<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended July 30, 1994
Commission File Number 1-4311
PALL CORPORATION
2200 Northern Boulevard, East Hills, N.Y. 11548
(516) 484-5400
Incorporated in New York State I.R.S. Employer Identification
Number 11-1541330
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange
Title of Class on Which Registered
---------------------------- -----------------------
Common Stock $.10 par value New York Stock Exchange
Common Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that registrant was required to file such reports), and (2) has been
subject to such filing requirement for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or an amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the registrant was $1,851,438,000, based upon the closing price
on October 3, 1994.
The number of common shares, $.10 par value outstanding of the
registrant was 115,322,619 shares on October 3, 1994.
Total number of pages - 292 Exhibit index located on page 31
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement for the 1994 annual meeting of
shareholders are incorporated by reference into Items 10, 11 and 12.
Portions of the Annual Report to shareholders for the year ended
July 30, 1994 are incorporated by reference into Items 1, 7 and 8.
<PAGE> 2
PART I
------
ITEM 1. BUSINESS.
- ------------------
(a) General development of business.
Pall Corporation, incorporated in July 1946, and its subsidiaries
(hereinafter collectively called "the Company" unless the context
requires otherwise) is a leading supplier of fine filters mainly
made by the Company using its proprietary filter media, and other
fluid clarification equipment for the removal of solid, liquid and
gaseous contaminants from a wide variety of liquids and gases. The
Company's business is best analyzed by the following three principal
markets, or industry segments, in which it sells its products:
(1) Health care.
(2) Aeropower.
(3) Fluid processing.
During the past five years, the Company has continued its development of
fluid clarification products and of their sale in a wide variety of
markets.
(b) Financial information about industry segments.
Reference is made to page 39 of the registrant's 1994 Annual Report
to Shareholders.
(c) Narrative description of business.
1) The Company sells its products in three principal markets. The
products sold are mainly filters made with proprietary Pall filter
media produced by chemical film casting, melt-blowing of polymer
fibers, papermaking and metallurgical processes. Metal and plastic
housings and a wide variety of appurtenant devices, are also made.
(A) Health Care Market:
See the following sections of the registrant's 1994 Annual
Report to Shareholders, which are incorporated herein by
reference:
Patient Protection, Hospital and Blood Bank - pages 12-14.
BioSupport and OEM Diagnostics - page 15.
Pharmaceutical, Biologicals and Bioprocessing - pages
16 and 17.
Food and Beverage - pages 18 and 19.
Sales of Health Care products in fiscal 1994 were $351,849,000 or
50% of total sales. Sales in this market are made about equally
through the Company's own personnel and through distributors. Backlog
information is omitted, as it is not considered meaningful to an
understanding of this segment of the Company's business.
<PAGE> 3
The Company feels that safety, efficacy, ease of use and technical
support, rather than price, are the principal competitive factors in
this market, although economy of use is important.
(B) Aeropower Market:
See the following sections of the registrant's 1994 Annual
Report to Shareholders, which are incorporated herein by
reference:
Airborne, Military Land and Marine - pages 22 and 23.
Industrial and Mobile Fluid Power - pages 24 and 25.
Sales in fiscal 1994 were $179,297,000 or 26% of total sales.
Backlog at July 30, 1994 was $48,448,000, a 14% decrease from the
prior year backlog of $56,250,000. The backlog at July 30, 1994 is
equal to about three months of sales. The Company's sales to aerospace
and military customers are made principally through its own personnel;
sales to industrial customers are made in about equal proportions
through Company personnel and through distributors and manufacturers'
representatives.
The Company believes that product performance and quality, and
service to the customer, as well as price, are the principal
competitive factors in this market segment.
(C) Fluid Processing Market:
See the following sections of the registrant's 1994 Annual
Report to Shareholders, which are incorporated herein by
reference:
Microelectronics, Data Storage and Photographic Film -
pages 28 and 29.
Oil and Gas, Chemical and Petrochemical, and Power
Generation - pages 30-32.
Sales in this market in fiscal 1994 were $169,702,000 or 24%
of total sales. The Company's products are sold to customers in
these markets in about equal proportions through its own personnel,
and through distributors and manufacturers' representatives.
Backlog information is omitted, as it is not considered material
for an understanding of this segment of the Company's business.
The Company believes that performance and quality of product and
service, as well as price, are determinative in most sales.
<PAGE> 4
(D) The following comments relate to the three segments
discussed above:
(i) Raw materials:
Most raw materials used by the Company are available from
multiple sources of supply. A limited number of materials are
proprietary products of major chemical companies. The Company
believes that it could find satisfactory substitutes for these
materials if they should become unavailable, and has in fact
done so several times in the past.
(ii) Patents:
The Company owns a broad range of patents covering its filter
media, filter designs and other products, but it considers these
to be mainly defensive, and relies on its proprietary manufacturing
methods and engineering skills. However, it does act against
infringers when it believes such action is economically justified.
2) The following comments relate to the Company's business in
general:
(a) With limited exceptions, research activities conducted by the
Company are Company-sponsored. Such expenditures totalled
$41,283,000 in 1994, $40,036,000 in 1993 and $34,787,000
in 1992.
(b) There was no one customer to whom sales were made totalling
10% or more of consolidated sales in fiscal 1994, 1993 or
1992.
(c) There is no material effect on the Company's capital
expenditures, earnings or competitive position resulting from
compliance with Federal, state or local environmental
protection laws.
(d) At July 30, 1994, the Company employed approximately 6,200
persons.
(d) Financial information about foreign and domestic operations
and export sales.
Reference is made to page 40 of the registrant's 1994 Annual
Report to Shareholders.
<PAGE> 5
ITEM 2. PROPERTIES.
- -------------------
<TABLE>
<CAPTION>
Size
(square
Location Type Industry Segment feet)
- ------------------- -------------- --------------------- --------
OWNED:
<S> <C> <C> <C>
Glen Cove, NY Office & labora- Research Center 65,000
tory
East Hills, NY Office, plant & Executive Office & 317,000
warehouse All Segments
Pt. Washington, NY Office & labora- All 215,000
tory
Hauppauge, NY Plant & office Health Care & Fluid 75,000
Processing
Cortland, NY Plants Health Care & Fluid 346,000
Processing
Putnam, CT Plant All 61,000
Pinellas Park, FL Plant Aeropower 152,000
Ft. Myers, FL Plant Aeropower & Fluid 111,000
Processing
New Port Richey, Plant Aeropower 160,000
FL
Fajardo, Puerto Plants Health Care & Fluid 226,000
Rico Processing
Portsmouth, U.K. Office & plants All 306,000
Ilfracombe, U.K. Plant Health Care & Fluid 112,000
Processing
Redruth, U.K. Plant Aeropower 111,000
Newquay, U.K. Plant Health Care & Fluid 101,000
Processing
Frankfurt, Office & ware- All 54,000
Germany house
Paris, France Office & ware- All 65,000
house
Limay, France Warehouse All 23,000
Tsukuba, Japan Plant & All 78,000
laboratory
</TABLE>
<PAGE> 6
<TABLE>
<CAPTION>
Size
(square
Location Type Industry Segment feet)
- ------------------- -------------- --------------------- --------
LEASED:
<S> <C> <C> <C>
Glen Cove, NY Office Health Care 36,000
Pt. Washington, NY Laboratory All 19,000
Lafayette, LA Office & ware- Fluid Processing 25,000
house
Toronto, Office Fluid Processing 12,000
Canada
Frankfurt, Germany Office & ware- All 46,000
house
Milan, Italy Office & ware- All 50,000
houses
Vienna, Austria Office & ware- All 13,000
house
Muttenz, Office & ware- All 7,000
Switzerland house
Madrid, Spain Office & ware- All 28,000
house
Warsaw, Poland Office All 2,000
Tokyo, Japan Offices All 33,000
Singapore Office & ware- All 17,000
house
Seoul, South Korea Office Health Care & Fluid 7,000
Processing
Beijing, China Office & ware- All 9,000
house
Melbourne, Office & ware- Aeropower & Fluid 10,000
Australia house Processing
</TABLE>
In the opinion of management, these premises are suitable and
adequate to meet the Company's requirements.
<PAGE> 7
ITEM 3. LEGAL PROCEEDINGS.
- -------------------------
The Company had been one of several third-party defendants in
an action brought by the City of Glen Cove, N.Y., involving
potential environmental damages and hazardous waste contamination.
The City sought from the primary defendants the cost of environ-
mental clean-up, compensatory damages of $10 million, and punitive
damages of $25 million. On December 30, 1993, the several parties
in this matter agreed to settle for a total of $625,000, of which
the Company's share was $200,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -----------------------------------------------------------
There were no matters submitted to a vote of shareholders during the
fourth quarter of fiscal year 1994.
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
- ------------------------------------------------------------
Pall Corporation's Common Stock is listed on the New York and London
Stock Exchanges. The table sets forth quarterly data relating to the
Company's Common Stock prices and cash dividends declared per share
for the past two fiscal years.
<TABLE>
<CAPTION>
Cash dividends
Price per share Fiscal 1994 Fiscal 1993 per common share
- --------------- ----------------- ----------------- -----------------
High Low High Low 1994 1993
Quarter: ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
First $21.25 $15.63 $22.88 $19.03 $0.08 $0.07
Second 21.00 17.50 23.16 18.88 0.09 0.08
Third 19.13 16.00 21.63 16.38 0.09 0.08
Fourth 17.25 13.63 20.25 16.50 0.09 0.08
</TABLE>
As of October 3, 1994, there were approximately 7,200 holders of
record of the Company's Common Stock.
<PAGE> 8
ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended
----------------------------------------------------
July 30, July 31, Aug. 1, Aug. 3, July 28,
1994(a) 1993(b) 1992(c) 1991 1990
-------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Results of operations:
Net sales $700,848 $687,222 $685,068 $656,979 $564,498
Net earnings 98,922 78,312 92,708 79,921 66,235
Earnings per share .86 .68 .79 .69 .57
Cash dividends per share .36 .31 .26 .21 .18
Financial position:
Total assets 959,579 902,273 912,876 786,654 797,771
Long-term debt 54,097 24,540 59,003 51,605 56,343
</TABLE>
(a) Fiscal 1994 includes a pre-tax charge of $3,696 ($2,332 after
taxes, 2 cents per share) due principally to the restructuring
of the German operations and to the write-off of a bad debt in
the Aerospace operations.
(b) Fiscal 1993 includes a pre-tax charge of $26,710 ($17,310 after
taxes, 15 cents per share) representing the cost of downsizing
and further integrating the military portion of the Aeropower
business with the Industrial Fluid Power business, and also
writing off certain excess corporate leasehold improvements.
(c) Fiscal 1992 includes (i) a pre-tax charge of $3,690 (2 cents
per share) from the settlement of certain promissory notes
received in connection with the sale of the air dryer business
in a leveraged buy-out reported in fiscal 1988, and (ii) an
increase in net earnings of $2,475 (2 cents per share) as a
result of adopting the Financial Accounting Standards Board
Statement No. 109 (Accounting for Income Taxes).
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
- -------------------------------------------------------------------
Reference is made to pages 33 and 34 of the registrant's 1994
Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ----------------------------------------------------
Reference is made to pages 35-38 and 41-47 of the registrant's
1994 Annual Report to Shareholders.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
- -------------------------------------------------------------
None.
<PAGE> 10
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -----------------------------------------------------------
(a) Identification of directors:
Reference is made to "Election of Directors" on page 1 of the
registrant's Proxy Statement for the 1994 annual meeting of
shareholders, previously filed.
None of the persons listed in the section of the Proxy
Statement referred to in the preceding paragraph has been
involved in those legal proceedings required to be disclosed
by Item 401(f) of Regulation S-K during the past five years.
(b) Identification of executive officers:
<TABLE>
<CAPTION>
Year in
Which Service
Age at as Officer of
Oct. 15, Pall Corp.
Name 1994 Position Held Began
- ---------------- ------- --------------------- -------
<S> <C> <C> <C>
Eric Krasnoff* 42 Chairman and Chief 1986
Executive Officer
Jeremy Hayward-Surry* 51 President and Treasurer - 1989
Chief Financial Officer
Derek T.D. Williams 62 Executive Vice President 1985
and Chief Operating Officer
Donald G.E. Nicholls 59 Executive Vice President 1985
Clifton S. Hutchings 56 Group Vice President 1993
Gerhard Weich 58 Group Vice President 1993
Arnold Weiner 57 Group Vice President 1986
Samuel T. Wortham 47 Group Vice President 1990
Peter Schwartzman 57 Secretary 1972
</TABLE>
* Member of the Executive Committee of the Board of Directors.
None of the persons listed above is related.
Messrs. Krasnoff and Hayward-Surry are directors of Pall Corpor-
ation. Mr. Williams is a nominee for director.
For more than the past five years, the principal occupation of
each person listed above has been in the employ of the registrant.
Executive officers are elected by the Board of Directors annually,
to serve until the next annual organizational meeting of the Board.
None of the above persons has been involved in those legal pro-
ceedings required to be disclosed by Item 401(f) of Regulation S-K,
during the past five years.
<PAGE> 11
ITEM 11. EXECUTIVE COMPENSATION.
- --------------------------------
Reference is made to "Compensation and Other Benefits of Senior
Management" on page 5 of the registrant's Proxy Statement for the
1994 annual meeting of shareholders, previously filed.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
- -------------------------------------------------------------
Reference is made to "Beneficial Ownership of Common Stock"
on page 16 of the registrant's Proxy Statement for the 1994 annual
meeting of shareholders, previously filed.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- --------------------------------------------------------
None.
<PAGE> 12
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- --------------------------------------------------------------------------
a. Certain documents filed as part of the Form 10-K:
(1) The following documents are incorporated by reference to the
indicated pages of the 1994 Annual Report to Shareholders,
filed as Exhibit 13 hereto.
<TABLE>
<CAPTION>
Page(s) of
Annual Report
Item to Shareholders
--------------------------------------------- ---------------
<S> <C>
Consolidated Statements of Earnings - years
ended July 30, 1994, July 31, 1993 and
August 1, 1992 35
Independent Auditors' Report 35
Consolidated Balance Sheets - as at July 30,
1994 and July 31, 1993 36
Consolidated Statements of Stockholders' Equity -
years ended July 30, 1994, July 31, 1993 and
August 1, 1992 37
Consolidated Statements of Cash Flows - years ended
July 30, 1994, July 31, 1993 and August 1, 1992 38
Notes to Consolidated Financial Statements 41-47
</TABLE>
(2) The following schedules are filed herewith:
<TABLE>
<CAPTION>
Schedule Page(s) of
Number Name of Schedule Form 10-K
------- -------------------------------------------- ----------
<S> <C> <C>
I Marketable securities - other investments 16
II Amounts receivable from related parties and
underwriters, promoters and employees other
than related parties 17-21
V Property, plant and equipment 22-23
VI Accumulated depreciation and amortization
of property, plant and equipment 24-25
VIII Valuation and qualifying accounts 26
IX Short-term borrowings 27
X Supplementary income statement information 28
Independent auditors' report on schedules 29
</TABLE>
Schedules not listed above have been omitted wither because
they are not applicable or the required information is
shown in the financial statements or in the notes thereto.
<PAGE> 13
(3) Exhibits filed herewith:
<TABLE>
<CAPTION>
Page
Exhibit of 1994
Number Description of Exhibit Form 10-K
------- -------------------------------------- ---------
<S> <C> <C>
3(i) Restated Certificate of Incorporation of
the registrant as amended through
November 23, 1993 34- 49
3(ii) By-Laws as amended through July 11, 1994 50- 71
4 Note: The exhibits filed herewith do not
include the instruments with respect to
long-term debt of the registrant and its
subsidiaries, inasmuch as the total amount
of debt authorized under any such instru-
ment does not exceed 10% of the total assets
of the registrant and its subsidiaries on a
consolidated basis. The registrant agrees,
pursuant to Item 601(b) (4) (iii) of
Regulation S-K, that it will furnish a copy
of any such instrument to the Securities
and Exchange Commission upon request.
10.1*(a) Agreement made as of July 31, 1992 with
David B. Pall, filed as Exhibit 10.3 to the
registrant's Annual Report on Form 10-K for
the fiscal year ended August 1, 1992 (the
"1992 10-K").
10.2(a) Employment Agreement dated April 1, 1994 with
Eric Krasnoff. 72-90
10.3(a) Amendment dated July 11, 1994 to Employment
Agreement dated April 1, 1994 with Eric
Krasnoff. 91
10.4(a) Employment Agreement dated August 1, 1994
with Jeremy Hayward-Surry. 92-109
10.5*(a) Service Agreement dated March 17, 1992 with
Derek Thomas Donald Williams, filed as
Exhibit 10.21 to the 1992 10-K.
10.6*(a) Service Agreement dated March 17, 1992 with
Donald Guy Edward Nicholls, filed as
Exhibit 10.20 to the 1992 10-K.
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c)
of Form 10-K.
<PAGE> 14
<TABLE>
<CAPTION>
Page
Exhibit of 1994
Number Description of Exhibit Form 10-K
------- -------------------------------------- ---------
<S> <C> <C>
10.7*(a) Service Agreement dated October 21, 1988
with Clifton Stanley Hutchings, filed as
Exhibit 10.17 to the registrant's Annual
Report on Form 10-K for the fiscal year
ended July 31, 1993 (the "1993 10-K").
10.8*(a) Service Agreement dated June 21, 1989
with Gerhard Friedrich Weich, filed as
Exhibit 10.18 to the 1993 10-K.
10.9*(a) Employment Agreement dated February 1, 1992
with Arnold Weiner, filed as Exhibit 10.32
to the 1992 10-K.
10.10*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with
Arnold Weiner, filed as Exhibit 10.14 to the
1993 10-K.
10.11*(a) Employment Agreement dated February 1, 1992
with Samuel Wortham, filed as Exhibit 10.15
to the 1992 10-K.
10.12*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with Samuel
Wortham, filed as Exhibit 10.4 to the 1993
10-K.
10.13(a) Employment Agreement dated August 1, 1994
with Peter Cope. 110-127
10.14(a) Employment Agreement dated August 1, 1994
with Robert Simkins. 128-145
10.15*(a) Employment Agreement dated February 1, 1992
with Peter Schwartzman, filed as Exhibit
10.33 to the 1992 10-K.
10.16*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with Peter
Schwartzman, filed as Exhibit 10.16 to the
1993 10-K.
10.17(a) Employment Agreement dated September 26, 1994
with Donald B. Stevens. 146-163
10.18(a) Agreement dated April 1, 1994 with Nicholas
Nickolaus. 164-165
10.19(a) Agreement dated August 15, 1994 with Joseph
Campolong. 166-167
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c)
of Form 10-K.
<PAGE> 15
<TABLE>
<CAPTION>
Page
Exhibit of 1994
Number Description of Exhibit Form 10-K
------- -------------------------------------- ---------
<S> <C> <C>
10.20(a) Pall Corporation Supplementary Profit-
Sharing Plan as amended and restated,
effective as of September 19, 1994. 168-175
10.21*(a) Pall Corporation Supplementary Pension Plan
as amended to February 26, 1993, filed as
Exhibit 10.20 to the 1993 10-K.
10.22(a) Pall Corporation Profit-Sharing Plan, as
amended and restated on September 19, 1994 176-236
10.23*(a) Pall Corporation 1993 Stock Option Plan,
filed as Exhibit 10.22 to the 1993 10-K.
10.24*(a) Pall Corporation 1991 Stock Option Plan,
filed as Exhibit 10.42 to the 1991 10-K.
10.25*(a) Pall Corporation 1988 Stock Option Plan,
as amended through October 8, 1991, filed
as Exhibit 10.32 to the 1991 10-K.
13 Annual Report to Shareholders for the year
ended July 30, 1994. 237-290
21 Subsidiaries of Pall Corporation. 291
23 Consent of Independent Auditors. 292
27 Financial Data Schedule (only filed
electronically).
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c)
of Form 10-K.
b. Reports on Form 8-K:
The registrant filed no reports on Form 8-K during the three
months ended July 30, 1994.
<PAGE> 16
Schedule I
PALL CORPORATION AND SUBSIDIARIES
MARKETABLE SECURITIES - OTHER INVESTMENTS
JULY 30, 1994
<TABLE>
<CAPTION>
Number of shares Amount at which
or units - principal shown in Balance
Name of amounts of bonds Sheet
Issuer and Title of Issue and notes
- ------------------------- -------------------- ----------------
<S> <C> <C>
Short-term Investments
- ----------------------
Bank Certificates of Deposit and $12,200,000 $ 12,200,000
Other Bank Time Deposits
Short-term paper - Repurchase 38,600,000 38,600,000
Agreements
----------------
Total $ 50,800,000(1)
================
Other Assets (Benefit Protection Trust)
- ----------------------------------------
U.S. Government Obligations $17,548,000 $ 17,304,000
Corporate and Other Bonds 7,579,000 7,342,000
----------------
Total $ 24,646,000(2)
================
</TABLE>
(1) Amounts shown at cost as fair value is approximately equal to the carrying
value at year end.
(2) Amounts shown at fair value as it is lower than cost.
<PAGE> 17
PALL CORPORATION AND SUBSIDIARIES Schedule II
AMOUNTS RECEIVABLE FROM RELATED PARTIES,
UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------- --------- --------
Deductions Balance at end of period
---------- ------------------------
Name Balance at Amounts
of Beginning Amounts Written Not
Debtor of Period Additions Collected Off Current Current
- ------ --------- --------- --------- ------- ------- -------
Year ended
July 30, 1994
<S> <C> <C> <C> <C> <C> <C>
Joseph G. Adiletta $ -0- $ 208,000 $ -0- $ -0- $ -0- $ 208,000 (A)
Leonard Bensch 39,000 107,000 5,000 -0- -0- 141,000 (B)
Joseph Campolong 118,000 197,000 60,000 -0- -0- 255,000 (C)
John Farris 109,000 38,000 147,000 -0- -0- -0-
Robert Festa 75,000 63,000 -0- -0- -0- 138,000 (D)
Frank Garcia -0- 134,000 48,000 -0- -0- 86,000 (E)
Steven Greco 127,000 38,000 -0- -0- -0- 165,000 (F)
Charles Grimm 71,000 66,000 -0- -0- -0- 137,000 (G)
Tom Gsell 53,000 59,000 -0- -0- -0- 112,000 (H)
Richard Haas -0- 121,000 -0- -0- -0- 121,000 (I)
Maurice G. Hardy 153,000 -0- -0- -0- -0- 153,000 (J)
Jeremy Hayward-Surry 117,000 75,000 -0- -0- -0- 192,000 (K)
Patricia Iannucci 121,000 38,000 -0- -0- -0- 159,000 (L)
Richard Jenks 99,000 89,000 -0- -0- -0- 188,000 (M)
Hyman Katz 74,000 33,000 -0- -0- -0- 107,000 (N)
Erwin Kirnbauer 134,000 151,000 -0- -0- -0- 285,000 (0)
Eric Krasnoff -0- 298,000 -0- -0- -0- 298,000 (P)
Vlado Matkovich -0- 304,000 162,000 -0- -0- 142,000 (Q)
Nicholas Nickolaus 140,000 149,000 140,000 -0- -0- 149,000 (R)
David B. Pall -0- 169,000 -0- -0- -0- 169,000 (S)
Nicholas Renzi 273,000 -0- -0- -0- -0- 273,000 (T)
Robert Simkins 84,000 38,000 -0- -0- -0- 122,000 (U)
Stanley Wernick 376,000 -0- 97,000 -0- -0- 279,000 (V)
Derek Williams 66,000 64,000 -0- -0- -0- 130,000 (W)
Charles Wolowitz -0- 134,000 -0- -0- -0- 134,000 (X)
Samuel Wortham -0- 126,000 -0- -0- -0- 126,000 (Y)
---------- ---------- -------- ----- ----- ----------
Total $2,229,000 $2,699,000 $659,000 -0- -0- $4,269,000
========== ========== ======== ===== ===== ==========
</TABLE>
<PAGE> 18
NOTES 2
NOTES TO SCHEDULE II
--------------------
A Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$99,000 loan secured by 10,000 shares, and
$109,000 loan secured by 12,500 shares.
B Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$34,000 loan secured by 3,333 shares,
$61,000 loan secured by 6,000 shares, and
$46,000 loan secured by 5,666 shares.
C Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$58,000 loan secured by 5,846 shares, and
$197,000 loan secured by 24,154 shares.
D Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$75,000 loan secured by 7,500 shares, and
$63,000 loan secured by 7,500 shares.
E Represents an $86,000 non-interest bearing stock option loan
payable on demand, secured by 8,500 shares of Pall Corporation
common stock.
F Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$76,000 loan secured by 7,500 shares,
$38,000 loan secured by 3,749 shares, and
$38,000 loan secured by 3,750 shares.
Also includes a $13,000 9.22% stock option loan secured by 3,000
shares of Pall Corporation common stock, which loan is payable in
January 1995.
G Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$41,000 loan secured by 4,000 shares,
$30,000 loan secured by 3,000 shares, and
$66,000 loan secured by 8,000 shares.
H Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$53,000 loan secured by 6,000 shares, and
$59,000 loan secured by 6,000 shares.
I Represents non-interest bearing stock option loan payable on demand
and secured by 15,000 shares of Pall Corporation common stock.
J Represents non-interest bearing stock option loan payable on demand
and secured by 20,000 shares of Pall Corporation common stock.
K Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$98,000 loan secured by 10,000 shares,
$19,000 loan secured by 7,500 shares, and
$75,000 loan secured by 7,500 shares.
L Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$76,000 loan secured by 7,500 shares,
$38,000 loan secured by 3,749 shares, and
$38,000 loan secured by 3,750 shares.
Also includes a $7,000 9.08% stock option loan secured by 1,500
shares of Pall Corporation common stock, which was paid in full
in September 1994.
<PAGE> 19
M Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$99,000 loan secured by 12,000 shares, and
$89,000 loan secured by 10,500 shares.
N Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$38,000 loan secured by 3,733 shares,
$36,000 loan secured by 3,766 shares, and
$33,000 loan secured by 3,750 shares.
O Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$134,000 loan secured by 15,000 shares, and
$151,000 loan secured by 15,000 shares.
P Represents non-interest bearing stock option loan payable on demand
and secured by 30,000 shares of Pall Corporation common stock.
Q Represents non-interest bearing stock option loan payable on demand
and secured by 14,000 shares of Pall Corporation common stock.
R Represents non-interest bearing stock option loan payable on demand
and secured by 15,000 shares of Pall Corporation common stock.
S Represents non-interest bearing stock option loan payable on demand
and secured by 16,666 shares of Pall Corporation common stock.
T Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$122,000 loan secured by 12,000 shares,
$76,000 loan secured by 7,500 shares, and
$75,000 loan secured by 7,500 shares.
U Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$46,000 loan secured by 4,700 shares,
$38,000 loan secured by 3,749 shares, and
$38,000 loan secured by 3,750 shares.
V Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$131,000 loan secured by 13,292 shares,
$96,000 loan secured by 7,407 shares, and
$52,000 loan secured by 3,843 shares.
W Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$66,000 loan secured by 6,666 shares, and
$64,000 loan secured by 7,500 shares.
X Represents non-interest bearing stock option loans payable on demand
and secured by shares of Pall Corporation common stock:
$50,000 loan secured by 5,000 shares, and
$84,000 loan secured by 10,000 shares.
Y Represents non-interest bearing stock option loan payable on demand
and secured by 15,000 shares of Pall Corporation common stock.
All number of shares shown above reflect the 3-for-2 stock split
declared by the Board on November 22, 1991, and the 4-for-3 stock
split declared by the Board on November 20, 1992.
<PAGE> 20
SCHEDULE II
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------- -------- --------
Deductions Balance at end of period
---------- ------------------------
Name Balance at Amounts
of Beginning Amounts Written Not
Debtor of Period Additions Collected Off Current Current
- ------ ---------- --------- --------- ------- ------- -------
Year ended
July 31, 1993
<S> <C> <C> <C> <C> <C> <C>
Howard Abrams $ 197,000 $ -0- $ 113,000 $-0- $-0- $ 84,000
Joseph Campolong 110,000 58,000 50,000 -0- -0- 118,000
Peter Degen 73,000 -0- 73,000 -0- -0- -0-
John Farris 71,000 38,000 -0- -0- -0- 109,000
Steven Greco 89,000 38,000 -0- -0- -0- 127,000
Charles Grimm 95,000 30,000 54,000 -0- -0- 71,000
Maurice G. Hardy 153,000 -0- -0- -0- -0- 153,000
Jeremy Hayward-Surry 174,000 -0- 57,000 -0- -0- 117,000
Hyman Katz 72,000 36,000 34,000 -0- -0- 74,000
Patricia Iannucci 121,000 -0- -0- -0- -0- 121,000
Erwin Kirnbauer 164,000 134,000 164,000 -0- -0- 134,000
Abraham Krasnoff 507,000 -0- 507,000 -0- -0- -0-
Nicholas Nickolaus 140,000 -0- -0- -0- -0- 140,000
Nicholas Renzi 122,000 151,000 -0- -0- -0- 273,000
Stanley Wernick 376,000 -0- -0- -0- -0- 376,000
---------- -------- ---------- ---- ---- ----------
TOTAL $2,464,000 $485,000 $1,052,000 $-0- $-0- $1,897,000
========== ======== ========== ==== ==== ==========
</TABLE>
<PAGE> 21
SCHEDULE II
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------- -------- --------
Deductions Balance at end of period
---------- ------------------------
Name Balance at Amounts
of Beginning Amounts Written Not
Debtor of Period Additions Collected Off Current Current
- ------ ---------- --------- --------- ------- ------- -------
Year ended
August 1, 1992
<S> <C> <C> <C> <C> <C> <C>
Howard Abrams $ 7,000 $ 197,000 $ 7,000 $-0- $-0- $ 197,000
Joseph Campolong 110,000 -0- -0- -0- -0- 110,000
Peter Degen 53,000 146,000 126,000 -0- -0- 73,000
Maurice G. Hardy 678,000 -0- 525,000 -0- -0- 153,000
Jeremy Hayward-Surry 98,000 76,000 -0- -0- -0- 174,000
Patricia Iannucci 21,000 114,000 14,000 -0- -0- 121,000
Mark Kachur 164,000 -0- 164,000 -0- -0- -0-
Erwin Kirnbauer 164,000 -0- -0- -0- -0- 164,000
Abraham Krasnoff 307,000 200,000 -0- -0- -0- 507,000
Nicholas Nickolaus -0- 140,000 -0- -0- -0- 140,000
Nicholas Renzi -0- 152,000 30,000 -0- -0- 122,000
Arnold Weiner 72,000 -0- 72,000 -0- -0- -0-
Stanley Wernick 295,000 148,000 67,000 -0- -0- 376,000
---------- ---------- ---------- ---- ---- ----------
TOTAL $1,969,000 $1,173,000 $1,005,000 $-0- $-0- $2,137,000
========== ========== ========== ==== ==== ==========
</TABLE>
<PAGE> 22
Schedule V
PALL CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED JULY 30, 1994
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS RETIREMENTS/ OTHER CHANGES BALANCE AT
7/31/93 AT COST SALES/ WRITE OFFS ADD (DEDUCT) 7/30/94
(A) (A) (B)
<S> <C> <C> <C> <C> <C>
LAND $ 24,716,000 $ $ $ 310,000 $ 25,026,000
BUILDINGS AND IMPROVEMENTS 196,238,000 31,956,000 (321,000) 3,469,000 231,342,000
MACHINERY AND EQUIPMENT 271,829,000 34,532,000 (2,341,000) 4,389,000 308,409,000
FURNITURE AND FIXTURES 39,131,000 3,962,000 (981,000) 2,103,000 44,215,000
TRANSPORTATION EQUIPMENT 12,088,000 2,904,000 (2,973,000) (382,000) 11,637,000
--------------- -------------- -------------- -------------- --------------
$ 544,002,000 $ 73,354,000 $ (6,616,000) $ 9,889,000 $ 620,629,000
=============== ============== ============== ============== ==============
</TABLE>
NOTES:
(A) FOREIGN SUBSIDIARY ADDITIONS AND RETIREMENTS/ SALES/ WRITE OFFS ARE
TRANSLATED AT WEIGHTED AVERAGE EXCHANGE RATES.
(B) REFLECTS THE EFFECT ON CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT OF
CHANGES IN THE EXCHANGE RATES USED TO TRANSLATE FOREIGN CURRENCY
FIXED ASSETS BETWEEN THE RESPECTIVE BALANCE SHEET DATES.
<PAGE> 23
Schedule V
PALL CORPORATION AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED JULY 31, 1993 AND AUGUST 1, 1992
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS RETIREMENTS OTHER CHANGES BALANCE AT
8/1/92 AT COST OR SALES ADD (DEDUCT) 7/31/93
YEAR ENDED JULY 31,1993 (A) (A) (B)
<S> <C> <C> <C> <C> <C>
LAND $ 24,370,000 $ $ $ 346,000 $ 24,716,000
BUILDINGS AND IMPROVEMENTS 188,039,000 24,149,000 (5,139,000) (10,811,000) 196,238,000
MACHINERY AND EQUIPMENT 292,125,000 32,565,000 (34,944,000) (17,917,000) 271,829,000
FURNITURE AND FIXTURES 41,903,000 3,252,000 (1,693,000) (4,331,000) 39,131,000
TRANSPORTATION EQUIPMENT 14,667,000 2,616,000 (2,612,000) (2,583,000) 12,088,000
------------- ------------- -------------- -------------- -------------
$ 561,104,000 $ 62,582,000 $ (44,388,000) $ (35,296,000) $ 544,002,000
============= ============= ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS RETIREMENTS OTHER CHANGES BALANCE AT
8/3/91 AT COST OR SALES ADD (DEDUCT) 8/1/92
YEAR ENDED AUGUST 1, 1992 (A) (A) (B)
<S> <C> <C> <C> <C> <C>
LAND $ 23,689,000 $ $ $ 681,000 $ 24,370,000
BUILDINGS AND IMPROVEMENTS 163,687,000 13,321,000 (418,000) 11,449,000 188,039,000
MACHINERY AND EQUIPMENT 255,031,000 34,107,000 (5,200,000) 8,187.000 292,125,000
FURNITURE AND FIXTURES 34,255,000 4,665,000 (816,000) 3,799,000 41,903.000
TRANSPORTATION EQUIPMENT 12,787,000 4,081.000 (3,803,000) 1,602,000 14,667,000
------------- ------------- -------------- -------------- --------------
$ 489,449,000 $ 56,174,000 $ (10,237,000) $ 25,718,000 $ 561,104,000
============= ============= ============== ============== ==============
</TABLE>
NOTES:
(A) FOREIGN SUBSIDIARY ADDITIONS AND RETIREMENTS ARE TRANSLATED AT WEIGHTED
AVERAGE EXCHANGE RATES.
(B) PREDOMINANTLY DUE TO THE EFFECT ON CONSOLIDATED PROPERTY, PLANT AND
EQUIPMENT OF CHANGES IN THE EXCHANGE RATES USED TO TRANSLATE FOREIGN
CURRENCY FIXED ASSETS BETWEEN THE RESPECTIVE BALANCE SHEET DATES.
<PAGE> 24
Schedule VI
PALL CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED JULY 30,1994
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS RETIREMENTS/ OTHER CHANGES BALANCE AT
7/31/93 AT COST SALES/ WRITE OFFS ADD (DEDUCT) 7/30/94
(A) (A) (B)
<S> <C> <C> <C> <C> <C>
BUILDINGS AND IMPROVEMENTS $ 36,239,000 $ 5,239,000 $ (242,000) $ 665,000 $ 41,901,000
MACHINERY AND EQUIPMENT 120,011,000 25,723,000 (1,229,000) 2,857,000 147,362,000
FURNITURE AND FIXTURES 22,972,000 3,818,000 (550,000) 1,021,000 27,261,000
TRANSPORTATION EQUIPMENT 7,160,000 2,024,000 (2,246,000) (450,000) 6,488,000
-------------- --------------- -------------- ------------- --------------
$ 186,382,000 $ 36,804,000 $ (4,267,000) $ 4,093,000 $ 223,012,000
============== =============== ============== ============= ==============
</TABLE>
NOTES:
(A) FOREIGN SUBSIDIARY ADDITIONS AND RETIREMENTS/ SALES/ WRITE OFFS ARE
TRANSLATED AT WEIGHTED AVERAGE EXCHANGE RATES.
(B) REFLECTS THE EFFECT ON CONSOLIDATED ACCUMULATED DEPRECIATION AND
AMORTIZATION OF CHANGES IN THE EXCHANGE RATES USED TO TRANSLATE FOREIGN
CURRENCY AMOUNTS BETWEEN THE RESPECTIVE BALANCE SHEET DATES.
<PAGE> 25
Schedule VI
PALL CORPORATION AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
YEARS ENDED JULY 31, 1993 AND AUGUST 1, 1992
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS RETIREMENTS OTHER CHANGES BALANCE AT
8/1/92 AT COST OR SALES ADD (DEDUCT) 7/31/93
YEAR ENDED JULY 31, 1993 (A) (A) (B)
<S> <C> <C> <C> <C> <C>
BUILDINGS AND IMPROVEMENTS $ 35,148,000 $ 5,025,000 $ (2,492,000) $ (1,442,000) $ 36,239,000
MACHINERY AND EQUIPMENT 128,161,000 24,208,000 (24,128,000) (8,230,000) 120,011,000
FURNITURE AND FIXTURES 23,695,000 3,560,000 (1,319,000) (2,964,000) 22,972,000
TRANSPORTATION EQUIPMENT 8,037,000 2,395,000 (1,858,000) (1,414,000) 7,160,000
-------------- -------------- ---------------- ---------------- --------------
$ 195,041,000 $ 35,188,000 $ (29,797,000) $ (14,050,000) $ 186,382,000
============== ============== ================ ================ ==============
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS RETIREMENTS OTHER CHANGES BALANCE AT
8/3/91 AT COST OR SALES ADD (DEDUCT) 8/1/92
YEAR ENDED AUGUST 1, 1992 (A) (A) (B)
<S> <C> <C> <C> <C> <C>
BUILDINGS AND IMPROVEMENTS $ 29,869,000 $ 4,450,000 $ (233,000) $ 1,062,000 $ 35,148,000
MACHINERY AND EQUIPMENT 102,533,000 23,606,000 (2,202,000) 4,224,000 128,161,000
FURNITURE AND FIXTURES 18,348,000 3,502,000 (273,000) 2,118,000 23,695,000
TRANSPORTATION EQUIPMENT 6,866,000 2,802,000 (2,463,000) 832,000 8,037,000
-------------- -------------- ---------------- ---------------- --------------
$ 157,616,000 $ 34,360,000 $ (5,171,000) $ 8,236,000 $ 195,041,000
============== ============== ================ ================ ==============
</TABLE>
NOTES:
(A) FOREIGN SUBSIDIARY ADDITIONS AND RETIREMENTS ARE TRANSLATED AT WEIGHTED
AVERAGE EXCHANGE RATES.
(B) PREDOMINANTLY DUE TO THE EFFECT ON CONSOLIDATED ACCUMULATED DEPRECIATION
AND AMORTIZATION OF CHANGES IN THE EXCHANGE RATES USED TO TRANSLATE
FOREIGN CURRENCY FIXED ASSETS BETWEEN THE RESPECTIVE BALANCE SHEET DATES.
<PAGE> 26
Schedule VIII
PALL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JULY 30, 1994,
JULY 31, 1993 AND AUGUST 1, 1992
<TABLE>
<CAPTION>
Balance at Charged to Write-off of Balance
Beginning Costs and Uncollectible at End
Description of Year Expenses Accounts of Year
----------- ----------- ----------- ------------- --------
<S> <C> <C> <C> <C>
Year ended July 3O, 1994:
Allowance for doubtful
accounts $ 3,368,000 $ 2,852,000 $ 1,444,000 $ 4,776,000
Year ended July 31, 1993:
Allowance for doubtful
accounts $ 3,537,000 $ 1,048,000 $ 1,217,000 $ 3,368,000
Year ended August 1, 1992:
Allowance for doubtful
accounts $ 3,878,000 $ 1,013,000 $ 1,354,000 $ 3,537,000
</TABLE>
<PAGE> 27
Schedule IX
PALL CORPORATION AND SUBSIDIARIES
SHORT-TERM BORROWINGS
YEARS ENDED JULY 30, 1994
JULY 31, 1993 AND AUGUST 1, 1992
<TABLE>
<CAPTION>
Category of Balance at Weighted Maximum Average Amount Weighted Average
Aggregate Short Year End Average Outstanding Outstanding Interest Rate
Term Borrowings Interest During Year During Year During Year
Rate at
Year End
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Year ended
July 30, 1994 Bank Loans $ 112,034,000 4.2% $ 167,234,000 $ 132,252,000 3.5%
Year ended
July 31, 1993 Bank Loans $ 125,054,000 3.3% $ 131,506,000 $ 112,950,000 3.8%
Year ended
August 1, 1992 Bank Loans $ 111,291,000 4.0% $ 120,927,000 $ 87,984,000 5.3%
</TABLE>
<PAGE> 28
Schedule X
PALL CORPORATION AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
YEARS ENDED JULY 30, 1994, JULY 31, 1993, AND AUGUST 1, 1992
<TABLE>
<CAPTION>
ITEM CHARGED TO COSTS AND EXPENSES
- ------- ----------------------------------
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
MAINTENANCE AND REPAIRS $14,119,000 $13,674,000 $13,018,000
ADVERTISING 7,955,000 7,859,000 7,728,000
</TABLE>
Amounts for taxes, other than payroll and income taxes, royalties and
amortization of intangibles do not exceed one percent of sales.
<PAGE> 29
[KPMG PEAT MARKWICK LETTERHEAD]
-29-
Independent Auditors' Report on Schedules
-----------------------------------------
The Board of Directors
Pall Corporation:
Under date of September 7, 1994, we reported on the consolidated balance
sheets of Pall Corporation and subsidiaries as of July 30, 1994 and July 31,
1993, and the related consolidated statements of earnings, stockholders'
equity and cash flows for each of the years in the three-year period ended
July 30, 1994, as contained in the Company's fiscal 1994 annual report to
stockholders. These consolidated financial statements and our report thereon
are incorporated by reference in the Company's annual report on Form 10-K for
fiscal year 1994. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related financial
statement schedules as listed in the accompanying index. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits.
In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
As discussed in the Income Taxes note to the consolidated financial statements,
the Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" on a prospective basis in fiscal year 1992.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Jericho, New York
September 7, 1994
<PAGE> 30
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorised.
/s/ Jeremy Hayward-Surry
-------------------------
PALL CORPORATION
By: Jeremy Hayward-Surry
President and Treasurer
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant, and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ Eric Krasnoff
- ------------------ Chairman of the Board and October 21, 1994
Eric Krasnoff Chief Executive Officer
/s/ Jeremy Hayward-
Surry
- ------------------ President and Treasurer - Chief October 21, 1994
Jeremy Hayward- Financial Officer and Director
Surry
/s/ Peter Schwartzman
- ---------------------- Chief Accountant (Chief October 21, 1994
Peter Schwartzman Accounting Officer)
/s/ Abraham Appel
- ------------------ Director October 21, 1994
Abraham Appel
/s/ Abraham Krasnoff
- --------------------- Director October 21, 1994
Abraham Krasnoff
/s/ David B. Pall
- ------------------ Director October 21, 1994
David B. Pall
- ------------------ Director October 21, 1994
Henry Petronis
/s/ Chesterfield F. Seibert
- ---------------------------- Director October 21, 1994
Chesterfield F. Seibert
/s/ Heywood Shelley
- -------------------- Director October 21, 1994
Heywood Shelley
/s/ James D. Watson
- -------------------- Director October 21, 1994
James D. Watson
</TABLE>
<PAGE> 31
EXHIBIT INDEX
*************
<TABLE>
<CAPTION>
Page
Exhibit of 1994
Number Description of Exhibit Form 10-K
------- -------------------------------------- ---------
<S> <C> <C>
3(i) Restated Certificate of Incorporation of
the registrant as amended through
November 23, 1993 34- 49
3(ii) By-Laws as amended through July 11, 1994 50- 71
4 Note: The exhibits filed herewith do not
include the instruments with respect to
long-term debt of the registrant and its
subsidiaries, inasmuch as the total amount
of debt authorized under any such instru-
ment does not exceed 10% of the total assets
of the registrant and its subsidiaries on a
consolidated basis. The registrant agrees,
pursuant to Item 601(b) (4) (iii) of
Regulation S-K, that it will furnish a copy
of any such instrument to the Securities
and Exchange Commission upon request.
10.1*(a) Agreement made as of July 31, 1992 with
David B. Pall, filed as Exhibit 10.3 to the
registrant's Annual Report on Form 10-K for
the fiscal year ended August 1, 1992 (the
"1992 10-K").
10.2(a) Employment Agreement dated April 1, 1994 with
Eric Krasnoff. 72- 90
10.3(a) Amendment dated July 11, 1994 to Employment
Agreement dated April 1, 1994 with Eric
Krasnoff. 91
10.4(a) Employment Agreement dated August 1, 1994
with Jeremy Hayward-Surry. 92-109
10.5*(a) Service Agreement dated March 17, 1992 with
Derek Thomas Donald Williams, filed as
Exhibit 10.21 to the 1992 10-K.
10.6*(a) Service Agreement dated March 17, 1992 with
Donald Guy Edward Nicholls, filed as
Exhibit 10.20 to the 1992 10-K.
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c)
of Form 10-K.
<PAGE> 32
<TABLE>
<CAPTION>
Page
Exhibit of 1994
Number Description of Exhibit Form 10-K
------- -------------------------------------- ---------
<S> <C>
10.7*(a) Service Agreement dated October 21, 1988
with Clifton Stanley Hutchings, filed as
Exhibit 10.17 to the registrant's Annual
Report on Form 10-K for the fiscal year
ended July 31, 1993 (the "1993 10-K").
10.8*(a) Service Agreement dated June 21, 1989
with Gerhard Friedrich Weich, filed as
Exhibit 10.18 to the 1993 10-K.
10.9*(a) Employment Agreement dated February 1, 1992
with Arnold Weiner, filed as Exhibit 10.32
to the 1992 10-K.
10.10*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with
Arnold Weiner, filed as Exhibit 10.14 to the
1993 10-K.
10.11*(a) Employment Agreement dated February 1, 1992
with Samuel Wortham, filed as Exhibit 10.15
to the 1992 10-K.
10.12*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with Samuel
Wortham, filed as Exhibit 10.4 to the 1993
10-K.
10.13(a) Employment Agreement dated August 1, 1994
with Peter Cope. 110-127
10.14(a) Employment Agreement dated August 1, 1994
with Robert Simkins. 128-145
10.15*(a) Employment Agreement dated February 1, 1992
with Peter Schwartzman, filed as Exhibit
10.33 to the 1992 10-K.
10.16*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with Peter
Schwartzman, filed as Exhibit 10.16 to the
1993 10-K.
10.17(a) Employment Agreement dated September 26, 1994
with Donald B. Stevens. 146-163
10.18(a) Agreement dated April 1, 1994 with Nicholas
Nickolaus. 164-165
10.19(a) Agreement dated August 15, 1994 with Joseph
Campolong. 166-167
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c)
of Form 10-K.
<PAGE> 33
<TABLE>
<CAPTION>
Page
Exhibit of 1994
Number Description of Exhibit Form 10-K
------- -------------------------------------- ---------
<S> <C>
10.20(a) Pall Corporation Supplementary Profit-
Sharing Plan as amended and restated,
effective as of September 19, 1994. 168-175
10.21*(a) Pall Corporation Supplementary Pension Plan
as amended to February 26, 1993, filed as
Exhibit 10.20 to the 1993 10-K.
10.22(a) Pall Corporation Profit-Sharing Plan, as
amended and restated on September 19, 1994 176-236
10.23*(a) Pall Corporation 1993 Stock Option Plan,
filed as Exhibit 10.22 to the 1993 10-K.
10.24*(a) Pall Corporation 1991 Stock Option Plan,
filed as Exhibit 10.42 to the 1991 10-K.
10.25*(a) Pall Corporation 1988 Stock Option Plan,
as amended through October 8, 1991, filed
as Exhibit 10.32 to the 1991 10-K.
13 Annual Report to Shareholders for the year
ended July 30, 1994. 237-290
21 Subsidiaries of Pall Corporation. 291
23 Consent of Independent Auditors. 292
27 Financial Data Schedule (only filed
electronically).
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14(c)
of Form 10-K.
<PAGE> 1
Exhibit 3(i)
RESTATED
CERTIFICATE OF INCORPORATION
OF
PALL CORPORATION
Under Section 807 of the
Business Corporation Law
The undersigned, being the President and the Secretary of Pall
Corporation, hereby certify that:
I. The name of the corporation is Pall Corporation.
The name under which the corporation was formed is Micro Metallic Corporation.
II. The certificate of incorporation of the corporation was filed
by the Department of State on July 31, 1946.
III. The text of the said certificate of incorporation, as amended
heretofore, is hereby restated without further amendment or change to read in
full as follows:
* * *
<PAGE> 2
1. The name of the corporation shall be
Pall Corporation
2. The purpose for which the corporation is formed is to engage in
any lawful act or activity for which corporations may be organized under the
Business Corporation Law, provided that the corporation is not formed to engage
in any act or activity requiring the consent or approval of any state official,
department, board, agency or other body without such consent or approval first
being obtained.
3. The aggregate number of shares which the corporation shall have
the authority to issue is 500,000,000 shares of Common Stock, par value $.10
per share.
4. The preferences, privileges and voting powers of the shares of
Common Stock, and restrictions or qualifications thereof shall be as follows:
(a) Dividends. The Common Stock shall be entitled to receive
dividends when and as declared by the Board of Directors.
(b) Liquidation Rights. In the event of any liquidation,
dissolution or winding up of the corporation, the holders of Common
Stock shall participate equally per share in any distribution to
shareholders.
(c) Voting Rights. The holder of each share of Common Stock
shall be entitled to one vote in respect of each share held.
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<PAGE> 3
(d) Pre-emptive Rights. No holder of shares of Common Stock
shall have any pre-emptive right to subscribe to any shares of stock
of any class now or hereafter authorized, or to any bonds, debentures
or other instruments convertible into shares of stock, or to options
or warrants evidencing rights to subscribe to shares of stock of any
class.
5. The office of the corporation is to be located at 2200 Northern
Boulevard, East Hills, New York 11548, in the County of Nassau, which shall be
the post office address to which the Secretary of State shall mail a copy of
any process against the corporation served upon him.
6. The duration of the corporation shall be perpetual.
7. The number of directors of the corporation shall not be less than
three nor more than twelve; directors need not be stockholders. To the fullest
extent permitted by the New York Business Corporation Law as in effect on
November 20, 1987 or, if thereafter amended, as so amended, a director of the
corporation shall not be liable to the corporation or its shareholders or any
of them for damages for any breach of duty as a director.
[Paragraphs numbered 8, 9 and 10 of the original certificate
of incorporation have been omitted from this Restated Certificate of
Incorporation pursuant to Business Corporation Law Section 807(c) and
are no longer a part of the certificate of incorporation of the
corporation.]
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<PAGE> 4
11. The Secretary of State is hereby designated as the agent of the
corporation upon whom process in any action or proceeding against it may be
served.
