<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 29, 1995
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 $2,403,364,000, based upon the closing price on October 2, 1995.
The number of common shares, $.10 par value outstanding of the registrant was
114,443,187 shares on October 2, 1995.
Total number of pages - 179 Exhibit index located on page 18
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement for the 1995 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 29, 1995
are incorporated by reference into items 1, 5, 7 and 8.
<PAGE> 2
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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 and
separations 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 and separations products and of their sale in a wide variety of
markets.
(b) Financial information about industry segments.
Reference is made to page 33 of the registrant's 1995 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 1995 Annual Report to
Shareholders, which are incorporated herein by reference:
Biomedical - pages 18 and 19.
BioSupport - pages 20 and 21.
Pharmaceutical, Biologicals and Bioprocessing - pages 22 and 23.
Bioseparations - pages 24 and 25.
Sales of Health Care products in fiscal 1995 were $396,907,000 or 48% 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
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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 1995 Annual Report to
Shareholders, which are incorporated herein by reference:
Industrial Hydraulics - pages 14 and 15.
Aerospace - pages 16 and 17.
Sales in fiscal 1995 were $212,796,000 or 26% of total sales. Backlog at
July 29, 1995 was $61,456,000, a 27% increase from the prior year backlog of
$48,448,000. The backlog at July 29, 1995 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 1995 Annual Report to
Shareholders, which are incorporated herein by reference:
Microelectronics - pages 6 and 7.
Industrial Processing Group - pages 8 and 9.
Hydrocarbon Processing, Chemical and Polymer - pages 10 and 11.
Pall Advanced Separations Systems - pages 12 and 13.
Sales in this market in fiscal 1995 were $213,120,000 or 26% 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
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(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 $45,142,000 in 1995,
$41,283,000 in 1994 and $40,036,000 in 1993.
(b) There was no one customer to whom sales were made totalling 10% or more
of consolidated sales in fiscal 1995, 1994 or 1993.
(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 29, 1995, the Company employed approximately 6,500 persons.
(d) Financial information about foreign and domestic operations
and export sales.
Reference is made to page 34 of the registrant's 1995 Annual Report to
Shareholders.
<PAGE> 5
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ITEM 2. PROPERTIES.
<TABLE>
<CAPTION>
Size
(square
Location Type Industry Segment feet)
- ------------------ ------------------- ------------------- -------
<S> <C> <C> <C>
OWNED:
Glen Cove, NY Office & laboratory Research Center 65,000
East Hills, NY Office, plant & Executive Office & 317,000
warehouse All Segments
Pt. Washington, NY Office, laboratory All 215,000
& training center
Hauppauge, NY Plant & office Health Care & Fluid 75,000
Processing
Cortland, NY Plants Health Care & Fluid 346,000
Processing
Putnam, CT Plant All 62,000
Pinellas Park, FL Plant Aeropower 152,000
Ft. Myers, FL Plant Aeropower 111,000
New Port Richey, Plant Aeropower 160,000
FL
Fajardo, Puerto Plants Health Care & Fluid 259,000
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 106,000
Processing
Frankfurt, Office & warehouse All 72,000
Germany
Paris, France Office & warehouse All 65,000
Limay, France Warehouse All 23,000
Tsukuba, Japan Plant & laboratory All 78,000
LEASED:
Pt. Washington, NY Laboratory All 19,000
Northborough, MA Plant Health Care & Fluid 35,000
Processing
Toronto, Office & warehouse Health Care & Fluid 12,000
Canada Processing
Frankfurt, Germany Office & warehouse All 46,000
Milan, Italy Office & warehouses All 62,000
Vienna, Austria Office & warehouse All 13,000
Muttenz, Office & warehouse All 7,000
Switzerland
Madrid, Spain Office & warehouse All 28,000
Warsaw, Poland Office All 4,000
Tokyo, Japan Offices All 33,000
Singapore Office & warehouse All 17,000
Seoul, South Korea Office All 7,000
Beijing, China Office & warehouse All 9,000
Melbourne & Sydney, Office, warehouse All 14,000
Australia & laboratory
Hong Kong Office All 2,000
</TABLE>
In the opinion of management, these premises are suitable and adequate to meet
the Company's requirements.
<PAGE> 6
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ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings pending to which the Company or any
of its subsidiaries is a party.
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 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
Reference is made to page 43 of the registrant's 1995 Annual Report to
shareholders.
<PAGE> 7
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ITEM 6. SELECTED FINANCIAL DATA.
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended
---------------------------------------------------
July 29, July 30, July 31, Aug. 1, Aug. 3,
1995(a) 1994(b) 1993(c) 1992(d) 1991
---------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Results of operations:
Net sales $ 822,823 $700,848 $687,222 $685,068 $656,979
Net earnings 118,436 98,922 78,312 92,708 79,921
Earnings per share 1.03 .86 .68 .79 .69
Cash dividends per share .41 .36 .31 .26 .21
Financial position:
Total assets 1,074,922 959,579 902,273 912,876 786,654
Long-term debt 68,814 54,097 24,540 59,003 51,605
</TABLE>
(a) Fiscal 1995 includes a charge of $780 after income taxes ($1,200
pre-tax, 1 cent per share) reflecting the initial effect of the
adoption of Financial Accounting Standards Board Statement
No. 112 (Employers' Accounting for Postemployment Benefits).
(b) 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.
(c) 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.
(d) 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> 8
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Reference is made to pages 27 and 28 of the registrant's 1995 Annual Report
to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to pages 29 to 32 and 35 to 43 of the registrant's 1995
Annual Report to Shareholders.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
None.
<PAGE> 9
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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 1995 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 1995 Position Held Began
- ---------------- ------- -------------------------- -------
<S> <C> <C> <C>
Eric Krasnoff* 43 Chairman and Chief 1986
Executive Officer
Jeremy Hayward-Surry* 52 President and Treasurer - 1989
Chief Financial Officer
Derek T.D. Williams 63 Executive Vice President 1985
and Chief Operating Officer
Donald G.E. Nicholls 60 Executive Vice President 1985
Clifton S. Hutchings 57 Group Vice President 1993
Gerhard Weich 59 Group Vice President 1993
Arnold Weiner 58 Group Vice President 1986
Samuel T. Wortham 48 Group Vice President 1990
Peter S. Cope 41 Senior Vice President 1994
Robert J. Festa 61 Senior Vice President 1991
Akio Satake 58 Senior Vice President 1995
Robert Simkins 51 Senior Vice President 1994
Donald B. Stevens 50 Senior Vice President 1994
Peter Schwartzman 58 Secretary 1972
</TABLE>
* Member of the Executive Committee of the Board of Directors.
None of the persons listed above is related.
Messrs. Krasnoff, Hayward-Surry and Williams are directors
of Pall Corporation.
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 proceedings required
to be disclosed by Item 401(f) of Regulation S-K, during the past five years.
<PAGE> 10
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ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to "Compensation and Other Benefits of Senior Management"
on page 4 of the registrant's Proxy Statement for the 1995 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 21 of the
registrant's Proxy Statement for the 1995 annual meeting of shareholders,
previously filed.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
Disclosure of information relating to delinquent filers required by Item 405
of Regulation S-K is set forth on page 22 of the registrant's Proxy Statement
for the 1995 annual meeting of shareholders, previously filed, and is
incorporated herein by reference.
<PAGE> 11
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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 1995 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 29, 1995, July 30, 1994 and
July 31, 1993 29
Independent Auditors' Report 29
Consolidated Balance Sheets - as at July 29,
1995 and July 30, 1994 30
Consolidated Statements of Stockholders' Equity -
years ended July 29, 1995, July 30, 1994 and
July 31, 1993 31
Consolidated Statements of Cash Flows - years ended
July 29, 1995, July 30, 1994 and July 31, 1993 32
Notes to Consolidated Financial Statements 35-43
</TABLE>
(2) The following schedules are filed herewith:
<TABLE>
<CAPTION>
Schedule Page(s) of
Number Name of Schedule Form 10-K
------- ----------------------------------------- ----------
<S> <C> <C>
II Valuation and qualifying accounts 15
Independent auditors' report on schedules 16
</TABLE>
Schedules not listed above have been omitted either because they are
not applicable or the required information is shown in the financial
statements or in the notes thereto.
<PAGE> 12
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(3) Exhibits filed herewith:
<TABLE>
<CAPTION>
Page
Exhibit of 1995
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, filed as Exhibit 3(i)
to the Registrant's Annual Report on
Form 10-K for the fiscal year ended July
30, 1994 (the "1994 10-K").
3(ii) By-Laws as amended on April 18, 1995. 21- 42
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) Agreement made as of March 17, 1995 with
David B. Pall. 43- 45
10.3*(a) Employment Agreement dated April 1, 1994 with
Eric Krasnoff, filed as Exhibit 10.2 to the
1994 10-K.
10.4*(a) Amendment dated July 11, 1994 to Employment
Agreement dated April 1, 1994 with Eric
Krasnoff, filed as Exhibit 10.3 to the 1994
10-K.
10.5*(a) Employment Agreement dated August 1, 1994
with Jeremy Hayward-Surry, filed as Exhibit
10.4 to the 1994 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> 13
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<TABLE>
<CAPTION>
Page
Exhibit of 1995
Number Description of Exhibit Form 10-K
------- ---------------------------------------- ---------
<S> <C> <C>
10.6*(a) Service Agreement dated March 17, 1992 with
Derek Thomas Donald Williams, filed as
Exhibit 10.21 to the 1992 10-K.
10.7*(a) Service Agreement dated March 17, 1992 with
Donald Guy Edward Nicholls, filed as
Exhibit 10.20 to the 1992 10-K.
10.8*(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").
10.9*(a) Service Agreement dated June 21, 1989
with Gerhard Friedrich Weich, filed as
Exhibit 10.18 to the 1993 10-K.
10.10*(a) Employment Agreement dated February 1, 1992
with Arnold Weiner, filed as Exhibit 10.32
to the 1992 10-K.
10.11*(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.
10.12*(a) Employment Agreement dated February 1, 1992
with Samuel Wortham, filed as Exhibit 10.15
to the 1992 10-K.
10.13*(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.
10.14*(a) Employment Agreement dated August 1, 1994
with Peter Cope, filed as Exhibit 10.13 to
the 1994 10-K.
10.15*(a) Employment Agreement dated August 1, 1994
with Robert Simkins, filed as Exhibit 10.14
to the 1994 10-K.
10.16*(a) Employment Agreement dated February 1, 1992
with Peter Schwartzman, filed as Exhibit
10.33 to the 1992 10-K.
10.17*(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.
</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
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<TABLE>
<CAPTION>
Page
Exhibit of 1995
Number Description of Exhibit Form 10-K
------- ---------------------------------------- ---------
<S> <C> <C>
10.18*(a) Employment Agreement dated September 26,
1994 with Donald B. Stevens, filed as
Exhibit 10.17 to the 1994 10-K.
10.19*(a) Pall Corporation Supplementary Profit-
Sharing Plan as amended and restated,
effective as of August 1, 1993, filed as
Exhibit 10.20 to the 1994 10-K.
10.20(a) Pall Corporation Supplementary Pension Plan
As Amended and Restated Effective August 1,
1995. 46- 73
10.21*(a) Pall Corporation Profit-Sharing Plan, as
amended and restated on September 19, 1994,
filed as Exhibit 10.22 to the 1994 10-K.
10.22*(a) Pall Corporation 1993 Stock Option Plan,
filed as Exhibit 10.22 to the 1993 10-K.
10.23*(a) Pall Corporation 1991 Stock Option Plan,
filed as Exhibit 10.42 to the 1991 10-K.
10.24*(a) Pall Corporation 1988 Stock Option Plan,
as amended through October 8, 1991, filed
as Exhibit 10.32 to the 1991 10-K.
10.25(a) Principal Rules of the Pall Supplementary
Pension Scheme 74-125
13 Annual Report to Shareholders for the year
ended July 29, 1995. 126-177
21 Subsidiaries of Pall Corporation. 178
23 Consent of Independent Auditors. 179
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 29, 1995.
<PAGE> 15
SCHEDULE II
PALL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JULY 29, 1995,
JULY 30, 1994 AND JULY 31, 1993
<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 29, 1995:
Allowance for doubtful
accounts $4,776,000 $ 999,000 $ 767,000 $5,008,000
Year ended July 30, 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
</TABLE>
<PAGE> 16
[KPMG PEAT MARWICK LLP LETTERHEAD]
Independent Auditors' Report on Schedule
The Board of Directors
Pall Corporation:
Under date of September 5, 1995, we reported on the consolidated balance sheets
of Pall Corporation and subsidiaries as of July 29, 1995 and July 30, 1994, and
the related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended July 29, 1995, as
contained in the Company's fiscal 1995 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 1995. In
connection with our audits of the aforementioned consolidated financial
statements, we also have audited the related financial statement schedule as
listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
option on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
As discussed in the Accounting Policies note to the consolidated financial
statements, the Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits" in fiscal year 1995.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Jericho, New York
September 5, 1995
<PAGE> 17
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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 23, 1995
Eric Krasnoff Chief Executive Officer
/s/ Jeremy Hayward-Surry
- ----------------------------------------- President and Treasurer - Chief October 23, 1995
Jeremy Hayward-Surry Financial Officer and Director
/s/ Peter Schwartzman
- ----------------------------------------- Chief Accountant (Chief October 23, 1995
Peter Schwartzman Accounting Officer)
/s/ Abraham Appel
- ----------------------------------------- Director October 23, 1995
Abraham Appel
/s/ Ulric S. Haynes
- ----------------------------------------- Director October 23, 1995
Ulric S. Haynes
/s/ David B. Pall
- ----------------------------------------- Director October 23, 1995
David B. Pall
- ----------------------------------------- Director October , 1995
Chesterfield F. Seibert
/s/ Heywood Shelley
- ----------------------------------------- Director October 23, 1995
Heywood Shelley
/s/ James D. Watson
- ----------------------------------------- Director October 23, 1995
James D. Watson
/s/ Derek T.D. Williams
- ----------------------------------------- Director October 23, 1995
Derek T.D. Williams
</TABLE>
<PAGE> 18
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Page
Exhibit of 1995
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, filed as Exhibit 3(i)
to the Registrant's Annual Report on
Form 10-K for the fiscal year ended July
30, 1994 (the "1994 10-K").
3(ii) By-Laws as amended on April 18, 1995. 21- 42
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) Agreement made as of March 17, 1995 with
David B. Pall. 43- 45
10.3*(a) Employment Agreement dated April 1, 1994 with
Eric Krasnoff, filed as Exhibit 10.2 to the
1994 10-K.
10.4*(a) Amendment dated July 11, 1994 to Employment
Agreement dated April 1, 1994 with Eric
Krasnoff, filed as Exhibit 10.3 to the 1994
10-K.
10.5*(a) Employment Agreement dated August 1, 1994
with Jeremy Hayward-Surry, filed as Exhibit
10.4 to the 1994 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> 19
<TABLE>
<CAPTION>
Page
Exhibit of 1995
Number Description of Exhibit Form 10-K
------- ---------------------------------------- ---------
<S> <C> <C>
10.6*(a) Service Agreement dated March 17, 1992 with
Derek Thomas Donald Williams, filed as
Exhibit 10.21 to the 1992 10-K.
10.7*(a) Service Agreement dated March 17, 1992 with
Donald Guy Edward Nicholls, filed as
Exhibit 10.20 to the 1992 10-K.
10.8*(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").
10.9*(a) Service Agreement dated June 21, 1989
with Gerhard Friedrich Weich, filed as
Exhibit 10.18 to the 1993 10-K.
10.10*(a) Employment Agreement dated February 1, 1992
with Arnold Weiner, filed as Exhibit 10.32
to the 1992 10-K.
10.11*(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.
10.12*(a) Employment Agreement dated February 1, 1992
with Samuel Wortham, filed as Exhibit 10.15
to the 1992 10-K.
10.13*(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.
10.14*(a) Employment Agreement dated August 1, 1994
with Peter Cope, filed as Exhibit 10.13 to
the 1994 10-K.
10.15*(a) Employment Agreement dated August 1, 1994
with Robert Simkins, filed as Exhibit 10.14
to the 1994 10-K.
10.16*(a) Employment Agreement dated February 1, 1992
with Peter Schwartzman, filed as Exhibit
10.33 to the 1992 10-K.
10.17*(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.
</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> 20
<TABLE>
<CAPTION>
Page
Exhibit of 1995
Number Description of Exhibit Form 10-K
------- ---------------------------------------- ---------
<S> <C> <C>
10.18*(a) Employment Agreement dated September 26,
1994 with Donald B. Stevens, filed as
Exhibit 10.17 to the 1994 10-K.
10.19*(a) Pall Corporation Supplementary Profit-
Sharing Plan as amended and restated,
effective as of August 1, 1993, filed as
Exhibit 10.20 to the 1994 10-K.
10.20(a) Pall Corporation Supplementary Pension Plan
As Amended and Restated Effective August 1,
1995. 46- 73
10.21*(a) Pall Corporation Profit-Sharing Plan, as
amended and restated on September 19, 1994,
filed as Exhibit 10.22 to the 1994 10-K.
10.22*(a) Pall Corporation 1993 Stock Option Plan,
filed as Exhibit 10.22 to the 1993 10-K.
10.23*(a) Pall Corporation 1991 Stock Option Plan,
filed as Exhibit 10.42 to the 1991 10-K.
10.24*(a) Pall Corporation 1988 Stock Option Plan,
as amended through October 8, 1991, filed
as Exhibit 10.32 to the 1991 10-K.
10.25(a) Principal Rules of the Pall Supplementary
Pension Scheme 74-125
13 Annual Report to Shareholders for the year
ended July 29, 1995. 126-177
21 Subsidiaries of Pall Corporation. 178
23 Consent of Independent Auditors. 179
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(ii)
PALL CORPORATION
BY-LAWS
(as amended on April 18, 1995)
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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<PAGE> 3
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
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<PAGE> 5
the board who may meet from time to time on notice to all by any 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
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<PAGE> 6
been given to each director as follows: (a) by delivering a copy 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
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<PAGE> 7
certificate of incorporation, or by these by-laws, decide any question brought
before such meeting.
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.
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<PAGE> 8
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 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
-8-
<PAGE> 9
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. 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.
-9-
<PAGE> 10
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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<PAGE> 11
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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<PAGE> 12
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
-12-
<PAGE> 13
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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<PAGE> 14
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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<PAGE> 15
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 the chairman or the president and by the
secretary or an assistant secretary 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 shares and the amount paid therefor shall be
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<PAGE> 16
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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<PAGE> 17
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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<PAGE> 18
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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<PAGE> 19
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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<PAGE> 20
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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<PAGE> 21
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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<PAGE> 1
EXHIBIT 10.2
THIS AGREEMENT is made as of March 17, 1995 between PALL
CORPORATION, a New York Corporation (the "Company"), and DAVID B. PALL
("Executive").
WHEREAS, the parties hereto are parties to a Restated
Employment Agreement dated August 1, 1982 as amended by an Amendment dated March
31, 1992, an Amendment dated December 10, 1992 and an Agreement dated July 31,
1992 (said Restated Employment Agreement as so amended is hereinafter called the
"Agreement"), and
WHEREAS, said Amendment dated March 31, 1992 provides for
medical coverage for Executive and his spouse during his lifetime, so that such
coverage for Executive's spouse would terminate upon his death, and it has now
been decided that the intention of the parties was to have such medical coverage
continue for the lifetime of Executive's spouse irrespective of whether
Executive predeceases his spouse, and the parties desire to amend the Agreement
to carry out their original intention,
NOW, THEREFORE, the parties hereto agree that the Agreement is
hereby further amended by revising the paragraph added to Section 5 by said
Amendment dated March 31, 1992 to read and provide as follows:
"(g) Beginning August 1, 1992, the Company at its sole expense
shall provide "full medical coverage" (as hereinafter defined) for Executive
during his lifetime and for his spouse during her lifetime. As used herein,
"full medical coverage" means coverage which, when taken in conjunction with any
<PAGE> 2
government-financed medical coverage available to Executive and/or his spouse,
will pay or reimburse Executive or his spouse for all "Medical Expenses", which
term as used herein means and includes all costs of doctors, hospitalization and
related services incurred by Executive or his spouse, provided, however, that
neither Executive nor his spouse shall be required to participate in or utilize
any government-financed medical coverage or scheme (i) which does not allow the
participants a free choice of doctors and hospitals or (ii) which is available
only if the participant passes a "means test," i.e., has assets or income below
a specified level. The Company shall have the option of providing such coverage
either through insurance (a group policy or an individual policy, at the
Company's option) or if for any reason such insurance coverage is not available
or is deemed by the Company to be unduly expensive, the Company shall itself pay
or reimburse Executive or his spouse for all Medical Expenses in excess of the
portion thereof paid by any government-financed coverage which Executive or his
spouse, as the case may be, is obligated to utilize under the preceding
provisions of this paragraph. The reimbursement provided for herein shall be
paid to Executive with respect to medical expenses incurred by Executive or his
spouse during Executive's lifetime and shall be paid to Executive's spouse with
respect to medical expenses incurred by her after Executive's death."
<PAGE> 3
Except as hereinabove amended, the Agreement is hereby ratified and
confirmed and shall remain in full force and effect in accordance with its
terms as amended hereby.
PALL CORPORATION
By: /s/ Jeremy Hayward-Surry
-----------------------------
President
/s/ David B. Pall
-----------------------------
David B. Pall
<PAGE> 1
EXHIBIT 10.20
PALL CORPORATION
SUPPLEMENTARY PENSION PLAN
(As Amended and Restated Effective August 1, 1995)
<PAGE> 2
PALL CORPORATION
SUPPLEMENTARY PENSION PLAN
Pall Corporation (hereinafter called the "Corporation") recognizes the
contributions to its growth and success which have been made by certain key
officers and technical consultants employed by the Corporation and desires to
retain the services of such individuals and to assure the Corporation of the
continued benefit of their experience and advice. Accordingly, the Corporation
has decided to provide such individuals with deferred compensation payable to
or for their benefit which, together with the other retirement benefits payable
to such individuals from the Corporation and under Title II of the Social
Security Act, will assure such individuals of sufficient funds during
retirement.
ARTICLE I
DEFINITIONS
As used in this Pall Corporation Supplementary Pension Plan
(hereinafter called the "Plan"), the following terms shall have the meanings
described in this Article I:
Section 1.1 "Affiliated Corporation" means a member of a controlled
group of corporations of which the Corporation is a member. For purposes
hereof, a "controlled group of corporations" means a controlled group of
corporations as defined in section 1563(a) of the Internal Revenue Code,
determined without regard to Section 1563(b)(2)(C).
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<PAGE> 3
Section 1.2 "Board of Directors" means the board of directors of the
Corporation.
Section 1.3 "Committee" means the Committee appointed and acting for
the time being pursuant to Article VI.
Section 1.4 "Compensation" means, for any Plan Year, the total of all
salary, incentive compensation and other bonus payments received by the Member
for such Plan Year from all Affiliated Corporations. The term "Compensation"
does not include any fringe benefits such as, but not limited to, stock
options, stock appreciation rights, or contributions by the Affiliated
Corporations to all employee retirement or benefit plans or programs.
Section 1.5 "Consumer Price Index" means the "Consumer Price Index for
all Urban Consumers for New York - Northern New Jersey - Long Island, NY-NJ-CT"
compiled and published by the Bureau of Labor Statistics of the United States
Department of Labor or any successor index thereto.
Section 1.6 "Early Retirement Date" means the last day of the month
coinciding with or immediately following the date a Member attains age 60.
Section 1.7 "Effective Date" means August 1, 1978.
Section 1.8 "Final Average Compensation" means one-third of the
aggregate of the Member's Compensation for the three (3) Plan Years in which
his Compensation was highest out of the last five (5) Plan Years in which he
was a Member except that (a) in the case of each Member who on March 16, 1987
held the
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<PAGE> 4
office of Chairman of the Board, Vice Chairman of the Board or President of the
Corporation, the term "Final Average Compensation" means one-half of the
aggregate of such Member's Compensation for the two (2) Plan Years in which his
Compensation was highest out of the last ten (10) Plan Years in which he was a
Member; (b) in the case of each Member who on March 16, 1987 held the office of
Executive Vice President of the Corporation, the term "Final Average
Compensation" means one-half of the aggregate of such Member's Compensation for
the two (2) Plan Years in which his Compensation was highest out of the last
five (5) Plan Years in which he was a Member and (c) in the case of the Member
who on April 28, 1992 held the office of Senior Vice President and Treasurer
and Chief Financial Officer of the Corporation, the term "Final Average
Compensation" means one-half of the aggregate of such Member's Compensation for
the two (2) Plan Years in which his Compensation was highest out of the last
five (5) Plan Years in which he was a Member.
Section 1.9 "Former Member" means a person who at the time he ceased
to be a Member was entitled to benefits under Article II or Article III.
Section 1.10 "Member" means:
(1) each person who on the Effective Date (a) had a written contract
in effect with the Corporation concerning his performance of services for
the Corporation, (b) was an officer of, or technical consultant employed
by, the
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<PAGE> 5
Corporation and (c) was a member of the Pall Corporation Pension Plan;
(2) each person who on October 20, 1980 held the office of President
of either of the following Affiliated Corporations:
Mectron Industries Inc.
Pallflex, Inc.;
(3) the person who, on July 6, 1986, held the office of President of
Pall Pneumatic Products Corporation (an Affiliated Corporation);
(4) each person who on February 10, 1982 or on any date thereafter
meets all of the following three conditions: (a) has a written contract
in effect with the Corporation concerning his performance of services for
the Corporation which contract does not provide that membership in the
Plan is waived, (b) is an officer of the Corporation (either a corporate
officer elected by the Board of Directors or a divisional or
non-corporate officer appointed by the President pursuant to the
by-laws), and (c) is a member of the Pall Corporation Pension Plan; and
(5) Roy Sheaff, who on May 1, 1990 was an appointed vice president of
the Corporation.
A person who is ineligible to retire under Article III shall cease to
be a Member on the day his employment with the Corporation and all other
Affiliated Corporations terminates. A
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<PAGE> 6
person shall also cease to be a Member on the date he retires under Article III
or dies.
Section 1.11 "Normal Retirement Date" means the last day of the month
coinciding with or immediately following the date a Member attains age 65.
Section 1.12 "Other Retirement Program" means the Pall Corporation
Pension Plan, the Pall Corporation Retirement Plan and the Pall (U.K.) Ltd.
Pension Fund.
Section 1.13 "Plan Year" means the twelve consecutive month period
beginning on August 1 and ending on July 31 of the following year.
Section 1.14 "Primary Social Security Benefit" means the following:
(a) in the case of a Member entitled to a pension under Section 3.1 or
Section 3.4, the annual old-age insurance benefit payable to the Member on
his Normal Retirement Date, as computed under the provisions of Title II
of the Social Security Act in effect on his Normal Retirement Date;
(b) in the case of a Member entitled to a pension under Section 2.2 or
Section 3.2, the annual old-age insurance benefit payable to the Member on
his Normal Retirement Date, as computed under the provisions of Title II
of the Social Security Act in effect on the date his pension commences
under Section 2.2 or Section 3.2; in making such computation in the case
of a Member entitled to
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<PAGE> 7
a pension under Section 2.2, it will be assumed that the Member will
continue to receive "wages" as defined in Title II of the Social Security
Act in each Plan Year until his Normal Retirement Date in the same amount
as the Compensation he received in the last Plan Year during which he was
a Member for the entire Plan Year; and
(c) in the case of a Member entitled to a pension under Section 3.3,
the annual disability benefit payable to the Member under the provisions
of Title II of the Social Security Act in effect on the date his pension
commences under Section 3.3.
The Committee may adopt rules governing the computation of the Primary
Social Security Benefit which shall be uniformly applicable to all persons
similarly situated. The non-receipt by a Former Member of his Primary Social
Security Benefit because of failure to apply for the same, continued
employment, or for any other reason, shall be disregarded.
Section 1.15 "Qualified Domestic Trust" means a trust described in
section 2056A of the Internal Revenue Code of 1986, as amended.
Section 1.16 "Total and Permanent Disability" means such disability as
entitles the Member to a Social Security certificate of disability award under
the Federal Social Security Act, as from time to time amended, and the
possession of such a certificate by a Member shall, unless and until it is
revoked, be conclusive evidence of such disability. The Committee may
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<PAGE> 8
require a disabled Former Member, from time to time, but not more than once
each Plan Year, to furnish the Committee with evidence satisfactory to the
Committee that such certificate has not been Revoked.
