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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 30, 1999
Commission File No. 1-4311
PALL CORPORATION
Incorporated in New York State I.R.S. Employer
Identification # 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 6, 1999, 124,002,979 shares of common stock of the Registrant were
outstanding.
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PALL CORPORATION
INDEX TO FORM 10-Q
-------------------
COVER SHEET 1
INDEX TO FORM 10-Q 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed consolidated balance sheets - October 30, 1999
and July 31, 1999 3
Condensed consolidated statements of earnings -
three months ended October 30, 1999 and October 31, 1998 4
Condensed consolidated statements of cash flows -
three months ended October 30, 1999 and October 31, 1998 5
Notes to condensed consolidated financial statements 6
Item 2. Management's discussion and analysis of financial condition and
results of operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 13
SIGNATURES 13
EXHIBIT INDEX 14
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands)
October 30,July 31,
ASSETS 1999 1999
Current Assets: ---------- ---------
Cash and cash equivalents $ 65,003 $ 86,677
Short-term investments 45,900 50,500
Accounts receivable, net of allowances
for doubtful accounts of $7,280
and $6,623, respectively 296,868 326,197
Inventories - Note 2 210,252 205,867
Taxes receivable 12,430 12,648
Deferred income taxes 32,537 33,412
Other 32,542 28,888
---------- ----------
Total Current Assets 695,532 744,189
Property, plant and equipment, net of
accumulated depreciation of $445,234
and $429,012, respectively 514,333 507,016
Other assets 238,250 237,122
---------- ----------
Total Assets $1,448,115 $1,488,327
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to banks $ 238,844 $ 301,647
Accounts payable 64,313 63,525
Accrued liabilities:
Salaries and commissions 44,968 44,515
Other 74,656 71,068
---------- ----------
119,624 115,583
Income taxes 20,310 20,147
Current portion of long-term debt 59,631 37,506
Dividends payable 19,869 19,871
---------- ----------
Total Current Liabilities 522,591 558,279
Long-term debt, less current portion 102,272 116,815
Deferred income taxes 21,607 21,232
Other non-current liabilities 65,712 61,337
---------- ----------
Total Liabilities 712,182 757,663
---------- ----------
Stockholders' Equity:
Common stock, $.10 par value 12,796 12,796
Capital in excess of par value 92,893 92,893
Retained earnings 737,782 732,970
Treasury stock, at cost (82,076) (82,283)
Stock option loans (6,334) (7,216)
Accumulated other comprehensive loss:
Foreign currency translation adjustment (11,322) (12,149)
Minimum pension liability (2,156) (1,937)
Unrealized investment losses (5,650) (4,410)
---------- ----------
(19,128) (18,496)
Total Stockholders' Equity 735,933 730,664
---------- ----------
Total Liabilities and
Stockholders' Equity $1,448,115 $1,488,327
========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands,
except per share data)
Three Months Ended
------------------------
Oct. 30, Oct. 31,
1999 1998
-------- --------
Net sales $267,122 $249,850
Costs and expenses:
Cost of sales - Note 1 124,746 117,340
Selling, general and
administrative expenses 94,733 96,887
Research and development 11,818 14,935
Interest expense, net 3,490 2,948
-------- --------
Total costs and expenses 234,787 232,110
Earnings before income taxes 32,335 17,740
Income taxes 7,437 4,279
-------- --------
Net earnings $ 24,898 $ 13,461
======== ========
Earnings per share
Basic $ 0.20 $ 0.11
Diluted $ 0.20 $ 0.11
Dividends declared per share $ 0.160 $ 0.155
Average number of shares
outstanding
Basic 124,178 124,107
Diluted 125,161 124,618
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
-----------------------
Oct. 30, Oct. 31,
1999 1998
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 72,546 $ 37,000
INVESTING ACTIVITIES:
Investments and licenses (55) (4,246)
Capital expenditures (18,434) (15,800)
Disposals of fixed assets 3,165 1,099
Short-term investments 4,600 (5,500)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (10,724) (24,447)
FINANCING ACTIVITIES:
Net short-term borrowings (64,207) 17,001
Long-term borrowings 7,827 396
Payments on long-term debt (8,175) (5,858)
Net proceeds from exercise of stock options 2,486 16,165
Purchase of treasury stock (1,613) (10,000)
Dividends paid (19,871) (19,202)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (83,553) (1,498)
-------- --------
CASH FLOW FOR PERIOD (21,731) 11,055
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 86,677 12,125
EFFECT OF EXCHANGE RATE CHANGES ON CASH 57 612
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 65,003 $ 23,792
======== ========
Supplemental disclosures:
Interest paid (net of amount capitalized) $ 5,126 $ 4,152
Income taxes paid (net of refunds) 4,962 4,697
See accompanying Notes to Condensed Consolidated Financial Statements.
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PALL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
----------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The financial information included herein is unaudited. However, such
information reflects all adjustments which are, in the opinion of management,
necessary to present fairly the Company's financial position, results of
operations and cash flows as of the dates and for the periods presented herein.
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 July 31, 1999.
The results of operations for the first quarter of fiscal 1999 have been
adjusted to include $1,567 (1 cent per share) of previously capitalized start-up
costs expensed in cost of sales when the Company adopted Statement of Position
98-5, "Reporting the Costs of Start-up Activities" in the third quarter of
fiscal year 1999.
