option or by the disposition of Shares received upon exercise of the Option to
the extent that the Company has a right of recovery or reimbursement under
applicable securities laws or under its pay recoupment policy.

 

17.          Plan Terms Govern.  The exercise of the Option, the
disposition of any Shares received upon exercise of the Option, and the
treatment of any gain on the disposition of these Shares are subject to the
terms of the Plan and any rules that the Committee may prescribe.  The Plan document, as may be amended from
time to time, is incorporated by reference into these Terms and Conditions.  Capitalized terms used in these Terms and
Conditions have the meaning set forth in the Plan, unless otherwise stated in
these Terms and Conditions.  In the event
of any conflict between the terms of the Plan and the terms of these Terms and
Conditions, the terms of the Plan will control. 
By not declining the Award, you acknowledge receipt of the Plan, as in
effect on the date of these Terms and Conditions.

 

18.          Personal Data.  To comply with applicable law
and to administer the Plan and these Terms and Conditions properly, the Company
and its agents may hold and process your 

 

6

 

personal data and/or sensitive personal
data.  Such data includes, but is not
limited to, the information provided in this grant package and any changes
thereto, other appropriate personal and financial data about you, and
information about your participation in the Plan and Shares obtained under the
Plan from time to time.  By not declining
the Award, you hereby give your explicit consent to the Company’s processing
any such personal data and/or sensitive personal data, and you also hereby give
your explicit consent to the Company’s transfer of any such personal data
and/or sensitive personal data outside the country in which you work or reside
and to the United States.  The legal
persons for whom your personal data is intended include the Company and any of
its Subsidiaries (or former Subsidiaries as are deemed necessary), the outside Plan
administrator as selected by the Company from time to time, and any other
person that the Company may find in its administration of the Plan to be
appropriate.  You have the right to
review and correct your personal data by contacting your local Human Resources
Representative.  By not declining the
Award, you understand and acknowledge that the transfer of the information
outlined here is important to the administration of the Plan, and that failure
to consent to the transmission of such information may limit or prohibit your
participation in the Plan.

 

19.          No Contract of Employment
or Promise of Future Grants.  By not declining the Award, you agree to be
bound by these Terms and Conditions and acknowledge that the Award is granted
at the sole discretion of the Company and is not considered part of any
contract of employment with the Company or your ordinary or expected salary or
other compensation, and that the Award will not be considered as part of such
salary or compensation for purposes of any pension benefits or in the event of
severance, redundancy or resignation.  If
your employment with the Company or a Subsidiary is terminated for any reason,
whether lawfully or unlawfully, you acknowledge and agree that you will not be
entitled by way of damages for breach of contract, dismissal or compensation
for loss of office or otherwise to any sum, shares or other benefits to
compensate you for the loss or diminution in value of any actual or prospective
rights, benefits or expectation under or in relation to the Plan.

 

20.          Limitations.  Nothing in these Terms and
Conditions or the Plan gives you any right to continue in the employ of the
Company or any of its Subsidiaries or to interfere in any way with the right of
the Company or any Subsidiary to terminate your employment at any time.  Payment of Shares is not secured by a trust,
insurance contract or other funding medium, and you do not have any interest in
any fund or specific asset of the Company by reason of the Option.  You have no rights as a stockholder of the
Company pursuant to the Option until Shares are actually delivered you.

 

21.          Incorporation of Other
Agreements.  These Terms and Conditions and the Plan
constitute the entire understanding between you and the Company regarding the
Option.  These Terms and Conditions
supercede any prior agreements, commitments or negotiations concerning the
Option, except as otherwise provided in section 17 above.

 

22.          Severability.  The invalidity or
unenforceability of any provision of these Terms and Conditions will not affect
the validity or enforceability of the other provisions of these Terms and
Conditions, which will remain in full force and effect.  Moreover, if any provision is found to be
excessively broad in duration, scope or covered activity, the provision will be
construed so as to be enforceable to the maximum extent compatible with
applicable law.

 

7

 

By not declining this Award, you agree to and
acknowledge the following:

 

(i)            you have carefully
read, fully understand and agree to all of the terms and conditions described
in these Terms and Conditions and the Plan; and

 

(ii)           you understand and
agree that these Terms and Conditions and the Plan constitute a binding
agreement between you and the Company and represent the entire understanding
between you and the Company regarding the Option, and that any prior
agreements, commitments or negotiations concerning the Option are replaced and
superseded.

 

You will be deemed to consent to the
application of the terms and conditions set forth in these Terms and Conditions
and the Plan unless you contact Tyco International Ltd., c/o Equity Plan
Administration, 9 Roszel Road, Princeton, NJ 
08540 in writing within sixty (60) days of the date of these Terms and
Conditions.  Notification of your
non-consent will nullify this grant unless otherwise agreed to in writing by
you and the Company.

 

 

	
   

  	
   

  
	
   

  	
  Edward D. Breen

  
	
   

  	
  Chairman of the Board

  
	
   

  	
  and Chief Executive Officer,

  
	
   

  	
  Tyco International Ltd.

  

 

8

 

Tyco International Ltd.

2004 Stock and Incentive Plan (the “Plan”)

 

TERMS AND CONDITIONS

OF

PERFORMANCE SHARE UNIT AWARD

 

PERFORMANCE SHARE UNIT AWARD made in Princeton,
New Jersey, as of
[          ] (“Grant Date”).

