<PAGE> 1
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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 October 31, 1998
Commission File No. 1-4311
PALL CORPORATION
Incorporated in New York State I.R.S. Employer Identifi-
cation # 11-1541330
2200 Northern Boulevard, East Hills, N.Y. 11548
Telephone Number (516) 484-5400
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
At December 7, 1998, 124,417,033 shares of common stock of the Registrant were
outstanding.
<PAGE> 2
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PALL CORPORATION
INDEX TO FORM 10-Q
------------------
<TABLE>
<S> <C>
COVER SHEET 1
INDEX TO FORM 10-Q 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets - October 31, 1998
and August 1, 1998 3
Condensed consolidated statements of earnings -
three months ended October 31, 1998 and November 1, 1997 4
Condensed consolidated statements of cash flows -
three months ended October 31, 1998 and November 1, 1997 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 11
SIGNATURES 11
EXHIBIT INDEX 12
</TABLE>
<PAGE> 3
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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)
October 31, August 1,
ASSETS 1998 1998
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 23,792 $ 12,125
Short-term investments 22,300 16,800
Accounts receivable, net of allowances
for doubtful accounts of $6,552
and $5,879, respectively 287,962 291,535
Inventories - Note 2 245,472 227,254
Taxes receivable 5,520 6,941
Deferred income taxes 18,000 15,915
Other 35,956 31,919
----------- -----------
Total Current Assets 639,002 602,489
Property, plant and equipment, net of
accumulated depreciation of $422,407
and $399,821, respectively 529,156 520,592
Other assets 220,280 223,838
----------- -----------
Total Assets $ 1,388,438 $ 1,346,919
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 155,647 $ 134,615
Accounts payable 59,469 66,773
Accrued liabilities:
Salaries and commissions 41,126 39,998
Other 73,589 61,271
----------- -----------
114,715 101,269
Income taxes 21,209 21,939
Current portion of long-term debt 54,385 50,292
Dividends payable 19,279 19,202
----------- -----------
Total Current Liabilities 424,704 394,090
Long-term debt, less current portion 112,860 111,469
Deferred income taxes 20,893 21,514
Other non-current liabilities 56,605 54,231
----------- -----------
Total Liabilities 615,062 581,304
----------- -----------
Stockholders' Equity:
Common stock, $.10 par value 12,796 12,796
Capital in excess of par value 92,893 92,893
Retained earnings 756,477 764,927
Treasury stock, at cost (77,504) (87,281)
Stock option loans (7,472) (7,140)
Accumulated other comprehensive income (loss):
Foreign currency translation adjustment 2,121 (10,416)
Minimum pension liability (4,082) (4,062)
Unrealized investment (losses) gains (1,853) 3,898
----------- -----------
(3,814) (10,580)
Total Stockholders' Equity 773,376 765,615
----------- -----------
Total Liabilities and
Stockholders' Equity $ 1,388,438 $ 1,346,919
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
<PAGE> 4
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PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands,
except per share data)
Three Months Ended
------------------------
Oct. 31, Nov. 1,
1998 1997
-------- --------
<S> <C> <C>
Net sales $249,850 $237,351
Costs and expenses:
Cost of sales 115,773 105,611
Selling, general and
administrative expenses 96,887 90,987
Research and development 14,935 14,190
Interest expense, net 2,948 988
-------- --------
Total costs and expenses 230,543 211,776
Earnings before income taxes 19,307 25,575
Income taxes 4,827 7,161
-------- --------
Net earnings $ 14,480 $ 18,414
======== ========
Earnings per share
Basic $ 0.12 $ 0.15
Diluted $ 0.12 $ 0.14
Dividends declared per share $ 0.155 $ 0.140
Average number of shares
outstanding
Basic 124,107 126,956
Diluted 124,618 127,609
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 5
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PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended
-------------------------
Oct. 31, Nov. 1,
1998 1997
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 37,000 $ 57,159
INVESTING ACTIVITIES:
Investments and licenses (4,246) (6,171)
Capital expenditures (15,800) (20,276)
Disposals of fixed assets 1,099 214
Short-term investments (5,500) (12,900)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (24,447) (39,133)
FINANCING ACTIVITIES:
Net short-term borrowings (repayments) 17,001 (24,808)
Long-term borrowings 396 59,044
Payments on long-term debt (5,858) (1,400)
Net proceeds from exercise of stock options 16,165 1,494
Purchase of treasury stock (10,000) (39,017)
Dividends paid (19,202) --
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (1,498) (4,687)
-------- --------
CASH FLOW FOR PERIOD 11,055 13,339
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,125 17,972
EFFECT OF EXCHANGE RATE CHANGES ON CASH 612 122
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 23,792 $ 31,433
======== ========
Supplemental disclosures:
Interest paid (net of amount capitalized) $ 4,152 $ 1,851
Income taxes paid (net of refunds) 4,697 11,024
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE> 6
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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 adjustments which are, in the opinion of management,
necessary to present fairly (i) the financial position of the Company at October
31, 1998 and August 1, 1998, (ii) the results of its operations for the three
months ended October 31, 1998 and November 1, 1997, and (iii) its cash flows for
the three months ended October 31, 1998 and November 1, 1997. These financial
statements should be read in conjunction with the financial statements and notes
set forth in the Company's Annual Report on Form 10-K for the fiscal year ended
August 1, 1998.
NOTE 2 - INVENTORIES
The major classes of inventory are as follows:
<TABLE>
<CAPTION>
(in thousands)
Oct. 31, Aug. 1,
1998 1998
-------- --------
<S> <C> <C>
Raw materials and components $ 99,055 $ 95,861
Work-in-process 30,307 24,168
Finished goods 116,110 107,225
-------- --------
Total inventory $245,472 $227,254
======== ========
</TABLE>
NOTE 3 - NEW ACCOUNTING STANDARD
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which
requires that all components of comprehensive income and total comprehensive
income be reported and that changes be shown in a financial statement displayed
with the same prominence as other financial statements. Total comprehensive
income for the three months ended October 31, 1998 and November 1, 1997 was
comprised of the following:
<TABLE>
<CAPTION>
Oct. 31, Nov. 1
1998 1997
-------- --------
<S> <C> <C>
Net income $ 14,480 $ 18,414
Foreign currency translation adjustment, net of tax
$255 and $346, respectively 12,537 6,563
Minimum pension liability adjustment, net of
tax benefit $11 and $7, respectively (20) (13)
Unrealized investment loss, net of tax
benefit $3,096 and $65, respectively (5,751) (171)
-------- --------
Total comprehensive income $ 21,246 $ 24,793
======== ========
</TABLE>
<PAGE> 7
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's discussion & analysis may contain "forward looking statements" as
defined in the Private Securities Litigation Reform Act of 1995. These
statements are based on current Company expectations and are subject to risks
and uncertainties which could cause actual results to differ materially. In
addition to foreign exchange rates, such risks and uncertainties include, but
are not limited to, regulatory approval, market acceptance of new technologies,
economic conditions and market demand.
I. Results of Operations
Sales for the quarter were $250 million, an increase of 5 1/2%, compared to $237
million last year. Negative effects of exchange rates and price reductions
reduced sales by 1/2% and 1%, respectively; excluding these, sales would have
increased by 7%. The acquisition of Rochem in the second quarter of the prior
fiscal year increased current quarter sales by about $8 million. A detailed
summary of sales by industry and geographic segments is given below.
Sales by Market
($ = 000)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
------------------------- EXCHANGE % CHANGE
OCT. 31, NOV. 1, % RATE IN LOCAL
1998 1997 CHANGE DIFFERENCE CURRENCY
---- ---- ------ ---------- --------
<S> <C> <C> <C> <C> <C>
Medical $ 60,050 $ 54,544 10 $ (237) 10 1/2
BioPharmaceuticals 71,178 67,081 6 (104) 6 1/2
-------- -------- ------
Total Health Care 131,228 121,625 8 (341) 8
Aerospace 29,901 25,782 16 171 15 1/2
Industrial Hydraulics 30,371 30,367 -- (35) --
-------- -------- ------
Total Aeropower 60,272 56,149 7 1/2 136 7
Microelectronics 11,698 22,251 (47 1/2) (567) (45)
Industrial Process 46,652 37,326 25 (776) 27
-------- -------- ------
Total
Fluid Processing 58,350 59,577 (2) (1,343) --
-------- -------- ------
Total $249,850 $237,351 5 1/2 (1,548) 6
-------- -------- ------
</TABLE>
<PAGE> 8
8
Sales by Geographic Region
($ = 000)
<TABLE>
<CAPTION>
FIRST QUARTER ENDED
---------------------- EXCHANGE % CHANGE
OCT. 31, NOV. 1, % RATE IN LOCAL
1998 1997 CHANGE DIFFERENCE CURRENCY
---- ---- ------ ---------- --------
<S> <C> <C> <C> <C> <C>
Asia $ 37,297 $ 45,121 (17 1/2) $(4,530) (7 1/2)
Europe 99,662 80,327 24 3,282 20
Western
Hemisphere 112,891 111,903 1 (300) 1
-------- -------- -------
Total $249,850 $237,351 5 1/2 (1,548) 6
-------- -------- -------
</TABLE>
In local currency, sales in the Health Care market increased by 8%, led by a
10 1/2% increase in the Medical segment; blood filter sales, a major portion
of this segment, increased 11% after a rebate to the American Red Cross (ARC)
under a new two-year agreement. The increase in blood filter sales reflects
movement in the U.S. and several European countries towards 100% leukocyte
depletion of blood. BioPharmaceuticals sales increased 6 1/2%. The growth in
this segment was led by the Specialty Materials division where sales increased
by 24%. By geography, total Health Care sales in each region increased by
about 8%.
