Document:

Exhibit 10.2

 

COVIDIEN LTD.

2007 STOCK AND INCENTIVE PLAN

(EFFECTIVE AS OF JUNE     , 2007)

 

ARTICLE I

 

PURPOSE

 

1.1    Purpose.
The purposes of this Covidien Ltd. 2007 Stock and Incentive Plan
(the “Plan”) are to promote the interests of Covidien Ltd. (and any successor
thereto) by (i) aiding in the recruitment and retention of Directors and
Employees, (ii) providing incentives to Directors and Employees by means of
performance-related incentives to achieve short-term and long-term performance
goals, (iii) providing Directors and Employees with an opportunity to
participate in the growth and financial success of the Company, and (iv)
promoting the growth and success of the Company’s business by aligning the
financial interests of Directors and Employees with that of the other
stockholders of the Company. Toward these objectives, the Plan provides for the
grant of Stock Options, Stock Appreciation Rights, Annual Performance Bonuses,
Long Term Performance Awards and Other Stock-Based Awards.

 

1.2    Effective
Date; Shareholder Approval. The Plan is effective as of the date of
the Separation, as defined below. The Plan was approved by the Board of
Directors of Covidien Ltd. on June 1, 2007 and by Tyco International Ltd., as
the Company’s sole shareholder on June   , 2007.

 

ARTICLE II

DEFINITIONS

 

For purposes of the Plan,
the following terms have the following meanings, unless another definition is
clearly indicated by particular usage and context:

 

“
Acquired Company “ means any
business, corporation or other entity acquired by the Company or any
Subsidiary.

 

“
Acquired Grantee “ means the
grantee of a stock-based award of an Acquired Company and may include a current
or former Director of an Acquired Company.

 

“
Annual Performance Bonus “ means
an Award of cash or Shares granted under Section 4.4 of the Plan that is paid
solely on account of the attainment of a specified performance target in
relation to one or more Performance Measures.

 

“
Award “ means any form of
incentive or performance award granted under the Plan, whether singly or in
combination, to a Participant by the Committee pursuant to any terms and
conditions that the Committee may establish and set forth in the applicable
Award Certificate. Awards granted under the Plan may consist of:

 

(a)    “ Stock Options “ awarded pursuant to
Section 4.3;

 

(b)    “ Stock
Appreciation Rights “ awarded pursuant to Section 4.3;

 

(c)    “ Annual
Performance Bonuses “ awarded pursuant to Section 4.4;

 

(d)    “ Long
Term Performance Awards “ awarded pursuant to Section 4.5;

 

(e)    “ Other
Stock-Based Awards “ awarded pursuant to Section 4.6;

 

(f)    “ Director
Awards “ awarded pursuant to Section 4.7; and

 

(g)    “ Substitute
Awards “ awarded pursuant to Section 4.8.

 

“
Award Certificate “ means the
document issued, either in writing or an electronic medium, by the Committee or
its designee to a Participant evidencing the grant of an Award and which
contains, in the same or accompanying 

 

 

document, the terms and
conditions applicable to such Award..

 

“
Board “ means the Board of
Directors of the Company.

 

“
Cause “ means misconduct that is
willfully or wantonly harmful to the Company or any of its Subsidiaries,
monetarily or otherwise including, without limitation, conduct that violates
the Company’s Code of Ethical Conduct.

 

“
Change in Control “ means the
first to occur of any of the following events:

 

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

 

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

 

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

 

(d)    approval by the stockholders of the Company
of a complete liquidation or dissolution of the Company;

 

provided, however, that if
and to the extent that any provision of this Plan or an Award Certificate
applicable to a Long Term Performance Award, a Restricted Unit Award or a
Deferred Stock Unit Award would cause a payment of deferred compensation that
is subject to Code Section 409A(a)(2) to be made upon the occurrence of a “Change
in Control,” then such payment shall not be made unless such “Change in Control”
satisfies the requirements of Code Section 409A(a)(2)(A)(v) and applicable
regulations and rulings thereunder.

 

“
Change in Control Termination “
means a Participant’s involuntary termination of employment that occurs during
the twelve (12) month period immediately following a Change in Control. For
this purpose, a Participant’s involuntary termination of employment includes
only the following:

 

2

 

(a)                            termination of the Participant’s employment
by the Company for any reason other than for Cause, Disability or death;

 

(b)                           termination of the Participant’s employment
by the Participant after one of the following events, provided that the
Participant’s termination of employment occurs within sixty (60) days after the
occurrence of any such event:

 

(i)             the Company (1) assigns or causes to be
assigned to the Participant duties inconsistent in any material respect with
his or her position as in effect immediately prior to the Change in Control;
(2) makes or causes to be made any material adverse change in the Participant’s
position (including titles and reporting relationships and level), authority,
duties or responsibilities; or (3) takes or causes to be taken any other action
which, in the reasonable judgment of the Participant, would cause him or her to
violate his or her ethical or professional obligations (after written notice of
such judgment has been provided by the Participant to the Company and the
Company has been given a 15-day period within which to cure such action), or
which results in a significant diminution in such position, authority, duties
or responsibilities; or

 

(ii)          the Company, without the Participant’s consent, (1) requires the
Participant to relocate to a principal place of employment more than fifty (50)
miles from his or her existing place of employment; or (2) reduces the
Participant’s base salary, annual bonus, or retirement, welfare, stock
incentive, perquisite (if any) and other benefits taken as a whole.

 

“
Code “ means the United States
Internal Revenue Code of 1986, as amended.

 

“
Committee “ means the
Compensation and Human Resources Committee of the Board or any successor
committee or other committee to which the Compensation and Human Resources
Committee delegates its authority under this Plan. The Compensation and Human
Resources Committee is comprised solely of nonemployee directors within the
meaning of Rule 16b-3(b)(3) of the Exchange Act and two or more persons who are
outside directors within the meaning of Section 162(m)(4)(C)(i) of the Code and
the applicable regulations.

 

“
Common Stock “ means the common
stock of the Company, $       (U.S.) par
value, and such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 5.3 of the Plan.

 

“
Company “ means Covidien Ltd., a
Bermuda company, or any successor thereto.

 

“
Deferred Stock Unit “ means a
Unit granted under Section 4.6 or 4.7 to acquire Shares upon Termination of
Directorship or Termination of Employment, subject to any restrictions that the
Committee, in its discretion, may determine.

 

“
Director “ means a member of the
Board who is a “non-employee director” within the meaning of Rule 16b-3(b)(3)
under the Exchange Act.

 

“
Disabled “ or “ Disability “ means the inability of the
Director or Employee to perform the material duties pertaining to such Director’s
directorship or such Employee’s employment due to a physical or mental injury,
infirmity or incapacity for 180 days (including weekends and holidays) in any
365-day period. The existence or nonexistence of a Disability shall be
determined by an independent physician selected by the Company and reasonably
acceptable to the Director or Employee. Notwithstanding the above, if and to
the extent that any provision of this Plan or an Award Certificate applicable
to a Long Term Performance Award, a Restricted Unit Award or a Deferred Stock
Unit Award would cause a payment of deferred compensation that is subject to
Code Section 409A(a)(2) to be made upon the occurrence of a “Disability” or
upon a person becoming “Disabled,” then such payment shall not be made unless
such “Disability” or condition of being “Disabled” satisfies the requirements
of Code Section 409A(a)(2)(C) and applicable regulations and rulings
thereunder.

 

“
Dividend Equivalent “ means an
amount equal to the cash dividend or the Fair Market Value of the stock
dividend that would be paid on each Share underlying an Award if the Share were
duly issued and outstanding on the date on which the dividend is payable.

 

3

 

“
Effective Date “ means the date
of Separation, as defined below.

 

“
Employee “ means any individual
who performs services as an officer or employee of the Company or a Subsidiary.

 

“
Exchange Act “ means the United
States Securities Exchange Act of 1934, as amended.

 

“
Exercise Price “ means the price
of a Share, as fixed by the Committee, which may be purchased under a Stock
Option or with respect to which the amount of any payment pursuant to a Stock
Appreciation Right is determined.

 

“
Fair Market Value “ of a Share
means, solely with respect to Awards issued as part of the Founders Grant, the
volume weighted average price of a Share as reported on the New York Stock
Exchange during the first day of trading of Common Stock after Separation and,
with respect to all other grants issued thereafter or for other purposes as
provided for in the Plan, the closing sales price on the New York Stock
Exchange of a Share on the trading day of the grant or on the date as of which
the determination of Fair Market Value is being made or, if no sale is reported
for such day, on the next preceding day on which a sale of Shares is reported.
Notwithstanding anything to the contrary herein, the Fair Market Value of a
Share will in no event be determined to be less than par value.

 

“
Fair Market Value Stock Option “
means a Stock Option the Exercise Price of which is fixed by the Committee at a
price equal to the Fair Market Value of a Share on the date of grant.

 

“
Founders Grant “ means the grant
of an Award made in connection with, and solely as a result of, the Separation.

 

“
GAAP “ means United States
generally accepted accounting principles.

 

“
Incentive Stock Option “ means a
Stock Option granted under Section 4.3 of the Plan that meets the requirements
of Section 422 of the Code and any related regulations and is designated in the
Award Certificate to be an Incentive Stock Option.

 

“
Key Employee “ means an Employee
who is a “covered employee” within the meaning of Section 162(m)(3) of the
Code.

 

“
Long-Term Performance Award “
means an Award granted under Section 4.5 of the Plan that is paid solely on
account of the attainment of a specified performance target in relation to one
or more Performance Measures or other performance criteria as selected in the sole
discretion of the Committee.

 

“
Non-Employee Director “ means any
member of the Board, elected or appointed, who is not otherwise an Employee of
the Company or a Subsidiary. An individual who is elected to the Board at an
annual meeting of the stockholders of the Company will be deemed to be a member
of the Board as of the date of such meeting.

 

“
Nonqualified Stock Option “ means
any Stock Option granted under Section 4.3 of the Plan that is not an Incentive
Stock Option.

 

“
Normal Retirement “ means Termination
of Employment on or after a Participant has attained age 60, provided that the
sum of the Participant’s age and years of service with the Company or a
Subsidiary is 70 or higher.

 

“
Other Stock-Based Award “ means
an Award granted under Section 4.6 of the Plan and denominated in Shares.

 

“
Participant “ means a Director,
Employee or Acquired Grantee who has been granted an Award under the Plan.

 

“
Performance Cycle “ means, with
respect to any Award that vests based on Performance Measures, the period of 12
months or longer over which the level of performance will be assessed. The
first Performance Cycle under 

 

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the Plan will begin on such
date as is set by the Committee, in its sole discretion.

 

“ Performance Measure “ means, with respect to any Annual
Performance Bonus or Long Term Performance Award, the business criteria
selected by the Committee to measure the level of performance of the Company
during a Performance Cycle. The Committee may select as the Performance Measure
any operating and maintenance expense targets or financial goals as interpreted
by the Committee, either individually, alternatively or in any combination,
applied to either the Company as a whole or to a business unit or Subsidiary,
either individually, alternatively or in any combination, and measured during
the Performance Cycle including, but not limited to the following criteria: (a)
cash flow, (b) earnings per share, (c) earnings before interest, taxes and
amortization, (d) return on equity, (e) total stockholder return, (f) share
price performance, (g) return on capital, (h) return on assets or net assets,
(i) revenue, (j) income or net income, (k) operating income or net operating
income, (l) operating profit or net operating profit, (m) operating margin or
profit margin, (n) return on operating revenue, (o) return on invested capital,
(p) market segment share, (q) product release schedules, (r) new product
innovation, (s) product cost reduction through advanced technology, (t) brand
recognition/acceptance, (u) product ship targets, or (v) customer satisfaction.

 

“
Performance Unit “ means a Long
Term Performance Award denominated in dollar Units.

 

“
Plan “ means the Covidien Ltd.
2007 Stock and Incentive Plan, as it may be amended from time to time.

 

“
Premium-Priced Stock Option “
means a Stock Option the Exercise Price of which is fixed by the Committee at a
price that exceeds the Fair Market Value of a Share on the date of grant.

 

“
Reporting Person “ means a
Director or an Employee who is subject to the reporting requirements of Section
16(a) of the Exchange Act.

 

“
Restricted Stock “ means Shares
issued pursuant to Section 4.6 that are subject to any restrictions that the
Committee, in its discretion, may impose.

 

“
Restricted Unit “ means a Unit
granted under Section 4.6 to acquire Shares or an equivalent amount in cash,
which Unit is subject to any restrictions that the Committee, in its
discretion, may impose.

 

“
Securities Act “ means the United
States Securities Act of 1933, as amended.

