Exhibit 10.29
EXECUTIVE INCENTIVE COMPENSATION PLAN FOR FISCAL 1999
1. Purpose. The purpose of the Executive Incentive Compensation
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Plan (the "Plan") is to further the growth and success of
Mallinckrodt Inc. (the "Company") and its subsidiaries by
providing key employees of the Company with additional incentives
to contribute to the growth and success of the Company as
measured by achievement against the objectives set forth in this
Plan.
2. Administration. The Plan shall be administered by the
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Organization and Compensation Committee of the Board of Directors
of the Company (the "Committee"). The Committee is authorized,
subject to the provisions of the Plan, to establish from time-to-
time such rules and regulations and make such interpretations and
determinations as it may deem necessary or advisable for the
proper administration of the Plan and all such rules,
regulations, interpretations and determinations shall be binding
upon all participants in the Plan.
3. Participation. Within three (3) months after the beginning of
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the Company's fiscal year beginning July 1, 1998 ("Fiscal 1999"),
the Committee shall designate those key employees who are to
become participants in the Plan. Notwithstanding the foregoing,
the Committee shall have the discretion to designate additional
participants in the Plan after such three (3) month period if and
to the extent they are key employees whose employment with the
Company (or any subsidiary thereof) commences more than three (3)
months after the beginning of Fiscal 1999. Each such designation
shall be in writing and shall be filed with the Vice President,
Human Resources of the Company.
4. Target Incentive Awards. The Target Incentive Award ("Target
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Award") for a participant in the Plan for Fiscal 1999 shall be
the amount (as approved by the Committee) communicated to such
participant in writing by the Committee on or before the end of
the third month of Fiscal 1999. Such Target Award shall be
payable in whole or in part (and if at all) only in accordance
with the provisions set forth in this Plan. Notwithstanding the
foregoing or any other provision hereof, all Target Awards
hereunder shall be indexed against changes in the Company's
common stock price from the beginning to the end of Fiscal 1999
as determined in the following manner: the amount of any Target
Award to be used in determining the amount payable to a
participant hereunder shall be increased or reduced, as
appropriate, by the percentage change in the Company's common
stock price calculated by comparing the average of the high and
low price of the Company's common stock, as reflected on the New
York Stock Exchange Composite transactions tape ("NYSE Tape"),
during the last fifteen (15) New York Stock Exchange trading
dates of Fiscal 1999 against the average of the high and low
price of the Company's common stock, as reflected on the NYSE
Tape, during the first fifteen (15) New York Stock Exchange
trading days prior to the date of approval by the Company of this
Plan (August 11, 1998). Unless and to the extent otherwise
specifically set forth herein, any and all references to a Target
Award in this Plan shall mean and refer to a Target Award as
indexed pursuant to the immediately preceding sentence.
5. Performance Objectives.
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(a) Not later than the end of the second month of Fiscal 1999,
the Committee, after consultation with the Chief
Executive Officer ("CEO") of the Company, shall establish
financial performance objectives for the Plan for Fiscal
1999 (the "Performance Objectives").
(b) Notwithstanding the provisions of paragraph (a) immediately
above, the Committee may, after consultation with the CEO,
cause adjustments to be made to the Performance Objectives
as a consequence of income or loss attributable to any
business acquired or divested during Fiscal 1999 or any
other transaction or any adjustment on the books of account
of the Company occurring during Fiscal 1999 identified by
the Committee as being of an unusual and nonrecurring
nature, provided that the Committee shall not so exclude any
such item unless it shall be satisfied that it was not taken
into account in arriving at the Performance Objectives for
Fiscal 1999.
(c) Not more than three (3) months after the beginning of Fiscal
1999, all participants shall be notified of the Performance
Objectives. Such Performance Objectives shall not be
changed unless approved by the Committee upon the
recommendation of the Chief Executive Officer of the Company
("CEO").
6. Threshold Percentage; Maximum Percentage.
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(a) No later than the end of the third month of Fiscal 1999, the
Committee, after consultation with the CEO, shall establish
for the participants hereunder a minimum percentage of
achievement (the "Threshold Percentage") with respect to the
Performance Objectives. If the Threshold Percentage is not
achieved, there will be no payment of incentive awards
hereunder except as provided in Section 6(c) below.