12. (A) Except as provided in subparagraph (B), the favorable vote,
at a meeting of stockholders, of the holders of not less than 85% of the
outstanding shares of Common Stock of this corporation shall be required prior
to and as a condition to the consummation of any Business Combination (as
hereinafter defined). Such 85% favorable vote (1) shall be in addition to any
stockholder vote which would be required without reference to this Paragraph
12, and (2) shall be required notwithstanding the fact that no vote may be
required, or that some lesser percentage may be specified, by law or the
by-laws of the corporation, by any other provision of this certificate of
incorporation or otherwise.
(B) The provisions of subparagraph (A) of this Paragraph 12 shall not
be applicable to a particular Business Combination, and such Business
Combination shall require only such stockholder vote or approval (if any) as
would be required without reference to this Paragraph 12, if all of the
conditions set forth in subsections (1) through (5) next below are satisfied.
These conditions are as follows:
(1) The ratio of:
(a) the aggregate amount of the cash and the fair
market value of other consideration to be received per share
in such Business Combination by holders of Common
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<PAGE> 5
Stock of this corporation other than the Related Person (as
hereinafter defined) involved in such Business Combination, to
(b) the market price per share of the Common Stock
immediately prior to the announcement of the proposed Business
Combination, is at least as great as the ratio of
(c) the highest per share price (including brokerage
commissions, transfer taxes and soliciting dealers' fees)
which such Related Person has theretofore paid for any shares
of Common Stock acquired by it prior to such Business
Combination, to
(d) the market price per share of the Common Stock
immediately prior to the initial acquisition by such Related
Person of any Common Stock; and
(2) The aggregate amount of the cash and the fair market value of
other consideration to be received per share in such Business Combination by
holders of Common Stock of this corporation other than the Related Person
(hereinafter called "Public Holders"):
(a) is not less than the highest per share price
(including brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by such Related Person in
acquiring any of its holdings of Common Stock, and
(b) is not less than the earnings per share of the Common
Stock for the four full consecutive fiscal
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<PAGE> 6
quarters immediately preceding the record date for solicitation of
votes on such Business Combination multiplied by the then
price/earnings multiple (if any) of such Related Person as customarily
computed and reported in the financial community; and
(3) The consideration (if any) to be received by Public Holders of
Common Stock in such Business Combination shall, except to the extent that a
stockholder agrees otherwise as to all or part of the shares which he or she
owns, be in the same form and of the same kind as the consideration paid by the
Related Person in acquiring the shares of Common Stock already owned by it; and
(4) After such Related Person became a Related Person and prior to
the consummation of such Business Combination:
(a) such Related Person shall have taken steps to ensure that
the corporation's Board of Directors included at all times
representation by Continuing Directors (as hereinafter defined)
proportionate to the ratio that the number of shares of Common Stock
from time to time owned by Public Holders bears to all Common Stock
outstanding at the time in question (with a Continuing Director to
occupy any resulting fractional board position);
(b) such Related Person shall not have acquired from the
corporation, directly or indirectly, any capital stock of the
corporation (except (i) upon conversion of convertible securities
acquired by it prior to becoming a Related
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<PAGE> 7
Person or (ii) as a result of a pro rata stock dividend or stock split
or (iii) in a transaction consummated after this Paragraph 12 was
added to this certificate of incorporation and which satisfied all
applicable requirements of this Paragraph 12);
(c) such Related Person shall not have acquired any
additional shares of the corporation's outstanding Common Stock or
securities convertible into or exchangeable for Common Stock except as
a part of the transaction which resulted in such Related Person
becoming a Related Person; and
(d) such Related Person shall not have (i) received the
benefit, directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees, pledges or other
financial assistance or tax credits provided by the corporation or any
Subsidiary (as hereinafter defined) or (ii) made any major change in
the corporation's business or equity capital structure or entered into
any contract, arrangement or understanding with the corporation except
any such change, contract, arrangement or understanding which has been
approved by the favorable vote of not less than 75% of the "whole
Board" (which quoted term means all directors which the corporation
would have if there were no vacancies) at a time when all members of
the Board are Continuing Directors; and
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<PAGE> 8
(5) A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934 shall have been mailed to all holders of Common
Stock for the purpose of soliciting stockholder approval of such Business
Combination. Such proxy statement shall contain at the front thereof, in a
prominent place, any recommendations as to the advisability (or inadvisability)
of the Business Combination which the Continuing Directors, or any of them, may
have furnished in writing and, if deemed advisable by a majority of the
Continuing Directors, an opinion of a reputable investment banking firm as to
the fairness (or lack of fairness) of the terms of such Business Combination
from the point of view of the holders of Common Stock other than any Related
Person (such investment banking firm to be selected by a majority of the
Continuing Directors, to be furnished with all information it reasonably
requests, and to be paid a reasonable fee for its services upon receipt by the
corporation of such opinion).
(C) For purposes of this Paragraph 12:
(1) The term "Business Combination" means (a) any merger or
consolidation of this corporation or any Subsidiary into or with a Related
Person or into or with another corporation which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of a Related
Person, in each case irrespective of which corporation is the surviving
corporation in such merger or consolidation; (b) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition to or with a
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<PAGE> 9
Related Person (in a single transaction or a series of related transactions) of
all or a Substantial Part (as hereinafter defined) of the assets of this
corporation (including without limitation any equity securities of a
Subsidiary) or all or a Substantial Part of the assets of a Subsidiary; (c) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition to or
with this corporation or to or with a Subsidiary (in a single transaction or a
series of related transactions) of all or a Substantial Part of the assets of a
Related Person; (d) the issuance or transfer of any securities of this
corporation or a Subsidiary by this corporation or a Subsidiary to a Related
Person with the exception of securities which, when aggregated with all such
securities so issued or transferred within the preceding five years to such
Related Person and the Affiliates and Associates (as hereinafter defined) of
such Related Person, or any of them, have a fair value of less than 10% of the
stockholders' equity of this corporation as of the end of its most recent
fiscal year ending prior to the time the determination is being made; (e) any
reclassification of securities (including any reverse stock split),
recapitalization, reorganization, merger or consolidation of the corporation
with any of its Subsidiaries, or any similar transaction (whether or not with
or into or otherwise involving a Related Person) which has the effect, directly
or indirectly, of increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of this corporation or any
Subsidiary which is directly or
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<PAGE> 10
indirectly owned by any Related Person; (f) any merger of this corporation into
a Subsidiary, or any consolidation between this corporation and a Subsidiary,
unless the surviving corporation or the consolidated corporation, as the case
may be, has a provision in its certificate of incorporation identical with or
substantially similar to this Paragraph 12; or (g) any agreement, contract or
other arrangement providing for any of the transactions hereinabove described
in this definition of Business Combination.
(2) A "Person" means an individual, firm, corporation or other
entity. "Related Person" means, with respect to any Business Combination, any
Person (other than this corporation or any Subsidiary) who or which, as of the
record date for the determination of stockholders entitled to notice of and to
vote on such Business Combination, or immediately prior to the consummation of
such transaction:
(a) is the Beneficial Owner (as hereinafter defined) of
either (i) 20% or more of the Common Stock, or (ii) 20% or more of the
securities of this corporation entitled at the time in question to
vote in the election of directors, considered as a single class
(hereinafter called "Voting Shares"), or
(b) is an Affiliate of this corporation and at any time
within the preceding five years was the Beneficial Owner of either 20%
or more of the then outstanding Common Stock or 20% or more of the
then outstanding Voting Shares.
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<PAGE> 11
(3) A person shall be considered the "Beneficial Owner" of
any Common Stock or Voting Shares:
(a) which are owned beneficially (whether or not owned of
record) by such Person or by any Affiliate or Associate of such
Person, or
(b) which such Person or any Affiliate or Associate of such
Person has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (ii) the right to vote pursuant to any agreement, arrangement or
understanding, or
(c) which are owned beneficially (whether or not owned of
record) by any other Person with which such first-mentioned Person or
any of its Affiliates or Associates has any agreement, arrangement or
understanding with respect to acquiring, holding, voting or disposing
of any shares of Common Stock or Voting Shares or acquiring, holding
or disposing of all or a Substantial Part of the assets of this
corporation or a Subsidiary.
For the purposes only of determining whether a Person is the Beneficial Owner
of 20% or more of the outstanding Common Stock or Voting Shares of this
corporation, the outstanding Common Stock and Voting Shares of this corporation
shall be deemed to include any Common Stock or Voting Shares that may be
issuable
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<PAGE> 12
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants, options or otherwise and which
are deemed to be beneficially owned by such Person pursuant to the foregoing
provisions of this subsection (3).
(4) The term "Substantial Part" as used with reference to the assets
of this corporation, of any Subsidiary or of any Related Person means assets
having a value of more than 5% of the total consolidated assets of this
corporation and its Subsidiaries as of the end of this corporation's most
recent fiscal year ending prior to the time the determination is being made.
(5) For purposes of subsections (1) and (2) of subparagraph (B) of
this Paragraph 12, in the event of a Business Combination upon consummation of
which this corporation would be the surviving corporation or would continue to
exist (unless it is provided, contemplated or intended that as part of such
Business Combination or within one year after consummation thereof a plan of
liquidation or dissolution of this corporation will be adopted or effected),
the term "other consideration to be received" shall include (without
limitation) Common Stock of this corporation retained by Public Holders.
(6) "Continuing Director" means a member of the Board of Directors of
this corporation who either (i) was first elected to the Board prior to the
date as of which a Related Person who or which proposes to enter into or be a
party to or involved in a Business Combination became the Beneficial Owner of
more than 10%
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<PAGE> 13
of the Common Stock, or (ii) was designated (before his or her initial election
to the Board) as a "Continuing Director" by a majority of the then Continuing
Directors.
(7) "Affiliate" means a Person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with another Person.
(8) "Associate" means (a) any corporation or organization of which a
Person is an officer or partner or is, directly or indirectly, the Beneficial
Owner of 5% or more of any class of equity securities, (b) any trust or other
estate in which a Person has a 5% or larger beneficial interest of any nature
or as to which a Person serves as trustee or in a similar fiduciary capacity,
(c) any spouse of a person, and (d) any relative of a person, or any relative
of a spouse of a person, who has the same residence as such person or spouse.
(9) "Subsidiary" means any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
September 1, 1979) is owned, directly or indirectly, by this corporation;
provided, however, that for the purposes of the definition of Related Person
set forth in subsection (2) of this subparagraph (C), the term "Subsidiary"
shall mean only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by this corporation.
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<PAGE> 14
(10) As used in the definition of Business Combination, a "series of
related transactions" shall be deemed to include not only a series of
transactions with the same Related Person but also a series of separate
transactions with a Related Person and any Affiliate or Associate of such
Related Person.
(11) A Related Person shall be deemed to have acquired a share of
Common Stock at the time when such Related Person became the Beneficial Owner
thereof. With respect to shares owned by Affiliates, Associates or other
Persons whose ownership is attributed to a Related Person under the foregoing
definition of "Beneficial Owner", if the price paid by such Related Person for
such shares is not determinable, then for purposes of subsections (1) and (2)
of subparagraph (B) of this Paragraph 12 the price so paid shall be deemed to
be the higher of (a) the price paid upon acquisition thereof by the Affiliate,
Associate or other Person or (b) the market price of the shares in question at
the time when the Related Person became the Beneficial Owner thereof.
(D) A majority of the Continuing Directors shall have the power to
determine for the purposes of this Paragraph 12, on the basis of information
known to them: (1) the number of shares of Common Stock and Voting Shares of
which any Person is the Beneficial Owner; (2) whether a Person is an Affiliate
or Associate of another; (3) whether a Person has an agreement, arrangement or
understanding with another as to the matters referred to in subsection (3) of
subparagraph (C); (4) whether the assets
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<PAGE> 15
subject to any Business Combination constitute a "Substantial Part" as
hereinabove defined; (5) whether two or more transactions constitute a "series
of related transactions" as hereinabove defined, and (6) any matters required
to be determined pursuant to subsection (11) of subparagraph (C) above.
(E) Any amendment, change or repeal of this Paragraph 12, or any
other amendment of this certificate of incorporation which would have the
effect of modifying or permitting circumvention of this Paragraph 12, shall
require the favorable vote, at a meeting of stockholders, of the holders of at
least 85% of the then outstanding Common Stock, provided, however, that this
subparagraph (E) shall not apply to, and such 85% vote shall not be required
for, any such amendment, change or repeal recommended to the stockholders by
not less than 75% of the Continuing Directors. For purposes of this
subparagraph (E) only, if at the time when any such amendment, change or repeal
is under consideration there is no proposed Business Combination (in which
event clause "(i)" of the definition of Continuing Director in subparagraph
(C)(6) above would be inapplicable), the "Continuing Directors" shall be deemed
to be those persons who were directors of the corporation at the time when the
amendment of this certificate of incorporation to add this Paragraph 12 hereto
was approved by stockholders plus those persons who are Continuing Directors
under clause "(ii)" of said subparagraph (C)(6).
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(F) Nothing contained in this Paragraph 12 shall be construed to
relieve any Related Person from any fiduciary obligation imposed by law.
* * *
IV. The foregoing restatement of the certificate of incorporation
was authorized by vote of a majority of the Board of Directors at a meeting of
the Board of Directors held on November 18, 1993.
IN WITNESS WHEREOF, the undersigned have subscribed this certificate,
and affirm that the statements made herein are true under the penalties of
perjury, this 23rd day of November, 1993.
/s/ ERIC KRASNOFF
------------------------------
Eric Krasnoff
President
/s/ PETER SCHWARTZMANN
------------------------------
Peter Schwartzman
Secretary
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Exhibit 3(ii)
PALL CORPORATION
BY-LAWS
(as amended on July 11, 1994)
ARTICLE I
Offices
Section 1.01 Offices. The principal office of the corporation shall
be as stated in the certificate of incorporation. The corporation may also
have offices and places of business at such other places within and without the
State of New York as the board of directors may from time to time determine.
ARTICLE II
Stockholders
Section 2.01 Annual Meeting. The annual meeting of the stockholders
for the election of directors (and the transaction of such other business as
may properly come before it) shall be held on such date within six months after
the end of each fiscal year of the corporation, and at such time and place
within the State of New York, as are fixed by resolution of the board of
directors and stated in the notice of meeting.
Section 2.02 Special Meetings. Special meetings of the shareholders
for any purpose or purposes may be called by the president (or, in case of the
absence or disability of the president, by any vice president) and must be
called by him on the written request of a majority of the directors in office
or
<PAGE> 2
of the holders of 50% of the shares then outstanding and entitled to vote.
Such request shall state the date and hour, the place within the City of Glen
Cove or the City of New York, and the purpose or purposes of the meeting, and
must be delivered or mailed to the president or such vice president not later
than fifteen days prior to the proposed date of the meeting.
Section 2.03 Notice of Meetings. Written or printed notice of each
meeting of stockholders, stating the purpose or purposes for which the meeting
is called and the date and hour when and the place within the State of New York
where it is to be held, shall be signed by the president or a vice president,
or by the secretary or an assistant secretary, and a copy thereof shall be
mailed to each stockholder of record entitled to vote at such meeting not less
than ten nor more than forty days before the meeting, directed to his address
as it appears on the books of the corporation, but if a stockholder shall have
requested that notice be sent to another address in a writing previously filed
with the secretary, then to such address. Except as required by statute,
notice of any adjourned meeting shall not be required.
Section 2.04 Quorum. At any meeting of the shareholders, the holders
of a majority of the shares entitled to vote then issued and outstanding,
present in person or represented by proxy, shall constitute a quorum except as
otherwise provided by law or by the certificate of incorporation. A lesser
interest may adjourn any meeting from time to time, and the meeting may be held
as adjourned without further notice.
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When a quorum is present or represented at any meeting, a majority of the stock
represented thereat shall, except where a larger vote is required by law, by
the certificate of incorporation, or by these by-laws, decide any question
brought before such meeting.
Section 2.05 Proxies and Voting. Each stockholder of record shall be
entitled to one vote for each share of stock registered in the name of such
stockholder on the books of the corporation, and such votes may be cast either
in person or by proxy. Every proxy must be executed in writing by the
stockholder or by his duly authorized attorney. No proxy shall be valid after
the expiration of eleven months from the date of its execution unless a longer
duration shall have been specified therein, and every proxy shall be revocable
at the pleasure of the person executing it or of his personal representatives
or assigns.
Section 2.06 Inspectors of Election. Elections of directors shall be
conducted by two inspectors of election, neither of whom shall be a candidate
for the office of director, appointed either by the chief executive officer,
or, if he fails to appoint, by a per capita vote of the stockholders personally
present at the election. The inspectors, before entering on the discharge of
their duties, shall be sworn faithfully to execute the duties of inspectors
with strict impartiality and according to the best of their ability, and shall
execute a written certificate of the results of the election.
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<PAGE> 4
ARTICLE III
Board of Directors
Section 3.01 Number and Term of Office. The board of directors shall
consist of not less than three nor more than twelve directors, all of whom
shall be of full age, and at least one of whom shall be a citizen of the United
States and a resident of the State of New York, and the number of directors is
presently fixed at twelve. The directors shall have power from time to time,
and at any time, when the stockholders as such are not assembled in a meeting,
regular or special, to increase their own number within the limits as to number
of directors set forth in the certificate of incorporation. If the number of
directors be increased, the additional directors may be elected by a majority
of the directors in office at the time of the increase, or if not so elected
prior to the next annual meeting of the stockholders, they shall be elected
thereat by the stockholders. Directors may, but need not, be stockholders.
Section 3.02 Powers. The business of the corporation shall be
managed by the board of directors which shall have and may exercise all the
powers of the corporation, except such as are expressly conferred upon the
stockholders by law, by the certificate of incorporation, or by these by-laws.
Section 3.03 Executive Committee. There may be an executive
committee of not less than three directors appointed by the board who may meet
from time to time on notice to all by any
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<PAGE> 5
one of their own number. They may consult with and advise the officers of the
corporation in the management of its business and, when the board of directors
is not in session, shall have all the authority of the board, except with
respect to those matters as to which Section 712 of the Business Corporation
Law of New York withholds authority from any committee of the board. Vacancies
shall be filled by the board of directors at any regular or special meeting.
The executive committee shall keep regular minutes of its proceedings and
report the same to the board when required.
Section 3.04 Regular Meetings. Regular meetings of the board of
directors may be held without call or formal notice at such places either
within or without the State of New York and at such times as the board may from
time to time by vote determine. A regular meeting of the board of directors
for the election of officers and for such other business as may come before the
meeting may be held without call or formal notice immediately after, and at the
same place as, the annual meeting of stockholders or any special meeting of
stockholders at which a board of directors is elected.
Section 3.05 Special Meetings. Special meetings of the board of
directors may be held at any place either within or without the State of New
York at any time when called by the chief executive officer or secretary or a
majority of the directors, written notice of the time and place thereof having
been given to each director as follows: (a) by delivering a copy
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<PAGE> 6
of such notice to the director personally no later than the second day
preceding the date of the meeting, or (b) by sending a copy of such notice
addressed to the director at his mailing address as it appears on the books of
the corporation, such notice to be sent no less than ten days before the date
of the meeting if sent by ordinary mail or no later than the third business day
before the date of the meeting if sent by overnight mail or by a courier
service (such as Federal Express) which guarantees next day delivery, or (c) by
transmitting such notice to the director by telecopier (to a telecopier number
which has been furnished by him to the Secretary of the corporation) no later
than the second business day preceding the date of the meeting.
Section 3.06 Quorum. Either of the following shall constitute a
quorum of the board of directors, to wit:
(a) One-half of the total number of directors or
(b) any four directors, of whom at least two shall also be
principal officers of the corporation; but a lesser number may adjourn any
meeting. A quorum of any committee shall be a majority of the members thereof
except that any committee may, by unanimous action, determine that a lesser
number of members (not less than half) shall constitute a quorum. A majority
of the members in attendance at any meeting shall, except where a larger number
is required by law, by the certificate of incorporation, or by these by-laws,
decide any question brought before such meeting.
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<PAGE> 7
Section 3.07 Classification of Directors. Upon election of directors
at the annual meeting of stockholders in 1971, the board of directors shall be
divided into three classes, as nearly equal in number as possible, and no class
shall include less than three directors. The terms of office of the directors
initially classified shall be as follows: that of the first class shall expire
at the next annual meeting of stockholders in 1972, the second class at the
annual meeting next following July 31, 1973 and the third class at the annual
meeting next following July 31, 1974. At each annual meeting after such
initial classification and election in 1971, directors to replace those whose
terms expire at such annual meeting shall be elected to hold office until the
third succeeding annual meeting after their election. If after the initial
classification of directors the number of directors is changed:
(1) Any newly created directorships or any decrease in
directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as possible; and
(2) When the number of directors is increased by the board
and any newly created directorships are filled by the board, there
shall be no classification of the additional directors until the next
annual meeting of stockholders.
Section 3.08 Action by the Board Without a Meeting. Any action
required or permitted to be taken by the board or any committee thereof may be
taken without a meeting if all members
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<PAGE> 8
of the board or the committee consent in writing to the adoption of a
resolution authorizing the action. The resolution and the written consents
thereto by the members of the board or committee shall be filed with the
minutes of the proceedings of the board or committee.
Section 3.09 Participation in Meetings by Telephone. Any one or more
members of the board or any committee thereof may participate in a meeting of
such board or committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
Section 3.10 Audit, Compensation, Stock Option and Nominating
Committees. There may be an Audit Committee, a Compensation Committee, a Stock
Option Committee and a Nominating Committee, each consisting of not less than
three directors appointed by the Board, each of which Committees may meet from
time to time on notice to all members thereof by any member thereof. Such
Committees shall keep regular minutes of their proceedings and report the same
to the Board. The Audit Committee shall have such powers and perform such
functions as are customarily performed by audit committees of publicly owned
corporations including but not limited to such powers and functions as may be
prescribed by applicable rules or requirements of the Securities and Exchange
Commission or of any stock exchange on which securities of the Corporation are
listed.
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<PAGE> 9
The Compensation Committee shall have the power and duty to fix the
compensation of officers of the Corporation from time to time and to authorize
and approve the making of employment contracts between the Corporation and its
officers and shall have such other powers and duties as may be assigned to it
by resolution of the Board. The Stock Option Committee shall have, with
respect to each Stock Option Plan of the Corporation, the powers and duties
which, by the terms of such Plan, are delegated to and imposed upon the stock
option committee referred to therein. The Nominating Committee shall have the
power and duty to develop policy on the size and composition of the board of
directors and criteria for director nomination, to establish procedures for the
nomination process, to identify and recommend candidates for election to the
board of directors, and to evaluate participation and contribution of current
board members.
Section 3.11 Chairman, etc. The board of directors may elect from
among its members a Chairman, a Founder Chairman (which office may only be
occupied by Dr. David B. Pall) and a Chairman Emeritus, all of whom shall hold
such titles at the pleasure of the board. The persons having the titles
Founder Chairman and Chairman Emeritus shall not thereby be or be deemed
officers of the corporation.
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ARTICLE IV
Officers and Agents
Section 4.01 (a) Corporate Officers and Agents. The officers of the
corporation shall be a chairman, a president, one or more executive vice
presidents (one of whom may be designated the chief operating officer of the
corporation), one or more group vice presidents, a secretary, a treasurer and a
controller. The officers hereinabove in this paragraph referred to shall be
elected annually by the board of directors and shall hold office until their
respective successors are chosen and qualified. The corporation may have such
other officers and agents as may be deemed necessary who shall be chosen in
such manner and hold their positions for such terms and have such authority and
duties as from time to time may be determined by the board of directors. The
salaries of the officers of the corporation shall be fixed by the board of
directors or, if there is a Compensation Committee of the board, then by said
Committee. One person may hold more than one office except to the extent
prohibited by law. In all cases where the duties of any officer, agent or
employee are not specifically prescribed by the by-laws or by the board of
directors, such officer, agent or employee shall follow the orders and
instructions of the chief executive officer or of such other corporate officer
as may be designated by the chief executive officer.
(b) Appointment of Non-Corporate Vice Presidents, etc. In addition
to corporate officers elected by the board of
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directors pursuant to subparagraph (a) next above, the chief executive officer
may appoint and remove one or more employees as divisional or non-corporate
vice presidents and one or more persons (who may but need not be employees of
the corporation) as assistant secretaries, assistant treasurers and assistant
controllers. The chief executive officer may at his option also include as
part of the title of any such divisional or non-corporate vice president so
appointed a designation which will indicate the principal position or area of
responsibility of such appointee and/or the designation "senior vice
president". Persons so appointed in accordance with this paragraph shall
report to, be under the supervision of and have such authority and duties as
may be specified from time to time by the chief executive officer or by such
other corporate officer as the chief executive officer may designate. Such
appointed vice presidents, assistant secretaries, assistant treasurers and
assistant controllers shall not be or be deemed officers of the corporation.
Each such appointment shall be in writing filed with the secretary. Such
appointments shall expire annually at the organizational meeting of the board
of directors following the annual meeting of shareholders or at such other time
as the chief executive officer may specify or determine.
Section 4.02 Chairman. The chairman shall be the chief executive
officer of the corporation. He shall have supervision of its affairs and
business subject to the direction of the board of directors. The chairman
shall preside at all
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meetings of the stockholders, of the board of directors and of the executive
committee unless he shall designate another officer or director to preside at
any such meeting. He shall, unless otherwise directed by the board of
directors, attend in person or by substitute appointed by him, or shall execute
on behalf of the corporation written instructions appointing a proxy or proxies
to represent the corporation at, all meetings of the stockholders of any
corporation in which the corporation shall hold any stock and may, on behalf of
the corporation, in person or by substitute or by proxy, execute written
waivers of notice and consents with respect to any such meetings. At all such
meetings and otherwise, the chairman in person or by substitute or proxy as
aforesaid, may vote the stock so held by the corporation and may execute
written consents and other instruments with respect to such stock and may
exercise any and all rights and powers incident to the ownership of said stock,
subject however to the instructions, if any, of the board of directors. The
chairman shall have custody of the treasurer's bond, if any.
Section 4.03 President and Vice Presidents. The president and the
vice presidents shall assist the chairman and shall perform such duties as may
be assigned to them by the chairman or by the board of directors. In the
absence of the chairman, the president (or, in the absence of the president and
the chairman, the executive vice presidents in order of their seniority) shall
have the powers and perform the duties of the chairman. Seniority of the
executive vice presidents may be
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determined in accordance with such designation as may be made for the purpose
from time to time by the board of directors, and in the absence of any
designation shall be determined by length of service with the corporation
except that an executive vice president who has been designated chief operating
officer shall thereby be deemed the executive vice presdient with the greatest
seniority.
Section 4.04 Secretary. The secretary shall keep the minutes of all
proceedings of the directors and of the shareholders. He shall attend to the
giving of notices to the shareholders and directors, or of other notices
required by law or by these by-laws. He shall have custody of the seal of the
corporation and shall affix such seal to deeds, contracts and other written
instruments when authorized by the board of directors. He shall have charge of
the stock certificate book and stock ledger and such other books and papers as
the board may direct, and he shall perform all other duties incident to the
office of secretary.
Section 4.05 Treasurer. The treasurer shall be the chief financial
officer of the corporation. The treasurer shall have the care and custody of
all funds, securities, evidences of indebtedness and other personal property of
the corporation and shall deposit the same in accordance with the instructions
of the board of directors. He shall receive and give receipts and acquitances
for moneys paid in on account of the corporation, and shall pay out of the
funds on hand all bills, payrolls and other
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just debts of the corporation of whatever nature upon maturity of the same. He
shall enter regularly in books belonging to the corporation, to be kept by him
for that purpose, full and accurate accounts of all moneys received and paid
out by him on account of the corporation, and he shall perform all other duties
incident to the office of the treasurer and, upon request of the board, he
shall make such reports to it as may be required at any time. He shall, if
required by the board, give the corporation a bond in such sums and with such
sureties as shall be satisfactory to the board, conditioned upon the faithful
performance of his duties and for the restoration to the corporation in case of
his death, resignation, retirement or removal from office of all books, papers,
vouchers, money and other property of whatever kind in his possession, or under
his control belonging to the corporation.
Section 4.06 Compensation of Officers. The officers shall receive
such salary or compensation as may be determined by the Compensation Committee.
ARTICLE V
Removals, Resignations and Vacancies
Section 5.01 Directors. Any director may resign at any time by
giving written notice thereof to the chief executive officer, and such
resignation shall take effect at the time therein specified. Whenever any
vacancy shall occur in the board of directors by death, resignation or
otherwise, the same shall
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be filled without undue delay by a majority vote of the remaining members of
the board at any regular or special meeting. The person so chosen shall hold
office until the next annual meeting or until his successor shall have been
chosen at a special meeting of the stockholders.
Section 5.02 Officers. The board of directors may, at any meeting
called for the purpose, remove from office any officer of the corporation. Any
officer may resign at any time by giving written notice thereof to the chief
executive officer, and such resignation shall take effect at the time therein
specified. Any vacancy occurring in the offices of chairman, president,
executive vice president, group vice president, secretary, treasurer or any
other corporate office, whether owing to removal, resignation, death or any
other reason, may be filled by the board of directors, and the officers so
chosen shall hold office at the pleasure of the board of directors.
ARTICLE VI
Stock
Section 6.01 Certificates. Certificates of stock shall be signed in
the name of the corporation by its president or a vice president and the
secretary or an assistant secretary or the treasurer or an assistant treasurer
and shall be sealed with the seal of the corporation. Certificates for each
class of authorized stock shall be consecutively numbered, and the names and
residences of the owners, the date of issue, the number of
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shares and the amount paid therefor shall be entered in the stock books.
Certificates of stock shall be in such form consistent with law as shall be
prescribed by the board of directors. The seal of the corporation attached to
any stock certificate may be a facsimile, engraved or printed. Where any stock
certificate is signed by a transfer agent or transfer clerk and by a registrar,
the signatures of any officer of the corporation appearing upon such
certificate may be facsimiles, engraved or printed.
Section 6.02 Lost Certificates. In case of the alleged loss,
destruction or mutilation of a certificate or certificates of stock, the board
of directors may direct the issuance of a new certificate or certificates in
lieu thereof upon such terms and conditions in conformity with law as it may
prescribe.
Section 6.03 Transfer of Shares. Upon surrender to the corporation
or to a transfer agent of the corporation of a certificate of stock duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, and cancel the old certificate. The
corporation shall be entitled to treat the holder of record of any share or
shares of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other
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notice thereof, except as may be required by the laws of New York.
Section 6.04 Closing of Transfer Books or Fixing of Record Date. The
board of directors may prescribe a period not exceeding fifty days prior to the
date of a meeting of the stockholders or prior to the last day on which the
consent or dissent of stockholders may be effectively expressed for any purpose
without a meeting, during which no transfer of stock on the books may be made;
or in lieu of prohibiting the transfer of stock, may fix a time not more than
fifty days prior to the date of any meeting of stockholders or prior to the
last day on which the consent or dissent of stockholders may be effectively
expressed for any purpose without a meeting, as the time as of which
stockholders entitled to notice of and to vote at such a meeting or whose
consent or dissent is required or may be expressed for any purpose, as the case
may be, shall be determined; and all persons who were holders of record of
voting stock at such time and no others shall be entitled to notice of and to
vote at such meeting or to express their consent or dissent, as the case may
be. The board of directors may also fix a time not exceeding fifty days
preceding the time fixed for the payment of any dividend or the making of any
distribution, or for the delivery of evidences of rights, or evidences of
interests arising out of any change, conversion or exchange of capital stock,
as a record time for the determination of the stockholders entitled to receive
any such dividend, distribution rights or
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interest, or, at its option, in lieu of so fixing a record time, may prescribe
a period not exceeding fifty days prior to the date for such payment,
distribution or delivery during which no transfer of stock on the books of the
corporation may be made.
ARTICLE VII
Miscellaneous
Section 7.01 Waiver of Notice. Whenever, in accordance with the laws
of the State of New York, or the by-laws of the corporation, the stockholders
or directors are required to meet after call, notice, lapse of time or other
prerequisite, a meeting may be held without call, notice, lapse of time or
other prerequisite, upon written waivers signed before or after the meeting by
all persons entitled to notice and stating the time and place of such meeting.
The presence at any meeting of a person or persons entitled to notice thereof
shall be deemed a waiver of such notice as to such person or persons.
Section 7.02 Idemnification. The Corporation shall indemnify any
person made or threatened to be made a party to any action or proceeding,
whether civil or criminal (and whether or not by or in the right of the
corporation or of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise), by reason of the fact that such person, his testator or
intestate, is or was a director or officer of the corporation or served any
other corporation of any type or kind, domestic or
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foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise in any capacity at the request of the corporation, against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees, actually and necessarily incurred as a result of such action
or proceeding, or any appeal therein, provided that (i) no indemnification may
be made to or on behalf of any person if a judgment or other final adjudication
adverse to such person establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained in fact a
financial profit or other advantage to which he was not legally entitled; (ii)
no indemnification shall be required in connection with the settlement of any
pending or threatened action or proceeding, or any other disposition thereof
except a final adjudication, unless the corporation has consented to such
settlement or other disposition, and (iii) the corporation shall not be
obligated to indemnify any person by reason of the adoption of this Section
7.02 if and to the extent such person is entitled to be indemnified under a
policy of insurance as such policy would apply in the absence of the adoption
of this Section 7.02.
Reasonable expenses, including attorneys' fees, incurred in defending
any action or proceeding, whether threatened or pending, shall be paid or
reimbursed by the corporation in advance of the final disposition thereof upon
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receipt of an undertaking by or on behalf of the person seeking indemnification
to repay such amount to the corporation to the extent, if any, such person is
ultimately found not to be entitled to indemnification.
Notwithstanding any other provision hereof, no amendment or repeal of
this Section 7.02, or any other corporate action or agreement which prohibits
or otherwise limits the right of any person to indemnification or advancement
or reimbursement of expenses hereunder, shall be effective as to any person
until the 60th day following notice to such person of such action, and no such
amendment or repeal or other corporate action or agreement shall deprive any
person of any right hereunder arising out of any alleged or actual act or
omission occurring prior to such 60th day.
The corporation is hereby authorized, but shall not be required, to
enter into agreements with any of its directors, officers or employees
providing for rights to indemnification and advancement and reimbursement of
reasonable expenses, including attorneys' fees, to the extent permitted by law,
but the corporation's failure to do so shall not in any manner affect or limit
the rights provided for by this Section 7.02 or otherwise.
For purposes of this Section 7.02, the term "the corporation" shall
include any legal successor to the corporation, including any corporation which
acquires all or substantially all of the assets of the corporation in one or
more transactions. For purposes of this Section 7.02, the corporation
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shall be deemed to have requested a person to serve an employee benefit plan
where the performance by such person of his duties to the corporation or any
subsidiary thereof also imposes duties on, or otherwise involves services by,
such person to the plan or participants or beneficiaries of the plan, and
excise taxes assessed on a person with respect to an employee benefit plan
pursuant to applicable law shall be considered fines.
The rights granted pursuant to or provided by the foregoing provisions
of this Section 7.02 shall be in addition to and shall not be exclusive of any
other rights to indemnification and expenses to which any such person may
otherwise be entitled by law, contract or otherwise.
ARTICLE VIII
Amendments
Section 8.01 By Stockholders. The stockholders may make, amend and
repeal the by-laws of the corporation at any annual meeting or at any special
meeting called for the purpose.
Section 8.02 By Directors. Subject to the provisions of Section 8.03
hereof, the board of directors shall have power to make, amend and repeal the
by-laws of the corporation, by vote of a majority of all the directors, at any
regular or special meeting of the board.
Section 8.03 By Stockholders Only. The board of directors shall have
no power to amend or repeal any of the provisions of Sections 2.02, 2.03, 2.04,
or this Section 8.03,
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and any such provisions may be amended or repealed only in the manner provided
in Section 8.01. Notwithstanding the foregoing, however, the board of
directors may amend this Section 8.03 if the sole effect of such amendment is
to add to the list of the provisions which may only be amended in the manner
set forth in Section 8.01.
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Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT dated April 1, 1994 between PALL CORPORATION,
a New York corporation (the "Company") and ERIC KRASNOFF
("Executive").
WHEREAS, the parties desire to terminate, as of the
Term Commencement Date (as defined in Section 1 hereof), any
employment agreement between them in effect at the time of the
making of this Agreement, and to enter into a new employment
agreement, on the terms and conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the mutual
agreements hereinafter set forth, the parties hereto agree as
follows:
Section 1. Employment and Term
The Company hereby employs Executive, and Executive
hereby agrees to serve, as an executive employee of the Company
with the duties set forth in Section 2, for a term (hereinafter
called the "Term of Employment") beginning April 1, 1994 (the
"Term Commencement Date") and ending, unless sooner terminated
under Section 4, on the effective date specified in a notice of
termination given by either party to the other except that such
effective date shall not be earlier than the later of (i) March
31, 1999 and (ii) the second anniversary of the date on which
such notice is given.
<PAGE> 2
Section 2. Duties
(a) As used herein, the term "Contract Position"
has the following meaning:
(i) unless Executive has been elected chief executive
officer of the Company, he shall be deemed to hold the
Contract Position so long as (but only so long as) he has
the title of President of the Company and also has such
authority and has been assigned such duties as are
customarily possessed by and assigned to a chief operating
officer;
(ii) if at any time Executive is elected chief
executive officer of the Company, then after such time as
Executive has first been elected chief executive officer, he
shall be deemed to hold the Contract Position so long as
(but only so long as) he has the title of chief executive
officer of the Company and also has such authority and has
been assigned such duties as are customarily possessed by
and assigned to a chief executive officer.
The Company represents to Executive that the Board of Directors
(acting by its Compensation Committee) has authorized the making
of this Agreement and expressed its present intention that during
the Term of Employment Executive will hold the Contract Position.
If at any time during the Term of Employment:
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<PAGE> 3
(i) the Board of Directors shall fail to elect
Executive to, or shall remove from him, the office which in
accordance with the by-laws as then in effect or any
resolution or resolutions of the Board of Directors, carries
with it the title, authority and duties of the Contract
Position, or
(ii) the by-laws are amended in such a way that,
or the Board of Directors takes any action the effect of
which is that, Executive no longer has the title, authority
and duties of the Contract Position,
then in either such event Executive shall have the right at his
option to terminate the Term of Employment by notice to the
Secretary of the Company given at any time thereafter. During
any period of time when Executive has the right to terminate
under this paragraph but elects not to do so, he shall hold such
office or offices in the Company, and perform such duties and
assignments relating to the business of the Company, as the Board
of Directors and/or the chief executive officer shall direct
except that Executive shall not be required to hold any office or
perform any duties or assignment inconsistent with his experience
and qualifications or not customarily performed by a senior
executive corporate officer. So long as Executive is performing
or stands ready to perform duties and assignments in accordance
with the preceding sentence, the Term of
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<PAGE> 4
Employment shall continue until it thereafter terminates or is
terminated pursuant to any applicable provision hereof (including
but not limited to termination at Executive's
option under this paragraph).
(b) During the Term of Employment Executive shall,
except during customary vacation periods and periods of illness,
devote substantially all of his business time and attention to
the performance of his duties hereunder and to the business and
affairs of the Company and its subsidiaries and to promoting the
best interests of the Company and its subsidiaries and he shall
not, either during or outside of such normal business hours,
engage in any activity inimical to such best interests.
Section 3. Compensation During Term of Employment
(a) Base Salary. With respect to the period beginning
on the Term Commencement Date and ending at the end of the Term
of Employment, the Company shall pay to Executive base
compensation (in addition to the compensation provided for
elsewhere in this Agreement) at such rate as the Board of
Directors may determine (the amount so determined by the Board
being herein called the "Base Salary") but at not less than the
rate of $ 296,000 per annum (hereinafter called the "Original
Base Salary") adjusted for each Contract Year (as hereinafter
defined) beginning with the Contract Year which starts August 1,
1994, as follows: The term "Contract Year"
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as used herein means the period from August 1 of each year
through July 31 of the following year. For each Contract Year
during the Term of Employment beginning with the Contract Year
which starts August 1, 1994, the minimum compensation payable to
Executive under this Section 3(a) (hereinafter called the
"Minimum Base Salary") shall be determined by increasing (or
decreasing) the Original Base Salary by the percentage increase
(or decrease) of the Consumer Price Index (as hereinafter
defined) for the month of June immediately preceding the start of
the Contract Year in question over (or below) the Consumer Price
Index for June 1993. The term "Consumer Price Index" as herein
used means the "Consumer Price Index for all Urban Consumers"
compiled and published by the Bureau of Labor Statistics of the
United States Department of Labor for "New York - Northern New
Jersey - Long Island, NY-NJ-CT". To illustrate the operation of
the foregoing provisions of this Section 3(a): Executive's Base
Salary for the Contract Year August 1, 1994 through July 31, 1995
shall be not less than the Original Base Salary adjusted by the
percentage increase (or decrease) of the Consumer Price Index for
June 1994 over (or below) said Index for June 1993. Further
adjustment in the Minimum Base Salary shall be made for each
ensuing Contract Year, in each case (i) using the Consumer Price
Index for June 1993 as the base except as provided in the
immediately following paragraph hereof and
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<PAGE> 6
(ii) applying the percentage increase (or decrease) in the
Consumer Price Index since said base month to the Original Base
Salary to determine the Minimum Base Salary. The Base Salary
shall be paid in such periodic installments as the Company may
determine but not less often than monthly.
If with respect to any Contract Year (including the
contract Year beginning August 1, 1994) the Board of Directors
fixes the Base Salary at an amount higher than the Minimum Base
Salary, then (unless the resolution fixing such higher Base
Salary provides otherwise), for the purpose of determining the
minimum Base Salary for subsequent Contract Years: (1) the amount
of the higher Base Salary so fixed shall be deemed substituted
for the Original Base Salary wherever the Original Base Salary is
referred to in the immediately preceding paragraph hereof, and
(ii) the base month for determining the Consumer Price Index
adjustment shall be June of the calendar year in which the
Contract Year to which such higher Base Salary is applicable
begins (e.g., if the Board fixes a Base Salary for the Contract
Year beginning August 1, 1994 which is higher than the Minimum
Base Salary, then June 1994 would become the base month for the
purposes of making the CPI adjustment to determine the Minimum
Base Salary for subsequent Contract Years).
(b) Bonus Compensation. With respect to each fiscal
year of the Company falling in whole or in part within
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<PAGE> 7
the Term of Employment beginning with the fiscal year ending July
30, 1994, Executive shall be entitled to a bonus (in addition to
his Base Salary) in such amount and computed in such manner as
shall be determined by the Board of Directors but in no event
shall the bonus payable to Executive under this Section 3(b) be
less than an amount computed by applying to the fiscal year in
question the following bonus formula:
"Bonus Compensation" means the amount, if any, payable
to Executive under this Section 3(b).
"Average Equity" means the average of stockholders'
equity as shown on the fiscal year-end consolidated balance
sheet of the Company as of the end of the fiscal year with
respect to which Bonus Compensation is being computed
hereunder and as of the end of the immediately preceding
fiscal year (e.g., "Average Equity" to be used in computing
Bonus Compensation for the fiscal year ending July 30, 1994
will be the average of stockholders' equity as of July 31,
1993 and July 30, 1994) except that the amount shown as the
"equity adjustment from foreign currency translation" on
each such consolidated balance sheet shall be disregarded
and the amount of $3,744,000 shall be the equity adjustment
(increase) from foreign currency translation used to
determine stockholders' equity at each such year-end balance
sheet date.
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<PAGE> 8
"Net Earnings" means the after-tax consolidated net
earnings of the Company and its subsidiaries as certified by
its independent accountants for inclusion in the annual
report to stockholders.
"Return on Equity" means Net Earnings as a percentage
of Average Equity.
For fiscal years 1994 and 1995, "Zero Bonus Percentage"
shall mean a Return on Equity of 12.5%. For fiscal year
1994, "Maximum Bonus Percentage" shall mean a Return on
Equity of 19%. For fiscal years after fiscal 1995 the
Company shall determine the Zero Bonus Percentage, and for
fiscal years after fiscal 1994 the Company shall determine
the Maximum Bonus Percentage, consistent in each case with
expected results based upon the Company's normal projection
procedures, or based on sound statistical or trend data, and
the determination by the Company of such percentages shall
be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero
Bonus Percentage or less, no Bonus Compensation shall be payable.
If Return on Equity equals or exceeds the Maximum Bonus
Percentage, the Bonus Compensation payable to Executive shall be
75% of his Base Salary. If Return on Equity is more than the
Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Bonus Compensation shall be increased
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<PAGE> 9
from zero percent of Base Salary towards 75% of Base Salary in
the same proportion that Return on Equity increases from the Zero
Bonus Percentage to the Maximum Bonus Percentage. Thus, for
example, if Return on Equity for fiscal 1994 is 15.75% (the
midpoint between 12.5% and 19%) the Bonus Compensation shall be
an amount equal to 37.5% of Executive's Base Salary (the midpoint
between zero percent of Base Salary and 75% of Base Salary).
The Bonus Compensation shall be paid in installments as
follows:
(i) 50% of the estimated amount thereof in July of the
fiscal year with respect to which the Bonus Compensation is
payable (e.g., 50% in July 1994 with respect to Bonus
Compensation for the fiscal year ending July 30, 1994),
based on the then current projections of Return on Equity,
and
(ii) the balance thereof not later than January 15th
next following the end of the fiscal year with respect to
which the Bonus Compensation is payable.
With respect to any fiscal year of the Company which
falls in part but not in whole within the Term of Employment, the
Bonus Compensation to which Executive is entitled under this
Section 3(b) shall be prorated on the basis of the number of days
of such fiscal year falling within the
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<PAGE> 10
Term of Employment except that if the Term of Employment ends
within five days before or after the end of a fiscal year, there
shall be no proration and the Bonus Compensation shall be payable
with respect to the full fiscal year ending within such five-day
period, provided, however, that for the purpose of computing
Bonus Compensation for the fiscal year ending July 30, 1994, the
period August 1, 1993 to the Term Commencement Date shall be
deemed part of the Term of Employment under this Agreement.
(c) Fringe Benefits and Perquisites. During the Term
of Employment, Executive shall enjoy the customary perquisites
of office, including but not limited to office space and
furnishings, secretarial services, expense reimbursements, and
any similar emoluments customarily afforded to senior executive
officers of the Company. Executive shall also be entitled to
receive or participate in all "fringe benefits" and employee
benefit plans provided or made available by the Company to its
executives or management personnel generally, such as, but not
limited to, group hospitalization, medical, life and disability
insurance, and pension, retirement, profit-sharing and stock
option or purchase plans.
(d) Vacations. Executive shall be entitled each year
to a vacation or vacations in accordance with the policies of the
Company as determined by the Board or by an
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authorized senior officer of the Company from time to time. The
Company shall not pay Executive any additional compensation for
any vacation time not used by Executive.
Section 4. Termination by Reason of Disability, Death,
Retirement or Change of Control
(a) Disability or Death. If, during the Term of
Employment, Executive, by reason of physical or mental
disability, is incapable of performing his principal duties
hereunder for an aggregate of 130 working days out of any period
of twelve consecutive months, the Company at its option may
terminate the Term of Employment effective immediately by notice
to Executive given within 90 days after the end of such twelve-
month period. If Executive shall die during the Term of
Employment or if the Company terminates the Term of Employment
pursuant to the immediately preceding sentence by reason of
Executive's disability, the Company shall pay to Executive, or to
Executive's legal representatives, or in accordance with a
direction given by Executive to the Company in writing, the
following: (i) Executive's Base Salary to the end of the month in
which such death or termination for disability occurs and
Executive's Bonus Compensation prorated to said last day of the
month, and (ii) for the period from the end of the month in which
such death or termination for disability occurs until the earlier
of (x) the first anniversary of the date of death or
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<PAGE> 12
termination and (y) the date on which the Term of Employment
would have ended but for such death or termination for
disability, monthly payments at one-half of the rate of
Executive's Base Salary plus one-half of Executive's Bonus
Compensation (pro rated to the last day of such period) which
would have been payable with respect to such period but for such
death or termination.
(b) Retirement. (i) The Term of Employment shall end
automatically, without action by either party, on Executive's
65th birthday unless, prior to such birthday, Executive and the
Company have agreed in writing that the Term of Employment shall
continue past such 65th birthday. In that event, unless the
parties have agreed otherwise, the Term of Employment shall be
automatically renewed and extended each year, as of Executive's
birthday, for an additional one-year term, unless either party
has given a Non-Renewal Notice. A Non-Renewal Notice shall be
effective as of Executive's ensuing birthday only if given not
less than 60 days before such birthday, and shall state that the
party giving such notice elects that this Agreement shall not
automatically renew itself further, with the result that the Term
of Employment shall end on Executive's ensuing birthday. (ii) If
the Term of Employment ends pursuant to this paragraph by reason
of a notice given by either party as herein permitted or
automatically at age 65 or any subsequent
- 12 -
<PAGE> 13
birthday, the Company shall pay to Executive, or to another payee
specified by Executive to the Company in writing, Executive's
Base Salary and Bonus Compensation prorated to the date on which
the Term of Employment ends. (iii) Anything hereinabove to the
contrary notwithstanding, if any provision of this paragraph
violates federal or applicable state law relating to
discrimination on account of age, such provision shall be deemed
modified or suspended to the extent necessary to eliminate such
violation of law. If at a later date, by reason of changed
circumstances or otherwise, the enforcement of such provision as
set forth herein would no longer constitute a violation of law,
then it shall be enforced in accordance with its terms as set
forth herein.
(c) Change of Control. In event of a Change of Control
(as hereinafter defined), Executive shall have the right to
terminate the Term of Employment, by notice to the Company given
at any time after such Change of Control, effective on the date
specified in such notice, which date shall not be more than (but
can be less than) one year after the giving of such notice. A
Change of Control shall be deemed to have occurred at such time
as a majority of the directors then in office are not Continuing
Directors as defined in subparagraph (C)(6) of Paragraph 12 of
the Company's Restated Certificate of Incorporation dated
- 13 -
<PAGE> 14
November 23, 1993 and filed by the New York Department of State
on December 7, 1993.
Section 5. Covenant Not to Compete
For a period of eighteen months after the end of the
Term of Employment if the Term of Employment is terminated by
notice to the Company given by Executive under Section 1, Section
2 or Section 4 hereof, or for a period of twelve months after the
end of the Term of Employment if the Term of Employment is
terminated by notice to Executive given by the Company under
Section 1 or Section 4 hereof or terminates under Section 4 by reason of
Executive attaining the age of 65, Executive shall not render
services to any corporation, individual or other entity engaged
in any activity, or himself engage directly or indirectly in any
activity, which is competitive to any material extent with the
business of the Company or any of its subsidiaries, provided,
however, that if the Company terminates under Section 1 following
a Change of Control (as defined in Section 4 (c)), the foregoing
covenant not to compete shall not apply.
Section 6. Company's Right to Injunctive Relief
Executive acknowledges that his services to the Company
are of a unique character, which gives them a peculiar value to
the Company, the loss of which cannot be reasonably or adequately
compensated in damages in an action at law, and that therefore,
in addition to any other remedy which the Company may have at law
or in equity, the Company
- 14 -
<PAGE> 15
shall be entitled to injunctive relief for a breach of this
Agreement by Executive.
Section 7. Inventions and Patents
All inventions, ideas, concepts, processes,
discoveries, improvements and trademarks (hereinafter
collectively referred to as intangible rights), whether
patentable or registrable or not, which are conceived, made,
invented or suggested either by Executive alone or by Executive
in collaboration with others during the Term of Employment, and
whether or not during regular working hours, shall be disclosed
to the Company and shall be the sole and exclusive property of
the Company. If the Company deems that any of such intangible
rights are patentable or otherwise registrable under any federal,
state or foreign law, Executive, at the expense of the Company,
shall execute all documents and do all things necessary or proper
to obtain patents and/or registrations and to vest the Company
with full title thereto.
