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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended February 1, 1997
Commission File No. 1-4311
PALL CORPORATION
Incorporated in New York State I.R.S. Employer Identifi-
cation # 11-1541330
2200 Northern Boulevard, East Hills, N.Y. 11548
Telephone Number (516) 484-5400
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---- ----
At March 6, 1997, 126,465,885 shares of common stock
of the Registrant were outstanding.
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PALL CORPORATION
INDEX TO FORM 10-Q
-----------------------------------
COVER SHEET 1
INDEX TO FORM 10-Q 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets - February 1, 1997
and August 3, 1996 3
Condensed consolidated statements of earnings -
three months and six months ended February 1, 1997
and January 27, 1996 4
Condensed consolidated statements of cash flows -
six months ended February 1, 1997 and January 27, 1996 5
Notes to condensed consolidated financial statements 6
Item 2. Management's discussion and analysis of financial condition and
results of operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 9
SIGNATURES 9
EXHIBIT INDEX 10
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands)
February 1, August 3,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 24,543 $ 34,528
Short-term investments 87,000 71,450
Accounts receivable, net of allowances
for doubtful accounts of $4,646
and $4,170, respectively 212,416 242,157
Inventories - Note 2 208,714 193,764
Deferred income taxes 17,502 15,995
Prepaid expenses 19,940 19,151
Other current assets 6,341 4,160
----------- -----------
Total Current Assets 576,456 581,205
Property, plant and equipment, net of
accumulated depreciation of $308,706
and $290,308, respectively 478,378 463,905
Other assets 139,662 139,848
----------- -----------
Total Assets $ 1,194,496 $ 1,184,958
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 155,269 $ 139,957
Accounts payable 42,680 61,071
Accrued liabilities:
Salaries 22,031 31,985
Other 43,492 44,213
----------- -----------
65,523 76,198
Income taxes 10,236 21,699
Current portion of long-term debt 15,404 17,163
Dividends payable 16,193 14,133
----------- -----------
Total Current Liabilities 305,305 330,221
Long-term debt, less current portion 51,077 46,712
Deferred income taxes 38,814 36,134
Other non-current liabilities 38,707 39,591
----------- -----------
Total Liabilities 433,903 452,658
----------- -----------
Stockholders' Equity:
Common stock, $.10 par value 11,735 11,735
Capital in excess of par value 53,939 53,769
Retained earnings 743,221 727,814
Treasury stock, at cost (32,582) (50,410)
Foreign currency translation adjustment (2,110) 2,901
Minimum pension liability adjustment (4,658) (4,629)
Stock option loans (8,843) (8,652)
Cumulative unrealized (losses) on investments (109) (228)
----------- -----------
Total Stockholders' Equity 760,593 732,300
----------- -----------
Total Liabilities and
Stockholders' Equity $ 1,194,496 $ 1,184,958
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands, (in thousands,
except per share data) except per share data)
Three Months Ended Six Months Ended
------------------------------- -------------------------------
Feb. 1, Jan. 27, Feb. 1, Jan. 27,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $233,958 $239,316 $441,414 $430,866
Costs and expenses:
Cost of sales 95,509 95,488 178,492 171,042
Selling, general and
administrative expenses 86,657 84,796 170,019 163,347
Research and development 11,557 11,664 23,237 22,592
Interest expense, net 662 866 1,292 1,657
-------- -------- -------- --------
Total costs and expenses 194,385 192,814 373,040 358,638
Earnings before income taxes 39,573 46,502 68,374 72,228
Provisions for income taxes 11,871 14,416 20,512 22,390
-------- -------- -------- --------
Net earnings $ 27,702 $ 32,086 $ 47,862 $ 49,838
======== ======== ======== ========
Earnings per share $ 0.24 $ 0.28 $ 0.42 $ 0.44
Dividends declared per share $ 0.1400 $ 0.1200 $ 0.2625 $ 0.2300
Average number of shares
outstanding 115,432 114,624 115,253 114,543
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands)
Six Months Ended
-----------------------
Feb. 1, Jan. 27,
1997 1996
------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $37,393 $ 62,448
INVESTING ACTIVITIES:
