Exhibit 10.3
May 9, 1994
MICHAEL A. ROCCA
Dear Mike,
This letter is to assure you that in the event you become
entitled to payments by operation of the Employee Agreement dated
April 4, 1994 ("Agreement") between you and Mallinckrodt Group
Inc., formerly known as IMCERA Group Inc., ("Mallinckrodt"), and
if any of the payments to be made under the Agreement ("Agreement
Payments") will be subject to the tax ("Excise Tax") imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended
("Code") (or any similar tax that may hereafter be imposed),
Mallinckrodt shall pay to you at the time specified in Paragraph
(c) below an additional amount ("Gross-up Payment") such that the
net amount retained by you, after deduction of any Excise Tax on
the Total Payments (as hereinafter defined) and any federal,
state and local income tax and Excise Tax upon the Gross-up
Payment provided for by this paragraph, but before deduction for
any federal, state or local income tax on the Agreement Payments,
shall be equal to the sum of (a) the Total Payments, and (b) an
amount equal to the product of any deductions disallowed because
of the inclusion of the Gross-Up Payment in your adjusted gross
income and the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-up Payment is
to be made. Notwithstanding the foregoing, your Gross-up
Payment, if any, may not exceed $492,455.
(1) For purposes of determining whether any of the
Agreement Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
(a) any other payments or benefits received or to be
received by you in connection with a change in control (as
that term is defined in the Mallinckrodt Group Inc.
Management Compensation and Benefit Assurance Program) of
Mallinckrodt or
AGREEMENT/2
MICHAEL A. ROCCA
your termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with Mallinckrodt, any person whose actions result
in a change of control of Mallinckrodt or any person
affiliated with Mallinckrodt or such person) (which,
together with the Agreement Payments, shall constitute the
"Total Payments") shall be treated as "parachute payments"
within the meaning of Section 280G(b)(2) of the Code, and
all "excess parachute payments" within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject
to the Excise Tax, unless in the opinion of tax counsel
selected by Mallinckrodt's independent auditors, such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the base amount within
the meaning of Section 280G(b)(3) o the Code or are
otherwise not subject to the Excise Tax.
(b) the amount of the Total Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of
(i) the total amount of the Total Payments or (ii) the
amount of excess parachute payments within the meaning of,
Section 280G(b)(1) of the Code (after applying clause (a),
above), and
(c) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by Mallinckrodt's
independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
(2) For purposes of determining the amount of the Gross-up
Payment, you shall be deemed to (x) pay federal income taxes at
the highest marginal rate of federal income taxation for the
calendar year in which the Gross-up Payment is to be made and,
(y) pay the applicable state and local income taxes at the
highest marginal rate of taxation for the calendar year in which
the Gross-up Payment is to be made, net of the maximum reduction
in federal income taxes which could be obtained from deduction of
such state and local taxes (determined without regard to
limitations on deductions based upon the amount of your adjust
gross income), and (z) have otherwise allowable deductions for
federal income tax purposes at least equal to those disallowed
because of the inclusion of the Gross-up Payment in your adjusted
gross income. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account
AGREEMENT/3
MICHAEL A. ROCCA
hereunder at the time the Gross-up Payment is made, you shall
repay to Mallinckrodt at the time that the amount of such
reduction in Excise Tax is finally determined the portion of the
Gross-up Payment attributable to such reduction (plus the portion
of the Gross-up Payment attributable to the Excise Tax and
federal and state and local income tax imposed on the portion of
the Gross-up Payment being repaid by you if such repayment
results in a reduction in Excise Tax and/or a federal and state
and local income tax deduction), plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time the
Gross-up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of
the Gross-up Payment) Mallinckrodt shall make an additional
gross-up payment in respect of such excess (plus any interest
payable with respect of such excess) at the time that the amount
of such excess is finally determined.
(3) The Gross-Up Payment or porion thereof provided for in
Paragraphs (1) and (2) above shall be paid not later than the
thirtieth day following payment of any amounts under the
Agreement; provided, however, that if the amount of such Gross-Up
Payment or portion thereof cannot be finally determined on or
before such day, Mallinckrodt shall pay to you on such day an
estimate, as determined in good faith by Mallinckrodt, of the
minimum amount of such payments and shall pay the remainder of
such payments (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined, but in no event later than the forty-fifth day
after payment of any amounts under the Agreement. In the event
that the amount of the estimated payment exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by Mallinckrodt to you, payable on the fifth
day after demand by Mallinckrodt (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code).
Should a change in control occur (as defined in the Management
Compensation and Benefit Assurance Program) and should Gross-up
Payments become due you as a result of the operation of your
Agreement, then such Gross-up Payments will be paid to you from
the Trust Agreement between Mallinckrodt Group Inc., and Wachovia
Bank of North Carolina, N.A., which has been established to
protect payment obligations of Mallinckrodt under this letter
agreement.
Mallinckrodt is pleased to be able to provide you with this
additional assurance of economic protection in the event of a
change in control.
AGREEMENT/4
MICHAEL A. ROCCA
Please sign, date and return the original of this letter in the
envelope provided and retain the enclosed copy for your records.
Very truly yours,
BEVERLY L. HAYES
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Beverly L. Hayes
Vice President
Organization & Human Resources
I have read this letter and
understand and accept its terms.
MICHAEL A. ROCCA
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(Signed)
Michael A. Rocca
5/11/94
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(Dated)