Section 8. Trade Secrets and Confidential
Information
Executive shall not, either directly or indirectly,
except as required in the course of his employment by the
Company, disclose or use at any time, whether during or
subsequent to the Term of Employment, any information of a
proprietary nature owned by the Company, including but not
limited to, records, data, formulae, documents,
- 15 -
<PAGE> 16
specifications, inventions, processes, methods and intangible
rights which are acquired by him in the performance of his duties
for the Company and which are of a confidential information or
trade-secret nature. All records, files, drawings, documents,
equipment and the like, relating to the company's business, which
Executive shall prepare, use, construct or observe, shall be and
remain the Company's sole property. Upon the termination of his
employment or at any time prior thereto upon request by the
Company, Executive shall return to the possession of the Company
any materials or copies thereof involving any confidential
information or trade secrets and shall not take any material or
copies thereof from the possession of the Company.
Section 9. Mergers and Consolidations; Assignability
In the event that the Company, or any entity resulting
from any merger or consolidation referred to in this Section 9 or
which shall be a purchaser or transferee so referred to, shall at
any time be merged or consolidated into or with any other entity
or entities, or in the event that substantially all of the assets
of the Company or any such entity shall be sold or otherwise
transferred to another entity, the provisions of this Agreement
shall be binding upon and shall inure to the benefit of the
continuing entity in or the entity resulting from such merger or
consolidation or the entity to which such assets shall be sold or
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<PAGE> 17
transferred. Except as provided in the immediately preceding
sentence of this Section 9, this Agreement shall not be
assignable by the Company or by any entity referred to in such
immediately preceding sentence. This Agreement shall not be
assignable by Executive, but in the event of his death it shall
be binding upon and inure to the benefit of his legal
representatives to the extent required to effectuate the terms
hereof.
Section 10. Captions
The captions in this Agreement are not part of the
provisions hereof, are merely for the purpose of reference and
shall have no force or effect for any purpose whatsoever,
including the construction of the provisions of this Agreement,
and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and
construed in accordance with the laws of, the State of New York.
Section 12. Entire Contract
This instrument contains the entire agreement of the
parties on the subject matter hereof except that the rights of
the Company hereunder shall be deemed to be in addition to and
not in substitution for its rights under the Company's standard
printed form of "Employee's Secrecy and
- 17 -
<PAGE> 18
Invention Agreement" or "Employee Agreement" if heretofore or
hereafter entered into between the parties hereto so that the
making of this Agreement shall not be construed as depriving the
Company of any of its rights or remedies under any such Secrecy
and Invention Agreement or Employee Agreement. This Agreement
may not be changed orally, but only by an agreement in writing
signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
Section 13. Notices
All notices given hereunder shall be in writing and
shall be sent by registered or certified mail or delivered by
hand, and, if intended for the Company, shall be addressed to it
(if sent by mail) or delivered to it (if delivered by hand) at
its principal office for the attention of the Secretary of the
Company, or at such other address and for the attention of such
other person of which the Company shall have given notice to
Executive in the manner herein provided, and, if intended for
Executive, shall be delivered to him personally or shall be
addressed to him (if sent by mail) at his most recent residence
address shown in the Company's employment records or at such
other address or to such designee of which Executive shall have
given notice to the Company in the manner herein provided. Each
such notice
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<PAGE> 19
shall be deemed to be given on the date of mailing thereof or, if
delivered personally, on the date so delivered.
Section 14. Termination of Any Prior Employment
Agreement
Any Employment Agreement in effect between the Company
and Executive at the time of the making of this Agreement is
hereby terminated by mutual consent effective as of the Term
Commencement Date and is superseded and replaced by this
Agreement effective as of the Term Commencement Date. Executive
shall be entitled to receive Bonus Compensation for the Company's
fiscal year ending July 30, 1994 in accordance with the terms of
this Agreement and not of any such prior Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first above written.
PALL CORPORATION
By /s/ JEREMY HAYWARD-SURRY
--------------------------
Name: Jeremy Hayward-Surry
Title: Executive Vice President
and Treasurer
/s/ ERIC KRASNOFF
--------------------------
Eric Krasnoff
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<PAGE> 1
Exhibit 10.3
AMENDMENT DATED JULY 11, 1994
TO EMPLOYMENT AGREEMENT DATED APRIL 1, 1994
PALL CORPORATION, a New York corporation (the
"Company") and ERIC KRASNOFF ("Executive") hereby agree that the
Employment Agreement dated April 1, 1994 between them is amended,
effective with respect to the Company's fiscal year beginning
July 31, 1994 and each subsequent fiscal year during the Term of
Employment, by changing the last paragraph on page 8 thereof to
read and provide as follows:
If Return on Equity for the fiscal year in question is the
Zero Bonus Percentage or less, no Bonus Compensation shall
be payable. If Return on Equity equals or exceeds the
Maximum Bonus Percentage, the Bonus Compensation payable to
Executive shall be 100% of his Base Salary. If Return on
Equity is more than the Zero Bonus Percentage and less than
the Maximum Bonus Percentage, the Bonus Compensation shall
be increased from zero percent of Base Salary towards 100%
of Base Salary in the same proportion that Return on Equity
increases from the Zero Bonus Percentage to the Maximum
Bonus Percentage. Thus, for example, if Return on Equity
for fiscal 1995 is 15.75% (the midpoint between 12.5% and
19%, the Company on July 11, 1994 having determined the
Maximum Bonus Percentage for fiscal 1995 to be 19%), the
Bonus Compensation shall be an amount equal to 50% of
Executive's Base Salary (the midpoint between zero percent
of Base Salary and 100% of Base Salary).
Except as hereby modified, said Employment Agreement is hereby
ratified and confirmed and shall continue in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed
this Amendment as of the day and year first above written.
PALL CORPORATION
By /s/ JEREMY HAYWARD-SURRY
--------------------------
Name: Jeremy Hayward-Surry,
President
/s/ ERIC KRASNOFF
--------------------------
Eric Krasnoff
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
AGREEMENT dated August 1, 1994 between PALL CORPORATION, a New York
corporation (the "Company") and JEREMY HAYWARD-SURRY ("Executive").
WHEREAS, the parties desire to terminate, as of the Term Commencement
Date (as defined in Section 1 hereof), any employment agreement between them in
effect at the time of the making of this Agreement, and to enter into a new
employment agreement, on the terms and conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
Section 1. Employment and Term
The Company hereby employs Executive, and Executive hereby agrees to
serve, as an executive employee of the Company with the duties set forth in
Section 2, for a term (hereinafter called the "Term of Employment") beginning
August 1, 1994 (the "Term Commencement Date") and ending, unless sooner
terminated under Section 4, on the effective date specified in a notice of
termination given by either party to the other except that such effective date
shall not be earlier than the later of (i) July 31, 1999 and (ii) the second
anniversary of the date on which such notice is given.
Section 2. Duties
(a) Executive agrees that during the Term of Employment he will
hold such offices or positions with the
<PAGE> 2
Company, and perform such duties and assignments relating to the business of
the Company, as the Board of Directors or the chief executive officer of the
Company shall direct except that Executive shall not be required to hold any
office or position or to perform any duties or assignment inconsistent with his
experience and qualifications or not customarily performed by a corporate
officer. The Company represents to Executive that the Board of Directors
(acting by its Compensation Committee) has authorized the making of this
Agreement and expressed its present intention that during the Term of
Employment Executive will be an elected officer of the Company. The failure of
any future Board of Directors to elect Executive as an officer of the Company
shall not, however, be deemed to relieve either party hereto of any of his or
its obligations under this Agreement.
(b) If the Board of Directors or the chief executive officer of
the Company so directs, Executive shall serve as an officer of one or more
subsidiaries of the Company (provided that the duties of such office are not
inconsistent with Executive's experience and qualifications and are duties
customarily performed by a corporate officer) and part or all of the
compensation to which Executive is entitled hereunder may be paid by such
subsidiary or subsidiaries. However, such employment and/or payment of
Executive by a subsidiary or subsidiaries shall not relieve
- 2 -
<PAGE> 3
the Company from any of its obligations under this Agreement except to the
extent of payments actually made to Executive by a subsidiary.
(c) During the Term of Employment Executive shall, except during
customary vacation periods and periods of illness, devote substantially all of
his business time and attention to the performance of his duties hereunder and
to the business and affairs of the Company and its subsidiaries and to
promoting the best interests of the Company and its subsidiaries and he shall
not, either during or outside of such normal business hours, engage in any
activity inimical to such best interests.
Section 3. Compensation During Term of Employment
(a) Base Salary. With respect to the period beginning on the
Term Commencement Date and ending at the end of the Term of Employment, the
Company shall pay to Executive base compensation (in addition to the
compensation provided for elsewhere in this Agreement) at such rate as the
Board of Directors may determine (the amount so determined by the Board being
herein called the "Base Salary") but at not less than the rate of $280,000 per
annum (hereinafter called the "Original Base Salary") adjusted for each
Contract Year (as hereinafter defined) beginning with the Contract Year which
starts August 1, 1995, as follows: The term "Contract Year" as used herein
means the period from August 1 of each year
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<PAGE> 4
through July 31 of the following year. For each Contract Year during the Term
of Employment beginning with the Contract Year which starts August 1, 1995, the
minimum compensation payable to Executive under this Section 3(a) (hereinafter
called the "Minimum Base Salary") shall be determined by increasing (or
decreasing) the Original Base Salary by the percentage increase (or decrease)
of the Consumer Price Index (as hereinafter defined) for the month of June
immediately preceding the start of the Contract Year in question over (or
below) the Consumer Price Index for June 1994. The term "Consumer Price Index"
as herein used means the "Consumer Price Index for all Urban Consumers"
compiled and published by the Bureau of Labor Statistics of the United States
Department of Labor for "New York - Northern New Jersey - Long Island,
NY-NJ-CT". To illustrate the operation of the foregoing provisions of this
Section 3(a): Executive's Base Salary for the Contract Year August 1, 1995
through July 31, 1996 shall be not less than the Original Base Salary adjusted
by the percentage increase (or decrease) of the Consumer Price Index for June
1995 over (or below) said Index for June 1994. Further adjustment in the
Minimum Base Salary shall be made for each ensuing Contract Year, in each case
(i) using the Consumer Price Index for June 1994 as the base except as
provided in the immediately following paragraph hereof and (ii) applying the
percentage increase (or decrease) in the
- 4 -
<PAGE> 5
Consumer Price Index since said base month to the Original Base Salary to
determine the Minimum Base Salary. The Base Salary shall be paid in such
periodic installments as the Company may determine but not less often than
monthly.
If with respect to any Contract Year subsequent to the Contract Year
beginning August 1, 1994 the Board of Directors fixes the Base Salary at an
amount higher than the Minimum Base Salary, then (unless the resolution fixing
such higher Base Salary provides otherwise), for the purpose of determining the
Minimum Base Salary for subsequent Contract Years: (1) the amount of the
higher Base Salary so fixed shall be deemed substituted for the Original Base
Salary wherever the Original Base Salary is referred to in the immediately
preceding paragraph hereof, and (ii) the base month for determining the
Consumer Price Index adjustment shall be June of the calendar year in which the
Contract Year to which such higher Base Salary is applicable begins (e.g., if
the Board fixes a Base Salary for the Contract Year beginning August 1, 1995
which is higher than the Minimum Base Salary, then June 1995 would become the
base month for the purposes of making the CPI adjustment to determine the
Minimum Base Salary for subsequent Contract Years).
(b) Bonus Compensation. With respect to each fiscal year of
the Company falling in whole or in part within the Term of Employment beginning
with the fiscal year ending
- 5 -
<PAGE> 6
July 29, 1995, Executive shall be entitled to a bonus (in addition to his Base
Salary) in such amount and computed in such manner as shall be determined by
the Board of Directors but in no event shall the bonus payable to Executive
under this Section 3(b) be less than an amount computed by applying to the
fiscal year in question the following bonus formula:
"Bonus Compensation" means the amount, if any, payable to
Executive under this Section 3(b).
"Average Equity" means the average of stockholders' equity as
shown on the fiscal year-end consolidated balance sheet of the Company
as of the end of the fiscal year with respect to which Bonus
Compensation is being computed hereunder and as of the end of the
immediately preceding fiscal year (e.g., "Average Equity" to be used in
computing Bonus Compensation for the fiscal year ending July 29, 1995
will be the average of stockholders' equity as of July 30, 1994 and
July 29, 1995) except that the amount shown as the "equity adjustment
from foreign currency translation" on each such consolidated balance
sheet shall be disregarded and the amount of $3,744,000 shall be the
equity adjustment (increase) from foreign currency translation used to
determine stockholders' equity at each such year-end balance sheet
date.
- 6 -
<PAGE> 7
"Net Earnings" means the after-tax consolidated net earnings
of the Company and its subsidiaries as certified by its independent
accountants for inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of
Average Equity.
For fiscal year 1995, "Zero Bonus Percentage" shall mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall mean a
Return on Equity of 19%. For fiscal years after fiscal 1995 the
Company shall determine the Zero Bonus Percentage and the Maximum
Bonus Percentage, consistent in each case with expected results based
upon the Company's normal projection procedures, or based on sound
statistical or trend data, and the determination by the Company of
such percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus
Percentage or less, no Bonus Compensation shall be payable. If Return on
Equity equals or exceeds the Maximum Bonus Percentage, the Bonus Compensation
payable to Executive shall be 75% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Bonus Compensation shall be increased from zero percent of Base Salary
towards 75% of Base Salary in the same proportion that Return on Equity
increases from
- 7 -
<PAGE> 8
the Zero Bonus Percentage to the Maximum Bonus Percentage. Thus, for example,
if Return on Equity for fiscal 1995 is 15.75% (the midpoint between 12.5% and
19%) the Bonus Compensation shall be an amount equal to 37.5% of Executive's
Base Salary (the midpoint between zero percent of Base Salary and 75% of Base
Salary).
The Bonus Compensation shall be paid in installments as
follows:
(i) 50% of the estimated amount thereof in July of the
fiscal year with respect to which the Bonus Compensation is payable
(e.g., 50% in July 1995 with respect to Bonus Compensation for the
fiscal year ending July 29, 1995), based on the then current
projections of Return on Equity, and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in
part but not in whole within the Term of Employment, the Bonus Compensation to
which Executive is entitled under this Section 3(b) shall be prorated on the
basis of the number of days of such fiscal year falling within the Term of
Employment except that if the Term of Employment ends within five days before
or after the end of a fiscal year, there shall be no proration and the Bonus
Compensation shall
- 8 -
<PAGE> 9
be payable with respect to the full fiscal year ending within such five-day
period.
(c) Fringe Benefits and Perquisites. During the Term of
Employment, Executive shall enjoy the customary perquisites of office,
including but not limited to office space and furnishings, secretarial
services, expense reimbursements, and any similar emoluments customarily
afforded to senior executive officers of the Company. Executive shall also be
entitled to receive or participate in all "fringe benefits" and employee
benefit plans provided or made available by the Company to its executives or
management personnel generally, such as, but not limited to, group
hospitalization, medical, life and disability insurance, and pension,
retirement, profit-sharing and stock option or purchase plans.
(d) Vacations. Executive shall be entitled each year to a
vacation or vacations in accordance with the policies of the Company as
determined by the Board or by an authorized senior officer of the Company from
time to time. The Company shall not pay Executive any additional compensation
for any vacation time not used by Executive.
Section 4. Termination by Reason of Disability, Death,
Retirement or Change of Control
(a) Disability or Death. If, during the Term of Employment,
Executive, by reason of physical or mental
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<PAGE> 10
disability, is incapable of performing his principal duties hereunder for an
aggregate of 130 working days out of any period of twelve consecutive months,
the Company at its option may terminate the Term of Employment effective
immediately by notice to Executive given within 90 days after the end of such
twelve-month period. If Executive shall die during the Term of Employment or
if the Company terminates the Term of Employment pursuant to the immediately
preceding sentence by reason of Executive's disability, the Company shall pay
to Executive, or to Executive's legal representatives, or in accordance with a
direction given by Executive to the Company in writing, the following: (i)
Executive's Base Salary to the end of the month in which such death or
termination for disability occurs and Executive's Bonus Compensation prorated
to said last day of the month, and (ii) for the period from the end of the
month in which such death or termination for disability occurs until the
earlier of (x) the first anniversary of the date of death or termination and
(y) the date on which the Term of Employment would have ended but for such
death or termination for disability, monthly payments at one-half of the rate
of Executive's Base Salary plus one-half of Executive's Bonus Compensation
(pro rated to the last day of such period) which would have been payable with
respect to such period but for such death or termination.
- 10 -
<PAGE> 11
(b) RETIREMENT. (i) The Term of Employment shall end
automatically, without action by either party, on Executive's 65th birthday
unless, prior to such birthday, Executive and the Company have agreed in
writing that the Term of Employment shall continue past such 65th birthday. In
that event, unless the parties have agreed otherwise, the Term of Employment
shall be automatically renewed and extended each year, as of Executive's
birthday, for an additional one-year term, unless either party has given a
Non-Renewal Notice. A Non-Renewal Notice shall be effective as of Executive's
ensuing birthday only if given not less than 60 days before such birthday, and
shall state that the party giving such notice elects that this Agreement shall
not automatically renew itself further, with the result that the Term of
Employment shall end on Executive's ensuing birthday. (ii) If the Term of
Employment ends pursuant to this paragraph by reason of a notice given by
either party as herein permitted or automatically at age 65 or any subsequent
birthday, the Company shall pay to Executive, or to another payee specified by
Executive to the Company in writing, Executive's Base Salary and Bonus
Compensation prorated to the date on which the Term of Employment ends. (iii)
Anything hereinabove to the contrary notwithstanding, if any provision of this
paragraph violates federal or applicable state law relating to discrimination
on account of age, such
- 11 -
<PAGE> 12
provision shall be deemed modified or suspended to the extent necessary to
eliminate such violation of law. If at a later date, by reason of changed
circumstances or otherwise, the enforcement of such provision as set forth
herein would no longer constitute a violation of law, then it shall be enforced
in accordance with its terms as set forth herein.
(c) Change of Control. In even of a Change of Control (as
hereinafter defined), Executive shall have the right to terminate the Term of
Employment, by notice to the Company given at any time after such Change of
Control, effective on the date specified on such notice, which date shall not
be more than (but can be less than) one year after the giving of such notice.
A Change of Control shall be deemed to have occurred at such time as a majority
of the directors then in office are not Continuing Directors as defined in
subparagraph (C)(6) of Paragraph 12 of the Company's Restated Certificate of
Incorporation dated November 23, 1993 and filed by the New York Department of
State on December 7, 1993.
Section 5. Covenant Not to Compete
For a period of eighteen months after the end of the Term of
Employment if the Term of Employment is terminated by notice to the Company
given by Executive under Section 1 or Section 4 hereof, or for a period of
twelve months after the end of the Term of Employment if the Term of Employment
is
- 12 -
<PAGE> 13
terminated by notice to Executive given by the Company under Section 1 or
Section 4 hereof or terminates under Section 4 by reason of Executive attaining
the age of 65, Executive shall not render services to any corporation,
individual or other entity engaged in any activity, or himself engage directly
or indirectly in any activity, which is competitive to any material extent with
the business of the Company or any of its subsidiaries, provided, however, that
if the Company terminates under Section 1 following a Change of Control (as
defined in Section 4(c)), the foregoing covenant not to compete shall not
apply.
Section 6. Company's Right to Injunctive Relief
Executive acknowledges that his services to the Company are of a
unique character, which gives them a peculiar value to the Company, the loss of
which cannot be reasonably or adequately compensated in damages in an action at
law, and that therefore, in addition to any other remedy which the Company may
have at law or in equity, the Company shall be entitled to injunctive relief
for a breach of this Agreement by Executive.
Section 7. Inventions and Patents
All inventions, ideas, concepts, processes, discoveries, improvements
and trademarks (hereinafter collectively referred to as intangible rights),
whether patentable or registrable or not, which are conceived, made, invented
or suggested either by Executive alone or by Executive in collaboration with
others during the Term of Employment, and whether or not during regular working
hours,
- 13 -
<PAGE> 14
shall be disclosed to the Company and shall be the sole and exclusive property
of the Company. If the Company deems that any of such intangible rights are
patentable or otherwise registrable under any federal, state or foreign law,
Executive, at the expense of the Company, shall execute all documents and do
all things necessary or proper to obtain patents and/or registrations and to
vest the Company with full title thereto.
Section 8. Trade Secrets and Confidential Information
Executive shall not, either directly or indirectly, except as required
in the course of his employment by the Company, disclose or use at any time,
whether during or subsequent to the Term of Employment, any information of a
proprietary nature owned by the Company, including but not limited to, records,
data, formulae, documents, specifications, inventions, processes, methods and
intangible rights which are acquired by him in the performance of his duties
for the Company and which are of a confidential information or trade-secret
nature. All records, files, drawings, documents, equipment and the like,
relating to the Company's business, which Executive shall prepare, use,
construct or observe, shall be and remain the Company's sole property. Upon
the termination of his employment or at any time prior thereto upon request by
the Company, Executive shall return to the possession of the Company any
materials
- 14 -
<PAGE> 15
or copies thereof involving any confidential information or trade secrets and
shall not take any material or copies thereof from the possession of the
Company.
Section 9. Mergers and Consolidations; Assignability
In the event that the Company, or any entity resulting from any merger
or consolidation referred to in this Section 9 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of
the assets of the Company or any such entity shall be sold or otherwise
transferred to another entity, the provisions of this Agreement shall be binding
upon and shall inure to the benefit of the continuing entity in or the entity
resulting from such merger or consolidation or the entity to which such assets
shall be sold or transferred. Except as provided in the immediately preceding
sentence of this Section 9, this Agreement shall not be assignable by the
Company or by any entity referred to in such immediately preceding sentence.
This Agreement shall not be assignable by Executive, but in the event of his
death it shall be binding upon and inure to the benefit of his legal
representatives to the extent required to effectuate the terms hereof.
- 15 -
<PAGE> 16
Section 10. Captions
The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and construed in
accordance with the laws of, the State of New York.
Section 12. Entire Contract
This instrument contains the entire agreement of the parties on the
subject matter hereof except that the rights of the Company hereunder shall be
deemed to be in addition to and not in substitution for its rights under the
Company's standard printed form of "Employee's Secrecy and Invention Agreement"
or "Employee Agreement" if heretofore or hereafter entered into between the
parties hereto so that the making of this Agreement shall not be construed as
depriving the Company of any of its rights or remedies under any such Secrecy
and Invention Agreement or Employee Agreement. This Agreement may not be
changed orally, but only by an agreement in writing signed by the party against
whom enforcement of
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<PAGE> 17
any waiver, change, modification, extension or discharge is sought.
Section 13. Notices
All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for the
Company, shall be addressed to it (if sent by mail) or delivered to it (if
delivered by hand) at its principal office for the attention of the Secretary
of the Company, or at such other address and for the attention of such other
person of which the Company shall have given notice to Executive in the manner
herein provided, and, if intended for Executive, shall be delivered to him
personally or shall be addressed to him (if sent by mail) at his most recent
residence address shown in the Company's employment records or at any such
other address or to such designee of which Executive shall have given notice to
the Company in the manner herein provided. Each such notice shall be deemed to
be given on the date of mailing thereof or, if delivered personally, on
the date so delivered.
Section 14. Termination of Any Prior Employment Agreement
The Employment Agreement in effect between the Company and Executive
at the time of the making of this Agreement is hereby terminated by mutual
consent effective as of the Term Commencement Date and is superseded and
replaced
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<PAGE> 18
by this Agreement effective as of the Term Commencement Date. Executive shall
be entitled to receive Bonus Compensation for the Company's fiscal year ending
July 30, 1994 in accordance with the terms of said prior Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PALL CORPORATION
By /s/ ERIC KRASNOFF
---------------------------------
Eric Krasnoff,
Chairman and Chief Executive Officer
/s/ JEREMY HAYWARD-SURRY
---------------------------------
Jeremy Hayward-Surry
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<PAGE> 1
Exhibit 10.13
[Elected Vice President Form]
EMPLOYMENT AGREEMENT
AGREEMENT made as of August 1, 1994 between PALL CORPORATION, a New
York corporation (the "Company") and Peter Cope ("Executive").
WHEREAS, the parties desire to terminate, as of July 31, 1994, any
employment agreement between them then in effect, and to enter into a new
employment agreement, on the terms and conditions hereinafter set forth, for a
term beginning August 1, 1994,
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
Section 1. Employment and Term
The Company hereby employs Executive, and Executive hereby agrees to
serve, as an executive employee of the Company with the duties set forth in
Section 2, for a term (hereinafter called the "Term of Employment") beginning
August 1, 1994 and ending, unless sooner terminated under Section 4, on the
effective date specified in a notice of termination given by either party to
the other except that such effective date shall not be earlier than the second
anniversary of the date on which such notice is given.
Section 2. Duties
<PAGE> 2
(a) Executive agrees that during the Term of Employment he will hold
such offices or positions with the Company, and perform such duties and
assignments relating to the business of the Company, as the Board of Directors
or the chief executive officer of the Company shall direct except that
Executive shall not be required to hold any office or position or to perform
any duties or assignment inconsistent with his experience and qualifications or
not customarily performed by a corporate officer. The Company represents to
Executive that the Board of Directors (acting by its Compensation Committee)
has authorized the making of this Agreement and expressed its present intention
that during the Term of Employment Executive will be an elected officer of the
Company. The failure of any future Board of Directors to elect Executive as an
officer of the Company shall not, however, be deemed to relieve either party
hereto of any of his or its obligations under this Agreement.
(b) If the Board of Directors or the chief executive officer of the
Company so directs, Executive shall serve as an officer of one or more
subsidiaries of the Company (provided that the duties of such office are not
inconsistent with Executive's experience and qualifications and are duties
customarily performed by a corporate officer) and part or all of the
compensation to which Executive is entitled hereunder may be paid by such
subsidiary or
- 2 -
<PAGE> 3
subsidiaries. However, such employment and/or payment of Executive by a
subsidiary or subsidiaries shall not relieve the Company from any of its
obligations under this Agreement except to the extent of payments actually made
to Executive by a subsidiary.
(c) During the Term of Employment Executive shall, except during
customary vacation periods and periods of illness, devote substantially all of
his business time and attention to the performance of his duties hereunder and
to the business and affairs of the Company and its subsidiaries and to
promoting the best interests of the Company and its subsidiaries and he shall
not, either during or outside of such normal business hours, engage in any
activity inimical to such best interests.
Section 3. Compensation During Term of Employment
(a) Base Salary. With respect to the period beginning August 1, 1994
and ending at the end of the Term of Employment, the Company shall pay to
Executive base compensation (in addition to the compensation provided for
elsewhere in this Agreement) at such rate as the Board of Directors may
determine (the amount so determined by the Board being herein called the "Base
Salary") but at not less than the rate of $136,800 per annum (hereinafter
called the "Original Base Salary") adjusted for each Contract Year (as
hereinafter defined) beginning with the Contract Year which
- 3 -
<PAGE> 4
starts August 1, 1995, as follows: The term "Contract Year" as used herein
means the period from August 1 of each year through July 31 of the following
year. For each Contract Year during the Term of Employment beginning with the
Contract Year which starts August 1, 1995, the minimum compensation payable to
Executive under this Section 3(a) (hereinafter called the "Minimum Base
Salary") shall be determined by increasing (or decreasing) the Original Base
Salary by the percentage increase (or decrease) of the Consumer Price Index (as
hereinafter defined) for the month of June immediately preceding the start of
the Contract Year in question over (or below) the Consumer Price Index for June
1994. The term "Consumer Price Index" as herein used means the "Consumer Price
Index for all Urban Consumers" compiled and published by the Bureau of Labor
Statistics of the United States Department of Labor for "New York - Northern
New Jersey - Long Island, NY-NJ-CT". To illustrate the operation of the
foregoing provisions of this Section 3(a): Executive's Base Salary for the
Contract Year August 1, 1995 through July 31, 1996 shall be not less than the
Original Base Salary adjusted by the percentage increase (or decrease) of the
Consumer Price Index for June 1995 over (or below) said Index for June 1994.
Further adjustment in the Minimum Base Salary shall be made for each ensuing
Contract Year, in each case (i) using the Consumer Price Index for June 1994 as
the base except as
- 4 -
<PAGE> 5
provided in the immediately following paragraph hereof and (ii) applying the
percentage increase (or decrease) in the Consumer Price Index since said
base month to the Original Base Salary to determine the Minimum Base Salary.
The Base Salary shall be paid in such periodic installments as the Company may
determine but not less often than monthly.
If with respect to any Contract Year (including the Contract Year
beginning August 1, l994) the Board of Directors fixes the Base Salary at an
amount higher than the Minimum Base Salary, then (unless the resolution fixing
such higher Base Salary provides otherwise), for the purpose of determining the
Minimum Base Salary for subsequent Contract Years: (1) the amount of the
higher Base Salary so fixed shall be deemed substituted for the Original Base
Salary wherever the Original Base Salary is referred to in the immediately
preceding paragraph hereof, and (ii) the base month for determining the
Consumer Price Index adjustment shall be June of the calendar year in which the
Contract Year to which such higher Base Salary is applicable begins (e.g., if
the Board fixes a Base Salary for the Contract Year beginning August 1, 1995
which is higher than the Minimum Base Salary, then June 1995 would become the
base month for the purposes of making the CPI adjustment to determine the
Minimum Base Salary for subsequent Contract Years).
- 5 -
<PAGE> 6
(b) Bonus Compensation. With respect to each fiscal year of
the Company falling in whole or in part within the Term of Employment
beginning with the fiscal year ending July 29, 1995, Executive shall
be entitled to a bonus (in addition to his Base Salary) in such amount
and computed in such manner as shall be determined by the Board of
Directors but in no event shall the bonus payable to Executive under
this Section 3(b) be less than an amount computed by applying to the
fiscal year in question the following bonus formula:
"Bonus Compensation" means the amount, if any, payable
to Executive under this Section 3(b).
"Average Equity" means the average of stockholders' equity as shown on
the fiscal year-end consolidated balance sheet of the Company as of the end of
the fiscal year with respect to which Bonus Compensation is being computed
hereunder and as of the end of the immediately preceding fiscal year (e.g.,
"Average Equity" to be used in computing Bonus Compensation for the fiscal year
ending July 29, 1995 will be the average of stockholders' equity as of July 30,
1994 and July 29, 1995) except that the amount shown as the "equity adjustment
from foreign currency translation" on each such consolidated balance sheet
shall be disregarded and the amount of $3,744,000 shall be the equity
adjustment (increase) from foreign currency translation used to
- 6 -
<PAGE> 7
determine stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings of the
Company and its subsidiaries as certified by its independent accountants for
inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
For fiscal year 1995, "Zero Bonus Percentage" shall mean a Return on
Equity of 12.5% and "Maximum Bonus Percentage" shall mean a Return on Equity of
l9.0%.
For fiscal years after fiscal 1995, the Company shall determine the
Zero Bonus Percentage and the Maximum Bonus Percentage consistent with expected
results based upon the Company's normal projection procedures, or based on
sound statistical or trend data, and the determination by the Company of such
percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus
Percentage or less, no Bonus Compensation shall be payable. If Return on
Equity equals or exceeds the Maximum Bonus Percentage, the Bonus Compensation
payable to Executive shall be 70% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Bonus Compensation shall be
- 7 -
<PAGE> 8
increased from zero percent of Base Salary towards 70% of Base Salary in the
same proportion that Return on Equity increases from the Zero Bonus Percentage
to the Maximum Bonus Percentage. Thus, for example, if Return on Equity for
fiscal 1995 is 15.75% (the midpoint between 12.5% and 19.0%) the Bonus
Compensation shall be an amount equal to 35% of Executive's Base Salary (the
midpoint between zero percent of Base Salary and 70% of Base Salary).
The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is payable (e.g.,
50% in July 1995 with respect to Bonus Compensation for the fiscal
year ending July 29, 1995), based on the then current projections of
Return on Equity, and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in part but
not in whole within the Term of Employment, the Bonus Compensation to which
Executive is entitled under this Section 3(b) shall be prorated on the basis of
the number of days of such fiscal year falling within the Term of Employment
except that if the Term of Employment ends
- 8 -
<PAGE> 9
within five days before or after the end of a fiscal year, there shall
be no proration and the Bonus Compensation shall be payable with respect to the
full fiscal year ending within such five-day period.
(c) Fringe Benefits and Perquisites. During the Term of Employment,
Executive shall enjoy the customary perquisites of office, including but not
limited to office space and furnishings, secretarial services, expense
reimbursements, and any similar emoluments customarily afforded to senior
executive officers of the Company at the same level as Executive. Executive
shall also be entitled to receive or participate in all "fringe benefits" and
employee benefit plans provided or made available by the Company to its
executives or management personnel generally, such as, but not limited to,
group hospitalization, medical, life and disability insurance, and pension,
retirement, profit-sharing and stock option or purchase plans.
(d) Vacations. Executive shall be entitled each year to a vacation
or vacations in accordance with the policies of the Company as determined by
the Board or by an authorized senior officer of the Company from time to time.
The Company shall not pay Executive any additional compensation for any
vacation time not used by Executive.
Section 4. Termination by Reason of Disability, Death, Retirement
or Change of Control
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<PAGE> 10
(a) Disability or Death. If, during the Term of Employment,
Executive, by reason of physical or mental disability, is incapable of
performing his principal duties hereunder for an aggregate of 130 working days
out of any period of twelve consecutive months, the Company at its option may
terminate the Term of Employment effective immediately by notice to Executive
given within 90 days after the end of such twelve-month period. If Executive
shall die during the Term of Employment or if the Company terminates the Term
of Employment pursuant to the immediately preceding sentence by reason of
Executive's disability, the Company shall pay to Executive, or to Executive's
legal representatives, or in accordance with a direction given by Executive to
the Company in writing, the following: (i) Executive's Base Salary to the end
of the month in which such death or termination for disability occurs and
Executive's Bonus Compensation prorated to said last day of the month and (ii)
for the period from the end of the month in which such death or termination for
disability occurs until the earlier of (x) the first anniversary of the date of
death or termination and (y) the date on which the Term of Employment would
have ended but for such death or termination for disability, monthly payments
at one-half of the rate of Executive's Base Salary plus one-half of Executive's
Bonus Compensation (prorated to the last day of such period) which
- 10 -
<PAGE> 11
would have been payable with respect to such period but for such death or
termination.
(b) Retirement. (i) The Term of Employment shall end automatically,
without action by either party, on Executive's 65th birthday unless, prior to
such birthday, Executive and the Company have agreed in writing that the Term
of Employment shall continue past such 65th birthday. In that event, unless
the parties have agreed otherwise, the Term of Employment shall be
automatically renewed and extended each year, as of Executive's birthday, for
an additional one-year term, unless either party has given a Non-Renewal
Notice. A Non-Renewal Notice shall be effective as of Executive's ensuing
birthday only if given not less than 60 days before such birthday, and shall
state that the party giving such notice elects that this Agreement shall not
automatically renew itself further, with the result that the Term of Employment
shall end on Executive's ensuing birthday. (ii) If the Term of Employment
ends pursuant to this paragraph by reason of a notice given by either party as
herein permitted or automatically at age 65 or any subsequent birthday, the
Company shall pay to Executive, or to another payee specified by Executive to
the Company in writing, Executive's Base Salary and Bonus Compensation prorated
to the date on which the Term of Employment ends. (iii) Anything hereinabove
to the contrary notwithstanding, if any
- 11 -
<PAGE> 12
provision of this paragraph violates federal or applicable state law relating
to discrimination on account of age, such provision shall be deemed modified or
suspended to the extent necessary to eliminate such violation of law. If at a
later date, by reason of changed circumstances or otherwise, the enforcement of
such provision as set forth herein would no longer constitute a violation of
law, then it shall be enforced in accordance with its terms as set forth herein.
(c) Change of Control. In event of a Change of Control (as
hereinafter defined), Executive shall have the right to terminate the Term of
Employment, by notice to the Company given at any time after such Change of
Control, effective on the date specified in such notice, which date shall not
be more than (but can be less than) one year after the giving of such notice.
A Change of Control shall be deemed to have occurred at such time as a majority
of the directors then in office are not Continuing Directors as defined in
subparagraph (C)(6) of Article 12 of the Company's Restated Certificate of
Incorporation dated January 14, 1982 and filed by the New York Department of
State on January 19, 1982.
Section 5. Covenant Not to Compete
For a period of eighteen months after the end of the Term of
Employment if the Term of Employment is terminated by notice to the Company
given by Executive under
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<PAGE> 13
Section 1 or Section 4 hereof, or for a period of twelve months after the
end of the Term of Employment if the Term of Employment is terminated by notice
to Executive given by the Company under Section 1 or Section 4 hereof or
terminates under Section 4 by reason of Executive attaining the age of 65,
Executive shall not render services to any corporation, individual or other
entity engaged in any activity, or himself engage directly or indirectly in any
activity, which is competitive to any material extent with the business of the
Company or any of its subsidiaries, provided, however, that if the Company
terminates under Section 1 following a Change of Control (as defined in Section
4(c)), the foregoing covenant not to compete shall not apply.
Section 6. Company's Right to Injunctive Relief
Executive acknowledges that his services to the Company are of a
unique character, which gives them a peculiar value to the Company, the loss of
which cannot be reasonably or adequately compensated in damages in an action at
law, and that therefore, in addition to any other remedy which the Company may
have at law or in equity, the Company shall be entitled to injunctive relief
for a breach of this Agreement by Executive.
Section 7. Inventions and Patents
All inventions, ideas, concepts, processes, discoveries, improvements
and trademarks (hereinafter collectively referred to as intangible rights),
whether
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<PAGE> 14
patentable or registrable or not, which are conceived, made, invented or
suggested either by Executive alone or by Executive in collaboration with
others during the Term of Employment, and whether or not during regular working
hours, shall be disclosed to the Company and shall be the sole and exclusive
property of the Company. If the Company deems that any of such intangible
rights are patentable or otherwise registrable under any federal, state or
foreign law, Executive, at the expense of the Company, shall execute all
documents and do all things necessary or proper to obtain patents and/or
registrations and to vest the Company with full title thereto.
Section 8. Trade Secrets and Confidential Information
Executive shall not, either directly or indirectly, except as required
in the course of his employment by the Company, disclose or use at any time,
whether during or subsequent to the Term of Employment, any information of a
proprietary nature owned by the Company, including but not limited to, records,
data, formulae, documents, specifications, inventions, processes, methods and
intangible rights which are acquired by him in the performance of his duties
for the Company and which are of a confidential information or trade-secret
nature. All records, files, drawings, documents, equipment and the like,
relating to the Company's business, which Executive shall prepare, use,
- 14 -
<PAGE> 15
construct or observe, shall be and remain the Company's sole property. Upon
the termination of his employment or at any time prior thereto upon request by
the Company, Executive shall return to the possession of the Company any
materials or copies thereof involving any confidential information or trade
secrets and shall not take any material or copies thereof from the possession of
the Company.
Section 9. Mergers and Consolidations; Assignability
In the event that the Company, or any entity resulting from any merger
or consolidation referred to in this Section 9 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of
the assets of the Company or any such entity shall be sold or otherwise
transferred to another entity, the provisions of this Agreement shall be
binding upon and shall inure to the benefit of the continuing entity in or the
entity resulting from such merger or consolidation or the entity to which such
assets shall be sold or transferred. Except as provided in the immediately
preceding sentence of this Section 9, this Agreement shall not be assignable by
the Company or by any entity referred to in such immediately preceding
sentence. This Agreement shall not be assignable by Executive, but in the
event of his death it shall be binding upon and inure to the benefit of his
legal
- 15 -
<PAGE> 16
representatives to the extent required to effectuate the terms hereof.
Section 10. Captions
The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and construed in
accordance with the laws of, the State of New York.
Section 12. Entire Contract
This instrument contains the entire agreement of the parties on the
subject matter hereof except that the rights of the Company hereunder shall be
deemed to be in addition to and not in substitution for its rights under the
Company's standard printed form of "Employee's Secrecy and Invention Agreement"
or "Employee Agreement" if heretofore or hereafter entered into between the
parties hereto so that the making of this Agreement shall not be construed as
depriving the Company of any of its rights or remedies under any such Secrecy
and Invention Agreement or Employee Agreement. This Agreement may not be
changed orally, but only by an agreement
- 16 -
<PAGE> 17
in writing signed by the party against om enforcement of any waiver, change,
modification, extension or discharge is sought.
Section 13. Notices
All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for the
Company, shall be addressed to it (if sent by mail) or delivered to it (if
delivered by hand) at its principal office for the attention of the Secretary
of the Company, or at such other address and for the attention of such other
person of which the Company shall have given notice to Executive in the manner
herein provided, and, if intended for Executive, shall be delivered to him
personally or shall be addressed to him (if sent by mail) at his most recent
residence address shown in the Company's employment records or at such other
address or to such designee of which Executive shall have given notice to the
Company in the manner herein provided. Each such notice shall be deemed to be
given on the date of mailing thereof or, if delivered personally, on the date
so delivered.
Section 14. Termination of Any Prior Employment Agreement
Any Employment Agreement in effect between the Company and Executive
on the date hereof is hereby terminated
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<PAGE> 18
by mutual consent effective July 31, 1994 and is superseded and replaced by
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PALL CORPORATION
By
-----------------------------------
Chairman and CEO
-----------------------------------
Executive
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<PAGE> 1
Exhibit 10.14
[Elected Vice President Form]
EMPLOYMENT AGREEMENT
AGREEMENT made as of August 1, 1994 between PALL CORPORATION, a New
York corporation (the "Company") and Robert Simkins ("Executive").
WHEREAS, the parties desire to terminate, as of July 31, 1994, any
employment agreement between them then in effect, and to enter into a new
employment agreement, on the terms and conditions hereinafter set forth, for a
term beginning August 1, 1994,
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
Section 1. Employment and Term
The Company hereby employs Executive, and Executive hereby agrees to
serve, as an executive employee of the Company with the duties set forth in
Section 2, for a term (hereinafter called the "Term of Employment") beginning
August 1, 1994 and ending, unless sooner terminated under Section 4, on the
effective date specified in a notice of termination given by either party to
the other except that such effective date shall not be earlier than the second
anniversary of the date on which such notice is given.
Section 2. Duties
<PAGE> 2
(a) Executive agrees that during the Term of Employment he will hold
such offices or positions with the Company, and perform such duties and
assignments relating to the business of the Company, as the Board of Directors
or the chief executive officer of the Company shall direct except that
Executive shall not be required to hold any office or position or to perform
any duties or assignment inconsistent with his experience and qualifications or
not customarily performed by a corporate officer. The Company represents to
Executive that the Board of Directors (acting by its Compensation Committee)
has authorized the making of this Agreement and expressed its present intention
that during the Term of Employment Executive will be an elected officer of the
Company. The failure of any future Board of Directors to elect Executive as an
officer of the Company shall not, however, be deemed to relieve either party
hereto of any of his or its obligations under this Agreement.
(b) If the Board of Directors or the chief executive officer of the
Company so directs, Executive shall serve as an officer of one or more
subsidiaries of the Company (provided that the duties of such office are not
inconsistent with Executive's experience and qualifications and are duties
customarily performed by a corporate officer) and part or all of the
compensation to which Executive is entitled hereunder may be paid by such
subsidiary or
- 2 -
<PAGE> 3
subsidiaries. However, such employment and/or payment of Executive by a
subsidiary or subsidiaries shall not relieve the Company from any of its
obligations under this Agreement except to the extent of payments actually made
to Executive by a subsidiary.
(c) During the Term of Employment Executive shall, except during
customary vacation periods and periods of illness, devote substantially all of
his business time and attention to the performance of his duties hereunder and
to the business and affairs of the Company and its subsidiaries and to
promoting the best interests of the Company and its subsidiaries and he shall
not, either during or outside of such normal business hours, engage in any
activity inimical to such best interests.
Section 3. Compensation During Term of Employment
(a) Base Salary. With respect to the period beginning August 1, 1994
and ending at the end of the Term of Employment, the Company shall pay to
Executive base compensation (in addition to the compensation provided for
elsewhere in this Agreement) at such rate as the Board of Directors may
determine (the amount so determined by the Board being herein called the "Base
Salary") but at not less than the rate of $142,300 per annum (hereinafter
called the "Original Base Salary") adjusted for each Contract Year (as
hereinafter defined) beginning with the Contract Year which
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<PAGE> 4
starts August 1, 1995, as follows: The term "Contract Year" as used herein
means the period from August 1 of each year through July 31 of the following
year. For each Contract Year during the Term of Employment beginning with the
Contract Year which starts August 1, 1995, the minimum compensation payable to
Executive under this Section 3(a) (hereinafter called the "Minimum Base
Salary") shall be determined by increasing (or decreasing) the Original Base
Salary by the percentage increase (or decrease) of the Consumer Price Index (as
hereinafter defined) for the month of June immediately preceding the start of
the Contract Year in question over (or below) the Consumer Price Index for June
1994. The term "Consumer Price Index" as herein used means the "Consumer Price
Index for all Urban Consumers" compiled and published by the Bureau of Labor
Statistics of the United States Department of Labor for "New York - Northern
New Jersey - Long Island, NY-NJ-CT". To illustrate the operation of the
foregoing provisions of this Section 3(a): Executive's Base Salary for the
Contract Year August 1, 1995 through July 31, 1996 shall be not less than the
Original Base Salary adjusted by the percentage increase (or decrease) of the
Consumer Price Index for June 1995 over (or below) said Index for June 1994.
Further adjustment in the Minimum Base Salary shall be made for each ensuing
Contract Year, in each case (i) using the Consumer Price Index for June 1994 as
the base except as
- 4 -
<PAGE> 5
provided in the immediately following paragraph hereof and (ii) applying the
percentage increase (or decrease) in the Consumer Price Index since said base
month to the Original Base Salary to determine the Minimum Base Salary. The
Base Salary shall be paid in such periodic installments as the Company may
determine but not less often than monthly.
If with respect to any Contract Year (including the Contract Year
beginning August 1, l994) the Board of Directors fixes the Base Salary at an
amount higher than the Minimum Base Salary, then (unless the resolution fixing
such higher Base Salary provides otherwise), for the purpose of determining the
Minimum Base Salary for subsequent Contract Years: (1) the amount of the
higher Base Salary so fixed shall be deemed substituted for the Original Base
Salary wherever the Original Base Salary is referred to in the immediately
preceding paragraph hereof, and (ii) the base month for determining the
Consumer Price Index adjustment shall be June of the calendar year in which the
Contract Year to which such higher Base Salary is applicable begins (e.g., if
the Board fixes a Base Salary for the Contract Year beginning August 1, 1995
which is higher than the Minimum Base Salary, then June 1995 would become the
base month for the purposes of making the CPI adjustment to determine the
Minimum Base Salary for subsequent Contract Years).
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<PAGE> 6
(b) Bonus Compensation. With respect to each fiscal year of
the Company falling in whole or in part within the Term of Employment
beginning with the fiscal year ending July 29, 1995, Executive shall
be entitled to a bonus (in addition to his Base Salary) in such amount
and computed in such manner as shall be determined by the Board of
Directors but in no event shall the bonus payable to Executive under
this Section 3(b) be less than an amount computed by applying to the
fiscal year in question the following bonus formula:
"Bonus Compensation" means the amount, if any, payable to
Executive under this Section 3(b).
"Average Equity" means the average of stockholders' equity as shown on
the fiscal year-end consolidated balance sheet of the Company as of the end of
the fiscal year with respect to which Bonus Compensation is being computed
hereunder and as of the end of the immediately preceding fiscal year (e.g.,
"Average Equity" to be used in computing Bonus Compensation for the fiscal year
ending July 29, 1995 will be the average of stockholders' equity as of July 30,
1994 and July 29, 1995) except that the amount shown as the "equity adjustment
from foreign currency translation" on each such consolidated balance sheet
shall be disregarded and the amount of $3,744,000 shall be the equity
adjustment (increase) from foreign currency translation used to
- 6 -
<PAGE> 7
determine stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings of the
Company and its subsidiaries as certified by its independent accountants for
inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
For fiscal year 1995, "Zero Bonus Percentage" shall mean a Return on
Equity of 12.5% and "Maximum Bonus Percentage" shall mean a Return on Equity of
l9.0%.
For fiscal years after fiscal 1995, the Company shall determine the
Zero Bonus Percentage and the Maximum Bonus Percentage consistent with expected
results based upon the Company's normal projection procedures, or based on
sound statistical or trend data, and the determination by the Company of such
percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus
Percentage or less, no Bonus Compensation shall be payable. If Return on
Equity equals or exceeds the Maximum Bonus Percentage, the Bonus Compensation
payable to Executive shall be 70% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Bonus Compensation shall be
- 7 -
<PAGE> 8
increased from zero percent of Base Salary towards 70% of Base Salary in the
same proportion that Return on Equity increases from the Zero Bonus Percentage
to the Maximum Bonus Percentage. Thus, for example, if Return on Equity for
fiscal 1995 is 15.75% (the midpoint between 12.5% and 19.0%) the Bonus
Compensation shall be an amount equal to 35% of Executive's Base Salary (the
midpoint between zero percent of Base Salary and 70% of Base Salary).
The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is payable (e.g.,
50% in July 1995 with respect to Bonus Compensation for the fiscal
year ending July 29, 1995), based on the then current projections of
Return on Equity, and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in part but
not in whole within the Term of Employment, the Bonus Compensation to which
Executive is entitled under this Section 3(b) shall be prorated on the basis of
the number of days of such fiscal year falling within the Term of Employment
except that if the Term of Employment ends
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<PAGE> 9
within five days before or after the end of a fiscal year, there shall be no
proration and the Bonus Compensation shall be payable with respect to the full
fiscal year ending within such five-day period.
(c) Fringe Benefits and Perquisites. During the Term of Employment,
Executive shall enjoy the customary perquisites of office, including but not
limited to office space and furnishings, secretarial services, expense
reimbursements, and any similar emoluments customarily afforded to senior
executive officers of the Company at the same level as Executive. Executive
shall also be entitled to receive or participate in all "fringe benefits" and
employee benefit plans provided or made available by the Company to its
executives or management personnel generally, such as, but not limited to,
group hospitalization, medical, life and disability insurance, and pension,
retirement, profit-sharing and stock option or purchase plans.
(d) Vacations. Executive shall be entitled each year to a vacation
or vacations in accordance with the policies of the Company as determined by
the Board or by an authorized senior officer of the Company from time to time.
The Company shall not pay Executive any additional compensation for any
vacation time not used by Executive.
Section 4. Termination by Reason of Disability,
Death, Retirement or Change of Control
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<PAGE> 10
(a) Disability or Death. If, during the Term of Employment,
Executive, by reason of physical or mental disability, is incapable of
performing his principal duties hereunder for an aggregate of 130 working days
out of any period of twelve consecutive months, the Company at its option may
terminate the Term of Employment effective immediately by notice to Executive
given within 90 days after the end of such twelve-month period. If Executive
shall die during the Term of Employment or if the Company terminates the Term
of Employment pursuant to the immediately preceding sentence by reason of
Executive's disability, the Company shall pay to Executive, or to Executive's
legal representatives, or in accordance with a direction given by Executive to
the Company in writing, the following: (i) Executive's Base Salary to the end
of the month in which such death or termination for disability occurs and
Executive's Bonus Compensation prorated to said last day of the month and (ii)
for the period from the end of the month in which such death or termination for
disability occurs until the earlier of (x) the first anniversary of the date of
death or termination and (y) the date on which the Term of Employment would
have ended but for such death or termination for disability, monthly payments
at one-half of the rate of Executive's Base Salary plus one-half of Executive's
Bonus Compensation (prorated to the last day of such period) which
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<PAGE> 11
would have been payable with respect to such period but for such death or
termination.
