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EXHIBIT 10.27
JOHN H. MORROW
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
NELLCOR INCORPORATED (the "Corporation") hereby establishes the John H.
Morrow Retirement Benefit Plan (the "Plan") for the benefit of John H. Morrow
(the "Executive").
Section 1. PURPOSE
The purpose of this Plan is to provide, through an unfunded,
nonqualified arrangement, supplemental retirement benefits to the Executive as
an incentive to attract and retain his services.
Section 2. DEFINITIONS
As used herein, the following words and phrases shall have the meanings
specified below unless a different meaning is clearly required by the context:
Section 2.01. Average Monthly Compensation. "Average Monthly Compensation"
means one-sixtieth (1/60) of the Executive's total Compensation for the five (5)
consecutive Plan Years during which he received the largest total amount of
Compensation and which will result in the highest such monthly amount. If the
Executive has been an employee for less than five (5) consecutive Plan Years,
but at least one full Plan Year, "Average Monthly Compensation" means his
Compensation for all full Plan Years, divided by the total number of months
within such full Plan Years. If the Executive has been an employee for less than
one full Plan Year, "Average Monthly Compensation" means his Compensation for
the period of employment divided by the number of full and fraction months of
employment.
Section 2.02. Beneficiary. "Beneficiary" shall have the meaning provided in
the Qualified Plan.
Section 2.03. Board of Directors. "Board of Directors" means the Board of
Directors of the Corporation.
Section 2.04. Committee. "Committee" means the Compensation Committee of the
Board of Directors of the Corporation which shall administer this Plan or such
other committee as may be appointed to administer the Plan.
Section 2.05. Compensation. "Compensation" means, for a Plan Year or other
period, (i) all salary and cash bonuses received by the Executive from the
Employer and (ii) any salary or cash bonuses deferred by the Executive pursuant
to either the Corporation's deferred compensation plan, a qualified cash or
deferred arrangement under Section 401(k) of the Code, or a plan qualified under
Section 125. The term "Compensation" does not include any other form of
compensation, including but not limited to any amounts paid from any severance
pay plan, any deferred compensation plan or any other plan, from the Employer,
whether or not constituting "wages" for purposes of Section 3401(a) of the Code.
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Section 2.06. Death Benefit. "Death Benefit" means any benefit paid to a
Beneficiary upon the death of the Executive as provided under the terms of this
Plan.
Section 2.07. Disability or Disabled. "Disability" or "Disabled" means
eligibility for disability benefits under the terms of the Corporation's
Long-Term Disability Plan in effect at the time the Executive becomes disabled.
In the event such a plan does not exist, disability shall be determined using
the definition under the Corporation's last effective Long-Term Disability Plan.
Section 2.08. Employer. "Employer" means the Corporation, its successors and
assigns, or the subsidiary by which the Executive is employed, and any
organization into which the Employer may be merged or consolidated or to which
substantially all of its assets may be transferred.
Section 2.09. Employment Contract. "Employment Contract" means the
Employment Contract between the Corporation, Puritan-Bennett Corporation ("PB")
and the Executive dated August 25, 1995, and any amendments thereto.
Section 2.10. Plan Year. "Plan Year" means each twelve (12) month period
ending on an anniversary of the Executive's first day of employment with the
Corporation.
Section 2.11. Supplemental Monthly Retirement Benefits. "Supplemental
Monthly Retirement Benefits" means a monthly income due the Executive hereunder.
Section 2.12. Qualified Plan. "Qualified Plan" means the PB Pension Plan
(Restated effective January 1, 1989), as amended from time to time.
Section 2.13. Spouse. "Spouse" means the legal wife of the Executive at the
Executive's date of death.
Section 3. RETIREMENT BENEFITS
Section 3.01. Supplemental Monthly Retirement Benefit. If the Executive
terminates employment with the Employer after attaining age fifty-five (55), he
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 sixty percent (60%) of
the Executive's Average Monthly Compensation, reduced by an amount computed
under Section 3.01(a). The amount resulting from the application of Section
3.01(a) shall then be adjusted as provided in Section 3.01(b).
Section 3.01(a). The amount payable shall be reduced by one hundred percent
(100%) of the monthly income or benefit to the extent such income or benefit is
payable or could be payable to the Executive (as if paid in the form of a single
life annuity commencing as of the Executive's Benefit Commencement Date) under
either (A) the Qualified Plan, (B) any annuity contract distributable in
connection with the termination of the Qualified Plan (regardless of the method
of distribution selected by Executive), (C) the PB Supplemental Retirement Plan,
or (D) the PB Make Up Plan.
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Section 3.01(b). The Executive's Supplemental Monthly Retirement Benefit (as
adjusted by Section 3.01(a)) shall be reduced or increased based upon age at
time of termination, in accordance with the following table:
Amount of Supplemental
Monthly Retirement
Benefit (as adjusted by
Age at Termination Sections 3.01(a))
of Employment To Which Executive Entitled
- ------------------ ---------------------------
Less than 55 0
55 50%
60 75%
65 100%
70 125%
In the event the Executive's age at termination of employment is within
a five-year bracket, the percentage adjustment to the Supplemental Monthly
Retirement Benefit shall be calculated by interpolation on a straight-line
basis.