Acquisition of Medical Plastics business
of Bayer Corporation -- (43,017)
Acquisition of License (2,000) --
Capital expenditures (43,879) (35,601)
Disposals of fixed assets 777 1,842
Short-term investments (15,550) 3,500
------- --------
NET CASH USED BY INVESTING ACTIVITIES (60,652) (73,276)
FINANCING ACTIVITIES:
Net short-term borrowings 20,528 29,916
Long-term borrowings 8,596 --
Payments on long-term debt (2,455) (6,229)
Net proceeds from exercise of stock options 12,274 5,688
Sale of treasury stock 3,375 --
Dividends paid (28,237) (24,035)
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 14,081 5,340
------- --------
CASH FLOW FOR PERIOD (9,178) (5,488)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 34,528 37,913
EFFECT OF EXCHANGE RATE CHANGES ON CASH (807) (1,702)
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $24,543 $ 30,723
======= ========
Supplemental disclosures:
Interest paid (net of amount capitalized) $ 4,174 $ 4,453
Income taxes paid (net of refunds) 30,141 26,110
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial information included herein is unaudited. However, such
information reflects all material adjustments which are, in the opinion of
management, necessary to present fairly (i) the financial position of the
Company at February 1, 1997 and August 3, 1996, (ii) the results of its
operations for the three months and six months periods ended February 1, 1997
and January 27, 1996, and (iii) its cash flows for the six months ended
February 1, 1997 and January 27, 1996. These financial statements should be
read in conjunction with the financial statements and notes set forth in the
Company's Annual Report and Form 10-K for the fiscal year ended August 3, 1996.
NOTE 2 - INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
(in thousands)
Feb. 1, Aug. 3,
1997 1996
-------- --------
<S> <C> <C>
Raw materials and components $ 95,737 $ 82,402
Work-in-process 25,644 21,132
Finished goods 87,333 90,230
-------- --------
Total inventory $208,714 $193,764
======== ========
</TABLE>
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
I. Results of Operations
A. Quarter ended February 1, 1997 compared to quarter ended January 27, 1996.
Sales for the quarter in local currency were flat. Including exchange rate
effects, sales declined by 2 1/2%. By market segment, before the effects of
exchange rates, Health Care was down 3%, Aeropower grew 7% and Fluid Processing
was down 1/2%. Within the Health Care sub-segment, Pharmaceuticals grew 7 1/2%,
led by Asia which grew 34% and Western Hemisphere grew 21%; however, Europe
declined by 5%. Food & Beverage increased 15%, which included 20% growth in
Asia. Patient Protection decreased 7% and BioSupport fell 36%. The reduction in
BioSupport sales relates to an overstocking at one of the customers who has now
started ordering again. Patient Protection sales decreased 7% and by geography,
Western Hemisphere was down 8%, Europe was down 16% and Asia grew 19%. Breaking
it down further, blood filter sales overall were down 4%, including a reduction
of 3% related to pricing. Bedside blood filter sales were up 2% and sales to
blood centers were down 12%. However, in the Western Hemisphere, sales of blood
filters increased 2%, led by a 7% increase in sales to blood centers. The
company noted widespread reduction in Europe, particularly in Germany, France
und the UK where Health Care costs are under pressure. The Fluid Processing
sub-segment, excluding Microelectronics showed 4% growth in sales. Growth was
strong in Europe and Asia where sales increases were greater than 17%; however,
Western Hemisphere declined by 10 1/2% due to reductions in Power Generation and
sales of our Stratapac technology. Microelectronics sales decreased 8%, all of
which was in the Western Hemisphere which fell 28% following an 86% increase in
the same quarter last year. Sales in the Aeropower segment increased 7%.
Commercial Aerospace increased 17 1/2%, and Military Aerospace grew 13%.
Commercial Aerospace now represents 55% of Aerospace sales, up from 50% last
year. Industrial Hydraulics was flat with a 19% growth rate in the Western
Hemisphere offset by an 8% reduction in Europe.
By geography, sales in Asia grew by 15 1/2% in local currency, whereas Europe
and Western Hemisphere sales declined by 4 1/2% and 2 1/2%, respectively.
