-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, OlJZ0q3qZshYJEszhDprwFPZVLZq6cZCOjx/+y1UiVzgnOKc0t9wL+yeNDRa1+/f oC9uOfXw+hV+M3fZipqIhg== 0000950123-94-001915.txt : 19941122 0000950123-94-001915.hdr.sgml : 19941122 ACCESSION NUMBER: 0000950123-94-001915 CONFORMED SUBMISSION TYPE: SC 14D9/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19941121 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PURITAN BENNETT CORP CENTRAL INDEX KEY: 0000081199 STANDARD INDUSTRIAL CLASSIFICATION: 3842 IRS NUMBER: 440399150 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 14D9/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-11018 FILM NUMBER: 94561269 BUSINESS ADDRESS: STREET 1: 9401 INDIAN CREEK PKWY BLDG 40 STE 300 CITY: OVERLAND PARK STATE: KS ZIP: 66210 BUSINESS PHONE: 913-338-7410 MAIL ADDRESS: STREET 1: 9401 INDIAN CREEK PARKWAY CITY: OVERLAND PARK STATE: KS ZIP: 66210 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PURITAN BENNETT CORP CENTRAL INDEX KEY: 0000081199 STANDARD INDUSTRIAL CLASSIFICATION: 3842 IRS NUMBER: 440399150 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 14D9/A BUSINESS ADDRESS: STREET 1: 9401 INDIAN CREEK PKWY BLDG 40 STE 300 CITY: OVERLAND PARK STATE: KS ZIP: 66210 BUSINESS PHONE: 913-338-7410 MAIL ADDRESS: STREET 1: 9401 INDIAN CREEK PARKWAY CITY: OVERLAND PARK STATE: KS ZIP: 66210 SC 14D9/A 1 AMENDMENT NO. 1 TO SCHEDULE 14D-9 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-9 (AMENDMENT NO. 1) SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------ PURITAN-BENNETT CORPORATION (Name of Subject Company) PURITAN-BENNETT CORPORATION (Name of Person(s) Filing Statement) COMMON STOCK, PAR VALUE $1.00 PER SHARE (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS) (Title of Class of Securities) 746299106 (CUSIP number of Class of Securities) BURTON A. DOLE, JR., CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER PURITAN-BENNETT CORPORATION 9401 INDIAN CREEK PARKWAY, P.O. BOX 25905 OVERLAND PARK, KANSAS 66225-5905 (913) 661-0444 (Name, address and telephone number of person authorized to receive notice and communications on behalf of the person(s) filing statement) COPIES TO: DANIEL C. WEARY, ESQ. PETER D. LYONS, ESQ. BLACKWELL SANDERS SHEARMAN & STERLING MATHENY WEARY & LOMBARDI L.C. 599 LEXINGTON AVENUE TWO PERSHING SQUARE NEW YORK, NEW YORK 10022 2300 MAIN STREET - SUITE 1100 (212) 848-4000 KANSAS CITY, MISSOURI 64108 (816) 274-6800 2 2 This Amendment No. 1 amends and supplements the Solicitation/Recommendation Statement on Schedule 14D-9, dated November 7, 1994 (as amended, the "Schedule 14D-9"), filed by Puritan-Bennett Corporation, a Delaware corporation (the "Company"), relating to the tender offer disclosed in the Tender Offer Statement on Schedule 14D-1, dated October 25, 1994 (the "Schedule 14D-1"), of PB Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Thermo Electron Corporation, a Delaware corporation ("Thermo Electron"), to purchase all of the outstanding Shares upon the terms and subject to the conditions set forth in the Offer to Purchase, dated October 25, 1994, and the related Letter of Transmittal (together, the "Offer"). Capitalized terms used and not defined herein shall have the meanings set forth in the Schedule 14D-9. This Amendment No. 1 is being filed to amend and restate Exhibits 3, 5, 6, 7, 14, 16 and 17 to the Schedule 14D-9 in their entirety as filed herewith, to add a press release issued by the Company on November 21, 1994 as Exhibit 25 to the Schedule 14D-9 and to amend Item 9 of the Schedule 14D-9. ITEM 9. MATERIAL TO BE FILED AS EXHIBITS. The list of exhibits contained in Item 9 is hereby amended by deleting the references to Exhibits 3, 5, 6, 7, 14, 16 and 17 and replacing them with the following: Exhibit 3 -- Supplemental Agreement, dated November 7, 1994, between John H. Morrow and the Company. Exhibit 5 -- Form of Executive Agreement for Messrs. Doyle, Jones, Rankin and Niles. Exhibit 6 -- Form of Severance Agreement. Exhibit 7 -- Puritan-Bennett Corporation Change of Control Severance Plan. Exhibit 14 -- Amendment to the Restated Puritan-Bennett Savings & Stock Ownership Plan Exhibit 16 -- SERP Agreement between Burton A. Dole, Jr. and the Company. 3 3 Exhibit 17 -- SERP Agreement between John H. Morrow and the Company. In addition, the list of exhibits contained in Item 9 is hereby amended and supplemented by adding thereto the following: Exhibit 25 --Press Release of the Company, dated November 21, 1994. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. PURITAN-BENNETT CORPORATION By: /s/ Burton A. Dole, Jr. -------------------------- Name: Burton A. Dole, Jr. Title: Chairman, President and Chief Executive Officer Dated: November 21, 1994 ------------------ 4 EXHIBIT INDEX
Number Title ------ ----- 1* Excerpts from the Company's Proxy Statement dated June 10, 1994 for its 1994 Annual Meeting of Stockholders. 2* Employment Agreement, dated April 25, 1980, between Burton A. Dole, Jr. and the Company. 3 Supplemental Agreement, dated November 7, 1994, between John H. Morrow and the Company. 4* Employment Agreement, dated June 9, 1994, between John H. Morrow and the Company. 5 Form of Executive Agreement for Messrs. Doyle, Jones, Rankin and Niles. 6 Form of Severance Agreement. 7 Puritan-Bennett Corporation Change of Control Severance Plan. 8* Form of Additions to Puritan-Bennett Corporation Management Incentive Bonus Plan A, and Management Incentive Bonus Plan B. 9* Form of First Amendment to the Restated Puritan-Bennett Deferred Compensation Plan. 10* Form of First Amendment to the Puritan-Bennett Supplemental Retirement Benefit Plan. 11* Form of Third Amendment to the Puritan-Bennett Supplemental Retirement Benefit Plan. 12* Form of First Amendment to the Puritan-Bennett Corporation Pension Benefit Make Up Plan. 13* Form of Addition to the Company's 1988 Stock Benefit Plan.