Section 3.02. Time of Commencement of Supplemental Monthly Retirement
Benefit. Payment of the Supplemental Monthly Retirement Benefit to which the
Executive is entitled pursuant to Section 3.01 shall commence as of the first
day of the calendar month coinciding with or next following the termination of
the Executive's employment (the "Benefit Commencement Date"). However, actual
payment of such Supplemental Monthly Retirement Benefit, in the Normal Form or
other form provided in Section 3.03, shall be subject to the following. If the
Executive has elected the form of payment of his Supplemental Monthly Retirement
Benefit pursuant to Section 3.03 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 Executive did not make an election pursuant to
Section 3.03 during a Preceding Year, but makes 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 Executive does not make an election pursuant to
Section 3.03 during either a Preceding Year or the Termination Year, then the
Executive 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.
Notwithstanding the foregoing, any time actual payment of the Executive's
Supplemental Monthly Retirement Benefit does 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 on the Benefit Commencement Date, together with interest
on all deferred payments (from the date when each such payment would have been
made if actual payment had commenced on the Benefit Commencement Date) at the
Most Applicable Treasury Security Rate compounded annually. The "Most Applicable
Treasury Security Rate" shall be the yield-to-maturity of the Treasury Bill with
a remaining term equal to one-half of the
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period beginning on the Benefit Commencement Date and ending on the date when
payments actually commence, as quoted in the edition of the Wall Street Journal
first published after the Benefit Commencement Date.
Section 3.03. Form of Payment of Supplemental Monthly Retirement Benefits.
The "Normal Form" of payment of the Executive's Supplemental Monthly Retirement
Benefit, and the form on which the amount of such Supplemental Monthly
Retirement Benefit is calculated pursuant to Section 3.01, shall be a single
life annuity payable for the Executive's life only commencing as of his Benefit
Commencement Date. The Executive, however, may 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 Executive's Benefit
Commencement Date, or in the event the Qualified Plan is terminated, as of the
termination of the Qualified Plan) of the Normal Form single life annuity.
(a) Ten-Year Certain and Continuous Option. Pursuant to this option,
the Executive's Supplemental Monthly Retirement Benefit shall be payable during
the Executive's life only; provided that if the Executive dies within ten years
after his Benefit Commencement Date, payments in the same amount will continue
to be made to the Executive's Beneficiary until a total of 120 monthly payments
have been made.
(b) Early Retirement Level Income Option. Pursuant to this option, the
Executive's Supplemental Monthly Retirement Benefit payments will be made during
the Executive's life only. Larger payments shall be made until the first day
when the Executive is eligible to receive Social Security benefits (age 62). At
that time, payments to the Executive shall be reduced by the amount of the
Executive's Social Security benefit that was estimated as part of the
determination of all payments to be made under this Section 3.03(b). No payments
shall be made after the Executive's death.
(c) 50%, 75%, and 100% Contingent Annuitant Option. Pursuant to this
option, the Executive's Supplemental Monthly Retirement Benefit payments shall
be made during the life of the Executive, with payments continuing to the
Executive's designated contingent annuitant ("Contingent Annuitant") for the
life of such Contingent Annuitant following the Executive's death. The
Contingent Annuitant and the percentage to be paid to such Contingent Annuitant
must be designated by the Executive at the time when this payment form is
elected. If the Contingent Annuitant predeceases the Executive, no benefits
shall be paid after the Executive's death. The amount paid to the Executive's
Contingent Annuitant shall be 50%, 75%, or 100% of the amount received by the
Executive during the Executive's life.
Section 3.04. Exceptions for Certain Terminations of Employment.
Notwithstanding the foregoing provisions of this Section 3 or any other
provision(s) of this Plan, in the event of the termination of employment of the
Executive for Good Reason (if initiated by the Executive), and/or other than for
Cause (if initiated by the Corporation), then (a) even if the Executive has not
at the date of termination of employment attained age fifty-five (55), he shall
nevertheless be entitled to the Supplemental Monthly Retirement Benefit provided
under Section 3.01 hereof; (b) the Executive 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
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the Supplemental Monthly Retirement Benefit (as adjusted by Section 3.01(a))
pursuant to Section 3.01(b); (c) the Benefit Commencement Date under Section
3.02 shall be the first day of the calendar month coinciding with or next
following the later of the date the Executive attains age 55 or the date of his
termination of employment for Good Reason or other than for Cause; provided,
however, that in no event shall the Benefit Commencement Date be prior to the
date all severance payments have been made pursuant to the Employment Contract;
and (d) for purposes of Sections 2.01 and 2.05, the Executive shall be deemed to
be employed for the full Plan Year in which he terminates employment, and the
Executive's Compensation for the year of termination of employment shall be
deemed to be equal to the Compensation the Executive would have earned had he
remained employed for the entire year and met any individual performance goals,
but based on the Company's actual performance.
For the purposes of this Section 3.04, the terms "Cause" and "Good
Reason" shall have the meanings set forth in the Employment Contract.