 

1.             Grant of Award.  Tyco International Ltd. (“the
Company”) has granted you Performance Share Units, as described in the grant
notification letter issued to you (“Grant Letter”), subject to the provisions
of these Terms and Conditions.  The
Company will hold the Performance Share Units in a bookkeeping account on your
behalf until they become payable or are forfeited or cancelled.

 

2.             Payment Amount.  Each Performance Share Unit
represents the right to receive upon vesting, one (1) Share of Common
Stock (as may be adjusted in accordance with section 5(b)).

 

3.             Form of Payment.  Your vested Performance Share
Unit Award, determined in accordance with section 5, will be redeemed solely
for Shares, subject to sections 15 and 16.

 

4.             Dividends.  For each Performance Share Unit
that is outstanding, you will be credited with a Dividend Equivalent Unit (DEU)
for any cash dividends distributed by the Company on Company Common Stock.  DEUs will be calculated at the same dividend
rate paid to other holders of Common Stock. 
DEUs will vest in accordance with the vesting schedule applicable to the
underlying Units, shall be subject to adjustment based on the same performance
measures applicable to the underlying units, and shall be payable at the same
time that the underlying units are payable, and subject to the same award
adjustment as the underlying units, as provided herein.

 

5.             (a) Vesting.  Subject to section 5(b), your
Performance Share Unit Award will fully vest at the end of the Performance
Cycle, as described in Appendix A, if you are then an active employee or
qualify for any exception described herein. Any payment shall be made as soon
as practicable following the end of the Performance Cycle.

 

(b)  Award Adjustment.  The target number of
Performance Share Units specified in your Grant Letter shall be adjusted at the
end of the Performance Cycle based on the level of attainment of the
performance measures and satisfaction of the other terms and conditions
described in Appendix A.  Such adjustment
shall range from 0% to 200% of the target Award set forth in your Grant
Letter.  The determination of the
attainment of the performance measures and satisfaction of any other applicable
terms and conditions will be made in the sole discretion of the Compensation
and Human Resources Committee (the “Committee”).

 

6.             Termination of Employment.  Any Performance Share Units
that have not been earned as of your Termination of Employment pursuant to
sections 7 through 11 will immediately be forfeited, and your rights with
respect to these Performance Share Units will end. Termination of Employment
means the date of cessation of an Employee’s employment relationship with the
Company or a subsidiary for any reason, with or without Cause, as determined by
the Company.

 

7.             Death or Disability.  If your Termination of Employment
is the result of your Death or Disability, you will earn a pro rata portion of
your Award, if any, determined in accordance with section 5 above, based on the
number of full months you have completed in the performance period applicable
to the 

 

 

Award. Any payment shall be made as soon as
practicable following the end of the Performance Cycle and shall be subject to
adjustment under section 5(b).

 

If you are deceased, the Company will make the
payment, if any, to your estate as soon as practicable following the end of the
Performance Cycle following your death.

 

8.             Retirement.  For purposes of this section 8,
“Retirement” means Termination of Employment on or after age 55 if the sum of
your age and full years of service with the Company is at least 60, and “Normal
Retirement” means Termination of Employment on or after age 60 if the sum of
your age and full years of service with the Company is at least 70.  If your employment with the Company
terminates because of your Retirement or Normal Retirement less than 12 months
after the Grant Date, your Performance Share Units will immediately be
forfeited and your rights with respect to such Units will end.  If your employment with the Company
terminates because of your Retirement twelve or more months after the Grant
Date, you will earn a pro rata portion of your Award, if any Award is payable
with respect to the Performance Cycle, determined in accordance with section 5
above, based on the number of full months you have completed in the Performance
Cycle applicable to the Award.  Any
unearned portion of your Award will immediately be forfeited and your rights
with respect to such Units will end.  If
your employment with the Company terminates because of your Normal Retirement
twelve or more months after the Grant Date, your Award will be determined in
accordance with section 5 above, as if you had continued active employment
through the end of the Performance Cycle applicable to the Award. Any payment
shall be made as soon as practicable following the end of the Performance
Cycle.

 

9.             Change in Control.  In the event of a Change in
Control of Tyco International Ltd, unless otherwise provided in this section 9,
the terms and conditions applicable to your Award under this Agreement shall
continue in effect, except that no adjustment shall be made under section
5(b).  Notwithstanding the preceding
sentence, your Award shall vest and become immediately payable upon a Change in
Control Termination, or a Termination of Employment by reason of a “Good Reason
Resignation”, within two (2) years following a Change In Control, which
qualifies you for severance benefits under the Tyco International Ltd. Change
in Control Severance Plan for Certain U. S. Officers and Executives (the “CIC
Severance Plan”).  Any Award payable
pursuant to the preceding sentence shall be paid at the target number of
Performance Share Units specified in your Grant Letter (and shall include any
DEUs credited under section 4) as soon as practicable following your Change in
Control Termination or Good Reason Resignation upon a Change in Control.  If prior to the Change in Control, you had
satisfied the Retirement provisions of section 8 and terminated your employment
because of your Retirement or Normal Retirement, or previously terminated
employment as a result of Death or Disability as described in section 7, your
Award (as determined under sections 7 and 8) shall be paid to you as soon as
practicable following the Change in Control and no adjustment shall be made
under section 5(b).