- -------------------- *Previously Filed 5
Number Title ------ ----- 14 Amendment to the Restated Puritan-Bennett Savings & Stock Ownership Plan. 15* Form of Amendment to the Puritan-Bennett Corporation Directors Post-Retirement Income Plan. 16 SERP Agreement between Burton A. Dole, Jr. and the Company. 17 SERP Agreement between John H. Morrow and the Company. 18* Form of First Amendment to the Trust Agreement for the Restated Puritan-Bennett Deferred Compensation Plan. 19* Form of Trust Agreement for the Puritan-Bennett Supplemental Retirement Benefit Plan. 20* Form of Trust Agreement for the Puritan-Bennett Corporation Pension Benefit Make Up Plan. 21* Form of Trust Agreement for the Puritan-Bennett Corporation Directors Post- Retirement Income Plan. 22* Letter to Stockholders of the Company. 23* Press Release of the Company, dated November 7, 1994. 24* Opinion of Smith Barney Inc., dated November 6, 1994. 25 Press Release of the Company, dated November 21, 1994.
EX-99.3 2 SUPP. AGREEMENT BETWEEN MORROW AND COMPANY 11-7-94 1 Exhibit 3 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: 1.1 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 2 Mr. John H. Morrow November 7, 1994 Page 2 below); provided, that the Continued Payment Period shall not 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 3 Mr. John H. Morrow November 7, 1994 Page 3 force and effect. It is expressly agreed that payments or benefits to you under the 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 4 Mr. John H. Morrow November 7, 1994 Page 4 purposes of this paragraph 6, 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 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. 5 Mr. John H. Morrow November 7, 1994 Page 5 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 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. 6 Mr. John H. Morrow November 7, 1994 Page 6 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 Robbins ------------------------------ Vice President Agreed to and accepted: /s/ John H. Morrow - ------------------------- JOHN H. MORROW EX-99.5 3 FORM OF EXECUTIVE AGREEMENT 1 Exhibit 5 FORM OF EXECUTIVE AGREEMENT FOR MESSRS. DOYLE, JONES, RANKIN AND NILES November 7, 1994 - --------------------------- - --------------------------- 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 2 - ------------------- November 7, 1994 Page 2 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. 3 - ------------------- November 7, 1994 Page 3 "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. 4 - ------------------- November 7, 1994 Page 4 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. 5 - ------------------- November 7, 1994 Page 5 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 6 - ------------------- November 7, 1994 Page 6 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 7 - ------------------- November 7, 1994 Page 7 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. 8 - ------------------- November 7, 1994 Page 8 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. 9 - ------------------- November 7, 1994 Page 9 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 10 - ------------------- November 7, 1994 Page 10 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 11 - ------------------- November 7, 1994 Page 11 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: --------------------------- --------------------------- --------------------------- 12 - ------------------- November 7, 1994 Page 12 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 --------------------------------- By: Title: Agreed to and accepted: - ------------------------------- EX-99.6 4 FORM OF SEVERANCE AGREEMENT 1 Exhibit 6 FORM OF SEVERANCE AGREEMENT November 7, 1994 - --------------------------- - --------------------------- Puritan-Bennett Corporation [Address] Dear ______________: In view of your position as ________________________________ at Puritan-Bennett Corporation (the "Company"), and in consideration of your services in such capacity, the Board of Directors (the "Board") has approved the commitment by the Company to you ("Employee") to provide you with certain benefits in the event your employment is terminated for specified reasons within two years after a Change of Control. The purpose of this letter agreement (the "Agreement") is to set forth the terms and conditions of the Company's agreement with you concerning such benefits. 1. Termination Benefits. If, within two years after the date of a Change of Control, Employee's employment is terminated (a) by the Company for any reason other than for Cause or Employee's death or Disability or (b) by Employee for Good Reason, Employee will be entitled to receive the following benefits: 1.1 Within 30 days following the Date of Termination, the Company shall pay to you in a lump sum the present value, determined as of the Date of Termination, of the amounts that you would have been paid by the Company if, during the Continued Payment Period, the Company were to make weekly payments to you each equal to one fifty-second of your Annual Compensation. Such payment shall be subject to all required withholdings. The Continued Payment Period shall commence on the Date of Termination, 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; provided, that the Continued Payment Period shall not exceed two years. Present value shall be determined using a discount rate, compounded annually, equal to the yield-to-maturity of a U.S. Treasury Bill 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 Date of Termination. If Employee should die before receiving all amounts payable to Employee hereunder, any unpaid amounts will be paid to Employee's spouse, if living, and otherwise to Employee's estate. Employee shall be entitled to receive interest on any amount payable hereunder from the date payment 2 - ---------------- November 7, 1994 Page 2 was due to the date actually paid at the rate of the lesser of 12% or the highest rate legally permissible. Employee will not be required to mitigate the amount of the payments due to Employee hereunder by seeking other employment or otherwise. Any amount earned by Employee as the result of employment by another employer or otherwise after the Date of Termination shall not reduce the Company's obligation to Employee hereunder. 1.2 Any outstanding unvested options held by Employee 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. 1.3 COBRA Benefits. 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 Date of Termination, 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 Date of Termination and (ii) your monthly contribution toward your coverage in effect immediately prior to the Date of Termination, and the denominator of which shall be the monthly cost of COBRA coverage for your coverage status in effect immediately prior to the Date of Termination. 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. 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. 1.4 Offset for Other Arrangements. The severance benefits provided hereunder will be reduced by the amount of any severance benefits to which Employee is entitled under the Company's Severance Benefits policy for terminated employees, or any other agreement between Employee and the Company for severance benefits. 2. Notice of Termination. Any termination by the Company for Cause or by Employee for Good Reason shall be communicated by written notice to the other party given by hand delivery or by registered or certified mail, return receipt requested, postage prepaid, if to Employee, then to Employee at his or her address as set forth in the Company's records, and, if to the Company, to Puritan-Bennett Corporation, Human Relations Division, 9401 Indian Creek Parkway, Overland Park, Kansas 66207. Any notices given pursuant to this paragraph 2 shall be effective the earlier of when such notice is actually received by the addressee or three days after such notice is delivered or sent. 3. Definitions. 