Sales in the Aeropower market increased by 7% led by strong growth of 15 1/2% in
the Aerospace segment; Commercial Aerospace sales grew 19% and sales to Military
customers increased nearly 10%. Sales were flat in the Industrial Hydraulics
segment, which tends to be cyclical. By geography, Aeropower sales in Europe
increased by 18%, Western Hemisphere sales increased marginally and Asia, which
represents a small portion of the total, declined by 5%.
Sales in the Fluid Processing market were flat due to the downturn in the
Microelectronics segment, where sales declined by 45%. Sales in the Industrial
Process segment increased by 27%, due to increased sales in the Hydrocarbon,
Chemical and Polymer markets and the acquisition of Rochem, which accounted for
22% of the increase. By geography, Fluid Processing sales increased by 61% in
Europe (excluding Rochem the increase was 6 1/2%), while sales in the Western
Hemisphere and Asia each declined by approximately 20%.
Quarter-on-quarter, cost of sales as a percentage of sales increased by nearly
2%, mainly as a result of the ARC rebate discussed above, Hurricane Georges,
which increased our costs in Puerto Rico, as well as changes in product mix. Net
interest expense increased nearly $2 million, reflecting higher debt levels due
to the purchase of Rochem in last year's second quarter and stock buy-backs.
Pretax margins declined by 3% for the reasons mentioned above. The tax rate for
the current quarter was 25% compared to 28% in the same period last year. The
reduction in the tax rate reflects the
<PAGE> 9
9
increase in products manufactured in Puerto Rico and Ireland, which have lower
tax rates. For the quarter, earnings per share on a diluted basis were 12 cents
compared to 14 cents last year.
II. Liquidity and Capital Resources
The Company's balance sheet is affected by the spot exchange rates used at the
end of the quarter. In local currency, accounts receivable declined by $18
million as sales in the current quarter were lower than the previous quarter.
Inventory in local currency is up $8 million. This build-up is normal in the
anticipation of sales for the remainder of the year. In local currency, debt and
short-term borrowings, net of cash and short-term investments, are about the
same as at the beginning of the year.
For the quarter, capital expenditures were $16 million and depreciation and
amortization expense was $20 million. During the quarter, the Company acquired
assets of its distributor in Argentina for approximately $4 million. The Company
also bought back an additional $10 million of its common stock during the
quarter. The Company expects to complete the purchase of the remaining $55
million authorized under its current buy-back program during the remainder of
fiscal year 1999.
III. Other Matters
Compliance With Year 2000
Since 1996, the Company has been assessing the impact that the Year 2000 issue
will have on its information systems. In response to these assessments, the
Company developed a plan to inventory critical systems and develop solutions to
those systems that are found to have date-related deficiencies. Project plans
call for the completion of the solution implementation phase and testing of
those solutions prior to any anticipated impact on our systems. There can be no
assurance, however, that there will not be a delay in, or increased costs
associated with, the implementation of such changes, and the Company's inability
to implement such changes could have a material impact on its financial
statements. At the current time, the Company expects that its critical systems
and applications will be compliant by the end of fiscal 1999 and it estimates
that the expenditures necessary to achieve compliance will not be material to
its financial statements.
The Company is also surveying critical suppliers, service providers and
distributors to determine the status of their Year 2000 compliance programs. The
Company's reliance on suppliers, service providers and distributors, and
therefore, proper functioning of their information systems and software means
that failure by such suppliers, service providers and distributors to address
their own Year 2000 issues could have a material impact on the Company's plan to
achieve Year 2000 compliance and therefore, its financial statements.
<PAGE> 10
10
New European Currency
A new European currency (Euro) is planned for introduction in January 1999 to
replace the separate currency of eleven individual countries. This will entail
changes in our operations as we modify systems and commercial arrangements to
deal with the new currency. Modifications will be necessary in operations such
as payroll, benefits and pension systems, contracts with suppliers and customers
and internal financial reporting systems. A three-year transition period is
expected during which transactions can be made in the legacy currencies. This
may require dual currency processes for our operations. We have identified
issues involved and are developing and implementing solutions. The cost of this
effort is not expected to have a material effect on our business or results of
operations. There is no guarantee, however, that all problems will be foreseen
and corrected, or that no material disruption of our business will occur. The
conversion to the Euro may have competitive implications on our pricing and
marketing strategies; however, any such impact is not known at this time.
<PAGE> 11
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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
October 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PALL CORPORATION
December 15, 1998 /s/ John Adamovich, Jr.
- ---------------------------- ------------------------------
Date John Adamovich, Jr.
Chief Financial Officer
and Treasurer
December 15, 1998 /s/ Viraj J. Patel
- ---------------------- ------------------------------
Date Viraj J. Patel
Chief Corporate
Accountant
<PAGE> 12
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Exhibit Index
------------------
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------------- ------------------------------
<S> <C>
3(i)* Restated Certificate of Incorporation of the Registrant as
amended through November 23, 1993, filed as Exhibit 3(i)
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended July 30, 1994.
3(ii)* By-Laws of the Registrant as amended on October 9, 1998,
filed as Exhibit 3(ii) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended August 2, 1998.
10.1(a) 1991 Stock Option Plan (as amended effective November 19,
1998).
10.2(a) 1993 Stock Option Plan (as amended effective November 19,
1998).
10.3(a) 1995 Employee Stock Option Plan (as amended effective
November 19, 1998).
10.4*(a) 1998 Employee Stock Option Plan, filed as exhibit 99 to
the Registrant's Registration Statement on Form S-8
(Registration No. 333-68371).
10.5(a) Stock Option Plan for Non-Employee Directors (as amended
effective November 19, 1998).
27 Financial Data Schedule (only filed electronically).
</TABLE>
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement.
<PAGE> 1
PALL CORPORATION
1991 STOCK OPTION PLAN
(as amended effective November 19, 1998)
Pall Corporation (the "Company"), in order to retain and attract
personnel for positions of responsibility with the Company and its subsidiaries
and to provide additional incentive to such personnel by offering them an
opportunity to obtain a proprietary interest in the Company, hereby authorizes
options to be granted to eligible employees (as hereinafter defined) of the
Company and its subsidiaries and to members of the Board of Directors of the
Company to purchase shares of Common Stock of the Company ("shares") upon the
terms and conditions described below in this Pall Corporation 1991 Stock Option
Plan (the "Plan")
1. Administration of the Plan. The Plan shall be administered, and the
options under the Plan shall be granted, by the Compensation Committee of the
Company as from time to time constituted (the "Committee"). The Committee shall
consist of three members of the Board of Directors who are appointed by the
Board and are (i) "Non-Employee Directors" as defined in Rule 16b-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934 or
any successor regulation, and (ii) "outside directors" as defined in the
regulations of the Internal Revenue Service under Section 162(m) of the Internal
Revenue Code. The members of the Committee shall serve, without compensation, at
the pleasure of the Board. Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan and the options granted under the
Plan, to establish, amend and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of the options described in Section
4 hereof, and to make all other decisions necessary or advisable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option in the
manner and to the extent the Committee deems desirable to carry it into effect.
Any decision of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may act only by a majority
of its members in office, except that the members thereof may authorize any one
or more of their number or any officer of the Company to execute and deliver
documents on behalf of the Committee. No member of the Committee shall be liable
for anything done or omitted to be done by him or by any other member of the
Committee in connection with the Plan, except for his own willful misconduct or
as expressly provided by statute.
2. Number of Shares Subject to Option. The aggregate number of shares
which may be issued under the Plan is one million five hundred thousand
(1,500,000) shares of Common Stock of the Company. Such shares may be either
authorized but unissued or reacquired shares. If after July 2, 1991 the Company
effects one or more stock splits, stock dividends, combinations, exchanges of
shares or similar capital adjustments, the number and kind of shares with
respect to which options may be granted under the Plan, the number and kind of
shares subject to each outstanding option and the option price per share under
each such option shall be proportionately
<PAGE> 2
and appropriately adjusted by the Committee. If any option granted under the
Plan, or any portion thereof, shall expire or terminate for any reason without
having been exercised in full, the shares with respect to which it has not been
exercised shall be available for further options under the Plan.
With respect to incentive stock options granted after December 31, 1986
under this Plan and under all stock option plans of the Company and its parent
and subsidiary corporations, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to which such incentive
stock options are exercisable for the first time by the optionee during any
calendar year shall not exceed $100,000.