 

10.          Termination of Employment
as a Result of Divestiture or Outsourcing.  Notwithstanding any
provision to the contrary in sections 6 through 9, if
your involuntary Termination of Employment other than for Cause is a result of
a Disposition of Assets, Disposition of a Subsidiary or Outsourcing Agreement,
you will earn a pro rata portion of your Award, if any, as is determined in
accordance with section 5 above, based on the number of full months of service
you have completed in the Performance Cycle applicable to the Award through the
closing date of the applicable transaction. Any payment shall be made as soon as practicable following the end of
the Performance Cycle, and shall be subject to adjustment as described in
section 5(b).

 

Notwithstanding
the foregoing, you shall not earn any portion of your Award in accordance with
the preceding paragraph if (i) your Termination of Employment occurs on or
prior to the closing date of such Disposition of Assets or Disposition of a
Subsidiary, as applicable, or on such later date as is specifically provided in
the applicable transaction agreement, or on the effective date of such
Outsourcing Agreement applicable to you, and (ii) you are offered
Comparable Employment with the buyer, successor company or outsourcing agent,
as applicable, but do not commence such employment on the Applicable Employment
Date.

 

2

 

For
the purposes of this section 10, “Comparable Employment” is defined as
employment at a base salary rate and bonus target that is at least equal to the
base salary rate and bonus target in effect immediately prior to your
termination of employment and at a location that is no more than 50 miles from
your job location in effect immediately prior to your termination of employment;
“Disposition of Assets” shall mean the disposition by the Company or a
Subsidiary by which you are employed of all or a portion of the assets used by
the Company or Subsidiary in a trade or business to an unrelated corporation or
entity;  “Disposition of a Subsidiary”
shall mean the disposition by the Company or a Subsidiary of its interest in a
subsidiary or controlled entity to an unrelated individual or entity, provided
that such subsidiary or entity ceases to be an affiliated company as a result of
such disposition; and “Outsourcing Agreement” shall mean a written agreement
between the Company or a Subsidiary and an unrelated third party (“Outsourcing
Agent”) pursuant to which (i) the Company transfers the performance of
services previously performed by employees of the Company or Subsidiary to the
Outsourcing Agent, and (ii) the Outsourcing Agent is obligated to offer
employment to any employee whose employment is being terminated as a result of
or in connection with said Outsourcing Agreement.

 

11.          Termination of Employment
with Severance Benefits.  If your Termination of Employment (i) occurs twelve months or more
after the Grant Date, (ii) is for a reason other than individual
performance, and (iii) you are eligible to receive severance benefits under
a severance plan maintained by the Company or a Subsidiary or an employment
agreement, your Award will  immediately
be forfeited and your rights with respect to these Performance Share Units will
end, unless the severance plan or agreement expressly provides that you may
earn a pro rata portion your Award, if any, determined in accordance with
section 5 above, based on the number of full months you have completed in the
Performance Cycle applicable to the Award. Any payment shall be made as soon as
practicable following the end of the Performance Cycle subject to adjustment as
described in section 5(b). Notwithstanding the foregoing, the Severance &
Retention Plan for Headquarters Group Move Program shall not apply to this
Award.

 

12.          Withholdings.  The Company will have the
right, prior to any issuance or delivery of Shares based on your Performance
Share Units, to withhold or require from you payment of the amount necessary to
satisfy applicable tax requirements, as determined by the Committee.  If you have not satisfied your tax
withholding requirements in a timely manner, the Company will have the right to
sell the number of Shares from your Award necessary to generate proceeds
sufficient to satisfy such requirements. 
In addition, the Company shall have the right, if so provided under
applicable law, to recover any taxes relating to this Award that the Company or
any of its affiliates pays on your behalf.

 

13.          Transfer of Award.  You may not transfer any
interest in Performance Share Units except by will or the laws of descent and
distribution.  Any other attempt to
dispose of your interest in Performance Share Units will be null and void.

 

14.          Covenant; Forfeiture of
Award; Agreement to Reimburse Company.

 

(a)           If you have been
terminated from employment for Cause, including without limitation a
termination as a result of your violation of the Company’s Code of Ethical
Conduct, any unearned Performance Share Units shall be immediately rescinded
and you will forfeit any rights you have with respect to such Units.  Furthermore, by not declining this
Performance Share Unit Award, you hereby agree and promise immediately to
deliver to the Company the number of Shares (or, in the discretion of the
Committee, the cash value of said shares) you received for Performance Share
Units during the period beginning six (6) months prior to your Termination
of Employment for Cause and ending on the later of (i) the second
anniversary of your Termination of Employment for Cause, Termination of
Employment for Cause including, without limitation, a termination as a result
of your violation of the Company’s Code of Ethical Conduct, or (ii) 60
days following the end of the applicable Performance Cycle.

 

3

 

(b)           If the Committee determines,
in its sole discretion, that at any time after the Grant Date and prior to the
second anniversary of your Termination of Employment you (i) disclosed
business confidential or proprietary information related to any business of the
Company or Subsidiary or (ii) have entered into an employment or
consultation arrangement (including any arrangement for employment or service
as an agent, partner, stockholder, consultant, officer or director) with any
entity or person engaged in a business, which arrangement would likely (in the
sole judgment of the Committee) result in the disclosure of business
confidential or proprietary information related to any business of the Company
or a Subsidiary to a business that is competitive with any Company or Subsidiary
business as to which you have had access to business strategic or confidential
information, and the Committee has not approved the arrangement in writing,
then any unearned Performance Share Units will immediately be rescinded, and
you will forfeit any rights you have with respect to these Performance Share
Units as of the date of the Committee’s determination.