Cost of sales in the second quarter increased nearly 1% of sales due to the
effect of foreign currency exchange rates, particularly by the Yen and the
Deutschmark. Selling, general and administrative expenses were up about 2% in
dollars but as sales declined, this represented an increase of 1 1/2% as a
percentage of sales. Pre-tax margins decreased 2 1/2% over the same quarter last
year mainly as sales for the quarter were flat. The tax rate for the current
quarter was 30% compared to 31% last year. The Company anticipates using a 30%
tax rate for the remainder of the year. Net earnings quarter-on-quarter declined
by 13 1/2%.
B. Six months ended February 1, 1997 compared to six months ended January 27,
1996
Sales for the first six months in local currency were up 5%. By market,
Aeropower sales increased 7 1/2%, Fluid Processing 6% and Health Care 3 1/2%. By
geography, sales in Asia increased 19 1/2 % and Western Hemisphere increased 4%.
Europe sales decreased by 1/2%.
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For the six months, cost of sales increased by nearly 1% of sales for the same
reasons as mentioned above. Selling, general and administrative expenses as a
percentage of sales were up just over 1/2% mainly because sales for the first
six months grew at a rate lower than the increase in selling, general and
administrative expenses. Pre-tax margins declined by nearly 1 1/2% over the same
six month period last year mainly due to lower sales growth. The tax rate for
the first six months was 30% compared to 31% last year. Net earnings for the
first six months declined by 4% over the same period last year.
II. Liquidity and Capital Resources
Borrowings, net of cash and short-term investments, at the end of the quarter
came to $110 million which represents an increase of $12 million over the end of
the fiscal year. Capital expenditures for the first six months were $44 million
and depreciation expense for the same period was $26 million.
On February 3, 1997 the Company completed its merger with Gelman Sciences Inc.
Gelman Sciences will operate as a subsidiary of Pall Corporation and will be
responsible for the sale of Gelman and Pall products to the Laboratory, Medical
OEM and specialty materials markets. Pursuant to the terms of the merger
agreement, Gelman shareholders received 1.3047 shares of Pall common stock
for each share of Gelman common stock. Pall Corporation is issuing approximately
10,600,000 shares of its common stock in exchange for all the outstanding shares
of Gelman Sciences Inc. The Company will account for the merger as
pooling-of-interests. Condensed comparative proforma results of the merged
operations for the second quarter and the six months ended February 1, 1997 are
as follows -
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
-------------------- ----------------
Feb 1,1997 Jan 27,1996 Feb 1,1997 Jan 27,1996
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $260,759 $266,440 $ 496,550 $485,325
Net earnings $ 28,967 $ 33,942 $ 46,251(a) $ 53,616
Earnings per share $ 0.23 $ 0.27 $ 0.37(a) $ 0.43
</TABLE>
(a) Includes $3,911 ($3,600 net of taxes) merger related expenses incurred by
Gelman Sciences in connection with the termination of its proposed merger
transaction with Memtec Ltd. Excluding this expense, net earnings would be
$49,851 ($0.40 per share).
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
See the Exhibit Index immediately following this page.
(b) Reports on Form 8-K.
The Company filed no reports on Form 8-K during the three
months ended February 1, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PALL CORPORATION
March 14, 1997 /s/ Jeremy Hayward-Surry
- --------------- ----------------------------
Date Jeremy Hayward-Surry
President, Treasurer and
Chief Financial Officer
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<TABLE>
<CAPTION>
Exhibit Index
-------------
Exhibit
Number Description of Exhibit
- ------- ----------------------
<S> <C> <C>
2 * Agreement and Plan of Reorganization and Merger
made on October 27, 1996, by and among the
Registrant, Pall Acquisition Corporation and
Gelman Sciences Inc., filed as Exhibit A to The
Proxy Statement - Prospectus constituting Part I of
the Registrant's Registration Statement on
Form S-4 (Registration No. 333-17417).
3 ( i )* Restated Certificate of Incorporation of the Registrant
as amended through November 23, 1993, filed as
Exhibit 3 ( i ) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended July 30, 1994.