3. Eligible Employees. Options may be granted only to officers and
other employees of the Company and of such other corporations as are subsidiary
corporations of the Company at the time of grant who, in the judgment of the
Committee, are in a position to contribute significantly to the Company's
success ("eligible employees") and to members of the Board of Directors of the
Company ("directors") except that no options shall be granted to members of the
Committee. The Committee is hereby given the authority to select the particular
eligible employees and directors (other than members of the Committee) to whom
options under the Plan are to be granted, to determine the number of shares to
be optioned to each such employee and director and to grant one or more options
under the Plan to any such employee or director from time to time, irrespective
of whether one or more options have been granted to such employee or director
under previous stock option plans of the Company. In exercising its authority
under the foregoing provisions of this Section 3, each member of the Committee,
as authorized by Section 717(a) of the New York Business Corporation Law, shall
be entitled to rely on information, opinions, reports and statements prepared or
presented by (i) one or more officers of the Company or any subsidiary of the
Company whom the member believes to be reliable and competent in the matters
presented or (ii) counsel, public accountants or other persons as to matters
which the member believes to be within such person's professional or expert
competence. Nothing in the Plan or in any option granted under the Plan shall
confer any rights (a) on any officer or other employee to continue in the employ
of the Company or any of its subsidiary corporations or shall interfere in any
way with the right of the Company or any of its subsidiary corporations, as the
case may be, to terminate his employment at any time or (b) on any director to
continue as a director.
4. Terms of Options. Options granted under the Plan, irrespective of
the date of grant thereof, may be "incentive stock options" meeting the
requirements for such options prescribed by Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or may be options not so qualifying as
incentive stock options ("nonqualified options"). The determination as to
whether or not an option granted under the Plan shall be an incentive stock
option shall be made by the Committee except that all options granted to
directors who are not also employees of the Company or a subsidiary ("outside
directors") shall be nonqualified options; outside directors shall not be
eligible to receive incentive stock options.
-2-
<PAGE> 3
Each option granted under the Plan shall comply with the following
terms and conditions:
(a) The option price shall be not less than the fair market
value of the shares subject to the option at the time the option is
granted. Fair market value shall be as determined in good faith by the
Committee. In no event shall the option price be less than the par
value of the shares.
(b) The option shall not be transferable by the optionee
otherwise than by will or the laws of descent and distribution, and
shall be exercisable during his or her lifetime only by him or her
except that, at the discretion of the Committee, a nonqualified option
may provide that the option is transferable to any "family member" of
the optionee, as the term "family member" is defined in the General
Instructions to Form S-8 promulgated by the Securities and Exchange
Commission under the Securities Act of 1933.
(c) An option shall not be exercisable
(i) after the expiration of ten years from the date
it is granted (the "date of grant");
(ii) unless counsel for the Company shall be
satisfied that the issuance of shares upon exercise will be in
compliance with the Securities Act of 1933, as amended, and
applicable state laws;
(iii) unless written notice of exercise, in form
satisfactory to the Committee, is given to the Company;
(iv) unless the optionee has been, at all times
during the period beginning with the date of grant of an
option and ending on the date of exercise thereof: (I) an
officer or employee of the Company or of one of its subsidiary
corporations, or of a corporation or a parent or subsidiary of
a corporation assuming the option in a transaction to which
Section 424(a) of the Code applies or (II) an outside director
if the optionee was an outside director on the date of grant,
except that
(A) if the optionee shall cease to be such
an officer or employee or outside director by reason
of his disability or by reason of his retirement
under an approved retirement program of the Company
or a subsidiary thereof while holding an option which
has not expired and has not been fully exercised, the
option shall remain in full force and effect and may
be exercised in accordance with its terms until it
expires by its terms by the passage of time or is
canceled or terminated in accordance with its terms
(it being understood, however, that incentive stock
option federal income tax treatment will not be
accorded with respect to an option exercise made
-3-
<PAGE> 4
more than three months after the optionee ceased to
be such officer or employee by reason of such
retirement or one year after he ceased to be such
officer or employee by reason of disability within
the meaning of Section 22(e)(3) of the Code or
successor section); and
(B) if any person to whom an option has been
granted shall die holding an option which has not
been fully exercised, his estate or any person who
acquired the right to exercise the option by bequest
or inheritance or by reason of the death of such
person may, at any time within one year after the
date of such death (but in no event after the option
has expired by its terms by the passage of time or
has been canceled or terminated in accordance with
its terms) exercise the option with respect to any
shares as to which the decedent could have exercised
the option at the time of his death; and
(v) unless the person exercising the option makes
payment to the Company in full in United States dollars by
cash or check of such amount as is sufficient to satisfy the
Company's obligation, if any, to withhold federal, state and
local taxes by reason of such exercise or makes such other
arrangement satisfactory to the Committee as will enable the
Company to satisfy such obligation.
(d) Each option granted under the Plan shall be evidenced by
an instrument in such form as the Committee shall prescribe from time
to time in accordance with the Plan and all applicable laws and
regulations and shall be subject to such terms and conditions relating
to the time at which the option may first be exercised and the number
of shares with respect to which it may thereafter be exercised from
time to time (for example, in cumulative annual or other periodic
installments), and to such additional terms and conditions not
inconsistent with the Plan or applicable laws and regulations, as the
Committee may in its discretion determine. Each nonqualified option
granted under the Plan shall state that it is not to be treated as an
incentive stock option. Each option granted under the Plan shall
require that the person exercising the option shall, at the time notice
of exercise is given pursuant to Section 4(c)(iii) hereof, make full
payment in United States dollars by cash or check of the option
exercise price of the shares being acquired except that, at the
election of the Committee, an option may provide that, at the time
notice of exercise is given pursuant to section 4(c)(iii) hereof, the
person exercising the option, at his or her election, shall either make
full payment in United States dollars by cash or check of the option
exercise price of the shares being acquired (sometimes hereafter called
the "purchase price") or agree to pay such purchase price on an
installment payment basis on the following terms and conditions:
(A) The installments payable shall be the
minimum amounts required to be paid by Regulation U
of the Board of Governors of the
-4-
<PAGE> 5
Federal Reserve System as in effect as of the date of
exercise of the option (hereinafter "Regulation U")
or such greater installment payments as the Committee
may prescribe.
(B) The person exercising the option shall
not be required to pay interest to the Company on the
unpaid balance of the purchase price.
(C) The unpaid balance of the purchase price
shall be immediately payable in full upon demand made
by the Company to the optionee (or to the successor
owner of the stock if the optionee has died).
(D) The shares for which the option is
exercised shall be issued to and registered in the
name of the person exercising the option but shall be
endorsed by the person exercising the option in blank
(either on the certificate or on a separate stock
power) and held by the Company as collateral security
for the unpaid balance of the purchase price. The
person exercising the option shall not be permitted
to sell, withdraw, pledge or otherwise dispose of all
or any part of such collateral except at a time when
such sale, withdrawal, pledge or other disposition is
permitted by Regulation U. Subject to compliance with
the immediately preceding sentence, the person
exercising the option shall have the right at any
time and from time to time to withdraw part or all of
the shares from the collateral so held by the Company
upon payment of the unpaid balance of the purchase
price of the shares withdrawn. For purposes of
determining such unpaid balance, each payment made
otherwise than to obtain withdrawal of shares under
the immediately preceding sentence shall be applied
pro rata to all shares which at the time of such
payment are held by the Company as collateral for the
payment of the purchase price by the person
exercising the option. Upon default by the person
exercising the option in the making of any payment
due under the foregoing provisions of this
subparagraph (d), the Company shall have with respect
to the collateral all of the rights of a secured
party under the Uniform Commercial Code as in effect
in the State of New York.
(E) The person exercising an option shall be
entitled, from the date of exercise of such option,
to all of the rights of a shareholder, including the
right to vote the shares and to receive and retain
all dividends paid thereon.
(e) The Committee is authorized in its discretion and with the
consent of the optionee to make amendments, not in conflict with the
Plan or any applicable law or regulation, in the terms of any option
granted under the Plan.
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<PAGE> 6
(f) In addition to the methods of payment of the option
exercise price authorized by subparagraph (d) next above, the option
may provide that the person exercising the option, at his or her
election, shall have the right to make payment at the time of exercise
by delivering to the Company shares of Common Stock of the Company
having a total fair market value equal to the option exercise price, or
a combination of cash and such shares having a total fair market value
equal to the option exercise price, provided, however, that all shares
so delivered must have been beneficially owned by the person exercising
the option for at least six months prior to the option exercise date
and, upon request, the Company shall be given satisfactory proof of
such beneficial ownership. For the purposes of the preceding sentence,
the fair market value of a share of Common Stock shall be the mean
between the high and low sale prices of the Common Stock on the trading
day preceding the option exercise date as such prices are reported by
and for the New York Stock Exchange, Inc. Composite Transactions.
Certificates representing shares delivered to the Company pursuant to
this paragraph shall be duly endorsed or accompanied by appropriate
stock powers, in either case with signature guaranteed if so required
by the Company.
5. Interpretation. The words "employee", "own", "outstanding" and
"disposition", the term "subsidiary corporation" and any other words or terms
used in the Plan or in the options granted under the Plan which are defined or
used in Section 422 or 424 of the Code shall, unless the context clearly
requires otherwise, have the meanings assigned to them therein, irrespective of
whether or not such options are incentive stock options.
6. Reports and Returns. The appropriate officers of the company shall
cause to be filed, or furnished to all employees to whom options have been
granted, any reports, returns or other information regarding the options granted
hereunder or any shares issued pursuant to the exercise thereof as may be
required by the Code, the Securities Act of 1933, the Securities Exchange Act of
1934, the Employee Retirement Income Security Act of 1974, Regulation U of the
Board of Governors of the Federal Reserve System or any other applicable
statute, rule or regulation, as any such statute, rule or regulation has been
amended to the time in question.