(b) Retirement. (i) The Term of Employment shall end automatically,
without action by either party, on Executive's 65th birthday unless, prior to
such birthday, Executive and the Company have agreed in writing that the Term
of Employment shall continue past such 65th birthday. In that event, unless
the parties have agreed otherwise, the Term of Employment shall be
automatically renewed and extended each year, as of Executive's birthday, for
an additional one-year term, unless either party has given a Non-Renewal
Notice. A Non-Renewal Notice shall be effective as of Executive's ensuing
birthday only if given not less than 60 days before such birthday, and shall
state that the party giving such notice elects that this Agreement shall not
automatically renew itself further, with the result that the Term of Employment
shall end on Executive's ensuing birthday. (ii) If the Term of Employment
ends pursuant to this paragraph by reason of a notice given by either party as
herein permitted or automatically at age 65 or any subsequent birthday, the
Company shall pay to Executive, or to another payee specified by Executive to
the Company in writing, Executive's Base Salary and Bonus Compensation prorated
to the date on which the Term of Employment ends. (iii) Anything hereinabove
to the contrary notwithstanding, if any
- 11 -
<PAGE> 12
provision of this paragraph violates federal or applicable state law relating
to discrimination on account of age, such provision shall be deemed modified or
suspended to the extent necessary to eliminate such violation of law. If at a
later date, by reason of changed circumstances or otherwise, the enforcement of
such provision as set forth herein would no longer constitute a violation of
law, then it shall be enforced in accordance with its terms as set forth
herein.
(c) Change of Control. In event of a Change of Control (as
hereinafter defined), Executive shall have the right to terminate the Term of
Employment, by notice to the Company given at any time after such Change of
Control, effective on the date specified in such notice, which date shall not
be more than (but can be less than) one year after the giving of such notice.
A Change of Control shall be deemed to have occurred at such time as a majority
of the directors then in office are not Continuing Directors as defined in
subparagraph (C)(6) of Article 12 of the Company's Restated Certificate of
Incorporation dated January 14, 1982 and filed by the New York Department of
State on January 19, 1982.
Section 5. Covenant Not to Compete
For a period of eighteen months after the end of the Term of
Employment if the Term of Employment is terminated by notice to the Company
given by Executive under
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<PAGE> 13
Section 1 or Section 4 hereof, or for a period of twelve months after the end
of the Term of Employment if the Term of Employment is terminated by notice to
Executive given by the Company under Section 1 or Section 4 hereof or
terminates under Section 4 by reason of Executive attaining the age of 65,
Executive shall not render services to any corporation, individual or other
entity engaged in any activity, or himself engage directly or indirectly in any
activity, which is competitive to any material extent with the business of the
Company or any of its subsidiaries, provided, however, that if the Company
terminates under Section 1 following a Change of Control (as defined in Section
4(c)), the foregoing covenant not to compete shall not apply.
Section 6. Company's Right to Injunctive Relief
Executive acknowledges that his services to the Company are of a
unique character, which gives them a peculiar value to the Company, the loss of
which cannot be reasonably or adequately compensated in damages in an action at
law, and that therefore, in addition to any other remedy which the Company may
have at law or in equity, the Company shall be entitled to injunctive relief
for a breach of this Agreement by Executive.
Section 7. Inventions and Patents
All inventions, ideas, concepts, processes, discoveries, improvements
and trademarks (hereinafter collectively referred to as intangible rights),
whether
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<PAGE> 14
patentable or registrable or not, which are conceived, made, invented or
suggested either by Executive alone or by Executive in collaboration with
others during the Term of Employment, and whether or not during regular working
hours, shall be disclosed to the Company and shall be the sole and exclusive
property of the Company. If the Company deems that any of such intangible
rights are patentable or otherwise registrable under any federal, state or
foreign law, Executive, at the expense of the Company, shall execute all
documents and do all things necessary or proper to obtain patents and/or
registrations and to vest the Company with full title thereto.
Section 8. Trade Secrets and Confidential Information
Executive shall not, either directly or indirectly, except as required
in the course of his employment by the Company, disclose or use at any time,
whether during or subsequent to the Term of Employment, any information of a
proprietary nature owned by the Company, including but not limited to, records,
data, formulae, documents, specifications, inventions, processes, methods and
intangible rights which are acquired by him in the performance of his duties
for the Company and which are of a confidential information or trade-secret
nature. All records, files, drawings, documents, equipment and the like,
relating to the Company's business, which Executive shall prepare, use,
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<PAGE> 15
construct or observe, shall be and remain the Company's sole property. Upon
the termination of his employment or at any time prior thereto upon request by
the Company, Executive shall return to the possession of the Company any
materials or copies thereof involving any confidential information or trade
secrets and shall not take any material or copies thereof from the possession
of the Company.
Section 9. Mergers and Consolidations; Assignability
In the event that the Company, or any entity resulting from any merger
or consolidation referred to in this Section 9 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of
the assets of the Company or any such entity shall be sold or otherwise
transferred to another entity, the provisions of this Agreement shall be
binding upon and shall inure to the benefit of the continuing entity in or the
entity resulting from such merger or consolidation or the entity to which such
assets shall be sold or transferred. Except as provided in the immediately
preceding sentence of this Section 9, this Agreement shall not be assignable by
the Company or by any entity referred to in such immediately preceding
sentence. This Agreement shall not be assignable by Executive, but in the
event of his death it shall be binding upon and inure to the benefit of his
legal
- 15 -
<PAGE> 16
representatives to the extent required to effectuate the terms hereof.
Section 10. Captions
The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and construed in
accordance with the laws of, the State of New York.
Section 12. Entire Contract
This instrument contains the entire agreement of the parties on the
subject matter hereof except that the rights of the Company hereunder shall be
deemed to be in addition to and not in substitution for its rights under the
Company's standard printed form of "Employee's Secrecy and Invention Agreement"
or "Employee Agreement" if heretofore or hereafter entered into between the
parties hereto so that the making of this Agreement shall not be construed as
depriving the Company of any of its rights or remedies under any such Secrecy
and Invention Agreement or Employee Agreement. This Agreement may not be
changed orally, but only by an agreement
- 16 -
<PAGE> 17
in writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
Section 13. Notices
All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for the
Company, shall be addressed to it (if sent by mail) or delivered to it (if
delivered by hand) at its principal office for the attention of the Secretary
of the Company, or at such other address and for the attention of such other
person of which the Company shall have given notice to Executive in the manner
herein provided, and, if intended for Executive, shall be delivered to him
personally or shall be addressed to him (if sent by mail) at his most recent
residence address shown in the Company's employment records or at such other
address or to such designee of which Executive shall have given notice to the
Company in the manner herein provided. Each such notice shall be deemed to be
given on the date of mailing thereof or, if delivered personally, on the date
so delivered.
Section 14. Termination of Any Prior Employment Agreement
Any Employment Agreement in effect between the Company and Executive
on the date hereof is hereby terminated
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<PAGE> 18
by mutual consent effective July 31, 1994 and is superseded and replaced by
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PALL CORPORATION
By
------------------------------------
Chairman and CEO
------------------------------------
Executive
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<PAGE> 1
Exhibit 10.17
[Elected Vice President Form]
EMPLOYMENT AGREEMENT
AGREEMENT made as of September 26, 1994 between PALL CORPORATION, a
New York corporation (the "Company") and Donald B. Stevens ("Executive").
WHEREAS, the parties desire to terminate, as of September 25, 1994,
any employment agreement between them then in effect, and to enter into a new
employment agreement, on the terms and conditions hereinafter set forth, for a
term beginning September 26, 1994,
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
Section 1. Employment and Term
The Company hereby employs Executive, and Executive hereby agrees to
serve, as an executive employee of the Company with the duties set forth in
Section 2, for a term (hereinafter called the "Term of Employment") beginning
September 26, 1994 and ending, unless sooner terminated under Section 4, on the
effective date specified in a notice of termination given by either party to
the other except that such effective date shall not be earlier than the second
anniversary of the date on which such notice is given.
Section 2. Duties
<PAGE> 2
(a) Executive agrees that during the Term of Employment he will hold
such offices or positions with the Company, and perform such duties and
assignments relating to the business of the Company, as the Board of Directors
or the chief executive officer of the Company shall direct except that
Executive shall not be required to hold any office or position or to perform
any duties or assignment inconsistent with his experience and qualifications or
not customarily performed by a corporate officer. The Company represents to
Executive that the Board of Directors (acting by its Compensation Committee)
has authorized the making of this Agreement and expressed its present intention
that during the Term of Employment Executive will be an elected officer of the
Company. The failure of any future Board of Directors to elect Executive as an
officer of the Company shall not, however, be deemed to relieve either party
hereto of any of his or its obligations under this Agreement.
(b) If the Board of Directors or the chief executive officer of the
Company so directs, Executive shall serve as an officer of one or more
subsidiaries of the Company (provided that the duties of such office are not
inconsistent with Executive's experience and qualifications and are duties
customarily performed by a corporate officer) and part or all of the
compensation to which Executive is entitled hereunder may be paid by such
subsidiary or
- 2 -
<PAGE> 3
subsidiaries. However, such employment and/or payment of Executive by a
subsidiary or subsidiaries shall not relieve the Company from any of its
obligations under this Agreement except to the extent of payments actually made
to Executive by a subsidiary.
(c) During the Term of Employment Executive shall, except during
customary vacation periods and periods of illness, devote substantially all of
his business time and attention to the performance of his duties hereunder and
to the business and affairs of the Company and its subsidiaries and to
promoting the best interests of the Company and its subsidiaries and he shall
not, either during or outside of such normal business hours, engage in any
activity inimical to such best interests.
Section 3. Compensation During Term of Employment
(a) Base Salary. With respect to the period beginning September 26,
1994 and ending at the end of the Term of Employment, the Company shall pay to
Executive base compensation (in addition to the compensation provided for
elsewhere in this Agreement) at such rate as the Board of Directors may
determine (the amount so determined by the Board being herein called the "Base
Salary") but at not less than the rate of $136,000 per annum (hereinafter
called the "Original Base Salary") adjusted for each Contract Year (as
hereinafter defined) beginning with the Contract Year which
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<PAGE> 4
starts August 1, 1995, as follows: The term "Contract Year" as used herein
means the period from August 1 of each year through July 31 of the following
year. For each Contract Year during the Term of Employment beginning with the
Contract Year which starts August 1, 1995, the minimum compensation payable to
Executive under this Section 3(a) (hereinafter called the "Minimum Base
Salary") shall be determined by increasing (or decreasing) the Original Base
Salary by the percentage increase (or decrease) of the Consumer Price Index (as
hereinafter defined) for the month of June immediately preceding the start of
the Contract Year in question over (or below) the Consumer Price Index for June
1994. The term "Consumer Price Index" as herein used means the "Consumer Price
Index for all Urban Consumers" compiled and published by the Bureau of Labor
Statistics of the United States Department of Labor for "New York - Northern
New Jersey - Long Island, NY-NJ-CT". To illustrate the operation of the
foregoing provisions of this Section 3(a): Executive's Base Salary for the
Contract Year August 1, 1995 through July 31, 1996 shall be not less than the
Original Base Salary adjusted by the percentage increase (or decrease) of the
Consumer Price Index for June 1995 over (or below) said Index for June 1994.
Further adjustment in the Minimum Base Salary shall be made for each ensuing
Contract Year, in each case (i) using the Consumer Price Index for June 1994 as
the base except as
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<PAGE> 5
provided in the immediately following paragraph hereof and (ii) applying the
percentage increase (or decrease) in the Consumer Price Index since said base
month to the Original Base Salary to determine the Minimum Base Salary. The
Base Salary shall be paid in such periodic installments as the Company may
determine but not less often than monthly.
If with respect to any Contract Year (including the Contract Year
beginning August 1, l994) the Board of Directors fixes the Base Salary at an
amount higher than the Minimum Base Salary, then (unless the resolution fixing
such higher Base Salary provides otherwise), for the purpose of determining the
Minimum Base Salary for subsequent Contract Years: (1) the amount of the
higher Base Salary so fixed shall be deemed substituted for the Original Base
Salary wherever the Original Base Salary is referred to in the immediately
preceding paragraph hereof, and (ii) the base month for determining the
Consumer Price Index adjustment shall be June of the calendar year in which the
Contract Year to which such higher Base Salary is applicable begins (e.g., if
the Board fixes a Base Salary for the Contract Year beginning August 1, 1995
which is higher than the Minimum Base Salary, then June 1995 would become the
base month for the purposes of making the CPI adjustment to determine the
Minimum Base Salary for subsequent Contract Years).
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<PAGE> 6
(b) Bonus Compensation. With respect to each fiscal year of
the Company falling in whole or in part within the Term of Employment
beginning with the fiscal year ending July 29, 1995, Executive shall
be entitled to a bonus (in addition to his Base Salary) in such amount
and computed in such manner as shall be determined by the Board of
Directors but in no event shall the bonus payable to Executive under
this Section 3(b) be less than an amount computed by applying to the
fiscal year in question the following bonus formula:
"Bonus Compensation" means the amount, if any, payable to
Executive under this Section 3(b).
"Average Equity" means the average of stockholders' equity as shown on
the fiscal year-end consolidated balance sheet of the Company as of the end of
the fiscal year with respect to which Bonus Compensation is being computed
hereunder and as of the end of the immediately preceding fiscal year (e.g.,
"Average Equity" to be used in computing Bonus Compensation for the fiscal year
ending July 29, 1995 will be the average of stockholders' equity as of July 30,
1994 and July 29, 1995) except that the amount shown as the "equity adjustment
from foreign currency translation" on each such consolidated balance sheet
shall be disregarded and the amount of $3,744,000 shall be the equity
adjustment (increase) from foreign currency translation used to
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<PAGE> 7
determine stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings of the
Company and its subsidiaries as certified by its independent accountants for
inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
For fiscal year 1995, "Zero Bonus Percentage" shall mean a Return on
Equity of 12.5% and "Maximum Bonus Percentage" shall mean a Return on Equity of
l9.0%.
For fiscal years after fiscal 1995, the Company shall determine the
Zero Bonus Percentage and the Maximum Bonus Percentage consistent with expected
results based upon the Company's normal projection procedures, or based on
sound statistical or trend data, and the determination by the Company of such
percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus
Percentage or less, no Bonus Compensation shall be payable. If Return on
Equity equals or exceeds the Maximum Bonus Percentage, the Bonus Compensation
payable to Executive shall be 70% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Bonus Compensation shall be
- 7 -
<PAGE> 8
increased from zero percent of Base Salary towards 70% of Base Salary in the
same proportion that Return on Equity increases from the Zero Bonus Percentage
to the Maximum Bonus Percentage. Thus, for example, if Return on Equity for
fiscal 1995 is 15.75% (the midpoint between 12.5% and 19.0%) the Bonus
Compensation shall be an amount equal to 35% of Executive's Base Salary (the
midpoint between zero percent of Base Salary and 70% of Base Salary).
The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is payable (e.g.,
50% in July 1995 with respect to Bonus Compensation for the fiscal
year ending July 29, 1995), based on the then current projections of
Return on Equity, and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in part but
not in whole within the Term of Employment, the Bonus Compensation to which
Executive is entitled under this Section 3(b) shall be prorated on the basis of
the number of days of such fiscal year falling within the Term of Employment
except that if the Term of Employment ends
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<PAGE> 9
within five days before or after the end of a fiscal year, there shall be no
proration and the Bonus Compensation shall be payable with respect to the full
fiscal year ending within such five-day period.
(c) Fringe Benefits and Perquisites. During the Term of Employment,
Executive shall enjoy the customary perquisites of office, including but not
limited to office space and furnishings, secretarial services, expense
reimbursements, and any similar emoluments customarily afforded to senior
executive officers of the Company at the same level as Executive. Executive
shall also be entitled to receive or participate in all "fringe benefits" and
employee benefit plans provided or made available by the Company to its
executives or management personnel generally, such as, but not limited to,
group hospitalization, medical, life and disability insurance, and pension,
retirement, profit-sharing and stock option or purchase plans.
(d) Vacations. Executive shall be entitled each year to a vacation
or vacations in accordance with the policies of the Company as determined by
the Board or by an authorized senior officer of the Company from time to time.
The Company shall not pay Executive any additional compensation for any
vacation time not used by Executive.
Section 4. Termination by Reason of Disability, Death, Retirement or
Change of Control
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<PAGE> 10
(a) Disability or Death. If, during the Term of Employment,
Executive, by reason of physical or mental disability, is incapable of
performing his principal duties hereunder for an aggregate of 130 working days
out of any period of twelve consecutive months, the Company at its option may
terminate the Term of Employment effective immediately by notice to Executive
given within 90 days after the end of such twelve-month period. If Executive
shall die during the Term of Employment or if the Company terminates the Term
of Employment pursuant to the immediately preceding sentence by reason of
Executive's disability, the Company shall pay to Executive, or to Executive's
legal representatives, or in accordance with a direction given by Executive to
the Company in writing, the following: (i) Executive's Base Salary to the end
of the month in which such death or termination for disability occurs and
Executive's Bonus Compensation prorated to said last day of the month and (ii)
for the period from the end of the month in which such death or termination for
disability occurs until the earlier of (x) the first anniversary of the date of
death or termination and (y) the date on which the Term of Employment would
have ended but for such death or termination for disability, monthly payments
at one-half of the rate of Executive's Base Salary plus one-half of Executive's
Bonus Compensation (prorated to the last day of such period) which
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<PAGE> 11
would have been payable with respect to such period but for such death or
termination.
(b) Retirement. (i) The Term of Employment shall end automatically,
without action by either party, on Executive's 65th birthday unless, prior to
such birthday, Executive and the Company have agreed in writing that the Term
of Employment shall continue past such 65th birthday. In that event, unless
the parties have agreed otherwise, the Term of Employment shall be
automatically renewed and extended each year, as of Executive's birthday, for
an additional one-year term, unless either party has given a Non-Renewal
Notice. A Non-Renewal Notice shall be effective as of Executive's ensuing
birthday only if given not less than 60 days before such birthday, and shall
state that the party giving such notice elects that this Agreement shall not
automatically renew itself further, with the result that the Term of Employment
shall end on Executive's ensuing birthday. (ii) If the Term of Employment
ends pursuant to this paragraph by reason of a notice given by either party as
herein permitted or automatically at age 65 or any subsequent birthday, the
Company shall pay to Executive, or to another payee specified by Executive to
the Company in writing, Executive's Base Salary and Bonus Compensation prorated
to the date on which the Term of Employment ends. (iii) Anything hereinabove
to the contrary notwithstanding, if any
- 11 -
<PAGE> 12
provision of this paragraph violates federal or applicable state law relating
to discrimination on account of age, such provision shall be deemed modified or
suspended to the extent necessary to eliminate such violation of law. If at a
later date, by reason of changed circumstances or otherwise, the enforcement of
such provision as set forth herein would no longer constitute a violation of
law, then it shall be enforced in accordance with its terms as set forth
herein.
(c) Change of Control. In event of a Change of Control (as
hereinafter defined), Executive shall have the right to terminate the Term of
Employment, by notice to the Company given at any time after such Change of
Control, effective on the date specified in such notice, which date shall not
be more than (but can be less than) one year after the giving of such notice.
A Change of Control shall be deemed to have occurred at such time as a majority
of the directors then in office are not Continuing Directors as defined in
subparagraph (C)(6) of Article 12 of the Company's Restated Certificate of
Incorporation dated January 14, 1982 and filed by the New York Department of
State on January 19, 1982.
Section 5. Covenant Not to Compete
For a period of eighteen months after the end of the Term of
Employment if the Term of Employment is terminated by notice to the Company
given by Executive under
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<PAGE> 13
Section 1 or Section 4 hereof, or for a period of twelve months after the end
of the Term of Employment if the Term of Employment is terminated by notice to
Executive given by the Company under Section 1 or Section 4 hereof or
terminates under Section 4 by reason of Executive attaining the age of 65,
Executive shall not render services to any corporation, individual or other
entity engaged in any activity, or himself engage directly or indirectly in any
activity, which is competitive to any material extent with the business of the
Company or any of its subsidiaries, provided, however, that if the Company
terminates under Section 1 following a Change of Control (as defined in Section
4(c)), the foregoing covenant not to compete shall not apply.
Section 6. Company's Right to Injunctive Relief
Executive acknowledges that his services to the Company are of a
unique character, which gives them a peculiar value to the Company, the loss of
which cannot be reasonably or adequately compensated in damages in an action at
law, and that therefore, in addition to any other remedy which the Company may
have at law or in equity, the Company shall be entitled to injunctive relief
for a breach of this Agreement by Executive.
Section 7. Inventions and Patents
All inventions, ideas, concepts, processes, discoveries, improvements
and trademarks (hereinafter collectively referred to as intangible rights),
whether
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<PAGE> 14
patentable or registrable or not, which are conceived, made, invented or
suggested either by Executive alone or by Executive in collaboration with
others during the Term of Employment, and whether or not during regular working
hours, shall be disclosed to the Company and shall be the sole and exclusive
property of the Company. If the Company deems that any of such intangible
rights are patentable or otherwise registrable under any federal, state or
foreign law, Executive, at the expense of the Company, shall execute all
documents and do all things necessary or proper to obtain patents and/or
registrations and to vest the Company with full title thereto.
Section 8. Trade Secrets and Confidential Information
Executive shall not, either directly or indirectly, except as required
in the course of his employment by the Company, disclose or use at any time,
whether during or subsequent to the Term of Employment, any information of a
proprietary nature owned by the Company, including but not limited to, records,
data, formulae, documents, specifications, inventions, processes, methods and
intangible rights which are acquired by him in the performance of his duties
for the Company and which are of a confidential information or trade-secret
nature. All records, files, drawings, documents, equipment and the like,
relating to the Company's business, which Executive shall prepare, use,
- 14 -
<PAGE> 15
construct or observe, shall be and remain the Company's sole property. Upon
the termination of his employment or at any time prior thereto upon request by
the Company, Executive shall return to the possession of the Company any
materials or copies thereof involving any confidential information or trade
secrets and shall not take any material or copies thereof from the possession
of the Company.
Section 9. Mergers and Consolidations; Assignability
In the event that the Company, or any entity resulting from any merger
or consolidation referred to in this Section 9 or which shall be a purchaser or
transferee so referred to, shall at any time be merged or consolidated into or
with any other entity or entities, or in the event that substantially all of
the assets of the Company or any such entity shall be sold or otherwise
transferred to another entity, the provisions of this Agreement shall be
binding upon and shall inure to the benefit of the continuing entity in or the
entity resulting from such merger or consolidation or the entity to which such
assets shall be sold or transferred. Except as provided in the immediately
preceding sentence of this Section 9, this Agreement shall not be assignable by
the Company or by any entity referred to in such immediately preceding
sentence. This Agreement shall not be assignable by Executive, but in the
event of his death it shall be binding upon and inure to the benefit of his
legal
- 15 -
<PAGE> 16
representatives to the extent required to effectuate the terms hereof.
Section 10. Captions
The captions in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or effect for
any purpose whatsoever, including the construction of the provisions of this
Agreement, and if any caption is inconsistent with any provisions of this
Agreement, said provisions shall govern.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and construed in
accordance with the laws of, the State of New York.
Section 12. Entire Contract
This instrument contains the entire agreement of the parties on the
subject matter hereof except that the rights of the Company hereunder shall be
deemed to be in addition to and not in substitution for its rights under the
Company's standard printed form of "Employee's Secrecy and Invention Agreement"
or "Employee Agreement" if heretofore or hereafter entered into between the
parties hereto so that the making of this Agreement shall not be construed as
depriving the Company of any of its rights or remedies under any such Secrecy
and Invention Agreement or Employee Agreement. This Agreement may not be
changed orally, but only by an agreement
- 16 -
<PAGE> 17
in writing signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
Section 13. Notices
All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for the
Company, shall be addressed to it (if sent by mail) or delivered to it (if
delivered by hand) at its principal office for the attention of the Secretary
of the Company, or at such other address and for the attention of such other
person of which the Company shall have given notice to Executive in the manner
herein provided, and, if intended for Executive, shall be delivered to him
personally or shall be addressed to him (if sent by mail) at his most recent
residence address shown in the Company's employment records or at such other
address or to such designee of which Executive shall have given notice to the
Company in the manner herein provided. Each such notice shall be deemed to be
given on the date of mailing thereof or, if delivered personally, on the date
so delivered.
Section 14. Termination of Any Prior Employment Agreement
Any Employment Agreement in effect between the Company and Executive
on the date hereof is hereby terminated
- 17 -
<PAGE> 18
by mutual consent effective July 31, 1994 and is superseded and replaced by
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PALL CORPORATION
By
-----------------------------------
Chairman and CEO
-----------------------------------
Executive
- 18 -
<PAGE> 1
EXHIBIT 10.18
THIS AGREEMENT is made as of April 1, 1994 between PALL CORPORATION,
a New York corporation (the "Company") and Nicholas Nickolaus ("Executive").
Recitals
The parties hereto are parties to an Employment Agreement dated
February 1, 1992 as supplemented by a Supplement to Employment Agreement
also dated February 1, 1992 and as amended by Amendment to Employment Agreement
dated July 19, 1993, (said Employment Agreement as so supplemented and
amended being hereafter called the "Employment Agreement"). The parties
desire to amend the Employment Agreement (i) to provide that the Term of
Employment thereunder will end at the close of business on July 31, 1994 and
(ii) in certain other respects hereinafter set forth. The parties further
desire to enter into a Consulting Agreement, for a term beginning August 1,
1994, on the terms and conditions hereinafter set forth. Accordingly,
the parties hereto hereby agrees as follows:
Amendment of Employment Agreement
(a) Section 1 of the Employment Agreement is amended to
provide that the Term of Employment shall end at the close of business on
July 31, 1994.
(b) Executive's Bonus Compensation under Section 3(b) of the
Employment Agreement for the fiscal year ending July 30, 1994 shall be paid
in full not later than July 29, 1994 based on the best estimate then
available as to the amount of such Bonus Compensation. At such time
thereafter as the exact amount of such Bonus Compensation can be finally
determined (i.e., when the Company's results for the fiscal year ending July
30, 1994 are known), to the extent that the amount paid in July 1994
pursuant to the preceding sentence was not the exact amount of such Bonus
Compensation as finally determined, the Company shall pay to Executive, or
Executive shall refund to the Company, the difference between the amount paid
in July and the exact amount payable. For purposes of the Company's
Supplementary Pension Plan, the amount of Bonus Compensation as finally
determined shall be deemed part of Executive's "Compensation" for the "Plan
Year" ending July 31, 1994 notwithstanding the payment of such Bonus
Compensation or any part thereof after the end of said Plan Year.
(c) After July 31, 1994 (the date on which the Term of
Employment will end as hereinabove provided) the Employment Agreement shall
be of no further force or effect except as provided in paragraph (b) hereof
and except that Sections 5 through 13 thereof shall remain in full force and
effect until the end of the term of the Consulting Agreement hereinafter
provided for and said Sections 5 through 13 shall be deemed part of said
Consulting Agreement as though set forth in full herein. The covenant not to
compete set forth in Section 5
<PAGE> 2
shall continue for a period of 18 months after the end of the term of the
Consulting Agreement hereinafter provided for (i.e., until January 31,
1997) as further consideration for the compensation paid for the consulting
services.
Consulting Agreement
--------------------
Beginning August 1, 1994 (by which date the Term of Employment under
the Employment Agreement will have ended and Executive will have retired and
ceased to be an employee of the Company), Executive shall serve as a consultant
to the Company, as follows:
(i) Executive shall make himself available for the performance of his
consulting services, as requested by Eric Krasnoff or his designee, up to a
maximum of 120 days during the term of this Consulting Agreement, which term
shall end on July 31, 1995. Such services shall consist of marketing projects
for the DMF, Microza and Pall-Sep VMF programs, as well as the preparation of
the Company's 1994 and 1995 annual reports.
(ii) The Company shall compensate Executive for his consulting services
at the rate of $1,200 a day up to a maximum amount of $143,000. Executive
shall submit a report to Eric Krasnoff or his designee for each calendar month
indicating the days that he worked as a consultant and the amount due to him
for consulting fees and expenses incurred; he shall be paid within one week
after submitting such report.
(iii) on the days on which Executive is performing consulting services
hereunder on the Company's premises, suitable private office space and
secretarial services shall be made available to him on the Company's premises.
He shall also be entitled to expense reimbursement for the use of his private
automobile on Company business including transportation to and from his home to
the Company's premises, at the rate allowed by the Internal Revenue Service.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the day and year first above written.
PALL CORPORATION
By: /s/
-------------------------------------
President & Chief Operating Officer
By: /s/ NICHOLAS NICKOLAUS
-------------------------------------
Nicholas Nickolaus
<PAGE> 1
EXHIBIT 10.19
THIS AGREEMENT is made as of August 15, 1994 between PALL CORPORATION,
a New York corporation (the "Company") and JOSEPH CAMPOLONG ("Executive").
Recitals
The parties hereto are parties to an Employment Agreement dated
February 1, 1992 as amended by Amendment to Employment Agreement dated July 19,
1993, (said Employment Agreement as so amended being hereafter called the
"Employment Agreement"). Words and terms used herein with initial
capital letters are used herein as defined in the Employment Agreement. The
parties desire to amend the Employment Agreement (i) to provide that the Term
of Employment thereunder will end at the close of business on September
30, 1994 and (ii) in certain other respects hereinafter set forth. The
parties further desire to enter into a Consulting Agreement, for a term
beginning October 1, 1994, on the terms and conditions hereinafter set forth.
Accordingly, the parties hereto hereby agrees as follows:
Amendment of Employment Agreement
(a) Section 1 of the Employment Agreement is amended to provide that
the Term of Employment shall end at the close of business on September 30,
1994. Executive shall be paid (i) his Bonus Compensation for the Contract Year
ended July 31, 1994 in accordance with the terms of the Employment Agreement
and (ii) his Base Salary and Bonus Compensation for the Contract Year ending
July 31, 1995 (when the amount thereof is determinable) prorated to September
30, 1994. Executive shall turn in his company car on September 30, 1994.
(b) After September 30, 1994 (the date on which the Term of Employment
will end as hereinabove provided) the Employment Agreement shall be of no
further force or effect except as provided in paragraph (a) hereof and except
that Sections 5 through 13 thereof shall remain in full force and effect until
the end of the term of the Consulting Agreement hereinafter provided for and
said Sections 5 through 13 shall be deemed part of said Consulting Agreement as
though set forth in full herein. The convenant not to compete set forth in
Section 5 shall continue for a period of 18 months after the end of the term of
the Consulting Agreement hereinafter provided for (i.e., until December 31,
1997) as further consideration for the compensation paid for the consulting
services.
Consulting Agreement
Beginning October 1, 1994 (by which date the Term of Employment under
the Employment Agreement will have ended and Executive will have retired and
ceased to be an employee of the Company), Executive shall serve as a consultant
to the Company, as follows:
<PAGE> 2
(i) Executive shall make himself available for the performance of his
consulting services, as requested by the Chief Executive Officer or Chief
Operating Officer of the Company, up to a maximum of 50 days during the term of
this Consulting Agreement, which term shall end on June 30, 1995. Such services
shall relate to all aspects of the Company's business, including sales,
marketing, engineering and manufacturing. Executive shall report to Derek
Williams, the Chief Operating Officer of the Company.
(ii) The Company shall compensative Executive for his agreement to make
himself available for the performance of consulting services hereunder in the
aggregate amount, for the nine-month term of this Consulting Agreement,
determined by multiplying the total of Executive's Base Salary and Bonus
Compensation for the Contract Year ended July 31, 1994 by 37.5%. Such aggregate
compensation shall be paid in nine installments, each in the amount of 1/9th of
the aggregate compensation, payable on the last day of each month during the
term, beginning October 31, 1994. Such aggregate compensation shall be paid
even if the number of days of consulting services in fact performed by
Executive is less than 50 for any reason (including Executive's death or
disability) other than his willful failure or refusal to perform such services
on request. In addition, the family health care coverage heretofore provided to
Executive under the Employment Agreement shall be continued to June 30, 1995,
on the same basis on which such coverage is now in effect (including
contribution to the cost thereof by Executive) but subject to any changes
during the term which are applicable to the Company's officers generally.
(iii) On the days on which Executive is performing consulting services
hereunder on the Company's premises, suitable private office space and
secretarial services shall be made available to him on the Company's premises.
He shall also be entitled to expense reimbursement for the use of his private
automobile on Company business including transportation to and from his home to
the Company's premises, at the rate allowed by the Internal Revenue Service.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the day and year first above written.
PALL CORPORATION
By:
--------------------------------
Title: President and Treasurer
/s/ JOSEPH CAMPOLONG
--------------------------------
Joseph Campolong
<PAGE> 1
Exhibit 10.20
PALL CORPORATION
SUPPLEMENTARY PROFIT-SHARING PLAN
As amended and restated
September 19, 1994
EXHIBIT A
<PAGE> 2
PALL CORPORATION
SUPPLEMENTARY PROFIT-SHARING PLAN
This document sets forth the Pall Corporation Supplementary
Profit-Sharing Plan, as amended and restated September 19, 1994. The
amendments reflected in this document are effective as of August 1, 1993.
The rights and entitlement to a benefit under the Plan of any person
who terminated employment with any Employer prior to the effective date of a
particular amendment to the Plan shall be determined solely under the terms of
the Plan as in effect on the date of such termination of employment, without
regard to such amendment.
SECTION 1. PURPOSE. The purpose of this Plan is to provide
participants in the Pall Corporation Profit-Sharing Plan (the "Profit Sharing
Plan") with benefits equivalent to those provided under the Profit Sharing
Plan, with respect to that portion of their annual compensation which may not
be taken into account under the Profit Sharing Plan because of the limitation
on compensation contained in section 401(a)(17) of the Internal Revenue Code.
The Plan is intended to constitute an unfunded plan of deferred
compensation for "a select group of management or highly compensated employees"
within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
SECTION 2. DEFINITIONS. When used herein, the following terms
shall have the following meanings:
(a) "Account" means the account established for a Participant
hereunder.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" means the Committee appointed by the Board to
administer the Plan.
(e) "Company" means Pall Corporation, a New York corporation.
(f) "Compensation" means "Compensation", as defined in the Profit
Sharing Plan for purposes of Section 3.4 of the Profit Sharing Plan.
<PAGE> 3
(g) "Corresponding PSP Plan Year" means, with respect to any Plan
Year, the plan year of the Profit Sharing Plan that corresponds to such Plan
Year.
(h) "Corresponding Valuation Period" means, with respect to any
Valuation Date, the period of time which starts on the day after the
immediately preceding Valuation Date and ends on such Valuation Date.
(i) "Employer" means the Company or any subsidiary of the Company
that has adopted the Profit Sharing Plan.
(j) "Employer Contribution" means "Employer Contribution", as
defined in the Profit Sharing Plan.
(k) "Employer Contribution Account" means the "Employer Contribution
Account", as defined in the Profit Sharing Plan, maintained for a participant
under the Profit Sharing Plan.
(l) "Excess Compensation" means, for any Plan Year, the amount of a
Participant's Compensation for the taxable year of the Employer which ends in
such Plan Year that is in excess of the limitation on Compensation in effect
for such Plan Year under section 401(a)(17) of the Code.
It is provided, however, that for the Short Plan Year, "Excess
Compensation" shall be the amount of a Participant's Compensation paid to the
Participant during such Plan Year in excess of the limitation on Compensation
in effect for such Plan Year under section 401(a)(17) of the Code.
(m) "Participant" means any person (i) who, on or after August 1,
1993, is employed by an Employer and is a participant in the Profit Sharing
Plan, and (ii) who has had Excess Compensation for any Plan Year beginning on
or after August 1, 1993.
(n) "Plan" means the Pall Corporation Supplementary Profit-Sharing
Plan, as set forth herein and as amended from time to time.
(o) "Plan Year" means, after July 31, 1993, the 5-consecutive month
period beginning on August 1, 1993 and ending on December 31, 1993 (the "Short
Plan Year"), and, thereafter, each calendar year.
(p) "Profit Sharing Plan" means the Pall Corporation Profit-Sharing
Plan, as amended from time to time.
(q) "Termination of Service" means the termination of a Participant's
employment with all Employers.
-2-
<PAGE> 4
(r) "Valuation Date" means (i) for the Short Plan Year, the last
business day of October and December of such year and (ii) after December 31,
1993, the last business day of the third, sixth, ninth and twelfth months
during a Plan Year.
SECTION 3. SUPPLEMENTARY PROFIT SHARING BENEFIT.
3.1 The Benefit. As of the last day of each Plan Year beginning on
or after August 1, 1993, each Participant's Account shall be credited with an
amount equal to (a) the Participant's Excess Compensation for such year,
multiplied by (b) a fraction, the numerator of which is the aggregate amount of
Employer Contributions allocated to all Employer Contribution Accounts with
respect to the Corresponding PSP Plan Year, and the denominator of which is the
aggregate amount of Compensation taken into account in making such allocation.
For the purpose of the preceding sentence, the aggregate amount of Employer
Contributions so allocated shall be determined without regard to the reduction
made from the Employer Contributions for amounts described in clause (b)(3) of
the second paragraph of Section 3.4 of the Profit Sharing Plan.
Notwithstanding the foregoing, no amount shall be allocated to the
Account of a Participant for the Plan Year in which the Participant's
Termination of Service occurs, unless the Participant is entitled to have a
portion of the Employer Contributions made to the Profit Sharing Plan for the
Corresponding PSP Plan Year allocated to his or her Profit Sharing Plan Account
for such year.
SECTION 4. ACCOUNTS, EARNINGS AND VESTING.
4.1. Accounts. The Committee shall establish and maintain, or cause
to be established and maintained, a separate memorandum Account for each
Participant. A Participant's Account shall be adjusted from time to time to
reflect the amounts to be credited to such Account under Section 3.1, the
amounts to be credited or charged to such Account under Section 4.2, and
amounts distributed to the Participant or his or her Beneficiary under Section
5.1.
4.2. Earnings. As of each Valuation Date occurring after August 1,
1993, each Participant's Account shall be credited, or charged, with an amount
determined by multiplying (a) the balance of such Account as of the immediately
preceding Valuation Date, by (b) the Earnings Adjustment Factor for such
Valuation Date. The Earnings Adjustment Factor for any Valuation Date shall be
a fraction. The numerator of such fraction shall be the amount of the earnings
or losses that would have resulted during the Corresponding Valuation Period
for such Valuation Date
-3-
<PAGE> 5
if, on the first day of such period, an amount equal to the balance of the
Participant's Employer Contribution Account as of the immediately preceding
Valuation Date had been invested in the Fidelity Asset Manager fund. The
denominator of such fraction shall be the balance of the Participant's Employer
Contribution Account as of the immediately preceding Valuation Date. If the
numerator of the Earnings Adjustment Factor for any Valuation Date is a
negative amount, the adjustment to be made to the Participant's Account
pursuant to this Section 4.2 as of such Valuation Date shall be a charge to
such Account.
In the case of any Participant who had a balance to his credit in his
Account as of July 31, 1993, such date shall be treated as the Valuation Date
immediately preceding the Valuation Date occurring in October of 1993, for
purposes of determining the amount to be credited or charged to such
Participant's Account under this Section 4.2 as of the October, 1993 Valuation
Date.
4.3. Vesting. As of any date of reference or upon the occurrence of
any event, a Participant shall have a vested interest in the same percentage of
his or her Account as the vested percentage the Participant has in his or her
Employer Contribution Account on such date or by reason of the occurrence of
such event.
Notwithstanding any other provision herein to the contrary, if a
Participant does not have a 100% vested interest in his or her Account at the
time of the Participant's Termination of Service (and does not acquire a 100%
vested interest in his or her Account by reason of the circumstances of his or
her Termination of Service), the nonvested portion of the Participant's Account
shall be forfeited, and shall not be distributed to the Participant pursuant to
Section 5.
SECTION 5. PLAN DISTRIBUTIONS.
5.1 Distributions. A Participant's Account balance shall become
distributable to the Participant or his or her Beneficiary, as the case may be,
upon the Participant's Termination of Service, for any reason. Distribution
shall be made in accordance with the following rules:
(a) Commencement of Distributions. Distributions hereunder shall
be made on the 60th day after the Valuation Date next following the
Participant's Termination of Service.
(b) Form and amount of Distributions. Distributions hereunder shall
be made in the form of a single lump-sum payment, in an amount equal to the
Participant's vested percentage of the balance of his or her Account as of the
Valuation Date immed-
-4-
<PAGE> 6
iately preceding the date as of which the distribution is to be made.
(c) Participant's Death. If the Participant dies prior to his or
her Termination of Service, or following his or her Termination Service but
prior to the distribution of his or her Account, the Participant's Account
shall be distributed to the Participant's Beneficiary. The Participant's
"Beneficiary" shall be the person(s) designated by the Participant to receive
any amount distributable hereunder by reason of his or her death, as indicated
in the last written designation of a Beneficiary filed by such Participant with
the Committee prior to such Participant's death. If a Participant has failed
to designate a Beneficiary, or if no Beneficiary designated by the Participant
survives to receive any amount distributable hereunder upon the Participant's
death, the following will be deemed to be such Participant's Beneficiary with
priority in the order named: (1) his or her spouse; and (2) his or her estate.
SECTION 6. SOURCE OF PAYMENT. All payments to be made hereunder
shall be paid from the general assets of the Company, and no special or
separate fund shall be established and no segregation of assets shall be made
to assure such payments. Nothing contained in the Plan, and no action taken
pursuant to the provisions of the Plan, shall create or be construed to create
a trust of any kind, or as creating in any Participant or Beneficiary any
right, title or beneficial ownership interest in or to any assets of the
Company. The Plan constitutes a mere promise by the Company to make benefit
payments in the future. It is the intention of the Company that the Plan be
treated as unfunded for Federal income tax purposes and for purposes of Title I
of ERISA. To the extent that any person acquires a right to receive payments
from the Company under the Plan, such right shall be no greater than the right
of any unsecured general creditor of the Company.
Notwithstanding the foregoing, the Company may establish a bookkeeping
reserve to reflect its obligations hereunder, or may establish a "grantor"
trust, within the meaning of sections 671 through 679 of the Code, to assist it
in making the payments provided for hereunder; provided, however, that any
bookkeeping reserve, and the assets of any trust, so established shall not be
deemed to constitute assets of this Plan, and the assets of any trust so
established shall at all times prior to payment to Participants or their
beneficiaries remain a part of the general assets of the Company and subject to
the claims of the Company's general creditors.
SECTION 7. ADMINISTRATION OF THE PLAN. The Plan shall be
administered by the Committee, which shall have full
-5-
<PAGE> 7
power and authority to interpret and construe the Plan, to make all
determinations considered necessary or advisable for the administration of the
Plan and the calculation of the amounts creditable and payable thereunder, and
to review claims for benefits under the Plan. The Committee's interpretations
and constructions of the Plan and its decisions or actions thereunder shall be
binding and conclusive on all persons for all purposes.
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of
judgment made in good faith, and the Company shall indemnify and hold harmless
each member of the Committee and each other employee, officer, or director of
the Company to whom any duty or power relating to the administration or
interpretation of the Plan may be allocated or delegated, against any cost or
expense (including counsel fees) or liability (including any sum paid in
settlement of a claim) arising out of any act or omission to act in connection
with the Plan unless arising out of such person's own fraud or bad faith.
SECTION 8. AMENDMENT AND TERMINATION. The Plan may be amended,
suspended or terminated, in whole or in part, by the Board without the consent
of any Participant or any other person. The Committee may adopt any amendment
that may be necessary or appropriate to facilitate the administration,
management and interpretation of the Plan or to conform the Plan thereto,
provided any such amendment does not have a material effect on the currently
estimated cost to the Company of maintaining the Plan. No such amendment,
suspension or termination shall retroactively impair or otherwise adversely
affect the rights of any Participant or other person to benefits under the Plan
that have accrued prior to the date of such action as determined by the
Committee in its sole discretion.
SECTION 9. GENERAL PROVISIONS. The following additional provisions
shall be applicable with respect to the Plan.
(a) The Plan shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and Participants, beneficiaries, and
their estates. The Plan shall also be binding upon any successor corporation
or organization succeeding to substantially all of the assets and business of
the Company, but nothing in the Plan shall preclude the Company from merging or
consolidating into or with, or transferring all or substantially all of its
assets to, another corporation or organization that assumes the Plan and all
obligations of the Company hereunder. The Company agrees that it will make
appropriate provision for the preservation of Participants' rights under the
Plan in any agreement or plan that it may enter into to
-6-
<PAGE> 8
effect any merger, consolidation, reorganization or transfer of assets. Upon
such a merger, consolidation, reorganization or transfer of assets and
assumption, the term "Company" shall refer to such other corporation or
organization and the Plan shall continue in full force and effect.
(b) Neither the Plan nor any action taken hereunder shall be
construed as giving to any Participant the right to be retained in the employ
of any Employer or as affecting the right of any Employer to dismiss any
Participant.
(c) The Company shall withhold from all amounts otherwise payable
under the Plan all Federal, state, local or other taxes required pursuant to
law to be withheld with respect to such payments.
(d) The rights or interests of any Participant under the Plan are not
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by the Participant's creditors
or beneficiary.
(e) The Plan shall be governed by the laws of the State of New York
from time to time in effect.
-7-
<PAGE> 1
Exhibit 10.22
PALL CORPORATION
PROFIT-SHARING PLAN
----------------------------------
as amended and restated
September 19, 1994
EXHIBIT A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. "Accounts" or "Plan Accounts" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. "Beneficiary" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. "Break in Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. "Code" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5. "Committee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6. "Company" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7. "Compensation" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8. "Disabled" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9. "Earnings" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10. "Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11. "Employer" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12. "Employer Contribution Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.13. "Employer Contributions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.14. "Employment Commencement Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.15. "ERISA" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.16. "401(k) Contribution Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17. "401(k) Contributions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18. "Highly Compensated Employee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19. "Hours of Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20. "Member" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.21. "Mutual Fund" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.22. "Normal Retirement Age" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.23. "Plan" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.24. "Plan Year" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.25. "Reemployment Commencement Date" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.26. "Rollover Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.27. "Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.28. "Termination of Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.29. "Trust" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.30. "Trust Agreement" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.31. "Trust Fund" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.32. "Trustee" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.33. "Vested Portion" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.34. "Voluntary Contribution Account" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.35. "Voluntary Contributions" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.36. "Years of Service" . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 2 - PURPOSE, ELIGIBILITY AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.2. Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3. Commencement of Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.4. Membership After Reemployment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE 3 - CONTRIBUTIONS AND ROLLOVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1. 401(k) Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2. Voluntary Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3. Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<TABLE>
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3.4. Employer Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5. Time and Manner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6. Rollovers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 4 - LIMITATIONS ON CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1. Dollar Limit for 401(k) Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.2. Nondiscrimination Test for 401(k) Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.3. Nondiscrimination Test for Voluntary Contri-
butions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.4. Special Rules for Nondiscrimination Tests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.5. Deduction Limit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.6. Section 415 Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.7. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8. Corrective Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 5 - PLAN ACCOUNTS, ALLOCATIONS AND FORFEITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1. Plan Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2. Forfeitures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 6 - INVESTMENTS AND EARNINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.1. Investment of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2. Investment Elections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.3. Determination of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.4. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE 7 - DISTRIBUTIONS, WITHDRAWALS AND LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.1. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.2. Hardship Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.3. In-Service Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.4. Direct Rollovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.5. Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 8 - PLAN ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.1. Responsibility for Administering the Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.2. Responsibilities of the Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.3. Duties and Powers of the Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
8.4. Reimbursement and Indemnification of the
Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.5. Responsibilities of the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
8.6. Responsibilities of the Company's Board of
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.7. Claims Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.8. Agent for Service of Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.9. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 9 - AMENDMENT, MERGER AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.2. Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.3. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.4. Termination of An Employer's Participation in
the Plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
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ARTICLE 10 - TOP-HEAVY PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.2. Minimum Benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
10.3. Minimum Vesting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.4. Maximum Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.5. Section 415 Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.6. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
10.7. Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 11 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.1. Plan Assets to be Held for Exclusive Benefit of
Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.2. Nonassignability of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
11.3. Qualified Domestic Relations Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.4. Trust Fund as Sole Source of Benefit Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.5. Right to Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.6. Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
11.7. Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
</TABLE>
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<PAGE> 5
PALL CORPORATION
PROFIT-SHARING PLAN
Foreword
This document sets forth the Pall Corporation Profit-Sharing Plan, as
amended and restated September 19, 1994.
The amendments to the Plan reflected in this document are effective as
of August 1, 1993, except as otherwise indicated in the text of the Plan.
The Plan was previously amended and restated August 1, 1993 (the
"Prior Document"). The amendments to the top-heavy provisions of the Plan
reflected in Article 10 of the Prior Document are effective as of August 1,
1985. The amendment to the definition of "Code" reflected in Section 1.4 of
the Prior Document, and the amendment adding a definition of "Highly
Compensated Employees" to the Plan reflected in Section 1.18 of the Prior
Document, are effective as of August 1, 1987. The amendments to the provisions
setting forth the limitations of Section 415 of the Code reflected in Section
4.6 of the Prior Document are effective as of August 1, 1987. The amendments
relating to the limitations on Voluntary Contributions, and the amendments
which add to the Plan procedures to ensure compliance with such limitations,
reflected in Sections 4.3, 4.4, 4.7 and 4.8 of the Prior Document are effective
as of August 1, 1987. The amendment to the definition of the "Normal
Retirement Age" reflected in Section 1.22 of the Prior Document is effective as
of August 1, 1988, with respect to any Employee who earns at least one Hour of
Service on or after that date. The amendment which requires that a Member be
furnished with a notice describing his right to defer a distribution reflected
in Section 7.1(d)(2) of the Prior Document is effective as of August 1, 1988.
The amendments which eliminate the Committee's discretion as to the form and
timing of distributions reflected in Article 7 of the Prior Document are
effective as of August 1, 1989. Each of the other amendments to the Plan
reflected in the Prior Document is effective as of August 1, 1993, except as
otherwise indicated in the text of the Plan.
The rights under the Plan of any person who retired or otherwise
terminated employment with his or her employer before the effective date of a
particular amendment shall be determined solely under the terms of the Plan as
in effect on the date of his or her retirement or other termination of
employment, without regard to such amendment.
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<PAGE> 6
ARTICLE 1 - DEFINITIONS
As used herein, the following terms shall have the following meanings,
unless a different meaning is required by the context:
1.1. "Accounts" or "Plan Accounts" - shall mean the separate
accounts established and maintained for a Member pursuant to Section 5.1.
1.2. "Beneficiary" - shall mean the person or persons designated
by a Member to receive any amount distributable under Section 7.1 by reason of
his death, as indicated in the last written designation of a Beneficiary filed
by such Member with the Committee, on a form furnished by the Committee for
such purpose, prior to such Member's death.