 

15.          Adjustments.  In the event of any stock
split, reverse stock split, dividend or other distribution (whether in the form
of cash, Shares, other securities or other property), extraordinary cash
dividend, recapitalization, merger, consolidation, split-up, spin-off,
reorganization, combination, repurchase or exchange of Shares or other
securities, the issuance of warrants or other rights to purchase Shares or
other securities, or other similar corporate transaction or event, the
Committee shall adjust the number and kind of Shares covered by the Performance
Share Units and other relevant provisions to the extent necessary to prevent
dilution or enlargement of the benefits or potential benefits intended to be
provided by the Performance Share 
Units.  Any such determinations
and adjustments made by the Committee will be binding on all persons.

 

16.          Restrictions on Payment of
Shares. 
Payment of Shares for your Performance Share Units is subject to the
conditions that, to the extent required at the time of vesting, (a) the
Shares underlying the Performance Share Units will be duly listed, upon
official notice of redemption, on the NYSE, and (b) a Registration
Statement under the Securities Act of 1933 with respect to the Shares will be
effective.  The Company will not be
required to deliver any Common Stock until all applicable federal and state
laws and regulations have been complied with and all legal matters in
connection with the issuance and delivery of the Shares have been approved by
the appropriate counsel of the Company.

 

17.          Disposition of Securities.  By not declining the Award, you
acknowledge that you have read and understand the Company’s Insider Trading
Policy, and are aware of and understand your obligations under federal
securities laws in respect of trading in the Company’s securities.  You also acknowledge that the Company will
have the right to recover, or receive reimbursement for, any compensation or
profit realized on the disposition of Shares received for Performance Share
Units to the extent that the Company has a right of recovery or reimbursement
under applicable securities laws or under its pay recoupment policy.

 

18.          Plan Terms Govern.  The redemption of Performance
Share Units, the disposition of any Shares received for Performance Share
Units, and the treatment of any gain on the disposition of these Shares are
subject to the terms of the Plan and any rules that the Committee may
prescribe.  The Plan document, as may be
amended from time to time, is incorporated by reference into these Terms and
Conditions.  Capitalized terms used in
these Terms and Conditions have the meaning set forth in the Plan, unless
otherwise stated in these Terms and Conditions. 
In the event of any conflict between the terms of the Plan and the terms
of these Terms and Conditions, the terms of the Plan will control.  By not declining the Award, you acknowledge
receipt of the Plan and the prospectus, as in effect on the date of these Terms
and Conditions.

 

19.          Personal Data.  To comply with applicable law
and to administer the Plan and these Terms and Conditions properly, the Company
and its agents may hold and process your personal data and/or sensitive personal
data.  Such data includes, but is not
limited to, the information provided in this grant package and any changes
thereto, other appropriate personal and financial data about you, and
information about your participation in the Plan and Shares obtained under the
Plan from time to time.  By not declining
the Award, you hereby give your explicit consent to the Company’s processing
any such personal data and/or sensitive personal data, and you also hereby give
your explicit consent to the Company’s transfer of any such personal 

 

4

 

data and/or sensitive personal data outside the
country in which you work or reside and to the United States.  The legal persons for whom your personal data
is intended include the Company and any of its Subsidiaries (or former
Subsidiaries as are deemed necessary), the outside Plan administrator as
selected by the Company from time to time, and any other person that the
Company may find in its administration of the Plan to be appropriate.  You have the right to review and correct your
personal data by contacting your local Human Resources Representative.  By not declining the Award, you understand
and acknowledge that the transfer of the information outlined here is important
to the administration of the Plan, and that failure to consent to the
transmission of such information may limit or prohibit your participation in
the Plan.

 

20.          No Contract of Employment
or Promise of Future Grants.  By not declining the Award, you agree to be
bound by these Terms and Conditions and acknowledge that the Award is granted
at the sole discretion of the Company and is not considered part of any
contract of employment with the Company or your ordinary or expected salary or
other compensation, and that the Award will not be considered as part of such
salary or compensation for purposes of any pension benefits or in the event of
severance, redundancy or resignation.  If
your employment with the Company or a Subsidiary is terminated for any reason,
whether lawfully or unlawfully, you acknowledge and agree that you will not be
entitled by way of damages for breach of contract, dismissal or compensation
for loss of office or otherwise to any sum, shares or other benefits to
compensate you for the loss or diminution in value of any actual or prospective
rights, benefits or expectation under or in relation to the Plan.

 

21.          Limitations.  Nothing in these Terms and
Conditions or the Plan gives you any right to continue in the employ of the
Company or any of its Subsidiaries or to interfere in any way with the right of
the Company or any Subsidiary to terminate your employment at any time.  Payment of your Performance Share Units is
not secured by a trust, insurance contract or other funding medium, and you do
not have any interest in any fund or specific asset of the Company by reason of
this Award or the account established on your behalf.  You have no rights as a stockholder of the
Company pursuant to the Performance Share Units until Shares are actually delivered
to you.

 

22.          Incorporation of Other
Agreements.  These Terms and Conditions (including
Appendix A) and the Plan constitute the entire understanding between you and
the Company regarding the Performance Share Units.  These Terms and Conditions supersede any
prior agreements, commitments or negotiations concerning the Performance Share
Units, except as otherwise provided in section 18 above.