 

“
Separation “ means the effective
date of the separation of Tyco International Ltd. into three separate, publicly
traded companies, one for each of (i) the healthcare business, which shall be
owned and conducted, directly or indirectly, by the Company, (ii) the
electronics business, which shall be owned and conducted, directly or
indirectly, by Tyco Electronics, Ltd. and (iii) the fire and security and
engineered products and services business, which shall be owned and conducted, directly
or indirectly, by Tyco International Ltd. as consummated by the dividend
distribution of Company shares to the Tyco International Ltd. shareholders of
record on the distribution date.

 

“
Share “ means a share of Common
Stock.

 

“
Stock Appreciation Right “ means
a right granted under Section 4.3 of the Plan of an amount in cash or Shares
equal to any difference between the Fair Market Value of the Shares as of the
date on which the right is exercised  and the Exercise Price.

 

“
Stock Option “ means a right
granted under Section 4.3 of the Plan to purchase from the Company a stated
number of Shares at a specified price. Stock Options awarded under the Plan may
be in the form of Incentive Stock Options or Nonqualified Stock Options.

 

“
Subsidiary “ means a subsidiary
company (wherever incorporated) of the Company, as defined by Section 86 of the
Companies Act 1981 of Bermuda, as amended.

 

“
Target Amount “ means the amount
of Performance Units that will be paid if the Performance Measure is fully
(100%) attained, as determined in the sole discretion of the Committee.

 

5

 

“
Target Vesting Percentage “ means
the percentage of performance-based Restricted Units or Shares of Restricted
Stock that will vest if the Performance Measure is fully (100%) attained, as
determined in the sole discretion of by the Committee.

 

“
Termination of Directorship “
means the date of cessation of a Director’s membership on the Board for any
reason, with or without Cause, as determined in the sole discretion of the
Committee, provided however that if the Director is a member of the Committee,
such determination shall be made by the full Board (excluding such Director)..

 

“
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 in the
sole discretion of the Company.

 

“
Unit “ means, for purposes of
Performance Units, the potential right to an Award equal to a specified amount
denominated in such form as is deemed appropriate
in the discretion of the Committee and, for purposes of Restricted Units or
Deferred Stock Units, the potential right to acquire one Share.

 

ARTICLE III

ADMINISTRATION

 

3.1    Committee. The
Plan will be administered by the Committee.

 

3.2    Authority of
the Committee. The Committee or, to the extent required by
applicable law, the Board will have the authority, in its sole and absolute
discretion and subject to the terms of the Plan, to:

 

(a)  Interpret and administer the Plan and any
instrument or agreement relating to the Plan;

 

(b)  Prescribe the rules and regulations that it
deems necessary for the proper operation and administration of the Plan, and
amend or rescind any existing rules or regulations relating to the Plan;

 

(c)  Select Employees to receive Awards under the
Plan;

 

(d)  Determine the form of an Award, the number of
Shares subject to each Award, all the terms and conditions of an Award,
including, without limitation, the conditions on exercise or vesting, the
designation of Stock Options as Incentive Stock Options or Nonqualified Stock
Options, and the circumstances under which an Award may be settled in cash or
Shares or may be cancelled, forfeited or suspended, and the terms of each Award
Certificate;

 

(e)  Determine whether Awards will be granted
singly, in combination or in tandem;

 

(f)  Establish and interpret Performance Measures
(or, as applicable, other performance criteria) in connection with Annual
Performance Bonuses and Long Term Performance Awards, evaluate the level of
performance over a Performance Cycle and certify the level of performance
attained with respect to Performance Measures (or other performance criteria,
as applicable);

 

(g)  Waive or amend any terms, conditions,
restriction or limitation on an Award, except that the prohibition on the
repricing of Stock Options and Stock Appreciation Rights, as described in
Section 4.3(g), may not be waived;

 

(h)  Make any adjustments to the Plan (including
but not limited to adjustment of the number of Shares available under the Plan
or any Award) and any Award granted under the Plan as may be appropriate
pursuant to Section 5.3;

 

(i)  Determine under which circumstances Awards
may be deferred and the extent to which a deferral will be credited with
Dividend Equivalents and interest thereon;

 

(j)  Determine whether a Nonqualified Stock Option
or Restricted Share may be transferable to family 

 

6

 

members, a family trust or a
family partnership;

 

(k)  Establish any subplans and make any
modifications to the Plan, without amending the Plan, or to Awards made
hereunder  (including the establishment of
terms and conditions in the Award Certificate not otherwise inconsistent with
the terms of the Plan) that the Committee  may determine to be necessary
or advisable for grants made in countries outside the United States to comply
with, or to achieve favorable tax treatment under, applicable foreign laws or
regulations or tax policies or customs;

 

(l)  Appoint such agents as it shall deem
appropriate for proper administration of the Plan; and

 

(m)  Take any and all other actions it deems
necessary or advisable for the proper operation or administration of the Plan.

 

3.3    Effect of Determinations.
All determinations of the Committee will be final, binding and
conclusive on all persons having an interest in the Plan.

 

3.4    Delegation
of Authority. The Board or, if permitted under applicable corporate
law, the Committee, in its discretion and consistent with applicable law and
regulations, may delegate to a committee or an officer or group of officers, as
it deems to be advisable, the authority to select Employees to receive an Award
and to determine the number of Shares under any such Award, subject to any
terms and conditions that the Board or the Committee may establish. When the
Board or the Committee delegates authority pursuant to the foregoing sentence,
it will limit, in its discretion, the number of Shares that may be subject to
Awards that the delegate may grant. Only the Committee will have authority to
grant and administer Awards to Directors, Key Employees and other Reporting
Persons or to delegates of the Committee, and to establish and certify
Performance Measures.

 

3.5    Employment of Advisors. The
Committee may employ attorneys, consultants, accountants and other advisors,
and the Committee, the Company and the officers and directors of the Company
may rely upon the advice, opinions or valuations of the advisors employed.

 

3.6    No
Liability. No member of the Committee or any person acting as a
delegate of the Committee with respect to the Plan will be liable for any
losses resulting from any action, interpretation or construction made in good
faith with respect to the Plan or any Award granted under the Plan.

 

ARTICLE IV

AWARDS

 

4.1    Eligibility.
All Participants and Employees are eligible to be designated to
receive Awards granted under the Plan, except as otherwise provided in this
Article IV.

 

4.2    Form of
Awards. Awards will be in the form determined by the Committee, in
its discretion, and will be evidenced by an Award Certificate. Awards may be
granted singly or in combination or in tandem with other Awards.

 

4.3    Stock
Options and Stock Appreciation Rights. The Committee may grant Stock
Options and Stock Appreciation Rights under the Plan to those Employees whom
the Committee may from time to time select, in the amounts and pursuant to the
other terms and conditions that the Committee, in its discretion, may determine
and set forth in the Award Certificate, subject to the provisions below:

 

(a)
   Form. Stock Options granted under
the Plan will, at the discretion of the Committee and as set forth in the Award
Certificate, be in the form of Incentive Stock Options, Nonqualified Stock
Options or a combination of the two. If an Incentive Stock Option and a
Nonqualified Stock Option are granted to the same Participant under the Plan at
the same time, the form of each will be clearly identified, and they will be deemed
to have been granted in separate grants. In no event will the exercise of one
Award affect the right to exercise the other Award. Stock Appreciation Rights
may be granted either alone or in connection with concurrently or previously
granted Nonqualified Stock Options.

 

(b)
   Exercise Price. The Committee
will set the Exercise Price of Fair Market Value Stock Options or Stock
Appreciation Rights granted under the Plan at a price that is equal to the Fair
Market Value of a Share on the date 

 

7

 

of grant, subject to
adjustment as provided in Section 5.3. The Committee will set the Exercise
Price of Premium-Priced Stock Options at a price that is higher than the Fair
Market Value of a Share as of the date of grant, provided that such price is no
higher than 150 percent of such Fair Market Value. The Exercise Price of
Incentive Stock Options will be equal to or greater than 110 percent of the
Fair Market Value of a Share as of the date of grant if the Participant
receiving the Stock Options owns stock possessing more than 10 percent of the
total combined voting power of all classes of stock of the Company or any
subsidiary or parent corporation of the Company, as defined in Section 424 of
the Code. The Exercise Price of a Stock Appreciation Right granted in tandem
with a Stock Option will equal the Exercise Price of the related Stock Option.
The Committee will set forth the Exercise Price of a Stock Option or Stock
Appreciation Right in the Award Certificate or accompanying documentation.
Stock Options granted under the Plan will, at the discretion of the Committee
and as set forth in the Award Certificate or accompanying documentation, be
Fair Market Value Stock Options, Premium-Priced Stock Options or a combination
of Fair Market Value Stock Options and Premium-Priced Stock Options.

 

(c)
   Term and Timing of Exercise. Each
Stock Option or Stock Appreciation Right granted under the Plan will be
exercisable in whole or in part, subject to the following conditions, unless
determined otherwise by the Committee:

 

(i)    A Stock Option or Stock Appreciation Right
will become exercisable at such times and in such manner as determined by the
Committee and set forth in the applicable Award Certificate.

 

(ii)    Unless the applicable Award Certificate
provides otherwise, upon the death, Disability or Normal Retirement (except as
otherwise provided below) of a Participant who has outstanding Stock Options or
Stock Appreciation Rights, the unvested Stock Options or Stock Appreciation
Rights will fully vest. Unless the applicable Award Certificate provides
otherwise, the Participant’s Stock Options and Stock Appreciation Rights will
lapse, and will not thereafter be exercisable, upon the earlier of (A) their
original expiration date or (B) the date that is three (3) years after the date
on which the Participant dies, incurs a Disability or retires due to Normal
Retirement. Upon a Participant’s Normal Retirement at any time after the
Separation, such Participant shall not be entitled to full vesting of Stock
Options or Stock Appreciation Rights issued as the Founders Grant unless such
Normal Retirement occurs at least twelve (12) months after the grant date of
such Founders Grant.

 

(iii)    Unless the applicable Award Certificate provides
otherwise, upon the Termination of Employment of a Participant for any reason
other than the Participant’s death, Disability, Normal Retirement or a Change
in Control Termination, if the Participant has attained age 55 and the sum of
the Participant’s age and years of service with the Company or a Subsidiary is
60 or higher, a pro rata portion of the Participant’s Stock Options and Stock
Appreciation Rights will vest so that the total number of vested Stock Options
or Stock Appreciation Rights held by the Participant at Termination of
Employment (including those that have already vested as of such date) will be
equal to the total number of Stock Options or Stock Appreciation Rights
originally granted to the Participant under each Award multiplied by a
fraction, the numerator of which is the period of time (in whole months) that
have elapsed since the date of grant, and the denominator of which is the
number of months set forth in the applicable Award Certificate that is required
to attain full vesting. Unless the Award Certificate provides otherwise, such
Participant’s Stock Options and Stock Appreciation Rights will lapse, and will
not thereafter be exercisable, upon the earlier of (A) their original
expiration date or (B) the date that is three (3) years after the date of
Termination of Employment.

 

(iv)  Unless the applicable Award Certificate
provides otherwise, upon the Termination of Employment of a Participant that
does not meet the requirements of paragraphs (ii) or (iii) above, any unvested
Stock Options or Stock Appreciation Rights will be forfeited. Unless the
applicable Award Certificate provides otherwise, any Stock Options or Stock
Appreciation Rights that are vested as of such Termination of Employment will
lapse, and will not thereafter be exercisable, upon the earlier of (A) their
original expiration date or (B) the date that is ninety (90) days after the
date of such Termination of Employment.

 

(v)  Stock Options and Stock Appreciation Rights
of a deceased Participant may be exercised only by the estate of the
Participant or by the person given authority to exercise the Stock Options or
Stock Appreciation Rights by the Participant’s will or by operation of law. If
a Stock Option or Stock Appreciation Right is exercised by the executor or administrator
of a deceased Participant, or by the 

 

8

 

person or persons to whom
the Stock Option or Stock Appreciation Right has been transferred by the
Participant’s will or the applicable laws of descent and distribution, the
Company will be under no obligation to deliver Shares or cash until the Company
is satisfied that the person exercising the Stock Option or Stock Appreciation
Right is the duly appointed executor or administrator of the deceased Participant
or the person to whom the Stock Option or Stock Appreciation Right has been
transferred by the Participant’s will or by applicable laws of descent and
distribution.

 

(vi)  A Stock Appreciation Right granted in tandem
with a Stock Option is subject to the same terms and conditions as the related
Stock Option and will be exercisable only to the extent that the related Stock
Option is exercisable.

