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EXHIBIT 10.1
SUPPLEMENTAL AGREEMENT
November 7, 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:
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 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 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
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Mr. John H. Morrow
November 7, 1994
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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 (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) 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 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
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Mr. John H. Morrow
November 7, 1994
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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 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.
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Mr. John H. Morrow
November 7, 1994
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(b) All determinations required to be made under this
paragraph 6 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 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 6, 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 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 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 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
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November 7, 1994
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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.
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.
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November 7, 1994
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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 Letter Agreement by
signing the enclosed counterpart of this letter and returning it to the
Company.
Very truly yours,
PURITAN-BENNETT CORPORATION
By: /s/ Lee A. Robbins
Vice President
Agreed to and accepted:
/s/ John H. Morrow
JOHN H. MORROW