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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
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PURITAN-BENNETT CORPORATION
(Name of Subject Company)
PURITAN-BENNETT CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(Including the Associated Common Stock Purchase Rights)
(Title of Class of Securities)
746299106
(CUSIP number of Class of Securities)
BURTON A. DOLE, JR.,
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
PURITAN-BENNETT CORPORATION
9401 INDIAN CREEK PARKWAY, P.O. BOX 25905
OVERLAND PARK, KANSAS 66225-5905
(913) 661-0444
(Name, address and telephone number of person authorized to receive notice and
communications on behalf of the person(s) filing statement)
Copies to:
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DANIEL C. WEARY, ESQ. PETER D. LYONS, ESQ.
BLACKWELL SANDERS SHEARMAN & STERLING
MATHENY WEARY & LOMBARDI L.C. 599 LEXINGTON AVENUE
TWO PERSHING SQUARE NEW YORK, NEW YORK 10022
2300 MAIN STREET -- SUITE 1100 (212) 848-4000
KANSAS CITY, MISSOURI 64108
(816) 274-6800
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Puritan-Bennett Corporation, a Delaware
corporation (the "Company"), and the address of its principal executive offices
is 9401 Indian Creek Parkway, P.O. Box 25905, Overland Park, Kansas 66225-5905.
The title of the class of equity securities to which this statement relates is
the common stock, par value $1.00 per share, of the Company (the "Shares"),
including the associated rights (the "Rights") to purchase Shares of the Company
to be issued pursuant to the Rights Agreement, dated May 2, 1989, between the
Company and United Missouri Bank of Kansas City, N.A. (now known as UMB Bank,
N.A.), as Rights Agent (the "Rights Agent") (as amended, the "Rights
Agreement"). The Rights Agreement was amended pursuant to an Amendment Agreement
between the Company and the Rights Agent dated October 27, 1994 (the "Rights
Amendment"). Unless the context otherwise requires, all references herein to the
Shares shall include the associated Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated October 25, 1994 (the "Schedule 14D-1"), of PB
Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of Thermo Electron Corporation, a Delaware corporation ("Thermo
Electron"), to purchase all of the outstanding Shares at a price of $24.50 per
Share net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated October 25, 1994 (the "Offer to
Purchase"), and the related Letter of Transmittal and any supplement thereto
(which together constitute the "Offer").
According to the Schedule 14D-1, the address of the principal executive
offices of Thermo Electron is 81 Wyman Street, Waltham, Massachusetts 02254.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth below, to the knowledge of the Company, there are
no material contracts, agreements, arrangements or understandings or any actual
or potential conflicts of interest, between the Company or its affiliates and
either (1) the Company's executive officers, directors or affiliates or (2)
Thermo Electron or its executive officers, directors or affiliates.
Certain contracts, agreements, arrangements or understandings between the
Company and certain of its directors, executive officers and affiliates are
described in the sections entitled "Executive Compensation and Other
Information," "Director Compensation," "Retirement Benefits," "Employment
Contract and Termination of Employment and Change-in-Control Arrangements,"
"Indebtedness of Management" and "Security Ownership of Management" in the
Company's Proxy Statement dated June 10, 1994 for the Company's 1994 Annual
Meeting of Stockholders (the "1994 Annual Meeting Proxy Statement"). A copy of
the relevant portions of the 1994 Annual Meeting Proxy Statement are filed as
Exhibit 1 hereto and are incorporated herein by reference. A copy of the
employment agreement, dated April 25, 1980, between the Company and Burton A.
Dole, Jr., described in Exhibit 1, is attached hereto as Exhibit 2 and is
incorporated herein by reference.
EXECUTIVE AGREEMENTS AND SEVERANCE AGREEMENTS
After careful consideration at meetings held on October 10, 1994 and on
November 6-7, 1994, the Board of Directors of the Company (the "Board")
determined that it was in the best interests of the Company and its stockholders
to ensure that the Company would have the continued dedication and service of
Burton A. Dole, Jr., John H. Morrow, Robert L. Doyle, Thomas E. Jones, Alexander
R. Rankin and David P. Niles and certain additional officers of the Company. In
that regard, the Board has approved the entry by the Company into (i) a
supplement (the "Morrow Supplement") to the employment agreement dated as of
June 9, 1994 (together with the Morrow Supplement, the "Morrow Employment
Agreement") between the Company and
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John H. Morrow and (ii) an employment agreement with each of (each such
individual and Mr. Morrow, an "Executive") Robert L. Doyle, Thomas E. Jones,
Alexander R. Rankin and David P. Niles (together with the Morrow Employment
Agreement, the "Executive Agreements"). The term of the Executive Agreements
continues until written notice of termination is delivered by the Company or the
Executive.
The Executive Agreements for Messrs. Doyle, Rankin and Niles restate and
supersede previous employment agreements entered into between the Company and
such executives. The entry by the Company into such previous employment
agreements (and the principal terms and conditions of the Executive Agreement
for Thomas E. Jones) was approved by the Board in August 1994. The Executive
Agreements for Messrs. Doyle, Rankin and Niles are similar in all material
respects to their previous employment agreements, except that such Executive
Agreements (and, except as noted below, the Morrow Supplement) provide for (i)
certain limitations on benefits to facilitate compliance with the Internal
Revenue Code's "golden parachute" rules and limitations on the tax deductibility
of executive compensation, (ii) certain changes to the formula for determining
the amount of severance benefits (which will not be paid for a period in excess
of three years in the case of Messrs. Morrow, Jones and Doyle and two years in
the case of Messrs. Rankin and Niles), (iii) certain differences relating to the
timing of severance payments (except in the case of Mr. Morrow), (iv) the
acceleration of vesting of Executive stock options under certain circumstances
(to the extent, if any, such options do not otherwise accelerate upon the
occurrence of such circumstances under the Company's stock option plans) and (v)
the termination of the Executive's (except in the case of Mr. Morrow)
non-compete obligations under certain circumstances.
The Executive Agreements incorporate base salaries and target bonus
percentages set by the Compensation Committee of the Board in April 1994, which
are as follows: (i) for Mr. Morrow, a salary of $230,000 and a target bonus of
40% of salary; (ii) for Mr. Doyle, a salary of $195,000 and a target bonus of
35% of salary; (iii) for Mr. Jones, a salary of $185,000 and a target bonus of
35% of salary; (iv) for Mr. Rankin, a salary of $173,000 and a target bonus of
35% of salary; and (v) for Mr. Niles, a salary of $168,000 and a target bonus of
25% of salary. In April 1994, the Board's Compensation Committee set Mr. Dole's
salary at $340,000 and his target bonus at 50% of salary. Actual bonuses may be
higher or lower than the target bonus, based on a formula that takes into
account the Company's financial performance and the individual's attainment of
certain business objectives. In no event may an individual's bonus exceed the
individual's base salary. Base salaries will be reviewed annually and target
bonus percentages may be increased from time to time.
Under the Executive Agreements, if the Executive is terminated without
"cause" or resigns for "good reason" (as defined below) prior to the Executive's
normal retirement date, (1) any stock options held by the Executive that have
not otherwise become fully vested under the terms of the Company's stock option
plans will become fully exercisable, (2) during any period when the Executive is
receiving severance payments from the Company, the Executive will be bound by a
non-compete obligation and (3) the Company will be required to (a) provide
salary and bonus continuation payments to the Executive for a period of up to
two to three years, (b) pay the Executive a one-time bonus prorated for the year
of termination (if the Executive is not otherwise entitled to a bonus payment
for the year of termination), (c) pay the Executive the market value of any
unvested restricted stock held by the Executive and (d) provide certain "COBRA"
health insurance continuation benefits; provided that if such termination or
resignation occurs within two years following a "change in control" (as defined
below), (i) the present value of the Executive's continuation payments will be
payable in a lump sum (except in the case of Mr. Morrow) and (ii) the
Executive's non-compete obligations will terminate (except in the case of Mr.
Morrow, whose non-compete obligations shall continue during any period in which
he is receiving severance payments from the Company). Payments of severance
benefits under the Executive Agreements are reduced by the amount of other
Company severance payments.
The Executive Agreements also provide that if any amounts due to the
Executive thereunder (or any other plan or program of the Company) become
subject to the "golden parachute" rules set forth in Section 280G of the
Internal Revenue Code, then such payments will be reduced to the extent
necessary to avoid the application of such rules. In addition, payments under
the Executive Agreements will be deferred (with interest) to the extent
necessary to avoid loss of a tax deduction by the Company under Section 162(m)
of the Internal Revenue Code, which provides for a limitation under certain
circumstances of the tax deductibility of executive compensation in excess of $1
million.
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"Cause" is generally defined in the Executive Agreements as the Executive's
(a) willful violation of any reasonable rule or direct order of the Board or the
Chief Executive Officer of the Company which is not corrected after notice, (b)
conviction or entry of a plea of nolo contendere with regard to a crime
involving moral turpitude or dishonesty, (c) Company-related drug or alcohol
abuse or (d) material violation of any provision of his Executive Agreement
which is not corrected after notice. "Good Reason" is generally defined in the
Executive Agreements as (i) a breach by the Company of any provision of the
Executive Agreement that is not corrected after written notice by the Executive
or (ii) any of the following if the same occurs within 2 years following a
change in control: (A) a reduction of the Executive's base salary or other
compensation, (B) a failure to continue in effect the Company's welfare plans on
substantially similar terms, (C) a material reduction in the Executive's job
responsibilities, position or title, (D) the relocation of the Executive or (E)
a failure or refusal of any successor to the Company to assume the Company's
obligations under the Executive Agreement.
For purposes of the Executive Agreements, a "change in control" shall be
deemed to have occurred (i) upon the acquisition by any person, entity or group
of beneficial ownership of 50% or more of either the then outstanding Shares or
the combined voting power of the Company's then outstanding voting securities,
(ii) at the time individuals who, as of the date of the Executive Agreement,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that any person becoming a director
subsequent to the date of the Executive Agreement whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company) shall be considered as though such
person were a member of the Incumbent Board, (iii) upon the approval by the
stockholders of the Company of a reorganization, merger, consolidation (in each
case, with respect to which persons who are the stockholders of the Company
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the combined voting power of the
reorganized, merged or consolidated company's then outstanding voting
securities) or a liquidation or dissolution of the Company or of the sale of all
or substantially all of the assets of the Company or (iv) the occurrence of any
other event which the Incumbent Board in its sole discretion determines
constitutes a change in control.
In addition, the Board approved the entry by the Company into severance
agreements (the "Severance Agreements") with 12 additional officers of the
Company. The Severance Agreements provide that if the officer is terminated
without "cause" or resigns for "good reason" within two years following a
"change in control" (which terms have meanings substantially identical to those
specified in the Executive Agreements), the Company will be required to provide
such officer with (i) a lump sum severance payment equal to the present value of
the salary (based on the then-current salary) and bonus (based on the average of
the bonuses for the prior three years) payments that such officer would have
received over a period of up to two years and (ii) certain "COBRA" health
insurance continuation benefits. The Severance Agreements also provide that if
any amounts due to the officer thereunder (or under any other plan or program of
the Company) become subject to the "golden parachute" rules set forth in Section
280G of the Internal Revenue Code, then such payments will be reduced to the
extent necessary to avoid the application of such rules. In addition, payments
under the Severance Agreements will be deferred (with interest) to the extent
necessary to avoid loss of a tax deduction by the Company under Section 162(m)
of the Internal Revenue Code. Payments under the Severance Agreements are
reduced by the amount of other Company severance payments.
COMPANY BENEFIT PLANS
After careful consideration at a meeting held on October 10, 1994 (after
receipt of Thermo Electron's Initial Proposal (as described below)) and at a
meeting held on November 6-7, 1994 (following publication of Thermo Electron's
unsolicited Offer) and after consideration of the potentially destabilizing
effects of the pendency of such Offer on the morale and retention of Company
employees, the Board approved a new severance plan (the "Severance Plan")
applicable to Company employees generally and certain additional changes to the
Company's employee benefit plans and arrangements.
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Under the Severance Plan, if a participating employee is terminated without
"cause" or resigns for "good reason" within two years following a "change in
control" (which terms have meanings that are generally similar to those
specified in the Executive Agreements), the Company will be required to provide
such employee with (i) a lump sum severance payment equal to one week's pay
(with a four week minimum and a two year maximum) for each six months of service
with the Company and (ii) certain "COBRA" health insurance continuation
benefits. Payments under the Severance Plan are reduced by the amount of other
Company severance payments.
The Board amended the Company's Management Incentive Bonus Plan (the "Bonus
Plan") to provide that if a participant is terminated without "cause" or resigns
for "good reason" within two years following a "change in control" (which terms
have meanings substantially identical to those specified in the Executive
Agreements), the participant would receive the maximum bonus for the year of
termination, prorated to the date of termination. The amendment also requires
appropriate adjustments to be made to the manner of calculating the Company's
profit for bonus purposes to eliminate any distortions caused by the change in
control.
The Board also amended the Company's Deferred Compensation Plan (the
"Deferred Plan") to generally prohibit, without the consent of affected
participants, any amendment following a "change in control" (as defined in the
Executive Agreements) where such amendment would adversely affect participants.
In addition, the Board approved the entry by the Company into agreements
(the "SERP Agreements") with each of Burton A. Dole, Jr. and John H. Morrow,
which amend the terms and conditions of the participation by Messrs. Dole and
Morrow in the Company's Supplemental Retirement Benefit Plan (the "SERP"). Under
the SERP Agreements, if (i) Mr. Dole or Mr. Morrow is terminated without "cause"
or resigns for "good reason" and (ii) in the case of Mr. Dole only, such
termination or resignation occurs within two years following a "change in
control" (which terms have meanings substantially identical to those specified
in the Executive Agreements), such individual will receive a benefit under the
SERP equal to the benefit that such individual would have been entitled to
receive under the SERP upon a termination of employment at age 65. In the case
of Mr. Dole, the Company will be required to provide certain "COBRA" health
insurance continuation benefits upon any termination without "cause" or
resignation for "good reason". In addition, the SERP Agreement for Mr. Dole
provides that if any benefits due to Mr. Dole under the SERP become subject to
the "golden parachute rules" set forth in Section 280G of the Internal Revenue
Code, such benefits will be reduced to the extent necessary to avoid the
application of such rules. Such benefits will also be deferred (with interest)
to the extent necessary to avoid loss of a tax deduction by the Company under
Section 162(m) of the Internal Revenue Code. The SERP Agreement for Mr. Morrow
also provides for additional non-competition obligations on the part of Mr.
Morrow, and generally defers the payment of SERP benefits to Mr. Morrow until
the later of age 55 and the lapse of severance benefits under the Morrow
Employment Agreement. The Board also approved an amendment to the SERP to
prohibit, without the consent of affected participants, any further amendment
following a change in control where such amendment would adversely affect any
rights or benefits to which such participants had become entitled prior to the
date of such amendment. Moreover, the Board authorized the establishment of a
"rabbi" trust (the "SERP Trust") to secure benefits under the SERP, but
determined not to fund such Trust at this time.
At the November 6-7 meeting, the Board approved an amendment to the
Company's Pension Benefit Make Up Plan (the "Make Up Plan"), which is a
nonqualified retirement plan intended to provide selected key employees with
benefits that may not be provided under the Company's qualified pension plan by
reason of certain Internal Revenue Code limitations, to prohibit, without the
consent of affected participants, any amendment following a "change in control"
(as defined in the Executive Agreements) that would adversely affect any rights
or benefits to which such participants had become entitled prior to the date of
such amendment. The Board also authorized the establishment of a rabbi trust
(the "Make Up Plan Trust") to secure benefits under the Make Up Plan, but
determined not to fund such Trust at this time.
The Board also approved an amendment to the Company's 1988 Stock Benefit
Plan (the "Stock Plan") to give the committee that administers the Stock Plan
the discretion, in the event of a merger or consolidation
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of the Company, any transaction that results in the Shares no longer being
publicly traded, or the purchase or offer to purchase by any one person or group
of specified percentages of the Company's voting securities or the Shares, to
provide for the assumption or substitution of outstanding stock options by the
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and exercise price. Any such
assumed or substituted option would otherwise retain the terms and conditions of
the original stock option, including any applicable vesting schedule.
At the November 6-7 meeting, the Board also authorized the establishment of
a rabbi trust (the "Directors' Trust") to secure benefits under the Company's
Directors' Post-Retirement Income Plan but determined not to fund such Trust at
this time.
At the November 6-7 meeting, the Board approved an amendment to the
Company's Retirement Savings and Stock Ownership Plan (the "Savings Plan") to
provide for the pass-through of tender decisions with respect to Shares held in
participants' accounts under the Savings Plan to such participants.
The foregoing descriptions of (i) the Morrow Supplement, (ii) the Executive
Agreements, (iii) the Severance Agreements, (iv) the Severance Plan, (v) the
amendments to the Bonus Plan, the Deferred Compensation Plan, the SERP, the Make
Up Plan, the Stock Plan and the Savings Plan, (vi) the SERP Agreements, and
(vii) the SERP Trust, the Make Up Plan Trust and the Directors' Trust are
qualified in their entirety by reference to the documentation therefor, copies
or forms of which are filed as Exhibits 3 through 21, respectively, and are
incorporated herein by reference.
OTHER AGREEMENTS AND ARRANGEMENTS
Mr. Daniel C. Weary is Secretary of the Company and is a member in the law
firm of Blackwell Sanders Matheny Weary & Lombardi L.C., retained by the Company
as general counsel.
The Company has entered into Indemnification Agreements between the Company
and each member of the Board (each an "Indemnification Agreement"). The
Indemnification Agreements supplement the protections afforded to the Company's
directors under the Company's Certificate of Incorporation and By-Laws. In
general, each Indemnification Agreement provides that the Company shall
indemnify the director to the fullest extent permitted by applicable law against
all expense, liability and loss arising in connection with any action, suit or
proceeding against any director by reason of such director's service as a
director of the Company, if such director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and, with respect to any criminal proceeding, had no reasonable cause to believe
the conduct was unlawful. Additionally, each Indemnification Agreement provides
that the Company shall advance reasonable expenses incurred by the director in
connection with any proceeding within 20 days of receipt of an undertaking from
the director to repay any advance upon an ultimate determination that the
director is not entitled to be indemnified.
In connection with a relocation by Mr. Doyle, the Company and Mr. Doyle
have entered into a lease, dated as of August 30, 1994, pursuant to which the
Company has agreed to lease a residence owned by Mr. Doyle for a period of two
years for $2,500 per month.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) THE BOARD HAS UNANIMOUSLY DETERMINED THAT THE OFFER IS NOT IN THE BEST
INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS. THE BOARD UNANIMOUSLY RECOMMENDS
THAT ALL HOLDERS OF SHARES REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT
TO THE OFFER.
A copy of a letter to stockholders communicating the recommendation of the
Board and a form of press release announcing such recommendation are filed as
Exhibits 22 and 23 hereto, respectively, and are incorporated herein by
reference.
(b) On June 23, 1994, Roger Herd, Managing Director of Thermo Instruments
Australia Pty., Ltd., a subsidiary of Thermo Electron, met with Burton A. Dole,
Jr., President and Chairman of the Board of the Company, at the Company's
offices in Carlsbad, California to discuss manufacturing in Ireland.
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On July 15, John W. Wood, Jr., Chief Executive Officer of Thermedics Inc.,
a subsidiary of Thermo Electron, met with Mr. Dole at the Company's headquarters
in Overland Park, Kansas, to discuss potential technology sharing between the
two companies either through cross-licensing or by Thermo Electron's purchase of
the Company's continuous blood gas sensing technology. During the meeting, Mr.
Dole expressed a willingness to meet with Dr. George N. Hatsopoulos, Chief
Executive Officer and Chairman of the Board of Thermo Electron, to further
discuss potential technology sharing. During these discussions, Mr. Wood
suggested that Thermo Electron might potentially be interested in acquiring the
Company and provided Mr. Dole with some general background information regarding
Thermo Electron. Mr. Wood also informed Mr. Dole that Thermo Electron had
acquired approximately 3% of the outstanding Shares. Mr. Dole indicated that he
did not believe that a sale of the Company at this time would be in the best
interests of the Company and its stockholders.
On July 20, Dr. Hatsopoulos and Mr. Dole met in Boston, Massachusetts to
discuss potential technology sharing. During these discussions, Dr. Hatsopoulos
provided Mr. Dole with an overview of Thermo Electron's businesses and
reiterated Thermo Electron's interest in a possible acquisition of the Company.
Mr. Dole indicated that he did not believe that a sale of the Company at this
time would be in the best interests of the Company and its stockholders. Dr.
Hatsopoulos and Mr. Dole agreed to meet again in Boston on September 21 to
continue discussions of potential technology sharing.
On July 29, Mr. Dole called Mr. Wood to follow-up on previous discussions
concerning Thermo Electron's possible interest in purchasing the blood gas
monitoring business of the Company. Mr. Wood indicated that Thermo Electron was
not interested in acquiring this business.
On August 31, a regular meeting of the Board was held. Mr. Dole described
to the Company's other directors the meetings and telephone calls he had had
with representatives of Thermo Electron. The matter was discussed, and the Board
concluded that it was not in the best interests of the Company and its
stockholders to consider a sale of the Company at that time.
On September 19, Mr. Dole had a telephone conversation with Dr. Hatsopoulos
in preparation for the meeting scheduled for September 21. During this
conversation, Dr. Hatsopoulos stated that Thermo Electron definitely was
interested in acquiring the Company. Mr. Dole indicated that he had recently
discussed Thermo Electron's interest with the other directors of the Company and
that the other directors shared his view that a sale of the Company at this time
would not be in the best interests of the Company and its stockholders and
stated that, under the circumstances, he did not believe a meeting with Dr.
Hatsopoulos would be appropriate. Dr. Hatsopoulos then informed Mr. Dole that
Thermo Electron had acquired 4.9% of the Shares and suggested that the Company
hire an investment banker to evaluate any proposal Thermo Electron might make.
Mr. Dole indicated that the Company would schedule a meeting of the Board to
discuss Thermo Electron's interest and would retain a financial advisor.
Subsequently, the Company retained Smith Barney Inc. ("Smith Barney") to render
financial advisory services to the Company.
On September 22, Dr. Hatsopoulos telephoned Mr. Dole and inquired regarding
the scheduling of a meeting of the Board to consider Thermo Electron's interest
in the Company. Mr. Dole indicated that the Board would meet on or about October
10 and that he would inform Dr. Hatsopoulos of the Board's determinations after
the meeting. Mr. Dole also informed Dr. Hatsopoulos that the Company had
retained a financial advisor. Dr. Hatsopoulos then requested that Mr. Dole have
the Company's General Counsel call Seth H. Hoogasian, Thermo Electron's General
Counsel. At Mr. Dole's request, Daniel C. Weary, General Counsel of the Company,
telephoned Mr. Hoogasian later that day. Mr. Hoogasian requested that the
Company's financial advisor contact Thermo Electron's investment bankers, Lehman
Brothers, in order to begin negotiation of a possible transaction. Mr. Weary
advised Mr. Hoogasian that the Company's management believed that such
negotiations would not be appropriate prior to the Board meeting. Mr. Hoogasian
advised Mr. Weary that Thermo Electron would not make an acquisition proposal
prior to the Board meeting unless the market price of the Shares increased.
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On September 23, Mr. Hoogasian called Mr. Weary and again requested that
the Company's financial advisor contact Lehman Brothers to commence
negotiations. Mr. Weary again advised him that the Company's management believed
that this would not be appropriate prior to the Board meeting to consider Thermo
Electron's interest in acquiring the Company. Mr. Weary indicated that the Board
would meet on or about October 10.
On September 27, Mr. Dole telephoned Dr. Hatsopoulos to inform him that the
Board would meet on October 10 to consider Thermo Electron's interest in
acquiring the Company. Later that day, Mr. Weary and Mr. Hoogasian had a
telephone conversation in which Mr. Hoogasian once again requested a meeting
between representatives of Thermo Electron and representatives of the Company
prior to the scheduled October 10 Board meeting. Mr. Weary once again advised
him that Company management believed that such a meeting would not be
appropriate in advance of the Board meeting on October 10.
On September 29, 1994, Mr. Weary and Mr. Hoogasian had another telephone
conversation in which Mr. Hoogasian requested a meeting to discuss Thermo
Electron's interest in acquiring the Company. Mr. Weary reiterated the belief of
the Company's management that it would not be appropriate to schedule such a
meeting in advance of the upcoming Board meeting and stated that the results of
the Board's deliberations at the October 10 meeting would be communicated to
Thermo Electron.
On Friday, September 30, Mr. Hoogasian telephoned Mr. Weary and asked him
if the Company was aware of any reason for the increased trading volume in the
Shares that day. Mr. Weary responded that he would look into this matter. On
Monday, October 3, Mr. Weary called Mr. Hoogasian and informed him that the
Company was not aware of any reason for the trading volume that had occurred on
September 30.
On October 5, Mr. Weary telephoned Mr. Hoogasian and informed him that the
Company was issuing a press release stating that the Company had received 510(k)
market clearance from the Food and Drug Administration for its new 7250
Metabolic Monitor and for four new products and product enhancements for its
7200 Series Ventilatory System.
On October 6, Mr. Hoogasian telephoned Mr. Weary and informed him that,
because of the increase in the market price of the Shares since September 30,
Thermo Electron was sending a letter to Mr. Dole proposing a merger transaction.
Later that day, the Company received a letter from Thermo Electron containing an
unsolicited proposal to acquire all of the outstanding Shares in a merger
transaction for $21 per Share in cash (the "Initial Proposal"). The letter
stated that Thermo Electron was interested, at that time, in pursuing a
transaction only if it were approved by the Board. Also on October 6, the
Company issued a press release describing the Initial Proposal and stating that
the Board would review the proposal and announcing its retention of Smith Barney
and Shearman & Sterling as its independent financial and legal advisors, in
connection with the proposal. On October 7, Thermo Electron issued a press
release summarizing the Initial Proposal.
The Board met on October 10 and received presentations by the Company's
management and financial and legal advisors regarding the Company's business,
financial condition and prospects and the Initial Proposal. The Company's
management made detailed presentations regarding, among other things, the
Company's business plan and the various strategic initiatives that the Company
had undertaken both in the United States and abroad. After reviewing and
carefully considering these presentations as well as the opinion of Smith Barney
that the $21 per Share price contained in the Initial Proposal was grossly
inadequate to the stockholders of the Company (other than Thermo Electron) from
a financial point of view, the Board unanimously determined that the Initial
Proposal was grossly inadequate and not in the best interests of the Company and
its stockholders (other than Thermo Electron). The Board also determined that,
in light of, among other things, the FDA's clearance of a number of new
Puritan-Bennett hospital products and product enhancements and a number of very
encouraging trends in the business of the Company, it would not be in the best
interests of the Company and it stockholders to pursue a sale of the Company at
that time. On October 11, the Company issued a press release summarizing the
Board's determinations and Mr. Dole telephoned Mr. Hoogasian and advised him
that the Company was issuing the press release.
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On October 12, Dr. Hatsopoulos sent the following letter (the "Second
Proposal"), via telecopier, to Mr. Dole, and Thermo Electron issued a press
release summarizing its contents:
October 12, 1994
VIA TELECOPY
Mr. Burton A. Dole, Jr.
President
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
Dear Burton:
I was disappointed in the response of your Board of Directors to our merger
proposal of $21 per share, and in your refusal to meet with us to discuss the
terms of a transaction that would be satisfactory to both parties. We have been
seeking an opportunity to meet with you for several weeks, and we believe that
the best interests of your shareholders cannot be served unless you meet with us
to discuss our proposal.
As I have stated previously, we continue to be interested in pursuing a
negotiated merger transaction with Puritan-Bennett. I want to stress again that
our desire is to complete a transaction on an amicable basis. It is not our
intention or tradition to engage in auctions for companies. In an effort to
raise our offer to a level that would be acceptable to your Board of Directors,
we have reevaluated certain of the assumptions underlying the original offer of
$21 per share. Among other things, we have considered the response of securities
analysts to our original offer. As a result, we are now prepared to offer $24
per share of outstanding common stock in a negotiated merger transaction.
At this stage I'm sure you appreciate the seriousness of our offer, and I'm
confident that you will act in the best interests of your shareholders in
considering the proposed merger. However, I do not believe that you can respond
to our offer in an informed manner until you have met with us to discuss all of
the relevant terms of the proposal. In that regard, we are prepared to fly to
Kansas City at your earliest convenience to discuss the details of our proposal.
I look forward to hearing from you soon.
Sincerely,
/s/ George
Chairman of the Board and
Chief Executive Officer
After receiving the letter on October 12, the Company scheduled a meeting
of the Board for October 26 to consider the Second Proposal. During the period
between October 12 and October 25, representatives of Smith Barney and Shearman
& Sterling had meetings and telephone conversations with various members of
management of the Company in preparation for presentations to be made at the
scheduled October 26 Board meeting.
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On October 19, Mr. Dole sent the following letter, via telecopier, to Dr.
Hatsopoulos:
October 19, 1994
BY TELECOPIER
George N. Hatsopoulos
Chairman of the Board and
Chief Executive Officer
Thermo Electron Corporation
81 Wyman Street
Waltham, MA 02254
Dear George:
We have received your letter of October 12, 1994 and it will be reviewed by
the Board of Directors of Puritan-Bennett Corporation at a meeting to held in
the near future.
In your letter, you imply that there may be additional terms of Thermo
Electron's proposal that are not described in the letter and request a meeting
to discuss those terms. I would suggest that if there are any additional terms
that are relevant to the consideration of your proposal, those additional terms
should be communicated to me in writing for presentation to the Board. In
addition, if you wish to clarify or amplify any aspect of your proposal, Conrad
L. Bringsjord of Smith Barney, the Company's financial advisor, is available and
can be reached at (212) 698-8455.
Very truly yours,
/s/ Burton A. Dole, Jr.
Chairman of the Board,
President and Chief
Executive Officer
On October 24, Dr. Hatsopoulos called Mr. Dole's office. Dr. Hatsopoulos
was told that Mr. Dole was traveling. Mr. Hoogasian then called Mr. Weary and
stated that Thermo Electron planned to commence the Offer on October 25 and was
sending a letter to that effect to Mr. Weary for delivery to Mr. Dole. Dr.
Hatsopoulos then sent the following letter, via telecopier:
October 24, 1994
VIA TELECOPY
Mr. Burton A. Dole, Jr.
President
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
Dear Burton:
It has been nearly two weeks since we proposed a merger of our two
companies in which the shareholders of Puritan-Bennett would receive $24 in cash
per share. I attempted to call you today and was informed that you were
traveling. To date, we have received no response from you other than a brief
letter indicating that your Board would consider our proposal "in the near
future," and requesting that we provide you with additional written terms of our
proposal. We do not understand how your Board can have failed to fully evaluate
and reach a conclusion regarding our proposal over this 12-day period. Further,
your request for written terms is unrealistic given your refusal to engage in
any discussion regarding price. Our position has always been that a meeting is
necessary to fully discuss each party's position on all relevant issues.
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We have attempted without success for over one month to initiate a dialogue
regarding a merger of our two companies. We have demonstrated our seriousness
and sincerity by proposing an all cash merger that would provide your
shareholders with a substantial premium over recent market prices for
Puritan-Bennett's common stock. We have raised our initial offer substantially
in order to address the concerns of your Board regarding the adequacy of our
original proposal. At all times we have stressed our desire to enter into a
negotiated transaction. Despite our efforts, you have been slow to respond to
our proposal and unwilling to negotiate with us in person.
Given your failure to respond to us in a timely or substantive manner, we
can only conclude that you have not taken Thermo Electron's proposal seriously.
Reluctantly, we are forced to take the only step that we believe is likely to
cause you to give appropriate weight and consideration to our proposal. On
Tuesday, October 25 we will commence a cash tender offer at $24.50 per share for
all of the outstanding Puritan-Bennett common stock.
This is an unprecedented action in our company's history, and one which we
take only after serious deliberation. Our preference continues to be for a
negotiated transaction. However, we believe that we now have no choice but to
present our proposal directly to the Puritan-Bennett shareholders. We of course
remain willing to meet with you at any time to discuss a negotiated merger
agreement.
Sincerely,
/s/ George
Chairman of the Board and
Chief Executive Officer
Thermo Electron then issued a press release announcing that it would
commence the Offer on October 25.
On October 25, the Company issued a press release stating that the Board
would meet to consider the Offer and in which it advised stockholders not to
tender their Shares to Thermo Electron pending review of the Offer by the Board
and the Board's recommendation.
On October 25, Thermo Electron commenced the Offer.
At the previously scheduled October 26 Board meeting, the Board received a
brief review of the Offer from representatives of Shearman & Sterling and Smith
Barney, but determined not to take any action with respect to the Offer until a
more thorough review of the Offer could be made by the Company's advisors and
management. In addition, the Board approved the Rights Amendment, which provides
that separate trading of the Rights shall not occur until such time as the Board
may, from time to time, determine. On October 27, the Company issued a press
release announcing the Rights Amendment.
On October 28, the Company received a request from Thermo Electron for a
list of stockholders of the Company and certain related information. On November
4, the Company responded to the request and informed Thermo Electron regarding
the materials to be made available to Thermo Electron.
At a meeting of the Board begun on November 6 and reconvened on November 7,
the Company's management and Smith Barney each reviewed and updated the
presentations they had made to the Board at its October 10th meeting. Smith
Barney then delivered its opinion to the Board that the $24.50 per Share price
provided for in the Offer is grossly inadequate to the Company's stockholders
(other than Thermo Electron) from a financial point of view. After careful
consideration, the Board determined that, based on, among other things, the
presentations of the Company's management and Smith Barney at the meeting and
the Board's knowledge of and familiarity with the Company businesses, financial
condition, technologies and future prospects, it is in the best interest of the
Company and its stockholders that the Company remain independent and continue to
pursue its long-term business strategy. Accordingly, the Board unanimously voted
to reject the Offer and unanimously recommends that the Company's stockholders
reject the Offer and not tender their Shares pursuant to the Offer.
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In reaching its determination and recommendations with respect to the
Offer, as indicated above, the Board took into account numerous factors
discussed at its October 10 and November 6-7 meetings including the following:
(i) The Board's determination that the $24.50 per Share price to be
paid in the Offer does not reflect the intrinsic value of the Company. In
reaching this conclusion, the Board relied on its knowledge of and
familiarity with the Company's businesses, financial condition,
technologies and future prospects. The Board believes that the Company is
positioned to reap substantial benefits in the future from the strategic
initiatives and operational restructurings that the Company has undertaken,
which benefits should inure to the Company and all of its stockholders, not
just Thermo Electron.
(ii) The Company is well positioned to take advantage of growth
opportunities, both in the United States and internationally, in the market
for home care respiratory and sleep disorder products. The Company's home
care operations generate a significant portion of the Company's revenue and
represent the fastest growing and most profitable segment of the Company's
business.
(iii) The Company's competitive position in the hospital/physician
office market has been strengthened by the recent FDA clearance of six new
products and product enhancements that offer the potential for additional
revenue and improved profitability. The Board believes that the Company
will continue to strengthen its leadership position in the U.S. critical
care ventilator market while profitably growing its position in key
international markets as a result of improving economic conditions in
Europe, Japan and other regions.
(iv) The fact that the Company is early in the process of implementing
a carefully conceived long-term business plan after a major restructuring
during the past year, which resulted in substantial one-time charges
against income while substantially improving the Company's competitive
position. The Board believes that the implementation of this plan will
produce greater long-term value for stockholders than the Offer and that a
sale of the Company at this time is not in the best interests of the
Company and its stockholders.
(v) The opinion of Smith Barney that the $24.50 per Share price
provided for in the Offer is grossly inadequate to the Company's
stockholders (other than Thermo Electron) from a financial point of view.
The full text of such opinion, dated November 6, 1994, which sets forth the
assumptions made, the matters considered and the limitations on the review
undertaken by Smith Barney is attached hereto as Exhibit 24, and is
incorporated herein by reference. Such opinion should be read carefully in
its entirety by stockholders.
(vi) The trading history of the Shares, including the fact that the
Shares have traded as high as $35.50 per Share as recently as November 1992
and closed at $25.50 per Share on November 4, 1994.
(vii) The disruptive effect the Offer, and a subsequent merger, has
had and could have on the Company and on the Company's employees, creditors
and customers and the communities in which the Company operates.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Smith Barney to render financial advisory services
to the Company with respect to the Offer and such other matters as may be agreed
by the Company and Smith Barney. Pursuant to the terms of an Engagement Letter
dated September 27, 1994, the Company has agreed to pay Smith Barney (a) an
advisory fee of $750,000 payable as follows: $50,000 on each of November 1,
1994, December 1, 1994, and January 1, 1995; and $100,000 on each of February 1,
1995, March 1, 1995, April 1, 1995, May 1, 1995, June 1, 1995 and July 1, 1995;
(b) an opinion fee of $750,000 upon delivery of an opinion by Smith Barney, at
the request of the Board, in connection with certain proposed transactions; (c)
an advisory fee calculated by multiplying (1) the sum of the Company's market
value of stock plus net debt and (2) a percentage ranging from 1% to 2%,
depending upon the Company's market value, such advisory fee to be payable only
if, as of the six month anniversary of the receipt by the Company of a proposed
transaction involving a change in control of
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the Company or certain other proposed transactions, (i) a fee payable under
clause (d) below has not been paid or become payable by the Company to Smith
Barney, (ii) a proposed transaction is withdrawn or abandoned and (iii) a
transaction whereby more than 50% of the outstanding Shares, or more than 50% of
the Company's assets are transferred, has not been consummated; and (d) if a
transaction involving a change in control of the Company or certain other
transactions is consummated, a transaction fee calculated by multiplying (1) the
aggregate value of such transaction (including long-term debt assumed) and (2) a
percentage ranging from 1% to 2%, depending upon the aggregate value of such
transaction. The fees paid pursuant to clauses (a) and (b) above shall be
creditable against any fees payable pursuant to clauses (c) and (d) above. The
Company has also agreed to reimburse Smith Barney for its out-of-pocket
expenses, including all fees and disbursements of counsel, and to indemnify
Smith Barney and certain related persons against certain liabilities in
connection with their engagement, including certain liabilities under the
federal securities laws.
The Company has retained Georgeson & Co., Inc. ("Georgeson") to assist the
Company in connection with communications with stockholders with respect to the
Offer and related matters. Georgeson will receive customary compensation for its
services and reimbursement of out-of-pocket expenses in connection therewith.
The Company has retained Ogilvy Adams & Rinehart, Inc. ("Ogilvy") as a
public relations advisor in connection with the Offer. Ogilvy will receive
customary compensation for its services and reimbursement of out-of-pocket costs
in connection therewith.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to stockholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as described below, to the knowledge of the Company, there have
been no transactions in Shares which were effected during the past 60 days by
the Company, or by any executive officer, director, affiliate or subsidiary of
the Company. Each of the executive officers of the Company is a participant in
the Savings Plan. Pursuant to existing investment elections made more than 60
days prior to the date hereof by such executive officers with respect to their
contributions to the Savings Plan and with respect to Company matching
contributions, Shares are regularly (including during the past 60 days) credited
to the respective executive officers pursuant to the terms of the Savings Plan.
During the past 60 days, no executive officer of the Company has changed any
such investment election or made any adjustment to the percent of his salary
contributed to the Savings Plan.
(b) To the knowledge of the Company, none of the Company's executive
officers, directors, affiliates or subsidiaries presently intends to tender any
Shares to Thermo Electron pursuant to the Offer or sell any Shares that are held
of record or beneficially by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) The Company is not engaged in any negotiations in response to the Offer
which are related to or would result in (i) an extraordinary transaction, such
as a merger or reorganization, involving the Company or any subsidiary of the
Company; (ii) a purchase, sale or transfer of a material amount of assets by the
Company or any subsidiary of the Company; (iii) a tender offer for or other
acquisition of securities by or of the Company; or (iv) any material change in
the present capitalization or dividend policy of the Company.
(b) There are no transactions, Board resolutions, agreements in principle
or signed contracts in response to the Offer that relate to or would result in
one or more of the events referred to in Item 7(a) above.
