Exhibit 10.1
EXECUTIVE EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT (the
“Agreement”) dated as of December 29, 2006 (the
“Effective Date”) between Tyco Healthcare Ltd., a
Bermuda corporation (“Company”) and Richard S. Meelia
(“Executive”).
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Company is a wholly-owned
subsidiary of Tyco International Ltd., a Bermuda corporation
(“Parent”) and, along with its subsidiaries, currently
does business as Parent’s “Healthcare” business
segment; and
WHEREAS, Executive is currently
employed by Tyco Healthcare Group LP and serves as Chief Executive
Office of Parent’s “Healthcare” business
segment;
WHEREAS, it is anticipated that
Company will be spun off by Parent in 2007 as a separate
publicly-traded corporation through issuance of a stock dividend to
Parent’s shareholders (the “Separation”), as
described in a Form 8-K filed by Parent on January 19,
2006;
WHEREAS, Company and Executive
desire to enter into this Employment Agreement to set forth certain
material terms of Executive’s employment;
NOW THEREFORE, in consideration of
the foregoing, of the mutual promises contained herein and of other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
1.
POSITION/DUTIES.
(a)
Prior to the Separation, Executive shall continue to serve as Chief
Executive Officer of Parent’s “Healthcare”
business segment. In this capacity, Executive shall have such
duties, authorities and responsibilities as the Chairman, President
and Chief Executive Officer of Parent (the “CEO”) shall
designate that are consistent with Executive’s
position. Executive shall report to the CEO.
(b)
Upon and following the Separation, Executive shall serve as the
Company’s Chief Executive Officer. In this capacity,
Executive shall have such duties, authorities and responsibilities
as the Board of Directors of the Company (“Board”)
shall designate that are consistent with Executive’s
position. Upon and following the Separation, Executive shall
report to the Board.
1
Hereinafter, for ease of reference,
the term “Employing Company” shall refer to
“Parent” prior to the Separation and
“Company” thereafter.
(c)
Executive’s employment shall be at will, meaning that such
employment may be terminated by Executive or by the Employing
Company at any time and for any reason, with or without notice,
subject to the provisions of Section 3 hereof.
(d)
Executive
shall devote substantially all of his business time (excluding
periods of vacation and other approved leaves of absence) to the
performance of his duties with the Employing Company, provided the
foregoing shall not prevent Executive from (i) participating in
charitable, civic, educational, professional, community or industry
affairs or, with prior written approval of the CEO or the Board (as
applicable), serving on the board of directors or advisory boards
of other companies; and (ii) managing his and his family’s
personal investments so long as such activities do not materially
interfere with the performance of his duties hereunder or create a
potential business conflict or the appearance thereof. If at any
time service on any board of directors or advisory board would, in
the good faith judgment of the CEO or the Board (as applicable),
conflict with Executive’s fiduciary duty to the Employing
Company or create any appearance thereof, Executive shall promptly
resign from such other board of directors or advisory board after
written notice of the conflict is received from the CEO or the
Board (as applicable). Service on the boards of directors or
advisory boards disclosed by Executive to Parent on which he is
serving as of the Effective Date is hereby approved by Parent and
Company.
(e)
Executive further agrees to serve without additional compensation
as an officer and/or director of any of the Employing
Company’s subsidiaries and agrees that any amounts received
from such corporation may be offset against the amounts due
hereunder. In addition, it is agreed that the Company may
assign the Executive to one of its subsidiaries or affiliated
companies for payroll purposes.
2.
COMPENSATION AND BENEFITS. Executive shall receive
compensation for his services hereunder as determined by the
Employing Company’s Board of Directors from time to time,
including base salary, bonus and long-term incentive
opportunity. Any base salary shall be payable periodically in
accordance with the Employing Company’s regular payroll
practices. In addition, Executive shall be entitled to
participate in all employee benefit plans and programs of the
Employing Company applicable to senior executives generally, as may
be determined or modified from time to time. Travel, business
and entertainment expenses shall be reimbursed by the Employing
Company in accordance with its then-applicable corporate
policies.
