<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended October 28, 1995
Commission File No. 1-4311
PALL CORPORATION
Incorporated in New York State I.R.S. Employer Identifi-
cation # 11-1541330
2200 Northern Boulevard, East Hills, N.Y. 11548
Telephone Number (516) 484-5400
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 the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
At December 1, 1995, 114,613,898 shares of common stock
of the Registrant were outstanding.
<PAGE> 2
-2-
PALL CORPORATION
INDEX TO FORM 10-Q
<TABLE>
<S> <C>
COVER SHEET 1
INDEX TO FORM 10-Q 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets - October 28,
1995 and July 29, 1995 3
Condensed consolidated statements of earnings -
three months ended October 28, 1995 and October 29,
1994 4
Condensed consolidated statements of cash flows -
three months ended October 28, 1995 and October 29,
1994 5
Notes to condensed consolidated financial statements 6
Item 2. Management's discussion and analysis of financial
condition and results of operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 9
SIGNATURES 9
EXHIBIT INDEX 10
</TABLE>
<PAGE> 3
-3-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands) Oct. 28, July 29,
ASSETS 1995 1995
----------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 23,265 $ 37,913
Short-term investments 63,370 72,850
Accounts receivable, net of allowances
for doubtful accounts of $4,277
and $5,008, respectively 187,736 216,216
Inventories - Note 2 172,685 158,430
Deferred income taxes 20,125 19,443
Prepaid expenses 18,595 15,546
Other current assets 3,488 4,369
---------- --------
Total Current Assets 489,264 524,767
Property, plant and equipment, net of
accumulated depreciation of $271,001
and $262,884, respectively 442,614 427,931
Other assets 137,237 122,224
---------- --------
Total Assets $ 1,069,115 $1,074,922
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 112,189 $ 117,489
Accounts payable 45,983 47,814
Accrued liabilities:
Salaries 28,652 25,676
Income taxes 27,283 34,311
Other 42,688 40,935
---------- --------
98,623 100,922
Current portion of long-term debt 9,428 9,494
Dividends payable 12,021 12,014
---------- --------
Total Current Liabilities 278,244 287,733
Long-term debt, less current portion 64,817 68,814
Deferred income taxes 32,837 33,444
Other non-current liabilities 39,856 33,132
---------- --------
Total Liabilities 415,754 423,123
---------- --------
Stockholders' Equity:
Common stock, $.10 par value 11,735 11,735
Capital in excess of par value 56,180 56,304
Retained earnings 649,406 643,675
Treasury stock, at cost (59,292) (60,389)
Foreign currency translation adjustment 7,945 13,036
Minimum pension liability adjustment (5,177) (5,145)
Stock option loans (7,623) (7,580)
Cumulative unrealized gains on investments 187 163
---------- --------
Total Stockholders' Equity 653,361 651,799
---------- --------
Total Liabilities and
Stockholders' Equity $ 1,069,115 $1,074,922
========== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 4
-4-
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands, except Three Months Ended
per share data) -----------------
Oct. 28, Oct. 29,
1995 1994
------- -------
<S> <C> <C>
Revenues:
Net sales $191,550 $159,195
Interest earned 1,972 1,370
------- -------
Total revenues 193,522 160,565
Costs and expenses:
Cost of sales 75,554 61,988
Selling, general and
administrative expenses 78,551 67,223
Research and development 10,928 10,160
Interest expense 2,763 2,182
------- -------
Total costs and expenses 167,796 141,553
Earnings before income taxes
and the cumulative effect of
an accounting change 25,726 19,012
Provisions for income taxes 7,974 5,703
------- -------
Earnings before the cumulative
effect of an accounting change 17,752 13,309
Cumulative effect of a change in
accounting for postemployment
benefits - Note 3 0 (780)
------- -------
Net earnings $ 17,752 $ 12,529
======= =======
Earnings per share:
Before the cumulative effect of
an accounting change $0.16 $0.12
Cumulative effect of a change in
accounting for postemployment
benefits - Note 3 0 (0.01)
------- -------
Net earnings per share $0.16 $0.11
======= =======
Dividends declared per share $0.105 $0.0925
Average number of shares
outstanding 114,446 115,321
</TABLE>
See accompanying Notes to Condensed Consolidated Financial
Statements.
<PAGE> 5
-5-
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------
(in thousands) Oct. 28, Oct. 29,
1995 1994
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 43,852 $ 48,422
INVESTING ACTIVITIES:
Acquisition of Medical Plastics business
of Bayer Corporation (38,888) -
Capital expenditures (17,131) (14,282)
Disposals of fixed assets 715 703
Short-term investments 9,480 900
-------- -------
NET CASH USED BY INVESTING ACTIVITIES (45,824) (12,679)
FINANCING ACTIVITIES:
Net short-term borrowings (2,096) (3,693)
Long-term borrowings 134 -
Payments on long-term debt (279) (555)
Net proceeds from exercise of stock options 930 186
Dividends paid (12,014) (21,334)
-------- -------
NET CASH USED BY FINANCING ACTIVITIES (13,325) (25,396)
CASH FLOW FOR PERIOD (15,297) 10,347
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 37,913 38,224
EFFECT OF EXCHANGE RATE CHANGES ON CASH 649 2,405
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,265 $ 50,976
======== =======
Supplemental disclosures:
Interest paid (net of amount capitalized) $ 2,260 $ 2,062
Income taxes paid (net of refunds) 13,202 5,998
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
-6-
PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial information included herein is unaudited. However, such
information reflects all adjustments which are, in the opinion of management,
necessary to present fairly (i) the financial position of the Company at
October 28, 1995 and July 29, 1995, (ii) the results of its operations for the
three months ended October 28, 1995 and October 29, 1994, and (iii) its cash
flows for the three months ended October 28, 1995 and October 29, 1994.