ARTICLE II
VESTING
Section 2.1 Vesting. Each Member whose services for the Corporation and
all other Affiliated Corporations terminate for any reason (other than his
death) under circumstances in which he is not entitled to retirement benefits
under any of the provisions of Article III, shall, subject to the provisions of
Section 4.3, be entitled to a vested pension in the amount, and payable at such
time, as provided in this Article, provided, however, that, notwithstanding the
foregoing, a person who becomes a member on or after February 10, 1982 shall
not be entitled to a vested pension under this Article II unless (a) he is an
employee of an Affiliated Corporation on the earlier of (i) his 60th birthday
and (ii) the date on which he has been employed by an Affiliated Corporation or
Corporations for a period of 25 years or (b) he has held the position of
Executive Vice President of the Corporation at any time after February 10,
1982.
Section 2.2 Amount and Payment of Vested Pension. The vested pension
shall be a monthly pension commencing on the first day of the month after such
Former Member has attained his Early Retirement Date. The monthly pension under
this Section shall be
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<PAGE> 9
equal to the amount computed under Section 3.1, without any reduction if the
pension of such Former Member commences prior to his Normal Retirement Date.
Section 2.3 Death Benefit to Spouse. If a Member dies after becoming
entitled to a vested pension but prior to becoming entitled to retirement
benefits under any of the provisions of Article III, and prior to the
commencement of the payment of his pension under this Article, and if such
Member is survived by a spouse to whom he has been lawfully married for at
least one year prior to his death, then such spouse shall be entitled to
receive a monthly pension for life, commencing on the first day of the month
following the date of the Member's death or, if later, the date that would have
been the Member's Early Retirement Date if he had not died. The monthly pension
under this Section shall be equal to fifty percent (50%) of the pension the
Member would have been entitled to receive under this Article II if, on the
date of his death, his services for the Corporation and all other Affiliated
Corporations had terminated for any reason other than his death.
Notwithstanding the foregoing, if a federal estate tax marital
deduction is available for amounts passing to a Member's spouse only if such
amounts pass in a Qualified Domestic Trust, then the amounts otherwise payable
to such spouse pursuant to this Section 2.3 upon the Member's death shall not
be paid to such spouse but shall be paid, instead, to a Qualified Domestic
Trust, if the Member has so directed either (x) in a written
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<PAGE> 10
instrument executed by the Member and filed with the Committee (and not revoked
by him prior to his death) or (y) in the Member's last will and testament. Any
payments to be made to a Qualified Domestic Trust pursuant to the preceding
sentence shall be made in the same amounts, and at the same times, as such
payments would have been made if payable directly to the Member's spouse in the
absence of such direction.
ARTICLE III
BENEFITS
Section 3.1 Normal Retirement Pension. Each Member who retires on his
Normal Retirement Date shall be entitled to receive a monthly pension
commencing on the first day of the month following his Normal Retirement Date.
The monthly pension payable under this Section shall be equal to one-twelfth
(1/12) of the amount determined as follows:
(a) fifty percent (50%) of the Member's Final Average Compensation
(seventy percent (70%) as to a Member who on March 16, 1987 held the
office of Executive Vice President of the Corporation), reduced by
(b) the sum of
(i) the total annual pension payable to the Member under all
Other Retirement Programs (excluding any portion thereof attributable
to contributions to such Other Retirement Programs by such Member), and
(ii) the Member's Primary Social Security Benefit.
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<PAGE> 11
For purposes of this Section, the amount of the pension payable to the Member
under any Other Retirement Program shall be deemed to be the amount equal to the
form of pension payable only to, and during the lifetime of, the Member, whether
or not the Member receives payment of such pension in some other form permitted
under such Other Retirement Program; but the amount of such pension shall be
taken into account only on and after the date on which payment of the Member's
pension under such Other Retirement Program is to commence.
Section 3.2 Early Retirement Pension. A Member who has attained his
Early Retirement Date may retire on the last day of any month which is not less
than thirty (30) days after he has filed a written request for retirement on
such day with the Committee. In such event, a Member shall be entitled to
receive a monthly pension commencing on the first day of the month after his
retirement. The monthly pension under this Section shall be equal to the amount
computed under Section 3.1, without any reduction because payment commences
prior to his Normal Retirement Date.
Section 3.3 Disability Retirement Pension. A Member who suffers Total
and Permanent Disability shall retire and shall be entitled to receive a
monthly pension commencing on the first day of the month after such disability
has continued for six months and continuing only during such period during
which such Member suffers Total and Permanent Disability. Notwithstanding the
foregoing, the pension of any Member who ceases to suffer
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<PAGE> 12
Total and Permanent Disability after he has attained his Normal Retirement Date
shall continue during his lifetime. The monthly pension under this Section shall
be equal to the amount computed under Section 3.1 without any reduction because
payment commences prior to his Normal Retirement Date.
Section 3.4 Deferred Retirement Pension. Each Member who retires after
his Normal Retirement Date shall be entitled to receive a monthly pension
commencing on the later of (i) the first day of the month in which his pension
under any Other Retirement Program commences or (ii) the first day of the month
after his retirement. The monthly pension under this Section shall be equal to
the greater of (a) the amount computed under Section 3.1 or (b) the amount
computed under Section 3.1 after first determining "Final Average Compensation"
on the basis of the Plan Year in which the Member's Normal Retirement Date
occurred and the immediately preceding four Plan Years (the immediately
preceding nine Plan Years in the case of the persons who were Chairman of the
Board, Vice Chairman of the Board and President of the Corporation on March 16,
1987) and then multiplying the pension amount thus computed by the percentage
increase, if any, of the Consumer Price Index for the month immediately
preceding the month in which the Member's pension under this Section is to
commence over the Consumer Price Index for the month in which the Member's
Normal Retirement Date occurred.
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<PAGE> 13
Section 3.5 Death Benefit to Spouse. If a Member who is eligible to
retire and thereupon receive a pension under this Article dies prior to the
commencement of payment of his pension and the Member is survived by a spouse
to whom he has been lawfully married for at least one year prior to his death,
such spouse shall be entitled to receive a monthly pension for life, commencing
on the first day of the month following the date of the Member's death. The
monthly pension under this Section shall be equal to fifty percent (50%) of the
pension the Member would have been entitled to receive under this Article had
he retired on the date of his death.
Notwithstanding the foregoing, if a federal estate tax marital
deduction is available for amounts passing to a Member's spouse only if such
amounts pass in a Qualified Domestic Trust, then the amounts otherwise payable
to such spouse pursuant to this Section 3.5 upon the Member's death shall not
be paid to such spouse but shall be paid, instead, to a Qualified Domestic
Trust, if the Member has so directed either (x) in a written instrument
executed by the Member and filed with the Committee (and not revoked by him
prior to his death) or (y) in the Member's last will and testament. Any
payments to be made to a qualified Domestic Trust pursuant to the preceding
sentence shall be made in the same amounts, and at the same times, as such
payments would have been made if payable directly to the Member's spouse in the
absence of such direction.
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<PAGE> 14
Section 3.6 Restoration of Former Members to Employment. If any Former
Member who is entitled to a pension under Article II or this Article again
becomes an employee of any Affiliated Corporation, his pension (if any was
being paid) shall cease. Upon his subsequent retirement or other termination of
employment his pension shall (i) recommence (if it was being paid) and (ii) be
recomputed under Article II or Article III taking into consideration his Final
Average Compensation and the total annual pension payable to the Member under
all Other Retirement Programs as the date of such subsequent retirement or
other termination of employment.
ARTICLE IV
PAYMENT AND FORM OF PENSIONS
Section 4.1 Payment of Pensions. All pensions payable pursuant to
Article II or Article III shall, upon application therefor by a Member, Former
Member, spouse or beneficiary and approval thereof by the Committee, be paid by
the Corporation, acting on the direction of the Committee, provided, however,
that the Corporation shall be obligated to pay a pension to which a Member,
Former Member, spouse or beneficiary is entitled by the terms of this Plan
notwithstanding the failure or refusal of the Committee to approve or direct
payment of such pension unless the Committee has a valid basis for such failure
or refusal by the terms of this Plan. Payment of pensions shall begin on the
first day of the month as provided in Article II or Article III and
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<PAGE> 15
shall cease after the first day of the month coinciding with or immediately
preceding the death of the Former Member, spouse or beneficiary.
Section 4.2 Form of Pensions. The pension payable to a Member or Former
Member under Article II or Article III shall be paid in such form as the Member
or Former Member has elected, provided that, on the day on which the Member or
Former Member makes such election, such form of payment is an authorized form
of payment under the Other Retirement Program in which the Member or Former
Member is a participant. If the pension the Member or Former Member receives
under this Plan is to be paid in a form other than a monthly pension payable
only during the lifetime of the Member or Former Member, such pension shall be
adjusted so that it is the actuarial equivalent of such lifetime only pension.
The actuarial factors used in determining such actuarial equivalent shall be
the same actuarial factors which are in use, on the day on which the pension
hereunder commences, by the Other Retirement Program to determine actuarial
equivalence for the same form of payment in which the Member's or Former
Member's pension hereunder is to be paid.
An election as to the form of payment for the pension payable to a
Member or Former Member under Article II or Article III shall be made in
writing, shall specify the form of payment selected, and shall be filed with
the Committee no later than 30 days after such individual has become a Member
pursuant to
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Section 1.10 or, in the case of any individual who was a Member or Former Member
on May 1, 1989, by no later than June 30, 1989.
At the time such election is made, the Member or Former Member may also
elect an alternative form of payment for his pension hereunder, and have
payment of his pension made automatically in such alternative form in the event
that (a) in the case of a Member or Former Member who is single at the time of
his election, the Member or Former Member is married at the time payment of his
pension is to commence or (b) in the case of a Member or Former Member who is
married at the time of his election, such Member or Former Member is not
married or is legally separated at the time payment of his pension is to
commence, or, if at such time, the Member or Former Member's spouse has a
terminal illness. The spouse of a Member or Former Member shall be treated as
having a "terminal illness" if the spouse has incurred any illness or injury
that, in the judgment of the Committee, has been determined by competent
medical evidence to be likely to result in the death of such spouse within a
period of three years from the date on which the terminal nature of such
illness or injury was first determined.
A Member or Former Member may elect, as an alternative form of payment,
any form that, on the day on which such election is made, is an authorized form
of payment under the Other Retirement Program in which the Member or Former
Member is a participant. Any individual who was a Member or Former Member on
June 30, 1989, may elect an alternative form of payment pursuant
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<PAGE> 17
to the preceding paragraph by specifying in writing the alternative form
selected and filing same with the Committee no later than 30 days after December
19, 1989.
Any election made by a Member or Former Member as to the form of
payment, or alternative form of payment, of his pension hereunder shall be
irrevocable.
Notwithstanding any other provision herein to the contrary, if under
the form of payment that a Member or Former Member has elected under this
Section 4.2 any amounts are otherwise payable to the Member's or Former
Member's spouse upon the death of the Member or Former Member, and if at the
time of the Member's or Former Member's death a federal estate tax marital
deduction is available for amounts passing to such Member's or Former Member's
spouse only if such amounts pass in a Qualified Domestic Trust, then the
amounts so payable shall not be paid to such spouse but shall be paid, instead,
to a Qualified Domestic Trust, if the Member or Former Member has so directed,
either (x) in a written instrument executed by the Member or Former Member and
filed with the Committee (and not revoked by him prior to his death) or (y) in
the Member or Former Member's last will and testament. Any payments to be made
to a Qualified Domestic Trust pursuant to the preceding sentence shall be made
in the same amounts, and at the same times, as such payments would have been
made if payable directly to the Member's or Former Member's spouse in the
absence of such direction.
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<PAGE> 18
Section 4.3 Conditions of Payment of Pensions. The payment of any
pension under this Plan to a Former Member, spouse or beneficiary is contingent
on the following:
(a) that at no time either prior to or subsequent to retirement or
other termination of employment shall such Member or Former Member engage
in any business or other activity which, in the reasonable judgment of the
Committee, is competitive with any activity of an Affiliated Corporation,
except that it shall not be deemed a violation of this Section 4.3(a) or
of Section 4.3(b) for a Member or Former Member to engage in any such
competitive activity after the Corporation has terminated an employment
agreement in effect with such Member or Former Member if by the terms of
such employment agreement the Member or Former Member is not prohibited
from engaging in such competitive activity immediately following such
termination by the Corporation;
(b) that at no time either prior to or subsequent to his retirement or
other termination of employment shall such Member or Former Member violate
the provisions of his secrecy or invention agreements with the Corporation
(if the Member or Former Member is or was a party to the "Pall Corporation
Employee Agreement" substantially in the form annexed as Exhibit A to the
Plan as amended in October 1987, then said Employee Agreement shall be
deemed a "secrecy or invention agreement" referred to in this Section
4.3(B)), and
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<PAGE> 19
(c) that such Member or Former Member shall not have been discharged by
the Corporation or another Affiliated Corporation as a result of gross
negligence or willful misconduct, and he shall not, while a Member, have
engaged in conduct which, had it been known at the time, would have
resulted, on the grounds of gross negligence or willful misconduct, in his
discharge by the Corporation or another Affiliated Corporation.
If the Committee determines that such Member or Former Member has
violated any of the conditions of this Section it shall notify such Member or
Former Member and the obligation of the Corporation to make any payments to
such Member or Former Member or his spouse or beneficiary shall forthwith
terminate, provided that no amount paid prior to the date of such determination
by the Committee shall be required to be repaid. Any action by the Committee
under this Section must be taken within one year from the date by which the
facts which constitute a violation of any of the conditions of this Section
have been brought to the attention of the Committee.
ARTICLE V
CERTAIN RIGHTS AND LIMITATIONS
Section 5.1 Prohibition Against Alienation of Benefits. No benefit
under the Plan shall be subject in any manner to anticipation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt so to anticipate,
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<PAGE> 20
alienate, sell, transfer, assign, pledge, encumber or charge the same shall be
void; nor shall any such benefit be in any manner liable for or subject to
garnishment, attachment, execution or levy, or liable for or subject to the
debts, contracts, liabilities, engagements or torts of the person entitled to
such benefits; and in the event that the Committee shall find that any Member,
Former Member or his spouse or beneficiary has become bankrupt or has attempted
to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any
benefits under the Plan, then payment of such benefit shall, in the discretion
of the Committee, cease and terminate, and in that event the Committee shall
hold or apply the same to or for the benefit of such Member, Former Member or
spouse or the children or other dependents of the same, or beneficiary in such
manner and in such proportions as the Committee may deem proper, and any such
application shall be a complete discharge of all liabilities of the Corporation
therefor.
Section 5.2 Incompetency. In the event that the Committee shall find
that a Member, Former Member or other person entitled to a benefit under the
Plan is unable to care for his affairs because of illness or accident or
because he is a minor, the Committee may direct that any benefit payment due
him, unless claim shall have been made therefor by a duly appointed guardian,
committee or other legal representative, be paid to a spouse, child, parent or
other blood relative of such person or to anyone found by the Committee to have
incurred expense for the support
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and maintenance of such person, and any such payment so made shall be a complete
discharge of all liabilities of the Corporation therefor.
Section 5.3 No Right to Continued Employment. The establishment and
continuation of the Plan by the Corporation shall not confer any legal rights
upon any Member or any person to continued employment, nor shall such
establishment or continuation interfere with the rights of the Corporation to
discharge any Member and to otherwise treat him without regard to the effect
which such discharge might have upon him as a Member.
Section 5.4 Payment of Taxes. The Corporation shall have the right to
deduct and withhold from any amount which it is otherwise obligated to pay
under the Plan any amount which it may be required to deduct or withhold
pursuant to any applicable statute, law, regulation or order of any
jurisdiction whatsoever. The Corporation shall not be required to pay any
amount to the spouse or beneficiary of any deceased Member pursuant to Article
III until such spouse, beneficiary or the legal representatives of the deceased
Member shall have furnished the Committee with evidence satisfactory to the
Corporation of the payment or the provision for the payment of any estate,
transfer, inheritance or death taxes which may be payable with respect thereto.
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ARTICLE VI
ADMINISTRATION OF THE PLAN
Section 6.1 Appointment of Committee. The Board of Directors shall
appoint a Committee of not less than three nor more than five persons who shall
serve at the pleasure of said Board. Any vacancy in the Committee arising by
death, resignation or otherwise shall be filled by the Board of Directors.
Section 6.2 Duties and Powers of the Committee. The Committee shall be
responsible for the control and management of the operation and administration
of the Plan and the proper execution of its provisions. It shall also be
responsible for the construction of the Plan and the determination of all
questions arising hereunder. It shall maintain all necessary books of accounts
and records. In furtherance of the foregoing, the Committee shall have the sole
power and responsibility (i) to establish, interpret, enforce, amend and revoke
from time to time such rules and regulations for the administration of the Plan
and the conduct of its business as it deems appropriate, provided such rules
and regulations are uniformly applicable to all persons similarly situated,
(ii) to receive and approve or disapprove (where approval is required)
elections of Members and Former Members to receive benefits, to otherwise
determine the entitlement of Members, Former Members and their spouses and
beneficiaries to benefits under the Plan and to decide any disputes which may
arise relative to the rights of the Members,
-21-
<PAGE> 23
Former Members and their spouses and beneficiaries with respect to such
benefits, and (iii) to keep all appropriate records and data pertaining to the
interests of the Members, Former Members and their spouses and beneficiaries in
the Plan. Any action which the Committee is required or authorized to take
shall, to the extent permitted by applicable law, be final and binding upon each
and every person who is or may become interested in the Plan, provided, however,
that nothing in this Section 6.2 is intended to or shall be deemed or construed
to empower the Committee to deny to any person a pension to which such person is
entitled by the terms of this Plan other than this Section 6.2 or to deprive any
person of the right to a determination by a court of competent jurisdiction of
whether such person is entitled to a pension pursuant to this Plan and of the
amount and other terms of such pension.
Section 6.3 Conduct of Affairs of Committee. The Committee shall hold
such meetings upon such notice at such place or places and at such times as it
may from time to time deem appropriate. The Committee may act by a majority of
its members in office from time to time. The action of such majority may be
taken at a meeting of the Committee or pursuant to written consent of such
majority without a meeting. It shall elect from time to time one of its own
members to act as Chairman and a different person, who may but need not be a
member of the Committee, to act as Secretary. It may authorize any one or more
-22-
<PAGE> 24
of its members to execute and deliver any documents on behalf of the Committee.
Section 6.4 Expenses and Liability. The expenses of administering the
Plan shall be paid by the Corporation. The members of the Committee shall serve
without compensation for their services as such, but shall be reimbursed by the
Corporation for any expenses they may individually or collectively incur in the
performance of their duties hereunder. No member of the Committee shall be
personally liable for anything done or omitted to be done by him unless it
shall have been judicially determined that the member failed to perform his
duties under the Plan in good faith and in a prudent manner.
Section 6.5 Indemnification of Committee Members. The Corporation
shall, to the maximum extent permitted under applicable law, indemnify each
member of the Committee from and against any and all claims, actions, demands,
losses, damages, expenses and liabilities arising from any act or omission of
the member in connection with the performance of his duties hereunder and for
which the member is not reimbursed or otherwise made whole under any contract
or contracts of insurance maintained by the Corporation for the purpose of
indemnifying the member from and against any and all such claims, actions,
demands, losses, damages, expenses and liabilities which may arise therefrom.
Such indemnification shall include attorneys' fees and all other costs and
expenses reasonably incurred by the member in defense of any claim or action
brought or asserted against him arising
-23-
<PAGE> 25
from such act or omission. Notwithstanding the foregoing, the Corporation shall
not indemnify any member of the Committee with respect to any claims, actions,
demands, losses, damages, expenses and liabilities arising from any act or
omission of the member with respect to the performance of his duties hereunder
if such act or omission is deemed by the Corporation to constitute gross
negligence, willful misconduct, criminal conduct or dealing with the Plan for
his own benefit or for his own account.
Section 6.6 Claims Procedure. A Member, Former Member, spouse or
beneficiary may claim any benefits under the Plan which such person believes is
properly payable pursuant to the provisions of the Plan by filing an
application therefor. Such claim shall be filed with the Committee on a form
approved by it. The claim shall be approved or denied by the Committee within
ninety (90) days after the claim was filed. If the Committee in its sole
discretion determines that special circumstances exist which require an
extension of time to process the claim, the Committee shall (i) give the
claimant written notice, within ninety (90) days after the claim was filed,
specifying the special circumstances and the expected date of a decision on the
claim and (ii) approve or deny the claim within 180 days after the claim was
filed.
If the claim is denied in full or in part, the claimant shall be given
written notice setting forth, in a manner calculated to be understood by the
claimant, (i) the specific reason or reasons for such denial, (ii) specific
reference to the
-24-
<PAGE> 26
pertinent provision or provisions of the Plan upon which such denial was based,
(iii) a description of any additional information, documentation or other
material necessary for the claimant to perfect his claim and an explanation of
why such information, documentation or other material is necessary, and (iv) an
explanation of the procedure for obtaining a review of the denial of the claim.
The claimant or his duly authorized representative may request a review of the
denial of the claim by filing with the secretary of the Committee a written
request for review within, and only within, the period of sixty (60) days
commencing with the date the denial of the claim was posted by registered or
certified mail to the claimant. The claimant and his duly authorized
representative shall be given a reasonable opportunity to review the documents
of the Plan and to submit their written issues and comments to the Committee at
any time prior to the expiration of the aforesaid 60-day period.
Within the period of sixty (60) days of the date a request for review
of a denial of claim is received by the Committee, the Committee shall consider
the request and post its final decision to the claimant by registered or
certified mail. In the event that the Committee in its sole discretion
determines that a hearing is warranted, and a hearing is held before the
Committee (at which hearing the claimant and his duly authorized representative
shall be given a reasonable opportunity to present their views), or in the
event that the Committee determines that the case otherwise presents special
circumstances requiring an
-25-
<PAGE> 27
extension of time for processing the request for review, the Committee shall (i)
give the claimant written notice of the extension within sixty (60) days after
receiving the request for review and (ii) post its final decision to the
claimant by registered or certified mail not later than 120 days after the date
the request for review was received by the Committee. Such decision shall be
written in a manner calculated to be understood by the claimant, and shall fully
set forth the reason or reasons for the decision, with specific references to
the pertinent provision or provisions of the Plan upon which the decision was
based.
ARTICLE VII
CONTRACTUAL OBLIGATION
The obligation of the Corporation under this Plan to make payments of
pensions when due is merely contractual, and all such pensions shall be paid
from the general revenues of the Corporation. Nothing contained in this Plan
shall require the Corporation to segregate or earmark any cash or other
property for any Member, Former Member, spouse or beneficiary.
ARTICLE VIII
AMENDMENT AND TERMINATION
Section 8.1 Amendment and Termination. The Plan may not be amended or
terminated, in whole or in part, without the written consent of (a) each
Member, (b) each Former Member and (c) any spouse or beneficiary of a Member or
Former Member who at
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<PAGE> 28
the time of the proposed amendment or termination is receiving benefits under
the Plan pursuant to Section 4.2 subsequent to the death of the Member or Former
Member. Notwithstanding the foregoing, no such consent shall be required from a
Member, Former Member, spouse or beneficiary as to whom the proposed amendment
to, or termination of, the Plan would not under any circumstances or at any time
reduce the benefits payable under the Plan to such Member, Former Member, spouse
or beneficiary.
Section 8.2 Successors and Assigns. The Plan shall be binding upon
and inure to the benefit of the Corporation and its successors and assigns, but
no assignment shall relieve the Corporation of any of its obligations or
liabilities hereunder to a Member, Former Member, spouse or beneficiary without
the written consent of such person.
ARTICLE IX
CONSTRUCTION
9.1 Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the State of New York.
9.2 Words and Headings. As used herein, the masculine gender shall be
deemed to refer to the feminine, and the singular person shall be deemed to
refer to the plural, wherever appropriate. The headings of Articles and
Sections are inserted for convenience and reference only, and in the event of
any conflict between the text of any provision of the Plan and the heading
thereof, the text shall control.
-27-
<PAGE> 1
Exhibit 10.25
PRINCIPAL RULES OF THE
PALL SUPPLEMENTARY PENSION SCHEME
<PAGE> 2
PRINCIPAL RULES
PART I
MEMBERSHIP AND PROVISIONS OF BENEFITS, ETC.
I.1 DEFINITIONS
In these Principal Rules and the Appendices thereto and any
Supplementary Rules, unless the context otherwise requires --
(i) words implying the masculine gender shall include the feminine
gender, and vice versa;
(ii) words in the singular shall include the plural, and vice versa;
(iii) any reference to legislation shall be construed as a reference to
that legislation as amended or re-enacted and to any regulations
made thereunder for the time being in force and to any
corresponding provisions in force in Northern Ireland;
(iv) any reference to a Part is a reference to a Part of these
Principal Rules;
(v) the following expressions shall have the following meanings.
"Act" means the Income and Corporation Taxes Act 1988 and any
amendment, modification or re-enactment thereof.
"Actuary" means a Fellow of the Faculty of Actuaries or of the
Institute of Actuaries appointed by the Trustees or such a Fellow
employed by a body corporate or firm whose services are offered
to the Trustees by that body or firm.
"Administrator" means the person or persons resident in the
United Kingdom who have the management of the Scheme and who
either are named as such in the Declaration of Trust or whom the
Trustees may from time to time appoint.
"Aggregate Retirement Benefit" means the aggregate of --
(i) the Member's pension under this Scheme and any Associated
Scheme;
(ii) the pension equivalent of the Member's Lump Sum Retirement
Benefit.
"Approval" means approval of the Scheme by the Board of Inland
Revenue under Chapter I of Part XIV of the Act.
"Associated Employment" means 2 or more concurrent employments
held by the Member which are associated, i.e. where --
(i) there is a period during which the Member has held all of
them;
<PAGE> 3
(ii) the period counts under the Scheme in the case of all of them
as a period in respect of which benefits are payable;
(iii) during the period all the employers in question are associated.
"Associated Scheme" means either (i) or (ii) below as appropriate
(i) in respect of a Class A Member any Relevant Scheme which is a
Connected Scheme or which provides benefits in respect of
Service;
(ii) in respect of a Class B or Class C Member any Relevant Scheme
providing benefits in respect of Service.
(For the purposes of this definition employers are associated if one is
controlled by the other, or both are controlled by a third party.
Control has the same meaning as in section 840 of the Act, or in the
case of a close company, section 416 of the Act.)
"Authorised Insurer" means an insurance company which is authorised
under section 3 or 4 of the Insurance Companies Act 1982 to carry on
ordinary long-term insurance business and acting through a branch or
office in the United Kingdom.
"Basic Salary" means the annual amount of fixed salary or wages paid to
a Member by a Participating Employer, including any director's fees if
they are of an annual amount fixed in advance of the period to which
they relate and which fees shall otherwise be treated as Other
Emoluments.
Director's fees are limited to fees --
(i) to which the director is beneficially entitled not being obliged
to account for them to another company, and
(ii) which are not being treated for tax purposes as a receipt of a
profession in which the director is engaged.
"Beneficiaries" means in relation to a Member --
(i) the spouse and any former spouse of the deceased Member;
(ii) the grandparents of the deceased Member or of his spouse or of
any former spouse, all descendants of those grandparents, and
the spouse and any former spouse of those descendants;
(iii) any ancestor of the grandparents of the deceased Member or of
his spouse and or of any former spouse, and the spouse and any
former spouse of those ancestors;
(iv) any person who in the opinion of the Principal Company was at any
time wholly or partially dependent on or was regularly assisted
financially by the deceased Member;
<PAGE> 4
(v) any individual who is a legatee under the Member's will or who
benefits from his estate or would have done had he died intestate
and had it been of sufficient amount;
(vi) any individual who is nominated in writing as a Beneficiary by
the Member;
and for the purposes of this definition a step-child or an adopted child
of any person shall be deemed to be a descendant of that person and that
person shall be deemed to be an ancestor of that child, but no person
shall be a Beneficiary who was not living or en ventre sa mere at the
date of the Member's death.
"Benefit Limit" in relation to any benefit means the maximum amount of
that benefit which can be provided for a Member without exceeding the
maximum prescribed by Rule VII.9.
"Bonus Credit" in relation to a Member means any part of the Retirement
Benefit which is not Transfer Credit and which is provided in respect
of, or computed by reference to, service while not a Member, or which is
not required by any Supplementary Rules to be provided but is provided
by the Trustees on the direction of the Principal Company, or which is
provided in consequence of any alteration in the Rules made after he
became a Member.
"Centralised Scheme" means the Scheme when there are two or more
Participating Employers.
"Class A Member" means --
(i) a Member who joined the Scheme on or after 1st June 1989, but who
is not a Transitional Member;
(ii) any Class B or Class C Member who has elected to be deemed to
have become a Class A Member.
"Class B Member" means a Member who joined the Scheme on or after 17th
March 1987 and before 1st June 1989 but who is not a Transitional
Member:
Provided that the Member may elect to be deemed to have become a Class A
Member if both of the following conditions are satisfied --
(i) he makes an election in writing; and
(ii) the election states the date on which he is to be deemed to have
become a Class A Member being a date before the Relevant Date but
after the date the Trustees receive the election.