3 (ii )* By-Laws of the Registrant as amended on November
21, 1995, filed as Exhibit 3 (ii) to the Registrant's
Quarterly Report on Form 10-Q for the quarterly
period ended October 28, 1995.
10 (a) Employment Agreement dated October 27, 1996 among
the Registrant, Gelman Sciences Inc. and Kim A. Davis.
27 Financial Data Schedule (only filed electronically).
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement.
<PAGE> 1
KIM A. DAVIS
EMPLOYMENT AGREEMENT
This agreement is dated October 27, 1996 among PALL CORPORATION, a New
York corporation ("Pall"), GELMAN SCIENCES INC., a Michigan corporation
("Gelman"), and KIM A. DAVIS (the "Executive" and, together with Pall and
Gelman, the "Parties").
The Executive has been a key employee of Gelman, and the Parties desire,
subject to the merger of Pall's wholly-owned subsidiary, Pall Acquisition
Corporation, a Michigan corporation, with and into Gelman (the "Merger"), to
enter into an employment agreement on the terms and conditions hereinafter set
forth. This Agreement shall become effective upon the closing of the Merger (the
"Closing") and shall not take effect until the date of the Closing (the "Closing
Date").
In consideration of the Merger and the payments to the Executive
hereunder, all prior employment contracts and any amendments to such contracts
between the Executive and Gelman in effect as of the Closing shall be terminated
on the Closing Date and shall be of no further force or effect.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the Parties agree as follows:
SECTION 1. EMPLOYMENT AND TERM
Gelman hereby employs the Executive, and the Executive hereby agrees to
serve, as President and Chief Operating Officer of Gelman, with the duties set
forth in Section 2, for a term
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(hereinafter called the "Term of Employment") beginning on the Closing Date and
continuing thereafter until terminated on three years' prior written notice.
Notwithstanding the provisions of the immediately preceding sentence of this
Section 1, this Agreement may automatically terminate earlier in the manner set
forth in Section 5.
SECTION 2. DUTIES
(a) The Executive is to serve as President and Chief Operating
Officer of Gelman. The immediately preceding sentence of this Section 2(a) shall
not be construed to limit the power of the Board of Gelman (the "Board") to
elect officers annually or to remove officers in accordance with the bylaws of
Gelman.
(b) The Executive agrees that during the Term of Employment his
duties and assignments shall be as the President and Chief Operating Officer of
Gelman, except that the Executive shall not be required to perform any duties
or assignments inconsistent with his experience and qualifications.
(c) During the Term of Employment the 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 Gelman and to promoting the best
interests of Gelman and he shall not, either during or outside such normal
business hours, engage in any activity inimical to such best interests. The
Executive shall competently perform all assigned duties; carry out the
policies, directives, and decisions of the Board and the Chief Executive
Officer of Gelman; not withhold from the Board or the Chief
2
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Executive Officer of Gelman, and will promptly report to the Chief Executive
Officer, any information which may affect Gelman's or any affiliate's business;
and refrain from any conduct which is illegal, dishonest, fraudulent, or
detrimental to Gelman's or any affiliate's business, as determined by the Board.
Section 3. COMPENSATION ON CLOSING DATE AND THE GELMAN STOCK OPTIONS
(a) CLOSING PAYMENT. Gelman shall pay the Executive on the Closing
Date a lump sum payment in the amount of $924,386. Pall hereby guarantees such
payment. To the extent such payment is subject to the excise tax of Internal
Revenue Code Section 4999 (or any successor statute) such payment shall be
increased by a one-time calculation (without a pyramid effect) of the product
derived by multiplying the "excess parachute payments") as defined in Internal
Revenue Code Section 4999) as initially calculated by the applicable excise tax
rate.
(b) THE GELMAN STOCK OPTIONS
(i) NON-QUALIFIED STOCK OPTIONS. The Executive shall exchange
all of his Gelman non-qualified stock options, all of which shall be
vested on the Closing Date, and which are unexercised on the Closing
Date for non-qualified stock options of Pall (the "Pall Non-Qualified
Options") which shall have the same terms as Pall's standard form
of non-qualified stock options. Such Pall Non-Qualified Options
shall expire a maximum of five years from the Closing Date.