NOTE 2 - INVENTORIES
The major classes of inventory are as follows:
Oct. 28, July 29,
(in thousands) 1995 1995
-------- --------
Raw materials and components $64,079 $61,436
Work-in-process 23,270 17,901
Finished goods 85,336 79,093
-------- --------
Total inventory $172,685 $158,430
======== ========
NOTE 3 - CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE
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
($1,200,000 pre-tax, $780,000 after taxes, 1 cent per share) was reported as
the cumulative effect of a change in an accounting principle.
<PAGE> 7
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
I. Results of Operations:
Quarter ended October 28, 1995 compared to quarter ended October 29,
1994.
Sales for the first quarter of 1996 increased 20 1/2% over the first
quarter of 1995. If foreign exchange rates had remained unchanged
relative to the first quarter of 1995, sales would have increased by
18 1/2%, all of which is attributable to unit growth. Approximately
$5 1/2 million of the quarter's growth was from acquisitions, with
contributions of $2 1/2 million from Medsep and $3 million from Pall
Filtron.
The Company's pretax margin increased to 13.4% of sales in the first
quarter of 1996 from 11.9% in the 1995 period. Cost of sales
increased to 39.4% of sales in the 1996 quarter from 38.9% in the 1995
period, principally due to increased system sales which have lower
gross margins. Selling, general and administrative expenses and
research and development, although increasing in dollars, together
declined as a percentage of sales to 46.7% in the 1996 quarter from
48.6% in the prior year period.
The Company's effective tax rate increased to 31% in the first quarter
of 1996 from 30% in the 1995 period, such increase resulting mainly
from reduced benefits of the Puerto Rico operations due to changes in
the U.S. tax laws.
Net earnings for the first quarter of fiscal 1996 increased 33 1/2% to
$17.75 million from $13.3 million before an accounting change in the
prior year period.
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 ($1,200,000 pre- tax, $780,000 after taxes, 1 cent per
share) was reported as the cumulative effect of a change in an
accounting principle.
<PAGE> 8
-8-
II. Liquidity and Capital Resources:
On September 29, 1995, the Company completed its acquisition of the
Medical Plastics business of Bayer Corporation, for a total cost of
approximately $44 million of which $37 million was paid in the quarter
ended October 28, 1995. The balance of approximately $7 million will
be paid in the second quarter of 1996.
The Company's working capital decreased by $26.0 million during the
first quarter of fiscal 1996. The effect of the Medsep acquisition on
working capital is shown below:
(in millions) Increase
(Decrease)
in Working Other
Capital Medsep Factors
------- ------- -------
Accounts receivable ($28.5) - ($28.5)
Inventories 14.3 $15.1 (0.8)
Other current assets 2.9 - 2.9
Short-term borrowings, net
of cash and investments (18.8) (37.1) 18.3
Payables and accruals (2.9) - (2.9)
Income taxes payable 7.0 - 7.0
----- ----- -----
Decrease in working capital ($26.0) ($22.0) ($4.0)
===== ===== =====
Capital expenditures totalled $17.1 million, and depreciation expense
totalled $11.4 million, in the quarter ended October 28, 1995.
<PAGE> 9
-9-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
See the Exhibit Index immediately following this page.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the three months ended
October 28, 1995.
SIGNATURES
Pursuant to the requirements 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 authorized.
PALL CORPORATION
December 11, 1995 /s/ Jeremy Hayward-Surry
- ------------------- ------------------------------
Date Jeremy Hayward-Surry
President and Treasurer -
Chief Financial Officer
December 11, 1995 /s/ Peter Schwartzman
- ------------------- ------------------------------
Date Peter Schwartzman
Secretary and Chief Corporate
Accountant
<PAGE> 10
EXHIBIT INDEX
*************
<TABLE>
<CAPTION>
Exhibit Page of
Number Description of Exhibit Form 10-Q
- ------- --------------------------------------- ---------
<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.
3(ii) By-Laws of the Registrant as amended on
November 21, 1995. 11-32
10.26(a) Pall Corporation Stock Option Plan for
Non-Employee Directors. 33-38
10.27(a) Pall Corporation 1995 Employee Stock
Option Plan. 39-46
27 Financial Data Schedule (only filed
electronically).
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement.
<PAGE> 1
PALL CORPORATION
BY-LAWS
(as amended on November 21, 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.
<PAGE> 2
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 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
-2-
<PAGE> 3
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. 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
-3-
<PAGE> 4
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.
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
-4-
<PAGE> 5
one of whom shall be a citizen of the United States and a resident of the State
of New York, and the number of directors is presently fixed at twelve. The
directors shall have power from time to time, and at any time, when the
stockholders as such are not assembled in a meeting, regular or special, to
increase their own number within the limits as to number of directors set forth
in the certificate of incorporation. If the number of directors be increased,
the additional directors may be elected by a majority of the directors in office
at the time of the increase, or if not so elected prior to the next annual
meeting of the stockholders, they shall be elected thereat by the stockholders.
Directors may, but need not, be stockholders.
Section 3.02 Powers. The business of the corporation shall be
managed by the board of directors which shall have and may exercise all the
powers of the corporation, except such as are expressly conferred upon the
stockholders by law, by the certificate of incorporation, or by these by-laws.