NOTE 2 - INVENTORIES
The major classes of inventory are as follows: (in thousands)
Oct. 30, July 31,
1999 1999
-------- --------
Raw materials and components $78,868 $ 77,092
Work-in-process 25,044 25,127
Finished goods 106,340 103,648
-------- --------
Total inventory $210,252 $205,867
======== ========
NOTE 3 - COMPREHENSIVE INCOME
The components of comprehensive income for the three months ended October 30,
1999 and October 31, 1998 were comprised of the following:
Oct. 30, Oct. 31,
1999 1998
------- -------
Net income $24,898 $13,461
Foreign currency translation adjustment, net of tax
benefit of $824 and tax of $255, respectively 827 12,537
Minimum pension liability adjustment, net of
tax benefit of $176 and $11, respectively (219) (20)
Unrealized investment loss, net of tax
benefit of $668 and $3,096, respectively (1,240) (5,751)
------- -------
Total comprehensive income $24,266 $20,227
======= =======
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NOTE 4 - SEGMENT INFORMATION
Market Segment Information: Three Months Ended
(in thousands) OCT. 30, OCT. 31,
1999 1998
- ----------------------------------------------------------------------------
Sales to Unaffilitated Customers:
Blood $ 48,572 $ 39,439
Critical Care 18,578 20,611
--------- ---------
Medical 67,150 60,050
--------- ---------
BioPharmaceuticals 52,940 50,935
Food and Beverage 12,991 11,183
Specialty Materials 8,648 9,060
--------- ---------
BioPharmaceuticals 74,579 71,178
--------- ---------
Health Care 141,729 131,228
--------- ---------
Aerospace 30,013 29,901
Industrial Hydraulics 31,291 30,371
--------- ---------
Aeropower 61,304 60,272
--------- ---------
Microelectronics 18,822 11,698
Industrial Process 45,267 46,652
--------- ---------
Fluid Processing 64,089 58,350
--------- ---------
Total $ 267,122 $ 249,850
- ----------------------------------------------------------------------------
Operating Profit:
Medical $ 14,503 $ 9,837
BioPharmaceuticals 13,786 10,494
--------- ---------
Health Care 28,289 20,331
Aeropower 14,366 14,380
Fluid Processing 7,656 2,345 (a)
--------- ---------
Subtotal 50,311 37,056
General corporate expenses (14,486) (16,368)
Interest expense, net (3,490) (2,948)
--------- ---------
Earnings before income taxes $ 32,335 $ 17,740
- ----------------------------------------------------------------------------
Geographic Segment Information: Three Months Ended
(in thousands) OCT. 30, OCT. 31,
1999 1998
----------------------
Sales to Unaffilitated Customers:
Western Hemisphere $ 122,715 $ 112,891
Europe 97,458 99,662
Asia 46,949 37,297
--------- ---------
Total $ 267,122 $ 249,850
- ----------------------------------------------------------------------------
Operating Profit:
Western Hemisphere $ 29,073 $ 12,822 (a)
Europe 20,002 23,493
Asia 5,433 914
Eliminations (4,197) (173)
--------- ---------
Subtotal 50,311 37,056
General corporate expenses (14,486) (16,368)
Interest expense, net (3,490) (2,948)
--------- ---------
Earnings before income taxes $ 32,335 $ 17,740
- ----------------------------------------------------------------------------
(a) Adjusted to include $1,567 of previously capitalized start-up costs expensed
in cost of sales when the Company adopted Statement of Position 98-5
"Reporting the Costs of Start-Up Activities" in the third quarter of fiscal
1999.
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NOTE 5 - OTHER MATTERS
On November 17, 1999, shareholders approved the two stock purchase plans (a
management stock purchase plan and an employee stock purchase plan) approved by
the Board of Directors at its June 1999 meeting.
The Company bought back an additional $1.6 million of its common stock during
the first quarter and $4.9 million at this filing date in the second quarter.
The Company expects to complete the purchase of the remaining $18.5 million
authorized under its current buy-back program during calendar year 2000.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Management's discussion and 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
Review of Consolidated Results
Sales for the quarter were $267.1 million, an increase of 7% compared to $249.9
million in the same quarter last year. Foreign exchange rates decreased sales
1/2% or approximately $1 million. In local currency, sales were up 7 1/2%. Price
reductions decreased sales by 1%.
Cost of sales as a percentage of sales improved slightly to 46.7% from 47.0%
last year, despite the change in mix of blood filter sales. This was largely due
to improvements in Fluid Processing margins. On an annual basis our aim is to
maintain gross margins at fiscal 1999 levels so the results so far in fiscal
year 2000 are in line with this aim.
Selling, general and administrative expenses and research and development costs
were the principal beneficiaries of the restructuring initiated in last year's
third quarter. On a comparative basis, the combination of SG&A and R&D were down
nearly $5.3 million and represent 39.9% of sales compared to 44.8% last year.
The nearly 5% reduction of these items as a percentage of sales is in line with
the aim to reduce them on an annual basis by at least 2%.
Part of the restructuring plan involved the consolidation of certain facilities.
The results for the first quarter of fiscal 2000 include a profit of $1.3
million from the sale of a property located in the United Kingdom.
The effective tax rate for the first quarter of fiscal 2000 was 23%, consistent
with the underlying tax rate for fiscal year 1999. The effective tax rate for
the first quarter of fiscal year 1999 was 25%.
Review of Market and Geographic Segments
Medical sales grew 12 1/2% in local currency with total blood filter sales up
24%. Blood filter sales to blood centers grew 59%. Sales to blood centers nearly
doubled in Europe as more and more countries move towards 100% leukodepletion.
Sales to blood centers in the US and Canada, which are twice as much as sales in
Europe, also increased well at 42% with pricing at similar rates to last year.
Blood filter sales to hospitals were down 16% as the routine filtration of blood
continues to move to the blood centers. Critical care sales were down largely
due to fewer sales of low margin bags.
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BioPharmaceuticals sales increased 6% in local currency. Double-digit growth in
Food & Beverage continued, while Specialty Material sales were flat. Sales to
pharmaceutical producers and laboratory products customers grew 5%.
Aeropower sales were lifted by a return to growth in the Industrial Hydraulics
sub-segment, where sales increased 5 1/2% in local currency. Industrial
Hydraulics sales in the US, which suffered through reduced sales last year,
posted a sales gain of 6 1/2%. Aerospace sales grew 1% in local currency. Sales
in the military area grew at 21% while commercial aerospace sales were down 11%
due to the timing of OEM business in the quarter. Overall, Aerospace is still
expected to be flat for this fiscal year due to non-repeating orders in the
fiscal year 1999 comparison.
