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Exhibit 12
AMENDMENT NUMBER 1
TO THE
HEALTHDYNE TECHNOLOGIES, INC.
RETIREMENT BENEFIT AWARD AGREEMENTS
WHEREAS, the Healthdyne Technologies, Inc. (the "Company") has entered
into Retirement Benefit Award Agreements (the "Agreements") with certain
Executives;
WHEREAS, the terms of the Agreements grant to the Board of Directors of
the Company the power to amend the Agreements in writing from time to time; and
WHEREAS, it is desirable to amend each of the Agreements to provide an
offset to benefits payable to an Executive or an Executive's beneficiary under
the Agreement for any benefits provided under any split-dollar life insurance
agreement between such Executive and the Company.
NOW, THEREFORE, effective ________________, 19___, each Agreement is
amended as follows:
Section 2
BENEFITS
1. Section 2.1(c) is amended by changing the phrase "using the actuarial
assumptions listed in ss. 4" at the end of the third sentence thereof to the
phrase "using the actuarial assumptions set forth in the definition of
Actuarial Equivalent."
2. Section 2.1(d) is amended by adding a new paragraph (2) thereto to
read as follows and by renumbering the former paragraphs (2) through (8)
as paragraphs (3) through (9), respectively:
"(2) Actuarial Equivalent - means a benefit in the form of a lump
sum payment which has an equivalent value computed by an enrolled
actuary (as defined in Department of Labor Regulation Section
901.1(8)) using the following assumptions:
Interest Rate: 7%
Mortality Table: 1983 GAM
Cost of Living Increases for
Social Security Benefits: 3%
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3. A new Section 2.5 is added to read as follows:
"2.5. Offset for Certain Benefits Payable Under Split-Dollar Life
Insurance Agreements.
a. Offset Value. Executive may own a life insurance policy (the
"Policy") purchased on his or her behalf by the Company. The exercise of
ownership rights under this Policy by Executive is, however, subject to
certain conditions (set forth in a 'Split-Dollar Life Insurance Agreement'
between Executive and the Company, pursuant to which the Company holds a
security interest on the Policy) and, if Executive fails to meet the
conditions set forth in the Split-Dollar Life Insurance Agreement, the
Company may exercise its security interest in the Policy and cause
Executive to lose certain benefits under the Policy. In the event that
Executive satisfies the condition specified in Section 4 or 5 of the
Split-Dollar Life Insurance Agreement, so that Executive or his or her
beneficiary becomes entitled to exercise rights free from the Company's
security interest under one of those sections, or the Company's security
interest is otherwise released, the value of those benefits shall
constitute an offset to Executive's benefits otherwise payable under this
Agreement. As the case may be, this offset (the 'Offset Value') shall be
equal to the cash surrender value of the Policy at the time Executive
becomes entitled to exercise rights free from the Company's security
interest, or in the case of Executive's death, the death benefits payable
to the beneficiary under the Policy. The Actuarial Equivalent of the
Offset Value shall be compared to the Actuarial Equivalent of the benefits
payable under this Agreement (the 'Plan Value'), and the Plan Value shall
be reduced by the Actuarial Equivalent of the Offset Value at the time and
in the manner described in Section 2.5(b) or Section 2.5(c).
b. Manner and Calculation of Payment. If, at the time Executive
terminates employment, the Plan Value exceeds the Actuarial Equivalent of
the Offset Value, the excess of the Plan Value over the Actuarial
Equivalent of the Offset Value shall be paid to Executive or Spouse at the
time and in the manner provided under the general provisions of Section 2;
provided, however, that if such excess is less than $10,000, such excess
shall be paid immediately to Executive or Spouse in a cash lump sum. For
this purpose, the Plan Value shall be calculated by assuming that
Executive or Spouse commences receiving benefits under this Agreement, as
well as any Other Retirement Benefits, any Disability Benefits and Social
Security Benefits, immediately upon Executive's termination of employment
with the Company (or any related entity described in Section 2.1(d)(8));
provided, however, that if Executive terminates employment when Executive
or Spouse is not eligible to commence the receipt of any of such benefits,
the calculation of the Plan Value shall be determined assuming that any
such benefits commence on the earliest date on which such benefits become
payable.