7. Amendment. The Plan may be amended at any time and from time to time
by the Board of Directors of the Company, but no amendment increasing the
aggregate number of shares which may be issued under options granted pursuant to
the Plan or affecting this sentence shall be effective unless the same be
approved by the shareholders of the Company not later than the date 12 months
after the Board adopts the amendment. No amendment of the Plan shall alter or
impair any of the rights or obligations of any person, without his or her
consent, under any option theretofore granted under the Plan.
8. Termination. The Plan shall terminate upon the earlier of the
following dates or events to occur:
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<PAGE> 7
(a) upon the adoption of a resolution of the Board of
Directors of the Company terminating the Plan; or
(b) July 1, 2001.
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his or her consent, under any option
theretofore granted under the Plan.
9. Shareholder Approval. The Plan shall be submitted to the
shareholders of the Company for their approval before July 2, 1992. No option
granted hereunder shall be exercisable until such approval has been obtained. If
the shareholders do not approve the Plan before July 2, 1992, the Plan shall
terminate and all options theretofore granted hereunder shall thereupon be void
without further action of the Company. The shareholders shall be deemed to have
approved the Plan only if it is approved at a meeting of the shareholders duly
held before July 2, 1992, by vote taken in the manner required by the laws of
the State of New York.
As adopted by the Board of Directors of Pall Corporation on July 2, 1991 and
submitted to shareholders for approval at the annual meeting of November 22,
1991 and amended by the Executive Committee
on November 19, 1998.
-7-
<PAGE> 1
PALL CORPORATION
1993 STOCK OPTION PLAN
(as amended effective November 19, 1998)
Pall Corporation (the "Company"), in order to retain and attract
personnel for positions of responsibility with the Company and its subsidiaries
and to provide additional incentive to such personnel by offering them an
opportunity to obtain a proprietary interest in the Company, hereby authorizes
options to be granted to executive officers and eligible employees (as
hereinafter defined) of the Company and its subsidiaries and to members of the
Board of Directors of the Company to purchase shares of Common Stock of the
Company ("shares") upon the terms and conditions described below in this Pall
Corporation 1993 Stock Option Plan (the "Plan").
1. Administration of the Plan. The Plan shall be administered, and the
options under the Plan shall be granted, by the Stock Option Committee of the
Company as from time to time constituted (the "Committee"). The Committee shall
consist of three members of the Board of Directors who are appointed by the
Board and are (i) "Non-Employee Directors" as defined in Rule 16b-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934 or
any successor regulation, and (ii) "outside directors" as defined in the
regulations of the Internal Revenue Service under Section 162(m) of the Internal
Revenue Code. The members of the Committee shall serve, without compensation, at
the pleasure of the Board. Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan and the options granted under the
Plan, to establish, amend and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of the options described in Section
4 hereof, and to make all other decisions necessary or advisable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option in the
manner and to the extent the Committee deems desirable to carry it into effect.
Any decision of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may act only by a majority
of its members in office, except that the members thereof may authorize any one
or more of their number or any officer of the Company to execute and deliver
documents on behalf of the Committee. No member of the Committee shall be liable
for anything done or omitted to be done by him or by any other member of the
Committee in connection with the Plan, except for his own willful misconduct or
as expressly provided by statute.
2. Number of Shares Subject to Option. The aggregate number of shares
which may be issued under the Plan is three million (3,000,000) shares of Common
Stock of the Company. Such shares may be either authorized but unissued or
reacquired shares. If after October 4, 1993 the Company effects one or more
stock splits, stock dividends, combinations, exchanges of shares or similar
capital adjustments, the number and kind of shares with respect to which options
may be granted under the Plan, the number of shares which may be granted to any
individual as limited by Section 3 hereof, the number and kind of shares subject
to each outstanding option and the option price per share under each such option
shall be proportionately and appropriately adjusted by the Committee. If any
option granted under the Plan, or any portion thereof, shall expire or terminate
for any reason without having been exercised in full, the shares with respect to
which it has not been exercised shall be available for further options under the
Plan.
<PAGE> 2
With respect to incentive stock options granted after December 31, 1986
under this Plan and under all stock option plans of the Company and its parent
and subsidiary corporations, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to which such incentive
stock options are exercisable for the first time by the optionee during any
calendar year shall not exceed $100,000.
3. Eligible Optionees. Options may be granted only (a) to executive
officers of the Company as that term is defined in Rule 405 of the Securities
and Exchange Commission under the Securities Act of 1933 or successor regulation
("executive officers"), (b) to other employees (including officers) of the
Company and of such other corporations as are subsidiary corporations of the
Company at the time of grant who, in the judgment of the Committee, are in a
position to contribute significantly to the Company's success ("eligible
employees") and (c) to members of the Board of Directors of the Company
("directors") except that no options shall be granted to members of the
Committee. The Committee is hereby given the authority to select the particular
executive officers, eligible employees and directors (other than members of the
Committee) to whom options under the Plan are to be granted, to determine the
number of shares to be optioned to each such executive officer, eligible
employee and director (except that options may not be granted under this Plan to
any individual during any period of 60 consecutive months on more than an
aggregate of 500,000 shares, subject to adjustment in accordance with the third
sentence of Section 2 hereof) and to grant one or more options under the Plan to
any such executive officer, eligible employee or director from time to time,
irrespective of whether one or more options have been granted to such employee
or director under previous stock option plans of the Company. In exercising its
authority under the foregoing provisions of this Section 3, each member of the
Committee, as authorized by Section 717(a) of the New York Business Corporation
Law, shall be entitled to rely on information, opinions, reports and statements
prepared or presented by (i) one or more officers of the Company or any
subsidiary of the Company whom the member believes to be reliable and competent
in the matters presented or (ii) counsel, public accountants or other persons as
to matters which the member believes to be within such person's professional or
expert competence. Nothing in the Plan or in any option granted under the Plan
shall confer any rights (a) on any officer or other employee to continue in the
employ of the Company or any of its subsidiary corporations or shall interfere
in any way with the right of the Company or any of its subsidiary corporations,
as the case may be, to terminate his employment at any time or (b) on any
director to continue as a director.
4. Terms of Options. Options granted under the Plan, irrespective of
the date of grant thereof, may be "incentive stock options" meeting the
requirements for such options prescribed by Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or may be options not so qualifying as
incentive stock options ("nonqualified options"). The determination as to
whether or not an option granted under the Plan shall be an incentive stock
option shall be made by the Committee except that all options granted to
directors who are not also employees of the Company or a subsidiary ("outside
directors") shall be nonqualified options; outside directors shall not be
eligible to receive incentive stock options.
Each option granted under the Plan shall comply with the following
terms and conditions:
-2-
<PAGE> 3
(a) The option price shall be the fair market value of the
shares subject to the option at the time the option is granted. Fair
market value shall be as determined in good faith by the Committee. In
no event shall the option price be less than the par value of the
shares.
(b) The option shall not be transferable by the optionee
otherwise than by will or the laws of descent and distribution, and
shall be exercisable during his or her lifetime only by him or her
except that, at the discretion of the Committee, a nonqualified option
may provide that the option is transferable to any "family member" of
the optionee, as the term "family member" is defined in the General
Instructions to Form S-8 promulgated by the Securities and Exchange
Commission under the Securities Act of 1933.
(c) An option shall not be exercisable
(i) after the expiration of ten years from the date
it is granted (the "date of grant"); and
(ii) unless counsel for the Company shall be
satisfied that the issuance of shares upon exercise will be in
compliance with the Securities Act of 1933, as amended, and
applicable state laws; and
(iii) unless written notice of exercise, in form
satisfactory to the committee, is given to the Company; and
(iv) unless the optionee has been, at all times
during the period beginning with the date of grant of an
option and ending on the date of exercise thereof: (I) an
employee of the Company or of one of its subsidiary
corporations, or of a corporation or a parent or subsidiary of
a corporation assuming the option in a transaction to which
Section 424(a) of the Code applies or (II) an outside director
if the optionee was an outside director on the date of grant,
except that
(A) if the optionee shall cease to be an
employee or outside director by reason of his
disability or by reason of his retirement under an
approved retirement program of the Company or a
subsidiary thereof while holding an option which has
not expired and has not been fully exercised, the
option shall remain in full force and effect and may
be exercised in accordance with its terms until it
expires by its terms by the passage of time or is
canceled or terminated in accordance with its terms
(it being understood, however, that incentive stock
option federal income tax treatment will not be
accorded with respect to an option exercise made more
than three months after the optionee ceased to be an
employee by reason of such retirement or one year
after he ceased to be an employee by reason of
disability within the meaning of Section 22(e)(3) of
the Code or successor section); and
(B) if any person to whom an option has been
granted shall die holding an option which has not
been fully exercised, his estate or any person who
acquired the right to exercise the option by bequest
or
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<PAGE> 4
inheritance or by reason of the death of such person
may, at any time within one year after the date of
such death (but in no event after the option has
expired by its terms by the passage of time or has
been canceled or terminated in accordance with its
terms) exercise the option with respect to any shares
as to which the decedent could have exercised the
option at the time of his death; and
(v) unless the person exercising the option makes
payment to the Company in full in United States dollars by
cash or check of such amount as is sufficient to satisfy the
Company's obligation, if any, to withhold federal, state and
local taxes by reason of such exercise or makes such other
arrangement satisfactory to the Committee as will enable the
Company to satisfy such obligation.
