<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 August 3, 1996
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 any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was $2,963,763,000, based upon the closing price on October 4, 1996.
The number of common shares, $.10 par value outstanding of the registrant was
115,101,755 shares on October 4, 1996.
Total number of pages - 241 Exhibit index located on page 19
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the 1996 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 August 3, 1996
are incorporated by reference into items 1, 5, 7 and 8.
<PAGE> 2
2
PART I
ITEM 1. BUSINESS.
(a) General development of business.
Pall Corporation, incorporated in July 1946, and its subsidiaries
(hereinafter collectively called "the Company" unless the context requires
otherwise) is a leading supplier of fine filters mainly made by the Company
using its proprietary filter media, and other fluid clarification 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 37 of the registrant's 1996 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 1996 Annual Report to
Shareholders, which are incorporated herein by reference:
Hospital Products - pages 6 and 7.
Blood Centers - pages 8 and 9.
Pharmaceutical, Diagnostics and Membrane Technology - pages 10, 11, 12 and
13.
Bioseparations - pages 14 and 15
Food and Beverage- pages 16 and 17.
Sales of Health Care products in fiscal 1996 were $471,424,000 or 49% 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.
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. A principal list of competitors is
included on the inside gate of the 1996 Annual Report to Shareholders.
<PAGE> 3
3
(B) Aeropower Market:
See the following sections of the registrant's 1996 Annual Report to
Shareholders, which are incorporated herein by reference:
Industrial Hydraulics - pages 18 and 19.
Aerospace - pages 20 and 21.
Sales in fiscal 1996 were $235,101,000 or 25% of total sales. Backlog at
August 3, 1996 was $60,476,000, a 2% decrease from the prior year backlog of
$61,456,000. The backlog at August 3, 1996 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. A principal list of competitors is included on the inside gate of the
1996 Annual Report to Shareholders.
(C) Fluid Processing Market:
See the following sections of the registrant's 1996 Annual Report to
Shareholders, which are incorporated herein by reference:
Microelectronics - pages 22 and 23.
Industrial Process Group - pages 24 and 25.
Hydrocarbon Processing, Chemical and Polymer - pages 26 and 27.
Pall Well Technology - pages 28 and 29.
Sales in this market in fiscal 1996 were $253,851,000 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. A principal list of competitors
is included on the inside gate of the 1996 Annual Report to Shareholders.
(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.
<PAGE> 4
4
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 $47,514,000 in 1996, $45,142,000
in 1995 and $41,283,000 in 1994.
(b) There was no one customer to whom sales were made totalling 10% or more
of consolidated sales in fiscal 1996, 1995 or 1994.
(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 August 3, 1996, the Company employed approximately 7,700 persons.
(d) Financial information about foreign and domestic operations and export
sales.
Reference is made to page 38 of the registrant's 1996 Annual Report to
Shareholders.
<PAGE> 5
5
ITEM 2. PROPERTIES.
<TABLE>
<CAPTION>
Location Type Industry Segment Size
(square feet)
- -------- ---- ---------------- -------------
<S> <C> <C> <C>
OWNED:
Glen Cove, NY Office & laboratory Research Center 65,000
East Hills, NY Office, plant & Executive Office &
warehouse All Segments 326,000
Pt. Washington, NY Office, laboratory All 215,000
& training center
Hauppauge, NY Plant, office Health Care & Fluid
& laboratory Processing 75,000
Cortland, NY Plants, office Health Care & Fluid
Processing 346,000
Putnam, CT Plant All 62,000
Pinellas Park, FL Plant Aeropower 152,000
Ft. Myers, FL Plant Aeropower 111,000
New Port Richey, FL Plant Aeropower 160,000
Covina, CA Plant, office &
laboratory Health Care 176,000
Fajardo, Puerto Rico Plants Health Care & Fluid
Processing 259,000
Portsmouth, U.K. Plant & office All 306,000
Ilfracombe, U.K. Plant & office Health Care & Fluid
Processing 112,000
Redruth, U.K. Plant, warehouse Aeropower 111,000
Newquay, U.K . Plant & office Health Care & Fluid
Processing 106,000
Frankfurt, Germany Office & warehouse All 72,000
Paris, France Office & warehouse All 65,000
Limay, France Warehouse All 23,000
Tsukuba, Japan Plant & laboratory All 78,000
LEASED:
Northborough, MA Plant & office Health Care 38,000
East Brunswick, NJ Office & warehouse Health Care &
Fluid Processing 10,000
Toronto, Canada Office & warehouse Health Care & Fluid
Processing 12,000
Frankfurt, Germany Office & warehouse All 46,000
Milan, Italy Office & warehouses All 62,000
Vienna, Austria Office & warehouse All 13,000
Muttenz, Switzerland Office & warehouse All 7,000
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
& Brisbane, Australia All 20,000
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
6
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 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Reference is made to page 46 of the registrant's 1996 Annual Report to
Shareholders.
<PAGE> 7
7
ITEM 6. SELECTED FINANCIAL DATA.
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended
Aug. 3 July 29, July 30, July 31, Aug. 1,
1996 1995(a) 1994(b) 1993(c) 1992(d)
---- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Results of operations:
Net sales $960,376 $822,823 $700,848 $687,222 $685,068
Net earnings 138,498 118,436 98,922 78,312 92,708
Earnings per share 1.21 1.03 .86 .68 .79
Cash dividends per share .47 .41 .36 .31 .26
Financial position:
Total assets 1,184,958 1,074,922 959,579 902,273 912,876
Long-term debt 46,712 68,814 54,097 24,540 59,003
</TABLE>
(a) Fiscal 1995 includes a charge of $780 after income taxes ($1,200 pre-tax)
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) 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)
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 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 as a result of adopting the Financial
Accounting Standards Board Statement No. 109 (Accounting for Income Taxes).
<PAGE> 8
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Reference is made to pages 31 and 32 of the registrant's 1996 Annual Report
to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to pages 33 to 36 and 39 to 46 of the registrant's 1996
Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
None.
<PAGE> 9
9
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 1996 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 1996 Position Held Began
----- ---- ------------- -----
<S> <C> <C> <C>
Eric Krasnoff* 44 Chairman and Chief
Executive Officer 1986
Jeremy Hayward-Surry* 53 President and Treasurer -
Chief Financial Officer 1989
Derek T.D. Williams 64 Executive Vice President
and Chief Operating Officer 1985
Clifton Hutchings 58 Group Vice President 1993
Gerhard Weich 60 Group Vice President 1993
Arnold Weiner 59 Group Vice President 1986
Samuel T. Wortham 49 Group Vice President 1990
Peter S. Cope 42 Senior Vice President 1994
Paul Kohn 50 Senior Vice President 1996
Akio Satake 59 Senior Vice President 1995
Robert Simkins 52 Senior Vice President 1994
Donald B. Stevens 51 Senior Vice President 1994
Peter Schwartzman 59 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
10
ITEM 11. EXECUTIVE COMPENSATION.
Reference is made to "Compensation and Other Benefits of Senior Management"
on page 5 of the registrant's Proxy Statement for the 1996 annual meeting of
shareholders, previously filed.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Reference is made to "Beneficial Ownership of Common Stock" on page 16 of the
registrant's Proxy Statement for the 1996 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 17 of the registrant's Proxy Statement
for the 1996 annual meeting of shareholders, previously filed, and is
incorporated herein by reference.
<PAGE> 11
11
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:
(l) The following documents are incorporated by reference to the indicated
pages of the 1996 Annual Report to Shareholders, filed as Exhibit 13
hereto.
<TABLE>
<CAPTION>
Item
<S> <C> <C>
Consolidated Statements of Earnings - years
ended August 3, 1996, July 29, 1995 and July 30, 1994 33
Independent Auditors' Report 33
Consolidated Balance Sheets - as at August 3, 1996,
and July 29, 1995 34
Consolidated Statements of Stockholders' Equity -
years ended August 3, 1996, July 29, 1995 and July 30, 1994 35
Consolidated Statements of Cash Flows - years ended
August 3, 1996, July 29, 1995 and July 30, 1994 36
Notes to Consolidated Financial Statements 39-45
(2) The following schedules are filed herewith:
Name of Schedule
II Valuation and qualifying accounts 16
Independent auditors' report on schedules 17
</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
12
(3) Exhibits filed herewith:
<TABLE>
<CAPTION>
Page
Exhibit of 1996
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 November 21, 1995
filed as Exhibit 3(ii) to the
registrant's Form 10-Q for the quarterly
period ended October 28, 1995.
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, filed as Exhibit 10.2 to
the registrant's Annual Report on Form
10-K for the fiscal year ended July 29,
1995 (the "1995 10-K").
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) Letter agreement dated August 2, 1996 with
Eric Krasnoff. 23-24
</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
13
<TABLE>
<CAPTION>
Page
Exhibit of 1996
Number Description of Exhibit Form 10-K
------- ---------------------- ---------
<S> <C> <C>
10.6*(a) Employment Agreement dated August 1, 1994
with Jeremy Hayward-Surry, filed as Exhibit
10.4 to the 1994 10-K.
10.7(a) Service Agreement dated November 28, 1995
with Derek Thomas Donald Williams. 25-36
10.8*(a) Service Agreement dated March 17, 1992 with
Donald Guy Edward Nicholls, filed as Exhibit
10.20 to the 1992 10-K.
10.9(a) Service Agreement dated November 28, 1995
with Clifton Stanley Hutchings. 37-48
10.10(a) Service Agreement dated November 28,
1995 with Gerhard Friedrich Weich. 49-60
10.11*(a) Employment Agreement dated February 1, 1992
with Arnold Weiner, filed as Exhibit 10.32 to
the 1992 10-K.
10.12*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with Arnold
Weiner, filed as Exhibit 10.14 to the
registrant's Annual Report on Form 10-K for
the fiscal year ended July 31, 1993 (the
"1993 10-K").
10.13(a) Second Amendment dated August 1, 1995 to
Employment Agreement dated February 1, 1992
with Arnold Weiner. 61-65
10.14*(a) Employment Agreement dated February 1, 1992
with Samuel Wortham, filed as Exhibit 10.15
to the 1992 10-K.
10.15*(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.
10.16(a) Second Amendment dated August 1, 1995 to
Employment Agreement dated February 1, 1992
with Samuel Wortham. 66-70
10.17*(a) Employment Agreement dated August 1, 1994
with Peter Cope, filed as Exhibit 10.13 to
the 1994 10-K.
10.18(a) Amendment dated August 1, 1995 to
Employment Agreement dated August 1, 1994
with Peter Cope. 71-75
</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
14
<TABLE>
<CAPTION>
Page
Exhibit of 1996
Number Description of Exhibit Form 10-K
- -------- ---------------------- ---------
<S> <C> <C>
10.19*(a) Employment Agreement dated August 1, 1994
with Robert Simkins, filed as Exhibit 10.14
to the 1994 10-K.
10.20(a) Amendment dated August 1, 1995 to
Employment Agreement dated August 1, 1994
with Robert Simkins. 76-80
10.21*(a) Employment Agreement dated February 1, 1992
with Peter Schwartzman, filed as Exhibit
10.33 to the 1992 10-K.
10.22*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with Peter
Schwartzman, filed as Exhibit 10.16 to the
1993 10-K.
10.23*(a) Employment Agreement dated September 26, 1994
with Donald B. Stevens, filed as Exhibit
10.17 to the 1994 10-K.
10.24 (a) Amendment dated August 1, 1995 to
Employment Agreement dated September 26, 1994
with Donald B. Stevens. 81-85
10.25 (a) Employment Agreement dated August 5, 1996
with Paul Kohn. 86-105
10.26 (a) Pall Corporation Supplementary Profit-
Sharing Plan as amended and restated February
15, 1995. 106-113
10.27*(a) Pall Corporation Supplementary Pension Plan
As Amended and Restated Effective August 1,
1995, filed as Exhibit 10.20 to the 1995
10-K.
10.28 (a) Pall Corporation Profit-Sharing Plan, as
amended and restated on October 25, 1995.
114-178
10.29*(a) Pall Corporation 1993 Stock Option Plan,
filed as Exhibit 10.22 to the 1993 10-K.
10.30*(a) Pall Corporation 1991 Stock Option Plan,
filed as Exhibit 10.42 to the registrant's
Annual Report on Form 10-K for the fiscal
year ended August 3, 1991 (the "1991 10-K").
10.31*(a) Pall Corporation 1988 Stock Option Plan, as
amended through October 8, 1991, filed as
Exhibit 10.32 to the 1991 10-K.
10.32*(a) Pall Corporation Stock Option Plan for
Non-Employee Directors filed as Exhibit 10.26
to the registrant's Form 10-Q for the
quarterly period ended October 28, 1995.
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to Item 14(c) of Form 10-K.
<PAGE> 15
15
<TABLE>
<CAPTION>
Page
Exhibit of 1996
Number Description of Exhibit Form 10-K
- --------- ---------------------- ---------
<S> <C> <C>
10.33*(a) Pall Corporation 1995 Employee Stock Option
Plan filed as Exhibit 10.27 to the
registrant's Form 10-Q for the quarterly
period ended October 28, 1995.
10.34*(a) Principal Rules of the Pall Supplementary
Pension Scheme, filed as Exhibit 10.25 to the
1995 10-K.
10.35 (a) Pall Deutschland GMBH, Dreieich, Concept
Of An Additional Pension Plan For Senior
Executives. 179-183
13 Annual Report to Shareholders for the year
ended August 3, 1996. 184-239
21 Subsidiaries of Pall Corporation. 240
23 Consent of Independent Auditors. 241
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
August 3, 1996.
<PAGE> 16
16
SCHEDULE II
PALL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED AUGUST 3, 1996
JULY 29, 1995 AND JULY 30, 1994
<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 August 3, 1996:
Allowance for doubtful
accounts $5,008,000 $ 989,000 $1,827,000 $4,170,000
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
</TABLE>
<PAGE> 17
17
[Letterhead]
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
The Board of Directors
Pall Corporation:
Under date of September 3, 1996, we reported on the consolidated
balance sheets of Pall Corporation and subsidiaries as of August 3, 1996 and
July 29, 1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the years in the three-year
period ended August 3, 1996, as contained in the Company's fiscal 1996 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 1996. 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 opinion 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 3, 1996
<PAGE> 18
18
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>
<CAPTION>
<S> <C> <C>
/s/ Eric Krasnoff Chairman of the Board and October 24, 1996
- ---------------------------------- Chief Executive Officer
Eric Krasnoff
/s/ Jeremy Hayward- Surry President and Treasurer - Chief October 24, 1996
- ---------------------------------- Financial Officer and Director
Jeremy Hayward-Surry
/s/ Peter Schwartzman Chief Accountant (Chief October 24, 1996
- ---------------------------------- Accounting Officer)
Peter Schwartzman
/s/ Abraham Appel Director October 24, 1996
- ----------------------------------
Abraham Appel
/s/ Ulric S. Haynes, Jr. Director October 24, 1996
- ----------------------------------
Ulric S. Haynes
/s/ Edwin W. Martin Director October 24, 1996
- ----------------------------------
Edwin W. Martin
/s/ David B. Pall Director October 24, 1996
- ----------------------------------
David B. Pall
/s/ Katharine Plourde Director October 24, 1996
- ----------------------------------
Katharine L. Plourde
/s/ Chesterfield F. Seibert Director October 24, 1996
- ----------------------------------
Chesterfield F. Seibert
/s/ Heywood Shelley Director October 24, 1996
- ----------------------------------
Heywood Shelley
Director October , 1996
- ----------------------------------
Alan B. Slifka
/s/ James D. Watson Director October 24, 1996
- ----------------------------------
James D. Watson
/s/ Derek T.D. Williams Director October 24, 1996
- ----------------------------------
Derek T.D. Williams
</TABLE>
<PAGE> 19
19
<TABLE>
<CAPTION>
EXHIBIT INDEX Page
Exhibit of 1996
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 November 21,
1995 filed as Exhibit 3(ii) to the
registrant's Form 10-Q for the
quarterly period ended October 28,
1995.
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, filed as Exhibit
10.2 to the registrant's Annual
Report on Form 10-K for the fiscal
year ended July 29, 1995 (the "1995
10-K").
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) Letter agreement dated August 2,
1996 with Eric Krasnoff. 23-24
</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
20
<TABLE>
<CAPTION>
EXHIBIT INDEX Page
Exhibit of 1996
Number Description of Exhibit Form 10-K
------- ---------------------- ---------
<S> <C> <C>
10.6*(a) Employment Agreement dated August 1, 1994
with Jeremy Hayward-Surry, filed as Exhibit
10.4 to the 1994 10-K.
10.7(a) Service Agreement dated November 28, 1995
with Derek Thomas Donald Williams. 25-36
10.8*(a) Service Agreement dated March 17, 1992 with
Donald Guy Edward Nicholls, filed as
Exhibit 10.20 to the 1992 10-K.
10.9(a) Service Agreement dated November 28, 1995
with Clifton Stanley Hutchings. 37-48
10.10(a) Service Agreement dated November 28, 1995
with Gerhard Friedrich Weich. 49-60
10.11*(a) Employment Agreement dated February 1, 1992
with Arnold Weiner, filed as Exhibit 10.32
to the 1992 10-K.
10.12*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with Arnold
Weiner, filed as Exhibit 10.14 to the registrant's
Annual Report on Form 10-K for the fiscal
year ended July 31, 1993 (the "1993 10-K").
10.13(a) Second Amendment dated August 1, 1995 to
Employment Agreement dated February 1, 1992
with Arnold Weiner. 61-65
10.14*(a) Employment Agreement dated February 1, 1992
with Samuel Wortham, filed as Exhibit 10.15
to the 1992 10-K.
10.15*(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.
10.16(a) Second Amendment dated August 1, 1995 to
Employment Agreement dated February 1, 1992
with Samuel Wortham. 66-70
10.17*(a) Employment Agreement dated August 1, 1994
with Peter Cope, filed as Exhibit 10.13 to the
1994 10-K.
10.18(a) Amendment dated August 1, 1995 to Employment
Agreement dated August 1, 1994 with Peter Cope. 71-75
</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> 21
21
<TABLE>
<CAPTION>
Page
Exhibit of 1996
Number Description of Exhibit Form 10-K
------- ---------------------- ---------
<S> <C> <C>
10.19*(a) Employment Agreement dated August 1, 1994
with Robert Simkins, filed as Exhibit 10.14
to the 1994 10-K.
10.20(a) Amendment dated August 1, 1995 to Employment
Agreement dated August 1, 1994 with Robert
Simkins. 76-80
10.21*(a) Employment Agreement dated February 1, 1992
with Peter Schwartzman, filed as Exhibit 10.33
to the 1992 10-K.
10.22*(a) Amendment dated July 19, 1993 to Employment
Agreement dated February 1, 1992 with Peter
Schwartzman, filed as Exhibit 10.16 to the
1993 10-K.
10.23*(a) Employment Agreement dated September 26, 1994
with Donald B. Stevens, filed as Exhibit 10.17
to the 1994 10-K.
10.24(a) Amendment dated August 1, 1995 to Employment
Agreement dated September 26, 1994 with Donald
B. Stevens. 81-85
10.25(a) Employment Agreement dated August 5, 1996 with
Paul Kohn. 86-105
10.26(a) Pall Corporation Supplementary Profit-Sharing
Plan as amended and restated February 15 1995. 106-113
10.27*(a) Pall Corporation Supplementary Pension Plan As
Amended and Restated Effective August 1, 1995,
filed as Exhibit 10.20 to the 1995 10-K.
10.28 (a) Pall Corporation Profit-Sharing Plan, as amended
and restated on October 25, 1995. 114-178
10.29*(a) Pall Corporation 1993 Stock Option Plan, filed
as Exhibit 10.22 to the 1993 10-K.
10.30*(a) Pall Corporation 1991 Stock Option Plan, filed
as Exhibit 10.42 to the registrant's Annual Report
on Form 10-K for the fiscal year ended August 3,
1991 (the "1991 10-K").
10.31*(a) Pall Corporation 1988 Stock Option Plan, as amended
through October 8, 1991, filed as Exhibit 10.32 to
the 1991 10-K.
10.32*(a) Pall Corporation Stock Option Plan for Non-Employee
Directors filed as Exhibit 10.26 to the registrant's
Form 10-Q for the quarterly period ended October 28,
1995.
</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> 22
22
<TABLE>
<CAPTION>
Page
Exhibit of 1996
Number Description of Exhibit Form 10-K
------- ---------------------- ---------
<S> <C> <C>
10.33*(a) Pall Corporation 1995 Employee Stock Option
Plan filed as Exhibit 10.27 to the registrant's
Form 10-Q for the quarterly period ended October
28, 1995.
10.34*(a) Principal Rules of the Pall Supplementary
Pension Scheme, filed as Exhibit 10.25 to the
1995 10-K.
10.35(a) Pall Deutschland GMBH, Dreieich, Concept Of
An Additional Pension Plan For Senior Executives. 179-183
13 Annual Report to Shareholders for the year
ended August 3, 1996. 184-239
21 Subsidiaries of Pall Corporation. 240
23 Consent of Independent Auditors. 241
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 10.5
Pall Corporation
2200 Northern Boulevard
East Hills, New York 11548
August 2, 1996
Mr. Eric Krasnoff
Chairman & Chief Executive Officer
Pall Corporation
2200 Northern Boulevard
East Hills, New York 11548
Dear Eric:
The purpose of this letter is to set forth the terms and conditions of
an agreement (the "Agreement") to defer the payment of the portion of your
incentive bonus for Pall Corporation's fiscal year beginning on August 4, 1996
("Fiscal 1997") which portion, if not deferred, would not be deductible by Pall
Corporation (the "Corporation") for federal income tax purposes due to the
limitations of Section 162(m) of the Internal Revenue Code (the "Code").
1. The payment of the portion of your incentive bonus for Fiscal 1997
which, when your incentive bonus is aggregated with all other "applicable
employer remuneration" (as defined in Section 162(m) of the Code) you receive
from the Corporation which is allowable as a deduction by the Corporation for
Fiscal 1997 (determined without regard to Section 162(m)) exceeds $1,000,000
will be deferred. Payment of the amount so deferred will be made to you on
January 2, 1998.
2. The Corporation will pay you interest on the amount deferred above,
computed from the date on which such amount would have been paid to you but for
this Agreement, until the date on which such amount is paid to you, computed at
an annual rate (of 7%. Such interest will be paid to you on the date on which
the amount deferred above is paid to you.
<PAGE> 2
3. You shall have the status of a general unsecured creditor of the
Corporation with respect to your right to receive any payment under this
Agreement. This Agreement shall constitute a mere promise by the Corporation to
make payments in the future of the amount described herein. It is intended that
the arrangement reflected in this Agreement be treated as unfunded for tax
purposes, as well as for purposes of Title 1 of ERISA.
4. Your right to any payment under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment or garnishment by your creditors.
If you agree to the arrangement described above, please so indicate by
signing and dating this letter below. Upon your execution, this letter will then
constitute a binding agreement between you and Pall Corporation as to the matter
described herein.
PALL CORPORATION
By /s/ Jeremy Hayward-Surry
------------------------------
Jeremy Hayward-Surry
President
I hereby agree to the deferral of the payment of a portion of my
incentive bonus, and to the terms and conditions of such deferral, as described
in this letter.
Date: August 2, 1996 /s/ Eric Krasnoff
------------------------------
Eric Krasnoff
<PAGE> 1
EXHIBIT 10.7
SERVICE AGREEMENT
AN AGREEMENT dated 28 November, 1995 between PALL EUROPE LIMITED of Europa
House, Havant Street, Portsmouth PO1 3PD, ("the Company") of the one part and
DEREK THOMAS DONALD WILLIAMS of "Martas Plat", St. Patricks Lane, Rake, Liss,
Hampshire, GU33 7HQ ("the Executive") of the other part.
WHEREBY IT IS AGREED as follows:
1. EMPLOYMENT AND TERM
SUBJECT as hereinafter provided the Company hereby agrees to employ the
Executive, and the Executive hereby agrees to act as an executive
employee of the Company with the duties set forth in Clause 3 hereof,
for two years from the date hereof and thereafter until either party
gives to the other not less than two year's previous written notice
until the Executive reaches age 65 and one year's previous written
notice after age 65 such notice in either case to expire at any time.
2. GENERAL
THERE shall be deemed to form part of the terms and conditions of this
Agreement the Terms and Conditions of Employment for Monthly Paid Staff
(as amended from time to time) and the terms of the Company's Technical
Patent and Confidentiality Agreement, copies of which the executive
acknowledges having received PROVIDED ALWAYS that in the event of
conflict between any part of those terms and this Agreement the terms
and conditions of this Agreement shall prevail.
<PAGE> 1
EXHIBIT 10.9
SERVICE AGREEMENT
AN AGREEMENT dated 28 November, 1995 between PALL EUROPE LIMITED of Europa
House, Havant Street, Portsmouth P01 3PD, ("the Company") of the one part and
CLIFTON STANLEY HUTCHINGS of No. 9 Cherry Court, 48 Westwood Road, Southampton,
Hampshire ("the Executive") of the other part
WHEREBY IT IS AGREED as follows:-
1. EMPLOYMENT AND TERM
SUBJECT as hereinafter provided the Company hereby agrees to employ the
Executive, and the Executive hereby agrees to act as an executive
employee of the Company with the duties set forth in Clause 3 hereof,
for two years from the date hereof and thereafter until either party
gives to the other not less than two year's previous written notice
until the Executive reaches age 65 and one year's previous written
notice after age 65 such notice in either case to expire at any time.
2. GENERAL
THERE shall be deemed to form part of the terms and conditions of this
Agreement the Terms and Conditions of Employment for Monthly Paid Staff
(as amended from time to time) and the terms of the Company's Technical
Patent and Confidentiality Agreement, copies of which the executive
acknowledges having received PROVIDED ALWAYS that in the event of
conflict between any part of those terms and this Agreement the terms
and conditions of this Agreement shall prevail.
<PAGE> 2
3. DUTIES
(A) THE Executive agrees that during the continuance of this
Agreement he will hold such offices or positions within the
Company, and perform such duties and assignments relating to
the business of the Company as the Board of Directors or its
Chairman shall direct except that the Executive shall not be
required to hold any office or position or to perform any
duties of assignment inconsistent with his experience and
qualifications or not customarily performed by an officer of
the company.
(B) If the Board of Directors or its Chairman so directs, the
Executive shall without further remuneration serve as an
officer of or perform services for one or more subsidiary or
associated company of the Company provided that the duties of
such office are not inconsistent with the Executive's
experience and qualifications and are duties customarily
performed by an officer of the Company. The Executive hereby
agrees that the Company shall be entitled from time to time to
second the Executive to any subsidiary or associated company
of the Company without prejudice to the rights of the
Executive hereunder or the other provisions of this Agreement
and the Company shall be at liberty to appoint other persons
to act jointly with the Executive whether in such secondment
or in his normal duties hereunder.
(C) During the continuance of this Agreement the Executive shall,
except during customary periods of holiday and periods of
illness, devote all of his business time and attention to the
performance of his duties hereunder and to the business and
affairs of the Company and its subsidiary and associated
companies and to promoting the best interests of the Company
and its subsidiary and associated companies.
<PAGE> 3
(D) The Executive shall not during the continuance of his
employment hereunder (except as a representative of the
Company or with the consent in writing of the Board of
Directors of the Company) be directly or indirectly engaged or
concerned in the conduct of any other business nor shall he be
directly or indirectly interested in any such business save
through his holding or being interested in investments (quoted
or unquoted) not representing more than five per cent of the
issued investments of any class of any one company.
4. SALARY AND OTHER BENEFITS
(A) THE Company shall pay to the Executive during the continuance
of his employment hereunder a salary at the annual rate set
out in the Schedule hereto (or such rate as may from time to
time be agreed or determined upon and notified by the Company
to the Executive). In the event of any alteration of salary
being so agreed or notified the alteration shall thereafter
have effect as if it were specifically provided for as a term
of this Agreement. Such salary shall be inclusive of any other
sums receivable as Director's fees or other remuneration from
the Company or any of its subsidiary or associated companies.
The said salary shall be payable by equal monthly payments in
arrear by the last day of each month.
(B) Formula Bonus Compensation. With respect to each fiscal year
of Pall Corporation falling in whole or in part within the
Term of Employment beginning with the fiscal year in which the
Term Commencement Date occurs, Executive shall be entitled to
a bonus (in addition to his Base Salary) in such amount and
computed in such manner as shall be determined by the Board of
Directors but in no event shall the bonus payable to Executive
under this 4(B) be less than an amount computed by applying to
the fiscal year in question the following bonus formula:
<PAGE> 4
"Formula Bonus Compensation" means the amount, if any, payable
to Executive under this 4(B) and "Bonus Compensation" means
the total amount payable under 4(B) and 4(C).
"Average Equity" means the average of stockholders' equity as
shown on the fiscal year-end consolidated balance sheet of
Pall Corporation as of the end of the fiscal year with respect
to which Formula Bonus Compensation is being computed
hereunder and as of the end of the immediately preceding
fiscal year (e.g., "Average Equity" to be used in computing
Bonus Compensation for the fiscal year ending August 3, 1996
will be the average of stockholders' equity as of July 29,
1995 and August 3, 1996) except that the amount shown as the
"equity adjustment from foreign currency translation" on each
such consolidated balance sheet shall be disregarded and the
amount of $3,744,000 shall be the equity adjustment (increase)
from foreign currency translation used to determine
stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings
of Pall Corporation and its subsidiaries as certified by its
independent accountants for inclusion in the annual report to
stockholders.
"Return on Equity" means Net earnings as a percentage of
Average Equity.
For fiscal year 1996, "Zero Bonus Percentage" shall mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall
mean a Return on Equity of 20.0%. For fiscal years after
fiscal 1996 Pall Corporation shall determine the Zero Bonus
Percentage and the Maximum Bonus Percentage, consistent in
each case with expected results based upon the Company's
normal projection procedures, or based on sound statistical or
trend data, and the determination by the Company of such
percentage shall be conclusive and binding on Executive.
<PAGE> 5
If Return on Equity for the fiscal year in question is
the Zero Bonus Percentage or less, no Bonus Compensation shall
be payable. If Return on Equity equals or exceeds the Maximum
Bonus Percentage, the Formula Bonus Compensation payable to
Executive shall be 21% of his Base Salary. If Return on
Equity is more than the Zero Bonus Percentage and less than
the Maximum Bonus Percentage, the Formula Bonus Compensation
shall be increased from zero percent of Base Salary towards
21% of Base Salary in the same proportion that Return on
Equity increases from the Zero Bonus Percentage to the
Maximum Bonus Percentage. Thus, for example, if Return on
Equity for fiscal 1996 is 16.25% (the midpoint between 12.5%
and 20.0%) the Bonus Compensation shall be an amount equal to
10.5% of Executive's Base Salary (the midpoint between zero
percent of Base Salary and 21% of Base Salary).
(C) Business Segment Bonus Compensation. Inasmuch as Executive's
services for the Company relate primarily to the operations of
a subsidiary, division or other segment of the overall
operations of the Company and its subsidiaries (a "Business
Segment"), Executive shall be considered for additional bonus
compensation for each fiscal year based on the results of
operations of such Business Segment for such fiscal year. The
amount of such additional bonus compensation, if any, shall be
determined by the chief executive officer of Pall Corporation
in his sole discretion but in no event shall such additional
bonus compensation exceed 14% of Executive's Base Salary.
(D) The Bonus Compensation shall be paid in installments as
follows:
(i) 50% of the estimated amount thereof in the October
following the end of the fiscal year with respect to
which the Bonus Compensation is payable (e.g., 50% in
October 1996 with respect to Bonus Compensation for
the fiscal year ending August 3, 1996), based on the
then current projections of Return on Equity and
results of operations of Executive's Business
Segment, and
<PAGE> 6
(ii) the balance thereof not later than April 30 next
following the end of the fiscal year with respect to
which the Bonus Compensation is payable.
With respect to any fiscal year of Pall Corporation which
falls in part but not in whole within the Term of Employment,
the Bonus Compensation to which Executive is entitled under
4(B) shall be pro rated on the basis of the number of days of
such fiscal year falling within the Term of Employment except
that if the Term of Employment ends within five days before or
after the end of a fiscal year, there shall be no proration
and the Bonus Compensation shall be payable with respect to
the full fiscal year ending within such five-day period.
(E) There shall be refunded to the Executive all
out-of-pocket expenses properly incurred by him in
the performance of his duties including expenses of
entertainment, subsistence and travelling. The
Executive shall produce to the Company at its request
all supporting vouchers and documents in respect of
such expenses.
(F) The Executive shall be entitled without loss of
remuneration to such holiday in each year (in
addition to Bank and other public holidays occurring
when not on holiday) as stated in the Terms and
Conditions of Employment for Monthly Paid Staff or as
may otherwise be determined by the Board of Directors
to be taken at such time or times as may be approved
by the Board of Directors. No holiday entitlement may
be carried over from year to year and the Executive
shall not be entitled to be paid in lieu of untaken
holiday.
(G) The Executive shall be entitled to participate in
such benefit schemes as may be provided by the
Company from time to time including but not limited
to medical insurance and life insurance, and the
executive supplementary pension scheme in accordance
with the rules and regulations and announcements
applicable to the said schemes from time to time in
force.
<PAGE> 7
(H) The Company shall provide a motor car for the use of
the Executive for the performance of his duties under
this Agreement. The motor car shall have an engine
capacity or not less than two litres and be of such
make and model as shall be determined by the Board of
Directors to be consistent with the Executive's
office or position. The Company shall bear the cost
of maintaining, insuring, testing and taxing the
motor car. The Executive is authorised to use the
motor car for private purposes.
5. TERMINATION
(A) THIS Agreement shall be subject to termination by the Company:
(i) by not less than six months' notice given at any time
while the Executive is incapacitated by reason of ill
health, mental disability or accident and shall have
been so incapacitated for an aggregate of 130 working
days (whether or not consecutive);
(ii) by summary notice if the Executive shall have
committed any serious breach or have repeated or have
continued (after warning) any material breach of his
obligations hereunder or shall have been guilty of
conduct tending to bring himself or the Company or
any of its subsidiary or associated companies into
disrepute or shall have become bankrupt or compounded
with this creditors generally or have been convicted
of any criminal offence involving a custodial
sentence;
(iii) at any time after the Executive's 65th birthday
(irrespective of whether the Executive is age 65 when
this Agreement is entered into), by notice to the
Executive effective on the date specified in such
notice;
<PAGE> 8
(B) In the event of a Change in Control (as hereinafter defined)
of the Company, the Executive shall have the right to
terminate this Agreement by giving not less than 3 months' and
not more than 24 months' prior written notice to the Company
such notice to be given not more than 24 months following such
Change in Control.
(C) Upon the termination of this Agreement howsoever arising the
Executive shall at any time or from time to time thereafter
upon the request of the Company, resign without claim for
compensation from office as a Director of the Company and all
offices held by him in subsidiary and associated companies of
the Company and should he fail so to do the Company is hereby
irrevocably authorised to appoint some person in his name and
on his behalf to sign and do any documents or things necessary
or requisite to give effect thereto. If the Executive shall
cease to be an officer of the Company or any of its
subsidiaries or associated companies (other than ceasing to be
a Group Vice President of Pall Corporation) this Agreement
shall not hereby automatically terminate.
6. COMPANY'S RIGHTS TO INJUNCTIVE RELIEF
THE Executive acknowledges that his services to the Company are of a
unique character, which gives them a peculiar value to the Company, the
loss of which cannot be reasonably or adequately compensated in damages
in any action at law, and that therefore, in addition to any other
remedy which the Company may have at law or in equity, the Company
shall be entitled to injunctive relief for a breach of this Agreement
by the Executive.
<PAGE> 9
7. HEADINGS
THE headings in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or
effect for any purpose whatsoever, including the construction of the
provisions of this Agreement, and if any heading is inconsistent with
any provisions of this Agreement, the said provisions shall govern.
8. IN this Agreement:-
(i) words and phrases defined for the purposes of Section 736 of
the Companies Act 1985 shall bear the same meaning;
(ii) "associated company" means any company which is (a) a company
having an ordinary share capital of which not less than 25 per
cent is owned directly or indirectly by the Company applying
the provisions of Section 838 of the Income and Corporation
Taxes Act 1988 in the determination of ownership or (b) a
holding company of the Company or a subsidiary of any such
holding company or (c) a company to which the Company or any
of its subsidiaries renders managerial, administrative or
technical service otherwise than in the ordinary course of its
business;
(iii) "the Board of Directors" means the Board of Directors of the
Company as the same may be constituted from time to time and
includes any duly appointed committee thereof;
(iv) "Change of Control" - a Change in Control of the Company shall
be deemed to have occurred if:
(a) the Company or its holding company sells or agrees to
sell the whole or substantially the whole of the
undertaking and assets of the Company; or
<PAGE> 10
(b) the Company or its holding company sells or agrees to
sell the whole or not less than 50% of the equity
share capital of the Company; or
(c) a member of the Company or its holding company
obtains control of the composition of the Board of
Directors of the Company. For the purpose of this
paragraph (c) the composition of the Company's Board
of Directors shall be deemed to be controlled by a
member if (but only if) the member by the exercise of
some power exercisable by it without the consent or
concurrence of any other person can appoint or remove
all or a majority of the Directors of the Company.
9. CHOICE OF LAW
THIS Agreement is made in, and shall be governed by and construed in
accordance with the laws of England.
10. ENTIRE CONTRACT
THIS instrument contains the entire agreement of the parties on the
subject matter hereof except that the rights of the Company hereunder
shall be deemed to be in addition to and not in substitution for its
rights under the Company's standard form of Technical Patent and
Confidentiality Agreement if heretofore or hereafter entered into
between the parties hereto so that the making of this Agreement shall
not be construed as depriving the Company of any of its rights or
remedies under any such Technical Patent and Confidentiality Agreement.
This Agreement may not be changed orally, but only by an agreement in
writing signed by the parties hereto.
<PAGE> 11
11. NOTICES
ALL notices given hereunder shall be in writing and shall be sent by
registered post or delivered by hand and, if intended for the Company,
shall be addressed to it (if sent by post) or delivered to it (if
delivered by hand) at its registered office for the attention of the
Secretary of the Company, or at such other address and for the
attention of such other person of which the Company shall have given
notice to the Executive in the manner herein provided and, if intended
for the Executive, shall be delivered to him personally or shall be
addressed to him (if sent by post) at his most recent residence address
shown in the Company's employment records or at such other address or
to such designee of which the Executive shall have given notice to the
Company in the manner herein provided. Each such notice shall be deemed
to be given on the date of posting thereof or, if delivered personally,
on the date so delivered.
12 TERMINATION OF ANY PRIOR EMPLOYMENT AGREEMENT
THIS Agreement is in substitution for all previous employment
agreements in effect between the Company and Executive on the date
hereof which shall be deemed to have been terminated by mutual consent
as from the date of commencement of this Agreement.
<PAGE> 12
IN WITNESS WHEREOF the Company has affixed its Common Seal and the Executive
has set his hand and seal the day and year first above written.
THE COMMON SEAL OF )
PALL EUROPE LIMITED ) /s/
was hereunto affixed )
in the presence of: )
SIGNED SEALED AND DELIVERED ) /s/
by the said ) /s/
CLIFTON STANLEY HUTCHINGS ) /s/
in the presence of: )
SCHEDULE
Pursuant to Clause 4 (A) the annual salary of the Executive shall be pound
sterling 87400-00
<PAGE> 1
EXHIBIT 10.10
SERVICE AGREEMENT
AN AGREEMENT dated 28 November 1995 between PALL DEUTSCHLAND GMBH HOLDING ("the
Company") of the one part and GERHARD FRIEDRICH WEICH of Am Alten Berg 54.6072
Dreieich-Goetzenhain, West Germany ("the Executive") of the other part
WHEREBY IT IS AGREED as follows:-
1. EMPLOYMENT AND TERM
SUBJECT as hereinafter provided the Company hereby agrees to employ the
Executive, and the Executive hereby agrees to act as an executive
employee of the Company with the duties set forth in Clause 3 hereof,
for two years from the date hereof and thereafter until either party
gives to the other not less than two year's previous written notice
until the executive reaches age 65 and one year's previous written
notice after age 65 such notice in either case to expire at any time.
2 GENERAL
THERE shall be deemed to form part of the terms and conditions of this
Agreement the Terms and Conditions of Employment for Monthly Paid Staff
(as amended from time to time) and the terms of the Company's Technical
Patent and Confidentiality Agreement, copies of which the executive
acknowledges having received PROVIDED ALWAYS that in the event of
conflict between any part of those terms and this Agreement the terms
and conditions of this Agreement shall prevail.
<PAGE> 2
3. DUTIES
(A) THE Executive agrees that during the continuance of this
Agreement he will hold such offices or positions within the
Company, and perform such duties and assignments relating to
the business of the Company as the Board of Directors or its
Chairman shall direct except that the Executive shall not be
required to hold any office or position or to perform any
duties of assignment inconsistent with his experience and
qualifications or not customarily performed by an officer of
the company.
(B) The Executive shall serve as an officer of or perform services
for one or more subsidiary or associated company of the
Company as the Board of Directors or its Chairman so directs
provided that the duties of such offices are not inconsistent
with the Executive's experience and qualifications and are
duties customarily performed by an officer of the Company. The
Executive hereby agrees that the Company shall be entitled
from time to time to second the Executive to any subsidiary or
associated company of the Company without prejudice to the
rights of the Executive hereunder or the other provisions of
this Agreement and the Company shall be at liberty to appoint
other persons to act jointly with the Executive whether in
such secondment or in his normal duties hereunder.
(C) During the continuance of this Agreement the Executive shall,
except during customary periods of holiday and periods of
illness, devote all of his business time and attention to the
performance of his duties hereunder and to the business and
affairs of the Company and its subsidiary and associated
companies and to promoting the best interests of the Company
and its subsidiary and associated companies.
<PAGE> 3
(D) The Executive shall not during the continuance of his
employment hereunder (except as a representative of the
Company or with the consent in writing of the Board of
Directors of the Company) be directly or indirectly engaged or
concerned in the conduct of any other business nor shall he be
directly or indirectly interested in any such business save
through his holding or being interested in investments (quoted
or unquoted) not representing more than five per cent of the
issued investments of any class of any one company.
4. SALARY AND OTHER BENEFITS
(A) THE Company or a subsidiary or associated company of the
Company shall pay to the Executive during the continuance of
his employment hereunder a salary at the annual rate set out
in the Schedule hereto (or such rate as may from time to time
be agreed or determined upon and notified by the Company to
the Executive). In the event of any alteration of salary being
so agreed or notified the alteration shall thereafter have
effect as if it were specifically provided for as a term of
this Agreement. Such salary shall be inclusive of any other
sums receivable as Director's fees or other remuneration from
the Company or any of its subsidiary or associated companies.
The said salary shall be payable by equal monthly payments in
arrear by the last day of each month.
(B) Formula Bonus Compensation. With respect to each fiscal year
of Pall Corporation falling in whole or in part within the
Term of Employment beginning with the fiscal year in which the
Term Commencement Date occurs, Executive shall be entitled to
a bonus (in addition to his Base Salary) in such amount and
computed in such manner as shall be determined by the Board of
Directors but in no event shall the bonus payable to Executive
under this 4(B) be less than an amount computed by applying to
the fiscal year in question the following bonus formula:
<PAGE> 4
"Formula Bonus Compensation" means the amount, if any, payable
to Executive under this 4(B) and "Bonus Compensation" means
the total amount payable under 4(B) and 4(C).