Fluid Processing sales increased 7 1/2% in local currency. Microelectronics
sales grew 52% in local currency even while backlog increased substantially.
Sales in Microelectronics more than doubled in the US. In Europe and Asia,
Microelectronics sales growth exceeded 20%. Sales in Industrial Process, Fluid
Processing's other sub-segment, were about flat after taking into account the
sale of the Stratapac business in the third quarter of last year. Within
Industrial Process, power generation sales grew 25% and water processing sales
were down 36% reflecting the effects of some big system sales in the quarter
last year.
The consolidated operating profit was 18.8% compared to 14.8% last year. The
restructuring initiated in the third quarter of last fiscal year has improved
the operating margin in our Medical, BioPharmaceutical and Fluid Processing
segments and BioPharmaceutical and Fluid Processing benefited from the decision
to eliminate low margin business. By market the operating profit for Medical
increased 5% reflecting the increase in blood center sales as more and more
countries move towards 100% leukodepletion. BioPharmaceuticals' operating profit
was 18.5% compared to 14.7% last year and operating profit in the Aeropower
market was essentially unchanged, as sales were fairly flat. Fluid Processing's
operating profit increased 5.2%, (excluding $1,567 for previously capitalized
start-up costs expensed in the third quarter of fiscal year 1999) reflecting the
recovery in Microelectronics and the decision to eliminate low margin business.
Sales in the Western Hemisphere increased 8.7% while operating profit increased
from 11.4% last year to 23.7% as it benefited substantially from the cost cuts
following our restructuring last year and as gross margins improved in the Fluid
Processing segment. Reported growth in sales in Asia was 25.9% with a local
currency growth of 9%. The profit in Asia grew from 2.5% last year to 11.6% this
year as Asia benefited from the strong yen as well as from last year's cost
cutting. Europe's reported sales declined 2.2% due to the weakness of the Euro
but grew 5% on a local currency basis. While operating profit was still strong
at 20.5%, this was down from 23.6% last year due to the currency weakness.
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II. Liquidity and Capital Resources
The Company's balance sheet is affected by spot exchange rates used at the end
of the quarter for translating local currency amounts into US dollars. In
relation to the spot exchange rates at the end of last year, the European
currencies have weakened against the dollar, except for the British Pound. The
Asian currencies have strengthened against the dollar. During the first quarter
of this fiscal year, net debt declined by $28.9 million which is also reflected
in a similar reduction in accounts receivable as is normal in the first quarter
when sales reduce from the prior quarter on a seasonal basis. The decline in net
debt is comprised of net reductions of $37.9 million being offset by foreign
exchange effects of $9 million (principally in Japan).
Net cash provided by operating activities increased by $35.5 million. Capital
expenditures and depreciation and amortization expense for the quarter were
$18.4 million and $17.5 million, respectively. The Company also bought back an
additional $1.6 million of its common stock during the quarter and expects to
complete the current buy-back program in calendar year 2000.
III. Other Matters
Year 2000 Compliance
In 1996, the Company began to assess the impact that the Year 2000 (Y2K) issue
will have on its information systems and operations. In March 1998, a formal Y2K
Committee was established. The Y2K Committee is chaired by the Company's Chief
Financial Officer. The Committee has a comprehensive plan to enable the Company
to achieve Y2K compliance and is responsible to regularly determine that
training, guidance and resources are available to carry out the plan on a
consistent basis, worldwide. Throughout the process, the Committee has utilized
the Company's internal audit department, a team of geographic leaders and
support personnel to visit numerous global locations to conduct training and
assess the progress being made toward location Y2K readiness.
To date, the Company has inventoried its critical and non-critical systems that
may be impacted by Y2K, and inquired of those vendors who support these systems,
as to their Y2K readiness. Most of those vendors queried have acknowledged that
their current systems are compliant or are expected to be Y2K compliant. In
addition, the Company has tested its critical and certain non-critical systems
to ensure Y2K compliance. (The Company does not plan to test systems of service
providers such as the New York Stock Exchange, banks, utility companies and
similar service providers, as it does not have the resources to test their
systems). The Company believes that its systems are either compliant or has
contingency plans in place. Continuity plans covering the Y2K rollover period
are also in place. The expenditures necessary to achieve compliance have not
been material to the Company's financial statements.
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The Company has also surveyed critical suppliers and distributors to determine
the status of their Y2K compliance programs. The Company has evaluated the
responses it has received and is taking appropriate steps as necessary.
Contingency plans are in place. The Company's reliance on suppliers and
distributors, and therefore, proper functioning of their products, information
systems and software means that failure by such suppliers and distributors to
address their own Y2K issues could have a material impact on the Company's plan
to achieve Y2K compliance.
The failure to correct a material Y2K problem could result in an interruption
in, or a failure of, certain normal business activities or operations. Such
failures could materially and adversely affect the Company's results of
operations. Due to the uncertainty inherent in the Y2K problem, the Company is
unable to determine, at this time, whether the consequences of Y2K failures will
have a material impact on the Company's results of operations. The Y2K project
has reduced the Company's level of uncertainty about the Y2K problem and, in
particular, about the Y2K compliance and readiness of its vendors and
distributors. The Company believes that, as a result of the activities performed
to date and those planned during the Y2K rollover period, the possibility of a
material interruption of normal operations should be reduced.
Euro Currency Conversion
A new European currency (Euro) was introduced in January 1999 to replace the
separate (legacy) currencies 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.
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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 30, 1999.
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 14, 1999 /s/ John Adamovich, Jr.
- ----------------- ---------------------------
Date John Adamovich, Jr.
Chief Financial Officer
and Treasurer
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Exhibit Index
--------------
Exhibit
Number Description of Exhibit
- ------- ----------------------
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 5, 1999,
filed as Exhibit 3 (ii) to the Registrant's Annual Report on
Form 10-K for the fiscal year ended July 31, 1999.
10 (a) Pall Corporation Management Stock Purchase Plan, as
amended on October 1, 1999.
27 Financial Data Schedule.
27.1 Financial Data Schedule amended for period ended July 31, 1999.
27.2 Financial Data Schedule amended for period ended May 1, 1999.
27.3 Financial Data Schedule amended and restated for period ended
January 30, 1999.