 

(d)
   Payment of Exercise Price. The
Exercise Price of a Stock Option must be paid in full when the Stock Option is
exercised. Stock certificates will be registered and delivered only upon
receipt of payment. Payment of the Exercise Price may be made in cash or by
certified check, bank draft, wire transfer, or postal or express money order,
provided that the format is approved by the Company or a designated third-party
administrator. The Committee, in its discretion may also allow payment to be
made by any of the following methods, as set forth in the applicable Award
Certificate:

 

(i)    Delivering a properly executed exercise
notice to the Company or its agent, together with irrevocable instructions to a
broker to deliver to the Company, within the typical settlement cycle for the
sale of equity securities on the relevant trading market (or otherwise in accordance
with the provisions of Regulation T issued by the Federal Reserve Board), the
amount of sale proceeds with respect to the portion of the Shares to be
acquired having a Fair Market Value on the date of exercise equal to the sum of
the applicable portion of the Exercise Price being so paid;

 

(ii)    Tendering (actually or by attestation) to
the Company previously acquired Shares that have been held by the Participant
for at least six (6) months, subject to paragraph (iv), and that have a Fair
Market Value on the day prior to the date of exercise equal to the applicable
portion of the Exercise Price being so paid, provided that the Board has
specifically approved the repurchase of such Shares (unless such approval is
not required by the terms of the bye-laws of the Company) and the Committee has
determined that, as of the date of repurchase, the Company is, and after the
repurchase will continue to be, able to pay its liabilities as they become due;
or

 

(iii)    Provided such payment method has been
expressly authorized by the Board or the Committee in advance and subject to
any requirements of applicable law and regulations, instructing the Company to
reduce the number of Shares that would otherwise be issued by such number of
Shares as have in the aggregate a Fair Market Value on the date of exercise
equal to the applicable portion of the Exercise Price being so paid.

 

(iv)    The Committee, in consideration of
applicable accounting standards, may waive any holding period on Shares
required to tender pursuant to clause (ii).

 

(e)
   Incentive Stock Options. Incentive
Stock Options granted under the Plan will be subject to the following
additional conditions, limitations and restrictions:

 

(i)
   Eligibility. Incentive Stock
Options may be granted only to Employees of the Company or a Subsidiary that is
a subsidiary or parent corporation of the Company within the meaning of Section
424 of the Code.

 

(ii)
   Timing of Grant. No Incentive
Stock Option will be granted under the Plan after the 10-year anniversary of
the date on which the Plan is adopted by the Board or, if earlier, the date on
which the Plan is approved by the Company’s stockholders.

 

(iii)
   Amount of Award. Subject to
Section 5.3 of the Plan, no more than 10 million Shares may be available for grant
in the form of Incentive Stock Options. The aggregate Fair Market Value (as of
the date of grant) of the Shares with respect to which the Incentive Stock
Options awarded to any Employee first become exercisable during any calendar
year may not exceed $100,000 (U.S.). For purposes of this 

 

9

 

$100,000 (U.S.) limit, the
Employee’s Incentive Stock Options under this Plan and all other plans
maintained by the Company and its Subsidiaries will be aggregated. To the
extent any Incentive Stock Option would exceed the $100,000 (U.S.) limit, the
Incentive Stock Option will afterwards be treated as a Nonqualified Stock
Option for all purposes.

 

(iv)
   Timing of Exercise. If the
Committee exercises its discretion in the Award Certificate to permit an
Incentive Stock Option to be exercised by a Participant more than three months
after the Participant has ceased being an Employee (or more than 12 months if
the Participant is permanently and totally disabled, within the meaning of
Section 22(e) of the Code), the Incentive Stock Option will afterwards be
treated as a Nonqualified Stock Option for all purposes. For purposes of this
paragraph (iv), an Employee’s employment relationship will be treated as
continuing intact while the Employee is on military leave, sick leave or
another approved leave of absence if the period of leave does not exceed 90
days, or a longer period to the extent that the Employee’s right to
reemployment with the Company or a Subsidiary is guaranteed by statute or by
contract. If the period of leave exceeds 90 days and the Employee’s right to
reemployment is not guaranteed by statute or contract, the employment
relationship will be deemed to have ceased on the 91st day of the leave.

 

(v)
   Transfer Restrictions. In no
event will the Committee permit an Incentive Stock Option to be transferred by
an Employee other than by will or the laws of descent and distribution, and any
Incentive Stock Option awarded under this Plan will be exercisable only by the
Employee during the Employee’s lifetime.

 

(f)
   Exercise of Stock Appreciation Rights. Upon
exercise of a Participant’s Stock Appreciation Rights, the Company will pay
cash or Shares or a combination of cash and Shares, in the discretion of the
Committee and as described in the Award Certificate. Cash payments will be
equal to the excess of the Fair Market Value of a Share on the date of exercise
(or, if the Committee shall so determine, any date during a specified period
before or after the date of exercise) over the Exercise Price, for each Share
for which a Stock Appreciation Right was exercised. If Shares are paid for the
Stock Appreciation Right, the Participant will receive a number of whole Shares
equal to the quotient of the cash payment amount divided by the Fair Market
Value of a Share on the date of exercise. The Committee may make payments after
exercise in a lump sum or defer full payment by annual installments or
otherwise.

 

(g)
   No
Repricing. Except as otherwise provided in Section 5.3, in no event
will the Committee decrease the Exercise Price of a Stock Option or Stock
Appreciation Right after the date of grant or cancel outstanding Stock Options
or Stock Appreciation Rights and grant replacement Stock Options or Stock
Appreciation Rights with a lower Exercise Price than that of the replaced Stock
Options or Stock Appreciation Rights or other Awards without first obtaining
the approval of the holders of a majority of the Shares who are present in
person or by proxy at a meeting of the Company’s stockholders and entitled to
vote.

 

4.4    Annual
Performance Bonuses. The Committee may grant Annual Performance
Bonuses under the Plan in the form of cash or Shares to the Reporting Persons
that the Committee may from time to time select, in the amounts and pursuant to
the terms and conditions that the Committee may determine and set forth in the
Award Certificate, subject to the provisions below:

 

(a)
   Performance Cycles. Annual
Performance Bonuses will be awarded in connection with a twelve (12) month
Performance Cycle, which will be the fiscal year of the Company.

 

(b)
   Eligible Participants. Within
ninety (90) days after the commencement of a Performance Cycle, the Committee
will determine the Reporting Persons who will be eligible to receive an Annual
Performance Bonus under the Plan.

 

(c)
   Performance Measures; Targets; Award
Criteria.

 

(i)    Within ninety (90) days after the
commencement of a Performance Cycle, the Committee will fix and establish in
writing (A) the Performance Measures that will apply to that Performance Cycle;
(B) the Target Amount payable to each Participant; and (C) subject to
subsection (d) below, the criteria for computing the amount that will be paid
with respect to each level of attained performance. The 

 

10

 

Committee will also set
forth the minimum level of performance, based on objective factors, that must
be attained during the Performance Cycle before any Annual Performance Bonus
will be paid and the percentage of the Target Amount that will become payable
upon attainment of various levels of performance that equal or exceed the
minimum required level.

 

(ii)   The Committee may, in its discretion, select
Performance Measures that measure the performance of the Company or one or more
business units, divisions or Subsidiaries of the Company. The Committee may
select Performance Measures that are absolute or relative to the performance of
one or more comparable companies or an index of comparable companies.

 

(iii)
 The Committee, in its discretion, may,
on a case-by-case basis, reduce, but not increase, the amount payable to any
Key Employee with respect to any given Performance Cycle, provided, however,
that no reduction will result in an increase in the amount payable under any
Annual Performance Bonus of another Key Employee.

 

(d)
   Payment, Certification. No Annual
Performance Bonus will vest with respect to any Reporting Person until the
Committee certifies in writing the level of performance attained for the Performance
Cycle in relation to the applicable Performance Measures. In applying
Performance Measures, the Committee may, in its discretion, exclude unusual or
infrequently occurring items (including any event listed in Section 5.3 and the
cumulative effect of changes in the law, regulations or accounting rules), and
may determine no later than ninety (90) days after the commencement of any
applicable Performance Cycle to exclude other items, each determined in
accordance with GAAP (to the extent applicable) and as identified in the
financial statements, notes to the financial statements or discussion and
analysis of management.

 

(e)
   Form of Payment. Annual
Performance Bonuses will be paid in cash or Shares. All such Performance
Bonuses shall be paid no later than the 15th day of the third month following
the end of the calendar year (or, if later, following the end of the Company’s
fiscal year) in which such Performance Bonuses are no longer subject to a
substantial risk of forfeiture (as determined for purposes of Section 409A of
the Code), except to the extent that a Participant has elected to defer payment
under the terms of a duly authorized deferred compensation arrangement.

 

(f)
   Section 162(m) of the Code. It is
the intent of the Company that Annual Performance Bonuses be “performance-based
compensation” for purposes of Section 162(m) of the Code, that this Section 4.4
be interpreted in a manner that satisfies the applicable requirements of
Section 162(m)(4)(C) of the Code and related regulations, and that the Plan be
operated so that the Company may take a full tax deduction for Annual
Performance Bonuses. If any provision of this Plan or any Annual Performance
Bonus would otherwise frustrate or conflict with this intent, the provision
will be interpreted and deemed amended so as to avoid this conflict.

 

(g)
   Acceleration. Each Participant
who is eligible to receive an Annual Performance Bonus with respect to a
Performance Cycle during which a Change of Control occurs will be deemed to
have achieved a level of performance, as of the date of Change in Control, that
would cause all (100%) of the Participant’s Target Amount to become payable at
such times and in such manner as determined in the sole discretion of the
Committee.

 

4.5    Long Term
Performance Awards. The Committee may grant Long Term Performance
Awards under the Plan in the form of Performance Units, Restricted Units or
Restricted Stock to any Employee who the Committee may from time to time
select, in the amounts and pursuant to the terms and conditions that the
Committee may determine and set forth in the Award Certificate, subject to the
provisions below:

 

(a)
   Performance Cycles. Long Term
Performance Awards will be awarded in connection with a Performance Cycle, as
determined by the Committee in its discretion, provided, however, that a
Performance Cycle may be no shorter than twelve (12) months and no longer than
five (5) years.

 

(b)
   Eligible Participants. Within
ninety (90) days after the commencement of a Performance Cycle, the Committee
will determine the Employees who will be eligible to receive a Long Term
Performance Award for the Performance Cycle, provided that the Committee may
determine the eligibility of any Employee other than a Key Employee after the
expiration of this ninety (90) day period.

 

11

 

(c)
   Performance Measures; Targets; Award
Criteria.

 

(i)    Within ninety (90) days after the
commencement of a Performance Cycle, the Committee will fix and establish in
writing (A) the Performance Measures that will apply to that Performance Cycle;
(B) with respect to Performance Units, the Target Amount payable to each
Participant; (C) with respect to Restricted Units and Restricted Stock, the
Target Vesting Percentage for each Participant; and (D) subject to subsection
(d) below, the criteria for computing the amount that will be paid or will vest
with respect to each level of attained performance. The Committee will also set
forth the minimum level of performance, based on objective factors, that must
be attained during the Performance Cycle before any Long Term Performance Award
will be paid or vest, and the percentage of Performance Units that will become
payable and the percentage of performance-based Restricted Units or Shares of
Restricted Stock that will vest upon attainment of various levels of
performance that equal or exceed the minimum required level.

 

(ii)   The Committee may, in its discretion, select
Performance Measures that measure the performance of the Company or one or more
business units, divisions or Subsidiaries of the Company. The Committee may
select Performance Measures that are absolute or relative to the performance of
one or more comparable companies or an index of comparable companies.

 

(iii)  The Committee, in its discretion, may, on a
case-by-case basis, reduce, but not increase, the amount of Long Term
Performance Awards payable to any Key Employee with respect to any given
Performance Cycle, provided, however, that no reduction will result in an
increase in the dollar amount or number of Shares payable under any Long Term
Performance Award of another Key Employee.

 

(iv)   With respect to Employees who are not Key
Employees, the Committee may establish, in its discretion, performance criteria
other than the Performance Measures that will be applicable for the Performance
Cycle.

 

(d)
   Payment, Certification. No Long
Term Performance Award will vest with respect to any Employee until the
Committee certifies in writing the level of performance attained for the
Performance Cycle in relation to the applicable Performance Measures. Long Term
Performance Awards awarded to Participants who are not Key Employees will be
based on the Performance Measures, or other applicable performance criteria,
and payment formulas that the Committee, in its discretion, may establish for
these purposes. These Performance Measures, or other performance criteria, and
formulas may be the same as or different than the Performance Measures and
formulas that apply to Key Employees.

 

In
applying Performance Measures, the Committee may, in its discretion, exclude
unusual or infrequently occurring items (including any event listed in Section
5.3 and the cumulative effect of changes in the law, regulations or accounting
rules, and may determine no later than ninety (90) days after the commencement
of any applicable Performance Cycle to exclude other items, each determined in
accordance with GAAP (to the extent applicable) and as identified in the
financial statements, notes to the financial statements or discussion and
analysis of management.