Notwithstanding the foregoing, if a Member who was married at the date
of his death, and who had been married to his spouse throughout the one-year
period ending on the date of his death, had designated any person other than
such spouse as his Beneficiary, such Member shall be deemed to have failed to
designate a Beneficiary unless such spouse consents to the designation of such
non-spouse Beneficiary. Said spousal consent shall be made in writing, shall
specifically identify the person designated as the Member's Beneficiary, and
shall acknowledge the effect of the spouse's consent to such designation on her
rights to benefits under the Plan. Further, such consent shall be signed by
the spouse, witnessed by a notary public and filed with the Committee. The
consent of a spouse to any designation of a non-spouse Beneficiary shall be
irrevocable as to such designation, and shall be effective only with respect to
that spouse. However, the consent of a Member's spouse to the Member's
designation of a non-spouse Beneficiary shall not be required if it is
established to the satisfaction of the Committee that such consent cannot be
obtained because there is no spouse, because the spouse cannot be located, or
because of such other circumstances as may be prescribed in the applicable
Treasury regulations or in rulings or notices issued by the Internal Revenue
Service.
If a Member has failed (or is deemed above to have failed) to
designate a Beneficiary, or if no Beneficiary designated by him survives to
receive any amount distributable hereunder upon the Member's death, the
following person or persons will be deemed to be such Member's Beneficiary with
priority in the order named: (a) his spouse; and (b) his estate.
1.3. "Break in Service" - shall mean a period consisting of one or
more consecutive Plan Years during each of which an Employee has not completed
more than 500 Hours of Service. A "5-Year Break in Service" shall mean a Break
in Service which includes five or more consecutive Plan Years
<PAGE> 7
during each of which the Employee has not completed more than 500 Hours of
Service.
1.4. "Code" - shall mean the Internal Revenue Code of 1986, as
amended from time to time.
1.5. "Committee" - shall mean the committee established by the
Board of Directors of the Company under Section 8.6(b) to control and manage
the operation and administration of the Plan.
1.6. "Company" - shall mean Pall Corporation.
1.7. "Compensation" - For any Plan Year beginning after July 31,
1993, an Employee's Compensation shall mean the sum, for the Plan Year, of (a)
the amount of the Employee's gross income reported on Form W-2 by the Employer
and (b) the 401(k) Contributions made on behalf of the Employee by the
Employer, and the amounts contributed by the Employer, at the Employee's
election, on behalf of the Employee to a "cafeteria plan", within the meaning
of Section 125 of the Code. Provided, however, that for purposes of Section
4.6(a)(2), for any such Plan Year, Compensation shall be defined as under the
preceding sentence except that amounts described in clause (b) thereof shall
not be included in Compensation. Provided further, however, that for purposes
of Section 3.4, for any such Plan Year beginning after December 31, 1993, an
Employee's Compensation shall mean the sum of the base pay, prior to reduction
for the amounts described in clause (b) above, bonuses and overtime pay paid by
the Employer to the Employee during the taxable year of the Employer which ends
in such Plan Year. For the Plan Year ending December 31, 1993, for purposes of
Section 3.4, an Employee's Compensation shall mean the sum described in the
preceding sentence paid by the Employer to the Employee during such Plan Year.
For any Plan Year beginning before August 1, 1993, an Employee's
Compensation shall mean the amount paid by the Employer to the Employee during
such Plan Year, without reduction for amounts contributed by the Employer on
the Employee's behalf to a cafeteria plan (as defined above), including
overtime pay and bonuses but excluding the value of stock options and
contributions by the Employer to any employee benefit plan other than a
cafeteria plan. Provided, however, that for the purposes of Sections 1.18, 4.3
and 4.6(a)(2), for Plan Years beginning before August 1, 1993, Compensation
shall be defined as under Section 415(c)(3) of the Code, as in effect for such
periods, modified, when determining Compensation for purposes of Section 1.18,
as required by Section 414(q)(7) of the Code.
For any Plan Year, the amount of Compensation taken into account under
the Plan for any Employee shall not exceed
-2-
<PAGE> 8
the limitation on such amount imposed by Section 401(a)(17) of the Code in
effect for such Plan Year, determined in accordance with the applicable
Treasury regulations. In determining the Compensation of an Employee for
purposes of the Section 401(a)(17) limitation, the rules of Section 414(q)(6)
of the Code shall apply, except in applying such rules, the term "family" shall
include only the spouse of the Employee and any lineal descendants of the
Employee who have not attained age 19 before the close of the Plan Year. If,
as a result of the application of such rules, the Section 401(a)(17) limitation
is exceeded, then such limitation shall be prorated among each affected
individual's Compensation in proportion to such individual's Compensation
determined under this Section 1.7 prior to the application of such limitation.
1.8. "Disabled" - The term "Disabled" shall have the meaning
assigned to it under Section 72(m)(7) of the Code.
1.9. "Earnings" - shall mean the Earnings attributable to the
investment of a Member's 401(k) Contribution Account, Voluntary Contribution
Account, Employer Contribution Account or Rollover Account, as determined under
Section 6.3 hereof.
1.10. "Employee" - shall mean an individual who is employed as a
common law employee by the Employer.
The term "Employee" shall not include any individual who is a "leased
employee" within the meaning of Section 414(n)(2) of the Code.
1.11. "Employer" - shall mean the Company or any other entity
described in Section 1.19(e)(2), (3) or (4) which has adopted this Plan.
1.12. "Employer Contribution Account" - shall mean the separate
account established and maintained for a Member under Section 5.1 to hold
Employer Contributions and the Earnings thereon.
1.13. "Employer Contributions" - shall mean the contributions
described in Section 3.4.
1.14. "Employment Commencement Date" - shall mean the date on which an
Employee first performs an Hour of Service.
1.15. "ERISA" - shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
1.16. "401(k) Contribution Account" - shall mean the separate account
established and maintained for a Member under
-3-
<PAGE> 9
Section 5.1 to hold 401(k) Contributions and the Earnings thereon.
1.17. "401(k) Contributions" - shall mean the contributions described
in Section 3.1.
1.18. "Highly Compensated Employee" - shall mean an individual who is
described in Section 414(q) of the Code and the applicable Treasury
regulations. In general, for any Plan Year, a Highly Compensated Employee is
any Employee who is in Service during such Plan Year, and who, during such Plan
Year or the immediately preceding Plan Year, either:
(a) was, at any time, a five-percent owner, as defined
in Section 416(i)(1)(B)(i) of the Code,
(b) received Compensation in excess of $75,000, as
adjusted for such year under Section 415(d) of the Code,
(c) received Compensation in excess of $50,000, as
adjusted for such year under Section 415(d) of the Code, and was in
the top-paid group of employees, as defined in Section 414(q)(4) of
the Code, for such year, or
(d) was, at any time, an officer, subject to the rules
and limitations on the number of officers contained in Section
414(q)(5) of the Code, and received Compensation greater than 50
percent of the limitation in effect for such year under Section
415(b)(1)(A) of the Code.
In applying the preceding sentence, if an Employee is not described in
(b), (c) or (d) above for the Plan Year immediately preceding the Plan Year in
question, such Employee shall not be treated as being described in (b), (c) or
(d) for the Plan Year in question unless such Employee is a member of the group
consisting of the 100 Employees with the highest Compensation for the Plan Year
in question.
1.19. "Hours of Service" - an Employee shall be credited with Hours of
Service in accordance with the following rules:
(a) Work Performed. An Employee shall be credited with one Hour
of Service for each hour for which he is paid, or entitled to payment, by the
Employer for the performance of duties for the Employer.
(b) Paid Absences. An Employee shall be credited with one Hour
of Service for each hour for which he is paid, or entitled to payment, by the
Employer for a period of time during which no duties are performed by him
(irrespective of whether the employment relationship has terminated) due to
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<PAGE> 10
vacation, holiday, illness, incapacity (including Disability), lay-off, jury
duty, military duty or leave of absence. For this purpose, a payment shall be
deemed to be made by or due from the Employer regardless of whether such
payment is made by or due from the Employer directly, or indirectly through,
among others, a trust fund, insurer, or other entity to which the Employer
contributes or pays premiums and regardless of whether contributions made or
due to the trust fund, insurer or other entity are for the benefit of
particular Employees or are on behalf of a group of Employees in the aggregate.
However, no Hours of Service shall be credited hereunder with respect to (1)
hours for which an Employee receives payment under a plan maintained solely for
the purpose of complying with applicable workmen's compensation, unemployment
compensation, or disability insurance laws, or (2) hours for which an Employee
receives a payment which solely reimburses him for medical or medically-related
expenses incurred by him. No more than 501 Hours of Service shall be credited
hereunder to an Employee on account of any single continuous period during
which he performs no duties whether or not such period occurs within a single
Plan Year.
(c) Back Pay. An Employee shall be credited with one Hour of
Service for each hour for which back pay, irrespective of mitigation of
damages, is awarded or agreed to by the Employer. However, no Hours of Service
shall be credited hereunder if they are credited to the Employee under
subsection (a) or (b) above. Furthermore, crediting of Hours of Service
hereunder for periods described in subsection (b) above shall be subject to the
limitations therein set forth.
(d) Special Rules for Crediting Hours of Service. Hours of
Service to be credited under subsection (b) above, and the periods to which
Hours of Service are to be credited under subsections (a), (b) and (c) above,
shall be determined under the rules set forth in Section 2530.200b-2(b) and (c)
of the regulations issued by the U.S. Department of Labor, as the same may be
amended from time to time.
(e) Aggregation Requirement. For the purpose of counting Hours
of Service, the term "Employer" shall mean (1) the Company; (2) any corporation
which is treated, under Sec-tion 414(b) of the Code, as a member of a
controlled group of corporations of which the Company is also a member; (3) any
trade or business (whether or not incorporated) which is treated, under Section
414(c) of the Code, as belonging to a group of trades or businesses under
common control, and which includes the Company; (4) any other entity which,
under Section 414(m) or 414(o) of the Code, is included, along with the
Company, in a group of employers, the employees of which are treated as
employed by a single employer; or (5) any entity which is a former employer of
any Employee and which has been
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<PAGE> 11
merged into, or the assets or business of which have been acquired by, the
Company or any other entity described in (2), (3) or (4) above.
(f) Employees Exempt From the Fair Labor Standards Act. In the
case of any Employee who is not covered by the Fair Labor Standards Act, in
lieu of being credited with Hours of Service in the amount and in the manner
described in subsections (a) through (e) above, such Employee shall be credited
with 45 Hours of Service for each week for which he would otherwise be credited
with at least one Hour of Service under subsections (a) through (e) above.
(g) Maternity or Paternity Absence. Solely for purposes of
determining whether an Employee has incurred a Break in Service by reason of a
Maternity or Paternity Absence, such Employee shall be credited, during such
absence, with the same number of Hours of Service which otherwise normally
would have been credited to such Employee but for such absence, or, if the Plan
is unable to determine such number of hours, with eight (8) Hours of Service
per day of absence. Notwithstanding the foregoing, the total number of hours
so credited by reason of any such Maternity or Paternity Absence shall not
exceed 501 hours. Hours to be credited hereunder shall be credited only in the
Plan Year in which the Maternity or Paternity Absence begins, if the Employee
would be prevented from incurring a Break in Service in such Plan Year solely
because of the operation of this subsection (g); otherwise, such Hours of
Service shall be credited in the immediately following Plan Year. For purposes
of this subsection (g), Maternity or Paternity Absence shall mean any period
during which an Employee is absent from work by reason of the Employee's
pregnancy, the birth of a child of the Employee, the placement of a child with
the Employee in connection with the Employee's adoption of such child, or
caring for such child for a period beginning immediately following such birth
or placement.
1.20. "Member" - shall mean (a) any Employee on August 1, 1987 who
was participating in the Plan on July 31, 1987 and (b) any other Employee whose
membership in the Plan commences, or resumes, on or after August 1, 1987. An
Employee who is or becomes a Member, as so defined, shall cease to be a Member,
as that term is used herein, on the date which is the later of (1) the date on
which he incurs a Termination of Service or (2) the date on which there is no
balance to his credit in his Plan Accounts.
1.21. "Mutual Fund" - shall mean any fund or portfolio maintained by
any open-end investment company registered under the Investment Company Act of
1940.
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<PAGE> 12
1.22. "Normal Retirement Age" - shall mean age 65.
1.23. "Plan" - shall mean the Pall Corporation Profit-Sharing Plan, as
set forth in this document and as the same may be amended from time to time.
1.24. "Plan Year" - shall mean the calendar year.
Notwithstanding the above, prior to August 1, 1993, the Plan Year
shall be the 12-consecutive month period commencing on each August 1 and ending
on the following July 31. In addition, there shall be a short Plan Year
commencing on August 1, 1993 and ending on December 31, 1993.
For purposes of the short Plan Year, the following special provisions
shall apply:
(a) "208 Hours of Service" shall be substituted for "500
Hours of Service" in Section 1.3, and "416 Hours of Service" shall be
substituted for "1,000 Hours of Service" in Section 1.36(a).
(b) "$83,333" shall be substituted for "$200,000" in
Sections 1.7 and 10.6(e).
(c) "$12,500" shall be substituted for "$30,000" in
Section 4.6(a)(1).
(d) "20%" shall be substituted for "15%" wherever "15%"
appears in Sections 3.1 and 3.2.
(e) An Employee who completes at least 1,000 Hours of
Service during both the period commencing on August 1, 1993 and ending
on July 31, 1994 and the period commencing on January 1, 1994 and
ending on December 31, 1994 shall be credited with at least two Years
of Service with respect to his Service during those two periods.
(f) For the short Plan Year, a Highly Compensated
Employee is any Employee who is in Service during such year, and who
either (1) is described in (a), (b), (c) or (d) in Section 1.18 for
the 12-consecutive month period commencing on August 1, 1992 and
ending on July 31, 1993 or (2) both (i) for the period commencing
August 1, 1993 and ending December 31, 1993 is an Employee described
in (a), (b), (c) or (d) of Section 1.18, determined by multiplying the
applicable dollar amounts set forth therein by 5/12 and (ii) unless he
is described in (a) of Section 1.18 for such period, belongs to the
group consisting of the 100 Employees with the highest Compensation
for such year.
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<PAGE> 13
In addition to the foregoing, for the purpose of identifying
the Highly Compensated Employees under Section 1.18 for the Plan Year
beginning January 1, 1994, the calendar year beginning January 1, 1993
shall be treated as the "immediately preceding Plan Year", and
"Compensation" for such calendar year shall be defined as under
Section 414(q)(7) of the Code.
(g) For the Plan Year beginning on January 1, 1994, a
Member who was in Service on July 31, 1993 shall be treated as having
satisfied the six consecutive month Service requirement in clause (a)
of the second sentence of Section 3.4.
(h) Any 401(k) Contributions to which the second
paragraph of Section 3.3(b) applies shall be treated as being made for
the short Plan Year.
(i) Except as provided in (a) through (h) above, the
short Plan Year shall be treated as any other Plan Year.
1.25. "Reemployment Commencement Date" - shall mean the date on which
an Employee first performs an Hour of Service upon his return to Service after
a Termination of Service.
1.26. "Rollover Account" - shall mean the separate account established
and maintained for a Member under Section 5.1 to hold Rollover Contributions
and the Earnings thereon.
1.27. "Service" - shall mean employment with the Employer or any other
entity described in Section 1.19(e)(2), (3) or (4).
1.28. "Termination of Service" - An Employee shall be treated as
having incurred a Termination of Service on the first date as of which he is no
longer in the employ of the Employer or any other entity described in Section
1.19(e)(2), (3) or (4). An Employee shall not be treated as having incurred a
Termination of Service as a result of his absence from work unless such absence
is due to his resignation, discharge, retirement or death.
1.29. "Trust" - shall mean the trust, created pursuant to a trust
agreement between the Company and the Trustee, which holds the assets of the
Plan.
1.30. "Trust Agreement" - shall mean the agreement, between the
Company and the person named as trustee therein, setting forth the provisions
of the trust associated with this Plan.
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<PAGE> 14
1.31. "Trust Fund" - shall mean the assets of the Plan held in trust,
pursuant to the Trust Agreement.
1.32. "Trustee" - shall mean the person named as trustee in the Trust
Agreement.
1.33. "Vested Portion" - shall mean the portion of a Member's Account
or Accounts in which the Member is vested, determined in accordance with the
rules set forth below.
(a) Employer Contribution Account. A Member shall become vested
in his Employer Contribution Account in accordance with the schedule below
which applies to him:
(1) For an individual who becomes a Member on or after
August 1, 1989:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
less than 5 0
5 or more 100
</TABLE>
(2) For an individual who became a Member prior to
August 1, 1989 and who earns at least one Hour of Service on or after
August 1, 1989:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
less than 2 0
2 20
3 30
4 40
5 or more 100
</TABLE>
(3) For a Member not described in (1) or (2) above:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
less than 2 0
2 20
3 30
4 40
5 50
6 60
7 70
8 80
9 90
10 or more 100
</TABLE>
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<PAGE> 15
Notwithstanding the schedule above which applies to a Member, a Member shall be
100% vested in his Employer Contribution Account if, while he is in Service, he
attains Normal Retirement Age or a higher age, dies or becomes Disabled.
(b) Other Plan Accounts. A Member shall, at all times, be 100%
vested in his 401(k) Contribution Account, his Voluntary Contribution Account
and his Rollover Account.
1.34. "Voluntary Contribution Account" - shall mean the separate
account established and maintained for a Member under Section 5.1 to hold
Voluntary Contributions and the Earnings thereon.
1.35. "Voluntary Contributions" - shall mean the contributions
described in Section 3.2.
1.36. "Years of Service" - An Employee's Years of Service shall be
determined in accordance with the following rules:
(a) General Rule. An Employee's Years of Service shall mean the
number of Plan Years in each of which the Employee has completed at least 1,000
Hours of Service.
(b) Break in Service. In determining an Employee's Years of
Service under subsection (a) as of any date after he has returned to Service
after incurring a Break in Service, his Years of Service prior to such break
shall not be taken into account if (1) he did not have any balance to his
credit in the Vested Portion of his Accounts at the time such break commenced
and (2) such break was a 5-Year Break in Service.
ARTICLE 2 - PURPOSE, ELIGIBILITY AND PARTICIPATION
2.1. Purpose. This Plan is intended to qualify as a cash or
deferred defined contribution profit sharing plan under Sections 401(a), 401(k)
and 401(m) of the Code. Pursuant to Section 401(a)(27) of the Code, the Plan
is intended to constitute a profit sharing plan under which contributions may
be made by the Employer whether or not the Employer has current or accumulated
profits.
2.2. Eligibility. An Employee shall be eligible for membership in
the Plan if:
(a) he is employed on a full-time basis, or he has
completed, or is expected to complete, at least 1,000 Hours of Service
during any 12-consecutive month period;
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<PAGE> 16
(b) he has completed at least 30 consecutive days of
Service;
(c) his principal place of employment is not Puerto
Rico; and
(d) he is not covered under a collective bargaining
agreement, unless such agreement specifically provides for his
participation in this Plan.
2.3. Commencement of Membership. An Employee shall commence
membership in the Plan on the first day of the month coincident with or next
following the day on which he first meets each of the requirements of Section
2.2.
2.4. Membership After Reemployment. An Employee who incurs a
Termination of Service, and who thereafter returns to Service, shall (a) if he
had become a Member prior to such Termination of Service, resume membership in
the Plan as of his Reemployment Commencement Date, or (b) if he is not
described in clause (a), commence membership as of the first day of the month
coincident with or next following the date on which he first meets each of the
conditions for eligibility set forth in Section 2.2 after his Reemployment
Commencement Date.
ARTICLE 3 - CONTRIBUTIONS AND ROLLOVERS
3.1. 401(k) Contributions. Subject to the limitations contained in
Article 4, a Member may elect to (1) have his Compensation for each pay period
within the Plan Year reduced by an amount equal to (i) any percentage thereof
which is not less than 1% or greater than 15%, and which is an integral
multiple of 1% or (ii) a specific dollar amount which, when aggregated with all
other amounts by which Compensation is reduced under this Section 3.1 during
such Plan Year, is not greater than 15% of his Compensation for such Plan Year,
and (2) have such amount contributed by the Employer to the Plan on his behalf.
The contributions made to the Plan on behalf of a Member under this Section 3.1
shall be referred to herein as "401(k) Contributions".
3.2. Voluntary Contributions. Subject to the limitations
contained in Article 4, a Member may elect to contribute to the Plan, by
payroll deduction, for each pay period within the Plan Year an amount equal to
(a) any percentage of his Compensation, after reduction for 401(k)
Contributions, for the pay period which is not less than 1% or greater than
10%, and which is an integral multiple of 1% or (b) a specific dollar amount
which, when aggregated with all other amounts contributed by the Member under
this Section 3.2
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<PAGE> 17
during such Plan Year, is not greater than 10% of his Compensation, after
reduction for 401(k) Contributions, for such Plan Year. However, the
percentage of Compensation the Member elects to contribute to the Plan for any
pay period under clause (a) of the preceding sentence, when aggregated with the
percentage of Compensation the Member elects to have contributed to the Plan on
his behalf for such pay period under clause (1)(i) of Section 3.1, cannot
exceed 15% of Compensation for such pay period; and the specific dollar amount
the Member elects to contribute to the Plan for any Plan Year pursuant to
clause (b) of the preceding sentence, when aggregated with his 401(k)
Contributions for such Plan Year, cannot exceed 15% of Compensation for such
Plan Year. The contributions that a Member elects to make to the Plan under
this Section shall be referred to herein as "Voluntary Contributions".
3.3. Elections. The elections that a Member may make under Sections
3.1 and 3.2, and any change in or termination of such elections, shall be made
in accordance with the following rules:
(a) Any election, and any change in or termination of
any election, shall be made in writing, on a form provided by the
Committee for such purpose, and filed with the Committee or with any
person designated by the Committee to receive such filings.
(b) A Member's initial election under Section 3.1 or 3.2
shall become effective as soon as practicable after the form
containing such election is filed. Any election, or change therein,
shall remain in effect until such election is changed or terminated as
hereinafter provided.
Notwithstanding the above, in the case of any Member who
files his initial election under Section 3.1 or 3.2 prior to July 28,
1993, such Member's initial election or elections shall apply to any
paychecks he receives during the period beginning on July 28, 1993 and
ending on July 30, 1993 with respect to any pay periods beginning on
and after August 1, 1993.
(c) A Member may, at any time, change his election so as
to increase or decrease the amount of 401(k) Contributions or
Voluntary Contributions, as applicable, to be contributed to the Plan
by him or on his behalf. Any such change in election shall become
effective as soon as practicable after the form containing such change
in election is filed.
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<PAGE> 18
(d) A Member may terminate his election under Section
3.1 or 3.2 at any time. Such termination of election shall become
effective as soon as practicable after the form containing such
termination of election is filed. A Member who terminates an election
under Section 3.1 or 3.2 may thereafter make a new election under
Section 3.1 or 3.2 at any time. Such new election shall become
effective as soon as practicable after the form containing such new
election is filed.
(e) A Member's elections under Sections 3.1 and 3.2
shall cease to be effective upon, and no contribution shall be made by
or on behalf of a Member after, the close of the pay period in which
he incurs a Termination of Service.
3.4. Employer Contributions. Subject to the limitations contained
in Article 4, for each Plan Year, the Employers shall contribute to the Plan,
in addition to the 401(k) Contributions, an amount determined below.
For each Plan Year, the Employers shall contribute to the Plan under
this Section 3.4 an amount which is equal to (a) the excess, if any, of (1)
7-1/2% of the combined "Net Earnings" for such Plan Year of all Employers over
(2) $500,000, less (b) the sum of (1) all forfeitures arising under Section
5.2(a) during such Plan Year, other than those applied to restore any
forfeitures under Section 5.2(b), (2) the expenses of administering the Plan
and Trust for such Plan Year, other than those paid out of the Trust Fund in
accordance with Section 8.9 and (3) any amounts set aside, and any payments
made, by the Employers, for such Plan Year, under the Pall Corporation
Supplementary Profit-Sharing Plan.
Notwithstanding the preceding paragraph, the Board of Directors of the
Company reserves the right with respect to any Plan Year to direct the
Employers, by action taken no later than five and one-half months after the
close of such Plan Year, to make to the Plan under this Section 3.4 (i) no
contribution, (ii) a contribution in any amount less than the amount required
to be contributed under the preceding paragraph, or (iii) a contribution in any
amount greater than the excess of 7-1/2% of the combined Net Earnings for such
Plan Year of all Employers over $500,000.
For purposes of this Section 3.4, the "Net Earnings" of an Employer
for any Plan Year shall be the net earnings and profits of such Employer for
its taxable year ending within such Plan Year, as determined by the accountants
employed by the Employer in accordance with generally accepted accounting
principles, before deducting any contributions to the Plan, any capital losses
and any taxes upon or with respect to in-
-13-
<PAGE> 19
come, but after deducting capital gains, income from investments and any
contributions to any employee benefit plan other than the Plan. Solely for the
purpose of determining the combined Net Earnings of all Employers, each
subsidiary of the Company which was incorporated in the United States, and
which is not otherwise an Employer, shall be treated as an Employer.
A Member shall be entitled to share in the allocation of the
Employers' contribution under this Section 3.4 for a Plan Year if (x) as of the
first day of such year, he had been in Service for at least six consecutive
months and had attained age 20 1/2 and (y) he is employed by any Employer on
the last day of such year or, during such year, he incurred a Termination of
Service after attaining Normal Retirement Age or by reason of death or
disability. The Employers' contribution for a Plan Year under this Section 3.4
shall be allocated to each Member entitled to share therein in the proportion
that each such Member's Compensation for such Plan Year bears to the aggregate
amount of Compensation of all such Members for such Plan Year. Contributions
made to the Plan under this Section 3.4 shall be referred to herein as
"Employer Contributions".
3.5. Time and Manner. All contributions to be made under Sections
3.1, 3.2 and 3.4 of the Plan shall be made in the form of cash payments by the
Company to the Trustee. 401(k) Contributions and Voluntary Contributions shall
be made as soon as possible after the date on which such contributions would
have been paid to the Employee but for his elections under Sections 3.1 and
3.2, but in all events within 90 days of such date. The Employer Contribution
to be made for any Plan Year shall be made no later than by the due date of the
tax return (with extensions) for the Employer's taxable year that ends during
the Plan Year to which such contribution relates.
In respect of the contributions the Company pays to the Trustee under
the preceding paragraph for each Plan Year, each other Employer shall reimburse
the Company for (1) a portion of the Employer Contribution so paid by the
Company to the Trustee for such year, based on the ratio of (i) the aggregate
Compensation for such year of the Members employed by such Employer who shared
in the allocation of such Employer Contribution to (ii) the aggregate
Compensation for such year of all Members who shared in the allocation of such
Employer Contribution, and (2) the amount of the 401(k) Contributions and
Voluntary Contributions so paid by the Company to the Trustee for such year
which are attributable to the Members employed by such Employer.
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<PAGE> 20
3.6. Rollovers. A Member, with the prior approval of the
Committee, may roll over into this Plan amounts that meet each of the following
requirements:
(a) The amount to be rolled over must represent either
(1) part or all of an "eligible rollover distribution", within the
meaning of Section 402(c)(4) of the Code, from a trust qualified under
Section 401(a) of the Code or from an employee annuity plan qualified
under Section 403(a) of the Code (such a trust or plan shall be
referred to below as a "Qualified Plan") or (2) the entire amount of a
distribution to the Member from an individual retirement account or
individual retirement annuity, as defined in Section 408(a) or Section
408(b) of the Code, provided that no amount in such account, or no
part of the value of such annuity (such an account or annuity shall be
referred to below as an "IRA"), at the time of distribution to the
Member, was attributable to any source other than a "rollover
contribution", as defined in Section 402 of the Code, from a Qualified
Plan.
(b) The amount to be rolled over must be (1) an amount
which the Member elected to have paid directly from a Qualified Plan
to this Plan in accordance with Section 401(a)(31) of the Code or (2)
an amount distributed, or deemed distributed, to the Member from a
Qualified Plan, or from an IRA, not more than 60 days prior to the
date on which such amount is transferred to this Plan, including any
such amount representing (i) any portion of the Member's account in a
Qualified Plan that was applied to offset any outstanding balance of a
loan to the Member from such plan or (ii) income taxes withheld on a
distribution to the Member from a Qualified Plan.
(c) The amount to be rolled over must not represent all
or part of (1) a distribution that is required to be made to the
Member under Section 401(a)(9), Section 408(a)(6) or Section 408(b)(3)
of the Code, or (2) an amount distributed to the Member in the
Member's capacity as a beneficiary of another individual.
(d) The amount to be rolled over may not include (1) any
part of a distribution to the Member that would not be includible in
the Member's gross income for Federal income tax purposes, even if it
were not rolled over or (2) any "accumulated deductible employee
contributions" within the meaning of Section 72(o)(5)(B) of the Code.
(e) The amount to be rolled over must consist entirely
of cash, and shall be paid to the Plan only by means of a check made
payable to, or endorsed over to, the Trustee.
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<PAGE> 21
The Committee may adopt such procedures, and may require a Member to
furnish such information or documentation, as the Committee, in its sole
discretion, deems necessary to ensure that the amount the Member requests to
roll over to this Plan will meet all the foregoing requirements.
ARTICLE 4 - LIMITATIONS ON CONTRIBUTIONS
4.1. Dollar Limit for 401(k) Contributions. For any Plan Year, the
total amount of 401(k) Contributions to be made on behalf of any Member, when
aggregated with the total amount deferred by such Member under other plans or
arrangements described in Code Section 401(k), 408(k) or 403(b) maintained by
the Employer or by any other entity described in Section 1.19(e)(2), (3) or
(4), shall not exceed $7,000, as increased by the cost-of-living adjustment, if
any, in effect for such year under regulations, rulings or notices issued under
Section 415(d) of the Code.
4.2. Nondiscrimination Test for 401(k) Contributions. For any Plan
Year, the 401(k) Contributions made on behalf of the group of Members who are
Highly Compensated Employees shall not exceed the maximum amount that may be
contributed to the Plan on their behalf for such year under either one of the
following tests:
(a) the Actual Deferral Percentage for the group of
Members who are Highly Compensated Employees may not be more than the
Actual Deferral Percentage for the group of all other Members
multiplied by 1.25; or
(b) the excess of the Actual Deferral Percentage for the
group of Members who are Highly Compensated Employees over the Actual
Deferral Percentage for the group of all other Members may not be more
than 2 percentage points, and the Actual Deferral Percentage for the
group of Members who are Highly Compensated Employees may not be more
than the Actual Deferral Percentage for the group of all other Members
multiplied by 2.
For these purposes, the term "Actual Deferral Percentage", for any
group of Members for any Plan Year, shall mean the average of the ratios,
calculated separately for each Member in such group, of (1) the 401(k)
Contributions made on behalf of such Member for such year to (2) such Member's
Compensation for such year.
In determining the Actual Deferral Percentage for any Plan Year,
401(k) Contributions in excess of the limitation in Section 4.1 made on behalf
of any Member who is not a Highly Compensated Employee shall be disregarded.
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<PAGE> 22
4.3. Nondiscrimination Test for Voluntary Contributions. For any
Plan Year, the Voluntary Contributions made by the group of Members who are
Highly Compensated Employees shall not exceed the maximum amount that may be
contributed to the Plan by them for such year under either one of the following
tests:
(a) the Contribution Percentage for the group of Members
who are Highly Compensated Employees may not be more than the
Contribution Percentage for the group of all other Members multiplied
by 1.25; or
(b) the excess of the Contribution Percentage for the
group of Members who are Highly Compensated Employees over the
Contribution Percentage for the group of all other Members may not be
more than 2 percentage points, and the Contribution Percentage for the
group of Members who are Highly Compensated Employees may not be more
than the Contribution Percentage for the group of all other Members
multiplied by 2.
For these purposes, the term "Contribution Percentage", for any group
of Members for any Plan Year, shall mean the average of the ratios, calculated
separately for each Member in such group, of (1) the Voluntary Contributions
credited to such Member's Voluntary Contribution Account during such year to
(2) such Member's Compensation for such year.
For purposes of determining the Contribution Percentage, all or a
portion of the 401(k) Contributions for the Plan Year may be treated as
Voluntary Contributions for such year provided:
(i) all 401(k) Contributions for such year satisfy the
limitation of Section 4.2, and
(ii) the 401(k) Contributions for such year, excluding
those treated as Voluntary Contributions under this Section for such
year, satisfy the limitation of Section 4.2.
4.4. Special Rules for Nondiscrimination Tests. For purposes of the
nondiscrimination tests set forth in Sections 4.2 and 4.3, the following rules
shall apply:
(a) Alternative Limitation. The alternative test set forth in
Sections 4.2(b) and 4.3(b) may be utilized only to the extent permitted under
Section 401(m)(9) of the Code and the Treasury regulations and rulings and
notices issued thereunder.
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<PAGE> 23
(b) Calculations. The Actual Deferral Percentage and the
Contribution Percentage shall be calculated to the nearest one- hundredth of
1%.
(c) Family Aggregation Requirement. For any Plan Year, in the
case of a Member who is a Highly Compensated Employee, and who is either a
5-percent owner, within the meaning of Section 416(i)(1)(B)(i) of the Code, or
one of the ten most highly compensated employees based on Compensation during
such year, such Member's Compensation and 401(k) Contributions and Voluntary
Contributions shall be aggregated with the Compensation and 401(k)
Contributions and Voluntary Contributions of the members of his family, within
the meaning of Section 414(q)(6)(B) of the Code, who are eligible to
participate in the Plan. The Compensation and 401(k) Contributions and
Voluntary Contributions of such Member and such members of his family shall, as
so aggregated, be treated as the Compensation and 401(k) Contributions and
Voluntary Contributions of a single Member who is a Highly Compensated Employee
in applying the nondiscrimination tests of Sections 4.2 and 4.3 for such Plan
Year, and shall not otherwise be taken into account in applying such tests.
(d) Plan Aggregation Requirements. Any qualified plans which
are aggregated with this Plan in any Plan Year for the purpose of satisfying
Section 401(a)(4) or 410(b) of the Code (other than solely for the purpose of
satisfying the average benefit percentage test) shall, for such Plan Year, be
aggregated with this Plan, and the elective contributions made under the 401(k)
provisions of, and any voluntary after-tax contributions made to, any such
qualified plans and this Plan shall be treated as if they had been made under a
single plan, for the purpose of applying the nondiscrimination tests of Section
4.2 and 4.3. In addition, for any Plan Year, to the extent permitted by the
Code and the applicable Treasury regulations, any other qualified plan of the
Employer or of any other entity described in Section 1.19(e)(2), (3) or (4) may
be aggregated with this Plan, and the elective contributions made under the
401(k) provisions of, and any voluntary after-tax contributions made to, such
qualified plan and this Plan may be treated as if they had been made under a
single plan, for the purpose of applying the nondiscrimination tests in
Sections 4.2 and 4.3, provided that any such qualified plan and this Plan, when
aggregated and treated as a single plan, satisfy the requirements of Sections
401(a)(4) and 410(b) of the Code.
(e) Records. The Committee shall maintain or cause to be
maintained records sufficient to demonstrate the satisfaction of the
nondiscrimination tests in Sections 4.2 and 4.3, and to show the amount of
401(k) Contributions, if
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any, used to satisfy the nondiscrimination test in Section 4.3.
4.5. Deduction Limit. The total amount of contributions made
hereunder by the Employer, considering the amount of such contributions both
with and without aggregating such contributions with the contributions made by
the Employer under each other qualified plan the Employer maintains, for any
taxable year of the Employer may not exceed the maximum amount allowable as a
deduction for the contributions made to this Plan by the Employer for such
taxable year.
4.6. Section 415 Limits.
(a) General. For any Plan Year, the total amount contributed by
or on behalf of any Member, or allocated to such Member, under the Plan, when
aggregated with all other amounts treated as "annual additions" under this Plan
under Sections 415(c)(2), 415(l)(1) and 419A(d)(2) of the Code, and the
applicable Treasury regulations, with respect to such Member for such Plan
Year, shall not exceed the lesser of (1) $30,000, or, if greater, one-quarter
of the defined benefit dollar limitation set forth in Section 415(b)(1)(A) of
the Code as in effect for the Plan Year or (2) 25% of the Participant's
Compensation for such Plan Year. In applying the preceding sentence, (i)
amounts treated as annual additions by Section 415(l)(1) and 419A(d)(2) of the
Code shall not be taken into account in determining whether the limitation set
forth in clause (2) thereof is satisfied and (ii) 401(k) Contributions shall
not be taken into account to the extent such contributions are distributed to
Members under Section 4.8(a) or (b).
(b) 415(e) Limit. In addition to the above, the amounts
contributed under the Plan by or on behalf of, or allocated under the Plan to,
any Member for any Plan Year shall not exceed the amount permissible under the
overall limitation applicable to such Member for such year under Section 415(e)
of the Code. In calculating the defined benefit plan fraction and the defined
contribution plan fraction, as defined in Section 415(e) of the Code, for the
purpose of determining the aforesaid Code Section 415(e) limitation, an amount
shall, to the extent permitted under Section 1106(i)(4) of P.L. 99-514, be
subtracted from the numerator of the defined contribution plan fraction (not
exceeding such numerator) as prescribed by the Secretary of the Treasury so
that the sum of the defined benefit plan fraction and the defined contribution
plan fraction does not exceed 1.0 for the Plan Year. In no event shall the
amount to be subtracted from the numerator of the defined contribution plan
fraction be less than the amount permitted to be so subtracted under Section
235(g)(3) of P.L. 97-248. In addition, the aforesaid Code Section 415(e)
limitation shall,
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to the extent permitted under Section 1106(i)(3) of P.L. 99-514, be calculated
by using the Member's Current Accrued Benefit. The "Current Accrued Benefit"
is a Member's accrued benefit under any qualified defined benefit plan which
is, or ever was, maintained by the Employer, determined as if the Member had
separated from service as of the close of the last limitation year of such plan
beginning before August 1, 1987, when expressed as an annual benefit within the
meaning of Section 415(b)(2) of the Code. In determining the amount of a
Member's Current Accrued Benefit, the following shall be disregarded: (1) any
change in the terms and conditions of such plan after May 5, 1986, and (2) any
cost of living adjustment occurring after May 5, 1986. In no event shall the
amount of the Current Accrued Benefit be less than the Current Accrued Benefit
as defined and determined under Section 235(g)(4) of P.L. 97-248.
If the limitation applicable to a Member under Section 415(e) of the
Code is exceeded, the Member's benefit under a qualified defined benefit plan
maintained by the Employer shall be reduced to the extent necessary to meet
such limitation, before any reduction is made with respect to the Member's
annual additions under this Plan.
(c) Plan Aggregation. In addition to the foregoing provisions,
this Section 4.6 shall be applied by treating each qualified defined
contribution plan, and each qualified defined benefit plan, maintained, or ever
maintained, by the Employer or another entity described in Section 1.19(e)(2),
(3) or (4) (modified for this purpose as required under Code Section 415(h)) as
a single qualified defined contribution plan and a single qualified defined
benefit plan.
(d) Reduction of Contributions. In the event that the amount of
the contributions which, without regard to this Section 4.6, would be made by
or on behalf of, or allocated to, a Member under the Plan in respect of any
Plan Year must be reduced by reason of the limitations of this Section 4.6,
such reductions shall be made in the following order of priority, but only to
the extent necessary: (1) the amount of the Member's Voluntary Contributions
shall be reduced, or, if already paid to the Trustee, shall (with the Trust
Fund earnings thereon) be refunded to the Member; then (2) the amount of the
Member's 401(k) Contributions shall be reduced, or, if already paid to the
Trustee, shall (with the Trust Fund earnings thereon) be refunded to the
Member; then (3) any Employer Contributions that would otherwise be allocated
to such Member in respect of such Plan Year shall, instead, be allocated to
each other Member entitled to share in such contributions (subject to the
limitations of this Section 4.6 as applied to each such Member) in the same
proportion that each such Member's Compensation for such Plan Year bears to the
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aggregate of the Compensation for such Plan Year of all such Members.
4.7. Adjustments. Notwithstanding any other provision in the Plan
to the contrary, at any time during the Plan Year, the Committee may make such
adjustments to or impose such restrictions on the amounts of contributions that
otherwise may be made to the Plan by or on behalf of, or allocated to, any
Member or group of Members during the balance of such Plan Year, as the
Committee deems necessary in order for such contributions or allocations not to
exceed any of the limitations set forth in this Article 4, or in order for the
Plan to meet any other requirement for the Plan's continued qualification under
Sections 401(a), 401(k) and 401(m) of the Code.
4.8. Corrective Distributions. If for any Plan Year the 401(k)
Contributions or Voluntary Contributions made by or on behalf of a Member for
such year exceed the limitation applicable to such contributions under Section
4.1, 4.2 or 4.3, or if for any Plan Year any amount of the 401(k) Contributions
made on behalf of a Member during such year is designated as an excess deferral
attributable to this Plan under subsection (b) below, the excess of the
contributions over the limitation, or the amount so designated, shall be
distributed to the Member in accordance with the following rules:
(a) If the aggregate amount of the 401(k) Contributions
made on behalf of a Member for any Plan Year exceeds the dollar limit
for such contributions under Section 4.1 for such year, the excess
amount so contributed, as adjusted for income or loss allocable
thereto, shall be (1) designated by the Committee as an excess amount
of 401(k) Contributions (and earnings), and (2) distributed to the
Member from his 401(k) Contribution Account after the end of such year
but by no later than April 15 next following the close of such year.
The 401(k) Contributions to be distributed under this subsection (a)
for any Plan Year shall be so distributed prior to any distribution of
401(k) Contributions under subsection (b) for such Plan Year, and
shall be reduced by the 401(k) Contributions previously distributed to
the Member under subsection (c) for such Plan Year.
(b) If the aggregate amount of the 401(k) Contributions
made on behalf of a Member under this Plan for any Plan Year, when
added to the total amount deferred by such Member in such year under
other plans or arrangements described in Section 401(k), 408(k) or
403(b) of the Code, exceeds the limit under Section 402(g) of the Code
for such year, the Member may designate a portion of
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such excess deferrals as allocable to the 401(k) Contributions made on
the Member's behalf under this Plan for such year. Such designation
shall be made by filing with the Committee a written notice that
specifies the amount so designated, and which contains a certification
by the Member that if the amount so designated is not distributed,
such amount, when added to his remaining 401(k) Contributions and the
total amount deferred under other plans or arrangements described in
Section 401(k), 408(k) or 403(b) of the Code, will exceed the limit
under Section 402(g) of the Code for the Plan Year in question.
Such written notice shall be filed with the Committee no later
than by March 1 next following the close of such Plan Year. The
amount so designated, as adjusted for income or loss allocable
thereto, shall be (1) designated by the Committee as an excess
deferral (and earnings), and (2) distributed to the Member from his
401(k) Contribution Account after the end of such year but by no later
than April 15 next following the close of such year.
The 401(k) Contributions to be distributed under this
subsection (b) for a Plan Year shall be reduced by any 401(k)
Contributions that were previously distributed to the Member under
subsection (a) or (c) for the same Plan Year. In no event shall a
distribution of 401(k) Contributions pursuant to this subsection (b)
for a Plan Year exceed the amount of the Member's 401(k) Contributions
under this Plan for such year.
(c) If for any Plan Year the aggregate amount of 401(k)
Contributions made on behalf of Members who are Highly Compensated
Employees exceeds the limit for such contributions under Section 4.2
(such excess is referred to herein as "Excess Contributions"), the
Excess Contributions, as adjusted for income or loss allocable
thereto, shall be distributed as follows. The amount of Excess
Contributions to be distributed to any Member under this subsection
(c) shall be determined by reducing the Actual Deferral Percentages of
the Members who are Highly Compensated Employees in the order of their
Actual Deferral Percentages, beginning with those Highly Compensated
Employees with the highest Actual Deferral Percentages, until the
aggregate amount of 401(k) Contributions for Members who are Highly
Compensated Employees has been reduced to the amount permissible under
Section 4.2. The Excess Contributions so determined shall be
distributed to those Highly Compensated Employees for whom a reduction
is made under the preceding sentence.
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<PAGE> 28
Distributions of Excess Contributions and the income or loss
allocable thereto shall be (1) designated by the Committee as Excess
Contributions (and earnings) and (2) distributed to the Member from
his 401(k) Contribution Account after the end of the Plan Year but no
later than by March 15 next following the close of such year. Excess
Contributions to be distributed to a Member in accordance with the
preceding sentence for any Plan Year shall be so distributed prior to
any distributions of 401(k) Contributions under subsection (a) or (b)
for such Plan Year. In no event shall a distribution of Excess
Contributions to a Member for a Plan Year exceed the amount of 401(k)
Contributions made on the Member's behalf for such year.
(d) If for any Plan Year the aggregate amount of
Voluntary Contributions, when added to the total amount of 401(k)
Contributions treated as Voluntary Contributions under Section 4.3,
made by or on behalf of Members who are Highly Compensated Employees
exceeds the limit for such contributions under Section 4.3 (such
excess is referred to herein as "Excess Aggregate Contributions"), the
Excess Aggregate Contributions, as adjusted for income or loss
allocable thereto, shall be distributed as follows. The amount of
Excess Aggregate Contributions to be distributed to any Member under
this subsection (d) shall be determined by reducing the Contribution
Percentages of the Members who are Highly Compensated Employees in the
order of their Contribution Percentages, beginning with those Highly
Compensated Employees with the highest Contribution Percentages, until
the aggregate amount of Voluntary Contributions (including 401(k)
Contributions treated as such) for Members who are Highly Compensated
Employees has been reduced to the amount permissible under Section
4.3. The Excess Aggregate Contributions so determined shall be
distributed to those Highly Compensated Employees for whom a reduction
is made under the preceding sentence.
Distributions of Excess Aggregate Contributions and the income
or loss allocable thereto shall be (1) designated by the Committee as
Excess Aggregate Contributions (and earnings) and (2) distributed to
the Member, first, from his Voluntary Contribution Account and,
second, to the extent that 401(k) Contributions were treated as
Voluntary Contributions for the Plan Year in question under Section
4.3, from his 401(k) Contribution Account after the end of the Plan
Year but no later than by March 15 next following the close of such
year. In no event shall a distribution of Excess Aggregate
Contributions to a Member for a Plan Year exceed the amount of
Voluntary Contributions made by the Member for such year.
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<PAGE> 29
(e) The amount of income or loss allocable to 401(k)
Contributions or Voluntary Contributions to be distributed to any
Member under subsection (a), (b), (c) or (d) above shall be determined
in accordance with the applicable provisions of the regulations issued
under Sections 401(k), 401(m) and 402(g) of the Code.
(f) Notwithstanding anything to the contrary in
subsections (c) or (d), the determination of the Excess Contributions
or the Excess Aggregate Contributions under subsections (c) or (d)
attributable to any Member who is a Highly Compensated Employee and
who is subject to the family aggregation rules of Section 414(q)(6) of
the Code shall be made by (1) ascertaining the single Actual Deferral
Percentage or Contribution Percentage for such Member and the members
of his family (the "Family Group"), which was determined in applying
the nondiscrimination test in Section 4.2 or Section 4.3 in accordance
with the rules set forth in Section 4.4(c), (2) reducing such single
Actual Deferral Percentage or such single Contribution Percentage in
the manner prescribed in subsection (c) or (d) as if the Family Group
was a single Highly Compensated Employee and (3) allocating the
resulting Excess Contributions or Excess Aggregate Contributions to
each member of the Family Group, including the Member in question, in
proportion to the amount of the 401(k) Contributions or Voluntary
Contributions of each such member that was taken into account, prior
to the application of this Section 4.8, for the purpose of computing
such single Actual Deferral Percentage or such single Contribution
Percentage.
(g) Any amounts required to be distributed to a Member
pursuant to subsection (a), (b), (c) or (d) above shall be so
distributed, notwithstanding any other provision in the Plan to the
contrary.
ARTICLE 5 - PLAN ACCOUNTS, ALLOCATIONS AND FORFEITURES
5.1. Plan Accounts. For each Member, the Committee shall
establish and maintain, or caused to be established and maintained, a separate
Plan Account with respect to the 401(k) Contributions made on behalf of the
Member under Section 3.1, the Voluntary Contributions made by the Member under
Section 3.2, the Employer Contributions allocated to the Member under Section
3.4 and the amounts rolled over to the Plan by the Member under Section 3.6.
Such Accounts shall be referred to herein, respectively, as the Member's
"401(k) Contribution Account", his "Voluntary Contribution Account", his
"Employer Contribution Account", and his "Rollover Account". The Committee
shall also establish
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and maintain, or cause to be established and maintained, such other Accounts as
may be necessary or desirable to comply with the requirements of the Code or to
otherwise effect the purposes of the Plan. Each such Account shall be adjusted
from time to time as follows:
(a) Such Account shall be credited, as hereinafter
provided, with the amounts contributed to the Plan by or on behalf of
the Member, allocated to the Member, or rolled over to the Plan by the
Member under Section 3.1, 3.2, 3.4 or 3.6, as the case may be, and
with any payments of principal and interest made by the Member
pursuant to Section 7.5 on any loan to him. 401(k) Contributions
shall be credited to a Member's 401(k) Contribution Account at the
time such contributions are made to the Plan, but no later than by the
final day of the Plan Year to which such contributions relate.
Voluntary Contributions, Employer Contributions and amounts rolled
over to the Plan by the Member shall be credited to a Member's
Voluntary Contribution Account, Employer Contribution Account and
Rollover Account, respectively, at the time such contributions are
made to the Plan or at the time such rolled over amounts are
transferred to or received by the Plan. Any payment on a loan under
Section 7.5, which is credited to a Member's Account as described
therein, shall be so credited to such Account as of the date on which
such payment is received by the Plan.
(b) Such Account shall be credited or charged, as the
case may be, with the Earnings attributable to the investment of such
Account under Section 6.3.
(c) Such Account shall be charged with the amount of any
distributions, withdrawals or loans made therefrom, pursuant to
Section 4.8 or Article 7. A distribution, withdrawal or loan shall be
so charged as of the date on which the amount thereof is paid to the
Member.
(d) In addition to (a), (b) and (c) above, such Account
shall be credited or charged as required by other provisions of the
Plan, in the manner and as of the date set forth therein, or, where
such manner or date is not expressly set forth, as the Committee shall
determine.
(e) Such Account shall also reflect the number of shares
of any Mutual Fund in which the balance of such Account is invested.
The number of shares to be so reflected shall include fractions of a
unit of a share, as well as whole units of shares.
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<PAGE> 31
5.2. Forfeitures.
(a) Incurrence and Application of Forfeitures. The portion of
the Member's Employer Contribution Account which is not a Vested Portion shall
be forfeited, and the amount so forfeited shall be charged to his Employer
Contribution Account, as of the close of the Plan Year in which he incurs a
Termination of Service. Any forfeiture shall be applied, first, to restore
other forfeitures under subsection (b) below, and, second, to reduce Employer
Contributions made to the Plan after the date such forfeiture arises. Prior to
such application, a forfeiture shall be held in a separate account established
and maintained solely for forfeitures under the Trust Fund; and such account
shall be invested in the Fidelity Retirement Money Market Portfolio described
in Section 6.1(e).
(b) Restoration of a Forfeiture. If any portion of a Member's
Employer Contribution Account was forfeited upon his Termination of Service,
and such Member thereafter returns to Service, any amount that was forfeited
shall be restored to his Employer Contribution Account, as of his Reemployment
Commencement Date, unless: (1) the Member failed to return to Service prior to
incurring a 5-Year Break in Service after such Termination of Service, or (2)
the Member had previously received from the Plan a distribution described in
subsection (c) below, and, as of his Reemployment Commencement Date, has failed
to repay such distribution in accordance with subsection (c) below. In the
event that the restoration of a forfeiture is prevented by reason of clause (2)
in the preceding sentence, and the Member subsequently repays the distribution
referred to in clause (2) in accordance with subsection (c) below, the amount
forfeited shall be restored to the Member's Employer Contribution Account as of
the date on which such repayment is made to the Plan. Any amount so restored
to such Account shall be invested in accordance with the Member's investment
election with respect to New Money to be credited to such Account then in
effect under Section 6.2.