27.4 Financial Data Schedule amended and restated for period ended
October 31, 1998.
27.5 Financial Data Schedule amended for period ended August 1, 1998.
27.6 Financial Data Schedule amended for period ended May 2, 1998.
27.7 Financial Data Schedule amended for period ended January 31, 1998.
27.8 Financial Data Schedule amended for period ended November 1, 1997.
27.9 Financial Data Schedule amended for period ended August 2, 1997.
* Incorporated herein by reference.
(a) Management contract or compensatory plan or arrangement.
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PALL CORPORATION
MANAGEMENT STOCK PURCHASE PLAN
-----
1. Purpose.
This document sets forth the Pall Corporation Management Stock Purchase
Plan as adopted effective June 29, 1999 and amended effective October 1, 1999.
The purpose of the Plan is to encourage key employees of the
Corporation and its Affiliated Companies to increase their ownership of shares
of the Corporation's Common Stock by providing such employees with an
opportunity to elect to have portions of their total annual compensation paid in
the form of Restricted Units, and to have additional matching Restricted Units
credited with respect thereto.
The Plan also provides certain employees with an opportunity to elect
to defer payment with respect to the Restricted Units credited to them that
become vested. With respect to these provisions, the Plan is intended to
constitute an unfunded plan of deferred compensation for "a select group of
management or highly compensated employees" within the meaning of Sections
201(2), 301(a)(3) and 401(a)(1) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA").
2. Definitions.
As used herein, the following terms shall have the following meanings:
"Account" and "Subaccount" shall mean, respectively, the account, and
each Subaccount within such Account, that is established for a Participant
pursuant to Section 8.
"Affiliated Companies" shall mean each direct or indirect subsidiary
of the Corporation.
"Beneficiary" shall mean the person or persons designated by a
Participant in accordance with Section 12 to receive any payment that is
required to be made under the Plan upon the Participant's death.
"Board of Directors" shall mean the Board of Directors of the
Corporation.
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"Bonus" shall mean, with respect to any Eligible Employee for any Plan
Year , the Bonus payable to such Eligible Employee during such year under the
Corporation's Executive Incentive Bonus Plan, or, if applicable, under the terms
of the Eligible Employee's employment agreement with the Corporation, or under
any other plan, program or arrangement of annual incentive compensation
maintained by the Corporation or any of its Affiliated Companies.
"Bonus Payment Date" shall mean each date on which Bonus payments are
made under the Corporation's Executive Incentive Bonus Plan.
"Business Day" shall mean any day on which the Corporation's principal
office in the U.S. is open for business.
"CEO" shall mean the Chief Executive Officer of the Corporation.
"Change in Control" means the occurrence of any of the following:
(a) the "Distribution Date" as defined in Section 3 of
the Rights Agreement dated as of November 17, 1989
between the Corporation and United States Trust
Company of New York, as Rights Agent as the same may
have been amended or extended to the time in question
or in any successor agreement (the "Rights
Agreement"); or
(b) any event described in Section 11(a)(ii)(B) of the
Rights Agreement; or
(c) any event described in Section 13 of the Rights
Agreement; or
(d) the date on which the number of duly elected and
qualified directors of the Corporation who were not
either elected by the 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 Corporation 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 as provided in Section 6 shall
exist, to the extent that the Board of Directors so determines by resolution
adopted prior to the Change in Control.
"Closing Price" shall mean, as of any date, the closing price of a
share of Common Stock as reported on the New York Stock Exchange Composite Tape
for such date.
"Committee" shall mean the CEO and such other officers of the
Corporation as the CEO in his discretion may appoint from time to time. The CEO
shall have the power to remove any other member of the Committee at any time.
"Common Stock" shall mean the shares of common stock ($0.10 par value)
of the Corporation.
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"Compensation Committee" shall mean the Compensation Committee of the
Board of Directors.
"Corporation" shall mean Pall Corporation.
"Crediting Date" shall mean, with respect to any Initial Award
Restricted Unit Subaccount, Purchased Restricted Unit Subaccount or Matching
Restricted Unit Subaccount maintained for a Participant under Section 8, the
date as of which Restricted Units, or Matching Restricted Units, were first
credited to such Subaccount pursuant to Section 5(a), (b), (c), (d), or (e).
"Deferred Vested Units" shall mean Vested Units with respect to which
the Participant has elected to defer payment in accordance with the provisions
of Section 7(d) hereof.
"Dividend Equivalent Units" shall mean additional Restricted Units or
additional Deferred Vested Units credited to a Participant's Account pursuant to
Section 5(f) or Section 7(d)(vi).
"Dividend Payment Date" shall mean each date on which the Corporation
pays a dividend on its Common Stock.
"Eligible Employee" shall mean, with respect to any Plan Year, any
Employee who has been designated under Section 4 as eligible to be credited with
Restricted Units for such Plan Year.
"Employee" shall mean any person employed by the Corporation or any of
its Affiliated Companies.
"Involuntary Termination" shall mean the termination of a Participant's
employment with the Corporation and all of its Affiliated Companies by the
Corporation, or by any of its Affiliated Companies, for any reason other than
for disability or for cause.
"Matching Restricted Units" shall mean Restricted Units that are
credited to a Participant's Account pursuant to Section 5(e), to match
Restricted Units that are credited to the Participant's Account under Section
5(b), (c) or (d).
"Participant" shall mean any Employee for whom an Account has been
established, and is being maintained, pursuant to Section 8 hereof.
"Plan" shall mean the Pall Corporation Management Stock Purchase Plan
as set forth herein and as amended from time to time.
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"Plan Year" shall mean the period beginning on August 1 of each
calendar year and ending on July 31 of the following calendar year.
"Restricted Unit" shall mean a Unit credited to a Participant pursuant
to Section 5 that has not yet become vested in accordance with the provisions of
Section 6.