2
Upon the occurrence of a
“change in control” or a sale of the Employing Company
on or prior to June 30, 2007, all shares of restricted stock
previously granted to Executive that are still subject to risk of
forfeiture shall become fully vested and nonforfeitable and all
options to purchase common shares of the Employing Company (or any
converted shares received in the separation) that remain
unxercisable shall become fully exercisable and vested. For
purposes of this Section 2, “change in control” shall
mean the first to occur of the following:
(a) Any “person” (as
that term is used in Sections 13 and 14(d)(2) of the Securities
Exchange act of 1934 (the “Exchange Act”)) becomes the
beneficial owner (as that term is used in Section 13(d) of the
Exchange Act), directly or indirectly, of 30% or more of Employing
Company’s capital stock entitled to vote in the election of
directors:
(b) Persons who, as of the Effective
Date (or with respect to the Company, as of the effective date of
the Separation), constitute the board of Employing Company (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 Employing
Company subsequent to the Effective Date (or with respect to the
Company, subsequent to the effective date of the Separation) shall
be considered an Incumbent Director if such person’s election
or nomination for election was approved by a vote of at least
three-quarters of the Incumbent Directors; but provided further,
that any such person whose initial assumption of office is in
connection with an actual or threatened election contest relating
to the election of members of the board of Employing Company or
other actual or threatened solicitation of proxies or consents by
or on behalf of a “person” (as that term is used in
Sections 13 and 14(d)(2) of the Exchange Act) other than the board
of Employing Company, 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;
(c) The shareholders of Employing
Company approve any consolidation or merger of Employing Company,
other than a merger of Employing Company in which the holders of
the common stock of Employing Company immediately prior to the
merger hold more than 50% of the common stock of the surviving
corporation immediately after the merger;
(d) The shareholders of Employing
Company approve any plan or proposal for the sale or dissolution of
Employing Company;
(e) Substantially all of the assets
of Employing Company are sold or otherwise transferred to parties
that are not within a “controlled group of
3
corporations” (as defined in
Section 1563 of the Internal Revenue Code of 1986, as amended) in
which the Employing Company is a member.
For avoidance of any doubt, the
Separation does not constitute a “Change in Control”
hereunder.
3.
SEPARATION BENEFITS UPON TERMINATION OTHER THAN FOR CAUSE. If
Executive’s employment terminates for any reason other than
termination by the Employing Company for Cause (as hereinafter
defined), then the Employing Company shall pay or provide Executive
with (i) a lump sum cash payment in an amount equal to two times
the sum of (1) the greater of (a) his then-current base salary or
(b) his base salary in effect as of the date immediately preceding
the Effective Date and (2) the greater of (a) his then-current
target annual bonus or (b) the greater of the average annual bonus
(i) received by Executive or (ii) target for Executive, for two
fiscal years of the Company immediately preceding the date of
termination of employment; and (ii) subject to Executive’s
continued co-payment of premiums, continued participation for two
years in all health and welfare plans which cover Executive (and
eligible dependents) upon the same terms and conditions (except for
the requirements of Executive’s continued employment) in
effect on the date of termination (or as amended from time to
time). The continuation of health benefits under this
subsection shall not reduce or count against Executive’s
rights under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (“COBRA”). Any termination
payments made and benefits provided under this Agreement to
Executive shall be in lieu of any termination or severance payments
or benefits for which Executive may be eligible under any of the
plans, policies or programs of the Employing Company or its
subsidiaries or affiliates (other than benefits under the
Company’s employee benefit plans that by their terms survive
termination of employment and COBRA benefits).
The payments made to Executive under
this Section 3 shall be made as soon as practical after his
termination of employment; provided, that if and to the extent so
required under Section 409A(a)(2)(B)(i) of the Internal Revenue
Code, such payment or any applicable portion thereof shall be made
no earlier than 6 months after the date of termination (or the date
of Executive’s death, if earlier).
Executive acknowledges and agrees
that the Separation shall not be deemed a “termination of
employment” for any purpose under this Section 3, so long as
his employment continues through the effective date of the
Separation and he is employed immediately after the Separation by
the Company as contemplated in Section 1(b).
4
For
purposes of this Agreement, “Cause” shall mean: (i)
conviction of a felony or misdemeanor involving dishonesty, theft,
fraud or moral turpitude; Executive’s violation of Employing
Company’s Code of Ethical conduct; or other willful
misconduct conduct, that in each case, is materially and
demonstrably injurious to Parent or the Company, or any of their
affiliates, as applicable, monetarily or otherwise; or (ii) willful
failure or refusal by Executive to substantially follow his
reasonably assigned duties with the Employing Company or to follow
the proper written direction of the CEO or Board, as applicable,
after a written notice of demand is delivered to Executive by the
CEO or Board, as applicable, which remains uncured for fifteen (15)
days after written notice is given to Executive. The Company
must notify Executive of an event constituting “Cause”
within 90 days following the knowledge of its existence or such
event shall not constitute Cause under this
Agreement.
5.
Certain Additional Payments by the Company.
(a)
Gross-UP Payment. If it shall be determined
that any payment or distribution of any type to or in respect of
Executive, by the Company or any other person, whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (the “Total Payments”), is
or will be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the “Code”)
or any interest or penalties are incurred by Executive with respect
to such excise tax (such excise tax, together with any such
interest and penalties, are collectively referred to as the
“Excise Tax”), then executive shall be entitled to
receive an additional payment (a “Gross-Up Payment”) in
an amount such that after payment by Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes) imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the total Payments.