(b) No later than the end of the third month of Fiscal 1999, the
Committee, after consultation with the CEO, shall establish
for the participants hereunder a schedule of incentive
awards to be paid hereunder expressed as a percentage of the
Target Award for each participant based on the percentage of
achievement of the Performance Objectives in excess of the
Threshold Percentage; provided that, in no event will any
participant be entitled to receive an amount in excess of
two hundred percent (200%) of his or her Target Award
("Maximum Percentage"), except as provided in Section 6(c)
or Section 8(d) below.
(c) If the Threshold Percentage is not met or the Maximum
Percentage is exceeded, the Board of Directors may, in
either case and upon the Committee's recommendation,
establish a special award pool for distribution to the
participants in a manner in which the Board of Directors
shall determine and in an amount which is reasonably related
to the actual performance of the Company and the
participants. The special award pool shall be combined with
any payment of incentive awards based on achievement of the
Maximum Percentage as specified in Section 6(b) above.
7. Payment and Vesting of Incentive Awards.
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(a) Except as otherwise provided in Section 8 hereof following a
Change in Control (as hereinafter defined), promptly after
the end of Fiscal 1999, the Chief Financial Officer ("CFO")
of the Company shall report to the CEO and the Committee the
percentage of achievement of the Performance Objectives with
respect to the Plan and the stock price indexing of Target
Awards as calculated pursuant to Section 4 above. If the
Threshold Percentage has been exceeded but the Maximum
Percentage has not been exceeded, the Committee shall
empower the Vice President, Human Resources and other
appropriate officers and employees of the Company to make
payment of incentive awards to the participants in
accordance with the requirements hereof, including but not
limited to the provisions of Section 7(c) below. If either
the Threshold Percentage has not been attained or the
Maximum Percentage has been exceeded, the Committee, if it
determines that it is appropriate to do so, will establish a
special award pool in accordance with Section 6(c) above to
be allocated for payment to each individual participant in
the same proportion as such participant's Target Award bears
to the total of all Target Awards established hereunder,
with such adjustments as the Committee deems necessary to
account for participants who are employed by the Company for
less than all of Fiscal 1999. Regardless of when payment of
any awards is to be made to participants hereunder, any
award to which a participant is entitled hereunder shall,
absent a Change in Control, become vested to the account of
the participant as follows: 50% on the last day of Fiscal
1999 and 100% on the last day of fiscal year 2000 ("Fiscal
2000").
(b) A participant who is otherwise eligible to receive an
incentive award pursuant to the terms of this Plan must be
actively employed by the Company (or a subsidiary thereof)
on the last day of Fiscal 1999 to be eligible to receive any
portion of an incentive award hereunder and must be actively
employed by the Company (or a subsidiary thereof) on the
last day of Fiscal 2000 to be eligible to receive the entire
amount of any award for which such participant is otherwise
eligible in accordance with the terms hereof. However, if a
participant's employment is terminated prior to the last day
of Fiscal 1999 by reason of the participant's death,
disability or Qualified Retirement (as defined below), the
participant (or the participant's designated beneficiary in
the event of his or her death), at the sole discretion of
the Committee, shall be entitled to receive an amount
determined by multiplying one-half of the incentive award
which would otherwise have been payable pursuant to this
Plan had the participant remained an employee through the
last day of Fiscal 2000 by a fraction, the numerator of
which is the number of days during Fiscal 1999 that the
participant was employed by the Company (or a subsidiary
thereof) and the denominator of which is 365. Further, if a
participant's employment is terminated prior to the last day
of Fiscal 2000 but after the end of Fiscal 1999 by reason of
the participant's death, disability or retirement, the
participant (or the participant's designated beneficiary in
the event of his or her death), shall be entitled to receive
(i) an amount equal to one-half of the incentive award which
would otherwise have been payable pursuant to this Plan had
the participant remained an employee through the last day of
Fiscal 2000 and, (ii) at the sole discretion of the
Committee, an additional amount determined by multiplying
one-half of the incentive award which otherwise would have
been payable pursuant to this Plan had the participant
remained an employee through the last day of Fiscal 2000 by
a fraction, the numerator of which is the number of days
during Fiscal 2000 that the participant was employed by the
Company (or a subsidiary thereof) and the denominator of
which is 365. For purposes of this Plan, "retirement" means
retirement at or after age 55, but shall not include any
termination of a participant for Cause (as defined in
Section 8(c) hereof). If a participant hereunder begins
employment after the first day of Fiscal 1999, the
participant's incentive award for Fiscal 1999 shall be
determined by an appropriate proration consistent with the
intent set forth in this paragraph (b).