(ii) INCENTIVE STOCK OPTIONS. The Executive shall exchange all
of his Gelman incentive stock options, all of which shall be vested
on the Closing Date, and which are unexercised on the Closing Date
(the "Gelman Incentive Options") for Pall's incentive stock
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options ("Pall's Incentive Options"). Pall's Incentive Options shall have terms
identical to Pall's standard form of Incentive Options, and shall expire a
maximum of five years from the Closing Date.
SECTION 4. COMPENSATION DURING THE TERM OF EMPLOYMENT
(a) Base Salary. With respect to the period beginning on the
Closing Date and ending at the end of the Term of Employment, Gelman shall pay
to the Executive base compensation (in addition to the compensation provided
for elsewhere in this Agreement) at such a rate as the Executive and the Board
shall agree (the "Base Salary"), but at not less than the rate of $325,000 per
annum, less appropriate payroll taxes, payable in such periodic installments as
Gelman may determine but not less often than monthly, with annual reviews and
adjustments, if any, in the discretion of the Board.
(b) Bonus Compensation. With respect to each fiscal year of Gelman
falling in whole or in part within the Term of Employment beginning with the
fiscal year ending July 1, 1997, the Executive shall be eligible for a bonus
(in addition to his Base Salary), equal to fifty percent of the Executive's
Base Salary for achieving Gelman's corporate goals, established at the
discretion of the Board, or seventy-five percent of the Executive's Base Salary
for exceeding Gelman's stretch goals, established at the discretion of the
Board. For each of the Gelman fiscal years ending July 31, 1997, 1998 and 1999,
such bonus shall consist of an amount equal to seventy-five percent of the
Executive's Base Salary. In accordance with Pall's standard policies, one-half
of such bonus compensation shall be payable to the Executive in July (on an
estimated basis) and the balance in the succeeding January.
4
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With respect to any fiscal year of Gelman which falls in part but not
in whole within the Term of Employment, the bonus compensation to which the
Executive is eligible under this Section 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 such bonus compensation
shall be payable with respect to the full fiscal year ending within such
five-day period.
(c) Expenses. Gelman shall reimburse the Executive, upon
presentation of proper documentation, for reasonable expenses incurred by the
Executive in the performance of his assigned duties.
(d) Fringe Benefits and Perquisites. During the Term of Employment,
the Executive shall enjoy the customary perquisites of office, including but
not limited to an automobile befitting his status, office space and
furnishings, secretarial services, expense reimbursements, and any similar
emoluments customarily afforded to the Executive officers of Gelman. The
Executive shall also be entitled to receive or participate in all "fringe
benefits" and employee benefit plans provided or made available by Gelman to
its executives or management personnel generally, such as, but not limited to,
group hospitalization, medical, life and disability insurance, and pension,
retirement and profit-sharing plans. The Executive shall be covered by an
additional, separate, whole life insurance policy in the amount of $1 million,
with premiums paid annually for a paid-up policy in ten years, the face value
of which shall be payable to the Executive's designated beneficiary upon the
Executive's death. Such premiums shall continue to be paid by Gelman during and
following the Executive's employment unless the Executive dies, resigns or is
terminated for cause or violates any
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obligations under the Pall Corporation Employee Agreement annexed as Schedule
A, in which event Gelman's obligations to continue paying such premiums shall
cease. Such insurance policy and its cash value shall become incrementally
vested to the Executive at the rate of ten percent of such policy's face and
cash value for each full year after August 1, 1995 during which Gelman is
obligated to continue paying premiums. At such time as Gelman is no longer
obligated to make premium payments, Gelman shall transfer ownership of such
policy to the Executive.
(d) Vacations. The Executive shall be entitled each year to six
weeks' vacation or vacations in accordance with the policies of Gelman as
determined by Gelman from time to time. Gelman shall not pay the Executive any
additional compensation for any vacation time not used by the Executive.