 

(e)
   Form of Payment. Long Term
Performance Awards in the form of Performance Units may be paid in cash or full
Shares, in the discretion of the Committee, and as set forth in the applicable
Award Certificate. Performance-based Restricted Units and Restricted Stock will
be paid in full Shares. Payment with respect to any fractional Share will be in
cash in an amount based on the Fair Market Value of the Share as of the date
the Performance Unit becomes payable.

 

(f)
   Section 162(m) of the Code. It is
the intent of the Company that Long Term Performance Awards made to Key
Employees be “performance-based compensation” for purposes of Section 162(m) of
the Code, that this Section 4.5 be interpreted in a manner that satisfies the
applicable requirements of Section 162(m)(4)(C) of the Code and related
regulations with respect to Long Term Performance awards made to Key Employees,
and that the Plan be operated so that the Company may take a full tax deduction
for Long Term Performance Awards. If any provision of this Plan or any Long
Term Performance Award would otherwise frustrate or conflict with this intent,
the provision will be interpreted and deemed amended so as to avoid this
conflict.

 

12

 

(g)
   Retirement. If a Participant
would be entitled to a Long Term Performance Award but for the fact that the
Participant’s employment with the Company terminated prior to the end of the
Performance Cycle, the Participant may, in the Committee’s discretion, receive
a Long Term Performance Award, pro rated for the portion of the Performance
Cycle that the Participant completed and payable at the same time after the end
of the Performance Cycle that payments to other Long Term Performance Award
recipients are made, if the sum of the Participant’s age and years of service
with the Company was sixty (60) or higher at the time of Termination of
Employment or if the Participant retired under a Normal Retirement.

 

4.6    Other
Stock-Based Awards. The Committee may, from time to time, grant
Awards (other than Stock Options, Stock Appreciation Rights, Annual Performance
Bonuses or Long Term Performance Awards) to any Employee who the Committee may
from time to time select, which Awards consist of, or are denominated in,
payable in, valued in whole or in part by reference to, or otherwise related
to, Shares. These Awards may include, among other forms, Restricted Stock,
Restricted Units, or Deferred Stock Units. The Committee will determine, in its
discretion, the terms and conditions that will apply to Awards granted pursuant
to this Section 4.6, which terms and conditions will be set forth in the
applicable Award Certificate.

 

(a)
   Vesting. Restrictions on Other
Stock-Based Awards granted under this Section 4.6 will lapse at such times and
in such manner as determined by the Committee and set forth in the applicable
Award Certificate. If the restrictions on Other Stock-Based Awards have not
lapsed or been satisfied as of the Participant’s Termination of Employment, the
Shares will be forfeited by the Participant if the termination is for any
reason other than the Normal Retirement (except for the Founders Grant, as
provided below), death or Disability of the Participant or a Change in Control
Termination, except that the Award will vest pro rata with respect to the
portion of the vesting term set forth in the applicable Award Certificate, that
the Participant has completed if the Participant has attained age 55 and the sum
of the Participant’s age and years of service with the Company is 60 or higher.
All restrictions on Other Stock-Based Awards granted pursuant to this Section
4.6 will lapse upon the Normal Retirement (except for the Founders Grant, as
provided below), death or Disability of the Participant or a Change in Control
Termination. Upon a Participant’s Normal Retirement at any time after the
Separation, such Participant shall not be entitled to full vesting of any Other
Stock-Based Awards issued as the Founders Grant unless such Normal Retirement
occurs at least twelve (12) months after the grant date of Founders Grant.

 

(b)
   Grant of Restricted Stock. The
Committee may grant Restricted Stock to any Employee, which Shares will be
registered in the name of the Participant and held for the Participant by the
Company. The Participant will have all
rights of a stockholder with respect to the Shares, including the right to vote
and to receive dividends or other distributions, except that the Shares may be
subject to a vesting schedule and will be forfeited if the Participant attempts
to sell, transfer, assign, pledge or otherwise encumber or dispose of the
Shares before the restrictions are satisfied or lapse.

 

(c)
   Grant of Restricted Units. The
Committee may grant Restricted Units to any Employee, which Units will be paid
in cash or whole Shares or a combination of cash and Shares, in the discretion
of the Committee, when the restrictions on the Units lapse and any other
conditions set forth in the Award Certificate have been satisfied. For each
Restricted Unit that vests, one Share will be paid or an amount in cash equal
to the Fair Market Value of a Share as of the date on which the Restricted Unit
vests.

 

(d)
   Grant of Deferred Stock Units. The
Committee may grant Deferred Stock Units to any Employee, which Units will be
paid in whole Shares upon the Employee’s Termination of Employment if the
restrictions on the Units have lapsed. One Share will be paid for each Deferred
Stock Unit that becomes payable.

 

(e)
   Dividends
and Dividend Equivalents. At the discretion of the Committee,
dividends issued on Shares may be paid immediately or withheld and deferred in
the Participant’s account. In the event of a payment of dividends on Common
Stock, the Committee may credit Restricted Units with Dividend Equivalents in
accordance with terms and conditions established in the discretion of the
Committee. Dividend Equivalents will be subject to such vesting terms as is
determined by the Committee and may be distributed immediately or withheld and
deferred in the Participant’s account as determined by the Committee and set
forth in the applicable Award Certificate. Deferred Stock Units may, in the
discretion of the Committee and as set forth in the Award Certificate, be
credited with Dividend Equivalents or additional Deferred Stock Units. The
number of any Deferred Stock Units credited to a Participant’s account upon the
payment of a dividend will be equal to the quotient produced by dividing the
cash value of the dividend by the Fair Market Value of one Share as of the date
the dividend is paid. 

 

13

 

The Committee will determine
any terms and conditions on deferral of a dividend or Dividend Equivalent,
including the rate of interest to be credited on deferral and whether interest
will be compounded.

 

4.7    Director
Awards.

 

(a)   As of the first day of each fiscal year of
the Company (or upon a Director’s commencement of service as a Director), the
Committee will grant Deferred Stock Units to each Director in such an amount as
the Board, in its discretion, may approve in advance. Each such Deferred Stock
Unit will vest as determined by the Committee and set forth in the Award
Certificate and will be paid in Shares within thirty (30) days following the
recipient’s Termination of Directorship. Dividend Equivalents or additional
Deferred Stock Units will be credited to each Director’s account when dividends
are paid on Common Stock to the shareholders, and will be paid to the Director at
the same time that the Deferred Stock Units are paid to the Director.

 

(b)   The Committee may, in its discretion, grant
Stock Options, Stock Appreciation Rights and Other Stock-Based Awards to
Directors.

 

4.8    Substitute
Awards. The Committee may make Awards under the Plan to Acquired
Grantees through the assumption of, or in substitution for, outstanding
stock-based awards previously granted to such Acquired Grantees. Such assumed
or substituted Awards will be subject to the terms and conditions of the
original awards made by the Acquired Company, with such adjustments therein as
the Committee considers appropriate to give effect to the relevant provisions
of any agreement for the acquisition of the Acquired Company. Any grant of
Incentive Stock Options pursuant to this Section 4.8 will be made in accordance
with Section 424 of the Code and any final regulations published thereunder.

 

4.9    Limit on
Individual Grants. Subject to Sections 5.1 and 5.3, no Employee may
be granted more than six (6) million Shares over any calendar year pursuant to
Awards of Stock Options, Stock Appreciation Rights and performance-based
Restricted Stock and Restricted Units, except that an incentive Award of no
more than ten (10) million Shares may be made pursuant to Stock Options, Stock
Appreciation Rights and performance-based Restricted Stock and Restricted Units
to any person who has been hired within the calendar year as a Key Employee.
The maximum amount that may be paid in cash or Shares pursuant to Annual
Performance Bonuses or Long Term Performance Awards paid in Performance Units
to any one Employee is $15 million (U.S.) for any Performance Cycle of twelve
(12) months. For any longer Performance Cycle, this maximum will be adjusted
proportionally.

 

4.10    Termination
for Cause. Notwithstanding anything to the contrary herein, if a
Participant incurs a Termination of Directorship or Termination of Employment
for Cause, then all Stock Options, Stock Appreciation Rights, Annual
Performance Bonuses, Long Term Performance Awards, Restricted Units, Restricted
Stock and Other Stock-Based Awards will immediately be cancelled. The exercise
of any Stock Option or Stock Appreciation Right or the payment of any Award may
be delayed, in the Committee’s discretion, in the event that a potential
termination for Cause is pending. If a Participant incurs a Termination of
Directorship or Termination of Employment for Cause, then the Participant will
be required to deliver to the Company (i) Shares (or, in the discretion of the
Committee, cash) equal in value to the amount of any profit the Participant
realized upon the exercise of an Option or Stock Appreciate Right during the
twelve (12) month period occurring immediately prior to the Participant’s
Termination of Directorship or Termination of Employment for Cause; and (ii)
the number of Shares (or, in the discretion of the Committee, the cash value of
Shares) the Participant received for Other Stock Based Awards (including
Restricted Stock, Restricted Units and Deferred Stock Units) that vested during
the period specified in (i) above. If, after a Participant’s Termination of
Directorship or Termination of Employment, the Committee determines in its sole
discretion that while the Participant was a Company or Subsidiary employee or a
Director, such Participant engaged in activity that would have been grounds for
a Termination of Directorship or Termination of Employment for Cause, then the
Company will immediately cancel all Stock Options, Stock Appreciation Rights,
Annual Performance Bonuses, Long Term Performance Awards, Restricted Units,
Restricted Stock and Other Stock-Based Awards and the Participant will be
required to deliver to the Company (A) Shares (or, in the discretion of the
Committee, cash) equal in value to the amount of any profit the Participant
realized upon the exercise of an Option or Stock Appreciate Right during the
period that begins twelve (12) months immediately prior to the Participant’s
Termination of Directorship or Termination of Employment and ends on the date
of the Committee’s determination that the Participant’s conduct would have
constituted grounds for a Termination of Directorship or Termination of
Employment for Cause; and (B) the number of Shares (or, in the discretion of
the Committee, the cash value of said shares) the Participant received for
Other Stock Based Awards (including Restricted Stock, Restricted Units and
Deferred Stock Units) that vested during the period specified in (A) above.

 

14

 

ARTICLE V

SHARES SUBJECT TO THE PLAN; ADJUSTMENTS

 

5.1    Shares
Available. The Shares issuable under the Plan will be authorized but
unissued Shares, and, to the extent permissible under applicable law, Shares
acquired by the Company, any Subsidiary or any other person or entity
designated by the Company. The total number of Shares with respect to which
Awards may be issued under the Plan may equal, but may not exceed, five percent
(5%) of the Shares outstanding as of the Effective Date, and subject to
adjustment in accordance with Section 5.3; provided that when Shares are issued
pursuant to a grant of Restricted Stock, Restricted Units, Deferred Stock
Units, Performance Units or as payment of an Annual Performance Bonus or Other
Stock-Based Award, the total number of Shares remaining available for grant
will be decreased by a margin of at least 1.8 per Share issued. No more than 10
million Shares of the total Shares issuable under the Plan may be available for
grant in the form of Incentive Stock Options.

 

5.2    Counting
Rules. The following Shares related to Awards under this Plan may
again be available for issuance under the Plan, in addition to the Shares
described in Section 5.1:

 

(a)   Shares related to Awards paid in cash;

 

(b)   Shares related to Awards that expire, are
forfeited or cancelled or terminate for any other reason without issuance of
Shares;

 

(c)   Shares that are tendered or withheld in
payment of all or part of the Exercise Price of a Stock Option awarded under
this Plan, or in satisfaction of withholding tax obligations arising under this
Plan;

 

(d)   Any Shares issued in connection with Awards
that are assumed, converted or substituted as a result of the acquisition of an
Acquired Company by the Company or a combination of the Company with another
company; and

 

(e)   Any Shares of Restricted Stock that are
returned to the Company upon a Participant’s Termination of Employment or, if
applicable, a Director’s Termination of Directorship.

 

5.3    Adjustments.
In the event of a change in the outstanding Shares by reason of a
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 or similar corporate transaction or event, the Committee shall make
an appropriate adjustment to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan . Any
adjustment made by the Committee under this Section 5.3 will be conclusive and
binding for all purposes under the Plan.