(c) Unless the participant elects otherwise pursuant to
paragraph (d) of Section 7 or unless required otherwise
pursuant to the provisions of paragraph (e) of Section 7,
payment of incentive awards to participants under the Plan
with respect to Fiscal 1999 shall be made in cash in a lump
sum (net of any required withholding taxes) within seventy
five (75) days after the close of Fiscal 2000.
(d) A participant (other than participants that are not either
United States citizens or permanently resident in the United
States) may elect to defer payment of his or her actual
incentive award for Fiscal 1999 by written notice submitted
to the Committee not later than thirty (30) days after the
date on which a participant has been provided notice of his
or her Target Award and the Plan Performance Objectives. A
participant electing to defer may have his or her award paid
in one of the following ways:
(i) with the consent of the Committee, in a lump sum
payment or in a series of not less than five (5) nor
more than ten (10) installments commencing no earlier
that seventy five (75) days after the end of Fiscal
2000 and not later than sixty (60) days after the end
of the calendar year in which the participant
terminates his employment, whether by death,
disability, normal or early retirement, pursuant to the
Company's retirement plan, or any other reason; it
being understood that the Committee may, upon request
by a participant prior to his or her termination of
employment, in the Committee's sole discretion, deem
that any period of consultancy with the Company which
is commenced immediately upon a participant's
termination of employment is a continuation of
employment for purposes of this subparagraph (i) only;
or
(ii) with the consent of the Committee, in a lump sum
payment on any other date or in a series of not less
than five (5) nor more than ten (10) installments
commencing on any other date as may be agreed upon by
the participant and the Committee; provided however,
should a participant terminate employment prior to such
agreed upon date, the Committee may, in its sole
discretion, pay all such participant's awards deferred
pursuant to this subparagraph (ii), plus interest
accrued thereon, to such participant no later than
sixty (60) days after the date of termination of
employment.
All incentive awards hereunder, whether deferred or not, shall be
payable in cash (net of any required withholding of taxes).
Notwithstanding the election to defer made by the participant
pursuant to the foregoing, the Committee in its sole discretion
may, upon the death or disability of a participant during Fiscal
1999 or Fiscal 2000 and who was still employed at the time of
such death or disability, pay such participant's deferred awards
under this Plan plus accrued interest thereon to the participant
or to such participant's designated beneficiary (as applicable)
in a lump sum no later than sixty (60) days after the end of the
calendar year in which the participant's death or disability
occurs.
A participant's deferred compensation account shall not be
trusted, nor will such account represent any obligation on the
part of the Company other than the contractual obligations
specified in the applicable award deferral agreement. The
Company agrees to accrue interest on the participant's deferred
compensation account at the end of each month at a rate equal to
the prime rate being charged or quoted by Citibank on and as of
the first day of the particular calendar quarter in which such
month occurs.
(e) Notwithstanding any other provision of this Plan that may be
interpreted to the contrary, the Committee, in its sole
judgment and discretion, may determine, because of the
adverse impact of any tax or other laws, rules or
regulations upon the Company or for the advancement of any
other corporate purpose, interest or objective, that it is
necessary or desirable that all or some portion of the
incentive award otherwise payable to all or any similarly
situated group of participants in accordance with this Plan
be deferred until such time or times as payment of all or
some of such deferred amounts to the participant would not
subject the Company to any such adverse impact. Further, it
is understood that, with respect to a participant who is a
"covered employee" within the meaning of Section 162(m) of
the Internal Revenue Code of 1986, as amended, payments of
incentive awards shall be automatically deferred to the
extent necessary until such time as either (i) payment of
all or a portion of any such deferred incentive awards can
be made to such an employee in a manner that will ensure
full tax deductibility therefor to the Company or (ii) such
employee ceases to be a "covered employee". It is
understood that no participant in this Plan shall be
entitled to receive payment of any incentive award hereunder
or to be a participant in this Plan unless such participant
shall execute such documents as the Company shall provide
specifying that participation in the Plan is conditional
upon the participant's understanding and acceptance of the
discretionary authority granted to the Committee pursuant to
this Section 7(e) and Section 9 hereof. In the event of an
automatic deferral of all or any portion of a participant's
incentive award pursuant to this Section 7(e), any such
deferred amounts shall accrue interest until paid at the
rate set forth in the last sentence of Section 7(d).