Funds to restore a forfeiture to a Member's Employer Contribution
Account shall come, first, from other forfeitures as provided in subsection (a)
above, and, second, from contributions made to the Plan by the Company for such
purpose. The Company shall make such additional contributions to the Plan as
are necessary to restore any forfeitures in accordance with the preceding
sentence. If the Company makes any such contributions with respect to a Member
who is employed by an Employer other than the Company, such Employer shall
reimburse the Company for the amount of any such contributions so made. The
amount of any forfeiture to be restored to a Member hereunder shall, to the
extent required by Section 411 of the
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<PAGE> 32
Code, include earnings on the amounts that were forfeited by the Member under
subsection (a) above.
(c) Repayment of Distributions. A Member who has incurred a
Termination of Service and, in connection therewith, has received from the Plan
a distribution of the entire Vested Portion of the balance of his Plan
Accounts, and thereafter returns to Service, may repay such distribution to the
Plan. Any such repayment shall consist of the full amount of such
distribution. Further, such repayment must be made before the fifth
anniversary of the Member's Reemployment Commencement Date. A repaid
distribution shall be credited pro rata to the Member's Accounts from which
such distribution was made, shall be so credited as of the date received by the
Plan, and shall be invested in accordance with the Member's investment election
with respect to New Money to be credited to such Accounts then in effect under
Section 6.2.
ARTICLE 6 - INVESTMENTS AND EARNINGS
6.1. Investment of Accounts. The balance of each Plan Account
maintained for a Member hereunder shall be invested, as the Member shall from
time to time elect in accordance with Section 6.2, in shares of any one or more
of the Mutual Funds selected by the Committee for investment. As of August 1,
1993, the Committee has selected the following Mutual Funds for investment:
(a) Fidelity U.S. Bond Index Portfolio;
(b) Fidelity Asset Manager;
(c) Fidelity Equity-Income Fund;
(d) Fidelity Magellan Fund; and
(e) Fidelity Retirement Money Market Portfolio.
The Committee may, at any time and in its sole discretion, eliminate or add any
Mutual Fund to the above list.
Except to the extent that the Committee otherwise directs, all
dividends and other distributions payable with respect to the shares of any
Mutual Fund in which any Plan Account is invested shall be reinvested in
additional shares of such Mutual Fund; and the number of additional shares
acquired as a result of such reinvestment shall be credited to such Plan
Account.
To the fullest extent permissible under Section 404(c) of ERISA, the
Trustee, the members of the
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<PAGE> 33
Committee, and any other fiduciary of the Plan shall not be liable for any
loss, or by reason of any breach of duty, that results from any election made,
or deemed to have been made, by a Member under Section 6.2 with respect to the
investment of his Plan Account balances.
6.2. Investment Elections. Elections with respect to the
investment of a Member's Plan Accounts shall be made in accordance with the
following rules:
(a) Initial Investment Election. Each Member shall make an
initial investment election with respect to each Plan Account that is
established for him hereunder by the later of (1) the close of the last
business day immediately preceding the date on which an amount is first
credited to such Account pursuant to Section 5.1 or (2) July 31, 1993. Such
election shall be made in the manner set forth in subsection (c) below.
(b) Investment Election Changes. Subject to the limitations set
forth below, a Member may change his investment election with respect to any of
his Plan Accounts, by making a new investment election with respect to such
Account in accordance with the provisions of subsection (c) below. A Member
may so change his investment election just with respect to the existing balance
of any Plan Account ("Current Balance"); or just with respect to contributions
and repayments of principal and interest on any loan from the Plan ("New
Money") that are to be credited to any Plan Account on or after the effective
date of such change; or with respect to both the Current Balance of, and New
Money to be credited to, any Plan Account.
(c) Procedure for Making Elections. An investment election
under subsection (a) above shall be made by filing with the Committee a form
furnished by the Committee for this purpose, on which the Member shall
indicate, by percentage (which shall be an integral multiple of 1%) or dollar
amount, the portion of the Member's Plan Account balance to be invested in
shares of each Mutual Fund. The Member shall designate his investment choices,
in the manner described in the preceding sentence, separately for each of his
Plan Accounts. Any change in a Member's investment election under subsection
(b) above shall be made in the same manner as herein described in the case of
an election under subsection (a) above; provided, however, that if the
Committee so permits (and subject to such rules as the Committee may have
promulgated) any Member may use the telephone service made available by the
Trustee to communicate directly to the Trustee any change in the Member's
investment election. A Member shall be provided with a written confirmation of
any investment election made under subsection (a), or any change in investment
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<PAGE> 34
election made under subsection (b), in the manner provided in the Trust
Agreement or in any administrative services agreement between the Committee and
the Trustee.
(d) Effect of Election. An investment election made by a Member
with respect to any of his Plan Accounts under subsection (a) above shall
remain in effect until the Member changes his investment election with respect
to such Plan Account in accordance with subsection (b) above. Any investment
election change made by a Member under subsection (b) above with respect to any
Plan Account shall remain in effect until the Member again changes his
investment election with respect to such Plan Account in accordance with
subsection (b) above.
(e) Implementation. All transactions necessary to implement any
investment elections and changes therein that are made by Members pursuant to
this Section 6.2 shall be executed at such times, and in such manner, as
provided in the Trust Agreement or in any administrative services agreement
between the Committee and the Trustee.
(f) Restrictions. Notwithstanding any provision to the contrary
in subsections (a) to (e) above, between August 1, 1993 and December 31, 1993,
the following restrictions shall apply to a Member's investment elections under
this Section 6.2:
(1) Prior to attaining age 55, a Member may not invest
any of his Plan Accounts in shares of the Fidelity Retirement Money
Market Portfolio;
(2) A Member may not invest any portion of his Employer
Contribution Account in shares of the Fidelity Equity-Income Fund or
the Fidelity Magellan Fund;
(3) A Member may not invest the portion of his Employer
Contribution Account which is not a Vested Portion in shares of the
Fidelity U.S. Bond Index Portfolio; and
(4) Before a Member attains age 55, the portion of the
Member's Employer Contribution Account which is not a Vested Portion
shall be invested in shares of the Fidelity Asset Manager fund, and
such portion of such Account shall not be subject to investment
direction by the Member.
The above restrictions shall not apply after December 31, 1993.
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On and after January 1, 1994, the following restriction shall apply to
a Member's investment elections under this Section 6.2: A Member may not
invest any portion of his Employer Contribution Account in shares of the
Fidelity Magellan Fund.
The Committee may, at any time and in its sole discretion, eliminate
or modify any of the foregoing restrictions, or impose additional restrictions
on Members' investment elections. To the extent that any such restriction
ceases to apply with respect to the Current Balance of, or the New Money to be
credited to, any Plan Account of a Member, the Member may elect to invest all
or any portion of such Current Balance, or of such New Money, of such Account
in shares of any Mutual Fund listed in Section 6.1, subject to any such
restrictions which remain, by making a change in investment election under
subsection (b) above.
6.3. Determination of Earnings. The Earnings attributable to the
investment of any Plan Account for any period shall mean the amount (positive
or negative) by which (a) the aggregate value, as of the close of the last
business day of such period, of all shares of Mutual Funds in which such
Account is then invested, plus the unpaid principal amount of any loan made to
the Member from such Account that is outstanding at the close of such day, and
any cash amount standing to the Member's credit in such Account as of the close
of such day, as reduced by (b) the amount of all contributions, loan repayments
and amounts rolled over to the Plan, that were credited to such Account during
the period, and as increased by (c) the amount of all distributions,
withdrawals and loans charged to such Account during the period, exceeds, or is
less than, (d) the aggregate value, as of the close of the last business day
immediately preceding the start of such period, of all shares of Mutual Funds
in which such Account was then invested, plus the unpaid principal amount of
any loan made to the Member from such Account that was outstanding at the close
of such day, and any cash amount standing to the Member's credit in such
Account as of the close of such day.
6.4. Voting Rights. In accordance with the applicable rules set
forth in the Trust Agreement, each Member shall have the right to direct the
Trustee as to how to vote the shares of any Mutual Fund credited to his Plan
Accounts, and the right to direct the Trustee as to how to exercise all other
rights pertaining to such shares. A Member shall be treated as a "named
fiduciary", within the meaning of Section 402(a)(2) of ERISA, for the purpose
of giving such directions to the Trustee.
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ARTICLE 7 - DISTRIBUTIONS, WITHDRAWALS AND LOANS
7.1. Distributions. Distributions shall be made in accordance
with the following rules:
(a) Termination of Service After Age 55 or Due to Disability.
In the case of a Member who incurs a Termination of Service, for any reason
other than death, after he has attained age 55, or who incurs a Termination of
Service due to Disability prior to attaining age 55, the Vested Portion of the
balance of the Member's Plan Accounts shall be distributed to him, in the form
of a single lump sum payment. The distribution shall be made as soon as
practicable after the Member's Termination of Service. The amount of the
distribution shall be the Vested Portion of the balance of the Member's Plan
Accounts determined as of the close of the last business day immediately
preceding the time such distribution is made.
(b) Termination of Service Prior to Age 55. In the case of a
Member who incurs a Termination of Service, for any reason other than Death or
Disability, before he has attained age 55, the distribution of his Plan Account
balances shall be made as follows:
(1) 401(k) Contribution Account, Voluntary Contribution
Account and Rollover Account. The balances of the Member's 401(k)
Contribution Account, Voluntary Contribution Account and Rollover
Account shall be distributed to the Member, in the form of a single
lump sum payment, as soon as practicable after such Member's
Termination of Service. However, if, under subsection (b)(2) below,
the Member has an Excess Portion in his Employer Contribution Account,
the Member may elect in writing, within 60 days after the date of his
Termination of Service, to have the balances of his 401(k)
Contribution Account, Voluntary Contribution Account and Rollover
Account remain invested in the Trust Fund. A Member who so elects
may, at any time thereafter, elect to receive a distribution, in the
form of a single lump sum payment, of the balances of such Accounts,
by delivering a written election to such effect to the Committee, on
which he specifies the date on which such distribution is to be made;
but, in any event, the balances of such Accounts shall be distributed
to the Member, in the form of a single lump sum payment, no later than
by the date on which the Excess Portion of his Employer Contribution
Account is distributed to him under subsection (b)(2) below.
(2) Employer Contribution Account. The Vested Portion
of the balance of the Member's Employer Contribu-
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tion Account, up to the greater of (i) $37,500 or (ii) one-half of the
Vested Portion of such balance, shall be distributed to the Member, in
the form of a single lump sum payment, as soon as practicable after
his Termination of Service. The portion of the Vested Portion of the
balance of the Member's Employer Contribution Account that is not
immediately distributed due to the restriction in clause (i) or (ii)
of the preceding sentence shall remain invested in the Trust Fund, and
shall be referred to herein as the "Excess Portion". For each Plan
Year beginning after December 31, 1993, the $37,500 amount referred to
above shall be adjusted, as of the first day of each such year, for
cost-of-living increases by the same percentage by which the Internal
Revenue Service has increased the limitation under Section 402(g) of
the Code, effective as of such day, pursuant to Section 415(d) of the
Code.
After a Member who has an Excess Portion in his Employer
Contribution Account invested in the Trust Fund attains age 55, he
may, at any time, elect to receive a distribution, in the form of
single lump sum payment, of such Excess Portion, by delivering a
written election to such effect to the Committee, on which he
specifies the date on which such distribution is to be made; but, in
any event, the Member's Excess Portion shall be distributed to him, in
the form of a single lump sum payment, when he attains age 65.
Notwithstanding the above, in the case of a Member who returns
to Service with the Employer after incurring a Termination of Service,
the foregoing provisions of this subsection (b)(2) shall cease to
apply to the Member's Excess Portion, and such Excess Portion shall be
distributed to the Member, along with any additional balances in his
Plan Accounts, in accordance with the provisions of this Section 7.1
after he again incurs a Termination of Service.
(3) Valuation and Investment. For the purposes of this
subsection (b), the balance of the Member's 401(k) Contribution
Account, Voluntary Contribution Account, Rollover Account or Employer
Contribution Account (including the Vested Portion of the balance of
the Employer Contribution Account or the amount of any Excess Portion
of the Employer Contribution Account) shall be determined as of the
close of the last business day immediately preceding the time the
distribution in question is made. Account balances which remain
invested in the Trust Fund under subsection (b)(1) above, and the
Excess Portion which remains invested in the Trust Fund under
subsection (b)(2) above, shall, while so invested,
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be invested by the Member as provided in Sections 6.1 and 6.2, and
shall be credited or charged with Earnings, as provided in Section
5.1.
(c) Corporate Events. Notwithstanding subsection (b) above, if
a Member is affected by an event described in Section 401(k)(10)(A)(ii) or
(iii) of the Code, then, upon such Member's written request, the entire Vested
Portion of the balance of his Plan Accounts (including any Excess Portion
described in subsection (b) above), determined as under the first sentence of
subsection (b)(3) above, shall be distributed to the Member in a single lump
sum payment.
(d) Special Rules.
(1) General. Notwithstanding any other provision of
subsection (a), (b) or (c) above to the contrary, payment of the
Member's Plan Account balances shall be made in accordance with the
provisions of this subsection (d).
(2) Member's Consent. No distribution to the Member
with respect to any of his Plan Accounts shall be made prior to his
attaining Normal Retirement Age unless either (i) the Vested Portion
of the balance of the Member's Plan Accounts at the close of the last
business day immediately preceding the time the distribution is made
does not exceed $3,500 or (ii) the Member consents, in writing, within
the 90-day period ending on the date of distribution and after receipt
of the explanation described in the paragraph below, to the immediate
payment of such distribution.
For purposes of clause (ii) of the preceding paragraph, the
Committee shall furnish the Member with a written explanation of the
Member's right to defer his distribution until he has attained age 65
and the effect of such deferral. Such explanation shall be furnished
no less than 30 days (or such shorter period as may be permitted by
Treasury regulations) and no more than 90 days before the distribution
is made to the Member.
If an immediate distribution with respect to any of the
Member's Plan Accounts cannot be made to the Member by reason of his
failure to consent to such distribution, distribution with respect to
such Account shall be made as soon as practicable after the earliest
to occur of the following: the date on which the Member attains age
65, the date of the Member's death, or the date on which the Committee
receives written notice from the Member requesting, and consenting to,
an immediate distribution from such Account. Any distribution made
pursuant to the preceding sentence shall be made in the form of a
single
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<PAGE> 39
lump sum payment, and the amount of such distribution shall be the
Vested Portion of the balance of such Account, determined as of the
close of the last business day immediately preceding the time such
distribution is made; provided, however, that in the case of a Member
who has not attained age 55 and who is alive and not Disabled, any
such distribution from such Member's Employer Contribution Account
cannot exceed the greater of (A) $37,500 (adjusted as provided in
subsection (b)(2) above) or (B) one-half of the Vested Portion of the
balance of such Account, determined as of the close of such business
day, and the portion, if any, of the Vested Portion of the Member's
Employer Contribution Account that is not distributed due to the
foregoing restriction shall thereafter be treated as the "Excess
Portion" under subsection (b)(2) above. Any request for and consent
to a distribution made by a Member under the second preceding sentence
must apply to the entire Vested Portion of the balance of all of his
Plan Accounts, or to so much of the Vested Portion of such balance as
may be distributed under the preceding sentence.
(3) Distributions after Termination of Service.
Distribution to the Member with respect to his Plan Account balances
shall be made no later than 60 days after the close of the Plan Year
in which occurs the latest of the date on which the Member attains age
65, the 10th anniversary of the date as of which the Member commenced
participation in the Plan, or the date of the Member's Termination of
Service.
(4) Age 70 1/2 Distributions. The distribution of a
Member's Plan Account balances shall be made or commence not later
than:
(i) in the case of a Member who is a 5-percent
owner, as defined under Section 416(i) of the Code and the
Treasury regulations thereunder, the April 1st following the
calendar year in which he attains age 70 1/2;
(ii) in the case of a Member who is not a
5-percent owner, as so defined in (i), and who attains age 70
1/2 prior to January 1, 1988, the April 1st following the
later of (A) the calendar year in which he attains age 70 1/2,
or (B) the calendar year ending December 31, 1990; or
(iii) in the case of a Member not described in (i)
or (ii), the later of (A) the April 1st following the calendar
year in which he attains age 70 1/2 or (B) April 1, 1990.
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<PAGE> 40
Clause (iii)(B) above shall not apply to a Member who both
attains age 70 1/2 in 1988 and incurs a Termination of Service in
1988. The date by which the distribution of a Member's Account
balances must be made or commence under (i), (ii) or (iii) above, as
applicable, shall be referred to herein as the Member's "Required
Commencement Date".
A Member who attains age 70 1/2 may elect to have his Account
balances distributed pursuant to one of the following options: (I) the
balance of his Plan Accounts shall be distributed to him annually in a
single lump sum payment or (II) his Account balances shall be paid to
him in 10 annual installments. The election must be made no later
than by the June 30 of the calendar year preceding the calendar year
in which the Member's Required Commencement Date falls, or by such
later date permitted by the Committee. If the Member fails to make an
election by such date, the Member's Account balances shall be
distributed under option (I).
If the Member's Account balances are to be distributed under
option (I), the initial lump sum payment shall be made no earlier than
by the November 1 of the calendar year preceding the calendar year in
which the Member's Required Commencement Date falls and no later than
by the Member's Required Commencement Date, and the amount of such
payment shall be determined at the close of the last business day
immediately preceding the time the payment is made. Thereafter,
pursuant to option (I), a lump sum payment shall be made once each
calendar year, beginning with the calendar year in which the Member's
Required Commencement Date falls, on or after August 1 of the year.
The amount of each such payment shall be determined at the close of
the last business day immediately preceding the time the payment is
made.
If the Member's Account balances are to be distributed under
option (II), the initial installment payment shall be made no earlier
than by the November 1 of the calendar year preceding the calendar
year in which the Member's Required Commencement Date falls and no
later than by the Member's Required Commencement Date, and with
respect to the remaining installment payments, one installment payment
shall be made each calendar year, beginning with the calendar year in
which the Member's Required Commencement Date falls, on or after
August 1 of the year. The amount of the initial installment payment
shall be equal to the balance of the Member's Plan Accounts,
determined at the close of the last business day immediately preceding
the time the payment is made, divided by 10, and the amount of each
other installment
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<PAGE> 41
payment shall be equal to the balance of the Member's Plan Accounts,
determined at the close of the last business day immediately preceding
the time the payment is made, divided by the excess of (x) 10 over (y)
the number of installment payments previously made. Any amounts
credited to the Member's Plan Accounts after the date on which the
10th installment payment is made shall be distributed in one lump sum
payment for each calendar year, beginning with the calendar year
following the calendar year in which the 10th installment is made, on
or after the August 1 of such year.
Notwithstanding any provision in the Plan to the contrary, the
amount of any payment made pursuant to this subsection (d)(4) shall be
increased to the extent necessary to satisfy the requirements of Code
Section 401(a)(9), including the incidental death benefit requirements
of Code Section 401(a)(9)(G), and the regulations, rulings or notices
issued thereunder.
(e) The Member's Death. In the case of a Member who dies and,
immediately following his death, has a balance to his credit in the Vested
Portion of his Plan Accounts, such balance shall be distributed to his
Beneficiary, in a single lump sum payment, as soon as practicable after his
death. For this purpose, such balance shall be determined as of the close of
the last business day immediately preceding the time such distribution is made.
In all events, such distribution shall be made not later than by the final day
of the Plan Year next following the Plan Year in which the Member died.
(f) Cash Payments. All distributions under this Section 7.1
shall be made in cash.
7.2. Hardship Withdrawals. A Member who is in Service, and who
has not attained age 59 1/2, may make a hardship withdrawal from his 401(k)
Contribution Account subject to the following conditions:
(a) The withdrawal must be for:
(1) expenses for "medical care", as defined in
Section 213(d) of the Code, incurred by the Member, the
Member's spouse or any "dependent" of the Member, as defined in
Section 152 of the Code;
(2) costs directly related to the purchase of the
Member's principal residence (excluding mortgage payments);
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<PAGE> 42
(3) payments necessary to prevent the eviction of
the Member from, or the foreclosure of the mortgage on, his
principal residence; or
(4) payment of tuition and related educational
fees for the next 12 months of post-secondary education for
the Member, or for the Member's spouse, children or dependents
(as defined in (1) above).
In addition to the above, the Committee may, in its sole discretion,
permit a Member to make a withdrawal in any circumstance which the
Committee determines to be an "immediate and heavy financial need",
within the meaning of Section 1.401(k)-1(d)(2)(iii) of the Treasury
regulations.
(b) The amount withdrawn may not exceed the lesser of
(1) the amount of the Member's immediate and heavy financial need,
determined in accordance with Section 1.401(k)-1(d)(2)(iv)(B)(1) of
the Treasury regulations, attributable to the matter for which the
hardship withdrawal is requested or (2) the aggregate amount of 401(k)
Contributions that have been contributed to the Plan on the Member's
behalf as of the day of the withdrawal, less the aggregate amount of
401(k) Contributions that were previously withdrawn by the Member
under this Section 7.2.
(c) The Member must have obtained all distributions,
other than hardship distributions, and all nontaxable loans currently
available under this Plan and all other plans maintained by the
Employer or any other entity described in Section 1.19(e)(2), (3) or
(4), to the extent obtaining such distributions or loans is required
under Section 401(k) of the Code and the regulations, rulings or
notices issued thereunder.
(d) Notwithstanding any other provision in Article 3 to
the contrary, no 401(k) Contributions or Voluntary Contributions may
be made to the Plan, and no elective contributions or employee
contributions may be made to any other plan (qualified or
nonqualified) of deferred compensation maintained by the Employer or
any other entity described in Section 1.19(e)(2), (3) or (4), by or on
behalf of the Member for a period of 12 months following the day of
the Member's receipt of a hardship withdrawal hereunder.
(e) Notwithstanding the provisions of Section 4.1, the
maximum amount of 401(k) Contributions that may be made to the Plan on
the Member's behalf for the Plan Year next following the Plan Year in
which the Member receives a hardship withdrawal shall not exceed the
dollar limit
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applicable to 401(k) Contributions under Section 402(g) of the Code
for such next following year, less the amount of the 401(k)
Contributions made on the Member's behalf for the Plan Year in which
such hardship withdrawal is received.
(f) A Member who wishes to make a withdrawal hereunder
shall file a written request with the Committee setting forth the
amount he wishes to withdraw. The Member's request shall include such
information as to the amount needed by the Member, the reason for the
withdrawal and the Member's financial need for such withdrawal as
required to enable the Committee to make a determination as to whether
or not the conditions set forth herein for a hardship withdrawal will
be met in the Member's case. However, if the Committee so permits,
and subject to such rules and guidelines as the Committee may have
promulgated, a Member may use the telephone service made available by
the Trustee to communicate the foregoing information directly to the
Trustee in request for a withdrawal. A Member requesting a withdrawal
shall complete such forms as are prescribed by the Committee and/or
the Trustee in support of his request.
A withdrawal cannot be made from the Member's 401(k)
Contribution Account to the extent there is an unpaid amount
outstanding on any loan to the Member from such Account. Amounts
withdrawn from the Member's 401(k) Contribution Account shall be
deemed to have been withdrawn, pro rata, from each Mutual Fund in
which such Account was invested at the time of the withdrawal. Any
withdrawal hereunder shall be paid in the form of a lump sum cash
payment.
7.3. In-Service Withdrawals. A Member who is in Service shall be
permitted to make withdrawals from his Plan Accounts as follows:
(a) Voluntary Contribution and Rollover Account. A Member may,
at any time, make a withdrawal of all or any portion of the balance of his
Voluntary Contribution Account or Rollover Account.
(b) Attainment of Age 59 1/2. A Member who has attained age 59
1/2 may, at any time and in addition to the withdrawals permitted under
subsection(a) above, make a withdrawal of all or any portion of the balance of
his 401(k) Contribution Account.
(c) Rules of Application. Withdrawals made pursuant to this
Section 7.3 shall be made in accordance with the following rules. A Member who
wishes to make a withdrawal
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hereunder shall file a written request with the Committee, setting forth the
amount he wishes to withdraw and specifying the Account or Accounts from which
such withdrawal is to be made. However, if the Committee so permits, and
subject to such rules and guidelines as the Committee may have promulgated, a
Member may use the telephone service made available by the Trustee to
communicate the foregoing information directly to the Trustee in request for a
withdrawal. A Member requesting a withdrawal shall complete such forms as are
prescribed by the Committee and/or the Trustee in support of his request.
A withdrawal cannot be made from an Account to the extent there is an
unpaid amount outstanding on any loan to the Member from such Account. Amounts
withdrawn from any Account shall be deemed to have been withdrawn, pro rata,
from each Mutual Fund in which such Account was invested at the time of the
withdrawal. For the purpose of this Section 7.3, the balance of any Account
shall be determined as of the close of the last business day immediately
preceding the time the withdrawal is made. Any withdrawal hereunder shall be
made in the form of a lump sum cash payment.
7.4. Direct Rollovers. This Section 7.4 applies to any
distribution made under Section 7.1, 7.2 or 7.3 on or after January 1, 1993, to
the extent that such distribution is an "Eligible Rollover Distribution".
Notwithstanding any provision of the Plan to the contrary, the "Payee" of any
Eligible Rollover Distribution made under Section 7.1, 7.2 or 7.3 may elect, at
the time and in the manner prescribed by the Committee, to have all or any
portion of such distribution paid as a "Direct Rollover" to an "Eligible
Retirement Plan" specified by the Payee.
For the purpose of this Section 7.4, the following definitions shall
apply. An "Eligible Rollover Distribution" is defined as under Section
402(c)(4) of the Code and the applicable Treasury regulations. An "Eligible
Retirement Plan" is an individual retirement account described in Section
408(a) of the Code, an individual retirement annuity described in Section
408(b) of the Code, a qualified annuity plan described in Section 403(a) of the
Code, or a qualified trust described in Section 401(a) of the Code, that will
accept a Direct Rollover of the Payee's distribution. However, if the Payee is
the surviving spouse of a Member, only an individual retirement account or
individual retirement annuity described above may be an Eligible Retirement
Plan. A "Payee" is any person who is entitled to receive a distribution from
the Plan, and who is a Member, the surviving spouse of a Member, or the spouse
or former spouse of a Member who is entitled to receive the distribution as the
alternate payee under a "qualified domestic relations order", as defined in
Section
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414(p) of the Code. A "Direct Rollover" is a direct payment of a distribution
by the Plan to the Eligible Retirement Plan specified by the Payee, made in
accordance with Section 401(a)(31) of the Code and the Treasury regulations,
and the rulings and notices issued by the Internal Revenue Service, thereunder,
and made in such manner as prescribed by the Committee.
7.5. Loans. The Committee shall establish and administer a loan
program for Members. Loans shall be made to a Member by the Trustee pursuant
to said program in accordance with the following rules:
(a) Generally, loans under the Plan shall: (1) be
available to all Members on a reasonably equivalent basis, (2) not be
made available to Highly Compensated Employees in an amount greater
than the amount made available to other Employees, (3) be made in
accordance with the specific provisions herein, (4) bear a reasonable
rate of interest, and (5) be adequately secured.
(b) A loan may be made to a Member only while such
Member is in Service. A loan may be made only from a Member's 401(k)
Contribution Account, Rollover Account or Employer Contribution
Account. A loan may not be taken from an Account while there is any
outstanding balance on a loan previously taken from that Account. A
loan may be made from a Member's 401(k) Contribution Account or
Rollover Account for any purpose. A loan may be made from a Member's
Employer Contribution Account to pay one or more of the following:
(1) expenses for "medical care", as defined in
Section 213(d) of the Code, incurred by the Member, the
Member's spouse or any "dependent" of the Member, as defined
in Section 152 of the Code;
(2) costs directly related to the purchase or
repair of the Member's principal residence (excluding mortgage
payments);
(3) payments necessary to prevent the eviction of
the Member from, or the foreclosure of the Mortgage on, his
principal residence;
(4) costs directly related to the purchase or
repair of any vehicle needed by the Member in connection with
his employment by the Employer;
(5) expenses for a funeral of any member of the
Member's family;
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(6) unpaid income or real estate taxes, legal
fees, or liabilities associated with the Member's divorce; or
(7) payment of tuition and related educational
fees for the next 12 months of post-secondary education for
the Member, or for the Member's spouse, children or dependents
(as defined in (1) above).
In addition to the above, the Committee may, in its sole discretion,
permit a Member to take a loan from his Employer Contribution Account
in any circumstance which the Committee determines to be a hardship.
The amount of any loan to a Member from an Account shall be
withdrawn, pro-rata, from each Mutual Fund in which the balance of
such Account is invested at the time of the loan. The Account from
which the loan is made shall be charged with such fees with respect to
the loan as the Trustee and the Committee shall agree from time to
time.
(c) A Member shall request a loan by filing a written
request with the Committee, in advance of the loan, setting forth the
amount and term of the loan desired, the Account from which the loan
is to be made, and, if the loan is to be made from the Member's
Employer Contribution Account, the purpose for which the loan is
requested. However, if the Committee so permits, and subject to such
rules and guidelines as the Committee may have promulgated, a Member
may use the telephone service made available by the Trustee to
communicate the foregoing information directly to the Trustee in
application for a loan. A Member requesting a loan shall complete
such forms and documents as are prescribed by the Committee and/or the
Trustee to obtain the loan.
(d) Each loan must be for a minimum amount of at least
$1,000. The amount of any loan, when added to the outstanding balance
of all other Plan loans to the Member, shall not exceed the least of:
(1) $50,000, reduced by the excess (if any) of
(i) the highest outstanding balance of Plan loans to the
Member during the one year period ending the day before the
loan is to be made over (ii) the outstanding balance of Plan
loans to the Member on the day the loan is made;
(2) one-half of the Vested Portion of the balance
of the Member's Plan Accounts; or
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(3) either (i) in the case of a loan to be made
from the Member's Employer Contribution Account, one-half of
the Vested Portion of the balance of such Account, or (ii) in
any other case, the Vested Portion of the balance of the
Account from which the loan is to be made.
(e) For the purpose of this Section 7.5, the Vested
Portion of the balance of the Member's Plan Accounts, individually and
in the aggregate, shall be determined as of the close of the last
business day immediately preceding the time the loan is made.
(f) The loan shall be evidenced by a Promissory Note in
such form and containing such terms and conditions as are herein
required and as the Committee otherwise determines.
(g) Each loan shall provide for repayment of principal
and interest in level monthly installments over its term. Repayments
shall commence with the month following the month in which the loan is
made. The monthly installments of Members shall be deducted
proportionately from each of their paychecks from the Employer for the
month and remitted by the Employer to the Trustee, or shall be made in
such other manner as prescribed by the Committee. Repayments shall be
suspended, for up to one year, for periods during which the Member is
taking an unpaid leave of absence from the Employer due to temporary
disability.
(h) The loan shall be for a term to be selected by the
Member with the approval of the Committee. The term for a loan from
the Member's Employer Contribution Account shall not exceed three
years. The term for a loan from the Member's 401(k) Contribution
Account or Rollover Account shall not exceed five years, or, if the
proceeds of such loan are to be used to acquire any dwelling unit
which, within a reasonable time, is to be used as the Member's
principal residence, the term of such loan shall not exceed 15 years.
Notwithstanding the above, the loan shall provide that all unpaid
amounts of principal and interest shall become immediately due and
payable one month after the Member's Termination of Service.
(i) The interest rate charged on any loan from the Plan
shall represent a prevailing interest rate charged on similar personal
loans granted under like circumstances by persons in the business of
lending money, as determined under rules of uniform application issued
by the Committee from time to time.
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(j) The amount of the outstanding balance of any loan
shall, itself, be deemed to be an investment of the Member's Account
from which the loan was made. No Earnings shall be credited or
charged to such Account under Section 6.3 with respect to the amount
of the outstanding balance of any Plan loan. Repayments on the loan
shall be credited to such Account, and shall be invested in accordance
with the Member's investment election with respect to New Money to be
credited to such Account then in effect under Section 6.2.
(k) The loan shall be secured by the portion of the
Member's Account deemed to be invested in the outstanding balance of
the loan. As a condition of any loan to a Member hereunder, the
Member shall agree in writing that in the event of a default by the
Member on such loan, to the extent that such Account is being used as
a security for the loan, such Account shall be reduced as an offset
against the Member's obligation to repay any amount outstanding on
such loan; provided, however, that no such reduction of the Member's
401(k) Contribution Account may be made until the earliest of the
Member's attainment of age 59 1/2, his becoming Disabled or his
Termination of Service.
(l) If any portion of the loan remains outstanding at
the time the Account from which the loan was made is to be distributed
under Section 7.1, to the extent such Account is being used as
security for the loan, the amount then distributable under Section 7.1
from such Account shall be reduced to offset the outstanding loan
balance.
(m) The failure to make any payment under the loan when
due shall constitute a default on the loan. However, the Committee
may, in its sole discretion, grant any Member who has failed to make
any payment on a loan by its due date a grace period, not exceeding 30
days after such due date, during which the Member may make such
payment and avoid a default on the loan. In the event of a default,
the balance of the Member's Account from which the loan was made, to
the extent such Account is being used as security for the loan, shall
be reduced as an offset against the Member's obligations under the
loan as provided in subsection (k). In addition, the Committee shall
take any commercially reasonable action it deems necessary or
desirable to satisfy any remaining obligations under the loan.
(n) Each loan hereunder shall be subject to such other
terms and conditions as the Committee may require
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under rules of uniform application issued by the Committee from time
to time.
ARTICLE 8 - PLAN ADMINISTRATION
8.1. Responsibility for Administering the Plan. Authority to control
and manage the operation and administration of the Plan shall rest exclusively
with the Committee, except as to those responsibilities and powers reserved or
granted to the Trustee under Section 8.5, and to the Company's Board of
Directors under Section 8.6.
8.2. Responsibilities of the Committee. The Committee shall be a
"named fiduciary" of the Plan within the meaning of Section 402(a) of ERISA,
the "administrator" of the Plan within the meaning of Section 3(16)(A) of
ERISA, and the "plan administrator" within the meaning of Section 414(g) of the
Code. The Committee shall have the following responsibilities with respect to
the administration of the Plan:
(a) to furnish Members (and other individuals entitled
to receive same) with such reports, notifications, documents,
statements, information and explanations with respect to the Plan as
may be required under the provisions hereof and by the Code and ERISA;
(b) to file with the appropriate governmental agencies
all reports with respect to the Plan required by the Code, ERISA or
any other applicable statute;
(c) to engage an independent certified public accountant
to perform such functions with respect to the Plan as may be required
of the Committee by ERISA;
(d) to direct the Trustee to pay out of the Trust Fund
all amounts which are payable hereunder to Members or their surviving
spouses or other beneficiaries, any contributions to be returned to
the Employer under Section 11.1 and any taxes (including interest and
penalties) that may be levied or assessed on the Trust's assets or the
income thereof;
(e) to interpret the Plan, to decide all questions that
may arise as to the construction or application of any of its
provisions and, in accordance with the claims procedure set forth in
Section 8.7, to make all final determinations as to the rights of
Members or their surviving spouses or other beneficiaries to benefits
under the Plan. Any determination made by the Committee as to the
interpretation, construction or application of the Plan, or as to the
rights of any Member or any other
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person to benefits under the Plan, shall be conclusive and binding on
all parties;
(f) to promulgate such rules and regulations, and
prescribe such forms and manuals, as it shall deem appropriate for the
efficient administration of the Plan, and to maintain all data,
records and documents with respect to the Plan that may be necessary
for its operation and administration or that may be required to be
maintained by law;
(g) to employ suitable agents and legal counsel (who may
be the same as legal counsel for the Employer) to advise or assist the
Committee with respect to any of its duties hereunder;
(h) to establish and carry out a funding policy and
method for the Plan consistent with the objectives of the Plan and
with the requirements of ERISA, and to communicate such funding policy
and method to the Trustee; and
(i) to perform such other duties and responsibilities as
are specifically assigned to it hereunder or under the Trust
Agreement, or as may be necessary for the Plan to be operated and
administered in accordance with the requirements of the Code and
ERISA.
8.3. Duties and Powers of the Committee. In carrying out its
responsibilities under Section 8.2, the Committee shall comply with the
standards of conduct set forth in subsection (a) and shall have the powers set
forth in subsection (b).
(a) Standards of Conduct. The Committee shall discharge its
duties under the Plan solely in the interest of the Members and their surviving
spouses or other beneficiaries (subject, however, to the provisions of Section
11.1); and
(1) for the exclusive purpose of providing benefits to
Members and their surviving spouses or other beneficiaries and
defraying the reasonable expenses of administering the Plan;
(2) with the skill, care, prudence, and diligence under
the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims;
(3) in accordance with the documents and instruments
governing the Plan insofar as such documents and
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instruments are consistent with the provisions of ERISA; and
(4) in accordance with such other applicable standards
as may be prescribed by ERISA for Plan fiduciaries.
In addition, the Committee shall maintain a written record of all
actions taken by it and determinations made by it in carrying out its
responsibilities under the Plan, and shall prepare and submit to the Company's
Board of Directors such written reports relating to its responsibilities under
the Plan as the Board may request of it from time to time. Any action to be
taken by the Committee hereunder shall be taken upon the affirmative vote of at
least a majority of all persons serving on the Committee, except as otherwise
permitted under subsection (b)(1). Any direction to be given by the Committee
hereunder in effecting any action may be given by any person serving on the
Committee, unless the duty to give such direction with respect to such action
has been allocated to a specific person or persons serving on the Committee
under subsection (b)(1).
(b) Powers. The Committee shall have the following powers:
(1) The persons serving on the Committee may allocate
specific duties and responsibilities among themselves. Any such
allocation shall be made pursuant to a written instrument, signed by
all such persons, and setting forth (i) the duties or responsibilities
so allocated, (ii) the person or persons to whom such duties or
responsibilities are allocated, and (iii) the period of time for which
such allocation is to be effective. If any duty or responsibility is
so allocated, a person to whom such duty or responsibility has not
been allocated shall not be liable for any act or omission of the
person or persons to whom such duty or responsibility has been
allocated, except as may otherwise be provided under Section 405(b)(2)
of ERISA;
(2) The Committee may designate persons other than
persons serving on the Committee to carry out any fiduciary
responsibility, other than a "trustee responsibility" within the
meaning of Section 405(c)(3) of ERISA. Any such designation shall be
made pursuant to a written instrument setting forth (i) the duties or
responsibilities so delegated, (ii) the person or persons to whom such
duties or responsibilities are delegated, and (iii) the period of time
for which such delegation is to be effective. If any fiduciary
responsibility is so delegated, the Committee shall not be liable for
any act or
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omission of the person or persons designated by it to carry out such
responsibility, except as otherwise provided under Section 405(c)(2)
of ERISA. Any person to whom fiduciary responsibilities are so
delegated shall perform such responsibilities in accordance with the
standards of conduct set forth in subsection (a) of this Section;
(3) The Committee, and any person to whom fiduciary
responsibilities are delegated by it under subsection (b)(2) above,
may employ attorneys, accountants, actuaries, and other consultants or
advisors to render advice to or otherwise to assist them in carrying
out their responsibilities under the Plan; and
(4) The Committee shall have all other powers necessary
to enable it to carry out its responsibilities under Section 8.2.
8.4. Reimbursement and Indemnification of the Committee. The
persons serving on the Committee, and any persons designated by the Committee
to perform fiduciary responsibilities pursuant to Section 8.3(b)(2), shall not
receive any compensation for their services as such, but shall be reimbursed by
the Company for all reasonable expenses incurred by them in the performance of
their duties hereunder. The persons serving on the Committee, and any other
persons designated by the Committee to perform fiduciary responsibilities
pursuant to Section 8.3(b)(2), shall be indemnified and held harmless by the
Company and each other Employer for any liability or loss (including legal fees
or other expenses of litigation) arising out of or in connection with their
services to the Plan in such capacity, to the extent that such liability or
loss (a) is not insured against under any applicable policy of insurance
(whether or not maintained by the Employer) and (b) is not determined to be due
to their gross negligence or willful misconduct.
8.5. Responsibilities of the Trustee. The Trustee shall have the
following responsibilities and powers in connection with the Plan:
(a) to hold all amounts contributed to the Plan by the
Employer, any income thereon and any other Plan assets, as part of the
Trust Fund;
(b) to make payments out of the Trust Fund in accordance
with the instructions of the Committee;
(c) to hold and control the Trust Fund, and to invest
the Trust Fund in accordance with any directions received from the
Committee and the Members which are
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proper, and which are in accordance with the terms of the Plan and the
requirements of ERISA; and
(d) to perform such other responsibilities and duties in
connection with the Plan and Trust as are set forth in the Trust
Agreement.
8.6. Responsibilities of the Company's Board of Directors. The
following responsibilities and powers in connection with the Plan shall be
reserved to the Board of Directors of the Company:
(a) to amend or terminate the Plan;
(b) to establish a committee to control and manage the
operation and administration of the Plan; and to appoint, remove and
replace the persons serving on such Committee, and to determine the
number of persons who shall serve on such Committee; and
(c) to appoint, remove and replace the Trustee.
8.7. Claims Procedure. Any claim for benefits or other payments
under the Plan shall be determined in accordance with the procedure set forth
below.
(a) Initial Determination. Any claim for benefits or other
payments under the Plan shall be made by filing a written statement of such
claim with the person or persons designated by the Committee to process and
make initial determinations as to such claims. In the event such claim is
denied in whole or in part, such person or persons shall notify the claimant of
the denial within 90 days after the date on which the claim was filed. Such
notification shall be in writing and shall set forth: the specific reason or
reasons for the denial; specific reference to the provisions of the Plan on
which denial was based; a description of any additional material or information
necessary for the claimant to perfect the claim, and an explanation of why such
material or information is necessary; and an explanation of the review
procedure under subsection (b).
(b) Review Procedure. A claimant whose claim is denied in whole
or in part under subsection (a) shall be entitled to have such denial reviewed
by the Committee, by filing a written request for such review with the
Committee within 60 days after his receipt of notification of the denial of his
claim under subsection (a). Upon receipt of such request, the Committee shall
make a full and fair review of the claim; and in connection with such review,
the claimant shall be entitled to review pertinent documents and to submit
issues and comments in writing.
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(c) Decision on Review. The Committee shall make a decision
with respect to such claim within 60 days after its receipt of the claimant's
written request for review; provided, however, that if the Committee determines
that a hearing is necessary, the Committee shall hold such hearing within such
60-day period and shall make its decision within 120 days after its receipt of
the claimant's request for review. The Committee's decision on review shall be
in writing and shall include specific reasons for the decision and specific
references to the provisions of the Plan on which its decision was based.
8.8. Agent for Service of Process. The agent to accept service
of legal process on behalf of the Plan shall be such person as may be
designated by the Committee, from time to time, to perform such function or, in
the absence of such designation, the Committee itself.
8.9. Expenses. The Employer shall pay all of the fees and expenses
of the Plan and Trust which are not specifically described in the Trust
Agreement. All other fees and expenses of the Plan and Trust shall be paid by
the Employer, or out of the Trust Fund, as provided in the Trust Agreement.
ARTICLE 9 - AMENDMENT, MERGER AND TERMINATION
9.1. Amendment. The Company may amend this Plan at any time, by a
duly adopted resolution of the Company's Board of Directors. Any such
amendment may be made with retroactive effect to the extent not prohibited by
law. However, no such amendment shall decrease the balance of any Member's
Plan Accounts, or affect the computation of the extent to which a Member is
vested in his Accounts. In addition, no such amendment shall increase the
duties or liabilities of the Committee or the Trustee without their written
consent.
9.2. Merger or Consolidation.
(a) General. In the event that the Plan is merged or consolidated
with any other plan, or in the event of any transfer of assets or liabilities
of the Plan to any other plan, the benefit which each Member would be entitled
to receive if the Plan terminated immediately after such merger, consolidation
or transfer shall be at least equal to the benefit which he would have been
entitled to receive if the Plan had terminated immediately before the merger,
consolidation or transfer.
(b) Transfer Accounts. In the event that any Employer terminates any
plan and its trust which are qualified
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and tax-exempt under Sections 401(a) and 501(a) of the Code, and such plan was
a defined contribution plan (such plan shall be referred to below as a
"Terminated Plan"), then the Committee may, in its sole discretion, permit such
Employer to directly transfer to this Plan any or all of the account balances
under the Terminated Plan which belong to Members in this Plan. Any such
transfer shall be made in accordance with the applicable provisions of the law,
and in accordance with such rules as are prescribed by the Committee. The
account balances under the Terminated Plan of any Member which are so
transferred to this Plan shall be held in an account referred to as a "Transfer
Account" established and maintained under the Plan for such Member. A Member's
interest in his Transfer Account shall be fully vested and nonforfeitable at
all times. The Transfer Account shall be invested in accordance with rules and
procedures which are consistent with those set forth in Article 6, as if such
account was a Rollover Account. A Transfer Account shall be credited with
Earnings in the manner described in Section 5.1(b). However, the balance of
any Transfer Account shall be distributed, or may be withdrawn or borrowed
from, under the same terms and conditions which applied to distributions,
withdrawals and loans from participants' accounts under the Terminated Plan
(immediately prior to the termination thereof) in lieu of the terms and
conditions of Article 7, and, upon Plan termination, Section 9.3(b), except
that, for purposes of determining the amount of any distribution, withdrawal or
loan, the Transfer Account shall be valued as of the close of the last business
day immediately preceding the time such distribution, withdrawal or loan is
made. If appropriate, the Transfer Account shall be divided into sub-accounts
to account separately for any portions of the account balances transferred from
the Terminated Plan which, under the provisions of the Terminated Plan, could
be distributed, withdrawn or borrowed against at different times, or in
different forms or manners, than other portions of such account balances. The
Transfer Account shall not be treated as an Account under the Plan for purposes
of determining the amount of any loan that may be made to a Member under
Section 7.5, but shall be treated as a part of the Vested Portion of the
balance of the Member's Plan Account under Sections 5.2(c) and 7.1(d)(2)(i).
Except as otherwise provided above, the Transfer Account shall be treated as an
Account under the Plan.
9.3. Termination.
(a) General. The Company reserves the right to terminate the
Plan at any time, without the consent of any other party, pursuant to a
resolution authorizing such termination duly adopted by the Company's Board of
Directors. Notwithstanding anything herein to the contrary, the Employer, upon
termination of the Plan, shall have no obligation or
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liability whatsoever to make any further contributions to the Trust, and
neither the Trustee, nor any Member, Beneficiary, Employee or other person
shall have any right to compel the Employer to make any such further
contributions.
(b) Termination or Continuation of the Trust. Upon termination
of the Plan, one of the following actions shall be taken:
(1) If the Company so directs, the Trust shall continue
in existence. In such event, the Trust Fund shall be held,
administered and distributed as directed by the Committee and as
provided in the Plan, and all of the provisions of the Plan set forth
herein, which are applicable in the opinion of the Committee, other
than the provisions relating to contributions, shall remain in full
force and effect.
(2) If the Plan is terminated without establishment or
maintenance of another defined contribution plan within the meaning of
Section 401(k)(10) of the Code, and if the Company so directs, the
Trust shall be terminated. In such case, notwithstanding any other
provision of the Plan to the contrary, the Plan Account balances of
each Member and Beneficiary shall be distributed to such Member or
Beneficiary, as soon as administratively feasible, in the form of a
single lump sum payment.
(3) If, upon termination of the Plan, another defined
contribution plan has been, or will be, established or maintained
within the meaning of Section 401(k)(10) of the Code, then,
notwithstanding any other provision of the Plan to the contrary (i) an
immediate distribution shall be made, in accordance with the
provisions of (2) above, to all Beneficiaries and to all Members who
have attained age 59-1/2 or are Disabled, and (ii) the Trust shall be
continued, in accordance with the provisions of (1) above, with
respect to all other Members; provided, however, that each such other
Member's Plan Account balances shall be distributed, in a single
lump-sum payment, as soon as practicable after such Member has
attained age 59-1/2, has become Disabled or has incurred a Termination
of Service for any reason.
(c) Vesting Upon Termination. Upon the termination or partial
termination of the Plan, or upon the complete discontinuance of contributions
to the Plan, notwithstanding any other provision of the Plan to the contrary,
each Member affected thereby shall become 100% vested, and shall have a
nonforfeitable interest, in his Plan Accounts.
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9.4. Termination of An Employer's Participation in the Plan. An
Employer, other than the Company, may at any time terminate its participation
in the Plan, and the Company may at any time direct that an Employer terminate
its participation in the Plan. Unless the Company specifically directs
otherwise, an Employer other than the Company shall be treated as having
terminated its participation in the Plan (a) upon the sale or other transfer of
all or substantially all of its assets to an Unaffiliated Entity or (b) upon
the sale or other transfer of its stock to an Unaffiliated Entity in a
transaction that results in the termination of such Employer's
"parent-subsidiary or controlled group relationship" with the Company, or with
the controlled group of which the Company is a member, within the meaning of
Section 414(b) of the Code. For purposes of the foregoing, the term
"Unaffiliated Entity" shall mean any entity other than one described in Section
1.19(e)(2), (3) or (4). Upon any such termination of participation, the Plan
shall terminate with respect to the terminating Employer and its Employees and
shall continue in effect with respect to the remaining Employers and their
Employees. In the event of such a termination, the provisions of Section
9.3(b) shall apply with respect to the portion of the Trust Fund attributable
to the terminating Employer, and Section 9.3(c) shall apply to the Employees of
such Employer.
ARTICLE 10 - TOP-HEAVY PROVISIONS
10.1. General. With respect to each Plan Year in which the Plan is
Top-Heavy, the provisions of Sections 10.2, 10.3, 10.4 and 10.5 shall apply
notwithstanding any other provisions in this Plan to the contrary. With
respect to any Plan Year in which the Plan is not Top- Heavy, except as
otherwise provided herein, the provisions of Sections 10.2, 10.3. 10.4 and 10.5
shall not apply.
10.2. Minimum Benefit. For any Plan Year in which the Plan is
Top-Heavy, the Employer shall make a contribution to the Plan under this
Section 10.2 on behalf of any Member who is a Non-Key Employee. Such
contribution shall be in the amount by which the contributions made by the
Employer on such Member's behalf, or allocated to such Member, for such year
under this Plan, and under each other defined contribution plan aggregated with
this Plan under Section 10.6(a), is less than the smaller of (a) 3% of such
Member's Section 415 Compensation for such year or (b) the percentage of such
Member's Section 415 Compensation for such year which is equal to the highest
Allocation Percentage for the year of any Member who is a Key Employee. For
this purpose, (1) 401(k) Contributions made on behalf of Non-Key Employees
under this Plan, and any contributions subject to Section 401(k) or 401(m) of
the Code made on behalf of Non-Key Employees under any other defined
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contribution plan, shall be disregarded; (2) a Key Employee's "Allocation
Percentage" for a Plan Year shall mean the percentage determined by dividing
the sum for such year of (i) total 401(k) Contributions and Employer
Contributions made on behalf of the Key Employee, or allocated to the Key
Employee, under this Plan and (ii) the total contributions made by the Employer
on such Key Employee's behalf, or allocated to such Key Employee, under any
other defined contribution plan aggregated with this Plan under Section 10.6(a)
by so much of his Section 415 Compensation for the year as does not exceed the
maximum amount of his Section 415 Compensation that may be taken into account
hereunder; and (3) any person who is not a Member solely because he has not
elected to have any 401(k) Contributions made on his behalf shall be treated as
a Member. Clause (b) in the second preceding sentence shall not apply in any
Plan Year in which this Plan enables a defined benefit plan, which is
aggregated with this Plan under Section 10.6(a), to meet the requirements of
Section 401(a)(4) or 410 of the Code for such year.