3 - ---------------- November 7, 1994 Page 3 3.1 "Annual Compensation" means the greater of (a) the sum of (i) the Employee's annual base salary ("Base Salary") in effect on the Date of Termination, plus (ii) the annual average of the Employee's incentive bonus payments under the Company's Management Incentive Bonus Plan or any successor thereto with respect to the three full (12 months) fiscal years ("Average Bonus") immediately preceding the Date of Termination (provided, if Employee has not been employed by the Company during all of the three full fiscal years immediately preceding the Date of Termination, then "Average Bonus" shall mean the annualized average of the bonus payments received by the Employee, computed based on the actual period of Employee's employment with the Company during any full fiscal year(s) of the Company with respect to which Employee has received a bonus); or (b) the sum of (x) the Employee's Base Salary in effect on the date of the Change of Control, plus (y) the Employee's Average Bonus computed with respect to the three full (12 months) fiscal years immediately preceding the date of the Change of Control. 3.2 "Cause" means (a) the Employee's willful violation of any reasonable rule or direct order of the Board, the Company's Chief Executive Officer ("CEO") or other elected officer, where such officer is Employee's direct supervisor, 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 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. 3.3 Change of Control. A "Change of Control" shall be deemed to have occurred at any of the following times: 3.3.1 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 4 - ---------------- November 7, 1994 Page 4 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 securities generally entitled to vote in the election of directors. 3.3.2 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 3.3.2, considered as though such person were a member of the Incumbent Board; or 3.3.3 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 3.3.4 The occurrence of any other event which the Incumbent Board in its sole discretion determines constitutes a Change of Control. 5 - ---------------- November 7, 1994 Page 5 3.4 "Date of Termination" means the date of receipt of the written notice of termination pursuant to paragraph 2 or any later date specified therein, as the case may be; provided, however, that (a) if Employee's employment is terminated by the Company other than for Cause or by reason of death or Disability, the Date of Termination shall be the date on which the Company notifies Employee of such termination and (b) if Employee's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death or determination of Disability pursuant to paragraph 3.5, as the case may be. 3.5 "Disability" means disability that, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Employee or Employee's legal representative (such acceptance not to be unreasonably withheld). 3.6 "Good Reason" means (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. 4. Nonexclusivity. Nothing in this Agreement shall prevent or limit Employee's continuing or future participation in any benefit, bonus, incentive or other plans, programs, policies or practices provided by the Company and for which Employee may otherwise qualify, nor shall anything herein limit or otherwise affect such rights as any Employee may have under any stock option or other agreements with the Company. Except as otherwise expressly provided herein, amounts which are vested benefits or which Employee is otherwise entitled to receive under any plan, policy, practice or program of the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program. 5. 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 6 - ---------------- November 7, 1994 Page 6 this Agreement, shall mean the Company as hereinafter defined and any successor or assignee to the business or assets which by reason hereof becomes bound by the terms and provisions of this Agreement. 6. 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 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. (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. 7 - ---------------- November 7, 1994 Page 7 (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. (d) Notwithstanding anything in this Agreement to the contrary, if after giving effect to the provisions of paragraphs 6(a)-(c) any portion of any payments to Employee by the Company hereunder 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 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. 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 semiannually. 7. Amendments and Termination. The Incumbent Board may from time to time supplement, amend or terminate this Agreement or make any other provisions which the Company may deem necessary or desirable, without the approval of Employee; provided, however, that from and after such time there has been a Change of Control, this Agreement shall not be amended in any manner which would adversely affect the interests of Employee without the written consent of Employee. Subject to the foregoing, this Agreement establishes and vests in Employee a contractual right to the benefits to which Employee is entitled hereunder, enforceable by Employee against the Company. The form of any proper amendment or termination of this Agreement shall be a written instrument signed by a duly authorized officer or officers of the Company certifying that the amendment or termination has been approved by the Incumbent Board. 8 - ---------------- November 7, 1994 Page 8 8. Miscellaneous. 8.1 Employment Status. This Agreement does not constitute a contract of employment or impose on Employee or the Company any obligation to retain Employee as an employee, to change the status of Employee's employment, or to change the Company's policies regarding termination of employment. 8.2 No Assignment. No benefit hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void. 8.3 Governing Law. This Agreement shall be governed by the laws of the State of Kansas. 8.4 Expenses of Suit. In the event of any dispute or litigation between the Company and Employee arising out of this Agreement, 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, covenants 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 By: --------------------------- President Agreed to and Accepted: - ----------------------- EX-99.7 5 P-B CORP. CHANGE OF CONTROL SEVERANCE PLAN 1 Exhibit 7 PURITAN-BENNETT CORPORATION CHANGE OF CONTROL SEVERANCE PLAN SECTION 1. INTRODUCTION This Change of Control Severance Plan (the "Plan") was adopted by the Board of Directors of Puritan-Bennett Corporation effective November 7, 1994. The Plan is intended to provide Employees whose employment terminates for specified reasons within two years after a Change of Control with a lump sum severance payment and with the continuation of coverage under certain employee benefit plans. The Plan is an employee welfare benefit plan within the meaning of Section 3(l) of the Employee Retirement Income Security Act of 1974 ("ERISA") and Section 2510.3-1 of the regulations issued thereunder. SECTION 2. DEFINITIONS (a) "Board" means the Company's Board of Directors, as constituted from time to time. (b) "Cause" means (i) the Employee's violation of Company policy or failure to perform satisfactorily any assigned duties of his or her job, if such failure is not corrected within 30 days after written notice to the Employee, or (ii) misconduct, including but not limited to: (A) 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 (B) drug or alcohol abuse on Company premises or at a Company sponsored event, or (C) conduct by an Employee that in the good faith and reasonable determination of the Company demonstrates gross unfitness. "Cause" shall not include any matter other than those specified in (A) through (C) 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, 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. (c) "Change of Control" shall be deemed to have occurred at any of the following times: 2 (i) 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 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 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 (c)(ii), considered as though such person were a member of the Incumbent Board; or (iii) 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 (iv) The occurrence of any other event which the Incumbent Board in its sole discretion determines constitutes a Change of Control. (d) "Company" means Puritan-Bennett Corporation. 