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
BUSINESS COMBINATION PROVISION
Article V of the Certificate of Incorporation (the "COI") of the Company
provides that, in addition to any affirmative vote required by applicable law
(currently, the affirmative vote of holders of at least a majority of the
outstanding Shares), the affirmative vote of the holders of not less than
66 2/3% of the voting power of all issued and outstanding shares of voting stock
of the Company (voting as a single class) is required to approve certain
business combinations (including mergers) between the Company and a person who
or which owns of record or beneficially, directly or indirectly, or is otherwise
entitled to vote shares constituting 5% or more of the total votes which may be
cast with respect to the matter (a "5% Stockholder"), unless the business
combination is approved and recommended to the stockholders of the Company by
the favorable vote of at least 66 2/3% of the whole Board (the "66 2/3% Charter
Provision"). Additionally, Article V of the COI may not be amended or repealed
except by vote of a majority of the entire Board and the affirmative vote of not
less than 66 2/3% of all of the outstanding shares of voting stock of the
Company.
Article V of the COI may make it more difficult for Thermo Electron to
consummate a merger or other business combination with the Company, unless such
merger or business combination is approved and recommended to the stockholders
of the Company by the favorable vote of at least 66 2/3% of the entire Board,
because the acquisition of in excess of 5% of the outstanding Shares by Thermo
Electron as a result of the Offer would make Thermo Electron a 5% Stockholder
for purposes of the 66 2/3% Charter Provision.
COMMON STOCK PURCHASE RIGHTS
On May 2, 1989, the Board declared a dividend distribution of one Right for
each of the outstanding Shares. Except as set forth below, each Right, when
exercisable, entitles the registered holder to purchase from the Company
one-half of a Share, at a per Share price of $90.00 (the "Purchase Price"),
subject to adjustment.
The Rights are currently attached to all outstanding Shares, and no
separate Rights Certificates have been distributed. Until the earlier to occur
of (i) a public announcement that, without the prior consent of the Company, a
person or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of securities
having 20% or more of the voting power of all outstanding voting securities of
the Company, or (ii) the close of business on such day, as may, from time to
time, be designated by the Board (acting in its sole discretion), that is after
the tenth business day after the commencement of (or a public announcement of an
intention to make) a tender offer or exchange offer which would result in any
person or group of related persons becoming an Acquiring Person, without the
prior consent of the Company (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any Share
certificates outstanding as of the Record Date, by such Share certificate
together with the Summary of Rights to purchase Shares attached to the Rights
Agreement as Exhibit B (the "Summary of Rights"). The Rights Agreement provides
that, until the Distribution Date, the Rights will be transferred with and only
with Share certificates. From as soon as practicable after the Record Date and
until the Distribution Date (or earlier redemption or expiration of the Rights),
new Share certificates issued upon transfer or new issuance of the Shares will
contain a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender or transfer of any certificates for Shares (with or without the
Summary of Rights attached) will also constitute the transfer of the Rights
associated with the Shares represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Rights Certificates") will be mailed to holders of record of the
Shares as of the close of business on the Distribution Date, and the separate
Rights Certificates alone will evidence the Rights.
The Rights are not exercisable until after the Distribution Date. The
Rights will expire on the earliest of (i) May 1, 1999, (ii) upon consummation of
a merger transaction with a person or group who acquired Shares pursuant to a
Permitted Offer (as defined below), and is offering in the merger the same price
per Share and form of consideration paid in the Permitted Offer, or (iii) upon
redemption by the Company as described below.
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The Purchase Price, and the number of Shares or other securities or
property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Shares, (ii) upon the grant
to holders of the Shares of certain rights or warrants to subscribe for Shares,
certain convertible securities or securities having the same or more favorable
rights, privileges and preferences as the Shares at less than the current market
price of the Shares, or (iii) upon the distribution to holders of the Shares of
evidences of indebtedness or assets (excluding regular quarterly cash dividends
out of earnings or retained earnings) or of subscription rights or warrants
(other than those referred to above).
In the event that, after the first date of public announcement that an
Acquiring Person has become such, the Company is involved in a merger or other
business combination transaction in which the Shares are exchanged or changed,
or 50% or more of the Company's assets or earning power are sold (in one or more
transactions), proper provision shall be made so that each holder of a Right
shall thereafter have the right to receive, upon the exercise thereof at the
then current Purchase Price multiplied by the then current number of Shares for
which a Right is then exercisable (the product being referred to as the "Right
Exercise Price"), that number of shares of common stock of the acquiring company
(or, in the event there is more than one acquiring company, the acquiring
company receiving the greatest portion of the assets or earning power
transferred), which at the time of such transaction would have a market value of
two times the Right Exercise Price (such right being referred to as the "Merger
Right").
In the event that a person becomes the beneficial owner of securities
having 20% or more of the voting power of all then outstanding Shares (unless
pursuant to a tender offer or exchange offer for all outstanding Shares at a
price and on terms determined by at least a majority of the Company's Directors
who are neither Acquiring Persons nor affiliates or associates of any Acquiring
Person nor officers of the Company to be both adequate and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), proper
provision shall be made so that each holder of a Right will for a 60-day period
thereafter have the right to receive upon exercise of the Right, and payment of
the Right Exercise Price, that number of Shares having a market value of two
times the Right Exercise Price, subject to the availability of a sufficient
number of authorized but unissued Shares (such right being referred to as the
"Subscription Right"). The holder of a Right will continue to have the Merger
Right whether or not such holder exercises the Subscription Right.
Upon the occurrence of any of the events giving rise to the exercisability
of the Subscription Right or the Merger Right, any Rights that are or were at
any time owned by an Acquiring Person on or after the time the Acquiring Person
became such shall become void insofar as they relate to the Subscription Right
or the Merger Right.
At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the Rights, the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right (the
"Redemption Price"), which redemption shall be effective upon the action of the
Board. Additionally, the Company may thereafter redeem the then outstanding
Rights in whole, but not in part, at the Redemption Price, provided that such
redemption (i) is incidental to a merger or other business combination
transaction or series of transactions involving the Company, but not involving
an Acquiring Person or any person who was an Acquiring Person or (ii) following
an event giving rise to, and the expiration of the exercise period for, the
Subscription Right if and for as long as an Acquiring Person beneficially owns
securities representing less than 20% of the Shares. The redemption of Rights
described in the preceding sentence shall be effective only as of such time when
the Subscription Right is not exercisable, and in any event, only after 10
business days' prior notice. Upon the effective date of the redemption of the
Rights, the right to exercise the Rights will terminate and the only right of
the holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. As long as the Rights are attached to the
Shares, the Company will issue one Right with each new Share and each Share
issued from the Company's treasury so that all such Shares will also have
attached rights. There have been reserved for issuance 6,500,000 Shares issuable
upon exercise of the Rights. The terms of the Rights may be amended by
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the Board, but following the Distribution Date no amendment may be made which
adversely affects the interests of holders of the Rights.
The Rights may have the effect of impeding the acquisition of control of
the Company by Thermo Electron, or any other party, without the prior consent of
the Board. The Rights should not interfere with any merger, consolidation or
other business combination with Thermo Electron, or any other party, which is
approved by the Board since the Rights may be redeemed by the Board as described
above.
DELAWARE TAKEOVER LEGISLATION
Section 203 of the Delaware General Corporation Law ("Section 203") makes
it more difficult to effect certain transactions between a Delaware corporation
and a person or group who or which owns 15% or more of the corporation's
outstanding voting stock (including any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and stock with respect to which the person has
voting rights only), or is an affiliate or associate of the corporation and was
the owner of 15% or more of such voting stock at any time within the previous
three years (excluding persons who became 15% stockholders by action of the
corporation alone). The legislation prevents, for a period of three years
following the date that a stockholder became a holder of 15% or more of the
corporation's outstanding voting stock, the following types of transactions
between the corporation and the 15% stockholder (unless certain conditions,
described below, are met): (i) mergers or consolidations, (ii) sales, leases,
exchanges or other transfers (except proportionately as a stockholder) of 10% or
more of the aggregate assets of the corporation, (iii) issuances or transfers by
the corporation of any stock of the corporation which would have the effect of
increasing the 15% stockholder's proportionate share of the stock of any class
or series of the corporation, (iv) receipt by the 15% stockholder of the benefit
(except proportionately as a stockholder) of loans, advances, guarantees,
pledges or other financial benefits provided by the corporation and (v) any
other transaction which has the effect of increasing the proportionate share of
the stock of any class or series of the corporation which is owned by the 15%
stockholder.
The three-year ban does not apply if either the proposed transaction or the
transaction by which the 15% stockholder became a 15% stockholder is approved by
the board of directors of the corporation prior to the date such stockholder
became a 15% stockholder. Additionally, a 15% stockholder may avoid the
statutory restriction if, upon the consummation of the transaction whereby such
stockholder became a 15% stockholder, the stockholder owns at least 85% of the
outstanding voting stock of the corporation without regard to those shares owned
by directors who are officers or certain employee stock plans. Business
combinations are also permitted within the three-year period if approved by the
board of directors and, at an annual or special meeting, by the holders of
66 2/3% of the outstanding voting stock not owned by the 15% stockholder.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by providing in its certificate of incorporation or bylaws at any
time to exempt itself from coverage, provided that a bylaw or charter amendment
cannot become effective for 12 months after such amendment is adopted and shall
not apply to a transaction between the corporation and any person who became a
15% stockholder prior to adoption of such provision. In addition, any
transaction is exempt from the statutory ban if it is proposed at a time when
the corporation has proposed, and a majority of certain continuing directors of
the corporation have approved, a transaction with a party who is not a 15%
stockholder of the corporation (or who became such with board approval) if the
proposed transaction involves (i) certain mergers or consolidations involving
the corporation, (ii) a sale or other transfer of over 50% of the aggregate
assets of the corporation or (iii) a tender or exchange offer for 50% or more of
the outstanding voting stock of the corporation. The COI of the Company (which
is a Delaware corporation) does not contain a provision "opting out" of the
coverage of Section 203.
Unless Thermo Electron acquires a sufficient number of Shares pursuant to
the Offer to satisfy the 85% requirement of Section 203 or unless certain other
provisions of Section 203 are complied with, Thermo Electron would be unable, if
Thermo Electron becomes a 15% stockholder, to effect a merger with the Company
for a period of three years from the consummation of the Offer and would be
prevented from engaging in certain transactions by Section 203.
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If Thermo Electron acquires a sufficient number of Shares pursuant to the
Offer to satisfy the 85% requirement of Section 203, Thermo Electron would be
able to effect a merger with the Company without any application of the
three-year waiting period.
The foregoing description of Section 203 is qualified in its entirety by
reference to Section 203 of the Delaware General Corporation Law.
STOCKHOLDER LITIGATION
On October 7, 1994, a purported class action complaint (the "Complaint")
entitled Kenneth Steiner v. Puritan-Bennett Corp., Burton A. Dole, Jr., C.
Phillip Larson, Jr., Andre F. Marion, Thomas A. McDonnell, Daniel C. Weary,
Frank P. Wilton, C.A. No. 13790, was filed against the Company and its directors
in the Court of Chancery of the State of Delaware in and for New Castle County,
alleging, among other things, that the defendants have breached their fiduciary
duties to the Company's stockholders as a result of the defendants'
implementation of a Rights Agreement dated on or about May 17, 1989 and the
directors' refusal to properly consider Thermo Electron's Initial Proposal to
acquire all outstanding Shares at a price of $21 per Share. Among other things,
the Complaint seeks an order directing the Company's directors to carry out
their fiduciary duties to the Company's stockholders by cooperating fully with
Thermo Electron or any other entity or person having a bona fide interest in
proposing any extraordinary transactions with the Company, including a merger or
acquisition of the Company, as well as damages and costs. The director
defendants believe that they have fulfilled their fiduciary duties to the
Company and its stockholders and intend to continue to do so. The Company and
the director defendants intend to defend the action vigorously.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
<TABLE>
<S> <C>
Exhibit 1 -- Excerpts from the Company's Proxy Statement dated June 10, 1994 for
its 1994 Annual Meeting of Stockholders.
Exhibit 2 -- Employment Agreement, dated April 25, 1980, between Burton A. Dole,
Jr. and the Company.
Exhibit 3 -- Form of Supplemental Agreement.
Exhibit 4 -- Employment Agreement, dated June 9, 1994, between John H. Morrow and
the Company.
Exhibit 5 -- Form of Executive Agreement for Messrs. Doyle, Jones, Rankin and
Niles.
Exhibit 6 -- Form of Severance Agreement.
Exhibit 7 -- Form of Change of Control Severance Plan.
Exhibit 8 -- Form of Additions to Puritan-Bennett Corporation Management Incentive
Bonus Plan A, and Management Incentive Bonus Plan B.
Exhibit 9 -- Form of First Amendment to the Restated Puritan-Bennett Deferred
Compensation Plan.
Exhibit 10 -- Form of First Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan.
Exhibit 11 -- Form of Third Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan.
Exhibit 12 -- Form of First Amendment to the Puritan-Bennett Corporation Pension
Benefit Make Up Plan.
Exhibit 13 -- Form of Addition to the Company's 1988 Stock Benefit Plan.
Exhibit 14 -- Form of Amendment to the Restated Puritan-Bennett Savings & Stock
Ownership Plan.
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
Exhibit 15 -- Form of Amendment to the Puritan-Bennett Corporation Directors Post-
Retirement Income Plan.
Exhibit 16 -- Form of SERP Agreement between Burton A. Dole, Jr. and the Company.
Exhibit 17 -- Form of SERP Agreement between John H. Morrow and the Company.
Exhibit 18 -- Form of First Amendment to the Trust Agreement for the Restated
Puritan-Bennett Deferred Compensation Plan.
Exhibit 19 -- Form of Trust Agreement for the Puritan-Bennett Supplemental
Retirement Benefit Plan.
Exhibit 20 -- Form of Trust Agreement for the Puritan-Bennett Corporation Pension
Benefit Make Up Plan.
Exhibit 21 -- Form of Trust Agreement for the Puritan-Bennett Corporation Directors
Post-Retirement Income Plan.
Exhibit 22 -- Letter to Stockholders of the Company.*
Exhibit 23 -- Press Release of the Company, dated November 7, 1994.
Exhibit 24 -- Opinion of Smith Barney Inc., dated November 6, 1994.*
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
18
<PAGE> 19
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
PURITAN-BENNETT CORPORATION
By: /s/ Burton A. Dole, Jr.
Name: Burton A. Dole, Jr.
Title: Chairman, President and
Chief
Executive Officer
Dated: November 7, 1994
19
<PAGE> 20
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
----------- ------------
<S> <C>
Exhibit 1 -- Excerpts from the Company's Proxy Statement dated June 10, 1994 for
its 1994 Annual Meeting of Stockholders.
Exhibit 2 -- Employment Agreement, dated April 25, 1980, between Burton A. Dole,
Jr. and the Company.
Exhibit 3 -- Form of Supplemental Agreement.
Exhibit 4 -- Employment Agreement, dated June 9, 1994, between John H. Morrow and
the Company.
Exhibit 5 -- Form of Executive Agreement for Messrs. Doyle, Jones, Rankin and
Niles.
Exhibit 6 -- Form of Severance Agreement.
Exhibit 7 -- Form of Change of Control Severance Plan.
Exhibit 8 -- Form of Additions to Puritan-Bennett Corporation Management Incentive
Bonus Plan A, and Management Incentive Bonus Plan B.
Exhibit 9 -- Form of First Amendment to the Restated Puritan-Bennett Deferred
Compensation Plan.
Exhibit 10 -- Form of First Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan.
Exhibit 11 -- Form of Third Amendment to the Puritan-Bennett Supplemental Retirement
Benefit Plan.
Exhibit 12 -- Form of First Amendment to the Puritan-Bennett Corporation Pension
Benefit Make Up Plan.
Exhibit 13 -- Form of Addition to the Company's 1988 Stock Benefit Plan.
Exhibit 14 -- Form of Amendment to the Restated Puritan-Bennett Savings & Stock
Ownership Plan.
Exhibit 15 -- Form of Amendment to the Puritan-Bennett Corporation Directors Post-
Retirement Income Plan.
Exhibit 16 -- Form of SERP Agreement between Burton A. Dole, Jr. and the Company.
Exhibit 17 -- Form of SERP Agreement between John H. Morrow and the Company.
Exhibit 18 -- Form of First Amendment to the Trust Agreement for the Restated
Puritan-Bennett Deferred Compensation Plan.
Exhibit 19 -- Form of Trust Agreement for the Puritan-Bennett Supplemental
Retirement Benefit Plan.
Exhibit 20 -- Form of Trust Agreement for the Puritan-Bennett Corporation Pension
Benefit Make Up Plan.
Exhibit 21 -- Form of Trust Agreement for the Puritan-Bennett Corporation Directors
Post-Retirement Income Plan.
Exhibit 22 -- Letter to Stockholders of the Company.*
Exhibit 23 -- Press Release of the Company, dated November 7, 1994.
Exhibit 24 -- Opinion of Smith Barney Inc., dated November 6, 1994.*
</TABLE>
<PAGE> 1
EXHIBIT 1
EXCERPTS FROM COMPANY
PROXY STATEMENT DATED
JUNE 10, 1994
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following information is given as to the chief executive officer
and the four other most highly paid executive officers of the Company for
services rendered in all capacities during the fiscal year ended December 31,
1991, the one month period ended January 31, 1992, the fiscal year ended
January 31, 1993 ("fiscal '93") and the fiscal year ended January 31, 1994
("fiscal '94").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
Restricted Securities
Name and Other Annual Stock Underlying All Other
Principal Position Year Salary Bonus Compensation(2) Award(s)(3) Options/SARs (#) Compensation(4)
- ------------------ ---- ------ ----- --------------- ----------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Burton A. Dole, Jr. 1994 $320,830 $48,123 $ - $ - 30,000 $4,027
Chairman, President 1993 298,750 268,845 - - 30,000 3,801
and Chief Executive Jan 1992 23,750 3,563 - - - 487
Officer 1991 282,083 42,313 5,329 - 25,000 3,263
John R. Morrow 1994 212,054 25,500 - - 15,000 3,846
Executive Vice 1993 199,337 143,507 - - 15,000 3,704
President and Chief Jan 1992 16,000 1,920 - - - 338
Operating Officer 1991 190,000 22,800 1,709 - 15,000 3,143
Robert L. Doyle 1994 182,170 19,128 - - 7,500 3,819
Senior Vice 1993 167,333 108,336 20,888 - 5,000 3,582
President Jan 1992 13,333 1,400 1,741 - - 364
1991 158,333 16,625 2,428 - 7,000 3,143
Thomas E. Jones 1994 170,840 58,748 - - 7,500 3,807
Senior Vice 1993 149,167 105,718 1,661 - 7,000 3,672
President Jan 1992 11,667 2,620 138 - - 253
1991 138,336 33,620 14,230 - 7,000 3,143
Alexander R. Rankin(5) 1994 136,865 47,903 - 34,125 15,000 3,433
Vice President 1993 - - - - - -
Jan 1992 - - - - - -
1991 - - - - - -
</TABLE>
____________________
(1) Compensation deferred at election of executive includable in category
and year earned.
(2) Amounts in this column are above-market earnings on deferred compensation
accounts maintained in trust accounts in a bank. Such amounts include
investment earnings and additional amounts to be paid by the Company in
future years based upon earnings and the participants contributions
during the year.
(3) A grant of 1,500 shares of restricted stock was made to Mr. Rankin in
connection with his employment by the Company on April 1, 1993. The
shares have a four-year vesting period with 25% of the stock vesting on
the first, second, third and fourth anniversary dates of the award. Mr.
Rankin has the right to vote and receive dividends on the shares. The
value of the award shown in the table was based on the market value of
the shares as of the date of the grant. The market value as of the close
of the fiscal year was $30,000.
(4) Amounts in this column include Company matching contributions for
fiscal '94 under the Company's 401(k) savings plan as follows: Mr.
Dole, $3,432; Mr. Morrow, $3,336; Mr. Doyle, $3,311; Mr. Jones,
$3,296; and Mr. Rankin, $2,923. The balance shown for fiscal '94
represents insurance premiums for term life insurance for the benefit
of such executive officers.
(5) Mr. Rankin was hired by the Company and became an executive officer of
the Company in April 1993.
<PAGE> 2
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal
1994 to the named executive officers.1
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term(1)
- ----------------------------------------------------------------------------- ----------------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted (#)(2) Fiscal Year (S/Sh) Date 0%(3) 5%(4) 10%(4)
- ---- ------------ ------------ ----------- ---------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Burton A. Dole, Jr. 30,000 14.0 $22.75 4/1/2003 $0 $429,210 $1,087,470
John H. Morrow 15,000 7.0 22.75 4/1/2003 0 214,605 543,870
Robert L. Doyle 7,500 3.5 22.75 4/1/2003 0 107,303 271,935
Thomas E. Jones 7,500 3.5 22.75 4/1/2003 0 107,303 271,935
Alexander R. Rankin 15,000 7.0 22.75 4/1/2003 0 214,605 543,870
</TABLE>
____________________
(1) Based on actual term and annual compounding.
(2) Mr. Dole's option is exercisable 15,000 shares on 4/1/94, 10,605
shares on 4/1/95 and 4,395 shares on 1/1/03. Mr. Morrow's option is
exercisable 7,500 shares on 4/1/94, 3,105 shares on 4/1/95 and 4,395
shares on 1/1/03. Mr. Doyle's option is exercisable 1,134 shares on
1/1/97 and 4,395 shares on 1/1/98 and 1,971 shares on 1/1/99. Mr.
Jones' option is exercisable 1,519 shares on 1/1/96, 4,395 shares on
1/1/97 and 1,586 shares on 1/1/98. Mr. Rankin's option is exercisable
4,395 shares on 4/1/94, 4,395 shares on 4/1/95, 4,395 shares on 1/1/96
and 1,815 shares on 1/1/97. However, options may only be exercised as
to shares exercisable during employment (except for death, total
disability or retirement pursuant to Company retirement plans) and
must be exercised within 90 days after termination of employment. All
options become immediately exercisable for a period of 30 days
preceding certain events that may result in a change of control or
liquidation or sale of substantially all of the assets of the Company.
The exercise price may be paid by delivery of already-owned shares and
tax withholding obligations may be paid by offset of the underlying
shares, subject to certain conditions.
(3) No gain to the optionees is possible without an increase in stock
appreciation, which will benefit all stockholders.
(4) These amounts represent certain assumed rates of appreciation only and
have no correlation to current or future market conditions.
<PAGE> 3
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
The following table provides information on options exercised
in fiscal '94 by the named executive officers and the value of such officers'
unexercised options at January 31, 1994.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Acquired Value Underlying Unexercised In-the-Money Options/
Name on Exercise (#) Realized(1) Options/SARs at FY-End (#) SARs at FY-End(*)
- ---- ---------------- ----------- -------------------------- -------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Burton A. Dole, Jr. None None 104,848/79,052 $131,096/None
John H. Morrow 4,947 $62,755 59,133/46,367 236,795/None
Robert L. Doyle None None 18,615/17,885 None/None
Thomas E. Jones 1,000 10,690 23,900/14,500 None/None
Alexander R. Rankin None None None/15,000 None/None
</TABLE>
______________
(1) Market value of underlying securities at exercise, minus the exercise
or base price.
(*) Based on the closing stock price on January 31, 1994 of $20.00 per
share, minus the exercise or base price.
<PAGE> 4
DIRECTOR COMPENSATION
Directors who are not employees of the Company are compensated
with a retainer fee of $13,000 per annum plus $3,000 per annum for serving as a
member on each committee, plus an additional $1,000 per committee membership if
the director serves as chairman. Separate fees for attendance at meetings of
the Board and committees are not paid. Directors are eligible for group term
life insurance of $50,000 paid for by the Company.
The Company also maintains a retirement plan for non-employee
directors that provides for payments to a retiring director who has completed a
minimum of five years of continuous service and attained the age of 60. Such
payments will equal the larger of the annual retainer currently in effect at
the time of retirement or the highest average annual retainer and committee
fees paid to such director during the three immediately preceding years. The
payment will be reduced by 10% per year for each year of service less than ten
years.
During fiscal '94, the Company also paid Dr. Larson $3,000 for
his services as a member of the Company's Medical Advisory Board and $25,737
for consulting services relating to the Company's continuous blood gas analyzer
products.
<PAGE> 5
RETIREMENT BENEFITS
The Company maintains a qualified defined benefit pension
plan, the Restated Puritan-Bennett Pension Plan (the "Retirement Plan"), in
which Mr. Dole, Mr. Morrow, Mr. Doyle, Mr. Jones and Mr. Rankin are
participants. The Company also maintains a nonqualified supplemental pension
plan for designated executive officers, the Puritan-Bennett Corporation
Supplemental Retirement Benefit Plan (the "Supplemental Retirement Plan"),
which provides benefits that would otherwise be denied participants in the
Retirement Plan by reason of certain Internal Revenue Code limitations on
qualified plan benefits. Messrs. Dole, Morrow, Doyle and Jones are
participants in the Supplemental Retirement Plan.
The following table shows the estimated maximum annual pension
benefits payable to employees, including executive officers, upon retirement at
age 65, in various remuneration and years-of-service classifications assuming
the election of a retirement benefit payable as a straight life annuity and
assuming they are covered by both the Retirement Plan and the Supplemental
Retirement Plan.
YEARS OF SERVICE
<TABLE>
<CAPTION>
Remuneration 10 Years 15 Years 20 Years 25 Years 30 or More Years
- ------------ -------- -------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
$100,000 $14,670 $22,005 $29,340 $36,675 $44,010
200,000 120,000 120,000 120,000 120,000 120,000
300,000 180,000 180,000 180,000 180,000 180,000
400,000 240,000 240,000 240,000 240,000 240,000
500,000 300,000 300,000 300,000 300,000 300,000
</TABLE>
Covered compensation includes salary, bonus (both as reported
in the Summary Compensation Table) and other amounts reported on Treasury Form
W-2 plus elective contributions under 401(k) and 125 plans and excludes all
reimbursements or other expense allowances, fringe benefits, moving expenses
and deferred compensation. The calculation of retirement benefits under the
Plans generally is based upon average earnings for the highest five consecutive
years. Sections 401(a)(17) and 415 of the Internal Revenue Code limit the
amount of compensation that may be considered in computing benefits under a
qualified retirement plan. For 1993, the maximum amount of compensation
allowed for use in calculating an individual's pension benefits under the
Retirement Plan was $235,840. For 1994, such maximum amount is $150,000.
The compensation for the 12 months ended December 31, 1993,
covered by the plans for the persons named in the Compensation Table was: Mr.
Dole, $416,291; Mr. Morrow, $263,436; Mr. Doyle, $222,522; Mr. Jones, $204,888
and Mr. Rankin, $184,987.
Those executive officers named in the Summary Compensation
Table have years of credited service under the Plans as follows: Mr. Dole
(14), Mr. Doyle (10), Mr. Jones (20), Mr. Morrow (15) and Mr. Rankin (1). The
above annual pension benefits are not subject to any deduction for Social
Security or other offset amounts.
<PAGE> 6
EMPLOYMENT CONTRACT AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company has a five-year employment agreement with its
President, Burton A. Dole, Jr., which is automatically extended for an
additional one-year period on each anniversary date of his employment. In the
discretion of the Board of Directors, the minimum annual compensation may be
increased during the term of the agreement. The minimum annual compensation
under this agreement is currently $340,000. In addition, Mr. Dole participates
in the Company's Management Incentive Bonus Plan, and the Company will be
obligated to pay Mr. Dole upon his termination without cause, or upon his
election to terminate the agreement in the event that the Company participates
in a merger or consolidation wherein it is not the surviving corporation or in
the event that the Company liquidates, dissolves or disposes of substantially
all of its assets, the amount of compensation at his minimum annual rate then
in effect for five years. Further, Mr. Dole has the option to terminate the
agreement if any other corporation, person, entity or group thereof acting in
concert shall acquire control of 50% or more of the capital stock of the
Company, in which event, or in the event of Mr. Dole's death, the Company will
be obligated to pay Mr. Dole or his estate, an amount equal to three years'
compensation at the minimum annual rate then in effect. The amounts paid to
Mr. Dole under this agreement for fiscal '94 are included in the Compensation
Table above.
<PAGE> 7
INDEBTEDNESS OF MANAGEMENT
During fiscal '94, the Company had outstanding to Robert
Doyle, an executive officer of the Company, a 17-year mortgage loan in an
amount of $178,995, bearing contingent interest equal to 19.16% of the net
appreciated value of the mortgaged property, that is due and owing to the
Company upon the occurrence of any one of certain events described in the loan
note, including the sale or transfer of the property encumbered. This loan
enabled Mr. Doyle to purchase a personal residence necessitated by his
relocation, at the Company's request, during 1989 to an area of the country
that was experiencing at the time unusually high real estate values. In
addition, Mr. Doyle had an outstanding demand loan during fiscal '94 of
$30,000, bearing interest at 7% per year, for personal purposes.
Mr. Rankin, an executive officer of the Company, had an
outstanding swing loan of $325,000, bearing interest at 7% per year, for the
purchase of his residence. This loan was repaid by the end of the year.
Beginning fiscal '94, the Company had outstanding to David
Niles, an executive officer of the Company, a 17-year mortgage loan in an
amount of $130,047, bearing contingent interest equal to 47.4% of the net
appreciated value of the mortgaged property, that is due and owing to the
Company upon the occurrence of any one of certain events described in the loan
note, including the sale or transfer of the property encumbered. This loan
enabled Mr. Niles to purchase a personal residence necessitated by his
relocation, at the Company's request, during 1990 to an area of the country
that was experiencing at the time unusually high real estate values. Mr. Niles
made principal payments of $26,010 during fiscal '94 on this loan and the
remaining balance of this loan was forgiven in connection with another
relocation at the request of the Company during fiscal '94.
<PAGE> 8
SECURITY OWNERSHIP OF MANAGEMENT
The following information is given as to the beneficial
ownership of shares of Common Stock of the Company by the above-named executive
officers, by all the directors and by all of the executive officers and
directors as a group as of April 26, 1994.
<TABLE>
<CAPTION>
Name No. of Shares Percent of Class(*)
- ---- ------------- -------------------
<S> <C> <C>
Burton A. Dole, Jr.(1),(2). . . . . . . . . . . . . . . . . . . 238,200 1 .9
John H. Marrow(1),(3) . . . . . . . . . . . . . . . . . . . . . . 92,070
Robert L. Doyle, Jr.(1),(4) . . . . . . . . . . . . . . . . . . . 28,018
Thomas E. Jones(1),(5) . . . . . . . . . . . . . . . . . . . . . 45,543
Alexander R. Rankin(1),(6) . . . . . . . . . . . . . . . . . . . 8,595
Andre F. Marion(1) . . . . . . . . . . . . . . . . . . . . . . . . 200
C. Philip Larson, Jr. M.D.(1) . . . . . . . . . . . . . . . . . . 1,400
Charles A. Dubec(1) . . . . . . . . . . . . . . . . . . . . . . . 4,000
Frank P. Wilton(1) . . . . . . . . . . . . . . . . . . . . . . . 1,100
Daniel C. Weary(1) . . . . . . . . . . . . . . . . . . . . . . . 21,000
Thomas A. McDonnell(1) . . . . . . . . . . . . . . . . . . . . . 2,500
All Directors and Executive Officers as a Group(7) . . . . . . 498,320 4 .0
</TABLE>
__________________________________
(*) Percentages are omitted for persons who have less than 1% of the shares
outstanding.
(1) Beneficial owner indicated has sole voting and investment power except that
C. Philip Larson, Jr. M.D. shares voting and investment power with respect
to his shares. In addition, shares credited to officers in the Retirement
Savings & Stock Ownership Plan are included in the table as of March 31,
1994. Additional shares may have been accumulated since that date and
participants in that Plan do not have investment power over all of the
shares credited to their accounts. Beneficial ownership of shares held by
the immediate families or family trusts of the executive officers and
directors has been, or is being, specifically disclaimed by certain
nominees, directors and officers in ownership reports filed with the SEC.
(2) Includes 130,927 shares held under options exercisable within 60 days and
15,000 shares of restricted stock.
(3) Includes 66,633 shares held under options exercisable within 60 days and
7,500 shares of restricted stock.
(4) Includes 18,615 shares held under options exercisable within 60 days and
3,750 shares of restricted stock.
(5) Includes 24,476 shares held under options exercisable within 60 days and
4,000 shares of restricted stock.
(6) Includes 4,395 shares held under options exercisable within 60 days and
3,625 shares of restricted stock.
(7) Includes 290,432 shares issuable upon exercise of stock options exercisable
within 60 days and 37,625 shares of restricted stock.
<PAGE> 1
EXHIBIT 2
CONFORMED COPY
April 25, 1980
Mr. Burton Andrew Dole, Jr.
16 Captain Forbush
Acton, Massachusetts 01720
Dear Mr. Dole:
Pursuant to authorization of its Board of Directors (the
"Board"), Puritan-Bennett Corporation ("Puritan-Bennett") hereby agrees to
employ you as chief executive officer of Puritan-Bennett and by your acceptance
hereof you hereby accept such employment, upon the terms and conditions
hereinafter set forth.
1. Term, Compensation and Services
1.1 The term of your employment pursuant to this
agreement shall commence within 30 days after this date on a date convenient to
you and shall expire, subject to earlier termination of employment as
hereinafter provided, five years thereafter. On each anniversary date of the
commencement of your employment the term of your employment shall be
automatically extended for an additional one-year period unless, on or prior to
any such anniversary date your employment shall have been terminated as
hereinafter provided.
1.2 During the term of your employment, you will be
compensated at the annual rate as may from time to time be fixed by resolution
of the Board, provided, however, that your annual rate of compensation shall in
no event be less than $120,000, and provided further that such minimum annual
rate may be increased by resolution of the Board which resolution shall be
binding on Puritan-Bennett for the remaining term of this agreement. Your
annual compensation shall be payable semi-monthly and you shall be reimbursed
for business, travel and entertainment expenses in accordance with
Puritan-Bennett's prevailing policies. In its discretion the Board may pay you
additional salary or
<PAGE> 2
Mr. Bert Dole
April 25, 1980
Page 2
bonuses, and, of course, Puritan-Bennett will observe the provisions of its
letter to you dated April 19, 1980.
1.3 You agree to devote your full business time and
efforts to the rendition of such services to Puritan-Bennett as may be
designated by the Board, subject, however, to temporary illness and customary
vacations. You will at all times be subject to the direction and supervision
of the Board. You may devote a reasonable amount of time to civic and
community affairs but shall not perform services during the term of your
employment for any other business organization in any capacity without the
prior consent of the Board.
2. Termination
2.1 Your employment shall be subject to termination by
Puritan-Bennett at any time for cause if you shall fail in any material respect
to perform your duties hereunder other than by reason of illness, shall breach
any provision hereof in any material respect, or shall engage in any dishonest
or fraudulent acts or conduct in the performance of your duties to Puritan-
Bennett. In addition, your employment hereunder shall terminate upon your
resignation or retirement from employment, whether voluntary or in accordance
with any prevailing retirement policy of Puritan-Bennett. Upon any termination
under this paragraph 2.1 all obligations of Puritan-Bennett hereunder shall
immediately terminate and, without limiting the foregoing, Puritan-Bennett
shall have no obligation under this agreement to make payments to you in
respect of any period subsequent to such termination.
2.2 Your employment shall be subject to termination by
Puritan-Bennett at any time without cause by notifying you in writing of such
termination not less than ten days prior to the effective date thereof. Upon
any termination of employment pursuant to this paragraph 2.2, Puritan-Bennett
shall be obligated to pay to you, or to your estate if you shall not be living,
the amount of compensation, at the minimum annual rate then in effect, which
would have otherwise been payable to you for the remaining term of this
agreement assuming no further extensions of the term of employment hereunder
pursuant to paragraph 1.1 hereof. The total amount owing to you or your estate
under this paragraph 2.2 shall be paid in not more than ninety equal monthly
installments as the Board, in its discretion, may determine. Installment
payments shall commence as soon as practicable following the effective date of
termination and shall not bear interest. For purposes of this paragraph 2.2
any material breach by Puritan-Bennett of its obligations hereunder which are
not cured after thirty days written notice given to Puritan-Bennett by you,
may, at your option, be treated by you as a termination of your employment
without cause.
2.3 You shall have the option to terminate your
employment hereunder in the event that: (i) Puritan-Bennett shall merge or
consolidate with any other corporation(s)
<PAGE> 3
Mr. Bert Dole
April 25, 1980
Page 3
wherein Puritan-Bennett shall not be the surviving corporation; (ii)
Puritan-Bennett shall liquidate or dissolve or shall sell, transfer or
otherwise dispose of substantially all of its properties, business and assets;
or (iii) any other corporation, person, entity or group thereof acting in
concert shall directly or indirectly acquire control of voting stock of
Puritan-Bennett representing 50% or more of all voting stock of
Puritan-Bennett, provided that appointment as a proxy for purposes of voting
shares at any meeting of stockholders shall not be considered to be a direct or
indirect acquisition of control of the shares subject to such proxy. Upon
occurrence of any of the foregoing events and you shall have a period of ninety
days thereafter to exercise the termination option herein provided by giving
written notice of such exercise to Puritan-Bennett. If you shall exercise such
option by reason of an event or events specified in the foregoing clause (i) or
clause (ii) of this paragraph 2.3, Puritan-Bennett shall be obligated to pay to
you such amount in such manner as in the event of a termination without cause
pursuant to paragraph 2.2 hereof. If you shall exercise such option by reason
of the event specified in the foregoing clause (iii) of this paragraph 2.3,
Puritan-Bennett shall be obligated to pay to you, in not more than fifty-four
installments, an amount equal to three years' compensation at the minimum
annual rate then in effect. Installment payments hereunder shall commence as
soon as practicable following exercise of the termination option and shall not
bear interest.
2.4 In the event of your death prior to the effective
date of any termination of your employment pursuant to paragraph 2.1, 2.2 or
2.3 hereof, Puritan-Bennett shall be obligated to pay to your estate, in not
more than thirty-six monthly installments, an amount equal to two years'
compensation at the minimum annual rate in effect hereunder at the date of
death. Installment payments shall commence as soon as practicable following
the date of death and shall not bear interest.
2.5 In no event shall any termination of your employment
under any provision of this agreement relieve you from complying fully with
your agreements set forth in paragraph 3.1 hereof.
3. Non-Competition Agreement
3.1 During the term of your employment and for a period
of sixty months following termination of employment for any reason, or
following expiration of the term hereof, you agree that you will not: (i)
directly on indirectly compete with Puritan-Bennett, or engage in or act as an
officer or director, or on an individual basis as an employee or an agent of
any entity which is engaged in any business in which Puritan-Bennett is engaged
at the time of such termination; or (ii) divulge to anyone any trade secret or
corporate information concerning Puritan-Bennett or otherwise use any such
information to the detriment of Puritan-Bennett.
<PAGE> 4
Mr. Bert Dole
April 25, 1980
Page 4
3.2 The foregoing paragraph 3.1 shall not prohibit you
from investing in any securities of any corporation whose securities, or any of
them, are listed on a national securities exchange or traded in the
over-the-counter market if you shall own less than 3% of the outstanding voting
stock of the corporation.
4. General Provisions
4.1 In the event you shall inquire, by written notice to
Puritan-Bennett, whether any proposed action on your part would be considered
by Puritan-Bennett to be prohibited by or in breach of the terms hereof,
Puritan-Bennett shall have forty-five days after the giving of such notice to
express in a writing to you its position with respect thereto, and in the event
such writing shall not be given to you, such proposed action (as set forth in
your notice to Puritan-Bennett) shall not be a violation of or in breach of the
terms hereof.
4.2 Except as context otherwise requires, references
herein to Puritan-Bennett shall include its subsidiaries, references to the
Board shall include committees thereof to the extent that any applicable powers
of the board are or shall be delegated to any such committees, and references
to the term of your employment shall include all periods of extension
subsequent to the initial term hereof.
4.3 The terms and conditions hereof shall constitute the
entire agreement between the parties and shall supersede all prior written or
oral understandings between you and Puritan-Bennett, except for its letter to
you dated April 19, 1980. The agreement may not be amended or altered except
in a writing signed by the parties and approved by a resolution of the Board.
Neither party may assign its rights hereunder without the written consent of
the other.
4.4 All notices required or permitted to be given
pursuant to this agreement shall be given in writing, if to you, then at the
address set forth at the beginning hereof; and, if to Puritan-Bennett, then to
the Secretary of Puritan-Bennett at Puritan-Bennett's corporate
<PAGE> 5
Mr. Bert Dole
April 25, 1980
Page 5
office. All notices shall be deemed to have been given when delivered in
person or, if mailed, 48 hours after depositing same in the United States mail,
properly addressed, and postage prepaid.