"Class C Member" means a Member who joined the Scheme before 17th March
1987:
Provided that the Member may elect to be deemed to have become a Class A
Member if both of the following conditions are satisfied --
<PAGE> 5
(i) he makes an election in writing; and
(ii) the election states the date on which he is to be deemed to have
become a Class A Member being a date before the Relevant Date
but after the date the Trustees receive the election.
"Commencing Date" means the date on which the Scheme started as
specified in the Declaration of Trust.
"Company" means in relation to a Member the Participating Employer in
whose service he is at the time or, if he is in the service of more
than one such Employer, those Employers. In relation to any person no
longer employed by any of these Employers, it means the one or more of
them by which he was last employed.
"Connected Scheme" shall mean any Relevant Scheme which is connected
with the Scheme in relation to the Member, i.e. if --
(i) there is a period during which the Member has been the employee
of 2 associated employers:
(ii) that period counts under both schemes as a period in respect of
which benefits are payable;
(iii) the periods counts under one scheme for service with one employer
and under the other for service with the other employer.
(For the purposes of this definition employers are associated if one is
controlled by the other, or both are controlled by a third party.
Control has the same meaning as in section 840 of the Act, or in the
case of a close company, section 416 of the Act.)
"Controlling Director" means a director of a Participating Employer who
was prior to 6th April 1973 a controlling director (as defined in
section 624(3) of the Act) of that Participating Employer.
"Current Remuneration" on any date means the annual rate of the Member's
Basic Salary on that date plus the annual average over the previous
three years, or over the period for which Other Emoluments have been
receivable if less than three years, of the Other Emoluments received by
the Member from the Participating Employers.
"Declaration of Trust" means the Declaration of Trust by which the
Scheme was established, any deeds supplemental thereto and any
alterations, amendments, additions or modifications to the Declaration
or to a supplemental deed for the time being in force.
"Dependant" means in relation to a Member --
(i) his spouse, widow or widower;
<PAGE> 6
(ii) his child or his spouse's child as long as the child has not
attained the age of 18 years, or is still receiving full time
education or vocational training, or who the Trustees are
satisfied suffers from a disability which makes it unlikely
that he will ever be able to maintain himself;
(iii) any individual who is financially dependent upon the Member
immediately before the date of the Member's death or
retirement.
"Dependent Child" means in relation to a Member a legitimate,
illegitimate or adopted child of the Member or his spouse who has not
attained the age of 18 years or who has not attained the age of 21
years and is still receiving full time education or vocational training
approved by the Trustees.
"Dependant's Death in Service Pension" means the class of benefit so
described in Part IV.
"Final Remuneration" means the following.
In relation to a Class A Member the greater of --
(a) the highest remuneration for any one of the 5 years preceding the
Relevant Date being the aggregate of --
(i) the basic pay for the year in question, and
(ii) the yearly average over 3 or more consecutive years (or
over the actual period fluctuating emoluments have been
received if less than 3 years) ending with the expiry of
the corresponding basic pay year, of any fluctuating
emoluments provided that fluctuating emoluments of a year
other than the basic pay year may be increased in
proportion to any increase in the Index from the last day
of that year up to the last day of the basic pay year; and
(b) the yearly average of the total emoluments for any 3 or more
consecutive years ending not earlier than 10 years before the
Relevant Date (or over the actual period where emoluments have
been received for less than 3 years):
Provided that --
(A) remuneration and total emoluments do not include any amounts
which arise from the acquisition or disposal of shares or an
interest in shares or from a right to acquire shares or anything
in respect of which tax is chargeable by virtue of section 148
of the Act, except where the shares or rights etc, had been
acquired before 17th March 1987;
(B) in relation to a Special Director, Final Remuneration shall
(subject to proviso (D) below) be the amount ascertained in
accordance with (b) above and (a) above shall not apply;
<PAGE> 7
(C) where Final Remuneration is computed by reference to any year
other than the last complete year ending on the Relevant Date,
the Member's remuneration (as calculated in (a) above) or total
emoluments (for the purposes of (b) above) of any year may be
increased in proportion to any increase in the Index from the
last day of that year up to the Relevant Date but this proviso
shall not apply to the calculation of the maximum Lump Sum
Retirement Benefit in accordance with Rule VII.9(a) for a Class A
Member unless (and subject to proviso (D) below) the Member's
Aggregate Retirement Benefit is similarly increased beyond the
maximum amount which could have been paid but for this proviso
and the proviso in (a) (ii) above and then only to the same
proportionate extent;
(D) Final Remuneration and the annual rate of the Member's
remuneration for the purposes of the calculation of the maximum
benefits in accordance with Rule VII.9(a) for a Class A Member
shall not exceed the permitted maximum as defined in section
590C(2) of the Act.
In relation to a Class B Member the greater of --
(c) the highest remuneration for any one of the 5 years preceding the
Relevant Date being the aggregate of --
(i) the basic pay for the year in question, and
(ii) the yearly average over 3 or more consecutive years (or
over the actual period fluctuating emoluments have been
received if less than 3 years) ending with the expiry of
the corresponding basic pay year, of any fluctuating
emoluments provided that fluctuating emoluments of a year
other than the basic pay year may be increased in
proportion to any increase in the Index from the last day
of that year up to the last day of the basic pay year; and
(d) the yearly average of the total emoluments for any 3 or more
consecutive years ending not earlier than 10 years before the
Relevant Date (or over the actual period where emoluments have
been received for less than 3 years):
Provided that --
(A) remuneration and total emoluments do not include any amounts
which arise from the acquisition or disposal of shares or an
interest in shares or from a right to acquire shares or anything
in respect of which tax is chargeable by virtue of section 148 of
the Act except where the shares or rights etc. had been acquired
before 17th March 1987;
<PAGE> 8
(B) in relation to a Special Director or any other Member whose
remuneration in any year subsequent to 5th April 1987 used for
the purpose of calculating benefits has exceeded 100,000 pounds
Sterling or such other figures as may be prescribed in an order
made by the Treasury, Final Remuneration shall (subject to
proviso (D) below) be the amount ascertained in accordance with
(d) above and (c) above shall not apply;
(C) where Final Remuneration is computed by reference to any year
other than the last complete year ending on the Relevant Date,
the Member's remuneration (as calculated in (c) above) or total
emoluments (for the purposes of (d) above) of any year may be
increased in proportion to any increase in the Index from the
last day of that year up to the Relevant Date but this proviso
shall not apply to the calculation of the maximum Lump Sum
Retirement Benefit in accordance with Rule VII.9(h) for a Class B
Member unless (and subject to proviso (D) below) the Member's
Aggregate Retirement Benefit is similarly increased beyond the
maximum amount which could have been paid but for this proviso
and the proviso in (c)(ii) above and then only to the same
proportionate extent;
(D) for the purpose of the calculation of the maximum Lump Sum
Retirement Benefit in accordance with Rule VII.9(h) for a Class B
Member Final Remuneration shall not in any event exceed 100,000
pounds Sterling or such other sum as may be specified in an order
made by the Treasury.
In relation to a Class C Member where the Relevant Date is on or before
16th March 1987 the greater of --
(e) the highest remuneration for any one of the 5 years preceding the
Relevant Date being the aggregate of --
(i) the basic pay for the year in question, and
(ii) the yearly average over 3 or more consecutive years (or
over the actual period fluctuating emoluments have been
received if less than 3 years) ending with the expiry of
the corresponding basic pay year, of any fluctuating
emoluments provided that fluctuating emoluments of a year
other than the basic pay year may be increased
in proportion to any increase in the Index from the last
day of that year up to the last day of the basic pay year;
and
(f) the yearly average of the total emoluments for any 3 or more
consecutive years ending not earlier than 10 years before the
Relevant Date (or over the actual period where emoluments have
been received for less than 3 years):
Provided that --
(A) in relation to a Special Director, Final Remuneration shall be
the amount ascertained in accordance with (f) above and (e) above
shall not apply;
<PAGE> 9
(B) where Final Remuneration is computed by reference to any year other
than the last complete year ending on the Relevant Date, the
Member's remuneration (as calculated in (e) above) or total
emoluments (for the purposes of (f) above) of any year may be
increased in proportion to any increase in the Index from the last
day of that year up to the Relevant Date but this proviso shall not
apply to the calculation of the maximum Lump Sum Retirement Benefit
in accordance with Rule VII.9(h) for a Class C Member unless the
Member's Aggregate Retirement Benefit is similarly increased beyond
the maximum amount which could have been paid but for this proviso
and the proviso in (e) (ii) above and then only to the same
proportionate extent.
In relation to a Class C Member where the Relevant Date is on or after
17th March 1987 the greater of --
(g) the highest remuneration for any one of the 5 years preceding the
Relevant Date being the aggregate of --
(i) the basic pay for the year in question, and
(ii) the yearly average over 3 or more consecutive years (or over
the actual period fluctuating emoluments have been received
if less than 3 years) ending with the expiry of the
corresponding basic pay year, of any fluctuating emoluments
provided that fluctuating emoluments of a year other than the
basic pay year may be increased in proportion to any increase
in the Index from the last day of that year up to the last
day of the basic pay year; and
(h) the yearly average of the total emoluments for any 3 or more
consecutive years ending not earlier than 10 years before the
Relevant Date (or over the actual period where emoluments have been
received for less than 3 years):
Provided that --
(A) remuneration and total emoluments do not include any amounts which
arise from the acquisition or disposal of shares or an interest in
shares or from a right to acquire shares or anything in respect of
which tax is chargeable by virtue of section 148 of the Act, except
where the shares or rights etc. had been acquired before 17th March
1987;
(B) in relation to a Special Director or any other Member whose
remuneration in any year subsequent to 5th April 1987 used for the
purpose of calculating benefits has exceeded 100,000 pounds
Sterling or such other figures as may be prescribed in an order may
be the Treasury, Final Remuneration shall be the amount ascertained
in accordance with (h) above and (g) above shall not apply;
<PAGE> 10
(C) where Final Remuneration is computed by reference to any year
other than the last complete year ending on the Relevant Date,
the Member's remuneration (as calculated in (g) above) or total
emoluments (for the purposes of (h) above) of any year may be
increased in proportion to any increase in the Index from the
last day of that year up to the Relevant Date but this proviso
shall not apply to the calculation of the maximum Lump Sum
Retirement Benefit in accordance with Rule VII.9(h) for a
Class C Member unless the Member's Aggregate Retirement Benefit
is similarly increased beyond the maximum amount which could
have been paid but for this proviso and the proviso in (g) (ii)
above and then only to the same proportionate extent.
"Incapacity" means in relation to a Member physical or mental
deterioration in health which is bad enough to prevent the Member from
following his normal employment, or which seriously impairs his
earnings capacity.
"Index" means the Government's Index of Retail Prices or any other
Index agreed for this purpose by the Board of Inland Revenue.
"Insurer" means the Scottish Equitable Life Assurance Society or
Scottish Equitable (Managed Funds) Limited, both acting through a
branch or office in the United Kingdom, or any other Authorised Insurer
chosen under the provisions of the Scheme.
"Life Assurance Benefit" means the class of benefit so described in
Part III.
"Lump Sum Retirement Benefit" means the total value of all retirement
benefits payable in any form other than non-commutable pension under
this and any Associated Scheme.
"Member" means an employee who has been admitted to membership of the
Scheme and to whom or to whose Dependants, Dependent Children or
Beneficiaries any benefit is actually or prospectively or contingently
payable under the Rules. An employee may include a director of a
Participating Employer, a former employee or a former director.
"Normal Retirement Date" means in relation to a Member the date set
out in the Appendix.
"Ordinary Retirement Benefit" means that part of Prospective Retirement
Benefit which does not consist of Bonus Credit or Transfer Credit.
"Other Emoluments" means any emoluments paid to a Member by a
Participating Employer other than Basic Salary.
"Participating Employer" means the Principal Company and any other
employer which participates in the Scheme, but does not include any
employer which has ceased to participate save in respect of the time
before it ceased to participate.
<PAGE> 11
"Pensionable Service" has the meaning ascribed to it by paragraph 3 of Schedule
16 to the Social Security Act of 1973.
"Policy" means any contract of life assurance or of annuity entered into by the
Trustees in connection with the Scheme, and in relation to a particular Member
means all such contracts securing benefits for him under the Rules.
"Post-Retirement Dependant's Pension" means the class of benefit so described
in Part V.
"Principal Company" means the employer named as the Principal Company in the
Declaration of Trust.
"Prospective Retirement Benefit" means in relation to a Member a lump sum or
pension payable to a Member upon retirement on the Normal Retirement Date or
to the widow or widower or other Dependants of a Member in the event of the
death of the Member after such retirement, and its amount on any other date
shall be computed according to the Rules upon the assumptions that the Member
would have remained in the service of the Company from that date until the
Normal Retirement Date without change in the Member's Final Pensionable Salary
(as defined in the Appendix).
"Qualifying Service" means Service while a Member, but excluding any period of
service which has previously been terminated.
"Relevant Date" means the date of retirement, leaving Pensionable Service or
death as the case may be.
"Relevant Scheme" means any other scheme approved or seeking approval under
Chapter I of Part XIV of the Act.
"Remuneration" in relation to any year means the following.
As regards a Class A member the aggregate of the total emoluments for the year
in question --
(i) from the Participating Employer;
(ii) in respect of any Associated Employment or any Connected Scheme;
which are assessable to Income Tax under Schedule E but excluding any amounts
which arise from the acquisition or disposal of shares or an interest in shares
or a right to acquire shares or anything in respect of which tax is chargeable
by virtue of section 148 of the Act. Provided that in arriving at such
emoluments there shall be disregarded any emoluments in excess of the permitted
maximum as defined in section 590C(2) of the Act.
<PAGE> 12
As regards a Class B Member and a Class C Member whose Relevant Date is
on or after 17th March 1987 total emoluments from the Participating
Employer in the year in question which are assessable to Income Tax
under Schedule E but excluding any amounts which arise from the
acquisition or disposal of shares or an interest in shares or a right
to acquire shares or anything in respect of which tax is chargeable by
virtue of section 148 of the Act (payments on termination of
employment, etc.).
As regards a Class C Member whose Relevant Date is on or before 16th
March 1987 total emoluments from the Participating Employer in the
year in question which are assessable to Income Tax under Schedule E.
"Retirement Benefit Scheme" means a retirement benefit scheme as
defined in Section 611(1) of the Act.
"Rules" means these Principal Rules, the Appendices thereto and any
alterations, amendments, additions or modifications thereto for the
time being in force and any Supplementary Rules as may be made from
time to time.
"Scheme" means the scheme established by and named in the Declaration
of Trust.
"Service" means service as follows.
Class A Member
Service means service with a Participating Employer and, for the
purposes of Rule VII.9, includes all other periods which count in
respect of any Associated Employment or any Connected Scheme. A
transfer from the service of a Participating Employer into the
service of another Participating Employer shall not constitute a
break in Service.
Class B and Class C Members
Service means service with a Participating Employer. A transfer
from the service of a Participating Employer into the service of
another Participating Employer shall not constitute a break in
Service.
"Special Director" means a Member who, at any time on or after 17th
March 1987 and in the last ten years before the Relevant Date has,
in relation to a Participating Employer been both within the
definition of a director in section 612(1) and within paragraph (b)
of section 417(5) both of the Act.
"Statement of Benefits" means the statement provided by the Insurer
to the Trustees showing the amount(s) of benefit(s) which have
accrued or will accrue in respect of each Member or of a particular
Member of the Scheme.
<PAGE> 13
"Transfer Credit" means any part of the Prospective Retirement Benefit
which is purchased or provided for a Member by a Transfer Value received
by the Administrator under Rule VII.7, but does not include any other
benefit provided for the Member in respect of service to which the
Transfer Value relates.
"Transfer Value" has the meaning assigned to it by Rule VII.7.
"Transitional Member" means a Member who, irrespective of when he joined
the Scheme or when he transferred into the service of a Participating
Employer, may be deemed to be a Class B Member or a Class C Member under
any transitional arrangements -- all so that Approval of the Scheme is
not prejudiced.
"Trustees" means the trustees under the Declaration of Trust from time
to time.
"Withdrawal Benefit" means any benefit to which a Member may be entitled
in terms of Part VI upon ceasing to be in Qualifying Service before the
Normal Retirement Date for any reason other than death.
I.2 Admission to Membership
(a) Those employees of the Participating Employers who are eligible for
admission in terms of the Appendix shall be admitted to membership if
they apply to the Trustees in a form prescribed by the Trustees and the
Trustees accept that application.
(b) Without the prior consent of the Board of Inland Revenue the
Trustees shall not accept an application for membership where the
employee is to be treated as a Transitional Member.
(c) If the Participating Employer is a service company or an investment
company, and the employee is a director of the Participating Employer,
the Trustees shall not accept the employee's application for membership
unless such conditions, if any, as the Board of Inland Revenue may
require are satisfied.
I.3 Benefits
(a) The benefits provided for a Member will, subject to the Rule
relating to Evidence of Health, be of one or more of the classes
described in Parts II to V inclusive and will be of the amount or
amounts specified in the Supplementary Rules. The Trustees will
nevertheless have power on the direction of the Principal Company to
provide benefits for and in respect of a particular Member in addition
to those specified in the Rules.
Provided that where a person has already received a benefit under the
Rules in the form of a cash sum, no additional benefit shall be provided
except in the form of pension.
(b) Nothing in these Principal Rules, and Appendix or in any
Supplementary Rules will permit the provision for any Member of benefits
exceeding Benefit Limits.
<PAGE> 14
(c) With the agreement of the Principal Company, the Trustee may provide
benefits under the Scheme for and in respect of any person who is or was
in the service of a Participating Employer but who is not a Member. The
benefits to be provided for and in respect of such a person need not be
the same in type or amount as those provided for Members. However, no
such benefit shall exceed the Benefit Limits.
I.4 Surplus
(a) In the event of there being a surplus in the Fund however arising
the Trustees may subject to the following and if the Principal Company
consents --
either (i) retain the surplus in the Scheme to such extent as will not
prejudice Approval;
or (ii) apply the surplus or part of it to provide benefits for or in
respect of a Member but not so that Approval will thereby be
prejudiced;
or they may deal with the surplus partly in one way and partly in
another; and to the extent that they do not retain or apply the surplus
as aforesaid the Trustees shall reduce the contributions of the
Participating Employers by the amount of the surplus.
(b) Where a person has already received a benefit under the Scheme in
the form of a cash sum no surplus shall be applied as above for his
benefit unless the benefits to be provided thereby are payable in the
form of pension; and where a benefit is provided as above it shall be
additional to any other benefits provided for the beneficiary under the
Scheme.
(c) Where a valuation carried out in accordance with prescribed
principles and fulfilling prescribed requirements discloses that the
value of the assets exceeds the value of the liabilities by a percentage
which is more than the prescribed maximum, if the steps taken or
proposed to be taken by the Trustees as above are not adequate or will
not be adequate over the prescribed period to reduce the excess so that
it is no more than the prescribed maximum, then the Trustees may in
their discretion use any one or more of the permitted ways to reduce the
excess so that it is no more than the prescribed maximum; and for the
purposes of this section "prescribed" means prescribed by regulations
made by the Board of Inland Revenue under Schedule 22 to the Act and
"permitted ways" means ways permitted by paragraph 3 of that
Schedule or reducing or eliminating the said excess.
I.5 Contributions
(a) If the Appendix requires a Member to contribute to the Scheme his
contributions will be applied as provided in the Appendix.
<PAGE> 15
(b) The balance of the cost, or, if there are no Member's contributions, the
whole cost of the Scheme, will be met by the Principal Company which will
recover from any other Participating Employers and proportions of the cost which
are attributable to the Members who are or have been in their employment. Any
Participating Employer may by notice in writing to the Trustees discontinue its
contributions to the Scheme and the Trustees shall, as they in their discretion
decide, either wind up the Scheme so far as relating to that Participating
Employer or reduce the benefits of the Members who are or have been in the
service of that Participating Employer to the amounts which have accrued in
terms of Rule VI(2)(b) or, if less, the amounts which would have been secured
had the Scheme been wound up.
(c) A Member may pay voluntary contributions. However, the Trustees shall not
be obliged to accept any voluntary contributions unless --
(i) in any year commencing on 6th April a Member's total voluntary
contributions are not less than the minimum prescribed in
regulation 2 of the Pension Schemes (Voluntary Contributions
Requirements and Voluntary and Compulsory Membership) Regulations
1987; and
(ii) the Member gives three months notice to the Trustees of his
intention to pay a voluntary contribution or pay voluntary
contributions at a specified rate or to vary that rate.
(d) Where a Member pays voluntary contributions, the Trustees shall provide
additional benefits for or in respect of the Member. The Trustees shall ensure
that the value of the additional benefits is reasonable having regard to the
amount of the voluntary contributions. No benefit shall be provided for which
there is no Benefit Limit or which would exceed a Benefit Limit. Any retirement
benefits so secured must be in the form of non-commutable pension except to the
extent to which the provisions of the Scheme allow commutation of trivial
pensions or on the grounds of serious ill-health or if payment of voluntary
contributions started before 8th April 1987.
(e) The total contributions paid by the Member in a year of assessment to this
and any Associated Scheme shall not exceed 15% of his Remuneration for that
year in respect of that Service.
(f) If a Member's contributions have to be restricted and it is necessary for
the Member's contributions to be reduced (or part of them to be repaid) the
Member shall reduce his voluntary contributions first, whether they are payable
(or have been paid) under the Scheme or under another scheme.
(g) The provisions for the payment of voluntary contributions shall
(notwithstanding anything in the Rules to the contrary) have effect as if the
provisions of Part III of Schedule 6 to the Finance Act 1989 concerning the
return of surplus funds applied to the Scheme.
<PAGE> 16
(h) A Member's contributions shall be deducted by the Company so far as
possible by weekly or monthly instalments from the payments of his
remuneration. The Company shall pay these contributions to the
Principal Company who in turn shall pay them to the Trustees.
(i) The Trustees will hold a Member's voluntary contributions, and any
assets derived therefrom, so that they are separately identifiable and
isolated from the other assets and liabilities of the Scheme and shall
apply them exclusively to provide benefits for and in respect of the
Member. No arrangement under Rule VII.12(e) shall result in these
segregated voluntary contributions, and any assets derived therefrom,
being used for any other purpose unless the Occupational Pensions Board
give their written approval thereto.
I.6 Retirement
(a) A Member may retire on his Normal Retirement Date, or may be
treated as having retired previously, or may be treated as having
deferred his retirement.
(b) A Member may retire before Normal Retirement Date if he has
attained the age of 50, or before that age if the reason for retirement
is Incapacity, and he tells the Trustees in writing that he wishes his
retirement benefits to become payable on his retirement.
Class A Member
(c) Where a Class A Member is to remain in Service on or after his
Normal Retirement Date, he must retire on the earlier to occur of --
(i) the date he leaves Service;
(ii) the day before the date of his 75th birthday.
Class B and Class C Members
(d) Where a Class B Member or Class C Member is to remain in Service on
or after his Normal Retirement Date he shall retire on his Normal
Retirement Date unless he tells the Trustees in writing before that date
that he wishes the payment of his retirement benefits to be deferred and
the Principal Company consents to the deferral. Subject to being able
to take a lump sum retirement benefit before retiring, as set out in
Rule II.7, he must retire on the earliest to occur of --
(i) the date he leaves Services;
(ii) the day before the date of his 75th birthday (or his 70th
birthday if Part VI applies to him);
(iii) the date on which he wishes to have his retirement benefits paid
and of which he gives to the Trustees at least one month's
written notice.
<PAGE> 17
I.7 Disposal of Death Benefits
(a) Any benefit arising on the death of a Member which falls to be
disposed of under this Rule will, subject to Sub-Rule (b), be paid to or
applied for the benefit of any one or more of the deceased Member's
Beneficiaries and his legal personal representatives in such shares as
the Principal Company in its absolute discretion decides, and for any
part of the benefits for which the discretion is not exercised within
two years of the Member's death that part will be paid to his legal
personal representatives. In the application of the benefit for any one
or more of the Beneficiaries it shall, if the Principal Company so
directs, be transferred by the Trustees to trustees or a trust
corporation to be held upon trust for such Beneficiary or Beneficiaries
in such shares and for such interests (being interests which will
necessarily vest within the period permitted by the law against
perpetuities) as the Principal Company shall direct.
(b) If there is no Beneficiary in existence at the time of the Member's
death, the Trustees shall not be obliged to pay the benefit but may, if
they think fit, declare it or part of it not to be payable.
(c) Any such benefit will be disposed of out of the Scheme as soon as
the said discretion is exercised and the Beneficiary to the Trustees'
satisfaction proves his title. Any benefit not paid by the second
anniversary of the Member's death shall be held outside the Scheme,
except that any sum which is applied to secure a pension under Part IV
or Part V, without causing any of the Benefit Limits to be exceeded,
shall be deemed to have been disposed of out of the Scheme on the date
on which it is so applied.
(d) If a Member to whom Part VI applies dies before the earlier of his
Normal Retirement Date and the date of his retirement before Normal
Retirement Date, the powers conferred on the Principal Company shall be
exercisable by the Trustees.
I.8 Temporary Absence and Secondment
(a) Subject to the following provisions in this Rule, a Member who is
temporarily absent from Service or is seconded to another employer may
be treated as remaining in Service.
(b) If the Member is a female Member who has a right under the
Employment Protection (Consolidation) Act 1978 to return to work
following pregnancy or confinement, her Service shall be deemed not to
have terminated so long as that right subsists.
(c) A Member's Service, unless it actually terminates, shall be deemed
to continue for the first four weeks of absence. Thereafter, subject to
Sub-rule (b), a Member's Service shall terminate on the earliest to
occur of the following --
<PAGE> 18
(i) the date the Trustees are told in writing by the Principal
Company that the Member's Service is to terminate on;
(ii) the date when there is no definite expectation of the Member's
return to Service and the Member is absent other than because
of ill-health or Incapacity;
(iii) the date when the Member has been absent for three years (or
such longer period as the Board of Inland Revenue may allow);
(iv) the date the Member becomes a member of another approved
retirement benefit scheme or approved personal pension scheme
in respect of service with a Participating Employer (except a
scheme which is to top up benefits under this Scheme);
(v) if the Participating Company is not resident for tax purposes
in the United Kingdom, the date the Member is transferred to
duties abroad in such circumstances that his earnings cease to
be effectively chargeable under Case I or II of Schedule E set
out in Part V of the Act.
Where a Member is sent abroad in circumstances which cannot be
regarded as secondment to serve with non-resident companies in
a group of which the parent company is resident in the United
Kingdom, but the parent company retains control over the
movements of the Member within the group (i.e. remains in a
position to recall him or direct him elsewhere), the Member's
Service shall be terminated if the Board of Inland Revenue give
their prior approval and the non-resident companies reimburse
the United Kingdom company for the employer's contributions
under the Scheme except where the Board of Inland Revenue agree
otherwise.
(d) After the first four weeks' absence, and subject to
Sub-rule (b), the Principal Company may tell the Trustees that
any service while a Member is absent from work shall not count
as Qualifying Service or Pensionable Service.
Provided that the Principal Company may tell the Trustees that
death in Service benefits and/or additional benefits may be
provided while the Member is absent from work.
I.9 Accounts and Annual Reports
The Trustees will prepare annual accounts of the Scheme and
have them audited by a person who is qualified by law to act as
auditor of a company but who is not a Member, Participating
Employer or Trustee or an employee or director of a
Participating Employer or Trustee.
I.10 Member's Option to Stop Active Membership
(a) While in Qualifying Service a Member may give notice to the
Company that his Qualifying Service and Pensionable Service is
to stop.
<PAGE> 19
(b) Any such notice shall be given in writing and shall specify the
date on which Qualifying Service and Pensionable Service is to stop,
but that date shall not be earlier than the date on which the notice
is received by the Company.
(c) A Company which has been given such a notice shall tell the
Trustees forthwith of the date on which Qualifying Service and
Pensionable Service stops.
(d) If the Principal Company and the Member agree, the Member may
again be treated as being in Qualifying Service and Pensionable
Service.
<PAGE> 20
PART II
RETIREMENT PENSIONS
II.1 Retirement Pensions
The class of benefit described in this Part will be known as Retirement
Pension and will consist of a pension which will become payable to the
Member if he retires on the Normal Retirement Date.
II.2 Early Retirement
If a member for whom a Retirement Pension is provided retires before the
Normal Retirement Date he will receive a reduced pension called an Early
Retirement Pension. The amount of the Early Retirement Pension will,
subject to the Benefit Limit, be the amount of the deferred pension to
which he would have been entitled as if he had ceased to be in Qualifying
Service otherwise than by retirement, reduced in accordance with his age
at retirement, but it will not be less than such amount as is certified
as reasonable by an Actuary. The Trustees must be reasonably satisfied
that on the date when the pension is or becomes payable the value of the
benefit equals or exceeds the value of the benefits which have accrued to
or in respect of the Member. The Trustees may, however, on the direction
of the Principal Company provide an Early Retirement Pension of a larger
amount, so long as the Benefit Limit is not exceeded.