2 3 (e) "Controlled Group" means the Company and each other entity that, at the time in question, is in the same controlled group of corporations within the meaning of Section 414(b) of the Internal Revenue Code of 1986, as amended; provided, however, that the term "Controlled Group" shall not include any foreign (non-U.S.) corporations or unincorporated entities. (f) "Date of Termination" means the date of receipt of the written notice of termination pursuant to Section 3 or any later date specified in such notice; provided, however, that (i) if the Employee's employment is terminated by the Company other than for Cause or by reason of death or Disability, the Date of Termination shall be the date on which the Company notifies the Employee of such termination and (ii) if the Employee's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death or determination of Disability pursuant to Section 2(g), as the case may be. (g) "Disability" means disability that, at least 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such acceptance not to be unreasonably withheld). (h) "Employee" means each regular full-time and regular part-time employee on the payroll of the Company on the day before a Change of Control occurs; provided, however, that "Employee" shall exclude any individual who renders services to the Company through any temporary employment agency or other employee leasing arrangement. (i) "Good Reason" means (i) reduction of Employee's base salary or rate of compensation as in effect immediately prior to the Change of Control, (ii) failure to continue to provide any medical, dental, accident or disability benefits that are no less favorable in the aggregate than the benefits provided to Employee immediately prior to the Change of Control (except that employee contributions may be raised to the extent of any cost increases imposed by third parties), (iii) failure or refusal of the successor company to assume the Company's obligations under this Plan, as required by Section 4(b), (iv) breach by the Company or any successor company of any of the provisions of this Plan, or (v) change of Employee's principal place of employment to a location more than 50 miles from Employee's principal place of employment on the date hereof without the consent of Employee. (j) "Pay" means all wages, salary, bonus and other incentive compensation (including commissions) paid by the Company as consideration for an Employee's service during the 12 months ended on either the Date of Termination or the date of the Change of Control, whichever is greater, that are includible in the gross income of the Employee for federal income tax purposes. If an Employee has not been employed by the Company for a full 12 months, the amount actually received by 3 4 Employee during Employee's actual period of employment shall be annualized to compute "Pay". SECTION 3. NOTICE OF TERMINATION Any termination of an Employee by the Company (whether for Cause or otherwise) or by the Employee for Good Reason shall be communicated by written notice to the other party given by hand delivery or by registered or certified mail, return receipt requested, postage prepaid. If mailed, notice to an Employee shall be delivered to his or her address as set forth in the Company's records. Notice to the Company shall be delivered to Puritan-Bennett Corporation, 9401 Indian Creek Parkway, Overland Park, Kansas 66225, Attention: Human Relations Director. Any notice given pursuant to this Section 3 shall be effective on the earlier of when such notice is actually received by the addressee or three days after such notice is delivered or sent. SECTION 4. BENEFITS (a) Conditions of Payment. A benefit shall be payable to an Employee under the Plan if, within 24 months after the occurrence of a Change of Control, his or her employment with any member of the Controlled Group is terminated (i) by the Company for any reason other than Cause or the Employee's death or Disability or (ii) voluntarily by the Employee for Good Reason. Subject to Subsections (b) and (e) of this Section 4, the benefit is payable regardless of any return to employment. (b) Special Rules and Exceptions. All members of the Controlled Group shall participate in the Plan. In the case of a spinoff after a Change of Control, the spun-off member shall adopt a plan equivalent to this Plan and any other severance plan maintained by the member of the Controlled Group from which it was spun off and shall continue this Plan and such other plan (if any) for two years following the spinoff. No benefit shall be payable hereunder solely because an Employee is transferred to another member of the Controlled Group (as it existed prior to the Change of Control) or there is a spin-off and the Employee becomes an employee of a spun-off member. In addition no benefit shall be payable hereunder solely because an Employee's employment terminates because a subsidiary, a division or other operating assets of any member of the Controlled Group is sold if: (i) The purchaser is contractually obligated to offer the Employee the same or a better job without relocation; and (ii) The purchaser is contractually obligated to maintain both a plan equivalent to this Plan and a plan equivalent to any other severance plan that 4 5 covered the Employee prior to the sale for the balance of the two-year period from the Change of Control. In the event of a transfer to another member of the Controlled Group (as it existed before the Change of Control) that requires the Employee's relocation, the Employee shall be reimbursed for his or her relocation expenses under the Company's policy in effect prior to the Change of Control. (c) Cash Benefit. An Employee's lump sum severance payment shall be paid in cash as soon as practicable (but in no event more than 30 days) following termination of employment, and shall be equal to the greater of (i) four weeks of Pay, or (ii) one week of Pay for each completed six months of such Employee's service with the Company; provided that in no event shall the total amount of payments hereunder to an Employee exceed two times the Employee's compensation during the one-year period ending on the Date of Termination. (d) Offsets and Withholding. The benefit under this Plan will be reduced by any severance benefits to which the Employee is entitled under the Company's Severance Benefits policy for terminated employees, or any other agreement between the Employee and the Company for severance benefits. In any event, the Company shall withhold any appropriate federal, state, local and foreign income and employment taxes from any cash payments made hereunder. (e) COBRA Benefits. An Employee who is entitled to the lump sum severance payment hereunder shall also be entitled to the following benefits: 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 the Employee's coverage status (e.g., individual or family coverage) in effect immediately preceding termination of the Employee's employment, 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 the Employee's coverage status in effect immediately prior to the termination of the Employee's employment and (ii) the Employee's monthly contribution toward the Employee's coverage in effect immediately prior to the termination of the Employee's employment, and the denominator of which shall be the monthly cost of COBRA coverage for the Employee's coverage status in effect immediately prior to the termination of the Employee's employment. 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 a part of such Employee's 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 terminated Employees. 