Very truly yours,
PURITAN-BENNETT CORPORATION
By /s/ John B. Francis
Chairman of the Board
Acceptance:
The foregoing terms and conditions
are accepted and agreed to effective
this 25th day of April, 1980.
/s/ Burton Andrew Dole, Jr.
Burton Andrew Dole, Jr.
<PAGE> 1
EXHIBIT 3
FORM OF SUPPLEMENTAL AGREEMENT
____________, 1994
Mr. John H. Morrow
Executive Vice President
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
Dear Mr. Morrow:
This supplemental letter agreement ("Supplemental Agreement") amends
and supplements the letter agreement dated June 9, 1994 (the "Agreement")
between you and Puritan-Bennett Corporation. All definitions of terms in the
Agreement shall apply in this Supplemental Agreement. As amended and
supplemented by this Supplemental Agreement, the Agreement shall remain in full
force and effect.
1. The benefits payable to you under Sections 3.1(a) and (b) of
the Agreement are hereby modified by replacing Sections 3.1(a) and (b) in their
entirety with the following:
1.1 Rights upon Termination by Company other than for Cause, or by
Employee for Good Reason. If the Company terminates your
employment other than for Cause prior to your Normal
Retirement Date, or if you terminate your employment for Good
Reason prior to your Normal Retirement Date, then the Company
shall have the following obligations to you:
(a) During the applicable Continued Payment Period, the
Company shall make semi-monthly payments to you equal
to your semi-monthly base salary in effect
immediately prior to the Employment Termination Date
plus one twenty-fourth of the annual average of your
incentive bonus payments under the MIB Plan or any
successor thereto with respect to the three full (12
months) fiscal years immediately preceding the
Employment Termination Date (such annual average
being referred to herein as the "Average Annual
Incentive Payment"), such amounts to be computed
without regard to any reductions which may have
occurred in breach of this Agreement or following a
Change in Control. Such payments shall be subject to
all required withholdings. The Continued Payment
Period shall commence on the Employment Termination
Date, and shall be a number of weeks determined by
adding (a) the greater of (i) four or (ii) two times
the number of years Employee has been an employee of
the Company (rounding up to the next full year and
excluding any intervening periods during which
Employee was not an
<PAGE> 2
Mr. John H. Morrow
____________________, 1994
Page 2
employee of the Company), plus (b) two times the
number of $5,000 increments (rounded up to the next
whole $5,000 increment) contained in the Employee's
Annual Compensation (as defined below); provided,
that the Continued Payment Period shall not exceed
three years. "Annual Compensation" shall mean the
sum of (x) your annual base salary in effect
immediately prior to the Employment Termination
Date, plus (y) the Average Annual Incentive Payment.
(b) Any outstanding unvested options held by you to
purchase stock of the Company that have not otherwise
become exercisable under the terms of the Company's
stock option plans shall become fully vested and
exercisable.
2. If your employment is terminated under circumstances in which
you are entitled to receive payments under Section 3.1 of the
Agreement, and if you are not otherwise entitled to a bonus
payment with respect to the fiscal year in which your
employment is terminated, the Company will pay to you within
30 days after the Employment Termination Date, and subject to
required withholdings, a one-time bonus equal to the product
of (i) the fraction of a full year represented by the period
from the beginning of the fiscal year to the Employment
Termination Date, and (ii) the Average Annual Incentive
Payment.
3. If your employment is terminated under circumstances
in which you are entitled to receive payments under
Section 3.1 of the Agreement, then the Company will
provide a benefit under the Consolidated Omnibus Budget
Reconciliation Act of 1986 ("COBRA") and Section 4980B of the
Internal Revenue Code of 1986, as amended, as follows: the
Company shall pay the cost of COBRA coverage with respect to
your coverage status (e.g., individual or family) in effect
immediately prior to the Employment Termination Date. The
insurance continuation benefits paid for hereunder shall be
deemed to be part of your COBRA coverage. Such benefits shall
be in addition to any other benefits relating to health or
medical care benefits that are available under the Company's
policies to you following termination of employment.
4. The severance benefits provided under the Agreement and this
Supplemental Agreement will be reduced by any severance
benefits to which you are entitled under the Company's
Severance Benefits policy for terminated employees, or any
other agreement between you and the Company for severance
benefits. Except as provided in the immediately preceding
sentence, all of your rights and benefits, including those
under the Agreement and this Letter Agreement, shall remain in
full force and effect. It is expressly agreed that payments
or benefits to you under the Company's SERP or under any
agreement with you relating to the Company's SERP or any other
retirement or pension arrangement shall not be offset against
or reduce in any way any payments or benefits to which you are
entitled under the Agreement or under this Supplemental
Agreement.
5. Section 5 of the Agreement is hereby replaced with the
following:
Non-Competition. During your employment, you agree that you
will not directly or indirectly compete with the Company, or
engage in, or act as an officer, director, employee, or agent
of any person or entity that is engaged in, any business in
which the Company is engaged, without the written approval of
the CEO. The foregoing shall not prohibit you from investing
in any securities of a corporation whose securities, or any of
them, are listed on a national securities exchange or traded
in the over-the-counter market so long as you shall own less
than 3% of the outstanding voting stock of such corporation.
If you are entitled
<PAGE> 3
Mr. John H. Morrow
____________________, 1994
Page 3
to receive payments under Section 3.1(a), then, as to any
business in which the Company is engaged as of the Employment
Termination Date, you shall continue to be bound by the
provisions of this Section 5 during the applicable Continued
Payment Period. If you violate the provisions of this Section
5, then, in addition to any other rights at law or in equity,
the Company shall be entitled to discontinue any payments
otherwise due to you hereunder.
6. (a) Anything in the Agreement or this Supplemental
Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the
Company to or for the benefit of Employee (whether paid or
payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise) (a "Payment") would be
nondeductible by the Company for Federal income tax purposes
because of Section 280G of the Code, then the aggregate
present value of amounts payable or distributable as severance
benefits hereunder shall be reduced to the Reduced Amount.
The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of such
severance benefits without causing any Payment to be
nondeductible by the Company because of Section 280G of the
Code. Anything to the contrary notwithstanding, if the
Reduced Amount is zero and it is determined further that any
Payment which is not part of the severance benefits payable
hereunder would nevertheless be nondeductible by the Company
for Federal income tax purposes because of Section 280G of the
Code, then the aggregate present value of Payments which are
not severance benefits under this Agreement shall also be
reduced (but not below zero) to an amount expressed in present
value which maximizes the aggregate present value of Payments
without causing any payment to be nondeductible by the Company
because of Section 280G of the Code. For purposes of this
paragraph 6, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this
paragraph 6 shall be made by the Company's independent
auditors which shall provide detailed supporting calculations
both to the Company and Employee within 15 business days of
the Date of Termination or such earlier time as is requested
by the Company and an opinion to Employee that he or she has
substantial authority not to report any excise tax on his
Federal income tax return with respect to any Payments. Any
such determination by the Company's independent auditors shall
be binding upon the Company and Employee. Employee shall
determine which and how much of the Payments, shall be
eliminated
<PAGE> 4
Mr. John H. Morrow
____________________, 1994
Page 4
or reduced consistent with the requirements of this
paragraph 6, provided that, if Employee does not make such
determination within ten business days of the receipt of the
calculations made by the Company's independent auditors, the
Company shall elect which and how much of the Payments shall
be eliminated or reduced consistent with the requirements of
this paragraph 6 and shall notify Employee promptly of such
election; and provided further that any Payments which do not
constitute gross income to Employee shall not be reduced or
eliminated unless all other Payments have first been
eliminated. Within five business days thereafter, the Company
shall pay to or distribute to or for the benefit of Employee
such amounts as are then due to Employee under this Agreement.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial
determination by the Company's independent auditors hereunder,
it is possible that Payments will have been made by the
Company which should not have been made ("Overpayment") or
that Payments will not have been made by the Company which
could have been made ("Underpayment"), in each case,
consistent with the calculations required to be made
hereunder. In the event that the Company's independent
auditors, based upon the assertion of a deficiency by the
Internal Revenue Service against Employee or the Company which
the Company's independent auditors believe has a high
probability of success, determine that an Overpayment has been
made, any such Overpayment paid or distributed by the Company
to or for the benefit of Employee shall be treated for all
purposes as a loan ab initio to Employee which Employee shall
repay to the Company together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have
been made and no amount shall be payable to the Company if and
to the extent such deemed loan and payment would not either
reduce the amount on which Employee is subject to tax under
Section 1 and Section 4999 of the Code or generate a refund of
such taxes. In the event that the Company's independent
auditors, based upon controlling precedent or other
substantial authority, determine that an Underpayment has
occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Employee together with
interest at 120% of the applicable federal rate provided for
in Section 7872(f)(2) of the Code, compounded semiannually.
7. Notwithstanding anything in the Agreement or this Supplemental
Agreement to the contrary, if after giving effect to the provisions of Section
6 of this Supplemental Agreement any portion of any payments to you by the
Company under the Agreement, this Supplemental Agreement and any other present
or future plan or program of the Company or other present or future agreement
between you and the Company would not be deductible by the Company for Federal
income tax purposes by reason of application of Section 162(m) of the Code,
then payment of that portion to you shall be deferred until the earliest date
upon which payment thereof can be made to you without being non-deductible
pursuant to Section 162(m) of the Code. In the event of such a deferral, the
Company shall pay interest to you on the amount deferred at 120% of the
applicable federal rate provided for in Section 7872(f)(2) of the Code,
compounded semi-annually.
<PAGE> 5
Mr. John H. Morrow
____________________, 1994
Page 5
8. Miscellaneous.
8.1. No Assignment. No benefit hereunder shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrances or
charge, and any attempt to do so shall be void.
8.2 Notices. All notices hereunder shall be in writing, and shall
be delivered in person, by facsimile or by certified mail-return receipt
requested. Notices shall be delivered as follows:
If to the Company:
Chief Executive Officer
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
If to the Employee:
Mr. John H. Morrow
10231 Catalina
Overland Park, Kansas 66207
Either party may change its address for notice by giving notice to the other
party of a new address in accordance with the foregoing provisions.
8.3 Governing Law. This Agreement shall be governed by the laws
of the State of Kansas.
8.4 Disputes. In the event of any dispute between the Company and
Employee arising out of this Agreement, the Company's then current Alternative
Dispute Resolution Procedure will be followed (a copy of the current procedure
is attached hereto) and the prevailing party shall be entitled to recover its
reasonable attorneys' fees and expenses incurred in connection with the
enforcement of its rights hereunder.
8.5 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
8.6 Descriptive Headings. Descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
<PAGE> 6
Mr. John H. Morrow
____________________, 1994
Page 6
Please acknowledge your agreement to the foregoing Letter Agreement by
signing the enclosed counterpart of this letter and returning it to the
Company.
Very truly yours,
PURITAN-BENNETT CORPORATION
By:_____________________________________
President
Agreed to and accepted:
______________________________________________
JOHN H. MORROW
<PAGE> 1
EXHIBIT 4
(LOGO) PURITAN GENERAL OFFICES
BENNETT 9401 Indian Creek Parkway
P.O. Box 25905
Overland Park, KS 66225-5905
913-661-0444
FAX: 913-661-0234
June 9, 1994
Mr. John H. Morrow
Executive Vice President
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
Dear Mr. Morrow:
In view of your position as Executive Vice President and Chief
Operating Officer of Puritan-Bennett Corporation (the "Company") and in
consideration of your agreement to continue serving in this or some other
mutually agreeable capacity, the Board of Directors (the "Board") of the
Company has approved the commitment by the Company to provide you ("Employee")
with certain benefits during your employment and in the event of termination of
your employment for Good Reason, if by you, and other than for Cause, if by the
Company. This letter agreement (the "Agreement") establishes the terms and
conditions of your continued employment by the Company, including your rights
to receive certain payments and benefits during and after your employment by
the Company.
1. Certain Definitions.
1.1 Cause. "Cause" means (a) the Employee's willful
violation of any reasonable rule or direct order of
the Board or the Company's Chief Executive Officer
("CEO"), which, after written notice to do so, the
Employee fails to make reasonable efforts to correct
within a reasonable time, or (b) conviction of a
crime, or entry of a plea of nolo contendere with
regard to a crime, involving actual moral turpitude
or dishonesty of or by the Employee, or (c) drug or
alcohol abuse on Company premises or at a Company
sponsored event, or (d) the Employee's material
violation of any provision of this Agreement, which,
after written notice to do so, the Employee fails to
make reasonable efforts to correct within a reasonable
time. "Cause" shall not include any matter other
than these specified in (a) through (d) above, and
without limiting the generality of the foregoing
statement, Cause shall not include (x) any charge or
conviction of a crime, or entry of a plea of nolo
contendere with regard to a crime, under the Federal
Food, Drug, and Cosmetic Act, as amended, or any
successor statute thereto (the "Act"), or (y) the
imposition or attempt to impose upon the Employee, or
upon any operation, asset, product or activity of the
Company, of any other sanction or remedy under the
Act, including without limitation civil money
penalties, warning letters, injunctions, repairs,
replacements,
<PAGE> 2
Mr. John H. Morrow
June 9, 1994
Page 2
refunds, recalls or seizures, if the Employee acted
in good faith and in a manner which he reasonably
believed to be in or not opposed to the best
interests of the Company.
1.2 Good Reason. "Good Reason" means (a) breach by the
Company or any successor company of any of the
provisions of this Agreement not corrected within
ninety (90) days after written notice to the Company
thereof, or (b) any of the following if the same
shall occur within two years after a Change of
Control: (i) reduction of the Employee's base salary,
management bonus percentage or other compensation, as
in effect immediately prior to the Change of Control,
(ii) failure to continue in effect any medical,
dental, accident, or disability plan in which the
Employee is entitled to participate immediately prior
to the Change of Control and failure to provide plans
with substantially similar benefits (except that
employee contributions may be raised to the extent of
any cost increases imposed by third parties) or any
action by the Company which would adversely affect
the Employee's participation or reduce the Employee's
benefits under any of such plans, (iii) material
reduction in Employee's job responsibilities, (iv)
material reduction of Employee's title or position,
(v) Employee shall be requested to relocate to an
office outside of the greater Kansas City
metropolitan area, or (vi) failure or refusal of any
successor company to assume the Company's obligations
under this Agreement.
1.3 Change of Control. A "Change of Control" shall be
deemed to have occurred at any of the following times:
1.3.1 Upon the acquisition (other than
from the Company) by any person,
entity or "group," within the
meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")
(excluding, for this purpose, the
Company or its affiliates, or any
employee benefit plan of the Company
or its affiliates which acquires
beneficial ownership of voting
securities of the Company) of
beneficial ownership (within the
meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or
more of either the then outstanding
shares of common stock of the
Company or the Combined Voting Power
of the Company's then outstanding
voting securities. "Combined Voting
Power" means the combined voting
power of the Company's then
outstanding voting
<PAGE> 3
Mr. John H. Morrow
June 9, 1994
Page 3
securities generally entitled to vote
in the election of directors.
1.3.2 At the time individuals who, as of
the date hereof, constitute the
Board (as of the date hereof, the
"Incumbent Board") cease for any
reason to constitute at least a
majority of the Board, provided that
any person becoming a director
subsequent to the date hereof whose
election, or nomination for election
by the Company's shareholders, was
approved by a vote of at least a
majority of the directors then
comprising the Incumbent Board
(other than an election or
nomination of an individual whose
initial assumption of office is in
connection with an actual or
threatened election contest relating
to the election of the directors of
the Company, as such terms are used
in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act)
shall be, for purposes of this
subsection 1.3.2, considered as
though such person were a member of
the Incumbent Board; or
1.3.3 Upon the approval by the
Shareholders of the Company of a
reorganization, merger,
consolidation (in each case, with
respect to which persons who were
the shareholders of the Company
immediately prior to such
reorganization, merger or
consolidation do not, immediately
thereafter, own more than 50% of the
Combined Voting Power of the
reorganized, merged or consolidated
company's then outstanding voting
securities) or a liquidation or
dissolution of the Company or of the
sale of all or substantially all of
the assets of the Company; or
1.3.4 The occurrence of any other event
which the Incumbent Board in its
sole discretion determines
constitutes a Change of Control.
1.4 Normal Retirement Date. "Normal Retirement
Date" shall mean the earliest date
(currently, the Employee's 65th birthday)
upon which the Employee is eligible to retire
from the Company, and commence receiving full
retirement benefits under the Company's then
applicable retirement plan.
<PAGE> 4
Mr. John H. Morrow
June 9, 1994
Page 4
1.5 Employment Termination Date. The date of
delivery of any notice of termination
pursuant to Section 2.5 shall be the
"Employment Termination Date."
1.6 Continued Payment Period. "Continued Payment
Period" shall have the meaning set forth in
Section 3.1(a).
2. Benefits and Duties During Employment; Termination of
Employment.
2.1 Base Salary. Your current annual base salary is
$230,000, payable in 24 equal semi-monthly amounts,
subject to required withholdings. Your base salary
will be reviewed and may be adjusted annually. Your
base salary will not be reduced from the current
level or from any future, higher levels without your
written concurrence, unless such reduction is in
connection with your disability and in accordance
with the Company's established disability income
protection plan.
2.2 Management Bonus. For the fiscal year ending January
31, 1995, your target bonus is 40% of your annual
base salary under the Company's Management Incentive
Bonus Plan ("MIB Plan"). Your target bonus
percentage under the MIB Plan will not be reduced
from the current level or from any future, higher
levels without your written concurrence, unless such
reduction is in connection with your disability and
in accordance with the Company's established
disability income protection plan. The Company may
modify the MIB Plan in the future; provided that in
the event of any such modification, the Company will
use reasonable efforts to provide you with a bonus
opportunity under the modified plan that is
equivalent to your opportunity under the current MIB
Plan.
2.3 Other Employee Benefits. You will continue to be
eligible for all employee benefits generally
available to employees of the Company, and to the
special benefit programs in which you are currently
participating, or in which you are hereafter eligible
to participate. These special benefits include but
are not limited to:
2.3.1 Supplemental Retirement Benefit Plan,
adopted September 1, 1985, as amended on
August 10, 1993, and as further amended
on June 9, 1994, as the same may be
further amended from time to time by
mutual agreement of the Employee and the
Company.
<PAGE> 5
Mr. John H. Morrow
June 9, 1994
Page 5
2.3.2 Company Automobile, including
reimbursement for automobile expenses.
2.3.3 Shadow Glen Golf Club Membership,
including reimbursement for monthly
dues, special assessments and expenses
incurred in connection with business
usage of club services and facilities.
You may direct the Company to transfer
the ownership of this membership to you,
or to pay to you an amount equal to the
original acquisition cost of such member-
ship, by giving notice to the Company at
any time within three months after the
Employment Termination Date.
2.3.4 Life insurance and income tax and estate
planning services, subject to currently
established annual limits.
2.4 Limitation on Outside Activities. You agree to
devote your full business time and efforts to the
rendition of such services to the Company as may be
designated by the Company, subject, however, to
temporary illness and customary vacations. You will
at all times be subject to the direction and
supervision of the CEO. You may devote a reasonable
amount of time to civic and community affairs but
shall not perform services during the term of your
employment for any other business organization in
any capacity without the prior consent of the CEO.
2.5 Employment Termination. Your employment with the
Company shall continue until either you or the
Company give written notice to the other of
termination of your employment.
3. Rights upon Termination of Employment.
3.1 Rights upon Termination by Company other than for
Cause, or by Employee for Good Reason. If the
Company terminates your employment other than for
Cause prior to your Normal Retirement Date, or if you
terminate your employment for Good Reason prior to
your Normal Retirement Date, then the Company shall
have the following obligations to you:
(a) During the applicable Continued Payment
Period, the Company shall continue to pay to you on
an annual basis your annual base salary in effect
immediately prior to the Employment Termination Date
plus the annual average of your incentive bonus
payments under the MIB Plan or
<PAGE> 6
Mr. John H. Morrow
June 9, 1994
Page 6
any successor thereto with respect to the three full
fiscal years immediately preceding the Employment
Termination Date (the "Average Annual Incentive
Payment"), such amounts to be computed without regard
to any reductions which may have occurred in breach
of this Agreement or following a Change in Control.
Such payments shall be made in equal installments on
a semi-monthly basis, and shall be subject to all
required withholdings. The Continued Payment Period
shall commence on the Employment Termination Date,
and shall be two years if the Employment Termination
Date occurs before the first anniversary of this
Agreement. The Continued Payment Period applicable
hereunder shall be increased by three months on each
anniversary of the date of this Agreement which
occurs prior to the Employment Termination Date,
provided, that the Contineud Payment Period shall not
exceed three years.
(b) Within 90 days following the Employment
Termination Date, the Company shall pay to you,
subject to required withholdings, a one-time bonus
equal to the product of (i) the fraction of a full
year represented by the period from the beginning of
the fiscal year to the Employment Termination Date,
and (ii) the Average Annual Incentive Payment. No
other management incentive payment or bonus will be
payable with respect to the fiscal year in which the
Employment Termination Date occurs.
(c) As soon as practical following the Employment
Termination Date, the Company shall will pay to you
the market value, as of close of business on the
Employment Termination Date, of any unvested
restricted stock awarded to you, subject to required
withholdings.
3.2 Death Benefits. If you are terminated by the Company
other than for Cause or terminate your employment for
Good Reason, and thereafter you die during the
applicable Continued Payment Period, the Company
shall be obligated to pay to your spouse, if
surviving, and otherwise to your estate, the amounts
to which you would have been entitled under Section
3.1 had you survived.
3.3 No Obligation To Mitigate. You shall not be required
to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any
payment provided for under this Agreement be reduced
by any compensation earned by you as the result of
employment by another employer after the Employment
Termination Date, or otherwise.
<PAGE> 7
Mr. John H. Morrow
June 9, 1994
Page 7
3.4 Other Rights. The provisions of this Agreement, and
any payment provided for hereunder, shall not reduce
any amounts otherwise payable, or in any way diminish
your existing rights or rights which would accrue
solely as a result of the passage of time, under any
benefit or incentive plan, employment agreement or
other contract, plan or arrangement. As soon as
practical following the Employment Termination Date,
you will receive cash payment(s) for: (a) the value
of your earned but unused vacation time as of the
Employment Termination Date in accordance with then
current Company policy, and (b) the value of your
deferred compensation account in accordance with your
then current payment election.
4. Successor To Company. The Company shall require any successor
or assignee, whether direct or indirect, by purchase, merger,
consolidation or otherwise to all or substantially all the
business or assets of the Company, expressly and
unconditionally to assume and agree to perform the Company's
obligations under this Agreement, in the same manner and to
the same extent that the Company would be required to perform
if no such succession or assignment had taken place. In such
event, the term "Company," as used in this Agreement, shall
mean the Company and any successor or assignee to the business
or assets which by reason hereof becomes bound by the terms
and provisions of this Agreement.
5. Non-Competition. During your employment and, if applicable,
during the Continued Payment Period under Section 3.1, you
agree that you will not directly or indirectly compete with
the Company, or engage in, or act as an officer, director,
employee, or agent of any person or entity that is engaged in,
any business in which the Company is engaged as of the
Employment Termination Date, without the written approval of
the CEO. The foregoing shall not prohibit you from investing
in any securities of a corporation whose securities, or any of
them, are listed on a national securities exchange or traded
in the over-the-counter market so long as you shall own less
than 3% of the outstanding voting stock of such corporation.
6. Confidentiality. During your employment and at all times
thereafter, you will not divulge to anyone or use for your own
benefit or the benefit of any other person or entity any
information concerning the Company, its businesses,
operations, products, plans, employees, or otherwise,
including without limitation trade secrets and other
proprietary information, except for information that has been
published by or with the consent of the Company and is as a
<PAGE> 8
Mr. John H. Morrow
June 9, 1994
Page 8
result thereof generally available to the public, or
information reasonably required by you for the preparation of
personal tax returns.
7. Miscellaneous.
7.1. No Assignment. No benefit hereunder shall be subject
to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrances or charge, and any
attempt to do so shall be void.
7.2 Notices. All notices hereunder shall be in writing,
and shall be delivered in person, by facsimile or by
certified mail-return receipt requested. Notices
shall be delivered as follows:
If to the Company:
Chief Executive Officer
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
If to the Employee:
Mr. John H. Morrow
10231 Catalina
Overland Park, Kansas 66207
Either party may change its address for notice by
giving notice to the other party of a new address in
accordance with the foregoing provisions.
7.2 Governing Law. This Agreement shall be governed by
the laws of the State of Kansas.
7.3 Disputes. In the event of any dispute between the
Company and Employee arising out of this Agreement,
the Company's then current Alternative Dispute
Resolution Procedure will be followed (a copy of the
current procedure is attached hereto) and the
prevailing party shall be entitled to recover its
reasonable attorneys' fees and expenses incurred in
connection with the enforcement of its rights
hereunder.
<PAGE> 9
Mr. John H. Morrow
June 9, 1994
Page 9
7.4 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
7.5 Descriptive Headings. Descriptive headings of the
several paragraphs of this Agreement are inserted for
convenience only and shall not control or affect the
meaning or construction of any of the provisions
hereof.
Please acknowledge your agreement to the foregoing Agreement by
signing the enclosed counterpart of this letter and returning it to the
Company.
Very truly yours,
PURITAN-BENNETT CORPORATION
By: /s/ BURTON A. DOLE, JR.
President
Agreed to and accepted:
/s/ JOHN H. MORROW
JOHN H. MORROW
<PAGE> 1
EXHIBIT 5
FORM OF EXECUTIVE AGREEMENT
FOR MESSRS. DOYLE, JONES, RANKIN AND NILES
____________, 1994
___________________________
___________________________
Puritan-Bennett Corporation
[Address]
Dear Mr. __________:
This letter agreement restates and supersedes in its entirety the
letter agreement dated __________________, 1994 between you and Puritan-Bennett
Corporation (the "Company"). In view of your position as
_______________________ Vice President of the Company and in consideration of
your agreement to continue serving in this or some other mutually agreeable
capacity, the Board of Directors (the "Board") of the Company has approved the
commitment by the Company to provide you ("Employee") with certain benefits
during your employment and in the event of termination of your employment for
Good Reason, if by you, and other than for Cause, if by the Company. This
letter agreement (the "Agreement") establishes the terms and conditions of your
continued employment by the Company, including your rights to receive certain
payments and benefits during and after your employment by the Company.
1. Certain Definitions.
1.1 Cause. "Cause" means (a) the Employee's willful
violation of any reasonable rule or direct order of
the Board or the Company's Chief Executive Officer
("CEO"), which, after written notice to do so, the
Employee fails to make reasonable efforts to correct
within a reasonable time, or (b) conviction of a
crime, or entry of a plea of nolo contendere with
regard to a crime, involving actual moral turpitude
or dishonesty of or by the Employee, or (c) drug or
alcohol abuse on Company premises or at a Company
sponsored event, or (d) the Employee's material
violation of any provision of this Agreement, which,
after written notice to do so, the Employee fails to
make reasonable efforts to correct within a
reasonable time. "Cause" shall not include any
matter other than those specified in (a) through (d)
above, and without limiting the generality of the
foregoing statement, Cause shall not include (x) any
charge or conviction of a crime, or entry of a plea
of nolo contendere with regard to a crime, under the
Federal Food, Drug, and Cosmetic Act, as amended, or
any successor statute thereto (the "Act"), or (y) the
imposition or attempt to impose upon the Employee, or
upon any operation, asset, product or activity of the
Company, of any other sanction or remedy under the
Act, including without limitation civil money
penalties, warning letters, injunctions, repairs,
replacements,
<PAGE> 2
______________________________________
___________, 1994
Page 2
refunds, recalls or seizures, if the Employee acted
in good faith and in a manner which he reasonably
believed to be in or not opposed to the best
interests of the Company.
1.2 Good Reason. "Good Reason" means (a) breach by the
Company or any successor company of any of the
provisions of this Agreement not corrected within
ninety (90) days after written notice to the Company
thereof, or (b) any of the following if the same
shall occur within two years after a Change of
Control: (i) reduction of the Employee's base salary,
management bonus percentage or other compensation, as
in effect immediately prior to the Change of Control,
(ii) failure to continue in effect any medical,
dental, accident, or disability plan in which the
Employee is entitled to participate immediately prior
to the Change of Control and failure to provide plans
with substantially similar benefits (except that
employee contributions may be raised to the extent of
any cost increases imposed by third parties) or any
action by the Company which would adversely affect
the Employee's participation or reduce the Employee's
benefits under any of such plans, (iii) material
reduction in Employee's job responsibilities, (iv)
material reduction of Employee's title or position,
(v) Employee shall be requested to relocate to an
office outside of the greater ______________________
metropolitan area, or (vi) failure or refusal of any
successor company to assume the Company's obligations
under this Agreement.
1.3 Change of Control. A "Change of Control" shall be
deemed to have occurred at any of the following times:
1.3.1 Upon the acquisition (other than
from the Company) by any person,
entity or "group," within the
meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")
(excluding, for this purpose, the
Company or its affiliates, or any
employee benefit plan of the Company
or its affiliates which acquires
beneficial ownership of voting
securities of the Company) of
beneficial ownership (within the
meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or
more of either the then outstanding
shares of common stock of the
Company or the Combined Voting Power
of the Company's then outstanding
voting securities. "Combined Voting
Power" means the combined voting
<PAGE> 3
______________________________________
___________, 1994
Page 3
power of the Company's then
outstanding voting securities
generally entitled to vote in the
election of directors.
1.3.2 At the time individuals who, as of
the date hereof, constitute the
Board (as of the date hereof, the
"Incumbent Board") cease for any
reason to constitute at least a
majority of the Board, provided that
any person becoming a director
subsequent to the date hereof whose
election, or nomination for election
by the Company's shareholders, was
approved by a vote of at least a
majority of the directors then
comprising the Incumbent Board
(other than an election or
nomination of an individual whose
initial assumption of office is in
connection with an actual or
threatened election contest relating
to the election of the directors of
the Company, as such terms are used
in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act)
shall be, for purposes of this
subsection 1.3.2, considered as
though such person were a member of
the Incumbent Board; or
1.3.3 Upon the approval by the
Shareholders of the Company of a
reorganization, merger,
consolidation (in each case, with
respect to which persons who were
the shareholders of the Company
immediately prior to such
reorganization, merger or
consolidation do not, immediately
thereafter, own more than 50% of the
Combined Voting Power of the
reorganized, merged or consolidated
company's then outstanding voting
securities) or a liquidation or
dissolution of the Company or of the
sale of all or substantially all of
the assets of the Company; or
1.3.4 The occurrence of any other event
which the Incumbent Board in its
sole discretion determines
constitutes a Change of Control.
1.4 Normal Retirement Date. "Normal Retirement
Date" shall mean the earliest date
(currently, the Employee's 65th birthday)
upon which the Employee is eligible to retire
from the Company, and commence receiving full
retirement benefits under the Company's then
applicable retirement plan.
<PAGE> 4
______________________________________
___________, 1994
Page 4
1.5 Employment Termination Date. The date of
delivery of any notice of termination
pursuant to Section 2.5 shall be the
"Employment Termination Date."
1.6 Continued Payment Period. "Continued
Payment Period" shall have the meaning set
forth in Section 3.1(a)(i).
2. Benefits and Duties During Employment; Termination of
Employment.
2.1 Base Salary. Your current annual base salary is
$_____________, payable in 24 equal semi-monthly
amounts, subject to required withholdings. Your base
salary will be reviewed and may be adjusted annually.
Your base salary will not be reduced from the current
level or from any future, higher levels without your
written concurrence, unless such reduction is in
connection with your disability and in accordance
with the Company's established disability income
protection plan.
2.2 Management Bonus. For the fiscal year ending January
31, 1995, your target bonus is __% of your annual
base salary under the Company's Management Incentive
Bonus Plan ("MIB Plan"). Your target bonus
percentage under the MIB Plan will not be reduced
from the current level or from any future, higher
levels without your written concurrence, unless such
reduction is in connection with your disability and
in accordance with the Company's established
disability income protection plan. The Company may
modify the MIB Plan in the future;provided that in
the event of any such modification, the Company will
use reasonable efforts to provide you with a bonus
opportunity under the modified plan that is
equivalent to your opportunity under the current MIB
Plan.
2.3 Other Employee Benefits. You will continue to be
eligible for all employee benefits generally
available to employees of the Company, and to the
special benefit programs in which you are currently
participating, or in which you are hereafter eligible
to participate. These special benefits include but
are not limited to:
2.3.1 Company Automobile, including
reimbursement for automobile expenses.
2.3.2 Life insurance and income tax and estate
planning services, subject to currently
established annual limits.
<PAGE> 5
______________________________________
___________, 1994
Page 5
2.4 Limitation on Outside Activities. You agree to
devote your full business time and efforts to the
rendition of such services to the Company as may be
designated by the Company, subject, however, to
temporary illness and customary vacations. You will
at all times be subject to the direction and
supervision of the CEO. You may devote a reasonable
amount of time to civic and community affairs but
shall not perform services during the term of your
employment for any other business organization in any
capacity without the prior consent of the CEO.
2.5 Employment Termination. Your employment with the
Company shall continue until either you or the
Company give written notice to the other of
termination of your employment.
3. Rights upon Termination of Employment.
3.1 Rights upon Termination by Company other than for
Cause, or by Employee for Good Reason. If the
Company terminates your employment other than for
Cause prior to your Normal Retirement Date, or if you
terminate your employment for Good Reason prior to
your Normal Retirement Date, then the Company shall
have the following obligations to you:
(a) (i) If such termination occurs within two
years after a Change of Control, then within 30 days
following the Employment Termination Date, the
Company shall pay to you in a lump sum the present
value, determined as of the Employment Termination
Date, of the amounts that you would have been paid by
the Company if, during the applicable Continued
Payment Period, the Company were to make equal
semi-monthly payments to you equal to your
semi-monthly base salary in effect immediately prior
to the Employment Termination Date plus one
twenty-fourth of the annual average of your incentive
bonus payments under the MIB Plan or any successor
thereto with respect to the three full (12 months)
fiscal years immediately preceding the Employment
Termination Date (such annual average being referred
to herein as the "Average Annual Incentive Payment"),
such amounts to be computed without regard to any
reductions which may have occurred in breach of this
Agreement or following a Change in Control. Such
payment shall be subject to all required
withholdings. The Continued Payment Period shall
commence on the Employment Termination Date, and
shall be a number of weeks determined by adding (a)
the greater of (i) four or (ii) two times the number
of years Employee has been an employee of the Company
(rounding up to the next full year and excluding any
<PAGE> 6
______________________________________
___________, 1994
Page 6
intervening periods during which Employee was not an
employee of the Company),plus (b) two times the
number of $5,000 increments (rounded up to the next
whole $5,000 increment) contained in the Employee's
Annual Compensation (as defined below), provided,
that the Continued Payment Period shall not exceed
_________ years. "Annual Compensation" shall mean
the sum of (x) your annual base salary in the effect
immediately prior to the Employment Termination Date,
plus (y) the Average Annual Incentive Payment.
Present value shall be determined using a discount
rate equal to the Most Applicable Treasury Security
Rate compounded annually, if the Applicable Treasury
Security is a Treasury Bill, and semiannually, if the
Applicable Treasury Security is a Treasury Note. The
"Most Applicable Treasury Security Rate" shall be the
yield-to-maturity of the Applicable Treasury Security
with a remaining term equal to one-half of the
Continued Payment Period, as quoted in the edition of
the Wall Street Journal first published after the
Employment Termination Date. The "Applicable
Treasury Security" shall mean a Treasury Bill if the
Continued Payment Period is two years or less; and
shall mean a Treasury note if the Continued Payment
Period is greater than two years.
(ii) If such termination occurs
at any time other than within two years after a
Change of Control, then, during the applicable
Continued Payment Period, the Company shall make
semi-monthly payments to you equal to your
semi-monthly base salary in effect immediately prior
to the Employment Termination Date plus one twenty-
fourth of the Average Annual Incentive Payment, such
amounts to be computed without regard to any
reductions which may have occurred in breach of this
Agreement. Such payments shall be subject to all
required withholdings.
(b) Any outstanding unvested options held by you
to purchase stock of the Company which have not
otherwise become exercisable under the terms of the
Company's stock option plans, shall become fully
vested and exercisable.
(c) If your employment is terminated under
circumstances in which you are entitled to receive
payments under Section 3.1(a) above, and if you are
not otherwise entitled to a bonus payment with
respect to the fiscal year in which your employment
is terminated, the Company will pay to you within 30
days after the Employment Termination Date, and
subject to required withholdings, a one-time bonus
equal to the product
<PAGE> 7
______________________________________
___________, 1994
Page 7
of (i) the fraction of a full year represented by the
period from the beginning of the fiscal year to the
Employment Termination Date, and (ii) the Average
Annual Incentive Payment.
(d) As soon as practical following the Employment
Termination Date, the Company shall pay to you the
market value, as of close of business on the
Employment Termination Date, of any unvested
restricted stock awarded to you, subject to required
withholdings.
3.2 Death Benefits. If you are terminated by the Company
other than for Cause or terminate your employment for
Good Reason, and thereafter you die during the
applicable Continued Payment Period, the Company
shall be obligated to pay to your spouse, if
surviving, and otherwise to your estate, the amounts
to which you would have been entitled under Section
3.1 had you survived.
3.3 No Obligation To Mitigate. You shall not be required
to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any
payment provided for under this Agreement be reduced
by any compensation earned by you as the result of
employment by another employer after the Employment
Termination Date, or otherwise.
3.4 COBRA Benefits. If your employment is terminated
without cause by the Company, or for Good
Reason by you, then the Company will provide a
benefit under the Consolidated Omnibus Budget
Reconciliation Act of 1986 ("COBRA") and Section
4980B of the Internal Revenue Code of 1986, as
amended, as follows: the Company shall pay the cost
of COBRA coverage with respect to your coverage status
(e.g., individual or family coverage) in effect
immediately prior to the Employment Termination Date.
The insurance continuation benefits paid for
hereunder shall be deemed to be part of Employee's
COBRA coverage. Such benefits shall be in addition
to any other benefits relating to health or medical
care benefits that are available under the Company's
policies to Employee following termination of
employment.
3.5 Other Rights. The severance benefits provided
hereunder will be reduced by any severance benefits
to which you are entitled under the Company's
Severance Benefits policy for terminated employees,
or any other agreement between you and the Company
for severance benefits. Except as provided in the
immediately preceding sentence, the provisions of
this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise
payable, or in any way diminish your existing rights
or rights which would accrue solely as a result of
the passage of time, under any benefit or incentive
plan, employment
<PAGE> 8
______________________________________
___________, 1994
Page 8
agreement or other contract, plan or arrangement. As
soon as practical following the Employment
Termination Date, you will receive a cash payment for
the value of your earned but unused vacation time as
of the Employment Termination Date in accordance with
then current Company Policy.
4. Successor To Company. The Company shall require any successor
or assignee, whether direct or indirect, by purchase, merger,
consolidation or otherwise to all or substantially all the
business or assets of the Company, expressly and
unconditionally to assume and agree to perform the Company's
obligations under this Agreement, in the same manner and to
the same extent that the Company would be required to perform
if no such succession or assignment had taken place. In such
event, the term "Company," as used in this Agreement, shall
mean the Company and any successor or assignee to the business
or assets which by reason hereof becomes bound by the terms
and provisions of this Agreement.
5. Non-Competition. During your employment, you agree that you
will not directly or indirectly compete with the Company, or
engage in, or act as an officer, director, employee, or agent
of any person or entity that is engaged in, any business in
which the Company is engaged, without the written approval of
the CEO. The foregoing shall not prohibit you from investing
in any securities of a corporation whose securities, or any of
them, are listed on a national securities exchange or traded
in the over-the-counter market so long as you shall own less
than 3% of the outstanding voting stock of such corporation.
If you are receiving payments under Section 3.1(a)(ii), then,
as to any business in which the Company is engaged as of the
Employment Termination Date, you shall continue to be bound by
the provisions of this Section 5 during the applicable
Continued Payment Period.
6. Confidentiality. During your employment and at all times
thereafter, you will not divulge to anyone or use for your own
benefit or the benefit of any other person or entity any
information concerning the Company, its businesses,
operations, products, plans, employees, or otherwise,
including without limitation trade secrets and other
proprietary information, except for information that has been
published by or with the consent of the Company and is as a
result thereof generally available to the public, or
information reasonably required by you for the preparation of
personal tax returns.