II.3 Late Retirement
If a Member for whom a Retirement Pension is provided is retained in
Qualifying Service after the Normal Retirement Date he will receive on
retirement an increased pension called a Late Retirement Pension. The
amount of the Late Retirement Pension will, subject to the Benefit Limit,
be the amount of the Retirement Pension, increased in accordance with the
Member's age at retirement. It will not be less than such amount as is
certified as reasonable by an Actuary and the Trustees must be reasonably
satisfied that on the date when the pension is or becomes payable the
value of the benefit equals or exceeds the value of the benefits which
have accrued to or in respect of the Member.
However, for any Member, benefits may be paid at a different date to the
extent necessary to comply with any Department of Social Security
requirements.
II.4 Payment of Pension
(a) A Retirement Pension or an Early or Late Retirement Pension will be
payable in arrear by monthly instalments of as nearly as possible equal
amount, commencing one month after the date of retirement and continuing
on the same date in each subsequent month (but not later than the 28th
day of the month) during the lifetime of the Member, the last instalment
being payable on the due date immediately following with the date of the
Member's death.
<PAGE> 21
(b) The Trustees may, however, arrange either for a pension to be paid
monthly on such other date as is convenient or for the pension to be paid
at approximately equal intervals longer than one month but not longer
than one year, as the Trustees think fit.
II.5 Death of Member
After Normal Retirement Date but before Retirement
(a) If a Member for whom a Retirement Pension is provided dies while in
Qualifying Service after the Normal Retirement Date without having
retired he will be deemed for the purpose of paragraph (b) of this Rule
to have retired on the day before his death. If the Principal Company so
directs and the effect is to increase the amount of the benefit payable
the Trustees shall also deem that the Member had exercised any right
which he would have had on such retirement to commute all or part of his
pension for a cash sum.
After Retirement
(b) If a Member who is receiving a pension under this Part dies after
retirement (whether before on or after the Normal Retirement Date) but
before the fifth anniversary of his retirement there will be payable at
the date of his death a lump sum equal to the value at that date of the
instalments of pension which would have fallen due after that date if his
pension had continued until the day before the said fifth anniversary.
(c) Any such lump sum will be disposed of in terms of Rule I.7.
II.6 Optional Dependant's Pension
(a) Subject to the Benefit Limit a Member for whom a Retirement Pension
is being provided may, by giving notice to the Trustees at least one
month before his retirement, elect to surrender a part of his pension in
order to provide a pension for a named Dependant of his. Such a
surrender will have no effect if the Member retires before the Normal
Retirement Date or the Member or his Dependant dies before the date of
the Member's retirement, but if after the Member's retirement the
Dependant predeceases him the Member will be entitled only to the
unsurrendered part of his pension. An election to surrender may not be
revoked after the Member has retired.
(b) With the consent of the Trustees a Member may exercise this option on
retirement before the Normal Retirement Date but he may be required to
produce evidence satisfactory to the Trustees of his good health.
(c) A Dependant's Pension under this Rule will become payable and be paid
in the same events and the same way as a Post-Retirement Dependant's
Pension under Part V.
<PAGE> 22
II.7 Commutation of Pension
(a) Subject to the Benefit Limits the Member may tell the Trustees in
writing before his date of retirement the amount of lump sum retirement
benefit he wishes. The Trustees shall then commute all or part of his
Retirement Pension to provide a lump sum retirement benefit. The rate of
commutation shall be that which the Actuary tells the Trustees is
reasonable. The rate of commutation shall not be such as to prejudice
Approval of the Scheme.
(b) A lump sum retirement benefit under Sub-rule (a) shall in the case of
a Class A Member be paid on the date of retirement. Where a Class B
Member or Class C Member retires late in terms of Rule I.6 he may tell
the Trustees in writing the lump sum retirement benefit he wishes and the
date of payment, being a date on or after Normal Retirement Date and on
or before the date he is deemed to retire in terms of Rule I.6, and the
Trustees shall then realise such part of the Member's Account as is
necessary to provide that benefit on that date. The Member shall not
then be entitled to any further lump sum retirement benefit.
<PAGE> 23
PART III
LIFE ASSURANCE BENEFITS
III.1 Life Assurance Benefit
The class of benefit described in this Part will be known as Life
Assurance Benefit and will consist of a cash sum which will become
payable in the event of the death of the Member in Qualifying Service
before the Normal Retirement Date.
III.2 Early Retirement
If a Member retires before the Normal Retirement Date the benefit will
cease on the date of retirement and will not be payable if he dies on or
after that date.
III.3 Late Retirement
Although a Member for whom Life Assurance Benefit is provided is retained
in Service after the Normal Retirement Date, the benefit will cease on
the Normal Retirement Date and will not be payable if he dies on or after
that Date.
III.4 Payment of Life Assurance Benefit
Any benefit arising under this Part will be disposed of in terms of Rule
I.7.
<PAGE> 24
PART IV
DEPENDANT'S DEATH IN SERVICE PENSION
IV.1 Dependant's Death in Service Pension
(a) The class of benefit described in this Part will be known as
Dependant's Death in Service Pension and will consist of a pension which
will become payable to a Dependant of the Member in the event of the
death of the Member in Qualifying Service before the Normal Retirement
Date survived by the Dependant. The Dependant to whom such a pension is
to be payable will be the widow or widower of the Member unless the
pension is provided by the Trustees on the direction of the Principal
Company and at the time the direction is given the Member requests and
the Principal Company agrees that the pension shall be payable to some
other existing Dependant of the Member.
(b) So long as the Benefit Limit is not exceeded (in particular, the
restriction on the sum total of pension benefits provided for all
Dependants), the Principal Company may if it thinks fit provide
Dependant's Death in Service Pensions payable to two or more Dependants
of the same Member.
IV.2 Dependent Children's Pension
(a) If a Dependant's Death in Service Pension is provided and the
Dependant is the spouse of the Member, a Dependent Children's Pension of
the same amount will be provided for the Member in addition. A Dependent
Children's Pension will also be provided for a Member who is a widow or
widower or is unmarried and who has one or more Dependent Children if a
Dependant's Death in Service Pension would have been provided had the
Member been married. One Dependent Children's Pension only will be
provided whether there is one Dependent Child or more.
(b) A Dependent Children's Pension will become payable
(i) on the death of the Member if he leaves no widow or widower, or
(ii) on the death of the Member's widow or widower,
and will be payable so long as there is a Dependent Child of the Member.
(c) In exceptional circumstances the Trustees may on the direction of the
Principal Company (i) where a Dependant's Death in Service Pension is to
be payable to a Dependant of a Member, who is not the Member's spouse,
provide a Dependent Children's Pension on the same basis as if the
Dependant was a spouse or (ii) arrange that in relation to any Dependent
Children's Pension, some only of the Member's Dependent Children shall be
regarded as his/her children, and that the remaining Dependent Children
shall be regarded as Dependent Children of the Member in relation to a
separate Dependent Children's Pension, or (iii) where a Dependant's Death
in Service Pension is not provided for a Member, provide a Dependent
Children's Pension as if the Member were a Member for whom such a
Dependant's Death-in-Service Pension had been provided but whose marriage
had been dissolved.
<PAGE> 25
IV.3 Early Retirement
If a Member for whom a Dependant's Death in Service Pension of this class
is provided retires before the Normal Retirement Date this benefit will
cease to be provided as from the date of retirement and will not be
payable if he dies on or after that date.
IV.4 Late Retirement
Although a Member for whom a Dependant's Death in Service Pension of this
class is provided is retained in Service after the Normal Retirement
Date, the benefit will cease on the Normal Retirement Date and will not
be payable if he dies on or after that Date.
IV.5 Payment of Pension
(a) A Dependant's Death in Service Pension under this Rule will be
payable in arrear by monthly instalments of as nearly as possible equal
amount, commencing two months after the date of the Member's death and
continuing on the said date in each subsequent month (but not later than
the 28th day of the month) during the lifetime of the Dependant, the last
instalment being payable on the due date immediately following the date
of the Dependant's death.
(b) The Trustees may, however, arrange either for a pension to be paid
monthly on such other date as is convenient, or for the pension to be
paid in arrear at approximately equal intervals, longer than one month
but not longer than one year, as the Trustees think fit.
(c) A Dependent Children's Pension will be paid in a similar manner to
any trustee for the children, or to any person having the legal or actual
custody of the children or the legal conduct of their affairs and the
receipt of any such person shall be a full and sufficient discharge.
Where a Dependent Children's Pension becomes payable on the death of a
Member's widow or widower, it will commence two months after the due date
of the last instalment of pension falling due in the lifetime of the
widow or widower.
<PAGE> 26
PART V
POST-RETIREMENT DEPENDANT'S PENSIONS
V.1 (a) The class of benefit described in this Part will be known as Post-
Retirement Dependant's Pension and will consist of a pension which will
subject to this Rule become payable to a Dependant of the Member in the
event of the Member's retiring on the Normal Retirement Date and then
dying, leaving the Dependant surviving him. The Dependant to whom such
a pension is to be payable will be the widow or widower of the Member
unless the pension is provided by the Trustees on the direction of the
Principal Company and at the time the direction is given the Member
requests and the Principal Company agrees that the pension shall be
payable to some other Dependant of the Member.
(b) The date on which a pension is provided will be --
(i) if the provision of the pension is required and its amount is
prescribed by any Rule, the date on which the Member joined the
Scheme or otherwise became subject to the Rule in question, or
the later date of his marriage or remarriage whether or not he
was a Member or in Service on that later date;
(ii) in any other case, the date on which the provision of the pension
is directed by the Principal Company, and if there is more than
one such direction the amount of pension provided by reason of
each direction will be provided on the date on which the
direction in question is given.
(c) So long as the Benefit Limit is not exceeded (in particular, the
restriction on the sum total of pension benefits provided for all
Dependants), the Principal Company may if it thinks fit, provide
Post-Retirement Dependant's Pensions payable to two or more Dependants
of the same Member.
V.2 Dependent Children's Pension
(a) If a Post-Retirement Dependant's Pension is provided and the
Dependant is the spouse of the Member, a Dependent Children's Pension
of the same amount will be provided for the Member in addition. A
Dependent Children's Pension will also be provided for a Member who is
a widow or widower or is unmarried and who has one or more Dependent
Children if a Post-Retirement Dependant's Pension would have been
provided had the Member been married. One Dependent Children's Pension
only will be provided whether there is one Dependent Child or more.
(b) If the Member retires on the Normal Retirement Date a Dependent
Children's Pension will become payable if there is a Dependent Child
of the Member in existence --
(i) if the Member does not leave a widow or widower, one month
after the due date of the last payment of the Member's
Retirement Pension;
<PAGE> 27
(ii) if the Member leaves a widow or widower, one month after the due
date of the last payment of the pension payable to the widow or
widower;
and will continue to be payable in the same way as a Post-Retirement
Dependant's Pension so long as there is a Dependent Child of the
Member.
(c) In exceptional circumstances the Trustees may on the direction of
the Principal Company (i) where a Post-Retirement Dependant's Pension is
to be payable to a Dependant of a Member, who is not the Member's
spouse, provide a Dependant Children's Pension on the same basis as if
the Dependant was the spouse, and (ii) arrange that in relation to any
Dependent Children's pension, some only of the Member's Dependent
Children shall be regarded as his/her children, and that the remaining
Dependent Children shall be regarded as Dependent Children of the Member
in relation to a separate Dependent Children's Pension.
V.3 Early Retirement
Subject to Rule V.5, if a Member for whom benefit is provided under this
Part retires before the Normal Retirement Date the Post-Retirement
Dependant's Pension and Dependent Children's pension, if any, will
become payable on the Member's subsequent death in the same events and
in the same way as though he/she had retired on the Normal Retirement
Date. Their amounts will be either based on the Member's Early
Retirement Pension or, as the case may be, actuarially reduced in the
same manner as an Early Retirement Pension.
V.4 Late Retirement
Subject to Rule V.5, if a Member for whom benefit is provided under this
Part is retained in Service after the Normal Retirement Date and dies on
or after that date the Post-Retirement Dependant's Pension will become
payable as if he had retired immediately before his death.
V.5 Value of benefits at retirement
The Trustees must be reasonably satisfied that on the date when the
benefit under Rules V.3 and V.4 is or becomes payable the value of the
benefit equals or exceeds the value of the benefits which have accrued
to or in respect of the Member for the Dependant(s).
V.6 Payment of Pension
(a) A Post-Retirement Dependant's Pension will be payable to the
Dependant in ARREAR by monthly instalments of as nearly as possible
equal amount, commencing on the date specified in this Part of the Rules
and continuing on the same date in each subsequent month (but not later
than the 28th day of each month) during the lifetime of the Dependant,
the last instalment being payable on the due date immediately following
the date of the Dependant's death.
<PAGE> 28
(b) The Trustees may, however, arrange either for a pension to be
paid monthly on such other date as is convenient, or for the pension to
be paid at approximately equal intervals, longer than one month but not
longer than one year, as the Trustees think fit. If any other pension is
payable to the Dependant from the Scheme the Trustees may adjust the
dates of payments of the pensions so that they coincide.
(c) A Dependent Children's Pension will be paid in a similar manner
to any trustee for the children or to any person having the legal or
actual custody of the children or the legal conduct of their affairs and
the receipt of any such person shall be a full and sufficient discharge.
<PAGE> 29
PART VI
CEASING TO BE A QUALIFIED EMPLOYEE
VI.1 Entitlement to Withdrawal Benefit
(a) A Member who before the Normal Retirement Date ceases to be in
Pensionable Service for any reason other than death or retirement shall
be entitled to Withdrawal Benefit.
(b) If a Member ceases to be in Qualifying Service and after an
interval re-enters Qualifying Service, and either --
(i) the interval did not exceed one month; or
(ii) the Scheme is a Centralised Scheme and before the Member ceased
to be in Qualifying Service he had been in Qualifying Service
for two years, whether continuously or not; or
(iii) the interval corresponds to the Member's absence wholly or
partly because of pregnancy or confinement, the Member is a
woman who returns to work after an absence for pregnancy or
confinement in exercise of a right under Section 45(1) of the
Employment Protection (Consolidation) Act 1978 and the Member
returns to Pensionable Service no later than one month after
returning to work; or
(iv) the interval corresponds to the Member's absence from work in
furtherance of a "trade dispute" as defined in section 19(2)(b)
of the Social Security Act 1975;
then for the purpose of determining the Member's entitlement to any
benefit in respect of Service thereafter the interval will be ignored
and the Member will be treated as if the earlier period of Service had
immediately preceded the later period.
VI.2 Calculation of Withdrawal Benefit
(a) Subject to the Benefit Limits the amount of the Withdrawal Benefit
granted in the form of Retirement Pension and Post-Retirement
Dependant's Pension will be the amount which by Sub-rule (b) of this
Rule is deemed to have accrued at the date on which the Member ceased
to be in Pensionable Service, with the addition of the full amount of
any Transfer Credit, provided however that the amount of the Withdrawal
Benefit will not exceed the amount of the Prospective Retirement
Benefit on the date of ceasing to be in Service.
(b) The amount which is deemed to have so accrued shall be the total
of --
(i) an amount of Ordinary Retirement Benefit computed according
to the Supplementary Rules; and
(ii) the portion of each Bonus Credit which has accrued up to the
date of ceasing to be in Pensionable Service upon the basis
that a Bonus Credit accrues by equal amounts from month to
month from the date on which it is provided until the Normal
Retirement Date; and
<PAGE> 30
(iii) the amount of the Paid-up Retirement Pension secured by a
Member's voluntary contributions under Rule I.5.
VI.3 Early or Late Retirement
A Member who is entitled to or is granted any Withdrawal Benefit, and
who is subsequently treated as retiring before or after the Normal
Retirement Date in terms of Rule I.7 shall be entitled to the benefits
appropriate to early retirement or to late retirement as the case may be
but those benefits shall be calculated by reference to the amount of the
Withdrawal Benefit. The Trustees must be reasonably satisfied that on
the date when the pension is or becomes payable the value of the benefit
equals or exceeds the value of the benefits which have accrued to or in
respect of the Member.
VI.4 Widow's/Widower's Benefit on Death before Normal Retirement Date
If a Member dies after retiring or otherwise ceasing to be in
Qualifying Service but before the Normal Retirement Date and leaves a
widow or widower, a Dependant's Death in Service Pension shall be
provided for that Widow/Widower under Part IV whether or not he/she was
his/her spouse when he/she ceased to be in Qualifying Service.
VI.5 Leaving Service Option
As an alternative to providing under the Scheme Withdrawal Benefits in
terms of Rule VI.2 the Trustees shall, if the Member so requests in
writing at the date he ceases to be in Pensionable Service or at any
time thereafter, purchase a life assurance policy and/or annuity
contract in the name of that Member from any Authorised Insurer of the
Member's choice, provided that -
(i) the policy or contract states in monetary terms the maximum
extent to which benefits may be taken in lump sum form on death
or at Normal Retirement Date;
(ii) the policy or contract contains provisions prohibiting its
assignment or surrender, except a surrender within the terms
permitted by regulations made under Section 52(C) of the Social
Security Pensions Act 1975, and either specifies the dates on
which the period or periods of service which gave rise to the
benefits began and ended or specifies whether that service was
service in respect of which the Scheme conforms to the appropriate
extent with the preservation requirements of Part II of the Social
Security Act 1973;
(iii) the rights to be conferred on the beneficiary (which may include
rights formerly vested in the Trustees) will be on terms which are
consistent with the terms which applied under the Scheme to his
benefits at the date of termination.
(iv) the policy or contract may be written under trust with discretion
to the trustees appointed for the purpose in relation to any lump
sum payable on the death of the Member. If not so dealt with, any
such lump sum shall be payable to the Member's legal personal
representatives.
<PAGE> 31
On the delivery of the policy or contract to the Member his entitlement
to benefits from the Scheme and those of his spouse and Dependants shall
be extinguished and, he shall cease for all purposes to be a Member of
the Scheme.
VI.6 Revaluation of Withdrawal Benefits
The amount of the Withdrawal Benefits in respect of a Member to whom
this Rule applies shall be increased during the period starting with the
day after his Pensionable Service stops and ending with his Normal
Retirement Date as set out in Part I of Schedule 1A to the Social
Security Pensions Act 1975:
Provided that B and C in the formula set out in paragraph 2(2) of
Schedule 1A shall both be calculated to the nearest whole month.
VI.7 Statutory Right
A Member who has a right to a cash equivalent under Part II of Schedule
1A to the Social Security Pensions Act 1975 may exercise the option
conferred by paragraph 13(2) of that Schedule and the Trustees must then
act in terms of that Schedule to transfer the Member's cash equivalent.
Provided that -
(i) where a transfer is made to a personal pension scheme the
provisions of Rule VII.8(d) shall apply here too; and
(ii) any annuity arising from a transfer must satisfy the Inland
Revenue's requirement for Approval.
VI.8 Compulsory Buy-out
The Trustees may without the consent of a Member secure the benefits for
and in respect of the Member under an insurance policy or annuity
contract where the provisions of Regulation 9 of The Occupational
Pension Schemes (Preservation of Benefit) Regulations 1991 apply. When
the benefits have been so secured no further benefit shall be payable
under the Scheme for and in respect of the Member.
VI.9 Alternative Benefits
With the Member's consent, the Trustees may secure the benefits for and
in respect of a Member who has left Pensionable Service by any one or
more of the means set out in Rule VII.12 (g) and (h). Subject to the
Benefit Limits the benefits thereafter provided may differ in type
and/or amount from the benefits due under the Scheme.
<PAGE> 32
PART VII
ADMINISTRATION, ETC.
VII.1 Investment and Rules
(a) The trustees shall invest all contributions to and assets of the
Scheme in effecting and maintaining with the Insurer annuity or
assurance policies or contracts. Subject to the Rules the Trustees may
vary and replace any of the policies or contracts, and may place money
on current or deposit account with any bank or building society in the
United Kingdom where convenient. However, the Trustees shall be under no
liability for any loss suffered or alleged to be suffered as a result of
the selection of the Insurer or of the policies or contracts or of
anything done or not done in terms of any policy or contract with the
Insurer.
(b) The Trustees and the Principal Company may from time to time make
additional rules (hereinafter called "Supplementary Rules") and may make
different Supplementary Rules for different Members or groups of
Members. They may also from time to time alter, amend, add to or revoke
these Rules or any Appendices or any Supplementary Rules or any of them.
If there is any conflict between any Appendices, any Supplementary Rules
and the Rules (other than Rule VII.8) the Appendices, the Supplementary
Rules shall prevail and shall be construed as amending the Rules to that
extent. No Appendices, Supplementary Rules and/or alteration, amendment,
addition or revocation to the Rules shall be made which would prejudice
Approval, or without the written consent of the Member which would
adversely affect the rights to any benefits already accrued in respect
of any Member, except something which is done so that the Rules will
conform to the details of the Scheme referred to in the Declaration of
Trust or to secure Approval. Any Appendix, Supplementary Rule and any
alteration, amendment, addition or revocation to the Rules shall come
into effect if subscribed by the Trustees and by the Principal Company
and may provide that they or it shall come into effect as from a date
earlier or later than the date of subscription.
VII.2 Admission of Employers to Participation
An employer which is associated in business with the Principal Company
may participate in the Scheme provided all the following conditions are
met.
(i) The Board of Inland Revenue shall be told in writing of the
employer's proposed participation before that participation is
effected.
(ii) Approval of the Scheme will not be prejudiced by the employer's
participation.
(iii) The employer agrees in writing to participate in the Scheme and
to be bound by the provisions of the Scheme.
(iv) The Principal Company agrees in writing to the employer's
participation in the Scheme.
<PAGE> 33
VII.3 Appointment and Removal of Trustees
(a) The Principal Company may remove a Trustee from office as a
trustee of the Scheme. The removal must be made in writing and cannot
result in there being no Trustee left.
(b) The Principal Company may appoint a new trustee to the Scheme.
The appointment must be made in writing.
(c) A Trustee may resign as a trustee of the Scheme. The resignation
must be made in writing to the Principal Company. The resignation shall
not take effect before the Principal Company receives the written
resignation. A Trustee cannot resign unless there is at least one
other Trustee left.
(d) A Trustee who was an employee of a Participating Employer when he
was appointed a trustee of the Scheme shall stop being a Trustee on the
earlier of --
(i) the date he leaves the employment of the Participating
Employer if there is at least one other Trustee left; and
(ii) after he leaves the employment of the Participating Employer,
the first date on which a new trustee of the Scheme is
appointed.
VII.4 Exercise of Powers etc.
(a) Anything which in terms of the Rules is required or permitted to
be done by a Participating Employer may be done --
(i) in the case of a corporate body by the directors or governing
body thereof; or
(ii) in the case of a partnership by the partners or a majority
of them; or
(iii) in the case of an individual by his subscribing a note or
memorandum as described in paragraph (c) of this Rule.
(b) Anything required or permitted to be done by the Trustees may be
done by a resolution passed by a majority of those voting at a meeting
of Trustees, or set down in writing and assented to by a majority of
the Trustees after having been circulated to all of them. The Trustees
shall appoint a chairman and he, or in his absence, a chairman
appointed for the duration of the meeting, shall take the chair at any
meeting and in the event of an equality of votes shall have a second or
casting vote. A Trustee which is a corporate body may be represented at
any such meeting by one of its directors or its secretary or by any
person appointed by it for the purpose who shall at that meeting have
the same powers as an individual Trustee. At any meeting of the
Trustees a majority shall be a quorum.
<PAGE> 34
(c) Where anything has been resolved or determined or otherwise done
by any Participating Employer or the Trustees or any of them a note or
memorandum thereof signed (i) in the case of a corporate body by a
director or the secretary thereof, or (ii) in the case of a partnership
by any partner or (iii) in the case of an individual by himself or (iv)
in the case of the Trustees by any one of them or by a director or the
secretary of a Trustee which is a corporate body or (v) in any case by a
person duly authorised so to sign, shall be conclusive evidence of its
contents in a question with persons dealing with the Trustees. Where
anything done by the Trustees requires the concurrence of the Principal
Company or vice versa and the Principal Company is itself a Trustee, a
signature on its behalf affixed to such a note or memorandum shall be
deemed to be affixed in both its capacities.
(d) The Trustees may from time to time engage and remunerate
Actuaries, solicitors, accountants, brokers, investment advisors or such
other advisors as they consider necessary or desirable in connection
with the Scheme. Further, the Trustees may, in writing, make such other
arrangements for the administration of the Scheme, including the giving
of receipts, discharges and mandates, the making of proposals for
annuity or assurance policies or contracts and the operation or
variation of any such policies or contracts as they consider necessary
or desirable.
(e) A Trustee or any firm or corporate body of which he is a partner
or employee may, with the written consent of the Principal Company, be
remunerated in respect of his service or those of the firm or corporate
body. Any such remuneration payable may be kept for the payee's own
beneficial use.
(f) The Trustees shall have the whole rights, powers, privileges and
immunities conferred by law. Notwithstanding, the Trustees shall not
incur any personal liability whatsoever for any act or omission --
(i) which is not wilful, criminal or negligent; or
(ii) which follows professional advice; or
(iii) which follows advice or information given by a Participating
Employer.
(g) The Trustees shall only be liable to account for contributions to
the Scheme which are actually received by them and for the benefits
actually secured by those contributions. No Trustee shall incur any
personal liability through any failure of the Trustees to sue for or
recover any contribution or cost payable by a Participating Employer or
for any sum for which a Participating Employer is accountable to the
Trustees in respect of Members' contributions paid to that Employer or
deducted from the remuneration of Members.
<PAGE> 35
VII.5 Miscellaneous Provisions
(a) Benefits non-assignable. No person entitled to benefit from the
Scheme may assign or charge in any way his beneficial interest under
the Scheme. If any person shall attempt to do so or shall suffer any
act or thing (otherwise than the exercise of any option under the
Rules), whereby by operation of law or otherwise a benefit if
belonging to him absolutely would be payable wholly or in part to some
other person such benefits shall be forfeited. Without prejudice to
the following while any person entitled to benefit from the Scheme is
bankrupt, such benefit shall not pass to any trustee in bankruptcy
and/or any creditor of that person and/or anybody acting on behalf of
the creditors of that person. However, the Trustees may on the
direction of the Principal Company apply the Member's benefits for
the maintenance or personal support of the person whose benefit has
been forfeited and his Dependants and Dependent Children or any one
or more of them in such manner as the Principal Company in its
absolute discretion thinks fit provided always that no payment
shall be made to or for the benefit of a purported assignee.
(b) Incapacity of beneficiary. If in the opinion of the Principal
Company any person entitled to benefit from the Scheme has become
incapable of managing his own affairs, the Principal Company may
in its discretion tell the Trustees in writing to pay or apply his
benefits in such manner as the Trustees may deem best for his
benefit or that of his Dependants or any of them.
(c) Failure to claim. If any person who is entitled to a payment
under the Scheme fails to claim such payment (or, if such person is
a child, no claim is made on behalf of such child) within six years
of the due date of such payment, then such person shall cease to
have any claim for such payment.
(d) Evidence and information. The Trustees may require any Member,
Dependant, Dependent Child or Beneficiary to produce such evidence
and information of a personal nature as they may from time to time
reasonably require for the purposes of the Scheme. If such evidence
or information is not produced, or if the evidence or information
produced is not satisfactory to the Trustees, the Trustees may
withhold any benefit in relation to which the evidence or information
was required until such time as satisfactory evidence or information
is produced.
(e) Evidence of health. The Trustees may require any person on whose
death in service a benefit may become payable to produce such evidence
of health or to satisfy such requirements as they deem necessary and,
if that evidence is not produced, or if the evidence produced is not
satisfactory to the Trustees, or if the requirements are not satisfied,
the amount of benefit in respect of which the evidence was required or
the requirements had to be satisfied shall not be payable or shall be
payable subject to such special terms and conditions as the Trustees
may decide.
(f) War service. The Trustees may restrict the amount of any benefit
payable on the death of a Member in service where his death occurs
directly or indirectly as a result of war (whether war be declared
or not) or where he dies while a whole time member of the armed
forces or of any organisation engaged in national service of any
country.
<PAGE> 36
(g) Aggregation of benefits. For the purpose of ascertaining the aggregate
benefits to which any person may be entitled under the Scheme any benefits to
which that person is entitled by right of his own membership shall be treated
separately from any benefits to which he is entitled by right of the membership
of some other person.
(h) Liability for duties and taxes. Where in consequence of making a payment
under the Scheme the Trustees or any other payer will incur a liability for a
duty or tax, they may deduct the amount of the duty of tax from the payment;
and where a payment is made without such a deduction, the payee shall be
obliged to repay the amount of the duty or tax if within six months of making
the payment the Trustees or payor so demand.
(i) Interest. Where contributions are repaid with interest on the death of a
Member or on the termination of a Member's Pensionable Service, the amount of
interest shall be that amount which the Actuary recommends to the Trustees as
being reasonable.