 

23.          Severability.  The invalidity or
unenforceability of any provision of these Terms and Conditions will not affect
the validity or enforceability of the other provisions of the Agreement, which
will remain in full force and effect. 
Moreover, if any provision is found to be excessively broad in duration,
scope or covered activity, the provision will be construed so as to be
enforceable to the maximum extent compatible with applicable law.

 

24.          Delayed Payment.  Notwithstanding
anything in these Terms and Conditions to the contrary, if the Company
determines that you  are a “specified
employee” within the meaning of Section 409A(a)(2)(B) of the United
States Internal Revenue Code and the regulations thereunder, and  you become entitled to payment of Performance
Units on account of your Termination of Employment, such payment shall be
delayed until six (6) months following your Termination of Employment if
the Company reasonably determines that your Award is subject to the provisions
of Section 409A of the United States Internal Revenue Code and the
regulations thereunder.  Your Award shall
continue to be credited with Dividend Equivalent Units during any such six (6) month
delay period.

 

25.          Section 409A.  Payments under the Plan may be
subject to Section 409A of the Internal Revenue Code. The Committee may
make such modifications to these Terms and Conditions as it deems necessary or
appropriate to comply with Section 409A.

 

5

 

By not declining this Award, you agree to and
acknowledge the following:

 

(i)            you have carefully
read, fully understand and agree to all of the terms and conditions described
in these Terms and Conditions and the Plan; and

 

(ii)           you understand and
agree that these Terms and Conditions and the Plan constitute a binding
agreement between you and the Company and represent the entire understanding
between you and the Company regarding the Award, and that any prior agreements,
commitments or negotiations concerning the Performance Share Units are replaced
and superseded.

 

You will be deemed to consent to the
application of the terms and conditions set forth in these Terms and Conditions
and the Plan unless you contact Tyco International Ltd., c/o Equity Plan
Administration, 9 Roszel Road, Princeton, NJ 
08540 in writing within sixty (60) days of the date of these Terms and
Conditions.  Notification of your
non-consent will nullify this grant unless otherwise agreed to in writing by
you and the Company.

 

 

	
   

  	
   

  
	
   

  	
  Edward D. Breen

  
	
   

  	
  Chairman of the Board

  
	
   

  	
  and Chief Executive Officer,

  
	
   

  	
  Tyco International, Ltd.

  

 

6

 

Tyco International Ltd.

2004 Stock and Incentive Plan (the “Plan”)

 

TERMS AND CONDITIONS

OF

RESTRICTED UNIT AWARD

 

RESTRICTED UNIT AWARD made in Princeton, New
Jersey, as of
[              ]
(the “Grant Date”).

 

1.             Grant of Award.  Tyco
International Ltd. (the “Company) has granted you Restricted Units, as
described in the grant notification letter that was issued to you (“Grant
Letter”), subject to the provisions of these Terms and Conditions.  The Company will hold the Restricted Units in
a bookkeeping account on your behalf until they become payable or are forfeited
or cancelled.

 

2.             Payment Amount.  Each
Restricted Unit represents the right to receive, upon vesting, one (1) Share
of Common Stock.

 

3.             Form of Payment. 
Vested Restricted Units will be redeemed solely for Shares, subject to
sections 14 and 15.

 

4.             Dividends.  For each
Restricted Unit that remains outstanding, you will be credited with a Dividend
Equivalent Unit (DEU) for any cash dividends distributed by the Company on
Company Common Stock.  DEUs will be
calculated at the same dividend rate paid to other holders of Common
Stock.  DEUs will vest in accordance with
the vesting schedule applicable to the underlying Units and shall be payable at
the same time that the underlying units are payable as provided herein.

 

5.             Vesting.  Except in
the event of your Normal Retirement (Termination of Employment on or after age
60 if the sum of your age and full years of service with the Company is at
least 70), Retirement (Termination of Employment on or after age 55 if the sum
of your age and full years of service with the Company is at least 60),
Termination of Employment, Death or Disability or a Change in Control, your
Restricted Units will vest in installments of one fourth (1/4) of the Shares
specified in your Grant Letter per year over four (4) years. Your vested
right will be calculated on the anniversary of the Grant Date.  No credit will be given for periods following
Termination of Employment, except as specifically provided herein. Except as
otherwise provided in these Terms and Conditions, any payment shall be made to
you as soon as practicable following the vesting date set forth in this section
5.

 

6.             Termination of Employment. 
In connection with your Termination of Employment for a reason other
than as described in sections 7, 8, 9 or 10 below, any Restricted Units that
have not vested as of your Termination of Employment will immediately be
forfeited, and your rights with respect to such Units will end. “Termination of
Employment” means the date of cessation of an Employee’s employment
relationship with the Company or a Subsidiary 

 

1

 

for any reason, with or without Cause, as
determined by the Company. The Severance & Retention Plan for Headquarters
Group Move Program shall not apply to this Award.

 

7.             Death or Disability. 
If your Termination of Employment is the result of your Death or
Disability, your Award will become fully vested as of your Termination of
Employment.  In the event that your Termination
of Employment is a result of your Death, the Company will make a payment to
your estate within 90 days following your death.  In the event that your Termination of
Employment is a result of your Disability, any payment shall be made to you as
soon as practicable following your Termination of Employment.