 

5.4    Change in
Control.

 

(a)
   Acceleration. Unless the
applicable Award Certificate provides otherwise, (i) all outstanding Stock
Options and Stock Appreciation Rights will become exercisable as of the
effective date of a Participant’s Change in Control Termination if the Awards
are not otherwise vested, and all conditions will be waived with respect to
outstanding Restricted Stock and Restricted Units (other than Long Term
Performance Awards) and Deferred Stock Units and (ii) each Participant who has
been granted a Long Term Performance Award that is outstanding as of the date
of such Participant’s Change in Control Termination will be deemed to have
achieved a level of performance, as of the Change in Control Termination, that
would cause all (100%) of the Participant’s Target Amounts to become payable
and all restrictions on the Participant’s performance-based Restricted Units
and Shares of Restricted Stock to lapse. Unless the Committee determines
otherwise in its discretion (either when an Award is granted or any time
thereafter), in the event that Awards outstanding as of the date of a Change in
Control that are payable in shares of Company Common Stock will not be
substituted with comparable awards payable or redeemable in shares of
publicly-traded stock after the Change in Control, each such outstanding Award
(A) will become fully vested (at target, where applicable) immediately prior to
the Change in Control and (B) each such Award that is a Stock Option will be
settled in cash, without the Participant’s consent, for an amount equal to the
amount that could have been attained upon the exercise of such Award
immediately prior to the Change in Control had such Award been exercisable or
payable at such time.

 

15

 

(b)
   Permissive Actions. In addition
to the actions described in Section 5.4(a)(A) and (B), in the event of a Change
in Control, the Committee may take any one or more of the following actions
with respect to any or all outstanding Awards, without the consent of
Participants: (i) the Committee may determine that outstanding Stock Options
and Stock Appreciation Rights shall be fully vested and exercisable and
restrictions on Restricted Stock, Restricted Units, Deferred Stock Units and
Other Stock-Based Awards shall lapse as of the date of the Change in Control or
such other time (prior to a Participant’s Change in Control Termination) as the
Committee determines; (ii) the Committee may require that a Participant
surrender his or her outstanding Stock Options and Stock Appreciation Rights in
exchange for one or more payments by the Company, in cash or Common Stock, as
determined by the Committee, in an amount equal to the amount by which the then
Fair Market Value of the Shares subject to the Participant’s unexercised Stock
Options and Stock Appreciation Rights exceeds the Exercise Price, if any, and
on such terms as the Committee determines; (iii) after giving Participants an
opportunity to exercise any outstanding Stock Options and Stock Appreciation
Rights, the Committee may terminate any or all unexercised Stock Options and
Stock Appreciation Rights at such time as the Committee deems appropriate; (iv)
the Committee may determine that Annual Performance Bonuses and/or Long Term
Performance Awards will be paid out at their target level, in cash or Common
Stock as determined by the Committee; or (v) the Committee may determine that
Awards that remain outstanding after the Change in Control shall be converted
to similar grants of, or assumed by, the surviving corporation (or a parent or
subsidiary of the surviving corporation or successor). Such acceleration,
surrender, termination, settlement, payment or conversion shall take place as
of the date of the Change in Control or such other date as the Committee
determines. The Committee may specify how an Award will be treated in the event
of a Change in Control either when the Award is granted or at any time
thereafter.

 

5.5    Fractional
Shares. No fractional Shares will be issued under the Plan. Except
as otherwise provided in Section 4.5(e) and unless otherwise provided by the
Committee, if a Participant acquires the right to receive a fractional Share
under the Plan, the Participant will receive, in lieu of the fractional Share,
a full Share as of the date of settlement.

 

ARTICLE VI

AMENDMENT AND TERMINATION

 

6.1    Amendment. The
Plan may be amended at any time and from time to time by the Board or
authorized Board committee without the approval of stockholders of the Company,
except that no material revision to the terms of the Plan will be effective
until the amendment is approved by the stockholders of the Company. A revision
is “material” for this purpose if, among other changes, it materially increases
the number of Shares that may be issued under the Plan (other than an increase
pursuant to Section 5.3 of the Plan), expands the types of Awards available
under the Plan, materially expands the class of persons eligible to receive
Awards under the Plan, materially extends the term of the Plan, materially
decreases the Exercise Price at which Stock Options or Stock Appreciation
Rights may be granted, reduces the Exercise Price of outstanding Stock Options
or Stock Appreciation Rights, or results in the replacement of outstanding
Stock Options and Stock Appreciation Rights with new Awards that have an
Exercise Price that is lower than the Exercise Price of the replaced Stock
Options and Stock Appreciation Rights. No amendment of the Plan made without
the Participant’s written consent may adversely affect any right of a
Participant with respect to an outstanding Award.

 

6.2    Termination.
The Plan will terminate upon the earlier of the following dates or
events to occur:

 

(a)    the adoption of a resolution of the Board
terminating the Plan; or

 

(b)    the day before the tenth (10th)
anniversary of the adoption of the Plan by the Company’s shareholder as
described in Section 1.2.

 

No Awards will be granted
under this Plan after it has terminated. The termination of the Plan, however,
will not alter or impair any of the rights or obligations of any person under
any Award previously granted under the Plan without such person’s consent.
After the termination of the Plan, any previously granted Awards will remain in
effect and will continue to be governed by the terms of the Plan and the
applicable Award Certificate.

 

16

 

ARTICLE VII

GENERAL PROVISIONS

 

7.1    Nontransferability of Awards. No
Award under the Plan will be subject in any manner to alienation, anticipation,
sale, assignment, pledge, encumbrance or transfer, and no other persons will
otherwise acquire any rights therein, except as provided below.

 

(a)    Any Award may be transferred by will or by
the laws of descent or distribution.

 

(b)    The Committee may provide in the applicable
Award Certificate that all or any part of a Nonqualified Stock Option or Shares
of Restricted Stock may, subject to the prior written consent of the Committee,
be transferred to a family member. For purposes of this subsection (b), “family
member” includes any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the
Participant, including adoptive relationships, any person sharing the
Participant’s household (other than a tenant or employee), a trust in which
these persons have more than fifty percent (50%) of the beneficial interest, a
foundation in which these persons (or the Participant) control the management
of assets, and any other entity in which these persons (or the Participant) own
more than fifty percent (50%) of the voting interests.

 

Any
transferred Award will be subject to all of the same terms and conditions as
provided in the Plan and the applicable Award Certificate. The Participant or
the Participant’s estate will remain liable for any withholding tax that may be
imposed by any federal, state or local tax authority. The Committee may, in its
discretion, disallow all or a part of any transfer of an Award pursuant to this
subsection (b) unless and until the Participant makes arrangements satisfactory
to the Committee for the payment of any withholding tax. The Participant must
immediately notify the Committee, in the form and manner required by the
Committee, of any proposed transfer of an Award pursuant to this subsection
(b). No transfer will be effective until the Committee consents to the transfer
in writing.

 

(c)    Except as otherwise provided in the
applicable Award Certificate, any Nonqualified Stock Option transferred by a
Participant pursuant to subsection (b) may be exercised by the transferee only
to the extent that the Award would have been exercisable by the Participant had
no transfer occurred. The transfer of Shares upon exercise of the Award will be
conditioned on the payment of any withholding tax.

 

(d)    Restricted Stock may be freely transferred
after the restrictions lapse or are satisfied and the Shares are delivered,
provided, however, that Restricted Stock awarded to an affiliate of the Company
may be transferred only pursuant to Rule 144 under the Securities Act, or
pursuant to an effective registration for resale under the Securities Act. For
purposes of this subsection (d), “affiliate” will have the meaning assigned to
that term under Rule 144.

 

(e)    In no event may a Participant transfer an
Incentive Stock Option other than by will or the laws of descent and
distribution.

 

7.2    Withholding
of Taxes. The Committee, in its discretion, may require the
satisfaction of a Participant’s tax withholding obligations by any of the
following methods or any method as it determines to be in accordance with the
laws of the jurisdiction in which the Participant resides, has domicile or
performs services.

 

(a)
   Stock Options and Stock Appreciation Rights.
As a condition to the delivery of Shares pursuant to the exercise of
a Stock Option or Stock Appreciation Right, the Committee may require that the
Participant, at the time of exercise, pay to the Company by cash, certified
check, bank draft, wire transfer or postal or express money order an amount
sufficient to satisfy any applicable tax withholding obligations. The Committee
may also, in its discretion, accept payment of tax withholding obligations
through any of the Exercise Price payment methods described in Section 4.3(d).

 

(b)
   Other Awards Payable in Shares. The
Participant shall satisfy the Participant’s tax withholding obligations arising
in connection with the release of restrictions on Restricted Units, Restricted
Stock and Other Stock-Based Awards by payment to the Company in cash or by
certified check, bank draft, wire transfer or postal or express money order,
provided that the format is approved by the Company or a designated third-party

 

17

 

administrator. However,
subject to any requirements of applicable law, the Company may also satisfy the
Participant’s tax withholding obligations by other methods, including selling
or withholding Shares that would otherwise be available for delivery, provided
that the Board or the Committee has specifically approved such payment method
in advance.

 

(c)
   Cash Awards. The Company may
satisfy a Participant’s tax withholding obligation arising in connection with
the payment of any Award in cash by withholding cash from such payment.

 

7.3    Special
Forfeiture Provision. The Committee may, in its discretion, provide
in an Award Certificate that the Participant may not, within two (2) years
after the Participant’s Termination of Employment, enter into any employment or
consultation arrangement (including service as an agent, partner, stockholder,
consultant, officer or director) with any entity or person engaged in any
business in which the Company or any Subsidiary is engaged without prior
written approval of the Committee if, in the sole judgment of the Committee,
the business is competitive with the Company or any Subsidiary or business unit
or such employment or consultation arrangement would present a risk that the
Participant would likely disclose Company proprietary information (as determined
in the sole discretion of the Committee). If the Committee makes a
determination that this prohibition has been violated, unless the Award
Certificate otherwise provides, the Participant (i) will forfeit all rights
under any outstanding Stock Option or Stock Appreciation Right that was granted
subject to the Award Certificate and will return to the Company the amount of
any profit realized upon an exercise of all Awards during the period, as the
Committee determines and sets forth in the Award Certificate, beginning no
earlier than twelve (12) months prior to the Participant’s Termination of
Employment, and (ii) will forfeit and return to the Company any Annual
Performance Bonuses, Performance Units, Shares of Restricted Stock, Restricted
Units (including any credited Dividend Equivalents), Deferred Stock Units, and
Other Stock-Based Awards that are outstanding on the date of the Participant’s
Termination of Employment, subject to the Award Certificate, and have not
vested or that became vested and remain subject to this Section 7.3 during a
period, as the Committee determines and sets forth in the Award Certificate,
beginning no earlier than twelve (12) months prior to the Participant’s
Termination of Employment.

 

7.4    No Implied
Rights. The establishment and operation of the Plan, including the
eligibility of a Participant to participate in the Plan, will not be construed
as conferring any legal or other right upon any Director for any continuation
of directorship or any Employee for the continuation of employment through the
end of any Performance Cycle or other period. The Company expressly reserves
the right, which may be exercised at any time and in the Company’s sole
discretion, to discharge any individual or treat him or her without regard to
the effect that discharge might have upon him or her as a Participant in the
Plan.

 

7.5    No
Obligation to Exercise Awards. The grant of a Stock Option or Stock
Appreciation Right will impose no obligation upon the Participant to exercise
the Award.

 

7.6    No Rights as
Stockholders. A Participant who is granted an Award under the Plan
will have no rights as a stockholder of the Company with respect to the Award
unless and until certificates for the Shares underlying the Award are
registered in the Participant’s name and (other than in the case of Restricted
Stock) delivered to the Participant. The right of any Participant to receive an
Award by virtue of participation in the Plan will be no greater than the right
of any unsecured general creditor of the Company.

 

7.7    Indemnification of Committee. The
Company will indemnify, to the fullest extent permitted by law, each person
made or threatened to be made a party to any civil or criminal action or
proceeding by reason of the fact that the person, or the executor or
administrator of the person’s estate, is or was a member of the Committee or an
authorized delegate of the Committee.

 

7.8    No Required
Segregation of Assets. Neither the Company nor any Subsidiary will
be required to segregate any assets that may at any time be represented by
Awards granted pursuant to the Plan.

 

7.9    Nature of
Payments. All Awards made pursuant to the Plan are in consideration
of services for the Company or a Subsidiary. Any gain realized pursuant to
Awards under the Plan constitutes a special incentive payment to the
Participant and will not be taken into account as compensation for purposes of
any other employee benefit plan of the Company or a Subsidiary, except as the
Committee otherwise provides. The adoption of the Plan will have no effect on
Awards made or to be made under any other benefit plan covering an employee of
the Company or a Subsidiary or any predecessor or successor of the Company or a
Subsidiary.