Notwithstanding the foregoing, the amount to be contributed on behalf
of any Member pursuant to this Section shall not exceed the minimum amount that
must be contributed on such Member's behalf in order to meet the "minimum
benefit" requirements of Section 416(c) of the Code and the regulations issued
thereunder; and no amount shall be contributed under this Section on behalf of
a Member for any Plan Year if (A) the Member is not employed by the Employer on
the last day of such Plan Year, or (B) the Member is entitled to receive for
such year, under any defined benefit plan aggregated with this Plan under
Section 10.6(a), a benefit that is at least equal to the defined benefit
minimum described in M-2 of Section 1.416-1 of the Treasury regulations.
Any amount contributed under this Section 10.2 by the Employer on
behalf of any Member shall be credited to the Member's Employer Contribution
Account, as of the day on which such contribution is made to the Plan, but no
later than by the final day of the Plan Year to which the contribution relates.
10.3. Minimum Vesting. In the case of a Member who earns at least
one Hour of Service under the Plan during or subsequent to a Plan Year for
which the Plan is Top-Heavy, the Vested Portion of his Plan Accounts shall be
determined as provided in Section 1.33, except that the following schedule
shall apply to all Members in lieu of the schedules appearing in (1), (2) and
(3) of subsection (a) of Section 1.33:
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Years of Service Vested Percentage
---------------- -----------------
0 - 1 0
2 40
3 100
10.4. Maximum Compensation. For any Plan Year beginning prior to
August 1, 1989 in which the Plan is Top-Heavy, the annual Compensation taken
into account under the Plan, and the annual Section 415 Compensation taken into
account under this Article 10, for any Member shall not exceed $200,000,
adjusted annually by the Secretary of the Treasury under Section 416(d) of the
Code and the Treasury regulations issued thereunder.
10.5. Section 415 Limits. For any Plan Year in which the Plan is
Top-Heavy, the overall limit of Section 415(e) of the Code shall be applied by
substituting "1.0" for "1.25" wherever "1.25" appears. However, the preceding
sentence shall not apply with respect to a Plan Year if (a) each Member who is
a Non-Key Employee is entitled to receive for such year (1) under this Plan,
when aggregated with any other defined contribution plan aggregated with this
Plan under Section 10.6(a), a benefit that is at least equal to the defined
contribution minimum described in M-14 of Section 1.416-1 of the Treasury
regulations, or (2) under any defined benefit plan aggregated with this Plan
under Section 10.6(a), a benefit that is at least equal to the defined benefit
minimum described in M-14 of Section 1.416-1 of the Treasury regulations, and
(b) the Plan is not Super Top-Heavy for such year.
10.6. Definitions. For purposes of this Article 10, the following
terms shall have the following meanings, and the following rules shall apply:
(a) "Top-Heavy" and "Super Top-Heavy" - the Plan shall be
deemed to be Top-Heavy with respect to any Plan Year if, as of the
Determination Date for that year, the aggregate Benefits of all Key
Employees under this Plan, and all other plans which are aggregated
with this Plan, exceed 60% of the aggregate Benefits of all Key and
Non-Key Employees under this Plan and all such other plans. The Plan
shall be deemed to be Super Top-Heavy with respect to any Plan Year
if, as of the Determination Date for that year, the aggregate Benefits
of all Key Employees under this Plan, and all other plans that are
aggregated with this Plan, exceed 90% of the aggregate Benefits of all
Key and Non-Key Employees under this Plan and all such other plans.
For purposes of the two preceding sentences, each qualified plan
maintained by the Employer, including this Plan, (1) in which a Key
Employee was a participant, or (2) which enabled any plan
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described in clause (1) to meet the requirements of Section 401(a)(4)
or Section 410 of the Code, during the 5-year period ending on the
Determination Date for the Plan Year in question shall be aggregated.
A terminated plan shall be aggregated with this Plan, for these
purposes, if such plan was maintained by the Employer during the
aforesaid 5-year period and would, but for its termination, be so
aggregated under the preceding sentence.
(b) "Determination Date" - The Determination Date for a Plan
Year shall mean the final day of the immediately preceding Plan Year,
except, however, the Determination Date for the first Plan Year shall
be the final day of such year.
(c) "Benefits" - An individual's Benefits shall mean the sum
of (1) the balance of his Plan Accounts under this Plan and his
accounts under all other defined contribution plans aggregated with
this Plan under Section 10.6(a); (2) the present value of his
cumulative accrued benefits under all defined benefit plans aggregated
with this Plan under Section 10.6(a); and (3) the aggregate
distributions made with respect to him under the plans described in
clauses (1) and (2) hereof during the 5-year period ending on the
Determination Date as of which such individual's Benefits are being
determined.
For purposes of this Section 10.6(c), the Benefits of any
individual shall be disregarded if such individual (i) has not
performed any services for the Employer during the 5-year period
ending on the Determination Date for the Plan Year or (ii) was a Key
Employee for any Plan Year but subsequently became a Non-Key Employee
for any Plan Year. The present value of accrued benefits under any
defined benefit plan shall be determined for each Non-Key Employee
under the uniform method of benefit accrual used by all qualified
defined benefit plans of the Employer, or, if there is no such method,
as if benefits accrued not more rapidly than under the slowest accrual
rate permitted under Section 411(b)(1)(C) of the Code.
(d) "Key Employee" and "Non-Key Employee" - shall be
defined as under Section 416(i) of the Code and the Treasury
regulations thereunder.
(e) "Section 415 Compensation" - shall mean compensation
as defined under Section 1.415-2(d)(1), (2), (3) and (4) of the
Treasury regulations. For Plan Years beginning on and after August 1,
1989, the $200,000 limitation set forth in Section 1.7 shall apply.
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(f) The benefits attributable to any plan aggregated
with this Plan under Section 10.6(a) shall be taken into account for
purposes of Sections 10.2, 10.5 and 10.6(a) and (c) in a Plan Year in
a manner consistent with T-23 of Section 1.416-1 of the Treasury
regulations.
(g) For purposes of this Article 10, wherever required
by Section 416 of the Code and the regulations thereunder, the term
"Employer" includes all entities aggregated with the Employer under
Section 414(b), (c), (m) or (o) of the Code and the regulations
thereunder.
10.7. Applicability. In the event that Congress should provide by
statute, or the Treasury Department or the Internal Revenue Service should
provide by regulation, ruling or notice, that the provisions of this Article
are no longer necessary to meet the qualification requirements of Section
401(a) of the Code, this Article shall become void, and shall no longer apply,
without the necessity of any amendment to the Plan.
ARTICLE 11 - MISCELLANEOUS
11.1. Plan Assets to be Held for Exclusive Benefit of Members. The
assets of the Plan shall never inure to the benefit of the Employer and shall
be held for the exclusive purposes of providing benefits to Members of the Plan
and their spouses and other beneficiaries, and defraying the reasonable costs
and expenses of administering the Plan. However, this Section shall not
prevent a contribution made by the Employer under the Plan from being returned
to it, or other Plan assets to be distributed to the Employer, in the following
circumstances:
(a) If an amount is contributed under the Plan by the
Employer pursuant to a mistake of fact, the amount so contributed
shall be returned to the Employer within one year of the date of such
contribution.
(b) Each contribution which the Employer makes under the
Plan is conditioned upon the deductibility of such contribution under
Section 404 of the Code. To the extent a deduction therefor is not
allowed, the amount of any such contribution shall be returned to the
Employer within one year after the contribution is determined to be
nondeductible.
11.2. Nonassignability of Rights. Except to the extent provided in
Section 11.3, no interest, right or claim in or to any part of the Trust Fund
or any payment therefrom shall be assignable, transferable or subject to sale,
mort-
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gage, pledge, garnishment, attachment, execution or levy of any kind, and the
Trustee shall not recognize any attempt to assign, transfer, sell, mortgage,
pledge, garnish, attach or execute the same.
11.3. Qualified Domestic Relations Orders. To the extent so provided
in an order that the Committee determines to constitute a "qualified domestic
relations order" within the meaning of Section 414(p)(1)(A) of the Code
("QDRO"), the right to receive all or a portion of the benefits payable under
the Plan with respect to a Member may be assigned or transferred by the Member
to any "alternate payee" within the meaning of Section 414(p)(8) of the Code
("Alternate Payee") specified in such QDRO. Notwithstanding any other
provision in this Plan to the contrary, if a QDRO so provides, the portion of a
Member's interest in the Plan which is payable under the QDRO to any Alternate
Payee shall be distributed to such Alternate Payee, in the form of a single
lump sum payment, as soon as practicable after the Committee has determined
that such order constitutes a QDRO.
11.4. Trust Fund as Sole Source of Benefit Payments. The Trust Fund
shall be the sole source of payment of benefits under the Plan. In no event
shall the Employer be liable to any Member or to any other individual for the
payment of such benefits.
11.5. Right to Employment. The Plan shall not confer upon any
Employee any right of employment, nor shall any provision of the Plan interfere
with the right of the Employer to discharge any Employee.
11.6. Gender and Number. Words used in the masculine include the
feminine gender. Words used in the singular or plural shall be construed as if
plural or singular, respectively, where they would so apply.
11.7. Titles. Titles of Articles, Sections and subsections are
inserted for convenience and shall not affect the meaning or construction of
the Plan.
-57-
<PAGE> 1
EXHIBIT 13
PATIENT PROTECTION, HOSPITAL AND BLOOD BANK
(FIGURE 1)
50% of Health Care Sales
(Millions of $)
Market Potential - $4,050
1994 Sales - $176.3
1993 Sales - $181.4
FISCAL 1994 IN REVIEW
We accomplished a great deal toward the goal of routine filtration of blood
components in 1994. There is now universal agreement among the blood banking
community that removing leukocytes from blood components provides documented
benefits.
Pall's work to establish blood filtration processing requirements and
hospital supply routes to meet the growing demands for blood bank filtered
blood components is required preparation for future growth. The results of this
effort are showing up in a 30% increase in sales to blood banks. We are working
in partnership with blood providers because it is clear to them, and to us,
that to achieve universal filtration of blood, much of that filtration must
take place in the blood bank.
There is now movement towards establishing broad "standard of care"
policies requiring filtration for a rapidly broadening range of patient
categories. We are supporting this with product configurations and training of
user personnel suitable for blood banks. We are well situated to meet the
requirements of both our blood bank and hospital customers.
Strategic partnerships have been formed with key manufacturers like
Miles, Haemonetics and Baxter. We also signed exclusive use contracts with key
blood processing organizations. In the U.S. these include the American Red
Cross, Blood Services, Inc. and the New York Blood Center. In France and
England, there are significant contractual commitments to Pall with others to
follow. These alliances and customer agreements will hasten the availability
of leukocyte depleted blood components for all patients.
Meanwhile, the spectre of governmental health care reform created
dramatic changes and uncertainty in the health care marketplace in fiscal 1994.
American hospitals are now caught up in a frenzy of cost cutting and cost
containment measures. In Europe, particularly in Germany, governments have
also tightened control of health care expenditures. We note, however that
routine filtration as a health care standard is rapidly growing with France,
Italy and Finland leading the way. In Japan, the use of filters is reimbursed
by the Ministry of Health. Most countries are actively developing leukocyte
removal policies and budgets.
(FIGURE 2)
12
<PAGE> 2
BLOOD TRANSFUSION FILTRATION
Unit and price growth of leukocyte removal filters to blood banks was 19% for
the year and represents 21% of blood filter sales. This trend in blood
processing filters is encouraging progress towards achieving our goal of 100%
filtration.
Pall's line of leukoreducing filters provides the highest degree of
patient protection against the well documented hazards of leukocytes. They
reduce transfusion complications and their associated costs, often saving lives
in the process. Equally motivating is the growing evidence that unfiltered
blood causes expensive complications and patient exposure to viral and other
complications.
To the blood banking community, we offer a broad range of options for
the production of leukocyte reduced blood components. Our RC300 filter,
incorporated into the Miles Leukotrap RC* blood collection system, serves as
the blood collection unit at the time of blood donation. Pall's BPF4 processing
filter system can be used at any time during the storage life of blood to
deplete leukocytes from packed red blood cells.
(FIGURE 3)
(FIGURE 4)
BREATHING CIRCUIT FILTRATION
Issues such as the increasing incidence of tuberculosis worldwide have
heightened awareness of the need for patient and staff protection. Pall's
breathing circuit filters protect patients and care givers from bacterial and
viral contamination in surgery during anesthesia, in intensive care units, and
in pulmonary function testing laboratories.
During recent months Pall breathing filters have been chosen by
Australian authorities to prevent the spread of Hepatitis C virus as a result
of patient cross-contamination of breathing and anesthesia circuits during
surgery. Sales of our breathing circuit filters have been brisk as a result.
The unique ability of Pall's breathing circuit filters to prevent the
passage of liquid and airborne contaminants provides unparalleled filtration
protection. Pall's Pro-Tec filters for pulmonary function testing are reported
to reduce the probability of patient cross-contamination to one in a million.
INTRAVENOUS FILTRATION
Pall filters for intravenous therapy protect patients from inadvertent
contamination of IV fluids that can cause phlebitis, air embolism, infection,
sepsis and fever. The ability of the Pall Posidyne filter membrane to retain
bacterial endotoxins allows both IV filter and administration sets to be used
for up to 96 hours protecting patients and saving money in the hospital and
home care setting.
New Pall filters for Total Nutrient Admixtures (TNA) were introduced
in our fourth quarter. They provide protection to patients receiving
intravenous feeding emulsions - a new sales opportunity for us.
EXTRACORPOREAL FILTRATION
During cardiopulmonary bypass surgery the patient's blood passes through the
extracorporeal (outside the body) circuit. When blood contacts these tubing
surfaces, leukocytes are activated, causing reactions that result in
post-surgical complications.
- -------------------
* Leukotrap RC is a registered trademark of Miles Inc.
13
<PAGE> 3
(FIGURE 5)
Pall's LeukoGuard arterial filter protects patients from their own
activated leukocytes as well as from particulates in the extracorporeal
circuit. Research in the U.S. and Japan concluded that patients protected by
the LeukoGuard filter spent less time post-surgically on a ventilator, less
time overall in the hospital, and generated lower patient charges during their
hospital stay.
FACTORS FUELING GROWTH
Leukocytes are contaminants in red cell and platelet transfusions and serve no
useful purpose. To the contrary, leukocytes in blood products carry or
reactivate viruses, cause serious transfusion reactions and suppress the
patient's immune system. With increasing evidence that transfused leukocytes
contribute to post-operative infections, leukocyte depletion is now expanding
to include blood transfused during surgery. Since the majority of blood is
transfused to surgery patients, we see this as a growing opportunity.
Pall's new Autostop filter, ATS, an integral part of the Miles
Leukotrap RC-PL* blood collection system, promises to revolutionize the
production of platelets from whole blood. After whole blood is collected and
centrifuged, the ATS series filter removes the leukocytes from platelet rich
plasma, and through mechanical separation improves the harvest of valuable
platelets and plasma.
Pall's Automated Blood Processing system will bring to blood centers a
highly efficient means to reduce leukocytes and enhance plasma harvest with the
Leukotrap RC-PL blood collection set. Good Manufacturing Practices based on
pharmaceutical manufacturing models are now required at blood centers. These,
along with significant savings in labor costs, will create a strong demand for
Pall's Automated Blood Processing system.
An aging population and health care cost containment issues will lead
to increasing numbers of patients receiving IV and transfusion therapies in the
home. The most common therapies in home care are antibiotics, pain management,
chemotherapy, total parenteral nutrition and respiratory therapy. The ease of
use and patient safety benefits of Pall products make them particularly well
suited to the less well controlled home care environment.
OUTLOOK FOR FISCAL 1995 AND BEYOND
As we look to 1995 and beyond, we expect top-line growth in the patient
protection market segment to be above the corporate average.
Public attention on health issues including resistant and highly
transmissible diseases among hospitalized patients is growing - so is the
intense awareness among hospital staff to contain and prevent their own
exposure to blood and airborne diseases. These realities ensure a growing
demand for Pall's protection through filtration.
As medical technology becomes more sophisticated, it is opening up new
opportunities for Pall to supply other health care manufacturers with custom
devices. We are pursuing these aggressively.
One large area of activity is the rapidly expanding area of drug
delivery systems. Here we are working in diverse areas such as novel
membrane-based ophthalmic delivery systems, the sterile venting of intravenous
drug delivery sets and devices to improve the outcome of artificial
insemination.
In blood banks and hospitals, in clinics and in the home health care
setting, Pall is pursuing myriad applications for its technology.
- -----------------------
* Miles Leukotrap RC-PL is a registered trademark of Miles Inc.
14
<PAGE> 4
BIOSUPPORT AND OEM DIAGNOSTICS
(FIGURE 6)
7% of Health Care Sales
(Millions of $)
Market Potential - $350
1994 Sales - $24.6
1993 Sales - $18.5
FISCAL 1994 IN REVIEW
Our young BioSupport Division is experiencing spectacular growth. The market
for products used to diagnose and monitor health conditions such as diabetes
and pregnancy is expected to grow significantly again in the next year.
A 10-year landmark study called the "Diabetic Control and
Complications Trial" concluded that patients who kept their blood sugar levels
close to normal by frequent monitoring (along with insulin and lifestyle
changes) had a 60% reduction in the serious health complications associated
with diabetes. This study, coupled with preventive health care and advances in
consumer testing products has propelled the home diagnostic market to record
growth.
Pall membranes for glucose monitoring test kits dominate this market.
They are also used extensively in pregnancy and ovulation kits and in "quick
tests" used by doctors to diagnose infectious diseases (such as strep) as well
as to test for sexually transmitted diseases.
Pall is also the leading supplier of membranes for molecular
biological applications. Forensic testing, genetic fingerprinting, and
worldwide scientific research to understand the genetic makeup of humans, all
rely heavily on the accuracy, reproducibility, and ease of use of Pall
membranes.
FACTORS FUELING GROWTH
Initial customer response to our new Leukosorb medium for the removal of
leukocytes from blood samples has been excellent. Virtually every diagnostic
company that performs a blood test is a candidate for a blood separation
device. The medium is also applied for the harvesting of DNA from complex
protein samples.
Sales of our Silent Monitor plates, widely applicable in drug
screening procedures during pharmaceutical development, continue to grow.
OUTLOOK FOR FISCAL 1995 AND BEYOND
Sales growth for fiscal 1995 is expected to exceed the corporate average.
There is a growing trend within the diagnostic testing industry
toward "single-step" products. These enable a body fluid to be directly applied
to a medium, with a color change indicating an immediate result. We expect to
release a breakthrough product in early fiscal 1995, ACCUWIK membrane, for
single-step diagnostic testing. It is expected to replace nitrocellulose, which
is fraught with handling and stability problems, and represents at least 50% of
the potential for our BioSupport business.
(FIGURE 7)
15
<PAGE> 5
PHARMACEUTICAL, BIOLOGICALS AND BIOPROCESSING
(FIGURE 8)
30% of Health Care Sales
(Millions of $)
Market Potential - $725
1994 Sales - $105.9
1993 Sales - $111.5
FISCAL 1994 IN REVIEW
The pharmaceutical marketplace is in a period of transition as customers
consolidate, as more production moves to Asia, and as bioengineered products
increasingly supplement or replace traditional pharmaceuticals. All of these
changes are taking place in an increasingly rigorous regulatory climate.
Pall is responding well to this changing environment. Our technical
position, new products and unrivalled technical support combine to garner an
increasingly large share of biopharmaceutical business.
Our significant growing presence in Asia has allowed us to follow
existing business and pick up new business as it moves to this part of the
globe. Pall is the industry leader, working in cooperation with our customers,
with the Food and Drug Administration (FDA) and other regulatory groups in
setting new standards for filter performance and quality assurance.
Regulatory agencies are looking further upstream in many production
cycles to eliminate early causes of product non-conformance. Our new BPC
filters for bulk pharmaceutical chemicals are uniquely positioned here by
reducing contamination in the intermediate products.
The continuing emphasis on fully validated systems and materials in
the pharmaceutical, biologicals and bioprocessing markets is positive for us.
We possess the substantial resources required to provide validation services
supporting the use of our filters in these markets. Our Parametric Validations
approach has become the standard in such evaluations.
Virus contamination in the sensitive milieu of a bioprocess fermentor
is a constant risk. Current methods for assuring virus removal or inactivation
have limitations in terms of cost, efficiency and final product loss. Our new
Ultipor VF virus filter medium is under evaluation at several major bioprocess
companies. We also have a Cooperative Research and Development Agreement
(CRADA) with the U.S. Centers for Disease Control (CDC) to develop improved
filter devices for the removal of bacteria and viruses from bioengineered
pharmaceuticals.
FACTORS FUELING GROWTH
Pall is aggressively pursuing many promising separations opportunities in the
pharmaceutical, biologicals and bioprocessing markets.
In mid-fiscal 1994, for example, we acquired a worldwide exclusive
license for vibrating membrane technology, our PallSep vibrating membrane
filter, for food, beverage and phamaceutical industry applications. It accepts
many Pall proprietary filter media and has virtually unlimited applications for
the concentration and separation of high solids content streams in these
industries.
Pall's dynamic membrane filter continues to show a three-to-four-fold
improvement in recovery of high value proteins in biopharmaceutical production.
We recently introduced a smaller version called the Mini-DMF filter. It will
allow economic evaluation of both pilot and large-scale separation steps in
biopharmaceutical production in a presterilized, disposable format. This will
produce wide and immediate access to dynamic membrane filter technology.
A major European manufacturer has awarded us an order for the largest
ever ultrafiltration installation. It will use our Microza hollow fiber
ultrafiltration modules for continuous concentration and downstream processing
of enzymes.
Also in Europe, we are working with parenteral manufacturers to meet
new regulatory requirements for particulate and fiber
16
<PAGE> 6
(FIGURE 9)
(FIGURE 10)
cleanliness levels through extensive qualification tests for our submicron
filters. In Japan, customers are increasingly aware of the necessity for
completing process validation, now that Japanese Good Manufacturing Practices
require such substantiation.
In the present pharmaceutical industry climate, we expect the need for
cost reduction and more efficient manufacturing processes to continue. This
will open many opportunities for us to strengthen our position in this market.
Our wide range of fluid clarification products and our new separations systems
will provide vital customer support tools to our global network of Scientific
and Laboratory Services (SLS) and application engineers.
OUTLOOK FOR FISCAL 1995 AND BEYOND
We expect top-line growth in these markets to be below the overall corporate
average, as we continue to be affected by the downturn in Germany. However,
the need to economically achieve cell separation and product purification of
bioengineered products remains a growing area.
Laboratories are critical to our long-term strategy of penetrating the
bioprocessing market. Regulatory requirements make it essential that filter
suppliers get involved in a customer's new product development process as early
as possible. With that in mind, we have developed a full line of
high-performance filters and separations systems for lab scale testing. We
expect these products to help us gain a significant market share.
The concern about viruses in biological and bioengineered products is
reaching major proportions. The kinds of viruses to be removed are varied, as
are the fluids, making the need for a filter to remove viruses from all
solutions a major opportunity. Our new Ultipor VF virus filter cartridge meets
all these criteria for viruses 50 nanometers and larger. It has already been
tested on a small scale by several important pharmaceutical companies.
Large-scale testing and validation are next.
Integrity test devices used to confirm the performance of a filter
before and after its use are becoming standard in the industry because of
increasing pressure by the FDA to validate the entire process for manufacturing
drugs. We are introducing a new integrity test instrument in fiscal 1995 that
we expect will become the industry standard. The Trueflow Palltronic integrity
test device is unique and will provide complete validation documentation to
enable our customers to integrate it into their process quickly and
economically. It will also interface with our customers' automated processes, a
growing trend in this industry.
17
<PAGE> 7
FOOD AND BEVERAGE
(FIGURE 11)
13% of Health Care Sales
(Millions of $)
Market Potential - $750
1994 Sales - $45.0
1993 Sales - $41.8
FISCAL 1994 IN REVIEW
Our Food and Beverage business enjoyed another year of solid sales growth. Pall
cartridge filters, dynamic membrane filters and ultrafilters are carving out
new market opportunities, led by our continued success in the area of beer
filtration. Pall is the dominant supplier of filters for cold-stabilization of
beer, an application that promises to grow tremendously. The recently
introduced ice beers - that are brewed normally and then cooled below freezing
to form ice crystals - have quickly garnered 10% and 5% respectively of the
Canadian and U.S. beer markets.
We are also effectively applying advanced filtration technology to the
dairy industry. Our alliance with Ault Foods Ltd., Canada's largest dairy,
continues to make progress in developing a wide variety of filtration
applications in the dairy industry. One particularly exciting application
involves a possible alternative to pasteurization. The end product has enhanced
shelf life without any sacrifice in taste, freshness or nutritional value.
In Europe, we sold our first ultrafiltration system to a leading fruit
juice producer. Our new Cluster Filter System (CFS) for fully automatic beer
stabilization was installed in several major European breweries to produce
high-quality beer.
In the United Kingdom, we sold our first ultrafiltration system to a
municipal water authority. These are examples of our close working
relationships with leading edge customers to apply our new technologies.
(FIGURE 12)
18
<PAGE> 8
FACTORS FUELING GROWTH
As government regulatory and environmental pressures continue to build in the
food and beverage industry, Pall filters grow in importance and worldwide sales
performance. For example, there is an intensifying movement to eliminate, for
environmental reasons, the large volumes of diatomaceous earth used in the
production of beer and wine.
In the bottled water industry, wide variations exist in product
quality and labeling. Standards outside the U.S. tend to be more stringent, and
are currently being assessed in the U.S. for implementation. Pall stands to
play a key role in that initiative.
Our PallSep filter, a unique vibrating membrane filtration system for
rapid, economical separations, is also expected to unlock tremendous growth
opportunities in the food processing and beverage markets.
We acquired the rights to develop and market this product in 1994. One
PallSep application, of great interest to brewers, is the replacement of
diatomaceous earth used in the clarification of their product. Other promising
applications include the remediation of food processing waste streams in the
meat and poultry industries, and in the concentration and packaging of fruit
juices.
(FIGURE 13)
OUTLOOK FOR FISCAL 1995 AND BEYOND
We expect worldwide growth of our filter systems to continue at a healthy rate
as the emphasis on product stability, safety, shelf life, processing costs and
waste minimization intensifies. Growth for our food and beverage markets for
fiscal 1995 should be above the corporate average.
Our nylon membrane-based cold filtration systems for beer are
expanding worldwide. For example, we received our first order for cold beer
filtration in China during the last fiscal year and expect this market to
expand rapidly. We are introducing a patented nylon membrane cleaning protocol
which will reduce cold beer filtration costs and further expand our market
potential.
The acceptance of fresh tasting, non-pasteurized beer is influencing
similar preferences in the milk and fruit juice marketplace, and we expect
membrane filtration to become more widely used for bottled water than currently
employed chemical stabilization techniques.
Finally, our PASS group is evaluating septa technology to replace
costly, antiquated plate and frame type filters for edible oil processing and
we are testing PallSep filter systems for waste stream minimization and
recovery of proteins from food process streams.
19
<PAGE> 9
AIRBORNE, MILITARY LAND AND MARINE
(FIGURE 14)
44% of Aeropower Sales
(Millions of $)
Market Potential - $250
1994 Sales - $79.2
1993 Sales - $82.6
FISCAL 1994 IN REVIEW
In fiscal 1994, we continued to restructure our Aerospace operations to
accommodate declining defense budgets. Nevertheless, we raised expectations in
Europe and Japan as a result of improvements in the airline aftermarket and the
British government's decision to procure an additional 259 Challenger II Main
Battle tanks and to upgrade its predecessor, Challenger I. In Japan, we gained
new business from the sale of Centrisep air cleaners for the Fuji Heavy
Industries UH-IJ Helicopter and the Bell 205B Helicopter.
In the United States, a greater percentage of military funds is being
allocated to research and development, rather than to production.
Specifically, the military intends to develop weapons systems, demonstrate them
and then hold them for future needs. What's more, there is a shift in military
strategy to rapid deployment, with smaller, more flexible forces. Pall is in
step with each of these new industry trends. For example the versatile V-22
Tiltrotor Aircraft and the Armored Gun system (air droppable light tank)
programs will employ significant Pall products once production begins.
At the same time, we are using the cost saving benefits of our
products to increase our penetration into the commercial aircraft market. While
we are gaining share, this market has been affected by airline cancellations
and delays in ordering new aircraft. Boeing, the world's largest commercial
supplier, delivered 441 jetliners in 1992, but has only 260 deliveries
projected for 1994.
Despite this, the commercial aftermarket continues to grow. We are
targeting customers with retrofit programs as well as pursuing the available
business on new airplanes.
FACTORS FUELING GROWTH
Pall Aerospace has been selected to design and supply all of the filter
manifolds for the long-range business jet aircraft, the Canadair Global Express
and the Gulfstream V. These programs represent significant business to Pall for
the next 12 to 15 years.
During this past fiscal year, we also enhanced our position in the
commercial airline aftermarket through the acquisition of a distributorship to
serve the Western Hemisphere to complement our existing distribution in Europe
and Asia. We can now offer any airline in the world delivery within 24 hours,
and have already seen a positive impact on sales.
Many of our aerospace customers are reducing their supplier base and
seeking long-term agreements. Our ability to supply innovative technology with
shorter lead times, along with quality and service, has allowed us to displace
the competition and achieve long-term agreements with most major aerospace OEMs
and major system and component suppliers.
On another major front, the U.S. military plans to spend $25 billion
on waste clean-up and minimization programs over a period of 20 years. Our
market assessment shows significant opportunities for our products, which
extend fluid life and result in wastestream minimization.
22
<PAGE> 10
(FIGURE 16)
One such clean-up program involves "graywater" on board naval ships.
Our PallSep vibrating membrane filter is uniquely suited to separate the
"sticky" substances in the U.S. Navy's graywater shipboard wastestreams which
render other treatment methods ineffective. We have responded to a solicitation
from the Navy for a graywater treatment system, and we estimate the market
potential for this technology to be about $50 million from the U.S. Navy alone.
Our first two orders for Turbodyne II self-cleaning inlet air filter
assemblies were received for the U.S. Army's Medium Integration Propulsion
System and the Army's M88A1 recovery vehicle. These assemblies may be specified
on all future Army vehicles requiring an engine in the 500 to 1,000 horsepower
range.
High-efficiency cabin air filters have also been developed with the
capability to reduce the transmission of microbial aerosols in commercial
aircraft. These filters ensure both greater service life, and passenger safety
and comfort.
Many of the newer aircraft being certified, such as the Boeing 777,
require ratings for long-range flights over water where engine reliability is
critical. Our dual-stage lube filter assembly, installed by Pratt and Whitney
as standard equipment on their 4000 series engines, should benefit from this
need. We also continue to be the leader in the design and development of
light-weight hydraulic filter manifolds that have been specified for use on
the SAAB 2000 commuter plane, the GDLS heavy assault bridge and CH-47 and
RAH-66 helicopters.
OUTLOOK FOR FISCAL 1995 AND BEYOND
We expect our aerospace sales for fiscal 1995 to be flat.
Commercial airline business will for the first time exceed military
sales. Current projections for the commercial airline market beyond fiscal 1995
are for steady growth to the end of the century. This growth will be driven by
expanding markets in Asia, emerging new markets in China and the former USSR,
and aircraft retirement brought about by the need for improved fuel efficiency
and tougher noise legislation.
As previously mentioned, the issue of air quality on board aircraft is
being hotly debated. We have successfully concluded a trial of our unique cabin
air filters for the Boeing 747-400, proving that our filters can save airlines
maintenance costs due to their long life, as well as improve air quality by
removing bacteria and viruses from the recirculated air. We are approved as the
sole supplier for cabin air filters on the new Boeing 777, the Airbus A330 and
A340 and the Douglas MD-90, and are approved on the Boeing 767. Our plan is to
become qualified on all major operating aircraft.
Although military budgets have decreased significantly in the past few
years, the reductions proposed in the coming years will be smaller. European
military activity will be centered on such programs as the Franco-German NH90
and the Anglo-Italian EH101 helicopters, reflecting the increased emphasis on
rotary-wing aircraft.
23
<PAGE> 11
INDUSTRIAL AND MOBILE FLUID POWER
(FIGURE 17)
56% of Aeropower Sales
(Millions of $)
Market Potential - $1,800
1994 Sales - $100.1
1993 Sales - $93.5
FISCAL 1994 IN REVIEW
Our Industrial Fluid Power business exceeded its projected revenue growth. This
was accomplished despite regional recession in the fluid power industry in
fiscal 1994.
Our Ultipor III series of filters were a significant factor in gaining
business. Long-life Ultipor III elements allow users to protect critical
systems while reducing the cost of filtration.
A new product with substantial sales impact in fiscal 1994 was the
Pall upgrade filter series, which allowed us to increase market share by
replacing elements in competitors' filter housings. These products span all
user markets, with special emphasis on pulp and paper manufacturing and power
generation.
Pall purifiers, including our new 45gpm unit, continue to be well
received. They recondition hydraulic and lubrication oils by removing water,
dirt and gaseous contaminants. This maximizes oil life and reduces the amount
of used oil added to the wastestream.
FACTORS FUELING GROWTH
We are the leader in high-performance filters for the on and off-highway truck
and bus markets, providing customers with filtration solutions that
significantly reduce operating and maintenance costs and minimize wastestreams.
There is a growing demand for Pall's proprietary diesel lube and fuel
filtration products as the trend to reduce exhaust emissions to safeguard the
environment increases.
Pall has also secured increased commitment from customers through
working alliances in future developments. For example, the automotive and power
generation industries provide growing opportunities for us within the
manufacturing process and OEM areas.
Pall technology, and the development of mutual technical expertise
with our customers, has produced extended component durability and reduced
emissions and warranty costs in the automotive field.
Similarly, our progressive work on turbines has led to improved levels
of fluid cleanliness in lubrication, hydraulic systems and fuel for OEMs, who
are optimizing systems and controls to obtain improved efficiency and economy
in turbine designs.
Growth projections for the power generation industry remain strong
through the 1990s. The majority of this demand will be met by Independent Power
Producers (IPPs). The Energy Policy Act of 1992 was designed to deregulate this
industry, allowing for more open access to transmission lines and easing
restrictions on utilities participating in IPP projects.
Many industry studies show the correlation between improved lube oil
cleanliness and greater turbine/generator reliability and availability - two
key performance measures that promise to enhance our position. Production of
lower cost energy will allow utilities to compete with the growing IPP base.
The primary metals market is projected to increase in fiscal 1995,
fueled by a resurgent U.S. steel industry. Our new Pall upgrade elements
program and alliances will be major factors in increasing fiscal 1995 sales as
customers seek single-source suppliers who can ensure lower operating costs.
The outlook for the pulp and paper industry is for production and
prices to increase moderately and earnings to increase significantly. This
should translate into
24
<PAGE> 12
(FIGURE 18)
(FIGURE 19)
(FIGURE 20)
increased maintenance budgets, freeing up funds for new filtration projects and
for proposals that have been on hold.
As reported last year, improved market conditions in the automotive
industry, coupled with more competitive products and favorable currency
exchange rates (such as the Japanese yen), have resulted in substantial sales
and profitability increases at the "Big Three" (GM, Ford, Chrysler) auto
manufacturers. These gains translate to increased purchases by the automotive
plants.
OUTLOOK FOR FISCAL 1995 AND BEYOND
We expect top-line growth in our Industrial Fluid Power business in fiscal 1995
to be above the overall corporate average. Our latest development in filter
technology - a new "standard" for hydraulic fluid filtration - will provide
users with higher efficiency ratings under static and cyclic flow conditions.
Our new liquid/liquid coalescer, equipped with high-performance
filtration, will fill a void in our water contamination control product line.
One advantage of our coalescer is its resistance to fuel additives that reduce
the efficiency of conventional coalescers.
We will introduce a particle counter and a contamination monitor as
valuable additions to our product line. Customers with these devices will
clearly see the unique benefits of Pall filtration.
Wastestream reduction will be a major focus of our new ECOPAK filter
design. Disposal of used elements has been simplified and made less costly.
We will apply our high-end separations technology to the primary
metals and machining markets via our backwash filter line, where high dirt
ingression makes disposable filter elements prohibitively expensive. Pall
backwash filters give the customer the benefits of low maintenance,
contamination control and process improvements from high-performance
filtration.
Internationally, the Middle East and Africa, where we have already
started to develop new business partners, will be major growth markets for
Pall. We also see opportunities in the primary metals, pulp and paper, power
generation and mining industries in Southeast Asia and China, and are
strengthening our presence in these areas.
25
<PAGE> 13
MICROELECTRONICS, DATA STORAGE AND PHOTOGRAPHIC FILM
(FIGURE 21)
56% of Fluid Processing Sales
(Millions of $)
Market Potential - $600
1994 Sales - $94.8
1993 Sales - $81.8
FISCAL 1994 IN REVIEW
Strong sales characterized our microelectronics business, where every niche
market exceeded our original projections. We took market share from
competitors, both in point of use and bulk gas filtration and in high-purity
chemicals. The Ultramet-L, Mini Gaskleen, Gaskleen IV and PMF Gasket-Sert
products were key to increased gas filter sales while our Super Cheminert
family of fluoropolymer elements led the way in the chemicals area. We also
introduced the improved Super Etch II filter for recirculating acid etch bath
filtration, which strengthened our lead in this application throughout the
world.
Our Purifilter gas purification products are gaining acceptance as the
industry reaps the benefits of finer levels of purity at point of use. We
expect to release a new polishing filter in fiscal 1995 that is the result of
collaborative work with the University of Arizona at the SEMATECH Center of
Excellence.
Last year our Microza ultrafilter modules became the industry standard
for high-purity deionized water filtration. These modules were sold in new
systems at leading semiconductor producers as well as in system upgrades for
existing facilities.
Producers of film, fiber and magnetic tape faced reduced global demand
and severe price competition. The introduction of Ultipleat Profile filters,
the next generation of our highly successful Profile cartridge line, has
provided customer cost reduction benefits that permit us to broaden our
position in this market. We expect Ultipleat Profile filters to help us to
penetrate major applications.
FACTORS FUELING GROWTH
New products and applications in the microelectronics, data storage and
photographic film markets augur well for sales growth. We have new metal and
polymeric filter media ready for release. The evolving semiconductor industry
standard of 0.35 micron line widths will demand filter removal ratings that are
roughly 10 times finer (.035 microns or 35 nanometers) than today. We are
working closely with leading edge customers to develop the next generation of
purity standards. Increasing demands from the semiconductor industry for ever
higher cleanliness levels, together with "cost-of-ownership" requirements for
predictable
(FIGURE 22)
(FIGURE 23)
28
<PAGE> 14
(FIGURE 24)
economy, will continue to fuel our electronics business.
The semiconductor industry has historically consumed vast quantities
of high-purity water, and pressure is building to conserve and recycle as much
as possible. Therefore, we expect increasing sales for Microza modules in waste
minimization applications. All signs indicate that this strong growth in U.S.
semiconductor production will continue.
We expect to convert photographic film suppliers to Ultipleat Profile
filters for emulsion filtration. Microza ultrafilters have application in this
market as well, and testing is under way at processors of professional movie
film to prove the feasibility of recovering wastewater from film processing.
The lithographic printing market represents an enormous opportunity for our
Profile and Ultipleat Profile products used in printing fluids to extend life
and reduce waste disposal costs.
OUTLOOK FOR FISCAL 1995 AND BEYOND
Our fiscal 1995 sales expectations in this market are for above-average growth.
The Semiconductor Equipment Association of Japan estimates that the demand for
process equipment over the next few years will increase by as much as 10% a
year. Also, the demand for ultraclean processing environments will continue to
advance, which creates the need for extraordinarily clean process fluids.
Pall has been developing new products in step with this trend. We are
now launching a new-concept gas purifier that has been developed in conjunction
with the University of Arizona.
The explosive growth in personal computers worldwide has led to
aggressive investment in new facilities by the major semiconductor
manufacturers. Our newly upgraded Ulti-Cheminert filter (already in use by a
large wafer manufacturer) and PMF Gasket-Sert filters meet the stringent
requirements of these manufacturers for providing superior removal efficiency
and cost effectiveness.
In the film markets, we are steadily increasing market share through
our balanced filtration concept. This approach encompasses all the filtration
needs of the process from beginning to end, resulting in higher yields at lower
costs to the manufacturer. Only Pall can provide this total support because of
our broad capability in filtration in both disposable and metal elements.
In the area of magnetic coatings, optical discs and compact discs, we
continue to gain market share. A large part of U.S. and European magnetic tape
manufacture has relocated to mainland Asia. We continue to enjoy this business
with our significant Asian sales presence. In paints, jet inks, lithographic
printing, photographic film and optical discs, our base of business has firmed
and will continue to grow with new products geared to these applications.
Although the requirements of these markets may be less stringent than
those for microelectronics, there is a growing awareness among users that our
products are very cost effective. Their performance, coupled with an
extraordinary level of free technical support, enables us to defuse our
commodity competitors' claims that they are "just as good, only cheaper."
29
<PAGE> 15
OIL/GAS, CHEMICAL/PETROCHEMICAL AND POWER GENERATION
(FIGURE 25)
44% of Fluid Processing Sales
(Millions of $)
Market Potential - $2,500
1994 Sales - $74.9
1993 Sales - $76.1
FISCAL 1994 IN REVIEW
Pall Advanced Separations Systems (PASS) was organized in fiscal 1992 to lead
the technical introduction of new separations systems technologies throughout
Pall's sales divisions to customers worldwide. Our success in these markets has
been very gratifying. New products have been intensely promoted worldwide. Most
large orders in fiscal 1994 for PASS resulted from projects that began 12 to 18
months earlier. We expect that momentum to continue.
Many of our successes involved new applications that are opening up
promising markets. We made significant progress in fiscal 1994 but, more
importantly, laid the groundwork for an exciting future.
Among our accomplishments in fiscal 1994:
* We sold our first automated filter system to the copper refining
industry.
* Metal HEPA filters were specified for all primary vent filters on the
high-level waste tank farm revamp at the U.S. Department of Energy's Hanford
Site.
* VITROPORE ceramic blowback filters were successfully tested at the
Rocky Flats Environmental Technology Site in the Accelerated Life Tester. The
test is designed to instill confidence in incineration as a means of waste
disposal.
* PASS sold the first of nine catalyst recovery filters for maleic
anhydride manufacture in China.
* The first backwash assembly to filter produced water in a waterflood
operation was sold in China.
* We successfully sold our pleated polyamide backwash filter elements to
the nuclear power industry.
In the coalescer part of our separations business, Pall's AquaSep
filter, our new liquid/liquid coalescer, was introduced and received immediate
acceptance both in the U.S. and Europe. Our PhaseSep coalescer was tested
successfully in the removal of water from hydrogen peroxide.
Our Stratapac filter is designed for sand control in oil and gas
wells. The control of sand has always been one of the most critical and costly
problems in well completion. Our Stratapac filters were developed to provide
improved mechanical resistance by maintaining integrity even after collapse or
bending, improved resistance to erosion from formation sand, high flow
characteristics that yield low-pressure drop, and high resistance to plugging.
(FIGURE 26)
30
<PAGE> 16
This technology has been operating in production wells at several
major oil and gas producers for several months. Results to date have been far
better than anticipated, with an increase in oil production at one offshore
site of over 65%. Success in these trials is expected to fuel a worldwide
demand for Stratapac filters.
We will continue our practice of introducing new products to help
nuclear power generation plants reduce their radiation levels. This is a
critical area for these plants, which are under constant pressure from the U.S.
Nuclear Regulatory Commission to reduce plant radiation levels as a way to
improve worker safety. For example, our "fines" program has enabled the nuclear
industry to reduce its level of filtration from 5 microns down to 0.2 microns.
As a next step in meeting our customers' needs, we will introduce a 0.1 micron
filter in fiscal 1995. We expect customer acceptance of this ongoing approach
to finer levels of filtration to continue to grow significantly.
FACTORS FUELING GROWTH
New orders in the power generation market will advance as the GE/Pall alliance
takes hold. We have demonstrated success with Septra backwashable,
semidisposable pleated elements in the U.S. and Europe, and expect to do the
same in Japan in fiscal 1995.
We also expect the U.S. Department of Energy (DOE) to place
substantial orders for UltraMet air filters for its waste tank farms in 1995.
Nearly 100 tanks await treatment, with a DOE target for full completion by
1996. We believe we are the only approved vendor who can meet the project's
strict specifications.
Environmental issues will continue to increase filter sales to
refineries in 1995. Slurry oil filtration is driven by the need to eliminate
the costs associated with the disposal of hazardous wastes. In the Asian
markets, the added driver is the need for "cleaner" fuel for marine diesels.
This requirement has led refiners to invest in new or upgraded hydrotreaters,
which remove
(FIGURE 27)
31
<PAGE> 17
(FIGURE 28)
sulfur from fuel. To reduce operating costs and improve catalyst bed operation,
we are working with refiners to upgrade existing systems. This involves
retrofitting competitive filters with our superior elements.
OUTLOOK FOR FISCAL 1995 AND BEYOND
We expect top-line growth within these markets to exceed the corporate
average. PASS now has more than 223 active proposals with a sales potential of
approximately $100 million, and almost as many other projects nearing the
proposal stage.
In fiscal 1994 approximately 40% of our PASS business stemmed from new
products. This percentage will be closer to 60% in fiscal 1995.
In fiscal 1994, many backwash systems were sold for new applications,
which we plan to pursue thoroughly as they represent large potentials.
Internationally, South America offers significant opportunity for Pall
in fiscal 1995, particularly in Mexico and Argentina, where the vast oil and
gas exploration and refining industry has been denationalized. Venezuela will
also provide strong growth if it can maintain political stability.
In fiscal 1995, we plan important trials of new systems approaches at
nuclear power plants in the U.S., Europe and Japan.
Pall is a major supplier of battery separator membranes for batteries
such as silver oxide cells. New types of batteries under current development
present large opportunities for increased sales.
The use of portable electronic devices such as camcorders, cellular
telephones, laptop computers and electric vehicles is becoming commonplace.
This is driving a revolution in the industry to develop batteries that can be
used for longer periods prior to being recharged.
Pall Corporation's proprietary expertise in substrate manufacture and
surface modification is leading to new battery separators. These membranes
provide battery designers with an effective tool to improve performance.
Clearly, we are aggressively pursuing the many opportunities that
exist in our markets worldwide as we deploy the full range of Pall's resources.
This effort is enabling us to strategically position Pall for the exciting
years ahead.
32
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1994 compared to 1993.
I. RESULTS OF OPERATIONS
Sales for fiscal 1994 increased by 2%. Had foreign exchange rates been
unchanged, sales would have increased by 3%. Price increases were 1% for the
year.
Cost of sales increased to 36.8% of sales in fiscal 1994 from 36.3% in
fiscal 1993, due to product mix. Selling, general and administrative expenses
declined to 37.3% of sales in fiscal 1994 compared to 38.2% in the prior year.
Net interest expense declined to 0.3% of sales in fiscal 1994 from 0.6% in
fiscal 1993.
In the fourth quarter of fiscal 1994, the Company incurred a one-time
charge of $3.7 million ($2.3 million after taxes, 2 cents per share), mainly in
connection with the restructuring of its German operations, and the write-off
of a bad debt in the Aerospace operations.
In the second quarter of fiscal 1993, the Company adopted a
restructuring plan to consolidate its Aeropower operations in anticipation of
further reductions in military spending, and as a result recorded a charge of
$26.7 million ($17.3 million after tax, 15 cents per share).
The Company's pre-tax margin increased to 19.3% in fiscal 1994 from
15.2% in fiscal 1993. Excluding the restructuring and other charges from both
years, the underlying pre-tax margin increased to 19.8% in fiscal 1994 from
19.1% in fiscal 1993.
Excluding the restructuring and other charges from both years, the
Company's effective tax rate was unchanged at 27.0%.
Net earnings for fiscal 1994 increased to $98.9 million from $78.3
million in fiscal 1993. Excluding the restructuring and other charges from both
years, fiscal 1994 earnings would have increased 6% to $101.3 million from
$95.6 million in the prior year.
II. LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased by $21.1 million in fiscal 1994. This
increase resulted principally from changes in foreign currency exchange rates,
and by refinancing current debt with a new 5-year $20 million term loan.
Capital expenditures totalled $73.4 million in fiscal 1994, and
consisted of:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
(in millions) Land & Machinery &
Buildings Equipment Other Total
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Western Hemisphere $30.7 $23.3 $ 3.3 $57.3
Europe 0.8 5.4 7.7 13.9
Asia and Australia 0.5 0.7 1.0 2.2
- ------------------------------------------------------------------------------------------------------------
Total $32.0 $29.4 $12.0 $73.4
============================================================================================================
</TABLE>
The expenditures on land and buildings in the Western Hemisphere were
principally for the establishment of our new Technical Center in Port
Washington, New York.
On August 3, 1993, the Company's Board of Directors authorized a
second program to repurchase shares of its common stock. The Board authorized
the expenditure of up to $30 million, and this program was completed in May
1994, with 1,763,000 shares being purchased.
During the second quarter of fiscal 1994, the Company purchased the
business of its Australian distributor and acquired a license from New Logic
International, Inc. to complement its separations product lines, which
transactions required approximately $12 million in funds.
III. IMPACT OF INFLATION
The Company's financial statements are prepared in accord-ance with traditional
historical accounting systems, and therefore do not reflect the effect of
inflation. The impact of changing prices on the financial statements is not
considered to be significant.
IV. NEW ACCOUNTING STANDARD AND CHANGE IN TAX RATES
In November 1992, the Financial Accounting Standards Board adopted Statement
No. 112 (Employers' Accounting for Postemployment Benefits), effective for
fiscal years beginning after December 15, 1993. The Company will adopt this
statement in fiscal 1995. The effect of adoption will not be material.
On August 10, 1993, President Clinton signed into law the Revenue
Reconciliation Act of 1993, which effectively increased corporate income tax
rates retroactive to January 1, 1993. Additionally, the tax benefits of
manufacturing in Puerto Rico have been reduced for fiscal 1995 and beyond. This
could increase the Company's effective tax rate by 3 percentage points.
33
<PAGE> 19
1993 compared to 1992.
RESULTS OF OPERATIONS
Sales for fiscal 1993 increased by 1/2%. Price increases were 2%, while
decreases due to changes in foreign exchange rates amounted to 1 1/2%.
Cost of sales decreased to 36.3% of sales in fiscal 1993 from 38.3% in
fiscal 1992, principally due to favorable product mix, and to the beneficial
effect of manufacturing in the U.K. for the European markets and in the U.S.
for the Japanese market. Selling, general and administrative expenses
increased to 38.2% of sales in fiscal 1993 from 36.9% in fiscal 1992, which
increase was largely due to flat sales, as the actual increase in dollars was
just 3.8%. Research and development increased to 5.8% of sales in fiscal 1993
from 5.1% in fiscal 1992. Net interest expense decreased to 0.6% of sales in
fiscal 1993 from 0.8% in fiscal 1992.