 

8.             Retirement.  If your
Termination of Employment is the result of your Retirement or Normal Retirement
(as defined in section 5) less than twelve months after the Grant Date, your
Restricted Units will immediately be forfeited and your rights with respect to
such Units will end. If your Termination of Employment is a result of your
Retirement twelve or more months after the Grant Date, your Restricted Units
will vest pro rata (in full year increments) based on the following
formula: the number of whole years of service that
you have completed from the Grant Date through your Date of
Termination divided by the original number of years of the vesting period,
times the difference between (a) the total number of shares awarded under
the Grant and (b) the number of shares previously vested.  Any unearned portion of your
Award will immediately be forfeited and your rights with respect to such Units
will end.  If your Termination of
Employment is a result of your Normal Retirement, your Restricted Units will
immediately become fully vested. Any payment shall be made to you as soon as
practicable following your Termination of Employment (adjusted to reflect any
payments previously made to you under section 5).

 

9.             Change in Control.  In
the event of a Change in Control of Tyco International Ltd., and your Change in
Control Termination or a Termination of Employment by reason of a “Good Reason
Resignation” which qualifies you for severance benefits under the Tyco
International Change in Control Severance Plan for Certain U. S. Officers and
Executives (the “CIC Severance Plan”) within two (2) years following a
Change in Control, Restricted Units will immediately become fully vested and
payment shall be made as soon as practicable following such Change in Control
Termination or Good Reason Resignation.

 

10.          Termination of Employment as a Result of Divestiture or Outsourcing.  Notwithstanding any
provision to the contrary in sections 6 through 9, if
your involuntary Termination of Employment other than for Cause is as a result
of a Disposition of Assets, Disposition of a Subsidiary or Outsourcing
Agreement, your Restricted Unit Award will vest pro rata (in full-month
increments) based on the following formula: the number of whole
months of service that you have
completed from the Grant Date through the closing date of the applicable
transaction divided by the original number of months of the vesting period,
times the difference between (a) the total number of shares awarded under
the Grant and (b) the number of shares previously vested.  Any payment shall be made to you
as soon as practicable following the date you vest.

 

Notwithstanding
the foregoing, you shall not be eligible for such pro-rata vesting if, (i) your
Termination of Employment occurs on or prior to the closing date of such
Disposition of Assets or Disposition of a Subsidiary, as applicable, or on such
later date as is specifically 

 

2

 

provided
in the applicable transaction agreement or related agreements, or on the
effective date of such Outsourcing Agreement applicable to you (the “Applicable
Employment Date”), and (ii) you are offered Comparable Employment with the
buyer, successor company or outsourcing agent, as applicable, but do not
commence such employment on the Applicable Employment Date.

 

For
the purposes of this section 10, “Comparable Employment” shall mean employment
at a base salary rate and bonus target that is at least equal to the base salary
rate and bonus target in effect immediately prior to your termination of
employment and at a location that is no more than 50 miles from your job
location in effect immediately prior to your termination of employment; “Disposition
of Assets” shall mean the disposition by the Company or a Subsidiary by which
you are employed of all or a portion of the assets used by the Company or
Subsidiary in a trade or business to an unrelated corporation or entity; “Disposition
of a Subsidiary” shall mean the disposition by the Company or a Subsidiary of
its interest in a subsidiary or controlled entity to an unrelated individual or
entity, provided that such subsidiary or entity ceases to be an affiliated
company as a result of such disposition; and “Outsourcing Agreement” shall mean
a written agreement between the Company or a Subsidiary and an unrelated third
party (“Outsourcing Agent”) pursuant to which (i) the Company transfers
the performance of services previously performed by employees of the Company or
Subsidiary to the Outsourcing Agent, and (ii) the Outsourcing Agent is
obligated to offer employment to any employee whose employment is being
terminated as a result of or in connection with said Outsourcing Agreement.

 

11.          Withholdings; Tax Recovery. 
The Company will have the right, prior to any issuance or delivery of
Shares on your Restricted Units, to withhold or require from you payment of the
amount necessary to satisfy applicable tax requirements, as determined by the
Compensation and Human Resources Committee (the “Committee”).  If you have not satisfied your tax
withholding requirements in a timely manner, the Company will have the right to
sell the number of Shares from your Award necessary to generate proceeds
sufficient to satisfy such requirements. In addition, the Company shall have
the right, if so provided under local law, to recover any taxes relating to
this Award that the Company or any affiliate pays on your behalf.

 

12.          Transfer of Award. 
You may not transfer any interest in Restricted Units except by will or
the laws of descent and distribution. 
Any other attempt to dispose of your interest in Restricted Units will
be null and void.

 

13.          Forfeiture of Award; Confidentiality; Non-Competition;
Non-Solicitation; Agreement to Reimburse Company.

 

(a) If you have been terminated from
employment for Cause, including without limitation a termination as a result of
your violation of the Company’s Code of Ethical Conduct, any unvested
Restricted Units shall be immediately rescinded and you will forfeit any rights
you have with respect to such Units. Furthermore, by accepting this Award and
not declining this Award, you agree and promise immediately to deliver to the
Company the number of Shares (or, in the discretion of the Committee, the cash
value of said shares) you received for Restricted Units that vested or were
delivered during the period beginning six (6) months prior to your
Termination of Employment for Cause and ending on the 6-month anniversary of
your 

 

3

 

Termination of Employment for Cause, including,
without limitation, a termination as a result of your violation of the Company’s
Code of Ethical Conduct.

