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Exhibit 5
FORM OF EXECUTIVE AGREEMENT
FOR MESSRS. DOYLE, JONES, RANKIN AND NILES
November 7, 1994
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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
________________________ 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
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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.
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.
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"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.
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)(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.
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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
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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
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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 (the "Code"), as
follows: the Company shall pay the percentage of 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, which percentage shall be the
fraction (expressed as a percentage), the numerator
of which shall be the difference between (i) the
monthly cost of COBRA coverage for your coverage
status in effect immediately prior to the Employment
Termination Date and (ii) your monthly contribution
toward your coverage in effect immediately prior to
the Employment Termination Date, and the denominator
of which shall be the monthly cost of COBRA coverage
for your coverage status in effect immediately prior
to the Employment Termination Date. All of such
amounts shall be determined as of the day immediately
preceding the termination of Employee's employment.
The insurance continuation benefits paid for
hereunder shall be deemed to be part of Employee's
COBRA coverage.
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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 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.
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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.
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 an accounting
firm jointly selected by you and the Company (the
"Accounting Firm") and paid by the Company, and which
may be the Company's independent auditors. The
Accounting Firm 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
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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 Accounting Firm 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 Accounting Firm, 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 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 Accounting Firm
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 Accounting Firm, based upon the
assertion of a deficiency by the Internal Revenue
Service against Employee or the Company which the
Accounting Firm believes has a high probability of
success, determines 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 Accounting Firm, based
upon controlling precedent or other substantial
authority, determines 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
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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 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:
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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.
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
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By:
Title:
Agreed to and accepted:
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