"Average Equity" means the average of stockholders' equity as
shown on the fiscal year-end consolidated balance sheet of
Pall Corporation as of the end of the fiscal year with respect
to which Formula Bonus Compensation is being computed
hereunder and as of the end of the immediately preceding
fiscal year (e.g., "Average Equity" to be used in computing
Bonus Compensation for the fiscal year ending August 3, 1996
will be the average of stockholders' equity as of July 29,
1995 and August 3, 1996) except that the amount shown as the
"equity adjustment from foreign currency translation" on each
such consolidated balance sheet shall be disregarded and the
amount of $3,744,000 shall be the equity adjustment (increase)
from foreign currency translation used to determine
stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings
of Pall Corporation and its subsidiaries as certified by its
independent accountants for inclusion in the annual report to
stockholders.
"Return on Equity" means Net Earnings as a percentage of
Average Equity.
For fiscal year 1996, "Zero Bonus Percentage" shall mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall
mean a Return on Equity of 20.0%. For fiscal years after
fiscal 1996 Pall Corporation shall determine the Zero Bonus
Percentage and the Maximum Bonus Percentage, consistent in
each case with expected results based upon the Company's
normal projection procedures, or based on sound statistical or
trend data, and the determination by the Company of such
percentage shall be conclusive and binding on Executive.
<PAGE> 5
If Return on Equity for the fiscal year in question is the
Zero Bonus Percentage or less, no Bonus Compensation shall be
payable. If Return on Equity equals or exceeds the Maximum
Bonus Percentage, the Formula Bonus Compensation payable to
Executive shall be 15% of his Base Salary. If Return on
Equity is more than the Zero Bonus Percentage and less than
the Maximum Bonus Percentage, the Formula Bonus Compensation
shall be increased from zero percent of Base Salary towards
15% of Base Salary in the same proportion that Return on
Equity increases from the Zero Bonus Percentage to the
Maximum Bonus Percentage. Thus, for example, if Return on
Equity for fiscal 1996 is 16.25% (the midpoint between 12.5%
and 20.0%) the Bonus Compensation shall be an amount equal to
7.5% of Executive's Base Salary (the midpoint between zero
percent of Base Salary and 15% of Base Salary).
(C) Business Segment Bonus Compensation. Inasmuch as Executive's
services for the Company relate primarily to the operations of
a subsidiary, division or other segment of the overall
operations of the Company and its subsidiaries (a "Business
Segment"), Executive shall be considered for additional bonus
compensation for each fiscal year based on the results of
operations of such Business Segment for such fiscal year. The
amount of such additional bonus compensation, if any, shall be
determined by the chief executive officer of Pall Corporation
in his sole discretion but in no event shall such additional
bonus compensation exceed 10% of Executive's Base Salary.
(D) The Bonus Compensation shall be paid in installments as
follows:
(i) 50% of the estimated amount thereof in the October
following the end of the fiscal year with respect to
which the Bonus Compensation is payable (e.g., 50% in
October 1996 with respect to Bonus Compensation for
the fiscal year ending August 3, 1996), based on the
then current projections of Return on Equity and
results of operations of Executive's Business
Segment, and
<PAGE> 6
(ii) the balance thereof not later than April 30 next
following the end of the fiscal year with respect to
which the Bonus Compensation is payable.
With respect to any fiscal year of Pall Corporation which
falls in part but not in whole within the Term of Employment,
the Bonus Compensation to which Executive is entitled under
4(B) shall be prorated on the basis of the number of days of
such fiscal year falling within the Term of Employment except
that if the Term of Employment ends within five days before or
after the end of a fiscal year, there shall be no proration
and the Bonus Compensation shall be payable with respect to
the full fiscal year ending within such five-day period.
(E) There shall be refunded to the Executive all out-of-pocket
expenses properly incurred by him in the performance of his
duties including expenses of entertainment, subsistence and
travelling. The Executive shall produce to the Company at its
request all supporting vouchers and documents in respect of
such expenses.
(F) The Executive shall be entitled without loss of remuneration
to such holiday in each year (in addition to Bank and other
public holidays occurring when not on holiday) as stated in
the Terms and Conditions of Employment for Monthly Paid Staff
in the German associated company or as may otherwise be
determined by the Board of Directors to be taken at such time
or times as may be approved by the Board of Directors. No
holiday entitlement may be carried over from year to year and
the Executive shall not be entitled to be paid in lieu of
untaken holiday.
<PAGE> 7
(G) The Executive shall be entitled to participate in such benefit
schemes as may be provided by the Company from time to time
including but not limited to medical insurance and life
insurance, and the executive supplementary pension scheme in
accordance with the rules and regulations and announcements
applicable to the said schemes from time to time in force.
(H) The Company shall provide a motor car for the use of the
Executive for the performance of his duties under this
Agreement. The motor car shall have an engine capacity or not
less than two litres and be of such make and model as shall be
determined by the Board of Directors to be consistent with the
Executive's office or position. The Company shall bear the
cost of maintaining, insuring, testing and taxing the motor
car. The Executive is authorised to use the motor car for
private purposes.
5. TERMINATION
A THIS Agreement shall be subject to termination by the Company:
(i) by not less than six months' notice given at any time
while the Executive is incapacitated by reason of ill
health, mental disability or accident and shall have
been so incapacitated for an aggregate of 130 working
days (whether or not consecutive);
(ii) by summary notice if the Executive shall have
committed any serious breach or have repeated or have
continued (after warning) any material breach of his
obligations hereunder or shall have been guilty of
conduct tending to bring himself or the Company or
any of its subsidiary or associated companies into
disrepute or shall have become bankrupt or compounded
with this creditors generally or have been convicted
of any criminal offence involving a custodial
sentence;
<PAGE> 8
(iii) at any time after the Executive's 65th birthday
(irrespective of whether the Executive is age 65 when
this Agreement is entered into), by notice to the
Executive effective on the date specified in such
notice;
(B) In the event of a Change in Control (as hereinafter defined)
of the Company, the Executive shall have the right to
terminate this Agreement by giving not less than 3 months' and
not more than 24 months' prior written notice to the Company
such notice to be given not more than 24 months following such
Change in Control.
(C) Upon the termination of this Agreement howsoever arising the
Executive shall at any time or from time to time thereafter
upon the request of the Company, resign without claim for
compensation from office as a Director of the Company and all
offices held by him in subsidiary and associated companies of
the Company and should he fail so to do the Company is hereby
irrevocably authorised to appoint some person in his name and
on his behalf to sign and do any documents or things necessary
or requisite to give effect thereto. If the Executive shall
cease to be an officer of the Company or any of its
subsidiaries or associated companies (other than ceasing to be
a Group Vice President of PaIL Corporation) this Agreement
shall not hereby automatically terminate.
<PAGE> 9
6. COMPANY'S RIGHTS TO INJUNCTIVE RELIEF
THE Executive acknowledges that his services to the Company are of a
unique character, which gives them a peculiar value to the Company, the
loss of which cannot be reasonably or adequately compensated in damages
in any action at law, and that therefore, in addition to any other
remedy which the Company may have at law or in equity, the Company
shall be entitled to injunctive relief for a breach of this Agreement
by the Executive.
7. HEADINGS
THE headings in this Agreement are not part of the provisions hereof,
are merely for the purpose of reference and shall have no force or
effect for any purpose whatsoever, including the construction of the
provisions of this Agreement, and if any heading is inconsistent with
any provisions of this Agreement, the said provisions shall govern.
8. IN this Agreement:
(i) words and phrases defined for the purposes of Section 736 of
the Companies Act 1985 shall bear the same meaning;
(ii) "associated company" means any company which is (a) a company
having an ordinary share capital of which not less than 25 per
cent is owned directly or indirectly by the Company applying
the provisions of Section 838 of the Income and Corporation
Taxes Act 1988 in the determination of ownership or (b) a
holding company of the Company or a subsidiary of any such
holding company or (c) a company to which the Company or any
of its subsidiaries renders managerial, administrative or
technical service otherwise than in the ordinary course of its
business;
<PAGE> 10
(iii) "the Board of Directors" means the Board of Directors of the
Company as the same may be constituted from time to time and
includes any duly appointed committee thereof;
(iv) "Change of Control" - a Change in Control of the Company shall
be deemed to have occurred if:
(a) the Company or its holding company sells or agrees to
sell the whole or substantially the whole of the
undertaking and assets of the Company; or
(b) the Company or its holding company sells or agrees to
sell the whole or not less than 50% of the equity
share capital of the Company; or
(c) a member of the Company or its holding company
obtains control of the composition of the Board of
Directors of the Company. For the purpose of this
paragraph (c) the composition of the Company's Board
of Directors shall be deemed to be controlled by a
member if (but only if) the member by the exercise of
some power exercisable by it without the consent or
concurrence of any other person can appoint or remove
all or a majority of the Directors of the Company.
9. PROPER LAW
THE construction validity and performance of this Agreement shall be
governed in all respects by English law and the parties agree that the
English Courts shall have exclusive jurisdiction in respect of any
dispute suit action or proceedings which may arise out of or in
connection with this Agreement and hereby submit to the jurisdiction of
the English Courts.
<PAGE> 11
10. ENTIRE CONTRACT ACT
THIS instrument contains the entire agreement of the parties on the
subject matter hereof except that the rights of the Company hereunder
shall be deemed to be in addition to and not in substitution for its
rights under the Company's standard form of Technical Patent and
Confidentiality Agreement if heretofore or hereafter entered into
between the parties hereto so that the making of this Agreement shall
not be construed as depriving the Company of any of its rights or
remedies under any such Technical Patent and Confidentiality Agreement.
This Agreement may not be changed orally, but only by an agreement in
writing signed by the parties hereto.
11. NOTICES
ALL notices given hereunder shall be in writing and shall be sent by
registered post or delivered by hand and, if intended for the Company,
shall be addressed to it (if sent by post) or delivered to it (if
delivered by hand) at its registered office for the attention of the
Secretary of the Company, or at such other address and for the
attention of such other person of which the Company shall have given
notice to the Executive in the manner herein provided and, if intended
for the Executive, shall be delivered to him personally or shall be
addressed to him (if sent by post) at his most recent residence address
shown in the Company's employment records or at such other address or
to such designee of which the Executive shall have given notice to the
Company in the manner herein provided. Each such notice shall be deemed
to be given on the date of posting thereof or, if delivered personally,
on the date so delivered.
12 TERMINATION OF ANY PRIOR EMPLOYMENT AGREEMENT
THIS Agreement is in substitution for all previous employment
agreements in effect between the Company and Executive on the date
hereof which shall be deemed to have been terminated by mutual consent
as from the date of commencement of this Agreement.
<PAGE> 12
IN WITNESS WHEREOF the Company has affixed its Common Seal
and the Executive has set his hand and seal the day and year first above
written.
THE COMMON SEAL OF )
PALL EUROPE LIMITED ) /s/
was hereunto affixed )
in the presence of: D. Louch ) /s/
SIGNED SEALED AND DELIVERED )
by the said ) /s/
GERHARD FRIEDRICH WEICH )
in the presence of: Marcus Wilson ) /s/
SCHEDULE
Pursuant to Clause 4 (A) the annual salary of the Executive shall be DM438493.00
<PAGE> 1
EXHIBIT 10.13
[Elected Vice President Form]
10/31/95
SECOND AMENDMENT
Amendment Dated August l, 1995 to Employment Agreement Dated
February 1, 1992.
PALL CORPORATION, a New York Corporation ("the Company") and Arnold
Weiner ("Executive") hereby agree that the Employment Agreement between them
dated February 1, 1992, as amended by Amendment dated July 19, 1993, is hereby
amended effective August 1, 1995 by changing Section 3(b) thereof to read and
provide as follows:
(b) Formula Bonus Compensation. With respect to each fiscal year of the
Company falling in whole or in part within the Term of Employment beginning with
the fiscal year in which the Term Commencement Date occurs, Executive shall be
entitled to a bonus (in addition to his Base Salary) in such amount and computed
in such manner as shall be determined by the Board of Directors but in no event
shall the bonus payable to Executive under this Section 3(b) be less than an
amount computed by applying to the fiscal year in question the following bonus
formula:
<PAGE> 2
"Formula Bonus Compensation" means the amount, if any, payable to
Executive under this Section 3(b) and "Bonus Compensation" means the total
amount payable under Sections 3(b) and 3(c).
"Average Equity" means the average of stockholders' equity as shown on
the fiscal year-end consolidated balance sheet of the Company as of the end of
the fiscal year with respect to which Formula Bonus Compensation is being
computed hereunder and as of the end of the immediately preceding fiscal year
(e.g., "Average Equity" to be used in computing Bonus Compensation for the
fiscal year ending August 3, 1996 will be the average of stockholders' equity as
of July 29, 1995 and August 3, 1996) except that the amount shown as the
"equity adjustment from foreign currency translation" on each such consolidated
balance sheet shall be disregarded and the amount of $3,744,000 shall be the
equity adjustment (increase) from foreign currency translation used to determine
stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings of the
Company and its subsidiaries as certified by its independent accountants for
inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
2
<PAGE> 3
For fiscal year 1996, "Zero Bonus Percentage" shall mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall mean a
Return on Equity of 20.0%. For fiscal years after fiscal 1996 the
Company shall determine the Zero Bonus Percentage and the Maximum Bonus
Percentage, consistent in each case with expected results based upon
the Company's normal projection procedures, or based on sound
statistical or trend data, and the determination by the Company of such
percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus Percentage
or less, no Formula Bonus Compensation shall be payable. If Return on Equity
equals or exceeds the Maximum Bonus Percentage, the Formula Bonus Compensation
payable to Executive shall be 42% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Formula Bonus Compensation shall be increased from zero percent of Base
Salary towards 42% of Base Salary in the same proportion that Return on Equity
increases from the Zero Bonus Percentage to the Maximum Bonus Percentage. Thus,
for example, if Return on Equity for fiscal 1996 is 16.25% (the midpoint between
12.5% and 20.0%) the Formula Bonus Compensation shall be an amount equal to 21%
of Executive's Base Salary (the midpoint between zero percent of Base Salary and
42% of Base Salary).
3
<PAGE> 4
(c) Business Segment Bonus Compensation. Inasmuch as Executive's
services for the Company relate primarily to the operations of a subsidiary, a
division or other segment of the overall operations of the Company and its
subsidiaries (a "Business Segment"), Executive shall be considered for
additional bonus compensation for each fiscal year based on the results of
operations of such Business Segment for such fiscal year. The amount of such
additional bonus compensation, if any, shall be determined by the chief
executive officer in his sole discretion but in no event shall such additional
bonus compensation exceed 28% of Executive's Base Salary.
(d) The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is payable (e.g., 50%
in July 1996 with respect to Bonus Compensation for the fiscal year
ending August 3, 1996), based on the then current projections of Return
on Equity and results of operations of Executive's Business Segment,
and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in part but
not in whole within the Term of
4
<PAGE> 5
Employment, the Bonus Compensation to which Executive is entitled under this
Section 3(b) and Section 3(c) shall be prorated on the basis of the number of
days of such fiscal year falling within the Term of Employment except that if
the Term of Employment ends within five days before or after the end of a fiscal
year, there shall be no proration and the Bonus Compensation shall be payable
with respect to the full fiscal year ending within such five-day period.
* * * * * * * * * * * * * * * * * * * * * * * *
Except as expressly amended hereby, said Employment Agreement dated
February 1, 1992 shall remain in full force and effect in accordance with its
terms.
PALL CORPORATION
By /s/ Jeremy Hayward-Surry
--------------------------------
Jeremy Hayward-Surry
President & Chief Financial Officer
/s/ Arnold Weiner
-------------------------------
Executive
5
<PAGE> 1
EXHIBIT 10.16
[Elected Vice President Form]
10/31/95
SECOND AMENDMENT
AMENDMENT DATED AUGUST 1, 1995 TO EMPLOYMENT AGREEMENT DATED
FEBRUARY 1, 1992.
PALL CORPORATION, a New York Corporation ("the Company") and Samuel T.
Wortham ("Executive") hereby agree that the Employment Agreement between them
dated February 1, 1992, as amended by Amendment dated July 19, 1993, is hereby
amended effective August 1, 1995 by changing Section 3(b) thereof to read and
provide as follows:
(b) Formula Bonus Compensation. With respect to each fiscal year of the
Company falling in whole or in part within the Term of Employment beginning with
the fiscal year in which the Term Commencement Date occurs, Executive shall be
entitled to a bonus (in addition to his Base Salary) in such amount and computed
in such manner as shall be determined by the Board of Directors but in no event
shall the bonus payable to Executive under this Section 3(b) be less than an
amount computed by applying to the fiscal year in question the following bonus
formula:
<PAGE> 2
"Formula Bonus Compensation" means the amount, if any, payable to
Executive under this Section 3(b) and "Bonus Compensation" means the total
amount payable under Sections 3(b) and 3(c).
"Average Equity" means the average of stockholders' equity as shown on
the fiscal year-end consolidated balance sheet of the Company as of the end of
the fiscal year with respect to which Formula Bonus Compensation is being
computed hereunder and as of the end of the immediately preceding fiscal year
(e.g., "Average Equity" to be used in computing Bonus Compensation for the
fiscal year ending August 3, 1996 will be the average of stockholders' equity as
of July 29, 1995 and August 3, 1996) except that the amount shown as the
"equity adjustment from foreign currency translation" on each such consolidated
balance sheet shall be disregarded and the amount of $3,744,000 shall be the
equity adjustment (increase) from foreign currency translation used to determine
stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings of the
Company and its subsidiaries as certified by its independent accountants for
inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
2
<PAGE> 3
For fiscal year 1996, "Zero Bonus Percentage" shall mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall mean a
Return on Equity of 20.0%. For fiscal years after fiscal 1996 the
Company shall determine the Zero Bonus Percentage and the Maximum Bonus
Percentage, consistent in each case with expected results based upon
the Company's normal projection procedures, or based on sound
statistical or trend data, and the determination by the Company of such
percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus Percentage
or less, no Formula Bonus Compensation shall be payable. If Return on Equity
equals or exceeds the Maximum Bonus Percentage, the Formula Bonus Compensation
payable to Executive shall be 42% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Formula Bonus Compensation shall be increased from zero percent of Base
Salary towards 42% of Base Salary in the same proportion that Return on Equity
increases from the Zero Bonus Percentage to the Maximum Bonus Percentage. Thus,
for example, if Return on Equity for fiscal 1996 is 16.25% (the midpoint between
12.5% and 20.0%) the Formula Bonus Compensation shall be an amount equal to 21%
of Executive's Base Salary (the midpoint between zero percent of Base Salary and
42% of Base Salary).
3
<PAGE> 4
(c) Business Segment Bonus Compensation. Inasmuch as Executive's
services for the Company relate primarily to the operations of a subsidiary, a
division or other segment of the overall operations of the Company and its
subsidiaries (a "Business Segment"), Executive shall be considered for
additional bonus compensation for each fiscal year based on the results of
operations of such Business Segment for such fiscal year. The amount of such
additional bonus compensation, if any, shall be determined by the chief
executive officer in his sole discretion but in no event shall such additional
bonus compensation exceed 28% of Executive's Base Salary.
(d) The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is payable (e.g., 50%
in July 1996 with respect to Bonus Compensation for the fiscal year
ending August 3, 1996), based on the then current projections of Return
on Equity and results of operations of Executive's Business Segment,
and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in part but
not in whole within the Term of
4
<PAGE> 5
Employment, the Bonus Compensation to which Executive is entitled under this
Section 3(b) and Section 3(c) shall be prorated on the basis of the number of
days of such fiscal year falling within the Term of Employment except that if
the Term of Employment ends within five days before or after the end of a fiscal
year, there shall be no proration and the Bonus Compensation shall be payable
with respect to the full fiscal year ending within such five-day period.
* * * * * * * * * * * * * * * * * * * * * * * *
Except as expressly amended hereby, said Employment Agreement dated
February 1, 1992 shall remain in full force and effect in accordance with its
terms.
PALL CORPORATION
By /s/ Jeremy Hayward-Surry
--------------------------------
Jeremy Hayward-Surry
President & Chief Financial Officer
/s/ Samuel T. Wortham
-------------------------------
Executive
5
<PAGE> 1
EXHIBIT 10.18
[Elected Vice President Form]
10/31/95
FIRST AMENDMENT
Amendment Dated August 1, 1995 to Employment Agreement Dated
August 1, 1994.
PALL CORPORATION, a New York Corporation ("the Company") and Peter Cope
("Executive") hereby agree that the Employment Agreement between them dated
August 1, 1994 is hereby amended effective August 1, 1995 by changing Section
3(b) thereof to read and provide as follows:
(b) Formula Bonus Compensation. With respect to each fiscal year of the
Company falling in whole or in part within the Term of Employment beginning with
the fiscal year in which the Term Commencement Date occurs, Executive shall be
entitled to a bonus (in addition to his Base Salary) in such amount and computed
in such manner as shall be determined by the Board of Directors but in no event
shall the bonus payable to Executive under this Section 3(b) be less than an
amount computed by applying to the fiscal year in question the following bonus
formula:
<PAGE> 2
"Formula Bonus Compensation" means the amount, if any, payable to
Executive under this Section 3(b) and "Bonus Compensation" means the total
amount payable under Sections 3(b) and 3(c).
"Average Equity" means the average of stockholders' equity as shown on
the fiscal year-end consolidated balance sheet of the Company as of the end of
the fiscal year with respect to which Formula Bonus Compensation is being
computed hereunder and as of the end of the immediately preceding fiscal year
(e.g., "Average Equity" to be used in computing Bonus Compensation for the
fiscal year ending August 3, 1996 will be the average of stockholders' equity as
of July 29, 1995 and August 3, 1996) except that the amount shown as the "equity
adjustment from foreign currency translation" on each such consolidated balance
sheet shall be disregarded and the amount of $3,744,000 shall be the equity
adjustment (increase) from foreign currency translation used to determine
stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings of the
Company and its subsidiaries as certified by its independent accountants for
inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
2
<PAGE> 3
For fiscal year 1996, "Zero Bonus Percentage" shall mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall mean a
Return on Equity of 20.0%. For fiscal years after fiscal 1996 the
Company shall determine the Zero Bonus Percentage and the Maximum Bonus
Percentage, consistent in each case with expected results based upon
the Company's normal projection procedures, or based on sound
statistical or trend data, and the determination by the Company of such
percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus Percentage
or less, no Formula Bonus Compensation shall be payable. If Return on Equity
equals or exceeds the Maximum Bonus Percentage, the Formula Bonus Compensation
payable to Executive shall be 42% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Formula Bonus Compensation shall be increased from zero percent of Base
Salary towards 42% of Base Salary in the same proportion that Return on Equity
increases from the Zero Bonus Percentage to the Maximum Bonus Percentage. Thus,
for example, if Return on Equity for fiscal 1996 is 16.25% (the midpoint between
12.5% and 20.0%) the Formula Bonus Compensation shall be an amount equal to 21%
of Executive's Base Salary (the midpoint between zero percent of Base Salary and
42% of Base Salary).
3
<PAGE> 4
(c) Business Segment Bonus Compensation. Inasmuch as Executive's
services for the Company relate primarily to the operations of a subsidiary, a
division or other segment of the overall operations of the Company and its
subsidiaries (a "Business Segment"), Executive shall be considered for
additional bonus compensation for each fiscal year based on the results of
operations of such Business Segment for such fiscal year. The amount of such
additional bonus compensation, if any, shall be determined by the chief
executive officer in his sole discretion but in no event shall such additional
bonus compensation exceed 28% of Executive's Base Salary.
(d) The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is payable (e.g., 50%
in July 1996 with respect to Bonus Compensation for the fiscal year
ending August 3, 1996), based on the then current projections of Return
on Equity and results of operations of Executive's Business Segment,
and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in part but
not in whole within the Term of
4
<PAGE> 5
Employment, the Bonus Compensation to which Executive is entitled under this
Section 3(b) and Section 3(c) shall be prorated on the basis of the number of
days of such fiscal year falling within the Term of Employment except that if
the Term of Employment ends within five days before or after the end of a fiscal
year, there shall be no proration and the Bonus Compensation shall be payable
with respect to the full fiscal year ending within such five-day period.
* * * * * * * * * * * * * * * * * * * * * * * *
Except as expressly amended hereby, said Employment Agreement dated
August 1, 1995 shall remain in full force and effect in accordance with its
terms.
PALL CORPORATION
By /s/ Jeremy Hayward-Surry
------------------------------------
Jeremy Hayward-Surry
President & Chief Financial Officer
/s/ Peter Cope 12/1/95
------------------------------------
Executive
5
<PAGE> 1
EXHIBIT 10.20
[Elected Vice President Form]
10/31/95
FIRST AMENDMENT
Amendment Dated August 1, 1995 to Employment Agreement Dated
August 1, 1994.
PALL CORPORATION, a New York Corporation ("the Company") and Robert
Simkins ("Executive") hereby agree that the Employment Agreement between them
dated August 1, 1994 is hereby amended effective August 1, 1995 by changing
Section 3(b) thereof to read and provide as follows:
(b) Formula Bonus Compensation. With respect to each fiscal year of the
Company falling in whole or in part within the Term of Employment beginning with
the fiscal year in which the Term Commencement Date occurs, Executive shall be
entitled to a bonus (in addition to his Base Salary) in such amount and computed
in such manner as shall be determined by the Board of Directors but in no event
shall the bonus payable to Executive under this Section 3(b) be less than an
amount computed by applying to the fiscal year in question the following bonus
formula:
<PAGE> 2
"Formula Bonus Compensation" means the amount, if any, payable to
Executive under this Section 3(b) and "Bonus Compensation" means the total
amount payable under Sections 3(b) and 3(c).
"Average Equity" means the average of stockholders' equity as shown on
the fiscal year-end consolidated balance sheet of the Company as of the end of
the fiscal year with respect to which Formula Bonus Compensation is being
computed hereunder and as of the end of the immediately preceding fiscal year
(e.g., "Average Equity" to be used in computing Bonus Compensation for the
fiscal year ending August 3, 1996 will be the average of stockholders' equity as
of July 29, 1995 and August 3, 1996) except that the amount shown as the "equity
adjustment from foreign currency translation" on each such consolidated balance
sheet shall be disregarded and the amount of $3,744,000 shall be the equIty
adjustment (increase) from foreign currency translation used to determine
stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earninqs of the
Company and its subsidiaries as certified by its independent accountants for
inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
2
<PAGE> 3
For fiscal year 1996, "Zero Bonus Percentage" shalt mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall mean a
Return on Equity of 20.0%. For fiscal years after fiscal 1996 the
Company shall determine the Zero Bonus Percentage and the Maximum Bonus
Percentage, consistent in each case with expected results based upon
the Company's normal projection procedures, or based on sound
statistical or trend data, and the determination by the Company of such
percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus Percentage
or less, no Formula Bonus Compensation shall be payable. If Return on Equity
equals or exceeds the Maximum Bonus Percentage, the Formula Bonus Compensation
payable to Executive shall be 42% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Formula Bonus Compensation shall be increased from zero percent of Base
Salary towards 42% of Base Salary in the same proportion that Return on Equity
increases from the Zero Bonus Percentage to the Maximum Bonus Percentage. Thus,
for example, if Return on Equity for fiscal 1996 is 16.25% (the midpoint between
12.5% and 20.0%) the Formula Bonus Compensation shall be an amount equal to 21%
of Executive's Base Salary (the midpoint between zero percent of Base Salary and
42% of Base Salary).
3
<PAGE> 4
(c) Business Segment Bonus Compensation. Inasmuch as Executive's
services for the Company relate primarily to the operations of a subsidiary, a
division or other segment of the overall operations of the Company and its
subsidiaries (a "Business Segment"), Executive shall be considered for
additional bonus compensation for each fiscal year based on the results of
operations of such Business Segment for such fiscal year. The amount of such
additional bonus compensation, if any, shall be determined by the chief
executive officer in his sole discretion but in no event shall such additional
bonus compensation exceed 28% of Executive's Base Salary.
(d) The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is payable (e.g., 50%
in July 1996 with respect to Bonus Compensation for the fiscal year
ending August 3, 1996), based on the then current projections of Return
on Equity and results of operations of Executive's Business Segment,
and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in part but
not in whole within the Term of
4
<PAGE> 5
Employment, the Bonus Compensation to which Executive is entitled under this
Section 3(b) and Section 3(c) shall be prorated on the basis of the number of
days of such fiscal year falling within the Term of Employment except that if
the Term of Employment ends within five days before or after the end of a fiscal
year, there shall be no proration and the Bonus Compensation shall be payable
with respect to the full fiscal year ending within such five-day period.
* * * * * * * * * * * * * * * * * * * * * * * *
Except as expressly amended hereby, said Employment Agreement dated
August 1, 1995 shall remain in full force and effect in accordance with its
terms.
PALL CORPORATION
By /s/ Jeremy Hayward-Surry
------------------------------------
Jeremy Hayward-Surry
President & Chief Financial Officer
/s/ Robert Simkins
------------------------------------
Executive
5
<PAGE> 1
EXHIBIT 10.24
[Elected Vice President Form]
10/31/95
FIRST AMENDMENT
AMENDMENT DATED AUGUST 1, 1995 TO EMPLOYMENT AGREEMENT DATED
SEPTEMBER 26, 1994.
PALL CORPORATION, a New York Corporation ("the Company") and Donald B.
Stevens ("Executive") hereby agree that the Employment Agreement between them
dated September 26, 1994 is hereby amended effective August 1, 1995 by changing
Section 3(b) thereof to read and provide as follows:
(b) Formula Bonus Compensation. With respect to each fiscal year of the
Company falling in whole or in part within the Term of Employment beginning with
the fiscal year in which the Term Commencement Date occurs, Executive shall be
entitled to a bonus (in addition to his Base Salary) in such amount and computed
in such manner as shall be determined by the Board of Directors but in no event
shall the bonus payable to Executive under this Section 3(b) be less than an
amount computed by applying to the fiscal year in question the following bonus
formula:
<PAGE> 2
"Formula Bonus Compensation" means the amount, if any, payable to
Executive under this Section 3(b) and "Bonus Compensation" means the total
amount payable under Sections 3(b) and 3(c).
"Average Equity" means the average of stockholders' equity as shown on
the fiscal year-end consolidated balance sheet of the Company as of the end of
the fiscal year with respect to which Formula Bonus Compensation is being
computed hereunder and as of the end of the immediately preceding fiscal year
(e.g., "Average Equity" to be used in computing Bonus Compensation for the
fiscal year ending August 3, 1996 will be the average of stockholders' equity as
of July 29, 1995 and August 3, 1996) except that the amount shown as the "equity
adjustment from foreign currency translation" on each such consolidated balance
sheet shall be disregarded and the amount of $3,744,000 shall be the equity
adjustment (increase) from foreign currency translation used to determine
stockholders' equity at each such year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings of the
Company and its subsidiaries as certified by its independent accountants for
inclusion in the annual report to stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
2
<PAGE> 3
For fiscal year 1996, "Zero Bonus Percentage" shall mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall mean a
Return on Equity of 20.0%. For fiscal years after fiscal 1996 the
Company shall determine the Zero Bonus Percentage and the Maximum Bonus
Percentage, consistent in each case with expected results based upon
the Company's normal projection procedures, or based on sound
statistical or trend data, and the determination by the Company of such
percentages shall be conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero Bonus Percentage
or less, no Formula Bonus Compensation shall be payable. If Return on Equity
equals or exceeds the Maximum Bonus Percentage, the Formula Bonus Compensation
payable to Executive shall be 42% of his Base Salary. If Return on Equity is
more than the Zero Bonus Percentage and less than the Maximum Bonus Percentage,
the Formula Bonus Compensation shall be increased from zero percent of Base
Salary towards 42% of Base Salary in the same proportion that Return on Equity
increases from the Zero Bonus Percentage to the Maximum Bonus Percentage. Thus,
for example, if Return on Equity for fiscal 1996 is 16.25% (the midpoint between
12.5% and 20.0%) the Formula Bonus Compensation shall be an amount equal to 21%
of Executive's Base Salary (the midpoint between zero percent of Base Salary and
42% of Base Salary).
3
<PAGE> 4
(c) Business Segment Bonus Compensation. Inasmuch as Executive's
services for the Company relate primarily to the operations of a subsidiary, a
division or other segment of the overall operations of the Company and its
subsidiaries (a "Business Segment"), Executive shall be considered for
additional bonus compensation for each fiscal year based on the results of
operations of such Business Segment for such fiscal year. The amount of such
additional bonus compensation, if any, shall be determined by the chief
executive officer in his sole discretion but in no event shall such additional
bonus compensation exceed 28% of Executive's Base Salary.
(d) The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is payable (e.g., 50%
in July 1996 with respect to Bonus Compensation for the fiscal year
ending August 3, 1996), based on the then current projections of Return
on Equity and results of operations of Executive's Business Segment,
and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which the Bonus
Compensation is payable.
With respect to any fiscal year of the Company which falls in part but
not in whole within the Term of
4
<PAGE> 5
Employment, the Bonus Compensation to which Executive is entitled under this
Section 3(b) and Section 3(c) shall be prorated on the basis of the number of
days of such fiscal year falling within the Term of Employment except that if
the Term of Employment ends within five days before or after the end of a fiscal
year, there shall be no proration and the Bonus Compensation shall be payable
with respect to the full fiscal year ending within such five-day period.
* * * * * * * * * * * * * * * * * * * * * * *
Except as expressly amended hereby, said Employment Agreement dated
August 1, 1995 shall remain in full force and effect in accordance with its
terms.
PALL CORPORATION
By /s/ Jeremy Hayward-Surry
------------------------------------
Jeremy Hayward-Surry
President & Chief Financial Officer
/s/ Donald B. Stevens
------------------------------------
Executive
5
<PAGE> 1
EXHIBIT 10.25
[Elected Vice President]
EMPLOYMENT AGREEMENT
AGREEMENT made as of August 5, 1996 between PALL CORPORATION, a New
York corporation (the "Company") and Paul Kohn ("Executive").
WHEREAS, the parties desire to terminate, as of August 4, 1996, any
employment agreement between them then in effect, and to enter into a new
employment agreement, on the terms and conditions hereinafter set forth, for a
term beginning August 5, 1996.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereto agree as follows:
SECTION 1. EMPLOYMENT AND TERM
The Company hereby employs Executive, and Executive hereby agrees to
serve, as an executive employee of the Company with the duties set forth in
Section 2, for a term (hereinafter called the "Term of Employment") beginning
August 5, 1996 and ending, unless sooner terminated under Section 4, on the
effective date specified in a notice of termination given by either party to the
other except that such effective date shall not be earlier than the second
anniversary of the date on which such notice is given.
<PAGE> 2
SECTION 2. DUTIES
(a) Executive agrees that during the Term of Employment he will
hold such offices or positions with the Company, and perform
such duties and assignments relating to the business of the
Company, as the Board of Directors or the Chief Executive
Officer of the Company shall direct except that Executive shall
not be required to hold any office or position or to perform any
duties or assignment inconsistent with his experience and
qualifications or not customarily performed by a corporate
officer. The Company represents to Executive that the Board of
Directors (acting by its Compensation Committee) has authorized
the making of this Agreement and expressed its present intention
that during the Term of Employment Executive will be an elected
officer of the Company. The failure of any future Board of
Directors to elect Executive as an officer of the Company shall
not, however, be deemed to relieve either party hereto of any of
his or its obligations under this Agreement.
(b) If the Board of Directors or the Chief Executive Officer of the
Company so directs, Executive shall serve as an officer of one
or more subsidiaries of the Company (provided that the duties of
such office are not inconsistent with Executive's experience and
2
<PAGE> 3
qualifications and are duties customarily performed by a
corporate officer) and part or all of the compensation to which
Executive is entitled hereunder may be paid by such subsidiary
or subsidiaries. However, such employment and/or payment of
Executive by a subsidiary or subsidiaries shall not relieve the
Company from any of its obligations under this Agreement except
to the extent of payments actually made to Executive by a
subsidiary.
(c) During the Term of Employment Executive shall, except during
customary vacation periods and periods of illness, devote
substantially all of his business time and attention to the
performance of his duties hereunder and to the business and
affairs of the Company and its subsidiaries and to promoting the
best interests of the Company and its subsidiaries and he shall
not, either during or outside of such normal business hours,
engage in any activity inimical to such best interests.
SECTION 3. COMPENSATION DURING TERM OF EMPLOYMENT
(a) Base Salary. With respect to the period beginning August 5, 1996
and ending at the end of the Term of Employment, the Company
shall pay to Executive base compensation (in addition to the
compensation provided for elsewhere in this Agreement) at such
3
<PAGE> 4
rate as the Board of Directors may determine (the amount so
determined by the Board being herein called the "Base Salary")
but at not less than the rate of $154,024 per annum (hereinafter
called the "Original Base Salary") adjusted for each Contract
Year (as hereinafter defined) beginning with the Contract Year
which starts August 1, 1997, as follows: The term "Contract
Year" as used herein means the period from August 1 of each year
through July 31 of the following year. For each Contract Year
during the Term of Employment beginning with the Contract Year
which starts August 1, 1997, the minimum compensation payable to
Executive under this Section 3 (a) (hereinafter called the
"Minimum Base Salary") shall be determined by increasing (or
decreasing) the Original Base Salary by the percentage increase
(or decrease) of the Consumer Price Index (as hereinafter
defined) for the month of June immediately preceding the start
of the Contract Year in question over (or below) the Consumer
Price Index for June 1996. The term "Consumer Price Index" as
herein used means the "Consumer Price Index for all Urban
Consumers" compiled and published by the Bureau of Labor
Statistics of the United States Department of Labor for "New
York - Northern New Jersey - Long Island,
4
<PAGE> 5
NY-NJ-CT". To illustrate the operation of the foregoing
provisions of this Section 3(a): Executive's Base Salary for the
Contract Year August 1, 1997 through July 31, 1998 shall be not
less than the Original Base Salary adjusted by the percentage
increase (or decrease) of the Consumer Price Index for June 1997
over (or below) said Index for June 1996. Further adjustment in
the Minimum Base Salary shall be made for each ensuing Contract
Year, in each case (i) using the Consumer Price Index for June
1996 as the base except as provided in the immediately following
paragraph hereof and (ii) applying the percentage increase (or
decrease) in the Consumer Price Index since said base month to
the Original Base Salary to determine the Minimum Base Salary.
The Base Salary shall be paid in such periodic installments as
the Company may determine but not less often than monthly.
If with respect to any Contract Year (including the Contract
Year beginning August 1, 1996) the Board of Directors fixes the
Base Salary at an amount higher than the Minimum Base Salary,
then (unless the resolution fixing such higher Base Salary
provides otherwise), for the purpose of determining the Minimum
Base Salary for subsequent Contract Years: (1) the amount of the
higher Base
5
<PAGE> 6
Salary so fixed shall be deemed substituted for the Original
Base Salary wherever the Original Base Salary is referred to in
the immediately preceding paragraph hereof, and (ii) the base
month for determining the Consumer Price Index adjustment shall
be June of the calendar year in which the Contract Year to which
such higher Base Salary is applicable begins (e.g., if the Board
fixes a Base Salary for the Contract Year beginning August 1,
1997 which is higher than the Minimum Base Salary, then June
1997 would become the base month for the purposes of making the
CPI adjustment to determine the Minimum Base Salary for
subsequent Contract Years) .
(b) Formula Bonus Compensation. With respect to each fiscal year of
the Company falling in whole or in part within the Term of
Employment beginning with the fiscal year in which the Term
Commencement Date occurs, Executive shall be entitled to a bonus
(in addition to his Base Salary) in such amount and computed in
such manner as shall be determined by the Board of Directors but
in no event shall the bonus payable to Executive under this
Section 3(b) be less than an amount computed by applying to the
fiscal year in question the following bonus formula:
6
<PAGE> 7
"Formula Bonus Compensation" means the amount, if any, payable
to Executive under this Section 3(b) and "Bonus Compensation"
means the total amount payable under Sections 3(b) and
3(c).
"Average Equity" means the average of stockholders' equity as
shown on the fiscal year-end consolidated balance sheet of the
Company as of the end of the fiscal year with respect to which
Formula Bonus Compensation is being computed hereunder and as of
the end of the immediately preceding fiscal year (e.g., "Average
Equity" to be used in computing Bonus Compensation for the
fiscal year ending August 2, 1997 will be the average of
stockholders' equity as of August 3, 1996 and August 2, 1997)
except that the amount shown as the "equity adjustment from
foreign currency translation" on each such consolidated balance
sheet shall be disregarded and the amount of $3,744,000 shall be
the equity adjustment (increase) from foreign currency
translation used to determine stockholders' equity at each such
year-end balance sheet date.
"Net Earnings" means the after-tax consolidated net earnings of
the Company and its subsidiaries as certified by its independent
accountants for inclusion in the annual report to
7
<PAGE> 8
stockholders.
"Return on Equity" means Net Earnings as a percentage of Average
Equity.
For fiscal year 1997, "Zero Bonus Percentage" shall mean a
Return on Equity of 12.5% and "Maximum Bonus Percentage" shall
mean a Return on Equity of 20.0%. For fiscal years after fiscal
1997 the Company shall determine the Zero Bonus Percentage and
the Maximum Bonus Percentage, consistent in each case with
expected results based upon the Company's normal projection
procedures, or based on sound statistical or trend data, and the
determination by the Company of such percentages shall be
conclusive and binding on Executive.
If Return on Equity for the fiscal year in question is the Zero
Bonus Percentage or less, no Formula Bonus Compensation shall be
payable. If Return on Equity equals or exceeds the Maximum Bonus
Percentage, the Formula Bonus Compensation payable to Executive
shall be 42% of his Base Salary. If Return on Equity is more
than the Zero Bonus Percentage and less than the Maximum Bonus
Percentage, the Formula Bonus Compensation shall be increased
from zero percent of Base Salary towards 42% of Base Salary in
the same proportion that Return on Equity increases from the
Zero Bonus
8
<PAGE> 9
Percentage to the Maximum Bonus Percentage. Thus, for example,
if Return on Equity for fiscal 1997 Is 16.25% (the midpoint
between 12.5% and 20.0%) the Formula Bonus Compensation shall be
an amount equal to 21% of Executive's Base Salary (the midpoint
between zero percent of Base Salary and 42% of Base Salary) .
(c) Business Segment Bonus Compensation. Inasmuch as Executive's
services for the Company relate primarily to the operations of a
subsidiary, a division or other segment of the overall
operations of the Company and its subsidiaries (a "Business
Segment"), Executive shall be considered for additional bonus
compensation for each fiscal year based on the results of
operations of such Business Segment for such fiscal year. The
amount of such additional bonus compensation, if any, shall be
determined by the chief executive officer in his sole discretion
but in no event shall such additional bonus compensation exceed
28% of Executive's Base Salary.
(d) The Bonus Compensation shall be paid in installments as follows:
(i) 50% of the estimated amount thereof in July of the fiscal
year with respect to which the Bonus Compensation is
payable (e.g., 50% in
9
<PAGE> 10
July 1997 with respect to Bonus Compensation for the fiscal
year ending August 2, 1997), based on the then current
projections of Return on Equity and results of operations
of Executive's Business Segment, and
(ii) the balance thereof not later than January 15th next
following the end of the fiscal year with respect to which
the Bonus Compensation is payable.
With respect to any fiscal year of the Company which falls in
part but not in whole within the Term of Employment, the Bonus
Compensation to which Executive is entitled under this Section
3(b) and Section 3(c) shall be prorated on the basis of the
number of days of such fiscal year falling within the Term of
Employment except that if the Term of Employment ends within
five days before or after the end of a fiscal year, there shall
be no proration and the Bonus Compensation shall be payable with
respect to the full fiscal year ending within such five-day
period .