 

(b) You agree that during your employment
with the Company or its Subsidiaries, and thereafter, you will not disclose
confidential or proprietary information, or trade secrets, related to any
business of the Company or the Subsidiary. 
Except as prohibited by law, you agree that during your employment with
the Company or its Subsidiaries, and for the one (1) year period following
your Termination of  Employment for any
reason, you will not directly or indirectly, own, manage, operate, control
(including indirectly through a debt or equity investment), provide services to,
or be employed by, any person or entity engaged in any business that is (i) located in a region with respect to
which you had substantial responsibilities while employed by the Company or its
Subsidiaries, and (ii) competitive, with (A) the line of
business or businesses of the Company or its Subsidiaries that you were
employed with during your employment (including any prospective business to be
developed or acquired that was proposed at the date of termination), or (B) any
other business of the Company or its Subsidiaries with respect to which you had
substantial exposure during such employment.

 

Except as prohibited by law, you further agree
that during your employment with the Company or its Subsidiaries, and for the
two (2) year period thereafter, you will not, directly or indirectly, on
your own behalf or on behalf of another (i) solicit, recruit, aid or
induce any employee of the Company or any of its Subsidiaries to leave their
employment with the Company or its Subsidiaries in order to accept employment
with or render services to another person or entity unaffiliated with the
Company or its Subsidiaries, or hire or knowingly take any action to assist or
aid any other person or entity in identifying or hiring any such employee, or (ii) solicit,
aid, or induce any customer of the Company or any of its Subsidiaries to
purchase goods or services then sold by the Company or its Subsidiaries from
another person or entity, or assist or aid any other persons or entity in
identifying or soliciting any such customer, or (iii) otherwise interfere
with the relationship of the Company or any of its Subsidiaries with any of its
employees, customers, agents, or representatives.

 

Irreparable injury will result to the Company,
and to its business, in the event of a breach by you of any of your covenants
and commitments under this Agreement, including the covenants of
non-competition and non-solicitation. 
Therefore, in the event of a breach of such covenants and commitments,
in the sole discretion of the Company, any of your unvested Restricted Units
shall be immediately rescinded and you will forfeit any rights you have with
respect to such Units. Furthermore, by accepting the award, and not declining
the award, in the event of such a breach, upon demand by the Company, you
hereby agree and promise immediately to deliver to the Company the number of
Shares (or, in the discretion of the Committee, the cash value of said shares)
you received for Restricted Units that vested or were delivered during the
period beginning six (6) months prior to your Termination of Employment
and ending on the six (6) month anniversary of your Termination of
Employment.  In addition, the Company
reserves all rights to seek any and all remedies and damages permitted under
law, including, but not limited to, injunctive relief, equitable relief and
compensatory damages.

 

4

 

14.          Adjustments.  In the
event of any stock split, reverse stock split, dividend or other distribution
(whether in the form of cash, Shares, other securities or other property),
extraordinary cash dividend, recapitalization, merger, consolidation, split-up,
spin-off, reorganization, combination, repurchase or exchange of Shares or
other securities, the issuance of warrants or other rights to purchase Shares
or other securities, or other similar corporate transaction or event, the
Committee shall adjust the number and kind of Shares covered by the Restricted
Units and other relevant provisions to the extent necessary to prevent dilution
or enlargement of the benefits or potential benefits intended to be provided by
the Restricted Units.  Any such
determinations and adjustments made by the Committee will be binding on all
persons.

 

15.          Restrictions on Payment of Shares.  Payment of Shares for your Restricted Units
is subject to the conditions that, to the extent required at the time of
delivery, (a) the Shares underlying the Restricted Units will be duly
listed, upon official notice of redemption, on the NYSE, and (b) a
Registration Statement under the Securities Act of 1933 with respect to the
Shares will be effective.  The Company
will not be required to deliver any Common Stock until all applicable federal
and state laws and regulations have been complied with and all legal matters in
connection with the issuance and delivery of the Shares have been approved by
the appropriate counsel of the Company.

 

16.          Disposition of Securities. 
By accepting the Award and not declining the Award, you acknowledge that
you have read and understand the Company’s Insider Trading Policy, and are
aware of and understand your obligations under federal securities laws in
respect of trading in the Company’s securities. 
You also acknowledge that the Company will have the right to recover, or
receive reimbursement for, any compensation or profit realized on the
disposition of Shares received for Restricted Units to the extent that the
Company has a right of recovery or reimbursement under applicable securities
laws or under its pay recoupment policy.

 

17.          Plan Terms Govern. 
The redemption of Restricted Units, the disposition of any Shares
received for Restricted Units, and the treatment of any gain on the disposition
of these Shares are subject to the terms of the Plan and any rules that
the Committee may prescribe.  The Plan
document, as may be amended from time to time, is incorporated by reference
into these Terms and Conditions. 
Capitalized terms used in these Terms and Conditions have the meaning
set forth in the Plan, unless otherwise stated in these Terms and
Conditions.  Except with
respect to the choice of law provision, in the event of any conflict between the terms of the Plan and the
terms of these Terms and Conditions, the terms of the Plan will control.  By accepting the Award and not declining the
Award, you acknowledge receipt of the Plan and the prospectus, as in effect on
the date of these Terms and Conditions.