(j) Benefits in Sterling. All benefits and contributions under the Scheme
shall be payable in Sterling; and if a Member's emoluments are payable in
another currency, then for the purpose of determining their amount on any date
at which a calculation of his emoluments is to be made for the purposes of the
Scheme they shall be converted into Sterling at the rate of exchange obtainable
by the Principal Company from its bankers at that date.
(k) Termination of employment. Nothing contained in the Rules shall restrict
in any way the right of a Company to terminate the employment of a Member.
(l) Claiming against Members. All benefits and refunds of contributions
payable or prospectively payable in respect of a Member stand charged and are
subject to reduction on account of all debts due by the Member to a Company as
a result of any criminal, negligent or fraudulent act or omission by the
Member. The Trustees shall, if told to do so by the Principal Company in
writing, deduct from the amount of the benefit and/or the refund of
contributions a sum of money not exceeding in all the amount of the debt and
shall account therefor to the Company.
The amount of any deduction shall not, without the Member's written agreement,
exceed the actuarial value at the time of the benefits and refund of
contributions payable, or prospectively payable, for and in respect of the
Member (other than any Transfer Benefits under Rule VII.7). The Member shall be
entitled to a certificate from the Trustees showing the amount of the
deduction, the amount of benefits and/or refund of contributions before the
deduction and then the remaining balance.
A deduction by the Trustees shall not have effect until the Member agrees to
the existence and amount of the debt failing which the debt has become
enforceable under an order of a competent court or the award of an arbitrator
or in Scotland an arbiter to be appointed (failing agreement between the
parties) by the Sheriff.
<PAGE> 37
VII.6 Transfer of Assets To the Scheme
(a) Subject to the Benefit Limits and the provisions of this Rule where
a Member has an interest in another retirement benefits scheme or a
personal pension scheme or an arrangement which is approved under
Section 620 of the Act (hereinafter called the "Transferring Scheme")
the Trustees may accept from the trustees or managers of the
Transferring Scheme a transfer of such assets as represent that
interest and the interests, if any, of the Member's Dependants or such
part of those assets as the trustees or managers of the Transferring
Scheme are empowered to transfer (the "Transfer Value"). In return for
accepting the Transfer Value, the Trustees shall provide "Transfer
Benefits" for and in respect of the Member. The type and amount of the
Transfer Benefits shall be arranged with the Member and shall not
exceed any Benefit Limit.
(b) The Transfer Benefits may take the form of one or more of the
following.
(i) They may be a specified amount.
(ii) They may be the proceeds of an insurance policy or
annuity contract effected by the Trustees and to
which the value of the assets transferred has been paid.
(iii) The Trustees may count all or part of the service which
counted towards pension under the Transferring Scheme
as service for the Member's pension under these Rules.
However, before accepting a transfer, the Trustees shall ask the
trustees or managers of the Transferring Scheme if there is any
restriction on the amount of lump sum retirement benefit and/or date
at which retirement benefits can be paid in respect of the assets to
be transferred. On being told in writing of such a restriction, the
Trustees shall comply with that restriction.
(c) Where the Trustees have accepted a Transfer Value in accordance
with Sub-rule (a) --
(i) such part and such part only of the Transfer Value as
is certified by the trustees or managers of the
Transferring Scheme as attributable to the contributions
paid by the Member under the Transferring Scheme shall
be treated as a contribution paid by the Member under
the Scheme and if at any time Part VI applies to the
Member any rights to, and restrictions on, a refund of
those contributions which would have applied on leaving
service at that time under the Transferring Scheme
(other than a restriction which the Board of Inland
Revenue have announced publicly need no longer apply)
shall apply under the Scheme; and
(ii) the Trustees shall comply with the terms of any
undertaking given by them to the Board of Inland
Revenue in connection with the acceptance of such
transfers.
<PAGE> 38
(d) If any benefits for or in respect of a Member derived from a
retirement benefits scheme are insured with an Authorised Insurer under
an insurance policy or annuity contract which does not form part of the
assets of that scheme (being either the property of the Member or a
policy or contract under which the rights to benefit are enforceable
against the Authorised Insurer), then at the request of the Member and
subject to the Authorised Insurer certifying to the Trustees the
maximum amount which can be paid out in lump sum form and providing
details of the amount represented by the Member's own contributions,
and any restrictions on the return of such contributions to the Member,
the Trustees may accept direct from the Authorised Insurer a transfer
of so much of the value of the policy or contract as the Authorised
Insurer is willing to transfer in respect of the Member and, if
appropriate, his Dependants; and if the Trustees do so, they shall
arrange with the Member to provide benefits for or in respect of him
as if the sum received were a transfer from the said retirement
benefits scheme.
(e) If the Scheme is not approved in terms of the Act within two years
of the Commencing Date (or such longer period as may be agreed by the
Board of Inland Revenue) any Transfer Value received shall be paid to
an Authorised Insurer to be applied to purchase immediate or deferred
annuities, as the case may require, upon the lives of the Members in
respect of whom they are made, which annuities shall have the same
provisions as are set out in Rule VI.5.
VII.7 Transfer of Assets From the Scheme
(a) Subject to the Benefit Limits, the provisions of this Rule and Rule
VI.6, if the Member so requests, the Trustees may transfer to the
trustees or managers of the Receiving Scheme such part of the assets
held by the Trustees for the purposes of the Scheme as represents the
Member's interest and the interests, if any, of his Dependants; and if
they do so, he shall cease to be a Member.
(b) To qualify as a Receiving Scheme for the purposes of Sub-rule (a)
a scheme must be --
(i) approved under Chapter I of Part XIV of the Act and the
Member has become a member of the scheme; or
(ii) approved under Chapter IV of Part XIV of the Act; or
(iii) specifically approved for the purposes of this Rule by the
Board of Inland Revenue.
(c) Before making a transfer in accordance with Sub-rule (a) the
Trustees shall --
(i) ascertain, where applicable, from the trustees or managers
of the Receiving Scheme the Chapter, Part and Act under
which it is approved by the Board of Inland Revenue;
(ii) refer to the Board of Inland Revenue for approval of the
transfer where the Trustees have given an undertaking to do
so and the transfer is of the description to which the
undertaking applies;
<PAGE> 39
(iii) arrange with the Member and the trustees or managers of
the Receiving Scheme the benefits which are to be provided
by the Receiving Scheme as a consequence of the transfer;
and
(iv) unless the transfer is to a personal pension scheme,
certify to the trustees or managers of the Receiving
Scheme the amount of that part of the transfer payment
which is attributable to contributions paid by the Member
and arrange with them that no greater part is to be
treated under the Receiving Scheme as a contribution paid
by the Member and that in the event no greater part of the
transfer payment will be returned to the Member in his
lifetime than would have been returned in the same event
under the Scheme.
Provided that where the transfer is made after 28th February 1991 and
the Member is to be treated as a Class A Member by the Receiving Scheme
on the date he joins the Receiving Scheme the Trustees do not have to
arrange any restriction on the amount of lump sum retirement benefit
payable from the transfer payment except to the extent appropriate where
all or part of the transfer payment is subject to a similar restriction
because of a previous transfer to the Scheme.
(d) Notwithstanding Sub-rule (c)(iv) where the Receiving Scheme is a
personal pension scheme the Trustees shall provide the trustees or
managers of the Receiving Scheme with the appropriate lump sum
retirement certificate as set out in The Personal Pension Scheme
(Transfer Payments) Regulations 1988 (or, if applicable, provisions set
out by the Board of Inland Revenue).
(e) In respect of a Member for whom retirement benefits are in
payment, the Trustees must ensure that the Receiving Scheme is a scheme
which forms part of the Participating Employer's reconstructed pension
arrangements and that the benefits to be provided under the Receiving
Scheme for and in respect of the Member are of similar form and not of a
lesser amount than those which would have been payable under the Scheme
for and in respect of the Member.
(f) The Trustees may arrange for the transfer for and in respect of a
Member to be made without his consent where the transfer conforms with
the requirements of regulation 12 of The Occupational Pension Schemes
(Preservation of Benefit) Regulations 1991.
VII.8 Inland Revenue Limits Rule
Class A Member
Notwithstanding anything to the contrary in the Scheme provisions --
<PAGE> 40
(i) any term used in the Scheme as a measure of the annual
earnings of a Class A Member for the purpose of calculating
benefits is to be interpreted as though those earnings are
no greater than the permitted maximum as defined in section
590C(2) of the Act, but the benefits so calculated may be
augmented up to the maximum limits in (ii) below;
(ii) the benefits payable to a Class A Member or to his widow,
widower, dependants or other beneficiaries in respect of him
shall not when aggregated with all benefits of a like nature
provided under all Relevant Schemes providing benefits in
respect of Service exceed the limits set out below.
(a) The Member's Aggregate Retirement Benefit shall not exceed --
(i) on retirement at any time between attaining age 50 and
attaining age 75, except before Normal Retirement Date on
grounds of Incapacity, a pension of 1/60th of Final
Remuneration for each year of Service (not exceeding 40
years) or such greater amount as will not prejudice
Approval;
(ii) on retirement at any time before Normal Retirement Date on
grounds of Incapacity a pension of the amount which could have
been provided at Normal Retirement Date in accordance with
paragraph (i) above, Final Remuneration being computed as at
the actual date of retirement;
(iii) on leaving Pensionable Service before attaining age 75, a
pension of 1/60th of Final Remuneration for each year of
that service (not exceeding 40 years) or such greater amount
as will not prejudice Approval. The amount computed as
aforesaid may be increased in proportion to any increase in
the Index which has occurred between the date of termination
of Pensionable Service and the date on which the pension
begins to be payable or by 5% per annum compound, if
greater. Any further increase necessary to comply with
Department of Social Security requirements is also
allowable.
(b) The Member's Lump Sum Retirement Benefit shall not exceed --
(i) on retirement at any time between attaining age 50 and
attaining age 75, except before Normal Retirement Date on
grounds of Incapacity, 3/80ths of Final Remuneration for
each year of Service (not exceeding 40 years) or such
greater amount as will not prejudice Approval;
(ii) on retirement at any time before Normal Retirement Date on
grounds of Incapacity the amount which could have been
provided at Normal Retirement Date in accordance with
paragraph (i) above, Final Remuneration being computed as at
the actual date of retirement;
<PAGE> 41
(iii) on leaving Pensionable Service before attaining age 75, a lump
sum of 3/80ths of Final Remuneration for each year of that service
(not exceeding 40 years) or such greater amount as will not
prejudice Approval. The amount computed as aforesaid may be
increased in proportion to any increase in the Index which has
occurred between the date of termination of Pensionable Service
and the date on which the pension begins to be payable but only if
and to the same extent as the total benefits have been increased
under paragraph (iii) of Sub-rule (a) above.
(c) The lump sum benefit (exclusive of any refund of the Member's own
contributions and any interest thereon) payable on the death of a Member while
in Service or (having left Service with a deferred pension) before the
commencement of his pension shall not, when aggregated with all like benefits
under Associated Schemes, exceed the greater of --
(i) 5,000 British pounds sterling and
(ii) 4 times the annual rate of the Member's remuneration from the
Employer at the date of his death (or, if greater, 4 times Final
Remuneration but excluding proviso (A) in (a) of that definition
in Rule 1) --
less
(A) any lump sum (other than a refund of his own contributions
and any interest thereon) payable on the death of the Member
under all Relevant Schemes in respect of service with
previous employers, and
(B) any lump sum life assurance benefit payable on the death of
the Member under a retirement annuity contract or trust
scheme approved under Chapter III of Part XIV of the Act, or
a personal pension scheme approved under Chapter IV of Part
XIV of the Act;
if the aggregate of such lump sums exceeds 1,000 British pounds
sterling.
(d) Any pension for a Dependant, when aggregated with the pensions, other than
those provided by the surrender of the Member's own pension, payable to that
Dependent under all Associated Schemes, shall not exceed an amount equal to
2/3rds of the Aggregate Retirement Benefit --
(i) being paid to the Member at the date of his death (including any
pension increases given under Rule VII.11; or
(ii) being a deferred benefit payable to the Member at any time
between attaining age 50 and attaining age 75; or
(iii) prospectively payable to the Member who dies in Service had he
remained in Service up to the Normal Retirement Date at the rate
of pay in force immediately before his death; or
<PAGE> 42
(iv) prospectively payable to the Member who dies in Service after
Normal Retirement Date on the basis that he had retired on the
day before he died;
or such greater amount as will not prejudice Approval.
If pensions are payable to more than one Dependant of a Member, the aggregate
of all Dependants' pensions payable in respect of him under this and all
Associated Schemes shall not exceed the full amount of whichever is the
appropriate Aggregate Retirement Benefit under paragraphs (i), (ii), (iii) or
(iv) of Sub-rule (d) above or such greater sum as will not prejudice Approval.
(e) The maximum amount of a pension ascertained in accordance with this Rule
less any pension which has been surrendered to provide a Dependant's pension
may be increased in proportion to the increase in the Index which has occurred
since the pension commenced to be paid or by 3% per annum compound, if greater.
(f) The preceding provisions of this Rule shall be modified in their
application to a Member who is or has been a Special Director or Controlling
Director as follows. The amount of the maximum Aggregate Retirement Benefit in
Sub-rule (a) and of the maximum Lump Sum Retirement Benefit in Sub-rule (b)
shall be reduced, where necessary for Approval, so as to take account of any
corresponding benefits under either a retirement annuity contract or trust
scheme approved under Chapter III of Part XIV of the Act or a personal pension
scheme approved under Chapter IV of Part XIV of the Act.
Class B Member or Class C Member
Notwithstanding anything to the contrary in the Scheme provisions, the benefits
payable to a Class B Member or Class C Member or to his widow, widower,
dependants or other beneficiaries in respect of him shall not when aggregated
with all benefits of a like nature provided under all Relevant Schemes
providing benefits in respect of Service exceed the limits set out below.
(g) The Member's Aggregate Retirement Benefit shall not exceed --
(i) on retirement at or before Normal Retirement Date, a pension of
1/60th of Final Remuneration for each year of Service (not
exceeding 40 years) or such greater amount as will not prejudice
Approval;
(ii) on retirement after Normal Retirement Date, a pension of the
greatest of --
(A) the amount calculated in accordance with paragraph (i) above
on the basis that the actual date of retirement was the
Member's Normal Retirement Date,
(B) the amount which could have been provided at Normal
Retirement Date in accordance with paragraph (i) above
increased either actuarially in respect of the period of
deferment or in proportion to any increase in the Index
during that period, and
<PAGE> 43
(C) where the Member's total Service has exceeded 40 years,
the aggregate of 1/60th of Final Remuneration for each
year of Service before Normal Retirement Date (not
exceeding 40 such years) and of a further 1/60th of
Final Remuneration for each year of Service after
Normal Retirement Date, with an overall maximum of
45 reckonable years.
Final Remuneration being computed in respect of (A) and (C)
above as at the actual date of retirement, but subject always
to Sub-rule (n) below;
(iii) on leaving Pensionable Service before Normal Retirement Date,
a pension of 1/60th of Final Remuneration for each year of that
service (not exceeding 40 years) or of such greater amount as
will not prejudice Approval. The amount computed as aforesaid
may be increased in proportion to any increase in the Index
which has occurred between the date of termination of
Pensionable Service and the date on which the pension begins to
be payable or by 5% per annum compound, if greater. Any further
increase necessary to comply with Department of Social Security
requirements is also allowable.
(h) The Member's Lump Sum Retirement Benefit shall not exceed --
(i) on retirement at or before Normal Retirement Date, 3/80ths of
Final Remuneration for each year of Service (not exceeding
40 years) or such greater amount as will not prejudice Approval;
(ii) on retirement after Normal Retirement Date, the greatest of --
(A) the amount calculated in accordance with paragraph (i)
immediately above on the basis that the actual date of
retirement was the Member's Normal Retirement Date,
(B) the amount which could have been provided at Normal
Retirement Date in accordance with paragraph (i)
immediately above together with an amount representing
interest thereon, and
(C) where the Member's total Service has exceeded 40 years,
the aggregate of 3/80ths of Final Remuneration for each
year of Service before Normal Retirement Date (not
exceeding 40 such years) and of a further 3/80ths of
Final Remuneration for each year of Service after
Normal Retirement Date, with an overall maximum of
45 reckonable years.
Final Remuneration being computed in respect of (A) and (C)
above as at the actual date of retirement, but subject always
to Sub-rule (n) below;
<PAGE> 44
(iii) on leaving Pensionable Service before Normal Retirement Date, a
lump sum of 3/80ths of Final Remuneration for each year of that
service (not exceeding 40 years) or such greater amount as will not
prejudice Approval. The amount computed as aforesaid may be
increased in proportion to any increase in the Index which has
occurred between the date of termination of Pensionable Service and
the date on which the pension begins to be payable but only if and
to the same extent as the total benefits have been increased under
paragraph (iii) of Sub-rule (g) above.
(j) The lump sum benefit (exclusive of any refund of the Member's own
contributions and any interest thereon) payable on the death of a Member while
in Service or (having left Service with a deferred pension) before the
commencement of his pension shall not, when aggregated with all like benefits
under Associated Schemes, exceed the greater of --
(i) 5,000 Pound Sterling and
(ii) 4 times the annual rate of Member's remuneration at the date of
his death (or, if greater, 4 times Final Remuneration but
excluding proviso (A) in (a) of that definition in Rule 1) --
less
(A) any lump sum (other than a refund of his own contributions
and any interest thereon) payable on the death of the Member
under all Relevant Schemes in respect of service with previous
employers, and
(B) any lump sum life assurance benefit payable on the death of
the Member under a retirement annuity contract or trust scheme
approved under Chapter III of Part XIV of the Act, or a
personal pension scheme approved under Chapter IV of Part XIV
of the Act;
if the aggregate of such lump sums exceeds 1,000 Pounds Sterling.
(k) Any pension for a Dependant, when aggregated with the pensions, other than
those provided by the surrender of the Member's own pension, payable to that
Dependant under all Associated Schemes, shall not exceed an amount equal to
2/3rds of the Aggregate Retirement Benefit --
(i) being paid to the Member at the date of his death (including
any pension increases given under Rule 14B); or
(ii) being a deferred benefit payable to the Member at Normal Retirement
Date; or
(iii) prospectively payable to the Member who dies in Service had he
remained in Service up to the Normal Retirement Date at the rate
of pay in force immediately before his death; or
<PAGE> 45
(iv) prospectively payable to the Member who dies in Service after
Normal Retirement Date on the basis that he had retired on the
day before he died;
or such greater amount as will not prejudice Approval.
If pensions are payable to more than one Dependant of a Member, the aggregate
of all Dependants' pensions payable in respect of him under this and all
Associated Schemes shall not exceed the full amount of whichever is the
appropriate Aggregate Retirement Benefit under paragraphs (i), (ii), (iii) or
(iv) of Sub-rule (k) above or such greater sum as will not prejudice Approval.
(l) The maximum amount of a pension ascertained in accordance with this Rule
less any pension which has been surrendered to provide a Dependant's pension
may be increased in proportion to the increase in the Index which has occurred
since the pension commenced to be paid or by 3% per annum compound, if greater.
(m) If a Member elects under Rule I.6(b) to take any part of his benefits under
this Scheme in advance of actual retirement, the limits set out in Sub-rules
(g) and (h) above shall apply as if he had retired at the date of the election
as aforesaid, no account being taken of subsequent Service, save that the
maximum amount of any uncommuted pension not commencing immediately may be
increased either actuarially in respect of the period of deferment or in
proportion to any increase in the Index during that period.
(n) The preceding provisions of this Rule shall be modified in their
application to a Member who is or has been a Special Director or Controlling
Director as follows. The amount of the maximum Aggregate Retirement Benefit in
Sub-rule (g) and of the maximum Lump Sum Retirement Benefit in Sub-rule (h)
shall be reduced, where necessary for Approval, so as to take account of any
corresponding benefits under either a retirement annuity contract or trust
scheme approved under Chapter III of Part XIV of the Act or a personal pension
scheme approved under Chapter IV of Part XIV of the Act and in relation to a
Member who is a Special Director at his Normal Retirement Date, as follows --
(i) where retirement takes place after Normal Retirement Date but
not later than the Member's 70th birthday, Sub-rule (g)(ii)(B)
and (C) and Sub-rule (h)(ii)(B) and (C) shall not apply, and if
retirement is later than the attainment of that age, the said
paragraphs shall apply as if the Member's 70th birthday had been
specified in the Rules as his Normal Retirement Date, so as not
to treat as Service after Normal Retirement Date any Service
before the Member reaches the age of 70;
(ii) where Sub-Rule (m) applies to him, the rate of the actuarial
increase referred to therein in relation to any period of
deferment prior to his attaining the age of 70, shall not exceed
the percentage increase in the Index during that period.
<PAGE> 46
Class A, Class B and Class C Members
(o) Augmentation of Benefits. Where in addition to being a member of
this Scheme the Member is also a member of an approved scheme (the
voluntary scheme) which provides additional benefits to supplement those
provided by this Scheme and to which no contributions are made by any
employer of his, the provisions of the paragraph that follows shall
apply in relation to any augmentation of the benefits provided for him
by this Scheme after he has ceased to participate in it.
Any provisions in this Scheme imposing a limit on the amount of a
benefit provided for the Member shall have effect (notwithstanding
anything in them to the contrary) as if they provided for the limit to
be reduced by the amount of any like benefit provided for the Member by
the voluntary scheme.
VII.9 Matters Affecting Pensions Payable
(a) If when a pension becomes payable under the Scheme to a person the
value of the aggregate benefits payable to the person under all schemes
approved or being considered for approval under Chapter I of Part XIV
of the Act to which a Company contributes or has contributed does not
exceed the value of an annuity of 104 pounds sterling per annum or such
greater amount as may be prescribed from time to time by regulations
made under paragraph 15(4) of Schedule 16 to the Social Security Act
1973 and as will not affect Approval payable for the remainder of his
life, the Trustees may pay to him in lieu of the pension a cash sum of
equal value and he shall cease to have any claim for benefits under the
Scheme.
(b) Where the Trustees pay a cash sum to a Member under Sub-rule (a), if
the aggregate value of the prospective benefits payable to a Dependant
of the Member under all schemes approved or being considered for
approval under Chapter I of Part XIV of the Act to which a Company
contributes or has contributed does not exceed the value of an annuity
of 104 pounds sterling per annum or such greater amount as may be
prescribed from time to time by regulations made under paragraph 15(4)
of Schedule 16 to the Social Security Act 1973 and as will not affect
Approval payable for the remainder of his life, the Trustees may at the
same time as they pay the cash sum in lieu of the Member's pension pay
to the Member or the Dependant as the Trustees shall decide a cash sum
in lieu of the prospective benefits of the Dependant.
(c) If when a pension becomes payable under the Scheme to a Member the
Member is in exceptional circumstances of serious ill-health (of which
the Trustees shall be the sole judge), the Trustees may pay to him in
lieu of the pension a cash sum of equal value and he (but not his
Dependants) shall cease to have any claim for benefits under the Scheme.
(d) Where under this Rule the Trustees pay a cash sum in lieu of a
pension the amount of the cash sum shall be calculated on a basis
certificated as reasonable by the Actuary.
<PAGE> 47
VII.10 Increases in Benefits Payable
Where any pension has become payable to any person under the Rules
either currently or in the event of that person surviving to a
particular date or being predeceased by another person or both but
subject to no other contingency, that pension may be increased from
time to time so long as no such increase causes its amount to exceed
the Benefit Limits.
VII.11 Winding-Up of All or Part of the Scheme
(a) Where all the Participating Employers are to stop participating
this Rule applies for and in respect of all the Members. Where some,
but not all, of the Participating Employers are to stop participating
this Rule applies for and in respect of the Members who are or were in
the service of one or more of the Participating Employers which are
to stop participating, but not such Members who remain in the Service
or who suffer no break in Service because they become employed by
another Participating Employer.
(b) A Participating Employer may stop participating in the Scheme
whenever it wishes to do so. It shall tell the Trustees in writing the
date on which it is to stop participating.
(c) A Participating Employer shall stop participating on the earliest
day at which one of the following occurs.
(i) Its continued participation would prejudice Approval
of the Scheme.
(ii) Proceedings for the liquidation or winding up of the
Participating Employer start.
(iii) The Principal Company stops participating and no other
employer takes its place as the Principal Company.
(d) When a Participating Employer stops participating the following
liabilities shall have priority over any other liabilities of the
Scheme --
(i) equivalent pension benefits under the National
Insurance Act 1965;
(ii) pensions and benefits in respect of which entitlement
to benefit has already arisen;
Each Member shall cease to be in Pensionable Service and Qualifying
Service on the date the Participating Employer stops participating,
and benefits shall be calculated accordingly.
<PAGE> 48
The Trustees shall secure the benefits by one or more of the following ways --
(iii) under the Policy;
(iv) by buying individual policies or annuity bonds from an
Authorised Insurer and which policies or bonds prohibit
their assignment;
(v) by making a transfer under Rule VII.7.
The assets used to provide benefits for any person shall not be available for
other purposes of the Scheme.
(e) If the Scheme assets are insufficient to secure all the benefits, each
Participating Employer shall make good the deficiency in respect of Members who
are or have been in its service, all as the Actuary shall advise the Trustees
is reasonable. If an insufficiency still remains, the Trustees shall abate the
benefits for and in respect of --
(i) firstly, those Members for whom entitlement to benefit has
not arisen and to whom (ii) below does not apply;
(ii) secondly, those Members who have reached their Normal
Retirement Date, but who are not in receipt of pension;
(iii) thirdly, those persons in respect of which entitlement to
benefit has already arisen.
The abatement shall be on such reasonable basis as the Trustees decide on the
advice of the Actuary:
(f) Where there are surplus assets the Principal Company may decide whether
the surplus is to be applied in one or more of the following ways.
(i) The surplus shall be paid to the Participating Employers in
such proportion as the Trustees consider reasonable in view
of the contributions paid by the Employer.
(ii) The surplus shall be used to provide additional benefits for
and in respect of Members. The Principal Company shall
decide which benefits are to be provided and for whom.
(iii) The surplus shall be retained in the Scheme (subject to the
provisions of Rule I.4).
(g) For Members and beneficiaries to whom this Rule applies the Trustees may
assign policies or contracts of assurance held under the Scheme to the
beneficiary failing which they shall secure the benefits which are or may
become payable by buying policies or annuity contracts from the Insurer and the
policies or contracts shall be made over to the Member or beneficiary, or to
trustees for him:
<PAGE> 49
Provided that where under Rule VII.9 the Trustees might have paid a cash
sum in lieu of pension, the Trustees may instead of making over a policy
or contract pay a cash sum equal to the value of the benefit that policy
or contract would have secured.
(h) Before conferring any rights on a Member or beneficiary under this
Rule, the Trustees shall ensure --
(i) that the policy or contract states in monetary terms the
maximum extent to which benefits may be taken in lump
sum form on death or at Normal Retirement Date;
(ii) that the policy or contract contains provisions
prohibiting its assignment or surrender, except a
surrender within the terms permitted by regulations made
under Section 52(C) of the Social Security Pensions Act
1975, and either specifies the dates on which the period
or periods of service which gave rise to the benefits
began and ended or specifies whether that service was
service in respect of which the Scheme conforms to the
appropriate extent with the preservation requirements of
Part II of the Social Security Act 1973;
(iii) that the rights to be conferred on the beneficiary (which
may include rights formerly vested in the Trustees) will
be on terms which are consistent with the terms which
applied under the Scheme to his benefits at the date of
termination.
(i) When the Trustees have disposed of all the assets of the Scheme in
accordance with the Rules, the Scheme shall be terminated and the
Trustees shall be discharged from the trusts of the Scheme without
the necessity of written discharges or resignations.
Adoption of Rules
IN WITNESS WHEREOF these Rules are adopted as the Rules of the Pall
Supplementary Pension Scheme established by Declaration of Trust dated
29 July 1988 and are executed as a deed by the Principal Company and
the Trustees on 1st November 1993 as follows.
FOR AND ON BEHALF OF THE PRINCIPAL COMPANY BY
/s/ MAURICE GRAHAM HARDY Director
- ------------------------
(Signature)
/s/ MARCUS A. WILSON Director
- ------------------------
(Signature)
<PAGE> 50
<TABLE>
<S> <C>
Signed and delivered as a deed
by Maurice Graham Hardy /s/ AUDREY A. GALATIOTO Witness
---------------------------- --------------------------------------
(Name of Trustee) (Signature)
/s/ MAURICE GRAHAM HARDY Trustee Audrey A. Galatioto
- -------------------------------- -------------------------------------
(Signature) (Name of Witness)
2324 Logue St
------------------------------------
No. Bellmore, NY 11710, U.S.A.