5 6 SECTION 5. NONEXCLUSIVITY Nothing in this Plan shall prevent or limit the Employee's continuing or future participation in any benefit, bonus, incentive or other plan, program, policy or practice provided by the Company and for which Employees may otherwise qualify, nor shall anything herein limit or otherwise affect such rights that any Employee may have under any stock option or other agreement with the Company. Except as otherwise expressly provided herein, amounts that are vested benefits or that an Employee is otherwise entitled to receive under any plan, policy, practice or program of the Company at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program. SECTION 6. PAYMENTS TO AND FROM THE PLAN The benefits under the Plan shall be paid from the general funds of the Company, and all Employees shall be no more than unsecured general creditors of the Company. Nothing contained in the Plan shall be deemed to create a trust of any kind for the benefit of the Employees, or create any fiduciary relationship between the Company and the Employees with respect to any assets of the Company. The Company is under no obligation to fund the benefits provided herein prior to payment, although it may do so if it chooses. Any assets that the Company chooses to use for advance funding shall nevertheless constitute assets of the Company and shall not cause the Plan to be a funded plan within the meaning of any section of ERISA. SECTION 7. ADMINISTRATION The Company is the plan administrator and plan sponsor for purposes of ERISA. SECTION 8. REDUCTION OR DEFERRAL OF BENEFIT Although it is highly unlikely that the provisions of this Section 8 could ever apply, in order to minimize potential adverse income tax consequences to either or both the Company and the Employee, and notwithstanding anything in this Plan to the contrary: (a) If any amounts due to the Employee under this Agreement and any other plan or program of the Company constitute a "parachute payment" as such term is defined in Section 280G(b)(2) of the Code, and the amount of the parachute payment, is equal to or greater than three times the Employee's "base amount," as defined in Section 280G(b)(3) of the Code, then the aggregate of the amounts constituting the parachute payment shall be reduced to an amount that will equal three times the Employee's base amount, less $1.00. The determination to be made with respect to this Section 8(a) shall be made by the Company's independent auditors, who shall be paid by the Company. 6 7 (b) If after giving effect to the provisions of Section 8(a) any portion of any payments to the Employee by the Company hereunder 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 the Employee shall be deferred until the earliest date upon which payment thereof can be made to the Employee 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 the Employee on the amount deferred at 120% of the applicable federal rate provided for in Section 7872(f)(2) of the Code, compounded semi-annually. SECTION 9. AMENDMENT AND TERMINATION If no Change of Control occurs, the Plan shall terminate on the first anniversary of its effective date, subject to renewal from year to year. Prior to a Change of Control, the Company may amend or terminate the Plan at any time and for any reason. For 24 months following a Change of Control, this Plan and any other Controlled Group severance plan shall not be terminated and shall not be amended to reduce any benefit or to make any condition more restrictive as it applies to any Employee. SECTION 10. MISCELLANEOUS (a) No Implied Employment Contract. The Plan shall not be deemed to give (i) any Employee or other person any right to be retained in the employ of the Company nor (ii) to interfere with the right of the Company to discharge any Employee or other person at any time and for any reason, which right is hereby reserved. (b) Benefits Not Assignable. No benefit hereunder shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void. (c) Legal Construction. The Plan shall be construed in accordance with ERISA and, to the extent not preempted by ERISA, with the laws of the State of Kansas. (d) Severability. If any term, provision, covenant or restriction of the Plan is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of the Plan shall remain in full force and effect and shall in no way be affected, impaired or invalidated. 7 8 SECTION 11. CLAIMS, INQUIRIES AND APPEALS (a) Applications for Benefits and Inquiries. Any application for benefits, inquiries about the Plan or inquiries about present or future rights under the Plan must be submitted to the Plan Administrator in writing. The Plan Administrator is: Puritan-Bennett Corporation Attention: Human Relations Department 9401 Indian Creek Parkway Overland Park, Kansas 66225 (b) Denial of Claims. In the event that any application for benefits is denied in whole or in part, the Plan Administrator must notify the applicant, in writing, of the denial of the application, and of the applicant's right to review of the denial. The written notice of denial will be set forth in a manner designed to be understood by the applicant, and will include specific reasons for the denial, specific references to the Plan provision upon which the denial is based, a description of any information or material that the Plan Administrator needs to complete the review and an explanation of the Plan's review procedure. This written notice will be given to the applicant within 90 days after the Plan Administrator receives the application, unless special circumstances require an extension of time, in which case the Plan Administrator shall have up to an additional 90 days for processing the application. If an extension of time for processing is required, written notice of the extension will be furnished to the applicant before the end of the initial 90-day period. This notice of extension will describe the special circumstances necessitating the additional time and the date by which the Plan Administrator is to render its decision on the application. If written notice of denial of the application for benefits is not furnished within the specified time, the application shall be deemed to be denied. The applicant will then be permitted to appeal the denial in accordance with the Review Procedure described below. (c) Review Panel. The Plan Administrator will appoint a "Review Panel," consisting of three individuals who may, but need not, be employees of the Company. The Review Panel will be the named fiduciary that has the authority to act on any appeal from a denial of benefits under the Plan. (d) Request for a Review. Any person (or that person's authorized representative) whose application for benefits is denied (or deemed denied), in whole or in part, may appeal the denial by submitting a request for a review to the Review Panel within 60 days after receiving written notice of the denial from the Plan 8 9 Administrator (or in the case of a deemed denial, within 60 days after the application is deemed denied). The Plan Administrator will give the applicant (or his or her representative) an opportunity to review pertinent documents in preparing a request for review. A request for a review shall be in writing and shall be addressed to the Review Panel. A request for review must set forth all of the grounds on which it is based, all facts in support of the request and any other matters that the applicant believes to be pertinent. The Review Panel may require the applicant to submit additional facts, documents or other material as it may find necessary or appropriate in making its review. (e) Decision on Review. The Review Panel will act on each request for review within 60 days after receipt of the request, unless special circumstances require an extension of time (not to exceed an additional 60 days) for processing the request for review. If an extension of time is required, written notice of the extension will be furnished to the applicant within the initial 60-day period. The Review Panel will give prompt, written notice of its decision to the applicant and to the Plan Administrator. In the event that the Review Panel confirms the denial of the application for benefits in whole or in part, the notice will outline, in a manner calculated to be understood by the applicant, the specific Plan provisions upon which the decision is based. If written notice of the Review Panel's decision is not given to the applicant within the time prescribed in this Subsection (e), the application will be deemed denied. (f) Rules and Procedures. The Review Panel will