SECTION 5. TERMINATION BY REASON OF DISABILITY, DEATH, RETIREMENT OR CHANGE OF
CONTROL
(a) Disability or Death. If, during the Term of Employment, the
Executive, by reason of physical or mental disability, is incapable of
performing his principal duties hereunder for an aggregate of 180 working days
out of any period of twelve consecutive months, Gelman at its option may
terminate the Term of Employment effective immediately by notice to the
Executive given within 90 days after the end of such 180-day period. If the
Executive shall die during the Term of Employment or if Gelman terminates the
Term of Employment pursuant to the immediately preceding sentence by reason of
the Executive's disability, Gelman shall pay to the Executive, or to the
Executive's legal representatives, or in accordance with a direction given by
the Executive to Gelman in writing, the following.
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(i) where Gelman is achieving or exceeding the projected
performance plan as approved by the Board, a severance amount equal to
the amount of the Base Salary and Bonus Compensation the Executive would
have received in the year of termination; or
(ii) where Gelman is not achieving the projected performance
plan as approved by the Board, a severance amount equal to the amount of
the Base Salary the Executive would have received in the year of
termination.
(b) Retirement.
(i) The Term of Employment shall end automatically, without
action by either party, on the Executive's 65th birthday unless, prior
to such birthday, the Executive and Gelman have agreed in writing that
the Term of Employment shall continue past such 65th 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, Gelman
shall pay to the Executive, or to another payee specified by the
Executive to Gelman in writing, the Executive's Base Salary and Bonus
Compensation prorated to the date on which the Term of Employment ends.
(iii) Anything hereinabove to the contrary notwithstanding, if
any provision of this paragraph violates federal or applicable state law
relating to discrimination on account of age, such provision shall be
deemed modified or suspended to the extent necessary to eliminate such
violation of law. If at a later date, by reason of changed circumstances
or otherwise, the enforcement of such provision as set forth herein
would no longer constitute a violation of law, then it shall be enforced
in accordance with its terms as set forth herein.
7
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SECTION 6. NONCOMPETITION; INVENTIONS; CONFIDENTIAL INFORMATION
The Executive shall, simultaneously with the execution of this
Agreement, execute the Pall Corporation Employee Agreement annexed as Schedule
A.
SECTION 7. COMPANY'S RIGHT TO INJUNCTIVE RELIEF
The Executive acknowledges that his services to Gelman are of a unique
character, which gives them a peculiar value to Gelman, 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 Gelman may have at law or in
equity, Gelman shall be entitled to injunctive relief for a breach of this
Agreement by the Executive.
SECTION 8. MERGERS AND CONSOLIDATIONS; ASSIGNABILITY
In the event that Pall or Gelman, or any entity resulting from any
merger or consolidation referred to in this Section 8 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 Pall or Gelman or any such entity shall be
sold or otherwise transferred to another entity, the provisions of this
Agreement shall be binding upon and shall inure to the benefit of the continuing
entity in or the entity resulting from such merger or consolidation or the
entity to which such assets shall be sold or transferred. Except as provided in
the immediately preceding sentence of this Section 8, this Agreement shall not
be assignable by Gelman or by any entity referred to in such immediately
preceding sentence. This Agreement shall not be assignable by the 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.
8
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SECTION 9. 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 10. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
Parties and their respective successors.
SECTION 11. EXECUTION OF AGREEMENT
This Agreement will be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument and agreement.
SECTION 12. 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 without reference to its
rules as to conflicts of laws.
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 Pall or
Gelman, 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,
or at such other address and for the attention of such other person of which
Gelman shall have given notice to the Executive in the manner herein provided,
and, if intended for the Executive, shall be
9
<PAGE> 10
delivered to him personally or shall be addressed to him (if sent by mail) at
his most recent residence address shown in Gelman's employment records or at
such other address or to such designee of which the Executive shall have given
notice to Gelman 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. AMENDMENT AND MODIFICATION
Any amendment or agreement supplemental hereto shall not be binding upon
either party unless executed in writing by Pall, Gelman and the Executive.
Section 15. ENTIRE AGREEMENT
This Agreement and Schedule A supersedes and cancels all prior
agreements, whether verbal or written, among Pall, Gelman and the Executive and
constitutes the entire agreement of the Parties on the subject matter hereof.
