Executive Retention Agreement - Tyco International Inc. and Mark Belnick
EXECUTIVE RETENTION AGREEMENT
AGREEMENT by and between Tyco International Ltd., a Bermuda company (the
"Company"), and Mark Belnick (the "Executive"), effective as of the Effective
Date (as hereinafter defined).
W I T N E S S E T H
WHEREAS, Executive is Executive Vice President and Chief Corporate Counsel
of the Company; and
WHEREAS, the Company has determined that it is in the best interests of the
Company and its stockholders to reinforce and encourage the continued attention
and dedication of Executive to the Company as a member of the Company's senior
management and to assure that the Company will have the services of Executive in
the foreseeable future.
NOW, THEREFORE, in consideration for the promises and mutual covenants
herein contained, it is hereby agreed by and between the Company and Executive
As used in this Agreement, the following terms shall have the respective
meanings set forth below:
(a) "Affiliate" means any entity that directly or indirectly is
controlled by, controls or is under common control with the Company.
(b) "Cause" means Executive's conviction of a felony. The Company
must notify Executive of an event constituting Cause within 90 days following
the Board's knowledge of its existence or such event shall not constitute
Cause under this Agreement.
(c) "Change in Control" means the first to occur of any of the
(1) Any "person" (as that term is used in Sections 13 and
14(d)(2) of the Securities Exchange Act of 1934 ("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 the
Company's capital stock entitled to vote in the election of
(2) 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 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
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 that term is used in Sections 13 and 14(d)(2) 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
(3) The shareholders of the Company approve any consolidation
or merger of the Company, other than a merger of the Company in which
the holders of the common stock of the Company immediately prior to
the merger hold more than 50% of the common stock of the surviving
corporation immediately after the merger;
(4) The shareholders of the Company approve any plan or
proposal for the liquidation or dissolution of the Company; or
(5) Substantially all of the assets of the Company are sold
or otherwise transferred to unaffiliated third parties.
(d) "Company" means Tyco International Ltd., a Bermuda corporation,
and the successor to, or transferee of all or substantially all of the assets
of, the Company.
(e) "Date of Termination" means (1) the effective date on which
Executive's employment by the Company terminates as specified in a Notice of
Termination by the Company or Executive, as the case may be, or (2) if
Executive's employment by the Company terminates by reason of death, the date
of death of Executive. Notwithstanding the previous sentence, (i) if
Executive's employment is terminated for Disability, then such Date of
Termination shall be no earlier than 30 days following the date on which a
Notice of Termination is received, and (ii) if Executive's employment is
terminated by the Company other than for Cause or by Executive other than for
Good Reason, then such Date of Termination shall be no earlier than 30 days
following the date on which a Notice of Termination is received.
(f) "Disability" means Executive's incapacity due to physical or
mental illness which renders Executive unable to perform his duties on a
full-time basis for 180 calendar days in the aggregate in any 12-month
period. Any question as to the existence of any physical or mental illness
referred to above to which the Company and Executive cannot agree shall be
determined by a qualified independent physician selected jointly by the
Company and Executive or, if the Company and Executive cannot agree, a
physician selected jointly by two physicians, one selected by the Company and
one selected by Executive. The determination of such a physician made in
writing to the Company and Executive shall be final and conclusive for
purposes of this Agreement.
(g) "Effective Date" means October 1, 2001.
(h) "Good Reason" means, without Executive's express written consent,
the occurrence of any of the following events:
(1) a material and adverse change in Executive's titles,
offices, duties or responsibilities with the Company as in effect on
the Effective Date;
(2) a reduction by the Company in Executive's rate of annual
base salary or annual or long-term incentive compensation opportunity
as in effect immediately prior to the Effective Date or as the same
may be increased from time to time thereafter; provided that amounts
payable pursuant to this Agreement shall not be considered an
incentive compensation opportunity for this purpose;
(3) the failure of the Company to provide Executive and his
dependents with employee and fringe benefits at least as generous as
those in effect on the Effective Date;
(4) the failure of the Company to obtain the assumption
agreement from any successor as contemplated in Section 16; or
(5) any relocation of Executive's principal place of business
more than 20 miles from Park City, Utah or New York City, New York.
Notwithstanding the foregoing, an isolated and inadvertent action taken
in good faith and which is remedied by the Company within ten days after receipt
of notice thereof given by Executive shall not constitute Good Reason.