8. Change in Control.
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(a) For purposes of the Plan, "Change in Control" means the
occurrence of any one of the following events:
(i) any "person" (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934 (the
"Exchange Act") and as used in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined
voting power of the Company's then outstanding
securities eligible to vote for the election of the
Board of Directors (the "Company Voting Securities");
provided, however, that the event described in this
subparagraph (i) shall not be deemed to be a Change in
Control by virtue of any of the following acquisitions:
(A) by the Company or any subsidiary of the Company,
(B) by any employee benefit plan sponsored or
maintained by the Company or any subsidiary of the
Company, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities,
(D) pursuant to a Non-Control Transaction (as defined
in subparagraph (iii) below), (E) with respect to any
specific participant, pursuant to any acquisition by
the participant or any group of persons including the
participant, or (F) except as provided in subparagraph
(iii) below, in which Company Voting Securities are
acquired from the Company, if a majority of the Board
approves a resolution providing expressly that such
acquisition does not constitute a Change in Control
under this subparagraph (i);
(ii) individuals who, on the date of adoption of this
Executive Incentive Compensation Plan, constitute the
Board of Directors (the "Incumbent Board") cease for
any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent
to the date of adoption of this Executive Incentive
Compensation Plan, whose election, or nomination for
election, by the Company's stockholders was approved by
a vote of at least a majority of the directors
comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for
director, without objection to such nomination) shall
be, for purposes of this paragraph (ii), considered as
though such person were a member of the Incumbent
Board; provided, however, that no individual initially
elected or nominated as a director of the Company as a
result of an actual or threatened election contest with
respect to directors or any other actual or threatened
solicitation of proxies or consents by or on behalf of
any person other than the Board of Directors shall be
deemed to be a member of the Incumbent Board;
(iii)the consummation of a merger, consolidation, share
exchange or similar form of corporate reorganization of
the Company or any such type of transaction requiring
the approval of the Company's stockholders (whether for
such transaction or the issuance of securities in the
transaction or otherwise), or the consummation of the
direct or indirect sale or other disposition of all or
substantially all of the assets, of the Company (a
"Business Combination"), unless immediately following
such Business Combination: (A) more than 50% of the
total voting power of the publicly traded corporation
resulting from such Business Combination (including,
without limitation, any corporation which directly or
indirectly has beneficial ownership of 100% of the
Company Voting Securities or all or substantially all
of the Company's assets) eligible to elect directors of
such corporation is represented by shares that were
Company Voting Securities immediately prior to such
Business Combination (either by remaining outstanding
or being converted), and such voting power is in
substantially the same proportion as the voting power
of such Company Voting Securities immediately prior to
the Business Combination, (B) no person (other than any
publicly traded holding company resulting from such
Business Combination, any employee benefit plan
sponsored or maintained by the Company (or the
corporation resulting from such Business Combination),
or any person which beneficially owned, immediately
prior to such Business Combination, directly or
indirectly, 20% or more of the Company Voting
Securities (a "Company 20% Stockholder")) becomes the
beneficial owner, directly or indirectly, of 20% or
more of the total voting power of the outstanding
voting securities eligible to elect directors of the
corporation resulting from such Business Combination
and no Company 20% Stockholder increases its percentage
of such total voting power, and (C) at least a majority
of the members of the board of directors of the
corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
approval of the Board of Directors of the execution of
the initial agreement providing for such Business
Combination (any transaction satisfying (A), (B) and
(C) immediately above a "Non-Control Transaction"); or
(iv) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, a Change in Control of the Company
shall not be deemed to occur solely because any person acquires
beneficial ownership or more than 20% of the Company Voting
Securities as a result of the acquisition of Company Voting
Securities by the Company which, by reducing the number of
Company Voting Securities outstanding, increases the percentage
of shares beneficially owned by such person; provided that, if a
Change in Control of the Company would occur as a result of such
an acquisition by the Company (if not for the operation of this
sentence), and after the Company's acquisition such person
becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company
Voting Securities beneficially owned by such person, then a
Change in Control of the of the Company shall occur.