"Retirement" shall mean the termination of a Participant's employment
with the Corporation and all of its Affiliated Companies, if at the time of such
termination of employment the Participant has attained age 62 and is eligible to
receive (i) a Retirement Benefit under Section 3.1, 3.2 or 3.3 of the Pall
Corporation Pension Plan or (ii), in the case of any Participant who is not a
resident of the U.S., a similar type of benefit under any plan or program
maintained by the Corporation or any of its Affiliated Companies (or to which
the Corporation or any of its Affiliated Companies makes contributions) that
provides benefits to Employees upon their retirement.
"Trading Day" shall mean any day on which the New York Stock Exchange
is open for trading.
"Unit" shall mean a unit of measurement equivalent to one share of
Common Stock, with none of the attendant rights of a shareholder of such share,
including, without limitation, the right to vote such share and the right to
receive dividends thereon, except to the extent otherwise specifically provided
herein.
"Vested Unit" shall mean a Unit credited to a Participant pursuant to
Section 5 that has become vested in accordance with the provisions of Section 6.
"Vesting Date" shall mean, with respect to any Restricted Units
credited to a Participant's Account, the date on which such Restricted Units
become vested in accordance with the provisions of Section 6.
3. Maximum Number of Shares of Common Stock Available.
The number of shares of Common Stock that may be distributed with
respect to Restricted Units and Deferred Vested Units credited to Participants
under the Plan, (including Dividend Equivalent Units credited with respect to
such Units) shall be limited to 1,000,000 shares of Common Stock. If any
Restricted Units initially credited to a Participant shall be forfeited, the
number of shares of Common Stock no longer payable with respect to the
Restricted Units so forfeited shall thereupon be released and shall thereafter
be available for the crediting of new Restricted Units under the Plan. The
limitation provided under this Section 3 shall be subject to adjustment as
provided in Section 9.
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The shares of Common Stock distributed under the Plan may be authorized
and unissued shares, shares held in the treasury of the Corporation, or shares
purchased on the open market by the Corporation at such time or times and in
such manner as it may determine. The Corporation shall be under no obligations
to acquire shares of Common Stock for distribution to Participants before
payment in Common Stock is due.
4. Eligibility.
An Employee shall be eligible to be credited with Restricted Units
under Section 5 during any Plan Year only if he or she has been designated by
the Compensation Committee as an Eligible Employee with respect to such year.
Upon the recommendation of the CEO, the Compensation Committee may
select as an Eligible Employee for any Plan Year any Employee who is expected to
make significant contributions during the course of such year to the success of
the Corporation and its Affiliated Companies and to the growth of their
businesses.
Any person who has been selected as an Eligible Employee for any Plan
Year shall continue to be an Eligible Employee in the Plan for each subsequent
Plan Year during the period of his or her employment, subject, however, to the
Compensation Committee's right to terminate such individual's eligibility
effective beginning as of the first base salary payment date or, if earlier, the
first Bonus Payment Date occurring after the date on which the Compensation
Committee makes its determination to terminate such individual's eligibility.
5. Crediting of Restricted Units.
For each Plan Year, Eligible Employees shall be credited with
Restricted Units in accordance with the following provisions:
(a) Initial Award Units. Each Employee who is an Eligible Employee for
the Plan Year that begins on August 1, 1999 shall be credited as of such date
with such number of Restricted Units as the Compensation Committee in its sole
discretion may determine for such Employee. To the extent that the Compensation
Committee in its sole discretion so determines, any Employee who is designated
as an Eligible Employee at any time after August 1, 1999 shall be credited, as
of the date specified by the Compensation Committee in such determination, with
such number of Restricted Units as the Compensation Committee may determine for
such Employee.
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(b) Bonus Units. Each Employee who is an Eligible Employee for any Plan
Year beginning on or after August 1, 1999 may elect to have any part or all of
any Bonus that may become payable to the Participant during such year paid in
the form of Restricted Units that will be credited to his or her Account
hereunder and distributed in accordance with the provisions of this Plan,
instead of being paid to the Eligible Employee in cash. If an Eligible Employee
has so elected, the Eligible Employee's Account shall be credited on the first
Bonus Payment Date during such year with a number of Restricted Units determined
by dividing (i) the total amount of the portion of the Eligible Employee's Bonus
payable during such year which the Eligible Employee elected to have paid in the
form of Restricted Units, by (ii) the Closing Price of a share of Common Stock
on such Bonus Payment Date or, if such date is not a Trading Day, on the next
following day that is a Trading Day.
(c) Base Salary Units. Each Employee who is an Eligible Employee for
any Plan Year beginning on or after August 1, 1999 may elect to have up to 50%
of the amount of the base salary otherwise payable to the Eligible Employee on
each payday during such year paid in the form of Restricted Units that will be
credited to his or her Account hereunder and distributed in accordance with the
provisions of this Plan, instead of being paid to the Eligible Employee in cash.
If an Eligible Employee has so elected, the amount specified in such election
shall be withheld from the payment of base salary otherwise required to be made
to the Eligible Employee on each payday during such year, and the Eligible
Employee's Account shall be credited on January 31 and on July 31 of such year,
with a number of Restricted Units determined by dividing (i) the aggregate
amount so withheld from the start of such year, in the case of the Restricted
Units to be credited on January 31, or from January 31, in the case of the
Restricted Units to be credited on July 31, by (ii) the Closing Price of a share
of Common Stock on the applicable crediting date or, if such date is not a
Trading Day, on the next following day that is a Trading Day.
(d) Cash Payment Units. Each Employee who is an Eligible Employee for
any Plan Year beginning on or after August 1, 1999 may make a direct cash
payment to the Corporation at least seven days prior to any Bonus Payment Date
during such year and in consideration thereof, have his or her Account credited
on such Bonus Payment Date with a number of Restricted Units determined by
dividing (i) the amount of such cash payment by (ii) the Closing Price of a
share of Common Stock on such Bonus Payment Date or, if such date is not a
Trading Day, on the next following day that is a Trading Day.
