Sweet Contract May Well Be All for Naught
By FLOYD NORRIS
On Jan. 22, 2001, just one week before shares of Tyco peaked, the company's board awarded L. Dennis Kozlowski a new contract that called for him to remain chairman and chief executive until Nov. 16, 2008, his 62nd birthday. He was given eight million shares of restricted stock, then worth $485 million at the market price for unrestricted stock.
That contract was unusual in many ways. For starters, it said that the only reason Mr. Kozlowski could be fired for cause was if he was convicted "of a felony that is materially and demonstrably injurious to the company or any of its subsidiaries or affiliates, monetarily or otherwise." And even with such a conviction, it would require a vote of three-quarters of the board to fire him.
That contract provided for generous severance benefits if he was fired without cause, or if he resigned for "good reason," a term that included a reaction to a board reduction of his duties.
Brad McGee, a Tyco spokesman, said yesterday that the "contract became void upon his resignation" but that the board planned to negotiate with Mr. Kozlowski about severance benefits. He estimated the value of the severance under the contract at about $120 million and said he did not know whether Mr. Kozlowski agreed that it was now void.
Under the existing deal, Mr. Kozlowski would be entitled to an immediate payment of almost $17 million, plus a bonus for the part of the current fiscal year that he worked. He would also receive a lifetime consulting arrangement that would pay him $137,500 a year. In addition, he would receive all the benefits he has been accustomed to receiving, including "access to company aircraft," as well as to cars, offices and apartments.
And the scale of his benefits now can be appreciated by noting that last year's company-paid premium on his life insurance policy, including the amount it paid to cover his taxes on the premium, came to $3.8 million. The company did not disclose the face amount of the policy, but the contract provided he would keep the policy for life, with the company continuing to pay the premiums. |