<PAGE> 9
______________________________________
___________, 1994
Page 9
7. Reduction of Payments.
7.1 (a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or
for the benefit of Employee (whether paid or payable
or distributed or distributable pursuant to the terms
of this Agreement or otherwise) (a "Payment") would
be nondeductible by the Company for Federal income
tax purposes because of Section 280G of the Code,
then the aggregate present value of amounts payable
or distributable as severance benefits hereunder
shall be reduced to the Reduced Amount. The "Reduced
Amount" shall be an amount expressed in present value
which maximizes the aggregate present value of such
severance benefits without causing any Payment to be
nondeductible by the Company because of Section 280G
of the Code. Anything to the contrary
notwithstanding, if the Reduced Amount is zero and it
is determined further that any Payment which is not
part of the severance benefits payable hereunder
would nevertheless be nondeductible by the Company
for Federal income tax purposes because of Section
280G of the Code, then the aggregate present value of
Payments which are not severance benefits under this
Agreement shall also be reduced (but not below zero)
to an amount expressed in present value which
maximizes the aggregate present value of Payments
without causing any payment to be nondeductible by
the Company because of Section 280G of the Code. For
purposes of this paragraph 7.1, present value shall
be determined in accordance with Section 280G(d)(4)
of the Code.
(b) All determinations required to be made under
this paragraph 7.1 shall be made by the Company's
independent auditors which shall provide detailed
supporting calculations both to the Company and
Employee within 15 business days of the Date of
Termination or such earlier time as is requested by
the Company and an opinion to Employee that he or she
has substantial authority not to report any excise
tax on his Federal income tax return with respect to
any Payments. Any such determination by the
Company's independent auditors shall be binding upon
the Company and Employee. Employee shall determine
which and how much of the Payments, shall be
eliminated or reduced consistent with the
requirements of this paragraph 7.1, provided that, if
Employee does not make such determination within ten
business days of the receipt of the calculations made
by the Company's independent auditors, the Company
shall elect which and how much of the Payments shall
be eliminated or reduced consistent with the
requirements of this paragraph 7.1 and shall notify
Employee promptly of such election; and
<PAGE> 10
______________________________________
___________, 1994
Page 10
provided further that any Payments which do not
constitute gross income to Employee shall not be
reduced or eliminated unless all other Payments have
first been eliminated. Within five business days
thereafter, the Company shall pay to or distribute to
or for the benefit of Employee such amounts as are
then due to Employee under this Agreement.
(c) As a result of the uncertainty in the
application of Section 280G of the Code at the time
of the initial determination by the Company's
independent auditors hereunder, it is possible that
Payments will have been made by the Company which
should not have been made ("Overpayment") or that
Payments will not have been made by the Company which
could have been made ("Underpayment"), in each case,
consistent with the calculations required to be made
hereunder. In the event that the Company's
independent auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against
Employee or the Company which the Company's
independent auditors believe has a high probability
of success, determine that an Overpayment has been
made, any such Overpayment paid or distributed by the
Company to or for the benefit of Employee shall be
treated for all purposes as a loan ab initio to
Employee which Employee shall repay to the Company
together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed
to have been made and no amount shall be payable to
the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which
Employee is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such
taxes. In the event that the Company's independent
auditors, based upon controlling precedent or other
substantial authority, determine that an Underpayment
has occurred, any such Underpayment shall be promptly
paid by the Company to or for the benefit of Employee
together with interest at 120% of the applicable
federal rate provided for in Section 7872(f)(2) of
the Code, compounded semiannually.
7.2 Notwithstanding anything in this Agreement to the
contrary, if after giving effect to the provisions of
Section 7.1 any portion of any payments to you by the
Company hereunder and any other present or future
plan or program of the Company or other present or
future agreement between you and the Company would
not be deductible by the Company for Federal income
tax purposes by reason of application of Section
162(m) of the Code, then payment of that portion to
you
<PAGE> 11
______________________________________
___________, 1994
Page 11
shall be deferred until the earliest date upon which
payment thereof can be made to you without being
non-deductible pursuant to Section 162(m) of the
Code. In the event of such a deferral, the Company
shall pay interest to you on the amount deferred at
120% of the applicable federal rate provided for in
Section 7872(f)(2) of the Code, compounded
semi-annually.
8. Miscellaneous.
8.1. No Assignment. No benefit hereunder shall be subject
to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrances or charge, and any
attempt to do so shall be void.
8.2 Notices. All notices hereunder shall be in writing,
and shall be delivered in person, by facsimile or by
certified mail-return receipt requested. Notices
shall be delivered as follows:
If to the Company:
Chief Executive Officer
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
If to the Employee:
______________________
______________________
______________________
Either party may change its address for notice by
giving notice to the other party of a new address in
accordance with the foregoing provisions.
8.3 Governing Law. This Agreement shall be governed by
the laws of the State of Kansas.
8.4 Disputes. In the event of any dispute between the
Company and Employee arising out of this Agreement,
the Company's then current Alternative Dispute
Resolution Procedure will be followed (a copy of the
current procedure is attached hereto) and the
prevailing party shall be
<PAGE> 12
______________________________________
___________, 1994
Page 12
entitled to recover its reasonable attorneys' fees
and expenses incurred in connection with the
enforcement of its rights hereunder.
8.5 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
8.6 Descriptive Headings. Descriptive headings of the
several paragraphs of this Agreement are inserted for
convenience only and shall not control or affect the
meaning or construction of any of the provisions
hereof.
Please acknowledge your agreement to the foregoing Agreement by
signing the enclosed counterpart of this letter and returning it to the
Company.
Very truly yours,
PURITAN-BENNETT CORPORATION
By:_____________________________________
President
Agreed to and accepted:
______________________________________________
<PAGE> 1
EXHIBIT 6
FORM OF SEVERANCE AGREEMENT
Dear
In view of your position as ____________________________ at
Puritan-Bennett Corporation ("Company"), and in consideration of your services
in such capacity, the Board of Directors (the "Board") has approved the
commitment by the Company to you ("Employee") to provide you with certain
benefits in the event your employment is terminated for specified reasons
within two years after a Change of Control. The purpose of this letter
agreement (the "Agreement") is to set forth the terms and conditions of the
Company's agreement with you concerning such benefits.
1. Termination Benefits. If, within two years after the date of
a Change of Control, Employee's employment is terminated (a) by the Company for
any reason other than for Cause or Employee's death or Disability or (b) by
Employee for Good Reason, Employee will be entitled to receive the following
benefits:
1.1 Within 30 days following the Date of Termination, the
Company shall pay to you in a lump sum the present value, determined as of the
Date of Termination, of the amounts that you would have been paid by the
Company if, during the Continued Payment Period, the Company were to make
weekly payments to you each equal to one fifty-second of your Annual
Compensation. Such payment shall be subject to all required withholdings. The
Continued Payment Period shall commence on the Date of Termination, and
shall be a number of weeks determined by adding (a) the greater of (i) four or
(ii) two times the number of years Employee has been an employee of the Company
(rounding up to the next full year and excluding any intervening periods during
which Employee was not an employee of the Company), plus (b) two times the
number of $5,000 increments (rounded up to the next whole $5,000 increment)
contained in the Employee's Annual Compensation; provided, that the Continued
Payment Period shall not
<PAGE> 2
exceed two years. Present value shall be determined using a discount rate,
compounded annually, equal to the yield-to-maturity of a U.S. Treasury Bill
with a remaining term equal to one-half of the Continued Payment Period, as
quoted in the edition of the Wall Street Journal first published after the
Employment Termination Date. If Employee should die before receiving all
amounts payable to Employee hereunder, any unpaid amounts will be paid to
Employee's spouse, if living, and otherwise to Employee's estate. Employee
shall be entitled to receive interest on any amount payable hereunder from the
date payment was due to the date actually paid at the rate of the lesser of 12%
or the highest rate legally permissible. Employee will not be required to
mitigate the amount of the payments due to Employee hereunder by seeking other
employment or otherwise. Any amount earned by Employee as the result of
employment by another employer or otherwise after the Date of Termination shall
not reduce the Company's obligation to Employee hereunder.
1.2 Any outstanding unvested options held by Employee to
purchase stock of the Company that have not otherwise become exercisable under
the terms of the Company's stock option plans shall become fully vested and
exercisable.
1.3 COBRA Benefits. The Company will provide a benefit
under the Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA")
and Section 4980B of the Internal Revenue Code of 1986, as amended, as follows:
the Company shall pay the cost of COBRA coverage with respect to your coverage
status (e.g., individual or family) in effect immediately prior to the Date of
Termination. The insurance continuation benefits paid for hereunder shall be
deemed to be part of Employee's COBRA coverage. Such benefits shall be in
addition to any other benefits relating to health or medical care benefits that
are available under the Company's policies to Employee following termination of
employment.
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<PAGE> 3
1.4 Offset for Other Arrangements. The severance benefits
provided hereunder will be reduced by the amount of any severance benefits to
which Employee is entitled under the Company's Severance Benefits policy for
terminated employees, or any other agreement between Employee and the Company
for severance benefits.
2. Notice of Termination. Any termination by the Company for
Cause or by Employee for Good Reason shall be communicated by written notice to
the other party given by hand delivery or by registered or certified mail,
return receipt requested, postage prepaid, if to Employee, then to Employee at
his or her address as set forth in the Company's records, and, if to the
Company, to ________________________________. Any notices given pursuant to
this paragraph 2 shall be effective the earlier of when such notice is actually
received by the addressee or three days after such notice is delivered or sent.
3. Definitions.
3.1 "Annual Compensation" means the greater of (a) the
sum of (i) the Employee's annual base salary ("Base Salary") in effect on the
Date of Termination, plus (ii) the annual average of the Employee's incentive
bonus payments under the Company's Management Incentive Bonus Plan or any
successor thereto with respect to the three full (12 months) fiscal years
("Average Bonus") immediately preceding the Date of Termination; or (b) the sum
of (x) the Employee's Base Salary in effect on the date of the Change of
Control, plus (y) the Employee's Average Bonus computed with respect to the
three full (12 months) fiscal years immediately preceding the date of the
Change of Control.
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<PAGE> 4
3.2 "Cause" means (a) the Employee's willful violation of
any reasonable rule or direct order of the Board, the Company's Chief Executive
Officer ("CEO") or other elected officer, where such officer is Employee's
direct supervisor, which, after written notice to do so, the Employee fails to
make reasonable efforts to correct within a reasonable time, or (b) conviction
of a crime, or entry of a plea of nolo contendere with regard to a crime,
involving actual moral turpitude or dishonesty of or by the Employee, or (c)
drug or alcohol abuse on Company premises or at a Company sponsored event, or
(d) the Employee's material violation of any provision of this Agreement,
which, after written notice to do so, the Employee fails to make reasonable
efforts to correct within a reasonable time. "Cause" shall not include any
matter other than those specified in (a) through (d) above, and without
limiting the generality of the foregoing statement, Cause shall not include (x)
any charge or conviction of a crime, or entry of a plea of nolo contendere with
regard to a crime, under the Federal Food, Drug, and Cosmetic Act, as amended,
or any successor statute thereto (the "Act"), or (y) the imposition or attempt
to impose upon the Employee, or upon any operation, asset, product or activity
of the Company, of any other sanction or remedy under the Act, including
without limitation civil money penalties, warning letters, injunctions,
repairs, replacements, refunds, recalls or seizures, if the Employee acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the Company.
3.3 Change of Control. A "Change of Control" shall be deemed
to have occurred at any of the following times:
3.3.1 Upon the acquisition (other than
from the Company) by any person,
entity or "group," within the
meaning of
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<PAGE> 5
Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934
(the "Exchange Act") (excluding, for
this purpose, the Company or its
affiliates, or any employee benefit
plan of the Company or its
affiliates which acquires beneficial
ownership of voting securities of
the Company) of beneficial ownership
(within the meaning of Rule 13d-3
promulgated under the Exchange Act)
of 50% or more of either the then
outstanding shares of common stock
of the Company or the Combined
Voting Power of the Company's then
outstanding voting securities.
"Combined Voting Power" means the
combined voting power of the
Company's then outstanding voting
securities generally entitled to
vote in the election of directors.
3.3.2 At the time individuals who, as of
the date hereof, constitute the
Board (as of the date hereof, the
"Incumbent Board") cease for any
reason to constitute at least a
majority of the Board, provided that
any person becoming a director
subsequent to the date hereof whose
election, or nomination for election
by the Company's shareholders, was
approved by a vote of at least a
majority of the directors then
comprising the Incumbent Board
(other than an election or
nomination of an individual whose
initial assumption of office is in
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<PAGE> 6
connection with an actual or
threatened election contest relating
to the election of the directors of
the Company, as such terms are used
in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act)
shall be, for purposes of this
subsection 3.3.2, considered as
though such person were a member of
the Incumbent Board; or
3.3.3 Upon the approval by the
Shareholders of the Company of a
reorganization, merger,
consolidation (in each case, with
respect to which persons who were
the shareholders of the Company
immediately prior to such
reorganization, merger or
consolidation do not, immediately
thereafter, own more than 50% of the
Combined Voting Power of the
reorganized, merged or consolidated
company's then outstanding voting
securities) or a liquidation or
dissolution of the Company or of the
sale of all or substantially all of
the assets of the Company; or
3.3.4 The occurrence of any other event
which the Incumbent Board in its
sole discretion determines
constitutes a Change of Control.
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<PAGE> 7
3.4 "Date of Termination" means the date of receipt of the
written notice of termination pursuant to paragraph 2 or any later date
specified therein, as the case may be; provided, however, that (a) if
Employee's employment is terminated by the Company other than for Cause or by
reason of death or Disability, the Date of Termination shall be the date on
which the Company notifies Employee of such termination and (b) if Employee's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death or determination of Disability pursuant
to paragraph 3.5, as the case may be.
3.5 "Disability" means disability that, at least 26 weeks
after its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to Employee or
Employee's legal representative (such acceptance not to be unreasonably
withheld).
3.6 "Good Reason" means (i) reduction of the Employee's base
salary, management bonus percentage or other compensation, as in effect
immediately prior to the Change of Control, (ii) failure to continue in effect
any medical, dental, accident, or disability plan in which the Employee is
entitled to participate immediately prior to the Change of Control and failure
to provide plans with substantially similar benefits (except that employee
contributions may be raised to the extent of any cost increases imposed by
third parties) or any action by the Company which would adversely affect the
Employee's participation or reduce the Employee's benefits under any of such
plans, (iii) material reduction in Employee's job responsibilities, (iv)
material reduction of Employee's title or position, (v) Employee shall be
requested to relocate to an office outside of the greater
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<PAGE> 8
___________________________ metropolitan area, or (vi) failure or refusal of
any successor company to assume the Company's obligations under this Agreement.
4. Nonexclusivity. Nothing in this Agreement shall prevent or
limit Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company and for which Employee may otherwise qualify, nor shall anything herein
limit or otherwise affect such rights as any Employee may have under any stock
option or other agreements with the Company. Except as otherwise expressly
provided herein, amounts which are vested benefits or which Employee is
otherwise entitled to receive under any plan, policy, practice or program of
the Company at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program.
5. Successor to Company. The Company shall require any successor
or assignee, whether direct or indirect, by purchase, merger, consolidation or
otherwise, to all or substantially all the business or assets of the Company,
expressly and unconditionally to assume and agree to perform the Company's
obligations under this Agreement, in the same manner and to the same extent
that the Company would be required to perform if no such succession or
assignment had taken place. In such event, the term "Company," as used in this
Agreement, shall mean the Company as hereinafter defined and any successor or
assignee to the business or assets which by reason hereof becomes bound by the
terms and provisions of this Agreement.
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<PAGE> 9
6. Certain Reduction of Payments.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment") would be nondeductible by the Company for Federal
income tax purposes because of Section 280G of the Code, then the aggregate
present value of amounts payable or distributable as severance benefits
hereunder shall be reduced to the Reduced Amount. The "Reduced Amount" shall
be an amount expressed in present value which maximizes the aggregate present
value of such severance benefits without causing any Payment to be
nondeductible by the Company because of Section 280G of the Code. Anything to
the contrary notwithstanding, if the Reduced Amount is zero and it is
determined further that any Payment which is not part of the severance benefits
payable hereunder would nevertheless be nondeductible by the Company for
Federal income tax purposes because of Section 280G of the Code, then the
aggregate present value of Payments which are not severance benefits under this
Agreement shall also be reduced (but not below zero) to an amount expressed in
present value which maximizes the aggregate present value of Payments without
causing any payment to be nondeductible by the Company because of Section 280G
of the Code. For purposes of this paragraph 6, present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this
paragraph 6 shall be made by the Company's independent auditors which shall
provide detailed supporting calculations both to the Company and Employee
within 15 business days of the Date of
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<PAGE> 10
Termination or such earlier time as is requested by the Company and an opinion
to Employee that he or she has substantial authority not to report any excise
tax on his Federal income tax return with respect to any Payments. Any such
determination by the Company's independent auditors shall be binding upon the
Company and Employee. Employee shall determine which and how much of the
Payments, shall be eliminated or reduced consistent with the requirements of
this paragraph 6, provided that, if Employee does not make such determination
within ten business days of the receipt of the calculations made by the
Company's independent auditors, the Company shall elect which and how much of
the Payments shall be eliminated or reduced consistent with the requirements of
this paragraph 6 and shall notify Employee promptly of such election; and
provided further that any Payments which do not constitute gross income to
Employee shall not be reduced or eliminated unless all other Payments have
first been eliminated. Within five business days thereafter, the Company shall
pay to or distribute to or for the benefit of Employee such amounts as are then
due to Employee under this Agreement.
(c) As a result of the uncertainty in the application of
Section 280G of the Code at the time of the initial determination by the
Company's independent auditors hereunder, it is possible that Payments will
have been made by the Company which should not have been made ("Overpayment")
or that Payments will not have been made by the Company which could have been
made ("Underpayment"), in each case, consistent with the calculations required
to be made hereunder. In the event that the Company's independent auditors,
based upon the assertion of a deficiency by the Internal Revenue Service
against Employee or the Company which the Company's independent auditors
believe has a high probability of success, determine that an Overpayment has
been made, any such Overpayment paid or distributed by the Company to or for
the benefit of
10
<PAGE> 11
Employee shall be treated for all purposes as a loan ab initio to Employee
which Employee shall repay to the Company together with interest at the
applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no such loan shall be deemed to have been made and no
amount shall be payable to the Company if and to the extent such deemed loan
and payment would not either reduce the amount on which Employee is subject to
tax under Section 1 and Section 4999 of the Code or generate a refund of such
taxes. In the event that the Company's independent auditors, based upon
controlling precedent or other substantial authority, determine that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of Employee together with interest at 120% of
the applicable federal rate provided for in Section 7872(f)(2) of the Code,
compounded semiannually.
(d) Notwithstanding anything in this Agreement to the
contrary, if after giving effect to the provisions of paragraphs 6(a)-(c) any
portion of any payments to Employee by the Company hereunder would not be
deductible by the Company for Federal income tax purposes by reason of
application of Section 162(m) of the Code, then payment of that portion to
Employee shall be deferred until the earliest date upon which payment thereof
can be made to Employee without being non-deductible pursuant to Section 162(m)
of the Code. In the event of such a deferral, the Company shall pay interest
to you on the amount deferred at 120% of the applicable federal rate provided
for in Section 7872(f)(2) of the Code, compounded semiannually.
7. Amendments and Termination. The Incumbent Board may from time
to time supplement, amend or terminate this Agreement or make any other
provisions which the Company may deem necessary or desirable, without the
approval of Employee; provided, however, that from and after such time there
has been a Change of Control, this Agreement shall not be amended in any manner
which would adversely affect the interests
11
<PAGE> 12
of Employee without the written consent of Employee. Subject to the foregoing,
this Agreement establishes and vests in Employee a contractual right to the
benefits to which Employee is entitled hereunder, enforceable by Employee
against the Company. The form of any proper amendment or termination of this
Agreement shall be a written instrument signed by a duly authorized officer or
officers of the Company certifying that the amendment or termination has been
approved by the Incumbent Board.
8. Miscellaneous.
8.1 Employment Status. This Agreement does not constitute a
contract of employment or impose on Employee or the Company any obligation to
retain Employee as an employee, to change the status of Employee's employment,
or to change the Company's policies regarding termination of employment.
8.2 No Assignment. No benefit hereunder shall be subject to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to do so shall be void.
8.3 Governing Law. This Agreement shall be governed by the
laws of the State of Kansas.
8.4 Expenses of Suit. In the event of any dispute or
litigation between the Company and Employee arising out of this Agreement, the
prevailing party shall be entitled to recover its reasonable attorneys' fees
and expenses incurred in connection with the enforcement of its rights
hereunder.
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<PAGE> 13
8.5 Severability. If any term, provision, covenants or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
8.6 Descriptive Headings. Descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
Please acknowledge your agreement to the foregoing agreement by
signing the enclosed counterpart of this letter and returning it to the
Company.
Very truly yours,
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<PAGE> 1
EXHIBIT 7
FORM OF CHANGE OF CONTROL SEVERANCE PLAN
SECTION 1. INTRODUCTION
This Change Of Control Severance Plan (the "Plan") was adopted by
the Board of Directors of Puritan-Bennett Corporation effective ___
______________, 199___. The Plan is intended to provide Employees whose
employment terminates for specified reasons within two years after a Change in
Control with a lump sum severance payment and with the continuation of coverage
under certain employee benefit plans.
The Plan is an employee welfare benefit plan within the meaning of
Section 3(l) of the Employee Retirement Income Security Act of 1974 ("ERISA")
and Section 2510.3-1 of the regulations issued thereunder.
SECTION 2. DEFINITIONS
(a) "Board" means the Company's Board of Directors, as constituted
from time to time.
(b) "Cause" means (i) the Employee's violation of Company policy
or failure to perform satisfactorily any assigned duties of his or her job, if
such failure is not corrected within 30 days after written notice to the
Employee, or (ii) misconduct, including but not limited to: (A) conviction of
a crime, or entry of a plea of nolo contendere with regard to a crime,
involving actual moral turpitude or dishonesty of or by the Employee, or (B)
drug or alcohol abuse on Company premises or at a Company sponsored event, or
(C) conduct by an Employee that in the good faith and reasonable determination
of the Company demonstrates gross unfitness. "Cause" shall not include any
matter other than those specified in (A) through (C) above, and without
limiting the generality of the foregoing statement, Cause shall not include (x)
any charge or conviction of a crime, or entry of a plea of nolo contendere with
regard to a crime, under the Federal Food, Drug, and Cosmetic Act, as amended,
or any successor statute thereto (the "Act"), or (y) the imposition or attempt
to impose upon the Employee, or upon any operation, asset, product or activity
of the Company, of any other sanction or remedy under the Act, including
without limitation civil money penalties, warning letters, injunctions,
repairs, replacements, refunds, recalls or seizures, if the Employee acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the Company.
(c) "Change of Control" shall be deemed to have occurred at any of
the following times:
(i) Upon the acquisition (other than from the Company) by
any person, entity or "group," within the meaning of
Section 13(d)(3)
<PAGE> 2
or 14(d)(2) of the Securities Exchange Act of 1934
(the "Exchange Act") (excluding, for this purpose,
the Company or its affiliates, or any employee
benefit plan of the Company or its affiliates which
acquires beneficial ownership of voting securities of
the Company) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) of 50% or more of either the then outstanding
shares of common stock of the Company or the Combined
Voting Power of the Company's then outstanding voting
securities. "Combined Voting Power" means the
combined voting power of the Company's then
outstanding voting securities generally entitled to
vote in the election of directors.
(ii) At the time individuals who, as of the date hereof,
constitute the Board (as of the date hereof, the
"Incumbent Board") cease for any reason to constitute
at least a majority of the Board, provided that any
person becoming a director subsequent to the date
hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising
the Incumbent Board (other than an election or
nomination of an individual whose initial assumption
of office is in connection with an actual or
threatened election contest relating to the election
of the directors of the Company, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall be, for purposes of
this Subsection (c)(ii), considered as though such
person were a member of the Incumbent Board; or
(iii) Upon the approval by the Shareholders of the Company
of a reorganization, merger, consolidation (in each
case, with respect to which persons who were the
shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the
Combined Voting Power of the reorganized, merged or
consolidated company's then outstanding voting
securities) or a liquidation or dissolution of the
Company or of the sale of all or substantially all of
the assets of the Company; or
(iv) The occurrence of any other event which the Incumbent
Board in its sole discretion determines constitutes a
Change of Control.
(d) "Company" means Puritan-Bennett Corporation.
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<PAGE> 3
(e) "Controlled Group" means the Company and each other entity
that, at the time in question, is in the same controlled group of corporations
within the meaning of Section 414(b) of the Internal Revenue Code of 1986, as
amended; provided, however, that the term "Controlled Group" shall not include
any foreign (non-U.S.) corporations or unincorporated entities.
(f) "Date of Termination" means the date of receipt of the written
notice of termination pursuant to Section 3 or any later date specified in such
notice; provided, however, that (i) if the Employee's employment is terminated
by the Company other than for Cause or by reason of death or Disability, the
Date of Termination shall be the date on which the Company notifies the
Employee of such termination and (ii) if the Employee's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death or determination of Disability pursuant to Section 2(g), as
the case may be.
(g) "Disability" means disability that, at least 26 weeks after
its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative (such acceptance not to be unreasonably
withheld).
(h) "Employee" means each regular full-time and regular part-time
employee on the payroll of the Company on the day before a Change of Control
occurs; provided, however, that "Employee" shall exclude any individual who
renders services to the Company through any temporary employment agency or
other employee leasing arrangement.
(i) "Good Reason" means (i) reduction of Employee's base salary or
rate of compensation as in effect immediately prior to the Change of Control,
(ii) failure to continue to provide any medical, dental, accident or disability
benefits that are no less favorable in the aggregate than the benefits provided
to Employee immediately prior to the Change of Control (except that employee
contributions may be raised to the extent of any cost increases imposed by
third parties), (iii) failure or refusal of the successor company to assume the
Company's obligations under this Plan, as required by Section 4(b), (iv)
breach by the Company or any successor company of any of the provisions of
this Plan, or (v) change of Employee's principal place of employment to a
location more than 50 miles from Employee's principal place of employment on
the date hereof without the consent of Employee.
(j) "Pay" means all wages, salary, bonus and other incentive
compensation (including commissions) paid by the Company as consideration for
an Employee's service during the 12 months ended on either the Date of
Termination or the date of the Change of Control, whichever is greater, that
are includible in the gross income of the Employee for federal income tax
purposes.
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SECTION 3. NOTICE OF TERMINATION
Any termination of an Employee by the Company (whether for Cause or
otherwise) or by the Employee for Good Reason shall be communicated by written
notice to the other party given by hand delivery or by registered or certified
mail, return receipt requested, postage prepaid. If mailed, notice to an
Employee shall be delivered to his or her address as set forth in the Company's
records. Notice to the Company shall be delivered to Puritan-Bennett
Corporation, 9401 Indian Creek Parkway, Overland Park, Kansas 66225, Attention:
Human Relations Director. Any notice given pursuant to this Section 3 shall be
effective on the earlier of when such notice is actually received by the
addressee or three days after such notice is delivered or sent.
SECTION 4. BENEFITS
(a) Conditions of Payment. A benefit shall be payable to an
Employee under the Plan if, within 24 months after the occurrence of a Change
of Control, his or her employment with any member of the Controlled Group is
terminated (i) by the Company for any reason other than Cause or the Employee's
death or Disability or (ii) voluntarily by the Employee for Good Reason.
Subject to Subsections (b) and (e) of this Section 4, the benefit is payable
regardless of any return to employment.
(b) Special Rules and Exceptions. All members of the Controlled
Group shall participate in the Plan. In the case of a spinoff after a Change
of Control, the spun-off member shall adopt a plan equivalent to this Plan and
any other severance plan maintained by the member of the Controlled Group from
which it was spun off and shall continue this Plan and such other plan (if any)
for two years following the spinoff. No benefit shall be payable hereunder
solely because an Employee is transferred to another member of the Controlled
Group (as it existed prior to the Change of Control) or there is a spin-off and
the Employee becomes an employee of a spun-off member.
In addition no benefit shall be payable hereunder solely because an
Employee's employment terminates because a subsidiary, a division or other
operating assets of any, member of the Controlled Group is sold if:
(i) The purchaser is contractually obligated to
offer the Employee the same or a better job without relocation; and
(ii) The purchaser is contractually obligated to
maintain both a plan equivalent to this Plan and a plan equivalent to any other
severance plan that covered the Employee prior to the sale for the balance of
the two-year period from the Change of Control.
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<PAGE> 5
In the event of a transfer to another member of the Controlled Group
(as it existed before the Change of Control) that requires the Employee's
relocation, the Employee shall be reimbursed for his or her relocation expenses
under the Company's policy in effect prior to the Change of Control.
(c) Cash Benefit. An Employee's lump sum severance payment shall
be paid in cash as soon as practicable (but in no event more than 30 days)
following termination of employment, and shall be equal to the greater of (i)
four weeks of Pay, or (ii) one week of Pay for each completed six months of
such Employee's service with the Company; provided that in no event shall the
total amount of payments hereunder to an Employee exceed two times the
Employee's compensation during the one-year period ending on the Date of
Termination.
(d) Offsets and Withholding. The benefit under this Plan will be
reduced by any severance benefits to which the Employee is entitled under the
Company's Severance Benefits policy for terminated employees, or any other
agreement between the Employee and the Company for severance benefits. In any
event, the Company shall withhold any appropriate federal, state, local and
foreign income and employment taxes from any cash payments made hereunder.
(e) COBRA Benefits. An Employee who is entitled to the lump sum
severance payment hereunder shall also be entitled to the following benefits:
The Company will provide a benefit under the Consolidated Omnibus Budget
Reconciliation Act of 1986 ("COBRA") and Section 4980B of the Internal Revenue
Code of 1986, as amended, as follows: the Company shall pay the cost of COBRA
coverage with respect to the Employee's coverage status (e.g., individual or
family coverage) in effect immediately preceding termination of the Employee's
employment. The insurance continuation benefits paid for hereunder shall be
deemed to be a part of such Employee's COBRA coverage. Such benefits shall be
in addition to any other benefits relating to health or medical care benefits
that are available under the Company's policies to terminated Employees.
SECTION 5. NONEXCLUSIVITY
Nothing in this Plan shall prevent or limit the Employee's continuing
or future participation in any benefit, bonus, incentive or other plan,
program, policy or practice provided by the Company and for which Employees may
otherwise qualify, nor shall anything herein limit or otherwise affect such
rights that any Employee may have under any stock option or other agreement
with the Company. Except as otherwise expressly provided herein, amounts that
are vested benefits or that an Employee is otherwise entitled to receive under
any plan, policy, practice or program of the Company at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program.
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<PAGE> 6
SECTION 6. PAYMENTS TO AND FROM THE PLAN
The benefits under the Plan shall be paid from the general funds of
the Company, and all Employees shall be no more than unsecured general
creditors of the Company. Nothing contained in the Plan shall be deemed to
create a trust of any kind for the benefit of the Employees, or create any
fiduciary relationship between the Company and the Employees with respect to
any assets of the Company. The Company is under no obligation to fund the
benefits provided herein prior to payment, although it may do so if it chooses.
Any assets that the Company chooses to use for advance funding shall
nevertheless constitute assets of the Company and shall not cause the Plan to
be a funded plan within the meaning of any section of ERISA.
SECTION 7. ADMINISTRATION
The Company is the plan administrator and plan sponsor for purposes of
ERISA.
SECTION 8. REDUCTION OF DEFERRAL OF BENEFIT
Although it is highly unlikely that the provisions of this Section 8
could ever apply, in order to minimize potential adverse income tax
consequences to either or both the Company and the Employee, and
notwithstanding anything in this Plan to the contrary:
(a) If any amounts due to the Employee under this Agreement and
any other plan or program of the Company constitute a "parachute payment" as
such term is defined in Section 280G(b)(2) of the Code, and the amount of the
parachute payment, is equal to or greater than three times your "base amount,"
as defined in Section 280G(b)(3) of the Code, then the aggregate of the amounts
constituting the parachute payment shall be reduced to an amount that will
equal three times your base amount, less $1.00. The determination to be made
with respect to this Section 8(a) shall be made by an accounting firm jointly
selected by the Company and you and paid by the Company, and which may be the
Company's independent auditors.
(b) If after giving effect to the provisions of Section 8(a) any
portion of any payments to the Employee by the Company hereunder would not be
deductible by the Company for Federal income tax purposes by reason of
application of Section 162(m) of the Code, then payment of that portion to the
Employee shall be deferred until the earliest date upon which payment thereof
can be made to the Employee without being non-deductible pursuant to Section
162(m) of the Code. In the event of such a deferral, the Company shall pay
interest to the Employee on the amount deferred at 120% of the applicable
federal rate provided for in Section 7872(f)(2) of the Code, compounded
semi-annually.
6
<PAGE> 7
SECTION 9. AMENDMENT AND TERMINATION
If no Change of Control occurs, the Plan shall terminate on the first
anniversary of its effective date, subject to renewal from year to year. Prior
to a Change of Control, the Company may amend or terminate the Plan at any time
and for any reason. For 24 months following a Change of Control, this Plan and
any other Controlled Group severance plan shall not be terminated and shall not
be amended to reduce any benefit or to make any condition more restrictive as it
applies to any Employee.
SECTION 10. MISCELLANEOUS
(a) No Implied Employment Contract. The Plan shall not be deemed
to give (i) any Employee or other person any right to be retained in the employ
of the Company nor (ii) to interfere with the right of the Company to discharge
any Employee or other person at any time and for any reason, which right is
hereby reserved.
(b) Benefits Not Assignable. No benefit hereunder shall be
subject to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to do so shall be void.
(c) Legal Construction. The Plan shall be construed in accordance
with ERISA and, to the extent not preempted by ERISA, with the laws of the
State of Kansas.
(d) Severability. If any term, provision, covenant or restriction
of the Plan is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of the Plan shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
SECTION 11. CLAIMS, INQUIRIES AND APPEALS
(a) Applications for Benefits and Inquiries. Any application for
benefits, inquiries about the Plan or inquiries about present or future rights
under the Plan must be submitted to the Plan Administrator in writing. The
Plan Administrator is:
Puritan-Bennett Corporation
Attention: Human Relations Department
9401 Indian Creek Parkway
Overland Park, Kansas 66225
(b) Denial of Claims. In the event that any application for
benefits is denied in whole or in part, the Plan Administrator must notify the
applicant, in writing, of the denial of the application, and of the applicant's
right to review of the denial. The
7
<PAGE> 8
written notice of denial will be set forth in a manner designed to be
understood by the applicant, and will include specific reasons for the denial,
specific references to the Plan provision upon which the denial is based, a
description of any information or material that the Plan Administrator needs to
complete the review and an explanation of the Plan's review procedure.
This written notice will be given to the applicant within 90 days
after the Plan Administrator receives the application, unless special
circumstances require an extension of time, in which case the Plan
Administrator shall have up to an additional 90 days for processing the
application. If an extension of time for processing is required, written
notice of the extension will be furnished to the applicant before the end of
the initial 90-day period. This notice of extension will describe the special
circumstances necessitating the additional time and the date by which the Plan
Administrator is to render its decision on the application.
If written notice of denial of the application for benefits is not
furnished within the specified time, the application shall be deemed to be
denied. The applicant will then be permitted to appeal the denial in
accordance with the Review Procedure described below.
(c) Review Panel. The Plan Administrator will appoint a "Review
Panel," consisting of three individuals who may, but need not, be employees of
the Company. The Review Panel will be the named fiduciary that has the
authority to act on any appeal from a denial of benefits under the Plan.
(d) Request for a Review. Any person (or that person's authorized
representative) whose application for benefits is denied (or deemed denied), in
whole or in part, may appeal the denial by submitting a request for a review to
the Review Panel within 60 days after receiving written notice of the denial
from the Plan Administrator (or in the case of a deemed denial, within 60 days
after the application is deemed denied). The Plan Administrator will give the
applicant (or his or her representative) an opportunity to review pertinent
documents in preparing a request for review. A request for a review shall be
in writing and shall be addressed to the Review Panel. A request for review
must set forth all of the grounds on which it is based, all facts in support of
the request and any other matters that the applicant believes to be pertinent.
The Review Panel may require the applicant to submit additional facts,
documents or other material as it may find necessary or appropriate in making
its review.
(e) Decision on Review. The Review Panel will act on each request
for review within 60 days after receipt of the request, unless special
circumstances require an extension of time (not to exceed an additional 60
days) for processing the request for review. If an extension of time is
required, written notice of the extension will be furnished to the applicant
within the initial 60-day period. The Review Panel
8
<PAGE> 9
will give prompt, written notice of its decision to the applicant and to the
Plan Administrator. In the event that the Review Panel confirms the denial of
the application for benefits in whole or in part, the notice will outline, in a
manner calculated to be understood by the applicant, the specific Plan
provisions upon which the decision is based. If written notice of the Review
Panel's decision is not given to the applicant within the time prescribed in
this Subsection (e), the application will be deemed denied.
(f) Rules and Procedures. The Review Panel will establish rules
and procedures, consistent with the Plan and with ERISA, as necessary and
appropriate in carrying out its responsibilities. The Review Panel may require
an applicant who wishes to submit additional information in connection with an
appeal from the denial (or deemed denial) of benefits to do so at the
applicant's own expense.
(g) Exhaustion of Remedies. No legal action for benefits under
the Plan may be brought until (i) the applicant has submitted a written
application for benefits in accordance with the procedures described by
Subsection (a) above, (ii) such application has been denied or deemed denied
in accordance with Subsection (b) above, (iii) the applicant has filed a
written request for a review of the application in accordance with the appeal
procedure described in Subsection (d) above, and (iv) the application is denied
or deemed denied under the review procedure set forth in Subsection (e) above.
SECTION 12. OTHER PLAN INFORMATION
(a) Employer and Plan Identification Numbers. The Employer
Identification Number ("EIN") assigned to Puritan-Bennett Corporation is
44-0399150. The Plan Number ("PN") assigned to the Plan by the Plan Sponsor
pursuant to the instructions of the Internal Revenue Service is [ ].
(b) Ending Date for Plan's Fiscal Year. The date of the end of
the fiscal year for the purpose of maintaining the Plan's records is January
31.
(c) Agent for the Service of Legal Process. The agent for the
service of legal process with respect to the Plan is _______________
____________________________. The service of legal process may also be made on
the Plan by serving the Plan Administrator.
(d) Plan Sponsor and Administrator. The "Plan Sponsor" and the
"Plan Administrator" of the Plan is Puritan-Bennett Corporation. The Plan
Administrator is the named fiduciary charged with the responsibility for
administering the Plan.
9
<PAGE> 10
SECTION 13. STATEMENT OF ERISA RIGHTS
Participants in this Plan (which is a welfare plan sponsored by
Puritan-Bennett Corporation) are entitled to certain rights and protections
under ERISA and are entitled to:
(a) Examine, without charge, at the Plan Administrator's office
and at other specified locations, such as work sites, all Plan documents filed
by the Plan with the U.S. Department of Labor, such as detailed annual reports;
(b) Obtain copies of all Plan documents and Plan information upon
written request to the Plan Administrator. The Administrator may make a
reasonable charge for the copies;
(c) Receive a summary of the Plan's annual financial report, in
the case of a plan which is required to file an annual financial report with
the Department of Labor.
In addition to creating rights for Plan participants, ERISA imposes
duties upon the people responsible for the operation of the employee benefit
plan. The people who operate the Plan, called "fiduciaries" of the Plan, have
a duty to do so prudently and in the interest of you and other Plan
participants and beneficiaries.
No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
Plan benefit or exercising your rights under ERISA. If your claim for a Plan
benefit is denied in whole or in part, you must receive a written explanation
of the reason for the denial. You have the right to have the Plan review and
reconsider your claim.
Under ERISA, there are a few steps you can take to enforce the above
rights. For instance, if you request materials from the Plan and do not
receive them within 30 days, you may file suit in a federal court. In such a
case, the court may require the Plan Administrator to provide the materials and
pay you up to $100 a day until you receive the materials, unless the materials
were not sent because of reasons beyond the control of the Plan Administrator.
If you have a claim for benefits which is denied or ignored, in whole or in
part, you may file suit in a state or federal court. If it should happen that
the Plan fiduciaries misuse the Plan's money, or if you are discriminated
against for asserting your rights, you may seek assistance from the U.S.