c. Payment of Certain Benefits. If the policy described in
Section 2.5(a) insures the life of an individual other than Executive (the
"Insured Party"), and if such Insured Party dies prior to Executive's
becoming eligible for benefits under this Agreement, and if Executive or
Spouse subsequently becomes eligible for benefits
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hereunder, the Plan Value (as defined in Section 2.5 (a) and
Section 2.5(b)) shall then be offset by the Actuarial Equivalent of the
amount equal to the death benefit previously paid to Executive or
Executive's beneficiary pursuant to the Split-Dollar Life Insurance
Agreement divided by the Tax Adjustment Factor (as defined below). Any
remaining Plan Value shall thereupon be paid to the Executive or Spouse at
the time and in the manner provided under the general provisions of
Section 2; provided, however, that if such remaining Plan Value is less
than $10,000, such remaining Plan Value shall be paid immediately to the
Executive or Spouse in a cash lump sum.
d. Tax Adjustment Factor. For purposes of this Section 2.5, Tax
Adjustment Factor shall mean a number, determined by the Company, which is
equal to one minus the sum of (a) the highest marginal federal personal
income tax rate then in effect and (b) the effective highest marginal
state income tax rate in the state in which Executive resides, net after
the effect of the deduction for such state income tax for federal income
tax purposes."
Section 4
SOURCE OF BENEFIT PAYMENTS
4. Section 4 is amended by deleting the clause "Unless there is a Change
in Control of the Company," at the beginning of the first paragraph thereof and
by capitalizing the first letter of the word "this" which appears after such
clause.
5. Section 4 is further amended by deleting the next three paragraphs
thereof (which begin with the phrases "If a 'Change in Control does occur," "A
delay by the Executive in the making" and "Any assets transferred to a trust")
and by inserting the following provisions in place of those deleted paragraphs:
"If a Change of Control (as defined below) occurs, all benefits accrued to
date by Executive shall cease to be forfeitable under Section 3 of this
Agreement, and Executive in his discretion exercised at any time thereafter may
require the Company on behalf of Executive to place in an individual grantor
trust established by the Company for the benefit of Executive (and Spouse, if
any), of the type and with the terms and conditions of the sample trust document
attached hereto as Exhibit B, an amount of money which is the lump sum
Actuarial Equivalent of Executive's benefits accrued to date. The Company shall
establish such trust and transfer such amount of money to the trust as soon as
practicable but in no event later than 30 days after written request from
Executive is received by the Company. Within 30 days after the end of each
calendar year thereafter, the Company shall make additional contributions to
the trust in amounts which, when added to the funds held by the trust, are
equal to the lump sum Actuarial Equivalent of the benefits accrued by Executive
as of the end of such calendar year. A delay by Executive in the making of a
request for the establishment of such a trust shall in no way compromise or
invalidate Executive's rights with respect thereto. For purposes of determining
the amounts to be transferred to a trust following a Change in Control,
'benefits accrued' and 'benefit accruals' shall be determined (1) without
regard to the possibility of any offset under Section 2.5 or whether Executive
has completed
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10 Years of Service, (2) assuming that Executive retires and commences
receiving benefits under this Agreement at the earliest date that benefits
become payable under the Agreement, and (3) assuming that any Other Retirement
Benefits and Social Security Benefits commence at the earliest date on which
such benefits become payable.
Except as provided herein, any assets transferred to a trust following a
Change in Control in accordance with the terms of the preceding paragraph shall
be irrevocably committed to paying benefits under this Agreement. No assets of
such trust shall revert to the Company prior to the payment of all benefits
payable to Executive under this Agreement (determined after any offset is made
pursuant to Section 2.5 of this Plan). In the event that Executive terminates
employment prior to completing 10 Years of Service, no benefits shall be
payable to Executive under this Agreement, and all assets held under such a
trust shall immediately revert to the Company. Notwithstanding anything
contained herein to the contrary, in the event that the value of the trust fund
ever exceeds 150% of the lump sum Actuarial Equivalent of Executive's accrued
but unpaid benefits (determined without regard to any offset pursuant to
Section 2.5 until such offset, if any, has actually occurred), that portion of
the trust fund in excess of 150% of such lump sum Actuarial Equivalent may, in
the Company's discretion, revert to the Company. In addition, Executive shall be
entitled to request immediate distribution from the trust of all or a portion
of the amount of taxes for which Executive has become liable as a result of the
transfer of assets to the trust or as a result of investment income earned by
such trust."
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EXHIBIT B
6. Exhibit B is amended by changing the title thereof to "Healthdyne
Technologies, Inc. Grantor Trust for Retirement Benefits for ____________" and
by changing the first paragraph thereof to read as follows:
"This Agreement made this ___ day of ___________,19__ by and
between Healthdyne Technologies, Inc. ('Company') and
___________________, a commercial bank or trust company acceptable to
a majority of Company's executives and former executives who have
entered into retirement benefit award agreements with the Company and
are or may become eligible to receive retirement benefits pursuant to
such agreements ('Trustee')."