Section 3.03 Executive Committee. There may be an executive
committee of not less than three directors appointed by the board who may meet
from time to time on notice to all by any one of their own number. They may
consult with and advise the
-5-
<PAGE> 6
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
-6-
<PAGE> 7
without the State of New York at any time when called by the chief executive
officer or secretary or a majority of the directors, written notice of the time
and place thereof having been given to each director as follows: (a) by
delivering a copy 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
-7-
<PAGE> 8
(b) any four directors, of whom at least two shall also be
principal officers of the corporation; but a lesser number may adjourn any
meeting. A quorum of any committee shall be a majority of the members thereof
except that any committee may, by unanimous action, determine that a lesser
number of members (not less than half) shall constitute a quorum. A majority of
the members in attendance at any meeting shall, except where a larger number is
required by law, by the certificate of incorporation, or by these by-laws,
decide any question brought before such meeting.
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
-8-
<PAGE> 9
whose terms expire at such annual meeting shall be elected to hold office until
the third succeeding annual meeting after their election. If after the initial
classification of directors the number of directors is changed:
(1) Any newly created directorships or any decrease in
directorships shall be so apportioned among the classes as to make all
classes as nearly equal in number as possible; and
(2) When the number of directors is increased by the board and
any newly created directorships are filled by the board, there shall be
no classification of the additional directors until the next annual
meeting of stockholders.
Section 3.08 Action by the Board Without a Meeting. Any action
required or permitted to be taken by the board or any committee thereof may be
taken without a meeting if all members 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.
-9-
<PAGE> 10
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 and Nominating Committees. There
may be an Audit Committee, a Compensation Committee, and a Nominating Committee,
each consisting of not less than three directors appointed by the Board, each of
which Committees may meet from time to time on notice to all members thereof by
any member thereof. Such Committees shall keep regular minutes of their
proceedings and report the same to the Board. The Audit Committee shall have
such powers and perform such functions as are customarily performed by audit
committees of publicly owned corporations including but not limited to such
powers and functions as may be prescribed by applicable rules or requirements of
the Securities and Exchange Commission or of any stock exchange on which
securities of the Corporation are listed. The Compensation Committee shall have
the power and duty to fix
-10-
<PAGE> 11
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. Effective November 21, 1995, the Compensation
Committee shall also 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 Committee administering such Plan,
irrespective of whether the Plan denominates such Committee as the Stock Option
Commitee or the Compensation Committee. 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
-11-
<PAGE> 12
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.
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
-12-
<PAGE> 13
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 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
-13-
<PAGE> 14
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 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
-14-
<PAGE> 15
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 determined in accordance with such designation as may be
made for the purpose from time to time by the board of directors, and in
-15-
<PAGE> 16
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 president
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
-16-
<PAGE> 17
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 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.
-17-
<PAGE> 18
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 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
-18-
<PAGE> 19
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 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
-19-
<PAGE> 20
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 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
-20-
<PAGE> 21
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
interest, or, at its option, in lieu of so fixing a record time,
-21-
<PAGE> 22
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
-22-
<PAGE> 23
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 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
-23-
<PAGE> 24
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 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
-24-
<PAGE> 25
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 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.
-25-
<PAGE> 26
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, 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
-26-
<PAGE> 27
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.
-27-
<PAGE> 1
PALL CORPORATION
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE
The purpose of the Pall Corporation Stock Option Plan for Non-Employee
Directors (the "Plan") is to secure for Pall Corporation (the "Company") and its
stockholders the benefits of the incentive inherent in increased common stock
ownership by the members of the Board of Directors (the "Board") of the Company
who are not employees of the Company or any of its subsidiaries.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the
Board (the "Committee"). The Committee shall have all the powers vested in it by
the terms of the Plan, such powers to include authority (within the limitations
described herein) to prescribe the form of the document embodying and evidencing
stock options granted under the Plan ("Options"). The Committee shall, subject
to the provisions of the Plan, have the power to construe the Plan, to determine
all questions arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. Any
decision of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may act only by a majority
of its members in office, except that the members thereof may authorize any one
or more of their number or the Secretary or any other officer of the Company to
execute and deliver documents on behalf of the Committee. No member of the
Committee shall be liable for anything done or omitted to be done by such member
or by any other member of the Committee in connection with the Plan, except for
his own willful misconduct or as expressly provided by statute.
3. AMOUNT OF STOCK
The stock which may be issued and sold under the Plan shall be the
Common Stock of the Company ("Common Stock") of a total number not exceeding
300,000 shares, subject to adjustment as provided in Section 6 below. The stock
to be issued may be either authorized and unissued shares or reacquired shares.
In the event that Options granted under the Plan shall terminate or expire
without having been exercised in full, new Options may be granted covering the
shares not purchased under such lapsed Options.
4. ELIGIBILITY AND GRANT OF OPTIONS.
Each member of the Board who is not an employee of the Company or any
of its subsidiaries at the time when an Option is to be granted under the
ensuing provisions of this Section 4 (a "Non-Employee Director") shall
automatically, by virtue of the Plan and without any action by the Committee or
the Board, be granted an Option as follows:
<PAGE> 2
(a) On the date of and immediately following the 1995 annual meeting of
shareholders and each annual meeting of shareholders thereafter until the
termination of the Plan, each Non-Employee Director who was elected a director
of the Company by shareholders at such annual meeting for the first time (i.e.,
disregarding any previous election of such person by the Board) shall be granted
an Option on 20,000 shares if such person is elected a director for a three-year
term or, if elected for a term of less than three years, shall be granted an
Option on 10,000 shares plus, if elected for a one year term, an additional
3,333 shares or, if elected for a two-year term, an additional 6,667 shares.