Department of Labor, or you may file suit in a federal court. The court will
decide who should pay court costs and legal fees. If you are successful, the
court may order the person you have sued to pay these costs and fees. If you
lose, the court may order you to pay these costs and fees--for example, if it
finds your claim is frivolous.
10
<PAGE> 11
If you have any questions about the Plan, you should contact the Plan
Administrator. If you have any questions about your rights under ERISA, you
should contact your nearest area office of the Pension and Welfare Benefit
Administration, Department of Labor.
SECTION 14. EXECUTION
To record the adoption of the Plan as set forth herein,
Puritan-Bennett Corporation has caused its duly authorized officer to execute
the same this _____ day of ______________________________________, 199___.
PURITAN-BENNETT CORPORATION
By:______________________________________
Title:____________________________________
11
<PAGE> 1
EXHIBIT 8
FORM OF ADDITIONS TO PURITAN-BENNETT CORPORATION
MANAGEMENT INCENTIVE BONUS PLAN A,
AND MANAGEMENT INCENTIVE BONUS PLAN B
The following text is to be added to Section e)1. on page 6 of each plan:
; provided that in the event that a participant is terminated without
Cause (as defined below) or resigns for Good Reason (as defined below) within
two years following a Change in Control (as defined below), the Company shall
pay to the participant as soon as possible following such termination the
maximum bonus amount for which such participant was eligible with respect to
the fiscal year of termination, prorated to the date of termination. The
following definitions shall apply:
"Cause" means (a) a participant's willful violation of any
reasonable rule or direct order of the Board or the Company's
Chief Executive Officer ("CEO"), which, after written notice
to do so, the participant fails to make reasonable efforts to
correct within a reasonable time, or (b) conviction of a
crime, or entry of a plea of nolo contendere with regard to a
crime, involving actual moral turpitude or dishonesty of or by
the participant, or (c) drug or alcohol abuse on Company
premises or at a Company sponsored event, or (d) the
participant's material violation of any provision of this
Agreement, which, after written notice to do so, the
participant fails to make reasonable efforts to correct within
a reasonable time. "Cause" shall not include any matter other
than these specified in (a) through (d) above, and without
limiting the generality of the foregoing statement, Cause
shall not include (x) any charge or conviction of a crime, or
entry of a plea of nolo contendere with regard to a crime,
under the Federal Food, Drug, and Cosmetic Act, as amended, or
any successor statute thereto (the "Act"), or (y) the
imposition or attempt to impose upon a participant, or upon
any operation, asset, product or activity of the Company, of
any other sanction or remedy under the Act, including without
limitation civil money penalties, warning letters,
injunctions, repairs, replacements, refunds, recalls or
seizures, if the participant acted in good faith and in a
manner which the participant reasonably believed to be in or
not opposed to the best interests of the Company.
"Good Reason" means any of the following: (a) breach
by the Company or any successor company of any of the
provisions of any employment agreement between the participant
and the Company not corrected within ninety (90) days after
written notice to the Company thereof, (b) reduction of a
participant's base salary, management bonus percentage or
other compensation, as in effect immediately prior to the
Change of Control, (c) failure to continue in effect any
medical, dental, accident, or disability plan in which the
participant is entitled to participate immediately prior to
the Change of Control and failure to provide plans with
substantially similar benefits (except that employee
contributions may be raised to the extent of any cost
increases imposed by third parties) or any action by the
Company which would adversely affect the participant's
<PAGE> 2
participation or reduce the participant's benefits
under any of such plans, (d) material reduction in the
participant's job responsibilities, (iv) material reduction of
participant's title or position, (v) the participant shall be
requested to relocate to an office [outside of the
metropolitan area in which the office to which he was assigned
prior to the Change of Control is located], or (vi) failure or
refusal of any successor company to assume the Company's
obligations under this plan or any employment agreement
between the participant and the Company.
A "Change of Control" shall be deemed to have occurred
at any of the following times:
A. Upon the acquisition (other than from the
Company) by any person, entity or "group," within the
meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934 (the "Exchange Act")
(excluding, for this purpose, the Company or its
affiliates, or any employee benefit plan of the
Company or its affiliates which acquires beneficial
ownership of voting securities of the Company) of
beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 50% or
more of either the then outstanding shares of common
stock of the Company or the Combined Voting Power of
the Company's then outstanding voting securities.
"Combined Voting Power" means the combined voting
power of the Company's then outstanding voting
securities generally entitled to vote in the election
of directors.
B. At the time individuals who, as of [date],
constitute the Board (as of [date], the "Incumbent
Board") cease for any reason to constitute at least a
majority of the Board, provided that any person
becoming a director subsequent to [date] whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the
Incumbent Board (other than an election or nomination
of an individual whose initial assumption of office
is in connection with an actual or threatened
election contest relating to the election of the
directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this
subparagraph B, considered as though such person were
a member of the Incumbent Board; or
C. Upon the approval by the shareholders of the
Company of a reorganization, merger, consolidation
(in each case, with respect to which persons who were
the shareholders of the Company immediately prior to
such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the
Combined Voting Power of the reorganized, merged or
consolidated company's then outstanding voting
securities) or a liquidation or dissolution of the
Company or of the sale of all or substantially all of
the assets of the Company; or
D. The occurrence of any other event which the
Incumbent Board in its sole discretion determines
constitutes a Change of Control.
<PAGE> 3
The following paragraph will be substituted in lieu of Section e)2. on page 6
of each plan:
Profit for bonus determination will be inclusive of any changes in
reserves, but will exclude any capital gains or losses, other unusual gains or
losses such as proceeds of fire or casualty insurance, and extraordinary items.
In cases of uncertainty, the decision of the CEO will be final. In the event
of a Change of Control, the Compensation Committee shall adjust profit for
bonus determination purposes hereunder to remove distortions in the Company's
profits and distortions in the method of measuring such profits, and
distortions in the methods used to determine and measure the realization of the
performance targets hereunder for bonus calculation purposes, that have
occurred as a result of the Change of Control. In addition, the Compensation
Committee shall have the authority, in its sole and absolute discretion, to
adjust the performance targets hereunder for bonus calculation purposes to
remove distortions in the realization of such targets and distortions in the
method of measuring such realization and such targets, caused by actions taken
or expenses incurred by the Company in connection with a proposal for a
transaction described in subparagraphs A or C of the definition of Change of
Control set forth in subsection e)1. above, or any other extraordinary
transaction, whether or not consummated. No changes in reserves shall be taken
into account for purposes of bonus calculations hereunder with respect to the
fiscal year in which a Change of Control occurs and the immediately following
fiscal year.
<PAGE> 1
EXHIBIT 9
FORM OF
FIRST AMENDMENT TO THE RESTATED PURITAN-BENNETT
DEFERRED COMPENSATION PLAN
THIS AMENDMENT of the Restated Puritan-Bennett Deferred Compensation
Plan (the "Plan") is made by the Puritan-Bennett Corporation (which, together
with its subsidiaries and affiliates, shall be referred to herein as the
"Corporation"), effective as of the _____ day of ____________, 1994.
WHEREAS, as part of the Plan, the Corporation reserved the right, at
any time, by action of its Board of Directors, to modify or amend, in whole or
in part, any or all provisions of the Plan, including specifically the right to
make any such amendment effective retroactively; and
WHEREAS, the Corporation now desires to amend the Plan.
NOW, THEREFORE, Article VI of the Plan is hereby amended to include
the following sentence at the end of the first paragraph of Article VI:
Notwithstanding any provision herein to the contrary, no
amendment or termination of this Plan which is made on or
after the occurrence of a "Change in Control," as such term is
defined in Section 1.1 of the Trust Agreement, shall be
effective with respect to any Participant or beneficiary
without the express written consent of such Participant or
beneficiary, except that the Plan may be amended to prohibit
further Contributions by Active Participants after the date
such amendment is adopted by the Corporation, and any other
amendment which does not adversely affect a Participant or
beneficiary.
IN WITNESS WHEREOF, the Corporation has executed this Amendment to the
Plan, effective as of the date first written above.
PURITAN-BENNETT CORPORATION
By:_____________________________________
Title:__________________________________
Date:___________________________________
ATTEST:
By:________________________________________
Title:_____________________________________
Date:______________________________________
<PAGE> 1
EXHIBIT 10
FORM OF
FIRST AMENDMENT
PURITAN-BENNETT CORPORATION
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
THIS AMENDMENT to the Puritan-Bennett Corporation Supplemental
Retirement Benefit Plan (the "Plan") is made this ____ day of ___________
_____, 1993 by Puritan-Bennett Corporation, a Delaware corporation (hereinafter
referred to as the "Corporation").
WHEREAS, the Corporation has adopted the Plan effective as of
September 1, 1985, which provides benefits that supplement benefits provided
under the Restated Puritan-Bennett Pension Plan (the "Qualified Plan"); and
WHEREAS, the Corporation and the participants in the Plan have agreed
to amendment of the Plan in the manner set forth below.
NOW, THEREFORE, the Plan is amended effective as of ______________,
1993 as follows:
1. Section 2.02, the definition of "Average Monthly Compensation,"
is amended in its entirety to read as follows:
Section 2.02. The term "Average Monthly Compensation" shall
have the meaning provided in the Qualified Plan (currently Section
2.08 thereof), provided that the dollar limitation on Compensation
provided in the Qualified Plan (currently Section 2.14 thereof) shall
not be applicable for purposes of determining Average Monthly
Compensation under this Plan.
2. Section 2.03, the definition of "Beneficiary," is amended in its
entirety to read as follows:
Section 2.03. The term "Beneficiary" shall have the meaning
provided for in the Qualified Plan (currently Section 2.09 thereof).
3. Section 2.13, the definition of "Years of Service," is amended in
its entirety to read as follows:
Section 2.13. The term "Years of Service" shall mean the
number of years for which a Member is given credit for the purpose of
determining eligibility for benefits (vesting) under the Qualified
Plan (as currently defined in Section 2.41 of the Qualified Plan).
4. Section 2, "Definitions," shall be amended by the addition of the
following new Section 2.14:
Section 2.14. The term "Years of Participation" shall mean
the number of years (twelve month periods) of the Member's
participation in this Plan, measured
<PAGE> 2
from the date he first became a Member (as herein defined) to the date
of his termination of employment.
5. The first paragraph of Section 4.01 is amended in its entirety to
read as follows:
Section 4.01-Supplemental Monthly Retirement Benefit. A
Member who has at the date of his termination of employment with an
Employer attained age fifty-five (55) and completed seven (7) Years of
Participation shall be entitled to a Supplemental Monthly Retirement
Benefit. Such Supplemental Monthly Retirement Benefit, payable in the
form of a single life annuity (the "Normal Form"), shall be an amount
equal to the percentage of the Member's Average Monthly Compensation
specified in such Member's Plan Agreement, reduced by an amount
computed under Section 4.01(a). The amount so reduced shall be
further adjusted based upon the vesting schedule set out in Section
4.01(b). The amount resulting from the application of Sections
4.01(a) and (b) shall then be adjusted as provided in Section 4.01(c).
6. Section 4, "Retirement Benefits," shall be amended by the
addition of the following new Section 4.02:
Section 4.02-Time of Commencement of Supplemental Monthly
Retirement Benefit. Payment of the Supplemental Monthly Retirement
Benefit to which a Member is entitled pursuant to Section 4.01 shall
commence as of the first day of the calendar month coinciding with or
next following the termination of the Member's employment (the
"Benefit Commencement Date"). Actual payment of such Supplemental
Monthly Retirement Benefit, in the Normal Form or other form provided
in Section 4.03, shall, however, be subject to the following: if the
Member shall have elected the form of payment of his Supplemental
Monthly Retirement Benefit pursuant to Section 4.03 during a calendar
year (a "Preceding Year") preceding the calendar year during which his
termination of employment occurs (the "Termination Year"), then actual
payment of his Supplemental Monthly Retirement Benefit shall commence
on or as soon as practical following his Benefit Commencement Date; if
the Member did not make an election pursuant to Section 4.03 during a
Preceding Year, but shall make such an election during the Termination
Year, actual payment of his Supplemental Monthly Retirement Benefit
shall commence on the first day of the next following calendar year
(the "Succeeding Year"); if the Member does not make an election
pursuant to Section 4.03 during either a Preceding or the Termination
Year, then such Member shall be deemed to have elected to receive
payment in the Normal Form single life annuity commencing on the first
day of the Succeeding Year; provided that any time actual payment of a
Member's Supplemental Monthly Retirement Benefit shall not commence on
his Benefit Commencement Date, then the first payment made shall
include all payments that would have been made on or before such
actual commencement date if actual payment had commenced
-2-
<PAGE> 3
on the Benefit Commencement Date, together with interest on all
deferred payments (from the date each such payment would have been
made if actual payment had commenced on the Benefit Commencement Date)
at the rate of _______% per annum. [Insert rate.]
7. Section 4, "Retirement Benefits," shall be amended by the
addition of the following new Section 4.03:
Section 4.03-Form of Payment of Supplemental Monthly
Retirement Benefits. The "Normal Form" of payment of a Member's
Supplemental Monthly Retirement Benefit, and the form on which the
amount of such Benefit is calculated pursuant to Section 4.01, shall
be a single life annuity payable for the Member's life only commencing
as of his Benefit Commencement Date. A Member may, however, elect in
writing filed with the Committee prior to the end of the Termination
Year, to receive payment of his Supplemental Monthly Retirement
Benefit in one of the following optional forms, each of which will be
the "Actuarial Equivalent" (which term shall have the meaning provided
in the Qualified Plan as of the Member's Benefit Commencement Date) of
the Normal Form single life annuity.
(a) Ten Year Certain and Continuous Option.
Pursuant to this option, the Member's Supplemental Monthly
Retirement Benefit shall be payable during the Member's life
only; provided that if the Member dies within ten years of his
Benefit Commencement Date, payments in the same amount will
continue to be made to the Member's Beneficiary until a total
of 120 monthly payments have been made.
(b) Early Retirement Level Income Option. Pursuant
to this option, the Member's Supplemental Monthly Retirement
Benefit payments will be made during the Member's life only.
Larger payments shall be made until the first day the Member
is eligible to receive social security benefits (age 62). At
that time payments to the Member shall be reduced by the
amount of the Member's social security benefit that was
estimated as part of the determination of all payments to be
made under this Section 4.03(c). No payments shall be made
after the Member's death.
(c) 50%, 75% and 100% Contingent Annuitant Option.
Pursuant to this option, the Member's Supplemental Monthly
Retirement Benefit payments shall be made during the life of
the Member, with payments continuing to the Member's
designated contingent annuitant ("Contingent Annuitant") for
the life of such Contingent Annuitant following the Member's
death. The Contingent Annuitant and the percentage to be paid
to such Contingent Annuitant must be designated by the Member
at the time this payment form is elected. If the Contingent
Annuitant predeceases the Member, no benefits shall be paid
after the Member's death. The amount paid to the Member's
Contingent Annuitant shall be either 50%, 75% or 100% of the
amount received by the Member during the Member's life.
8. Section 5, "Death Benefits", is amended in its entirety to
read as follows:
Section 5-Death Benefits.
-3-
<PAGE> 4
Section 5.01-Death Before Commencement of Benefits. In the
event of the death of a Member or a Disabled Member prior to his
Benefit Commencement Date, leaving a surviving Spouse, then if such
Member had prior to his death completed seven (7) Years of
Participation, his surviving Spouse shall be entitled to a Death
Benefit in the form of a monthly annuity payable for the life of the
Spouse only. The monthly Death Benefit shall be an amount equal to
50% of the annuity amount which would have been payable to the Member
during his life if he had survived, terminated employment at the later
of age fifty-five (55) or the date of his death, elected immediate
payment in the form of a 50% contingent annuity pursuant to Section
4.03(c) and designated his Spouse as the contingent annuitant. If the
Member had not attained age fifty-five (55) at the time of his death,
payment of the Death Benefit hereunder to his surviving Spouse will
not commence until the date that the deceased Member would have
attained age fifty-five (55), and no Death Benefit shall be payable
in the event his surviving Spouse shall die before such date. No
Death Benefit will be paid hereunder if the Member dies before his
Benefit Commencement Date and is not then married.
Section 5.02-Death After Commencement of Benefits. If the
Member dies after his Benefit Commencement Date, the Member's
Beneficiary shall be entitled to receive, in a single lump sum, a
Special Death Benefit in an amount equal to twelve (12) times the
monthly Supplemental Monthly Retirement Benefit calculated on the
basis of the Normal Form single life annuity (regardless of the form
in which such Member's Supplemental Monthly Retirement Benefit was
being paid or was payable prior to his death). If the Member dies
following his Benefit Commencement Date, no other or additional death
benefits will be payable except to the extent provided under any
optional form of payment selected by the Member.
9. New Section 9.03 is added to the Plan to read as follows:
Section 9.03-Plan Interpretation. The Corporation shall have
sole and absolute discretion and authority to interpret all provisions
of this Plan and to resolve all questions arising under this Plan;
including, but not limited to, determining whether any person is
eligible to contribute to this Plan, whether any person shall receive
any payments pursuant to this Plan, and the amount of any payments to
be paid pursuant to this Plan. Any interpretation, resolution or
determination of the Corporation pursuant to this Section shall be
final and binding upon all concerned.
IN WITNESS WHEREOF, this Amendment is adopted as of the date set forth
above.
PURITAN-BENNETT CORPORATION
ATTEST: "Corporation"
By: By
---------------------------------- ---------------------------
Title: Title:
------------------------------- -----------------------
Date:
-----------------------
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<PAGE> 1
EXHIBIT 11
FORM OF
THIRD AMENDMENT
PURITAN-BENNETT CORPORATION
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
THIS AMENDMENT to the Puritan-Bennett Corporation Supplemental
Retirement Benefit Plan (the "Plan") is made this _____ day of __________
____________________, 1994 by Puritan-Bennett Corporation, a Delaware
corporation (hereinafter referred to as the "Corporation").
WHEREAS, the Corporation has adopted the Plan effective as of
September 1, 1985, which provides benefits that supplement benefits provided
under the Restated Puritan-Bennett Pension Plan (the "Qualified Plan"); and
WHEREAS, the Plan was heretofore amended by a First Amendment thereto
effective on or about September 1, 1993 and a Second Amendment thereto
effective January 1, 1994; and
WHEREAS, the Corporation and the Members of the Plan have agreed to
the further amendment of the Plan in the manner set forth below.
NOW, THEREFORE, the Plan, as heretofore amended, is amended effective
October 1, 1994 as follows:
A. Section 4.01(a)(i) is amended to read in its entirety as
follows:
Section 4.01(a)(i). The amount payable shall be reduced by
one hundred percent (100%) of the monthly income or Pension benefits
payable or which would be payable to the Member under the Qualified
Plan in the form of a single life annuity commencing as of the
Member's Benefit Commencement Date.
B. Section 8.05 is amended to include the following sentence at
the end of the first paragraph:
Notwithstanding any provision herein to the contrary, no amendment or
termination of this Plan which is made on or after the occurrence of a
"Change in Control," as such term is defined in Section 1.1 of the
Trust Agreement, shall affect any rights or benefits to which any
Member or beneficiary had become entitled pursuant to this Plan prior
to the date of such amendment or termination without the express
written consent of said Member or beneficiary.
C. A new Section 10 is added to read in its entirety as follows:
Section 10.01 - Trust Fund. The Corporation has established a trust
fund pursuant to an agreement with Wachovia Bank of North Carolina,
N.A., as trustee (the "Trustee"), dated ___________________, 1994 (the
"Trust Agreement"). Any payments to a Participant from such trust
fund shall, to the extent thereof, discharge the Corporation's
obligations pursuant to this Plan.
<PAGE> 2
IN WITNESS WHEREOF, this Third Amendment is adopted as of the date set
forth above.
PURITAN-BENNETT CORPORATION
ATTEST: "Corporation"
By:________________________________________ By _______________________________
Title:_____________________________________ Title:____________________________
Date:_____________________________
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<PAGE> 1
EXHIBIT 12
FORM OF
FIRST AMENDMENT TO THE PURITAN-BENNETT CORPORATION
PENSION BENEFIT MAKE UP PLAN
THIS AMENDMENT to the Puritan-Bennett Corporation Pension Benefit Make
Up Plan (the "Plan") is made by the Puritan-Bennett Corporation (the
"Corporation"), effective as of the ____ day of ___________, 1994.
WHEREAS, the Corporation reserved the right to amend the Plan at any
time and from time to time; and
WHEREAS, the Corporation now desires to amend the Plan as of the date
first written above.
NOW, THEREFORE, the Plan is amended as follows:
1. Section 5.01 of Article V is amended to include the following sentence
at the end of the first paragraph:
Notwithstanding any provision herein to the contrary, no
amendment or termination of this Plan which is made on or
after the occurrence of a "Change in Control," as such term is
defined in Section 1.1 of the Trust Agreement, shall affect
any rights or benefits to which any Participant or beneficiary
had become entitled pursuant to this Plan prior to the date of
such amendment or termination without the express written
consent of such Participant or beneficiary.
2. A new Article VI is added to read in its entirety as follows:
ARTICLE VI
TRUST FUND
The Corporation has established a trust fund pursuant to an agreement
with Wachovia Bank of North Carolina, N.A., as trustee (the
"Trustee"), dated _________________, 1994 (the "Trust Agreement").
Any payments to a Participant from such trust fund shall, to the
extent thereof, discharge the Corporation's obligations pursuant to
this Plan.
IN WITNESS WHEREOF, the Corporation has executed this Amendment,
effective as of the date first written above.
PURITAN-BENNETT CORPORATION
By:_____________________________________
Title:__________________________________
Date:___________________________________
<PAGE> 2
ATTEST:
By:________________________________________
Title:_____________________________________
Date:______________________________________
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<PAGE> 1
EXHIBIT 13
FORM OF ADDITION TO THE
COMPANY'S 1988 STOCK BENEFIT PLAN
The following text is to be added to Section 9 of the Plan:
At the sole discretion of the Committee, and on such terms and
conditions as it deems appropriate, the Committee may provide either by the
terms of an option granted under the Plan or by a resolution adopted prior to
the occurrence of an event described in clauses (x), (y) or (z) above, that
upon such event, such option shall be assumed by the successor corporation, or
a parent or subsidiary thereof, or shall be substituted for by a similar
option, covering the stock of the successor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and exercise prices. In the event that the Committee provides for such
assumption or substitution of options, the assumed or substituted options shall
continue to be subject to their original vesting schedules notwithstanding the
provision for acceleration of vesting set forth above.
<PAGE> 1
EXHIBIT 14
FORM OF AMENDMENT TO THE
RESTATED PURITAN-BENNETT RETIREMENT SAVINGS &
STOCK OWNERSHIP PLAN
THIS AMENDMENT is made is this ______ day of ____________, 1994 by
Puritan-Bennett Corporation (the "Company") as plan sponsor of the Restated
Puritan-Bennett Retirement Savings & Stock Ownership Plan (the "Plan").
WHEREAS, the Plan was established effective January 1, 1984, and
restated effective January 1, 1989; and
WHEREAS, pursuant to Section 14 of the Plan, the Board of Directors
reserved the right to amend, modify, or terminate the Plan at any time; and
WHEREAS, the Board of Directors now desire to amend the Plan to permit
each Participants under the Plan to direct the Trustee with respect to a tender
offer for common stock of the Company allocated to such Participants' Accounts;
IT IS NOW THEREFORE RESOLVED, that a new Section 15.13 is added to
read in its entirety as follows:
15.13 Tender Offers for Company Common Stock. Each Participant shall
have the right to direct the Trustee as to the manner in which to
respond to a tender offer, exchange offer or any other offer to
purchase common stock of the Company allocated to the Participant's
Accounts invested in the Stock Fund, irrespective of whether the
Participant is fully vested in such Accounts. The Trustee or its
designee will solicit such instructions from Participants by
distributing to each Participant such information as is distributed to
shareholders of the Company generally in connection with any such
offer, and any additional information the Trustee deems appropriate in
order for each Participant to give instructions. A reasonable
deadline for the return of such material may be specified.
Shares of common stock of the Company will be tendered,
exchanged or sold as instructed by the Participants, in response to a
tender offer, exchange offer or other offer to purchase. Fractional
shares will be aggregated for purposes of tendering, exchanging or
selling shares, to the extent possible, to reflect the instructions of
the Participants. Failure of any Participant to timely instruct the
Trustee pursuant hereto shall be treated as an instruction that the
common stock allocated to such Participant's Accounts shall not be
tendered, exchanged or sold.
<PAGE> 2
For purposes of receiving, tabulating and transmitting
instructions, the Trustee will establish a procedure to ensure that
instructions received from individual Participants regarding the a
tender offer, exchange offer, or any other offer are held in
confidence, and are not divulged, released or otherwise utilized in a
manner that, in the Trustee's reasonable judgment, might influence the
Participant's free exercise of the rights set forth in this Section
15.13.
IN WITNESS WHEREOF, this Amendment is effective as of the date first
written above.
Puritan-Bennett Corporation
Attest: "Company"
By:
------------------------------ ----------------------------------
IDS Trust, A Division of IDS
Bank & Trust
Attest: "Trustee"
By:
------------------------------ ----------------------------------
<PAGE> 1
EXHIBIT 15
FORM OF AMENDMENT TO THE PURITAN-BENNETT CORPORATION
DIRECTORS POST-RETIREMENT INCOME PLAN
THIS AMENDMENT to the Puritan-Bennett Corporation Directors
Post-Retirement Income Plan (the "Plan") is made by the Puritan-Bennett
Corporation (the "Corporation"), effective as of the ____ day of ___________,
1994.
WHEREAS, subject to certain restrictions, the Corporation reserved the
right to amend the Plan by action of the Board of Directors at any time and
from time to time; and
WHEREAS, the Corporation now desires to amend the Plan as of the date
first written above by resolution of the Board of Directors.
NOW, THEREFORE, the Plan is amended by the addition of new Section
5.4, which shall read as follows:
5.4 Trust. The Corporation has established a trust fund pursuant to
an agreement with Wachovia Bank of North Carolina, N.A., as trustee
(the "Trustee"), dated _________________, 1994 (the "Trust
Agreement"). Any payments to a Director from such trust fund shall,
to the extent thereof, discharge the Corporation's obligations
pursuant to the Plan.
<PAGE> 1
EXHIBIT 16
FORM OF AGREEMENT
THIS AGREEMENT is made this ____ day of _____________, 1994 by and
between Puritan-Bennett Corporation, a Delaware corporation (hereinafter
referred to as the "Corporation"), and Burton A. Dole, Jr. (hereinafter
referred to as the "Employee").
WHEREAS, the Corporation has adopted the Puritan-Bennett Corporation
Supplemental Retirement Benefit Plan effective as of September 1, 1985 (the
"Plan") which provides benefits that supplement benefits provided under the
Restated Puritan-Bennett Pension Plan (the "Pension Plan"); and
WHEREAS, the Corporation and the Employee have entered into an
agreement pursuant to which the Employee became a Member under the terms of the
Plan; and
WHEREAS, the Employee and the Corporation desire to make the following
changes to the Plan as it applies to Employee; and
WHEREAS, contemporaneously herewith the Corporation is agreeing to pay
COBRA benefits for all employees of the Corporation under certain circumstances
and the Corporation and Employee desire that the same agreement shall be made
for Employee.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the Employee and the Corporation agree that
1. Plan Benefits. Solely for purposes of determining the
Employee's and his beneficiaries' rights under the Plan and not for purposes of
determining the rights of any other individual under the Plan, the terms of the
Plan applicable to Employee shall be amended as follows:
A. Section 4, "Retirement Benefits," shall be amended by
the addition of the following new Section 4.04.
Section 4.04-Exceptions for Certain Terminations of
Employment. Notwithstanding the foregoing provisions of this Section
4 or any other provision(s) of this Plan, in the event of the
termination of employment of a Member within two years following the
occurrence of a Change in Control for Good Reason (if initiated by the
Member), and/or other than for Cause (if initiated by the
Corporation), then (a) even if the Member has not at the date of
termination of employment attained age fifty-five (55) and/or
completed seven (7) Years of Participation, he shall nevertheless be
entitled to the Supplemental Monthly Retirement Benefit provided under
Section 4.01 hereof; (b) the Member shall be deemed to have completed
ten or more Years of Service and to be 100% vested in the Supplemental
Monthly Retirement Benefit pursuant to Section 4.01(b) hereof; and (c)
the Member shall be deemed to have been age sixty-five (65) (unless
his actual age shall be greater) at the date of termination of
employment so as to be entitled to 100% of the Supplemental Monthly
Retirement Benefit (as adjusted by Section 4.01(a)) pursuant to
Section 4.01(c).
<PAGE> 2
For the purposes of this Section 4.04, the terms Cause, Good
Reason and Change in Control shall be defined as follows:
(a) Cause. "Cause" means (i) the Member's willful
violation of any reasonable rule or direct order of
the Corporation's board of directors (the "Board") or
the Corporation's Chief Executive Officer ("CEO"),
which, after written notice to do so, the Member
fails to make reasonable efforts to correct within a
reasonable time, or (ii) conviction of a crime, or
entry of a plea of nolo contendere with regard to a
crime, involving actual moral turpitude or dishonesty
of or by the Member, or (iii) drug or alcohol abuse
on Corporation premises or at a Corporation sponsored
event, or (iv) the Member's material violation of any
provision of his employment agreement with the
Corporation, which, after written notice to do so,
the Member fails to make reasonable efforts to
correct within a reasonable time. "Cause" shall not
include any matter other than these specified in (i)
through (iv) above, and without limiting the
generality of the foregoing statement, Cause shall
not include (x) any charge or conviction of a crime,
or entry of a plea of nolo contendere with regard to
a crime, under the Federal Food, Drug, and Cosmetic
Act, as amended, or any successor statute thereto
(the "Act"), or (y) the imposition or attempt to
impose upon the Member, or upon any operation, asset,
product or activity of the Corporation, of any other
sanction or remedy under the Act, including without
limitation civil money penalties, warning letters,
injunctions, repairs, replacements, refunds, recalls
or seizures, if the Member acted in good faith and in
a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation.
(b) Good Reason. "Good Reason" means (i) breach by the
Corporation or any successor company of any of the
provisions of the employment agreement between the
Corporation and the Member (the "Employment
Agreement") not corrected within ninety (90) days
after written notice to the Corporation thereof, or
(ii) any of the following if the same shall occur
within two years after a Change in Control: (A)
reduction of the Member's base salary, management
bonus percentage or other compensation, as in effect
immediately prior to the Change in Control, (B)
failure to continue in effect any medical, dental,
accident, or disability plan in which the Member is
entitled to participate immediately prior to the
Change in Control and failure to provide plans with
substantially similar benefits (except that employee
contributions may be raised to the extent of any cost
increases imposed by third parties) or any action by
the Corporation which would adversely affect the
Member's participation or reduce the Member's
benefits under any of such plans, (C) material
reduction in Member's job responsibilities, (D)
material reduction of Member's title or position, (E)
Member shall be requested to relocate to an office
outside of the greater metropolitan area
-2-
<PAGE> 3
or (F) failure or refusal of any successor company
to assume the Corporation's obligations under the
Employment Agreement.
(c) Change in Control. A "Change in Control" shall be
deemed to have occurred at any of the following times:
(i) Upon the acquisition (other than
from the Corporation) by any person,
entity or "group," within the
meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")
(excluding, for this purpose, the
Corporation or its affiliates, or
any employee benefit plan of the
Corporation or its affiliates which
acquires beneficial ownership of
voting securities of the
Corporation) of beneficial ownership
(within the meaning of Rule 13d-3
promulgated under the Exchange Act)
of 50% or more of either the then
outstanding shares of common stock
of the Corporation or the Combined
Voting Power of the Corporation's
then outstanding voting securities.
"Combined Voting Power" means the
combined voting power of the
Corporation's then outstanding
voting securities generally entitled
to vote in the election of
directors.
(ii) At the time individuals who, as of
the date hereof, constitute the
Board (as of the date hereof, the
"Incumbent Board") cease for any
reason to constitute at least a
majority of the Board, provided that
any person becoming a director
subsequent to the date hereof whose
election, or nomination for election
by the Corporation's shareholders,
was approved by a vote of at least a
majority of the directors then
comprising the Incumbent Board
(other than an election or
nomination of an individual whose
initial assumption of office is in
connection with an actual or
threatened election contest relating
to the election of the directors of
the Corporation, as such terms are
used in Rule 14a-11 of Regulation
14A promulgated under the Exchange
Act) shall be, for purposes of this
subsection 1.3.2, considered as
though such person were a member of
the Incumbent Board; or
(iii) Upon the approval by the
shareholders of the Corporation of a
reorganization, merger,
consolidation (in each case, with
respect to which persons who were
the shareholders of the Corporation
immediately prior to such
reorganization, merger or
consolidation do not, immediately
thereafter, own more than 50% of the
-3-
<PAGE> 4
Combined Voting Power of the
reorganized, merged or consolidated
company's then outstanding voting
securities) or a liquidation or
dissolution of the Corporation or of
the sale of all or substantially all
of the assets of the Corporation; or
(iv) The occurrence of any other event
which the Incumbent Board in its
sole discretion determines
constitutes a Change in Control.
B. A new Section 11 is added to read in its entirety as
follows:
Section 11--Certain Reduction of Payments.
(a) Anything in this Agreement to the
contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the
Corporation to or for the benefit of Employee
(whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment") would be nondeductible by
the Corporation for Federal income tax purposes
because of Section 280G of the Code, then the
aggregate present value of amounts payable or
distributable hereunder shall be reduced to the
Reduced Amount; provided, however, that Payments
shall not include any amount payable pursuant to the
Agreement between Member and the Corporation dated
April 25, 1980. The "Reduced Amount" shall be an
amount expressed in present value which maximizes the
aggregate present value of such benefits without
causing any Payment to be nondeductible by the
Corporation because of Section 280G of the Code.
Anything to the contrary notwithstanding, if the
Reduced Amount is zero and it is determined further
that any Payment which is not part of the benefits
payable hereunder would nevertheless be nondeductible
by the Corporation for Federal income tax purposes
because of Section 280G of the Code, then the
aggregate present value of Payments which are not
benefits hereunder shall also be reduced (but not
below zero) to an amount expressed in present value
which maximizes the aggregate present value of
Payments without causing any payment to be
nondeductible by the Corporation because of Section
280G of the Code. For purposes of this Section 11,
present value shall be determined in accordance with
Section 280G(d)(4) of the Code.
(b) All determinations required to be
made under this Section 11 shall be made by the
Corporation's independent auditors which shall
provide detailed supporting calculations both to the
Corporation and Employee within 15 business days of
the Date of Termination or such earlier time as is
requested by the Corporation and an opinion to
Employee that he or she has substantial authority not
to report any excise tax on his Federal income tax
return with
-4-
<PAGE> 5
respect to any Payments. Any such determination by
the Corporation's independent auditors shall be
binding upon the Corporation and Employee. Employee
shall determine which and how much of the Payments,
shall be eliminated or reduced consistent with the
requirements of this Section 11, provided that, if
Employee does not make such determination within ten
business days of the receipt of the calculations made
by the Corporation's independent auditors, the
Corporation shall elect which and how much of the
Payments shall be eliminated or reduced consistent
with the requirements of this Section 11 and shall
notify Employee promptly of such election; and
provided further that any Payments which do not
constitute gross income to Employee shall not be
reduced or eliminated unless all other Payments have
first been eliminated. Within five business days
thereafter, the Corporation shall pay to or
distribute to or for the benefit of Employee such
amounts as are then due to Employee under this
Agreement.
(c) As a result of the uncertainty in
the application of Section 280G of the Code at the
time of the initial determination by the
Corporation's independent auditors hereunder, it is
possible that Payments will have been made by the
Corporation which should not have been made
("Overpayment") or that Payments will not have been
made by the Corporation which could have been made
("Underpayment"), in each case, consistent with the
calculations required to be made hereunder. In the
event that the Corporation's independent auditors,
based upon the assertion of a deficiency by the
Internal Revenue Service against Employee or the
Corporation which the Corporation's independent
auditors believe has a high probability of success,
determine that an Overpayment has been made, any such
Overpayment paid or distributed by the Corporation to
or for the benefit of Employee shall be treated for
all purposes as a loan ab initio to Employee which
Employee shall repay to the Corporation together with
interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code; provided,
however, that no such loan shall be deemed
to have been made and no amount shall be payable to
the Corporation if and to the extent such deemed loan
and payment would not either reduce the amount on
which Employee is subject to tax under Section 1 and
Section 4999 of the Code or generate a refund of such
taxes. In the event that the Corporation's
independent auditors, based upon controlling
precedent or other substantial authority, determine
that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the
Corporation to or for the benefit of Employee
together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code.
(d) Notwithstanding anything in this
Agreement to the contrary, if after giving effect to
the provisions of Section 11(a)-(c) any portion of
any payments to Employee by the Corporation
-5-
<PAGE> 6
hereunder would not be deductible by the Corporation
for Federal income tax purposes by reason of
application of Section 162(m) of the Code, then
payment of that portion to Employee shall be deferred
until the earliest date upon which payment thereof
can be made to Employee without being non-deductible
pursuant to Section 162(m) of the Code.
2. COBRA Benefits. In the event of the termination of employment
without Cause (if initiated by the Corporation) of Employee for Good Reason
(if initiated by Employee), the Corporation will provide a benefit under the
Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA") and Section
4980B of the Internal Revenue Code of 1986, as amended, as follows: The
Corporation shall pay the cost of COBRA coverage with respect to your coverage
status (e.g., individual or family) in effect immediately prior to such
termination of employment. The insurance continuation benefits paid for
hereunder shall be deemed to be part of Employee's COBRA coverage. Such
benefits shall be in addition to any other benefits relating to health or
medical care benefits that, under the Corporation's policies, are available to
Employee following termination of employment.
IN WITNESS WHEREOF, this Agreement has been made as of the date set
forth above.
PURITAN-BENNETT CORPORATION
EMPLOYEE "Corporation"
By
- ---------------------------------- ---------------------------------
Burton A. Dole, Jr. Title:
-----------------------------
Address:
--------------------------
- ----------------------------------
-6-
<PAGE> 1
EXHIBIT 17
FORM OF AGREEMENT
THIS AGREEMENT is made this ____ day of __________, 1994 by and
between Puritan-Bennett Corporation, a Delaware corporation (hereinafter
referred to as the "Corporation"), and John H. Morrow (hereinafter referred to
as the "Employee").
WHEREAS, the Corporation has adopted the Puritan-Bennett Corporation
Supplemental Retirement Benefit Plan effective as of September 1, 1985 (the
"Plan") which provides benefits that supplement benefits provided under the
Restated Puritan-Bennett Pension Plan (the "Pension Plan"); and
WHEREAS, the Corporation and the Employee have entered into an
agreement pursuant to which the Employee became a Member under the terms of the
Plan; and
WHEREAS, the Employee and the Corporation desire to make the following
changes to the Plan as it applies to Employee.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the Employee and the Corporation agree that, solely for purposes of
determining the Employee's and his beneficiaries' rights under the Plan and not
for purposes of determining the rights of any other individual under the Plan,
the terms of the Plan applicable to Employee shall be amended as follows:
A. Section 4, "Retirement Benefits," shall be amended by the
addition of the following new Section 4.04.
Section 4.04-Exceptions for Certain Terminations of
Employment. Notwithstanding the foregoing provisions of this Section
4 or any other provision(s) of this Plan, in the event of the
termination of employment of a Member for Good Reason (if initiated by
the Member), and/or other than for Cause (if initiated by the
Corporation), then (a) even if the Member has not at the date of
termination of employment attained age fifty-five (55) and/or
completed seven (7) Years of Participation, he shall nevertheless be
entitled to the Supplemental Monthly Retirement Benefit provided under
Section 4.01 hereof; (b) the Member shall be deemed to have completed
ten or more Years of Service and to be 100% vested in the Supplemental
Monthly Retirement Benefit pursuant to Section 4.01(b) hereof; (c) the
Member shall be deemed to have been age sixty-five (65) (unless his
actual age shall be greater) at the date of termination of employment
so as to be entitled to 100% of the Supplemental Monthly Retirement
Benefit (as adjusted by Section 4.01(a)) pursuant to Section 4.01(c);
and (d) the Benefit Commencement Date under Section 4.02 shall be the
first day of the calendar month coinciding with or next following the
earlier of--(i) the first date following termination of Member's
employment on which the Corporation is in material breach of its
obligations pursuant to the contracts between the Member and the
Corporation dated June 9, 1994, and November ___, 1994 (the
"Contracts"); or (ii) the later of--(I) the date the Member attains
age fifty-five (55), or (II) the latest date on which the last payment
pursuant to the Contracts is scheduled
<PAGE> 2
to be made (which date shall be determined without regard to whether
the payment is in fact made prior to such scheduled date).