(i) "Notice of Termination" means the written notice described in
2. RETENTION PAYMENT.
If Executive remains employed by the Company or any Affiliate through
October 1, 2003 then he shall receive a lump sum cash payment within ten (10)
business days after October 1, 2003 in the amount of ten million six hundred
thousand dollars ($10,600,000.00). This payment shall be in lieu of cash bonuses
for the fiscal years ending September 30, 2001, September 30, 2002 and September
30, 2003, and any and all severance obligations.
3. TERMINATION OF EMPLOYMENT.
Executive's employment hereunder may be terminated on or prior to October
1, 2003 under the following circumstances:
(a) DEATH. Executive's employment with the Company shall terminate
upon his death.
(b) DISABILITY. Executive's employment with the Company shall
terminate upon his Disability.
(c) TERMINATION BY COMPANY FOR CAUSE. Subject to the provisions of
Section 1(b) hereof and upon a Notice of Termination to Executive, the
Company may terminate Executive's employment with the Company for Cause.
(d) TERMINATION BY COMPANY WITHOUT CAUSE. Upon a Notice of
Termination to Executive, the Company may terminate Executive's employment
with the Company without Cause.
(e) TERMINATION BY EXECUTIVE. Upon a Notice of Termination to the
Company, Executive may terminate his employment with the Company for any
reason, including but not limited to Good Reason.
4. COMPENSATION UPON TERMINATION.
(a) TERMINATION GENERALLY. If Executive's employment with the Company
is terminated for any reason, the Company shall pay or provide to Executive
(or to his authorized representatives or estate) any earned but unpaid base
salary, unpaid expense reimbursements, accrued but unused vacation and any
vested benefits that Executive may have under any employee benefit plan of
the Company, including without limitation, executive compensation, insurance
and retirement plans or arrangements (the "Accrued Benefits").
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD
REASON. If, prior to October 1, 2003, Executive's employment with the Company
and all Affiliates is terminated for any reason other than by Executive
without Good Reason or by the Company with Cause, then (i) if such
termination occurs prior to October 1, 2002, Executive shall receive a lump
sum cash payment within ten (10) business days after the date of such
termination in an amount equal to three million five hundred thirty-three
thousand three hundred thirty-three dollars ($3,533,333.00), and Executive
shall receive an additional lump sum payment of the same amount on each of
October 1, 2002 and October 1, 2003, and (ii) if such termination occurs on
or after October 1, 2002, Executive shall receive a lump sum cash payment
within ten (10) business days after the date of such termination in an amount
equal to seven million sixty-six thousand six hundred sixty-seven dollars
($7,066,667.00), and Executive shall receive an additional lump sum payment
of three million five hundred thirty-three thousand three hundred
thirty-three dollars ($3,533,333.00) on October 1, 2003.
(c) TERMINATION BY COMPANY WITH CAUSE OR BY EXECUTIVE WITHOUT GOOD
REASON. If, prior to October 1, 2003, Executive's employment with the Company
and all Affiliates is terminated by Executive without Good Reason or by the
Company for Cause, then Executive shall receive a lump sum cash payment
within ten (10) business days after the date of such termination in an amount
equal to ten million six hundred thousand dollars ($10,600,000.00) multiplied
by (i) one-third, if such termination occurs after September 30, 2001 and
before October 1, 2002 and (ii) two-thirds if such termination occurs after
September 30, 2002 and before October 1, 2003.
(d) The sum of the payments received by Executive, if any, pursuant
to Section 2, 4(b) or 4(c) is referred to herein as the "Retention Payment."
The Retention Payment shall be in lieu of cash bonuses for the fiscal years
ending September 30, 2001, September 30, 2002 and September 30, 2003, and any
and all severance and benefit obligations.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
If Executive receives a Retention Payment pursuant to Section 2, 4(b) or
4(c), he shall also be paid, at the same time as any installment of the
Retention Payment, an additional payment (the "Gross-Up Payment") in an amount
such that, after payment by Executive of all taxes on such installment of the
Retention Payment and the Gross-Up Payment (including all federal, state and
local income, employment and other taxes, and any interest or penalties imposed
on such taxes), Executive retains an amount of the Gross-Up Payment equal to the
amount of such taxes.
This Agreement shall terminate, and neither party shall have any rights or
obligations hereunder (other than the Company's obligation, if any, to pay any
amounts owed to Executive pursuant to Sections 2, 4 and 5 hereof), on the
earlier of (i) October 1, 2003 or (ii) Executive's termination of employment.
7. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing in this Agreement shall (i) be deemed to confer on Executive any
right to employment or continued employment with the Company or any Affiliates,
or (ii) affect any right that the Company or any Affiliates may have to
terminate the employment of Executive at any time.
Executive may designate, on the Beneficiary Designation Form attached
hereto as Exhibit "A," a beneficiary to receive the payments provided by
Sections 2, 4 and 5 hereof, subject to the terms described herein, in the event
of Executive's death. Executive may designate more than one person as
Executive's beneficiary, in which case the beneficiaries shall share in any
payments in proportion to the percentages of interest assigned to them by
Executive. Executive may change his beneficiary (without the consent of any
prior beneficiary) on a subsequently dated Beneficiary Designation Form
delivered to the Company before Executive's death. In the event Executive does
not designate a beneficiary, or no designated beneficiary survives Executive,
Executive's beneficiary shall be Executive's estate.
9. OTHER EMPLOYEE BENEFITS
Any Retention Payment or Gross-Up Payment paid under this Agreement shall
not be includible as an annual or long-term bonus or other compensation in
creditable compensation in computing benefits under any employee benefit plan of
the Company or any Affiliates.
10. WITHHOLDING TAXES.
The Company may withhold from all payments due to Executive (or his
beneficiary or estate) hereunder all taxes which, by applicable federal, state,
local or other law, the Company is required to withhold therefrom.
11. CONFIDENTIAL INFORMATION.
Executive agrees that he shall not, directly or indirectly, use, make
available, sell, disclose or otherwise communicate to any person, other than in
the course of Executive's assigned duties and for the benefit of the Company,
either during the period of Executive's employment or at any time thereafter,
any nonpublic, proprietary or confidential information, knowledge or data
relating to the Company, or any of its Affiliates, which shall have been
obtained by Executive during Executive's employment by the Company. The
foregoing shall not apply to information that (a) was known to the public prior
to its disclosure to Executive; (b) becomes known to the public subsequent to
disclosure to Executive through no wrongful act of Executive or any
representative of Executive; or (c) Executive is required to disclose by
applicable law, regulation or legal process (provided that Executive 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 (a)
and (b) of the preceding sentence, Executive's obligation to maintain such
disclosed information in confidence shall not terminate where only portions of
the information are in the public domain.
12. NON-SOLICITATION AGREEMENT.
During Executive's employment with the Company and continuing for a
three-year period following the Date of Termination, Executive agrees that he
will not, directly or indirectly, individually or on behalf of any other person,
firm, corporation or other entity, knowingly solicit, aid or induce (a) any
managerial level employee of the Company or any of its Affiliates 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 (b)
any customer of the Company to purchase goods or services then sold by the
Company or any of its Affiliates from another person, firm, corporation or other
entity or assist or aid any other persons or entity in identifying or soliciting
any such customer.
13. ACKNOWLEDGEMENTS RESPECTING RESTRICTIVE COVENANTS.
(a) NO ADEQUATE REMEDY AT LAW. Executive acknowledges that it is
impossible to measure in money the damages that will accrue to the Company in
the event that Executive breaches any of the restrictive covenants and that
any such damages, in any event, would be inadequate and insufficient.
Therefore, if Executive breaches any restrictive covenant, the Company and
any of its Affiliates shall be entitled to an injunction restraining
Executive from violating such restrictive covenant. If the Company or any of
its Affiliates shall institute any action or proceeding to enforce a
restrictive covenant, Executive hereby waives, and agrees not to assert in
any such action or proceeding, the claim or defense that the Company or any
of its respective Affiliates have an adequate remedy at law.
(b) INJUNCTIVE RELIEF NOT EXCLUSIVE REMEDY. In the event of a breach
of any of the restrictive covenants, Executive agrees that, in addition to
any injunctive relief as
described in Section 13(a), the Company shall be entitled to any other
appropriate legal or equitable remedy.
(c) THIS SECTION REASONABLE, FAIR AND EQUITABLE. Executive agrees
that this Section 13 is reasonable, fair and equitable in light of his duties
and responsibilities under this Agreement and the benefits to be provided to
him under this Agreement and that it is necessary to protect the legitimate
business interests of the Company and that Executive has had independent
legal advice in so concluding.