Section 16. SEVERABILITY
Each paragraph of this Agreement of portion thereof shall be treated as
severable, to the end that if any paragraph or portion thereof shall be
declared illegal, invalid or unenforceable, this Agreement shall be interpreted
so that part only is invalid, without invalidating the remainder of this
Agreement, which shall remain in full force and effect as though such paragraph
or portion thereof had never been contained in this Agreement, and the affected
part shall be interpreted, consistent with the law, to carry out the intent of
the parties.
10
<PAGE> 11
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
day and year first above written.
PALL CORPORATION
By: /s/ Eric Krasnoff
--------------------------
Name:
Title:
GELMAN SCIENCES INC.
By: /s/ Kim A. Davis
---------------------------
Name:
Title:
/s/ Kim A. Davis
--------------------------------
KIM A. DAVIS
11
<PAGE> 12
SCHEDULE A TO KIM A. DAVIS EMPLOYMENT AGREEMENT
PALL CORPORATION
EMPLOYEE AGREEMENT
I am about to commence or have recently commenced employment with Pall
Corporation or one of its subsidiaries or affiliated corporations. I
acknowledge that I have been advised that the execution and delivery of this
Agreement is a condition of my employment. Accordingly, in consideration of my
employment and/or continued employment by the Company as well as to induce the
Company to afford me access to Confidential Information (as defined below), I
agree as follows:
CERTAIN DEFINITIONS
AS USED IN THIS AGREEMENT
(a) "Pall Corporation" means the New York corporation of that name which
has its headquarters in Glen Cove, New York and the "Company" means Pall
Corporation and its subsidiaries and affiliated corporations collectively.
(b) "Confidential Information" means information, whether or not in
written form, which (i) is not generally made available by the Company to the
public and (ii) relates to the Company's products, processes or business,
including, but not limited to information relating to the Company's research
and development, manufacturing, purchasing, engineering, sales or marketing or
to the Company's competitors, suppliers or its distributors or other
customers. Examples of Confidential Information are: business, manufacturing
and research plans, methods and projects, formulae, techniques, apparatus,
equipment and systems, materials and products, product design and
specifications, manufacturing procedures and tolerances, research tools, test
procedures, prices and pricing formulae and cost information, customer lists,
customer's special material and product specifications and requirements,
marketing plans and strategies, sales plans and strategies, analyses of
competitors, suppliers, sales records, sample records, salesmen's reports,
customer contact reports, customer records and information, know-how,
notebooks, reports, memoranda, data, designs, drawings and blueprints.
(c) "Competing Product" means any product or process in existence or
under development which is the same as or similar to or competes with any
product or process (i) which the Company manufactures, sells or licenses, or
(ii) to which the Company has devoted a significant research or development
effort and plans to manufacture, sell or license.
(d) "Competitor" means any organization or person engaged in or about
to or planning to become engaged in research, development, production,
marketing, leasing or selling of a Competing Product.
1
<PAGE> 13
PART I: PROTECTION OF CONFIDENTIAL INFORMATION
1. I will not, either during my employment with the Company or
thereafter, except as may be necessary in the course of my duties as an
employee of the Company, use or disclose Confidential Information without the
prior written consent of the Company.
2. I will not, without the prior written consent of the Company,
remove from the Company's premises any printed, written, recorded or graphic
material, or any reproduction thereof, constituting, containing or reflecting
Confidential Information, and at the time that I cease to be an employee of the
Company I will turn over to the Company all such material and reproductions in
my possession or under my custody or control.
PART II: OWNERSHIP OF INVENTIONS
3. (a) As used herein: (i) The term "Invention" means any invention,
discovery, improvement, modification, or refinement made or conceived by me,
alone or jointly with others (whether made within or outside my usual working
hours and whether made on or off the Company's premises), (ii) The term
"Covered Invention" means any invention made or conceived during the period of
my employment with the Company or within one year thereafter if either (I) such
invention relates in any way to the products, processes or business of the
Company or to any Competing Product, or (II) in connection with such Invention
I used any equipment, supplies, facilities or Confidential Information of the
Company or I worked on such Invention during any regular working hours while
employed by the Company. (I understand that if I claim that an Invention is
not a Covered Invention because not falling within clause "II" of the preceding
sentence, I will have the burden of proving that I did not use any equipment,
supplies, facilities or Confidential Information of the Company in connection
with such Invention and that I did not work on such Invention during my regular
working hours while employed by the Company.)