establish rules and procedures, consistent with the Plan and with ERISA, as necessary and appropriate in carrying out its responsibilities. The Review Panel may require an applicant who wishes to submit additional information in connection with an appeal from the denial (or deemed denial) of benefits to do so at the applicant's own expense. (g) Exhaustion of Remedies. No legal action for benefits under the Plan may be brought until (i) the applicant has submitted a written application for benefits in accordance with the procedures described by Subsection (a) above, (ii) such application has been denied or deemed denied in accordance with Subsection (b) above, (iii) the applicant has filed a written request for a review of the application in accordance with the appeal procedure described in Subsection (d) above, and (iv) the application is denied or deemed denied under the review procedure set forth in Subsection (e) above. SECTION 12. OTHER PLAN INFORMATION (a) Employer and Plan Identification Numbers. The Employer Identification Number ("EIN") assigned to Puritan-Bennett Corporation is 44-0399150. The Plan Number ("PN") assigned to the Plan by the Plan Sponsor pursuant to the instructions of the Internal Revenue Service is 512. 9 10 (b) Ending Date for Plan's Fiscal Year. The date of the end of the fiscal year for the purpose of maintaining the Plan's records is January 31. (c) Agent for the Service of Legal Process. The agent for the service of legal process with respect to the Plan is Mr. Daniel C. Weary, Member, Blackwell Sanders Matheny Weary & Lombardi L.C., 2300 Main Street, Kansas City, Missouri 64108. The service of legal process may also be made on the Plan by serving the Plan Administrator. (d) Plan Sponsor and Administrator. The "Plan Sponsor" and the "Plan Administrator" of the Plan is Puritan-Bennett Corporation. The Plan Administrator is the named fiduciary charged with the responsibility for administering the Plan. SECTION 13. STATEMENT OF ERISA RIGHTS Participants in this Plan (which is a welfare plan sponsored by Puritan-Bennett Corporation) are entitled to certain rights and protections under ERISA and are entitled to: (a) Examine, without charge, at the Plan Administrator's office and at other specified locations, such as work sites, all Plan documents filed by the Plan with the U.S. Department of Labor, such as detailed annual reports; (b) Obtain copies of all Plan documents and Plan information upon written request to the Plan Administrator. The Administrator may make a reasonable charge for the copies; (c) Receive a summary of the Plan's annual financial report, in the case of a plan which is required to file an annual financial report with the Department of Labor. In addition to creating rights for Plan participants, ERISA imposes duties upon the people responsible for the operation of the employee benefit plan. The people who operate the Plan, called "fiduciaries" of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a Plan benefit or exercising your rights under ERISA. If your claim for a Plan benefit is denied in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have the Plan review and reconsider your claim. Under ERISA, there are a few steps you can take to enforce the above rights. For instance, if you request materials from the Plan and do not receive them within 30 10 11 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that the Plan fiduciaries misuse the Plan's money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees--for example, if it finds your claim is frivolous. If you have any questions about the Plan, you should contact the Plan Administrator. If you have any questions about your rights under ERISA, you should contact your nearest area office of the Pension and Welfare Benefit Administration, Department of Labor. SECTION 14. EXECUTION To record the adoption of the Plan as set forth herein, Puritan-Bennett Corporation has caused its duly authorized officer to execute the same this 7th day of November, 1994. PURITAN-BENNETT CORPORATION By: /s/ Lee Robbins ------------------------------------- Title: Vice President ---------------------------------- 11 EX-99.14 6 AM. TO RESTATED SAVINGS AND STOCK OWNERSHIP PLAN 1 Exhibit 14 AMENDMENT TO THE RESTATED PURITAN-BENNETT RETIREMENT SAVINGS & STOCK OWNERSHIP PLAN THIS AMENDMENT is made is this 7th day of November, 1994 by Puritan-Bennett Corporation (the "Company") as plan sponsor of the Restated Puritan-Bennett Retirement Savings & Stock Ownership Plan (the "Plan"). WHEREAS, the Plan was established effective January 1, 1984, and restated effective January 1, 1989; and WHEREAS, pursuant to Section 14 of the Plan, the Board of Directors reserved the right to amend, modify, or terminate the Plan at any time; and WHEREAS, the Board of Directors now desire to amend the Plan to permit each Participants under the Plan to direct the Trustee with respect to a tender offer for common stock of the Company allocated to such Participants' Accounts; IT IS NOW THEREFORE RESOLVED, that the title of Section 15.11 is amended to be "Voting and Tendering of Company Common Stock," and the following paragraphs are added to the end of Section 15.11: Each Participant shall have the right to direct the Trustee as to the manner in which to respond to a tender offer, exchange offer or any other offer to purchase common stock of the Company allocated to the Participant's Accounts invested in the Stock Fund, irrespective of whether the Participant is fully vested in such Accounts. The Trustee or its designee will solicit such instructions from Participants by distributing to each Participant such information as is distributed to shareholders of the Company generally in connection with any such offer, and any additional information the Trustee deems appropriate in order for each Participant to give instructions. A reasonable deadline for the return of such material may be specified. Shares of common stock of the Company will be tendered, exchanged or sold as instructed by the Participants, in response to a tender offer, exchange offer or other offer to purchase. Fractional shares will be aggregated for purposes of tendering, exchanging or selling shares, to the extent possible, to reflect the instructions of the Participants. Failure of any Participant to timely instruct the Trustee pursuant hereto shall be treated as an instruction that the common stock allocated to such Participant's Accounts shall not be tendered, exchanged or sold. 2 For purposes of receiving, tabulating and transmitting instructions, the Trustee will establish a procedure to ensure that instructions received from individual Participants regarding the a tender offer, exchange offer, or any other offer are held in confidence, and are not divulged, released or otherwise utilized in a manner that, in the Trustee's reasonable judgment, might influence the Participant's free exercise of the rights set forth in this Section 15.11. IN WITNESS WHEREOF, this Amendment is effective as of the date first written above. COMPANY: PURITAN-BENNETT CORPORATION ------------------------------- By: Title: ATTEST: By: ----------------------------------- Title: -------------------------------- Date: --------------------------------- The undersigned hereby accepts the adoption of this Amendment by the Company. TRUSTEE: IDS TRUST COMPANY ------------------------------- By: Title: ATTEST: By: ----------------------------------- Title: -------------------------------- Date: --------------------------------- EX-99.16 7 SERP AGREEMENT BETWEEN DOLE AND THE COMPANY 1 Exhibit 16 AGREEMENT THIS AGREEMENT is made this 7th day of November, 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). 