-------------------------------------
(Address of Witness)
Administrative Assistant
-------------------------------------
(Occupation of Witness)
Signed and delivered as a deed
by Derek Thomas Donald Williams /s/ J.H. STANLEY Witness
----------------------------- --------------------------------------
(Name of Trustee) (Signature)
/s/ DEREK THOMAS DONALD WILLIAMS Trustee J.H. STANLEY
- -------------------------------- --------------------------------------
(Signature) (Name of Witness)
Walton Road
-------------------------------------
Portsmouth
-------------------------------------
(Address of Witness)
Barrister
-------------------------------------
(Occupation of Witness)
Signed and delivered as a deed
by Donald Guy Edward Nicholls /s/ MARCUS A. WILSON Witness
---------------------------- --------------------------------------
(Name of Trustee) (Signature)
/s/ DONALD GUY EDWARD NICHOLLS Trustee Marcus A. Wilson
- ------------------------------ --------------------------------------
(Signature) (Name of Witness)
22 The Peak, Rowlands Castle, Hants.
-------------------------------------
(Address of Witness)
Accountant
-------------------------------------
(Occupation of Witness)
Signed and delivered as a deed
by Jeremy Keith Hayward-Surry /s/ JOAN P. NEEDHAM Witness
---------------------------- -------------------------------------
(Name of Trustee) (Signature)
/s/ JEREMY KEITH HAYWARD-SURRY Trustee Joan P. Needham
- ------------------------------- --------------------------------------
(Signature) (Name of Witness)
16 Gaffney St., Glen Cove, N.Y. U.S.A.
-------------------------------------
(Address of Witness)
Administrative Assistant
-------------------------------------
(Occupation of Witness)
</TABLE>
<PAGE> 51
APPENDIX TO THE RULES OF THE
PALL SUPPLEMENTARY PENSION SCHEME
This is the Appendix referred to in the foregoing Rules.
Definitions
In the Rules: --
"Current Pensionable Salary" in relation to a Member on any date means his
annual rate of basic salary on the immediately preceding anniversary of the
Commencing Date excluding any fluctuating additions reckoned to the nearer
complete 1 pound sterling.
"Final Pensionable Salary" in relation to a Member on any date means the yearly
average over the best period of three consecutive years within the ten years
before that date of his basic salary excluding any fluctuating additions
reckoned to the nearer complete 1 pound sterling.
"Normal Retirement Date" means the 65th birthday of a Member.
"Fund" means The Pall (UK) Pension Fund.
"Pensionable Service" means full-time permanent continuous service with the
Company while a member of this Scheme and a completed month of such service
means a calendar month in which the member has completed not less than
15 days' service.
"Rules" means the Rules of the Pall Supplementary Pension Scheme of which this
Appendix forms part.
1. Conditions of Eligibility
Membership of the Scheme shall be open to: --
(a) those Directors and Employees of Pall Europe Limited and its UK
subsidiary companies who were members of the Pall Executive Pension
Scheme on 31 July 1988 ("Old Scheme Members")
and
(b) such of the Senior Employees of Pall Europe Limited and its UK
subsidiary companies as the Principal Company may from time to time
invite to become members ("New Scheme Members").
2. Nature and Amount of Benefits
Without prejudice to any power to provide benefits of a larger amount or of
other classes, but subject to the Rules the benefits provided for a Member
shall be
(i) a Retirement Pension in terms of Part II of the Rules, the amount of
which shall be in respect of New Scheme Members one-sixtieth of the
Member's Final Pensionable Salary on the Normal Retirement Date
multiplied by the number of complete years and months of Pensionable
Service and in respect of Old Scheme Members two-thirds of the Member's
Final Pensionable Salary reduced by the amount of the Member's pension
secured under the Fund, and
<PAGE> 52
(ii) Life Assurance Benefit in terms of Part III of the Rules, the amount of
which shall be three times the Member's Current Pensionable Salary at
the time of his death in service before the Normal Retirement Date,
reduced by the amount of life assurance benefit under the Fund, and
(iii) for a married Member a Dependant's Death-in-Service Pension in terms of
Part IV of the Rules, the amount of which shall be in respect of New
Scheme Members 50% of the Member's prospective Retirement Pension and in
respect of Old Scheme Members 2/3 of the Member's prospective Retirement
Pension, assuming in each case the Member's Current Pensionable Salary
to be his Final Pensionable Salary, and
(iv) for a married Member a Post-Retirement Dependant's Pension in terms of
Part V of the Rules, the amount of which shall be in respect of
New Scheme Members 50% of the Member's Retirement Pension and in
respect of Old Scheme Members 2/3 of the Member's Retirement Pension.
If a Dependant's Pension on Death in Service or a Post-Retirement Dependant's
Pension becomes payable on the death of a Member who was more than 10 years
older than his/her spouse the amount of the pension payable to such spouse may
be reduced by not more than 2 1/2% or by such other rate as may be acceptable
to the Occupational Pensions Board, for each year of age disparity in excess
of 10.
Pensions in payment will increase on each anniversary of their relevant dates
at the rate of 5 per centum per annum compound or in line with the percentage
increase in the Index if lower. The relevant dates will be, in respect of (i)
and (iv) above, the date of retirement, and in respect of (iii) above, the date
of death. In addition, for Old Scheme Members the Retirement Pension and
Dependant's Post Retirement Pensions secured by the Fund will also increase at
the rate of 5% per annum compound or in line with the percentage increase in
the Index if lower when in payment.
3. Member's Contributions
Normal and Voluntary Contributions:
A Member will not be required to contribute to the Scheme but may make
voluntary contributions in terms of Part I.5.
While a Member is being treated as remaining in Service though temporarily
absent therefrom a Member may in his own option continue or suspend payment of
his own contributions. Unless a Member pays any arrears of these voluntary
contributions on his return to Service (with such addition for late payment as
the Principal Company requires) his Retirement Pension/Dependant's Pension will
be reduced accordingly.
If a Member dies before the Normal Retirement Date without having retired, and
his contributions have not been refunded in his lifetime, there will be payable
by way of death benefit such amount as the Policy securing the benefits permits.
Reserved Rights
Those Members of the Pall Executive Pension Scheme established on 12 July 1978
and who were admitted to membership thereof before 17 March 1987 shall be Class
C Members as defined in the Rules for the purposes of the Scheme.
<PAGE> 1
EXHIBIT 13
FLUID PROCESSING
MICROELECTRONICS
[FIGURE 1]
ENSURING HIGHER PRODUCT YIELDS
- --------------------------------------------------------------------------------
Pall filters are carving out deep niches in the high-growth microelectronics
industry. By filtering and purifying chemical, water and gas streams, they
enable semiconductor manufacturers to remove microscopic contaminants that
would otherwise have a devastating impact on sensitive--and extremely
expensive--products and equipment. Filtration and purification ensures
customers worldwide of consistently high product yields, and delivers
significant savings. - THE INDUSTRY'S INNOVATOR. Pall is a leading supplier to
virtually all of the major producers of semiconductor devices and capital
equipment. State-of-the-art products, technical expertise and customer service
underscore our reputation as the industry's innovator. An example is our new
Gaskleen PPT Reactive Gas filter, the result of an alliance with the University
of Arizona, a SEMATECH Center of Excellence. This device will produce gas
purity levels 10 to 100 times better than those available through current
purification methods. - SETTING THE STANDARD. Our Microza* ultrafiltration
modules have set the industry standard for high-purity deionized water
filtration while Pall's new Ultipleat Posidyne II filter is allowing customers
to double their flow capacity and achieve breakthrough reductions in terms of
space for new construction.
* Microza is a registered trademark of ASAHI CHEMICAL INDUSTRY CO. LTD.
6
<PAGE> 2
[FIGURE 2]
[FIGURE 3]
RAPID
INNOVATION
IN SYNC WITH DYNAMIC
INDUSTRY REQUIREMENTS
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
The double-digit growth of the microelectronics industry, coupled with our
ability to deliver innovative new products, has created an extremely promising
outlook for Pall Microelectronics. This high-profile business, which accounts
for nearly 40 percent of the sales of our Fluid Processing segment, grew 43
percent in 1995, outpacing the growth of the microelectronics industry.
- - SUSTAINABLE GROWTH. We believe that a high level of growth is sustainable over
the next three to five years as we increasingly become the filter supplier of
choice for semiconductor fabricators worldwide. Driving that market is the
explosive growth of microprocessor-based consumer and business products,
including personal computers (50 percent of all U.S. employees use a PC at
work, while Japan at 20 percent and Europe at 18 percent are pushing hard to
catch up), printers, cellular telephones and other wireless communications
devices. Consider, half of the world's population has yet to use a telephone.
To meet this soaring demand, it is estimated that over 60 new semiconductor
fabrication plants will be built or under construction worldwide by the year
2000. This business alone represents a potential $100 million sales opportunity
for Pall.
BECOMING THE SUPPLIER OF CHOICE. THROUGH OUR WORK WITH A TOP-10
SEMICONDUCTOR MANUFACTURER, WE'RE SHOWING WHY PALL CORPORATION HAS THE
INSIDE TRACK FOR SUPPLYING STATE-OF-THE-ART FILTER SYSTEMS TO THE 60
FABRICATION PLANTS EITHER PLANNED OR UNDER CONSTRUCTION. PALL WAS AWARDED
THE MAJORITY OF THE FILTER APPLICATIONS FOR THE FIRST PHASE OF THE
CUSTOMER'S $1.5 BILLION FABRICATION PLANT IN THE SOUTHWESTERN U.S. WE
DELIVERED EVERY PRODUCT ON TIME, AND ARE REPEATING THAT PERFORMANCE DURING
PHASE TWO, NOW UNDERWAY. WE HAVE DELIGHTED OUR CUSTOMER THROUGH AN
INTEGRATED APPROACH THAT COMBINES HIGH PERFORMANCE PRODUCTS, LIKE GASKLEEN
IV FILTER ASSEMBLIES AND MICROZA ULTRAFILTRATION MODULES, WITH EXEMPLARY
SERVICE, AND OUR SCIENTIFIC AND ENGINEERING EXPERTISE. THE LATTER LED TO AN
INDUSTRY "FIRST"--CREATION OF A 30-INCH PFA HOUSING FOR ENHANCED FILTER
PERFORMANCE AND COST SAVINGS.
7
<PAGE> 3
FLUID PROCESSING
INDUSTRIAL PROCESSING GROUP
[FIGURE 4]
THE COMPETITIVE EDGE
- --------------------------------------------------------------------------------
The Industrial Processing Group (IPG) uses a broad array of filtration and
high-end separations technologies to solve complex customer problems in the
data storage and imaging fields. With customers demanding ever finer levels of
filtration, Pall has demonstrated its edge over the competition with
sophisticated lines of application-specific products--such as Fluorodyne VA
filters--coupled with unparalleled technical support. - COMPUTER INDUSTRY
INROADS. While photofilm--which includes photographic films and paper, graphic
arts films, medical x-ray films and lithographic and flexographic printing
plates--continues to be our largest market, the greatest gains in fiscal 1995
came in sales to the computer industry. Here, our filters play key roles in the
production of thin film rigid disks for hard drives and magnetic storage
devices (floppy disks, audio, computer and video tape). All told, Industrial
Processing Group sales increased by 25 percent in fiscal 1995.
8
<PAGE> 4
[FIGURE 5]
[FIGURE 6]
CREATING
WEALTH FOR
CUSTOMERS THROUGH
ENABLING TECHNOLOGIES
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
The mission of our IPG organization is to provide not just hardware, but novel
solutions to satisfy the most demanding filtration and separations
problems--solutions that create wealth for our customers. To that end, IPG has
forged close relationships with our customers' engineering and research and
development staffs. - PRODUCTS TAILORED TO APPLICATIONS. This cooperative
effort has often led to the development of application-specific new products
designed to optimize the customer's fluid systems. An example is the Fluorodyne
VA filter, which we developed for the computer hard drive market. In addition,
Pall's new Ultipleat Profile filters have been widely adopted in a broad array
of industries, such as photographic and graphic arts film, optical lens and
fine chemical manufacturing. - COST-SAVING RETROFITS. In cases where we have
retrofitted competitive products, we have reduced customer costs through longer
filter life, faster batch filling rates and enhanced product quality. For new
filter installations, the unique lower flow resistance of Ultipleat Profile
filters has enabled our customers to purchase smaller, less expensive filter
housings.
CUSTOMIZING A SOLUTION. CANON, ONE OF THE WORLD'S LEADING IMAGING COMPANIES,
CAN ATTEST TO PALL'S APPLICATION DEVELOPMENT SKILLS. THE PROBLEM: EXISTING
PRODUCTS DID NOT ALLOW CANON TO FILTER AND LOAD INK INTO INK JET PRINTER
CARTRIDGES FAST ENOUGH WITHOUT PURCHASING ADDITIONAL FILTER HOUSINGS. THE
SOLUTION: PALL SCIENTISTS AND ENGINEERS DEVELOPED THE FLUORODYNE VA FILTER
WITH HALF THE FLOW RESISTANCE OF THE PREVIOUSLY USED PRODUCT. WITH A GREATER
FLOW RATE THROUGH THE FILTER HOUSING, CANON WAS ABLE TO FILL SHIPMENT
CONTAINERS FASTER--RESULTING IN INCREASED PRODUCTION WITHOUT INCREASED
PRODUCTION COSTS.
9
<PAGE> 5
FLUID PROCESSING
HYDROCARBON PROCESSING,
CHEMICAL AND POLYMER
[FIGURE 7]
USING AN INTEGRATED SYSTEMS APPROACH
- --------------------------------------------------------------------------------
Pall's Hydrocarbon Processing, Chemical and Polymer (HCP) group provides a wide
range of businesses--from petroleum refining to polyester film and fiber to
hydrogen peroxide production--with well-defined filtration and separations
solutions. Because of the breadth of its product line, Pall is able to offer an
integrated systems approach to solve customer problems that often involves not
one, but a combination of Pall products. - COST-EFFECTIVE COALESCERS. HCP has
become a significant supplier of liquid/liquid separations equipment to the
petroleum and petrochemical markets through its recently introduced AquaSep
and PhaseSep coalescers. These products are able to separate liquids more
efficiently than competitive coalescers and promise to become an economically
attractive alternative to more expensive capital equipment currently being
used. - DRILLING BREAKTHROUGH. Another Pall product--the Stratapac
filter--offers a revolutionary approach to sand control in oil and gas wells.
With more than 100 offshore installations already, sales of the Stratapac
filter are expected to triple next year. HCP sales to petroleum producers are
also poised to grow dramatically over the next three years as we continue to
develop strategic technical alliances with the major producers.
10
<PAGE> 6
[FIGURE 8]
[FIGURE 9]
BREAKTHROUGH
TECHNOLOGIES
TURN PROFITS
FOR CUSTOMERS
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
Pall HCP is capitalizing on its technical expertise and advanced product
capabilities to grow its market share through direct customer partnerships and
alliances. Our scientific and marketing teams have developed close working
relationships with a number of major petroleum refining and licensing companies
and institutes, including customers in the U.S., Eastern Europe and Southeast
Asia. In China, our engineers helped the Beijing Chemical Works solve a complex
waste minimization problem. - A MAJOR GROWTH OPPORTUNITY. Pall HCP is taking
advantage of the fast growing demand for hydrogen peroxide as a more
ecologically friendly product than chlorine. With hydrogen peroxide plants
being built worldwide, we are positioning various Pall separations technologies
as cost-effective partners.
BRINGING A WELL BACK TO LIFE. SAND PRODUCTION FROM A SAND-PRONE PAY ZONE
FORCED A SHELL COMPANY IN MALAYSIA, IN SOUTHEAST ASIA, TO CLOSE- IN THE
WELL. IN AN EFFORT TO COST EFFECTIVELY INCREASE PRODUCTION FROM EXISTING
WELLS, SHELL SELECTED A PRODUCT FROM PALL--THE STRATACOIL FILTER. THIS
PRODUCTION ZONE WAS RESTORED, SURGING FROM ZERO TO 850 B/D WITH LITTLE SAND
PRODUCTION. THE PAYBACK PERIOD FOR SHELL WAS ONE WEEK AND THE COMPANY PLANS
TO EXTEND THE USE OF THIS TECHNOLOGY TO SIMILAR WELLS IN ITS AREA OF
OPERATIONS.
11
<PAGE> 7
FLUID PROCESSING
PALL ADVANCED
SEPARATIONS SYSTEMS
[FIGURE 10]
TARGETING ENERGY PRODUCERS
- --------------------------------------------------------------------------------
Organized three years ago to spearhead the Company's move to high-end
separations, Pall Advanced Separations Systems (PASS) is making major inroads
in the multi-billion dollar global energy field. Through a total systems
approach, the PASS organization is demonstrating to the power generation,
refining and chemical processing industries the key role separations can play
in controlling costs and minimizing environmentally hazardous waste streams. -
WASTE REDUCTION. In fiscal 1995, for example, along with our alliance partner,
GE Nuclear Energy, we supplied separations systems to nuclear power generating
stations incorporating our Septra polymeric filters for processing condensate
and waste water. This innovative approach is dramatically reducing the volume
of radioactive waste. In other energy markets, Pall backwash filters were
selected by petroleum refineries in the Pacific Rim, Europe and the U.S. as a
way to extend catalyst service life and reduce maintenance costs. - ROBUST
GROWTH. Sales of PASS products for the power generation market are expected to
grow at a robust 25 percent rate over the next several years, based in part on
the strength of our Septra filters. China, which has 72 refineries and plans to
double its refining capacity by 2010, and Southeast Asia, represent the fastest
growing markets for PASS. We have also been successful in Korea, where Pall
recently teamed up with Goldstar Cable to sell a large backwash system to Honam
Oil Refinery.
12
<PAGE> 8
[FIGURE 11]
[FIGURE 12]
NOVEL
TECHNOLOGIES
FOR COMPLEX
PROBLEMS
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
By providing the best available technology at competitive prices and defining a
"total separations systems" approach to process plant needs, PASS anticipates
continued strong top-line growth across its markets. Our alliance with GE
Nuclear Energy is a major factor behind our success in the nuclear power
generation market. Working with GE gives us significant credibility with
customers, offers us high-level contacts at utilities, and allows us to provide
world-class filter solutions while GE supplies the engineering and project
management expertise. - NEW MARKET THRUST. With few nuclear plants currently on
the drawing boards, our market thrust is to upgrade existing plants and move
the industry toward even greater radiation control. To that end, we recently
introduced the next generation of submicron filters designed to meet stringent
efficiency standards while ensuring cost economies. - BACKWASH FILTER
SOLUTIONS. The real driver of our power generation business, however, is Septra
backwashable filters, which operate without the need for filter aids or
additives. Because these polymeric elements are durable, they do not require
replacement annually, which helps to further reduce waste. - GROWING
APPLICATION. Catalyst recovery in both gas and liquid phases has become an
increasingly important application for PASS products, particularly Vitropore
ceramic filters and non-metallic Septra filters.
PALL PIONEERS REMOTE MONITORING. PALL ENGINEERING HAS FOUND ANOTHER WAY TO
HELP CUSTOMERS ACHIEVE THE OPTIMAL FILTER SOLUTION: REMOTE MONITORING OF
THEIR BACKWASH SYSTEM. THIS UNIQUE TECHNOLOGY WAS RECENTLY INTRODUCED TO OIL
REFINERIES IN THE FORM OF A LARGE PILOT-SCALE UNIT DEVELOPED BY PALL THAT
WILL REMAIN AT A CUSTOMER'S SITE FOR UP TO SIX MONTHS TO ELECTRONICALLY
MONITOR AND CONTROL THE BACKWASH SYSTEM. MORE IMPORTANTLY, DATA COLLECTED BY
THIS HIGHLY VERSATILE UNIT WILL DEMONSTRATE HOW PALL BACKWASH TECHNOLOGY CAN
IMPROVE FLOW RATES AND PROVIDE CATALYST BED PROTECTION TO A DEGREE
PREVIOUSLY IMPOSSIBLE WITH COMPETING PRODUCTS. THIS APPLICATION IS THE
GATEWAY TO EVENTUAL REMOTE MONITORING OF ALL PALL SOLID SEPARATIONS SYSTEMS
AS WE LEAD THE INDUSTRY TO A NEW ERA OF CUSTOMER SUPPORT.
13
<PAGE> 9
AEROPOWER
INDUSTRIAL HYDRAULICS
[FIGURE 13]
BUILDING MARKET SHARE
- --------------------------------------------------------------------------------
Industrial equipment users and Original Equipment Manufacturers (OEMs) look to
Pall Industrial Hydraulics for a high performance line of filters to meet their
stringent hydraulic and lubrication system requirements where the correlation
between system cleanliness and productivity is distinct. Our Ultipor III
filters provide them with particulate control, service life and performance
consistency. Mobile equipment users and OEMs also count on Pall hydraulic,
lubrication, transmission fluid and diesel engine oil and fuel filters. Pall's
oil purifiers protect both industrial and mobile equipment from the harmful
effects of water, solvents and gaseous contamination. Increasingly, our
products are providing customers with solutions that enable them to reduce
operating and maintenance costs. Just as important, they're helping safeguard
the environment by minimizing waste and reducing exhaust emissions. - EXPANDING
CUSTOMER BASE. Sales to a diversity of global markets increased by almost 19
percent in fiscal 1995. Those markets included pulp and paper, where a
turnaround this past year created a resurgence in demand for Pall filters. In
the power generation market, the tremendous growth of independent power
producers in an industry moving toward deregulation has triggered an expanding
customer base. We also opened up new opportunities in the transit and school
bus market by introducing the "one filter fits all" concept. This approach
reduces inventory and administrative costs for customers and simplifies the
maintenance process.
14
<PAGE> 10
[FIGURE 14]
[FIGURE 15]
HIGHER FLUID
CLEANLINESS
STANDARDS
REWARD WITH
GREATER PRODUCTIVITY
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
Pall Industrial Hydraulics is building market share and customer loyalty
through a powerful product mix. - ENVIRONMENTAL PROTECTION. A major new product
impacting sales this past year was the Pall Coreless Ultipor III element
series. Manufactured without metallic parts, Coreless Ultipor III elements are
allowing us to meet our customers' filtration performance requirements as well
as address mounting environmental concerns and reduce element disposal costs.
Now, used filters can be safely incinerated, shredded or more compactly crushed
to eliminate or minimize use of dwindling landfill space. - CLEANLINESS
STANDARDS. A thorough customer understanding of system cleanliness standards
has become more and more important in the fluid power industry. Our scientists
and sales force have taken the lead in offering this expertise. Now, with the
introduction of Pall's PCM100 fluid contamination monitor, customers can keep
constant track of system fluid cleanliness levels, ensuring that standards are
being met.
WORKING FOR THE ENVIRONMENT. HUSKY INJECTION MOLDING SYSTEMS LTD., OF
ONTARIO, CANADA HAS DECLARED ENVIRONMENTAL PROTECTION TO BE "THE DRIVING
FORCE BEHIND EVERYTHING WE DO." AS PART OF THAT COMMITMENT, HUSKY, ONE OF
THE WORLD'S LARGEST MANUFACTURERS OF INJECTION MOLDING EQUIPMENT, IS WORKING
WITH PALL CORPORATION TO MEET ITS INDUSTRIAL FLUID POWER NEEDS. WE RESPONDED
BY INTRODUCING THREE UNIQUE FILTER HOUSINGS THAT INCORPORATE PALL CORELESS
ULTIPOR III ELEMENT TECHNOLOGY, THEREBY MINIMIZING FILTER AND FLUID WASTE
AND REDUCING DISPOSAL COSTS. PALL IS HELPING HUSKY TO PRODUCE WORLD-CLASS
MACHINES, AND LIVE UP TO ITS EXACTING ENVIRONMENTAL AND QUALITY STANDARDS.
15
<PAGE> 11
AEROPOWER
AEROSPACE
[FIGURE 16]
COMMERCIAL AND MILITARY FOCUS
- --------------------------------------------------------------------------------
Pall Aerospace is the world's leading supplier of sophisticated fluid
clarification and separations products to the commercial aircraft market and to
the military for use on aircraft, ships and land-based vehicles. By removing
contaminants from fuels and hydraulic and lubricating fluids, our filter
systems increase the reliability and life of our customers' equipment. They
help prevent costly groundings of aircraft and other vehicles. Pall products
enhance the health and comfort of commercial airplane passengers and crews by
eliminating dust, bacteria and viruses from cabin air circulation systems. - A
STRONGER BUSINESS. Dramatic cutbacks in worldwide military spending a few years
ago, caused us to rethink our Aerospace strategy. We successfully re-engineered
our opera-tions and refocused our sales efforts on the commercial aerospace and
industrial markets. The military and industrial portions of our Aeropower
segment were consolidated, achieving dramatic productivity gains and cost
reductions. We made significant investment in state-of-the-art equipment,
allowing us to design with extreme precision and manufacture our products
faster than ever before. What has emerged is a much stronger and smarter
business--one that's well equipped to succeed on a global scale. - BULLISH
OUTLOOK. Pall's worldwide Aeropower sales were up nearly 19 percent in fiscal
1995. With military opportunities on the rise, thanks to new generation armored
vehicles, helicopters and field artillery systems, and with commercial aircraft
manufacturers gearing up to handle a doubling in passenger miles over the next
decade, Pall is looking forward to steady and profitable growth in its
Aerospace business.
16
<PAGE> 12
[FIGURE 17]
[FUGURE 18]
AIRLINE
SUPPORT
WORLDWIDE
WITHIN HOURS
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
We have positioned ourselves for growth through distinct technology, product
diversity, global distribution capability and outstanding customer service.
- - PALL AS AN INNOVATOR. Following an industry-wide downsizing, our Aerospace
customers look to us more than ever for technical support. We provide it
through applications of our innovative filtration and separations technologies.
Our AquaSep coalescer, for example, is the only proven method for removing
water from a new fuel used by the U.S. Air Force. - DISTRIBUTION CAPABILITY.
Pall's global distribution network gives airline customers anywhere in the
world immediate access to products and customer service. In fact, our Aircraft
On Ground (AOG) Service guarantees dispatch within four hours of receipt of an
order. That's helped drive the growth of our sales through distribution--a $75
million potential market--by more than 100 percent over the past three years.
- - TECHNICAL SUPPORT. Enhancing our geographic reach is the worldwide presence of
Pall's Scientific and Laboratory Services (SLS). Our trained specialists work
directly with customers to identify and solve contamination problems. As a
result of these core strengths, more customers are signing long-term agreements
with Pall to meet their total filtration needs. And that's giving our Aerospace
business a solid platform for future growth.
CATERING TO CUSTOMERS. ADVANCED TECHNOLOGY IS ENABLING PALL TO PRODUCE
TOP-PERFORMING PRODUCTS WITHIN SIGNIFICANTLY SHORTER LEAD TIMES. THE BOEING
COMPANY HAD A FIRSTHAND LOOK AT THIS CAPABILITY AT OUR AEROSPACE PLANT IN
NEW PORT RICHEY, FLORIDA. A VISITING TEAM OF BOEING TECHNICIANS TOOK
IMMEDIATE ADVANTAGE OF OUR ABILITY TO DESIGN COMPLEX COOLING SYSTEM FILTERS
FOR THEIR HIGH-TECH V-22 TILTROTOR AIRCRAFT USING THREE-DIMENSIONAL
COMPUTER-AIDED DESIGN (CAD) SYSTEMS. WORKING SHOULDER TO SHOULDER WITH OUR
CAD ENGINEERS, BOEING ENGINEERS WERE ABLE TO MAKE CHANGES IN REAL TIME. THEY
ALSO HAD A CLOSE-UP LOOK AT PALL'S INTEGRATED ABILITY TO DESIGN AND MACHINE
FILTER PARTS. IN THE CASE OF THE V-22 AIRCRAFT FILTER, THIS CONCURRENT
ENGINEERING CAPABILITY IS EXPECTED TO CUT DESIGN-TO-PRODUCTION TIME IN HALF.
17
<PAGE> 13
HEALTH CARE -- PATIENT PROTECTION
BIOMEDICAL
[FIGURE 19]
PLAYING A PIVOTAL ROLE
- --------------------------------------------------------------------------------
Pall filtration technology in hospital and blood bank settings provides unique
patient protection against contaminating bacteria and viruses, as well as the
foreign leukocytes found in blood components. The worldwide clamor for dramatic
new approaches to reducing the cost of patient care--without jeopardizing
quality--has underscored the importance of Pall Biomedical products and
technology. Pall filters are playing a pivotal role in improving patient
outcomes, shortening hospital stays and cutting health care costs. - SALES
GROWTH. In fiscal 1995, Pall increased its sales to blood banks
dramatically--by approximately 60 percent--as a greater awareness of the
benefits of leukocyte depletion of blood components took hold in the blood
banking community worldwide. The increases were greatest in Western Europe,
where blood centers are moving quickest to more routine pre-filtration of blood
for hospital usage. At the same time, blood filter sales to hospitals declined
as the process of filtration continues its shift from the bedside to the blood
bank. Overall, the market for blood filters rose sharply, with Pall picking up
the major share of this expanding business. - PRODUCT STRENGTH. Breakthrough
products promise future Biomedical growth. They include AutoStop filters for
blood banks, to ensure leukocyte reduced platelet rich plasma, and other novel
products. - A NEW SUBSIDIARY. In May, we announced our intention to acquire the
Medical Plastics business of Bayer Corporation, a well recognized innovator and
producer of plastic disposable products and preservative solutions used in
blood collection and storage. The acquisition was completed in the first
quarter of fiscal 1996 and the new entity, Medsep Corporation, will help us
provide integrated filtration solutions to this marketplace.