7. Exhibit B is further amended by restating the "Whereas" clauses to
read as follows:
WHEREAS, Company has entered into a Retirement Benefit Award
Agreement ('Agreement') with _________________ [insert name of
executive] ('Executive');
WHEREAS, Company has incurred or expects to incur liability
under the terms of such Agreement with respect to Executive;
WHEREAS, Company wishes to establish a trust ('Trust') and to
contribute to the Trust assets that shall be held therein, subject to
the claims of Company's creditors in the event of Company's
Insolvency, as herein defined, until paid to Executive and/or
Executive's surviving Spouse in such manner and at such time as
provided in the Agreement;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect the
status of the Agreement as a part of an unfunded plan maintained for
the purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title I of
the Employee Retirement Income Security Act of 1974;
WHEREAS, it is the intention of Company to make contributions to
the Trust to provide itself with a source of funds to assist it in
the meeting of its liabilities under the Agreement;".
8. Exhibit B is further amended by deleting subsections (d) through (g)
of Section 1 and inserting the following new subsections (d) through (i) in
place thereof:
"(d) The principal of the Trust, and any earnings thereon, shall
be held separate and apart from other funds of Company and shall be
used exclusively for the uses and purposes of Executive and general
creditors as set
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forth herein. Executive and/or Executive's surviving Spouse (as
defined in the Agreement) shall have no preferred claim on, or any
beneficial ownership interest in, any assets of the Trust. Any rights
created under the Agreement and this Trust Agreement shall be mere
unsecured contractual rights of Executive and/or Executive's
surviving Spouse against Company. Any assets held by the Trust will
be subject to the claims of Company's general creditors under federal
and state law in the event of Insolvency, as defined in Section 3(a)
herein.
(e) Company shall, as soon as possible but in no event later
than the date specified in the Agreement, make an irrevocable
contribution to the Trust in an amount that is the lump sum Actuarial
Equivalent (as defined in the Agreement) of Executive's accrued
benefits (as defined in the second paragraph of Section 4 of the
Agreement) as of the date on which this Trust is established.
(f) Within 30 days following the end of each calendar year after
the Trust is established, Company shall be required to irrevocably
deposit additional cash or other property to the Trust in an amount
which, when combined with the other trust assets, is equal to the
lump sum Actuarial Equivalent of the Executive's accrued benefits
under the terms of the Agreement as of the close of the calendar
year.
(g) Company, in its sole discretion, may at any time, or from
time to time, make additional deposits of cash or other property in
trust with Trustee to augment the principal to be held, administered
and disposed of by Trustee as provided in this Trust Agreement.
Neither Trustee nor Executive (nor Executive's Spouse) shall any
right to compel such additional deposits.
(i) Notwithstanding anything to contrary contained herein, in
the event that the value of the Trust funds ever exceeds 150% of the
lump sum Actuarial Equivalent of the accrued benefits of Executive
(determined without regard to any offset pursuant to Section 2.5 of
the Agreement unless such offset, if any, has actually occurred),
that portion of Trust Fund in excess of 150% of such lump sum
Actuarial Equivalent may, in the Company's discretion, revert to
Company."
9. Exhibit B is further amended (a) by replacing the phrases "each Plan
participant (and his or her beneficiary)" and "Plan participants and their
beneficiaries" with the phrase "Executive and/or Executive's surviving Spouse",
(b) by replacing the phrases "Plan participant or his or her beneficiaries" and
"Plan participants or their beneficiaries" with the phrase "Executive or
Executive's surviving Spouse", and (c) by replacing the term "Plan(s)" with the
term "Agreement" throughout Sections 2 through 13.
10. Sections 11 and 12 of Exhibit B are amended by replacing the three
phrases "a majority of the participants and beneficiaries entitled to benefit
payments", "all participants and beneficiaries entitled to benefit payments"
and "all participants and beneficiaries entitled
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to payment of benefits" with the phrase "Executive or, if Executive is no
longer living, Executive's surviving Spouse."
IN WITNESS WHEREOF, the Company has caused this instrument to be executed
by its duly authorized officers this ____ day of ________________, 1996.
HEALTHDYNE TECHNOLOGIES, INC.
By___________________________
By:__________________________
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