For the purposes of this Section 4.04, the terms Cause and
Good Reason shall be defined as follows:
(a) Cause. "Cause" means (i) the Member's willful
violation of any reasonable rule or direct order of
the Corporation's board of directors (the "Board") or
the Corporation's Chief Executive Officer ("CEO"),
which, after written notice to do so, the Member
fails to make reasonable efforts to correct within a
reasonable time, or (ii) conviction of a crime, or
entry of a plea of nolo contendere with regard to a
crime, involving actual moral turpitude or dishonesty
of or by the Member, or (iii) drug or alcohol abuse
on Corporation premises or at a Corporation sponsored
event, or (iv) the Member's material violation of any
provision of his employment agreement with the
Corporation, which, after written notice to do so,
the Member fails to make reasonable efforts to
correct within a reasonable time. "Cause" shall not
include any matter other than these specified in (i)
through (iv) above, and without limiting the
generality of the foregoing statement, Cause shall
not include (x) any charge or conviction of a crime,
or entry of a plea of nolo contendere with regard to
a crime, under the Federal Food, Drug, and Cosmetic
Act, as amended, or any successor statute thereto
(the "Act"), or (y) the imposition or attempt to
impose upon the Member, or upon any operation, asset,
product or activity of the Corporation, of any other
sanction or remedy under the Act, including without
limitation civil money penalties, warning letters,
injunctions, repairs, replacements, refunds, recalls
or seizures, if the Member acted in good faith and in
a manner which he reasonably believed to be in or not
opposed to the best interests of the Corporation.
(b) Good Reason. "Good Reason" means (i) breach by the
Corporation or any successor company of any of the
provisions of the employment agreement between the
Corporation and the Member (the "Employment
Agreement") not corrected within ninety (90) days
after written notice to the Corporation thereof, or
(ii) any of the following: (A) reduction of the
Member's base salary, management bonus percentage or
other compensation, (B) failure to continue in effect
any medical, dental, accident, or disability plan in
which the Member is entitled to participate and
failure to provide plans with substantially similar
benefits (except that employee contributions may be
raised to the extent of any cost increases imposed by
third parties) or any action by the Corporation which
would adversely affect the Member's participation or
reduce the Member's benefits under any of such plans,
(C) material reduction in Member's job
responsibilities, (D) material reduction of Member's
title or position, (E) Member shall be requested to
relocate to an office outside of the Kansas City
metropolitan area, or (F) failure or refusal of
-2-
<PAGE> 3
any successor company to assume the Corporation's
obligations under the Employment Agreement.
B. Section 9.02(a) is amended to read in its entirety as follows:
(a) Competition Restriction. During the period of employment
and during the period that the Member is receiving Supplemental
Monthly Retirement Benefits under this Plan, the Member shall not
directly or indirectly become or serve as an officer, director or
employee of, or consultant to, or independent contractor for any
individual, partnership, joint venture or corporation, nor owner of
any business, nor member of any partnership or joint venture which, in
the judgment of the Committee, competes with the Employer, unless the
Member shall have obtained the prior written consent of the Committee.
IN WITNESS WHEREOF, this Agreement has been made as of the date set
forth above.
PURITAN-BENNETT CORPORATION
EMPLOYEE "Corporation"
By
- ------------------------------- -----------------------------------
John H. Morrow Title:
-------------------------------
Address:
-----------------------
- -------------------------------
-3-
<PAGE> 1
EXHIBIT 18
FORM OF
FIRST AMENDMENT TO THE TRUST AGREEMENT
FOR THE RESTATED PURITAN-BENNETT
DEFERRED COMPENSATION PLAN
THIS AMENDMENT is made by the Puritan-Bennett Corporation (which,
together with its subsidiaries and affiliates, shall be referred to herein as
the "Corporation"), and the Wachovia Bank of North Carolina, N.A. (the
"Trustee"), effective as of the _____ day of _______________, 1994.
WHEREAS, the Corporation established the 1985 Deferred Compensation
Plan (the "1985 Plan"), consisting of separate but identical Deferred
Compensation Agreements with a select group of management or highly compensated
employees of the Corporation and Policy Guidelines developed by the
Corporation; and
WHEREAS, the Corporation established a trust fund pursuant to an
agreement with the Trustee, dated May 22, 1992 (the "Trust Agreement") for
receipt of contributions pursuant to the 1985 Plan; and
WHEREAS, the Corporation and each participant desired to amend the
terms of the 1985 Plan by voiding the Deferred Compensation Agreements and the
Policy Guidelines, and amending and restating the 1985 Plan in its entirety to
become the Restated Puritan-Bennett Deferred Compensation Plan (the "Restated
Plan"), effective as of September 1, 1993; and
WHEREAS, the Corporation desires to amend the Trust Agreement to
revise the definition of "Change in Control" and replace references to the 1985
Plan with references to the Restated Plan, and to make such other changes as
are necessary to reflect changes made pursuant to the restatement of the 1985
Plan.
NOW, THEREFORE, the Trust Agreement is hereby amended as follows:
1. All references to the "1985 Deferred Compensation
Plan" are hereby deleted and replaced with the "Restated
Puritan-Bennett Deferred Compensation Plan."
2. Section 1.1 is amended to read in its entirety as
follows:
(c) Change in Control. A "Change in Control" shall be
deemed to have occurred at any of the following times:
(i) Upon the acquisition (other than
from the Corporation) by any person,
entity or "group," within the
meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange
Act of 1934 (the "Exchange Act")
(excluding, for this purpose, the
Corporation or its affiliates, or
any employee benefit plan of the
Corporation or its affiliates which
acquires beneficial ownership of
voting securities of the
Corporation) of beneficial ownership
(within the
<PAGE> 2
meaning of Rule 13d-3 promulgated
under the Exchange Act) of 50% or
more of either the then outstanding
shares of common stock of the
Corporation or the Combined Voting
Power of the Corporation's then
outstanding voting securities.
"Combined Voting Power" means the
combined voting power of the
Corporation's then outstanding
voting securities generally entitled
to vote in the election of
directors.
(ii) At the time individuals who, as of
the date hereof, constitute the
Board (as of the date hereof, the
"Incumbent Board") cease for any
reason to constitute at least a
majority of the Board, provided that
any person becoming a director
subsequent to the date hereof whose
election, or nomination for election
by the Corporation's shareholders,
was approved by a vote of at least a
majority of the directors then
comprising the Incumbent Board
(other than an election or
nomination of an individual whose
initial assumption of office is in
connection with an actual or
threatened election contest relating
to the election of the directors of
the Corporation, as such terms are
used in Rule 14a-11 of Regulation
14A promulgated under the Exchange
Act) shall be, for purposes of this
subsection 1.3.2, considered as
though such person were a member of
the Incumbent Board; or
(iii) Upon the approval by the
shareholders of the Corporation of a
reorganization, merger,
consolidation (in each case, with
respect to which persons who were
the shareholders of the Corporation
immediately prior to such
reorganization, merger or
consolidation do not, immediately
thereafter, own more than 50% of the
Combined Voting Power of the
reorganized, merged or consolidated
company's then outstanding voting
securities) or a liquidation or
dissolution of the Corporation or of
the sale of all or substantially all
of the assets of the Corporation; or
(iv) The occurrence of any other event
which the Incumbent Board in its
sole discretion determines
constitutes a Change in Control.
3. Section 1.3 is deleted in its entirety and Sections
1.4 and 1.5 are renumbered to become 1.3 and 1.4, respectively. A new
Section 1.5 is added to read as follows: "Plan" means the
Puritan-Bennett Restated Deferred Compensation Plan, effective
September 1, 1993.
<PAGE> 3
4. The term "Investment Account" in new section 1.4 is
amended to read "Account Balance" and all references to "Investment
Account" throughout the Trust Agreement are hereby replaced with
"Account Balance."
5. All references to a "Participating Agreement" or the
"Participating Agreements" are hereby deleted and replaced with the
"Restated Plan." Further, all references to "Policy Guidelines" or
"Guidelines" are hereby deleted.
6. The second sentence of Section 4.1 is deleted in its
entirety.
7. The last sentence of Paragraph (d) of Section 5.2 is
deleted in its entirety.
IN WITNESS WHEREOF, the parties have executed this Amendment,
effective as of the date written above.
PURITAN-BENNETT CORPORATION
("GRANTOR")
By:_____________________________
Title:__________________________
Date:___________________________
ATTEST:
By:______________________________
Title:___________________________
Date:____________________________
WACHOVIA BANK OF NORTH
CAROLINA, N.A. ("TRUSTEE")
By:_____________________________
Title:__________________________
Date: __________________________
ATTEST:
By:______________________________
Title:___________________________
Date:____________________________
<PAGE> 1
EXHIBIT 19
FORM OF
TRUST AGREEMENT
THIS TRUST AGREEMENT is made and entered into as of the _____ day of
___________________, 19___, by and between PURITAN-BENNETT CORPORATION, a
Delaware corporation, as grantor (the "Grantor"), and WACHOVIA BANK OF NORTH
CAROLINA, N.A., as trustee (the "Trustee");
W I T N E S S E T H:
WHEREAS, Grantor maintains for the benefit of a select group of
management or highly compensated employees or former employees listed on
Exhibit A and their beneficiaries (together referred to as the "Members" or
individually as a "Member") a plan of deferred compensation (the
"Puritan-Bennett Corporation Supplemental Retirement Benefit Plan" or simply
the "Plan"), consisting of individual deferred compensation agreements with the
Members and a Plan document adopted by the Grantor, copies of which are
attached hereto as Exhibit B, which Exhibits A and B may be supplemented by the
Grantor with additional names and arrangements from time to time; and
WHEREAS, the Plan was amended by a First Amendment effective on or
about September 1, 1993, and by a Second Amendment effective January 1, 1994;
and
WHEREAS, the payments under the Plan and Member Agreements are not
funded or otherwise secured, and Grantor desires to provide to Members greater
assurance of the future receipt of those payments pursuant to the Plan and
Member Agreements; and
WHEREAS, to provide greater assurance to Members that they will
receive the payments pursuant to the Plan and Member Agreements, the Grantor
desires to enter into an irrevocable grantor trust within the meaning of Code
Section 671, by depositing with the Trustee sufficient cash and other assets of
Grantor to assist it in meeting its future obligations to Members (the
"Trust"); and
WHEREAS, Grantor desires to appoint the Trustee as trustee of the
Trust; and
WHEREAS, the Grantor has approved the Trust established hereby;
NOW, THEREFORE, Grantor hereby establishes the Trust, effective as of
the date first set forth above, as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Change in Control. A "Change in Control" shall be deemed to
have occurred at any of the following times:
(i) Upon the acquisition (other than from the
Corporation) by any person, entity or
"group," within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act")
(excluding, for this purpose, the
Corporation or its affiliates, or any
employee benefit plan of the Corporation or
its affiliates which acquires beneficial
ownership of voting securities of the
Corporation) of beneficial ownership
(within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50%
or more of either the then outstanding
shares of common stock of the Corporation
or the Combined Voting Power of the
Corporation's then outstanding voting
securities. "Combined Voting Power" means
the combined voting power of the
Corporation's then outstanding voting
securities generally entitled to vote in
the election of directors.
(ii) At the time individuals who, as of the date
hereof, constitute the Board (as of the
date hereof, the "Incumbent Board") cease
for any reason to constitute at least a
majority of the Board, provided that any
person becoming a director subsequent to
the date hereof whose election, or
nomination for election by the
Corporation's shareholders, was approved by
a vote of at least a majority of the
directors then comprising the Incumbent
Board (other than an election or nomination
of an individual whose initial assumption
of office is in connection with an actual
or threatened election contest relating to
the election of the directors of the
Corporation, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under
the Exchange Act) shall be, for purposes of
this subsection 1.3.2, considered as though
such person were a member of the Incumbent
Board; or
2
<PAGE> 3
(iii) Upon the approval by the shareholders of
the Corporation of a reorganization,
merger, consolidation (in each case, with
respect to which persons who were the
shareholders of the Corporation immediately
prior to such reorganization, merger or
consolidation do not, immediately
thereafter, own more than 50% of the
Combined Voting Power of the reorganized,
merged or consolidated company's then
outstanding voting securities) or a
liquidation or dissolution of the
Corporation or of the sale of all or
substantially all of the assets of the
Corporation; or
(iv) The occurrence of any other event which the
Incumbent Board in its sole discretion
determines constitutes a Change in Control.
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Insolvent" or "Insolvency" means that Grantor (a)
voluntarily files a petition for bankruptcy under federal bankruptcy law, or an
involuntary bankruptcy petition is filed against the Grantor under federal
bankruptcy law, which involuntary petition is not dismissed within 60 days of
the filing, (b) the Grantor makes a general assignment for the benefit of
creditors, or (c) the Grantor seeks or consents to the appointment of a
trustee, receiver, liquidator or similar person.
1.4 "Plan" means the Puritan-Bennett Corporation Supplemental
Retirement Benefit Plan.
1.5 "Trust" or "Trust Fund" means all property transferred to
the Trustee, in trust, by Grantor and thereafter held by the Trustee under the
Trust established pursuant to this Trust Agreement, including the investments
and reinvestments thereof and the income therefrom.
ARTICLE II
INCORPORATION OF PLAN AND MEMBER AGREEMENTS
2.1 Incorporation of Plan and Member Agreements by Reference.
The Plan and Member Agreements are incorporated herein by reference.
2.2 Trust Agreement Given Precedence Over Plan and Member
Agreements. In the event of a conflict between the terms and provisions of
this Trust Agreement and those of the Plan or a
3
<PAGE> 4
Member Agreement, the terms and provisions of this Trust Agreement shall be
given precedence in the administration and determination of the benefits
payable from the Trust. However, nothing contained in this Trust Agreement is
intended to diminish the amount of benefits required to be paid for the benefit
of any Member under the terms of the Plan or any Member Agreement. To the
extent possible, the terms and provisions of the Plan and each Member Agreement
and those of this Trust Agreement shall be interpreted as mutually consistent.
ARTICLE III
CLAIMS OF GENERAL CREDITORS
3.1 Trust Fund Considered as General Assets. The assets
constituting the Trust Fund shall be treated as general assets of Grantor and
shall remain subject to claims of the general creditors of Grantor under
applicable state and federal law. Nothing in the Trust Agreement shall affect
the rights of any Member as a general creditor of Grantor. No Member shall
have a preferred claim on or any beneficial ownership in the Trust Fund.
3.2 Insolvency of Grantor. In the event of Grantor's
Insolvency, Grantor's Chief Executive Officer and Grantor's Chief Financial
Officer shall inform the Trustee within a reasonable time of such Insolvency.
At any time the Trustee receives actual notice from Grantor that Grantor is
Insolvent, determines that the Grantor is Insolvent or has actual knowledge of
Grantor's Insolvency, the Trustee shall suspend all further payments to Members
and shall hold any undistributed assets of the Trust Fund for the benefit of
the general creditors of Grantor as a court of competent jurisdiction may
direct. In the event of such Insolvency, the Trustee shall have the right to
pay the assets of the Trust into such court in an interpleader proceeding for
the purpose of such court directing the proper disposition of such assets. The
Trustee and all other parties shall be bound by such direction, and payment of
the Trust assets by the Trustee to the court or pursuant to such court
direction shall discharge the Trustee from liability with respect to such
payment under the Trust. If a creditor of Grantor or any third party submits a
written allegation of Grantor's Insolvency to the Trustee, the Trustee shall
determine, within 30 days after receipt of the allegation, whether Grantor is
Insolvent. Pending such determination of Insolvency by the Trustee, the
Trustee shall suspend payments to Members. The Trustee shall resume holding
the Trust assets for the benefit of Members and resume making any payments
under the Plan and Member Agreements to Members only after the Trustee has
determined that Grantor is not Insolvent. Unless the Trustee has actual notice
of Grantor's Insolvency or has received a written allegation of same, the
Trustee shall have no duty to inquire whether Grantor is Insolvent. The
Trustee may
4
<PAGE> 5
rely on evidence of solvency provided by Grantor, and the Trustee shall not be
liable to any person for any good faith actions it takes on account of any such
determination.
ARTICLE IV
CONTRIBUTIONS
4.1 Contributions. Any and all contributions to the Trust shall
be at the sole discretion of the Grantor.
4.2 Duties of Trustee. The Trustee shall be responsible for
assets actually received by it as Trustee, and shall have no duty or authority
to compute amounts to be contributed or to review the computation of amounts to
be contributed.
ARTICLE V
ACCOUNTING AND PAYMENTS
5.1 Prior to Change in Control. Prior to the occurrence of a
Change in Control, the following shall apply:
(a) Accrued Benefits. No less frequently than annually,
Grantor shall furnish a written statement setting forth each Member's
benefit as of a specific date or instructions, acceptable to the
Trustee, utilizing readily determinable and objective information for
determining such benefit. The Trustee shall have no duty to
independently calculate or verify information provided by the Grantor
in accordance with the foregoing.
(b) Payments from Trust Fund. At all times during which
the Grantor is not Insolvent, and prior to a Change in Control, the
Trustee shall make payments to each Member of his or her benefits in
accordance with the instructions or directions of the Grantor as to
the form, time and amount of such benefit payments. Notwithstanding
the foregoing, Grantor may direct the Trustee to pay any amount from
the Trust Fund to the Grantor at any time during which the Grantor is
not Insolvent and prior to a Change in Control.
(c) Investment and Management of Trust Fund. The
Grantor shall have the power to direct the Trustee concerning any
aspect of investment and management of Trust assets and the power to
direct the Trustee to dispose of Trust assets or to borrow from the
Grantor or other sources such amounts determined appropriate by the
Grantor and to
5
<PAGE> 6
pledge, assign and/or encumber such Trust assets directed by the
Grantor as security for such debt.
5.2 Following Change in Control. Upon and following the
occurrence of a Change in Control, the following shall apply:
(a) Insurance Policies. As provided in Section 7.3, the
Trustee shall surrender any life insurance policies held by it as a
part of the Trust Fund for the cash value thereof.
(b) Member Accounting. The Trustee shall determine each
Member's benefit payable pursuant to the terms of the Plan. Grantor
shall provide Trustee with any and all information appropriate and
necessary to perform such determination, including copies of records
of the trustee and recordkeeper of the Qualified Plan.
(c) Payments from Trust Fund. At all times during which
the Grantor is not Insolvent, the Trustee shall, to the extent the
assets of the Trust Fund are adequate therefor, make payments to
Members pursuant to the terms of the Plan and Member Agreements and
pursuant to each Member's election regarding the time, manner and form
of payment. No payment shall be made to Grantor from the Trust Fund
until all Members (and beneficiaries) have received all benefits to
which they are entitled under the Plan and Member Agreements, at which
time any remaining assets of the Trust Fund, after provision for
reasonable expenses, shall be paid to the Grantor and the Trust shall
terminate.
(d) Investment and Management of Trust Fund. The
Grantor shall have no power to direct the Trustee with respect to any
matter, except to inform the Trustee of the location of a Member
pursuant to Section 7.5(c). To the extent the Trustee does not, or
may not under the terms hereof, receive direction from the Grantor,
the Trustee shall have sole discretion and responsibility for the
investment and management of Trust assets in accordance with the terms
of this Trust Agreement and the Plan and Member Agreements.
5.3 Method and Effect of Payment. Each Member may give the
Trustee reasonable instructions in writing, prior to the date a payment is to
be made to the Member, as to the method by which the Member will receive
payments, which may be by check delivered to the Member or electronic funds
transfer or any other reasonable means. The Trustee shall make payment
according to the method specified in the Member's reasonable instructions, or
if no instructions are given, by check mailed to the Member by regular U.S.
mail. To the extent benefits are paid to a Member from the Trust Fund, such
payments shall be deemed to have
6
<PAGE> 7
satisfied Grantor's obligation under the Plan and applicable Member Agreements.
Notwithstanding anything to the contrary contained herein, if Grantor makes any
payment to any person other than the Trustee in respect of its obligations
under a Plan and Member Agreement, or if the Trustee makes any payment for the
benefit of a Member, any such payment shall be deemed to have satisfied, to the
extent of such payment, Grantor's obligations under the applicable Member
Agreement, in order of the maturity of such obligations, and any future
benefits payable under the Plan and any such Member Agreement to the Member
shall be reduced accordingly. In any event, the Trustee shall be liable for
payment of benefits to any Member only to the extent of the lesser of-- (i) the
amount due to the Member pursuant to the terms of the Plan and Member
Agreements, or (ii) the assets in the Trust Fund from time to time.
5.4 Payment of Taxes. If a court of competent jurisdiction
decides by final judgment, or as a result of settlement and compromise between
a Member and the Internal Revenue Service, which settlement and compromise is
approved by Grantor (or the Trustee following a Change in Control), or the Code
is amended in such a manner that a tax is payable by the Member in respect of
any right, title or interest in any assets of the Trust Fund prior to the date
such assets are actually used to pay amounts to such Member pursuant to this
Trust Agreement; then, upon the occurrence of such an event, the Trustee shall
pay the present value of such Member's benefit as of the date of such event to
him or her in full satisfaction of all amounts or benefits to which the Member
is entitled from the Trust Fund.
ARTICLE VI
THE TRUST FUND
6.1 Accumulation Trust. The Trust shall be an accumulation
trust, and principal and all currently earned income shall be accumulated
during the term of the Trust. The Trustee shall hold, preserve, manage,
administer, invest and reinvest the assets of the Trust, collect the income
therefrom and, after deducting all charges and expenses properly payable
therefrom, hold and distribute the then principal of the Trust and the income
therefrom in accordance with the provisions of this Trust Agreement.
6.2 Exclusive Benefit of Members. Except as otherwise provided
herein, at no time prior to the satisfaction of all liabilities with respect to
each Member under the Plan and any Member Agreement shall any portion of the
Trust Fund be used for or diverted to purposes other than the exclusive benefit
of Members (including the defraying of reasonable expenses of
7
<PAGE> 8
administration of the Trust) unless and until Grantor is determined to be
Insolvent.
6.3 Investment. The assets of the Trust shall be held and
administered as a single trust. Except to the extent of instructions from the
Grantor, as herein provided, the Trust Fund shall be under the investment
management of the Trustee.
6.4 Legal Ownership. The Trustee shall be vested with legal
ownership of the assets comprising the Trust Fund. Except as otherwise
provided under the terms and provisions of the Plan and Member Agreement, no
Member shall have claim to or interest in a specific asset of the Trust Fund as
a result of any manner of accounting for a Member's interest in or benefits
under the Plan or Member Agreement.
6.5 Grantor Trust Intended. It is intended that the Trust be
taxed as a grantor trust under the provisions of Section 671 and Section
677(a)(2) of the Code and that Grantor, as grantor, be treated as "owner"
within the meaning of those provisions. Grantor shall file its federal income
tax returns in a manner consistent with these provisions of the Code.
ARTICLE VII
THE TRUSTEE
7.1 Trustee as Fiduciary. The Trustee shall be a fiduciary with
respect to the Trust and, except as otherwise provided herein, shall have the
exclusive responsibility for and all the powers necessary to receive, hold,
preserve, manage, invest and reinvest the Trust Fund as provided generally in
this Trust Agreement and to pay all costs and expenses incident thereto. The
Trustee shall not be responsible for the adequacy of the Trust Fund to meet and
discharge any liabilities of the Plan and Member Agreements. The following
entity shall have power to construe the terms of this Trust Agreement, the Plan
and the Member Agreements and to determine all questions that arise under those
documents, including entitlement to and the amount of benefits: (i) prior to
the occurrence of a Change in Control, the Grantor; (ii) upon and following the
occurrence of a Change in Control, the Trustee.
7.2 Additional Powers Relating to Investments. Subject to the
Grantor's direction prior to a Change in Control, the Trustee shall have the
following powers relating to the receipt, preservation, management, investment,
and reinvestment of both principal and income of the Trust, in addition to all
of the powers, rights, options and privileges now or hereafter provided for,
vested in, or granted to the Trustee under applicable law, except such as
conflict with the terms of this Trust Agreement or
8
<PAGE> 9
applicable law, and as far as possible, no subsequent legislation or regulation
shall be in limitation of the rights, powers or privileges granted the Trustee
hereunder or under applicable law at the time of the execution hereof:
(a) To purchase or subscribe for and to hold as a part
of the Trust Fund any securities or property of any kind or nature
whatsoever (other than securities issued by Grantor), whether real,
personal, or mixed, whether tangible or intangible, whether or not
productive of income, any rights or interests in property, or any
evidence or indicia of property, including, without limitation, life
insurance policies and shares of mutual funds, beneficial interests,
leaseholds, bonds, mortgages, leases, notes (including, but not
limited to, secured or unsecured notes of any kind), obligations,
savings accounts, certificates of deposit or like investments with the
commercial department of any bank (including any bank acting as
Trustee or its affiliates provided they bear a reasonable rate of
interest and the bank is supervised by the United States or a state),
common, pooled, or collective trust funds which the Trustee or any
other corporation may now have or in the future may adopt for the
collective investment of funds pursuant to Section 584 of the Code,
money market funds, or other property or interests in property as long
as the purchases are made in accordance with the requirements of
applicable provisions of state and federal law, and to retain the same
in trust;
(b) To sell, exchange, convey, transfer, or otherwise
dispose of any securities or property held by it, by private contract
or at public auction, with or without advertising, and no person
dealing with the Trustee shall be bound to see to the application of
the purchase money or to inquire into the validity, expediency or
propriety of any disposition;
(c) To vote any stocks, bonds or other securities; to
give general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments
incidental thereto; to oppose, to consent to, or otherwise participate
in corporate reorganizations or other changes affecting corporate
securities, to delegate discretionary powers, and to pay any
assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities or other property held as part of the Trust Fund;
(d) To hold any investment unregistered or to register
any investment held as a part of the Trust Fund in its own name or in
the name of a nominee, and to hold any investment in bearer or in
Federal Book-Entry form or through or by a central clearing
corporation maintained by
9
<PAGE> 10
institutions active in the national securities markets, but the books
and records of the Trustee shall at all times show that all the
investments are part of the Trust Fund;
(e) To make, execute, acknowledge and deliver any
documents of transfer and conveyance and any other instruments or
agreements that may be necessary or appropriate to carry out the
powers of the Trustee under this Trust or incidental thereto;
(f) To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Trust Fund; to
commence or defend any suits or legal or administrative proceedings
arising or necessary or appropriate in connection with the Trust, the
administration and operation thereof or the powers or authority of the
Trustee under this Trust; and to represent the Trust in all suits and
legal and administrative proceedings in any court or before any body,
board, agency, panel, or tribunal;
(g) To keep portions of the Trust Fund in cash or cash
balances as the Trustee may deem to be in the best interest of the
Trust, it being understood that the Trustee shall not be required to
pay any interest on any cash balances;
(h) To apply for or to procure life insurance or annuity
contracts upon the life of a Member; to borrow against the values of
any life insurance or annuity contract owned by the Trustee as a
portion of the Trust Fund; and to surrender any life insurance or
annuity contract owned by the Trustee as a portion of the Trust Fund;
(i) Generally, to do all acts and to execute and deliver
all instruments as in the judgment of the Trustee may be necessary or
desirable to carry out any powers or authority of the Trustee, without
advertisement, without order of court and without having to post bond
or make any returns or report of its doings to any court; and
(j) After giving prior written notice to Grantor, to
engage the services of individuals, partnerships or corporations
(including, but not limited to, lawyers, accountants, actuaries,
brokers, banks, investment counsel, or other agents or employees) to
assist and advise with respect to the management or investment of the
Trust Fund and to delegate to them such duties, rights, and powers of
the Trustee as the Trustee deems advisable in managing the Trust Fund.
7.3 Life Insurance. Notwithstanding anything herein to the
contrary, upon the occurrence of a Change in Control, the
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<PAGE> 11
Trustee shall surrender all insurance policies then held by it as part of the
Trust Fund for their cash value.
7.4 Standard of Performance. Subject to the Grantor's
directions prior to a Change in Control, the Trustee, in discharging its duties
hereunder, including but not limited to the management, investment and
reinvestment of the Trust Fund, shall do so solely in the interest of Members
using the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a like character; shall
diversify the investments of the Trust Fund under its management within the
described funds so as to minimize the risk of large losses unless under the
circumstances it is clearly prudent not to do so; and shall otherwise act in
accordance with the provisions of this Trust Agreement and applicable federal
or state law.
7.5 Powers Relating to Payment and Distribution. The Trustee
shall have the following powers relating to payments and distributions to be
made from the Trust Fund:
(a) To the extent the same are not paid by the Grantor,
to pay out of the Trust Fund the following: amounts due and payable on
any advance made by the Trustee or on any loan made by anyone to the
Trust Fund; all taxes of any nature levied, assessed or imposed upon
the Trust Fund; reasonable expenses of the Trustee, including fees of
accountants, actuaries and legal counsel with respect to the Trust;
and the Trustee's compensation as provided in Article IX.
(b) Except where inconsistent with applicable law which
cannot be waived, to convey, assign and deliver, upon full termination
of the Trust, the Trust Fund or the net proceeds of the Trust Fund in
cash, to each Member to the extent each such Member is entitled
thereto under the Plan and the Member Agreements (which amounts shall,
prior to a Change in Control, be determined and paid in accordance
with written instructions from Grantor) and the balance, if any, to
Grantor.
(c) To make distributions out of the Trust Fund in
accordance with the provisions of Article V hereof. If the person to
receive the distribution cannot be found, the Trustee shall hold such
payment or deposit same in a bank, including the Trustee, for the
credit of that person without liability for interest thereon. If a
check in payment of the benefit hereunder has been mailed by regular
U.S. mail to the last address of the payee furnished the Trustee by
Grantor and is returned unclaimed, the Trustee shall notify Grantor
and shall discontinue further payments to payee
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until it receives instructions from Grantor or otherwise receives
information concerning the Member's location. The Trustee shall not
be required to make any investigation to determine the whereabouts or
mailing address of any person. The Trustee may make payment of any
benefit hereunder by mailing its check for the amount thereof to the
person certified to the Trustee by Grantor as the person to whom such
payment is to be made or by personally delivering same to said person.
7.6 Proof of Trustee's Authority. All persons dealing with the
Trustee are entitled to rely upon the representations of the Trustee as to its
authority and are released from any duty to inquire into its authority for
taking or omitting any action or to verify that any money paid or other
property delivered to the Trustee is used by the Trustee for Trust purposes.
Any action of the Trustee under this Trust Agreement shall be conclusively
evidenced for all purposes by a certificate or other document signed by the
Trustee, and any such certificate or document shall be conclusive evidence of
the facts recited in it. All persons shall be fully protected when acting or
relying upon any notice, resolution, instruction, direction, order,
certificate, opinion, letter, telegram or other document believed by such
persons to be genuine, to have been signed by the Trustee, and to be the act of
the Trustee.
7.7 Employment of Legal Counsel. The Trustee may engage and
consult with legal counsel of its choice, who may be counsel for Grantor, a
Member or Trustee's own general counsel, with respect to the meaning or
construction of the Plan or Member Agreement or the Trust Agreement as regards
the Trustee's obligations or duties hereunder.
7.8 Exemption from Bond. The Trustee shall not be required to
give bond or other security for the faithful performance of its duties unless
required by a law which cannot be waived or as a result of litigation; and the
Trustee shall not be required to make any inventory, return, or report of any
kind to any court unless required by a law which cannot be waived or as a
result of litigation.
ARTICLE VIII
NOTICES AND DIRECTIONS
8.1 Effective Time of Notice. The Trustee shall not be bound by
any certificate, notice, resolution, consent, order, information or other
communication unless and until it has been received by the Trustee.
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8.2 Evidence of Authority. The Trustee may accept as evidence
of the authority of any persons acting on behalf of Grantor or its agents, a
copy of resolutions of the Grantor designating such persons and conferring such
authority, and shall be entitled to recognize them as such and act upon the
instructions, directions, consents, and requests of such persons. The Trustee
may continue to act in accordance with any such notice until the receipt by it
of notice rescinding or superseding such action or resolution.
8.3 Directions of Grantor. Instructions, directions or notices
from Grantor to the Trustee, certified by a duly authorized officer appointed
by Grantor shall be accepted as conclusive evidence of the proper issuance and
contents thereof.
8.4 Reliance Upon Direction. The Trustee, in all matters
pertaining to its management, investment and distribution of the Trust, when it
acts in good faith may rely upon any notice, resolution, instruction,
direction, order, certificate, opinion, letter, telegram or other document
believed by the Trustee to be genuine, to have been signed by a Member or a
proper representative of Grantor, and to be the act of a Member or Grantor, as
the case may be.
8.5 Notices from Trustee. Notices or communications from the
Trustee to Grantor shall be addressed to the person as shall have been
certified to the Trustee and shall be sent to that person at the principal
office of Grantor unless the Trustee shall have been instructed in writing to
send communications to another address.
ARTICLE IX
FEES AND EXPENSES
The Trustee shall be reimbursed for expenses properly and actually
incurred in the performance of its duties under the Trust, including, but not
limited to compensation to agents and fees for professional services incurred
in administration of the Trust, and shall receive fair and reasonable
compensation for services rendered as may be agreed upon from time to time
between the Trustee and Grantor. The Trustee's compensation and the expenses
of the Trust shall be paid by Grantor, but in any case, such compensation and
expenses shall be a lien or charge on the Trust Fund until actually paid. In
the event that Grantor shall fail to pay the Trustee its compensation and
expenses within 90 days of the presentation of its invoice, the Trustee is
authorized to use the assets held by the Trustee under the Trust (including, to
the extent necessary, the surrender of life insurance contracts for their cash
surrender value) to pay its unpaid compensation and expenses.
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ARTICLE X
LIABILITY OF THE TRUSTEE
10.1 In General. The Trustee shall not be liable for any act or
omission, any losses or decline in value which may be incurred upon any
investment of the Trust Fund, or for failure of the Trust Fund to produce any
or greater earnings, interest, or profits, so long as the Trustee acts in good
faith and in accordance with the responsibilities, obligations and duties
placed on it hereunder and under applicable law.
10.2 Acts or Omissions Under Direction. The Trustee shall not
be liable for any act or omission by it that is in compliance with a direction
received from Grantor prior to a Change in Control of Grantor, nor for any act
or omission of Grantor except to the extent required by applicable law. When
the Trustee has made any payment out of the Trust Fund in accordance with the
directions of Grantor, it shall not be responsible for the correctness of the
amount of the payment to the recipient, or the method by which it is paid. The
Trustee shall also be protected in relying upon any certificate, notice,
resolution, consent, order or other communication purporting to have been so
signed on behalf of Grantor which it believes to be genuine, without any
obligation on the part of the Trustee to ascertain whether or not the
provisions of the Plan or Member Agreement are thereby being complied with.
10.3 Withholding for Taxes. The Trustee shall withhold from
distributions from the Trust Fund such amounts as the trustee considers
necessary and proper for the payment of any income taxes under present (with
respect to federal income tax, currently in accordance with Treasury Regulation
Section 31.3402(g)-l) or future laws, which the Trustee is obligated to pay or
withhold.
10.4 Filing Returns or Reports. The Trustee shall not be liable
for its failure or inability to file any tax return or other report which it is
unable to file because of the failure of Grantor, after written demand by the
Trustee, to furnish the information necessary for the preparation thereof.
10.5 Indemnity. Grantor hereby agrees to indemnify and hold
harmless the Trustee from and against any and all losses, claims, damages,
liabilities, costs and expenses, including but not limited to, liability for
any judgments or settlements consented to in writing by the Trustee, which
consents will not be unreasonably given, and reasonable attorneys' fees,
arising out of or in connection with its acts or omissions taken in good faith
and in accordance with the terms of the Trust Agreement and applicable law.
The Trustee shall promptly notify Grantor of any
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claim, action or proceeding for which it may seek indemnity. Such indemnity is
a continuing obligation and shall be binding on Grantor and its successors,
whether by merger or otherwise, and assigns. In addition, such indemnity shall
survive the resignation or removal of the Trustee and/or the liquidation of the
Trust.
ARTICLE XI
ACCOUNTS
11.1 Maintenance of Records. The Trustee shall keep such
records as the Trustee considers necessary for the management of the Trust.
The Trustee's books and records of the Trust Fund shall be open to inspection
by Grantor during regular business hours of the Trustee.
11.2 Written Reports. Within sixty (60) days after the close
of each Plan year, at such other times (or shorter accounting periods) as
requested in writing by Grantor, and as of the date of the removal or
resignation of the Trustee, the Trustee shall render to Grantor a written
account of its management of the Trust Fund covering the period since the
previous account and report. The written approval of such accounting and
report by Grantor or the failure of Grantor to notify the Trustee of its
disapproval of such accounting within ninety (90) days after its receipt shall
be final and binding as to the Trustee's administration of the Trust for the
period upon Grantor and all persons who have or may thereafter have an interest
in the Trust.
ARTICLE XII
RESIGNATION, REMOVAL AND SUCCESSION
12.1 Notice of Resignation. The Trustee may resign at any time
upon giving thirty (30) days' prior written notice to Grantor.
12.2 Notice of Removal. Grantor may remove the Trustee by
giving at least five (5) business days' prior written notice to the Trustee,
unless prior thereto a successor Trustee shall have been appointed and accepted
and the Trustee consents to an earlier date.
12.3 Vacancy. Any vacancy in the office of Trustee created by
the resignation or removal of the Trustee shall not terminate the Trust. Upon
removal or resignation of the Trustee, Grantor shall appoint a successor
Trustee.
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12.4 Appointment of Successor. The appointment of a successor
Trustee hereunder shall be accomplished by Grantor's delivery to the resigning
or removed Trustee, as the case may be, a written instrument appointing such
successor Trustee, and the successor Trustee's acceptance in writing of the
appointment as successor Trustee hereunder. Any successor Trustee hereunder
shall be a national banking association or trust company having at least one
billion dollars in assets. All of the provisions set forth herein with respect
to the Trustee shall relate to each successor Trustee.
12.5 Transfer of Assets. Any successor Trustee, after
acknowledging acceptance of the Trust Agreement and accepting the Trust assets
and the accounting of the retiring Trustee, shall be vested with all the
estates, titles, rights, powers, duties, and discretions granted to the
retiring Trustee. The retiring Trustee shall execute and deliver all
assignments or other instruments within a reasonable time as may be necessary
or advisable in the discretion of the successor Trustee; provided, however, the
retiring Trustee is hereby authorized to reserve such sum of money as is
reasonable for the payment of its fees and expenses in connection with the
settlement of its account or otherwise.
12.6 Consolidation or Merger of Trustee. In the event that a
corporate Trustee shall merge or be consolidated with or otherwise be acquired
by any other corporation authorized to exercise trust powers, the continuing,
resulting or acquiring corporation shall automatically become Trustee hereunder
without the necessity of designation or appointment by Grantor.
ARTICLE XIII
AMENDMENT AND TERMINATION
13.1 Amendment. The Trust Agreement may be amended any time and
to any extent by a written instrument executed by the Trustee and Grantor,
provided, however, that no such amendment shall be effective to the extent that
it purports to make the Trust revocable. No amendment to the Trust Agreement
shall be effective to the extent that such amendment would be inconsistent with
the intents and purposes of the Trust Agreement. No amendment shall have the
effect of retroactively changing or depriving Members of rights already accrued
hereunder. Upon and following a Change in Control, no amendment may have the
effect or possible effect of reducing the amount of payments to which the
Members are or will be entitled to receive from the Trust pursuant to the terms
hereof prior to any such amendment. For instance, the definition of
"Insolvency" may not be amended in a manner that would cause an Insolvency to
occur at a time prior to the time it would occur but for such amendment, the
definition of
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"Change in Control" may not be amended in a manner that would cause a Change in
Control to not occur at a time it would occur but for such amendment, and the
Grantor's rights under Section 5.2, relating to accounting and payments
following Change in Control, may not be amended; unless, in the case of each
such amendment, it is necessary to achieve the tax results intended for this
Trust. Furthermore, upon and following a Change in Control, the provisions of
Section 12.4, relating to appointment of a successor trustee, may not be
amended.