18
<PAGE> 14
[FIGURE 20]
[FIGURE 21]
IMPROVING
PATIENT
OUTCOMES AND
CUTTING HEALTH CARE COSTS
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
Over the past year, the volume of blood undergoing leukocyte removal rose
dramatically in the world's blood banks, reflecting increasing demand by
hospitals for filtered blood. It illustrates the developing market for blood
filters that is being driven by new medical standards of care. Another factor
is the breadth of our Biomedical product line, which includes not just blood,
but respiratory and intravenous (IV) filters. - SOURCE OF PROTECTION. The
increasing need of hospitals to protect workers from patients with resistant
strains of tuberculosis, for instance, has resulted in remarkable growth for
our breathing circuit filters. We're seeing multiple areas of growth for Pall's
IV filters. An example is our total parenteral nutrition (TPN) filters which
remove bacteria, fungi and yeast from intravenous feeding solutions
administered to patients. - THE POWER OF ALLIANCES. We're also relying on
alliances with health care industry leaders such as Baxter and Haemonetics to
fuel our Biomedical business growth. Baxter has begun incorporating Pall's
blood filtration products for European customers, a major development. To be
sure, more and more health care manufacturers are finding a niche for filters
in their product lines.
PROMOTING A SAFER BLOOD SUPPLY. THOUGH A BLOOD TRANSFUSION CAN BE A
LIFESAVING PROCEDURE FOR MANY PEOPLE, IT ALSO POSES CERTAIN RISKS. SOME OF
THOSE DANGERS, SUCH AS VIRUS TRANSMISSION, ARE BEING DRAMATICALLY REDUCED
THROUGH CAREFUL SCREENING AND SUBSEQUENT FILTRATION OF DONOR BLOOD. ABOUT 90
PERCENT OF ALL ADVERSE TRANSFUSION REACTIONS, HOWEVER, CAN BE TRACED TO
FOREIGN LEUKOCYTES, OR WHITE BLOOD CELLS, NATURALLY PRESENT IN TRANSFUSED
BLOOD. IT IS PALL'S FIRM CONVICTION THAT LEUKOCYTE FILTRATION OF TRANSFUSED
BLOOD IS A NECESSITY, NOT A LUXURY. WE, AND OTHERS, ARE SPREADING THAT
MESSAGE THROUGH ACTIVE EDUCATIONAL EFFORTS FOR PHYSICIANS AND PATIENTS.
19
<PAGE> 15
HEALTH CARE--PHARMACEUTICALS, DIAGNOSTICS AND NUTRITION
BIOSUPPORT
[FIGURE 22]
CARVING A COMPETITIVE ADVANTAGE
- --------------------------------------------------------------------------------
Pall BioSupport membranes, critical to a wide range of biological analyses,
constitute one of Pall's fastest growing businesses. Products used in the
diagnosis and monitoring of health conditions such as diabetes, pregnancy and
infectious disease, comprise a major market for this young division. Another
major growth area is molecular biological applications, where Pall BioSupport
is the leading supplier of membranes used for forensic testing, genetic
fingerprinting and projects designed to map the genetic makeup of humans. The
ability of Pall membranes to ensure accuracy, sensitivity and ease of use gives
them distinct competitive advantage. - IMPRESSIVE GROWTH. BioSupport sales grew
by 33 percent in fiscal 1995. The blood glucose market continues to be a major
source of sales growth, with the American Diabetes Association stressing the
importance of frequent monitoring of blood sugar levels as an important
companion to treatment.
20
<PAGE> 16
[FIGURE 23]
[FIGURE 24]
GROWING
THROUGH
UNSURPASSED
CUSTOMER COMMUNICATION
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
Our BioSupport group is looking forward to continued growth on the strength of
its cutting edge products and unsurpassed level of technical support. -
THOUGHTFUL PRODUCTS. ACCUWIK and Hemadyne membranes are two recently introduced
products in tune with the changing needs of the marketplace. The ACCUWIK
membrane is a microporous, microfilm membrane with flow characteristics that
make it highly desirable for single-step diagnostic testing--the direction in
which the worldwide market is headed. Our Hemadyne membrane is also proving
attractive to companies that produce diagnostic test kits. It separates plasma
from whole blood for such tests as glucose and cholesterol. - TALKING TO
CUSTOMERS. In a business where personal communication is critical, Pall
BioSupport is setting the standard through its uncompromising customer support.
We routinely bring our R&D and laboratory specialists in at many different
points to develop solutions tailored to customer needs.
JUST LIKE BEING THERE. BIOSUPPORT'S ABILITY TO DELIVER TECHNICAL INFORMATION
TO CUSTOMERS FROM A WIDE RANGE OF GLOBAL RESOURCES CONTINUES TO SET US APART
FROM THE COMPETITION. THAT'S WHY WE'RE USING VIDEO CONFERENCING IN ADDITION
TO FACE-TO-FACE MEETINGS TO STRENGTHEN THAT VITAL COMMUNICATIONS LINK. THIS
APPROACH WORKED PARTICULARLY WELL IN THE CASE OF A EUROPEAN COMPANY
EVALUATING A WIDE VARIETY OF OUR FILTER MEDIA. TO ENHANCE THAT PROCESS, WE
SCHEDULED A SERIES OF VIDEOCONFERENCES THAT BROUGHT TOGETHER PALL
SCIENTISTS, TECHNICAL EXPERTS AND BIOSUPPORT MANAGEMENT FROM EUROPE AND THE
U.S. THESE OPEN DISCUSSIONS MADE POSSIBLE EXPEDITIOUS DEVELOPMENT OF A
MEMBRANE CLOSELY ATTUNED TO THE CUSTOMER'S NEEDS.
21
<PAGE> 17
HEALTH CARE--PHARMACEUTICALS, DIAGNOSTICS AND NUTRITION
PHARMACEUTICAL, BIOLOGICALS
AND BIOPROCESSING
[FIGURE 25]
COST SAVING SOLUTIONS
- --------------------------------------------------------------------------------
Pall continues to lead worldwide in the supply of sterilizing filters and bulk
chemical filter cartridges to producers of injectable pharmaceuticals,
biopharmaceuticals and therapeutics for both human and veterinary medicine.
Pharmaceutical, Biologicals and Bioprocessing (PBB) producers rely on our
ability to engineer complete filtration solutions rather than simply supply
system components. Significantly, our R&D staff often establishes a direct
dialogue with the customer's process development specialists, developing
solutions that save countless hours of process downtime and countless dollars
in operating costs. Our resources also ensure customer compliance with complex
regulatory and validation requirements of the Guideline on Sterile Drug
Products Produced by Aseptic Processing (published by the U.S. Food and Drug
Administration). This prevents the need for costly redesign or revalidation of
production sequences. (Validation is the accumulation of evidence that a
sterilizing filter will perform as per the claims made for the filter).
- - REBOUNDING MARKETS. Our global PBB business grew by a healthy 18 percent in
1995. We benefited from a strong position in the U.S. and Pacific Rim markets
and from a growing presence in China, where our filters are playing a major
role in that country's expanding antibiotics production.
22
<PAGE> 18
[FIGURE 26]
[FIGURE 27]
THE METHOD
OF CHOICE
FOR TOTAL SYSTEMS
VALIDATION
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
In the rapidly changing PBB marketplace, Pall is well positioned for growth
through its products, technology and unsurpassed technical support. - PRODUCT
INNOVATION. In the product arena, we responded to ever growing concerns over
viruses in biological and biopharmaceutical products by introducing our Ultipor
VF grade DV50 virus removal filter. This filter won immediate acceptance from
many major biopharmaceutical and blood fraction producers around the world for
its ability to remove viruses. - INTEGRITY TESTING. Pall is also taking full
advantage of the industry's move toward validation of the entire pharmaceutical
manufacturing process. Our Parametric Validation Approach is fast becoming the
industry standard. The centerpiece of this approach is our new Truflow
Palltronic integrity test instrument, which can be easily integrated into the
customer's automated processes and provides complete validation documentation.
- - GLOBAL TECHNICAL SUPPORT. Providing further validation support through the
testing and analysis of customer products is Pall's global network of
Scientific and Laboratory Services specialists. They are recognized
international experts in not just membrane and polymer chemistry, but in
customer processes as well.
FORGING GLOBAL ALLIANCES. WE BELIEVE THAT TO BE SUCCESSFUL TODAY, COMPANIES
MUST BE LOCAL ON A WORLDWIDE BASIS. AN EXAMPLE IS OUR RELATIONSHIP WITH
PHARMACIA OF SWEDEN. BECAUSE OF PALL'S STRENGTH THROUGHOUT EUROPE, WE'VE
BEEN ABLE TO WORK CLOSELY WITH PERSONNEL AT EACH OF THIS PHARMACEUTICAL
COMPANY'S SITES. MORE SPECIFICALLY, WE'VE ESTABLISHED LOCAL PHARMACIA/PALL
TEAMS THAT HAVE IDENTIFIED AND WORKED SUCCESSFULLY TO ACHIEVE COST SAVINGS.
THAT PALL HAS BEEN ABLE TO DELIVER A CONSISTENTLY HIGH LEVEL OF SUPPORT
REGARDLESS OF THE CUSTOMER'S LOCATION SPEAKS CONVINCINGLY OF OUR WORLDWIDE
RESOURCES--AND THE VALUE OF COOPERATIVE PARTNERSHIPS.
23
<PAGE> 19
HEALTH CARE--PHARMACEUTICALS, DIAGNOSTICS AND NUTRITION
BIOSEPARATIONS
[FIGURE 28]
VITAL SEPARATIONS ROLE
- --------------------------------------------------------------------------------
Pall Bioseparations serves the laboratory, life sciences and food and beverage
industries through existing and advanced new separations systems. Pall products
meet the critical need of these industries for separation of cell debris from
biopharmaceutical fermentation processes and the separation of proteins and
enzymes produced in those fermentators. Pall Bioseparations products also
purify vaccines and various human and animal blood components. - ACQUISITION OF
FILTRON. The addition of Pall Filtron as a family member significantly
increases our presence in the laboratory and life sciences markets. The
combination of Filtron's ultrafiltration membranes and cassettes with Pall's
new family of separations systems enables us to meet our customers' complete
filtration and separations requirements, from pre-clinical to pilot to
full-scale production. The introduction of the Mini-DMF filter, a small-scale
dynamic membrane filter, has also strengthened our laboratory product line.
- - FOOD AND BEVERAGE. We continue to be the dominant supplier of filters for cold
stabilization of beer. This was supported last year by major sales in the
Pacific Rim and China. In Korea, we installed a sophisticated Cluster
Filtration System (CFS) which ensures total product quality control and shows
promise of replacing traditional pasteurization methods.
24
<PAGE> 20
[FIGURE 29]
[FIGURE 30]
MARRYING
OURSELVES TO THE
CUSTOMER'S PROCESS
FACTORS FUELING GROWTH
- --------------------------------------------------------------------------------
The teaming of Pall and Filtron will continue to open up new opportunities for
distribution, customer support and sales and market penetration. At stake is a
potential $300 million worldwide market for ultrafiltration and microfiltration
products within the industrial, government and academic laboratory sectors.
- - GOOD PRODUCT POSITIONING. Pall's strategy is to get its separations systems
specified at the early laboratory stages of a pharmaceutical or biotechnology
product, thus gaining the inside sales track for successive stages of the
development and production cycle. While this qualification process can be
costly and risk-intensive, it ensures that once approved, Pall is not easily
displaced. Helping to ensure continued growth is the introduction of new
tangential-flow systems from Pall Filtron which can be easily scaled up to meet
customer needs at each stage of the product development cycle. - STRONG MARKET
POTENTIAL. In the food and beverage arena, Pall is employing advanced
bioseparations technology to open up new market opportunities. The PallSep
filter, for example, is a unique vibrating membrane filter that succeeds where
other cross-flow devices have failed to handle high-solid streams in production
and waste minimization applications.
SAFER PLASMA TRANSFUSIONS. PALL FILTRON HAS FOR MANY YEARS BEEN THE MAJOR
SUPPLIER OF ULTRAFILTRATION SYSTEMS TO THE BLOOD BANK OF LILLE, FRANCE. SIX
PALL FILTRON MAXISETTE(TM) CASSETTE SYSTEMS ARE IN USE FOR THE
PASTEURIZATION PROCESS DEVELOPED AND PATENTED BY THE CENTRAL REGIONALE DE
TRANSFUSION SANGUINE DE LILLE. THIS PROCESS, VALIDATED ACCORDING TO
INTERNATIONAL GUIDELINES, MAKES IT POSSIBLE FOR THE FIRST TIME TO SUBJECT
HUMAN PLASMA TO HEAT TREATMENT OF 60 DEGREES CELSIUS FOR TEN HOURS IN THE
LIQUID STATE. THIS, IN TURN, RESULTS IN THE INACTIVATION OF VIRUSES SUCH AS
AIDS AND HEPATITIS, IMPROVING THE SAFETY OF PLASMA TRANSFUSIONS. WE EXPECT
OTHER BLOOD BANKS AROUND THE WORLD TO ADOPT THE SAME PROCESS AND EQUIPMENT.
25
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1995 COMPARED TO 1994
I. RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
Sales for fiscal 1995 increased 17-1/2% over fiscal 1994. Had foreign
exchange rates been unchanged, sales would have increased by 11%. Price
increases were 1% for the year.
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.
Excluding the one-time charge referred to in the preceding paragraph, the
Company's pretax margin increased to 20.4% of sales in fiscal 1995 from 19.8%
in fiscal 1994. A decrease in selling, general and administrative expenses as a
percentage of sales to 36.7% in 1995, from 37.3% in 1994, was the principal
factor in the improved profit margin. The dollar increase in selling, general
and administrative expenses resulted from higher exchange rates, the
acquisition of Filtron Technology Corporation at the beginning of the third
quarter, and an increase in selling costs to better support the growing volume
of sales.
The Company's effective tax rate increased to 28.9% in fiscal 1995 from 26.8%
in fiscal 1994, such increase resulting mainly from reduced benefits of the
Puerto Rico operations due to changes in the U.S. tax laws.
Prior to the cumulative effect of a change in an accounting principle
in 1995, and to the one-time charge in 1994, net earnings for fiscal 1995
increased 18% to $119.2 million from $101.3 million in 1994.
In the first quarter of fiscal 1995, the Company adopted Financial Accounting
Standards Board Statement No. 112 (Employers' Accounting for Postemployment
Benefits). The effect of initially applying this Statement ($1.2 million
pretax, $780,000 after taxes, 1 cent per share) is reported as the cumulative
effect of a change in an accounting principle.
Net earnings for fiscal 1995 increased 20% to $118.4 million from $98.9
million in fiscal 1994.
II. LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------------
The Company's working capital increased by $23.4 million in fiscal 1995,
largely from changes in foreign currency exchange rates.
The changes in the components of working capital were:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Increase Changes
(Decrease) Due to
in Working Exchange Other
(In millions) Capital Rates Factors
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts receivable $ 9.1 $11.4 $ (2.3)
Inventories 20.0 6.8 13.2
Other current assets 3.5 0.5 3.0
Short-term borrowings, net
of cash and investments 9.6 (1.0) 10.6
Payables and accruals (17.5) (4.9) (12.6)
Income taxes payable (1.3) (1.0) (0.3)
- ----------------------------------------------------------------------------------------------
Increase in working capital $23.4 $11.8 $ 11.6
- ----------------------------------------------------------------------------------------------
</TABLE>
Capital expenditures totalled $66.5 million in fiscal 1995, and consisted of:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Land & Machinery
(In millions) Buildings & Equipment Other Total
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Western Hemisphere $6.8 $31.0 $3.1 $40.9
Europe 2.4 15.5 5.5 23.4
Asia and Australia 0.1 1.6 0.5 2.2
- --------------------------------------------------------------------------------------------------
Total $9.3 $48.1 $9.1 $66.5
- --------------------------------------------------------------------------------------------------
</TABLE>
On January 9, 1995, the Company's Board of Directors authorized a program to
repurchase shares of its Common Stock. The Board authorized the expenditure of
up to $50 million, and this program was completed in May 1995, with 2.3 million
shares being purchased.
On November 15, 1994, the Company announced that it had reached an agreement
to acquire Filtron Technology Corporation for a price of approximately $28
million (consisting of $2.8 million from working capital sources and 1.28
million shares of the Company's treasury shares, valued at approximately $25
million). This transaction, which is being accounted for as a purchase, was
completed at the end of January 1995.
On May 30, 1995, the Company announced that it had reached agreement in
principle to acquire the assets of the Medical Plastics Business of Bayer
Corporation. This business is a leading producer of proprietary plastic
disposable products and preservative solutions used in blood collection and
storage. The closing took place on September 29, 1995. The purchase price was
$41 million, subject to adjustment based on asset valuations on that date.
III. IMPACT OF INFLATION
- --------------------------------------------------------------------------------
The Company's financial statements are prepared in accordance 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.
27
<PAGE> 22
IV. NEW ACCOUNTING STANDARD NOT ADOPTED
- --------------------------------------------------------------------------------
In March 1995, the Financial Accounting Standards Board adopted Statement No.
121 (Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of), effective for fiscal years beginning after December
15, 1995. Management does not believe that the effect of adopting Statement No.
121 will have a material impact on the financial position of the Company.
1994 COMPARED TO 1993
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 pretax 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 pretax 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.
28
<PAGE> 23
CONSOLIDATED STATEMENTS OF EARNINGS
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Years Ended
- -------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) July 29, 1995 July 30, 1994 July 31, 1993
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
NET SALES $822,823 $700,848 $687,222
INTEREST EARNED 6,500 5,274 4,713
- -------------------------------------------------------------------------------------------------------------------------
TOTAL REVENUES 829,323 706,122 691,935
- -------------------------------------------------------------------------------------------------------------------------
Costs and Expenses:
COST OF SALES 305,287 257,624 249,629
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 301,686 261,289 262,598
RESEARCH AND DEVELOPMENT 45,142 41,283 40,036
INTEREST EXPENSE 9,504 7,132 8,683
RESTRUCTURING AND OTHER CHARGES -- 3,696 26,710
- -------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 661,619 571,024 587,656
- -------------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes and the
Cumulative Effect of an Accounting Change 167,704 135,098 104,279
PROVISIONS FOR INCOME TAXES 48,488 36,176 25,967
- -------------------------------------------------------------------------------------------------------------------------
Earnings Before the Cumulative
Effect of an Accounting Change 119,216 98,922 78,312
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
FOR POSTEMPLOYMENT BENEFITS (780) -- --
- -------------------------------------------------------------------------------------------------------------------------
Net Earnings $118,436 $ 98,922 $ 78,312
Earnings Per Share:
EARNINGS BEFORE THE CUMULATIVE EFFECT OF AN
ACCOUNTING CHANGE $ 1.04 $ .86 $ .68
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING FOR
POSTEMPLOYMENT BENEFITS (.01) -- --
- -------------------------------------------------------------------------------------------------------------------------
NET EARNINGS PER SHARE $ 1.03 $ .86 $ .68
- -------------------------------------------------------------------------------------------------------------------------
Average Shares Outstanding 115,184 115,678 115,856
- -------------------------------------------------------------------------------------------------------------------------
</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 29, 1995 and July 30, 1994, and the
related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended July 29, 1995. 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 29, 1995 and July 30, 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended July 29, 1995, in conformity with generally accepted
accounting principles.
As discussed in the Accounting Policies note to the consolidated financial
statements, the Company adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits" in fiscal year 1995.
/s/ KPMG PEAT MARWICK LLP
Jericho, New York
September 5, 1995
29
<PAGE> 24
CONSOLIDATED BALANCE SHEETS
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) July 29, 1995 July 30, 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
CASH AND CASH EQUIVALENTS $ 37,913 $ 38,224
SHORT-TERM INVESTMENTS 72,850 50,800
ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $5,008 AND $4,776, RESPECTIVELY 216,216 207,159
INVENTORIES 158,430 138,382
DEFERRED INCOME TAXES 19,443 17,178
PREPAID EXPENSES 15,546 15,346
OTHER CURRENT ASSETS 4,369 3,336
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 524,767 470,425
- -------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment:
LAND 25,783 25,026
BUILDINGS AND IMPROVEMENTS 246,280 231,342
MACHINERY AND EQUIPMENT 351,752 308,409
FURNITURE AND FIXTURES 53,590 44,215
TRANSPORTATION EQUIPMENT 13,410 11,637
- -------------------------------------------------------------------------------------------------------------------------
690,815 620,629
LESS: ACCUMULATED DEPRECIATION AND AMORTIZATION 262,884 223,012
- -------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 427,931 397,617
- -------------------------------------------------------------------------------------------------------------------------
Other Assets 122,224 91,537
- -------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $1,074,922 $ 959,579
- -------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
NOTES PAYABLE TO BANKS $ 117,489 $ 112,034
ACCOUNTS PAYABLE 47,814 40,401
ACCRUED LIABILITIES:
SALARIES AND COMMISSIONS 27,863 24,031
PAYROLL TAXES 6,279 5,185
INCOME TAXES 34,311 33,019
INTEREST 1,624 1,232
PENSION AND PROFIT SHARING PLANS 9,342 11,014
OTHER 21,503 16,437
- -------------------------------------------------------------------------------------------------------------------------
100,922 90,918
CURRENT PORTION OF LONG-TERM DEBT 9,494 2,819
DIVIDENDS PAYABLE 12,014 10,667
- -------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 287,733 256,839
Long-term Debt, Net of Current Portion 68,814 54,097
Deferred Income Taxes 33,444 31,450
Other Non-current Liabilities 33,132 29,987
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 423,123 372,373
- -------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
COMMON STOCK, PAR VALUE $.10 PER SHARE; 500,000 SHARES AUTHORIZED;
117,351 SHARES ISSUED 11,735 11,735
CAPITAL IN EXCESS OF PAR VALUE 56,304 53,769
RETAINED EARNINGS 643,675 572,388
TREASURY STOCK, AT COST (1995 -- 2,920 SHARES, 1994 -- 2,032 SHARES) (60,389) (35,144)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT 13,036 (1,816)
MINIMUM PENSION LIABILITY ADJUSTMENT (5,145) (4,711)
STOCK OPTION LOANS (7,580) (8,432)
CUMULATIVE UNREALIZED GAINS (LOSSES) ON INVESTMENTS 163 (583)
- -------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 651,799 587,206
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,074,922 $ 959,579
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 25
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
(In thousands) Foreign Minimum
Capital in Currency Pension
Years Ended July 31, 1993, Common Excess of Retained Treasury Translation Liability
July 30, 1994 and July 29, 1995 Stock Par Value Earnings Stock Adjustment Adjustment
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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 (4,996)
CHANGE IN STOCK OPTION LOANS
- -----------------------------------------------------------------------------------------------------------
Balance at
July 31, 1993 29,338 36,166 524,407 (24,963) (12,861) (4,996)
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 285
CHANGE IN STOCK OPTION LOANS
NET UNREALIZED HOLDING
LOSSES ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
Balance at
July 30, 1994 11,735 53,769 572,388 (35,144) (1,816) (4,711)
NET EARNINGS 118,436
CASH DIVIDENDS DECLARED (46,911)
ISSUANCE OF STOCK PURSUANT
TO EXERCISE OF STOCK OPTIONS,
269 SHARES (145) (238) 5,225
PURCHASE OF 2,437 SHARES
OF COMMON STOCK (52,645)
ISSUANCE OF 1,280 SHARES
IN ACQUISITION OF FILTRON
TECHNOLOGY CORPORATION 2,680 22,175
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT 14,852
MINIMUM PENSION LIABILITY
ADJUSTMENT (434)
CHANGE IN STOCK OPTION LOANS
NET UNREALIZED HOLDING
GAINS ON INVESTMENTS
- -----------------------------------------------------------------------------------------------------------
Balance at
July 29, 1995 $ 11,735 $56,304 $643,675 $ (60,389) $ 13,036 $(5,145)
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------
(In thousands) Cumulative
Stock Unrealized Total
Years Ended July 31, 1993, Option Gains (Losses) Stockholders'
July 30, 1994 and July 29, 1995 Loans on Investments Equity
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
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)
CHANGE IN STOCK OPTION LOANS (129) (129)
- -----------------------------------------------------------------------------
Balance at
July 31, 1993 (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
CHANGE IN STOCK OPTION LOANS (4,219) (4,219)
NET UNREALIZED HOLDING
LOSSES ON INVESTMENTS (583) (583)
- -----------------------------------------------------------------------------
Balance at
July 30, 1994 (8,432) (583) 587,206
NET EARNINGS 118,436
CASH DIVIDENDS DECLARED (46,911)
ISSUANCE OF STOCK PURSUANT
TO EXERCISE OF STOCK OPTIONS,
269 SHARES 4,842
PURCHASE OF 2,437 SHARES
OF COMMON STOCK (52,645)
ISSUANCE OF 1,280 SHARES
IN ACQUISITION OF FILTRON
TECHNOLOGY CORPORATION 24,855
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT 14,852
MINIMUM PENSION LIABILITY
ADJUSTMENT (434)
CHANGE IN STOCK OPTION LOANS 852 852
NET UNREALIZED HOLDING
GAINS ON INVESTMENTS 746 746
- -----------------------------------------------------------------------------
Balance at
July 29, 1995 $(7,580) $ 163 $651,799
- -----------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
31
<PAGE> 26
CONSOLIDATED STATEMENTS OF CASH FLOWS
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Years Ended
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands) July 29, 1995 July 30, 1994 July 31, 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
NET EARNINGS $ 118,436 $ 98,922 $ 78,312
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT 41,667 36,804 35,188
AMORTIZATION OF INTANGIBLES 4,393 2,737 1,807
RESTRUCTURING AND OTHER CHARGES -- 3,696 23,110
DEFERRED INCOME TAXES 221 4,406 (4,289)
PROVISION FOR DOUBTFUL ACCOUNTS 998 1,033 1,048
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING FOR POSTEMPLOYMENT BENEFITS 780 -- --
CHANGES IN OPERATING ASSETS AND LIABILITIES, NET OF EFFECTS OF ACQUISITIONS:
ACCOUNTS RECEIVABLE 2,496 (5,354) (14,245)
INVENTORIES (11,547) (7,284) (2,827)
PREPAID EXPENSES 210 (640) (3,162)
OTHER ASSETS (8,576) (4,848) (2,433)
ACCOUNTS PAYABLE 4,625 2,285 (829)
ACCRUED EXPENSES 1,080 (2,302) 3,800
INCOME TAXES PAYABLE 236 (1,418) (4,860)
OTHER LIABILITIES 1,888 1,680 3,945
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 156,907 129,717 114,565
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
CAPITAL EXPENDITURES (66,479) (73,354) (62,582)
DISPOSALS OF FIXED ASSETS 4,523 1,942 3,059
SHORT-TERM INVESTMENTS (22,050) 13,600 9,952
ACQUISITIONS OF LICENSE AND OF BUSINESSES, NET OF CASH ACQUIRED (230) (11,333) --
BENEFITS PROTECTION TRUST (2,599) (2,567) (7,072)
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (86,835) (71,712) (56,643)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
NET SHORT-TERM BORROWINGS 1,930 (14,241) 14,253
LONG-TERM BORROWINGS 21,620 31,165 5,358
PAYMENTS ON LONG-TERM DEBT (4,223) (17,297) (35,749)
NET PROCEEDS FROM EXERCISE OF STOCK OPTIONS 3,043 6,185 4,488
DIVIDENDS PAID (45,564) (39,954) (26,357)
TREASURY STOCK (49,997) (30,190) --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Cash Used by Financing Activities (73,191) (64,332) (38,007)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash Flow for Year (3,119) (6,327) 19,915
Cash and Cash Equivalents at Beginning of Year 38,224 42,652 26,977
Effect of Exchange Rate Changes on Cash 2,808 1,899 (4,240)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 37,913 $ 38,224 $ 42,652
- ----------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures:
INTEREST PAID (NET OF AMOUNT CAPITALIZED) $ 9,143 $ 6,292 $ 10,379
INCOME TAXES PAID (NET OF REFUNDS) 47,524 32,670 34,316
TREASURY STOCK ISSUED UPON ACQUISITION OF
FILTRON TECHNOLOGY CORPORATION 24,855 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
32
<PAGE> 27
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands) Fiscal 1995 Fiscal 1994 Fiscal 1993
Amount % Change Amount % Change Amount % Change
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
HEALTH CARE $ 396,907 13 $351,849 0 $353,197 7
AEROPOWER 212,796 19 179,297 2 176,123 -14
FLUID PROCESSING 213,120 26 169,702 7 157,902 6
------- ------- -------
TOTAL $ 822,823 17 $700,848 2 $687,222 0
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Profit:
HEALTH CARE $ 126,914 10 $115,228(a) -1 $115,992(b) 5
AEROPOWER 51,342 41 36,487(a) 126 16,129(b) -63
FLUID PROCESSING 40,112 50 26,784(a) 35 19,785(b) 30
------- ------- -------
SUBTOTAL 218,368 22 178,499 18 151,906 -10
INTEREST INCOME 6,500 23 5,274 12 4,713 -13
INTEREST EXPENSE (9,504) 33 (7,132) -18 (8,683) -19
GENERAL CORPORATE EXPENSES (47,660) 15 (41,543) -5 (43,657) 14
------- -------- --------
TOTAL $ 167,704 24 $135,098 30 $104,279 -17
- ----------------------------------------------------------------------------------------------------------------------------------
Identifiable Assets:
HEALTH CARE $ 399,075 8 $369,352 5 $350,832 2
AEROPOWER 177,389 5 169,433 2 166,683 -17
FLUID PROCESSING 231,971 10 211,487 5 201,115 2
------- ------- -------
SUBTOTAL 808,435 8 750,272 4 718,630 -3
CORPORATE 266,487 27 209,307 14 183,643 7
------- ------- -------
TOTAL $1,074,922 12 $959,579 6 $902,273 -1
- ----------------------------------------------------------------------------------------------------------------------------------
Capital Expenditures:
HEALTH CARE $ 31,372 $ 26,284 $ 26,688
AEROPOWER 12,419 5,568 6,800
FLUID PROCESSING 16,263 14,181 13,886
------- ------- -------
SUBTOTAL 60,054 46,033 47,374
CORPORATE 6,425 27,321 15,208
------- ------- -------
TOTAL $ 66,479 $ 73,354 $ 62,582
- ----------------------------------------------------------------------------------------------------------------------------------
Depreciation:
HEALTH CARE $ 17,912 $ 16,446 $ 15,156
AEROPOWER 8,545 7,326 7,924
FLUID PROCESSING 10,872 10,230 9,624
------- ------- -------
SUBTOTAL 37,329 34,002 32,704
CORPORATE 4,338 2,802 2,484
------- ------- -------
TOTAL $ 41,667 $ 36,804 $ 35,188
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes a pretax 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 pretax 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).