 

18.          Personal Data.  To
comply with applicable law and to administer the Plan and these Terms and
Conditions properly, the Company and its agents may hold and process your
personal data and/or sensitive personal data. 
Such data includes, but is not limited to, the information provided in
this grant package and any changes thereto, other appropriate personal and
financial data about you, and information about your participation in the Plan
and Shares obtained under the Plan from time to time.  By accepting the Award and not declining the
Award, you hereby give your explicit consent to the Company’s processing any
such personal data and/or sensitive personal data, and you also hereby give
your explicit consent to the Company’s transfer of any such personal data
and/or sensitive personal data outside the country 

 

5

 

in which you work or reside and to the United
States.  The legal persons for whom your
personal data is intended include the Company and any of its Subsidiaries (or
former Subsidiaries as are deemed necessary), the outside Plan administrator as
selected by the Company from time to time, and any other person that the
Company may find in its administration of the Plan to be appropriate.  You have the right to review and correct your
personal data by contacting your local Human Resources Representative.  By accepting the Award and not declining the
Award, you understand and acknowledge that the transfer of the information
outlined here is important to the administration of the Plan, and that failure
to consent to the transmission of such information may limit or prohibit your
participation in the Plan.

 

19.          No Contract of Employment or Promise of Future Grants.  By accepting the Award and not declining the
Award, you agree to be bound by these Terms and Conditions and acknowledge that
the Award is granted at the sole discretion of the Company and is not considered
part of any contract of employment with the Company or your ordinary or
expected salary or other compensation, and that the Award will not be
considered as part of such salary or compensation for purposes of any pension
benefits or in the event of severance, redundancy or resignation.  If your employment with the Company or a
Subsidiary is terminated for any reason, whether lawfully or unlawfully, you
acknowledge and agree that you will not be entitled by way of damages for
breach of contract, dismissal or compensation for loss of office or otherwise
to any sum, shares or other benefits to compensate you for the loss or
diminution in value of any actual or prospective rights, benefits or
expectation under or in relation to the Plan.

 

20.          Limitations.  Nothing
in these Terms and Conditions or the Plan gives you any right to continue in
the employ of the Company or any of its Subsidiaries or to interfere in any way
with the right of the Company or any Subsidiary to terminate your employment at
any time.  Payment of your Restricted
Units is not secured by a trust, insurance contract or other funding medium,
and you do not have any interest in any fund or specific asset of the Company
by reason of this Award or the account established on your behalf.  You have no rights as a stockholder of the
Company pursuant to the Restricted Units until Shares are actually delivered to
you.

 

21.          Incorporation of Other Agreements.  These Terms and Conditions and the Plan
constitute the entire understanding between you and the Company regarding the
Restricted Units.  These Terms and
Conditions supercede any prior agreements, commitments or negotiations
concerning the Restricted Units, except as otherwise provided in section 17
above.

 

22.          Severability.  The
invalidity or unenforceability of any provision of these Terms and Conditions
will not affect the validity or enforceability of the other provisions of the
Agreement, which will remain in full force and effect.  Moreover, if any provision is found to be
excessively broad in duration, scope or covered activity, the provision will be
construed so as to be enforceable to the maximum extent compatible with
applicable law.

 

23.          Delayed Payment.  Notwithstanding
anything in these Terms and Conditions to the contrary, if the Company determines
that you are a “specified employee” within the meaning of Section 409A(a)(2)(B) of
the United States Internal Revenue Code and the regulations thereunder, and you
become entitled to payment of Restricted Units on account of your Termination
of Employment, such payment shall be delayed until six (6) months
following your 

 

6

 

Termination of Employment if the Company
reasonably determines that your Award is subject to the provisions of Section 409A
of the United States Internal Revenue Code and the regulations thereunder.  Your Award shall continue to be credited with
Dividend Equivalent Units during any such six (6) month delay period.

 

24.          Compliance with Section 409A. 
Payments under the Plan may be subject to Section 409A
of the Internal Revenue Code. The Committee may make such modifications to
these Terms and Conditions as it deems necessary or appropriate to comply with Section 409A.

 

25.          Governing
Law.  The validity, interpretation, construction and performance of
these Terms and Conditions shall be governed by the laws of the state of New
Jersey without reference to principles of conflicts of laws that would direct
the application of the law of any other jurisdiction.

 

26.          Acceptance of Terms and Conditions.  By physically acknowledging this Award you
agree to and acknowledge the following:

 

(i)            you
have carefully read, fully understand and agree to all of the terms and
conditions described in these Terms and Conditions;

 

(ii)           you
understand and agree that these Terms and Conditions constitute a binding
agreement between you and the Company and represent the entire understanding
between you and the Company regarding the Award, and that any prior agreements,
commitments or negotiations concerning the Restricted Units are replaced and
superseded;

 

(iii)          you
acknowledge the authority of the Committee to administer and interpret these
Terms and Conditions and the terms and conditions set forth in the Plan; and

 

(iv)          you
acknowledge that these Terms and Conditions contain a noncompetition
provision that may impact your ability to perform certain services in the
future.

 

Failure to affirmatively reject
this Award before December 11, 2010 will result in your immediate and
automatic acceptance of this Award and the Terms and Conditions under which
this Award is governed, including the noncompetition provision contained
therein.  You
must therefore reject this Award or acknowledge these Terms and Conditions by
returning the enclosed Acceptance Form to Tyco International Ltd., c/o
Equity Plan Administration, 9 Roszel Road, Princeton, NJ  08540 including your written signature within
ninety (90) days of the date of these Terms and Conditions.  Notification of your rejection will nullify
this grant unless otherwise agreed to in writing by you and the Company.

 

 

	
   

  	
   

  
	
   

  	
  Edward D. Breen

  
	
   

  	
  Chairman of the Board

  
	
   

  	
  and Chief Executive Officer,

  
	
   

  	
  Tyco International, Ltd.

  

 

7

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