(d) Each option granted under the Plan shall be evidenced by
an instrument in such form as the Committee shall prescribe from time
to time in accordance with the Plan and all applicable laws and
regulations and shall be subject to such terms and conditions relating
to the time at which the option may first be exercised and the number
of shares with respect to which it may thereafter be exercised from
time to time (for example, in cumulative annual or other periodic
installments), and to such additional terms and conditions not
inconsistent with the Plan or applicable laws and regulations, as the
Committee may in its discretion determine. Each nonqualified option
granted under the Plan shall state that it is not to be treated as an
incentive stock option. Each option granted under the Plan shall
require that the person exercising the option shall, at the time notice
of exercise is given pursuant to Section 4(c)(iii) hereof, make full
payment in United States dollars by cash or check of the option
exercise price of the shares being acquired except that, at the
election of the Committee, an option may provide that, at the time
notice of exercise is given pursuant to Section 4(c)(iii) hereof, the
person exercising the option, at his or her election, shall either make
full payment in United States dollars by cash or check of the option
exercise price of the shares being acquired (sometimes hereafter called
the "purchase price") or agree to pay such purchase price on an
installment payment basis on the following terms and conditions:
(A) The installments payable shall be the
minimum amounts required to be paid by Regulation U
of the Board of Governors of the Federal Reserve
System as in effect as of the date of exercise of the
option (hereinafter "Regulation U") or such greater
installment payments as the Committee may prescribe.
(B) The person exercising the option shall
not be required to pay interest to the Company on the
unpaid balance of the purchase price.
(C) The unpaid balance of the purchase price
shall be immediately payable in full upon demand made
by the Company to the optionee (or to the successor
owner of the stock if the optionee has died).
(D) The shares for which the option is
exercised shall be issued to and registered in the
name of the person exercising the option but shall be
endorsed by the person exercising the option in blank
(either on the
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<PAGE> 5
certificate or on a separate stock power) and held by
the Company as collateral security for the unpaid
balance of the purchase price. The person exercising
the option shall not be permitted to sell, withdraw,
pledge or otherwise dispose of all or any part of
such collateral except at a time when such sale,
withdrawal, pledge or other disposition is permitted
by Regulation U. Subject to compliance with the
immediately preceding sentence, the person exercising
the option shall have the right at any time and from
time to time to withdraw part or all of the shares
from the collateral so held by the Company upon
payment of the unpaid balance of the purchase price
of the shares withdrawn. For purposes of determining
such unpaid balance, each payment made otherwise than
to obtain withdrawal of shares under the immediately
preceding sentence shall be applied pro rata to all
shares which at the time of such payment are held by
the Company as collateral for the payment of the
purchase price by the person exercising the option.
Upon default by the person exercising the option in
the making of any payment due under the foregoing
provisions of this subparagraph (d), the Company
shall have with respect to the collateral all of the
rights of a secured party under the Uniform
Commercial Code as in effect in the State of New
York.
(E) The person exercising an option shall be
entitled, from the date of exercise of such option,
to all of the rights of a shareholder, including the
right to vote the shares and to receive and retain
all dividends paid thereon.
(e) The Committee is authorized in its discretion and with the
consent of the optionee to make amendments, not in conflict with the
Plan or any applicable law or regulation, in the terms of any option
granted under the Plan.
(f) In addition to the methods of payment of the option
exercise price authorized by subparagraph (d) next above, the option
may provide that the person exercising the option, at his or her
election, shall have the right to make payment at the time of exercise
by delivering to the Company shares of Common Stock of the Company
having a total fair market value equal to the option exercise price, or
a combination of cash and such shares having a total fair market value
equal to the option exercise price, provided, however, that all shares
so delivered must have been beneficially owned by the person exercising
the option for at least six months prior to the option exercise date
and, upon request, the Company shall be given satisfactory proof of
such beneficial ownership. For the purposes of the preceding sentence,
the fair market value of a share of Common Stock shall be the mean
between the high and low sale prices of the Common Stock on the trading
day preceding the option exercise date as such prices are reported by
and for the New York Stock Exchange, Inc. Composite Transactions.
Certificates representing shares delivered to the Company pursuant to
this paragraph shall be duly endorsed or accompanied by appropriate
stock powers, in either case with signature guaranteed if so required
by the Company.
5. Interpretation. The words "employee", "own", "outstanding" and
"disposition", the term "subsidiary corporation" and any other words or terms
used in the Plan or in the options
-5-
<PAGE> 6
granted under the Plan which are defined or used in Section 422 or 424 of the
Code shall, unless the context clearly requires otherwise, have the meanings
assigned to them therein, irrespective of whether or not such options are
incentive stock options.
6. Reports and Returns. The appropriate officers of the Company shall
cause to be filed, or furnished to all employees to whom options have been
granted, any reports, returns or other information regarding the options granted
hereunder or any shares issued pursuant to the exercise thereof as may be
required by the Code, the Securities Act of 1933, the Securities Exchange Act of
1934, the Employee Retirement Income Security Act of 1974, Regulation U of the
Board of Governors of the Federal Reserve System or any other applicable
statute, rule or regulation, as any such statute, rule or regulation has been
amended to the time in question.
7. Amendment. The Plan may be amended at any time and from time to time
by the Board of Directors of the Company, but no amendment increasing the
aggregate number of shares which may be issued under options granted pursuant to
the Plan or affecting this sentence shall be effective unless the same be
approved by the shareholders of the Company not later than the date 12 months
after the Board adopts the amendment. No amendment of the Plan shall alter or
impair any of the rights or obligations of any person, without his or her
consent, under any option theretofore granted under the Plan.
8. Termination. The Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board of
Directors of the Company terminating the Plan; or
(b) October 3, 2003.
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his or her consent, under any option
theretofore granted under the Plan.
9. Shareholder Approval. The Plan shall be submitted to the
shareholders of the Company for their approval before October 4, 1994. No option
granted hereunder shall be exercisable until such approval has been obtained. If
the shareholders do not approve the Plan before October 4, 1994, the Plan shall
terminate and all options theretofore granted hereunder shall thereupon be void
without further action of the Company. The shareholders shall be deemed to have
approved the Plan only if it is approved at a meeting of the shareholders duly
held before October 4, 1994, by vote taken in the manner required by the laws of
the State of New York.
As adopted by the Board of Directors of Pall Corporation on October 4, 1993 and
approved by shareholders at the annual meeting of November 18, 1993 and amended
by the Executive Committee on November 19, 1998.
-6-
<PAGE> 1
PALL CORPORATION
1995 EMPLOYEE STOCK OPTION PLAN
(as amended effective November 19, 1998)
Pall Corporation (the "Company"), in order to retain and attract
personnel for positions of responsibility with the Company and its subsidiaries
and to provide additional incentive to such personnel by offering them an
opportunity to obtain a proprietary interest in the Company, hereby authorizes
options to be granted to "executive officers" and "eligible employees" (as those
terms are hereinafter defined) of the Company and its subsidiaries to purchase
shares of Common Stock of the Company ("shares") upon the terms and conditions
described below in this Pall Corporation 1995 Employee Stock Option Plan (the
"Plan").
1. Administration of the Plan. The Plan shall be administered, and the
options under the Plan shall be granted, by the Compensation Committee of the
Company as from time to time constituted (the "Committee"). The Committee shall
consist of three members of the Board of Directors who are appointed by the
Board and are (i) "Non-Employee Directors" as defined in Rule 16b-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934 or
any successor regulation, and (ii) "outside directors" as defined in the
regulations of the Internal Revenue Service under Section 162(m) of the Internal
Revenue Code. The members of the Committee shall serve, without compensation, at
the pleasure of the Board. Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan and the options granted under the
Plan, to establish, amend and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of the options described in Section
4 hereof, and to make all other decisions necessary or advisable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any option in the
manner and to the extent the Committee deems desirable to carry it into effect.
Any decision of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may act only by a majority
of its members in office, except that the members thereof may authorize any one
or more of their number or any officer of the Company to execute and deliver
documents on behalf of the Committee. No member of the Committee shall be liable
for anything done or omitted to be done by him or by any other member of the
Committee in connection with the Plan, except for his own willful misconduct or
as expressly provided by statute.
2. Number of Shares Subject to Option. The aggregate number of shares
which may be issued under the Plan is four million (4,000,000) shares of Common
Stock of the Company. Such shares may be either authorized but unissued or
reacquired shares. If after July 14, 1995 the Company effects one or more stock
splits, stock dividends, combinations, exchanges of shares or similar capital
adjustments, the number and kind of
<PAGE> 2
shares with respect to which options may be granted under the Plan, the number
of shares which may be granted to any individual as limited by Section 3 hereof,
the number and kind of shares subject to each outstanding option and the option
price per share under each such option shall be proportionately and
appropriately adjusted by the Committee. If any option granted under the Plan,
or any portion thereof, shall expire or terminate for any reason without having
been exercised in full, the shares with respect to which it has not been
exercised shall be available for further options under the Plan.
With respect to incentive stock options granted after December 31, 1986
under this Plan and under all stock option plans of the Company and its parent
and subsidiary corporations, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to which such incentive
stock options are exercisable for the first time by the optionee during any
calendar year shall not exceed $100,000.