(b) On the date of and immediately following the 1995 annual meeting
and at each annual meeting thereafter, each Non- Employee Director who is
re-elected a director for a three-year term shall be granted an Option on 10,000
shares, for a two-year term 6,667 shares and for one-year term 3,333 shares
except that the grant to Mr. Slifka in 1995 shall be as set forth in paragraph
(c) next below.
(c) On the date of and immediately following the 1995 annual meeting,
Messrs. Abraham Appel and Alan Slifka, having heretofore been ineligible for
option grants by reason of serving on the Stock Option Committee of the Company,
shall be granted Options as follows: (i) 10,000 shares to Mr. Appel (whose
present term will expire at the annual meeting in 1996) provided that Mr. Appel
is a director of the Company immediately following said 1995 annual meeting and
(ii) 20,000 shares to Mr. Slifka (whose present term will expire at the 1995
annual meeting) provided that Mr. Slifka is re-elected at said 1995 annual
meeting.
5. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under the Plan shall be evidenced by an instrument
in such form as the Committee shall prescribe from time to time in accordance
with the Plan and all applicable laws and regulations and shall comply with the
following terms and conditions:
(a) The Option exercise price shall be the Fair Market Value (as
defined in Section 7(a) hereof) of the shares of Common Stock subject to such
Option on the date the Option is granted (the "date of grant") but in no event
less than the par value of the shares.
(b) No part of an Option may be exercised (i) before the first
anniversary of the date of grant or (ii) after the fifth anniversary of the date
of grant. The minimum number of shares with respect to which an Option may be
exercised in part at one time shall be 100. Subject to the foregoing and to the
ensuing provisions of this Section 5, an Option may be exercised as follows: (i)
at any time or times from the first anniversary of the date of grant to the day
preceding the second anniversary, both such dates inclusive, for any number of
shares up to one-third (rounded to the nearest whole share) of the number of
shares covered thereby; (ii) at any time or times from the second anniversary
of the date of grant to the day preceding the third anniversary, both such
dates inclusive, as to any number of shares which, when added to the shares as
to which such Option has theretofore been exercised, will not exceed two-thirds
(rounded to the nearest whole share) of the shares covered
2
<PAGE> 3
thereby; and (iii) at any time or times from the third anniversary of date of
grant to the fifth anniversary, both such dates inclusive, as to any number of
shares which, when added to the shares as to which the Option has theretofore
been exercised, will not exceed the total number of shares covered thereby.
(c) The Option shall not be transferable by the optionee otherwise than
by will or the laws of descent and distribution, and shall be exercisable during
the optionee's lifetime only by the optionee, or if a legal guardian or other
legal representative is appointed for an optionee, by such guardian or
representative. If any person to whom an Option has been granted shall die
holding an Option which has not been fully exercised, his estate or any person
who acquired the right to exercise the Option by bequest or inheritance or by
reason of the death of such person may, at any time within one year after the
date of such death (but in no event after the Option has expired by its terms by
the passage of time) exercise the Option with respect to any shares as to which
the decedent could have exercised the Option at the time of his or her death.
(d) No Option or any part of an Option shall be exercisable:
(i) before the first anniversary or after the fifth
anniversary of the date of grant; and
(ii) unless counsel for the Company shall be satisfied that
the issuance of shares upon exercise will be in compliance with the
Securities Act of 1933, as amended, and applicable state laws; and
(iii) unless written notice of exercise, in form satisfactory
to the Committee, is given to the Company; and
(iv) unless the person exercising the Option makes payment to
the Company in full in United States dollars by cash or check of such
amount as is sufficient to satisfy the Company's obligation, if any, to
withhold federal, state and local taxes by reason of such exercise or
makes such other arrangement satisfactory to the Committee as will
enable the Company to satisfy any such obligation.
(e) Each option granted under the Plan shall require that the person
exercising the option shall, at the time notice of exercise is given pursuant to
Section 5(d)(iii) hereof, either (I) make full payment in United States dollars
by cash or check of the option exercise price of the shares being acquired
(sometimes hereinafter called the "purchase price") or (II) agree to pay the
purchase price on an installment payment basis on the following terms and
conditions:
(A) The installments payable, including the
installment payable on the date of exercise of the Option,
shall be the minimum amounts required to be paid by Regulation
G of the Board of Governors of the Federal Reserve System as in
effect as of the date of exercise (hereinafter "Regulation G").
3
<PAGE> 4
(B) The person exercising the Option shall not be
required to pay interest to the Company on the unpaid balance
of the purchase price.
(C) The unpaid balance of the purchase price shall be
immediately payable in full upon demand made by the Company to
the optionee (or to the successor owner of the stock if the
optionee has died).
(D) The shares for which the Option is exercised shall
be issued to and registered in the name of the person
exercising the Option but shall be endorsed by the person
exercising the Option in blank (either on the certificate or on
a separate stock power) and held by the Company as collateral
security for the unpaid balance of the purchase price. The
person exercising the Option shall not be permitted to sell,
withdraw, pledge or otherwise dispose of all or any part of
such collateral except at a time when such sale, withdrawal,
pledge or other disposition is permitted by Regulation G.
Subject to compliance with the immediately preceding sentence,
the person exercising the option shall have the right at any
time and from time to time to withdraw part or all of the
shares from the collateral so held by the Company upon payment
of the unpaid balance of the purchase price of the shares
withdrawn. For purposes of determining such unpaid balance,
each payment made otherwise than to obtain withdrawal of shares
under the immediately preceding sentence shall be applied pro
rata to all shares which at the time of such payment are held
by the Company as collateral for the payment of the purchase
price by the person exercising the option. Upon default by the
person exercising the Option in the making of any payment due
under the foregoing provisions of this subparagraph (e), the
Company shall have with respect to the collateral all of the
rights of a secured party under the Uniform Commercial Code as
in effect in the State of New York.