 

18

 

7.10    Securities
Law Compliance. Awards under the Plan are intended to satisfy the
requirements of Rule 16b-3 under the Exchange Act. If any provision of this
Plan or any grant of an Award would otherwise frustrate or conflict with this
intent, that provision will be interpreted and deemed amended so as to avoid
conflict. No Participant will be entitled to a grant, exercise, transfer or
payment of any Award if the grant, exercise, transfer or payment would violate
the provisions of the Sarbanes-Oxley Act of 2002 or any other applicable law.

 

7.11  Coordination with Other Plans. If this
Plan provides a level of benefits with respect to Awards that differs from the
level of benefits provided under the Covidien Ltd. Severance Plan for U.S.
Officers and Executives, the Covidien Ltd. Change in Control Severance Plan for
Certain U.S. Officers and Executives or any other plan or any agreement between
the Participant and Company or Subsidiary that directly addresses the treatment
of any Awards, then the terms of the plan or agreement that provides for the
more favorable benefit to the Participant shall govern.

 

7.12   Section 409A Compliance. To the extent the Committee determines that
any Award granted under the Plan is subject to Section 409A of the Code, the
Award Certificate evidencing such Award will incorporate the terms and
conditions required by Section 409A of the Code. To the extent applicable, the
Plan and the Award Certificate will be interpreted in accordance with Section
409A of the Code and Department of Treasury regulations and other interpretive
guidance issued thereunder, including without limitation any such regulations
or other guidance that may be issued after the Effective Date. Notwithstanding
any provision of the Plan, in the event that following the Effective Date the
Committee determines that any Award may be subject to Section 409A of the Code,
the Committee may adopt such amendments to the Plan and/or the applicable Award
Certificate or adopt policies and procedures or take any other action or
actions, including an action or amendment with retroactive effect, that the
Committee determines is necessary or appropriate to (i) exempt the Award from
the application of Section 409A of the Code or (ii) comply with the
requirements of Section 409A of the Code.

 

7.13    Governing
Law, Severability. The Plan and all determinations made and actions
taken under the Plan will be governed by the law of Bermuda and construed
accordingly. If any provision of the Plan is held unlawful or otherwise invalid
or unenforceable in whole or in part, the unlawfulness, invalidity or
unenforceability will not affect any other parts of the Plan, which parts will
remain in full force and effect.

 

19Exhibit
10.5

 

TYCO
INTERNATIONAL (US) INC.

 

SEVERANCE
PLAN FOR U.S. OFFICERS AND EXECUTIVES

 

(AS AMENDED AND RESTATED EFFECTIVE MAY 10, 2007)

 

May 10, 2007

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  BACKGROUND, PURPOSE AND TERM OF PLAN

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01

  	
   

  	
  Purpose of the Plan

  	
   

  	
  1

  
	
  Section 1.02

  	
   

  	
  Term of the Plan

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  DEFINITIONS

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01

  	
   

  	
  “Alternative Position”

  	
   

  	
  2

  
	
  Section 2.02

  	
   

  	
  “Annual Bonus”

  	
   

  	
  2

  
	
  Section 2.03

  	
   

  	
  “Base Salary”

  	
   

  	
  2

  
	
  Section 2.04

  	
   

  	
  “Board”

  	
   

  	
  2

  
	
  Section 2.05

  	
   

  	
  “Cause”

  	
   

  	
  2

  
	
  Section 2.06

  	
   

  	
  “COBRA”

  	
   

  	
  2

  
	
  Section 2.07

  	
   

  	
  “Code”

  	
   

  	
  2

  
	
  Section 2.08

  	
   

  	
  “Committee”

  	
   

  	
  2

  
	
  Section 2.09

  	
   

  	
  “Company”

  	
   

  	
  2

  
	
  Section 2.10

  	
   

  	
  “Effective Date”

  	
   

  	
  3

  
	
  Section 2.11

  	
   

  	
  “Eligible Employee”

  	
   

  	
  3

  
	
  Section 2.12

  	
   

  	
  “Employee”

  	
   

  	
  3

  
	
  Section 2.13

  	
   

  	
  “Employer”

  	
   

  	
  3

  
	
  Section 2.14

  	
   

  	
  “ERISA”

  	
   

  	
  3

  
	
  Section 2.15

  	
   

  	
  “Exchange Act”

  	
   

  	
  3

  
	
  Section 2.16

  	
   

  	
  “Involuntary Termination”

  	
   

  	
  3

  
	
  Section 2.17

  	
   

  	
  “Notice Pay”

  	
   

  	
  3

  
	
  Section 2.18

  	
   

  	
  “Officer”

  	
   

  	
  3

  
	
  Section 2.19

  	
   

  	
  “Participant”

  	
   

  	
  3

  
	
  Section 2.20

  	
   

  	
  “Permanent Disability”

  	
   

  	
  3

  
	
  Section 2.21

  	
   

  	
  “Plan”

  	
   

  	
  4

  
	
  Section 2.22

  	
   

  	
  “Plan Administrator”

  	
   

  	
  4

  
	
  Section 2.23

  	
   

  	
  “Release”

  	
   

  	
  4

  
	
  Section 2.24

  	
   

  	
  “Service”

  	
   

  	
  4

  
	
  Section 2.25

  	
   

  	
  “Severance Benefit”

  	
   

  	
  4

  
	
  Section 2.26

  	
   

  	
  “Severance Period”

  	
   

  	
  4

  
						

 

i

 

 

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.27

  	
   

  	
  “Subsidiary”

  	
   

  	
  4

  
	
  Section 2.28

  	
   

  	
  “Termination Date”

  	
   

  	
  4

  
	
  Section 2.29

  	
   

  	
  “Voluntary Termination”

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  PARTICIPATION AND ELIGIBILITY FOR BENEFITS

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01

  	
   

  	
  Participation

  	
   

  	
  5

  
	
  Section 3.02

  	
   

  	
  Conditions

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  DETERMINATION OF SEVERANCE BENEFITS

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01

  	
   

  	
  Amount of Severance Benefits Upon Involuntary
  Termination

  	
   

  	
  7

  
	
  Section 4.02

  	
   

  	
  Voluntary Termination; Termination for Death or
  Permanent Disability

  	
   

  	
  9

  
	
  Section 4.03

  	
   

  	
  Termination for Cause

  	
   

  	
  9

  
	
  Section 4.04

  	
   

  	
  Reduction of Severance Benefits

  	
   

  	
  9

  
	
  Section
  4.05

  	
   

  	
  Modification of
  Severance Benefits

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  METHOD AND DURATION OF SEVERANCE BENEFIT PAYMENTS

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01

  	
   

  	
  Method of Payment

  	
   

  	
  10

  
	
  Section 5.02

  	
   

  	
  Other Arrangements

  	
   

  	
  10

  
	
  Section 5.03

  	
   

  	
  Termination of Eligibility for Benefits

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  CONFIDENTIALITY, COVENANT NOT TO COMPETE AND NOT TO
  SOLICIT

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01

  	
   

  	
  Confidential Information

  	
   

  	
  11

  
	
  Section 6.02

  	
   

  	
  Non-Competition

  	
   

  	
  11

  
	
  Section 6.03

  	
   

  	
  Non-Solicitation

  	
   

  	
  11

  
	
  Section 6.04

  	
   

  	
  Non-Disparagement

  	
   

  	
  12

  
	
  Section 6.05

  	
   

  	
  Reasonableness

  	
   

  	
  12

  
	
  Section 6.06

  	
   

  	
  Equitable Relief

  	
   

  	
  12

  
	
  Section 6.07

  	
   

  	
  Survival of Provisions

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  THE PLAN ADMINISTRATOR

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01

  	
   

  	
  Authority and Duties

  	
   

  	
  14

  
	
  Section 7.02

  	
   

  	
  Compensation of the Plan Administrator

  	
   

  	
  14

  
	
  Section 7.03

  	
   

  	
  Records, Reporting and Disclosure

  	
   

  	
  14

  
							

 

ii

 

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  AMENDMENT, TERMINATION AND DURATION

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01

  	
   

  	
  Amendment, Suspension and Termination

  	
   

  	
  15

  
	
  Section 8.02

  	
   

  	
  Duration

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  DUTIES OF THE COMPANY AND THE COMMITTEE

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01

  	
   

  	
  Records

  	
   

  	
  16

  
	
  Section 9.02

  	
   

  	
  Payment

  	
   

  	
  16

  
	
  Section 9.03

  	
   

  	
  Discretion

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  CLAIMS PROCEDURES

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01

  	
   

  	
  Claim

  	
   

  	
  17

  
	
  Section 10.02

  	
   

  	
  Initial Claim

  	
   

  	
  17

  
	
  Section 10.03

  	
   

  	
  Appeals of Denied Administrative Claims

  	
   

  	
  17

  
	
  Section 10.04

  	
   

  	
  Appointment of the Named Appeals Fiduciary

  	
   

  	
  18

  
	
  Section 10.05

  	
   

  	
  Arbitration; Expenses

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  MISCELLANEOUS

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.01

  	
   

  	
  Nonalienation of Benefits

  	
   

  	
  19

  
	
  Section 11.02

  	
   

  	
  Notices

  	
   

  	
  19

  
	
  Section 11.03

  	
   

  	
  Successors

  	
   

  	
  19

  
	
  Section 11.04

  	
   

  	
  Other Payments

  	
   

  	
  19

  
	
  Section 11.05

  	
   

  	
  No Mitigation

  	
   

  	
  19

  
	
  Section 11.06

  	
   

  	
  No Contract of Employment

  	
   

  	
  19

  
	
  Section 11.07

  	
   

  	
  Severability of Provisions

  	
   

  	
  19

  
	
  Section 11.08

  	
   

  	
  Heirs, Assigns, and Personal Representatives

  	
   

  	
  20

  
	
  Section 11.09

  	
   

  	
  Headings and Captions

  	
   

  	
  20

  
	
  Section 11.10

  	
   

  	
  Gender and Number

  	
   

  	
  20

  
	
  Section 11.11

  	
   

  	
  Unfunded Plan

  	
   

  	
  20

  
	
  Section 11.12

  	
   

  	
  Payments to Incompetent Persons

  	
   

  	
  20

  
	
  Section 11.13

  	
   

  	
  Lost Payees

  	
   

  	
  20

  
	
  Section 11.14

  	
   

  	
  Controlling Law

  	
   

  	
  20

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE A SEVERANCE BENEFITS

  	
   

  	
  A-1

  
							

 

iii

 

ARTICLE I

BACKGROUND, PURPOSE AND TERM OF PLAN

 

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

 

Section 1.02         Term of the Plan.
The Plan shall generally be effective as of the Effective Date and shall
supersede any prior plan, program or policy under which the Company or any
Subsidiary provided severance benefits prior to the Effective Date of the Plan.
The Plan shall continue until terminated pursuant to Article VIII of the Plan.

 

 

ARTICLE II

DEFINITIONS

 

Section 2.01         “Alternative
Position” shall mean a position with the Company that:

 

(a)           is not more than 75
miles each way from the location of the Employee’s current position (for
positions that are essentially mobile, the mileage does not apply); and

 

(b)           provides the Employee
with pay and benefits (not including perquisites or long term incentive
compensation) that are comparable in the aggregate to the Employee’s current
position.

 

The Plan
Administrator has the exclusive discretionary authority to determine whether a
position is an Alternative Position.

 

Section 2.02         “Annual Bonus”
shall mean 100% of the Participant’s target annual bonus.

 

Section 2.03         “Base Salary”
shall mean the annual base salary in effect as of the Participant’s Termination
Date.

 

Section 2.04         “Board” shall
mean the Board of Directors of the Company, or any successor thereto, or a
committee thereof specifically designated for purposes of making determinations
hereunder.

 

Section 2.05         “Cause” shall
mean an Employee’s (i) substantial failure or refusal to perform duties and
responsibilities of his or her job as required by the Company, (ii) violation
of any fiduciary duty owed to the Company, (iii) conviction of a felony or
misdemeanor, (iv) dishonesty, (v) theft, (vi) violation of Company rules or
policy, or (vii) other egregious conduct, that has or could have a serious and
detrimental impact on the Company and its employees. The Plan Administrator, in
its sole and absolute discretion, shall determine Cause. Examples of “Cause”
may include, but are not limited to, excessive absenteeism, misconduct,
insubordination, violation of Company policy, dishonesty, and deliberate
unsatisfactory performance (e.g., Employee refuses to improve deficient
performance).

 

Section 2.06         “COBRA” shall
mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.

 

Section 2.07         “Code” shall
mean the Internal Revenue Code of 1986, as amended.

 

Section 2.08         “Committee”
shall mean the Compensation and Human Resources Committee of the Board or such
other committee appointed by the Board to assist the Company in making
determinations required under the Plan in accordance with its terms. The “Committee”
may delegate its authority under the Plan to an individual or another
committee.

 

Section 2.09         “Company”
shall mean Tyco International Ltd. Unless it is otherwise clear from the
context, Company shall generally include participating Subsidiaries.