3. Eligible Optionees. Options may be granted only (a) to executive
officers of the Company as that term is defined in Rule 405 of the Securities
and Exchange Commission under the Securities Act of 1933 or successor regulation
("executive officers"), and (b) to other employees (including officers) of the
Company and of such other corporations as are subsidiary corporations of the
Company at the time of grant who, in the judgment of the Committee, are in a
position to contribute significantly to the Company's success ("eligible
employees"). The Committee is hereby given the authority to select the
particular executive officers and eligible employees to whom options under the
Plan are to be granted, to determine the number of shares to be optioned to each
such executive officer and eligible employee (except that options may not be
granted under this Plan to any individual during any period of 24 consecutive
months on more than an aggregate of 200,000 shares, subject to adjustment in
accordance with the third sentence of Section 2 hereof) and to grant one or more
options under the Plan to any such executive officer or eligible employee from
time to time, irrespective of whether one or more options have been granted to
such individual under previous stock option plans of the Company. In exercising
its authority under the foregoing provisions of this Section 3, each member of
the Committee, as authorized by Section 717(a) of the New York Business
Corporation Law, shall be entitled to rely on information, opinions, reports and
statements prepared or presented by (i) one or more officers of the Company or
any subsidiary of the Company whom the member believes to be reliable and
competent in the matters presented or (ii) counsel, public accountants or other
persons as to matters which the member believes to be within such person's
professional or expert competence. Nothing in the Plan or in any option granted
under the Plan shall confer any rights on any officer or other employee to
continue in the employ of the Company or any of its subsidiary corporations or
shall interfere in any way with the right of the Company or any of its
subsidiary corporations, as the case may be, to terminate his or her employment
at any time.
4. Terms of Options. Options granted under the Plan, irrespective of
the date of grant thereof, may be "incentive stock options" meeting the
requirements for such
-2-
<PAGE> 3
options prescribed by Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), or may be options not so qualifying as incentive stock
options ("nonqualified options"). The determination as to whether or not an
option granted under the Plan is intended to be an incentive stock option shall
be made by the Committee.
Each option granted under the Plan shall comply with the following
terms and conditions:
(a) The option price shall be the fair market value of the
shares subject to the option at the time the option is granted. Fair
market value shall be as determined in good faith by the Committee. In
no event shall the option price be less than the par value of the
shares.
(b) The option shall not be transferable by the optionee
otherwise than by will or the laws of descent and distribution, and
shall be exercisable during his or her lifetime only by him or her
except that, at the discretion of the Committee, a non-qualified
option may provide that the option is transferable to any "family
member" of the optionee, as the term "family member" is defined in the
General Instructions to Form S-8 promulgated by the Securities and
Exchange Commission under the Securities Act of 1933.
(c) An option shall not be exercisable
(i) after the expiration of ten years from the date
it is granted (the "date of grant"); and
(ii) unless counsel for the Company shall be
satisfied that the issuance of shares upon exercise will be in
compliance with the Securities Act of 1933, as amended, and
applicable state laws; and
(iii) unless written notice of exercise, in form
satisfactory to the Committee, is given to the Company; and
(iv) unless the optionee has been, at all times
during the period beginning with the date of grant of an
option and ending on the date of exercise thereof, an employee
of the Company or of one of its subsidiary corporations, or of
a corporation or a parent or subsidiary of a corporation
assuming the option in a transaction to which Section 424(a)
of the Code applies, except that
(A) if the optionee shall cease to be an
employee by reason of his disability or by reason of
his retirement under an approved retirement program
of the Company or a subsidiary thereof while holding
-3-
<PAGE> 4
an option which has not expired and has not been
fully exercised, the option shall remain in full
force and effect and may be exercised in accordance
with its terms until it expires by its terms by the
passage of time or is canceled or terminated in
accordance with its terms (it being understood,
however, that incentive stock option federal income
tax treatment will not be accorded with respect to an
option exercise made more than three months after the
optionee ceased to be an employee by reason of such
retirement or one year after he ceased to be an
employee by reason of disability within the meaning
of Section 22(e)(3) of the Code or successor
section); and
(B) if any person to whom an option has been
granted shall die holding an option which has not
been fully exercised, his estate or any person who
acquired the right to exercise the option by bequest
or inheritance or by reason of the death of such
person may, at any time within one year after the
date of such death (but in no event after the option
has expired by its terms by the passage of time or
has been canceled or terminated in accordance with
its terms) exercise the option with respect to any
shares as to which the decedent could have exercised
the option at the time of his death; and
(v) unless the person exercising the option makes
payment to the Company in full in United States dollars by
cash or check of such amount as is sufficient to satisfy the
Company's obligation, if any, to withhold federal, state and
local taxes by reason of such exercise or makes such other
arrangement satisfactory to the Committee as will enable the
Company to satisfy such obligation.
(d) Each option granted under the Plan shall be evidenced by
an instrument in such form as the Committee shall prescribe from time
to time in accordance with the Plan and all applicable laws and
regulations and shall be subject to such terms and conditions relating
to the time at which the option may first be exercised and the number
of shares with respect to which it may thereafter be exercised from
time to time (for example, in cumulative annual or other periodic
installments), and to such additional terms and conditions not
inconsistent with the Plan or applicable laws and regulations, as the
Committee may in its discretion determine. Each nonqualified option
granted under the Plan shall state that it is not to be treated as an
incentive stock option. Each option granted under the Plan shall
require that the person exercising the option shall, at the time notice
of exercise is given pursuant to Section 4(c)(iii) hereof, make full
payment in United States dollars by cash or check of the option
exercise price of the shares being acquired except that, at the
election of the Committee, an option may provide that, at the time
notice of exercise is given pursuant to Section 4(c)(iii) hereof, the
person exercising the option, at his or her
-4-
<PAGE> 5
election, shall either make full payment in United States dollars by
cash or check of the option exercise price of the shares being acquired
(sometimes hereafter called the "purchase price") or agree to pay such
purchase price on an installment payment basis on the following terms
and conditions:
(A) The installments payable shall be the
minimum amounts required to be paid by Regulation U
of the Board of Governors of the Federal Reserve
System as in effect as of the date of exercise of the
option (hereinafter "Regulation U") or such greater
installment payments as the Committee may prescribe.
(B) The person exercising the option shall
not be required to pay interest to the Company on the
unpaid balance of the purchase price.
(C) The unpaid balance of the purchase price
shall be immediately payable in full upon demand made
by the Company to the optionee (or to the successor
owner of the stock if the optionee has died).
(D) The shares for which the option is
exercised shall be issued to and registered in the
name of the person exercising the option but shall be
endorsed by the person exercising the option in blank
(either on the certificate or on a separate stock
power) and held by the Company as collateral security
for the unpaid balance of the purchase price. The
person exercising the option shall not be permitted
to sell, withdraw, pledge or otherwise dispose of all
or any part of such collateral except at a time when
such sale, withdrawal, pledge or other disposition is
permitted by Regulation U. Subject to compliance with
the immediately preceding sentence, the person
exercising the option shall have the right at any
time and from time to time to withdraw part or all of
the shares from the collateral so held by the Company
upon payment of the unpaid balance of the purchase
price of the
-5-
<PAGE> 6
shares withdrawn. For purposes of determining such
unpaid balance, each payment made otherwise than to
obtain withdrawal of shares under the immediately
preceding sentence shall be applied pro rata to all
shares which at the time of such payment are held by
the Company as collateral for the payment of the
purchase price by the person exercising the option.
Upon default by the person exercising the option in
the making of any payment due under the foregoing
provisions of this subparagraph (d), the Company
shall have with respect to the collateral all of the
rights of a secured party under the Uniform
Commercial Code as in effect in the State of New
York.
(E) The person exercising an option shall be
entitled, from the date of exercise of such option,
to all of the rights of a shareholder, including the
right to vote the shares and to receive and retain
all dividends paid thereon.
(e) The Committee is authorized in its discretion and with the
consent of the optionee to make amendments, not in conflict with the
Plan or any applicable law or regulation, in the terms of any option
granted under the Plan.
(f) In addition to the methods of payment of the option
exercise price authorized by subparagraph (d) next above, the option
may provide that the person exercising the option, at his or her
election, shall have the right to make payment at the time of exercise
by delivering to the Company shares of Common Stock of the Company
having a total fair market value equal to the option exercise price, or
a combination of cash and such shares having a total fair market value
equal to the option exercise price, provided, however, that all shares
so delivered must have been beneficially owned by the person exercising
the option for at least six months prior to the option exercise date
and, upon request, the Company shall be given satisfactory proof of
such beneficial ownership. For the purposes of the preceding sentence,
the fair market value of a share of Common Stock shall be the mean
between the high and low sale prices of the Common Stock on the trading
day preceding the option exercise date as such prices are reported by
and for the New York Stock Exchange, Inc. Composite Transactions.
Certificates representing shares delivered to the Company pursuant to
this paragraph shall be duly endorsed or accompanied by appropriate
stock powers, in either case with signature guaranteed if so required
by the Company.
5. Change in Control.
(a) In the event of a "Change in Control" of the Company (as defined in
paragraph (b) below), options outstanding under the Plan on the day preceding
the date on which the Change in Control occurs (x) shall become exercisable in
full on the date of the
-6-
<PAGE> 7
Change in Control (i.e., to the extent that any such option or portion thereof
is not yet exercisable, the right to exercise such option in full shall be
accelerated) and (y) shall remain fully exercisable, irrespective of whether the
optionee ceases to be an employee of the Company or a subsidiary, until the date
on which the option would otherwise expire by its terms by the passage of time.