(b) All Covered Inventions shall be the property of Pall Corporation.
I will promptly, without request, disclose to the Company all Inventions. If
Pall Corporation in its sole discretion determines that the Company has no
interest in any such Invention and I am so advised in writing by an officer of
Pall Corporation, then I understand that the rights in and to such Invention
shall revert to me.
(c) For purposes of this Agreement, any Invention which during my
employment with the Company or within one year thereafter I disclose to anyone
or reduce to writing or which is the subject of a patent application by me or
any assignee of mine shall be conclusively presumed to have been made or
conceived by me during my employment with the Company or within one year
thereafter unless at or before the delivery of this Agreement such Invention is
disclosed and identified in Exhibit A to this Agreement. (The fact that an
Invention does not fall within the conclusive presumption created by the
preceding sentence shall not be deemed to preclude the
2
<PAGE> 14
Company from establishing by other evidence that such Invention is a Covered
Invention as hereinabove defined).
4. Upon request by Pall Corporation, either during or following my
employment by the Company, I or my legal representatives will apply for a patent
or patents on all Covered Inventions in the United States and in foreign
countries, and will execute and deliver all papers necessary to obtain such
patent or patents, together with assignments to Pall Corporation (or such of its
subsidiaries or affiliates as it may designate) all of my rights, title and
interest in and to such invention, patent applications and patents, without
further compensation to me. Such patent applications shall be filed at the
expense of and under the exclusive control of Pall Corporation (or such of its
subsidiaries or affiliates as it may designate). Further, I will perform all
other proper acts, without further compensation to me but at the expense of the
Company, which the Company may consider necessary or desirable to secure Pall
Corporation (or such of its subsidiaries or affiliates as it may designate) the
fullest rights to such Inventions and to patents covering them.
PART III: COVENANT NOT TO COMPETE
5. Until the end of the Non-Compensation Period (as hereinafter
defined), I will not, except with the prior written consent of an officer of
Pall Corporation: (i) work for or render services to any Competitor (whether as
an employee, consultant or otherwise) in any line of work or activity in which I
was engaged at the Company during any part of the two years immediately
preceding the cessation of my employment with the Company or (ii) acquire or
hold any financial interest (whether as a partner, stockholder or otherwise) in
any Competitor. The Non-Competition Period shall run until the date one year
after I cease to be an employee of the Company (i.e., until the first
anniversary of the date on which I cease to be an employee of the Company).
However, if, prior to such first anniversary, I propose to work for or render
services to a Competitor, I shall give at least ten days advance notice of my
intentions to the Director of Personnel of Pall Corporation. If I fail to give
such notice, the Non-Competition Period shall not end until the date one year
after Pall Corporation learns that I have entered into an employment or
consulting relationship with or acquired a financial interest in a Competitor.
GENERAL PROVISIONS
6. This Agreement is made for the benefit of Pall Corporation and
each and all of its subsidiaries and affiliated corporations and may be enforced
against me by any of said corporations, jointly or severally, or by their
successors and assignees. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
7. Part I, Part II and Part III of this Agreement shall each be
deemed separate agreements severally and independently enforceable regardless of
the enforcement of any other such parts. I understand and acknowledge that in
the event of any breach of this Agreement an action for damages alone may not be
an adequate remedy for the Company and that the Company will have the right
3
<PAGE> 15
to seek specific enforcement, by injunction or other appropriate court order,
of my obligations under this Agreement. The rights and remedies granted to the
Company under this Agreement are intended to be in addition to and not in
derogation of any rights and remedies which the Company would have by law
(whether statutory or case law) in the absence of this Agreement, and this
Agreement shall not be construed as a waiver by the Company of any such
statutory or common law rights or remedies.
Date: October 27, 1996
------------------------------------
Name of Employee (type or print)
Kim A. Davis
/s/ Kim A. Davis
------------------------------------
Signature of Employee
Witness:
- ---------------------------
4
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