 

2

 

Section 2.10         “Effective Date”
shall mean May 10, 2007, the effective date of this amended and restated Plan. The
Plan was originally effective January 1, 2004.

 

Section 2.11         “Eligible Employee”
shall mean an Employee employed in the United States who is an Officer, or in
career bands 1 and 2, who is not covered under any other severance plan or
program sponsored by the Company or a Subsidiary. If there is any question as
to whether an Employee is deemed an Eligible Employee for purposes of the Plan,
the Senior Vice President—Human Resources, Tyco International Ltd. shall make
the determination.

 

Section 2.12         “Employee”
shall mean an individual employed by Tyco International Ltd. or a Subsidiary as
a common law employee on the United States payroll of Tyco International Ltd.
or a Subsidiary, and shall not include any person working for the Company
through a temporary service or on a leased basis or who is hired by the Company
as an independent contractor, consultant, or otherwise as a person who is not
an employee for purposes of withholding federal employment taxes, as evidenced
by payroll records or a written agreement with the individual, regardless of
any contrary governmental or judicial determination or holding relating to such
status or tax withholding.

 

Section 2.13         “Employer”
shall mean the Company or any Subsidiary with respect to which this Plan has
been adopted.

 

Section 2.14         “ERISA” shall
mean the Employee Retirement Income Security Act of 1974, as amended, and
regulations thereunder.

 

Section 2.15         “Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended.

 

Section 2.16         “Involuntary
Termination” shall mean a termination of the Participant initiated by the
Company or a Subsidiary for any reason other than Cause, Permanent Disability
or death, as provided under and subject to the conditions of Article III.

 

Section 2.17         “Notice Pay”
shall mean the amounts that a Participant is eligible to receive pursuant to
Article IV of the Plan.

 

Section 2.18         “Officer”
shall mean any individual who is an officer, as such term is defined pursuant
to Rule 16a-1(f) as promulgated under the Exchange Act, of the Company. For
purposes of this definition, Officer shall also mean any officer of any of the
Company’s Subsidiaries who perform policy making functions, within the context
of Rule 16a-1(f).

 

Section 2.19         “Participant”
shall mean any Eligible Employee who meets the requirements of Article III and
thereby becomes eligible for salary continuation and other benefits under the
Plan.

 

Section 2.20         “Permanent
Disability” shall mean that an Employee has a permanent and total
incapacity from engaging in any employment for the Employer for physical or
mental reasons. A “Permanent Disability” shall be deemed to exist if the
Employee meets the requirements for disability benefits under the Employer’s
long-term disability plan or under the requirements for disability benefits
under the Social Security law (or similar law outside the

 

3

 

United States, if the Employee is employed in that
jurisdiction) then in effect, or if the Employee is designated with an inactive
employment status at the end of a disability or medical leave.

 

Section 2.21         “Plan” means
the Tyco International (US) Inc. Severance Plan for U.S. Officers and
Executives as set forth herein, and as the same may from time to time be
amended.

 

Section 2.22         “Plan
Administrator” shall mean the individual(s) appointed by the Committee to
administer the terms of the Plan as set forth herein and if no individual is
appointed by the Committee to serve as the Plan Administrator for the Plan, the
Plan Administrator shall be the Senior Vice President—Human Resources, Tyco
International Ltd. (or the equivalent). Notwithstanding the preceding sentence,
in the event the Plan Administrator is entitled to Severance Benefits under the
Plan, the Committee or its delegate shall act as the Plan Administrator for
purposes of administering the terms of the Plan with respect to the Plan
Administrator. The Plan Administrator may delegate all or any portion of its
authority under the Plan to any other person(s).

 

Section 2.23         “Release”
shall mean the Separation of Employment Agreement and General Release, as
provided by the Company.

 

Section 2.24         “Service”
shall mean the total number of years and completed months the Participant was
an Employee of the Company. Service with any predecessor employer or with a
Subsidiary prior to the Subsidiary’s becoming part of the Company shall be
recognized only to the extent specified in the merger or acquisition
documentation relating to the Subsidiary. Periods of authorized leave of
absence, such as military leave, will be included in Service only to the extent
required by applicable law. Any period of employment with the Company, a
Subsidiary, or a predecessor employer for which an Eligible Employee previously
received severance benefits, shall be excluded from Service.

 

Section 2.25         “Severance Benefit”
shall mean the salary continuation amounts and other benefits that a
Participant is eligible to receive pursuant to Article IV of the Plan.

 

Section 2.26         “Severance Period”
shall mean the period during which a Participant is receiving Severance
Benefits under this Plan.

 

Section 2.27         “Subsidiary”
shall mean (i) a subsidiary company (wherever incorporated) as defined by
section 86 of the Companies Act 1981 of Bermuda (as amended), (ii) any
separately organized business unit, whether or not incorporated, of the
Company, and (iii) any employer that is required to be aggregated with the
Company pursuant to section 414 of the Internal Revenue Code of 1986, as
amended, and regulations issued thereunder.

 

Section 2.28         “Termination Date”
shall mean the date on which the active employment of the Participant by the
Company or a Subsidiary is severed by reason of an Involuntary Termination.

 

Section 2.29         “Voluntary
Termination” shall mean any retirement or termination of employment that is
not initiated by the Company or any Subsidiary.

 

4

 

ARTICLE III

PARTICIPATION AND ELIGIBILITY FOR BENEFITS

 

Section 3.01         Participation.
Each Eligible Employee in the Plan who incurs an Involuntary Termination and
who satisfies the conditions of Section 3.02 shall be eligible to receive the
Severance Benefits described in the Plan. An Eligible Employee shall not be
eligible to receive any other severance benefits from the Company or Subsidiary
on account of an Involuntary Termination, unless otherwise provided in the Plan.
In addition, any Eligible Employee who is a party to an employment agreement
with the Company pursuant to which such Eligible Employee is entitled to
severance benefits shall be ineligible to participate in the Plan.

 

Section 3.02         Conditions.

 

(a)           Eligibility for any
Severance Benefits is expressly conditioned on (i) execution by the Participant
of a Release in the form provided by the Company; (ii) compliance by the
Participant with all the terms and conditions of such Release; (iii) the Participant’s
written agreement to the confidentiality, non-solicitation, and
non-disparagement provisions in Article VI during and after the Participant’s
employment with the Company; and (iv) execution of a written agreement that
authorizes the deduction of amounts owed to the Company prior to the payment of
any Severance Benefit (or in accordance with any other schedule as the
Committee may, in its sole discretion, determine to be appropriate). If the
Committee determines, in its sole discretion, that the Participant has not
fully complied with any of the terms of the Agreement and/or Release, the
Committee may deny Severance Benefits not yet in pay status or discontinue the
payment of the Participant’s Severance Benefit and may require the Participant,
by providing written notice of such repayment obligation to the Participant, to
repay any portion of the Severance Benefit already received under the Plan. If
the Committee notifies a Participant that repayment of all or any portion of
the Severance Benefit received under the Plan is required, such amounts shall
be repaid within thirty (30) calendar days of the date the written notice is
sent. Any remedy under this subsection (a) shall be in addition to, and not in
place of, any other remedy, including injunctive relief, that the Company may
have.

 

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

 

(i)            The Eligible Employee
voluntarily terminates employment:

 

(ii)           The Eligible Employee
resigns employment before the job-end date specified by the Employer or while
the Employer still desires the Eligible Employee’s services;

 

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

 

(iv)          The Eligible Employee
voluntarily retires;

 

5

 

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

 

(vi)          The Eligible Employee
does not return to work within six (6) months of the onset of an approved leave
of absence, other than a personal, educational or military leave and/or as
otherwise required by applicable statute;

 

(vii)         The Eligible Employee
does not return to work within three (3) months of the onset of a personal or
educational leave of absence;

 

(viii)        The Eligible Employee
continues in employment with the Company or a Subsidiary or has the opportunity
to continue in employment in the same or in an Alternative Position with the
Company or a Subsidiary; or

 

(ix)           The Eligible Employee’s
employment with the Employer terminates as a result of a sale of stock or
assets of the Employer, merger, consolidation, joint venture or a sale or
outsourcing of a business unit or function, or other transaction, and the
Eligible Employee accepts employment, or has the opportunity to continue
employment in an Alternative Position, with the purchaser, joint venture, or
other acquiring or outsourcing entity, or a related entity of either the
Company or the acquiring entity. The payment of Severance Benefits in the
circumstances described in this subsection (ix) would result in a windfall to
the Eligible Employee, which is not the intention of the Plan.

 

(c)           The Plan Administrator
has the sole discretion to determine an Eligible Employee’s eligibility to
receive Severance Benefits.

 

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

 

6

 

ARTICLE IV

DETERMINATION OF SEVERANCE BENEFITS

 

Section 4.01         Amount of Severance
Benefits Upon Involuntary Termination. Except as otherwise provided in
Section 4.05,  the Severance Benefits to be
provided to an Eligible Employee who incurs an Involuntary Termination and is
determined to be eligible for Severance Benefits shall be as follows:

 

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

 

(b)           Salary Continuation
Benefits. Salary Continuation shall be provided during the Severance Period
applicable to the Participant as set forth under the benefits schedule appended
to the Plan. During the Severance Period, the Participant shall receive his or
her Base Salary (net of deductions and tax withholdings, as applicable) in
equal installments over the Severance Period, per normal payroll cycles. The
salary continuation payment shall commence no earlier than the end of the
revocation period applicable to the Release.

 

(c)           Bonus.

 

(i)            Participant may be
eligible for a cash payment equal to his or her pro rated annual bonus for the
year in which Participant’s Termination Date occurs, subject to the discretion
of the Company and pursuant to the terms set forth in the applicable incentive
plans.

 

(ii)           The Participant shall
also receive a cash payment equal to his or her Annual Bonus during the
Severance Period applicable to the Participant as set forth under the benefits
schedule appended to the Plan. Such bonus payment shall be paid to the
Participant in equal installments over the Severance Period (e.g., 12 month, 18 months or 24 months) or, in the sole
discretion of the Plan Administrator, may be paid to the Participant in a
single lump sum in lieu of payment over the Severance Period. The bonus payment
shall be paid at the same time as the Salary Continuation Benefits.

 

(d)           Medical, Dental and
Health Care Reimbursement Account Benefits. The Participant shall continue
to be eligible to participate in the medical, dental and Health Care
Reimbursement Account coverage in effect at the date of his or her termination
(or generally comparable coverage) for himself or herself and, where
applicable, his or her spouse and

 

7

 

dependents, as the same may be changed from time to time
for employees of the Company generally, as if Participant had continued in
employment during the Severance Period (the “COBRA Continuation Coverage Period”).
The Participant shall be responsible for the payment of the employee portion of
the medical, dental and Health Care Reimbursement Account contributions that
are required during the Severance Period and such contributions shall be made
within the time period and in the amounts that other employees are required to
pay to the Company for similar coverage. The Participant’s failure to pay the
applicable contributions shall result in the cessation of the applicable
medical and dental coverage for the Participant and his or her spouse or
domestic partner and dependents. Notwithstanding any other provision of this
Plan to the contrary, in the event that a Participant commences employment with
another company at any time during the Severance Period, the Participant may
cease receiving coverage under the Company’s medical and dental plans. Within
thirty (30) days of Participant’s commencement of employment with another
company, Participant shall provide the Company written notice of such
employment and provide information to the Company regarding the medical and
dental benefits provided to Participant by his or her new employer. The COBRA
Continuation Coverage Period under section 4980B of the Code shall run
concurrently with the Severance Period.

 

(e)           Stock Options. All
stock options held by the Participant as of his or her Termination Date shall
continue to vest as scheduled during the twelve (12) month period after the
Participant’s Termination Date (unless the Participant’s option agreement
covering such options provides for more favorable vesting treatment), and
provided that the Participant has met any other condition contained in an
applicable stock option award agreement with respect to such continued vesting.
All vested outstanding stock options held by Participant shall be exercisable
for the greater of (i) the period set forth in Participant’s option agreement
covering such options, or (ii) twelve (12) months from the Termination Date,
provided that the Participant has met any other condition contained in an
applicable stock option award agreement with respect to such extended exercise
period. In no event, however, shall an option be exercisable beyond its
original term.

 

(f)            Restricted Stock.

 

(i)            Restricted Stock.
All unvested restricted stock and restricted stock units held by the
Participant as of his or her Termination Date shall be forfeited as of the
Termination Date.