(e) Fringe Benefits and Perquisites. During the Term of Employment,
Executive shall enjoy the customary perquisites of office,
including but not limited to office space and furnishings,
secretarial services, expense reimbursements, and any similar
emoluments
10
<PAGE> 11
customarily afforded to senior executive officers of the Company
at the same level as Executive. Executive shall also be entitled
to receive or participate in all "fringe benefits" and employee
benefit plans provided or made available by the Company to its
executives or management personnel generally, such as, but not
limited to, group hospitalization, medical, life and disability
insurance, and pension, retirement, profit-sharing and stock
option or purchase plans.
(d) Vacations. Executive shall be entitled each year to a vacation
or vacations in accordance with the policies of the Company as
determined by the Board or by an authorized senior officer of
the Company from time to time. The Company shall not pay
Executive any additional compensation for any vacation time not
used by Executive.
Section 4. Termination by Reason of Disability, Death, Retirement or Change of
Control
(a) Disability or Death. If, during the Term of Employment,
Executive, by reason of physical or mental disability, is
incapable of performing his principal duties hereunder for an
aggregate of 130 working days out of any period of twelve
consecutive months, the Company at its option may
11
<PAGE> 12
terminate the Term of Employment effective immediately by notice
to Executive given within 90 days after the end of such
twelve-month period. If Executive shall die during the Term of
Employment or if the Company terminates the Term of Employment
pursuant to the immediately preceding sentence by reason of
Executive's disability, the Company shall pay to Executive, or
to Executive's legal representatives, or in accordance with a
direction given by Executive to the Company in writing, the
following: (i) Executive's Base Salary to the end of the month
in which such death or termination for disability occurs and
Executive's Bonus Compensation prorated to said last day of the
month and (ii) for the period from the end of the month in which
such death or termination for disability occurs until the
earlier of (x) the first anniversary of the date of death or
termination and (y) the date on which the Term of Employment
would have ended but for such death or termination for
disability, monthly payments at one-half of the rate of
Executive's Base Salary plus one-half of Executive's Bonus
Compensation (prorated to the last day of such period) which
would have been payable with respect to such period but for such
death or termination.
12
<PAGE> 13
(b) Retirement. (i) The Term of Employment shall end automatically,
without action by either party, on Executive's 65th birthday
unless, prior to such birthday, Executive and the Company have
agreed in writing that the Term of Employment shall continue
past such 65th birthday. In that event, unless the parties have
agreed otherwise, the Term of Employment shall be automatically
renewed and extended each year, as of Executive's birthday, for
an additional one-year term, unless either party has given a
Non-Renewal Notice. A Non-Renewal Notice shall be effective as
of Executive's ensuing birthday only if given not less than 60
days before such birthday, and shall state that the party giving
such notice elects that this Agreement shall not automatically
renew itself further, with the result that the Term of
Employment shall end on Executive's ensuing birthday. (ii) If
the Term of Employment ends pursuant to this paragraph by reason
of a notice given by either party as herein permitted or
automatically at age 65 or any subsequent birthday, the Company
shall pay to Executive, or to another payee specified by
Executive to the Company in writing, Executive's Base Salary and
Bonus Compensation prorated to the date on which the Term of
Employment ends. (iii)
13
<PAGE> 14
Anything hereinabove to the contrary notwithstanding, if any
provision of this paragraph violates federal or applicable state
law relating to discrimination on account of age, such provision
shall be deemed modified or suspended to the extent necessary to
eliminate such violation of law. If at a later date, by reason
of changed circumstances or otherwise, the enforcement of such
provision as set forth herein would no longer constitute a
violation of law, then it shall be enforced in accordance with
its terms as set forth herein.
(c) Change of Control. In event of a Change of Control (as
hereinafter defined), Executive shall have the right to
terminate the Term of Employment, by notice to the Company given
at any time after such Change of Control, effective on the date
specified in such notice, which date shall not be more than (but
can be less than) one year after the giving of such notice. A
Change of Control shall be deemed to have occurred at such time
as a majority of the directors then in office are not Continuing
Directors as defined in subparagraph (C) (6) of Article 12 of
the Company's Restated Certificate of Incorporation dated
November 23, 1993 and filed by the New York Department of State
on December 7, 1993.
14
<PAGE> 15
Section 5. Covenant Not to Compete
For a period of eighteen months after the end of the Term of
Employment if the Term of Employment is terminated by notice to the Company
given by Executive under Section 1 or Section 4 hereof, or for a period of
twelve months after the end of the Term of Employment if the Term of Employment
is terminated by notice to Executive given by the Company under Section 1 or
Section 4 hereof or terminates under Section 4 by reason of Executive attaining
the age of 65, Executive shall not render services to any corporation,
individual or other entity engaged in any activity, or himself engage directly
or indirectly in any activity, which is competitive to any material extent with
the business of the Company or any of its subsidiaries, provided, however, that
if the Company terminates under Section 1 following a Change of Control (as
defined in Section 4(c)), the foregoing covenant not to compete shall not apply.
Section 6. Company's Right to Injunctive Relief
Executive acknowledges that his services to the Company are of a
unique character, which gives them a peculiar value to the Company, the loss of
which cannot be reasonably or adequately compensated in damages in an action at
law, and that therefore, in addition to any other remedy which the Company may
have at law or in equity, the Company shall be
15
<PAGE> 16
entitled to injunctive relief for a breach of this Agreement by Executive.
Section 7. Inventions and Patents
All inventions, ideas, concepts, processes, discoveries, improvements
and trademarks (hereinafter collectively referred to as intangible rights),
whether patentable or registrable or not, which are conceived, made, invented or
suggested either by Executive alone or by Executive in collaboration with others
during the Term of Employment, and whether or not during regular working hours,
shall be disclosed to the Company and shall be the sole and exclusive property
of the Company. If the Company deems that any of such intangible rights are
patentable or otherwise registrable under any federal, state or foreign law,
Executive, at the expense of the Company, shall execute all documents and do all
things necessary or proper to obtain patents and/or registrations and to vest
the Company with full title thereto.
Section 8. Trade Secrets and Confidential Information
Executive shall not, either directly or indirectly, except as
required in the course of his employment by the Company, disclose or use at any
time, whether during or subsequent to the Term of Employment, any information of
a proprietary nature owned by the Company, including but not
16
<PAGE> 17
limited to, records, data, formulae, documents, specifications, inventions,
processes, methods and intangible rights which are acquired by him in the
performance of his duties for the Company and which are of a confidential
information or trade-secret nature. All records, files, drawings, documents,
equipment and the like, relating to the Company's business, which Executive
shall prepare, use, construct or observe, shall be and remain the Company's sole
property. Upon the termination of his employment or at any time prior thereto
upon request by the Company, Executive shall return to the possession of the
Company any materials or copies thereof involving any confidential information
or trade secrets and shall not take any material or copies thereof from the
possession of the Company.
Section 9. Mergers and Consolidations; Assignability
In the event that the Company, or any entity resulting from any
merger or consolidation referred to in this Section 9 or which shall be a
purchaser or transferee so referred to, shall at any time be merged or
consolidated into or with any other entity or entities, or in the event that
substantially all of the assets of the Company or any such entity shall be sold
or otherwise transferred to another entity, the provisions of this Agreement
shall be binding upon and shall inure to the benefit of the continuing entity in
or the entity resulting from such merger or consolidation or the
17
<PAGE> 18
entity to which such assets shall be sold or transferred. Except as provided in
the immediately preceding sentence of this Section 9, this Agreement shall not
be assignable by the Company or by any entity referred to in such immediately
preceding sentence. This Agreement shall not be assignable by Executive, but in
the event of his death it shall be binding upon and inure to the benefit of his
legal representatives to the extent required to effectuate the terms hereof.
Section 10. Captions
The captions in this Agreement are not part of the provisions
hereof, are merely for the purpose of reference and shall have no force or
effect for any purpose whatsoever, including the construction of the provisions
of this Agreement, and if any caption is inconsistent with any provisions of
this Agreement, said provisions shall govern.
Section 11. Choice of Law
This Agreement is made in, and shall be governed by and construed in
accordance with the laws of, the State of New York.
Section 12. Entire contract
This instrument contains the entire agreement of the parties on the
subject matter hereof except that the rights
18
<PAGE> 19
of the Company hereunder shall be deemed to be in addition to and not in
substitution for its rights under the Company's standard printed form of
"Employee's Secrecy and Invention Agreement" or "Employee Agreement" if
heretofore or hereafter entered into between the parties hereto so that the
making of this Agreement shall not be construed as depriving the Company of any
of its rights or remedies under any such Secrecy and Invention Agreement or
Employee Agreement. This Agreement may not be changed orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
Section 13. Notices
All notices given hereunder shall be in writing and shall be sent by
registered or certified mail or delivered by hand, and, if intended for the
Company, shall be addressed to it (if sent by mail) or delivered to it (if
delivered by hand) at its principal office for the attention of the Secretary of
the Company, or at such other address and for the attention of such other person
of which the Company shall have given notice to Executive in the manner herein
provided, and, if intended for Executive, shall be delivered to him personally
or shall be addressed to him (if sent by mail) at his most recent residence
address shown in the Company's employment records or at such other address or to
such
19
<PAGE> 20
designee of which Executive shall have given notice to the Company in the manner
herein provided. Each such notice shall be deemed to be given on the date of
mailing thereof or, if delivered personally, on the date so delivered.
Section 14. Termination of Any Prior Employment Agreement
Any Employment Agreement in effect between the Company and Executive
on the date hereof is hereby terminated by mutual consent effective August 4,
1996 and is superseded and replaced by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PALL CORPORATION
By:_____________________________________
Jeremy Hayward-Surry
President and
Chief Financial Officer
By:_____________________________________
Paul Kohn
Executive
20
<PAGE> 1
EXHIBIT 10.26
Revised Appendix C
PALL CORPORATION
SUPPLEMENTARY PROFIT-SHARING PLAN
As amended and restated
February 15, 1995
<PAGE> 2
PALL CORPORATION
SUPPLEMENTARY PROFIT-SHARING PLAN
This document sets forth the Pall Corporation Supplementary
Profit-Sharing Plan, as amended and restated February 15, 1995. The amendments
reflected in this document are effective as of January 1, 1995. The Plan was
previously amended and restated September 19, 1994, to reflect amendments
effective as of August 1, 1993.
The rights and entitlement to a benefit under the Plan of any person who
terminated employment with any Employer prior to the effective date of a
particular amendment to the Plan shall be determined solely under the terms of
the Plan as in effect on the date of such termination of employment, without
regard to such amendment.
SECTION 1. PURPOSE. The purpose of this Plan is to provide participants
in the Pall Corporation Profit-Sharing Plan (the "Profit Sharing Plan") with
benefits equivalent to those provided under the Profit Sharing Plan, with
respect to that portion of their annual compensation which may not be taken into
account under the Profit Sharing Plan because of the limitation on compensation
contained in section 401 (a) (17) of the Internal Revenue Code.
The Plan is intended to constitute an unfunded plan of deferred
compensation for "a select group of management or highly compensated employees"
within the meaning of sections 201(2), 301(a) (3) and 401(a) (1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
SECTION 2. DEFINITIONS. When used herein, the following terms shall
have the following meanings:
(a) "Account" means the account established for a Participant
hereunder.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Committee" means the Committee appointed by the Board to
administer the Plan.
(e) "Company" means Pall Corporation, a New York corporation.
<PAGE> 3
(f) "Compensation" means "Compensation", as defined in the Profit
Sharing Plan for purposes of Section 3.4 of the Profit Sharing Plan.
(g) "Corresponding PSP Plan Year" means, with respect to any Plan Year,
the plan year of the Profit Sharing Plan that corresponds to such Plan Year.
(h) "Corresponding Valuation Period" means, with respect to any
Valuation Date, the period of time which starts on the day after the immediately
preceding Valuation Date and ends on such Valuation Date.
(i) "Employer" means the Company or any subsidiary of the Company that
has adopted the Profit Sharing Plan.
(j) "Employer Contribution" means "Employer Contribution", as defined
in the Profit Sharing Plan.
(k) "Employer Contribution Account" means the "Employer Contribution
Account", as defined in the Profit Sharing Plan, maintained for a participant
under the Profit Sharing Plan.
(1) "Excess Compensation" means, for any Plan Year, the amount of a
Participant's Compensation for the taxable year of the Employer which ends in
such Plan Year that is in excess of the limitation on Compensation in effect for
such Plan Year under section 401(a) (17) of the Code.
It is provided, however, that for the Short Plan Year, "Excess
Compensation" shall be the amount of a Participant's Compensation paid to the
Participant during such Plan Year in excess of the limitation on Compensation in
effect for such Plan Year under section 401(a) (17) of the Code.
(m) "Participant" means any person (i) who, on or after August 1, 1993,
is employed by an Employer and is a participant in the Profit Sharing Plan, and
(ii) who has had Excess Compensation for any Plan Year beginning on or after
August 1, 1993.
(n) "Plan" means the Pall Corporation Supplementary Profit-Sharing
Plan, as set forth herein and as amended from time to time.
(o) "Plan Year" means, after July 31, 1993, the 5-consecutive month
period beginning on August 1, 1993 and ending on December 31, 1993 (the "Short
Plan Year"), and, thereafter, each calendar year.
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<PAGE> 4
(p) "Profit Sharing Plan" means the Pall Corporation Profit-Sharing
Plan, as amended from time to time.
(q) "Termination of Service" means the termination of a Participant's
employment with all Employers.
(r) "Valuation Date" means (i) for the Short Plan Year, the last
business day of October and December of such year and (ii) after December 31,
1993, the last business day of the third, sixth, ninth and twelfth months during
a Plan Year.
SECTION 3. SUPPLEMENTAL PROFIT SHARING BENEFIT.
3.1 The Benefit. As of the last day of each Plan Year beginning on or
after August 1, 1993, each Participant's Account shall be credited with an
amount equal to (a) the Participant's Excess Compensation for such year,
multiplied by (b) a fraction, the numerator of which is the aggregate amount of
Employer Contributions allocated to all Employer Contribution Accounts with
respect to the Corresponding PSP Plan Year, and the denominator of which is the
aggregate amount of Compensation taken into account in making such allocation.
For the purpose of the preceding sentence, the aggregate amount of Employer
Contributions so allocated shall be determined without regard to the reduction
made from the Employer Contributions for amounts described in clause (b) (3) of
the second paragraph of Section 3.4 of the Profit Sharing Plan.
Notwithstanding the foregoing, no amount shall be allocated to the
Account of a Participant for the Plan Year in which the Participant's
Termination of Service occurs, unless the Participant is entitled to have a
portion of the Employer Contributions made to the Profit Sharing Plan for the
Corresponding PSP Plan Year allocated to his or her Profit Sharing Plan Account
for such year.
SECTION 4. ACCOUNTS, EARNINGS AND VESTING.
4.1. Accounts. The Committee shall establish and maintain, or cause to
be established and maintained, a separate memorandum Account for each
Participant. A Participant's Account shall be adjusted from time to time to
reflect the amounts to be credited to such Account under Section 3.1, the
amounts to be credited or charged to such Account under Section 4.2, and amounts
distributed to the Participant or his or her Beneficiary under Section 5.1.
4.2. Earnings. As of each Valuation Date occurring after August 1,
1993, each Participant's Account shall be credited, or charged, with an amount
determined by multiplying (a)
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<PAGE> 5
the balance of Buch Accounts as of the immediately preceding Valuation Date, by
(b) the Earnings Adjustment Factor for such Valuation Date. The Earnings
Adjustment Factor for any Valuation Date shall be a fraction. The numerator of
such fraction shall be the amount of the earnings or losses that would have
resulted during the Corresponding Valuation Period for such Valuation Date if,
on the first day of such period, an amount equal to the balance of the
Participant's Employer Contribution Account as of the immediately preceding
Valuation Date had been invested in the Fidelity Asset Manager fund. The
denominator of such fraction shall be the balance of the Participant's Employer
Contribution Account as of the immediately preceding Valuation Date. If the
numerator of the Earnings Adjustment Factor for any Valuation Date is a negative
amount, the adjustment to be made to the Participant's Account pursuant to this
Section 4.2 as of such Valuation Date shall be a charge to such Account.
In the case of any Participant who had a balance to his credit in his
Account as of July 31, 1993, such date shall be treated as the Valuation Date
immediately preceding the Valuation Date occurring in October of 1993, for
purposes of determining the amount to be credited or charged to such
Participant's Account under this Section 4.2 as of the October, 1993 Valuation
Date.
4.3. Vesting. As of any date of reference or upon the occurrence of any
event, a Participant shall have a vested interest in the same percentage of his
or her Account as the vested percentage the Participant has in his or her
Employer Contribution Account on such date or by reason of the occurrence of
such event.
Notwithstanding any other provision herein to the contrary, if a
Participant does not have a 100% vested interest in his or her Account at the
time of the Participant's Termination of Service (and does not acquire a 100%
vested interest in his or her Account by reason of the circumstances of his or
her Termination of Service), the nonvested portion of the Participant's Account
shall be forfeited, and shall not be distributed to the Participant pursuant to
Section 5.
SECTION 5. PLAN DISTRIBUTIONS.
5.1 Distributions. A Participant's Account balance shall become
distributable to the Participant or his or her Beneficiary, as the case may be,
upon the Participant's Termination of Service, for any reason. Distribution
shall be made in accordance with the following rules:
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<PAGE> 6
(a) Commencement of Distributions. Distributions hereunder shall be
made on the 60th day after the Valuation Date next following the Participant's
Termination of Service.
(b) Form and Amount of Distributions. Distributions hereunder shall be
made in the form of a single lump-sum payment, in an amount equal to the
Participant's vested percentage of the balance of his or her Account as of the
Valuation Date immediately preceding the date as of which the distribution is to
be made.
(c) Participant's Death. If the Participant dies prior to his or her
Termination of Service, or following his or her Termination Service but prior to
the distribution of his or her Account, the Participant's Account shall be
distributed to the Participant's Beneficiary. The Participant's "Beneficiary"
shall be the person(s) designated by the Participant to receive any amount
distributable hereunder by reason of his or her death, as indicated in the last
written designation of a Beneficiary filed by such Participant with the
Committee prior to such Participant's death. If a Participant has failed to
designate a Beneficiary, or if no Beneficiary designated by the Participant
survives to receive any amount distributable hereunder upon the Participant's
death, the following will be deemed to be such Participant's Beneficiary with
priority in the order named: (1) his or her spouse; and (2) his or her estate.
(d) Special Rule for Amounts Credited to a Participant's Account After
a Distribution. If a distribution is made to or on behalf of any Participant by
the Plan pursuant to this Section 5, and if any amount is credited to such
Participant's Account after such distribution has been made, then the portion of
the amount so credited in which the Participant is vested shall be paid to the
Participant, or, if the Participant has died, to his Beneficiary (as determined
in subsection (c)), in a single lump-sum payment, within 30 days of the later of
(1) the date as of which the amount is so credited, or (2) the date on which the
Committee determines that such amount is to be so credited.
SECTION 6. SOURCE OF PAYMENT. All payments to be made hereunder shall
be paid from the general assets of the Company, and no special or separate fund
shall be established and no segregation of assets shall be made to assure such
payments. Nothing contained in the Plan, and no action taken pursuant to the
provisions of the Plan, shall create or be construed to create a trust of any
kind, or as creating in any Participant or Beneficiary any right, title or
beneficial ownership interest in or to any assets of the Company. The Plan
constitutes a mere promise by the Company to make benefit payments in the
future. It is the intention of the Company that the Plan be treated as
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<PAGE> 7
unfunded for Federal income tax purposes and for purposes of Title I of ERISA.
To the extent that any person acquires a right to receive payments from the
Company under the Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company.
Notwithstanding the foregoing, the Company may establish a bookkeeping
reserve to reflect its obligations hereunder, or may establish a "grantor"
trust, within the meaning of sections 671 through 679 of the Code, to assist it
in making the payments provided for hereunder; provided, however, that any
bookkeeping reserve, and the assetS of any trust, so established shall not be
deemed to constitute assets of this Plan, and the assets of any trust so
established shall at all times prior to payment to Participants or their
beneficiaries remain a part of the general assets of the Company and subject to
the claims of the Company's general creditors.
SECTION 7. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Committee, which shall have full power and authority to interpret and
construe the Plan, to make all determinations considered necessary or advisable
for the administration of the Plan and the calculation of the amounts creditable
and payable thereunder, and to review claims for benefits under the Plan. The
Committee's interpretations and constructions of the Plan and its decisions or
actions thereunder shall be binding and conclusive on all persons for all
purposes.
No member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith, and the Company shall indemnify and hold harmless each
member of the Committee and each other employee, officer, or director of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan may be allocated or delegated, against any cost or
expense (including counsel fees) or liability (including any sum paid in
settlement of a claim) arising out of any act or omission to act in connection
with the Plan unless arising out of such person's own fraud or bad faith.
SECTION 8. AMENDMENT AND TERMINATION. The Plan may be amended,
suspended or terminated, in whole or in part, by the Board without the consent
of any Participant or any other person. The Committee may adopt any amendment
that may be necessary or appropriate to facilitate the administration,
management and interpretation of the Plan or to conform the Plan thereto,
provided any such amendment does not have a material effect on the currently
estimated cost to the Company of maintaining the Plan. No such amendment,
suspension or termination shall retroactively
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<PAGE> 8
impair or otherwise adversely affect the rights of any Participant or other
person to benefits under the Plan that have accrued prior to the date of such
action as determined by the Committee in its sole discretion.
SECTION 9. GENERAL PROVISIONS. The following additional provisions
shall be applicable with respect to the Plan.
(a) The Plan shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and Participants, beneficiaries, and
their estates. The Plan shall also be binding upon any successor corporation or
organization succeeding to substantially all of the assets and business of the
Company, but nothing in the Plan shall preclude the Company from merging or
consolidating into or with, or transferring all or substantially all of its
assets to, another corporation or organization that assumes the Plan and all
obligations of the Company hereunder. The Company agrees that it will make
appropriate provision for the preservation of Participants' rights under the
Plan in any agreement or plan that it may enter into to effect any merger,
consolidation, reorganization or transfer of assets. Upon such a merger,
consolidation, reorganization or transfer of assets and assumption, the term
"Company" shall refer to such other corporation or organization and the Plan
shall continue in full force and effect.
(b) Neither the Plan nor any action taken hereunder shall be construed
as giving to any Participant the right to be retained in the employ of any
Employer or as affecting the right of any Employer to dismiss any Participant.
(c) The Company shall withhold from all amounts otherwise payable under
the Plan all Federal, state, local or other taxes required pursuant to law to be
withheld with respect to such payments.
(d) The rights or interests of any Participant under the Plan are not
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by the Participant's creditors
or beneficiary.
(e) The Plan shall be governed by the laws of the State of New York
from time to time in effect.
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<PAGE> 1
EXHIBIT 10.28(a)
PALL CORPORATION
PROFIT-SHARING PLAN
as amended and restated
October 25, 1995
EXHIBIT A
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - DEFINITIONS ........................................... 1
1.1. "Accounts" or "Plan Accounts" ......................... 1
1.2. "Beneficiary" ......................................... 1
1.3. "Break in Service" .................................... 1
1.4. "Code" ................................................ 2
1.5. "Committee" ........................................... 2
1.6. "Company" ............................................. 2
1.7. "Compensation" ........................................ 2
1.8. "Disabled" ............................................ 3
1.9. "Earnings" ............................................ 3
1.10. "Employee" ............................................ 3
1.11. "Employer" ............................................ 3
1.12. "Employer Contribution Account" ....................... 3
1.13. "Employer Contributions" .............................. 3
1.14. "Employment Commencement Date" ........................ 3
1.15. "ERISA" ............................................... 4
1.16. "401(k) Contribution Account" ......................... 4
1.17. "401(k) Contributions" ................................ 4
1.18. "Highly Compensated Employee" ......................... 4
1.19. "Hours of Service" .................................... 4
1.20. "Leave" ............................................... 7
1.21. "Member" .............................................. 7
1.22. "Mutual Fund" ......................................... 7
1.23. "Normal Retirement Age" ............................... 7
1.24. "Plan". . ............................................. 7
1.25. "Plan Year" ........................................... 7
1.26. "Reemployment Commencement Date" ...................... 9
1.27. "Rollover Account" .................................... 9
1.28. "Service" ............................................. 9
1.29. "Termination of Service" .............................. 9
1.30. "Trust" ............................................... 9
1.31. "Trust Agreement" ..................................... 9
1.32. "Trust Fund" .......................................... 9
1.33. "Trustee" . . ......................................... 9
1.34. "Vested Portion" ...................................... 9
1.35. "Voluntary Contribution Account" ...................... 11
1.36. "Voluntary Contributions" ............................. 11
1.36. "Years of Service" .................................... 11
ARTICLE 2 - PURPOSE, ELIGIBILITY AND PARTICIPATION ................ 11
2.1. Purpose ............................................... 11
2.2. Eligibility ........................................... 11
2.3. Commencement of Membership ............................ 12
2.4. Membership After Reemployment ......................... 12
2.5. Asset and Stock Acquisitions .......................... 12
</TABLE>
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<PAGE> 3
ARTICLE 3 - CONTRIBUTIONS AND ROLLOVERS ........................... 12
3.1. 401(k) Contributions .................................. 12
3.2. Voluntary Contributions ............................... 13
3.3. Elections ............................................. 13
3.4. Employer Contributions ................................ 14
3.5. Time and Manner ....................................... 15
3.6. Rollovers ............................................. 16
ARTICLE 4 - LIMITATIONS ON CONTRIBUTIONS .......................... 17
4.1. Dollar Limit for 401(k) Contributions ................. 17
4.2. Nondiscrimination Test for 401(k) Contributions ....... 17
4.3. Nondiscrimination Test for Voluntary Contributions .... 18
4.4. Special Rules for Nondiscrimination Tests. ............ 19
4.5. Deduction Limit ....................................... 20
4.6. Section 415 Limits .................................... 20
4.7. Adjustments ........................................... 22
4.8. Corrective Distributions .............................. 22
ARTICLE S - PLAN ACCOUNTS, ALLOCATIONS AND FORFEITURES ............ 26
5.1. Plan Accounts ......................................... 26
5.2. Forfeitures. .......................................... 27
ARTICLE 6 - INVESTMENTS AND EARNINGS .............................. 28
6.1. Investment of Accounts ................................ 28
6.2. Investment Elections .................................. 29
6.3. Determination of Earnings ............................. 31
6.4. Voting Rights ......................................... 32
ARTICLE 7 - DISTRIBUTIONS, WITHDRAWALS AND LOANS .................. 32
7.1. Distributions ......................................... 32
7.2. Hardship Withdrawals .................................. 38
7.3. In-Service Withdrawals ................................ 40
7.4. Direct Rollovers ...................................... 41
7.5. Loans ................................................. 41
ARTICLE 8 - PLAN ADMINISTRATION ................................... 45
8.1. Responsibility for Administering the Plan. ............ 45
8.2. Responsibilities of the Committee ..................... 46
8.3. Duties and Powers of the Committee .................... 47
8.4. Reimbursement and Indemnification of the
Committee ............................................. 49
8.5. Responsibilities of the Trustee ....................... 49
8.6. Responsibilities of the Company's Board of
Directors ............................................. 50
8.7. Claims Procedure ...................................... 50
8.8. Agent for Service of Process .......................... 51
8.9. Expenses .............................................. 51
ARTICLE 9 - AMENDMENT, MERGER AND TERMINATION ..................... 51
9.1. Amendment ............................................. 51
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<PAGE> 4
9.2. Merger or Consolidation . ............................. 51
9.3. Termination . ......................................... 52
9.4. Termination of An Employer's Participation in
the Plan .......................................... 54
ARTICLE 10 - TOP-HEAVY PROVISIONS ................................. 54
10.1. General ............................................... 54
10.2. Minimum Benefit ....................................... 54
10.3. Minimum Vesting ....................................... 55
10.4. Maximum Compensation .................................. 56
10.5. Section 415 Limits .................................... 56
10.6. Definitions ........................................... 56
10.7. Applicability ......................................... 58
ARTICLE 11 - MISCELLANEOUS ........................................ 58
11.1. Plan Assets to be Held for Exclusive Benefit of
Members ............................................... 58
11.2. Nonassignability of Rights ............................ 59
11.3. Qualified Domestic Relations Orders ................... 59
11.4. Trust Fund as Sole Source of Benefit Payments ......... 59
11.5. Right to Employment ................................... 59
11.6. Gender and Number ..................................... 59
11.7. Titles ................................................ 59
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<PAGE> 5
PALL CORPORATION
PROFIT-SHARING PLAN
Foreword
This document sets forth the Pall Corporation Profit-Sharing Plan, as
amended and restated October 25, 1995.
The amendments to the Plan reflected in this document are effective as
of January 1, 1995, except as otherwise indicated in the text of the Plan.
The Plan was previously amended and restated September 19, 1994 (the "Prior
Document"). The amendments to the Plan reflected in the Prior Document are
effective as of August 1, 1993, except as otherwise indicated in the text of the
Plan.
The Plan was also previously amended and restated August 1, 1993 (the
"Second Prior Document"). The amendments to the top-heavy provisions of the
Plan reflected in Article 10 of the Second Prior Document are effective as of
August 1, 1985. The amendment to the definition of "Code" reflected in Section
1.4 of the Second Prior Document, and the amendment adding a definition of
"Highly Compensated Employees" to the Plan reflected in Section 1.18 of the
Second Prior Document, are effective as of August 1, 1987. The amendments to the
provisions setting forth the limitations of Section 415 of the Code reflected in
Section 4.6 of the Second Prior Document are effective as of August 1, 1987. The
amendments relating to the limitations on Voluntary Contributions, and the
amendments which add to the Plan procedures to ensure compliance with such
limitations, reflected in Sections 4.3, 4.4, 4.7 and 4.8 of the Second Prior
Document are effective as of August 1, 1987. The amendment to the definition of
the "Normal Retirement Age" reflected in Section 1.22 of the Second Prior
Document is effective as of August 1, 1988, with respect to any Employee who
earns at least one Hour of Service on or after that date. The amendment which
requires that a Member be furnished with a notice describing his right to defer
a distribution reflected in Section 7.1(d)(2) of the Second Prior Document is
effective as of August 1, 1988. The amendments which eliminate the Committee's
discretion as to the form and timing of distributions reflected in Article 7 of
the Second Prior Document are effective as of August 1, 1989. Each of the other
amendments to the Plan reflected in the Second Prior Document is effective as of
August 1, 1993, except as otherwise indicated in the text of the Plan.
The rights under the Plan of any person who retired or otherwise
terminated employment with his or her employer before
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<PAGE> 6
the effective date of a particular amendment shall be determined solely under
the terms of the Plan as in effect on the date of his or her retirement or other
termination of employment, without regard to such amendment.
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<PAGE> 7
ARTICLE 1 - DEFINITIONS
As used herein, the following terms shall have the following
meanings, unless a different meaning is required by the context:
1.1. "Accounts" or "Plan Accounts" - shall mean the
separate accounts established and maintained for a Member
pursuant to Section 5.1.
1.2. "Beneficiary" - shall mean the person or persons designated
by a Member to receive any amount distributable under Section 7.1 by reason of
his death, as indicated in the last written designation of a Beneficiary filed
by such Member with the Committee, on a form furnished by the Committee for
such purpose, prior to such Member's death.
Notwithstanding the foregoing, if a Member who was married at
the date of his death, and who had been married to his spouse throughout the
one-year period ending on the date of his death, had designated any person other
than such spouse as his Beneficiary, such Member shall be deemed to have failed
to designate a Beneficiary unless such spouse consents to the designation of
such non-spouse Beneficiary. Said spousal consent shall be made in writing,
shall specifically identify the person designated as the Member's Beneficiary,
and shall acknowledge the effect of the spouse's consent to such designation on
her rights to benefits under the Plan. Further, such consent shall be signed by
the spouse, witnessed by a notary public and filed with the Committee. The
consent of a spouse to any designation of a non-spouse Beneficiary shall be
irrevocable as to such designation, and shall be effective only with respect to
that spouse. However, the consent of a Member's spouse to the Member's
designation of a non-spouse Beneficiary shall not be required if it is
established to the satisfaction of the Committee that such consent cannot be
obtained because there is no spouse, because the spouse cannot be located, or
because of such other circumstances as may be prescribed in the applicable
Treasury regulations or in rulings or notices issued by the Internal Revenue
Service.
If a Member has failed (or is deemed above to have failed) to
designate a Beneficiary, or if no Beneficiary designated by him survives to
receive any amount distributable hereunder upon the Member's death, the
following person or persons will be deemed to be such Member's Beneficiary with
priority in the order named: (a) his spouse; and (b) his estate .
1.3. "Break in Service" - shall mean a period consisting of
one or more consecutive Plan Years during each
<PAGE> 8
of which an Employee has not completed more than 500 Hours of Service. A
"5-year Break in Service" shall mean a Break in Service which includes five or
more consecutive Plan Years during each of which the Employee has not completed
more than 500 Hours of Service.
1.4. "Code" - shall mean the Internal Revenue Code
of 1986, as amended from time to time.
1.5. "Committee" - shall mean the committee established by
the Board of Directors of the Company under Section 8.6(b) to control and manage
the operation and administration of the Plan.
1.6. "Company" - shall mean Pall Corporation.
1.7. "Compensation" - For any Plan year beginning after July 31,
1993, an Employee's Compensation shall mean the sum, for the Plan Year, of (a)
the amount of the Employee's gross income reported on Form W-2 by the Employer
and (b) the 401(k) Contributions made on behalf of the Employee by the Employer,
and the amounts contributed by the Employer, at the Employee's election, on
behalf of the Employee to a "cafeteria plan", within the meaning of Section 125
of the Code. Provided, however, that for purposes of Section 4.6(a)(2), for any
such Plan year, Compensation shall be defined as under the preceding sentence
except that amounts described in clause (b) thereof shall not be included in
Compensation. Provided further, however, that for purposes of Section 3.4, for
any such Plan year beginning after December 31, 1993, an Employee's Compensation
shall mean the sum of the base pay, prior to reduction for the amounts described
in clause (b) above, bonuses and overtime pay paid by the Employer to the
Employee during the taxable year of the Employer which ends in such Plan Year.
For the Plan Year ending December 31, 1993, for purposes of Section 3.4, an
Employee's Compensation shall mean the sum described in the preceding sentence
paid by the Employer to the Employee during such Plan Year.
For any Plan Year beginning before August 1, 1993, an Employee's
Compensation shall mean the amount paid by the Employer to the Employee during
such Plan Year, without reduction for amounts contributed by the Employer on the
Employee's behalf to a cafeteria plan (as defined above), including overtime pay
and bonuses but excluding the value of stock options and contributions by the
Employer to any employee benefit plan other than a cafeteria plan. Provided,
however, that for the purposes of Sections 1.18, 4.3 and 4.6(a)(2), for Plan
Years beginning before August 1, 1993, Compensation shall be defined as under
Section 415(c)(3) of the Code, as in effect for such
-2-
<PAGE> 9
periods, modified, when determining Compensation for purposes of Section 1.18,
as required by Section 414(q) (7) of the Code.
For any Plan Year, the amount of Compensation taken into account
under the Plan for any Employee shall not exceed the limitation on such amount
imposed by Section 401 (a) (17) of the Code in effect for such Plan Year,
determined in accordance with the applicable Treasury regulations. In
determining the Compensation of an Employee for purposes of the Section 401 (a)
(17) limitation, the rules of Section 414(q) (6) of the Code shall apply, except
in applying such rules, the term "family" shall include only the spouse of the
Employee and any lineal descendants of the Employee who have not attained age 19
before the close of the Plan Year. If, as a result of the application of such
rules, the Section 401 (a) (17) limitation is exceeded, then such limitation
shall be prorated among each affected individual's Compensation in proportion to
such individual's Compensation determined under this Section 1.7 prior to the
application of such limitation.
1.8. "Disabled" - The term "Disabled" shall have the meaning
assigned to it under Section 72(m) (7) of the Code.
1.9. "Earnings" - shall mean the Earnings attributable to the
investment of a Member's 401(k) Contribution Account, Voluntary Contribution
Account, Employer Contribution Account or Rollover Account, as determined under
Section 6.3 hereof.
1.10. "Employee" - shall mean an individual who is employed as a
common law employee by the Employer.
The term "Employee" shall not include any individual who is a
"leased employee" within the meaning of Section 414(n) (2) of the Code.
1.11. "Employer" - shall mean the Company or any other entity
described in Section 1.19(f) (2), (3) or (4) which has adopted this Plan.
1.12. "Employer Contribution Account" - shall mean the separate
account established and maintained for a Member under Section 5.1 to hold
Employer Contributions and the Earnings thereon.
1.13. "Employer Contributions" - shall mean the contributions
described in Section 3.4.
1.14. "Employment Commencement Date" - shall mean
the date on which an Employee first performs an Hour of
Service .
-3-
<PAGE> 10
1.15. "ERISA" - shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
1.16. "401(k) Contribution Account" - shall mean the separate
account established and maintained for a Member under Section 5.1 to hold 401(k)
Contributions and the Earnings thereon.
1.17. "401(k) Contributions" - shall mean the contributions
described in Section 3.1.
1.18. "Highly Compensated Employee" - shall mean an individual
who is described in Section 414(q) of the Code and the applicable Treasury
regulations. In general, for any Plan Year, a Highly Compensated Employee is any
Employee who is in Service during such Plan Year, and who, during such Plan Year
or the immediately preceding Plan Year, either:
(a) was, at any time, a five-percent owner, as defined in
Section 416(i) (1) (B) (i) of the Code,
(b) received Compensation in excess of $75,000, as adjusted
for such year under Section 415(d) of the Code,
(c) received Compensation in excess of $50,000, as adjusted
for such year under Section 415(d) of the Code, and was in the top-paid
group of employees, as defined in Section 414(q) (4) of the Code, for
such year, or
(d) was, at any time, an officer, subject to the rules and
limitations on the number of officers contained in Section 414(q) (5)
of the Code, and received Compensation greater than 50 percent of the
limitation in effect for such year under Section 415(b) (1) (A) of the
Code.
In applying the preceding sentence, if an Employee is not
described in (b), (c) or (d) above for the Plan Year immediately preceding the
Plan Year in question, such Employee shall not be treated as being described in
(b), (c) or (d) for the Plan Year in question unless such Employee is a member
of the group consisting of the 100 Employees with the highest Compensation for
the Plan Year in question.
1.19. "Hours of Service" - an Employee shall be credited with
Hours of Service in accordance with the following rules:
(a) Work Performed. An Employee shall be cred-
ited with one Hour of Service for each hour for which he is
paid, or entitled to payment, by the Employer for the performance of
duties for the Employer.
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<PAGE> 11
(b) Paid Absences. An Employee shall be credited with one Hour
of Service for each hour for which he is paid, or entitled to payment, by the
Employer for a period of time during which no duties are performed by him
(irrespective of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including Disability), lay-off, jury
duty or military duty. For this purpose, a payment shall be deemed to be made by
or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or indirectly through, among others, a trust fund,
insurer, or other entity to which the Employer contributes or pays premiums and
regardless of whether contributions made or due to the trust fund, insurer or
other entity are for the benefit of particular Employees or are on behalf of a
group of Employees in the aggregate. However, no Hours of Service shall be
credited hereunder with respect to (1) hours for which an Employee receives
payment under a plan maintained solely for the purpose of complying with
applicable workmen's compensation, unemployment compensation, or disability
insurance laws, or (2) hours for which an Employee receives a payment which
solely reimburses him for medical or medically-related expenses incurred by him.
No more than 501 Hours of Service shall be credited hereunder to an Employee on
account of any single continuous period during which he performs no duties
whether or not such period occurs within a single Plan Year.
(c) Back Pay. An Employee shall be credited with one Hour of
Service for each hour for which back pay, irrespective of mitigation of damages,
is awarded or agreed to by the Employer. However, no Hours of Service shall be
credited hereunder if they are credited to the Employee under subsection (a) or
(b) above. Furthermore, crediting of Hours of Service hereunder for periods
described in subsection (b) above shall be subject to the limitations therein
set forth.
(d) Special Rules for Crediting Hours of Service. Hours of
Service to be credited under subsection (b) above, and the periods to which
Hours of Service are to be credited under subsections (a), (b) and (c) above,
shall be determined under the rules set forth in Section 2530.200b-2(b) and (c)
of the regulations issued by the U.S. Department of Labor, as the same may be
amended from time to time.
(e) Paid Leave. In the case of any Employee who incurs any paid
Leave, the Employee shall be credited, for the period during which he is on such
Leave, with the number of Hours of Service which otherwise normally would have
been credited to such Employee for such period under the Plan but for such
Leave, as determined by the Committee. However, no Hours of Service shall be
credited under this subsection (e)
-5-
<PAGE> 12
if they are credited to the Employee under subsection (b) above.
(f) Aggregation Requirement. For the purpose of counting Hours
of Service, the term "Employer" shall mean (1) the Company; (2) any corporation
which is treated, under Section 414(b) of the Code, as a member of a controlled
group of corporations of which the Company is also a member; (3) any trade or
business (whether or not incorporated) which is treated, under Section 414(c) of
the Code, as belonging to a group of trades or businesses under common control,
and which includes the Company; (4) any other entity which, under Section 414(m)
or 414(o) of the Code, is included, along with the Company, in a group of
employers, the employees of which are treated as employed by a single employer.
(g) Employees Exempt From the Fair Labor Standards Act. In the
case of any Employee who is not covered by the Fair Labor Standards Act, in lieu
of being credited with Hours of Service in the amount and in the manner
described in subsections (a) through (f) above, such Employee shall be credited
with 45 Hours of Service for each week for which he would otherwise be credited
with at least one Hour of Service under subsections (a) through (f) above.
(h) Maternity or Paternity Absence. Solely for purposes of
determining whether an Employee has incurred a Break in Service by reason of a
Maternity or Paternity Absence, such Employee shall be credited, during such
absence, with the same number of Hours of Service which otherwise normally would
have been credited to such Employee but for such absence, as determined by the
Committee. Notwithstanding the foregoing, the total number of hours so credited
by reason of any such Maternity or Paternity Absence shall not exceed 501 hours.
Hours to be credited hereunder shall be credited only in the Plan Year in which
the Maternity or Paternity Absence begins, if the Employee would be prevented
from incurring a Break in Service in such Plan Year solely because of the
operation of this subsection (h); otherwise, such Hours of Service shall be
credited in the immediately following Plan Year. For purposes of this
subsection (h), Maternity or Paternity Absence shall mean any period during
which an Employee is absent from work by reason of the Employee's pregnancy, the
birth of a child of the Employee, the placement of a child with the Employee in
connection with the Employee's adoption of such child, or the Employee's
providing care for such child for a period beginning immediately following such
birth or placement. This subsection (h) shall not apply to any Maternity or
Paternity absence which is a paid Leave.
-6-
<PAGE> 13
(i) FMLA Absence. Solely for purposes of determining whether an
Employee has incurred a Break in Service by reason of a leave of absence taken
under the Family Medical Leave Act of 1993 (an "FMLA Absence"), such Employee
shall be credited, for the period during which he is taking the FMLA Absence,
with the same number of Hours of Service which otherwise normally would have
been credited to such Employee but for such absence, as determined by the
Committee. This subsection (i) shall not apply to any FMLA Absence which is a
paid Leave.