(E) The person exercising an Option shall be entitled,
from the date of exercise of such Option, to all of the rights
of a shareholder, including the right to vote the shares and to
receive and retain all dividends paid thereon.
(f) Except as limited by Section 7(e) hereof, the Committee is
authorized in its discretion and with the consent of the optionee to make
amendments, not in conflict with the Plan or any applicable law or regulation,
in the terms of any Option granted under the Plan.
(g) In addition to the methods of payment of the option exercise price
authorized by subparagraph (d) next above, the instrument evidencing the Option
shall provide that the person exercising the Option, at his or her election,
shall have the right to make payment at the time of exercise by delivering to
the Company shares of Common Stock of the Company having a total Fair Market
Value (as hereinafter defined) equal to the option exercise price, or a
combination of cash and such shares having a total Fair Market Value equal to
the option exercise price, provided, however, that all shares so
delivered must have been beneficially owned by the person exercising
4
<PAGE> 5
the Option for at least six months prior to the option exercise date
and, upon request, the Company shall be given satisfactory proof of such
beneficial ownership. Certificates representing shares delivered to the Company
pursuant to this paragraph shall be duly endorsed or accompanied by appropriate
stock powers, in either case with signature guaranteed if so required by the
Company.
6. ADJUSTMENT IN THE EVENT OF CHANGE IN STOCK
If the Company effects any stock split, stock dividend, combination,
exchange of shares or similar capital adjustment, the aggregate number and class
of shares available under the Plan, the number, class and the price of shares of
Common Stock subject to outstanding Options and the number of shares
constituting an Option grant under Section 4 hereof, shall be appropriately
adjusted so as to reflect such change, all as determined by the Committee.
7. MISCELLANEOUS PROVISIONS
(a) As used in the Plan, "Fair Market Value" means the arithmetic mean
of the highest and lowest sales prices of the Common Stock as reported in the
Consolidated Transactions of the New York Stock Exchange ("NYSE") (or such other
national securities exchange on which the Common Stock may be listed at the time
of determination, and if the Common Stock is listed on more than one exchange,
then on the one located in New York or if the Common Stock is listed only on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), then on such system) on the date of the grant or other date as of
which the Common Stock is to be valued hereunder. If no sale shall have been
made on the NYSE, such other exchange or the NASDAQ on such date or if the
Common Stock is not then listed on any exchange or on the NASDAQ. Fair Market
Value shall be determined by the Committee in accordance with Treasury
Regulations applicable to incentive stock options.
(b) Nothing in the Plan or in any Option granted under the Plan shall
confer any rights on any director to continue as a director of the Company or
shall interfere in any way with the right of the Company or its shareholders to
remove such person as a director in accordance with applicable law. If a
director shall be removed for cause in accordance with law, any Option held by
such person shall automatically terminate as of the date of such removal.
(c) It is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 or any successor rule ("Rule 16b-3") under the
Securities Exchange Act of 1934, as amended (the "Act"), that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give effect to
such intention and that if any provision of the Plan is found not to be in
compliance with Rule 16b-3, such provision shall be deemed null and void to the
extent required to permit the Plan to comply with Rule 16b-3. The Committee may
adopt rules and regulations under, and amend, the Plan in furtherance of the
intent of the foregoing. Anything elsewhere in the Plan to the contrary
notwithstanding, neither the Board nor the Committee shall have the power to
amend the Plan in any way or take any other action which would cause Options
granted under the Plan to fail to qualify as
5
<PAGE> 6
or be disqualified as "Formula Awards" under and for purposes of Rule 16b-3, and
any such amendment or other action so taken shall be deemed void ab initio and
of no force or effect. Without limitation of the generality of the foregoing
provisions of this paragraph, the Board shall not have the power to amend the
Plan provisions referred to in paragraph (c)(2)(ii)(A) of Rule 16b-3 more than
once in six months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act or the rules thereunder.
8. AMENDMENT
Except as provided in Section 7(c) hereof, the Plan may be amended at
any time and from time to time by the Board as the Board shall deem advisable,
including, but not limited to, amendments necessary to qualify for any exemption
or to comply with applicable law or regulations; provided, however, that except
as provided in Section 6 above, the Board may not, without further approval by
the shareholders of the Company, increase the maximum number of shares of Common
Stock as to which Options may be granted under the Plan. Subject to the
provision of Section 7(c) hereof relating to Rule 16b-3, no amendment of the
Plan shall alter or impair any of the rights or obligations of any optionee,
without his or her consent, with respect to any Option theretofore granted under
the Plan.
9. TERMINATION
The Plan shall terminate upon the earlier of the following dates or
events to occur:
(a) upon the adoption of a resolution of the Board terminating
the Plan; or
(b) immediately following an annual meeting of shareholders if
at that time the number of shares remaining available for grant of
Options under the Plan is not sufficient for the making of the grants
required by Section 4 hereof to be made immediately following such
annual meeting.
No termination of the Plan shall alter or impair any of the rights or
obligations of any optionee, without his or her consent, with respect to any
Option theretofore granted under the Plan.
10. SHAREHOLDER APPROVAL
The Plan shall be submitted to the shareholders of the Company for
their approval at the 1995 annual meeting of shareholders. The shareholders
shall be deemed to have approved the Plan if it is approved at said meeting in
accordance with the Business Corporation Law of the State of New York. If the
shareholders do not approve the Plan at said meeting, the Plan shall thereupon
terminate and shall be of no further force or effect.