In the second quarter of fiscal 1993, the Company adopted a
restructuring plan to allow for the consolidation of its Aeropower operations
in anticipation of further reductions in military spending. Consolidation was
expected to enable greater efficiency in manufacturing and certain overhead
functions, despite lower levels of demand. The plan consisted principally of
downsizing and further integrating the military portion of the Aeropower
business with the Industrial Fluid Power business. As a result, fiscal 1993
earnings reflect a pre-tax charge of $26.7 million ($17.3 million after taxes,
15 cents per share) for the restructuring plan and also to write off certain
excess corporate leasehold improvements. The charge included $11.5 million of
inventory write-offs, $9.5 million of machinery and equipment write-offs, $3.6
million for severance and other expenses, and $2.1 million for the write-off of
excess corporate leasehold improvements.
In the first quarter of fiscal 1992, the Company had incurred a charge
of $3.7 million (2 cents per share) as a result of the settlement of certain
promissory notes received in connection with the sale of the air dryer business
in a leveraged buy-out which was reported in fiscal 1988.
The Company's pre-tax margin decreased to 15.2% of sales in 1993 from
18.4% in 1992. Excluding the restructuring and other charges from 1993, and the
loss on settlement of notes from 1992, the underlying pre-tax margin increased
to 19.1% in 1993 from 19.0% in 1992.
The Company's effective tax rate, before the effect of the
restructuring and other charges and of the item mentioned in the next
paragraph, decreased to 27.0% in 1993 from 28.5% in 1992, principally as a
result of reduced corporation income tax rates in Germany and to increased
benefits of the Company's operations in Puerto Rico.
In fiscal 1992, the Company adopted Financial Accounting Standards
Board Statement No. 109 (Accounting for Income Taxes) and, as a result,
realized an increase in earnings of $2.5 million (2 cents per share).
Net earnings for fiscal 1993 decreased to $78.3 million, from $92.7
million in 1992. Before giving effect to the restructuring and other charges in
1993, and to the loss on settlement of notes and the effect of adopting new
rules for accounting for income taxes in 1992, fiscal 1993 earnings would have
increased 3% to $95.6 million from $92.7 million in 1992.
34
<PAGE> 20
CONSOLIDATED STATEMENTS OF EARNINGS
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended
- ---------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) JULY 30, 1994 July 31, 1993 August 1, 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Net sales $700,848 $687,222 $685,068
Interest earned 5,274 4,713 5,396
- ---------------------------------------------------------------------------------------------------------------------
Total Revenues 706,122 691,935 690,464
- ---------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 257,624 249,629 262,076
Selling, general and administrative expenses 261,289 262,598 253,030
Research and development 41,283 40,036 34,787
Interest expense 7,132 8,683 10,680
Restructuring and other charges 3,696 26,710 3,690
- ---------------------------------------------------------------------------------------------------------------------
Total Costs and Expenses 571,024 587,656 564,263
- ---------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND THE
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 135,098 104,279 126,201
Provisions for income taxes 36,176 25,967 35,968
- ---------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE THE CUMULATIVE
EFFECT OF AN ACCOUNTING CHANGE 98,922 78,312 90,233
Cumulative effect of a change in accounting for income taxes -- -- 2,475
- ---------------------------------------------------------------------------------------------------------------------
NET EARNINGS $ 98,922 $ 78,312 $ 92,708
=====================================================================================================================
EARNINGS PER SHARE:
Earnings before the cumulative effect of an accounting change $ .86 $ .68 $ .77
Cumulative effect of a change in accounting for income taxes -- -- .02
- ---------------------------------------------------------------------------------------------------------------------
Net Earnings Per Share $ .86 $ .68 $ .79
- ---------------------------------------------------------------------------------------------------------------------
AVERAGE SHARES OUTSTANDING 115,678 115,856 116,928
=====================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
INDEPENDENT AUDITORS' REPORT
Board of Directors
PALL CORPORATION
We have audited the accompanying consolidated balance sheets of Pall
Corporation and subsidiaries as of July 30, 1994 and July 31, 1993 and the
related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended July 30,1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Pall
Corporation and subsidiaries as of July 30, 1994 and July 31, 1993 and the
results of their operations and their cash flows for each of the years in the
three-year period ended July 30, 1994, in conformity with generally accepted
accounting principles.
As discussed in the Income Taxes note to the consolidated financial
statements, the Company adopted Statement of Financial Accounting Standards No.
109 (Accounting for Income Taxes) on a prospective basis in fiscal year 1992.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Jericho, New York
September 7, 1994
35
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) JULY 30, 1994 July 31, 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $38,224 $42,652
Short-term investments 50,800 64,400
Accounts receivable, net of allowance for doubtful accounts
of $4,776 and $3,368, respectively 207,159 197,464
Inventories 138,382 127,525
Deferred income taxes 17,178 19,198
Prepaid expenses 15,346 14,384
Other current assets 3,336 4,665
- ----------------------------------------------------------------------------------------------------------------
Total Current Assets 470,425 470,288
- ----------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT:
Land 25,026 24,716
Buildings and improvements 231,342 196,238
Machinery and equipment 308,409 271,829
Furniture and fixtures 44,215 39,131
Transportation equipment 11,637 12,088
- ----------------------------------------------------------------------------------------------------------------
620,629 544,002
Less: Accumulated depreciation and amortization 223,012 186,382
- ----------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment, Net 397,617 357,620
- ----------------------------------------------------------------------------------------------------------------
OTHER ASSETS 91,537 74,365
- ----------------------------------------------------------------------------------------------------------------
Total $959,579 $902,273
================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks $112,034 $125,054
Accounts payable 40,401 36,998
Accrued liabilities:
Salaries and commissions 24,031 20,002
Payroll taxes 5,185 5,298
Income taxes 33,019 33,763
Interest 1,232 505
Pension and profit sharing plans 11,014 8,544
Other 16,437 21,395
- ----------------------------------------------------------------------------------------------------------------
90,918 89,507
Current portion of long-term debt 2,819 16,916
Dividends payable 10,667 9,285
- ----------------------------------------------------------------------------------------------------------------
Total Current Liabilities 256,839 277,760
LONG-TERM DEBT, NET OF CURRENT PORTION 54,097 24,540
DEFERRED INCOME TAXES 31,450 28,673
OTHER NON-CURRENT LIABILITIES 29,987 28,422
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities 372,373 359,395
- ----------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock, par value $.10 and $.25 per share, respectively;
500,000 and 200,000 shares authorized, respectively;
117,351 shares issued 11,735 29,338
Capital in excess of par value 53,769 36,166
Retained earnings 572,388 524,407
Treasury stock, at cost (1994 -- 2,032 shares,
1993 -- 1,288 shares) (35,144) (24,963)
Foreign currency translation adjustment (1,816) (12,861)
Minimum pension liability adjustment (4,711) (4,996)
Stock option loans (8,432) (4,213)
Unrealized losses on investments (583) --
- ----------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 587,206 542,878
- ----------------------------------------------------------------------------------------------------------------
Total $959,579 $902,273
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE> 22
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
(In thousands) Foreign
Capital in Currency
Years Ended August 1, 1992, Common Excess of Retained Treasury Translation
July 31, 1993, and July 30,1994 Stock Par Value Earnings Stock Adjustment
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT
AUGUST 3, 1991 $14,605 $45,780 $423,869 $ -- $ 3,744
Net earnings 92,708
Cash dividends declared (30,075)
Three-for-two stock split
(including $25 paid for
fractional shares) 7,317 (7,342)
Issuance of stock pursuant
to exercise of stock options,
329 shares 82 5,088 (618) 1,313
Purchase of 1,357 shares
of common stock (35,066)
Foreign currency translation
adjustment 28,274
Change in stock option loans
- --------------------------------------------------------------------------------------------------
BALANCE AT
AUGUST 1, 1992 22,004 43,526 485,884 (33,753) 32,018
Net earnings 78,312
Cash dividends declared (35,642)
Four-for-three stock split
(including $26 paid for
fractional shares) 7,334 (7,360)
Issuance of stock pursuant
to exercise of stock options,
402 shares (4,147) 8,790
Foreign currency translation
adjustment (44,879)
Minimum pension liability
adjustment
Change in stock option loans
- --------------------------------------------------------------------------------------------------
BALANCE AT
JULY 31, 1993 29,338 36,166 524,407 (24,963) (12,861)
Net earnings 98,922
Cash dividends declared (41,336)
Reduction of par value from
$.25 per share to $.10
per share (17,603) 17,603
Issuance of stock pursuant
to exercise of stock options,
1,040 shares (9,605) 20,009
Purchase of 1,776 shares
of common stock (30,190)
Foreign currency translation
adjustment 11,045
Minimum pension liability
adjustment
Change in stock option loans
Unrealized losses on
investments
- --------------------------------------------------------------------------------------------------
BALANCE AT
JULY 30, 1994 $11,735 $53,769 $572,388 $(35,144) $(1,816)
==================================================================================================
<CAPTION>
- ------------------------------------------------------------------------------------------
(In thousands) Minimum
Pension Stock Unrealized Total
Years Ended August 1, 1992, Liability Option Losses on Stockholders'
July 31, 1993, and July 30,1994 Adjustment Loans Investment Equity
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT
AUGUST 3, 1991 $ -- $(2,859) $ -- $485,139
Net earnings 92,708
Cash dividends declared (30,075)
Three-for-two stock split
(including $25 paid for
fractional shares) (25)
Issuance of stock pursuant
to exercise of stock options,
329 shares 5,865
Purchase of 1,357 shares
of common stock (35,066)
Foreign currency translation
adjustment 28,274
Change in stock option loans (1,225) (1,225)
- ------------------------------------------------------------------------------------------
BALANCE AT
AUGUST 1, 1992 -- (4,084) -- 545,595
Net earnings 78,312
Cash dividends declared (35,642)
Four-for-three stock split
(including $26 paid for
fractional shares) (26)
Issuance of stock pursuant
to exercise of stock options,
402 shares 4,643
Foreign currency translation
adjustment (44,879)
Minimum pension liability
adjustment (4,996) (4,996)
Change in stock option loans (129) (129)
- ------------------------------------------------------------------------------------------
BALANCE AT
JULY 31, 1993 (4,996) (4,213) -- 542,878
Net earnings 98,922
Cash dividends declared (41,336)
Reduction of par value from
$.25 per share to $.10
per share --
Issuance of stock pursuant
to exercise of stock options,
1,040 shares 10,404
Purchase of 1,776 shares
of common stock (30,190)
Foreign currency translation
adjustment 11,045
Minimum pension liability
adjustment 285 285
Change in stock option loans (4,219) (4,219)
Unrealized losses on
investments (583) (583)
- ------------------------------------------------------------------------------------------
BALANCE AT
JULY 30, 1994 $(4,711) $(8,432) $(583) $587,206
==========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE> 23
CONSOLIDATED STATEMENTS OF CASH FLOWS
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
Years Ended
- -------------------------------------------------------------------------------------------------------------------
(In thousands) JULY 30, 1994 July 31, 1993 August 1, 1992
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net earnings $98,922 $78,312 $92,708
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization of property, plant and
equipment 36,804 35,188 34,360
Amortization of intangibles 2,737 1,807 1,922
Restructuring and other charges 3,696 23,110 3,690
Deferred income taxes 4,406 (4,289) (1,113)
Provision for doubtful accounts 1,033 1,048 1,013
Cumulative effect of a change in accounting for income taxes -- -- (2,475)
Changes in operating assets and liabilities:
Accounts receivable (5,354) (14,245) (20,603)
Inventories (7,284) (2,827) 5,709
Prepaid expenses (640) (3,162) (1,050)
Other assets (4,848) (2,433) (4,954)
Accounts payable 2,285 (829) (2,392)
Accrued expenses (2,302) 3,800 7,310
Income taxes payable (1,418) (4,860) 8,347
Other liabilities 1,680 3,945 2,796
- -------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 129,717 114,565 125,268
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (73,354) (62,582) (56,174)
Disposals of fixed assets 1,942 3,059 5,066
Short-term investments 13,600 9,952 (24,521)
Acquisitions of license and of business of Australian distributor (11,333) -- --
Benefits protection trust (2,567) (7,072) (6,100)
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (71,712) (56,643) (81,729)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net short-term borrowings (14,241) 14,253 32,118
Long-term borrowings 31,165 5,358 19,020
Payments on long-term debt (17,297) (35,749) (18,087)
Net proceeds from exercise of stock options 6,185 4,488 4,615
Dividends paid (39,954) (26,357) (30,075)
Treasury stock (30,190) -- (35,066)
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED BY FINANCING ACTIVITIES (64,332) (38,007) (27,475)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOW FOR YEAR (6,327) 19,915 16,064
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 42,652 26,977 9,238
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1,899 (4,240) 1,675
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $38,224 $42,652 $26,977
===================================================================================================================
SUPPLEMENTAL DISCLOSURES
Interest paid (net of amount capitalized) $6,292 $10,379 $11,408
Income taxes paid (net of refunds) 32,670 34,316 33,206
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
38
<PAGE> 24
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(In thousands) FISCAL 1994 Fiscal 1993 Fiscal 1992
AMOUNT % CHANGE Amount % Change Amount % Change
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS:
Health Care 351,849 0 353,197 7 331,552 24
Aeropower 179,297 2 176,123 -14 204,721 -12
Fluid Processing 169,702 7 157,902 6 148,795 -5
------- ------- -------
Total 700,848 2 687,222 0 685,068 4
- ------------------------------------------------------------------------------------------------------
OPERATING PROFIT:
Health Care 115,228(a) -1 115,992(b) 5 110,636 37
Aeropower 36,487(a) 126 16,129(b) -63 43,905 -27
Fluid Processing 26,784(a) 35 19,785(b) 30 15,179(c) -18
------- ------- -------
Subtotal 178,499 18 151,906 -10 169,720 6
Interest income 5,274 12 4,713 -13 5,396 -12
Interest expense (7,132) -18 (8,683) -19 (10,680) -32
General corporate expenses (41,543) -5 (43,657) 14 (38,235) 12
------- ------- -------
Total 135,098 30 104,279 -17 126,201 9
- ------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS:
Health Care 369,352 5 350,832 2 343,737 22
Aeropower 169,433 2 166,683 -17 199,807 2
Fluid Processing 211,487 5 201,115 2 197,684 15
------- ------- -------
Subtotal 750,272 4 718,630 -3 741,228 14
Corporate 209,307 14 183,643 7 171,648 25
------- ------- -------
Total 959,579 6 902,273 -1 912,876 16
- ------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES:
Health Care 26,284 26,688 26,060
Aeropower 5,568 6,800 8,048
Fluid Processing 14,181 13,886 13,811
------- ------- -------
Subtotal 46,033 47,374 47,919
Corporate 27,321 15,208 8,255
------- ------- -------
Total 73,354 62,582 56,174
- ------------------------------------------------------------------------------------------------------
DEPRECIATION:
Health Care 16,446 15,156 13,804
Aeropower 7,326 7,924 8,797
Fluid Processing 10,230 9,624 8,778
------- ------- -------
Subtotal 34,002 32,704 31,379
Corporate 2,802 2,484 2,981
------- ------- -------
Total 36,804 35,188 34,360
======================================================================================================
</TABLE>
(a) Includes a pre-tax charge of $3,696 due principally to the restructuring
of the German operations and to the write-off of a bad debt in the
Aerospace operations (Health Care - $1,703, Aeropower - $1,503, Fluid
Processing - $490).
(b) Includes a pre-tax charge of $24,610 representing principally the cost of
downsizing and further integrating the military portion of the Aeropower
business with the Industrial Fluid Power business (Health Care - $2,578,
Aeropower - $20,291, Fluid Processing - $1,741).
(c) Includes a pre-tax charge of $3,690 from the settlement of certain
promissory notes received in connection with the sale of the Air Dryer
business in a leveraged buy-out reported in fiscal 1988.
39
<PAGE> 25
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
(In thousands) FISCAL 1994 Fiscal 1993 Fiscal 1992
AMOUNT % CHANGE Amount % Change Amount % Change
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS:
Western Hemisphere 302,287 1 300,440 -1 303,655 6
Europe 279,423 -4 289,586 -2 294,764 1
Asia and Australia 119,138 23 97,196 12 86,649 12
------- ------- -------
Total 700,848 2 687,222 0 685,068 4
- ------------------------------------------------------------------------------------------------------
TRANSFERS BETWEEN GEOGRAPHIC AREAS:
Western Hemisphere 61,679 52,832 47,829
Europe 10,461 8,052 10,338
Asia and Australia 1,809 1,732 1,853
------- ------- -------
Total 73,949 62,616 60,020
- ------------------------------------------------------------------------------------------------------
TOTAL SALES:
Western Hemisphere 363,966 3 353,272 1 351,484 6
Europe 289,884 -3 297,638 -2 305,102 -1
Asia and Australia 120,947 22 98,928 12 88,502 12
Eliminations (73,949) (62,616) (60,020)
------- ------- -------
Total 700,848 2 687,222 0 685,068 4
- ------------------------------------------------------------------------------------------------------
OPERATING PROFIT:
Western Hemisphere 89,898(a) 58 57,020(b) -28 79,372(c) 17
Europe 74,707(a) -12 84,578(b) 5 80,297(c) -7
Asia and Australia 13,834 8 12,788(b) 37 9,344 41
Eliminations 60 (2,480) 707
------- ------- -------
Subtotal 178,499 18 151,906 -10 169,720 6
Interest income 5,274 12 4,713 -13 5,396 -12
Interest expense (7,132) -18 (8,683) -19 (10,680) -32
General corporate expenses (41,543) -5 (43,657) 14 (38,235) 12
------- ------- -------
Total 135,098 30 104,279 -17 126,201 9
- ------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS:
Western Hemisphere 375,970 2 369,793 3 358,534 3
Europe 275,219 4 265,199 -16 315,514 28
Asia and Australia 112,873 16 97,404 24 78,538 17
Eliminations (13,790) (13,766) (11,358)
------- ------- -------
Subtotal 750,272 4 718,630 -3 741,228 14
Corporate 209,307 14 183,643 7 171,648 25
------- ------- -------
Total 959,579 6 902,273 -1 912,876 16
======================================================================================================
</TABLE>
(a) Includes a pre-tax charge of $3,696 due principally to the restructuring
of the German operations and to the write-off of a bad debt in the
Aerospace operations (Western Hemisphere - $2,301, Europe - $1,395).
(b) Includes a pre-tax charge of $24,610 representing principally the cost of
downsizing and further integrating the military portion of the Aeropower
business with the Industrial Fluid Power business (Western Hemisphere -
$19,675, Europe - $4,606, Asia and Australia - $329).
(c) Includes a pre-tax charge of $3,690 from the settlement of certain
promissory notes received in connection with the sale of the Air Dryer
business in a leveraged buy-out reported in fiscal 1988 (Western
Hemisphere - $2,466, Europe - $1,224).
Export sales to unaffiliated customers by the Company's U.S. operations
totalled $28,907 in 1994 ($28,995 in 1993 and $24,134 in 1992). The Company
considers its foreign operations to be of major importance to its future growth
prospects, and does not believe the risk of its foreign business differs
materially from its domestic business, except for the risk of currency
fluctuations.
Transfers between geographic areas are generally priced on the basis
of a mark-up of manufacturing costs, to achieve an appropriate sharing of the
profit between the parties.
40
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS 1994, 1993, AND 1992
ACCOUNTING POLICIES
Fiscal Year:
The Company's fiscal year ends on the Saturday closest to July 31, except that
the Company's foreign subsidiaries are on a July 31 fiscal year. The years
ended July 30, 1994, July 31, 1993 and August 1, 1992 each comprise 52 weeks.
Basis of Consolidation:
The statements of Pall Corporation are presented in consolidation with its
subsidiaries, all of which are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.
Translation of Foreign Currencies:
The financial statements of the foreign companies for the three years have been
translated into United States dollars at exchange rates as follows: (i) balance
sheet accounts at year-end rates, and (ii) income statement accounts at
weighted average exchange rates. Translation gains and losses are reflected in
shareholders' equity, while transaction gains and losses are reflected in
income. Transaction losses in the amounts of $348,000, $25,000 and $298,000
were incurred in fiscal years 1994, 1993 and 1992, respectively.
The equity of, and advances to, foreign subsidiaries totalled
$249,154,000 and $249,028,000 at July 30, 1994 and July 31, 1993, respectively.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less,
other than its investments in Puerto Rico, to be cash equivalents. Cash
equivalents totalled $17,703,000 and $16,382,000 at July 30, 1994 and July 31,
1993, respectively. The Company holds all cash equivalents until maturity.
Short-Term Investments:
Short-term investments consist principally of certificates of deposit, time
deposits and repurchase agreements secured by government obligations, and are
carried at cost which approximates fair value. The Company holds all short-term
investments until maturity.
Inventories:
Inventories are valued at the lower of cost (principally on the first-in,
first-out method) or market.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation of plant and
equipment is provided over the estimated useful lives of the respective assets,
principally on the straight-line basis.
Expenditures for additions, major renewals and betterments are
capitalized, and expenditures for maintenance and repairs are charged to
earnings as incurred.
Patents and Trademarks:
Costs related to patents and trademarks are amortized on a straight-line basis
over the estimated useful lives.
Income Taxes:
In 1992, the Company adopted Statement of Financial Accounting Standards No.
109 (Accounting for Income Taxes), which requires recognition of deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the years in which the
differences are expected to reverse.
Earnings Per Share:
Earnings per share was computed based on the average number of shares
outstanding. Stock options were excluded from the computation since they were
not materially dilutive during 1994, 1993 or 1992. (See "Common Stock - Stock
Splits")
Capitalized Interest:
Interest in the amounts of $1,641,000 in 1994, $748,000 in 1993 and $1,220,000
in 1992 was capitalized. Such amounts were computed by applying the effective
interest rate on the borrowing to the accumulated expenditures incurred.
Reclassifications:
Certain prior year amounts have been reclassified to conform with current year
classifications.
RESTRUCTURING AND OTHER CHARGES
In the second quarter of fiscal 1993, the Company adopted a restructuring plan
to allow for the consolidation of its Aeropower operations due to reductions in
military spending. Consolidation was expected to enable greater efficiency in
manufacturing and certain overhead functions, despite lower levels of demand.
The plan consisted principally of downsizing and further integrating the
military portion of the Aeropower business with the Industrial Fluid Power
business.
As a result, fiscal 1993 earnings reflect a pre-tax charge of
$26,710,000 ($17,310,000 after taxes, 15 cents per share) for the restructuring
plan and also to write-off certain excess corporate leasehold improvements. The
charge included $11,530,000 of inventory write-offs, $9,476,000 of machinery
and equipment write-offs, $3,604,000 for severance and other expenses, and
$2,100,000 for the write-off of excess corporate leasehold improvements.
In the fourth quarter of fiscal 1994, the Company recorded a one-time
charge of $3,696,000 pre-tax ($2,332,000 after taxes, 2 cents per share), due
principally to the restructuring of the German operations and to the write-off
of a bad debt in the Aerospace operations.
41
<PAGE> 27
INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
(in thousands) JULY 30, July 31,
1994 1993
- -----------------------------------------------------------
<S> <C> <C>
Raw materials and components $58,999 $53,549
Work-in-process 12,737 14,075
Finished goods 66,646 59,901
- -----------------------------------------------------------
Total inventory $138,382 $127,525
===========================================================
</TABLE>
OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------
(in thousands) JULY 30, July 31,
1994 1993
- -----------------------------------------------------------
<S> <C> <C>
Patents and trademarks, net of
amortization $34,332 $26,603
Benefits protection trust 24,646 23,767
Prepaid pension expenses 8,272 6,631
Intangible pension assets 3,247 3,319
Goodwill 6,087 --
Other 14,953 14,045
- -----------------------------------------------------------
Total $91,537 $74,365
===========================================================
</TABLE>
Patents and trademarks include costs related to successfully defending certain
Pall patents, and expenditures made to register new patents and trademarks, as
well as paid-up licenses in respect of third party patents.
The benefits protection trust was established for the purpose of
satisfying certain previously unfunded pension obligations, in the event of a
change of control of the Company. The July 30, 1994 and July 31, 1993 balance
sheets reflect related liabilities in the amounts of $26,999,000 and
$25,494,000, respectively. The trust primarily holds investments in U.S.
government obligations and debt obligations of corporations with high credit
ratings. Investments are carried at fair value. Unrealized gains and losses are
reported as a separate component of stockholders' equity, until realized.
Realized gains and losses are recognized in earnings upon sale. The Company
considers investments held in the trust to be available-for-sale, based upon
certain investment guidelines. Contractual maturity dates of U.S. government
obligations and of corporate obligations range from 1995-2003 and 1997- 2003,
respectively. Pertinent information related to the trust follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C>
Company contributions $2,567 $7,072 $6,100
Total purchases (excluding
above contributions) 33,896 11,339 28,240
Total proceeds from sales 34,309 10,455 29,268
Net (losses) gains recognized (157) 120 324
===================================================================
</TABLE>
Prepaid pension expenses represent the non-current amounts arising from the
excess of cumulative employer contributions and earnings thereon, over accrued
net pension expenses.
Intangible pension assets represent, for certain domestic pension
arrangements, the excess of unfunded accumulated benefits over unrecognized
prior service costs. The July 30, 1994 and July 31, 1993 balance sheets reflect
additional long-term pension liabilities of $10,489,000 and $10,889,000,
respectively and a reduction in stockholders' equity, net of deferred tax
benefits, of $4,711,000 and $4,996,000, respectively.
Goodwill represents the cost in excess of the net assets acquired of
the Company's former distributor in Australia, and is being amortized on a
straight-line basis over 15 years.
SHORT-TERM DEBT
The Company had short-term investments in Puerto Rico of $50,800,000 at July
30, 1994 ($64,400,000 at July 31, 1993), at the same time that it had bank
borrowings of $112,034,000 ($125,054,000 at July 31, 1993) outside of Puerto
Rico.
Pertinent information with respect to short-term bank borrowings
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C>
Average month-end
borrowings $132,252 $112,950 $187,984
Weighted average interest
rate during the year 3.5% 3.8% 5.3%
Highest level of borrowing
at any month-end during
the year $167,234 $131,506 $120,927
Weighted average interest
rate at year-end 4.2% 3.3% 4.0%
===================================================================
</TABLE>
At July 30, 1994, the Company and its subsidiaries had lines of credit
totalling approximately $370 million, of which $112 million had been drawn.
Such lines of credit do not represent legal commitments on the parts of the
banks and no formal compensating balance requirements relate to them.
LONG-TERM DEBT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(in thousands) AT JULY 30, At July 31,
1994 1993
- -------------------------------------------------------------------
<S> <C> <C>
Bank loans in Japan, due in
installments through 1999 $27,858 $28,912
7.23% term loan, due on
June 30, 1999 20,000 --
Industrial development bonds, due in
varying amounts through the year 1996,
with interest at 63% and 67% of prime
rates 4,760 7,700
Capitalized leases, 4.65% to 16.5% due in
varying amounts through 2005 4,298 4,844
- -------------------------------------------------------------------
Total long-term debt 56,916 41,456
Less: current portion 2,819 16,916
- -------------------------------------------------------------------
Long-term debt, net of
current portion $54,097 $24,540
===================================================================
</TABLE>
42
<PAGE> 28
The Company's Japanese subsidiary has entered into loan arrangements with three
banks, in the total amount of 2.79 billion Yen ($27.9 million). The loans are
being amortized through the year 1999, and bear interest at rates between 2.7%
and 4.4%.
A subsidiary of the Company has entered into agreements with two
industrial development agencies for the financing of building and machinery
acquisitions and building renovations. The payments being made by the Company
are in the form of rent payments, equal in amount to the principal and interest
on the bonds. Upon final payment of the bonds, the Company will reacquire the
properties for a nominal price. The transactions have been accounted for as
financings and the future rent payments net of interest are treated as debt on
the balance sheet.
The aggregate annual maturities of long-term debt during the fiscal
years 1995 through 1999 are approximately as follows: 1995, $2,819,000; 1996,
$6,317,000; 1997, $14,734,000; 1998, $449,000; and 1999, $31,349,000.
INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No. 109
(Accounting for Income Taxes) as of the beginning of fiscal year 1992. The
cumulative effect of this change in accounting for income taxes of $2,475,000
was reported as income in the consolidated statement of earnings for the year
ended August 1, 1992.
The components of earnings before income taxes are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(in thousands) 1994 1993 1992
<S> <C> <C> <C>
Domestic operations $ 62,135 $ 27,365 $ 48,750
Foreign operations 72,963 76,914 77,451
- -------------------------------------------------------------------
Total $135,098 $104,279 $126,201
===================================================================
</TABLE>
The Company and its domestic subsidiaries file a consolidated Federal income
tax return. The provisions for income taxes attributable to income from
continuing operations consist of the following items:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal and Puerto Rico $ 4,229 $ 2,692 $ 9,339
State 350 410 1,271
Foreign 27,191 27,154 26,471
- -------------------------------------------------------------------
Total 31,770 30,256 37,081
- -------------------------------------------------------------------
Deferred:
Federal 4,585 (5,207) (1,353)
State 75 (125) (30)
Foreign (254) 1,043 270
- -------------------------------------------------------------------
Total 4,406 (4,289) (1,113)
- -------------------------------------------------------------------
Total income tax expense $36,176 $25,967 $35,968
===================================================================
</TABLE>
The tax effects of temporary differences and loss carry-forwards that give rise
to significant portions of the net deferred tax liability at July 30, 1994,
July 31, 1993 and August 1, 1992 are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
(in thousands) 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax asset:
Inventories $ 9,221 $13,191 $ 12,129
Pension liabilities 11,325 9,559 5,562
Accrued expenses 2,468 2,561 3,615
Other 4,584 2,874 679
- -------------------------------------------------------------------
Total deferred tax asset 27,598 28,185 21,985
- -------------------------------------------------------------------
Deferred tax liability:
Plant and equipment (39,025) (34,991) (37,453)
Pension assets (1,697) (1,430) (1,848)
Other (1,148) (1,239) (1,796)
- -------------------------------------------------------------------
Total deferred tax
liability (41,870) (37,660) (41,097)
- -------------------------------------------------------------------
Net deferred tax liability $(14,272) $ (9,475) $(19,112)
- -------------------------------------------------------------------
</TABLE>
A reconciliation of the provisions for income taxes from continuing operations
to the statutory Federal income tax rate follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
(in thousands) 1994 1993 1992
- --------------------------------------------------------------------------------------------
% OF % of % of
PRE-TAX Pre-tax Pre-tax
AMOUNT EARNINGS Earnings Earnings
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computed "expected" tax expense $47,284 35.0% 34.6%* 34.0%
Tax benefit of Puerto Rican operations (11,990) (8.9) (10.9) (5.3)
Federal tax credits and other effects (42) -- (0.6) (0.3)
Foreign income and withholding taxes, net
of U.S. foreign tax credits 648 0.5 1.5 (0.6)
State income taxes, net of Federal
income tax benefit 276 0.2 0.3 0.7
- --------------------------------------------------------------------------------------------
Total and effective tax rate $36,176 26.8% 24.9% 28.5%
============================================================================================
</TABLE>
*34.6% was the effective rate which resulted from the change in the Federal
income tax rate from 34% to 35% as of January 1, 1993.
43
<PAGE> 29
United States income taxes have not been provided on the retained earnings of
foreign subsidiaries, which totalled $161,047,000, $118,962,000 and $66,038,000
at July 30, 1994, July 31, 1993 and August 1, 1992, respectively. Foreign
subsidiaries have paid, and are expected to continue to pay, dividends out of
accumulated earnings. Any additional U.S. taxes arising from the repatriation
of such earnings, less applicable credits for taxes paid abroad, would not be
material.
The Company's Puerto Rican subsidiaries are organized as "possessions
corporations" as defined in Section 936 of the Internal Revenue Code. As such,
the earnings of these companies are currently exempt from most U.S. and Puerto
Rican income taxes. Repatriation of these earnings results in Puerto Rican
withholding taxes of no more than 10% being imposed.
COMMON STOCK
Stock Splits:
On November 22, 1991, the Board of Directors declared a three-for-two stock
split effective December 27, 1991. The par value of the new shares issued
totalled $7,317,000, which was transferred from capital in excess of par value
to the common stock account.
On November 20, 1992, the Board of Directors declared a four-for-three
stock split effective December 28, 1992. The par value of the new shares issued
totalled $7,334,000, which was transferred from capital in excess of par value
to the common stock account.
All share and per share data for prior periods presented have been
restated to reflect the stock splits.
Reduction in Par Value and Increase in Number of Authorized Shares:
At the annual meeting held on November 18, 1993, the shareholders approved an
amendment to the Certificate of Incorporation reducing the par value of the
common stock from $.25 per share to $.10 per share, and increasing the number
of authorized shares of common stock from 200 million to 500 million. As a
result of the reduction in par value, the common stock account was reduced by
$17,603,000 and the capital in excess of par value account was increased by the
same amount.
Shareholder Rights Plan:
On November 17, 1989, the Board of Directors adopted a Shareholder Rights Plan.
Under the Plan, each shareholder received a dividend of one right for each
share of the Company's outstanding common stock. Each right entitles the holder
to purchase one share of common stock at an initial exercise price of $60 per
share. Initially, the rights are attached to the common stock and are not
exercisable. The rights become exercisable and will trade separately from the
common stock ten days after any person or group acquires 20% or more of the
Company's outstanding common stock, or ten business days after any person or
group announces a tender offer for 20% or more of the outstanding common stock.
Each right not owned by the acquiror would become exercisable for the number of
shares of common stock of the Company having a market value at that time of
twice the exercise price of the right. Alternatively, the Board of Directors
could exchange the rights not owned by the acquiror for common stock at an
exchange ratio of one share of common stock per right.
The effective date of the rights dividend was December 1, 1989, to
shareholders of record on that date. Such rights are also attached to common
stock issued subsequent to December 1, 1989. The rights will expire on December
1, 1999, unless earlier redeemed by the Company. The rights are redeemable by
the Board of Directors for .33 cents per right at any time until a 20% position
has been acquired in the Company's common stock by a person or group.
Stock Repurchase Programs:
On June 9, 1992, the Company's Board of Directors authorized a program to
repurchase shares of its common stock to fund the Company's stock option
programs. The Board authorized the expenditure of up to $35 million, and the
repurchase program was completed by the end of fiscal year 1992, with 1,357,000
(pre-split) shares being acquired.
On August 3, 1993, the Company's Board of Directors authorized another
program to repurchase shares of its common stock. The Board authorized the
expenditure of up to $30 million, and this second program was completed by the
end of fiscal year 1994, with 1,763,000 shares being acquired.
The shares repurchased under both programs were held in treasury for
use upon the exercise of options granted under the Company's stock option
plans.
Other:
As of July 30, 1994, 6,671,038 shares of common stock of the Company were
reserved for the exercise of stock options. To the extent that the treasury
shares referred to in the preceding paragraphs are used to satisfy option
exercises, these reserved shares will not be issued. At July 30, 1994, the
Company held 2,031,541 treasury shares intended for use upon stock option
exercises.
44
<PAGE> 30
PENSION AND PROFIT SHARING PLANS AND ARRANGEMENTS
Pension Plans:
The Company and its subsidiaries provide substantially all domestic and foreign
employees with pension benefits. Pension costs charged to operations totalled
$8,638,000, $8,818,000 and $4,699,000 in fiscal years 1994, 1993 and 1992,
respectively.
The Company's pension plans provide benefits based on salary and
length of service. Funding policy for domestic plans is in accordance with
ERISA funding standards; for foreign plans, funding is determined by local tax
laws and regulations. Plan assets are invested primarily in common stocks,
bonds and cash instruments. At both July 30, 1994 and July 31, 1993, 48,665
shares of Company common stock were held in the Company's domestic pension
funds.
Net periodic pension cost for these plans in fiscal years 1994, 1993 and 1992
was:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
(in thousands) U.S. Plans Foreign Plans
1994 1993 1992 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $2,651 $3,227 $2,329 $3,582 $3,411 $2,731
Interest cost on projected
benefit obligation 4,851 4,579 3,322 2,635 2,582 2,553
Return on plan assets (763) (2,017) (2,387) (3,854) (4,156) (4,515)
Net amortization and deferrals (1,383) 266 (182) (388) (377) (443)
- -------------------------------------------------------------------------------------------------------
Net periodic pension cost $5,356 $6,055 $3,082 $1,975 $1,460 $ 326
=======================================================================================================
The assumptions used were:
Discount rate 8.25% 7.5% 8.5% 5.5-8.0% 5.5-9.0% 5.5-10.0%
Rate of compensation increase 4.75-5.5% 4.75-5.5% 4.75-5.5% 2.9-5.0% 3.1-6.0% 3.1-8.0%
Long-term rate of return on assets 9.0% 9.0% 9.0% 5.5-8.5% 5.5-9.5% 5.5-10.0%
=======================================================================================================
</TABLE>
The following table presents the plans' funded status and amounts recognized on
the Company's consolidated balance sheets at July 30, 1994 and July 31, 1993:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
U.S. Plans Foreign Plans U.S. Plans Foreign Plans
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands) 1994 1993 1994 1993 1994 1993 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 3,365 $ 3,449 $ 30,023 $ 22,799 $ 52,660 $ 51,175 $ 6,660 $ 4,868
Accumulated benefit obligation 3,590 3,728 30,100 22,867 54,590 53,352 7,680 5,784
Projected benefit obligation 3,590 3,728 33,414 27,408 63,257 63,515 9,974 7,563
Plan assets 4,178 4,200 49,220 40,671 29,111 29,955 6,113 4,890
- ----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation
(in excess of) or less than
plan assets 588 472 15,806 13,263 (34,146) (33,560) (3,861) (2,673)
Unrecognized net (gain) or loss (106) 46 (4,756) (3,599) 12,795 15,248 (1,372) (1,408)
Unrecognized prior service cost 348 368 217 229 2,531 2,905 0 0
Unrecognized net obligation or
(asset) at date of adoption (549) (592) (3,276) (3,556) (1,681) (1,805) 564 562
Additional minimum liability 0 0 0 0 (10,489) (10,889) (178) (115)
- ----------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost (liability)
in the consolidated balance sheet $ 281 $ 294 $7,991 $ 6,337 $(30,990) $(28,101) $ (4,847) $ (3,634)
============================================================================================================================
The assumptions used were:
Discount rate 8.25% 7.5% 5.5-8.0% 5.5-9.0% 8.25% 7.5% 5.5-7.8% 5.5-8.4%
Rate of compensation increase 4.75-5.5% 4.75-5.5% 2.9-4.0% 3.1-6.0% 4.75-5.5% 4.75-5.5% 4.0-5.0% 4.0-5.0%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 31
At July 30, 1994 and July 31, 1993, the Company had recorded additional minimum
pension liabilities of $10,489,000 and $10,889,000, respectively. Related
intangible assets in the amounts of $3,247,000 and $3,319,000, respectively,
are reflected in non-current assets, and reductions in stockholders' equity,
net of deferred tax benefits, of $4,711,000 and $4,996,000, respectively, are
recorded.
The Company and its subsidiaries also participate in certain
multi-employer pension plans for the benefit of its employees who are union
members. Contributions to these plans were $1,307,000, $1,303,000 and
$1,291,000 for fiscal years 1994, 1993 and 1992, respectively.
Profit Sharing Plan:
The Company's profit sharing plan covers substantially all domestic employees
of the Company and its participating subsidiaries, other than those employees
covered by a union retirement plan. The plan provides that, unless the Board of
Directors decides otherwise, the Company contribute annually the lesser of (a)
the amount which, when added to forfeitures for the year, equals 7 1/2% of the
amount by which the consolidated net operating income before income taxes of
the Company and its participating subsidiaries exceeds $500,000, or (b) the
amount deductible for Federal income tax purposes. The provisions for fiscal
years 1994, 1993 and 1992 were $4,683,000, $3,711,000 and $3,988,000,
respectively.
INCENTIVE COMPENSATION PLAN
The plan provides additional compensation to officers and key employees of the
Company and its subsidiaries based upon the achievement of specified management
goals. The Compensation Committee of the Board of Directors establishes the
goals on which the Company's executive officers are compensated, and management
establishes the goals for other covered employees. With respect to the officers
covered by the employment contracts referred to in the Contingencies and
Commitments footnote, any incentive compensation payable to an officer under
the incentive compensation arrangement described in this paragraph is reduced
by the incentive compensation payable under the formula contained in his/her
employment contract. The aggregate amounts charged to expense in connection
with the plan were $5,019,000, $5,289,000 and $6,411,000 in fiscal years 1994,
1993 and 1992, respectively.
STOCK OPTION PLANS
The Company has adopted several plans which provide for the granting of stock
options to officers and employees, at option prices equal to the market price
of the common stock at date of grant, which results in no charge to earnings.
The forms of option adopted provide that the options may not be exercised
within one year from the date of grant, and expire if not completely exercised
within five years from the date of grant. For the most part, in any year after
the first year, the options can be exercised with respect to only up to 25% of
the shares subject to the option, computed cumulatively.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
AT At
JULY 30, July 31,
1994 1993
- -----------------------------------------------------------------
<S> <C> <C>
Options exercisable 1,146,450 1,673,942
Shares available for grant 1,427,633 1,557,836
=================================================================
</TABLE>
Changes in the options outstanding during fiscal years 1992, 1993 and 1994 are
summarized in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Number
of Shares Price per Share
- -----------------------------------------------------------------
<S> <C> <C> <C>
BALANCE - AUGUST 3, 1991 2,147,867 $ 5.12 - $18.66
Fiscal 1992:
Options granted 2,035,000 18.38 - 19.66
Options exercised (582,515) 5.12 - 11.69
Options terminated (18,276) 10.13 - 18.47
- -----------------------------------------------------------------
BALANCE - AUGUST 1, 1992 3,582,076 9.40 - 19.66
Fiscal 1993:
Options granted 49,000 18.25 - 22.31
Options exercised (452,090) 9.40 - 18.38
Options terminated (25,918) 10.13 - 18.38
- -----------------------------------------------------------------
BALANCE - JULY 31, 1993 3,153,068 9.40 - 22.31
Fiscal 1994:
Options granted 3,374,668 15.25 - 19.81
Options exercised (1,039,866) 9.40 - 18.38
Options terminated (244,465) 10.13 - 18.50
- -----------------------------------------------------------------
BALANCE - JULY 30, 1994 5,243,405 9.60 - 22.31
=================================================================
</TABLE>
Since June 1992, the Company has delivered treasury shares upon the exercise of
stock options. The difference between the cost of the treasury shares, on a
weighted average basis, and the exercise price of the options is charged
against retained earnings.
OTHER NON-CURRENT LIABILITIES
This consists primarily of accruals for deferred compensation plans and
arrangements, the benefits of which are, and will continue to be, paid to
covered officers and employees.
46
<PAGE> 32
CONTINGENCIES AND COMMITMENTS
The Company and its subsidiaries are subject to certain legal actions which
arise in the normal course of business. It is management's belief that these
actions will not have a material effect on the Company's consolidated financial
position.
The Company and its subsidiaries lease office and warehouse space,
automobiles, computers and office equipment. Rent expense for all operating
leases amounted to approximately $11,000,000 in 1994, $10,200,000 in 1993 and
$8,700,000 in 1992. Future minimum rental commitments at July 30, 1994 for all
noncancelable operating leases with initial terms exceeding one year are
$6,600,000 in 1995; $5,700,000 in 1996; $4,700,000 in 1997; $1,700,000 in 1998;
$1,500,000 in 1999; and $1,300,000 thereafter.
The Company has employment agreements with its executive officers, the
terms of which expire at various times through July 31, 1999. Such agreements,
which have been revised from time to time, provide for minimum salary levels,
adjusted annually for cost-of-living changes, as well as for incentive bonuses
which are payable if specified management goals are attained. The aggregate
commitment for future salaries at July 30, 1994, excluding bonuses, was
approximately $10,000,000.
FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET
RISKS AND CONCENTRATIONS OF CREDIT RISK
The Company enters into forward exchange contracts, generally with terms of 90
days or less, to manage its foreign currency transaction exposures. Effects of
changes in currency rates on those transactions are therefore minimized and
hedges are accounted for as part of the underlying transactions. The total
value of open contracts at year-end was not material.
The Company sells its products to a diverse group of customers in the
Health Care, Aeropower and Fluid Processing industries throughout the world and
as such does not consider itself exposed to concentration of credit risks.
These risks are further minimized by placing credit limits, ongoing monitoring
of the customers' account balances, and assessment of the customers' financial
strengths.
The Company's cash and cash equivalents and investments are in
high-quality securities placed with a wide array of financial institutions with
high credit ratings. This investment policy limits the Company's exposure to
concentration of credit risks.
The Company considers the fair value of all financial instruments to
be not materially different from their carrying value at year-end.
INFORMATION BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
Specified financial information by industry segment and geographic area for
fiscal years 1994, 1993 and 1992 is summarized on pages 39 and 40 of this
report.
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
(in thousands, except per share data) First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994:
NET SALES $141,874 $169,710 $177,814 $211,450 $700,848
GROSS PROFIT 86,673 105,641 114,585 136,325 443,224
EARNINGS BEFORE INCOME TAXES 15,380 30,598 37,475 51,645(a) 135,098(a)
NET EARNINGS 11,073 22,031 27,817 38,001(a) 98,922(a)
EARNINGS PER SHARE .10 .19 .24 .33(a) .86(a)
1993:
Net sales 148,363 167,460 172,547 198,852 687,222
Gross profit 90,198 104,506 111,693 131,196 437,593
Earnings before income taxes 15,360 2,045(b) 34,962 51,912 104,279(b)
Net earnings 10,982 3,255(b) 24,999 39,076 78,312(b)
Earnings per share .09 .03(b) .22 .34 .68(b)
===================================================================================================
</TABLE>
(a) Includes a pre-tax charge of $3,696 ($2,332 after taxes, 2 cents per
share) due principally to the restructuring of the German operations and
to the write-off of a bad debt in the Aerospace operations.
(b) Includes a pre-tax charge of $26,710 ($17,310 after taxes, 15 cents per
share) representing principally the cost of downsizing and further
integrating the military portion of the Aeropower business with the
Industrial Fluid Power business.
47
<PAGE> 33
GRAPHICAL APPENDIX TO ELECTRONIC DOCUMENT
Figure 1 -- page 12 Pie Chart
Figure 2 -- page 12 Picture of Filters
Figure 3 -- page 13 Picture of Filters
Figure 4 -- page 13 Picture of Filters
Figure 5 -- page 14 Picture of Filters
Figure 6 -- page 15 Pie Chart
Figure 7 -- page 15 Picture of Filters
Figure 8 -- page 16 Pie Chart
Figure 9 -- page 17 Picture of Filters
Figure 10 -- page 17 Picture of Filters
Figure 11 -- page 18 Pie Chart
Figure 12 -- page 18 Picture of Filters
Figure 13 -- page 19 Picture of Filters
Figure 14 -- page 22 Pie Chart
Figure 14 -- page 22 Picture of Filters
Figure 16 -- page 23 Picture of Filters
Figure 17 -- page 24 Pie Chart
Figure 18 -- page 25 Picture of Filters
Figure 19 -- page 25 Picture of Filters
Figure 20 -- page 25 Picture of Filters
Figure 21 -- page 28 Pie Chart
Figure 22 -- page 28 Picture of Filters
Figure 23 -- page 28 Picture of Filters
Figure 24 -- page 29 Picture of Filters
Figure 25 -- page 30 Pie Chart
Figure 26 -- page 30 Picture of Filters
Figure 27 -- page 31 Picture of Filters
Figure 28 -- page 32 Picture of Filters
<PAGE> 1
Exhibit 21
EXHB
SUBSIDIARIES OF PALL CORPORATION
Pall Corporation owns 100% of the outstanding capital stock of
those companies listed below, except where otherwise noted:
<TABLE>
<CAPTION>
State or Other
Jurisdiction of
Incorporation
---------------
<S> <C>
Pall Aeropower Corporation Delaware
Pall Biomedical, Inc. Delaware
Pall International Corporation Delaware
Pall Puerto Rico, Inc. Delaware
Russell Associates Inc. Delaware
Pall (Canada) Limited Canada
Pall Europe Limited England
Pall Biomedizin GmbH (a) Germany
Pall Deutschland GmbH Germany
Pall Filtrationstechnik GmbH (a) Germany
Pall Industrie-Hydraulik GmbH (a) Germany
Pall Luftfahrttechnik APME Deutschland
GmbH (a) Germany
Pall Verwaltungsgesellschaft mbH (b) Germany
Pall Italia S.R.L. Italy
Institut de Formation a la Filtration
Pall (c) France
Pall Biomedical France (c) France
Pall France S.A. France
Pall (Schweiz) A.G. Switzerland
Pall Austria Filter Ges.m.b.H. Austria
Pall Espana S.A. Spain
Pall Poland Limited (a) Poland
Nihon Pall Ltd. Japan
Pall Filtration Pte. Ltd. Singapore
Pall Korea Limited Korea
Pall Filter (Beijing) Co., Ltd. China
Pall Export Sales Corp., Limited (d) Jamaica
</TABLE>
(a) 100% owned by Pall Deutschland GmbH.
(b) 100% owned by Pall Europe Limited.
(c) 100% owned by Pall France S.A.
(d) 100% owned by Pall International Corporation.
All subsidiaries listed above are included in the consolidated
financial statements for the fiscal years 1994, 1993 and 1992,
or, in the case of corporations organized since August 4, 1991,
from the date of incorporation. The list does not include
inactive subsidiaries.
<PAGE> 1
[KPMG PEAT MARWICK LETTERHEAD]
Exhibit 23
Consent of Independent Auditors
-------------------------------
Board of Directors
Pall Corporation:
We consent to incorporation by reference in Pall Corporation's Registration
Statements Nos. 2-89404, 33-25640, 33-44399 and 33-51151 on Form S-8, and
Registration Statement No. 33-39655 on Form S-3, of our reports dated
September 7, 1994, relating to the consolidated balance sheets of Pall
Corporation and subsidiaries as of July 30, 1994 and July 31, 1993 and the
related consolidated statements of earnings, stockholders' equity and cash
flows and related schedules for each of the years in the three-year period
ended July 30, 1994, which reports are incorporated by reference or appear in
this annual report on Form 10-K of Pall Corporation for the fiscal year ended
July 30, 1994.
Our reports refer to the Company's adoption of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes", on a prospective
basis in fiscal year 1992.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Jericho, New York
October 14, 1994
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 1994 FORM 10-K
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-30-1994
<PERIOD-END> JUL-30-1994
<CASH> 38,224
<SECURITIES> 50,800
<RECEIVABLES> 211,935
<ALLOWANCES> 4,776
<INVENTORY> 138,382
<CURRENT-ASSETS> 470,425
<PP&E> 620,629
<DEPRECIATION> 223,012
<TOTAL-ASSETS> 959,579
<CURRENT-LIABILITIES> 256,839
<BONDS> 0
<COMMON> 11,735
0
0
<OTHER-SE> 575,471
<TOTAL-LIABILITY-AND-EQUITY> 959,579
<SALES> 700,848
<TOTAL-REVENUES> 706,122
<CGS> 257,624
<TOTAL-COSTS> 571,024
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,132
<INCOME-PRETAX> 135,098
<INCOME-TAX> 36,176
<INCOME-CONTINUING> 98,922
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98,922
<EPS-PRIMARY> 0.86
<EPS-DILUTED> 0.86
</TABLE>