1.20. "Leave" - shall mean any period during which an Employee
is absent pursuant to an authorized leave of absence, approved by the Employer
on a non-discriminatory basis under rules uniformly applicable to all Employees.
similarly situated, for a period not to exceed two years.
1.21. "Member" - shall mean (a) any Employee on August 1, 1987
who was participating in the Plan on July 31, 1987 and (b) any other Employee
whose membership in the Plan commences, or resumes, on or after August 1, 1987.
An Employee who is or becomes a Member, as so defined, shall cease to be a
Member, as. that term is used herein, on the date which is the later of (1) the
date on which he incurs a Termination of Service or (2) the date on which there
is no balance to his. credit in his Plan Accounts.
1.22. "Mutual Fund" - shall mean any fund or portfolio
maintained by any open-end investment company registered under the Investment
Company Act of 1940.
1.23. "Normal Retirement Age" - shall mean age 65.
1.24. "Plan" - shall mean the Pall Corporation Profit-Sharing
Plan, as. set forth in this document and as the same may be amended from time to
time.
1.25. "Plan Year" - shall mean the calendar year.
Notwithstanding the above, prior to August 1, 1993, the Plan
Year shall be the 12-consecutive month period commencing on each August 1 and
ending on the following July 31. In addition, there shall be a short Plan Year
commencing on August 1, 1993 and ending on December 31, 1993.
For purposes of the short Plan Year, the following special
provisions shall apply:
(a) "208 Hours of Service" shall be substituted for "500 Hours
of Service" in Section 1.3, and "416 Hours
-7-
<PAGE> 14
of Service" shall be substituted for "1,000 Hours of Service" in
Section 1.37(a).
(b) "$83,333" shall be substituted for "$200,000" in Sections
1.7 and 10.6(e).
(c) "12,500" shall be substituted for "$30,000" in Section
4.6(a) (1).
(d) "20%" shall be substituted for "15%" wherever "15%"
appears in Sections 3.1 and 3.2.
(e) An Employee who completes at least 1,000 Hours of Service
during both the period commencing on August 1, 1993 and ending on July
31, 1994 and the period commencing on January 1, 1994 and ending on
December 31, 1994 shall be credited with at least two Years of Service
with respect to his Service during those two periods.
(f) For the short Plan Year, a Highly Compensated Employee is
any Employee who is in Service during such year, and who either (1) is
described in (a), (b), (c) or (d) in Section 1.18 for the
12-consecutive month period commencing on August 1, 1992 and ending on
July 31, 1993 or (2) both (i) for the period commencing August 1, 1993
arid ending December 31, 1993 is an Employee described in (a), (b), (c)
or (d) of Section 1.18, determined by multiplying the applicable
dollar amounts set forth therein by 5/12 and (ii.) unless he is
described in (a) of Section 1.18 for such period, belongs to the group
consisting of the 100 Employees with the highest Compensation for such
year .
In addition to the foregoing, for the purpose of identifying
the Highly Compensated Employees under Section 1.18 for the Plan Year
beginning January 1, 1994, the calendar year beginning January 1, 1993
shall be treated as the "immediately preceding Plan Year", and
"Compensation" for such calendar year shall be defined as under Section
414(q) (7) of the Code.
(g) For the Plan Year beginning on January 1, 1994, a Member
who was in Service on July 31, 1993 shall be treated as having
satisfied the six consecutive month Service requirement of Section 3.4.
(h) Any 401(k) Contributions to which the second paragraph of
Section 3.3(b) applies shall be treated as being made for the short
Plan Year.
-8-
<PAGE> 15
(i) Except as provided in (a) through (h) above, the short
Plan Year shall be treated as any other Plan Year.
1.26. "Reemployment Commencement Date" - shall mean the date on
which an Employee first performs an Hour of Service upon his return to Service
after a Termination of Service .
1.27. "Rollover Account" - shall mean the separate account
established and maintained for a Member under Section 5.1 to hold Rollover
Contributions and the Earnings thereon.
1.28. "Service" - shall mean employment with the Employer or any
other entity described in Section 1.19(f) (2), (3) or (4).
1.29. "Termination of Service" - An Employee shall be treated as
having incurred a Termination of Service on the first date as of which he is no
longer in the employ of the Employer or any other entity described in Section
1.19(f) (2), (3) or (4)d . An Employee shall not be treated as having incurred a
Termination of Service as a result of his absence from work unless such absence
is due to his resignation, discharge, retirement or death. However, an Employee
who is on a Leave shall be treated as having incurred a Termination of Service
(and as having ceased to be an Employee) (a) as of the expiration of such Leave,
unless prior to such expiration he resumes his active employment with the
Employer, or (b) at such earlier time as he notifies, in writing, the Employer
that he does not intend to resume his active employment with the Employer at the
expiration of such Leave.
1.30. "Trust" - shall mean the trust, created pursuant to a
trust agreement between the Company and the Trustee, which holds the assets of
the Plan.
1.31. "Trust Agreement" - shall mean the agreement, between the
Company and the person named as trustee therein, setting forth the provisions of
the trust associated with this Plan.
1.32. "Trust Fund" - shall mean the assets of the Plan held in
trust, pursuant to the Trust Agreement.
1.33. "Trustee" - shall mean the person named as trustee in the
Trust Agreement.
1.34. "Vested Portion" - shall mean the portion of a Member's
Account or Accounts in which the Member is vested, determined in accordance with
the rules set forth below.
-9-
<PAGE> 16
(a) Employer Contribution Account. A Member shall become vested
in his. Employer Contribution Account in accordance with the schedule below
which applies to him:
(1) For an individual who becomes a Member on or
after August 1, 1989:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
less than 5 0
5 or more 100
</TABLE>
(2) For an individual who became a Member prior to August 1,
1989 and who earns at least one Hour of Service on or after August 1, 1989:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
less than 2 0
2 20
3 30
4 40
5 or more 100
</TABLE>
(3) For a Member not described in (1) or (2) above:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
less than 2 0
2 20
3 30
4 40
S 50
6 60
7 70
8 80
9 90
10 or more 100
</TABLE>
Notwithstanding the schedule above which applies to a Member, a Member shall be
100% vested in his Employer Contribution Account if (i) while he is in Service,
he attains Normal Retirement Age or a higher age, dies or becomes Disabled, or
(ii) he is employed at the Pall well technology division on July 27, 1995, and
incurs a Termination of Service after such date .
-10-
<PAGE> 17
(b) Other Plan Accounts. A Member shall, at all times, be 100%.
vested in his 401(k) Contribution Account, his Voluntary Contribution Account
and his Rollover Account.
1.35. "Voluntary Contribution Account" - shall mean the separate
account established and maintained for a Member under Section 5.1 to hold
Voluntary Contributions and the Earnings thereon.
1.36. "Voluntary Contributions" - shall mean the contributions
described in Section 3.2.
1.37. "Years of Service" - An Employee's Years of Service shall
be determined in accordance with the following rules:
(a) General Rule. An Employee's Years of Service shall
mean the number of Plan Years in each of which the Employee has completed at
least 1,000 Hours of Service.
(b) Break in Service. In determining an Employee's Years of
Service under subsection (a) as of any date after he has returned to Service
after incurring a Break in Service, his Years of Service prior to such break
shall not be taken into account if (1) he did not have any balance to his credit
in the Vested Portion of his Accounts at the time such break commenced and (2)
such break was a 5-Year Break in Service .
ARTICLE 2 - PURPOSE, ELIGIBILITY AND PARTICIPATION
2.1. Purpose. This Plan is intended to qualify as a cash or
deferred defined contribution profit sharing plan under Sections . 401(a),
401(k) and 401(m) of the Code. Pursuant to Section 401(a) (27) of the Code,
the Plan is intended to constitute a profit sharing plan under which
contributions may be made by the Employer whether or not the Employer has
current or accumulated profits.
2.2. Eligibility. An Employee shall be eligible for membership
in the Plan if:
(a) he is employed on a full-time basis, or he has completed,
or is expected to complete, at least 1,000 Hours of Service during any
12-consecutive month period;
(b) he has completed at least 30 consecutive days of Service;
-11-
<PAGE> 18
(c) his principal place of employment is not Puerto Rico;
and
(d) he is not covered under a collective bargaining
agreement, unless such agreement specifically provides for his
participation in this Plan.
2.3. Commencement of Membership. An Employee shall commence
membership in the Plan on the first day of the month coincident with or next
following the day on which he first meets each of the requirements of Section
2.2.
2.4. Membership After Reemployment. An Employee who incurs a
Termination of Service, and who thereafter returns to Service, shall (a) if he
had become a Member prior to such Termination of Service, resume membership in
the Plan as of his Reemployment Commencement Date, or (b) if he is not described
in clause (a), commence membership as of the first day of the month coincident
with or next following the date on which he first meets each of the conditions.
for eligibility set forth in Section 2.2 after his Reemployment Commencement
Date .
2.5. Asset and Stock Acquisitions. If any person becomes an
Employee in connection with the acquisition of the assets of his former
employer by the Employer, or in connection with the acquisition of the stock of
his former employer by, and the merger of his former employer with and into,
the Employer or any similar transaction, then to the extent determined by the
Committee, all service performed by such person as an employee of such former
employer shall be taken into account under the Plan.
ARTICLE 3 - CONTRIBUTIONS AND ROLLOVERS
3.1. 401(k) Contributions. Subject to the limitations contained
in Article 4, a Member may elect to (1) have his Compensation for each pay
period within the Plan Year reduced by an amount equal to (i) any percentage
thereof which is not less than 1% or greater than 15%, and which is an integral
multiple of 1% or (ii) a specific dollar amount which, when aggregated with all
other amounts by which Compensation is reduced under this Section 3.1 during
such Plan Year, is riot greater than 15% of his Compensation for such Plan Year,
and (2) have such amount contributed by the Employer to the Plan on his behalf.
The contributions made to the Plan on behalf of a Member under this Section 3.1
shall be referred to herein as "401(k) Contributions".
-12-
<PAGE> 19
3.2. Voluntary Contributions. Subject to the limitations
contained in Article 4, a Member may elect to contribute to the Plan, by payroll
deduction, for each pay period within the Plan Year an amount equal to (a) any
percentage of his Compensation, after reduction for 401(k) Contributions, for
the pay period which is not less. than 1% or greater than 10%, and which is an
integral multiple of 1% or (b) a specific dollar amount which, when aggregated
with all other amounts contributed by the Member under this Section 3.2 during
such Plan Year, is not greater than 10% of his Compensation, after reduction for
401(k) Contributions, for such Plan Year. However, the percentage of
Compensation the Member elects to contribute to the Plan for any pay period
under clause (a) of the preceding sentence, when aggregated with the percentage
of Compensation the Member elects to have contributed to the Plan on his behalf
for such pay period under clause (1) (i) of Section 3.1, cannot exceed 15% of
Compensation for such pay period; and the specific dollar amount the Member
elects to contribute to the Plan for any Plan Year pursuant to clause (b) of the
preceding sentence, when aggregated with his 401(k) Contributions for such Plan
Year, cannot exceed 15% of Compensation for such Plan Year. The contributions
that a Member elects to make to the Plan under this Section shall be referred
to herein as "Voluntary Contributions" .
3.3. Elections. The elections that a Member may make under
Sections 3.1 and 3.2, and any change in or termination of such elections,
shall be made in accordance with the following rules:
(a) Any election, and any change in or termination of any
election, shall be made in writing, on a form provided by the Committee
for such purpose, and filed with the Committee or with any person
designated by the Committee to receive such filings.
(b) A Member's initial election under Section 3.1 or 3.2 shall
become effective as soon as practicable after the form containing such
election is filed. Any election, or change therein, shall remain in
effect until such election is changed or terminated as hereinafter
provided .
Notwithstanding the above, in the case of any Member who files
his initial election under Section 3.1 or 3.2 prior to July 28, 1993, such
Member's initial election or elections shall apply to any paychecks he receives
during the period beginning on July 28, 1993 and ending on July 30, 1993 with
respect to any pay periods beginning on and after August 1, 1993.
-13-
<PAGE> 20
(c) A Member may, at any time, change his election so as to
increase or decrease the amount of 401(k) Contributions or Voluntary
Contributions, as applicable, to be contributed to the Plan by him or on his
behalf. Any such change in election shall become effective as soon as
practicable after the form containing such change in election is filed.
(d) A Member may terminate his election under Section 3.1 or 3.2
at any time. Such termination of election shall become effective as soon as
practicable after the form containing such termination of election is filed. A
Member who terminates an election under Section 3.1 or 3.2 may thereafter make a
new election under Section 3.1 or 3.2 at any time. Such new election shall
become effective as soon as. practicable after the form containing such new
election is filed.
(e) A Member's elections under Sections 3.1 and 3.2 shall cease
to be effective upon, and no contribution shall be made by or on behalf of a
Member after, the close of the pay period in which he incurs a Termination of
Service.
3.4. Employer Contributions. Subject to the limitations
contained in Article 4, for each Plan Year, the Employers shall contribute to
the Plan, in addition to the 401(k) Contributions, an amount determined below.
For each Plan Year, the Employers shall contribute to the Plan
under this Section 3.4 an amount which is equal to (a) the excess, if any, of
(1) 7-1/2% of the combined "Net Earnings" for such Plan Year of all Employers
over (2) $500,000, less (b) the sum of (1) all forfeitures arising under
Section 5.2(a) during such Plan Year, other than those applied to restore any
forfeitures under Section 5.2(b), (2) the expenses of administering the Plan and
Trust for such Plan Year, other than those paid out of the Trust Fund in
accordance with Section 8.9 and (3) any amounts set aside, and any payments.
made, by the Employers, for such Plan Year, under the Pall Corporation
Supplementary Profit-Sharing Plan.
Notwithstanding the preceding paragraph, the Board of Directors
of the Company reserves the right with respect to any Plan Year to direct the
Employers, by action taken no later than five and one-half months after the
close of such Plan Year, to make to the Plan under this Section 3.4 (i) no
contribution, (ii) a contribution in any amount less than the amount required to
be contributed under the preceding paragraph, or (iii) a contribution in any
amount greater than the
-14-
<PAGE> 21
excess of 7-1/2% of the combined Net Earnings for such Plan Year of all
Employers over $500,000.
For purposes. of this Section 3.4, the "Net Earnings" of an
Employer for any Plan Year shall be the net earnings and profits of such
Employer for its taxable year ending within such Plan Year, as determined by the
accountants employed by the Employer in accordance with generally accepted
accounting principles, before deducting any contributions to the Plan, any
capital losses and any taxes upon or with respect to income, but after deducting
capital gains, income from investments and any contributions to any employee
benefit plan other than the Plan. Solely for the purpose of determining the
combined Net Earnings of all Employers, each subsidiary of the Company which was
incorporated in the United States, and which is not otherwise an Employer, shall
be treated as an Employer.
A Member shall be entitled to share in the allocation of the
Employers' contribution under this Section 3.4 for a Plan Year if (A) as of the
first day of such year, he had been in Service for at least six consecutive
months and had attained age 20 1/2 and (B) either (x) he is employed by any
Employer on the last day of such year, (y) during such year, he incurred a
Termination of Service after attaining Normal Retirement Age or by reason of
death or disability or (z) he incurred a Termination of Service after July 31 of
such year, and the reason for such termination, as indicated on the Employer's
records, is "retirement" (Code 12). The Employers' contribution for a Plan Year
under this Section 3.4 shall be allocated to each Member entitled to share
therein in the proportion that each such Member's Compensation for such Plan
Year bears. to the aggregate amount of Compensation of all such Members for such
Plan Year. Contributions made to the Plan under this Section 3.4 shall be
referred to herein as "Employer Contributions" .
3.5. Time and Manner. All contributions to be made under
Sections 3.1, 3.2 and 3.4 of the Plan shall be made in the form of cash
payments by the Company to the Trustee. 401(k) Contributions and Voluntary
Contributions shall be made as soon as possible after the date on which such
contributions would have been paid to the Employee but for his elections under
Sections 3.1 and 3.2, but in all events within 90 days of such date. The
Employer Contribution to be made for any Plan Year shall be made no later than
by the due date of the tax return (with extensions) for the Employer's taxable
year that ends during the Plan Year to which such contribution relates .
In respect of the contributions the company pays to the Trustee
under the preceding paragraph for each Plan Year,
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each other Employer shall reimburse the Company for (1) a portion of the
Employer Contribution so paid by the Company to the Trustee for such year, based
on the ratio of (i) the aggregate Compensation for such year of the Members
employed by such Employer who shared in the allocation of such Employer
Contribution to (ii) the aggregate Compensation for such year of all Members who
shared in the allocation of such Employer Contribution, and (2) the amount of
the 401(k) Contributions and Voluntary Contributions so paid by the Company to
the Trustee for such year which are attributable to the Members employed by such
Employer.
3.6. Rollovers. A Member, with the prior approval of the
Committee, may roll over into this Plan amounts that meet each of the following
requirements:
(a) The amount to be rolled over must represent either (1)
part or all of an "eligible rollover distribution", within the meaning
of Section 402(c) (4) of the Code, from a trust qualified under Section
401(a) of the Code or from an employee annuity plan qualified under
Section 403 (a) of the Code (such a trust or plan shall be referred to
below as a "Qualified Plan") or (2) the entire amount of a
distribution to the Member from an individual retirement account or
individual retirement annuity, as defined in Section 408(a) or Section
408(b) of the Code, provided that no amount in such account, or no part
of the value of such annuity (such an account or annuity shall be
referred to below as an "IRA"), at the time of distribution to the
Member, was attributable to any source other than a "rollover
contribution", as defined in Section 402 of the Code, from a Qualified
Plan.
(b) The amount to be rolled over must be (1) an amount which
the Member elected to have paid directly from a Qualified Plan to this
Plan in accordance with Section 401 (a) (31) of the Code or (2) an
amount distributed, or deemed distributed, to the Member from a
Qualified Plan, or from an IRA, not more than 60 days prior to the date
on which such amount is transferred to this Plan, including any such
amount representing (i) any portion of the Member's account in a
Qualified Plan that was applied to offset any outstanding balance of a
loan to the Member from such plan or (ii) income taxes withheld on a
distribution to the Member from a Qualified Plan.
(c) The amount to be rolled over must not represent all or
part of (1) a distribution that is required to be made to the Member
under Section 401 (a) (9), Section 408(a) (6) or Section 408(b) (3) of
the Code, or (2) an amount distributed to the Member in the Member's
capacity as a beneficiary of another individual.
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(d) The amount to be rolled over may not include (1) any
part of a distribution to the Member that would not be
includible in the Member's gross income for Federal income tax
purposes, even if it were not rolled over or (2) any "accumulated
deductible employee contributions" within the meaning of Section
72(0) (5) (B) of the Code.
(e) The amount to be rolled over must consist entirely of
cash, and shall be paid to the Plan only by means of a check made
payable to, or endorsed over to, the Trustee.
The Committee may adopt such procedures, and may require a
Member to furnish such information or documentation, as the Committee, in its
sole discretion, deems necessary to ensure that the amount the Member requests
to roll over to this Plan will meet all the foregoing requirements.
ARTICLE 4 - LIMITATIONS ON CONTRIBUTIONS
4.1. Dollar Limit for 401(k) Contributions. For any Plan Year,
the total amount of 401(k) Contributions to be made on behalf of any Member,
when aggregated with the total amount deferred by such Member under other plans
or arrangements described in Code Section 401(k), 408(k) or 403(b) maintained
by the Employer or by any other entity described in Section 1.19(f)(2),
(3) or (4), shall not exceed $7,000, as increased by the cost-of-living
adjustment, if any, in effect for such year under regulations, rulings or
notices issued under Section 402(g) (5) of the Code.
4.2. Nondiscrimination Test for 401(k) Contributions. For any
Plan Year, the 401(k) Contributions made on behalf of the group of Members who
are Highly Compensated Employees shall not exceed the maximum amount that may be
contributed to the Plan on their behalf for such year under either one of the
following tests:
(a) the Actual Deferral Percentage for the group of Members
who are Highly Compensated Employees may not be more than the Actual
Deferral Percentage for the group of all other Members multiplied by
1.25; or
(b) the excess of the Actual Deferral Percentage for the group
of Members who are Highly Compensated Employees over the Actual
Deferral Percentage for the group of all other Members may not be more
than 2 percentage points, and the Actual Deferral Percentage for the
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group of Members who are Highly Compensated Employees may not be more
than the Actual Deferral Percentage for the group of all others
Members multiplied by 2.
For these purposes, the term "Actual Deferral Percentage", for
any group of Members for any Plan Year, shall mean the average of the ratios,
calculated separately for each Member in such group, of (1) the 401(k)
Contributions made on behalf of such Member for such year to (2) such Member's
Compensation for such year.
In determining the Actual Deferral Percentage for any Plan Year,
401(k) Contributions in excess of the limitation in Section 4.1 made on behalf
of any Member who is not a Highly Compensated Employee shall be disregarded.
4.3. Nondiscrimination Test for Voluntary Contributions. For any
Plan year, the Voluntary Contributions made by the group of Members who are
Highly Compensated Employees shall not exceed the maximum amount that may be
contributed to the Plan by them for such year under either one of the following
tests:
(a) the Contribution Percentage for the group of Members who
are Highly Compensated Employees may not be more than the Contribution
Percentage for the group of all other Members multiplied by 1.25; or
(b) the excess of the Contribution Percentage for the group of
Members who are Highly Compensated Employees over the Contribution
Percentage for the group of all other Members may not be more than 2
percentage points, and the Contribution Percentage for the group of
Members who are Highly Compensated Employees may not be more than the
Contribution Percentage for the group of all other Members multiplied
by 2.
For these purposes, the term "Contribution Percentage", for any
group of Members for any Plan Year, shall mean the average of the ratios,
calculated separately for each Member in such group, of (1) the Voluntary
Contributions credited to such Member's Voluntary Contribution Account during
such year to (2) such Member's Compensation for such year.
For purposes of determining the Contribution Percentage, all or
a portion of the 401(k) Contributions for the Plan Year may be treated as.
Voluntary Contributions for such year provided:
(i) all 401(k) Contributions for such year satisfy the
limitation of Section 4.2, and
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(ii) the 401(k) Contributions for such year, excluding those
treated as Voluntary Contributions under this Section for such year,
satisfy the limitation of Section 4.2.
4.4. Special Rules for Nondiscrimination Tests. For purposes of
the nondiscrimination tests set forth in Sections 4.2 and 4.3, the following
rules shall apply:
(a) Alternative Limitation. The alternative test set forth in
Sections 4.2(b) and 4.3(b) may be utilized only to the extent permitted under
Section 401(m) (9) of the Code and the Treasury regulations and rulings and
notices issued thereunder .
(b) Calculations. The Actual Deferral Percentage and the
Contribution Percentage shall be calculated to the nearest one-hundredth of 1%.
(c) Family Aggregation Requirement. For any Plan Year, in the
case of a Member who is a Highly Compensated Employee, and who is either a
5-percent owner, within the meaning of Section 416(i) (1) (B) (i) of the Code,
or one of the ten most highly compensated employees based on Compensation during
such year, such Member's Compensation and 401(k) Contributions and Voluntary
Contributions shall be aggregated with the Compensation and 401(k) Contributions
and Voluntary Contributions of the members of his family, within the meaning of
Section 414(q) (6) (B) of the Code, who are eligible to participate in the Plan.
The Compensation and 401(k) Contributions and Voluntary Contributions of such
Member and such members of his family shall, as so aggregated, be treated as the
Compensation and 401(k) Contributions and Voluntary Contributions of a single
Member who is a Highly Compensated Employee in applying the nondiscrimination
tests. of Sections 4.2 and 4.3 for such Plan Year, and shall not otherwise be
taken into account in applying such tests.
(d) Plan Aggregation Requirements. Any qualified plans which are
aggregated with this Plan in any Plan Year for the purpose of satisfying Section
401(a) (4) or 410(b) of the Code (other than solely for the purpose of
satisfying the average benefit percentage test) shall, for such Plan Year, be
aggregated with this Plan and the elective contributions made under the 401(k)
provisions of, and any voluntary after-tax contributions made to, any such
qualified plans and this Plan shall be treated as if they had been made under a
single plan, for the purpose of applying the nondiscrimination tests of Section
4.2 and 4.3. In addition, for any Plan Year, to the extent permitted by the Code
and the applicable Treasury regulations, any other qualified plan of the
Employer or of any
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<PAGE> 26
other entity described in Section 1.19(f)(2), (3) or (4) may be aggregated with
this Plan, and the elective contributions made under the 401(k) provisions of,
and any voluntary after-tax contributions made to, such qualified plan and this
Plan may be treated as if they had been made under a single plan, for the
purpose of applying the nondiscrimination tests in Sections . 4.2 and 4.3,
provided that any such qualified plan and this Plan, when aggregated and treated
as a single plan, satisfy others. requirements of Sections 401(a) (4) and 410
(b)of the Coders.
(e) Records. The committee shall maintain or cause to be
maintained records sufficient to demonstrate the satisfaction of the
nondiscrimination tests in Sections 4.2 and 4.3, and to show the amount of
401(k) Contributions, if any, used to satisfy the nondiscrimination test in
Section 4.3.
4.5. Deduction Limit. The total amount of contributions made
hereunder by the Employer, considering the amount of such contributions both
with and without aggregating such contributions with the contributions. made by
the Employer under each other qualified plan the Employer maintains, for any
taxable year of the Employer may not exceed the maximum amount allowable as a
deduction for the contributions made to this Plan by the Employer for such
taxable year.
4.6. Section 415 Limits.
(a) General. For any Plan Year, the total amount contributed by
or on behalf of any Member, or allocated to such Member, under the Plan, when
aggregated with all other amounts treated as "annual additions" under this Plan
under Sections 415(c) (2), 415(1) (1) and 419A(d) (2) of the Code, and the
applicable Treasury regulations, with respect to such Member for such Plan Year,
shall not exceed the lesser of (1) $30,000 (as adjusted by the Internal Revenue
Service for cost-of-living increases under Section 415(d) of the Code) as in
effect for the Plan Year or (2) 25% of the Participant's Compensation for such
Plan Year. In applying the preceding sentence, (i) amounts treated as annual
additions by Section 415(1) (1) and 419A(d) (2) of the Code shall not be taken
into account in determining whether the limitation set forth in clause (2)
thereof is satisfied and (ii) 401(k) Contributions. shall not be taken into
account to the extent such contributions are distributed to Members under
Section 4.8(a) or (b).
(b) 415(e) Limit. In addition to the above, the amounts
contributed under the Plan by or on behalf of, or allocated under the Plan to,
any Member for any Plan Year shall
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not exceed the amount permissible under the overall limitation applicable to
such Member for such year under Section 415(e) of the Code. In calculating the
defined benefit plan fraction and the defined contribution plan fraction, as
defined in Section 415(e) of the Code, for the purpose of determining the
aforesaid Code Section 415(e) limitation, an amount shall, to the extent
permitted under Section 1106(i) (4) of P.L. 99-514, be subtracted from the
numerator of the defined contribution plan fraction (not exceeding such
numerator) as prescribed by the Secretary of the Treasury so that the sum of
the defined benefit plan fraction and the defined contribution plan fraction
does not exceed 1.0 for the Plan Year. In no event shall the amount to be
subtracted from the numerator of the defined contribution plan fraction be less
than the amount permitted to be so subtracted under Section 235(g) (3) of P.L.
97-248. In addition, the aforesaid Code Section 415(e) limitation shall, to the
extent permitted under Section 1106(i) (3) of P.L. 99-514, be calculated by
using the Member's Current Accrued Benefit. The "Current Accrued Benefit" is a
Member's accrued benefit under any qualified defined benefit plan which is, or
ever was, maintained by the Employer, determined as if the Member had separated
from service as of the close of the last limitation year of such plan beginning
before August 1, 1987, when expressed as an annual benefit within the meaning
of Section 415(b) (2) of the Code. In determining the amount of a Member's
Current Accrued Benefit, the following shall be disregarded: (1) any change in
the terms and conditions of such plan after May 5, 1986, and (2) any cost of
living adjustment occurring after May 5, 1986. In no event shall the amount of
the Current Accrued Benefit be less than the Current Accrued Benefit as defined
and determined under Section 235(g)(4) of P.L. 97- 248.
If the limitation applicable to a Member under Section 415(e) of
the Code is exceeded, the Member's benefit under a qualified defined benefit
plan maintained by the Employer shall be reduced to the extent necessary to meet
such limitation, before any reduction is made with respect to the Member's
annual additions under this Plan.
(c) Plan Aggregation. In addition to the foregoing provisions,
this Section 4.6 shall be applied by treating each qualified defined
contribution plan, and each qualified defined benefit plan, maintained, or ever
maintained, by the Employer or another entity described in Section 1.19(f)(2),
(3) or (4) (modified for this purpose as required under Code Section 415(h)) as
a single qualified defined contribution plan and a single qualified defined
benefit plan.
(d) Reduction of Contributions. In the event that the amount of
the contributions which, without regard to
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this Section 4.6, would be made by or on behalf of, or allocated to, a Member
under the Plan in respect of any Plan Year must be reduced by reason of the
limitations of this Section 4.6, such reductions shall be made in the following
order of priority, but only to the extent necessary: (1) the amount of the
Member's Voluntary Contributions shall be reduced, or, if already paid to the
Trustee, shall (with the Trust Fund earnings thereon) be refunded to the
Member; then (2) the amount of the Member's 401(k) Contributions shall be
reduced, or, if already paid to the Trustee, shall (with the Trust Fund earnings
thereon) be refunded to the Member; then (3) any Employer Contributions that
would otherwise be allocated to such Member in respect of such Plan Year shall,
instead, be allocated to each other Member entitled to share in such
contributions (subject to the limitations of this Section 4.6 as applied to each
such Member) in the same proportion that each such Member's Compensation for
such Plan Year bears to the aggregate of the Compensation for such Plan Year of
all such Members .
4.7. Adjustments. Notwithstanding any other provision in the
Plan to the contrary, at any time during the Plan Year, the Committee may make
such adjustments to or impose such restrictions on the amounts of contributions
that otherwise may be made to the Plan by or on behalf of, or allocated to, any
Member or group of Members during the balance of such Plan Year, as the
Committee deems necessary in order for such contributions or allocations not to
exceed any of the limitations set forth in this Article 4, or in order for the
Plan to meet any other requirement for the Plan's continued qualification under
Sections 401(a), 401(k) and 401(m) of the Code .
4.8. Corrective Distributions. If for any Plan Year the 401(k)
Contributions or Voluntary Contributions made by or on behalf of a Member for
such year exceed the limitation applicable to such contributions under Section
4.1, 4.2 or 4.3, or if for any Plan Year any amount of the 401(k) Contributions
made on behalf of a Member during such year is designated as an excess deferral
attributable to this Plan under subsection (b) below, the excess of the
contributions over the limitation, or the amount so designated, shall be
distributed to the Member in accordance with the following rules:
(a) If the aggregate amount of the 401(k) Contributions made on
behalf of a Member for any Plan Year exceeds the dollar limit for such
contributions under Section 4.1 for such year, the excess amount so contributed,
as adjusted for income or loss allocable thereto, shall be (1) designated by the
Committee as an excess
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<PAGE> 29
amount of 401(k) Contributions (and earnings), and (2) distributed to the Member
from his 401(k) Contribution Account after the end of such year but by no later
than April 15 next following the close of such year. The 401(k) Contributions to
be distributed under this subsection (a) for any Plan Year shall be so
distributed prior to any distribution of 401(k) Contributions under subsection
(b) for such Plan Year, and shall be reduced by the 401(k) Contributions
previously distributed to the Member under subsection (c) for such Plan Year.
(b) If the aggregate amount of the 401(k) Contributions made on
behalf of a Member under this Plan for any Plan Year, when added to the total
amount deferred by such Member in such year under other plans or arrangements
described in Section 401(k), 408(k) or 403(b) of the Code, exceeds the limit
under Section 402(g) of the Code for such year, the Member may designate a
portion of such excess deferrals as allocable to the 401(k) Contributions made
on the Member's behalf under this Plan for such year. Such designation shall be
made by filing with the Committee a written notice that specifies the amount so
designated, and which contains a certification by the Member that if the amount
so designated is not distributed, such amount, when added to his remaining
401(k) Contributions and the total amount deferred under other plans or
arrangements described in Section 401(k), 408(k) or 403(b) of the Code, will
exceed the limit under Section 402(g) of the Code for the Plan Year in question.
Such written notice shall be filed with the Committee no later
than by March 1 next following the close of such Plan Year. The amount so
designated, as adjusted for income or loss allocable thereto, shall be (1)
designated by the Committee as an excess deferral (and earnings), and (2)
distributed to the Member from his 401(k) Contribution Account after the end of
such year but by no later than April 15 next following the close of such year.
The 401(k) Contributions to be distributed under this subsection
(b) for a Plan Year shall be reduced by any 401(k) Contributions that were
previously distributed to the Member under subsection (a) or (c) for the same
Plan Year. In no event shall a distribution of 401(k) Contributions pursuant to
this subsection (b) for a Plan Year exceed the amount of the Member's 401(k)
Contributions under this Plan for such year.
(c) If for any Plan Year the aggregate amount of 401(k)
Contributions made on behalf of Members who are
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Highly Compensated Employees exceeds the limit for such contributions under
Section 4.2 (such excess is referred to herein as "Excess Contributions"), the
Excess Contributions, as adjusted for income or loss allocable thereto,. shall
be distributed as follows. The amount of Excess Contributions to be distributed
to any Member under this subsection (c) shall be determined by reducing the
Actual Deferral Percentages of the Members who are Highly Compensated Employees
in the order of their Actual Deferral Percentages, beginning with those Highly
Compensated Employees with the highest Actual Deferral Percentages, until the
aggregate amount of 401(k) Contributions for Members who are Highly Compensated
Employees has been reduced to the amount permissible under Section 4.2. The
Excess Contributions so determined shall be distributed to those Highly
Compensated Employees for whom a reduction is made under the preceding sentence.
Distributions of Excess Contributions and the income or loss
allocable thereto shall be (1) designated by the Committee as Excess
Contributions (and earnings) and (2) distributed to the Member from his 401(k)
Contribution Account after the end of the Plan Year but no later than by March
15 next following the close of such year. Excess Contributions to be distributed
to a Member in accordance with the preceding sentence for any Plan Year shall be
so distributed prior to any distributions of 401(k) Contributions under
subsection (a) or (b) for such Plan Year. In no event shall a distribution of
Excess Contributions to a Member for a Plan Year exceed the amount of 401(k)
Contributions made on the Member's behalf for such year.
(d) If for any Plan Year the aggregate amount of Voluntary
Contributions, when added to the total amount of 401(k) Contributions treated as
Voluntary Contributions under Section 4.3, made by or on behalf of Members who
are Highly Compensated Employees exceeds the limit for such contributions under
Section 4.3 (such excess is referred to herein as "Excess Aggregate
Contributions"), the Excess Aggregate Contributions, as adjusted for income or
loss allocable thereto, shall be distributed as follows. The amount of Excess
Aggregate Contributions to be distributed to any Member under this subsection
(d) shall be determined by reducing the Contribution Percentages of the Members
who are Highly Compensated Employees in the order of their Contribution
Percentages, beginning with those Highly Compensated Employees with the highest
Contribution Percentages, until the aggregate amount of Voluntary Contributions
(including 401(k) Contributions treated as such) for Members who are Highly
Compensated
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<PAGE> 31
Employees has been reduced to the amount permissible under section 4.3. The
Excess Aggregate Contributions so determined shall be distributed to those
Highly Compensated Employees for whom a reduction is made under the preceding
sentence.
Distributions of Excess Aggregate Contributions and the income
or loss allocable thereto shall be (1) designated by the Committee as Excess
Aggregate Contributions (and earnings) and (2) distributed to the Member, first,
from his voluntary Contribution Account and, second, to the extent that 401(k)
Contributions were treated as voluntary Contributions for the Plan Year in
question under Section 4.3, from his 401(k) Contribution Account after the end
of the Plan Year but no later than by March 15 next following the close of such
year. In no event shall a distribution of Excess Aggregate Contributions to a
Member for a Plan Year exceed the amount of Voluntary Contributions made by the
Member for such year.
(e) The amount of income or loss allocable to 401(k)
Contributions or voluntary Contributions to be distributed to any Member under
subsection (a), (b), (c) or (d) above shall be determined in accordance with the
applicable provisions of the regulations issued under Sections 401(k), 401(m)
and 402(g) of the Code.
(f) Notwithstanding anything to the contrary in subsections (c)
or (d), the determination of the Excess Contributions or the Excess Aggregate
Contributions under subsections (c) or (d) attributable to any Member who is a
Highly Compensated Employee and who is subject to the family aggregation rules
of Section 414(q) (6) of the Code shall be made by (1) ascertaining the single
Actual Deferral Percentage or Contribution Percentage for such Member and the
members of his family (the "Family Group"), which was determined in applying the
nondiscrimination test in Section 4.2 or Section 4.3 in accordance with the
rules set forth in Section 4.4(c), (2) reducing such single Actual Deferral
Percentage or such single Contribution Percentage in the manner prescribed in
subsection (c) or (d) as if the Family Group was a single Highly Compensated
Employee and (3) allocating the resulting Excess Contributions or Excess
Aggregate Contributions to each member of the Family Group, including the Member
in question, in proportion to the amount of the 401(k) Contributions or
voluntary Contributions of each such member that was taken into account, prior
to the application of this Section 4.8, for the purpose of computing such single
Actual Deferral Percentage or such single Contribution Percentage.
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(g) Any amounts required to be distributed to a Member pursuant
to subsection (a), (b), (c) or (d) above shall be so distributed,
notwithstanding any other provision in the Plan to the contrary.
ARTICLE S - PLAN ACCOUNTS, ALLOCATIONS AND FORFEITURES
5.1. Plan Accounts. For each Member, the Committee shall
establish and maintain, or caused to be established and maintained, a separate
Plan Account with respect to the 401(k) Contributions made on behalf of the
Member under Section 3.1, the Voluntary Contributions made by the Member under
Section 3.2, the Employer Contributions allocated to the Member under Section
3.4 and the amounts rolled over to the Plan by the Member under Section 3.6.
Such Accounts shall be referred to herein, respectively, as the Member's "401(k)
Contribution Account", his "Voluntary Contribution Account", his "Employer
Contribution Account", and his "Rollover Account". The Committee shall also
establish and maintain, or cause to be established and maintained, such other
Accounts as may be necessary or desirable to comply with the requirements of the
Code or to otherwise effect the purposes of the Plan. Each such Account shall be
adjusted from time to time as follows:
(a) Such Account shall be credited, as hereinafter provided,
with the amounts contributed to the Plan by or on behalf of the Member,
allocated to the Member, or rolled over to the Plan by the Member under
Section 3.1, 3.2, 3.4 or 3.6, as the case may be, and with any
payments of principal and interest made by the Member pursuant to
Section 7.5 on any loan to him. 401(k) Contributions shall be credited
to a Member's 401(k) Contribution Account at the time such
contributions are made to the Plan, but no later than by the final day
of the Plan Year to which such contributions relate. Voluntary
Contributions, Employer Contributions and amounts rolled over to the
Plan by the Member shall be credited to a Member's Voluntary
Contribution Account, Employer Contribution Account and Rollover
Account, respectively, at the time such contributions are made to the
Plan or at the time such rolled over amounts are transferred to or
received by the Plan. Any payment on a loan under Section 7.5, which is
credited to a Member's Account as described therein, shall be so
credited to such Account as of the date on which such payment is
received by the Plan.
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<PAGE> 33
(b) Such Account shall be credited or charged, as the case may
be, with the Earnings attributable to the investment of such Account
under Section 6.3.
(c) Such Account shall be charged with the amount of any
distributions, withdrawals or loans made therefrom, pursuant to Section
4.8 or Article 7. A distribution, withdrawal or loan shall be so
charged as of the date on which the amount thereof is paid to the
Member.
(d) In addition to (a), (b) and (c) above, such Account shall
be credited or charged as required by other provisions of the Plan, in
the manner and as of the date set forth therein, or, where such manner
or date is not expressly set forth, as the Committee shall determine.
(e) Such Account shall also reflect the number of shares of
any Mutual Fund in which the balance of such Account is invested. The
number of shares to be so reflected shall include fractions of a unit
of a share, as well as whole units of shares.
5.2. Forfeitures.
(a) Incurrence and Application of Forfeitures. The portion of
the Member's Employer Contribution Account which is not a Vested Portion shall
be forfeited, and the amount so forfeited shall be charged to his Employer
Contribution Account, as of the close of the Plan Year in which he incurs a
Termination of Service. Any forfeiture shall be applied, first, to restore other
forfeitures under subsection (b) below, and, second, to reduce Employer
Contributions made to the Plan after the date such forfeiture arises. Prior to
such application, a forfeiture shall be held in a separate account established
and maintained solely for forfeitures under the Trust Fund; and such account
shall be invested in the Fidelity Retirement Money Market Portfolio described in
Section 6.1(e).
(b) Restoration of a Forfeiture. If any portion of a Member's
Employer Contribution Account was forfeited upon his Termination of Service, and
such Member thereafter returns to Service, any amount that was forfeited shall
be restored to his Employer Contribution Account, as of his Reemployment
Commencement Date, unless: (1) the Member failed to return to Service prior to
incurring a 5-Year Break in Service after such Termination of Service, or (2)
the Member had previously received from the Plan a distribution described in
subsection (c) below, and, as of his Reemployment Commencement Date, has failed
to repay such distribution in accordance with subsection (c) below. In the event
that the restoration of a for-
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feiture is prevented by reason of clause (2) in the preceding sentence, and
the Member subsequently repays the distribution referred to in clause (2) in
accordance with subsection (c) below, the amount forfeited shall be restored to
the Member's Employer Contribution Account as of the date on which such
repayment is made to the Plan. Any amount so restored to such Account shall be
invested in accordance with the Member's investment election with respect to New
Money to be credited to such Account then in effect under Section 6.2.
Funds to restore a forfeiture to a Member's Employer
Contribution Account shall come, first, from other forfeitures as provided in
subsection (a) above, and, second, from contributions made to the Plan by the
Company for such purpose. The Company shall make such additional contributions
to the Plan as are necessary to restore any forfeitures in accordance with the
preceding sentence. If the Company makes any such contributions with respect to
a Member who is employed by an Employer other than the Company, such Employer
shall reimburse the Company for the amount of any such contributions so made.
The amount of any forfeiture to be restored to a Member hereunder shall, to the
extent required by Section 411 of the Code, include earnings on the amounts that
were forfeited by the Member under subsection (a) above.
(c) Repayment of Distributions. A Member who has incurred a
Termination of Service and, in connection therewith, has received from the Plan
a distribution of the entire Vested Portion of the balance of his Plan Accounts,
and thereafter returns to Service, may repay such distribution to the Plan. Any
such repayment shall consist of the full amount of such distribution. Further,
such repayment must be made before the fifth anniversary of the Member's
Reemployment Commencement Date. A repaid distribution shall be credited pro
rata to the Member's Accounts from which such distribution was made, shall be so
credited as of the date received by the Plan, and shall be invested in
accordance with the Member's investment election with respect to New Money to be
credited to such Accounts then in effect under Section 6.2.
ARTICLE 6 - INVESTMENTS AND EARNINGS
6.1. Investment of Accounts. The balance of each Plan Account
maintained for a Member hereunder shall be invested, as the Member shall from
time to time elect in accordance with Section 6.2, in shares of any one or more
of the Mutual Funds selected by the Committee for investment. As of April 10,
1995, the Committee has selected the following Mutual Funds for investment:
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(a) Fidelity U.S. Bond Index Portfolio;
(b) Fidelity Asset Manager;
(c) Fidelity Puritan Fund;
(d) Fidelity Equity-Income Fund;
(e) Fidelity Magellan Fund; and
(f) Fidelity Retirement Money Market Portfolio.
