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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).
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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
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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
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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
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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
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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
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Burton A. Dole, Jr. Title:
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Address:
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