(b) For purposes of the Plan, "Good Reason" with respect to a
participant means, without such participant's express
written consent, the occurrence of any of the following
events after a Change in Control:
(i) (1) the assignment to such participant of any duties
or responsibilities (including reporting
responsibilities) inconsistent in any material and
adverse respect with the participant's duties and
responsibilities with the Company immediately prior to
such Change in Control (including any material and
adverse diminution of such duties or responsibilities),
it being understood that Good Reason shall not be
deemed to occur upon a change in duties or
responsibilities that is solely and directly a result
of the Company no longer being a publicly traded
entity, and does not involve any other event set forth
in this paragraph (b) or (2) a material and adverse
change in such participant's titles or offices with the
Company as in effect immediately prior to such Change
in Control;
(ii) a reduction by the Company in such participant's rate
of annual base salary or target annual bonus or other
incentive compensation opportunity as in effect
immediately prior to such Change in Control or as the
same may be increased from time to time thereafter;
(iii)any requirement of the Company that such participant
(1) notwithstanding his or her objection, be based
anywhere more than fifty (50) miles from the location
where the participant's employment is located at the
time of the Change in Control or (2) travel on Company
business to an extent substantially greater than the
travel obligations of the participant immediately prior
to such Change in Control; or
(iv) the failure of the Company to (1) continue in effect
any employee benefit plan or compensation plan in which
such participant is participating immediately prior to
such Change in Control (including the taking of any
action by the Company which would adversely affect the
participant's participation in or materially reduce the
participant benefits under any such plan), unless the
participant is permitted to participate in other plans
providing the participant with substantially comparable
benefits, (2) provide such participant and the
participant's dependents with welfare benefits in
accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated
companies in effect for the participant immediately
prior to such Change in Control or provide
substantially comparable benefits at a substantially
comparable cost to the participant, (3) provide fringe
benefits in accordance with the most favorable plans,
practices, programs and policies of the Company and its
affiliated companies in effect for such participant
immediately prior to such Change in Control, or provide
substantially comparable fringe benefits, or (4)
provide such participant with paid vacation in
accordance with the most favorable plans, policies,
programs and practices of the Company and its
affiliated companies as in effect for the participant
immediately prior to such Change in Control (including
crediting the participant with all service credited to
him or her for such purpose prior to the Change in
Control), unless the failure to provide such paid
vacation is a result of a policy uniformly applied by
the entity acquiring the Company to its employees.
Notwithstanding the foregoing portions of this paragraph
(b), an isolated and inadvertent action taken in good faith
and which is remedied by the Company within ten (10) days
after receipt of notice thereof given by the participant
shall not constitute Good Reason. The participant must
notify the Company of an event constituting Good Reason
within ninety (90) days following his or her knowledge of
its existence or such event shall not constitute Good Reason
under the Plan.
(c) For purposes of the Plan, "Cause" means with respect to a
participant (i) the willful and continued failure of such
participant substantially to perform his or her duties with
the Company (other than any failure due to physical or
mental incapacity) after a demand for substantial
performance is delivered to him or her by the Committee
which specifically identifies the manner in which the
Committee believes he has not substantially performed his or
her duties or (ii) willful misconduct materially and
demonstrably injurious to the Company. No act or failure to
act by a participant shall be considered "willful" unless
done or omitted to be done by him or her not in good faith
and without reasonable belief that his or her action or
omission was in the best interest of the Company. The
unwillingness of a participant to accept any condition or
event which would constitute Good Reason under paragraph (b)
of this Section 8 may not be considered by the Committee to
be a failure to perform or misconduct by a participant. The
Company must notify the participant of an event constituting
Cause within ninety (90) days following its knowledge of the
event's existence or such event shall not constitute Cause
under the Plan.
(d) If a Change in Control of the Company occurs at any time
during Fiscal 1999 or Fiscal 2000, and a participant's
employment with the Company and its subsidiaries is
terminated at any time after such Change of Control but on
or prior to the last day of Fiscal 2000 and such
termination is effected (i) by the Company (other than for
Cause, disability (within the meaning of the Company's long-
term disability plan) or mandatory retirement) or (ii) by
the participant for Good Reason, then (in event of the
foregoing) such participant shall be paid, within thirty
(30) days following such termination of employment, a lump
sum cash amount (net of any required withholding taxes)
equal to such participants Target Award for Fiscal 1999.