The Committee may, at any time and in its sole discretion, eliminate or add any
Mutual Fund to the above list.
Except to the extent that the Committee otherwise directs, all
dividends and other distributions payable with respect to the shares of any
Mutual Fund in which any Plan Account is invested shall be reinvested in
additional shares of such Mutual Fund; and the number of additional shares
acquired as a result of such reinvestment shall be credited to such Plan
Account.
To the fullest extent permissible under Section 404(c) of ERISA,
the Trustee, the members of the Committee, and any other fiduciary of the Plan
shall not be liable for any loss, or by reason of any breach of duty, that
results from any election made, or deemed to have been made, by a Member under
Section 6.2 with respect to the investment of his Plan Account balances.
6.2. Investment Elections. Elections with respect to the
investment of a Member's Plan Accounts shall be made in accordance with the
following rules:
(a) Initial Investment Election. Each Member shall make an
initial investment election with respect to each Plan Account that is
established for him hereunder by the later of (1) the close of the last business
day immediately preceding the date on which an amount is first credited to such
Account pursuant to Section S.l or (2) July 31, 1993. Such election shall be
made in the manner set forth in subsection (c) below.
(b) Investment Election Changes. Subject to the limitations set
forth below, a Member may change his investment election with respect to any of
his Plan Accounts, by making a new investment election with respect to such
Account in accordance with the provisions of subsection (c) below. A Member may
so change his investment election just with respect to the existing balance of
any Plan Account ("Current
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Balance"); or just with respect to contributions and repayments of principal and
interest on any loan from the Plan ("New Money") that are to be credited to any
Plan Account on or after the effective date of such change; or with respect to
both the Current Balance of, and New Money to be credited to, any Plan Account.
(c) Procedure for Making Elections. An investment election
under subsection (a) above shall be made by filing with the Committee a form
furnished by the Committee or this purpose, on which the Member shall indicate,
by percentage (which shall be an integral multiple of 1%) or dollar amount, the
portion of the Member's Plan Account balance to be invested in shares of each
Mutual Fund. The Member shall designate his investment choices, in the manner
described in the preceding sentence, separately for each of his Plan Accounts.
Any change in a Member's investment election under subsection (b) above shall be
made in the same manner as herein described in the case of an election under
subsection (a) above; provided, however, that if the Committee so permits (and
subject to such rules as the Committee may have promulgated) any Member may use
the telephone service made available by the Trustee to communicate directly to
the Trustee any change in the Member's investment election. A Member shall be
provided with a written confirmation of any investment election made under
subsection (a), or any change in investment election made under subsection (b),
in the manner provided in the Trust Agreement or in any administrative services
agreement between the Committee and the Trustee.
(d) Effect of Election. An investment election made by a Member
with respect to any of his Plan Accounts under subsection (a) above shall remain
in effect until the Member changes his investment election with respect to such
Plan Account in accordance with subsection (b) above. Any investment election
change made by a Member under subsection (b) above with respect to any Plan
Account shall remain in effect until the Member again changes his investment
election with respect to such Plan Account in accordance with subsection (b)
above.
(e) Implementation. All transactions necessary to implement any
investment elections and changes therein that are made by Members pursuant to
this Section 6.2 shall be executed at such times, and in such manner, as
provided in the Trust Agreement or in any administrative services agreement
between the Committee and the Trustee.
(f) Restrictions. Notwithstanding any provision to the contrary
in subsections (a) to (e) above, between August 1, 1993 and December 31, 1993,
the following restric-
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tions shall apply to a Member's investment elections under this Section 6.2:
(1) Prior to attaining age 55, a Member may not invest any
of his Plan Accounts in shares of the Fidelity Retirement Money Market
Portfolio;
(2) A Member may not invest any portion of his Employer
Contribution Account in shares of the Fidelity Equity-Income Fund or
the Fidelity Magellan Fund;
(3) A Member may not invest the portion of his Employer
Contribution Account which is not a Vested Portion in shares of the
Fidelity U.S. Bond Index Portfolio; and
(4) Before a Member attains age 55, the portion of the
Member's Employer Contribution Account which is not a Vested Portion
shall be invested in shares of the Fidelity Asset Manager fund, and
such portion of such Account shall not be subject to investment
direction by the Member.
The above restrictions shall not apply after December 31, 1993.
On and after January 1, 1994, and prior to April 10, 1995, the
following restriction shall apply to a Member's investment elections under this
Section 6.2: A Member may not invest any portion of his Employer Contribution
Account in shares of the Fidelity Magellan Fund.
The Committee may, at any time and in its sole discretion,
eliminate or modify any of the foregoing restrictions, or impose additional
restrictions on Members' investment elections. To the extent that any such
restriction ceases to apply with respect to the Current Balance of, or the New
Money to be credited to, any Plan Account of a Member, the Member may elect to
invest all or any portion of such Current Balance, or of such New Money, of such
Account in shares of any Mutual Fund listed in Section 6.1, subject to any such
restrictions which remain, by making a change in investment election under
subsection (b) above.
6.3. Determination of Earnings. The Earnings attributable to the
investment of any Plan Account for any period shall mean the amount (positive or
negative) by which (a) the aggregate value, as of the close of the last business
day of such period, of all shares of Mutual Funds in which such Account is then
invested, plus the unpaid principal amount of any loan made to the Member from
such Account that
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<PAGE> 38
is outstanding at the close of such day, and any cash amount standing to the
Member's credit in such Account as of the close of such day, as reduced by (b)
the amount of all contributions, loan repayments and amounts rolled over to
the Plan, that were credited to such Account during the period, and as increased
by (c) the amount of all distributions, withdrawals and loans charged to such
Account during the period, exceeds, or is less than, (d) the aggregate value, as
of the close of the last business day immediately preceding the start of such
period, of all shares of Mutual Funds in which such Account was then invested,
plus the unpaid principal amount of any loan made to the Member from such
Account that was outstanding at the close of such day, and any cash amount
standing to the Member's credit in such Account as of the close of such day.
6.4 Voting Rights. In accordance with the applicable rules set
forth in the Trust Agreement, each Member shall have the right to direct the
Trustee as to how to vote the shares of any Mutual Fund credited to his Plan
Accounts, and the right to direct the Trustee as to how to exercise all other
rights pertaining to such shares. A Member shall be treated as a "named
fiduciary", within the meaning of Section 402 (a) (2) of ERISA, for the purpose
of giving such directions to the Trustee.
ARTICLE 7 - DISTRIBUTIONS, WITHDRAWALS AND LOANS
7.1. Distributions. Distributions shall be made in accordance
with the following rules:
(a) Termination of Service After Age 55 or Due to Disability.
In the case of a Member who incurs a Termination of Service, for any reason
other than death, after he has attained age 55, or who incurs a Termination of
Service due to Disability prior to attaining age 55, the Vested Portion of the
balance of the Member's Plan Accounts shall be distributed to him, in the form
of a single lump sum payment. The distribution shall be made as soon as
practicable after the Member's Termination of Service. The amount of the
distribution shall be the Vested Portion of the balance of the Member's Plan
Accounts determined as of the close of the last business day immediately
preceding the time such distribution is made.
(b) Termination of Service Prior to Age 55. In the case of a
Member who incurs a Termination of Service, for any reason other than Death or
Disability, before he has attained age 55, the distribution of his Plan Account
balances shall be made as follows:
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<PAGE> 39
(1) 401(k) Contribution Account, Voluntary Contribution
Account and Rollover Account. The balances of the Member's 401(k)
Contribution Account, Voluntary Contribution Account and Rollover
Account shall be distributed to the Member, in the form of a single
lump sum payment, as soon as practicable after such Member's
Termination of Service. However, if, under subsection (b) (2) below,
the Member has an Excess Portion in his Employer Contribution Account,
the Member may elect in writing, within 60 days after the date of his
Termination of Service, to have the balances of his 401(k) Contribution
Account, Voluntary Contribution Account and Rollover Account remain
invested in the Trust Fund. A Member who so elects may, at any time
thereafter, elect to receive a distribution, in the form of a single
lump sum payment, of the balances of such Accounts, by delivering a
written election to such effect to the Committee, on which he specifies
the date on which such distribution is to be made; but, in any event,
the balances of such Accounts shall be distributed to the Member, in
the form of a single lump sum payment, no later than by the date on
which the Excess Portion of his Employer Contribution Account is
distributed to him under subsection (b) (2) below.
(2) Employer Contribution Account. The Vested Portion of the
balance of the Member's Employer Contribution Account, up to the
greater of (i) $37,500 or (ii) one-half of the Vested Portion of such
balance, shall be distributed to the Member, in the form of a single
lump sum payment, as soon as practicable after his Termination of
Service. The portion of the Vested Portion of the balance of the
Member's Employer Contribution Account that is not immediately
distributed due to the restriction in clause (i) or (ii) of the
preceding sentence shall remain invested in the Trust Fund, and shall
be referred to herein as the "Excess Portion". For each Plan Year
beginning after December 31, 1993, the $37,500 amount referred to above
shall be adjusted, as of the first day of each such year, for
cost-of-living increases by the same percentage by which the Internal
Revenue Service has increased the limitation under Section 402(g) of
the Code, effective as of such day, pursuant to Section 415(d) of the
Code.
After a Member who has an Excess Portion in his Employer
Contribution Account invested in the Trust Fund attains age 55, he may,
at any time, elect to receive a distribution, in the form of single
lump sum payment, of such Excess Portion, by delivering a written
election to such effect to the Committee, on which he specifies the
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date on which such distribution is to be made; but, in any event, the
Member's Excess Portion shall be distributed to him, in the form of a
single lump sum payment, when he attains age 65.
Notwithstanding the above, in the case of a Member who returns
to Service with the Employer after incurring a Termination of Service,
the foregoing provisions of this subsection (b) (2) shall cease to
apply to the Member's Excess Portion, and such Excess Portion shall
be distributed to the Member, along with any additional balances in his
Plan Accounts, in accordance with the provisions of this Section 7.1
after he again incurs a Termination of Service.
(3) Valuation and Investment. For the purposes of this
subsection (b), the balance of the Member's 401(k) Contribution
Account, Voluntary Contribution Account, Rollover Account or Employer
Contribution Account (including the Vested Portion of the balance of
the Employer Contribution Account or the amount of any Excess Portion
of the Employer Contribution Account) shall be determined as of the
close of the last business day immediately preceding the time the
distribution in question is made. Account balances which remain
invested in the Trust Fund under subsection (b) (1) above, and the
Excess Portion which remains invested in the Trust Fund under
subsection (b) (2) above, shall, while so invested, be invested by
the Member as provided in Sections 6.1 and 6.2, and shall be credited
or charged with Earnings, as provided in Section 5.1.
(c) Corporate Events. Notwithstanding subsection (b) above, if
a Member is affected by an event described in Section 401(k) (10) (A) (ii) or
(iii) of the Code, then, upon such Member's written request, the entire Vested
Portion of the balance of his Plan Accounts (including any Excess Portion
described in subsection (b) above), determined as under the first sentence of
subsection (b) (3) above, shall be distributed to the Member in a single lump
sum payment.
(d) Special Rules.
(1) General. Notwithstanding any other provision of subsection
(a), (b) or (c) above to the contrary, payment of the Member's Plan
Account balances shall be made in accordance with the provisions of
this subsection (d) .
(2) Member's Consent. No distribution to the Member with
respect to any of his Plan Accounts shall be made prior to his
attaining Normal Retirement Age unless
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<PAGE> 41
either (i) the Vested Portion of the balance of the Member's Plan Accounts at
the close of the last business day immediately preceding the time the
distribution is made does not exceed $3,500 or (ii) the Member consents, in
writing, within the 90-day period ending on the date of distribution and after
receipt of the explanation described in the paragraph below, to the immediate
payment of such distribution.
For purposes of clause (ii) of the preceding paragraph, the
Committee shall furnish the Member with a written explanation of the Member's
right to defer his distribution until he has attained age 65 and the effect of
such deferral. Such explanation shall be furnished no less than 30 days (or such
shorter period as may be permitted by Treasury regulations) and no more than 90
days before the distribution is made to the Member.
If an immediate distribution with respect to any of the Member's
Plan Accounts cannot be made to the Member by reason of his failure to consent
to such distribution, distribution with respect to such Account shall be made as
soon as practicable after the earliest to occur of the following: the date on
which the Member attains age 65, the date of the Member's death, or the date on
which the Committee receives written notice from the Member requesting, and
consenting to, an immediate distribution from such Account. Any distribution
made pursuant to the preceding sentence shall be made in the form of a single
lump sum payment, and the amount of such distribution shall be the Vested
Portion of the balance of such Account, determined as of the close of the last
business day immediately preceding the time such distribution is made; provided,
however, that in the case of a Member who has not attained age 55 and who is
alive and not Disabled, any such distribution from such Member's Employer
Contribution Account cannot exceed the greater of (A) $37,500 (adjusted as
provided in subsection (b) (2) above) or (B) one-half of the Vested Portion of
the balance of such Account, determined as of the close of such business day,
and the portion, if any, of the Vested Portion of the Member's Employer
Contribution Account that is not distributed due to the foregoing restriction
shall thereafter be treated as the "Excess Portion" under subsection (b) (2)
above. Any request for and consent to a distribution made by a Member under the
second preceding sentence must apply to the entire Vested Portion of the balance
of all of his Plan Accounts, or to so much of the Vested Portion of such balance
as may be distributed under the preceding sentence.
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<PAGE> 42
(3) Distributions after Termination of Service. Distribution
to the Member with respect to his Plan Account balances shall be made
no later than 60 days after the close of the Plan Year in which occurs
the latest of the date on which the Member attains age 65, the 10th
anniversary of the date as of which the Member commenced participation
in the Plan, or the date of the Member's Termination of Service .
(4) Age 70 1/2 Distributions. The distribution of a Member's
Plan Account balances shall be made or commence not later than:
(i) in the case of a Member who is a 5-percent owner,
as defined under Section 416(i) of the Code and the Treasury
regulations thereunder, the April 1st following the calendar
year in which he attains age 70 1/2;
(ii) in the case of a Member who is not a 5-percent
owner, as so defined in (i), and who attains age 70 1/2 prior
to January 1, 1988, the April 1st following the later of (A)
the calendar year in which he attains age 70 1/2, or (B) the
calendar year ending December 31, 1990; or
(iii) in the case of a Member not described in (i) or
(ii), the later of (A) the April 1st following the calendar
year in which he attains age 70 1/2 or (B) April 1, 1990.
Clause (iii) (B) above shall not apply to a Member who both
attains age 70 1/2 in 1988 and incurs a Termination of Service in 1988. The date
by which the distribution of a Member's Account balances must be made or
commence under (i), (ii) or (iii) above, as applicable, shall be referred to
herein as the Member's "Required Commencement Date" .
A Member who attains age 70 1/2 may elect to have his Account
balances distributed pursuant to one of the following options: (I) the balance
of his Plan Accounts shall be distributed to him annually in a single lump sum
payment or (II) his Account balances shall be paid to him in 10 annual
installments. The election must be made no later than by the June 30 of the
calendar year preceding the calendar year in which the Member's Required
Commencement Date falls, or by such later date permitted by the Committee. If
the Member fails to make an election by such date, the Member's Account balances
shall be distributed under option (I).
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<PAGE> 43
If the Member's Account balances are to be distributed under
option (I), the initial lump sum payment shall be made no earlier than by the
November 1 of the calendar year preceding the calendar year in which the
Member's Required Commencement Date falls and no later than by the Member's
Required Commencement Date, and the amount of such payment shall be determined
at the close of the last business day immediately preceding the time the payment
is made. Thereafter, pursuant to option (I), a lump sum payment shall be made
once each calendar year, beginning with the calendar year in which the Member's
Required Commencement Date falls, on or after August 1 of the year. The amount
of each such payment shall be determined at the close of the last business day
immediately preceding the time the payment is made.
If the Member's Account balances are to be distributed under
option (II), the initial installment payment shall be made no earlier than by
the November 1 of the calendar year preceding the calendar year in which the
Member's Required Commencement Date falls and no later than by the Member's
Required Commencement Date, and with respect to the remaining installment
payments, one installment payment shall be made each calendar year, beginning
with the calendar year in which the Member's Required Commencement Date falls,
on or after August 1 of the year. The amount of the initial installment payment
shall be equal to the balance of the Member's Plan Accounts, determined at the
close of the last business day immediately preceding the time the payment is
made, divided by 10, and the amount of each other installment payment shall be
equal to the balance of the Member's Plan Accounts, determined at the close of
the last business day immediately preceding the time the payment is made,
divided by the excess of (x) 10 over (y) the number of installment payments
previously made. Any amounts credited to the Member's Plan Accounts after the
date on which the 10th installment payment is made shall be distributed in one
lump sum payment for each calendar year, beginning with the calendar year
following the calendar year in which the 10th installment is made, on or after
the August 1 of such year.
Notwithstanding any provision in the Plan to the contrary, the
amount of any payment made pursuant to this subsection (d) (4) shall be
increased to the extent necessary to satisfy the requirements of Code Section
401 (a) (9), including the incidental death benefit requirements of Code Section
401 (a) (9) (G}, and the regulations, rulings or notices issued thereunder.
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(e) The Member's Death. In the case of a Member who dies and,
immediately following his death, has a balance to his credit in the Vested
Portion of his Plan Accounts, such balance shall be distributed to his
Beneficiary, in a single lump sum payment, as soon as practicable after his
death. For this purpose, such balance shall be determined as of the close of the
last business day immediately preceding the time such distribution is made. In
all events, such distribution shall be made not later than by the final day of
the Plan Year next following the Plan Year in which the Member died.
(f) Cash Payments. All distributions under this Section 7.1
shall be made in cash.
7.2. Hardship Withdrawals. A Member who is in Service, and who
has not attained age 59 1/2, may make a hardship withdrawal from his 401(k)
Contribution Account subject to the following conditions:
(a) The withdrawal must be for:
(1) expenses for "medical care", as defined in
Section 213(d) of the Code, incurred by the Member, the
Member's spouse or any "dependent" of the Member, as defined
in Section 152 of the Code;
(2) costs directly related to the purchase of the
Member's principal residence (excluding mortgage payments};
(3) payments necessary to prevent the eviction of the
Member from, or the foreclosure of the mortgage on, his
principal residence; or
(4) payment of tuition and related educational fees
for the next 12 months of post-secondary education for the
Member, or for the Member's spouse, children or dependents (as
defined in (1) above) .
In addition to the above, the Committee may, in its sole discretion,
permit a Member to make a withdrawal in any circumstance which the
Committee determines to be an "immediate and heavy financial need",
within the meaning of Section 1.401(k)-1(d) (2) (iii) of the Treasury
regulations.
(b) The amount withdrawn may not exceed the lesser of (1) the
amount of the Member's immediate and heavy financial need, determined
in accordance with Section 1.401(k)- 1(d) (2) (iv) (B) (1) of the
Treasury regulations, attributable to the matter for which the hardship
withdrawal is requested or (2) the aggregate amount of 401(k)
Contribu-
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tions that have been contributed to the Plan on the Member's behalf
as of the day of the withdrawal, less the aggregate amount of 401(k)
Contributions that were previously withdrawn by the Member under this
Section 7.2.
(c) The Member must have obtained all distributions, other
than hardship distributions, and all nontaxable loans currently
available under this Plan and all other plans maintained by the
Employer or any other entity described in Section 1.19(f) (2), (3) or
(4), to the extent obtaining such distributions or loans is required
under Section 401(k) of the Code and the regulations, rulings or
notices issued thereunder.
(d) Notwithstanding any other provision in Article 3 to the
contrary, no 401(k) Contributions or Voluntary Contributions may be
made to the Plan, and no elective contributions or employee
contributions may be made to any other plan (qualified or nonqualified)
of deferred compensation maintained by the Employer or any other
entity described in Section 1.19(f) (2), (3) or (4), by or on behalf of
the Member for a period of 12 months following the day of the Member's
receipt of a hardship withdrawal hereunder.
(e) Notwithstanding the provisions of Section 4.1, the maximum
amount of 401(k) Contributions that may be made to the Plan on the
Member's behalf for the Plan Year next following the Plan Year in which
the Member receives a hardship withdrawal shall not exceed the dollar
limit applicable to 401(k) Contributions under Section 402(g) of the
Code for such next following year, less the amount of the 401(k)
Contributions made on the Member's behalf for the Plan Year in which
such hardship withdrawal is received .
(f) A Member who wishes to make a withdrawal hereunder shall
file a written request with the Committee setting forth the amount he
wishes to withdraw. The Member's request shall include such information
as to the amount needed by the Member, the reason for the withdrawal
and the Member's financial need for such withdrawal as required to
enable the Committee to make a determination as to whether or not the
conditions set forth herein for a hardship withdrawal will be met in
the Member's case. However, if the Committee so permits, and subject to
such rules and guidelines as the Committee may have promulgated, a
Member may use the telephone service made available by the Trustee to
communicate the foregoing information directly to the Trustee in
request
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<PAGE> 46
for a withdrawal. A Member requesting a withdrawal shall complete such
forms as are prescribed by the Committee and/or the Trustee in support
of his request.
A withdrawal cannot be made from the Member's 401(k)
Contribution Account to the extent there is an unpaid amount
outstanding on any loan to the Member from such Account. Amounts
withdrawn from the Member's 401(k) Contribution Account shall be deemed
to have been withdrawn, pro rata, from each Mutual Fund in which such
Account was invested at the time of the withdrawal. Any withdrawal
hereunder shall be paid in the form of a lump sum cash payment.
7.3. In-Service Withdrawals. A Member who is in Service shall
be permitted to make withdrawals from his Plan Accounts as follows:
(a) Voluntary Contribution and Rollover Account. A Member may,
at any time, make a withdrawal of all or any portion of the balance of his
Voluntary Contribution Account or Rollover Account.
(b) Attainment of Age 59 1/2. A Member who has attained age
59 1/2 may, at any time and in addition to the withdrawals permitted under
subsection(a) above, make a withdrawal of all or any portion of the balance of
his 401(k) Contribution Account .
(c) Rules of Application. Withdrawals made pursuant to this
Section 7.3 shall be made in accordance with the following rules. A Member who
wishes to make a withdrawal hereunder shall file a written request with the
Committee, setting forth the amount he wishes to withdraw and specifying the
Account or Accounts from which such withdrawal is to be made. However, if the
Committee so permits, and subject to such rules and guidelines as the Committee
may have promulgated, a Member may use the telephone service made available by
the Trustee to communicate the foregoing information directly to the Trustee in
request for a withdrawal. A Member requesting a withdrawal shall complete such
forms as are prescribed by the Committee and/or the Trustee in support of his
request.
A withdrawal cannot be made from an Account to the extent there
is an unpaid amount outstanding on any loan to the Member from such Account.
Amounts withdrawn from any Account shall be deemed to have been withdrawn, pro
rata, from each Mutual Fund in which such Account was invested at the time of
the withdrawal. For the purpose of this Section 7.3, the balance of any Account
shall be determined as of the close
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of the last business day immediately preceding the time the withdrawal is made.
Any withdrawal hereunder shall be made in the form of a lump sum cash payment.
7.4. Direct Rollovers. This Section 7.4 applies to any
distribution made under Section 7.1, 7.2 or 7.3 on or after January 1, 1993, to
the extent that such distribution is an "Eligible Rollover Distribution".
Notwithstanding any provision of the Plan to the contrary, the "Payee" of any
Eligible Rollover Distribution made under Section 7.1, 7.2 or 7.3 may elect, at
the time and in the manner prescribed by the Committee, to have all or any
portion of such distribution paid as a "Direct Rollover" to an "Eligible
Retirement Plan" specified by the Payee.
For the purpose of this Section 7.4, the following definitions
shall apply. An "Eligible Rollover Distribution" is defined as under Section 402
(c) (4) of the Code and the applicable Treasury regulations. An "Eligible
Retirement Plan" is an individual retirement account described in Section 408(a)
of the Code, an individual retirement annuity described in Section 408(b) of the
Code, a qualified annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that will accept a
Direct Rollover of the Payee's distribution. However, if the Payee is the
surviving spouse of a Member, only an individual retirement account or
individual retirement annuity described above may be an Eligible Retirement
Plan. A "Payee" is any person.who is entitled to receive a distribution from the
Plan, and who is a Member, the surviving spouse of a Member, or the spouse or
former spouse of a Member who is entitled to receive the distribution as the
alternate payee under a "qualified domestic relations order", as defined in
Section 414(p) of the Code. A "Direct Rollover" is a direct payment of a
distribution by the Plan to the Eligible Retirement Plan specified by the Payee,
made in accordance with Section 401 (a) (31) of the Code and the Treasury
regulations, and the rulings and notices issued by the Internal Revenue Service,
thereunder, and made in such manner as prescribed by the Committee .
7.5. Loans. The Committee shall establish and administer a
loan program for Members. Loans shall be made to a Member by the Trustee
pursuant to said program in accordance with the following rules:
(a) Generally, loans under the Plan shall: (1) be available to
all Members on a reasonably equivalent basis, (2) not be made available
to Highly Compensated Employees in an amount greater than the amount
made available to other Employees, (3) be made in accordance
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with the specific provisions herein, (4) bear a reasonable rate of
interest, and (5) be adequately secured.
(b) A loan may be made to a Member only while such Member is
in Service. A loan may be made only from a Member's 401(k) Contribution
Account, Rollover Account or Employer Contribution Account. A loan
may not be taken from an Account while there is any outstanding balance
on a loan previously taken from that Account. A loan may be made from a
Member's 401(k) Contribution Account or Rollover Account for any
purpose. A loan may be made from a Member's Employer Contribution
Account to pay one or more of the following:
(1) expenses for "medical care", as defined in
Section 213 (d) of the Code, incurred by the Member, the
Member's spouse or any "dependent" of the Member, as defined
in Section 152 of the Code;
(2) costs directly related to the purchase or repair
of the Member's principal residence (excluding mortgage
payments);
(3) payments necessary to prevent the eviction of the
Member from, or the foreclosure of the Mortgage on, his
principal residence;
(4) costs directly related to the purchase or repair
of any vehicle needed by the Member in connection with his
employment by the Employer;
(5) expenses for a funeral of any member of the
Member's family;
(6) unpaid income or real estate taxes, legal fees,
or liabilities associated with the Member's divorce; or
(7) payment of tuition and related educational fees
for the next 12 months of post-secondary education for the
Member, or for the Member's spouse, children or dependents (as
defined in (1) above) .
In addition to the above, the Committee may, in its sole discretion,
permit a Member to take a loan from his Employer Contribution Account
in any circumstance which the Committee determines to be a hardship.
The amount of any loan to a Member from an Account shall be
withdrawn, pro-rata, from each Mutual Fund in which the balance of such
Account is invested at the time
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of the loan. The Account from which the loan is made shall be charged
with such fees with respect to the loan as the Trustee and the
Committee shall agree from time to time .
(c) A Member shall request a loan by filing a written request
with the Committee, in advance of the loan, setting forth the amount
and term of the loan desired, the Account from which the loan is to be
made, and, if the loan is to be made from the Member's Employer
Contribution Account, the purpose for which the loan is requested.
However, if the Committee so permits, and subject to such rules and
guidelines as the Committee may have promulgated, a Member may use the
telephone service made available by the Trustee to communicate the
foregoing information directly to the Trustee in application for a
loan. A Member requesting a loan shall complete such forms and
documents as are prescribed by the Committee and/or the Trustee to
obtain the loan.
(d) Each loan must be for a minimum amount of at least $1,000.
The amount of any loan, when added to the outstanding balance of all
other Plan loans to the Member, shall not exceed the least of:
(1) $50,000, reduced by the excess (if any) of (i) .
the highest outstanding balance of Plan loans to the Member
during the one year period ending the day before the loan is
to be made over (ii) the outstanding balance of Plan loans to
the Member on the day the loan is made;
(2) one-half of the Vested Portion of the balance of
the Member's Plan Accounts; or
(3) either (i) in the case of a loan to be made from
the Member's Employer Contribution Account, one-half of the
Vested Portion of the balance of such Account, or (ii) in any
other case, the Vested Portion of the balance of the Account
from which the loan is to be made.
(e) For the purpose of this Section 7.5, the Vested Portion of
the balance of the Member's Plan Accounts, individually and in the
aggregate, shall be determined as of the close of the last business day
immediately preceding the time the loan is made.
(f) The loan shall be evidenced by a Promissory Note in such
form and containing such terms and condi-
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tions as are herein required and as the Committee otherwise
determines .
(g) Each loan shall provide for repayment of principal and
interest in level monthly installments over its term. Repayments shall
commence with the month following the month in which the loan is made.
The monthly installments of Members shall be deducted proportionately
from each of their paychecks from the Employer for the month and
remitted by the Employer to the Trustee, or shall be made in such other
manner as prescribed by the Committee. Repayments shall be suspended,
for up to one year, for periods during which the Member is taking an
unpaid leave of absence from the Employer due to temporary disability.
(h) The loan shall be for a term to be selected by the Member
with the approval of the Committee. The term for a loan from the
Member's Employer Contribution Account shall not exceed three years.
The term for a loan from the Member's 401(k) Contribution Account or
Rollover Account shall not exceed five years, or, if the proceeds of
such loan are to be used to acquire any dwelling unit which, within a
reasonable time, is to be used as the Member's principal residence, the
term of such loan shall not exceed 15 years. Notwithstanding the above,
the loan shall provide that all unpaid amounts of principal and
interest shall become immediately due and payable one month after the
Member's Termination of Service .
(i) The interest rate charged on any loan from the Plan shall
represent a prevailing interest rate charged on similar personal loans
granted under like circumstances by persons in the business of lending
money, as determined under rules of uniform application issued by the
Committee from time to time.
(j) The amount of the outstanding balance of any loan shall,
itself, be deemed to be an investment of the Member's Account from
which the loan was made. No Earnings shall be credited or charged to
such Account under Section 6.3 with respect to the amount of the
outstanding balance of any Plan loan. Repayments on the loan shall be
credited to such Account, and shall be invested in accordance with the
Member's investment election with respect to New Money to be credited
to such Account then in effect under Section 6.2.
(k) The loan shall be secured by the portion of the Member's
Account deemed to be invested in the out-
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standing balance of the loan. As a condition of any loan to a Member
hereunder, the Member shall agree in writing that in the event of a
default by the Member on such loan, to the extent that such Account is
being used as a security for the loan, such Account shall be reduced as
an offset against the Member's obligation to repay any amount
outstanding on such loan; provided, however, that no such reduction of
the Member's 401(k) Contribution Account may be made until the earliest
of the Member's attainment of age 59 1/2, his becoming Disabled or his
Termination of Service.
(1) If any portion of the loan remains outstanding at the time
the Account from which the loan was made is to be distributed under
Section 7.1, to the extent such Account is being used as security for
the loan, the amount then distributable under Section 7.1 from such
Account shall be reduced to offset the outstanding loan balance .
(m) The failure to make any payment under the loan when due
shall constitute a default on the loan. However, the Committee may, in
its sole discretion, grant any Member who has failed to make any
payment on a loan by its due date a grace period, not exceeding 30 days
after such due date, during which the Member may make such payment and
avoid a default on the loan. In the event of a default, the balance of
the Member's Account from which the loan was made, to the extent such
Account is being used as security for the loan, shall be reduced as an
offset against the Member's obligations under the loan as provided in
subsection (k) . In addition, the Committee shall take any commercially
reasonable action it deems necessary or desirable to satisfy any
remaining obligations under the loan.
(n) Each loan hereunder shall be subject to such other terms
and conditions as the Committee may require under rules of uniform
application issued by the Committee from time to time.
ARTICLE 8 - PLAN ADMINISTRATION
8.1. Responsibility for Administering the Plan. Authority to
control and manage the operation and administration of the Plan shall rest
exclusively with the Committee, except as to those responsibilities and powers
reserved or granted to the Trustee under Section 8.5, and to the Company's Board
of Directors under Section 8.6.
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8.2. Responsibilities of the Committee. The Committee shall be a
"named fiduciary" of the Plan within the meaning of Section 402(a) of ERISA, the
"administrator" of the Plan within the meaning of Section 3 (16) (A) of ERISA,
and the "plan administrator" within the meaning of Section 414(g) of the Code.
The Committee shall have the following responsibilities with respect to the
administration of the Plan:
(a) to furnish Members (and other individuals entitled to
receive same) with such reports, notifications, documents, statements,
information and explanations with respect to the Plan as may be
required under the provisions hereof and by the Code and ERISA;
(b) to file with the appropriate governmental agencies all
reports with respect to the Plan required by the Code, ERISA or any
other applicable statute;
(c) to engage an independent certified public accountant to
perform such functions with respect to the Plan as may be required of
the Committee by ERISA;
(d) to direct the Trustee to pay out of the Trust Fund all
amounts which are payable hereunder to Members or their surviving
spouses or other beneficiaries, any contributions to be returned to the
Employer under Section 11.1 and any taxes (including interest and
penalties) that may be levied or assessed on the Trust's assets or the
income thereof;
(e) to interpret the Plan, to decide all questions that may
arise as to the construction or application of any of its provisions
and, in accordance with the claims procedure set forth in Section 8.7,
to make all final determinations as to the rights of Members or their
surviving spouses or other beneficiaries to benefits under the Plan.
Any determination made by the Committee as to the interpretation,
construction or application of the Plan, or as to the rights of any
Member or any other person to benefits under the Plan, shall be
conclusive and binding on all parties;
(f) to promulgate such rules and regulations, and prescribe
such forms and manuals, as it shall deem appropriate for the efficient
administration of the Plan, and to maintain all data, records and
documents with respect to the Plan that may be necessary for its
operation and administration or that may be required to be maintained
by law;
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(g) to employ suitable agents and legal counsel (who may be
the same as legal counsel for the Employer) to advise or assist the
Committee with respect to any of its duties hereunder;
(h) to establish and carry out a funding policy and method for
the Plan consistent with the objectives of the Plan and with the
requirements of ERISA, and to communicate such funding policy and
method to the Trustee; and
(i) to perform such other duties and responsibilities as are
specifically assigned to it hereunder or under the Trust Agreement, or
as may be necessary for the Plan to be operated and administered in
accordance with the requirements of the Code and ERISA.
8.3. Duties and Powers of the Committee. In carrying out its
responsibilities under Section 8.2, the Committee shall comply with the
standards of conduct set forth in subsection (a) and shall have the powers set
forth in subsection (b) .
(a) Standards of Conduct. The Committee shall discharge its
duties under the Plan solely in the interest of the Members and their surviving
spouses or other beneficiaries (subject, however, to the provisions of Section
11.1); and
(1) for the exclusive purpose of providing benefits to Members
and their surviving spouses or other beneficiaries and defraying the
reasonable expenses of administering the Plan;
(2) with the skill, care, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims;
(3) in accordance with the documents and instruments
governing the Plan insofar as such documents and instruments are
consistent with the provisions of ERISA; and
(4) in accordance with such other applicable standards as may
be prescribed by ERISA for Plan fiduciaries .
In addition, the Committee shall maintain a written record of
all actions taken by it and determinations made by it in carrying out its
responsibilities under the Plan, and
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shall prepare and submit to the Company's Board of Directors such written
reports relating to its responsibilities under the Plan as the Board may request
of it from time to time. Any action to be taken by the Committee hereunder shall
be taken upon the affirmative vote of at least a majority of all persons serving
on the Committee, except as otherwise permitted under subsection (b) (1) . Any
direction to be given by the Committee hereunder in effecting any action may be
given by any person serving on the Committee, unless the duty to give such
direction with respect to such action has been allocated to a specific person or
persons serving on the Committee under subsection (b) (1).
(b) Powers. The Committee shall have the following powers:
(1) The persons serving on the Committee may allocate specific
duties and responsibilities among themselves. Any such allocation shall
be made pursuant to a written instrument, signed by all such persons,
and setting forth (i) the duties or responsibilities so allocated, (ii)
the person or persons to whom such duties or responsibilities are
allocated, and (iii) the period of time for which such allocation is to
be effective. If any duty or responsibility is so allocated, a person
to whom such duty or responsibility has not been allocated shall not be
liable for any act or omission of the person or persons to whom such
duty or responsibility has been allocated, except as may otherwise be
provided under Section 405(b) (2) of ERISA;
(2) The Committee may designate persons other than persons
serving on the Committee to carry out any fiduciary responsibility,
other than a "trustee responsibility" within the meaning of Section
405(c) (3) of ERISA. Any such designation shall be made pursuant to a
written instrument setting forth (i) the duties or responsibilities so
delegated, (ii) the person or persons to whom such duties or
responsibilities are delegated, and (iii) the period of time for which
such delegation is to be effective. If any fiduciary responsibility is
so delegated, the Committee shall not be liable for any act or omission
of the person or persons designated by it to carry out such
responsibility, except as otherwise provided under Section 405(c) (2)
of ERISA. Any person to whom fiduciary responsibilities are so
delegated shall perform such responsibilities in accordance with the
standards of conduct set forth in subsection (a) of this Section ;
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(3) The Committee, and any person to whom fiduciary
responsibilities are delegated by it under subsection (b) (2) above,
may employ attorneys, accountants, actuaries, and other consultants or
advisors to render advice to or otherwise to assist them in carrying
out their responsibilities under the Plan; and
(4) The Committee shall have all other powers necessary to
enable it to carry out its responsibilities under Section 8.2.
8.4. Reimbursement and Indemnification of the Committee. The
persons serving on the Committee, and any persons designated by the Committee to
perform fiduciary responsibilities pursuant to Section 8.3(b) (2), shall not
receive any compensation for their services as such, but shall be reimbursed by
the Company for all reasonable expenses incurred by them in the performance of
their duties hereunder. The persons serving on the Committee, and any other
persons designated by the Committee to perform fiduciary responsibilities
pursuant to Section 8.3(b) (2), shall be indemnified and held harmless by the
Company and each other Employer for any liability or loss (including legal fees
or other expenses of litigation) arising out of or in connection with their
services to the Plan in such capacity, to the extent that such liability or loss
(a) is not insured against under any applicable policy of insurance (whether or
not maintained by the Employer) and (b) is not determined to be due to their
gross negligence or willful misconduct.
8.5. Responsibilities of the Trustee. The Trustee shall have
the following responsibilities and powers in connection with the Plan:
(a) to hold all amounts contributed to the Plan by the
Employer, any income thereon and any other Plan assets, as part of the
Trust Fund;
(b) to make payments out of the Trust Fund in accordance with
the instructions of the Committee;
(c) to hold and control the Trust Fund, and to invest the
Trust Fund in accordance with any directions received from the
Committee and the Members which are proper, and which are in accordance
with the terms of the Plan and the requirements of ERISA; and
(d) to perform such other responsibilities and duties in
connection with the Plan and Trust as are set forth in the Trust
Agreement.
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8.6. Responsibilities of the Company's Board of Directors. The
following responsibilities and powers in connection with the Plan shall be
reserved to the Board of Directors of the Company:
(a) to amend or terminate the Plan;
(b) to establish a committee to control and manage the
operation and administration of the Plan; and to appoint, remove and
replace the persons serving on such Committee, and to determine the
number of persons who shall serve on such Committee; and
(c) to appoint, remove and replace the Trustee.
8.7. Claims Procedure. Any claim for benefits or other
payments under the Plan shall be determined in accordance with the procedure
set forth below.
(a) Initial Determination. Any claim for benefits or other
payments under the Plan shall be made by filing a written statement of such
claim with the person or persons designated by the Committee to process and
make initial determinations as to such claims. In the event such claim is denied
in whole or in part, such person or persons shall notify the claimant of the
denial within 90 days after the date on which the claim was filed. Such
notification shall be in writing and shall set forth: the specific reason or
reasons for the denial; specific reference to the provisions of the Plan on
which denial was based; a description of any additional material or information
necessary for the claimant to perfect the claim, and an explanation of why such
material or information is necessary; and an explanation of the review procedure
under subsection (b) .
(b) Review Procedure. A claimant whose claim is denied in whole
or in part under subsection (a) shall be entitled to have such denial reviewed
by the Committee, by filing a written request for such review with the Committee
within 60 days after his receipt of notification of the denial of his claim
under subsection (a) . Upon receipt of such request, the Committee shall make a
full and fair review of the claim; and in connection with such review, the
claimant shall be entitled to review pertinent documents and to submit issues
and comments in writing.
(c) Decision on Review. The Committee shall make a decision with
respect to such claim within 60 days after its receipt of the claimant's written
request for review; provided, however, that if the Committee determines that a
hearing is necessary, the Committee shall hold such hearing
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within such 60-day period and shall make its decision within 120 days after
its receipt of the claimant's request for review. The Committee's decision on
review shall be in writing and shall include specific reasons for the decision
and specific references to the provisions of the Plan on which its decision was
based.
8.8. Agent or Service of Process. The agent to accept service of
legal process on behalf of the Plan shall be such person as may be designated by
the Committee, from time to time, to perform such function or, in the absence of
such designation, the Committee itself.
8.9. Expenses. The Employer shall pay all of the fees and
expenses of the Plan and Trust which are not specifically described in the
Trust Agreement. All other fees and expenses of the Plan and Trust shall be paid
by the Employer, or out of the Trust Fund, as provided in the Trust Agreement.
ARTICLE 9 - AMENDMENT, MERGER AND TERMINATION
9.1. Amendment. The Company may amend this Plan at any time, by
a duly adopted resolution of the Company's Board of Directors. Any such
amendment may be made with retroactive effect to the extent not prohibited by
law. However, no such amendment shall decrease the balance of any Member's Plan
Accounts, or affect the computation of the extent to which a Member is vested in
his Accounts. In addition, no such amendment shall increase the duties or
liabilities of the Committee or the Trustee without their written consent.
9.2. Merger or Consolidation.
(a) General. In the event that the Plan is merged or
consolidated with any other plan, or in the event of any transfer of assets or
liabilities of the Plan to any other plan, the benefit which each Member would
be entitled to receive if the Plan terminated immediately after such merger,
consolidation or transfer shall be at least equal to the benefit which he would
have been entitled to receive if the Plan had terminated immediately before the
merger, consolidation or transfer.
(b) Transfer Accounts. In the event that any Employer terminates
any plan and its trust which are qualified and tax-exempt under Sections 401(a)
and 501(a) of the Code, and such plan was a defined contribution plan (such plan
shall be referred to below as a "Terminated Plan"), then the Committee may, in
its sole discretion, permit such Employer to directly transfer to this Plan any
or all of the account
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balances under the Terminated Plan which belong to Members in this Plan. Any
such transfer shall be made in accordance with the applicable provisions of the
law, and in accordance with such rules as are prescribed by the Committee.
The account balances under the Terminated Plan of any Member
which are so transferred to this Plan shall be held in an account referred to as
a "Transfer Account" established and maintained under the Plan for such Member.
A Member's interest in his Transfer Account shall be fully vested and
nonforfeitable at all times. The Transfer Account shall be invested in
accordance with rules and procedures which are consistent with those set forth
in Article 6, as if such account was a Rollover Account. A Member may borrow
from his Transfer Account under the provisions of Section 7.5 as if such Account
was a Rollover Account. Any loan against the Member's account balances under the
Terminated Plan which is outstanding at the time such balances are transferred
to this Plan may, in the discretion of the Committee, be included in such
transfer; and the Member shall repay any such loan in accordance with the terms
and conditions thereof as established under the Terminated Plan.