Section 4. DEATH BENEFITS
Section 4.01. Death Before Commencement of Benefits. In the event the
Executive dies or becomes Disabled prior to his Benefit Commencement Date and
has a surviving Spouse, then 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 that would have been payable to the Executive 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 3.03(c), and designated his Spouse as the Contingent
Annuitant. If the Executive 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 Executive would have attained age
fifty-five (55), and no Death Benefit shall be payable in the event his
surviving Spouse dies before such date. No Death Benefit will be paid hereunder
if the Executive dies before his Benefit Commencement Date and is not then
married.
Section 4.02. Death After Commencement of Benefits. If the Executive dies
after his Benefit Commencement Date, the Executive'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 Executive's Supplemental Monthly Retirement Benefit was
being paid or was payable prior to his death). If the Executive 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 Executive
Section 5. DISABILITY
Section 5.01. Disability. If the Executive is Disabled, the Executive shall
commence receiving benefits under this Plan at such time as he commences
receiving benefits under the Corporation's Long-Term Disability Plan, as it may
be amended from time to time, or any successor plan, or, in the absence of such
a plan, at the time benefits would have been payable under the Corporation's
last effective Long-Term Disability Plan. At such time,
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Supplemental Monthly Retirement Benefits shall be paid as determined in Section
3.01 hereunder as though the Executive had retired on the date of his
Disability.
Section 6. PLAN ADMINISTRATION
Section 6.01. Committee. The Committee shall administer the Plan and keep
records of the Executive's benefits.
Section 6.02. Legal Counsel and Advisors. The Committee may employ such
counsel, accountants, actuaries, and other agents as it deems advisable. The
Corporation shall pay the compensation of such counsel, accountants, actuaries,
and other agents and any other expense incurred by the Committee in the
administration of the Plan.
Section 7. MISCELLANEOUS PROVISIONS
Section 7.01. No Guarantee of Employment. Nothing contained in this Plan
shall be deemed to give the Executive the right to be retained in the service of
the Employer or to interfere with the right of the Employer to discharge the
Executive at any time regardless of the effect which such discharge shall have
upon him as a member of this Plan.
Section 7.02. Nature of Employer's Obligations. The benefits provided under
this Plan shall be payable solely from the general assets of the Employer, and
neither the Executive nor the Executive's Spouse or estate shall have any
interest in any assets of the Employer by virtue of this Plan.
Section 7.03. Rights Not Assignable. Except insofar as this provision may be
contrary to applicable law, no sale, transfer, alienation, assignment, pledge,
collateralization, or attachment of any benefits under this Plan shall be valid
or recognized by the Committee.
Section 7.04. Inurements; Successors, Mergers, or Consolidations. This Plan
shall inure to the benefit of and be binding upon (i) the Employer and its
successors and assigns, including, without limitation, any person, organization,
or corporation which may acquire substantially all assets and business of the
Employer, or any corporation with which or into which the Employer may be merged
or consolidated, and (ii) the Executive and his heirs, executors,
administrators, and legal representatives.
Section 7.05. Construction. This Plan shall be governed by, and interpreted
and enforced in accordance with, the laws of the State in which the Executive
resides at the time the dispute arises.
Section 7.06. Plurality Clause. Words in the singular shall be read and
construed as though used in the plural in all cases where they would so apply.
Section 7.07. Benefits Upon Removal from Plan. The Executive shall not be
removed from membership in this Plan unless:
(a) The Executive is convicted for a felonious act against the
Employer; or
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(b) The Executive breaches the terms of the Agreement.
If a Executive is removed from this Plan pursuant to this Section, all
future benefits payable under this Plan to the Executive or Beneficiary shall
cease.
Section 7.08. Conditions to Payment of Benefits. The payment of benefits to
the Executive or Beneficiary under this Plan is conditioned upon and subject to
the following conditions:
(a) Competition Restriction. During the period of employment and during
the period that the Executive is receiving Supplemental Monthly Retirement
Benefits under this Plan, the Executive 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 Executive shall have obtained the prior written consent of the
Committee.
(b) Advisory Services. The Executive agrees that, as long as he is to
receive any payment from the Plan, and as long as he is physically and mentally
able to do so, he will render to the Corporation, as an independent contractor,
such advice, counsel, or other services as the Corporation may reasonably and
from time to time require, at the times and places mutually agreeable to
Executive and Corporation. For such advice, counsel, and other services as the
Executive may render in accordance with the provisions of this Section, the
Executive shall be compensated by the Corporation as an independent contractor
in such amounts as shall be reasonably agreed to between the Executive and the
Corporation. In addition, the Corporation shall reimburse the Executive for
reasonable travel expense from whatever place the Executive may then be living
and for other reasonable expenses incurred by the Executive in rendering such
advisory services.
Section 7.09. Arbitration and Amendment; Waivers. The arbitration and
amendment/waiver provisions set forth in the Employment Contract are hereby
incorporated into this Plan.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be executed
this 25th day of August, 1995, to be effective on such date.
ATTEST: (SEAL) NELLCOR INCORPORATED
By: By:
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Secretary President
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