2 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"), 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 Kansas City metropolitan area, or (F) failure or refusal of any successor company to assume the Corporation's obligations under the Employment Agreement. -2- 3 (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 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 -3- 4 (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 Member (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 Internal Revenue Code of 1986, as amended (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 an accounting firm jointly selected by Member and the Corporation (the "Accounting Firm") and paid by the Corporation, and which may be the Company's independent auditors. The Accounting Firm shall provide detailed supporting calculations both to the Corporation and Member within 15 business days of the date of termination of Member's employment by the Corporation (the "Employment Termination Agreement") or such earlier time as is requested by the Corporation and an opinion to Member that he 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 Corporation and Member. Member shall determine which and how much of the Payments, shall be eliminated or reduced consistent with -4- 5 the requirements of this Section 11, provided that, if Member does not make such determination within ten business days of the receipt of the calculations made by the Accounting Firm, 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 Member promptly of such election; and provided further that any Payments which do not constitute gross income to Member 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 Member 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 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 Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against Member or the Corporation 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 Corporation to or for the benefit of Member shall be treated for all purposes as a loan ab initio to Member which Member 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 Member 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 Corporation to or for the benefit of Member together with interest at 120% of the applicable federal rate provided for in Section 7872(f)(2) of the Code, compounded semiannually. (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 Member by the Corporation 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 Member shall be deferred until the earliest date upon which payment thereof can be made to Member without being non-deductible pursuant to Section 162(m) of the Code. In the event of a such a deferral, the Corporation shall pay interest to Member on the amount deferred at 120% of the applicable -5- 6 federal rate provided for in Section 7872(f)(2) of the Code, compounded semiannually. 2. COBRA Benefits. In the event of the termination of employment of Employee without Cause (if initiated by the Corporation) or 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 percentage of the cost of COBRA coverage with respect to Employee's coverage status (e.g., individual or family) in effect immediately prior to such termination of employment, 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 Employee's coverage status in effect immediately prior to the Employment Termination Date and (ii) Employee's monthly contribution toward Employee's coverage in effect immediately prior to the Employment Termination Date, and the denominator of which shall be the monthly cost of COBRA coverage for Employee's 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. 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. CORPORATION: PURITAN-BENNETT CORPORATION /s/ Lee Robbins --------------------------------- By: Lee Robbins Title: Vice President EMPLOYEE: /s/ Burton A. Dole, Jr. - --------------------------- Burton A. Dole, Jr. 9605 W. 191st Street Bucyrus, Kansas 66013 -6- EX-99.17 8 SERP AGREEMENT BETWEEN MORROW AND THE COMPANY 1 Exhibit 17 AGREEMENT THIS AGREEMENT is made as of November 7, 1994 by and between Puritan-Bennett Corporation, a Delaware corporation (hereinafter referred to as the "Corporation"), and John H. Morrow (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. NOW, THEREFORE, in consideration of the mutual covenants set forth herein, the Employee and the Corporation agree that, 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 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; (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); and (d) the Benefit Commencement Date under Section 4.02 shall be the first day of the calendar month coinciding with or next following the earlier of--(i) the first date following termination of Member's employment on which the Corporation is in material breach of its obligations pursuant to the contracts between the Member and the Corporation dated June 9, 1994, and November 7, 1994 (the "Contracts"); or 2 (ii) the later of: (I) the date the Member attains age fifty-five (55), or (II) the latest date on which the last payment pursuant to the Contracts is scheduled to be made (which date shall be determined without regard to whether the payment is in fact made prior to such scheduled date). For the purposes of this Section 4.04, the terms Cause and Good Reason 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: (A) reduction of the Member's base salary, management bonus percentage or other compensation, (B) failure to continue in effect any medical, dental, accident, or disability plan in which the Member is entitled to participate 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 -2- 3 of the greater Kansas City metropolitan area, or (F) failure or refusal of any successor company to assume the Corporation's obligations under the Employment Agreement. B. Section 9.02(a) is amended to read in its entirety as follows: (a) Competition Restriction. During the period of employment and during the period that the Member is receiving Supplemental Monthly Retirement Benefits under this Plan, the Member 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 Member shall have obtained the prior written consent of the Committee. IN WITNESS WHEREOF, this Agreement has been made as of the date set forth above. CORPORATION: PURITAN-BENNETT CORPORATION /s/ Burton A. Dole, Jr. --------------------------------- By: Burton A. Dole, Jr. Title: President EMPLOYEE: /s/ John H. Morrow - ---------------------------- John H. Morrow 10231 Catalina Overland Park, Kansas 66207 -3- EX-99.25 9 PRESS RELEASE DATED 11-21-94 1 Exhibit 25 [LOGO OF PURITAN-BENNETT CORPORATION] NEWS GENERAL OFFICES 9401 Indian Creek Parkway P.O. Box 25905 Overland Park, KS 66225-5905 913-661-0444 FOR RELEASE For Further Information: Lee Robbins, ext. 512 PURITAN-BENNETT ANNOUNCES THIRD QUARTER RESULTS - PRE-CHARGE EPS UP 15%: ORDERS AND REVENUES IN QUARTER UP 11% - RESULTS NEGATIVELY IMPACTED BY THERMO'S UNSOLICITED TENDER OFFER - COMPANY NOTIFIED BY HOMEDCO THAT IT WILL BE A SUPPLIER IN LARGE HOME OXYGEN THERAPY EQUIPMENT ORDER - NEW REPORTING OF BUSINESS LINE PROFITABILITY OVERLAND PARK, KS - Puritan-Bennett Corporation (PBEN:NASDAQ), after recording charges of $4.6 million for obligations associated with Thermo-Electron Corp.'s unsolicited tender offer, today reported a loss of $640,000 or $.05 per share for the third quarter ending October 31, 1994. Without the charge, earnings per share for the quarter would have been $.31 per share, up 15% from the $.27 per share (adjusted to eliminate losses associated with the FOxS blood gas monitoring system) for the same period last year. 2 2 Orders of $83,018,000 and revenues of $83,412,000 for the quarter were up 11% over the same period last year. For the first nine months, orders of $245,271,000 and revenues of $247,813,000 were up 7% and 8%, respectively, over the same period last year. The Company also noted that it was told by Homedco Group, Inc., one of the nation's leading providers of home respiratory services, that Puritan-Bennett would be selected as one of their endorsed vendors for home care oxygen equipment. Homedco has been in the process of upgrading its oxygen therapy technology to achieve greater operational efficiencies. This award is the result of Homedco's formal bid process, and it is one of the largest purchases of oxygen therapy equipment in Homedco's history. In addition, Homedco said it would work with the Company to adapt Puritan-Bennett's CliniVision Respiratory Management System to the home care respiratory management needs of its patients. SUPPLEMENTAL PRO-FORMA INFORMATION - Chairman and President Burton A. Dole stated: "In order to help our stockholders better understand the economic dynamics and potential of the company's business, we have decided to begin, with this announcement, providing supplemental information that sets forth the company's "operating profitability" in its two lines of business -- Puritan and Bennett. Operating profitability is defined as earnings before interest and taxes and before any historical restructuring or current Thermo Electron related charges." Mr. Dole said, "The figures below summarize results for the two lines of business for the current and last two fiscal years: 3 3