A Transfer Account shall be credited with Earnings in the manner
described in Section 5.1(b) However, the balance of any Transfer Account shall
be distributed, or may be withdrawn, under the same terms and conditions which
applied to distributions and withdrawals from participants' accounts under the
Terminated Plan (immediately prior to the termination thereof) in lieu of the
terms and conditions of Article 7, and, upon Plan termination, Section 9.3(b),
except that, for purposes of determining the amount of any distribution or
withdrawal, the Transfer Account shall be valued as of the close of the last
business day immediately preceding the time such distribution or withdrawal is
made. If appropriate, the Transfer Account shall be divided into sub-accounts to
account separately for any portions of the account balances transferred from the
Terminated Plan which, under the provisions of the Terminated Plan, could be
distributed or withdrawn at different times, or in different forms or manners,
than other portions of such account balances.
Except as otherwise provided above, the Transfer Account shall
be treated as an Account under the Plan.
9.3. Termination.
(a) General. The Company reserves the right to terminate the
Plan at any time, without the consent of any other party, pursuant to a
resolution authorizing such termination duly adopted by the Company's Board of
Directors. Not-
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withstanding anything herein to the contrary, the Employer, upon termination of
the Plan, shall have no obligation or liability whatsoever to make any further
contributions to the Trust, and neither the Trustee, nor any Member,
Beneficiary, Employee or other person shall have any right to compel the
Employer to make any such further contributions.
(b) Termination or Continuation of the Trust. Upon termination
of the Plan, one of the following actions shall be taken:
(1) If the Company so directs, the Trust shall continue in
existence. In such event, the Trust Fund shall be held, administered
and distributed as directed by the Committee and as provided in the
Plan, and all of the provisions of the Plan set forth herein, which are
applicable in the opinion of the Committee, other than the provisions
relating to contributions, shall remain in full force and effect.
(2) If the Plan is terminated without establishment or
maintenance of another defined contribution plan within the meaning of
Section 401(k) (10) of the Code, and if the Company so directs, the
Trust shall be terminated. In such case, notwithstanding any other
provision of the Plan to the contrary, the Plan Account balances of
each Member and Beneficiary shall be distributed to such Member or
Beneficiary, as soon as administratively feasible, in the form of a
single lump sum payment.
(3) If, upon termination of the Plan, another defined
contribution plan has been, or will be, established or maintained
within the meaning of Section 401(k) (10) of the Code, then,
notwithstanding any other provision of the Plan to the contrary (i) an
immediate distribution shall be made, in accordance with the provisions
of (2) above, to all Beneficiaries and to all Members who have attained
age 59-1/2 or are Disabled, and (ii) the Trust shall be continued, in
accordance with the provisions of (1) above, with respect to all other
Members; provided, however, that each such other Member's Plan Account
balances shall be distributed, in a single lump-sum payment, as soon as
practicable after such Member has attained age 59-1/2, has become
Disabled or has incurred a Termination of Service for any reason.
(c) Vesting Upon Termination. Upon the termination or
partial termination of the Plan, or upon the complete discontinuance of
contributions to the Plan, notwithstanding any other provision of the Plan to
the contrary, each
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Member affected thereby shall become 100% vested, and shall have a
nonforfeitable interest, in his Plan Accounts.
9.4. Termination of An Employer's Participation in the Plan. An
Employer, other than the Company, may at any time terminate its participation in
the Plan, and the Company may at any time direct that an Employer terminate its
participation in the Plan. Unless the Company specifically directs otherwise, an
Employer other than the Company shall be treated as having terminated its
participation in the Plan (a) upon the sale or other transfer of all or
substantially all of its assets to an Unaffiliated Entity or (b) upon the sale
or other transfer of its stock to an Unaffiliated Entity in a transaction that
results in the termination of such Employer's "parent-subsidiary or controlled
group relationship" with the Company, or with the controlled group of which the
Company is a member, within the meaning of Section 414(b) of the Code. For
purposes of the foregoing, the term "Unaffiliated Entity" shall mean any entity
other than one described in Section 1.19(f) (2), (3) or (4). Upon any such
termination of participation, the Plan shall terminate with respect to the
terminating Employer and its Employees and shall continue in effect with respect
to the remaining Employers and their Employees. In the event of such a
termination, the provisions of section 9.3(b) shall apply with respect to the
portion of the Trust Fund attributable to the terminating Employer, and Section
9.3(c) shall apply to the Employees of such Employer.
ARTICLE 10 - TOP-HEAVY PROVISIONS
10.1. General. With respect to each Plan Year in which the
Plan is Top-Heavy, the provisions of Sections 10.2, 10.3, 10.4 and 10.5 shall
apply notwithstanding any other provisions in this Plan to the contrary. With
respect to any Plan Year in which the Plan is not Top-Heavy, except as otherwise
provided herein, the provisions of Sections 10.2, 10.3. 10.4 and 10.5 shall not
apply.
10.2. Minimum Benefit. For any Plan Year in which the Plan is
Top-Heavy, the Employer shall make a contribution to the Plan under this Section
10.2 on behalf of any Member who is a Non-Key Employee. Such contribution shall
be in the amount by which the contributions made by the Employer on such
Member's behalf, or allocated to such Member, for such year under this Plan, and
under each other defined contribution plan aggregated with this Plan under
Section 10.6(a), is less than the smaller of (a) 3% of such Member's Section 415
Compensation for such year or (b) the percentage of such Member's Section 415
Compensation for such year which is equal to the highest Allocation Percentage
for the year of any Member who
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is a Key Employee. For this purpose, (1) 401(k) Contributions made on behalf of
Non-Key Employees under this Plan, and any contributions subject to Section
401(k) or 401(m) of the Code made on behalf of Non-Key Employees under any other
defined contribution plan, shall be disregarded; (2) a Key Employee's
"Allocation Percentage" for a Plan Year shall mean the percentage determined by
dividing the sum for such year of (i) total 401(k) Contributions and Employer
Contributions made on behalf of the Key Employee, or allocated to the Key
Employee, under this Plan and (ii) the total contributions made by the Employer
on such Key Employee's behalf, or allocated to such Key Employee, under any
other defined contribution plan aggregated with this Plan under Section 10.6(a)
by so much of his Section 415 compensation for the year as does not exceed the
maximum amount of his Section 415 Compensation that may be taken into account
hereunder; and (3) any person who is not a Member solely because he has not
elected to have any 401(k) Contributions made on his behalf shall be treated as
a Member. Clause (b) in the second preceding sentence shall not apply in any
Plan Year in which this Plan enables a defined benefit plan, which is aggregated
with this Plan under Section 10.6(a), to meet the requirements of Section 401
(a) (4) or 410 of the Code for such year.
Notwithstanding the foregoing, the amount to be contributed on
behalf of any Member pursuant to this Section shall not exceed the minimum
amount that must be contributed on such Member's behalf in order to meet the
"minimum benefit" requirements of Section 416(c) of the Code and the regulations
issued thereunder; and no amount shall be contributed under this Section on
behalf of a Member for any Plan Year if (A) the Member is not employed by the
Employer on the last day of such Plan Year, or (B) the Member is entitled to
receive for such year, under any defined benefit plan aggregated with this Plan
under Section 10.6(a), a benefit that is at least equal to the defined benefit
minimum described in M-2 of Section 1.416-1 of the Treasury regulations.
Any amount contributed under this Section 10.2 by the Employer
on behalf of any Member shall be credited to the Member's Employer Contribution
Account, as of the day on which such contribution is made to the Plan, but no
later than by the final day of the Plan Year to which the contribution relates .
10.3. Minimum Vesting. In the case of a Member who earns at
least one Hour of Service under the Plan during or subsequent to a Plan Year for
which the Plan is Top-Heavy, the Vested Portion of his Plan Accounts shall be
determined as provided in Section 1.34, except that the following schedule shall
apply to all such Members in lieu of the schedules
-55-
<PAGE> 62
appearing in (1), (2) and (3) of subsection (a) of Section 1.34:
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C>
0-1 0
2 40
3 100
</TABLE>
10.4. Maximum Compensation. For any Plan Year beginning prior to
August 1, 1989 in which the Plan is Top-Heavy, the annual Compensation taken
into account under the Plan, and the annual Section 415 Compensation taken into
account under this Article 10, for any Member shall not exceed $200,000,
adjusted annually by the Secretary of the Treasury under Section 416(d) of the
Code and the Treasury regulations issued thereunder .
10.5. Section 415 Limits. For any Plan Year in which the Plan is
Top-Heavy, the overall limit of Section 415(e) of the Code shall be applied by
substituting "1.0" for "1.25" wherever "1.25" appears. However, the preceding
sentence shall not apply with respect to a Plan Year if (a) each Member who is a
Non-Key Employee is entitled to receive for such year (1) under this Plan, when
aggregated with any other defined contribution plan aggregated with this Plan
under Section 10.6(a), a benefit that is at least equal to the defined
contribution minimum described in M-14 of Section 1.416-1 of the Treasury
regulations, or (2) under any defined benefit plan aggregated with this Plan
under Section 10.6(a), a benefit that is at least equal to the defined benefit
minimum described in M-14 of Section 1.416-1 of the Treasury regulations, and
(b) the Plan is not Super Top-Heavy for such year.
10.6. Definitions. For purposes of this Article 10, the
following terms shall have the following meanings, and the following rules shall
apply:
(a) "Top-Heavy" and "Super Top-Heavy" - the Plan shall be
deemed to be Top-Heavy with respect to any Plan Year if, as of the
Determination Date for that year, the aggregate Benefits of all Key
Employees under this Plan, and all other plans which are aggregated
with this Plan, exceed 60% of the aggregate Benefits of all Key and
Non-Key Employees under this Plan and all such other plans. The Plan
shall be deemed to be Super Top-Heavy with respect to any Plan Year if,
as of the Determination Date for that year, the aggregate Benefits of
all Key Employees under this Plan, and all other plans that are
aggregated with this Plan, exceed 90% of the aggregate Benefits of all
Key and Non-Key Employees under this Plan
-56-
<PAGE> 63
and all such other plans. For purposes of the two preceding sentences,
each qualified plan maintained by the Employer, including this Plan,
(1) in which a Key Employee was a participant, or (2) which enabled any
plan described in clause (1) to meet the requirements of Section 401(a)
(4) or Section 410 of the Code, during the 5-year period ending on the
Determination Date for the Plan Year in question shall be aggregated. A
terminated plan shall be aggregated with this Plan, for these purposes,
if such plan was maintained by the Employer during the aforesaid 5-year
period and would, but for its termination, be so aggregated under the
preceding sentence.
(b) "Determination Date" - The Determination Date for a Plan
Year shall mean the final day of the immediately preceding Plan Year,
except, however, the Determination Date for the first Plan Year shall
be the final day of such year.
(c) "Benefits" - An individual's Benefits shall mean the sum
of (1) the balance of his Plan Accounts under this Plan and his
accounts under all other defined contribution plans aggregated with
this Plan under Section 10.6(a); (2) the present value of his
cumulative accrued benefits under all defined benefit plans aggregated
with this Plan under Section 10.6(a); and (3) the aggregate
distributions made with respect to him under the plans described in
clauses (1) and (2) hereof during the 5-year period ending on the
Determination Date as of which such individual's Benefits are being
determined.
For purposes of this Section 10.6(c), the Benefits of any
individual shall be disregarded if such individual (i) has not
performed any services for the Employer during the 5-year period ending
on the Determination Date for the Plan Year or (ii) was a Key Employee
for any Plan Year but subsequently became a Non-Key Employee for any
Plan Year. The present value of accrued benefits under any defined
benefit plan shall be determined for each Non-Key Employee under the
uniform method of benefit accrual used by all qualified defined benefit
plans of the Employer, or, if there is no such method, as if benefits
accrued not more rapidly than under the slowest accrual rate permitted
under Section 411(b) (1) (C) of the Code.
(d) "Key Employee" and "Non-Key Employee" - shall be defined
as under Section 416(i) of the Code and the Treasury regulations
thereunder.
-57-
<PAGE> 64
(e) "Section 415 Compensation" - shall mean compensation as
defined under Section 1.415-2(d)(1), (2), (3) and (4) of the Treasury
regulations. For Plan Years beginning on and after August 1, 1989, the
$200,000 limitation set forth in Section 1.7 shall apply.
(f) The benefits attributable to any plan aggregated with this
Plan under Section 10.6(a) shall be taken into account for purposes of
Sections 10.2, 10.5 and 10.6(a) and (c) in a Plan Year in a manner
consistent with T-23 of Section 1.416-1 of the Treasury regulations.
(g) For purposes of this Article 10, wherever required by
Section 416 of the Code and the regulations thereunder, the term
"Employer" includes all entities aggregated with the Employer under
Section 414(b), (c), (ni) or (o) of the Code and the regulations
thereunder.
10.7. Applicability. In the event that Congress should provide
by statute, or the Treasury Department or the Internal Revenue Service should
provide by regulation, ruling or notice, that the provisions of this Article are
no longer necessary to meet the qualification requirements of Section 401(a) of
the Code, this Article shall become void, and shall no longer apply, without the
necessity of any amendment to the Plan.
ARTICLE 11 - MISCELLANEOUS
11.1. Plan Assets to be Held for Exclusive Benefit of Members.
The assets of the Plan shall never inure to the benefit of the Employer and
shall be held for the exclusive purposes of providing benefits to Members of the
Plan and their spouses and other beneficiaries, and defraying the reasonable
costs and expenses of administering the Plan. However, this Section shall not
prevent a contribution made by the Employer under the Plan from being returned
to it, or other Plan assets to be distributed to the Employer, in the following
circumstances:
(a) If an amount is contributed under the Plan by the Employer
pursuant to a mistake of fact, the amount so contributed shall be
returned to the Employer within one year of the date of such
contribution.
(b) Each contribution which the Employer makes under the Plan
is conditioned upon the deductibility of such contribution under
Section 404 of the Code. To the extent a deduction therefor is not
allowed, the amount of any such contribution shall be returned to the
Employer
-58-
<PAGE> 65
within one year after the contribution is determined to be nondeductible.
11.2. Nonassignability of Rights. Except to the extent provided
in Section 11.3, no interest, right or claim in or to any part of the Trust Fund
or any payment therefrom shall be assignable, transferable or subject to sale,
mortgage, pledge, garnishment, attachment, execution or levy of any kind, and
the Trustee shall not recognize any attempt to assign, transfer, sell, mortgage,
pledge, garnish, attach or execute the same.
11.3. Qualified Domestic Relations Orders. To the extent so
provided in an order that the Committee determines to constitute a "qualified
domestic relations order" within the meaning of Section 414 (p) (1) (A) of the
Code ("QDRO"), the right to receive all or a portion of the benefits payable
under the Plan with respect to a Member may be assigned or transferred by the
Member to any "alternate payee" within the meaning of Section 414(p) (8) of the
Code ("Alternate Payee") specified in such QDRO. Notwithstanding any other
provision in this Plan to the contrary, if a QDRO so provides, the portion of a
Member's interest in the Plan which is payable under the QDRO to any Alternate
Payee shall be distributed to such Alternate Payee, in the form of a single lump
sum payment, as soon as practicable after the Committee has determined that such
order constitutes a QDRO.
11.4. Trust Fund as Sole Source of Benefit Payments. The Trust
Fund shall be the sole source of payment of benefits under the Plan. In no event
shall the Employer be liable to any Member or to any other individual for the
payment of such benefits
11.5. Right to Employment. The Plan shall not confer upon
any Employee any right of employment, nor shall any provision of the Plan
interfere with the right of the Employer to discharge any Employee.
11.6. Gender and Number. Words used in the masculine include
the feminine gender. Words used in the singular or plural shall be construed as
if plural or singular, respectively, where they would so apply.
11.7. Titles. Titles of Articles, Sections and subsections are
inserted for convenience and shall nOt affect the meaning or construction of the
Plan.
-59-
<PAGE> 1
EXHIBIT 10.35
PALL DEUTSCHLAND GMBH
Dreieich
Concept Of An Additional Pension Plan
For Senior Executives
September 1988
<PAGE> 2
I OBJECTIVES / INSTRUCTION
PALL DEUTSCHLAND GMBH intends to improve the pension entitlements for senior
management employees. The intention is to provide this group of employees with
a total net retirement income of 65 to 70 per cent of final net active earnings
after approximately 30 years of service.
The improved pension entitlements should be granted, at the earliest, upon the
attainment of age 50 so that employees under the age of 50 can not accrue vested
rights under this pension arrangement.
Once an employee qualifies for an additional pension contract his benefit
entitlement should be increased step by step or i.e. for each year of service he
is credited with an additional pension unit until at age 65 he gets the full
benefit of the improvement. The purpose is to minimize portability rights in
case an employee leaves the company after age 50 but before reaching the
retirement age.
1
<PAGE> 3
II OUTLINE OF THE CONCEPT
In a recent meeting in Dreieich the basics of a plan concept have been
developed. The main features are summarized in the following:
1. After a potential beneficiary has attained age 51 his achievable pension on
basis of the present plan is compared with the achievable benefit, if the
accrual rate above the Social Security Contribution Ceiling had been
increased from 0.9 per cent to 1.5 per cent per year of service.
2. The difference between these two amounts is divided by 15, i.e. normally
the remaining number of years of service between age 50 and 65.
3. The employee is credited with one resulting pension unit for the year of
service between age 50 and age 51.
4. After one year, at age 52, the employee is credited with a second pension
unit. If this employee has had a salary increase, a new calculation must be
made to determine the difference between achievable pensions on basis of
the present plan and the (fictitious) improved plan, If the pension
entitlements increase in line with salary increases the pension units
calculated in each year will increase correspondingly. Since, however, the
PALL scheme is a final average pay plan, the pension units for previous
years of service after age 50 must be revalued in order to account for the
salary increases and to maintain the nature of a final pay plan. If the
pension units were just added up, the plan improvement would be on a
carrier average basis.
2
<PAGE> 4
In the following the concept is demonstrated by an example. It is assumed that
an employee at the age of 51 has pensionable earnings of DM 100,000.-- p.a. His
entry age was 35 so that his potential period of service is 30 years. Under the
present PALL scheme his pension entitlement at age 65 would be DM
14,040.--p.a. If the accrual rate above the SSCC were increased to 1.5 per cent
if his achievable benefit would be DM 19.080 p.a. The difference between the two
amounts is DM 5,040.--. This amount divided by 15 leads to a first pension unit
of DM 336. --. The following table shows the development of the pension units in
each year until age 65 as well as the accrued revalued pension units until
retirement age.
Demonstration of Plan Concept
<TABLE>
<CAPTION>
Age Pension Unit Accrued Pension Increase
Units (in %)
---------------------------------------------------
<S> <C> <C> <C>
51 336 336 -
52 349,44 698,88 108
53 363,42 1.090,26 56
54 377,96 1.511,84 38,7
55 393,08 1.965,40 30
56 408,80 2.452,80 24,8
57 425,15 2.976,05 21,3
58 442,16 3.537,28 18,9
59 459,85 4.138,65 17
60 478,24 4.782,40 15,5
61 497,37 5.471,07 14,4
62 517,26 6.207,12 13,4
63 537,95 6.993,35 12,7
64 559,67 7.835,38 12
65 582,06 8.730,90 11,4
----------------------------------------------------
</TABLE>
3
<PAGE> 5
In practice, each beneficiary will receive a revised pension contract every year
stating the respective accrued pension units which represent the achievable
old-age retirement pension at any time between age 51 and 65.
Wiesbaden, September 28, 1988
Hr-eb
IPC
INTERNATIONAL
PENSION CONSULTANTS GMBH
1.V.
/s/ /s/
R&B Ter Hauner
4
<PAGE> 1
EXHIBIT 10.13
PALL CORPORATION
[PICTURE BY PAUL KLEE, SCHEIDUNG ABENDS (PARTING IN THE EVENING/SEPARATION IN
THE EVENING)]
1996 ANNUAL REPORT
<PAGE> 2
FISCAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Years Ended
---------------------------------------------
(In thousands, except per share data) AUGUST 3, 1996 July 29, 1995 % INCREASED
- ------------------------------------- -------------- ------------- ----------
<S> <C> <C> <C>
Net Sales $ 960,376 $ 822,823 17
Earnings Before Income Taxes $ 197,854 $ 167,704 18
Net Earnings $ 138,498 $ 118,436(a) 17
Earnings Per Share $ 1.21 $ 1.03(a) 17
Total Assets at End of Year $ 1,184,958 $ 1,074,922 10
Working Capital $ 250,984 $ 237,034 6
Stockholders' Equity $ 732,300 $ 651,799 12
Average Shares Outstanding 114,839 115,184
Equity Per Share Outstanding at Year End $ 6.38 $ 5.70 12
- ----------------------------------------------------------------------------------------
</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).
SALES
(In millions)
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
332 390 434 497 564 557 685 687 701 823 960
</TABLE>
DIVIDENDS PER SHARE
(In dollars)
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
.09 .11 .13 .15 .18 .21 .26 .31 .36 .41 .47
</TABLE>
EARNINGS PER SHARE
(In dollars)
<TABLE>
<CAPTION>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
.37 .43 .50 .50 .57 .69 .79 .68 .86 1.03 1.21
</TABLE>
CONTENTS
Profile of Pall Corporation 1.
Pall at a Glance Inside Gate.
Letter to Shareholders 2.
Business Units-Year in Review 5.
Financial Contents 30.
Corporate Directory 49.
ABOUT THE COVER
Cover Painting: Paul Klee, (Scheidung Abends) Parting in the Evening/Separation
in the Evening, 1922/79. Watercolor on paper, 33.5 x 23.2 cm. Private
collection, Switzerland. (C)1996 Artists Rights Society (ARS)/ New York, VG
Bild-Kunst, Bonn.
<PAGE> 3
PROFILE OF PALL
Pall Corporation is in the business of purifying liquids and gases. It has the
broadest-based filtration and separations product lines in the world. Our
engineering expertise and unmatched array of proprietary technologies enable us
to provide innovative solutions to complex contamination problems.
The worldwide demand for filtration and separations products has risen to more
than $12 billion and is increasing steadily.
Pall serves global customers in three major markets: Health Care, Aeropower and
Fluid Processing. The diverse customers in these markets share an urgent need
for pure products, clean processes and efficiently operating equipment. Pall
products meet these needs.
- - Pall at a Glance
[Caption]
[Filtration Separation Solution (TM).]
<PAGE> 4
PALL AT A GLANCE
Percent of Fiscal 1996 Total Sales Description
(amounts in millions)
- --------------------------------------------------------------------------------
FLUID PROCESSING 26.5% In this diverse market, Pall products
are critical to the producers of oil and
1995 $213.1 gas, electricity, chemicals, plastics,
1996 $253.9 semiconductors, photographic film,
magnetic storage devices, thin-film
rigid discs, jet ink printers, computer
terminals, disc drives and many more. To
meet the stringent challenges of these
innovators, Pall offers a wide range of
sophisticated products and services that
enhance the purity of process fluids by
removing microscopic and larger
contaminants that can devastate
production equipment, product yields and
quality.
- --------------------------------------------------------------------------------
AEROPOWER 24.5% Pall is a leading supplier of filtration
products to the commercial and military
1995 212.8 aircraft market for use on aircraft,
1996 235.1 ships and land-based vehicles. Our
industrial customers include power
generation plants, manufacturers of
aluminum and steel, paper, automobiles,
injection molded parts and mobile
equipment--including trucks and
earthmoving machinery. Pall's
high-performance products remove
particulates and water from hydraulic
and lubrication fluids and systems,
extending their useful life, minimizing
waste for disposal, and increasing
overall productivity.
- --------------------------------------------------------------------------------
HEALTH CARE 25.0% PATIENT PROTECTION
1995 194.5 Pall filters protect patients receiving
1996 239.5 blood transfusions, undergoing
open-heart surgery, organ transplants,
intravenous feeding and breathing
therapy. They are used extensively in
hospitals and in blood centers. Often
the last line of defense, our
sophisticated products provide
unparalleled protection from
particulates, bacteria, viral and
foreign leukocyte contamination. They
help to improve patient outcomes,
shorten hospital stays, and lower health
care costs.
- --------------------------------------------------------------------------------
HEALTH CARE 24.0% PHARMACEUTICALS, DIAGNOSTICS, FOOD &
BEVERAGE
1995 202.4
1996 231.9 Pall is an innovator and leader in the
supply of filtration systems, validation
services and proprietary membranes that
are fundamental to manufacturers of
pharmaceuticals, biopharmaceuticals,
blood fractions, therapeutic biologicals
and food and beverages, as well as
producers of diagnostic tests and users
of laboratory-scale filtration devices.
These producers rely on Pall to ensure
the efficacy and safety of their
products and processes.
- --------------------------------------------------------------------------------
2
<PAGE> 5
<TABLE>
<CAPTION>
Sales by Market Segment 1996 Market Potential Competitors
(amounts in millions) (amounts in millions)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
[Pie Chart 1]
Microelectronics, Data Storage $3,600 Baker Hughes, CUNO, Funda Filter,
and Photographic Film Graver, Memtec, Millipore, Roki
1996 Sales: $156.4 Techno, Ronningen-Petter
1995 Sales: $128.6
Oil/Gas, Chemical/Petrochemical
and Power Generation
1996 Sales: $ 97.5
1995 Sales: $ 84.5
- ----------------------------------------------------------------------------------------------------
[Pie Chart 2]
Airborne, Military Land $2,075 Donaldson, Fairley Arlon, Hydac,
and Marine Koito Manufacturing, LeBozak,
1996 Sales: $ 99.9 Mark IV Industries, Parker
1995 Sales: $ 94.1 Hannifin, Schroeder, Taisei,
Western Filter
Industrial and Mobile
Fluid Power
1996 Sales: $135.2
1995 Sales: $118.7
- ----------------------------------------------------------------------------------------------------
[Pie Chart 3]
Patient Protection $4,075 Abbott, Asahi Medical, Maco
1996 Sales: $239.5 Pharma
1995 Sales: $194.5
BioSupport and OEM Diagnostics $2,650 Abcor, CUNO, Gelman Sciences,
1996 Sales: $ 38.3 Koch, Millipore, Sartorius
1995 Sales: $ 32.8
Pharmaceutical, Biologicals
and Bioprocessing
1996 Sales: $145.4
1995 Sales: $125.0
Food & Beverage
1996 Sales: $ 48.2
1995 Sales: $ 44.6
GRAND TOTAL = $12.4 BILLION
</TABLE>
3
<PAGE> 6
LETTER TO SHAREHOLDERS
[PHOTO OF ERIC KRASNOFF CHAIRMAN AND CHIEF EXECUTIVE OFFICER]
Solid execution of Pall Corporation's Business Plan in fiscal 1996 achieved our
twin goals of double-digit sales and earnings growth. Both were up over 16
percent despite the negative effects of currency and some pockets of economic
weakness in Europe. Significantly, each of our three market segments, Health
Care, Aeropower and Fluid Processing, contributed to this success.
As 1996 ended, we celebrated a very special milestone . . . Pall Corporation's
50th anniversary. We paused at each of our locations throughout the world to
appreciate the enduring values that brought us this far. We also dedicated
ourselves to preserving those values . . . integrity, a commitment to quality
and to serving our customers' long-term needs, a drive to push the boundaries of
science and technology, a long-standing awareness of operating globally and a
willingness to take strategic risks . . . in order to excel in the years ahead.
We are extremely proud of our employees' achievements and share their conviction
that even greater successes are at hand. Pall's skilled and dedicated work force
is unequaled at serving the filtration and separations needs of our customers.
We thank them all for our first 50 years and enlist their ongoing support in
pursuit of our bright future.
Over the past two years your company has redefined itself. No longer content to
be a niche supplier of components, we have broadened both our product lines and
our technical support and service capabilities. Profits have grown apace.
This is not a rags to riches saga. Our metamorphosis started from a strong base.
But certainly a flower to bouquet analogy is apt. Pall Corporation is now a
veritable garden of products and services . . . and business is blooming!
We are a systems engineering and specialty materials company. Our
product--Solutions. We solve the knottiest problems of filtration and
separations for our customers . . . and do so with a broader range of
proprietary technologies than any competitor. We apply our know-how to an
equally wide range of markets and applications. Pall succeeds best with
customers who require intense scientific support and in applications that are
complex and demanding.
4
<PAGE> 7
At first glance there does not seem to be much similarity between a
manufacturer of pharmaceuticals, a jet engine producer, and a pulp and paper
plant. Yet most companies are driven by similar global operating pressures.
Regardless of industry, our customers share an imperative to be cost-efficient,
profitable and environmentally responsible producers. To achieve this, companies
throughout the world are focusing on core competencies by outsourcing as much
work as possible to an increasingly concentrated vendor base.
[CAPTION]
["Our product--Solutions. We solve the knottiest problems of filtration and
separations for our customers . . . and do so with a broader range of
proprietary technologies than any competitor."]
This trend of outsourcing and vendor consolidation meshes seamlessly
with our major strategic move begun at the end of fiscal 1994 to become an
integrated source for high-end filtration and separations. As part of that
strategy we emphasize systems over components and provide sophisticated and
unique custom-engineered solutions for customer problems.
To effectively provide this comprehensive support from the design stage
throughout installation and beyond, has required, appropriately enough, the
"re-engineering" of our Engineering Departments in the U.S., Europe and Asia.
Additional scientists and laboratories have also been added throughout the
world, particularly in Asia. I am pleased to say that this investment was
substantially completed by the end of 1996.
We have also refocused and bolstered research and development over the
past two years. The results are gratifying. More new products were introduced in
1996 than at any time in our history. Equally significant, a bevy of
developments in the pipeline promise the continuing release of commercially
significant products through the end of this century.
Such internal generation of new products remains our core focus. But to
master every possible technology in each of our broad markets is a fool's
errand. So we have reached out to other companies, universities and customers to
add technology to our portfolio. These arrangements run the gamut from licensing
agreements to exclusive marketing partnerships to acquisitions.
This openness has, in just the last few years, brought us such
capabilities as ceramic filter materials for hot gas applications, molecular
purifiers for the semiconductor industry, ultrafiltration for just about
everything and blood collection systems for blood processing, to name but a few.
These technologies and others fit within our strategic vision by addressing the
pressing purification and separations needs of our customers.
Our sales growth will continue to be driven by new products, new
geographies, acquisitions and alliances. Each of these made a significant
contribution in the year. Strategic acquisitions in the Health Care segment
added about $38 million to our sales in the year. Asia, outside Japan, where we
have been investing heavily, grew 41 percent.
Each of our three major markets achieved double-digit sales growth in
1996. For the third year in a row, our best growth--19 percent--came from Fluid
Processing. Sales to Microelectronics customers, which now account for 39
percent of this segment, increased more than 20 percent for the third
consecutive year. We were particularly successful in the U.S., where
Microelectronics sales jumped 60 percent over fiscal 1995. We expect to be able
to sustain growth as new products increase our penetration. Yet even without the
Microelectronics contribution, Fluid Processing grew 18 percent.
Sales in Health Care increased 19 percent and continue to represent
close to half of Pall's total sales. Medical Product sales account for half of
these revenues. All four of our Health Care submarkets experienced double-digit
local currency growth.
5
<PAGE> 8
To increase the momentum of sales to blood centers and leverage our
acquisition of Medsep, we restructured our distribution and now sell direct to
blood centers. At the same time, our Hospital Products distributors are focused
more intensely on sales to hospitals. Sales to blood centers now represent 42
percent of our blood filter sales, up from 21 percent just two years ago. This
increased focus will result in better sales growth and service to both blood
center and hospital customers.
We were mildly but pleasantly surprised by the robust growth in
Aeropower of 10 1/2 percent. Sales in the Aerospace subsegment, at about $100
million, were up 6 percent against the difficult comparison of a $9 million,
one-time sale to the U.K. military in fiscal 1995. Commercial Aerospace business
increased 27 percent. We expect to see double-digit growth for some time to come
in this market.
The commercial sector now represents about half of our Aerospace sales.
We continue to fortify our distribution in this market to ensure our ability to
capitalize on its promise.
Sales to U.S. military customers now account for just 3 1/2 percent of
Pall's total sales, and actually showed an increase in fiscal 1996 of 14
percent. The Industrial Hydraulics segment is 58 percent of Aeropower and also
increased 14 percent. These results will be bolstered in 1997 as our separations
technologies and experience expand in this part of the business.
We continued to generate cash in fiscal 1996 and increased our dividend
this year by 17 percent so that we still distributed about 40 percent of
after-tax profits. We purchased the Medical Plastics business of Bayer for $45
million in cash. We bought back $10 million of our own stock and spent $82
million on capital projects. Even so, our borrowings, net of cash and short-term
investments, increased just $13 million to $98 million. Our balance sheet
remains very strong with net debt at 13 percent of equity. Return on average
equity increased to 20 percent this year.
In fiscal year 1997 we intend to establish manufacturing facilities in
The Republic of Ireland and take advantage of that country's favorable tax
rates. We also plan to open modest facilities in India under a joint venture
with our long-time local distributor.
[CAPTION]
["Your company's ability to master complex technologies to achieve solutions to
real customer problems has never been greater."]
The cover of this Report is a reproduction of an original watercolor
from 1922 by Paul Klee entitled Separation in the Evening. The Swiss-born Klee
is renowned for his creativity and for his ability to continually reinvent his
art while remaining true to his ideals. For us, the painting captures our vision
of attacking problems from multiple directions with a bright and varied palette.
The following pages detail a wealth of capabilities and a mountain of
banked potential ready to be converted to sales. Your company's ability to
master complex technologies to achieve solutions to real customer problems has
never been greater. I welcome you to our company and ask you to share our zeal
for the future.
/s/ Eric Krasnoff
Eric Krasnoff
Chairman and Chief Executive Officer
6
<PAGE> 9
[CAPTION]
["IN THE LAST TWO YEARS SALES INCREASED 37% TO $960 MILLION. OUR SALES GOAL OF
$1 BILLION DURING CALENDAR YEAR 1996 IS WITHIN REACH."]
[PHOTO OF JEREMY HAYWARD-SURRY, PRESIDENT,
TREASURER AND CHIEF FINANCIAL OFFICER]
[CAPTION]
[50 YEARS OF INNOVATION]
[CAPTION]
["OUR MANUFACTURING PHILOSOPHY IS TO ADHERE TO THE HIGHEST INTERNATIONAL QUALITY
AND ENVIRONMENTAL STANDARDS AND TO GLOBALIZE THESE EFFORTS TO BETTER SUPPORT OUR
CUSTOMERS."]
[PHOTO OF DEREK WILLIAMS, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER]
7
<PAGE> 10
HOSPITAL PRODUCTS
PATIENT PROTECTION Pall filters play a vital role protecting hospital patients
receiving blood transfusions, undergoing open-heart surgery, organ transplants,
intravenous feeding and breathing therapy. Our hospital products business grew
by 9 percent.
TRENDS TO CONTROL COSTS Pressure on health care economics continues unabated
but with a new target. No longer simply a purchasing exercise, hospitals are
focused on improving patient outcomes as a means to strengthen their bottom
lines. Clinical data indicating that filtration is a means to improve patient
outcomes and reduce health care costs continues to mount. Pall filters are the
most widely used in these studies. Hospital administrators and group purchasing
organizations -- an industry "born" to watch costs -- are selecting products
that add value by reducing the cost of patient care.
ROOM FOR GROWTH When we first entered the white blood cell filtration market,
most filters were used on critically ill patients. Blood filtration
opportunities in general surgical procedures, such as gall bladder surgery, hip
replacement and appendectomies, are still largely untapped.
PRODUCTS FOR THE PROVIDER We are addressing the needs of nursing personnel
PROBLEM:
Complications resulting from blood transfusions significantly increase costs,
prolong hospital stays, and pose patient health problems for years to come.
[PHOTO OF EZ PRIME REDUCTION FILTER]
The new EZ Prime bedside leukocyte reduction filter is easier to use, while
ensuring a safer blood product.
[PHOTO OF PALL FILTER]
Pall filters are often used in the operating room to minimize transfusion
complications and risks.
[PHOTO ASSISTANT]
Technical assistance routinely provided by Pall is critical to the success of
any leukocyte reduction program.
8
<PAGE> 11
for products that are not only effective but easy to use. The recently
introduced EZ Prime bedside filter is a proprietary self-priming leukocyte
depletion filter that satisfies these dual requirements.
MORE THAN BLOOD FILTERS A quarter of Pall revenues from hospital sales are
non-blood related and equally critical to patient care. At present,
ventilator-associated pneumonia ranks third as the most likely infection to
contract during a hospital stay. It also ranks highest in documented costs, due
to diagnostic testing, drug therapy and prolonged hospitalization. Pall's
breathing circuit filters minimize the risk of infection, thereby reducing
related post-infection costs. They provide extremely affordable protection and
sales of Pall breathing circuit filters reflect this worldwide.
NEW OPPORTUNITIES We are now focused on a wealth of new applications including
filtration of salvaged blood. This is blood that has been removed, cleansed and
returned to patients undergoing cardiac, or other extensive surgeries. We also
anticipate continued growth from leukocyte filtration as it becomes the global
standard of care for all recipients of blood transfusions.
OPPORTUNITY:
Studies show that each unit of donor blood received by patients during surgery
increases the risk of post-operative infection by 15 percent, a figure that
accumulates with every additional transfusion. For a few dollars per patient,
Pall filters enable hospitals to remove leukocytes from donor blood. Leukocytes
are the known culprit in 90 percent of transfusion complications. They transmit
viruses and infectious agents, as well as contribute to immune system
suppression in the recipient. A standard of care evolution is taking place in
which health care providers are advocating the removal of white blood cells from
all donor blood as a means to protect patients and drive costs from the overall
system. With clinical studies building a convincing case for leukocyte
reduction, we believe the hospital filtration market has only begun to realize
its vast $600 million global potential.
[PHOTO OF DOCTOR WITH YOUNG PATIENT]
SOLUTION:
Hospitals can dramatically minimize the threat to patients and realize cost
savings by using Pall filters to reduce potentially dangerous viruses and
contaminants in transfused donor blood.
9
<PAGE> 12
BLOOD CENTERS
THE LAUNCH OF MEDSEP Pall's blood center business grew 71 percent worldwide in
fiscal 1996 as the move toward universal filtration intensifies. Central to this
growth is Medsep Corporation, which was created in September 1995 following the
acquisition of the Medical Plastics business of Bayer Corporation. In less than
a year the benefits are showing, with an expanded range of products, technical
support and service. Medsep is one of only three companies in the world licensed
to sell whole blood collection systems in the U.S.
MORE THAN SEMANTICS Blood centers are different from hospital blood banks and
require different products and support. Pall is uniquely positioned to meet the
requirements in either setting. Blood centers serve as freestanding agents for
the collection and processing of donated blood, which is then sold to hospital
blood banks. Hospital blood banks support the clinical needs of patients -- they
inventory, issue and monitor transfusion services in the hospital. Only rarely
do hospitals collect or process blood. Increasingly, blood centers are operating
as licensed manufacturers of biologicals (much like a pharmaceutical producer)
and as such are subject to compliance with standard operating procedures,
quality assurance practices and audits by regulatory agencies.
UNIVERSAL FILTRATION MOVES CLOSER Through co-marketing programs, supply
contracts and educational seminars, we are
PROBLEM:
Blood centers must process blood efficiently, reliably and consistently prior to
shipment to transfusion centers for patient use. From the moment a unit of blood
is collected, the clock, for its shelf life, begins to tick.
OPPORTUNITY:
Blood centers process blood for patient use in compliance with rigorous
regulatory standards within severe time constraints. Platelets, for example,
must be collected, processed (which includes various quality control tests),
shipped and administered to patients in no more than 5 days from collection.
Donor blood is now screened for the presence of cytomegalovirus (CMV) for those
patients requiring CMV-negative blood products. CMV screening adds cost and time
to the process. Leukocyte reduction by Pall filtration has been clinically
demonstrated to be equivalent to testing of blood components for CMV. Removing
cytomegalovirus through filtration obviates the need for this additional test
and maximizes blood availability. Pall filtration makes CMV-safe products
readily available for all patients and simultaneously enhances blood quality. We
believe that, as blood centers understand not just the health benefits but the
economic benefits of filtration, Pall has the inside track on a world market
worth $800 million.
[PHOTO OF LAB TECHNICIAN]
Pall's Scientific and Laboratory Services department provides high-level
customized technical support.
10
<PAGE> 13
[PHOTO OF LAB TECHNICIAN WORKING ON LEUKOTRAP RC-PL SYSTEM]
The Leukotrap RC-PL system, a unique in-line blood processing system, in use at
the American Red Cross Blood Services, Southern Region.
helping to raise awareness of the benefits of leukocyte depleted blood products.
Countries around the world are beginning to put policies in place that require
filtered blood. In fact, European blood centers, led by France, are the
architects of universal filtration as the standard of care. France, Sweden and
Switzerland have made significant progress toward universal filtration. More
recently, the Austrian Red Cross selected Pall to help it meet its goal of 100
percent filtration. Germany and New Zealand are currently developing policies
for 1997 and beyond. The Japanese Ministry of Health is evaluating its
long-standing preference for bedside filtration and will likely let economics
and blood quality determine the right balance between bedside and blood center
filtration.
ROOM FOR GROWTH The fact that 85 percent of donor blood worldwide is not
filtered creates extraordinary opportunities for us. We're penetrating new
markets with an unrivaled family of products including the Leukotrap RC-PL
system, the first and only closed system that provides simultaneous pre-storage
leukocyte reduction of both red cells and platelets. Our newest addition is the
Leukotrap whole blood filter used to remove white cells from red cell and plasma
components prior to component processing. This offers greater ease of use for
blood center processing with the added value of leukocyte reduction for both
components.
SOLUTION:
Pall offers an unmatched range of advanced filtration products for whole blood
and blood components that enable blood centers to ship high-quality blood
products for immediate patient use.
[PHOTO OF COMPUTING PC]
Pall R&D programs secure future advancements in the field of blood component
processing.
[PHOTO OF BAG OF DONATED BLOOD]
Medsep helps blood centers provide quality blood components with the added value
of leukocyte reduction.
11
<PAGE> 14
PHARMACEUTICALS
OPPORTUNITY:
[picture of filter]
Viral contamination is a very real and ever-present threat to the makers of
biopharmaceuticals and blood fraction products and ultimately to the patients
who receive them. Viruses can invade and destroy the cells that are the
"factories" used to express these valuable products. Pall's Ultipor VF virus
removal filter is part of a family of filtration and ultrafiltration products
designed to lessen the threat of viruses as small as 50 nanometers (50
billionths of a meter) at every point in the production process. The Ultipor VF
virus filter is already being sold -- its performance supported by extensive
testing and publication by the U.S. Centers for Disease Control -- as a highly
effective device for the removal of some of even the smallest known viruses.
Given the rapidly growing need for virus deactivation and removal, Pall filters
are expected to open up, over the next five years, a $40 million global
opportunity.
[picture of molecule]
PROBLEM:
Producers of biopharmaceuticals and plasma fractions must entirely remove
devastating viral contaminants from their products and processes.
[picture of employees using product]
Pall products are used by our pharmaceutical manufacturing customers to purify
the lifesaving medicines they provide for patients.
[picture of employee in decontamination suit]
10
<PAGE> 15
OUTPACING THE INDUSTRY Pall products are fundamental to the production of
injectable pharmaceuticals, biopharmaceuticals and therapeutic biologicals for
both human and veterinary medicine. Sterilization and viral inactivation are
often mandated by regulatory authority. While the pharmaceutical industry
worldwide grew between 6 and 8 percent, Pall experienced double-digit growth.