[Note: This Plan was adopted by the
6
<PAGE> 7
Board of Directors on July 14, 1995
and approved by shareholders at the
annual meeting on November 21, 1995]
7
<PAGE> 1
PALL CORPORATION
1995 EMPLOYEE STOCK OPTION PLAN
Pall Corporation (the "Company"), in order to retain and
attract personnel for positions of responsibility with the Company and its
subsidiaries and to provide additional incentive to such personnel by offering
them an opportunity to obtain a proprietary interest in the Company, hereby
authorizes options to be granted to "executive officers" and "eligible
employees" (as those terms are hereinafter defined) of the Company and its
subsidiaries to purchase shares of Common Stock of the Company ("shares") upon
the terms and conditions described below in this Pall Corporation 1995 Employee
Stock Option Plan (the "Plan").
1. Administration of the Plan. The Plan shall be administered,
and the options under the Plan shall be granted, by the Compensation Committee
of the Company as from time to time constituted (the "Committee"). The Committee
shall consist of three members of the Board of Directors who are appointed by
the Board and are (i) "disinterested persons" as defined in Rule 16b-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934, or
any successor regulation, and (ii) "outside directors" as defined in the
regulations of the Internal Revenue Service under Section 162(m) of the Internal
Revenue Code. The members of the Committee shall serve, without compensation, at
the pleasure of the Board. Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan and the options granted under the
Plan, to establish, amend and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of the options described in Section
4 hereof, and to make all other decisions necessary or advisable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option in the
manner and to the extent the Committee deems desirable to carry it into effect.
Any decision of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may act only by a majority
of its members in office, except that the members thereof may authorize any one
or more of their number or any officer of the Company to execute and deliver
documents on behalf of the Committee. No member of the Committee shall be liable
for anything done or omitted to be done by him or by any other member of the
Committee in connection with the Plan, except for his own willful misconduct or
as expressly provided by statute.
2. Number of Shares Subject to Option. The aggregate number of
shares which may be issued under the Plan is four million (4,000,000) shares of
Common Stock of the Company. Such shares may be either authorized but unissued
or reacquired shares. If after July 14, 1995 the Company effects one or more
stock splits, stock dividends, combinations, exchanges of shares or similar
capital adjustments, the number and kind of shares with respect to which options
may be granted under the Plan, the number of shares which may be granted to any
individual as limited by Section 3 hereof, the number and kind of shares subject
to each
<PAGE> 2
outstanding option and the option price per share under each such option
shall be proportionately and appropriately adjusted by the Committee. If any
option granted under the Plan, or any portion thereof, shall expire or terminate
for any reason without having been exercised in full, the shares with
respect to which it has not been exercised shall be available for further
options under the Plan.
With respect to incentive stock options granted after December
31, 1986 under this Plan and under all stock option plans of the Company and its
parent and subsidiary corporations, the aggregate fair market value (determined
at the time the option is granted) of the stock with respect to which such
incentive stock options are exercisable for the first time by the optionee
during any calendar year shall not exceed $100,000.
3. Eligible Optionees. Options may be granted only (a) to
executive officers of the Company as that term is defined in Rule 405 of the
Securities and Exchange Commission under the Securities Act of 1933 or successor
regulation ("executive officers"), and (b) to other employees (including
officers) of the Company and of such other corporations as are subsidiary
corporations of the Company at the time of grant who, in the judgment of the
Committee, are in a position to contribute significantly to the Company's
success ("eligible employees"). The Committee is hereby given the authority to
select the particular executive officers and eligible employees to whom options
under the Plan are to be granted, to determine the number of shares to be
optioned to each such executive officer and eligible employee (except that
options may not be granted under this Plan to any individual during any period
of 24 consecutive months on more than an aggregate of 200,000 shares, subject to
adjustment in accordance with the third sentence of Section 2 hereof) and to
grant one or more options under the Plan to any such executive officer or
eligible employee from time to time, irrespective of whether one or more options
have been granted to such individual under previous stock option plans of the
Company. Nothing in the Plan or in any option granted under the Plan shall
confer any rights on any officer or other employee to continue in the employ of
the Company or any of its subsidiary corporations or shall interfere in any way
with the right of the Company or any of its subsidiary corporations, as the case
may be, to terminate his or her employment at any time.
4. Terms of Options. Options granted under the Plan,
irrespective of the date of grant thereof, may be "incentive stock options"
meeting the requirements for such options prescribed by Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or may be options not so
qualifying as incentive stock options ("nonqualified options"). The
determination as to whether or not an option granted under the Plan is intended
to be an incentive stock option shall be made by the Committee.
Each option granted under the Plan shall comply with the
following terms and conditions:
(a) The option price shall be the fair market value of the
shares subject to the option at the time the option is granted. Fair
market value shall be as determined in good
-2-
<PAGE> 3
faith by the Committee. In no event shall the option price be less than
the par value of the shares.
(b) The option shall not be transferable by the optionee
otherwise than by will or the laws of descent and distribution, and
shall be exercisable during his lifetime only by him.