Third Quarter Year-to-Date FY95 FY94 FY95 FY94 Fiscal 1994 Fiscal 1993 -------------- ----------------- ----------- ----------- Revenue Puritan $56,187 $45,751 $159,391 $136,263 $184,239 $167,763 Bennett 27,225 23,838 88,422 90,361 122,751 131,279 ------- ------- ---------- ---------- --------- --------- Total $83,412 $74,589 $247,813 $226,624 $306,990 $299,042 Operating Profit Puritan $ 5,995 $ 6,251 $ 16,306 $ 18,493 $ 22,939 $ 24,740 Bennett 456 (793) 2,620 2,718 14 11,803 ------- ------- ---------- ---------- --------- --------- Total $ 6,451 $ 5,458 $ 18,926 $ 21,211 $ 22,953 $ 36,543
NOTE: Figures exclude discontinued lines of business, restructuring charges, and current Thermo Electron related charges. PURITAN - "Puritan includes our rapidly growing home care product line as well as our medical gas and gas-related equipment and spirometry product lines. Aero Systems is also included because it shares one of our larger manufacturing facilities with the Puritan Group and is relatively small. "Because of its rapid revenue growth (up 17% for the first nine months of this year compared with the same period last year and average annual growth of 15% for the 5 years ended January 31, 1994) Puritan now accounts for about two-thirds of the company's total revenues. Within Puritan, home care products continue to grow at rates considerably above the overall Puritan average. "For the third quarter of this year, Puritan's operating profitability was 11% of revenues," Mr. Dole said. "Operating profitability has been higher (12% and 15% of revenues in FY94 and FY93, respectively) in the recent past and we expect it to return to 4 4 recent historical levels in the future, as we realize the benefits of several major regulatory control and compliance initiatives undertaken in the latter part of FY94 and during FY95. These initiatives required considerable staffing and other resource additions as well as manufacturing process modifications. As a result, we experienced certain significant short-run operating disruptions and inefficiencies, which increased our costs," Mr. Dole continued. BENNETT - "The Bennett line of business consists of our critical care ventilator business -- a business that continues to represent an exceptional and long-standing customer franchise on a global basis -- as well as our growing CliniVision(R) product line in the U.S., and our holter monitoring and international portable ventilator product lines. "Since FY93, when Bennett's operating profitability equaled 9% of revenues, revenues have declined for several reasons including difficult market conditions, particularly in the U.S. hospital market, discontinuance of certain older products and accessories as a result of evolving regulatory standards, and our withdrawal from the U.S. portable ventilator market," he said. "In addition, Bennett has also undertaken major regulatory control and compliance initiatives at significant cost. Current operating profitability (2% of revenues in the third quarter and 3% for the nine months) is not close to where we believe it should and will be. We believe the recent poor profitability of Bennett will begin to reverse itself and both revenues and margins will increase as a result of the benefits from full implementation of our regulatory compliance initiatives, continued growth of CliniVision and service revenue and several other positive developments. These developments include the new products/product enhancements recently cleared by FDA for marketing in the U.S. and 5 5 recently introduced internationally. In addition, other important new products are being developed for introduction a little over a year from now. "In summary, we are encouraged by the continued strong growth of Puritan in the third quarter and believe both Puritan and Bennett are well positioned to begin returning to historical levels of profitability. We will continue to build upon our unique franchise in the critical care ventilator area while continuing to invest in and grow the exciting home care businesses that make up the bulk of our Puritan business line," Mr. Dole said. Puritan-Bennett is a world leader in products related to respiration. These products are used in multiple health care settings and on aircraft. 6 PURITAN-BENNETT CORPORATION QUARTER ENDED OCTOBER 31, 1994 NOVEMBER 21, 1994 Caption> ------------------------------- THREE MONTHS ENDED OCTOBER 31 ------------------------------- (Dollars in thousands except per share amounts) FY 1995 FY 1994 ------- ------- Net Sales $ 83,412 $ 75,277 Cost of Goods Sold 49,128 43,910 ------------- ---------- Gross Profit 34,284 31,367 Selling and Administrative Expense 23,508 23,721 Research and Development Expense 5,046 6,153 Interest Expense 1,719 1,159 Cost Associated With Unsolicited Offers to Acquire Company's Stock 4,559 - Other Expense (Income), net (768) (773) ------------- ---------- Income Before Income Taxes 220 1,107 Provision for Income Taxes 860 359 ------------- ---------- Net Income (Loss) $ (640) $ 748 ------------- ---------- Average Number of Shares Outstanding 12,533,709 11,908,653 ------------- ---------- Net Income (Loss) Per Share $ (.05) $ .06 ------------- ----------
7 PURITAN-BENNETT CORPORATION NINE MONTHS ENDED OCTOBER 31, 1994
---------------------------- NINE MONTHS ENDED OCTOBER 31 ---------------------------- (Dollars in thousands except per share amounts) FY 1995 FY 1994 ------- ------- Net Sales $ 247,813 $ 228,582 Cost of Goods Sold 144,091 130,602 ----------- ----------- Gross Profit 103,722 97,980 Selling and Administrative Expense 71,790 71,474 Research and Development Expense 14,825 19,406 Interest Expense 4,319 3,560 Restructuring Charges - 9,014 Cost Associated With Unsolicited Offers to Acquire Company's Stock 4,559 - Other Expense (Income), net (1,949) (304) ----------- ----------- Income (Loss) Before Income Taxes 10,178 (5,170) Provisions for (Benefit from) Income Taxes 2,850 (2,804) ----------- ----------- Income (Loss) Before Cumulative Effect 7,328 (2,366) Cumulative Effect of a Change In Accounting for Income Taxes - (2,755) ----------- ----------- Net Income (Loss) $ 7,328 (5,121) ----------- ----------- Average Number of Shares Outstanding 12,478,113 11,914,627 ----------- ----------- Net Income (Loss) Per Share Before Cumulative Effect $ .59 $ (.20) Cumulative Effect of Change in Accounting for Income Taxes Per Share - (.23) ----------- ----------- Net Income (Loss) Per Share $ .59 $ (.43) ----------- -----------
8 INCOMING ORDERS AND NET SALES ($ MILLION)
FY 1994 FY 1995 Apr. 30 July 31 Oct. 31 Jan. 31 Apr. 30 July 31 Oct. 31 --------------------------------------- ------------------------------- Medical - Orders $65.4 $75.6 $ 69.9 $85.0 $71.9 $76.2 $74.9 Sales 69.4 71.9 69.6 75.0 73.7 77.2 74.9 Aero - Orders 5.6 7.0 5.1 $10.4 $ 8.2 $ 6.0 $ 8.1 Sales 6.0 6.0 5.7 5.7 6.7 6.8 8.5 Pooled - Orders $71.0 $82.6 $ 75.0 $95.4 $80.1 $82.2 $83.0 Sales 75.4 77.9 75.3 80.7 80.4 84.0 83.4 Backlog Increase $(4.4) $ 4.7 $ (0.3) $14.7 $(0.3) $(1.8) $(0.4) (Decrease) - -------------------------------------------------------------------------------------------------------------------------- Net Income (Loss) Per Share $ .15 $(.41) $ 0.6 $(2.46) $ .30 $ .34 $(.05) Before Cumulative Effect Cumulative Effect of Accounting Changes Per Share (.23) - - (.01) - - - ----- ----- ------ ------ ----- ----- ----- Net Income (Loss) Per Share $(.08) $(.41) $ .06 $(2.47) $ .30 $ .34 $(.05) ===== ===== ====== ====== ===== ===== =====
PURITAN-BENNETT CORPORTION QUARTER ENDED OCTOBER 31, 1994 NOVEMBER 21, 1994 -----END PRIVACY-ENHANCED MESSAGE-----