13.2 Ultimate Termination of the Trust. Notwithstanding any
other provisions of the Trust Agreement to the contrary, the Trust shall
terminate (a) on the complete distribution of the Trust Fund of the benefits of
all Members in accordance with the terms and provisions of this Trust Agreement
and the Plan and Member Agreements, (b) upon the delivery to the Trustee of a
written instrument terminating the Trust signed by all Members and Grantor, or
(c) prior to a Change in Control, upon the delivery to the Trustee of a writing
terminating the Trust signed by all Members who are officers of Grantor holding
a position of senior vice-president or higher and at least two-thirds of all
Members (including such officers) and Grantor. Any assets remaining in the
Trust Fund after satisfaction of all liabilities pursuant to the Plan and
Member Agreements, expenses of the Trust, and any liability pursuant to Section
10.5 hereof shall be returned to Grantor.
ARTICLE XIV
MISCELLANEOUS
14.1 Spendthrift Provisions. No principal or income payable or
to become payable from the Trust will be subject to anticipation or assignment
by any Member or any person entitled to receive benefits under a Member
Agreement; to attachment by, interference with, or control by any creditor of
any Member or any person entitled to receive benefits under the Plan or Member
Agreement; or to being taken or reached by any legal or equitable process in
satisfaction of any debt or liability of any Member or any person entitled to
receive benefits under the Plan or Member Agreement prior to its actual receipt
by the Member or such person. Any attempted conveyance, transfer, assignment,
mortgage, pledge, or encumbrance of the Trust Fund, any part of it, or any
interest in it by any Member or any person entitled to receive benefits under
the Plan or Member Agreement prior to distribution will be void, whether that
conveyance, transfer, assignment, mortgage, pledge, or encumbrance is intended
to take place or become effective before or after any distribution of trust
assets or the termination of the Trust Fund. The Trustee will under no
circumstances be required to recognize any conveyance, transfer, assignment,
mortgage, pledge or encumbrance
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by any Member or any person entitled to receive benefits under the Plan or
Member Agreement, any part of it, or any interest in it, or to pay any money or
thing of value to any creditor or assignee of any Member or such person for any
cause whatsoever; provided, however, this Section 14.1 does not affect the
provisions of Article III of the Trust Agreement.
14.2 Ownership of Contracts. The Trustee shall hold, own, and
control all contracts and policies purchased by the Trust, if any, as well as
all other property belonging to the Trust, subject to the rights of Members as
specified in the Trust Agreement.
14.3 Gender of Words. Whenever the context requires such, words
of the masculine gender used herein shall include the feminine and the neuter,
and the words used in the singular shall include the plural.
14.4 Severability. Each provision of the Trust Agreement is
severable and if any provision is found to be void as against public policy it
shall not affect the validity of any other provision hereof.
14.5 Successors and Assigns. The Trust Agreement shall be
binding upon the successors and assigns of Grantor and the Trustee.
14.6 Governing Law; Parties to Legal Actions. The provisions of
the Trust shall be construed according to the laws of the State of Kansas and,
to the extent applicable, according to the laws of the United States. The
Trustee or Grantor may at any time initiate a legal action or proceeding for
the settlement of the account of the Trustee, or for the determination of any
question or for instructions. The only necessary parties to any such action or
proceeding are the Trustee, the Member concerned, if any, and Grantor; however,
any other person or persons may be included as parties defendant at the
election of the Trustee and Grantor.
IN WITNESS WHEREOF, Grantor and Trustee have caused the Trust
Agreement to be executed in multiple counterparts, each of which shall be
deemed to be an original, as of the date first above written.
GRANTOR:
PURITAN-BENNETT CORPORATION
By:
___________________________________
ATTEST:
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Title:
___________________________________
By: _________________________________
Title: ______________________________
(CORPORATE SEAL)
TRUSTEE:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By:
____________________________________
ATTEST:
Title:
____________________________________
By: _________________________________
Title: ______________________________
(SEAL)
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<PAGE> 1
EXHIBIT 20
FORM OF
TRUST AGREEMENT
THIS TRUST AGREEMENT is made and entered into as of the _____ day of
___________________, 19___, by and between PURITAN-BENNETT CORPORATION, a
Delaware corporation, as grantor (the "Grantor"), and WACHOVIA BANK OF NORTH
CAROLINA, N.A., as trustee (the "Trustee");
W I T N E S S E T H:
WHEREAS, Grantor maintains for the benefit of a select group of
management or highly compensated employees or former employees and their
beneficiaries (together referred to as the "Participants" or individually as a
"Participant") a plan of deferred compensation (the "Puritan-Bennett
Corporation Pension Benefit Make Up Plan" or simply the "Plan") for the purpose
of providing Participants with supplemental retirement benefits equal to the
difference between the benefit provided to said Participants by the Restated
Puritan-Bennett Pension Plan (the "Pension Plan") and the benefit which the
Pension Plan would have provided except for the restrictions of Code Sections
415 and 401(a)(17) and similar limiting provisions of the Pension Plan; and
WHEREAS, the payments under the Plan are not funded or otherwise
secured, and Grantor desires to provide to Participants greater assurance of
the future receipt of those payments pursuant to the Plan; and
WHEREAS, to provide greater assurance to Participants that they will
receive the payments pursuant to the Plan, the Grantor desires to enter into an
irrevocable grantor trust within the meaning of Code Section 671, by depositing
with the Trustee cash and other assets of Grantor to assist it in meeting its
future obligations to Participants (the "Trust"); and
WHEREAS, Grantor desires to appoint the Trustee as trustee of the
Trust; and
WHEREAS, the Grantor has approved the Trust established hereby;
NOW THEREFORE, Grantor hereby establishes the Trust, effective as of
the date first set forth above, as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Change in Control. A "Change in Control" shall be deemed to
have occurred at any of the following times:
(i) Upon the acquisition (other than from the
Corporation) by any person, entity or "group,"
within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934 (the
"Exchange Act") (excluding, for this purpose, the
Corporation or its affiliates, or any employee
benefit plan of the Corporation or its affiliates
which acquires beneficial ownership of voting
securities of the Corporation) of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more
of either the then outstanding shares of common
stock of the Corporation or the Combined Voting
Power of the Corporation's then outstanding voting
securities. "Combined Voting Power" means the
combined voting power of the Corporation's then
outstanding voting securities generally entitled to
vote in the election of directors.
(ii) At the time individuals who, as of the date hereof,
constitute the Board (as of the date hereof, the
"Incumbent Board") cease for any reason to
constitute at least a majority of the Board,
provided that any person becoming a director
subsequent to the date hereof whose election, or
nomination for election by the Corporation's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the
Incumbent Board (other than an election or
nomination of an individual whose initial assumption
of office is in connection with an actual or
threatened election contest relating to the election
of the directors of the Corporation, as such terms
are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for
purposes of this subsection 1.3.2, considered as
though such person were a member of the Incumbent
Board; or
(iii) Upon the approval by the shareholders of the
Corporation of a reorganization, merger,
consolidation (in each case, with respect to which
persons who were the shareholders of the
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Corporation immediately prior to such
reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the
Combined Voting Power of the reorganized, merged or
consolidated company's then outstanding voting
securities) or a liquidation or dissolution of the
Corporation or of the sale of all or substantially
all of the assets of the Corporation; or
(iv) The occurrence of any other event which the
Incumbent Board in its sole discretion determines
constitutes a Change in Control.
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Insolvent" or "Insolvency" means that Grantor (a)
voluntarily files a petition for bankruptcy under federal bankruptcy law, or an
involuntary bankruptcy petition is filed against the Grantor under federal
bankruptcy law, which involuntary petition is not dismissed within 60 days of
the filing, (b) the Grantor makes a general assignment for the benefit of
creditors, or (c) the Grantor seeks or consents to the appointment of a
trustee, receiver, liquidator or similar person.
1.4 "Trust" or "Trust Fund" means all property transferred to
the Trustee, in trust, by Grantor and thereafter held by the Trustee under the
Trust established pursuant to this Trust Agreement, including the investments
and reinvestments thereof and the income therefrom.
ARTICLE II
INCORPORATION OF MAKE UP PLAN
2.1 Incorporation of Make Up Plan by Reference. The Make Up
Plan is incorporated herein by reference.
2.2 Trust Agreement Given Precedence Over Make Up Plan. In the
event of a conflict between the terms and provisions of this Trust Agreement
and the Plan, the terms and provisions of this Trust Agreement shall be given
precedence in the administration and determination of the benefits payable from
the Trust. However, nothing contained in this Trust Agreement is intended to
diminish the amount of benefits required to be paid for the benefit of any
Participant under the terms of the Plan. To the extent possible, the terms and
provisions of the Plan and those of this Trust Agreement shall be interpreted
as mutually consistent.
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ARTICLE III
CLAIMS OF GENERAL CREDITORS
3.1 Trust Fund Considered as General Assets. The assets
constituting the Trust Fund shall be treated as general assets of Grantor and
shall remain subject to claims of the general creditors of Grantor under
applicable state and federal law. Nothing in the Trust Agreement shall affect
the rights of any Participant as a general creditor of Grantor. No Participant
shall have a preferred claim on or any beneficial ownership in the Trust Fund.
3.2 Insolvency of Grantor. In the event of Grantor's
Insolvency, Grantor's Chief Executive Officer and Grantor's Chief Financial
Officer shall inform the Trustee within a reasonable time of such Insolvency.
At any time the Trustee receives actual notice from Grantor that Grantor is
Insolvent, determines that the Grantor is Insolvent or has actual knowledge of
Grantor's Insolvency, the Trustee shall suspend all further payments to
Participants and shall hold any undistributed assets of the Trust Fund for the
benefit of the general creditors of Grantor as a court of competent
jurisdiction may direct. In the event of such Insolvency, the Trustee shall
have the right to pay the assets of the Trust into such court in an
interpleader proceeding for the purpose of such court directing the proper
disposition of such assets. The Trustee and all other parties shall be bound
by such direction, and payment of the Trust assets by the Trustee to the court
or pursuant to such court direction shall discharge the Trustee from liability
with respect to such payment under the Trust. If a creditor of Grantor or any
third party submits a written allegation of Grantor's Insolvency to the
Trustee, the Trustee shall determine, within 30 days after receipt of the
allegation, whether Grantor is Insolvent. Pending such determination of
Insolvency by the Trustee, the Trustee shall suspend payments to Participants.
The Trustee shall resume holding the Trust assets for the benefit of
Participants and resume making any payments under the Plan to Participants only
after the Trustee has determined that Grantor is not Insolvent. Unless the
Trustee has actual notice of Grantor's Insolvency or has received a written
allegation of same, the Trustee shall have no duty to inquire whether Grantor
is Insolvent. The Trustee may rely on evidence of solvency provided by
Grantor, and the Trustee shall not be liable to any person for any good faith
actions it takes on account of any such determination.
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ARTICLE IV
CONTRIBUTIONS
4.1 Contributions. Any and all contributions to the Trust shall
be at the sole discretion of the Grantor.
4.2 Duties of Trustee. The Trustee shall be responsible for
assets actually received by it as Trustee, and shall have no duty or authority
to compute amounts to be contributed or to review the computation of amounts to
be contributed.
ARTICLE V
ACCOUNTING AND PAYMENTS
5.1 Prior to Change in Control. Prior to the occurrence of a
Change in Control, the following shall apply:
(a) Accrued Benefits. No less frequently than annually,
Grantor shall furnish a written statement setting forth each
Participant's accrued benefit as of a specific date. The Trustee
shall have no duty to independently calculate or verify information
provided by the Grantor in accordance with the foregoing.
(b) Payments from Trust Fund. At all times during which
the Grantor is not Insolvent, and prior to a Change in Control, the
Trustee shall make payments to each Participant of his or her benefits
in accordance with the instructions or directions of the Grantor as to
the form, time and amount of such benefit payments. Notwithstanding
the foregoing, Grantor may direct the Trustee to pay any amount from
the Trust Fund to the Grantor at any time during which the Grantor is
not Insolvent and prior to a Change in Control.
(c) Investment and Management of Trust Fund. The
Grantor shall have the power to direct the Trustee concerning any
aspect of investment and management of Trust assets and the power to
direct the Trustee to dispose of Trust assets or to borrow from the
Grantor or other sources such amounts determined appropriate by the
Grantor and to pledge, assign and/or encumber such Trust assets
directed by the Grantor as security for such debt.
5.2 Following Change in Control. Upon and following the
occurrence of a Change in Control, the following shall apply:
(a) Insurance Policies. As provided in Section 7.3, the
Trustee shall surrender any life insurance policies held
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<PAGE> 6
by it as a part of the Trust Fund for the cash value thereof.
(b) Participant Accounting. The Trustee shall determine
each Participant's benefit payable pursuant to the terms of the Plan.
Grantor shall provide Trustee with any and all information appropriate
and necessary to perform such determination, including copies of
records of the trustee and recordkeeper of the Pension Plan.
(c) Payments from Trust Fund. At all times during which
the Grantor is not Insolvent, the Trustee shall, to the extent the
assets of the Trust Fund are adequate therefor, make payments to
Participants pursuant to the terms of the Plan and pursuant to each
Participant's election regarding the time, manner and form of payment.
Grantor shall provide to Trustee such information as is necessary and
appropriate to make such payments. No payment shall be made to
Grantor from the Trust Fund until all Participants (and beneficiaries)
have received all benefits to which they are entitled under the Plan,
at which time any remaining assets of the Trust Fund, after provision
for reasonable expenses, shall be paid to the Grantor and the Trust
shall terminate.
(d) Investment and Management of Trust Fund. The
Grantor shall have no power to direct the Trustee with respect to any
matter, except to inform the Trustee of the location of a Participant
pursuant to Section 7.5(c). To the extent the Trustee does not, or
may not under the terms hereof, receive direction from the Grantor,
the Trustee shall have sole discretion and responsibility for the
investment and management of Trust assets in accordance with the terms
of this Trust Agreement.
5.3 Method and Effect of Payment. Each Participant may give the
Trustee reasonable instructions in writing, prior to the date a payment is to
be made to the Participant, as to the method, which may be by check delivered
to the Participant or electronic funds transfer or any other reasonable means.
The Trustee shall make payment according to the method specified in the
Participant's reasonable instructions, or if no instructions are given, by
check mailed to the Participant by regular U.S. mail. To the extent benefits
are paid to a Participant from the Trust Fund, such payments shall be deemed to
have satisfied Grantor's obligation under the Plan. Notwithstanding anything
to the contrary contained herein, if Grantor makes any payment to any person
other than the Trustee in respect of its obligations under the Plan, or if the
Trustee makes any payment for the benefit of a Participant, any such payment
shall be deemed to
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have satisfied, to the extent of such payment, Grantor's obligations under the
Plan, in order of the maturity of such obligations, and any future benefits
payable to the Participant shall be reduced accordingly. In any event, the
Trustee shall be liable for payment of benefits to any Participant only to the
extent of the lesser of--(i) the amount due to the Participant pursuant to the
terms of the Plan, or (ii) the assets in the Trust Fund from time to time.
5.4 Payment of Taxes. If a court of competent jurisdiction
decides by final judgment, or as a result of settlement and compromise between
a Participant and the Internal Revenue Service, which settlement and compromise
is approved by Grantor (or the Trustee following a Change in Control), or the
Code is amended in such a manner that a tax is payable by the Participant in
respect of any right, title or interest in any assets of the Trust Fund prior
to the date such assets are actually used to pay amounts to such Participant
pursuant to this Trust Agreement; then, upon the occurrence of such an event,
the Trustee shall pay the present value of such Participant's benefit as of the
date of such event to him or her in full satisfaction of all amounts or
benefits to which the Participant is entitled from the Trust Fund.
ARTICLE VI
THE TRUST FUND
6.1 Accumulation Trust. The Trust shall be an accumulation
trust, and principal and all currently earned income shall be accumulated
during the term of the Trust. The Trustee shall hold, preserve, manage,
administer, invest and reinvest the assets of the Trust, collect the income
therefrom and, after deducting all charges and expenses properly payable
therefrom, hold and distribute the then principal of the Trust and the income
therefrom in accordance with the provisions of this Trust Agreement.
6.2 Exclusive Benefit of Participants. Except as otherwise
provided herein, at no time prior to the satisfaction of all liabilities with
respect to each Participant under the Plan shall any portion of the Trust Fund
be used for or diverted to purposes other than the exclusive benefit of
Participants (including the defraying of reasonable expenses of administration
of the Trust) unless and until Grantor is determined to be Insolvent.
6.3 Investment. The assets of the Trust shall be held and
administered as a single trust. Except to the extent of
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instructions from the Grantor, as herein provided, the Trust Fund shall be
under the investment management of the Trustee.
6.4 Legal Ownership. The Trustee shall be vested with legal
ownership of the assets comprising the Trust Fund. Except as otherwise
provided under the terms and provisions of the Plan, no Participant shall have
claim to or interest in a specific asset of the Trust Fund as a result of any
manner of accounting for a Participant's interest in or benefits under the
Plan.
6.5 Grantor Trust Intended. It is intended that the Trust be
taxed as a grantor trust under the provisions of Section 671 and Section
677(a)(2) of the Code and that Grantor, as grantor, be treated as "owner"
within the meaning of those provisions. Grantor shall file its federal income
tax returns in a manner consistent with these provisions of the Code.
ARTICLE VII
THE TRUSTEE
7.1 Trustee as Fiduciary. The Trustee shall be a fiduciary with
respect to the Trust and, except as otherwise provided herein, shall have the
exclusive responsibility for and all the powers necessary to receive, hold,
preserve, manage, invest and reinvest the Trust Fund as provided generally in
this Trust Agreement and to pay all costs and expenses incident thereto. The
Trustee shall not be responsible for the adequacy of the Trust Fund to meet and
discharge any liabilities of the Plan. The following entity shall have power
to construe the terms of this Trust Agreement and the Plan and to determine all
questions that arise under those documents, including entitlement to and the
amount of benefits: (i) prior to the occurrence of a Change in Control, the
Grantor; (ii) upon and following the occurrence of a Change in Control, the
Trustee.
7.2 Additional Powers Relating to Investments. Subject to the
Grantor's direction prior to a Change in Control, the Trustee shall have the
following powers relating to the receipt, preservation, management, investment,
and reinvestment of both principal and income of the Trust, in addition to all
of the powers, rights, options and privileges now or hereafter provided for,
vested in, or granted to the Trustee under applicable law, except such as
conflict with the terms of this Trust Agreement or applicable law, and as far
as possible, no subsequent legislation or regulation shall be in limitation of
the rights, powers or privileges granted the Trustee hereunder or under
applicable law at the time of the execution hereof:
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(a) To purchase or subscribe for and to hold as a part
of the Trust Fund any securities or property of any kind or nature
whatsoever (other than securities issued by Grantor), whether real,
personal, or mixed, whether tangible or intangible, whether or not
productive of income, any rights or interests in property, or any
evidence or indicia of property, including, without limitation, life
insurance policies and shares of mutual funds, beneficial interests,
leaseholds, bonds, mortgages, leases, notes (including, but not
limited to, secured or unsecured notes of any kind), obligations,
savings accounts, certificates of deposit or like investments with the
commercial department of any bank (including any bank acting as
Trustee or its affiliates provided they bear a reasonable rate of
interest and the bank is supervised by the United States or a state),
common, pooled, or collective trust funds which the Trustee or any
other corporation may now have or in the future may adopt for the
collective investment of funds pursuant to Section 584 of the Code,
money market funds, or other property or interests in property as long
as the purchases are made in accordance with the requirements of
applicable provisions of state and federal law, and to retain the same
in trust;
(b) To sell, exchange, convey, transfer, or otherwise
dispose of any securities or property held by it, by private contract
or at public auction, with or without advertising, and no person
dealing with the Trustee shall be bound to see to the application of
the purchase money or to inquire into the validity, expediency or
propriety of any disposition;
(c) To vote any stocks, bonds or other securities; to
give general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments
incidental thereto; to oppose, to consent to, or otherwise participate
in corporate reorganizations or other changes affecting corporate
securities, to delegate discretionary powers, and to pay any
assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities or other property held as part of the Trust Fund;
(d) To hold any investment unregistered or to register
any investment held as a part of the Trust Fund in its own name or in
the name of a nominee, and to hold any investment in bearer or in
Federal Book-Entry form or through or by a central clearing
corporation maintained by institutions active in the national
securities markets, but the books and records of the Trustee shall at
all times show that all the investments are part of the Trust Fund;
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(e) To make, execute, acknowledge and deliver any
documents of transfer and conveyance and any other instruments or
agreements that may be necessary or appropriate to carry out the
powers of the Trustee under this Trust or incidental thereto;
(f) To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Trust Fund; to
commence or defend any suits or legal or administrative proceedings
arising or necessary or appropriate in connection with the Trust, the
administration and operation thereof or the powers or authority of the
Trustee under this Trust; and to represent the Trust in all suits and
legal and administrative proceedings in any court or before any body,
board, agency, panel, or tribunal;
(g) To keep portions of the Trust Fund in cash or cash
balances as the Trustee may deem to be in the best interest of the
Trust, it being understood that the Trustee shall not be required to
pay any interest on any cash balances;
(h) To apply for or to procure life insurance or annuity
contracts upon the life of a Participant; to borrow against the values
of any life insurance or annuity contract owned by the Trustee as a
portion of the Trust Fund; and to surrender any life insurance or
annuity contract owned by the Trustee as a portion of the Trust Fund;
(i) Generally, to do all acts and to execute and deliver
all instruments as in the judgment of the Trustee may be necessary or
desirable to carry out any powers or authority of the Trustee, without
advertisement, without order of court and without having to post bond
or make any returns or report of its doings to any court; and
(j) After giving prior written notice to Grantor, to
engage the services of individuals, partnerships or corporations
(including, but not limited to, lawyers, accountants, actuaries,
brokers, banks, investment counsel, or other agents or employees) to
assist and advise with respect to the management or investment of the
Trust Fund and to delegate to them such duties, rights, and powers of
the Trustee as the Trustee deems advisable in managing the Trust Fund.
7.3 Life Insurance. Notwithstanding anything herein to the
contrary, upon the occurrence of a Change in Control, the Trustee shall
surrender all insurance policies then held by it as part of the Trust Fund for
their cash value.
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7.4 Standard of Performance. Subject to the Grantor's
directions prior to a Change in Control, the Trustee, in discharging its duties
hereunder, including but not limited to the management, investment and
reinvestment of the Trust Fund, shall do so solely in the interest of
Participants using the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise of a like
character; shall diversify the investments of the Trust Fund under its
management within the described funds so as to minimize the risk of large
losses unless under the circumstances it is clearly prudent not to do so; and
shall otherwise act in accordance with the provisions of this Trust Agreement
and applicable federal or state law.
7.5 Powers Relating to Payment and Distribution. The Trustee
shall have the following powers relating to payments and distributions to be
made from the Trust Fund:
(a) To the extent the same are not paid by the Grantor,
to pay out of the Trust Fund the following: amounts due and payable on
any advance made by the Trustee or on any loan made by anyone to the
Trust Fund; all taxes of any nature levied, assessed or imposed upon
the Trust Fund; reasonable expenses of the Trustee, including fees of
accountants, actuaries and legal counsel with respect to the Trust;
and the Trustee's compensation as provided in Article VIII.
(b) Except where inconsistent with applicable law which
cannot be waived, to convey, assign and deliver, upon full termination
of the Trust, the Trust Fund or the net proceeds of the Trust Fund in
cash, to each Participant to the extent each such Participant is
entitled thereto under the Plan (which amounts shall, prior to a
Change in Control, be determined and paid in accordance with written
instructions from Grantor) and the balance, if any, to Grantor.
(c) To make distributions out of the Trust Fund in
accordance with the provisions of Article V hereof. If the person to
receive the distribution cannot be found, the Trustee shall hold such
payment or deposit same in a bank, including the Trustee, for the
credit of that person without liability for interest thereon. If a
check in payment of the benefit hereunder has been mailed by regular
U.S. mail to the last address of the payee furnished the Trustee by
Grantor and is returned unclaimed, the Trustee shall notify Grantor
and shall discontinue further payments to payee until it receives
instructions from Grantor or otherwise receives information concerning
the Participant's location.
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The Trustee shall not be required to make any investigation to
determine the whereabouts or mailing address of any person. The
Trustee may make payment of any benefit hereunder by mailing its check
for the amount thereof to the person certified to the Trustee by
Grantor as the person to whom such payment is to be made or by
personally delivering same to said person.
7.6 Proof of Trustee's Authority. All persons dealing with the
Trustee are entitled to rely upon the representations of the Trustee as to its
authority and are released from any duty to inquire into its authority for
taking or omitting any action or to verify that any money paid or other
property delivered to the Trustee is used by the Trustee for Trust purposes.
Any action of the Trustee under this Trust Agreement shall be conclusively
evidenced for all purposes by a certificate or other document signed by the
Trustee, and any such certificate or document shall be conclusive evidence of
the facts recited in it. All persons shall be fully protected when acting or
relying upon any notice, resolution, instruction, direction, order,
certificate, opinion, letter, telegram or other document believed by such
persons to be genuine, to have been signed by the Trustee, and to be the act of
the Trustee.
7.7 Employment of Legal Counsel. The Trustee may engage and
consult with legal counsel of its choice, who may be counsel for Grantor, a
Participant or Trustee's own general counsel, with respect to the meaning or
construction of the Plan, the Trust Agreement or the Pension Plan as regards
the Trustee's obligations or duties hereunder.
7.8 Exemption from Bond. The Trustee shall not be required to
give bond or other security for the faithful performance of its duties unless
required by a law which cannot be waived or as a result of litigation; and the
Trustee shall not be required to make any inventory, return, or report of any
kind to any court unless required by a law which cannot be waived or as a
result of litigation.
ARTICLE VIII
NOTICES AND DIRECTIONS
8.1 Effective Time of Notice. The Trustee shall not be bound by
any certificate, notice, resolution, consent, order, information or other
communication unless and until it has been received by the Trustee.
8.2 Evidence of Authority. The Trustee may accept as evidence
of the authority of any persons acting on behalf of
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Grantor or its agents, a copy of resolutions of the Grantor designating such
persons and conferring such authority, and shall be entitled to recognize them
as such and act upon the instructions, directions, consents, and requests of
such persons. The Trustee may continue to act in accordance with any such
notice until the receipt by it of notice rescinding or superseding such action
or resolution.
8.3 Directions of Grantor. Instructions, directions or notices
from Grantor to the Trustee, certified by a duly authorized officer appointed
by Grantor shall be accepted as conclusive evidence of the proper issuance and
contents thereof.
8.4 Reliance Upon Direction. The Trustee, in all matters
pertaining to its management, investment and distribution of the Trust, when it
acts in good faith may rely upon any notice, resolution, instruction,
direction, order, certificate, opinion, letter, telegram or other document
believed by the Trustee to be genuine, to have been signed by a Participant or
a proper representative of Grantor, and to be the act of a Participant or
Grantor, as the case may be.
8.5 Notices from Trustee. Notices or communications from the
Trustee to Grantor shall be addressed to the person as shall have been
certified to the Trustee and shall be sent to that person at the principal
office of Grantor unless the Trustee shall have been instructed in writing to
send communications to another address.
ARTICLE IX
FEES AND EXPENSES
The Trustee shall be reimbursed for expenses properly and actually
incurred in the performance of its duties under the Trust, including, but not
limited to compensation to agents and fees for professional services incurred
in administration of the Trust, and shall receive fair and reasonable
compensation for services rendered as may be agreed upon from time to time
between the Trustee and Grantor. The Trustee's compensation and the expenses
of the Trust shall be paid by Grantor, but in any case, such compensation and
expenses shall be a lien or charge on the Trust Fund until actually paid. In
the event that Grantor shall fail to pay the Trustee its compensation and
expenses within 90 days of the presentation of its invoice, the Trustee is
authorized to use the assets held by the Trustee under the Trust (including, to
the extent necessary, the surrender of life insurance contracts for their cash
surrender value) to pay its unpaid compensation and expenses.
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ARTICLE X
LIABILITY OF THE TRUSTEE
10.1 In General. The Trustee shall not be liable for any act or
omission, any losses or decline in value which may be incurred upon any
investment of the Trust Fund, or for failure of the Trust Fund to produce any
or greater earnings, interest, or profits, so long as the Trustee acts in good
faith and in accordance with the responsibilities, obligations and duties
placed on it hereunder and under applicable law.
10.2 Acts or Omissions Under Direction. The Trustee shall not
be liable for any act or omission by it that is in compliance with a direction
received from Grantor prior to a Change in Control of Grantor, nor for any act
or omission of Grantor except to the extent required by applicable law. When
the Trustee has made any payment out of the Trust Fund in accordance with the
directions of Grantor, it shall not be responsible for the correctness of the
amount of the payment to the recipient, or the method by which it is paid. The
Trustee shall also be protected in relying upon any certificate, notice,
resolution, consent, order or other communication purporting to have been so
signed on behalf of Grantor which it believes to be genuine, without any
obligation on the part of the Trustee to ascertain whether or not the
provisions of the Plan are thereby being complied with.
10.3 Withholding for Taxes. The Trustee shall withhold from
distributions from the Trust Fund such amounts as the Trustee considers
necessary and proper for the payment of any income taxes under present (with
respect to federal income tax, currently in accordance with Treasury Regulation
Section 31.3402(g)-l) or future laws, which the Trustee is obligated to pay or
withhold.
10.4 Filing Returns or Reports. The Trustee shall not be liable
for its failure or inability to file any tax return or other report which it is
unable to file because of the failure of Grantor, after written demand by the
Trustee, to furnish the information necessary for the preparation thereof.
10.5 Indemnity. Grantor hereby agrees to indemnify and hold
harmless the Trustee from and against any and all losses, claims, damages,
liabilities, costs and expenses, including but not limited to, liability for
any judgments or settlements consented to in writing by the Trustee, which
consents will not be unreasonably given, and reasonable attorneys' fees,
arising out of or in connection with its acts or omissions taken in good faith
and in accordance with the terms of the Trust Agreement and applicable law.
The Trustee shall promptly notify Grantor of any claim, action or proceeding
for which it may seek indemnity.
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Such indemnity is a continuing obligation and shall be binding on Grantor and
its successors, whether by merger or otherwise, and assigns. In addition, such
indemnity shall survive the resignation or removal of the Trustee and/or the
liquidation of the Trust.
ARTICLE XI
ACCOUNTS
11.1 Maintenance of Records. The Trustee shall keep such
records as the Trustee considers necessary for the management of the Trust.
The Trustee's books and records of the Trust Fund shall be open to inspection
by Grantor during regular business hours of the Trustee.
11.2 Written Reports. Within sixty (60) days after the close of
each Plan year, at such other times (or shorter accounting periods) as
requested in writing by Grantor, and as of the date of the removal or
resignation of the Trustee, the Trustee shall render to Grantor a written
account of its management of the Trust Fund covering the period since the
previous account and report. The written approval of such accounting and
report by Grantor or the failure of Grantor to notify the Trustee of its
disapproval of such accounting within ninety (90) days after its receipt shall
be final and binding as to the Trustee's administration of the Trust for the
period upon Grantor and all persons who have or may thereafter have an interest
in the Trust.
ARTICLE XII
RESIGNATION, REMOVAL AND SUCCESSION
12.1 Notice of Resignation. The Trustee may resign at any time
upon giving thirty (30) days' prior written notice to Grantor.
12.2 Notice of Removal. Grantor may remove the Trustee by
giving at least five (5) business days' prior written notice to the Trustee,
unless prior thereto a successor Trustee shall have been appointed and accepted
and the Trustee consents to an earlier date.
12.3 Vacancy. Any vacancy in the office of Trustee created by
the resignation or removal of the Trustee shall not terminate the Trust. Upon
removal or resignation of the Trustee, Grantor shall appoint a successor
Trustee.
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12.4 Appointment of Successor. The appointment of a successor
Trustee hereunder shall be accomplished by Grantor's delivery to the resigning
or removed Trustee, as the case may be, a written instrument appointing such
successor Trustee, and the successor Trustee's acceptance in writing of the
appointment as successor Trustee hereunder. Any successor Trustee hereunder
shall be a national banking association or trust company having at least one
billion dollars in assets. All of the provisions set forth herein with respect
to the Trustee shall relate to each successor Trustee.
12.5 Transfer of Assets. Any successor Trustee, after
acknowledging acceptance of the Trust Agreement and accepting the Trust assets
and the accounting of the retiring Trustee, shall be vested with all the
estates, titles, rights, powers, duties, and discretions granted to the
retiring Trustee. The retiring Trustee shall execute and deliver all
assignments or other instruments within a reasonable time as may be necessary
or advisable in the discretion of the successor Trustee; provided, however, the
retiring Trustee is hereby authorized to reserve such sum of money as is
reasonable for the payment of its fees and expenses in connection with the
settlement of its account or otherwise.
12.6 Consolidation or Merger of Trustee. In the event that a
corporate Trustee shall merge or be consolidated with or otherwise be acquired
by any other corporation authorized to exercise trust powers, the continuing,
resulting or acquiring corporation shall automatically become Trustee hereunder
without the necessity of designation or appointment by Grantor.
ARTICLE XIII
AMENDMENT AND TERMINATION
13.1 Amendment. The Trust Agreement may be amended any time and
to any extent by a written instrument executed by the Trustee and Grantor,
provided, however, that no such amendment shall be effective to the extent that
it purports to make the Trust revocable. No amendment to the Trust Agreement
shall be effective to the extent that such amendment would be inconsistent with
the intents and purposes of the Trust Agreement. No amendment shall have the
effect of retroactively changing or depriving Participants of rights already
accrued hereunder. Upon and following a Change in Control, no amendment may
have the effect or possible effect of reducing the amount of payments to which
the Participants are or will be entitled to receive from the Trust pursuant to
the terms hereof prior to any such amendment. For instance, the definition of
"Insolvency" may not be amended in a manner that would cause an Insolvency to
occur at
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a time prior to the time it would occur but for such amendment, the definition
of "Change in Control" may not be amended in a manner that would cause a Change
in Control to not occur at a time it would occur but for such amendment, and
the Grantor's rights under Section 5.2, relating to accounting and payments
following Change in Control, may not be amended; unless, in the case of each
such amendment, it is necessary to achieve the tax results intended for this
Trust. Furthermore, upon and following a Change in Control, the provisions of
Section 12.4, relating to appointment of a successor trustee, may not be
amended.
13.2 Ultimate Termination of the Trust. Notwithstanding any
other provisions of the Trust Agreement to the contrary, the Trust shall
terminate (a) on the complete distribution of the Trust Fund of the benefits of
all Participants in accordance with the terms and provisions of this Trust
Agreement and the Plan, (b) upon the delivery to the Trustee of a written
instrument terminating the Trust signed by all Participants and Grantor, or (c)
prior to a Change in Control, upon the delivery to the Trustee of a writing
terminating the Trust signed by all Participants who are officers of Grantor
holding a position of senior vice-president or higher and at least two-thirds
of all Participants (including such officers) and Grantor. Any assets
remaining in the Trust Fund after satisfaction of all liabilities pursuant to
the Plan, expenses of the Trust, and any liability pursuant to Section 10.5
hereof shall be returned to Grantor.
ARTICLE XIV
MISCELLANEOUS
14.1 Spendthrift Provisions. No principal or income payable or
to become payable from the Trust will be subject to anticipation or assignment
by any Participant or any person entitled to receive benefits under the Plan;
to attachment by, interference with, or control by any creditor of any
Participant or any person entitled to receive benefits under the Plan; or to
being taken or reached by any legal or equitable process in satisfaction of any
debt or liability of any Participant or any person entitled to receive benefits
under the Plan prior to its actual receipt by the Participant or such person.
Any attempted conveyance, transfer, assignment, mortgage, pledge, or
encumbrance of the Trust Fund, any part of it, or any interest in it by any
Participant or any person entitled to receive benefits under the Plan prior to
distribution will be void, whether that conveyance, transfer, assignment,
mortgage, pledge, or encumbrance is intended to take place or become effective
before or after any distribution of trust assets or the termination of the
Trust Fund. The Trustee will under no circumstances be required to recognize
any conveyance, transfer, assignment,
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mortgage, pledge or encumbrance by any Participant or any person entitled to
receive benefits under the Plan, any part of it, or any interest in it, or to
pay any money or thing of value to any creditor or assignee of any Participant
or such person for any cause whatsoever; provided, however, this Section 14.1
does not affect the provisions of Article III of the Trust Agreement.
14.2 Ownership of Contracts. The Trustee shall hold, own, and
control all contracts and policies purchased by the Trust, if any, as well as
all other property belonging to the Trust, subject to the rights of
Participants as specified in the Trust Agreement.
14.3 Gender of Words. Whenever the context requires such, words
of the masculine gender used herein shall include the feminine and the neuter,
and the words used in the singular shall include the plural.
14.4 Severability. Each provision of the Trust Agreement is
severable and if any provision is found to be void as against public policy it
shall not affect the validity of any other provision hereof.
14.5 Successors and Assigns. The Trust Agreement shall be
binding upon the successors and assigns of Grantor and the Trustee.
14.6 Governing Law; Parties to Legal Actions. The provisions of
the Trust shall be construed according to the laws of the State of Kansas and,
to the extent applicable, according to the laws of the United States. The
Trustee or Grantor may at any time initiate a legal action or proceeding for
the settlement of the account of the Trustee, or for the determination of any
question or for instructions. The only necessary parties to any such action or
proceeding are the Trustee, the Participant concerned, if any, and Grantor;
however, any other person or persons may be included as parties defendant at
the election of the Trustee and Grantor.
IN WITNESS WHEREOF, Grantor and Trustee have caused the Trust
Agreement to be executed in multiple counterparts, each of which shall be
deemed to be an original, as of the date first above written.
GRANTOR:
PURITAN-BENNETT CORPORATION
By:
_____________________________
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ATTEST:
Title: ________________________________
By: _________________________________
Title: ______________________________
(CORPORATE SEAL)
TRUSTEE:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By:
___________________________________
ATTEST:
Title:
___________________________________
By: _________________________________
Title: ______________________________
(SEAL)
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EXHIBIT 21
FORM OF
TRUST AGREEMENT
THIS TRUST AGREEMENT is made and entered into as of the _____ day of
___________________, 19___, by and between PURITAN-BENNETT CORPORATION, a
Delaware corporation, as grantor (the "Grantor"), and WACHOVIA BANK OF NORTH
CAROLINA, N.A., as trustee (the "Trustee");
W I T N E S S E T H:
WHEREAS, Grantor maintains for the benefit of the non-employee
directors and former non-employee directors listed on Exhibit A and their
beneficiaries (together referred to as the "Directors" or individually as a
"Director") a plan of deferred compensation (the "Puritan-Bennett Corporation
Directors Post-Retirement Income Plan" or simply the "Plan") (which Plan
document and all amendments thereto are attached hereto as Exhibit B), which
Exhibits A and B may be supplemented by the Grantor with additional names and
documents from time to time; and
WHEREAS, the payments under the Plan are not funded or otherwise
secured, and Grantor desires to provide to Directors greater assurance of the
future receipt of those payments pursuant to the Plan; and
WHEREAS, to provide greater assurance to Directors that they will
receive the payments pursuant to the Plan, the Grantor desires to enter into an
irrevocable grantor trust within the meaning of Code Section 671, by depositing
with the Trustee sufficient cash and other assets of Grantor to assist it in
meeting its future obligations to Directors (the "Trust"); and
WHEREAS, Grantor desires to appoint the Trustee as trustee of the
Trust; and
WHEREAS, the Grantor has approved the Trust established hereby;
NOW THEREFORE, Grantor hereby establishes the Trust, effective as of
the date first set forth above, as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Change in Control. A "Change in Control" shall be deemed to
have occurred at any of the following times:
(i) Upon the acquisition (other than from the
Corporation) by any person, entity or
"group," within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act")
(excluding, for this purpose, the
Corporation or its affiliates, or any
employee benefit plan of the Corporation or
its affiliates which acquires beneficial
ownership of voting securities of the
Corporation) of beneficial ownership
(within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50%
or more of either the then outstanding
shares of common stock of the Corporation
or the Combined Voting Power of the
Corporation's then outstanding voting
securities. "Combined Voting Power" means
the combined voting power of the
Corporation's then outstanding voting
securities generally entitled to vote in
the election of directors.