The aggregate amount of the direct cash payments that an Eligible
Employee may make under this Section 5(d) during any Plan Year shall not exceed
the sum of (x) the amount by which 50% of the Eligible Employee's base salary
for such year exceeds the portion thereof which the Eligible Employee has
elected under Section 5(c) to have paid in the form of Restricted Units, plus
(y) the amount by which the Bonus payable to the Eligible Employee during such
Plan Year exceeds the portion thereof which the Eligible Employee elected under
Section 5(b) to have paid in the form of Restricted Units.
(e) Matching Units. On each date on which any Restricted Units are
credited to an Eligible Employee's Account pursuant to the provisions of
paragraphs (b), (c) or (d) of this Section 5, there shall also be credited to
the Eligible Employee's Account on that date a number of Matching Restricted
Units equal to (i) 50% of the number of Restricted Units credited on such date,
in the case of Restricted Units credited during the Plan Year beginning on
August 1, 1999, and (ii) 33_% of the number of Restricted Units credited on such
date, in the case of Restricted Units credited during each Plan Year beginning
on or after August 1, 2000.
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<PAGE>
(f) Dividend Equivalents. Until the Vesting Date for the Restricted
Units that have been credited to a Participant's Account pursuant to paragraphs
(a), (b), (c), (d) and (e) of this Section 5, additional Restricted Units shall
be credited to the Participant's Account, with respect to the Restricted Units
so credited, as of each Dividend Payment Date. The number of additional
Restricted Units to be so credited shall be determined separately for each
Initial Award Restricted Unit Subaccount, for each Purchased Restricted Unit
Subaccount, and for each Matching Restricted Unit Subaccount, maintained for a
Participant pursuant to Section 8. The number of additional Restricted Units to
be credited to each such Subaccount shall be determined by first multiplying (A)
the total number of Restricted Units standing to the Participant's credit in
such Subaccount on the day immediately preceding such Dividend Payment Date
(including all Dividend Equivalent Units credited to such Subaccount on all
previous Dividend Payment Dates), by (B) the per-share dollar amount of the
dividend paid on such Dividend Payment Date and then, dividing the resulting
amount by the Closing Price of one share of Common Stock on such Dividend
Payment Date.
(g) Election Procedures. Any election made by an Eligible Employee
under paragraph (b) or (c) of this Section 5 shall be made in accordance with,
and shall be subject to, the provisions set forth below.
(i) any such election shall be made in writing, on a form
furnished to the Eligible Employee for such purpose by the Committee
and filed by the Eligible Employee with the Committee.
(ii) An election under Section 5(b) with respect to the Bonus
payable to an Eligible Employee during the Plan Year beginning on
August 1, 1999 shall be made by no later than July 23, 1999. An
election under Section 5(b) with respect to the Bonus payable to an
Eligible Employee during any Plan Year beginning on or after August 1,
2000 shall be made by no later than April 30 of the immediately
preceding Plan Year. An election under Section 5(c) with respect to the
base salary payable to an Eligible Employee during any Plan Year shall
be made on or prior to the last Business Day preceding the start of
such Plan Year. Notwithstanding the foregoing, any Employee who is
hired after the start of a Plan Year but who is designated under
Section 4 as an Eligible Employee for such year may make election under
Section 5(c) with respect to his or her base salary for such year at
any time during the 30-day period commencing on his or her date of
hire; provided, however, that any election so made shall be effective
only with respect to base salary payable to the Eligible Employee for
periods of service beginning after the date on which he or she files
such election with the Committee.
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<PAGE>
(iii) In his or her election form, the Eligible Employee shall
specify, by dollar amount (which shall be an even multiple of $100) or
by percentage (which shall be an even multiple of 1%), the portion of
his or her Bonus and/or base salary that the Eligible Employee wishes
to have paid in the form of Restricted Units credited to his or her
Account, instead of in cash. The dollar amount or percentage so
specified shall be at least equal to any minimum amount or percentage
which the Committee in its discretion may have determined to be
applicable to elections under Section 5(b) and/or Section 5(c) for the
Plan Year.
(iv) Any election made under Section 5(b) or (c) for any Plan
Year shall be irrevocable.
(h) Other Election Rules. Elections made under Section 5(b) or (c)
shall be subject to the following rules:
(i) If an Eligible Employee who has made an election under
Section 5(b) with respect to the Bonus payable to the Eligible Employee
during any Plan Year terminates employment with the Company and all of
its Affiliated Companies for any reason prior to any Bonus Payment Date
for such Bonus but is nevertheless entitled to receive a Bonus payment
on such date, the portion of such payment that is otherwise required to
be paid by means of the crediting of Restricted Units to the Eligible
Employee's Account pursuant to his or her election under Section 5(b)
shall not be paid in such form, but shall be paid instead in the form
of a single lump sum cash payment. Such payment shall be made as soon
as practicable after such Bonus Payment Date.
(ii) If an Eligible Employee who has made an election under
Section 5(c) with respect to the base salary payable to the Eligible
Employee during any Plan Year terminates employment with the Company
and all of its Affiliated Companies for any reason prior to any date on
which Restricted Units are to be credited to his or her Account with
respect to amounts withheld from his or her base salary pursuant to
such election, no Restricted Units shall be so credited on such date
but instead, the aggregate amount so withheld as of the date of the
Eligible Employee's termination of employment shall be paid to the
Eligible Employee, without interest thereon, in a single lump sum cash
payment. Payment shall be made on such termination date, or as soon
thereafter as is practicable.
(iii) Any election made by an Eligible Employee under Section
5(b) or (c) shall not be given effect if, at any time during the
12-month period ending on the date as of which any Restricted Units are
otherwise required to be credited to his or her Account pursuant to
such election, the Eligible Employee received a hardship withdrawal
under Section 7.2 of the Pall Corporation Profit-Sharing Plan.
6. Vesting of Units.
Restricted Units credited to a Participant's Account, and Dividend
Equivalent Units credited with respect thereto, shall become vested in
accordance with the provisions set forth below.