(b) A "Change in Control" for purposes of the Plan shall mean the
occurrence of any of the following:
(i) the "Distribution Date" as defined in Section 3 of the
Rights Agreement dated as of November 17, 1989 between the Company and
United States Trust Company of New York, as Rights Agent (the "Rights
Agreement"); or
(ii) any event described in Section 11(a)(ii)(B) of the Rights
Agreement; or
(iii) any event described in Section 13 of the Rights
Agreement, or
(iv) the date on which the number of duly elected and
qualified directors of the Company who were not either elected by the
Company's Board of Directors or nominated by the Board of Directors or
its Nominating Committee for election by the shareholders shall equal
or exceed one-third of the total number of directors of the Company as
fixed by its by-laws;
provided, however, that no Change in Control shall be deemed to have occurred,
and no rights arising upon a Change in Control pursuant to paragraph (a) of this
Section 5 shall exist, to the extent that the Board of Directors of the Company
so determines by resolution adopted prior to the Change in Control. Any such
resolution may be rescinded or countermanded by the Board at any time. If the
Board so determines by such resolution, and such resolution has not been
rescinded or countermanded as permitted by the preceding sentence, the Board
shall have the right to authorize (I) the cancellation and termination of all
options then outstanding as of a date to be fixed by the Board, provided,
however, that not less than 30 days written notice of the date so fixed shall be
given to each optionee, and each optionee shall have the right during such
period (irrespective of whether the optionee ceases to be an employee of the
Company or a subsidiary during such period) to exercise his or her option as to
all or any part of the shares covered thereby, including any shares as to which
the option has not yet become exercisable, or (II) the substitution for each
outstanding option of a new option meeting the requirements of Section 424(a) of
the Internal Revenue Code.
6. Interpretation. The words "employee", "own", "outstanding" and
"disposition", the term "subsidiary corporation" and any other words or terms
used in the Plan or in the options granted under the Plan which are defined or
used in Section 422 or
-7-
<PAGE> 8
424 of the Code shall, unless the context clearly requires otherwise, have the
meanings assigned to them therein, irrespective of whether or not such options
are incentive stock options.
7. Reports and Returns. The appropriate officers of the Company shall
cause to be filed, or furnished to all employees to whom options have been
granted, any reports, returns or other information regarding the options granted
hereunder or any shares issued pursuant to the exercise thereof as may be
required by the Code, the Securities Act of 1933, the Securities Exchange Act of
1934, the Employee Retirement Income Security Act of 1974, Regulation U of the
Board of Governors of the Federal Reserve System or any other applicable
statute, rule or regulation, as any such statute, rule or regulation has been
amended to the time in question.
8. Amendment. The Plan may be amended at any time and from time to time
by the Board of Directors of the Company, but no amendment increasing the
aggregate number of shares which may be issued under options granted pursuant to
the Plan or affecting this sentence shall be effective unless the same be
approved by the shareholders of the Company not later than the date 12 months
after the Board adopts the amendment. No amendment of the Plan shall alter or
impair any of the rights or obligations of any person, without his or her
consent, under any option theretofore granted under the Plan.
9. Termination. The Plan shall terminate upon the earlier of the
following dates or events to occur:
(a) upon the adoption of a resolution of the Board of
Directors of the Company terminating the Plan; or
(b) July 13, 2005.
No termination of the Plan shall alter or impair any of the rights or
obligations of any person, without his or her consent, under any option
theretofore granted under the Plan.
10. Shareholder Approval. The Plan shall be submitted to the
shareholders of the Company for their approval before July 14, 1996. No option
granted hereunder shall be exercisable until such approval has been obtained. If
the shareholders do not approve the Plan before July 14, 1996, the Plan shall
terminate and any options theretofore granted hereunder shall thereupon be void
without further action of the Company. The shareholders shall be deemed to have
approved the Plan only if it is approved at a meeting of the shareholders duly
held before July 14, 1996, by vote taken in the manner required by the laws of
the State of New York.
[Note: This Plan was adopted by the
-8-
<PAGE> 9
Board of Directors on July 14, 1995
and approved by shareholders at the
annual meeting on November 21, 1995
and amended by the Executive Committee
on November 19, 1998]
-9-
<PAGE> 1
PALL CORPORATION
Stock Option Plan for Non-Employee Directors
(as amended effective November 19, 1998)
1. PURPOSE
The purpose of the Pall Corporation Stock Option Plan for Non-Employee
Directors (the "Plan") is to secure for Pall Corporation (the "Company") and its
stockholders the benefits of the incentive inherent in increased common stock
ownership by the members of the Board of Directors (the "Board") of the Company
who are not employees of the Company or any of its subsidiaries.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the
Board (the "Committee"). The Committee shall have all the powers vested in it by
the terms of the Plan, such powers to include authority (within the limitations
described herein) to prescribe the form of the document embodying and evidencing
stock options granted under the Plan ("Options"). The Committee shall, subject
to the provisions of the Plan, have the power to construe the Plan, to determine
all questions arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable. Any
decision of the Committee in the administration of the Plan, as described
herein, shall be final and conclusive. The Committee may act only by a majority
of its members in office, except that the members thereof may authorize any one
or more of their number or the Secretary or any other officer of the Company to
execute and deliver documents on behalf of the Committee. No member of the
Committee shall be liable for anything done or omitted to be done by such member
or by any other member of the Committee in connection with the Plan, except for
his own willful misconduct or as expressly provided by statute.
3. AMOUNT OF STOCK
The stock which may be issued and sold under the Plan shall be the
Common Stock of the Company ("Common Stock") of a total number not exceeding
300,000 shares, subject to adjustment as provided in Section 6 below. The stock
to be issued may be either authorized and unissued shares or reacquired shares.
In the event that Options granted under the Plan shall terminate or expire
without having been exercised in full, new Options may be granted covering the
shares not purchased under such lapsed Options.
4. ELIGIBILITY AND GRANT OF OPTIONS.
Each member of the Board who is not an employee of the Company or any
of its subsidiaries at the time when an Option is to be granted under the
ensuing provisions of this
<PAGE> 2
Section 4 (a "Non-Employee Director") shall automatically, by virtue of the Plan
and without any action by the Committee or the Board, be granted an Option as
follows:
(a) On the date of and immediately following the 1995 annual meeting of
shareholders and each annual meeting of shareholders thereafter until the
termination of the Plan, each Non-Employee Director who was elected a director
of the Company by shareholders at such annual meeting for the first time (i.e.,
disregarding any previous election of such person by the Board) shall be granted
an Option on 20,000 shares if such person is elected a director for a three-year
term or, if elected for a term of less than three years, shall be granted an
Option on 10,000 shares plus, if elected for a one year term, an additional
3,333 shares or, if elected for a two-year term, an additional 6,667 shares.
(b) On the date of and immediately following the 1995 annual meeting
and at each annual meeting thereafter, each Non-Employee Director who is
re-elected a director for a three-year term shall be granted an Option on 10,000
shares, for a two-year term 6,667 shares and for one-year term 3,333 shares
except that the grant to Mr. Slifka in 1995 shall be as set forth in paragraph
(c) next below.
(c) On the date of and immediately following the 1995 annual meeting,
Messrs. Abraham Appel and Alan Slifka, having heretofore been ineligible for
option grants by reason of serving on the Stock Option Committee of the Company,
shall be granted Options as follows: (i) 10,000 shares to Mr. Appel (whose
present term will expire at the annual meeting in 1996) provided that Mr. Appel
is a director of the Company immediately following said 1995 annual meeting and
(ii) 20,000 shares to Mr. Slifka (whose present term will expire at the 1995
annual meeting) provided that Mr. Slifka is re-elected at said 1995 annual
meeting.
5. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under the Plan shall be evidenced by an instrument
in such form as the Committee shall prescribe from time to time in accordance
with the Plan and all applicable laws and regulations and shall comply with the
following terms and conditions:
(a) The Option exercise price shall be the Fair Market Value (as
defined in Section 7(a) hereof) of the shares of Common Stock subject to such
Option on the date the Option is granted (the "date of grant") but in no event
less than the par value of the shares.
(b) No part of an Option may be exercised (i) before the first
anniversary of the date of grant or (ii) after the fifth anniversary of the date
of grant. The minimum number of shares with respect to which an Option may be
exercised in part at one time shall be 100. Subject to the foregoing and to the
ensuing provisions of this Section 5, an Option may be exercised as follows: (i)
at any time or times from the first anniversary of the date of grant to the day
preceding the second anniversary, both such dates inclusive, for any number of
shares up to one-third (rounded to the nearest whole share) of the number of
shares covered thereby; (ii) at any time or times from the second anniversary of
the date of grant to the day preceding the third anniversary, both such
2
<PAGE> 3
dates inclusive, as to any number of shares which, when added to the shares as
to which such Option has theretofore been exercised, will not exceed two-thirds
(rounded to the nearest whole share) of the shares covered thereby; and (iii) at
any time or times from the third anniversary of date of grant to the fifth
anniversary, both such dates inclusive, as to any number of shares which, when
added to the shares as to which the Option has theretofore been exercised, will
not exceed the total number of shares covered thereby.
(c) The option shall not be transferable by the optionee otherwise than
by will or the laws of descent and distribution, and shall be exercisable during
the optionee's lifetime only by the optionee, or if a legal guardian or other
legal representative is appointed for an optionee, by such guardian or
representative, except that, at the discretion of the Committee, an option may
provide that it is transferable to any "family member" of the optionee, as the
term "family member" is defined in the General Instructions to Form S-8
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933.