(ii) At the time individuals who, as of the date
hereof, constitute the Board (as of the
date hereof, the "Incumbent Board") cease
for any reason to constitute at least a
majority of the Board, provided that any
person becoming a director subsequent to
the date hereof whose election, or
nomination for election by the
Corporation's shareholders, was approved by
a vote of at least a majority of the
directors then comprising the Incumbent
Board (other than an election or nomination
of an individual whose initial assumption
of office is in connection with an actual
or threatened election contest relating to
the election of the directors of the
Corporation, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under
the Exchange Act) shall be, for purposes of
this subsection 1.3.2, considered as though
such person were a member of the Incumbent
Board; or
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(iii) Upon the approval by the shareholders of
the Corporation of a reorganization,
merger, consolidation (in each case, with
respect to which persons who were the
shareholders of the Corporation immediately
prior to such reorganization, merger or
consolidation do not, immediately
thereafter, own more than 50% of the
Combined Voting Power of the reorganized,
merged or consolidated company's then
outstanding voting securities) or a
liquidation or dissolution of the
Corporation or of the sale of all or
substantially all of the assets of the
Corporation; or
(iv) The occurrence of any other event which the
Incumbent Board in its sole discretion
determines constitutes a Change in Control.
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Insolvent" or "Insolvency" means that Grantor (a)
voluntarily files a petition for bankruptcy under federal bankruptcy law, or an
involuntary bankruptcy petition is filed against the Grantor under federal
bankruptcy law, which involuntary petition is not dismissed within 60 days of
the filing, (b) the Grantor makes a general assignment for the benefit of
creditors, or (c) the Grantor seeks or consents to the appointment of a
trustee, receiver, liquidator or similar person.
1.4 "Plan" means the Puritan-Bennett Corporation Supplemental
Retirement Benefit Plan.
1.5 "Trust" or "Trust Fund" means all property transferred to
the Trustee, in trust, by Grantor and thereafter held by the Trustee under the
Trust established pursuant to this Trust Agreement, including the investments
and reinvestments thereof and the income therefrom.
ARTICLE II
INCORPORATION OF PLAN
2.1 Incorporation of Plan by Reference. The Plan is
incorporated herein by reference.
2.2 Trust Agreement Given Precedence Over Plan. In the event of
a conflict between the terms and provisions of this Trust Agreement and those
of the Plan, the terms and provisions of this Trust Agreement shall be given
precedence in the
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administration and determination of the benefits payable from the Trust.
However, nothing contained in this Trust Agreement is intended to diminish the
amount of benefits required to be paid for the benefit of any Director under
the terms of the Plan. To the extent possible, the terms and provisions of the
Plan and those of this Trust Agreement shall be interpreted as mutually
consistent.
ARTICLE III
CLAIMS OF GENERAL CREDITORS
3.1 Trust Fund Considered as General Assets. The assets
constituting the Trust Fund shall be treated as general assets of Grantor and
shall remain subject to claims of the general creditors of Grantor under
applicable state and federal law. Nothing in the Trust Agreement shall affect
the rights of any Director as a general creditor of Grantor. No Director shall
have a preferred claim on or any beneficial ownership in the Trust Fund.
3.2 Insolvency of Grantor. In the event of Grantor's
Insolvency, Grantor's Chief Executive Officer and Grantor's Chief Financial
Officer shall inform the Trustee within a reasonable time of such Insolvency.
At any time the Trustee receives actual notice from Grantor that Grantor is
Insolvent, determines that the Grantor is Insolvent or has actual knowledge of
Grantor's Insolvency, the Trustee shall suspend all further payments to
Directors and shall hold any undistributed assets of the Trust Fund for the
benefit of the general creditors of Grantor as a court of competent
jurisdiction may direct. In the event of such Insolvency, the Trustee shall
have the right to pay the assets of the Trust into such court in an
interpleader proceeding for the purpose of such court directing the proper
disposition of such assets. The Trustee and all other parties shall be bound
by such direction, and payment of the Trust assets by the Trustee to the court
or pursuant to such court direction shall discharge the Trustee from liability
with respect to such payment under the Trust. If a creditor of Grantor or any
third party submits a written allegation of Grantor's Insolvency to the
Trustee, the Trustee shall determine, within 30 days after receipt of the
allegation, whether Grantor is Insolvent. Pending such determination of
Insolvency by the Trustee, the Trustee shall suspend payments to Directors.
The Trustee shall resume holding the Trust assets for the benefit of Directors
and resume making any payments under the Plan to Directors only after the
Trustee has determined that Grantor is not Insolvent. Unless the Trustee has
actual notice of Grantor's Insolvency or has received a written allegation of
same, the Trustee shall have no duty to inquire whether Grantor is Insolvent.
The Trustee may rely on evidence of solvency provided by Grantor, and the
Trustee shall
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not be liable to any person for any good faith actions it takes on account of
any such determination.
ARTICLE IV
CONTRIBUTIONS
4.1 Contributions. Any and all contributions to the Trust shall
be at the sole discretion of the Grantor.
4.2 Duties of Trustee. The Trustee shall be responsible for
assets actually received by it as Trustee, and shall have no duty or authority
to compute amounts to be contributed or to review the computation of amounts to
be contributed.
ARTICLE V
ACCOUNTING AND PAYMENTS
5.1 Prior to Change in Control. Prior to the occurrence of a
Change in Control, the following shall apply:
(a) Accrued Benefits. No less frequently than annually,
Grantor shall furnish a written statement setting forth each
Director's benefit as of a specific date or instructions, acceptable
to the Trustee, utilizing readily determinable and objective
information for determining such benefit. The Trustee shall have no
duty to independently calculate or verify information provided by the
Grantor in accordance with the foregoing.
(b) Payments from Trust Fund. At all times during which
the Grantor is not Insolvent, and prior to a Change in Control, the
Trustee shall make payments to each Director of his or her benefits in
accordance with the instructions or directions of the Grantor as to
the form, time and amount of such benefit payments. Notwithstanding
the foregoing, Grantor may direct the Trustee to pay any amount from
the Trust Fund to the Grantor at any time during which the Grantor is
not Insolvent and prior to a Change in Control.
(c) Investment and Management of Trust Fund. The
Grantor shall have the power to direct the Trustee concerning any
aspect of investment and management of Trust assets and the power to
direct the Trustee to dispose of Trust assets or to borrow from the
Grantor or other sources such amounts determined appropriate by the
Grantor and to pledge, assign and/or encumber such Trust assets
directed by the Grantor as security for such debt.
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5.2 Following Change in Control. Upon and following the
occurrence of a Change in Control, the following shall apply:
(a) Insurance Policies. As provided in Section 7.3, the
Trustee shall surrender any life insurance policies held by it as a
part of the Trust Fund for the cash value thereof.
(b) Director Accounting. The Trustee shall determine
each Director's benefit payable pursuant to the terms of the Plan.
Grantor shall provide Trustee with any and all information appropriate
and necessary to perform such determination.
(c) Payments from Trust Fund. At all times during which
the Grantor is not Insolvent, the Trustee shall, to the extent the
assets of the Trust Fund are adequate therefor, make payments to
Directors pursuant to the terms of the Plan and pursuant to each
Director's election regarding the time, manner and form of payment.
No payment shall be made to Grantor from the Trust Fund until all
Directors (and beneficiaries) have received all benefits to which they
are entitled under the Plan, at which time any remaining assets of the
Trust Fund, after provision for reasonable expenses, shall be paid to
the Grantor and the Trust shall terminate.
(d) Investment and Management of Trust Fund. The
Grantor shall have no power to direct the Trustee with respect to any
matter, except to inform the Trustee of the location of a Director
pursuant to Section 7.5(c). To the extent the Trustee does not, or
may not under the terms hereof, receive direction from the Grantor,
the Trustee shall have sole discretion and responsibility for the
investment and management of Trust assets in accordance with the terms
of this Trust Agreement and the Plan.
5.3 Method and Effect of Payment. Each Director may give the
Trustee reasonable instructions in writing, prior to the date a payment is to
be made to the Director, as to the method by which the Director will receive
payments, which may be by check delivered to the Director or electronic funds
transfer or any other reasonable means. The Trustee shall make payment
according to the method specified in the Director's reasonable instructions, or
if no instructions are given, by check mailed to the Director by regular U.S.
mail. To the extent benefits are paid to a Director from the Trust Fund, such
payments shall be deemed to have satisfied Grantor's obligation under the Plan.
Notwithstanding anything to the contrary contained herein, if Grantor makes any
payment to any person other than the Trustee in respect of its obligations
under the Plan, or if the Trustee makes any payment for the benefit of a
Director, any such payment
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shall be deemed to have satisfied, to the extent of such payment, Grantor's
obligations under the Plan, in order of the maturity of such obligations, and
any future benefits payable under the Plan to the Director shall be reduced
accordingly. In any event, the Trustee shall be liable for payment of benefits
to any Director only to the extent of the lesser of--(i) the amount due to the
Director pursuant to the terms of the Plan, or (ii) the assets in the Trust
Fund from time to time.
5.4 Payment of Taxes. If a court of competent jurisdiction
decides by final judgment, or as a result of settlement and compromise between
a Director and the Internal Revenue Service, which settlement and compromise is
approved by Grantor (or the Trustee following a Change in Control), or the Code
is amended in such a manner that a tax is payable by the Director in respect of
any right, title or interest in any assets of the Trust Fund prior to the date
such assets are actually used to pay amounts to such Director pursuant to this
Trust Agreement; then, upon the occurrence of such an event, the Trustee shall
pay such Director's benefit as of the date of such event to him or her in full
satisfaction of all amounts or benefits to which the Director is entitled from
the Trust Fund.
ARTICLE VI
THE TRUST FUND
6.1 Accumulation Trust. The Trust shall be an accumulation
trust, and principal and all currently earned income shall be accumulated
during the term of the Trust. The Trustee shall hold, preserve, manage,
administer, invest and reinvest the assets of the Trust, collect the income
therefrom and, after deducting all charges and expenses properly payable
therefrom, hold and distribute the then principal of the Trust and the income
therefrom in accordance with the provisions of this Trust Agreement.
6.2 Exclusive Benefit of Directors. Except as otherwise
provided herein, at no time prior to the satisfaction of all liabilities with
respect to each Director under the Plan shall any portion of the Trust Fund be
used for or diverted to purposes other than the exclusive benefit of Directors
(including the defraying of reasonable expenses of administration of the Trust)
unless and until Grantor is determined to be Insolvent.
6.3 Investment. The assets of the Trust shall be held and
administered as a single trust. Except to the extent of instructions from the
Grantor, as herein provided, the Trust Fund shall be under the investment
management of the Trustee.
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6.4 Legal Ownership. The Trustee shall be vested with legal
ownership of the assets comprising the Trust Fund. Except as otherwise
provided under the terms and provisions of the Plan, no Director shall have
claim to or interest in a specific asset of the Trust Fund as a result of any
manner of accounting for a Director's interest in or benefits under the Plan.
6.5 Grantor Trust Intended. It is intended that the Trust be
taxed as a grantor trust under the provisions of Section 671 and Section
677(a)(2) of the Code and that Grantor, as grantor, be treated as "owner"
within the meaning of those provisions. Grantor shall file its federal income
tax returns in a manner consistent with these provisions of the Code.
ARTICLE VII
THE TRUSTEE
7.1 Trustee as Fiduciary. The Trustee shall be a fiduciary with
respect to the Trust and, except as otherwise provided herein, shall have the
exclusive responsibility for and all the powers necessary to receive, hold,
preserve, manage, invest and reinvest the Trust Fund as provided generally in
this Trust Agreement and to pay all costs and expenses incident thereto. The
Trustee shall not be responsible for the adequacy of the Trust Fund to meet and
discharge any liabilities of the Plan. The following entity shall have power
to construe the terms of this Trust Agreement and the Plan and to determine all
questions that arise under those documents, including entitlement to and the
amount of benefits: (i) prior to the occurrence of a Change in Control, the
Grantor; (ii) upon and following the occurrence of a Change in Control, the
Trustee.
7.2 Additional Powers Relating to Investments. Subject to the
Grantor's direction prior to a Change in Control, the Trustee shall have the
following powers relating to the receipt, preservation, management, investment,
and reinvestment of both principal and income of the Trust, in addition to all
of the powers, rights, options and privileges now or hereafter provided for,
vested in, or granted to the Trustee under applicable law, except such as
conflict with the terms of this Trust Agreement or applicable law, and as far
as possible, no subsequent legislation or regulation shall be in limitation of
the rights, powers or privileges granted the Trustee hereunder or under
applicable law at the time of the execution hereof:
(a) To purchase or subscribe for and to hold as a part
of the Trust Fund any securities or property of any kind or nature
whatsoever (other than securities issued by Grantor), whether real,
personal, or mixed, whether tangible or intangible, whether or not
productive of income, any
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rights or interests in property, or any evidence or indicia of
property, including, without limitation, life insurance policies and
shares of mutual funds, beneficial interests, leaseholds, bonds,
mortgages, leases, notes (including, but not limited to, secured or
unsecured notes of any kind), obligations, savings accounts,
certificates of deposit or like investments with the commercial
department of any bank (including any bank acting as Trustee or its
affiliates provided they bear a reasonable rate of interest and the
bank is supervised by the United States or a state), common, pooled,
or collective trust funds which the Trustee or any other corporation
may now have or in the future may adopt for the collective investment
of funds pursuant to Section 584 of the Code, money market funds, or
other property or interests in property as long as the purchases are
made in accordance with the requirements of applicable provisions of
state and federal law, and to retain the same in trust;
(b) To sell, exchange, convey, transfer, or otherwise
dispose of any securities or property held by it, by private contract
or at public auction, with or without advertising, and no person
dealing with the Trustee shall be bound to see to the application of
the purchase money or to inquire into the validity, expediency or
propriety of any disposition;
(c) To vote any stocks, bonds or other securities; to
give general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments
incidental thereto; to oppose, to consent to, or otherwise participate
in corporate reorganizations or other changes affecting corporate
securities, to delegate discretionary powers, and to pay any
assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities or other property held as part of the Trust Fund;
(d) To hold any investment unregistered or to register
any investment held as a part of the Trust Fund in its own name or in
the name of a nominee, and to hold any investment in bearer or in
Federal Book-Entry form or through or by a central clearing
corporation maintained by institutions active in the national
securities markets, but the books and records of the Trustee shall at
all times show that all the investments are part of the Trust Fund;
(e) To make, execute, acknowledge and deliver any
documents of transfer and conveyance and any other instruments or
agreements that may be necessary or appropriate to carry out the
powers of the Trustee under this Trust or incidental thereto;
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(f) To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Trust Fund; to
commence or defend any suits or legal or administrative proceedings
arising or necessary or appropriate in connection with the Trust, the
administration and operation thereof or the powers or authority of the
Trustee under this Trust; and to represent the Trust in all suits and
legal and administrative proceedings in any court or before any body,
board, agency, panel, or tribunal;
(g) To keep portions of the Trust Fund in cash or cash
balances as the Trustee may deem to be in the best interest of the
Trust, it being understood that the Trustee shall not be required to
pay any interest on any cash balances;
(h) To apply for or to procure life insurance or annuity
contracts upon the life of a Director; to borrow against the values of
any life insurance or annuity contract owned by the Trustee as a
portion of the Trust Fund; and to surrender any life insurance or
annuity contract owned by the Trustee as a portion of the Trust Fund;
(i) Generally, to do all acts and to execute and deliver
all instruments as in the judgment of the Trustee may be necessary or
desirable to carry out any powers or authority of the Trustee, without
advertisement, without order of court and without having to post bond
or make any returns or report of its doings to any court; and
(j) After giving prior written notice to Grantor, to
engage the services of individuals, partnerships or corporations
(including, but not limited to, lawyers, accountants, actuaries,
brokers, banks, investment counsel, or other agents or employees) to
assist and advise with respect to the management or investment of the
Trust Fund and to delegate to them such duties, rights, and powers of
the Trustee as the Trustee deems advisable in managing the Trust Fund.
7.3 Life Insurance. Notwithstanding anything herein to the
contrary, upon the occurrence of a Change in Control, the Trustee shall
surrender all insurance policies then held by it as part of the Trust Fund for
their cash value.
7.4 Standard of Performance. Subject to the Grantor's
directions prior to a Change in Control, the Trustee, in discharging its duties
hereunder, including but not limited to the management, investment and
reinvestment of the Trust Fund, shall do so solely in the interest of Directors
using the care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and
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familiar with such matters would use in the conduct of an enterprise of a like
character; shall diversify the investments of the Trust Fund under its
management within the described funds so as to minimize the risk of large
losses unless under the circumstances it is clearly prudent not to do so; and
shall otherwise act in accordance with the provisions of this Trust Agreement
and applicable federal or state law.
7.5 Powers Relating to Payment and Distribution. The Trustee
shall have the following powers relating to payments and distributions to be
made from the Trust Fund:
(a) To the extent the same are not paid by the Grantor,
to pay out of the Trust Fund the following: amounts due and payable on
any advance made by the Trustee or on any loan made by anyone to the
Trust Fund; all taxes of any nature levied, assessed or imposed upon
the Trust Fund; reasonable expenses of the Trustee, including fees of
accountants, actuaries and legal counsel with respect to the Trust;
and the Trustee's compensation as provided in Article IX.
(b) Except where inconsistent with applicable law which
cannot be waived, to convey, assign and deliver, upon full termination
of the Trust, the Trust Fund or the net proceeds of the Trust Fund in
cash, to each Director to the extent each such Director is entitled
thereto under the Plan (which amounts shall, prior to a Change in
Control, be determined and paid in accordance with written
instructions from Grantor) and the balance, if any, to Grantor.
(c) To make distributions out of the Trust Fund in
accordance with the provisions of Article V hereof. If the person to
receive the distribution cannot be found, the Trustee shall hold such
payment or deposit same in a bank, including the Trustee, for the
credit of that person without liability for interest thereon. If a
check in payment of the benefit hereunder has been mailed by regular
U.S. mail to the last address of the payee furnished the Trustee by
Grantor and is returned unclaimed, the Trustee shall notify Grantor
and shall discontinue further payments to payee until it receives
instructions from Grantor or otherwise receives information concerning
the Director's location. The Trustee shall not be required to make
any investigation to determine the whereabouts or mailing address of
any person. The Trustee may make payment of any benefit hereunder by
mailing its check for the amount thereof to the person certified to
the Trustee by Grantor as the person to whom such payment is to be
made or by personally delivering same to said person.
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7.6 Proof of Trustee's Authority. All persons dealing with the
Trustee are entitled to rely upon the representations of the Trustee as to its
authority and are released from any duty to inquire into its authority for
taking or omitting any action or to verify that any money paid or other
property delivered to the Trustee is used by the Trustee for Trust purposes.
Any action of the Trustee under this Trust Agreement shall be conclusively
evidenced for all purposes by a certificate or other document signed by the
Trustee, and any such certificate or document shall be conclusive evidence of
the facts recited in it. All persons shall be fully protected when acting or
relying upon any notice, resolution, instruction, direction, order,
certificate, opinion, letter, telegram or other document believed by such
persons to be genuine, to have been signed by the Trustee, and to be the act of
the Trustee.
7.7 Employment of Legal Counsel. The Trustee may engage and
consult with legal counsel of its choice, who may be counsel for Grantor, a
Director or Trustee's own general counsel, with respect to the meaning or
construction of the Plan or the Trust Agreement as regards the Trustee's
obligations or duties hereunder.
7.8 Exemption from Bond. The Trustee shall not be required to
give bond or other security for the faithful performance of its duties unless
required by a law which cannot be waived or as a result of litigation; and the
Trustee shall not be required to make any inventory, return, or report of any
kind to any court unless required by a law which cannot be waived or as a
result of litigation.
ARTICLE VIII
NOTICES AND DIRECTIONS
8.1 Effective Time of Notice. The Trustee shall not be bound by
any certificate, notice, resolution, consent, order, information or other
communication unless and until it has been received by the Trustee.
8.2 Evidence of Authority. The Trustee may accept as evidence
of the authority of any persons acting on behalf of Grantor or its agents, a
copy of resolutions of the Grantor designating such persons and conferring such
authority, and shall be entitled to recognize them as such and act upon the
instructions, directions, consents, and requests of such persons. The Trustee
may continue to act in accordance with any such notice until the receipt by it
of notice rescinding or superseding such action or resolution.
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8.3 Directions of Grantor. Instructions, directions or notices
from Grantor to the Trustee, certified by a duly authorized officer appointed
by Grantor shall be accepted as conclusive evidence of the proper issuance and
contents thereof.
8.4 Reliance Upon Direction. The Trustee, in all matters
pertaining to its management, investment and distribution of the Trust, when it
acts in good faith may rely upon any notice, resolution, instruction,
direction, order, certificate, opinion, letter, telegram or other document
believed by the Trustee to be genuine, to have been signed by a Director or a
proper representative of Grantor, and to be the act of a Director or Grantor,
as the case may be.
8.5 Notices from Trustee. Notices or communications from the
Trustee to Grantor shall be addressed to the person as shall have been
certified to the Trustee and shall be sent to that person at the principal
office of Grantor unless the Trustee shall have been instructed in writing to
send communications to another address.
ARTICLE IX
FEES AND EXPENSES
The Trustee shall be reimbursed for expenses properly and actually
incurred in the performance of its duties under the Trust, including, but not
limited to compensation to agents and fees for professional services incurred
in administration of the Trust, and shall receive fair and reasonable
compensation for services rendered as may be agreed upon from time to time
between the Trustee and Grantor. The Trustee's compensation and the expenses
of the Trust shall be paid by Grantor, but in any case, such compensation and
expenses shall be a lien or charge on the Trust Fund until actually paid. In
the event that Grantor shall fail to pay the Trustee its compensation and
expenses within 90 days of the presentation of its invoice, the Trustee is
authorized to use the assets held by the Trustee under the Trust (including, to
the extent necessary, the surrender of life insurance contracts for their cash
surrender value) to pay its unpaid compensation and expenses.
ARTICLE X
LIABILITY OF THE TRUSTEE
10.1 In General. The Trustee shall not be liable for any act or
omission, any losses or decline in value which may be incurred upon any
investment of the Trust Fund, or for failure of the Trust Fund to produce any
or greater earnings, interest, or
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profits, so long as the Trustee acts in good faith and in accordance with the
responsibilities, obligations and duties placed on it hereunder and under
applicable law.
10.2 Acts or Omissions Under Direction. The Trustee shall not
be liable for any act or omission by it that is in compliance with a direction
received from Grantor prior to a Change in Control of Grantor, nor for any act
or omission of Grantor except to the extent required by applicable law. When
the Trustee has made any payment out of the Trust Fund in accordance with the
directions of Grantor, it shall not be responsible for the correctness of the
amount of the payment to the recipient, or the method by which it is paid. The
Trustee shall also be protected in relying upon any certificate, notice,
resolution, consent, order or other communication purporting to have been so
signed on behalf of Grantor which it believes to be genuine, without any
obligation on the part of the Trustee to ascertain whether or not the
provisions of the Plan are thereby being complied with.
10.3 Withholding for Taxes. The Trustee shall withhold from
distributions from the Trust Fund such amounts as the trustee considers
necessary and proper for the payment of any income taxes under present (with
respect to federal income tax, currently in accordance with Treasury Regulation
Section 31.3402(g)-l) or future laws, which the Trustee is obligated to pay or
withhold.
10.4 Filing Returns or Reports. The Trustee shall not be liable
for its failure or inability to file any tax return or other report which it is
unable to file because of the failure of Grantor, after written demand by the
Trustee, to furnish the information necessary for the preparation thereof.
10.5 Indemnity. Grantor hereby agrees to indemnify and hold
harmless the Trustee from and against any and all losses, claims, damages,
liabilities, costs and expenses, including but not limited to, liability for
any judgments or settlements consented to in writing by the Trustee, which
consents will not be unreasonably given, and reasonable attorneys' fees,
arising out of or in connection with its acts or omissions taken in good faith
and in accordance with the terms of the Trust Agreement and applicable law.
The Trustee shall promptly notify Grantor of any claim, action or proceeding
for which it may seek indemnity. Such indemnity is a continuing obligation and
shall be binding on Grantor and its successors, whether by merger or otherwise,
and assigns. In addition, such indemnity shall survive the resignation or
removal of the Trustee and/or the liquidation of the Trust.
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ARTICLE XI
ACCOUNTS
11.1 Maintenance of Records. The Trustee shall keep such
records as the Trustee considers necessary for the management of the Trust.
The Trustee's books and records of the Trust Fund shall be open to inspection
by Grantor during regular business hours of the Trustee.
11.2 Written Reports. Within sixty (60) days after the close
of each Plan year, at such other times (or shorter accounting periods) as
requested in writing by Grantor, and as of the date of the removal or
resignation of the Trustee, the Trustee shall render to Grantor a written
account of its management of the Trust Fund covering the period since the
previous account and report. The written approval of such accounting and
report by Grantor or the failure of Grantor to notify the Trustee of its
disapproval of such accounting within ninety (90) days after its receipt shall
be final and binding as to the Trustee's administration of the Trust for the
period upon Grantor and all persons who have or may thereafter have an interest
in the Trust.
ARTICLE XII
RESIGNATION, REMOVAL AND SUCCESSION
12.1 Notice of Resignation. The Trustee may resign at any time
upon giving thirty (30) days' prior written notice to Grantor.
12.2 Notice of Removal. Grantor may remove the Trustee by
giving at least five (5) business days' prior written notice to the Trustee,
unless prior thereto a successor Trustee shall have been appointed and accepted
and the Trustee consents to an earlier date.
12.3 Vacancy. Any vacancy in the office of Trustee created by
the resignation or removal of the Trustee shall not terminate the Trust. Upon
removal or resignation of the Trustee, Grantor shall appoint a successor
Trustee.
12.4 Appointment of Successor. The appointment of a successor
Trustee hereunder shall be accomplished by Grantor's delivery to the resigning
or removed Trustee, as the case may be, a written instrument appointing such
successor Trustee, and the successor Trustee's acceptance in writing of the
appointment as successor Trustee hereunder. Any successor Trustee hereunder
shall be a national banking association or trust company having at least one
billion dollars in assets. All of the provisions
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set forth herein with respect to the Trustee shall relate to each successor
Trustee.
12.5 Transfer of Assets. Any successor Trustee, after
acknowledging acceptance of the Trust Agreement and accepting the Trust assets
and the accounting of the retiring Trustee, shall be vested with all the
estates, titles, rights, powers, duties, and discretions granted to the
retiring Trustee. The retiring Trustee shall execute and deliver all
assignments or other instruments within a reasonable time as may be necessary
or advisable in the discretion of the successor Trustee; provided, however, the
retiring Trustee is hereby authorized to reserve such sum of money as is
reasonable for the payment of its fees and expenses in connection with the
settlement of its account or otherwise.
12.6 Consolidation or Merger of Trustee. In the event that a
corporate Trustee shall merge or be consolidated with or otherwise be acquired
by any other corporation authorized to exercise trust powers, the continuing,
resulting or acquiring corporation shall automatically become Trustee hereunder
without the necessity of designation or appointment by Grantor.
ARTICLE XIII
AMENDMENT AND TERMINATION
13.1 Amendment. The Trust Agreement may be amended any time and
to any extent by a written instrument executed by the Trustee and Grantor,
provided, however, that no such amendment shall be effective to the extent that
it purports to make the Trust revocable. No amendment to the Trust Agreement
shall be effective to the extent that such amendment would be inconsistent with
the intents and purposes of the Trust Agreement. No amendment shall have the
effect of retroactively changing or depriving Directors of rights already
accrued hereunder. Upon and following a Change in Control, no amendment may
have the effect or possible effect of reducing the amount of payments to which
the Directors are or will be entitled to receive from the Trust pursuant to the
terms hereof prior to any such amendment. For instance, the definition of
"Insolvency" may not be amended in a manner that would cause an Insolvency to
occur at a time prior to the time it would occur but for such amendment, the
definition of "Change in Control" may not be amended in a manner that would
cause a Change in Control to not occur at a time it would occur but for such
amendment, and the Grantor's rights under Section 5.2, relating to accounting
and payments following Change in Control, may not be amended; unless, in the
case of each such amendment, it is necessary to achieve the tax results
intended for this Trust. Furthermore, upon and following a
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Change in Control, the provisions of Section 12.4, relating to appointment of a
successor trustee, may not be amended.
13.2 Ultimate Termination of the Trust. Notwithstanding any
other provisions of the Trust Agreement to the contrary, the Trust shall
terminate (a) on the complete distribution of the Trust Fund of the benefits of
all Directors in accordance with the terms and provisions of this Trust
Agreement and the Plan, (b) upon the delivery to the Trustee of a written
instrument terminating the Trust signed by all Directors and Grantor, or (c)
prior to a Change in Control, upon the delivery to the Trustee of a writing
terminating the Trust signed by all Directors who are officers of Grantor
holding a position of senior vice-president or higher and at least two-thirds
of all Directors (including such officers) and Grantor. Any assets remaining
in the Trust Fund after satisfaction of all liabilities pursuant to the Plan,
expenses of the Trust, and any liability pursuant to Section 10.5 hereof shall
be returned to Grantor.
ARTICLE XIV
MISCELLANEOUS
14.1 Spendthrift Provisions. No principal or income payable or
to become payable from the Trust will be subject to anticipation or assignment
by any Director or any person entitled to receive benefits under the Plan; to
attachment by, interference with, or control by any creditor of any Director or
any person entitled to receive benefits under the Plan; or to being taken or
reached by any legal or equitable process in satisfaction of any debt or
liability of any Director or any person entitled to receive benefits under the
Plan prior to its actual receipt by the Director or such person. Any attempted
conveyance, transfer, assignment, mortgage, pledge, or encumbrance of the Trust
Fund, any part of it, or any interest in it by any Director or any person
entitled to receive benefits under the Plan prior to distribution will be void,
whether that conveyance, transfer, assignment, mortgage, pledge, or encumbrance
is intended to take place or become effective before or after any distribution
of trust assets or the termination of the Trust Fund. The Trustee will under
no circumstances be required to recognize any conveyance, transfer, assignment,
mortgage, pledge or encumbrance by any Director or any person entitled to
receive benefits under the Plan, any part of it, or any interest in it, or to
pay any money or thing of value to any creditor or assignee of any Director or
such person for any cause whatsoever; provided, however, this Section 14.1 does
not affect the provisions of Article III of the Trust Agreement.
14.2 Ownership of Contracts. The Trustee shall hold, own, and
control all contracts and policies purchased by the Trust, if
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any, as well as all other property belonging to the Trust, subject to the
rights of Directors as specified in the Trust Agreement.
14.3 Gender of Words. Whenever the context requires such, words
of the masculine gender used herein shall include the feminine and the neuter,
and the words used in the singular shall include the plural.
14.4 Severability. Each provision of the Trust Agreement is
severable and if any provision is found to be void as against public policy it
shall not affect the validity of any other provision hereof.
14.5 Successors and Assigns. The Trust Agreement shall be
binding upon the successors and assigns of Grantor and the Trustee.
14.6 Governing Law; Parties to Legal Actions. The provisions of
the Trust shall be construed according to the laws of the State of Kansas and,
to the extent applicable, according to the laws of the United States. The
Trustee or Grantor may at any time initiate a legal action or proceeding for
the settlement of the account of the Trustee, or for the determination of any
question or for instructions. The only necessary parties to any such action or
proceeding are the Trustee, the Director concerned, if any, and Grantor;
however, any other person or persons may be included as parties defendant at
the election of the Trustee and Grantor.
IN WITNESS WHEREOF, Grantor and Trustee have caused the Trust
Agreement to be executed in multiple counterparts, each of which shall be
deemed to be an original, as of the date first above written.
GRANTOR:
PURITAN-BENNETT CORPORATION
By: _____________________________
ATTEST:
Title: __________________________
By: _________________________________
Title: ______________________________
(CORPORATE SEAL)
18
<PAGE> 19
TRUSTEE:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By: _______________________________
ATTEST:
Title: ____________________________
By: _________________________________
Title: ______________________________
(SEAL)
19
<PAGE> 1
[LETTERHEAD]
November 7, 1994
Dear Fellow Puritan-Bennett Stockholder:
On October 25, 1994, Thermo Electron Corporation commenced an unsolicited
tender offer to purchase all of the outstanding common stock of Puritan-Bennett
for $24.50 per share in cash.
For the reasons set forth below and in the accompanying statement on
Schedule 14D-9, your Board of Directors has unanimously determined that the
Thermo Electron offer is not in the best interests of Puritan-Bennett and its
stockholders. YOUR BOARD STRONGLY RECOMMENDS THAT YOU REJECT THE OFFER AND NOT
TENDER YOUR SHARES TO THERMO ELECTRON.
Your Board believes that Thermo Electron's offer seeks to deny you the full
value of your investment in Puritan-Bennett. Puritan-Bennett is early in the
process of implementing a carefully conceived long-term business plan after a
major restructuring during the past year, which put some major issues behind us.
Your Board fully expects an increasingly profitable future for Puritan-Bennett
to emerge from our outstanding technological and competitive positions. Thermo
Electron timed its offer to seize Puritan-Bennett's value before the market
fully appreciates the long-term benefits of the restructuring and other
initiatives we have undertaken. Puritan-Bennett is positioned to take advantage
of exciting growth opportunities, both in the United States and abroad,
especially in the home care respiratory products market, the fastest growing
part of our business, and also in the hospital and aviation markets. We want all
of our stockholders to reap these benefits, not just Thermo Electron. Thus,
after careful consideration, your Board has determined that it is in the best
interests of Puritan-Bennett and its stockholders that Puritan-Bennett remain
independent and continue to pursue its long-term business strategy.
Before arriving at its recommendation, your Board carefully reviewed
Puritan-Bennett's businesses, financial condition, technologies and future
prospects, as well as the opinion of Smith Barney Inc. that the $24.50 per share
price provided for in the offer is grossly inadequate to Puritan-Bennett's
stockholders (other than Thermo Electron) from a financial point of view. The
Board also considered numerous other factors described in the attached Schedule
14D-9, including the recent FDA clearance of six new products and product
enhancements that offer the potential for additional revenues and strengthen our
competitive position in the critical care ventilator market and the fact that
Puritan-Bennett stock has traded as high as $35.50 per share as recently as
November 1992 and closed at $25.50 per share on November 4, 1994. Please read
carefully the attached Schedule 14D-9, which describes in depth your Board's
recommendation.
Your Board firmly believes that the benefits of Puritan-Bennett's existing
projects and initiatives have not yet been fully reflected in the market -- and
that they certainly are not reflected in Thermo Electron's offer. In making its
offer at this time, Thermo Electron is trying to buy Puritan-Bennett at a
bargain price that does not reflect Puritan-Bennett's intrinsic value and the
long-term strategic promise that Thermo Electron itself has recognized.
Thank you for your continued support and encouragement. Be assured that
your Board and management will continue to act in your best interests.
Sincerely,
Burton A. Dole, Jr.
Chairman, President and
Chief Executive Officer
<PAGE> 1
NEWS
FOR RELEASE IMMEDIATELY
NOVEMBER 7, 1994
<TABLE>
<C> <S>
Investor Relations Contact: Lee Robbins
913-661-0444
Media Contact: Mitch Stoller
212-880-5285
</TABLE>
PURITAN-BENNETT BOARD REJECTS THERMO ELECTRON OFFER
Overland Park, KS -- The Board of Directors of Puritan-Bennett Corporation
(PBEN:NASDAQ) announced today that it has unanimously determined that an
unsolicited tender offer from Thermo Electron Corp. to acquire Puritan-Bennett
for $24.50 per share in cash is not in the best interests of Puritan-Bennett and
its stockholders. Accordingly, the Board recommended that stockholders reject
the offer and not tender their shares to Thermo Electron.
Burton A. Dole, Jr., President and Chairman of the Board of
Puritan-Bennett, said: "Puritan-Bennett's Board is dedicated to serving its
stockholders' interests. Puritan-Bennett is early in the process of implementing
a carefully conceived long-term business plan after a major restructuring during
the past year. The Board believes that the benefits of Puritan-Bennett's
existing initiatives have not yet been fully reflected in the market and that
they certainly are not reflected in Thermo Electron's offer. In making its offer
at this time, Thermo Electron is trying to buy Puritan-Bennett at a bargain
price that does not reflect Puritan-Bennett's intrinsic value and the long-term
strategic promise that Thermo Electron itself has recognized."
In rejecting the offer, Puritan-Bennett's Board considered a variety of
factors, including the opinion of Smith Barney Inc. that the $24.50 per share
price provided for in the offer is grossly inadequate to Puritan-Bennett's
stockholders (other than Thermo Electron) from a financial point of view, the
recently received FDA clearance of six new products and product enhancements
that offer the potential for additional revenues and strengthen
Puritan-Bennett's competitive position in the critical care ventilator market
and the fact that Puritan-Bennett stock has traded as high as $35.50 per share
as recently as November 1992 and closed at $25.50 per share on November 4, 1994.
Puritan-Bennett will file a formal response with the Securities and
Exchange Commission later today and will mail the response and a letter to its
stockholders.
Mr. Dole stated, "Thermo Electron seeks to deny other stockholders the full
value of their investment in Puritan-Bennett. The restructuring charges of the
past year put some major issues behind us and our Board believes that we are
well positioned to take advantage of exciting growth opportunities, both in the
United States and internationally. Thermo Electron's tender offer is nothing
more than an opportunistic attempt to profit from the undervalued businesses and
prospects of Puritan-Bennett at the expense of our other stockholders."
Puritan-Bennett is a world leader in products related to respiration. These
products are used in multiple health care settings and on aircraft.
<PAGE> 1
EXHIBIT 24
SMITH BARNEY INC.
1345 Avenue Of The Americas
New York, NY 10105
November 6, 1994
The Board of Directors
Puritan-Bennett Corporation
9401 Indian Creek Parkway
Overland Park, Kansas 66225
Gentlemen:
You have requested our opinion as to the adequacy, from a financial point of
view, to the holders (other than Thermo Electron Corporation ("Thermo
Electron") and its affiliates) of the outstanding shares of Common Stock, par
value $1.00 per share (including the associated Common Stock Purchase Rights)
(the "Shares"), of Puritan-Bennett Corporation (the "Company") of the $24.50
net per Share in cash (the "Consideration") being offered to such holders
pursuant to the terms and conditions set forth in PB Acquisition Corp.'s (a
wholly owned subsidiary of Thermo Electron) (the "Purchaser") Offer to
Purchase, dated October 25, 1994 (the "Offer").
In arriving at our opinion, we reviewed the Tender Offer Statement on Schedule
14D-1 filed by the Purchaser and Thermo Electron with the Securities
Exchange Commission on October 25, 1994 (the "Statement") and held discussions
with certain senior officers, directors and other representatives and advisors
of the Company concerning the business, operations and prospects of the
Company. We examined certain publicly available business and financial
information relating to the Company as well as certain financial forecasts and
other data for the Company which were provided to us by the senior management
of the Company. We reviewed the financial terms of the Offer as set forth in
the Statement in relation to, among other things: current and historical market
prices and trading volumes of the Shares; the Company's historical and
projected earnings; and the capitalization and financial condition of the
Company. We also considered, to the extent publicly available, the financial
terms of certain other similar transactions recently effected which we
considered comparable to the Offer
<PAGE> 2
and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations we considered comparable to those of the Company. In addition to
the foregoing, we conducted such other analyses and examinations and considered
such other financial, economic and market criteria as we deemed necessary to
arrive at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information publicly available or furnished to or otherwise discussed with us.
With respect to financial forecasts and other information provided to or
otherwise discussed with us, we assumed that such forecasts and other
information were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the Company as to the
expected future financial performance of the Company. We have not made or been
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company nor have we made any
physical inspection of the properties or assets of the Company. Our opinion is
necessarily based upon financial, stock market and other conditions and
circumstances existing and disclosed to us as of the date hereof.
Smith Barney Inc. has been engaged to render financial advisory services to the
Company in connection with the Offer and will receive a fee for our services.
We also will receive a fee upon the delivery of this opinion. In the ordinary
course of our business, we and our affiliates may actively trade the equity and
debt securities of the Company for our own account or for the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Our advisory services and the opinion expressed herein are provided solely for
the use of the Board of Directors of the Company in its evaluation of the
proposed Offer. Our opinion may not be published or otherwise used or referred
to, in whole or in part, nor shall any public reference to Smith Barney Inc. be
made, without our prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Consideration is grossly inadequate,
from a financial point of view, to the holders of the Shares (other than Thermo
Electron and its affiliates).
Very truly yours,
/s/ Smith Barney Inc.
SMITH BARNEY INC.