 

(g)           Outplacement
Services. The Company may, in its sole and absolute discretion, pay the
cost of outplacement services for the Participant at the outplacement agency
that the Company regularly uses for such purpose; provided,
however, that the period of outplacement shall not exceed twelve
(12) months from Participant’s Termination Date. The Company shall pay the cost
of outplacement services for the Participant for a period of up to twelve (12)
months from Participant’s Termination Date at either (i) the outplacement
agency that the Company regularly uses for such purpose, or (ii) provided the
Senior Vice President—Human Resources provides prior approval, at an
outplacement agency selected by the Participant.

 

(h)           In the event that provision
of any of the benefits in (d) above, would adversely affect the tax status of
the applicable plan or benefits, the Company, in its sole

 

8

 

discretion, may elect to pay to the Participant cash
in lieu of such coverage in an amount equal to the Company’s premium or average
cost of providing such coverage.

 

9

 

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

 

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

 

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

 

Section 4.05         Modification of
Severance Benefits. Notwithstanding anything to the contrary contained
herein, the Senior Vice President, Human Resources (or her/his successor) shall
have the discretion to modify the benefits otherwise available to a Plan
Participant under Section 4.01 or the timing of such benefits as she/he deems
appropriate, provided that in no event may the exercise of such discretion
result in an increase in the benefits that would otherwise have been payable to
the Participant under Section 4.01.

 

10

 

ARTICLE V

METHOD AND DURATION OF SEVERANCE BENEFIT PAYMENTS

 

Section 5.01         Method of Payment.
The Severance Benefit to which a Participant is entitled, as determined
pursuant to Section 4.01, shall be paid in accordance with normal payroll
practices over the Severance Period or from a supplemental unemployment
benefits trust. In no event will interest be credited on the unpaid balance for
which a Participant may become eligible. Payment shall be made by mailing to
the last address provided by the Participant to the Company or such other
reasonable method as determined by the Plan Administrator. In general, the
initial payments shall be made as promptly as practicable after the Participant’s
Termination Date, the execution of the Release required under Section 3.02, and
the expiration of the required revocation period specified in the Release. All
payments of Severance Benefits are subject to applicable federal, state and
local taxes and withholdings. In the event of the Participant’s death prior to
the completion of all payments being made, the remaining payments shall be paid
to the Participant’s estate.

 

Section 5.02         Other Arrangements.
The Severance Benefits under this Plan are not additive or cumulative to
severance or termination benefits that a Participant might also be entitled to
receive under the terms of a written employment agreement, a severance
agreement or any other arrangement with the Employer. As a condition of
participating in the Plan, the Eligible Employee must expressly agree that this
Plan supersedes all prior agreements, and sets forth the entire Severance
Benefit the Eligible Employee is entitled to while an Eligible Employee in the
Plan. The provisions of this Plan may provide for payments to the Eligible
Employee under certain compensation or bonus plans under circumstances where
such plans would not provide for payment thereof. It is the specific intention
of the Company that the provisions of this Plan shall supersede any provisions
to the contrary in such plans, to the extent permitted by applicable law, and
such plans shall be deemed to be have been amended to correspond with this Plan
without further action by the Company or the Board.

 

Section 5.03         Termination of
Eligibility for Benefits.

 

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

 

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

 

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

 

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

 

11

 

ARTICLE VI

CONFIDENTIALITY, COVENANT NOT TO COMPETE AND NOT TO SOLICIT

 

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

 

Section 6.02         Non-Competition.
The Participant acknowledges that he or she performs services of a unique
nature for the Company that are irreplaceable, and that his or her performance
of such services for a competing business will result in irreparable harm to
the Company. Accordingly, during the Participant’s employment with the Company
or Subsidiary and for the one (1) year period thereafter, the Participant
agrees that the Participant will not, directly or indirectly, own, manage,
operate, control, be employed by (whether as an employee, consultant,
independent contractor or otherwise, and whether or not for compensation) or
render services to any person, firm, corporation or other entity, in whatever
form, engaged in any business of the same type as any business in which the
Company or any of its Subsidiaries or affiliates is engaged on the date of
termination or in which they have proposed, on or prior to such date, to be
engaged in on or after such date and in which the Participant has been involved
to any extent (other than de minimis) at any time during the one (1) year
period ending with the date of termination, in any locale of any country in
which the Company or any of its Subsidiaries conducts business. This Section
6.02 shall not prevent the Participant from owning not more than one percent of
the total shares of all classes of stock outstanding of any publicly held
entity engaged in such business, nor will it restrict the Participant from
rendering services to charitable organizations, as such term is defined in
section 501(c) of the Code.

 

Section 6.03         Non-Solicitation.
During the Eligible Employee’s employment with the Company or a Subsidiary and
for the two (2) year period thereafter, the Eligible Employee agrees that he or
she will not, directly or indirectly, individually or on behalf of any other
person, firm, corporation or other entity, knowingly solicit, aid or induce (i)
any employee of the Company or any Subsidiary, as defined by the Company, to
leave such employment in order to accept employment with or render services to
or with any other person, firm, corporation or other entity unaffiliated with
the Company or knowingly take any action to materially assist or aid any other
person, firm, corporation or other entity in identifying or hiring any such
employee, or (ii)

 

12

 

any customer of the Company or any Subsidiary to purchase
goods or services then sold by the Company or any Subsidiary from another
person, firm, corporation or other entity or assist or aid any other persons or
entity in identifying or soliciting any such customer.

 

Section 6.04         Non-Disparagement.
Each of the Eligible Employee and the Company (for purposes hereof, the Company
shall mean only the executive officers and directors thereof and not any other
employees) agrees not to make any statements that disparage the other party, or
in the case of the Company or its Subsidiaries, their respective affiliates,
employees, officers, directors, products or services. Notwithstanding the
foregoing, statements made in the course of sworn testimony in administrative,
judicial or arbitral proceedings (including, without limitation, depositions in
connection with such proceedings) shall not be subject to this Section 6.04.

 

Section 6.05         Reasonableness.
In the event the provisions of this Article VI shall ever be deemed to exceed
the time, scope or geographic limitations permitted by applicable laws, then
such provisions shall be reformed to the maximum time, scope or geographic
limitations, as the case may be, permitted by applicable laws.

 

Section 6.06         Equitable Relief.

 

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

 

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

 

(c)           The Eligible Employee
irrevocably and unconditionally (i) agrees that any suit, action or other legal
proceeding arising out of this Article VI, including without limitation, any
action commenced by the Company for preliminary and permanent injunctive relief
or other equitable relief, may be brought in the United States District Court
for the District of New York, or if such court does not have jurisdiction or
will not accept jurisdiction, in any court of general jurisdiction in New York,
(ii) consents to the non-exclusive jurisdiction of any such court in any

 

13

 

such suit, action or proceeding, and (iii) waives any
objection which Participant may have to the laying of venue of any such suit,
action or proceeding in any such court. Participant also irrevocably and
unconditionally consents to the service of any process, pleadings, notices or
other papers in a manner permitted by the notice provisions of Section 11.02.

 

Section 6.07         Survival of Provisions.
The obligations contained in this Article VI shall survive the termination of
Eligible Employee’s employment with the Company or a Subsidiary and shall be
fully enforceable thereafter.

 

14

 

ARTICLE VII

THE PLAN ADMINISTRATOR

 

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

 

Section 7.02         Compensation of the
Plan Administrator. The Plan Administrator shall receive no
compensation for services as such. However, all reasonable expenses of the Plan
Administrator shall be paid or reimbursed by the Company upon proper
documentation. The Plan Administrator shall be indemnified by the Company
against personal liability for actions taken in good faith in the discharge of
the Plan Administrator’s duties.

 

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

 

15

 

ARTICLE VIII

AMENDMENT, TERMINATION AND DURATION

 

Section 8.01         Amendment, Suspension
and Termination. Except as otherwise provided in this Section 8.01, the
Board or its delegee shall have the right, at any time and from time to time,
to amend, suspend or terminate the Plan in whole or in part, for any reason or
without reason, and without either the consent of or the prior notification to
any Participant, by a formal written action. No such amendment shall give the
Company the right to recover any amount paid to a Participant prior to the date
of such amendment or to cause the cessation of Severance Benefits already
approved for a Participant who has executed a Release as required under Section
3.02.

 

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

 

16

 

ARTICLE IX

DUTIES OF THE COMPANY AND THE COMMITTEE

 

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

 

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

 

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

 

17

 

ARTICLE X

CLAIMS PROCEDURES

 

Section 10.01       Claim. Each
Participant under this Plan may contest only the administration of the
Severance Benefits awarded by completing and filing with the Plan Administrator
a written request for review in the manner specified by the Plan Administrator.
No appeal is permissible as to a Participant’s eligibility for or amount of the
Severance Benefit, which are decisions made solely within the discretion of the
Company, and the Committee acting on behalf of the Company. No person may bring
an action for any alleged wrongful denial of Plan benefits in a court of law
unless the claims procedures described in this Article X are exhausted and a
final determination is made by the Plan Administrator and/or the Named Appeals
Fiduciary. If the terminated Participant or interested person challenges a
decision by the Plan Administrator and/or Named Appeals Fiduciary, a review by
the court of law will be limited to the facts, evidence and issues presented to
the Plan Administrator during the claims procedure set forth in this Article X.
Facts and evidence that become known to the terminated Participant or other
interested person after having exhausted the claims procedure must be brought
to the attention of the Plan Administrator for reconsideration of the claims
administrator. Issues not raised with the Plan Administrator and/or Named
Appeals Fiduciary will be deemed waived.

 

Section 10.02       Initial Claim. Before
the date on which payment of a Severance Benefit commences, each such
application must be supported by such information as the Plan Administrator
deems relevant and appropriate. In the event that any claim relating to the
administration of Severance Benefits is denied in whole or in part, the
terminated Participant or his or her beneficiary (“claimant”) whose claim has
been so denied shall be notified of such denial in writing by the Plan
Administrator within ninety (90) days after the receipt of the claim for
benefits. This period may be extended an additional ninety (90) days if the
Plan Administrator determines such extension is necessary and the Plan
Administrator provides notice of extension to the claimant prior to the end of
the initial ninety (90) day period. The notice advising of the denial shall
specify the following: (i) the reason or reasons for denial, (ii) make specific
reference to the Plan provisions on which the determination was based, (iii)
describe any additional material or information necessary for the claimant to
perfect the claim (explaining why such material or information is needed), and
(iv) describe the Plan’s review procedures and the time limits applicable to
such procedures, including a statement of the claimant’s right to bring a civil
action under section 502(a) of ERISA following an adverse benefit determination
on review.

 

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

 

(a)           A claimant whose claim
has been denied shall file with the Plan Administrator a notice of appeal of
the denial. Such notice shall be filed within sixty (60) calendar days of
notification by the Plan Administrator of the denial of a claim, shall be made
in writing, and shall set forth all of the facts upon which the appeal is based.
Appeals not timely filed shall be barred.

 

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

 

18

 

(c)           The Named Appeals
Fiduciary shall render a determination upon the appealed claim which
determination shall be accompanied by a written statement as to the reasons
therefor. The determination shall be made to the claimant within sixty (60)
days of the claimant’s request for review, unless the Names Appeals Fiduciary
determines that special circumstances require an extension of time for
processing the claim. In such case, the Named Appeals Fiduciary shall notify
the claimant of the need for an extension of time to render its decision prior
to the end of the initial sixty (60) day period, and the Named Appeals
Fiduciary shall have an additional sixty (60) day period to make its
determination. The determination so rendered shall be binding upon all parties.
If the determination is adverse to the claimant, the notice shall provide (i)
the reason or reasons for denial, (ii) make specific reference to the Plan
provisions on which the determination was based, (iii) a statement that the
claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records and other information relevant
to a the claimant’s claim for benefits, and (iv) state that the claimant has
the right to bring an action under section 502(a) of ERISA.

 

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

 

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

 

19

 

ARTICLE XI

MISCELLANEOUS

 

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

 

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

 

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

 

Section 11.04       Other Payments. Except
as otherwise provided in this Plan, no Participant shall be entitled to any
cash payments or other severance benefits under any of the Company’s then
current severance pay policies for a termination that is covered by this Plan
for the Participant.

 

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

 

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

 

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

 

20

 

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

 

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

 

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

 

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

 

Section 11.12       Payments to Incompetent
Persons. Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receipting therefor shall be
deemed paid when paid to such person’s guardian or to the party providing or
reasonably appearing to provide for the care of such person, and such payment
shall fully discharge the Company, the Committee and all other parties with
respect thereto.

 

Section 11.13       Lost Payees. A
benefit shall be deemed forfeited if the Committee is unable to locate a
Participant to whom a Severance Benefit is due. Such Severance Benefit shall be
reinstated if application is made by the Participant for the forfeited
Severance Benefit while this Plan is in operation.

 

Section 11.14       Controlling Law.
This Plan shall be construed and enforced according to the laws of the State of
New York to the extent not superseded by Federal law.

 

21

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