Further, with respect to a situation in which an incentive
award under this Plan has been deferred (whether voluntarily
by a participant, by action of the Committee or by operation
of the terms of this Plan), if a Change in Control of the
Company occurs after the end of Fiscal 2000 but prior to the
payment or distribution to a participant of any such
incentive award, and a participant's employment with the
Company and its subsidiaries is terminated after the end of
the Fiscal 2000 and after such Change of Control occurs and
such termination is effected (i) by the Company (other than
for cause, disability (within the meaning of the Company's
long-term disability plan) or mandatory retirement) or (ii)
by the participant for Good Reason, then (in the event of
all of the foregoing) such participant shall be paid, within
thirty (30) days following such termination of employment, a
lump sum cash amount (net of any required withholding taxes)
equal to such participant's Target Award for Fiscal 1999
notwithstanding any such deferral.
(e) In the event a Change in Control of the Company occurs at
any time during Fiscal 1999 or Fiscal 2000, each participant
who thereafter remains employed by the Company as of the end
of Fiscal 2000 shall receive, in lieu of any other amounts
payable hereunder, an annual incentive award under this Plan
with respect to Fiscal 1999 equal to two (2) times his or
her Target Award for Fiscal 1999.
(f) Notwithstanding anything in this Plan to the contrary, this
Section 8 may not be amended, modified or terminated in a
manner adverse to the participants during a period of one
year and two (2) months immediately following a Change in
Control of the Company.
(g) Notwithstanding anything in paragraph (c) of Section 5 to
the contrary, in the event a Change in Control of the
Company occurs during Fiscal 1999 or Fiscal 2000 then, at
any time during or with respect to the remainder of Fiscal
1999 or Fiscal 2000, the Committee may not adjust
Performance Objectives or Target Awards hereunder in any
manner adverse to any one or more of the participants.
(h) Anything in this Plan to the contrary notwithstanding, in
the event it shall be determined that any payment or
distribution by the Company of an incentive award pursuant
to this Section 8 (any such award referred to herein as a
"Change of Control Payment") to or for the benefit of a
participant (determined without regard to any additional
payments required under this paragraph (h)) would be subject
to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended, or any interest or
penalties are incurred by a participant with respect to such
excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as
the "Excise Tax"), then the participant shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that, after payment by the participant of all
taxes, including any interest or penalties imposed with
respect to such taxes (including, without limitation, any
income and employment taxes, and any interest and penalties
imposed with respect thereto, and Excise Tax imposed upon
the Gross-Up Payment), the participant retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon
the Change of Control Payment made to the participant
pursuant to this Plan. For purposes of determining the
amount of the Gross-Up Payment, a participant shall be
deemed to pay federal income taxes at the highest marginal
rates of federal income taxation for the calendar year in
which the Gross-Up Payment is to be made and 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. All determinations required to be
made under this paragraph (h), including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at
such determination, shall be made by the public accounting
firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting
Firm"), which Accounting Firm shall provide detailed
supporting calculations both to the Company and the
participant within fifteen (15) business days of the receipt
of notice from the Company or the participant that there has
been a Change of Control Payment, or such earlier time as is
requested by the Company (collectively, the
"Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, the participant
may appoint another nationally recognized public accounting
firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company and the Company
shall enter into any reasonable agreement requested by the
Accounting Firm in connection with the performance of the
services hereunder. The Gross-Up Payment under this
paragraph (h) should be made within thirty (30) days of any
Change of Control Payment. If the Accounting Firm
determines that no Excise Tax is payable by the participant,
it shall furnish the participant with a written opinion that
failure to report the Excise Tax on the participant's
applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. The
Determination by the Accounting Firm shall be binding upon
the Company and the participant. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the Determination, it is possible that Gross-
Up Payments will be made by the Company which should not
have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event
that the participant thereafter is required to make payment
of any additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred
and any such Underpayment (together with interest at the
rate provided in Section 1274(b)(2)(B) of the Code) shall be
promptly paid by the Company to or for the benefit of the
participant. In the event the amount of the Gross-Up
Payment exceeds the amount necessary to reimburse the
participant for his Excise Tax, the Accounting Firm shall
determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate
provided in Section 1274(b)(2) of the Code) shall be
promptly paid by the participant to or for the benefit of
the Company. The participant shall cooperate, to the extent
his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any
contests or disputes with the Internal Revenue Service in
connection with the Excise Tax. The provisions of this
paragraph (h) shall be coordinated with any substantially
similar provisions contained in any plan or agreement
covering the participant and calling for payment by the
Company (under appropriate circumstances) of any bonus,
award, benefit or other compensation, with the intent and
effect that the participant shall be made whole for the
effect of all Excise Taxes levied on the participant as a
consequence of payments made under such plans or agreements
but shall not receive any windfall or double payment.