(d) CONSTRUCTION. If any of the restrictions contained in Sections 11
or 12 hereof are deemed by a court of competent jurisdiction to be
unenforceable by reason of their extent, duration or geographical scope or
otherwise, Executive and Company contemplate that the court shall revise such
extent, duration, geographical scope or other provision but only to the
extent required in order to render such restrictions enforceable, and enforce
any such restriction in its revised form for all purposes in the manner
Each of Executive 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 public statements that disparage the other
party or, in the case of the Company, its 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 14.
To the fullest extent permitted by law, the Company shall indemnify
Executive (including the advancement of expenses) for any judgments, fines,
amounts paid in settlement and reasonable expenses, including reasonable
attorneys' fees, incurred by Executive in connection with the defense of any
lawsuit or other claim to which he is made a party by reason of being an
officer, director, employee or consultant of the Company or any of its
Affiliates. The provisions of this Section 15 shall survive the termination of
16. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement is personal to Executive and without the prior
written consent of the Company, shall not be assignable by Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by Executive's
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors. The Company agrees that, for so long as it
has any obligations under this Agreement, it will cause any successor or
transferee (if other than the Company) to unconditionally assume, by written
instrument delivered to Executive (or his beneficiary or estate), all of the
obligations of the Company hereunder.
(a) All notices or other communications pursuant to this Agreement
shall be in writing and shall be deemed valid and sufficient if delivered by
personal service or overnight courier or if dispatched by registered mail,
postage prepaid, in any post office, or if dispatched by telefax, promptly
confirmed by letter dispatched as above provided, addressed as follows:
If to Executive:
P.O. Box 4163
Park City, Utah 84060
3468 Crest Court
Park City, Utah 84060
If to the Company:
Tyco International Ltd.
The Zurich Centre
90 Pitts Bay Road
Pembroke, HM08, Bermuda
Attn.: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and other communications rendered as
herein provided shall be deemed to have been given on the day on which
personally served or sent by telefax or, if sent by overnight courier, on the
second (2nd) day after being posted, or if sent by registered mail, on the
seventh (7th) day after being posted, or the date of actual receipt, whichever
date is the earlier.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under
the provision so indicated and (iii) specify the Date of Termination. The
failure by Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive
or the Company from asserting such fact or circumstance in enforcing
Executive's or the Company's rights hereunder.
18. OBLIGATIONS OF THE COMPANY
If Executive becomes entitled to payment of any installment of a Retention
Payment hereunder, and if at such time Executive has outstanding any debt,
obligation, or other liability representing an amount owed to the Company or any
Affiliates, the amount of such indebtedness obligation or other liability may,
at the Company's option, to the extent lawful, be deducted by
the Company from the amount of the Retention Payment installment then due
and payable to Executive or Executive's beneficiary pursuant to this Agreement
(but not from the associated Gross-Up Payment). Consent to such deduction shall
be evidenced by Executive's signature on this Agreement.
19. GOVERNING LAW; VALIDITY.
The validity, interpretation, and enforcement of this Agreement shall be
governed by the laws of the State of New York as to all matters, including, but
not limited to, matters of validity, construction and performance, without
regard to principles of conflict of laws. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which other provisions shall remain in
full force and effect.
20. ARBITRATION; LEGAL FEES.
Any dispute or controversy under this Agreement shall be settled
exclusively by arbitration in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitration award in any court having jurisdiction. The Company shall bear all
costs and expenses arising in connection with any arbitration proceeding
pursuant to this Section 20 (including, without limitation, all reasonable legal
fees incurred by Executive in connection with such arbitration).
Executive's or the Company's failure to insist upon strict compliance with
any provision hereof or any other provision of this Agreement or the failure to
assert any right Executive or the Company may have hereunder shall not be deemed
to be a waiver of such provision or right or any other provision or right of
22. ENTIRE AGREEMENT; NO AMENDMENT.
This Agreement contains the entire agreement between the parties respecting
the subject matter hereof and supersedes all prior oral or written
communications and agreements between the parties relating to employment or
payments in the event employment terminates. Neither this Agreement, nor any of
its terms, may be changed, added to, amended, waived or varied except in writing
signed by Executive and the Company (by an officer or other person authorized to
do so by the Board other than Executive).
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original and all of which together shall constitute one and the
IN WITNESS WHEREOF, the parties hereto have executed this Agreement this
28th day of February, 2002.
THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE
ENFORCED BY THE PARTIES.
EXECUTIVE TYCO INTERNATIONAL LTD.
/s/ Mark Belnick By: /s/ L. Dennis Kozlowski
Mark Belnick Chairman and Chief Executive Officer