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(a) All Restricted Units standing to a Participant's credit in any
Initial Award Restricted Unit Subaccount, Purchased Restricted Unit Subaccount
or Matching Restricted Unit Subaccount maintained for the Participant under
Section 8 (including, in each case, all such Units that are Dividend Equivalent
Units) shall become vested on the earliest to occur of the following dates:
(i) the third anniversary of the Crediting Date for such
Subaccount,
(ii) the date of the Participant's death,
(iii) the date as of which the Participant first incurs a
disability that entitles the Participant to a Social Security
certificate of disability award under the Federal Social Security Act,
or
(iv) the date on which a Change in Control occurs.
(b) If a Participant's employment with the Corporation and all of its
Affiliated Companies terminates as a result of Retirement or Involuntary
Termination prior to the third anniversary of the Crediting Date for any Initial
Reward Restricted Unit Subaccount, Purchased Restricted Unit Subaccount or
Matching Restricted Unit Subaccount maintained for the Participant under Section
8 and prior to the occurrence of a Change in Control, as of the date of such
termination of the Participant's employment
(i) all Units in any such Purchased Restricted Unit Subaccount
(including all such Units that are Dividend Equivalent Units), shall
become vested;
(ii) the Earned Portion (as defined below) of all Units in any
such Initial Award Restricted Unit Subaccount and in any such Matching
Restricted Unit Subaccount (including all such Units that are Dividend
Equivalent Units), shall become vested; and
(iii) the Unearned Portion (as defined below) of all Units in
any such Initial Award Restricted Unit Subaccount and in any such
Matching Restricted Unit Subaccount (including all such Units that are
Dividend Equivalent Units) shall be forfeited, and the Participant
shall have no further rights with respect thereto.
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<PAGE>
For purposes of the foregoing, the "Earned Portion" of the Units in any
Initial Award Restricted Unit Subaccount and in any Matching Restricted Unit
Subaccount maintained for a Participant shall mean the percentage of such Units
determined by dividing by 36 the number of months in the period beginning on the
Crediting Date for such Subaccount and ending on the date of the Participant's
termination of employment, with any fraction of a month included in such period
treated as a full month; and the "Unearned Portion" of the Units in any such
Subaccount shall mean the percentage of such Units determined by subtracting
from 100% the Earned Portion of such Units, as determined under the preceding
clause.
(c) If a Participant's employment with the Corporation and all of its
Affiliated Companies terminates for any reason other than death, disability,
Retirement or Involuntary Termination prior to the third anniversary of the
Crediting Date for any Initial Award Restricted Unit Subaccount, Purchased
Restricted Unit Subaccount or Matching Restricted Unit Subaccount maintained for
the Participant under Section 8 and prior to the occurrence of a Change in
Control, upon such termination of the Participant's employment
(i) all Units in any such Initial Award Restricted Unit
Subaccount and in any such Matching Restricted Unit Subaccount
(including all such Units that are Dividend Equivalent Units), shall be
forfeited, and the Participant shall have no further rights with
respect thereto; and
(ii) all Units in any such Purchased Restricted Unit
Subaccount shall become vested.
7. Payment for Vested Units.
Payment with respect to a Participant's Vested Units shall be made in
accordance with the provisions set forth below.
(a) Time for Payment. Payment with respect to a Participant's Vested
Units shall be made to the Participant or, in the event of the Participant's
death, to his or her Beneficiary, as soon as practicable after the Vesting Date
for such Units, except as otherwise provided in paragraph (d) below.
(b) Form of Payment. Except as provided in paragraph (c) below, payment
to be made in accordance with paragraph (a) above with respect to all Restricted
Units that have become vested on any Vesting Date shall be made in the form of a
single lump sum payment consisting of (i) a number of shares of Common Stock
equal to the total number of whole Restricted Units that have become vested on
such Vesting Date, and (ii) a cash payment for any fractional part of a
Restricted Unit that has become vested on such Vesting Date. The amount of such
cash payment shall be determined by multiplying such fractional part by the
Closing Price of a share of Common Stock on the first Trading Day preceding the
date of payment.
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<PAGE>
(c) Payment on Termination. Payment to be made in accordance with
paragraph (a) above with respect to all Restricted Units that have become vested
pursuant to Section 6(c)(ii) on any Vesting Date shall be made by the issuance
of a number of shares of Common Stock determined by dividing the lesser of (x)
the aggregate value of such Units determined by multiplying the number of such
Units by the Closing Price of a share of Common Stock on the date or dates as of
which such Units were credited to the Participant's Account, or (y) the
aggregate value of such Units determined by multiplying the number of such Units
by the Closing Price of a share of Common Stock on such Vesting Date, by (z) the
Closing Price of a share of Common Stock on such Vesting Date. If such Vesting
Date was not a Trading Day, the Closing Price of a share of Common Stock on the
first Trading Day following such Vesting Date shall be used for purposes of the
preceding sentence. If the number of shares of Common Stock determined in
accordance with the provisions of the second preceding sentence includes a
fractional part of a share, payment with respect to such fractional part shall
be made in cash, in an amount determined by multiplying such fractional part by
the Closing Price of a share of Common Stock on the first Trading Day preceding
the date of payment.
(d) Deferred Payment. Subject to the provisions of paragraph (e) below,
payment with respect to part or all of a Participant's Restricted Units that
become vested on any Vesting Date pursuant to Section 6(a)(i) shall be deferred,
and shall be made at the time and in the manner hereinafter set forth, if the
Participant so elects in accordance with the following provisions:
(i) An election by the Participant hereunder with respect to
any Restricted Units that become vested on any Vesting Date shall be
made in writing, on a form furnished to the Participant for such
purpose by the Committee. The form shall be filed with the Committee at
least one year prior to such Vesting Date.
(ii) In the Participant's election form, the Participant shall
specify the number of such Restricted Units with respect to which the
Participant wishes to defer payment, and the date on which payment with
respect to such Units shall be made (the "Payment Date").
(iii) The Participant may select, as the Payment Date for such
Units (A) the first Business Day of the calendar year following the
date of termination of his or her employment with the Corporation or
any of its Affiliated Companies for any reason, or (B) the first
Business Day of any earlier calendar month but no earlier than the
first Business Day of the third calendar year following the calendar
year in which the Vesting Date for such Units occurs.