(d) No Option or any part of an Option shall be exercisable:
(i) before the first anniversary or after the fifth
anniversary of the date of grant; and
(ii) unless counsel for the Company shall be satisfied that
the issuance of shares upon exercise will be in compliance with the
Securities Act of 1933, as amended, and applicable state laws; and
(iii) unless written notice of exercise, in form satisfactory
to the Committee, is given to the Company; and
(iv) unless the person exercising the Option makes payment to
the Company in full in United States dollars by cash or check of such
amount as is sufficient to satisfy the Company's obligation, if any, to
withhold federal, state and local taxes by reason of such exercise or
makes such other arrangement satisfactory to the Committee as will
enable the Company to satisfy any such obligation.
(e) Each option granted under the Plan shall require that the person
exercising the option shall, at the time notice of exercise is given pursuant to
Section 5(d)(iii) hereof, either (I) make full payment in United States dollars
by cash or check of the option exercise price of the shares being acquired
(sometimes hereinafter called the "purchase price") or (II) agree to pay the
purchase price on an installment payment basis on the following terms and
conditions:
(A) The installments payable shall be the minimum
amounts required to be paid by Regulation U of the Board of
Governors of the Federal Reserve System as in effect as of the
date of exercise of the option (hereinafter "Regulation U") or
such greater installment payments as the Committee may
prescribe.
3
<PAGE> 4
(B) The person exercising the Option shall not be
required to pay interest to the Company on the unpaid balance
of the purchase price.
(C) The unpaid balance of the purchase price shall be
immediately payable in full upon demand made by the Company to
the optionee (or to the successor owner of the stock if the
optionee has died).
(D) The shares for which the Option is exercised
shall be issued to and registered in the name of the person
exercising the Option but shall be endorsed by the person
exercising the Option in blank (either on the certificate or
on a separate stock power) and held by the Company as
collateral security for the unpaid balance of the purchase
price. The person exercising the Option shall not be permitted
to sell, withdraw, pledge or otherwise dispose of all or any
part of such collateral except at a time when such sale,
withdrawal, pledge or other disposition is permitted by
Regulation U. Subject to compliance with the immediately
preceding sentence, the person exercising the option shall
have the right at any time and from time to time to withdraw
part or all of the shares from the collateral so held by the
Company upon payment of the unpaid balance of the purchase
price of the shares withdrawn. For purposes of determining
such unpaid balance, each payment made otherwise than to
obtain withdrawal of shares under the immediately preceding
sentence shall be applied pro rata to all shares which at the
time of such payment are held by the Company as collateral for
the payment of the purchase price by the person exercising the
option. Upon default by the person exercising the Option in
the making of any payment due under the foregoing provisions
of this subparagraph (e), the Company shall have with respect
to the collateral all of the rights of a secured party under
the Uniform Commercial Code as in effect in the State of New
York.
(E) The person exercising an Option shall be
entitled, from the date of exercise of such Option, to all of
the rights of a shareholder, including the right to vote the
shares and to receive and retain all dividends paid thereon.
(f) Except as limited by Section 7(e) hereof, the Committee is
authorized in its discretion and with the consent of the optionee to make
amendments, not in conflict with the Plan or any applicable law or regulation,
in the terms of any Option granted under the Plan.
(g) In addition to the methods of payment of the option exercise price
authorized by subparagraph (d) next above, the instrument evidencing the Option
shall provide that the person exercising the Option, at his or her election,
shall have the right to make payment at the time of exercise by delivering to
the Company shares of Common Stock of the Company having a total Fair Market
Value (as hereinafter defined) equal to the option exercise price, or a
combination of cash and such shares having a total Fair Market Value equal to
the option exercise price,
4
<PAGE> 5
provided, however, that all shares so delivered must have been beneficially
owned by the person exercising the Option for at least six months prior to the
option exercise date and, upon request, the Company shall be given satisfactory
proof of such beneficial ownership. Certificates representing shares delivered
to the Company pursuant to this paragraph shall be duly endorsed or accompanied
by appropriate stock powers, in either case with signature guaranteed if so
required by the Company.
6. ADJUSTMENT IN THE EVENT OF CHANGE IN STOCK
If the Company effects any stock split, stock dividend, combination,
exchange of shares or similar capital adjustment, the aggregate number and class
of shares available under the Plan, the number, class and the price of shares of
Common Stock subject to outstanding Options and the number of shares
constituting an Option grant under Section 4 hereof, shall be appropriately
adjusted so as to reflect such change, all as determined by the Committee.
7. MISCELLANEOUS PROVISIONS
(a) As used in the Plan, "Fair Market Value" means the arithmetic mean
of the highest and lowest sales prices of the Common Stock as reported in the
Consolidated Transactions of the New York Stock Exchange ("NYSE") (or such other
national securities exchange on which the Common Stock may be listed at the time
of determination, and if the Common Stock is listed on more than one exchange,
then on the one located in New York or if the Common Stock is listed only on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"), then on such system) on the date of the grant or other date as of
which the Common Stock is to be valued hereunder. If no sale shall have been
made on the NYSE, such other exchange or the NASDAQ on such date or if the
Common Stock is not then listed on any exchange or on the NASDAQ. Fair Market
Value shall be determined by the Committee in accordance with Treasury
Regulations applicable to incentive stock options.
(b) Nothing in the Plan or in any Option granted under the Plan shall
confer any rights on any director to continue as a director of the Company or
shall interfere in any way with the right of the Company or its shareholders to
remove such person as a director in accordance with applicable law. If a
director shall be removed for cause in accordance with law, any Option held by
such person shall automatically terminate as of the date of such removal.
(c) It is the intent of the Company that the Plan comply in all
respects with Rule 16b-3 or any successor rule ("Rule 16b-3") under the
Securities Exchange Act of 1934, as amended (the "Act"), that any ambiguities or
inconsistencies in construction of the Plan be interpreted to give effect to
such intention and that if any provision of the Plan is found not to be in
compliance with Rule 16b-3, such provision shall be deemed null and void to the
extent required to permit the Plan to comply with Rule 16b-3. The Committee may
adopt rules and regulations under, and amend, the Plan in furtherance of the
intent of the foregoing. Anything elsewhere in the Plan to the contrary
notwithstanding, neither the Board nor the Committee shall have the power to
amend the Plan in any way or take any other action which would cause Options
granted under the Plan to fail
5
<PAGE> 6
to qualify as or be disqualified as "Formula Awards" under and for purposes of
Rule 16b-3, and any such amendment or other action so taken shall be deemed void
ab initio and of no force or effect. Without limitation of the generality of the
foregoing provisions of this paragraph, the Board shall not have the power to
amend the Plan provisions referred to in paragraph (c)(2)(ii)(A) of Rule 16b-3
more than once in six months, other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act or the rules
thereunder.
8. AMENDMENT
Except as provided in Section 7(c) hereof, the Plan may be amended at
any time and from time to time by the Board as the Board shall deem advisable,
including, but not limited to, amendments necessary to qualify for any exemption
or to comply with applicable law or regulations; provided, however, that except
as provided in Section 6 above, the Board may not, without further approval by
the shareholders of the Company, increase the maximum number of shares of Common
Stock as to which Options may be granted under the Plan. Subject to the
provision of Section 7(c) hereof relating to Rule 16b-3, no amendment of the
Plan shall alter or impair any of the rights or obligations of any optionee,
without his or her consent, with respect to any Option theretofore granted under
the Plan.
9. TERMINATION
The Plan shall terminate upon the earlier of the following dates or
events to occur:
(a) upon the adoption of a resolution of the Board terminating
the Plan; or
(b) immediately following an annual meeting of shareholders if
at that time the number of shares remaining available for grant of
Options under the Plan is not sufficient for the making of the grants
required by Section 4 hereof to be made immediately following such
annual meeting.
No termination of the Plan shall alter or impair any of the rights or
obligations of any optionee, without his or her consent, with respect to any
Option theretofore granted under the Plan.
10. SHAREHOLDER APPROVAL
The Plan shall be submitted to the shareholders of the Company for
their approval at the 1995 annual meeting of shareholders. The shareholders
shall be deemed to have approved the Plan if it is approved at said meeting in
accordance with the Business Corporation Law of the State of New York. If the
shareholders do not approve the Plan at said meeting, the Plan shall thereupon
terminate and shall be of no further force or effect.
[Note: This Plan was adopted by the
6
<PAGE> 7
Board of Directors on July 14, 1995,
approved by shareholders at the
annual meeting on November 21, 1995
and amended by the Executive Committee
on November 19, 1998]
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> OCT-31-1998
<CASH> 23,792
<SECURITIES> 22,300
<RECEIVABLES> 294,514
<ALLOWANCES> 6,552
<INVENTORY> 245,472
<CURRENT-ASSETS> 639,002
<PP&E> 951,563
<DEPRECIATION> 422,407
<TOTAL-ASSETS> 1,388,438
<CURRENT-LIABILITIES> 424,704
<BONDS> 0
0
0
<COMMON> 12,796
<OTHER-SE> 760,580
<TOTAL-LIABILITY-AND-EQUITY> 1,388,438
<SALES> 249,850
<TOTAL-REVENUES> 249,850
<CGS> 115,773
<TOTAL-COSTS> 230,543
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,948
<INCOME-PRETAX> 19,307
<INCOME-TAX> 4,827
<INCOME-CONTINUING> 14,480
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,480
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
