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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,
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June 9, 1994
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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
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June 9, 1994
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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.
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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.
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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
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June 9, 1994
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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.
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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
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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.
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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