VIRUS REMOVAL The threat of viral contamination continues to drive the
biopharmaceutical sector of this industry. Left unchecked, viruses can invade
harvesting cells and can multiply and ultimately destroy valuable drugs.
Regulatory agencies and producers alike prudently require virus removal.
Wherever there is risk of viral contamination, the U.S. Food and Drug
Administration (FDA) recommends that producers employ three separate mechanisms
to remove them. With the addition of Pall Filtron last year, we now have two of
the three accepted steps to offer customers. Each of these has been validated in
accordance with existing FDA standards. FILTER VALIDATION Our Parametric
Validation approach is helping producers of injectable pharmaceuticals and
biopharmaceuticals to achieve FDA-required filter validation. Validation assures
that a sterilizing filter will repeatedly achieve a pre-defined result. The
primary tool used to verify filter performance is integrity testing. The
Palltronic TruFlow integrity test instrument can easily be integrated into a
customer's automated process. It employs state-of-the-art software and design to
accurately measure filter performance and provide a record of the results. The
process is further strengthened by Pall's Scientific and Laboratory Services
(SLS) scientists who work closely with customers to define the parameters for
filter validation testing. VALIDATION LABS We expect the demand for our
validation services to increase two- to three-fold in the year ahead as
customers convert to our approach to validation. In fiscal 1996, we performed
more than 100 of these sensitive validation studies for customers, the results
of which often accompany New Drug Applications submitted to the FDA, and other
agencies around the world.
SOLUTION:
Pall's family of virus removal filters provide manufacturers with powerful tools
to ensure total product purity.
[picture of employee working with filters]
Pall's Ultipor VF virus filters provide biopharmaceutical manufacturers the
protection they need to assure that their products are free of viral
contaminants.
11
<PAGE> 16
DIAGNOSTICS AND MEMBRANE TECHNOLOGY
GROWTH IN MOLECULAR BIOLOGY Pall is driving growth in this market through a
remarkable range of proprietary membranes and porous media used by the
diagnostics, molecular biology and health care markets. Pall membranes are
available in rolls, sheets or discs for incorporation into specific customer
applications. FORENSIC TESTING Few understand the consequences of inaccurate
results more than the U.S. Federal Bureau of Investigation, where thousands of
blood samples are analyzed each year. The FBI has specified Pall membranes to
ensure accurate analysis of DNA in these samples. Pall membranes are also
playing a dynamic role in molecular diagnostics for the Human Genome Project, an
arduous, global research effort to decipher and map the body's intricate genetic
coding system. Through our materials for sample preparation and DNA multiplex
sequencing applications, we're providing researchers with a complete molecular
biology package. This capability will prove particularly important to Pall in
the years ahead as the market for sample preparation methodology blossoms into
an estimated $4 billion a year industry. DIAGNOSTICS ADVANCES Pall is the
leading provider of membranes used in glucose monitoring -- a burgeoning home
testing market. Ongoing growth will be driven by the 120 million diabetics
worldwide.
PROBLEM:
One daunting challenge for the Human Genome Project was to find a membrane that
could help researchers accurately map and analyze all the genes on every
chromosome in the human body.
[picture of human in motion surrounded by helix]
Pall membranes are playing a dynamic role in deciphering human genetics.
[picture of DNA strand]
12
<PAGE> 17
In the coming fiscal year, we're expecting solid performance from the Hemasep
medium with its capability to separate plasma from whole blood for use in
single-step diagnostic test kits to measure blood sugar, cholesterol levels and
cardiac markers. VALUE AND ECONOMY From original equipment manufacturers (OEMs)
to laboratory devices to one-step diagnostics, customers use Pall products to
ensure a strong competitive edge. Our wide selection of membranes, including
nylon and other cast membranes, hydrophobic media and fibrous materials, allow
customers to choose the most appropriate media for their specific application.
In addition to the diversity of membranes, our customers recognize the value and
economy of working with one vendor that can meet all of their diagnostic and
analytical needs. Increasingly they are relying on Pall.
[picture of sample]
OPPORTUNITY:
Mapping the human body's estimated 100,000 genes and understanding its
biochemical structure may take 15 years. Thousands of DNA samples are prepared
every day. Automated processes are then used to assemble the many millions of
"letters" of DNA into a form that allows for easy access and analysis by
researchers. One multiplex sequencing application is a fast, efficient and
accurate method to sequence large amounts of DNA without centrifugation by
transferring them to a membrane for analysis. In addition to DNA sequencing,
samples need to be prepared for DNA analysis. Here, our Leukosorb and Hemasep
membranes are proving to be ideal materials. As a result of this research, Pall
will have played an important role in the understanding and eventual treatment
of many of the 4,000 genetic diseases that afflict mankind. Aside from the $50
million potential opportunity for Pall at present, our ability to provide total
customer support, from sample preparation through gene detection, could
ultimately unlock a much broader market with a potential in the billions of
dollars.
[picture of employee looking at samples]
Pall membranes for sample preparation and DNA sequencing provide researchers
with accurate and consistent results.
SOLUTION:
Pall membranes were selected for their accuracy, reproducibility and ease of use
in sample preparation and DNA multiplex sequencing.
13
<PAGE> 18
BIOSEPARATIONS
PALL FILTRON Pall's initiative into high-end separations, first applied to
industrial markets two years ago, has now been expanded to the health care
arena. Central to this initiative is the addition of Filtron to the Pall family,
which has dramatically broadened our presence, capabilities and product
offerings to include ultrafiltration membranes and cassettes. Ultrafiltration is
required when fluids carry particles so small that they can be measured only by
molecular weight. Pall Filtron's sophisticated ultrafiltration technology
enables customers to filter to a level of 1/10,000th of one micron. TRANSLATABLE
TECHNOLOGY Ultrafiltration is critical to such industries as biopharmaceuticals,
blood fractionation, and food and beverage and chemical processing. Importantly,
Pall had an established presence for many applications within these industries,
and saw a need for a family of ultrafiltration products that would enable us to
address the filtration needs of our customers at every stage of their process.
Our merged technologies are also allowing us to approach new markets and
applications, such as industrial latex and paint emulsions. VIRUS REDUCTION
Similar to our offerings to the pharmaceuticals market (pgs. 10-11), producers
of biopharmaceuticals and blood and plasma fractions have access to the broadest
range of virus removal products on the market. We successfully introduced the
Pall Filtron Omega 100 VR ultrafiltration cassette with the
PROBLEM:
Producers of paint and latex emulsions consume great quantities of water.
Concerned with environmental and cost effects, they sought a method to maximize
production and recycle water.
Ultrafiltration is required when fluids carry particles so small they can be
measured only by molecular weight.
[picture of fluid]
[picture of paint makeup]
[picture of employee looking through microscope]
Our filters help paint manufacturers worldwide to improve paint quality and
reduce waste water.
[picture of hand painting]
Pall provides solutions to difficult contamination problems through on-site
testing and extensive work in its Scientific and Laboratory Services labs.
14
<PAGE> 19
[picture of three paint cans pouring out into puddle]
ability to remove the smallest known virus, a class known as Parvovirus. In
addition, our products enable biopharmaceutical manufacturers to separate water
and small molecules from biologically active components, creating stronger
concentrations of vaccines, antibodies, cells, albumen and much more, all with
significant cost savings to the producer. LABORATORY MARKETS Our technologies
are creating significant prospects in the industrial, government and academic
laboratory sector, estimated at more than $500 million globally. Pall nearly
doubled its laboratory product line in fiscal 1996, and now offers
ultrafiltration systems, syringe filters, the MiniKleenpak filter and the
Mini-DMF dynamic membrane filter. Researchers can use lab-sized Pall products
right from the beginning and can scale up to full production when ready.
[picture of maxisett cassette system]
OPPORTUNITY:
Paint and latex emulsion producers are seeking to increase production and reuse
water. Pall technology is helping them to achieve this by teaming our industrial
Maxisette cassette system with their white water waste recovery efforts. When
waste water meets this high-performance ultrafiltration system, two streams
result. One is a concentrated stream of polymer that can be converted back to
paint and sold. The other can either be reused within the plant or harmlessly
disposed. One European customer who generated copious amounts of waste water
before installing the system 2 years ago has not generated a single liter of
waste water since. For Pall, this is a promising global market with a potential
value of $100 million.
SOLUTION:
Through an application known as white water recovery, Pall is enabling these
producers to meet these goals and realize significant cost savings.
15
<PAGE> 20
FOOD AND BEVERAGE
BEVERAGE FILTRATION Pall technology has a growing presence in the food and
beverage industry, where our products are used by dominant producers of beer,
wine, bottled water and other beverages. In fiscal 1996, sales to this industry
grew by about 8 percent. Part of the growth impetus was our CFS cluster filter
system for cold stabilization of beer. WATER FILTRATION Our Microza*
ultrafiltration modules provide high-purity filtration for consumer bottled
water. This market is now largest in Europe, where governments have mandated
processing standards. This year we also commercialized a system for the
filtration of whey. This fractionation system removes fat and bacteria from
whey, so that biologically active proteins can be extracted and used as natural
food additives. An integral part of this system is Pall's DMF dynamic membrane
filter. THE BEER MARKET The linchpin of growth continues to be cold beer
filtration as the most economic alternative to traditional heat pasteurization.
Far from a fad, consumers are demanding a natural, fresher-tasting product, and
brewers worldwide realize that these virtues are significantly diminished by
heat pasteurization. These signs suggest that cold beer stabilization will be
the platform for the future and no company is better positioned than Pall to
capitalize on this rising market.
*Microza is a registered trademark of ASAHI CHEMICAL INDUSTRY CO. LTD.
PROBLEM:
Breweries seek effective ways to improve product quality, taste and shelf life
while remaining cost competitive.
[picture of glass of beer]
[picture of wheat]
16
<PAGE> 21
Cluster Filter System Our cluster filter system provides a fully automated
process for preserving the natural taste of beer through cold stabilization.
Using our process knowledge and systems integration skills, we created a system
that can integrate immediately into brewery process equipment and interface
directly with its computer systems. And to ensure customer satisfaction, we have
three brew masters of our own to walk customers through the new technology. The
systems have been sold to breweries in Germany, Japan, Korea and Brazil. Other
potential markets include China, which is expected to become the biggest
beer-producing country in the world by the year 2000, and the U.S., where a
growing microbrewing industry is taking a closer look at cold beer
stabilization. In addition, breweries and governments alike are looking to
replace diatomaceous earth (DE) which is part of the microbial sterilization
process. DE is used copiously and is costly and difficult to handle and discard.
In France, DE disposal is such a problem that the government will pay 50 percent
of the conversion fee for beer and wine producers. In addition to CFS
technology, the PallSep vibrating membrane system can also help alleviate that
problem.
[picture of person filtering whey through their fingers]
This year Pall commercialized a system for the filtration of whey.
[picture of man observing beer line]
Pall's cluster filter system meets the need for effective stabilization and
retention of the natural flavor of beer.
[picture of beer pasteurization device]
OPPORTUNITY:
The brewing industry is awakening to the tremendous advantages of cold beer
stabilization. Breweries and consumers around the world are recognizing the
effect heat pasteurization has on beer. Cold stabilization ensures microbial
control and stability while also producing a much fresher tasting product with a
longer shelf life. Pall's cluster filter system is enabling breweries to enhance
product quality and reduce costs. As brewing becomes more of a science, CFS
technology is providing a sophisticated solution that promises to open up a $110
million opportunity for Pall in brewing centers around the world.
SOLUTION:
Pall created the cluster filter system, a totally automated, cost-effective
system that preserves natural beer taste through cold stabilization.
17
<PAGE> 22
INDUSTRIAL HYDRAULICS
VALUE-ADDED ROLE Pall serves a wide array of markets from automotive, steel
making, pulp and paper and power generation. Our filtration and separation
expertise is regularly called upon to develop and provide solutions that save
our customers time and money. This value-added role contributed to sales growth
in this market of 14 percent in fiscal 1996. GROWTH IN EMERGING NATIONS These
gains were well distributed worldwide, and notably from emerging markets like
India, China, and the Commonwealth of Independent States. Accordingly,
investment in people and local partnerships to support these regions continues.
The intense work occurring to build roads, power plants, telecommunications
facilities and other projects to develop the infrastructure of these budding
world markets is amplifying the need for our products and systems expertise. A
BUSINESS MAKEOVER Greater operating and cost efficiencies continue to be the
crusade for our customers. Paramount to their success are Pall products that
help extend the life of process fluids and equipment such as our coreless
Ultipor III filter element series, fluid cleanliness monitoring systems, and a
broad range of purifiers and backwash filter systems. Our coreless Ultipor III
filter, which is manufactured without metallic parts, was a strong performer in
1996 and represents a solid platform for future growth. This lightweight filter
is easier to handle from a maintenance standpoint.
PROBLEM:
Contaminated lubricating fluids in steel and aluminum
rolling mills cause product defects and increase downtime
at a cost of millions of dollars per month in lost revenues.
[Graphic of Worker]
Strong competition necessitates high productivity and efficiency. Pall filters
help achieve the fluid cleanliness necessary to reduce defects, mill downtime
and associated costs.
[Graphic of filters]
[Graphic of backwash filter system]
OPPORTUNITY:
The resurgence of the steel industry in the U.S. and in developing nations has
necessitated significant capital investment to recondition and modernize
existing mills. Pall's broad range of backwash filter systems, designed to
customer specifications, dramatically improve fluid cleanliness, and eliminate
metal sheet scratches, defects and occlusions. Spurred by the mounting
competitive needs of the steel and aluminum rolling mills, Pall backwash filter
systems are garnering an ever-growing slice of a $100 million application.
18
<PAGE> 23
[A crane holding backwash filter]
Further, the absence of metallic parts makes it more environmentally friendly
and less costly to dispose of. FULL SERVICE RESPONSIBILITY Total Cleanliness
Control (TCC) is a bold concept introduced globally last year. The European
automotive industry has been a particularly strong proponent of TCC which sets
Pall apart as a total service provider to our customers by assuming full on-site
responsibility for maintaining fluid cleanliness and equipment performance
throughout their processes. By taking the maintenance and monitoring burden off
our customers, they save time and money. OEM PARTNERSHIPS We're also using our
leading-edge products and technology expertise to forge closer ties with OEMs.
This growing segment of our business is increasing our presence in regions of
the world like Asia, where OEM products are likely to be shipped. Worldwide,
we're educating customers about the importance of fluid cleanliness standards
through our seminar series conducted at major universities.
SOLUTION:
Pall Septra and ProSep backwash filter systems are helping these expansive
manufacturing operations to meet and exceed required cleanliness levels and
increase profits.
[Man standing next to filter]
19
<PAGE> 24
AEROSPACE
INCREASING OPPORTUNITIES Pall's aerospace business continued to gain strength
in fiscal 1996, fueled by the increase of new commercial aircraft and a battery
of alliances, partnerships and long-term agreements with OEMs. As the world's
leading supplier of filters to the commercial and military aircraft market, our
products are meeting a wealth of applications needs. There are as many as eight
main systems on a single twin-engine commercial jet that require filtration and
as many as ten filters per engine. Our products are also a vital part of the
vehicles that provide ground support, and are found on fuel trucks and cargo
loaders. EXPANDING GLOBAL FLEET Our comprehensive applications capability is
particularly important in light of anticipated future growth of the commercial
airline industry. McDonnell Douglas forecasts that the worldwide fleet of
passenger jet aircraft will double by the year 2013, while the volume of air
traffic triples. And since newer aircraft use significantly more filters than
older generations, this bodes well for Pall. At the same time, industry OEMs are
actively reducing costs and overhead by relying on preferred suppliers with the
requisite experience and products to augment their
[Tail of an airplane]
PROBLEM:
The U.S. Department of Defense and Pratt and Whitney are jointly developing a
cleaner burning jet fuel that allows high-temperature burning without the usual
coke build up. Competing coalescers failed to remove water from the stored fuel.
[Engine with build up] [Engine with reduced build up]
The engine on the left developed coke build up burning traditional jet fuel.
After running the same engine with the new cleaner burning fuel, the engine on
the right demonstrates that the coke build up was significantly reduced.
20
<PAGE> 25
[Tail of large airplane with small airplane]
capabilities. These trends have already opened up tremendous prospects for Pall,
whose filters are used by every commercial airline in the world.
THE AFTERMARKET OPPORTUNITY One of the most attractive opportunities for Pall is
the aftermarket, or replacement products business. Here, we expect to grow 10 to
15 percent per year through the remainder of this decade. That growth is closely
tied to our global distribution capability that enables Pall to guarantee
dispatch of replacement products to airline customers anywhere in the world
within hours. MILITARY UPTURN Strong aftermarket sales have also helped drive
growth on the military side of our aerospace business. Several factors have
contributed to this worldwide trend. First, governments are using a short list
of preferred suppliers to restock depleted spare parts inventories for aircraft
and helicopters as well as armored vehicles and field artillery systems. Our
bidding strategy, history of product performance and technical support make us
likely candidates to secure future business. Second, we've aligned ourselves
with OEMs and systems manufacturers who supply the military. This stimulates
growth for Pall through existing products and gives us increased visibility for
developing programs. Moreover, we're employing Pall technology to meet such
stringent new military requirements as a 200-hour life span for engine inlet
filters, compared to the traditional 20 hours.
SOLUTION:
Pall engineers adapted our Aquasep
coalescer to the application. Tests show that it
effectively removes water from the military's
promising new fuel.
[Aquasep coalescer]
OPPORTUNITY:
The U.S. military's new fuel for Air Force and Navy aircraft is a breakthrough
development. The new fuel ensures thermal stability, cleaner operation and
significantly reduces maintenance costs. But the government didn't anticipate
the failure of every coalescer tested with the new fuel. Pall responded with the
Aquasep coalescer. In government-controlled tests, the Aquasep coalescer helped
reduce aircraft maintenance costs more than 60 percent. Once the new fuel comes
into general use, it promises to generate a market of enormous proportions --
not just within the military, but in the commercial sector, where the global
opportunities are even greater.
21
<PAGE> 26
MICROELECTRONICS
RAPID GROWTH INDUSTRY Pall's Microelectronics business continues to be one of
our stronger markets. This is being fueled by industry growth and our ability to
support it with innovative products and attentive service. The industry is
acutely aware of the potential for a single microscopic contaminant to destroy
valuable silicon wafers. In fiscal 1996, sales grew by 21 percent. Pall products
are used at every level of semiconductor manufacturing: in the production of the
high-purity chemicals, gases and silicon wafers; as a key component of
semiconductor manufacturing equipment; as well as throughout the entire wafer
production and waste minimization processes. As silicon wafer technology
evolves, the importance of filtration and its difficulty increases
commensurately. DRIVERS OF GROWTH The microelectronics industry is constantly
being recharged through the introduction of next generation consumer and
business products. These include cellular phones and multimedia systems with
their insatiable appetite for memory devices. Demand for these products is
expected to grow 25-35 percent annually through the year 2000. Personal
computers and automobiles are also powerful drivers of the semiconductor market.
The new "smart card" developed in France and heralded to be the ultimate
replacement for cash, is heavily dependent upon "flash memory" technology.
[Closeup of an intergrated circuit]
PROBLEM:
The semiconductor manufacturing process requires
enormous amounts of ultra-high-purity water.
Environmental sensitivity and cost concerns have
motivated manufacturers to reduce, reuse and recycle
water wherever possible.
[Graphic of semiconductor]
OPPORTUNITY:
Semiconductor plants are aggressively working to reduce their waste. Two
obstacles to this are the chemical-mechanical polishing (CMP) process and
silicon backgrinding of wafer surfaces. Both of these processes utilize large
quantities of water and polishing compounds. In the CMP process, a wafer is
polished, leaving behind a flat, even surface. This smoothing, or planarization,
is necessary for integrated circuit manufacturers to produce highly dense,
multilevel products. This enables computers and other semiconductor products to
run faster, more complex system requirements, without additional microchips or
hardware space. The industry faces a dilemma in effectively disposing of, and
reusing elements of the resulting waste stream. Pall engineers developed an
automated waste management system that separates and retains the hazardous
materials from the process fluid. The water that emerges can either be recycled
for plant use or discharged safely into the environment. This novel system
provides Pall with an excellent entree to the burgeoning $300 million waste
water treatment market in the U.S., Europe and Asia.
22
<PAGE> 27
NEW CONSTRUCTION In order to meet the demand, the microelectronics industry
continues to add capacity, which creates additional opportunities for Pall. It
is estimated that over 160 new semiconductor fabrication plants will be built or
under construction worldwide by the year 2000. Significantly, new and existing
plants are constantly being retooled and upgraded. This represents an annual
market potential of more than $200 million for Pall. We have become a valuable
technological partner to end users and OEMs, helping customers resolve complex
particle and fluid purity problems and waste reduction challenges.
HIGH-PERFORMANCE PRODUCTS At the heart of this effort are products such as our
ultrafiltration membranes and Ultipleat Posidyne II filters for
ultra-high-purity water and Ulti-Cheminert filters for the chemicals market. In
the year ahead, we are looking to pre-wet versions of our Ulti-Cheminert and
Super-Cheminert filters to further penetrate the semiconductor industry's
chemicals market, a global target of $110 million.
[Man with cellular phone]
Improved filtration technology helps to manufacture cellular phones with
increased memory.
Solution:
Pall designed and developed an integrated,
fully-automated system for treating waste water
so it can be recycled or discharged safely to the
environment.
[Man inside filter system lab]
A Pall filter system installed on a CMP tool captures the spent slurry solution
providing customers a cost-effective, environmentally friendly method of
disposal.
23
<PAGE> 28
INDUSTRIAL PROCESS GROUP
STATE-OF-THE-ART SOLUTIONS Pall serves customers in more than 50 fast-paced
markets, including producers of thin-film rigid discs, printed circuit boards
and magnetic storage devices, photographic film and medical x-ray film, ink jet
printers and automotive coatings. While these industries are diverse, they share
a common need -- to increase the quality and yield of their products while
reducing overall costs. In fiscal 1996, our filtration and separations solutions
continued to produce strong growth for Pall, with sales increasing 22 percent.
DRIVERS OF GROWTH The computer industry continues to be one of our primary
drivers of growth. While our Microelectronics team focuses its efforts on
producers of microchips, we also serve the makers of the accompanying
"macroelectronics" products. Pall products support the production of discs and
disc drives, back-up tapes, terminals, and more. Here, our Fluorodyne VA filter
has been making significant customer inroads. GRAPHIC ARTS OPPORTUNITIES We are
also an active participant in all stages of the graphic arts industry which
represents tremendous future opportunities for Pall. Products like the Profile
II filter and Ultipleat Profile filter enable photographic film and developing
paper producers to
[Graphic of CD's]
PROBLEM:
To remain competitive in rapidly changing global
markets, our customers must increase the speed,
yield and quality of their manufacturing operations.
[Ultipleat Profile Filter]
OPPORTUNITY:
Whether producing photographic film, magnetic tape or computer discs, companies
that manufacture fastest with the greatest precision and highest quality will
ultimately be the survivors in a fiercely competitive marketplace. The Pall
Ultipleat Profile filter is providing an increasing number of customers with
this important advantage. Thanks to its consistent, quality performance,
customers are able to increase the speed and yield of their processes. The
revolutionary pleat structure of the Ultipleat Profile filter maximizes the
usable filter area of the cartridge. This translates into improved flow rates
and longer filter service life. For customers, the Ultipleat Profile filter is
significantly reducing filtration costs, while for Pall it's creating a
fast-unfolding market with a worldwide potential of $180 million.
24
<PAGE> 29
furnish their commercial printing customers with reliable, defect-free products.
The same Pall products also help ink formulators and equipment manufacturers to
create products that ensure high-resolution reproductions. Our newly introduced
Lithopure clarifiers enable commercial offset printers to minimize press
downtime and the waste and labor involved in system maintenance. THE NEED FOR
INNOVATION The fast-changing nature of these industries is underscored by the
fact that some of the strongest markets we support today -- such as thin-film
rigid discs and ink jet printing -- were barely noticeable just three years ago.
To maintain our leadership position to this industry, we continue to innovate
the design of existing technology into second-and-third generation families of
products. To that end, we've formed strategic partnerships with a growing number
of leading-edge customers. Our goal is to help these companies succeed in a
range of highly competitive fields through filtration and separation products
that allow them to produce more efficiently and economically.
[Graph of CD's]
[Lab worker]
Pall products support the production of discs and disc drives, back-up tapes and
terminals.
SOLUTION:
Pall's Ultipleat Profile filter helps customers
to reduce production costs, maximize their
fluid systems and increase the quality of their
final products.
25
<PAGE> 30
HYDROCARBON PROCESSING, CHEMICAL AND POLYMER
Particulate contamination in refinery processes can
cripple critical equipment such as reactors, reducing
their effectiveness and requiring expensive
maintenance and repairs.
PROBLEM:
[Worker walking up stairs at refinery]
[Picture of filter]
OPPORTUNITY:
Refineries are finding that to successfully compete in world markets, they must
operate far more efficiently than they have in the past. This means jettisoning
antiquated separations systems which are inadequate for today's petroleum
refineries. Pall is providing the industry with a timely and powerful solution
in the form of its backwash filter systems. These fully automated systems
maintain high-efficiency operation (99.9 percent) to maximize solids recovery,
improve product quality, and afford protection to employees, equipment and the
environment. Pall backwash systems encourage consistent performance with less
energy consumption, noise, maintenance costs and labor and are well positioned
for growth in a global marketplace with a potential of $400 million.
[Lab analyst testing filters]
Using the latest in filter equipment, this lab analyst tests our backwash
filters.
[Pall scientist]
A Pall scientist ensures product integrity.
26
<PAGE> 31
RIDING THE GROWTH CURVE Pall sales to these industries showed balanced growth
throughout the Western Hemisphere, Europe and Asia. Our strength -- and
competitive edge -- lies in deploying advanced technology and products to serve
a diverse range of industries, including petroleum refining, power generation,
and chemical and polymer processing. Significantly, about 40 percent of our
business in these markets in fiscal 1996 can be traced to products introduced
during the past few years. MEETING THE CHALLENGES The challenges facing the
industries we serve are enormous. To succeed, they must constantly increase the
efficiency, reliability and safety of their operations. In the petroleum
refining industry, Pall is enabling companies to reduce their cost of
operations, eliminate waste and improve the quality of their end products
through our advanced backwash filter and coalescing technologies. Our AquaSep
and PhaseSep liquid/liquid coalescers continued their excellent growth on the
strength of their ability to remove unwanted water from refinery fuels and a
host of chemicals. While conventional coalescers break down in the presence of
many of the additives built into today's cleaner burning fuels, Pall coalescers
are able to comfortably handle the job. CHEMICALS AND POLYMERS More recently,
we've transferred that coalescing expertise to other processing industries,
including chemicals and polymers, where suspended water, a common contaminant,
can pose serious problems for customers. Protecting catalysts is another major
concern in chemicals processing. Here, Pall filters and coalescers are effective
in removing both solid and liquid contaminants from various hydrocarbon
processing streams. Within the chemical/polymer environment, Pall filters also
protect the environment from gaseous and liquid waste discharges and ensure high
product quality at the final chemical or polymer-processing stage. THE POWER
GENERATION MARKET In the power generation field, Pall products are right in step
with advanced new technologies for reducing the cost and increasing the
availability of power to consumers. We're doing that through products like our
durable Septra backwashable filters and through alliances with industry
innovators, such as GE Nuclear Energy, which are allowing us to demonstrate our
capabilities to the rest of the nuclear power generation market.
In Tokyo, environmentally conscious refiners use Pall filters to produce cleaner
and more efficient gasoline.
[Picture of street in Tokyo]
[Picture of refinery]
SOLUTION:
Pall backwash filter systems offer significant
improvement over existing technologies through
high-efficiency separations capabilities that can
reduce waste as well as costs.
27
<PAGE> 32
PALL WELL TECHNOLOGY
[Graph of oil refinery]
PROBLEM:
Increasingly advanced techniques for extracting oil
and gas have clashed with an age-old problem,
formation sand, which can prematurely shut wells
down and require extremely costly repairs.
[Picture of screens]
OPPORTUNITY:
The growing worldwide demand for oil has put intense pressure on the drilling
industry -- not only to uncover new wells, but to ensure that existing projects
are operating at full capacity. This means "reworking" or stimulating wells
whose production has begun to slip. In the process, drillers often run afoul of
a complex problem: formation sand intrusion. Downhole sand can wreak economic
havoc on a well, forcing its premature capping or the expenditure of several
million dollars for refurbishing and repairs. Pall technology has met the
problem head-on with a pair of revolutionary new products: Stratapac and
Stratacoil screens. These products provide unprecedented strength, flexibility
and damage tolerance. For Pall, this a dynamic growth market with a worldwide
potential of $600 million.
28
<PAGE> 33
MEETING A HUGE DEMAND Pall set a new baseline for wellbore purity in the oil and
gas industry, and is starting to reap the rewards. Our biggest obstacle in
fiscal 1996 was sufficient manufacturing capacity to meet the demand for
Stratapac and Stratacoil screens, our breakthrough sand control products.
Significantly expanding production capability has now solved that problem.
EXPANDING PRODUCTS AND TECHNOLOGY Growth opportunities are increasing through
broadened technology and product lines. This past year, we solved a decades-old
problem of corrosion and sulfide stress cracking of well materials by
introducing a new welding process for the Stratapac filter that joins dissimilar
metals. On the product front is a soon to be released group of sand control
products designed to filter the coarser sand found in rugged drilling
environments like the North Sea. INDUSTRY STANDARD The Stratapac filter is fast
becoming the industry standard for today's increasingly difficult types of
drilling. Because of its unusual flexibility and damage resistance, it's proving
indispensable to oil and gas companies for deep water (over 1,000 feet) drilling
projects. Its use is critical in horizontal and deviated drilling that requires
abrupt turns around solid formations. Stratapac screens are meeting customer
demands for wells with a production lifetime of 20 years, instead of the
traditional seven to ten. As for cost savings, the Stratacoil screen enabled one
large oil producer to rejuvenate a near-dormant well at a cost of $380,000 -- a
savings of $1.3 million from the cost of a traditional work over. MORE THAN A
SUPPLIER In little more than a year, Pall has supplied over 250 drilling sites
with Stratapac or Stratacoil filters. We've demonstrated the technological
leadership and resources to develop and produce advanced porous media and
products that solve complex customer problems.
[Worker writing]
The sintering process used in the manufacture of Pall's PMM filter media makes
it the right approach to sand control.
[Men drilling]
The Stratapac screen is driven downhole into the production zone.
[Worker checking joint of screen]
To ensure product quality, every joint of the screen is checked before shipment
to the customer.
SOLUTION:
Pall's Stratapac and Stratacoil filters offer
unprecedented control over downhole sand and
help wells to produce at maximum capacity.
29
<PAGE> 34
Financial Contents
<TABLE>
<S> <C>
Management's Discussion and Analysis
of Financial Condition and Results of Operations 31
Consolidated Statements of Earnings 33
Independent Auditors' Report 33
Consolidated Balance Sheets 34
Consolidated Statements of Stockholders' Equity 35
Consolidated Statements of Cash Flows 36
Financial Information About Industry Segments 37
Financial Information About Foreign
and Domestic Operations and Export Sales 38
Notes to Consolidated Financial Statements 39
Common Stock Prices and Cash Dividends 46
Eleven-Year Sales 47
Eleven-Year Financial History 48
Corporate Directory 49
Corporate Information 50
</TABLE>
30
<PAGE> 35
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1996 Compared to 1995
Results of Operations
Review of Consolidated Results
Sales for fiscal 1996 increased 16 1/2% to $960 million from $823 million last
year. Excluding exchange rate effects, sales would have increased by 19%.
Acquisitions accounted for approximately $38 million of fiscal 1996 sales. The
growth by quarters during the year, excluding the effects of exchange rates and
acquisitions, was: first quarter 15%, second quarter 17%, third quarter 13 1/2%
and fourth quarter 12 1/2%.
Cost of sales as a percentage of sales for the year increased to 38.8% from
37.1%, principally due to: the acquisition of Medsep which brought with it lower
gross margin products, the negative effect of exchange rates, mainly the
Japanese Yen, as most of the products sold in Japan are sourced from the U.S.
and product mix.
Selling, general and administrative expenses as a percentage of sales
decreased by 1.4% mainly as the increase in sales volume was not accompanied by
a similar increase in selling, general and administrative expenses. During the
third quarter, the Company received $6.2 million as a partial payment of a
judgment awarded to it in a patent litigation with Micron Separations, Inc.
Offset against this were $3.9 million of related legal fees. Also, during the
quarter, the Company wrote off $1.2 million of fixed assets following the
transfer of most industrial cartridge manufacturing from its Japanese plant into
existing facilities elsewhere. The net pretax benefit of $1.1 million has been
reflected as a reduction of selling, general and administrative expenses.
Research and development as a percentage of sales showed a reduction of 0.5%
compared to last year. This reduction does not constitute a decrease in research
efforts by the Company but rather a reevaluation to ensure that various research
and development related activities across the world are working in concert.
The Company's pretax margin of 20.6% is about the same as last year. The
Company's effective tax rate for the year has increased to 30.0% compared to
28.9% last year, due to continued reduction in the tax benefits from its Puerto
Rico operations. The Company's net earnings, before the effect of the change in
an accounting principle last year, increased by 16.2%.
Review of Industry and Geographic Segment Results
Sales in the Health Care segment increased by $82 million in local currency of
which $38 million was due to acquisitions. Blood filter sales in this segment
increased by 27% in local currency to $182 million. The acquisition of Medsep
increased blood filter sales by $19 million. Sales in the rest of the Health
Care segments also grew in excess of 10% in local currency.
Sales in the Aeropower segment grew $24 million in local currency despite the
fact that fiscal 1995 included a one-time sale of $9 million to the U.K.
military. Aerospace sales account for 42% of total Aeropower sales. Sales in the
Aerospace segment are evenly split between military and commercial sales. Sales
to the U.S. military in fiscal 1996 were $32 million, an increase of 14% over
fiscal 1995. Sales in the Industrial Hydraulics segment grew by 15% in local
currency to $135 million.
Sales in the Fluid Processing segment grew by $49 million in local currency.
Microelectronics sales in this segment increased by 26% in local currency to $98
million. Microelectronics sales represent nearly 40% of the total Fluid
Processing segment. Sales in the rest of the Fluid Processing segment grew in
excess of 15% in local currency.
The consolidated operating profit rate by segments for the current year
stands at 26.5%, which is the same as last year. By segment, the Health Care
profit rate is slightly lower than last year, mainly because of the Medsep
acquisition which brought with it lower gross margin products. Aeropower's
profit rate is 1.7% lower than last year mainly due to the one-time sale to the
U.K. military in fiscal 1995. Fluid Processing's profit rate increased by 2.5%
over last year, mainly due to increased sales volume that was not accompanied by
similar increases in selling, general and administrative expenses.
Outside sales in the Western Hemisphere increased by 28 1/2% to $418 million.
Included in this geographic segment is $38 million from acquisitions. Sales in
Europe grew 8 1/2% in local currency to $368 million. Excluding the one-time
shipment of $9 million last year to the U.K. military, sales would have grown by
11%. Sales in Asia and Australia grew by 11 1/2% to $175 million; in local
currency sales increased by 22%.
The operating profit rate in the Western Hemisphere increased by 2.0% over
last year mainly because of increased sales volume. The profit rate in this
geographic segment would have been higher excluding Medsep, which brought with
it lower gross margin products. Europe showed a slight decline mainly due to the
one-time sale to the U.K. military in fiscal 1995. The profit rate in Asia and
Australia decreased by 1.4% compared to fiscal 1995 mainly due to the weakness
of the Japanese Yen in fiscal 1996.
Liquidity and Capital Resources
The Company generated $149 million in cash from its operating activities in
fiscal 1996 compared to $157 million in fiscal 1995 and $130 million in fiscal
1994. Capital expenditures in fiscal 1996 amounted to $82 million compared to
$66 million in fiscal 1995. The increased expenditures will enable the Company
to support its future expansion in various markets around the world. During the
year the Company purchased the Medical Plastics business of Bayer Corporation
(Medsep) for $45 million. The Company also bought back $10 million of its own
stock in fiscal 1996 compared to $50 million in fiscal 1995 and $30 million in
fiscal 1994. Cash dividends paid to stockholders in fiscal 1996 amounted to $52
million compared to $46 million in fiscal 1995 and $40 million in fiscal 1994.
31
<PAGE> 36
The Company considers its existing lines of credit along with the cash it
generates from its operations to be sufficient for its future growth. The
Company anticipates that capital expenditures in fiscal 1997 will be about $90
million.
New Accounting Standards
In October 1995, the Financial Accounting Standards Board adopted Statement No.
123 (Accounting for Stock-Based Compensation), effective for fiscal years
beginning after December 15, 1995. Under this Statement companies can elect, but
are not required, to recognize compensation expense for all stock-based awards,
using a fair value methodology. The Company will implement the disclosures-only
provisions as allowed by this Statement in fiscal 1997 and will continue to
measure compensation expense in accordance with Accounting Principles Board
Opinion No. 25 (Accounting for Stock Issued to Employees).
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 adopting Statement No. 121 in fiscal
1997 will have a material effect on the Company's financial position.
Impact of Inflation
The Company's financial statements are prepared on a historical cost basis and
do not reflect the effect of inflation. The effect of changing prices on the
financial statements is not considered to be significant.
1995 Compared to 1994
Results of Operations
Review of Consolidated Results
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
17.7% 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 19.7% to $118.4 million from $98.9
million in fiscal 1994.
Review of Industry and Geographic Segment Results
Sales in the Health Care segment increased by 13%; excluding the effects of
exchange rates and the acquisition it grew by 5%. Sales in the Aeropower segment
increased by 13% in local currency to $213 million. Included in fiscal 1995
sales was a one-time sale to the U. K. military of $9 million. The Industrial
Hydraulics subsegment grew by 12% in local currency to $119 million. Sales in
the Fluid Processing segment increased by 18 1/2% in local currency to $213
million. The Microelectronics subsegment grew by 32% in local currency to $81
million.
The consolidated operating profit rate by segments for fiscal 1995 was 26.5%
compared to 26.0% (excluding the one-time charge) in fiscal 1994. The Health
Care profit rate in fiscal 1995 declined by 1.3% due to product mix. Aeropower's
profit rate was 2.9% higher than fiscal 1994, principally due to the one-time
sale to the U.K. military and increased sales volume. Fluid Processing's profit
rate was 2.7% higher than fiscal 1994 year mainly due to increased sales volume.
Outside sales in the Western Hemisphere increased by 8% to $325 million in
fiscal 1995, which included $7.5 million from acquisition. Sales in Europe
increased by 22% to $341 million; in local currency the increase was 12%. This
geographic segment included the one-time sale to the U.K. military of $9
million. Sales in Asia and Australia increased by 32% to $157 million; however,
in local currency the increase was 18%. All the countries in this region had
growth in excess of 10% in local currency.
The operating profit rate in the Western Hemisphere in fiscal 1995 declined
by 3.7% mainly due to product mix. Europe's profit rate increased by 2.9%
principally due to the one-time shipment to the U.K. military, increased sales
volume and the favorable effect of exchange rates. The profit rate in Asia and
Australia increased by 6.0% principally due to increased sales volume and the
favorable effect of exchange rates.
32
<PAGE> 37
CONSOLIDATED STATEMENTS OF EARNINGS Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) Years Ended
---------------------------------------------
August 3, 1996 July 29, 1995 July 30, 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Net sales $ 960,376 $ 822,823 $ 700,848
Interest earned 7,021 6,500 5,274
--------- --------- ---------
Total Revenues 967,397 829,323 706,122
- --------------------------------------------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of sales 372,864 305,287 257,624
Selling, general and administrative expenses 338,726 301,686 261,289
Research and development 47,514 45,142 41,283
Interest expense 10,439 9,504 7,132
Restructuring and other charges -- -- 3,696
--------- --------- ---------
Total Costs and Expenses 769,543 661,619 571,024
- --------------------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes and the Cumulative Effect of an Accounting Change 197,854 167,704 135,098
Provisions for income taxes 59,356 48,488 36,176
- --------------------------------------------------------------------------------------------------------------------------------
Earnings Before the Cumulative Effect of an Accounting Change 138,498 119,216 98,922
Cumulative effect of a change in accounting for postemployment benefits -- (780) --
- --------------------------------------------------------------------------------------------------------------------------------
Net Earnings $ 138,498 $ 118,436 $ 98,922
- --------------------------------------------------------------------------------------------------------------------------------
Earnings Per Share:
Earnings before the cumulative effect of an accounting change $ 1.21 $ 1.04 $ .86
Cumulative effect of a change in accounting for postemployment benefits -- (.01) --
--------- --------- ---------
Net Earnings Per Share $ 1.21 $ 1.03 $ .86
- --------------------------------------------------------------------------------------------------------------------------------
Average Shares Outstanding 114,839 115,184 115,678
- --------------------------------------------------------------------------------------------------------------------------------
</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 August 3, 1996 and July 29, 1995, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended August 3, 1996. 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 August 3, 1996 and July 29, 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended August 3, 1996, 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.