(b)
Determination by
Accountant.
(1)
All computations and determinations relevant to this Section shall
be made by a national accounting firm selected by the Company from
among the five (5) largest accounting firms in the United States
(the “Accounting Firm”), and reasonably acceptable to
Executive, which firm may be the Company’s accountants.
All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Such determinations shall include whether any
of the Total Payments are “parachute payments” (within
the meaning of Section 280G of the Code). In making the
initial determination hereunder as
5
to whether a Gross-Up Payment is
required, the Accounting Firm shall be required to determine that
no Gross-Up Payment is required if, but only if, the Accounting
Firm (A) concludes that (i) there has not occurred a change in the
ownership or effective control of the Company or a change in the
ownership of a substantial portion of the assets of the Company (as
such terms are defined in Section 280G of the Code) or (ii) no
portion of the total Payments constitutes “parachute
payments” (within the meaning of said Section 280)G), in
either case on the basis of “substantial authority”
(within the meaning of Section 6230 of the Code), and (B) provides
an opinion to that effect to both the Company and Executive,
including the reasons therefore and an option that Executive has
substantial authority not to report any Excise Tax on his federal
income tax return. If the Accounting Firm determines that a
Gross-Up Payment is required, the Accounting Firm shall provide its
determination (the “Determination”), together with
detailed supporting calculations regarding the amount of any
Gross-Up Payment and any other relevant matter both to the Company
and Executive by no later than ten (10) days following the Date of
Termination, or such earlier time as is requested by the Company or
Executive (if Executive reasonably believes that any of the Total
Payments may be subject to the Excise Tax).
(2)
If a Gross-Up Payment is determined to be payable, it shall be paid
to Executive within 20 days after the Determination is delivered to
the Company by the Accounting Firm. Any determination by the
Accounting Firm shall be binding upon the Company and Executive,
absent manifest error. Notwithstanding the foregoing, a
Gross-up Payment shall be made as soon as practicable following a
determination by the Internal Revenue Service that any portion for
the Total Payments is subject to the Excise Tax.
(3)
As a result of uncertainly in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments not made by
the Company should have been made (“Underpayment”), or
that Gross-Up Payments will have been made by the company which
should not have been made (“Overpayments”). In
either such event, the Accounting Firm shall determine the amount
of the Underpayment or Overpayment that has occurred. In the
case of an Underpayment, the amount of such Underpayment (together
with any interest and penalties payable by Executive as a result of
such Underpayment) shall be promptly paid by the Company to or for
the benefit of Executive.
6
(4)
In the case of any Overpayment, Executive shall, at the direction
and expense of the Company, take such steps as are reasonably
necessary (including the filing of returns and claims for refund),
follow reasonable instructions from, and procedures established by,
the Company, and otherwise reasonably cooperate with the Company to
correct such Overpayment, provided, however, that (i) Executive
shall not in any event be obligated to return to the Company and
amount greater than the net after-tax portion of the Overpayment
that he has retained or as recovered as a refund from the
applicable taxing authorities and (ii) this provision and all other
provisions in this Agreement shall be interpreted in a manner
consistent with the intent of this Section, which is to make
Executive whole, on an after-tax basis, from the application of the
Excise Taxes, it being acknowledged and understood that the
correction of an Overpayment may result in Executive repaying to
the Company and amount which is less than Overpayment.
(5)
Executive shall notify the Company in writing of any claim by the
Internal Revenue Service relating to the possible application of
the Excise Tax under Section 4999 of the Code to any of the
payments and amounts referred to herein and shall afford the
Company, at its expense, the opportunity to control the defense of
such claims.
(6)
Executive shall cooperate with any reasonably requests by the
company in connection with any contests or disputes with the
Internal Revenue Service in connection with the Excise Tax and
shall be reimbursed by the Company, on an after-tax basis, for all
costs, expenses, interest and penalties incurred by Executive in
connection with any such contest or dispute.
5.
RELEASE. Any and all amounts payable and benefits or additional
rights provided pursuant to this Agreement upon Executive’s
termination of employment, beyond Accrued Amounts, shall only be
payable if Executive delivers to the Employing Company a general
release of all claims of Executive occurring up to the release date
in the form of Exhibit A hereto (with such changes therein as may
be necessary to make it valid and encompassing under applicable
law) within 21 days of presentation thereof by the Employing
Company to Executive.
6.
(a)
CONFIDENTIALITY. Executive agrees that he shall not, directly
or indirectly, use, make available, sell, disclose or
otherwise
7
communicate to any person, other
than in the course of Executive’s assigned duties and for the
benefit of the Employing Company, either during the period of
Executive’s employment or at any time thereafter, any
nonpublic, pro