(i) Any payments made by the Company to a participant
pursuant to either Sections 8(d) or 8(e) above shall be
deemed to be in lieu of and not in addition to any
amounts a participant might otherwise be entitled to
receive pursuant to the provisions of Section 7 hereof.
9. Forfeiture of Awards. The Committee may, in its sole discretion,
--------------------
in the event of a serious breach of conduct by a participant
(including, without limitation, any conduct prejudicial to or in
conflict with the Company or its subsidiaries) or any activity of
a participant in competition with the business of the Company or
any subsidiary, (i) cancel any incentive award, in whole or in
part, whether or not vested or deferred, and/or (ii) if such
conduct or activity occurs within one (1) year following the
payment of any incentive award, require the participant to repay
to the Company some or all of the amount of any incentive award.
Such cancellation or repayment obligation shall be effective as
of the date specified by the Committee, and the Committee may
provide for an offset to any future payments owed by the Company
or any subsidiary to the participant under this Plan if necessary
to satisfy the repayment obligation. The determination of
whether a participant has engaged in a serious breach of conduct
or any activity in competition with the business of the Company
or any subsidiary shall be determined by the Committee in good
faith and in its sole discretion.
10. Miscellaneous.
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(a) By action of the Board of Directors, the Plan may be amended
at any time and from time to time, or terminated at any
time, provided, however, that no such amendment shall divest
any participant of rights which have been accrued under the
Plan.
(b) The rights of a participant under the Plan are personal to
the participant and to any person or persons who may become
entitled to distributions or payments under the Plan by
reason of the death of the participant, and the rights of
the participant or any such person under the Plan shall not
be subject to voluntary or involuntary alienation,
assignment or transfer by the participant or any such person
or persons.
(c) The obligations of the Company under the Plan shall be
binding upon any successor corporation or organization which
shall succeed to substantially all of the assets and
business of the Company and the term "Company" wherever used
in this Plan shall mean and include any such corporation or
organization after such succession.
(d) No participant shall have any right to be retained in the
employ of the Company by virtue of participation in the
Plan.
(e) If, at any time prior to the payment or delivery of any
incentive awards under this Plan, mandatory wage controls
are in effect which, in the opinion of counsel to the
Company, are applicable to this Plan and would make such
incentive awards or the payments or delivery thereof in
accordance with the Plan illegal, the Committee shall reduce
the amount of such incentive awards, payments or deliveries
in such manner and to such extent (including elimination of
such incentive awards) as, in its sole judgment, are
necessary or advisable in order to comply with such
applicable law. If, at any time prior to such payment or
delivery under the Plan, voluntary wage controls are in
effect under any federal policy with respect to wage
controls and if any such incentive awards or the payments or
delivery thereof as provided for in the Plan would, in the
opinion of counsel to the Company, exceed applicable
guidelines established under such voluntary controls, the
Committee may, in its absolute discretion and if it deems it
to be in the interest of the Company, reduce or eliminate
the amount of such incentive awards, payments or deliveries
in such manner and to such extent as it deems advisable.
(f) This Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. Nothing contained in
this Plan shall give the participants any rights with
respect to any incentive award that are greater than those
of a general creditor of the Company.
(g) This Plan sets forth all of the terms and conditions
applicable to its subject matter and no other prior or
future plan, agreement or understanding, whether written or
oral, shall have any effect on the interpretation, validity
or enforceability hereof.
(h) Unless the context otherwise requires, words in the singular
include the plural and words in the plural include the
singular.
(i) The Plan shall be governed by and construed in accordance
with the laws of the State of New York, regardless of the
effect of such state's conflict of laws principles.
IN WITNESS WHEREOF, Mallinckrodt Inc. has caused this instrument
to be executed, effective as of August 11, 1998.
Mallinckrodt Inc.
By: C. RAY HOLMAN
----------------------------
Its: Chairman and Chief Executive
Officer
(Corporate Seal)
ATTEST:
By: ROGER A. KELLER
-------------------------
Its: Vice President, Secretary
and General Counsel