KPMG Peat Marwick LLP
Jericho, New York
September 3, 1996
33
<PAGE> 38
CONSOLIDATED BALANCE SHEETS Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) August 3, 1996 July 29, 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 34,528 $ 37,913
Short-term investments 71,450 72,850
Accounts receivable, net of allowance for doubtful accounts of $4,170 and $5,008, respectively 242,157 216,216
Inventories 193,764 158,430
Deferred income taxes 15,995 19,443
Prepaid expenses 19,151 15,546
Other current assets 4,160 4,369
----------- -----------
Total Current Assets 581,205 524,767
- ------------------------------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment:
Land 27,598 25,783
Buildings and improvements 263,258 246,280
Machinery and equipment 395,099 351,752
Furniture and fixtures 54,720 53,590
Transportation equipment 13,538 13,410
----------- -----------
754,213 690,815
Less: Accumulated depreciation and amortization 290,308 262,884
----------- -----------
Property, Plant and Equipment, Net 463,905 427,931
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets 139,848 122,224
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets $ 1,184,958 $ 1,074,922
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 139,957 $ 117,489
Accounts payable 61,071 47,814
Accrued liabilities:
Salaries and commissions 31,985 27,863
Payroll taxes 6,444 6,279
Interest 2,128 1,624
Pension and profit sharing plans 12,902 9,342
Other 22,739 21,503
----------- -----------
76,198 66,611
Income taxes 21,699 34,311
Current portion of long-term debt 17,163 9,494
Dividends payable 14,133 12,014
----------- -----------
Total Current Liabilities 330,221 287,733
- ------------------------------------------------------------------------------------------------------------------------------------
Long-term Debt, Net of Current Portion 46,712 68,814
Deferred Income Taxes 36,134 33,444
Other Non-Current Liabilities 39,591 33,132
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 452,658 423,123
- ------------------------------------------------------------------------------------------------------------------------------------
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 53,769 56,304
Retained earnings 727,814 643,675
Treasury stock, at cost (1996 -- 2,375 shares, 1995-- 2,920 shares) (50,410) (60,389)
Foreign currency translation adjustment 2,901 13,036
Minimum pension liability adjustment (4,629) (5,145)
Stock option loans (8,652) (7,580)
Cumulative unrealized (losses) gains on investments (228) 163
- ------------------------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 732,300 651,799
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 1,184,958 $ 1,074,922
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
34
<PAGE> 39
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
(In thousands) Foreign Minimum
Capital in Currency Pension
Years Ended July 30, 1994, Common Excess of Retained Treasury Translation Liability
July 29, 1995 and August 3, 1996 Stock Par Value Earnings Stock Adjustment Adjustment
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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 1,040 shares pursuant
to exercise of stock options (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 269 shares pursuant
to exercise of stock options (145) (238) 5,225
Shares exchanged in payment
of stock options, 131 shares (2,648)
Purchase of 2,306 shares
of Common Stock (49,997)
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)
Net earnings 138,498
Cash dividends declared (54,343)
Issuance of 1,019 shares pursuant
to exercise of stock options (2,535) (16) 21,136
Shares exchanged in payment
of stock options, 41 shares (1,157)
Purchase of 433 shares
of Common Stock (10,000)
Foreign currency translation
adjustment (10,135)
Minimum pension liability
adjustment 516
Change in stock option loans
Net unrealized holding
losses on investments
- ----------------------------------------------------------------------------------------------------------------------------
Balance at August 3, 1996 $ 11,735 $ 53,769 $ 727,814 $ (50,410) $ 2,901 $ (4,629)
============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
(In thousands) Cumulative
Stock Unrealized Total
Years Ended July 30, 1994, Option (Losses) Gains Stockholders'
July 29, 1995 and August 3, 1996 Loans on Investments Equity
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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 1,040 shares pursuant
to exercise of stock options 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 269 shares pursuant
to exercise of stock options 4,842
Shares exchanged in payment
of stock options, 131 shares (2,648)
Purchase of 2,306 shares
of Common Stock (49,997)
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
Net earnings 138,498
Cash dividends declared (54,343)
Issuance of 1,019 shares pursuant
to exercise of stock options 18,585
Shares exchanged in payment
of stock options, 41 shares (1,157)
Purchase of 433 shares
of Common Stock (10,000)
Foreign currency translation
adjustment (10,135)
Minimum pension liability
adjustment 516
Change in stock option loans (1,072) (1,072)
Net unrealized holding
losses on investments (391) (391)
- --------------------------------------------------------------------------------
Balance at August 3, 1996 $ (8,652) $ (228) $ 732,300
=================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
35
<PAGE> 40
CONSOLIDATED STATEMENTS OF CASH FLOWS Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Years Ended
-------------------------------------------------
(In thousands) August 3, 1996 July 29, 1995 July 30, 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities:
Net earnings $ 138,498 $118,436 $ 98,922
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment 46,782 41,667 36,804
Amortization of intangibles 6,329 4,393 2,737
Restructuring and other charges -- -- 3,696
Deferred income taxes 6,416 221 4,406
Provision for doubtful accounts 989 998 1,033
Cumulative effect of a change in accounting for postemployment benefits -- 780 --
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable (35,252) 2,496 (5,354)
Inventories (28,935) (11,547) (7,284)
Prepaid expenses (3,671) 210 (640)
Other assets (2,887) (8,576) (4,848)
Accounts payable 16,220 4,625 2,285
Accrued expenses 12,451 1,080 (2,302)
Income taxes payable (10,529) 236 (1,418)
Other liabilities 2,267 1,888 1,680
--------- -------- --------
Net Cash Provided by Operating Activities 148,678 156,907 129,717
- ----------------------------------------------------------------------------------------------------------------------------------
Investing Activities:
Capital expenditures (82,222) (66,479) (73,354)
Disposals of fixed assets 5,405 4,523 1,942
Short-term investments 1,400 (22,050) 13,600
Acquisitions of license and of businesses, net of cash acquired (44,545) (230) (11,333)
Benefits protection trust (2,596) (2,599) (2,567)
--------- -------- --------
Net Cash Used by Investing Activities (122,558) (86,835) (71,712)
- ----------------------------------------------------------------------------------------------------------------------------------
Financing Activities:
Notes payable 26,775 1,930 (14,241)
Long-term debt borrowings -- 21,620 31,165
Payments on long-term debt (9,252) (4,223) (17,297)
Net proceeds from exercise of stock options 16,356 3,043 6,185
Dividends paid (52,224) (45,564) (39,954)
Treasury stock (10,000) (49,997) (30,190)
--------- -------- --------
Net Cash Used by Financing Activities (28,345) (73,191) (64,332)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash Flow for Year (2,225) (3,119) (6,327)
Cash and Cash Equivalents at Beginning of Year 37,913 38,224 42,652
Effect of Exchange Rate Changes on Cash (1,160) 2,808 1,899
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 34,528 $ 37,913 $ 38,224
==================================================================================================================================
Supplemental Disclosures:
Interest paid (net of amount capitalized) $ 9,918 $ 9,143 $ 6,292
Income taxes paid (net of refunds) 62,318 47,524 32,670
Treasury stock issued upon acquisition of
Filtron Technology Corporation -- 24,855 --
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE> 41
FINANCIAL INFORMATION ABOUT FOREIGN
AND DOMESTIC OPERATIONS AND EXPORT SALES Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fiscal Years
------------------------------------------
(In thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales to Unaffiliated Customers:
Western Hemisphere $ 417,597 $ 325,252 $302,287
Europe 367,534 340,541 279,423
Asia and Australia 175,245 157,030 119,138
----------- ---------- --------
Total $ 960,376 $ 822,823 $700,848
- -----------------------------------------------------------------------------------------------------------------------------
Transfers Between Geographic Areas:
Western Hemisphere $ 82,514 $ 63,422 $ 61,679
Europe 21,549 13,838 10,461
Asia and Australia 3,552 2,025 1,809
----------- ---------- --------
Total $ 107,615 $ 79,285 $ 73,949
- -----------------------------------------------------------------------------------------------------------------------------
Total Sales:
Western Hemisphere $ 500,111 $ 388,674 $363,966
Europe 389,083 354,379 289,884
Asia and Australia 178,797 159,055 120,947
Eliminations (107,615) (79,285) (73,949)
----------- ---------- --------
Total $ 960,376 $ 822,823 $700,848
- -----------------------------------------------------------------------------------------------------------------------------
Operating Profit:
Western Hemisphere $ 120,119 $ 87,030 $ 89,898 (a)
Europe 109,572 102,532 74,707 (a)
Asia and Australia 28,361 27,630 13,834
Eliminations (3,644) 1,176 60
----------- ---------- --------
Subtotal 254,408 218,368 178,499
Interest income 7,021 6,500 5,274
Interest expense (10,439) (9,504) (7,132)
General corporate expenses (53,136) (47,660) (41,543)
----------- ---------- --------
Total $ 197,854 $ 167,704 $135,098
- -----------------------------------------------------------------------------------------------------------------------------
Identifiable Assets:
Western Hemisphere $ 460,713 $ 385,023 $375,970
Europe 328,047 308,535 275,219
Asia and Australia 143,115 127,602 112,873
Eliminations (16,468) (12,725) (13,790)
----------- ---------- --------
Subtotal 915,407 808,435 750,272
Corporate 269,551 266,487 209,307
----------- ---------- --------
Total $ 1,184,958 $1,074,922 $959,579
- -----------------------------------------------------------------------------------------------------------------------------
</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).
Export sales to unaffiliated customers by the Company's U.S. operations totaled
$53,779 in 1996 ($37,167 in 1995 and $28,907 in 1994). 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 markup
of manufacturing costs, to achieve an appropriate sharing of the profit between
the parties.
37
<PAGE> 42
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS Pall Corporation and Subsidiaries
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Fiscal Years
-------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES TO UNAFFILIATED CUSTOMERS:
Health Care $ 471,424 $ 396,907 $351,849
Aeropower 235,101 212,796 179,297
Fluid Processing 253,851 213,120 169,702
---------- ---------- --------
Total $ 960,376 $ 822,823 $700,848
- -----------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT:
Health Care $ 147,628 $ 126,914 $115,228 (a)
Aeropower 52,686 51,342 36,487 (a)
Fluid Processing 54,094 40,112 26,784 (a)
---------- ---------- --------
Subtotal 254,408 218,368 178,499
Interest income 7,021 6,500 5,274
Interest expense (10,439) (9,504) (7,132)
General corporate expenses (53,136) (47,660) (41,543)
---------- ---------- --------
Total $ 197,854 $ 167,704 $135,098
- -----------------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS:
Health Care $ 450,331 $ 399,075 $369,352
Aeropower 184,374 177,389 169,433
Fluid Processing 280,702 231,971 211,487
---------- ---------- --------
Subtotal 915,407 808,435 750,272
Corporate 269,551 266,487 209,307
---------- ---------- --------
Total $1,184,958 $1,074,922 $959,579
- -----------------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES:
Health Care $ 38,374 $ 31,372 $ 26,284
Aeropower 13,193 12,419 5,568
Fluid Processing 23,595 16,263 14,181
---------- ---------- --------
Subtotal 75,162 60,054 46,033
Corporate 7,060 6,425 27,321
---------- ---------- --------
Total $ 82,222 $ 66,479 $ 73,354
- -----------------------------------------------------------------------------------------------------------------------------
DEPRECIATION:
Health Care $ 21,397 $ 17,912 $ 16,446
Aeropower 8,852 8,545 7,326
Fluid Processing 12,892 10,872 10,230
--------- --------- --------
Subtotal 43,141 37,329 34,002
Corporate 3,641 4,338 2,802
--------- --------- --------
Total $ 46,782 $ 41,667 $ 36,804
- -----------------------------------------------------------------------------------------------------------------------------
</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).
38
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS 1996, 1995 AND 1994 (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
August 3, 1996, July 29, 1995 and July 30, 1994 comprise 53, 52 and 52 weeks,
respectively.
Basis of Consolidation
The financial 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.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make assumptions and estimates that
affect the reported amounts in the financial statements. Actual results could
differ from those estimates.
Revenue Recognition
Revenue is recognized when a product is shipped or a service is performed.
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 gains in the
amount of $1,198 were realized in fiscal year 1996. Transaction losses in the
amounts of $586 and $348 were incurred in fiscal years 1995 and 1994,
respectively.
The equity in, and advances to, foreign subsidiaries totaled $264,845 and
$252,287 at August 3, 1996 and July 29, 1995, respectively.
Cash and Cash Equivalents
The Company considers all financial instruments purchased with a maturity of
three months or less, other than its investments in Puerto Rico, to be cash
equivalents. The Company holds all cash equivalents until maturity.
Short-Term Investments
Short-term investments, consisting principally of certificates of deposit 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. The Company periodically reviews its intangible assets to assess
recoverability and to ensure that the carrying values of such intangible assets
have not been impaired.
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 $1,608 in 1996, $1,365 in 1995 and $1,641 in 1994 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.
Reclassifications
Certain prior year amounts have been reclassified to conform with current year
presentation.
39
<PAGE> 44
ACQUISITIONS
On September 29, 1995, the Company completed its acquisition of the Medical
Plastics business of Bayer Corporation for approximately $45,000. This business
now operates under the name of Medsep Corporation and is a leading supplier to
blood centers of specialty plastic disposable products and preservative
solutions used in the collection and storage of blood components for medical
purposes. The acquisition of Medsep was financed through working capital sources
and is accounted for under the purchase method of accounting. As such, the
results of its operations are included in the Company's financial statements
from the date of acquisition. The purchase price exceeded the fair value of the
tangible net assets acquired by approximately $16,000.
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
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 purchase price exceeded the fair
value of the tangible net assets acquired by approximately $22,000.
The acquisitions of Medsep and Filtron would not have materially affected the
financial statements of the Company had the results of their operations been
included in the Company's financial statements of prior years.
RESTRUCTURING AND OTHER CHARGES
In the fourth quarter of fiscal 1994, the Company recorded a one-time
pretax charge for $3,696, due principally to the restructuring of the German
operations and to the write-off of a bad debt in the Aerospace operations.
INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
AUGUST 3, 1996 July 29, 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Raw materials and components $ 82,402 $ 61,436
Work-in-process 21,132 17,901
Finished goods 90,230 79,093
- ------------------------------------------------------------------------
Total inventory $193,764 $158,430
- ------------------------------------------------------------------------
</TABLE>
OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
AUGUST 3, 1996 July 29, 1995
- ------------------------------------------------------------------------
<S> <C> <C>
Patents and trademarks,
net of accumulated
amortization of $13,184
and $10,209, respectively $ 34,552 $ 38,728
Benefits protection trust 26,701 25,848
Prepaid pension expenses 13,654 11,247
Intangible pension assets 2,385 2,964
Goodwill and other intangibles,
net of accumulated amortization
of $4,701 and $1,726, respectively 39,047 26,272
Other 23,509 17,165
- ------------------------------------------------------------------------
Total $139,848 $122,224
- ------------------------------------------------------------------------
</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 for 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 August 3, 1996 and July 29, 1995 balance sheets
reflect related liabilities in the amounts of $28,205 and $28,240, respectively.
The trust primarily holds investments in U.S. government obligations and debt
obligations of corporations and financial institutions with high credit ratings.
The Company considers investments held in the trust to be available-for-sale,
and 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 range from 1996-2008.
Pertinent information related to the trust follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------
<S> <C> <C> <C>
Annual contributions $ 2,596 $ 2,599 $ 2,567
Total purchases 41,779 28,364 33,896
Total proceeds from sales 42,720 29,611 34,309
Net gains (losses) recognized 584 (712) (157)
</TABLE>
Prepaid pension expenses represent the non-current amounts arising from the
excess of cumulative employer contributions and earnings thereon, over accrued
net pension expenses.
Intangible pension assets represent, for certain domestic pension
arrangements, the excess of unfunded accumulated benefits over unrecognized
prior service costs. The August 3, 1996 and July 29, 1995 balance sheets reflect
additional long-term pension liabilities of $9,506 and $10,880, respectively,
and a reduction in stockholders' equity, net of deferred tax benefits, of $4,629
and $5,145, respectively.
40
<PAGE> 45
Goodwill and other intangibles represent the cost in excess of the tangible
net assets acquired of the Company's former distributor in Australia and of
Filtron Technology Corporation and the Medical Plastics business of Bayer
Corporation.
NOTES PAYABLE
At August 3, 1996, the Company and its subsidiaries had lines of credit totaling
approximately $370,000, of which $140,000 had been drawn. Such lines of credit
do not represent legal commitments on the parts of the financial institutions
and no compensating balance is required.
Pertinent information with respect to notes payable follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Average month-end borrowings $138,629 $119,226 $132,252
Weighted average interest rate
during the year 4.8% 5.1% 3.5%
Highest level of borrowing at any
month-end during the year $157,871 $160,655 $167,234
Weighted average interest rate
at year-end 4.6% 5.1% 4.2%
- -------------------------------------------------------------------------------
</TABLE>
The Company had short-term investments in Puerto Rico of $71,450 at August 3,
1996 ($72,850 at July 29, 1995), at the same time it had notes payable of
$139,957 ($117,489 at July 29, 1995) outside of Puerto Rico.
LONG-TERM DEBT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
AT AUGUST 3, At July 29,
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Bank loans in Japan, due in installments
through 1999 $23,028 $28,501
7.23% term loan, due on June 30, 1999 20,000 20,000
7.38% sale-and-leaseback obligation 18,030 21,620
Industrial development bonds, paid in 1996 -- 4,320
Capitalized leases, 6.48% to 16.5% due in
varying amounts through the year 2005 2,817 3,867
- --------------------------------------------------------------------------------
Total long-term debt 63,875 78,308
Less: current portion 17,163 9,494
- -------------------------------------------------------------------------------
Long-term debt, net of current portion $46,712 $68,814
- -------------------------------------------------------------------------------
</TABLE>
The Company's Japanese subsidiary has entered into loan arrangements in the
total amount of 2.5 billion Yen ($23,028). The loans are being amortized through
the year 1999, and bear interest at rates between 1.13% 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 2001. Depreciation on the properties has been
reflected in accordance with the Company's normal accounting practices.
The aggregate annual maturities of long-term debt during the fiscal years
1997 through 2001 are approximately as follows: 1997, $17,163; 1998, $4,606;
1999, $34,225; 2000, $3,475; and 2001, $3,696.
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>
- -------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------
<S> <C> <C> <C>
Domestic operations $ 80,134 $ 56,708 $ 62,135
Foreign operations 117,720 110,996 72,963
- -------------------------------------------------------------
Total $197,854 $167,704 $135,098
- -------------------------------------------------------------
</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>
- -------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal and Puerto Rico $12,338 $10,155 $ 4,229
State 425 350 350
Foreign 40,177 37,762 27,191
- -------------------------------------------------------------
Total 52,940 48,267 31,770
- -------------------------------------------------------------
Deferred:
Federal 3,636 (387) 4,585
State -- -- 75
Foreign 2,780 608 (254)
- -------------------------------------------------------------
Total 6,416 221 4,406
- -------------------------------------------------------------
Total income tax expense $59,356 $48,488 $36,176
- -------------------------------------------------------------
</TABLE>
41
<PAGE> 46
The tax effects of temporary differences and loss carry-forwards that
give rise to significant portions of the net deferred tax liability at August 3,
1996, July 29, 1995 and July 30, 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax asset:
Inventories $ 9,360 $ 9,125 $ 9,221
Pension liabilities 11,911 12,044 11,325
Accrued expenses 4,179 3,667 2,468
Other 1,495 5,642 4,584
- -------------------------------------------------------------------------------
Total deferred tax asset 26,945 30,478 27,598
- -------------------------------------------------------------------------------
Deferred tax liability:
Plant and equipment (41,970) (41,215) (39,025)
Pension assets (3,398) (2,564) (1,697)
Other (1,716) (700) (1,148)
- -------------------------------------------------------------------------------
Total deferred tax liability (47,084) (44,479) (41,870)
- -------------------------------------------------------------------------------
Net deferred tax liability $(20,139) $(14,001) $(14,272)
- -------------------------------------------------------------------------------
</TABLE>
A reconciliation of the provisions for income taxes, excluding the
cumulative effect of a change in an accounting principle, follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ------------------------------------------------------------------------------
% of % of % of
Pretax Pretax Pretax
Amount Earnings Earnings Earnings
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Computed "expected"
tax expense $ 69,249 35.0% 35.0% 35.0%
Tax benefit of Puerto
Rico operations (9,781) (4.9) (5.8) (8.9)
Federal tax credits
and other effects (2,364) (1.2) (0.3) --
Foreign income and
withholding taxes,
net of U.S. foreign
tax credits 1,976 1.0 (0.1) 0.5
State income taxes,
net of Federal
income tax benefit 276 0.1 0.1 0.2
- ------------------------------------------------------------------------------
Total and effective
tax rate $ 59,356 30.0% 28.9% 26.8%
==============================================================================
</TABLE>
United States income taxes have not been provided on the retained
earnings of foreign subsidiaries, which totaled $171,144, $173,544 and $161,047
at August 3, 1996, July 29, 1995 and July 30, 1994, 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% to 55% and 60% of income for the years ended August 3, 1996 and July 29,
1995, respectively. 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.
The Small Business Job Protection Act of 1996 repealed Section 936 of
the Internal Revenue Code which provided a tax credit for U.S. companies with
operations in certain U.S. possessions, including Puerto Rico. For existing
qualifying Puerto Rico operations, such as Pall, Section 936 will be phased out
over a period of several years, with a decreasing credit being available through
the last taxable year beginning before January 1, 2006.
COMMON STOCK
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.
42
<PAGE> 47
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.
On February 28, 1996, the Company's Board of Directors authorized
another program to repurchase shares of its common stock. The Board authorized
the expenditure of up to $40,000. Through the end of fiscal 1996 the Company
purchased 433 shares at an aggregate cost of $10,000.
The shares repurchased under these programs are held in treasury for
use in connection with the exercise of options granted under the Company's stock
option plans, and for general corporate purposes. At August 3, 1996, the Company
held 2,375 treasury shares.
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 $9,330, $7,786 and $6,958 in fiscal years 1996, 1995 and 1994,
respectively.
STOCK OPTION PLANS
The Company has adopted several plans that 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 August 3, At July 29,
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Options exercisable 2,570 2,222
Options available for grant 3,236 1,322
</TABLE>
Changes in the options outstanding during fiscal years 1994, 1995 and 1996 are
summarized in the following table:
<TABLE>
<CAPTION>
Number of Shares Price Per Share
- --------------------------------------------------------------------------------
<S> <C> <C>
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
Fiscal 1996:
Options granted 2,455 21.50 - 27.25
Options exercised (1,019) 11.69 - 19.88
Options terminated (73) 18.38 - 24.25
- --------------------------------------------------------------------------------
Balance--August 3, 1996 6,439 15.25 - 27.25
- --------------------------------------------------------------------------------
</TABLE>
As of August 3, 1996, 9,675 shares of common stock of the Company were
reserved for the exercise of stock options. To the extent treasury shares are
used to satisfy option exercises, these reserved shares will not be issued.
Since June 1992, the Company has issued treasury shares upon the exercise of
stock options.
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 totaled
$10,532, $9,018 and $8,638 in fiscal years 1996, 1995 and 1994, 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.
43
<PAGE> 48
Net periodic pension cost for these plans in fiscal years 1996, 1995
and 1994 was:
<TABLE>
<CAPTION>
U.S. Plans Foreign Plans
------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 3,449 $ 2,665 $ 2,651 $ 4,074 $ 4,115 $ 3,582
Interest cost on projected benefit obligation 5,700 5,308 4,851 4,279 3,469 2,635
Return on plan assets (5,684) (7,472) (763) (5,362) (5,282) (3,854)
Net amortization and deferrals 3,458 5,198 (1,383) (863) (400) (388)
- --------------------------------------------------------------------------------------------------------------------------
Net periodic pension cost $ 6,923 $ 5,699 $ 5,356 $ 2,128 $ 1,902 $ 1,975
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table presents the plans' funded status and amounts
recognized on the Company's consolidated balance sheets at August 3, 1996 and
July 29, 1995:
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
-------------------------------------- -----------------------------------------
U.S. Plans Foreign Plans U.S. Plans Foreign Plans
-------------------------------------- -----------------------------------------
1996 1995 1996 1995 1996 1995 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 5,021 $ 4,471 $ 42,781 $ 36,070 $ 61,382 $ 56,985 $ 9,089 $ 8,752
Accumulated benefit obligation 5,274 4,696 43,525 36,153 64,668 60,041 10,138 9,860
Projected benefit obligation 5,274 4,696 48,140 40,252 75,080 69,618 12,263 12,656
Plan assets 5,413 4,937 75,993 59,775 41,470 37,351 0 0
- -----------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (in excess of)
or less than plan assets 139 241 27,853 19,523 (33,610) (32,267) (12,263) (12,656)
Unrecognized net (gain) or loss (555) (456) (10,889) (5,738) 10,663 11,564 (2,484) (1,846)
Unrecognized prior service cost 936 970 179 204 2,021 2,428 0 0
Unrecognized net obligation or (asset)
at date of adoption (465) (507) (3,544) (2,990) (1,434) (1,558) 501 594
Additional minimum liability 0 0 0 0 (9,506) (10,880) (116) (170)
- -----------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost (liability) in
the consolidated balance sheets $ 55 $ 248 $ 13,599 $ 10,999 $(31,866) $(30,713) $(14,362) $(14,078)
- -----------------------------------------------------------------------------------------------------------------------------------
The assumptions used were:
Discount rate 7.75% 7.75% 5.5-8.5% 5.5-8.5% 7.75% 7.75% 5.5-6.5% 5.5-7.0%
Rate of compensation increase 4.25-5.25% 4.25-5.25% 2.9-5.5% 2.8-5.5% 4.25-5.25% 4.25-5.25% 3.0-5.0% 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 each year.
The Company and its subsidiaries also participate in certain pension
plans, primarily for the benefit of its employees who are union members.
Contributions to these plans were $1,481, $1,417 and $1,307 for fiscal years
1996, 1995 and 1994, 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 7.5% 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 profit sharing expense for
fiscal years 1996, 1995 and 1994 was $6,092, $4,293 and $4,683, respectively.
44
<PAGE> 49
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. The Company's appeal is now pending.
In the opinion of management, including insurance recoveries, the Company does
not expect the loss, if any, resulting from this matter to have a material
effect on its financial position.
Certain locations of the Company are involved in environmental
proceedings. The situations at these sites are similar, in that they relate to
the acts of third parties and are not related to ongoing Company operations. The
Company's insurers have been notified and are evaluating coverage. In the
opinion of management these proceedings will not have a material effect on the
Company's financial position.
The Company and its subsidiaries are subject to certain other legal
actions that arise in the normal course of business. It is management's opinion
that these other actions will not have a material effect on the Company's
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 $15,000 in 1996, $13,100 in 1995 and $11,000 in
1994. Future minimum rental commitments at August 3, 1996 for all noncancelable
operating leases with initial terms exceeding one year are $10,200 in 1997;
$7,200 in 1998; $5,000 in 1999; $3,000 in 2000; $1,300 in 2001; and $400
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
that are payable if specified management goals are attained. The aggregate
commitment for future salaries at August 3, 1996, excluding bonuses, was
approximately $9,000.
FINANCIAL INSTRUMENTS AND RISKS AND UNCERTAINTIES
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 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.
The Company manufactures and markets filtration and separations
products and systems within three segments, Health Care, Aeropower and Fluid
Processing, throughout the world, and as such, is subject to certain risks and
uncertainties as a result of changes in general economic conditions, sources of
supply, competition, foreign exchange rates, tax reform, litigation and
regulatory developments. The diversity and breadth of the Company's products and
geographic operations mitigate significantly the risk that adverse changes in
any event would materially affect the Company's operating results. The Company's
segment information by industry and geographic areas is disclosed on pages 37
and 38.
45
<PAGE> 50
QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996:
NET SALES $191,550 $239,316 $247,874 $281,636 $960,376
GROSS PROFIT 115,996 143,828 152,321 175,367 587,512
EARNINGS BEFORE INCOME TAXES 25,726 46,502 53,205 72,421 197,854
NET EARNINGS 17,752 32,086 37,965 50,695 138,498
EARNINGS PER SHARE .16 .28 .33 .44 1.21
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)
- ----------------------------------------------------------------------------------------------------------------
</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).
COMMON STOCK PRICES AND CASH DIVIDENDS
Pall Corporation's Common Stock is listed on the New York and London Stock
Exchanges. The table below 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 1996 Fiscal 1995 per common share
- -----------------------------------------------------------------------------------
Price per share HIGH LOW High Low 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
QUARTER:
First $24.50 $20.13 $18.38 $15.75 $0.1050 $0.0925
Second 27.75 23.25 20.25 17.13 0.1225 0.1050
Third 29.38 25.63 23.63 18.63 0.1225 0.1050
Fourth 28.63 19.63 24.00 20.38 0.1225 0.1050
- -----------------------------------------------------------------------------------
</TABLE>
There are approximately 6,800 holders of record of the Company's Common Stock.
46
<PAGE> 51
ELEVEN-YEAR SALES
<TABLE>
<CAPTION>
(In thousands,
to nearest $25,000) 1996 1995 1994 1993 1992 1991 1990 1989 1988(a)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Health Care $471,425 $396,900 $351,850 $353,200 $331,550 $267,625 $214,125 $188,400 $148,050
Aeropower (without NBC) 235,100 212,800 179,300 176,125 204,725 232,200 191,100 165,475 154,775
Fluid Processing
(without Air Dryers) 253,850 213,125 169,700 157,900 148,800 157,150 159,275 143,125 111,025
- --------------------------------------------------------------------------------------------------------------------------
Subtotal 960,375 822,825 700,850 687,225 685,075 656,975 564,500 497,000 413,850
Air Dryers -- -- -- -- -- -- -- -- 19,850
NBC Canisters -- -- -- -- -- -- -- -- 325
- --------------------------------------------------------------------------------------------------------------------------
Total $960,375 $822,825 $700,850 $687,225 $685,075 $656,975 $564,500 $497,000 $434,025
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands,
to nearest $25,000) 1987(a) 1986
- ------------------------------------------------
<S> <C> <C>
Health Care $129,325 $ 96,225
Aeropower (without NBC) 137,125 132,650
Fluid Processing
(without Air Dryers) 86,575 66,550
- ------------------------------------------------
Subtotal 353,025 295,425
Air Dryers 31,250 31,025
NBC Canisters 5,800 5,600
- ------------------------------------------------
Total $390,075 $332,050
================================================
</TABLE>
(a) Restated to reflect the acquisition of RAI Research Corporation on
September 30, 1988, accounted for as a pooling of interests. Prior years
have not been restated, due to immateriality.
47
<PAGE> 52
ELEVEN-YEAR FINANCIAL HISTORY
<TABLE>
<CAPTION>
(In millions, except per share data
and number of employees) 1996 1995 1994 1993 1992 1991 1990
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
RESULTS FOR THE YEAR:
Sales 960.4 822.8 700.8 687.2 685.1 657.0 564.5
Cost of sales 372.9 305.3 257.6 249.6 262.1 258.8 224.5
Selling, general and
administrative expenses 338.7 301.7 261.3 262.6 253.0 242.4 207.8
Research and development 47.5 45.1 41.3 40.0 34.8 30.3 24.0
Interest expense (net) 3.4 3.0 1.8 4.0 5.3 9.7 10.8
Other charge (income) -- -- 3.7(d) 26.7(e) 3.7(f) -- --
Earnings before taxes 197.9 167.7 135.1 104.3 126.2 115.8 97.4
Income taxes 59.4 48.5 36.2 26.0 36.0 35.9 31.2
Accounting change -- (0.8)(g) -- -- 2.5(h) -- --
Net earnings 138.5 118.4 98.9 78.3 92.7 79.9 66.2
Earnings per share (a) 1.21 1.03(g) .86(d) .68(e) .79(h) .69 .57
Dividends declared
per share (a) .47 .41 .36 .31 .26 .21 .18
Capital expenditures 82.2 66.5 73.4 62.6 56.2 58.3 81.8
Depreciation 46.8 41.7 36.8 35.2 34.4 31.9 26.8
- -----------------------------------------------------------------------------------------------------------------------------
YEAR-END POSITION:
Working capital 251.0 237.0 213.6 192.5 223.3 197.3 166.2
Property, plant and
equipment (net) 463.9 427.9 397.6 357.6 366.1 331.8 319.0
Total assets 1,185.0 1,074.9 959.6 902.3 912.9 786.7 797.8
Long-term debt 46.7 68.8 54.1 24.5 59.0 51.6 56.3
Total liabilities 452.7 423.1 372.4 359.4 367.3 301.6 357.8
Equity 732.3 651.8 587.2 542.9 545.6 485.1 440.0
- -----------------------------------------------------------------------------------------------------------------------------
OTHER RATIOS AND STATISTICS:
Net earnings (excluding other
items and accounting
changes) as % of:
Sales 14.4 14.5 14.4 13.9 13.5 12.2 11.7
Average total assets 12.3 11.7 10.9 10.5 10.9 10.1 8.7
Average equity 20.0 19.2 17.9 17.6 18.0 17.3 16.3
Average shares outstanding (a) 114.8 115.2 115.7 115.9 116.9 116.2 115.8
Equity per share (a) 6.37 5.70 5.09 4.68 4.72 4.15 3.80
Number of employees
at year-end 7,700 6,500 6,200 6,300 6,400 6,400 6,300
Price range of stock
during the year (a):
High 29.38 24.00 21.25 23.16 24.09 20.12 12.46
Low 19.63 15.75 13.63 16.38 16.50 8.71 10.04
=============================================================================================================================
<CAPTION>
(In millions, except per share data
and number of employees) 1989(b) 1988(b,c) 1987(c) 1986
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RESULTS FOR THE YEAR:
Sales 497.0 434.0 390.1 332.0
Cost of sales 190.2 175.2 157.6 142.5
Selling, general and
administrative expenses 190.3 163.0 139.8 115.8
Research and development 20.1 17.0 14.9 12.3
Interest expense (net) 5.8 5.0 9.8 6.8
Other charge (income) 6.5 (10.2) -- --
Earnings before taxes 84.1 84.0 68.0 54.6
Income taxes 26.4 27.2 19.7 13.7
Accounting change -- -- -- --
Net earnings 57.7 56.8 48.3 40.9
Earnings per share (a) .50 .50 .43 .37
Dividends declared
per share (a) .15 .13 .11 .09
Capital expenditures 66.2 50.2 35.6 39.2
Depreciation 24.7 21.2 18.0 13.6
- -------------------------------------------------------------------------------------------
YEAR-END POSITION:
Working capital 173.4 159.1 136.6 102.0
Property, plant and
equipment (net) 255.8 220.8 199.4 176.9
Total assets 717.0 581.8 532.5 440.6
Long-term debt 40.4 41.2 41.2 42.2
Total liabilities 345.9 252.8 256.7 219.7
Equity 371.1 329.0 275.8 220.9
- -------------------------------------------------------------------------------------------
OTHER RATIOS AND STATISTICS:
Net earnings (excluding other
items and accounting
changes) as % of:
Sales 12.4 12.3 12.4 12.3
Average total assets 9.5 9.6 9.9 10.2
Average equity 17.6 17.7 19.4 20.8
Average shares outstanding (a) 114.9 113.9 113.1 109.4
Equity per share (a) 3.21 2.88 2.43 2.01
Number of employees
at year-end 6,200 5,600 5,400 5,100
Price range of stock
during the year (a):
High 11.42 11.79 11.66 11.22
Low 8.33 6.50 8.09 6.00
===========================================================================================
</TABLE>
(a) Reflects all stock splits since January 1, 1984.
(b) The air dryer and NBC canister lines were disposed of in fiscal 1988 and
1989, respectively. Fiscal 1989 pretax earnings were reduced by a payment
of $6.5 million (4 cents per share) in settlement of an indemnification
obligation pertaining to the Gore-Garlock patent infringement lawsuit.
Fiscal 1988 pretax earnings included a $10.2 million gain on the sale of
the air dryer line (6 cents per share) and a charge in connection with an
inventory takeback resulting from the reorganization of certain
distribution arrangements of $4.6 million (3 cents per share).
(c) Restated to reflect the acquisition of RAI Research Corporation on
September 30, 1988, accounted for as a pooling of interests. Prior years
have not been restated, due to immateriality.
(d) Represents principally the cost ($2.3 million after taxes, 2 cents per
share) of restructuring the German operations and of writing off a bad debt
in the Aerospace operations.
(e) Represents principally the cost ($17.3 million after taxes, 15 cents per
share) of downsizing and further integrating the military portion of the
Aeropower business with the Industrial Fluid Power business.
(f) Represents a charge from the settlement of certain promissory notes
received in connection with the sale of the air dryer business in a
leveraged buyout reported in fiscal 1988.
(g) Represents a decrease in earnings (1 cent per share) as a result of
adopting Financial Accounting Standards Board Statement No. 112 (Employers'
Accounting for Postemployment Benefits) in the first quarter of fiscal
1995.
(h) Represents an increase in earnings (2 cents per share) as a result of
adopting Financial Accounting Standards Board Statement No. 109 (Accounting
for Income Taxes) in the first quarter of fiscal 1992.
48
<PAGE> 53
CORPORATE DIRECTORY
SENIOR OFFICERS
Eric Krasnoff
Chairman and
Chief Executive Officer
Jeremy Hayward-Surry
President, Treasurer and
Chief Financial Officer
Derek Williams
Executive Vice President and
Chief Operating Officer
GROUP VICE PRESIDENTS
Clifton Hutchings
Gerhard Weich
Arnold Weiner
Samuel Wortham
SECRETARY
Peter Schwartzman
SENIOR VICE PRESIDENTS
Dr. Joseph Adiletta
Peter Cope
Dr. Peter Degen
Dr. Thomas Gsell
Erwin Kirnbauer
Paul Kohn
John Miller
Akio Satake
Robert Simkins
Donald Stevens
Gilbert Weiner
VICE PRESIDENTS
Dr. Leonard Bensch
Jane Block
Thomas Bormann
Claude Broussy
Steven Chisolm
Jack Cole
John Farris
Terry Flack
Stephen Geibel
Charles Grimm
Dr. Martin Hirsch
Patricia Iannucci
Sakae Isohata
Dr. Hyman Katz
Neil MacDonald
William Palmer
Clarence Treppa
Marcus Wilson
Charles Wolowitz
DIRECTORS
Abraham Appel
Ulric Haynes, Jr.
Jeremy Hayward-Surry
Eric Krasnoff
Dr. Edwin Martin, Jr.
Dr. David Pall
Katharine Plourde
Chesterfield Seibert
Heywood Shelley
Alan Slifka
Dr. James Watson
Derek Williams
49
<PAGE> 54
CORPORATE INFORMATION
CORPORATE HEADQUARTERS
2200 Northern Boulevard
East Hills, New York 11548-1289
Telephone: 516-484-5400
Fax: 516-484-3529
PRINCIPAL PLANTS
Glen Cove, East Hills,
Port Washington, Hauppauge
and Cortland, New York
Pinellas Park, New Port Richey
and Fort Myers, Florida
Covina, California
Putnam, Connecticut
Northborough, Massachusetts
Fajardo, Puerto Rico
Portsmouth, Ilfracombe,
Newquay and Redruth, England
Tsukuba, Japan
COUNSEL
Carter, Ledyard & Milburn
New York, New York
PATENT COUNSEL
Leydig, Voit & Mayer
Chicago, Illinois
AUDITORS
KPMG Peat Marwick LLP
Jericho, New York
REGISTRAR AND TRANSFER AGENT
Wachovia Bank of North Carolina, N.A.
Winston-Salem, North Carolina
1-800-633-4236
Written shareholder correspondence and requests for transfer should be sent to:
Wachovia Bank of North Carolina, N.A. P.O. Box 8217
Boston, Massachusetts 02266-8217
ANNUAL SHAREHOLDERS' MEETING
Tuesday, November 19, 1996
2:30 p.m., The Garden City Hotel
Garden City, New York 11530
Dividend Reinvestment Plan
Shareholders have a convenient opportunity for automatic reinvestment of cash
dividends and voluntary cash investments in the Company's stock through the
Dividend Reinvestment Plan. Participating shareholders pay no brokerage
commissions or other charges on purchases of shares under the Plan; all such
commissions and charges are paid by the Company.
You must own at least 50 shares of Pall Common Stock to join the Dividend
Reinvestment Plan (or to rejoin if your participation in the Plan has
terminated). As a Plan participant, whether or not you have elected to reinvest
your dividends, you can make voluntary cash contributions of $100 or more at any
time subject to a maximum of $5,000 a month.
Direct Deposit of Cash Dividends
Shareholders can choose to have dividend payments automatically deposited to
checking, savings or money market accounts at any financial institution that
participates in the Automated Clearing House system. The Deposit will occur on
the dividend payment date, thus providing immediate access to funds. The Direct
Deposit of Cash Dividends Service is provided free of charge.
Shareholders interested in participating in either the Dividend
Reinvestment Plan or the Direct Deposit of Cash Dividends Service should contact
our Registrar and Transfer Agent.
INVESTOR RELATIONS
Pall Corporation
Investor Communications Manager
25 Harbor Park Drive
Port Washington, NY 11050-4630
Telephone: 1-800-205-7255
In New York State: 516-484-3600
Fax: 516-484-3649
E-Mail Address:
[email protected]
TRADEMARKS
All product names appearing in type form different from that of the surrounding
text are trademarks owned by Pall Corporation or its subsidiaries.
ADDITIONAL INFORMATION
Pall Corporation is an equal opportunity employer and maintains affirmative
action programs covering minorities, women, the handicapped, disabled veterans
and veterans of the Vietnam era.
[recycle logo] This report has been printed on recycled paper.
The papers used in this annual report were manufactured in mills that use Pall
filters on their paper machines.
INTERNET
To visit Pall Corporation's web site on the Internet, go to
URL:http://www.pall.com
50
<PAGE> 55
BOARD OF DIRECTORS
[PHOTO OF BOARD MEMBERS]
Alan Slifka
Managing Principal
Halcyon/Alan B.
Slifka Management
Co., LLC
Eric Krasnoff(1)
Chairman and
Chief Executive Officer
of Pall Corporation
Abraham Appel(2,3,4)
President, Appel Consultants, Inc.
Toronto, Canada
Dr. David Pall(1)
Founder Chairman
of Pall Corporation
Derek Williams
Executive Vice President and Chief Operating Officer
of Pall Corporation
Dr. James Watson(2)
President,
Cold Spring Harbor Laboratory
Cold Spring Harbor, New York
[PHOTO OF BOARD MEMBERS]
Chesterfield Seibert(2,4)
Retired Chairman and Chief Executive Officer, Marietta
Corporation, Cortland, New York;
Retired Executive Vice President
of Pall Corporation
Jeremy Hayward-Surry(1)
President, Treasurer and Chief Financial Officer
of Pall Corporation
Heywood Shelley
Partner,
Carter Ledyard & Milburn, Attorneys, New York, New York
Ulric Haynes(3)
Dean, The Frank G. Zarb School of Business at Hofstra University
Hempstead, New York
Katharine Plourde(2)
Principal,
Donaldson, Lufkin & Jenrette Inc.
New York, New York
Dr. Edwin Martin, Jr.(3,4)
President Emeritus,
The National Center for Disability
Services, Albertson, New York
Board Committees
(1) Executive
(2) Audit
(3) Compensation
(4) Nominating
<PAGE> 56
[PALL LOGO]
FILTRATION.
SEPARATION.
SOLUTION.(TM)
Pall Corporation
2200 Northern Boulevard
East Hills, NY 11548
<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>
Medsep Corporation Delaware
Pall Aeropower Corporation Delaware
Pall Biomedical, Inc. Delaware
Pall International Corporation Delaware
Pall Puerto Rico, Inc. Delaware
Pall Stratapac Ltd. Delaware
Russell Associates Inc. Delaware
Pall Filtron Corporation Massachusetts
Pall (Canada) Limited Canada
Pall Europe Limited England
Pall Deutschland GmbH Holding Germany
Pall GmbH (a) Germany
Pall Italia S.R.L. Italy
Institut de Formation a la Filtration Pall (b) France
Pall Biomedical France (b) 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 1996, 1995 and 1994, or, in the case of
corporations organized since August 1 1993, from the date of incorporation. The
list does not include inactive subsidiaries.
<PAGE> 1
EXHIBIT 23
{LETTERHEAD}
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
Pall Corporation:
We consent to incorporation by reference in Pall Corporation's
Registration Statements Nos. 33-25640, 33-44399, 33-51151 and 33-64751 on Form
S-8, and Registration Statements Nos. 33-39655 and 33-57507 on Form S-3, of our
reports dated September 3, 1996, relating to the consolidated balance sheets of
Pall Corporation and subsidiaries as of August 3, 1996 and July 29, 1995 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
August 3, 1996, which reports are incorporated by reference or appear in this
annual report on Form 10-K of Pall Corporation for the fiscal year ended
August 3, 1996.
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 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-03-1996
<PERIOD-END> AUG-03-1996
<CASH> 34,528
<SECURITIES> 71,450
<RECEIVABLES> 246,327
<ALLOWANCES> 4,170
<INVENTORY> 193,764
<CURRENT-ASSETS> 581,205
<PP&E> 754,213
<DEPRECIATION> 290,308
<TOTAL-ASSETS> 1,184,958
<CURRENT-LIABILITIES> 330,221
<BONDS> 0
0
0
<COMMON> 11,735
<OTHER-SE> 720,565
<TOTAL-LIABILITY-AND-EQUITY> 1,184,958
<SALES> 960,376
<TOTAL-REVENUES> 967,397
<CGS> 372,864
<TOTAL-COSTS> 769,543
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,439
<INCOME-PRETAX> 197,854
<INCOME-TAX> 59,356
<INCOME-CONTINUING> 138,498
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138,498
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.21
</TABLE>