(c) An option shall not be exercisable
(i) after the expiration of ten years from the
date it is granted (the "date of grant"); and
(ii) unless counsel for the Company shall be satisfied
that the issuance of shares upon exercise will be in compliance
with the Securities Act of 1933, as amended, and applicable
state laws; and
(iii) unless written notice of exercise, in form
satisfactory to the Committee, is given to the Company; and
(iv) unless the optionee has been, at all times during
the period beginning with the date of grant of an option and
ending on the date of exercise thereof, an employee of the
Company or of one of its subsidiary corporations, or of a
corporation or a parent or subsidiary of a corporation assuming
the option in a transaction to which Section 424(a) of the Code
applies, except that
(A) if the optionee shall cease to be an
employee by reason of his disability or by reason of
his retirement under an approved retirement program of
the Company or a subsidiary thereof while holding an
option which has not expired and has not been fully
exercised, the option shall remain in full force and
effect and may be exercised in accordance with its
terms until it expires by its terms by the passage of
time or is canceled or terminated in accordance with
its terms (it being understood, however, that
incentive stock option federal income tax treatment
will not be accorded with respect to an option
exercise made more than three months after the
optionee ceased to be an employee by reason of such
retirement or one year after he ceased to be an
employee by reason of disability within the meaning of
Section 22(e)(3) of the Code or successor section);
and
(B) if any person to whom an option has been
granted shall die holding an option which has not been
fully exercised, his estate or any person who acquired
the right to exercise the option by bequest or
inheritance or by reason of the death of such person
may, at any time within one
-3-
<PAGE> 4
year after the date of such death (but in no event
after the option has expired by its terms by the
passage of time or has been canceled or terminated in
accordance with its terms) exercise the option with
respect to any shares as to which the decedent could
have exercised the option at the time of his death;
and
(v) unless the person exercising the option makes
payment to the Company in full in United States dollars by cash
or check of such amount as is sufficient to satisfy the
Company's obligation, if any, to withhold federal, state and
local taxes by reason of such exercise or makes such other
arrangement satisfactory to the Committee as will enable the
Company to satisfy such obligation.
(d) Each option granted under the Plan shall be evidenced by an
instrument in such form as the Committee shall prescribe from time to
time in accordance with the Plan and all applicable laws and
regulations and shall be subject to such terms and conditions relating
to the time at which the option may first be exercised and the number
of shares with respect to which it may thereafter be exercised from
time to time (for example, in cumulative annual or other periodic
installments), and to such additional terms and conditions not
inconsistent with the Plan or applicable laws and regulations, as the
Committee may in its discretion determine. Each nonqualified option
granted under the Plan shall state that it is not to be treated as an
incentive stock option. Each option granted under the Plan shall
require that the person exercising the option shall, at the time notice
of exercise is given pursuant to Section 4(c)(iii) hereof, make full
payment in United States dollars by cash or check of the option
exercise price of the shares being acquired except that, at the
election of the Committee, an option may provide that, at the time
notice of exercise is given pursuant to Section 4(c)(iii) hereof, the
person exercising the option, at his or her election, shall either make
full payment in United States dollars by cash or check of the option
exercise price of the shares being acquired (sometimes hereafter called
the "purchase price") or agree to pay such purchase price on an
installment payment basis on the following terms and conditions:
(A) The installments payable shall be the
minimum amounts required to be paid by Regulation G of
the Board of Governors of the Federal Reserve System
as in effect as of the date of exercise of the option
(hereinafter "Regulation G") or such greater
installment payments as the Committee may prescribe.
(B) The person exercising the option shall not
be required to pay interest to the Company on the
unpaid balance of the purchase price.
-4-
<PAGE> 5
(C) The unpaid balance of the purchase price
shall be immediately payable in full upon demand made
by the Company to the optionee (or to the successor
owner of the stock if the optionee has died).
(D) The shares for which the option is
exercised shall be issued to and registered in the
name of the person exercising the option but shall be
endorsed by the person exercising the option in blank
(either on the certificate or on a separate stock
power) and held by the Company as collateral security
for the unpaid balance of the purchase price. The
person exercising the option shall not be permitted to
sell, withdraw, pledge or otherwise dispose of all or
any part of such collateral except at a time when such
sale, withdrawal, pledge or other disposition is
permitted by Regulation G. Subject to compliance with
the immediately preceding sentence, the person
exercising the option shall have the right at any time
and from time to time to withdraw part or all of the
shares from the collateral so held by the Company upon
payment of the unpaid balance of the purchase price of
the shares withdrawn. For purposes of determining such
unpaid balance, each payment made otherwise than to
obtain withdrawal of shares under the immediately
preceding sentence shall be applied pro rata to all
shares which at the time of such payment are held by
the Company as collateral for the payment of the
purchase price by the person exercising the option.
Upon default by the person exercising the option in
the making of any payment due under the foregoing
provisions of this subparagraph (d), the Company shall
have with respect to the collateral all of the rights
of a secured party under the Uniform Commercial Code
as in effect in the State of New York.
(E) The person exercising an option shall be
entitled, from the date of exercise of such option, to
all of the rights of a shareholder, including the
right to vote the shares and to receive and retain all
dividends paid thereon.
(e) The Committee is authorized in its discretion and with the
consent of the optionee to make amendments, not in conflict with the
Plan or any applicable law or regulation, in the terms of any option
granted under the Plan.
(f) In addition to the methods of payment of the option
exercise price authorized by subparagraph (d) next above, the option
may provide that the person exercising the option, at his or her
election, shall have the right to make payment at the time of exercise
by delivering to the Company shares of Common Stock of the Company
having a total fair market value equal to the option exercise price, or
a combination of cash and such shares having a total fair market value
equal to the option exercise price, provided,
-5-
<PAGE> 6
however, that all shares so delivered must have been beneficially owned
by the person exercising the option for at least six months prior to
the option exercise date and, upon request, the Company shall be given
satisfactory proof of such beneficial ownership. For the purposes of
the preceding sentence, the fair market value of a share of Common
Stock shall be the mean between the high and low sale prices of the
Common Stock on the trading day preceding the option exercise date as
such prices are reported by and for the New York Stock Exchange, Inc.
Composite Transactions. Certificates representing shares delivered to
the Company pursuant to this paragraph shall be duly endorsed or
accompanied by appropriate stock powers, in either case with signature
guaranteed if so required by the Company.