33
<PAGE> 28
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
(In thousands) Fiscal 1995 Fiscal 1994 Fiscal 1993
Amount % Change Amount % Change Amount % Change
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to Unaffiliated Customers:
WESTERN HEMISPHERE $ 325,252 8 $302,287 1 $300,440 -1
EUROPE 340,541 22 279,423 -4 289,586 -2
ASIA AND AUSTRALIA 157,030 32 119,138 23 97,196 12
------- ------- -------
TOTAL $ 822,823 17 $700,848 2 $687,222 0
- ----------------------------------------------------------------------------------------------------------------------------------
Transfers Between Geographic Areas:
WESTERN HEMISPHERE $ 63,422 $ 61,679 $ 52,832
EUROPE 13,838 10,461 8,052
ASIA AND AUSTRALIA 2,025 1,809 1,732
------- ------- -------
TOTAL $ 79,285 $ 73,949 $ 62,616
- ----------------------------------------------------------------------------------------------------------------------------------
Total Sales:
WESTERN HEMISPHERE $ 388,674 7 $363,966 3 $353,272 1
EUROPE 354,379 22 289,884 -3 297,638 -2
ASIA AND AUSTRALIA 159,055 32 120,947 22 98,928 12
ELIMINATIONS (79,285) (73,949) (62,616)
------- ------- -------
TOTAL $ 822,823 17 $700,848 2 $687,222 0
- ----------------------------------------------------------------------------------------------------------------------------------
Operating Profit:
WESTERN HEMISPHERE $ 87,030 -3 $ 89,898(a) 58 $ 57,020(b) -28
EUROPE 102,532 37 74,707(a) -12 84,578(b) 5
ASIA AND AUSTRALIA 27,630 100 13,834 8 12,788(b) 37
ELIMINATIONS 1,176 60 (2,480)
------- ------- -------
SUBTOTAL 218,368 22 178,499 18 151,906 -10
INTEREST INCOME 6,500 23 5,274 12 4,713 -13
INTEREST EXPENSE (9,504) 33 (7,132) -18 (8,683) -19
GENERAL CORPORATE EXPENSES (47,660) 15 (41,543) -5 (43,657) 14
------- ------- -------
TOTAL $ 167,704 24 $135,098 30 $104,279 -17
- ----------------------------------------------------------------------------------------------------------------------------------
Identifiable Assets:
WESTERN HEMISPHERE $ 385,023 2 $375,970 2 $369,793 3
EUROPE 308,535 12 275,219 4 265,199 -16
ASIA AND AUSTRALIA 127,602 13 112,873 16 97,404 24
ELIMINATIONS (12,725) (13,790) (13,766)
------- ------- -------
SUBTOTAL 808,435 8 750,272 4 718,630 -3
CORPORATE 266,487 27 209,307 14 183,643 7
------- ------- -------
TOTAL $1,074,922 12 $959,579 6 $902,273 -1
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes a pretax 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 pretax 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).
Export sales to unaffiliated customers by the Company's U.S. operations
totalled $37,167 in 1995 ($28,907 in 1994 and $28,995 in 1993). 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.
34
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS 1995, 1994 AND 1993
(In thousands, except per share data)
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 29, 1995, July 30, 1994 and July 31, 1993 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
Financial statements of foreign subsidiaries have been translated into U.S.
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 stockholders' equity, while
transaction gains and losses are reflected in income. Transaction losses in the
amounts of $586, $348 and $25 were incurred in fiscal years 1995, 1994 and
1993, respectively.
The equity in, and advances to, foreign subsidiaries totalled $252,287 and
$249,154 at July 29, 1995 and July 30, 1994, 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, consisting principally of short-term bank deposits, totalled
$11,808 and $17,703 at July 29, 1995 and July 30, 1994, respectively. The
Company holds all cash equivalents until maturity.
Short-Term Investments
Short-term investments, consisting principally of certificates of deposit, time
deposits and repurchase agreements secured by government obligations, are held
to maturity and are carried at cost, which approximates fair value.
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.
Intangible Assets
Costs related to patents and trademarks are amortized using the straight-line
method over the estimated useful lives, generally for periods ranging up to 17
years. Goodwill and other intangible assets are amortized over periods ranging
up to 20 years.
Income Taxes
The Company accounts for taxes on income using the asset and liability method.
Under this method, deferred tax assets and liabilities are determined based on
the differences 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.
Capitalized Interest
Interest in the amounts of $1,365 in 1995, $1,641 in 1994 and $748 in 1993 was
capitalized. Such amounts were computed by applying the effective interest rate
on the borrowing to the accumulated expenditures incurred for property, plant
and equipment.
Accounting Change
In the first quarter of fiscal 1995, the Company adopted Financial Accounting
Standards Board Statement No. 112 (Employers' Accounting for Postemployment
Benefits). The effect of initially applying this Statement ($1,200 pretax, $780
after taxes, 1 cent per share) is reported as the cumulative effect of a change
in an accounting principle.
35
<PAGE> 30
ACQUISITION OF FILTRON TECHNOLOGY CORPORATION
- --------------------------------------------------------------------------------
On January 26, 1995, the Company acquired for approximately $28,000 all of the
outstanding shares of Filtron Technology Corporation, a manufacturer of
ultrafiltration membranes and cassettes. This acquisition was financed through
the issuance of 1,280 shares of the Company's treasury shares valued at
approximately $25,000, and the remainder through working capital sources.
The acquisition has been accounted for under the purchase method of accounting
and, accordingly, the operations of Filtron are included in the Company's
financial statements from the date of acquisition. The results of operations
for the Company would not be materially affected had Filtron been included in
fiscal 1995 from the beginning of the year, or had it been included in fiscal
1994.
The purchase price exceeded the fair value of the tangible net assets
acquired by approximately $22,000.
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 year 1993 earnings reflect a pretax charge of $26,710
($17,310 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 of inventory write-offs, $9,476 of machinery and equipment
write-offs, $3,604 for severance and other expenses, and $2,100 for the
write-off of excess corporate leasehold improvements.
In the fourth quarter of fiscal 1994, the Company recorded a one-time pretax
charge for $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.
Restructuring and other charges remaining in the July 29, 1995 balance sheet
are not significant.
INVENTORIES
- --------------------------------------------------------------------------------
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
JULY 29, July 30,
1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Raw materials and components $ 61,436 $ 58,999
Work-in-process 17,901 12,737
Finished goods 79,093 66,646
- ---------------------------------------------------------------
Total inventory $158,430 $138,382
- ---------------------------------------------------------------
</TABLE>
OTHER ASSETS
- --------------------------------------------------------------------------------
Other assets consist of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
JULY 29, July 30,
1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Patents and trademarks, net of
accumulated amortization of $10,209
and $7,768, respectively $ 38,728 $34,332
Benefits protection trust 25,848 24,646
Prepaid pension expenses 11,247 8,272
Intangible pension assets 2,964 3,247
Goodwill and other intangible assets,
net of accumulated amortization
of $1,726 and $246, respectively 26,272 6,087
Other 17,165 14,953
- ---------------------------------------------------------------
Total $122,224 $91,537
- ---------------------------------------------------------------
</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 29, 1995 and July 30, 1994 balance sheets
reflect related liabilities in the amounts of $28,240 and $26,999,
respectively. The trust primarily holds investments in U.S. government
obligations and debt obligations of corporations with high credit ratings. The
Company considers investments held in the trust to be available-for-sale and,
therefore, these 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.
Contractual maturity dates of U.S. government obligations and of corporate
obligations range from
36
<PAGE> 31
1996-2004 and 1997-2005, respectively. Pertinent information related to the
trust follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------
<S> <C> <C> <C>
Company contributions $ 2,599 $ 2,567 $ 7,072
Total purchases (excluding
above contributions) 28,364 33,896 11,339
Total proceeds from sales 29,611 34,309 10,455
Net (losses) gains recognized (712)* (157) 120
</TABLE>
*Unrealized gains of $746 are reflected in stockholders' equity.
- --------------------------------------------------------------
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 29, 1995 and July 30, 1994 balance sheets reflect
additional long-term pension liabilities of $10,880 and $10,489, respectively,
and a reduction in stockholders' equity, net of deferred tax benefits, of
$5,145 and $4,711, respectively.
Goodwill and other intangible assets represent the cost in excess of the net
tangible assets acquired of the Company's former distributor in Australia and
of Filtron Technology Corporation.
SHORT-TERM DEBT
- --------------------------------------------------------------------------------
The Company had short-term investments in Puerto Rico of $72,850 at July 29,
1995 ($50,800 at July 30, 1994), at the same time that it had bank borrowings
of $117,489 ($112,034 at July 30, 1994) outside of Puerto Rico.
Pertinent information with respect to short-term bank borrowings follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1995 1994 1993
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Average month-end
borrowings $119,226 $132,252 $112,950
Weighted average interest
rate during the year 5.1% 3.5% 3.8%
Highest level of borrowing
at any month-end
during the year $160,655 $167,234 $131,506
Weighted average interest
rate at year-end 5.1% 4.2% 3.3%
- ----------------------------------------------------------------------------------
</TABLE>
At July 29, 1995, the Company and its subsidiaries had lines of credit
totalling approximately $400,000, of which $117,276 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>
- ------------------------------------------------------------------------------------
AT JULY 29, At July 30,
1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
Bank loans in Japan, due in
installments through 1999 $28,501 $27,858
7.23% term loan, due on June 30, 1999 20,000 20,000
7.38% sale-and-leaseback obligation 21,620 --
Industrial development bonds, due in
the year 1996, with interest at 63%
and 67% of prime rates 4,320 4,760
Capitalized leases, 4.65% to 16.5% due in
varying amounts through the year 2005 3,867 4,298
- ------------------------------------------------------------------------------------
Total long-term debt 78,308 56,916
Less: current portion 9,494 2,819
- ------------------------------------------------------------------------------------
Long-term debt, net of current portion $68,814 $54,097
- ------------------------------------------------------------------------------------
</TABLE>
The Company's subsidiary in Japan has entered into loan arrangements with
three banks, in the total amount of 2.52 billion Yen ($28,501). The loans are
being amortized through the year 1999, and bear interest at rates between 1.7%
and 3.6%.
In July 1995, the Company entered into a sale-and-leaseback transaction for
certain of its personal properties for approximately $25,000. No gain or loss
was recognized on this transaction. For accounting purposes, the Company has
treated this transaction as a financing arrangement. Payments are due in
installments through the year 2003. Depreciation on the properties has been
reflected in accordance with the Company's normal accounting practices.
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
1996 through 2000 are approximately as follows: 1996, $9,494; 1997, $19,816;
1998, $4,677; 1999, $36,384; and 2000, $3,489.
37
<PAGE> 32
INCOME TAXES
- --------------------------------------------------------------------------------
The components of earnings before income taxes and the cumulative effect of a
change in an accounting principle are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic operations $ 56,708 $ 62,135 $ 27,365
Foreign operations 110,996 72,963 76,914
- -------------------------------------------------------------------------------------
Total $167,704 $135,098 $104,279
- -------------------------------------------------------------------------------------
</TABLE>
The Company and its domestic subsidiaries file a consolidated Federal income
tax return. The provisions for income taxes, excluding the cumulative effect of
a change in an accounting principle, consist of the following items:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1995 1994 1993
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal and Puerto Rico $10,155 $ 4,229 $ 2,692
State 350 350 410
Foreign 37,762 27,191 27,154
- ------------------------------------------------------------------------------------
Total 48,267 31,770 30,256
- ------------------------------------------------------------------------------------
Deferred:
Federal (387) 4,585 (5,207)
State -- 75 (125)
Foreign 608 (254) 1,043
- ------------------------------------------------------------------------------------
Total 221 4,406 (4,289)
- ------------------------------------------------------------------------------------
Total income tax expense $48,488 $36,176 $25,967
- ------------------------------------------------------------------------------------
</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 29,
1995, July 30, 1994 and July 31, 1993 are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1995 1994 1993
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax asset:
Inventories $ 9,125 $ 9,221 $ 13,191
Pension liabilities 12,044 11,325 9,559
Accrued expenses 3,667 2,468 2,561
Other 5,642 4,584 2,874
- -----------------------------------------------------------------------------------
Total deferred tax asset 30,478 27,598 28,185
- -----------------------------------------------------------------------------------
Deferred tax liability:
Plant and equipment (41,215) (39,025) (34,991)
Pension assets (2,564) (1,697) (1,430)
Other (700) (1,148) (1,239)
- -----------------------------------------------------------------------------------
Total deferred tax liability (44,479) (41,870) (37,660)
- -----------------------------------------------------------------------------------
Net deferred tax liability $(14,001) $(14,272) $ (9,475)
- -----------------------------------------------------------------------------------
</TABLE>
A reconciliation of the provisions for income taxes, excluding the cumulative
effect of a change in an accounting principle, follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------
% of % of % of
Pretax Pretax Pretax
Amount Earnings Earnings Earnings
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computed "expected"
tax expense $58,696 35.0% 35.0% 34.6%*
Tax benefit of Puerto
Rico operations (9,716) (5.8) (8.9) (10.9)
Federal tax credits
and other effects (603) (0.3) -- (0.6)
Foreign income and
withholding taxes,
net of U.S. foreign
tax credits (117) (0.1) 0.5 1.5
State income taxes, net
of Federal income tax
benefit 228 0.1 0.2 0.3
- --------------------------------------------------------------------------------------
Total and effective
tax rate $48,488 28.9% 26.8% 24.9%
- --------------------------------------------------------------------------------------
</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.
United States income taxes have not been provided on the retained earnings of
foreign subsidiaries, which totalled $173,544, $161,047 and $118,962 at July
29, 1995, July 30, 1994 and July 31, 1993, 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 Rico subsidiaries are organized as "possessions
corporations" as defined in Section 936 of the Internal Revenue Code. A change
in the provisions of Section 936 decreased the available U.S. tax credit from
100% of income to 60%, effective during the year ended July 29, 1995. The
exemption from Puerto Rico income tax remains at 90%. Repatriation of these
earnings results in Puerto Rico withholding taxes of no more than 10% being
imposed.
COMMON STOCK
- --------------------------------------------------------------------------------
STOCK SPLIT
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, which was transferred from capital in excess of par value to
the Common Stock account.
38
<PAGE> 33
All share and per share data for prior periods presented have been restated to
reflect the stock split.
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 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 August 3, 1993, the Company's Board of Directors authorized a program to
repurchase shares of its Common Stock. The Board authorized the expenditure of
up to $30,000, and this program was completed by the end of fiscal 1994, with
1,763 shares being acquired.
On January 9, 1995, the Company's Board of Directors authorized another
program to repurchase shares of its Common Stock. The Board authorized the
expenditure of up to $50,000, and this program was completed by the end of
fiscal 1995, with 2,306 shares being acquired.
The shares repurchased under these programs were held in treasury for use in
connection with the exercise of options granted under the Company's stock
option plans, and the acquisition of Filtron Technology Corporation.
Other
As of July 29, 1995, 6,398 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 29, 1995, the Company held
2,920 treasury shares intended for use upon stock option exercises.
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
$9,018, $8,638 and $8,818 in fiscal years 1995, 1994 and 1993, 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 29, 1995 and July 30, 1994, 49 shares of Company
Common Stock were held in the Company's domestic pension funds.
39
<PAGE> 34
Net periodic pension cost for these plans in fiscal years 1995, 1994 and 1993
was:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
U.S. Plans Foreign Plans
- -------------------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 2,665 $ 2,651 $ 3,227 $ 4,115 $ 3,582 $ 3,411
Interest cost on projected benefit obligation 5,308 4,851 4,579 3,469 2,635 2,582
Return on plan assets (7,472) (763) (2,017) (5,282) (3,854) (4,156)
Net amortization and deferrals 5,198 (1,383) 266 (400) (388) (377)
- -------------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 5,699 $ 5,356 $ 6,055 $ 1,902 $ 1,975 $ 1,460
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table presents the plans' funded status and amounts recognized
on the Company's consolidated balance sheets at July 29, 1995 and July 30,
1994:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Plans Foreign Plans U.S. Plans Foreign Plans
- --------------------------------------------------------------------------------------------------------------------------------
1995 1994 1995 1994 1995 1994 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit
obligations:
Vested benefit obligation $ 4,471 $ 3,365 $ 36,070 $ 30,023 $ 56,985 $ 52,660 $ 8,752 $ 6,660
Accumulated benefit obligation 4,696 3,590 36,153 30,100 60,041 54,590 9,860 7,680
Projected benefit obligation 4,696 3,590 40,252 33,414 69,618 63,257 12,656 9,974
Plan assets 4,937 4,178 59,775 49,220 37,351 29,111 8,147 6,113
- --------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation
(in excess of)
or less than plan assets 241 588 19,523 15,806 (32,267) (34,146) (4,509) (3,861)
Unrecognized net (gain) or loss (456) (106) (5,738) (4,756) 11,564 12,795 (1,846) (1,372)
Unrecognized prior service cost 970 348 204 217 2,428 2,531 0 0
Unrecognized net obligation or
(asset) at date of adoption (507) (549) (2,990) (3,276) (1,558) (1,681) 594 564
Additional minimum liability 0 0 0 0 (10,880) (10,489) (170) (178)
- --------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost (liability) in
the consolidated balance sheet $ 248 $ 281 $ 10,999 $ 7,991 $(30,713) $(30,990) $ (5,931) $ (4,847)
- --------------------------------------------------------------------------------------------------------------------------------
The assumptions used were:
Discount rate 7.75% 8.25% 5.5-8.5% 5.5-8.0% 7.75% 8.25% 5.5-7.0% 5.5-7.8%
Rate of compensation increase 4.25-5.25% 4.75-5.5% 2.8-5.5% 2.9-4.0% 4.25-5.25% 4.75-5.5% 4.0-5.0% 4.0-5.0%
</TABLE>
The long-term rate of return for the U.S. plans was 9.0% in each year, and
for the foreign plans ranged from 5.5% to 9.0% in 1995 and 5.5% to 8.5% in
1994.
40
<PAGE> 35
At July 29, 1995 and July 30, 1994, the Company had recorded additional
minimum pension liabilities of $10,880 and $10,489, respectively. Related
intangible assets in the amounts of $2,964 and $3,247, respectively, are
reflected in non-current assets, and reductions in stockholders' equity, net of
deferred tax benefits, of $5,145 and $4,711, 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 $1,417, $1,307 and $1,303 for fiscal years
1995, 1994 and 1993, 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, or (b) the amount
deductible for Federal income tax purposes. The provisions for fiscal years
1995, 1994 and 1993 were $4,293, $4,683 and $3,711, 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 $5,781, $5,019 and $5,289 in fiscal years 1995, 1994 and
1993, respectively.
STOCK OPTION PLANS
- --------------------------------------------------------------------------------
The Company has adopted several plans which provide for the granting of stock
options to officers, employees and non-employee directors, 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 29, July 30,
1995 1994
- -------------------------------------------------------
<S> <C> <C>
Options exercisable 2,222 1,146
Options available for grant 1,322 1,428
- -------------------------------------------------------
</TABLE>
Changes in the options outstanding during fiscal years 1993, 1994 and 1995 are
summarized in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Number of Shares Price Per Share
- -----------------------------------------------------------------
<S> <C> <C>
BALANCE--AUGUST 1, 1992 3,582 $ 9.40-$19.66
Fiscal 1993:
Options granted 49 18.25- 22.31
Options exercised (452) 9.40- 18.38
Options terminated (26) 10.13- 18.38
- -----------------------------------------------------------------
BALANCE--JULY 31, 1993 3,153 9.40- 22.31
Fiscal 1994:
Options granted 3,375 15.25- 19.81
Options exercised (1,040) 9.40- 18.38
Options terminated (245) 10.13- 18.50
- -----------------------------------------------------------------
BALANCE--JULY 30, 1994 5,243 9.60- 22.31
Fiscal 1995:
Options granted 194 16.00- 21.44
Options exercised (269) 9.60- 18.81
Options terminated (92) 18.25- 22.31
- -----------------------------------------------------------------
BALANCE--JULY 29, 1995 5,076 11.69- 21.44
- -----------------------------------------------------------------
</TABLE>
Since June 1992, the Company has delivered treasury shares upon the exercise
of stock options.
41
<PAGE> 36
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.
CONTINGENCIES AND COMMITMENTS
- --------------------------------------------------------------------------------
On April 19, 1995, a jury verdict for $7,000 in damages was rendered against
the Company in a product disparagement action. In the opinion of management and
outside counsel, post-trial motions filed by the Company requesting the court
to either (a) dismiss the jury verdict as a matter of law, or (b) grant a new
trial, will be successful, resulting in no loss to the Company, and therefore,
no accrual for the judgment has been made in the accompanying consolidated
financial statements.
The Company and its subsidiaries are subject to certain other legal actions
which arise in the normal course of business. It is management's belief that
these other 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 $13,100 in 1995, $11,000 in 1994 and $10,200
in 1993. Future minimum rental commitments at July 29, 1995 for all
noncancelable operating leases with initial terms exceeding one year are $8,500
in 1996; $5,400 in 1997; $3,800 in 1998; $2,300 in 1999; $1,100 in 2000; and
$700 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 29, 1995, excluding bonuses, was
approximately $10,000.
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 1995, 1994 and 1993 is summarized on pages 33 and 34 of this
report.
EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT
- --------------------------------------------------------------------------------
On September 29, 1995, the Company completed its acquisition of the assets of
the Medical Plastics Business of Bayer Corporation. This business is a leading
producer of proprietary plastic disposable products and preservative solutions
used in blood collection and storage. The purchase price of approximately
$41,000 was financed from working capital sources.
Proforma unaudited results of operations, assuming this acquisition had taken
place at the beginning of fiscal year 1993, would not be materially different
from those earnings reported in the Consolidated Statements of Earnings on page
29.
The purchase price exceeded the fair value of the tangible net assets
acquired by approximately $11,000, which will be allocated to goodwill.
42
<PAGE> 37
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995:
NET SALES $159,195 $192,847 $217,309 $253,472 $822,823
GROSS PROFIT 97,207 119,682 140,184 160,463 517,536
EARNINGS BEFORE INCOME TAXES AND
THE CUMULATIVE EFFECT
OF AN ACCOUNTING CHANGE 19,012 37,827 47,575 63,290 167,704
NET EARNINGS 12,529(a) 26,481 33,508 45,918 118,436(a)
EARNINGS PER SHARE 0.11(a) 0.23 0.29 0.40 1.03(a)
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(b) 135,098(b)
Net earnings 11,073 22,031 27,817 38,001(b) 98,922(b)
Earnings per share .10 .19 .24 .33(b) .86(b)
- -----------------------------------------------------------------------------------------------------
</TABLE>
(a) Includes a charge against earnings of $780 after income taxes (1 cent per
share) as a result of adopting the Financial Accounting Standards Board
Statement No. 112 (Employers' Accounting for Postemployment Benefits).
(b) Includes a pretax 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.
COMMON STOCK PRICES AND CASH DIVIDENDS
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
Fiscal 1995 Fiscal 1994 per common share
Price per share High Low High Low 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Quarter:
First $18.38 $15.75 $21.25 $15.63 $0.0925 $0.08
Second 20.25 17.13 21.00 17.50 0.105 0.0925
Third 23.63 18.63 19.13 16.00 0.105 0.0925
Fourth 24.00 20.38 17.25 13.63 0.105 0.0925
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
There are approximately 7,000 holders of record of the Company's Common Stock.
43
<PAGE> 1
Exhibit 21
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
Name of Company 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 Filtron Corporation Massachusetts
Pall (Canada) Limited Canada
Pall Europe Lmiited England
Pall Deutschland GmbH Holding Germany
Pall GmbH (a) Germany
Pall Filtron GmbH (d) Germany
Pall Italia S.R.L. Italy
Institut de Formation a la Filtration
Pall (c) France
Pall Biomedical France (b) France
Pall Filtron SARL (d) 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 Filtron AB(d) Sweden
Pall Filtron Technology B.V. (d) The Netherlands
Pall Poland Limited (a) Poland
Nihon Pall Ltd. Japan
Pall Filtration Pte. Ltd. Singapore
Pall Korea Limited South Korea
Pall Filter (Beijing) Co., Ltd. China
Pall Asia International Ltd. Hong Kong
Pall Export Sales Corp., Limited (c) Jamaica
</TABLE>
(a) 100% owned by Pall Deutschland GmbH Holding.
(b) 100% owned by Pall France S.A.
(c) 100% owned by Pall International Corporation.
(d) 100% owned by Pall Filtron Corporation.
All subsidiaries listed above are included in the consolidated financial
statements for the fiscal years 1995, 1994 and 1993, or, in the case of
corporations organized since August 2, 1992, from the date of incorporation. The
list does not include inactive subsidiaries.
<PAGE> 1
EXHIBIT 23
[KPMG PEAT MARWICK LLP LOGO]
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 Nos. 33-39655 and 33-57507 on Form S-3, of our reports
dated September 5, 1995, relating to the consolidated balance sheets of Pall
Corporation and subsidiaries as of July 29, 1995 and July 30, 1994 and the
related consolidated statements of earnings, stockholders' equity and cash
flows and related schedule for each of the years in the three-year period ended
July 29, 1995, 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
29, 1995.
Our reports refer to the Company's adoption of Statement of Financial
Accounting Standards No. 112, "Employers Accounting for Postemployment
Benefits" in fiscal year 1995.
/s/ KPMG PEAT MARWICK LLP
-------------------------
KPMG PEAT MARWICK LLP
Jericho, New York
October 23, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-END> JUL-29-1995
<CASH> 37,913
<SECURITIES> 72,850
<RECEIVABLES> 221,224
<ALLOWANCES> 5,008
<INVENTORY> 158,430
<CURRENT-ASSETS> 524,767
<PP&E> 690,815
<DEPRECIATION> 262,884
<TOTAL-ASSETS> 1,074,922
<CURRENT-LIABILITIES> 287,733
<BONDS> 0
<COMMON> 11,735
0
0
<OTHER-SE> 640,064
<TOTAL-LIABILITY-AND-EQUITY> 1,074,922
<SALES> 822,823
<TOTAL-REVENUES> 829,323
<CGS> 305,287
<TOTAL-COSTS> 661,619
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,504
<INCOME-PRETAX> 167,704
<INCOME-TAX> 48,488
<INCOME-CONTINUING> 119,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (780)
<NET-INCOME> 118,436
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
</TABLE>