5. Change in Control.
(a) In the event of a "Change in Control" of the Company (as defined in
paragraph (b) below), options outstanding under the Plan on the day preceding
the date on which the Change in Control occurs (x) shall become exercisable in
full on the date of the Change in Control (i.e., to the extent that any such
option or portion thereof is not yet exercisable, the right to exercise such
option in full shall be accelerated) and (y) shall remain fully exercisable,
irrespective of whether the optionee ceases to be an employee of the Company
or a subsidiary, until the date on which the option would otherwise expire
by its terms by the passage of time.
(b) A "Change in Control" for purposes of the Plan shall mean the
occurrence of any of the following:
(i) the "Distribution Date" as defined in Section 3 of the
Rights Agreement dated as of November 17, 1989 between the Company and
United States Trust Company of New York, as Rights Agent (the "Rights
Agreement"); or
(ii) any event described in Section 11(a)(ii)(B) of the
Rights Agreement; or
(iii) any event described in Section 13 of the Rights
Agreement, or
(iv) the date on which the number of duly elected and
qualified directors of the Company who were not either elected by
the Company's Board of Directors or nominated by the Board of
Directors or its Nominating Committee for election by the
shareholders shall equal or exceed one-third of the total number of
directors of the Company as fixed by its by-laws;
provided, however, that no Change in Control shall be deemed to have occurred,
and no rights arising upon a Change in Control pursuant to paragraph (a) of this
Section 5 shall exist, to the extent that the Board of Directors of the Company
so determines by resolution adopted prior to the Change in Control. Any such
resolution may be rescinded or countermanded by the Board at
-6-
<PAGE> 7
any time. If the Board so determines by such resolution, and such resolution has
not been rescinded or countermanded as permitted by the preceding sentence, the
Board shall have the right to authorize (I) the cancellation and termination of
all options then outstanding as of a date to be fixed by the Board, provided,
however, that not less than 30 days written notice of the date so fixed shall be
given to each optionee, and each optionee shall have the right during such
period (irrespective of whether the optionee ceases to be an employee of the
Company or a subsidiary during such period) to exercise his or her option as to
all or any part of the shares covered thereby, including any shares as to which
the option has not yet become exercisable, or (II) the substitution for each
outstanding option of a new option meeting the requirements of Section 424(a) of
the Internal Revenue Code.
6. Interpretation. The words "employee", "own", "outstanding"
and "disposition", the term "subsidiary corporation" and any other words or
terms used in the Plan or in the options granted under the Plan which are
defined or used in Section 422 or 424 of the Code shall, unless the context
clearly requires otherwise, have the meanings assigned to them therein,
irrespective of whether or not such options are incentive stock options.
7. Reports and Returns. The appropriate officers of the Company
shall cause to be filed, or furnished to all employees to whom options have been
granted, any reports, returns or other information regarding the options granted
hereunder or any shares issued pursuant to the exercise thereof as may be
required by the Code, the Securities Act of 1933, the Securities Exchange Act of
1934, the Employee Retirement Income Security Act of 1974, Regulation G of the
Board of Governors of the Federal Reserve System or any other applicable
statute, rule or regulation, as any such statute, rule or regulation has been
amended to the time in question.
8. Amendment. The Plan may be amended at any time and from time
to time by the Board of Directors of the Company, but no amendment increasing
the aggregate number of shares which may be issued under options granted
pursuant to the Plan or affecting this sentence shall be effective unless the
same be approved by the shareholders of the Company not later than the date 12
months after the Board adopts the amendment. No amendment of the Plan shall
alter or impair any of the rights or obligations of any person, without his or
her consent, under any option theretofore granted under the Plan.
9. Termination. The Plan shall terminate upon the earlier of
the following dates or events to occur:
(a) upon the adoption of a resolution of the Board
of Directors of the Company terminating the Plan; or
(b) July 13, 2005.
-7-
<PAGE> 8
No termination of the Plan shall alter or impair any of the
rights or obligations of any person, without his or her consent, under any
option theretofore granted under the Plan.
10. Shareholder Approval. The Plan shall be submitted to the
shareholders of the Company for their approval before July 14, 1996. No option
granted hereunder shall be exercisable until such approval has been obtained. If
the shareholders do not approve the Plan before July 14, 1996, the Plan shall
terminate and any options theretofore granted hereunder shall thereupon be void
without further action of the Company. The shareholders shall be deemed to have
approved the Plan only if it is approved at a meeting of the shareholders duly
held before July 14, 1996, by vote taken in the manner required by the laws of
the State of New York.
[Note: This Plan was adopted by the
Board of Directors on July 14, 1995
and approved by shareholders at the
annual meeting on November 21, 1995]
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-03-1996
<PERIOD-END> OCT-28-1995
<CASH> 23,265
<SECURITIES> 63,370
<RECEIVABLES> 192,013
<ALLOWANCES> 4,277
<INVENTORY> 172,685
<CURRENT-ASSETS> 489,264
<PP&E> 713,615
<DEPRECIATION> 271,001
<TOTAL-ASSETS> 1,069,115
<CURRENT-LIABILITIES> 278,244
<BONDS> 0
<COMMON> 11,735
0
0
<OTHER-SE> 641,626
<TOTAL-LIABILITY-AND-EQUITY> 1,069,115
<SALES> 191,550
<TOTAL-REVENUES> 193,522
<CGS> 75,554
<TOTAL-COSTS> 167,796
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,763
<INCOME-PRETAX> 25,726
<INCOME-TAX> 7,974
<INCOME-CONTINUING> 17,752
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,752
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