(iv) Any election made hereunder by the Participant shall be
irrevocable.
(v) As of the Vesting Date for any Restricted Units covered by
a deferral election made by a Participant hereunder, the number of such
Units shall be transferred from the Restricted Unit Subaccount or
Matching Restricted Unit Subaccount in which such Units were recorded
to the appropriate Deferred Vested Unit Subaccount established for the
Participant under Section 8.
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(vi) Until payment has been made with respect to all of the
Units in any Deferred Vested Unit Subaccount maintained for the
Participant under Section 8, there shall be credited to each such
Subaccount, as of each Dividend Payment Date, a number of additional
Deferred Vested Units determined by first multiplying (A) the total
number of Deferred Vested Units standing to the Participant's credit in
such Subaccount on the day immediately preceding such Dividend Payment
Date (including all Dividend Equivalent Units credited to such
Subaccount on all previous Dividend Payment Dates), by (B) the
per-share dollar amount of the dividend paid on such Dividend Payment
Date and then, dividing the resulting amount by the Closing Price of
one share of Common Stock on such Dividend Payment Date.
(vii) Except as provided in subparagraph (viii) below, payment
with respect to the Deferred Vested Units in any Deferred Vested Unit
Subaccount maintained for the Participant shall be made on the Payment
Date specified by the Participant in his or her deferral election with
respect to such Units. Payment with respect to the Deferred Vested
Units payable on any Payment Date shall be made (A) by the issuance of
one share of Common Stock for each whole Deferred Vested Unit payable
on such Payment Date, and (B) by a cash payment for any fractional part
of a Deferred Vested Unit payable on such Payment Date. The amount of
such cash payment shall be determined by multiplying such fractional
part by the Closing Price of a share of Common Stock on the first
Trading Day preceding the date of payment.
(viii) Notwithstanding any other provision in this Section 7
to the contrary, payment with respect to any part or all of any
Deferred Vested Unit Subaccount maintained for a Participant may be
made to the Participant on any date earlier than the Payment Date
specified by the Participant in his deferral election for such Units if
(A) the Participant requests such early payment and (B) the Committee,
in its sole discretion, determines that such early payment is necessary
to help the Participant meet an "unforeseeable emergency" within the
meaning of Section 1.457-2(h)(4) of the federal income tax regulations.
The amount that may be so paid may not exceed the amount necessary to
meet such emergency.
(e) Limitations on Deferrals. A deferral election otherwise permitted
to be made under paragraph (d) above shall be subject to the following
limitations:
(i) The Committee may deny any Participant the right to make
such election if it determines, in its sole discretion, that such
deferral election by the Participant might cause the Plan to fail to be
treated as a plan of deferred compensation "for a select group of
management or highly compensated employees" for purposes of ERISA.
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(ii) If a Change in Control should occur after the date on
which the Participant's election form is filed with the Committee but
before the date that otherwise would have been the Vesting Date under
Section 6(a)(i) for the Units designated in such form, the
Participant's deferral election shall not be given effect, and payment
with respect to such Units shall be made in accordance with the other
applicable provisions of this Section 7.
(iii) No deferral election shall be effective hereunder if, at
any time during the 12-month period ending on the Vesting Date, the
Participant received a hardship withdrawal under Section 7.2 of the
Pall Corporation Profit-Sharing Plan.
(iv) No amount may be deferred with respect to the
Participant's Vested Units pursuant to a Participant's deferral
election hereunder to the extent that any tax is required to be
withheld with respect to such amount pursuant to applicable federal,
state or local law.
8. Accounts.
There shall be established on the books and records of the Corporation,
for bookkeeping purposes only, a separate Account for each Participant, to
reflect the Participant's interest under the Plan.
Within each Account so established for each Participant there shall be
established and maintained the following Subaccounts: an "Initial Award
Restricted Unit Subaccount" to reflect all Restricted Units to be credited to
the Participant's Account on any Crediting Date pursuant to Section 5(a); a
"Purchased Restricted Unit Subaccount" to reflect all Restricted Units to be
credited to the Participant's account on any Crediting Date pursuant to Section
5(b), (c) or (d); a "Matching Restricted Unit Subaccount" to reflect all
Matching Restricted Units to be credited to the Participant's Account on any
Crediting Date pursuant to Section 5(e); and a "Deferred Vested Unit Subaccount"
to reflect all Vested Units with respect to which a Participant has elected to
defer payment, and for which the Participant has selected the same Payment Date,
pursuant to Section 7(d).
A Participant's Account and Subaccounts shall be adjusted from time to
time to reflect all Dividend Equivalent Units to be credited thereto pursuant to
Section 5(f) and Section 7(d)(vi), all payments made with respect to the Units
reflected therein pursuant to Section 7, and, in the case of any Initial Award
Restricted Unit Subaccount, Purchased Restricted Unit Subaccount or Matching
Restricted Unit Subaccount maintained for a Participant, any forfeitures of
Units reflected therein pursuant to Section 6.
A Participant's interest in any Deferred Vested Unit Subaccount
maintained for the Participant shall be fully vested and nonforfeitable at all
times.
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9. Certain Adjustments to Plan Shares.
In the event of any change in the shares of Common Stock by reason of
any stock dividend, stock split, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any rights
offering to purchase shares of Common Stock at a price substantially below fair
market value, or any similar change affecting the shares of Common Stock, the
number and kind of shares represented by Units credited to Participants'
Accounts shall be appropriately adjusted consistent with such change in such
manner as the Compensation Committee, in its sole discretion, may deem equitable
to prevent substantial dilution or enlargement of the rights granted to, or
available for, the Participants hereunder. The Committee shall give notice to
each Participant of any adjustment made pursuant to this Section and, upon such
notice, such adjustment shall be effective and binding for all purposes.
10. Listing and Qualification of Common Stock.
The Corporation, in its discretion, may postpone the issuance,
delivery, or distribution of shares of Common Stock with respect to any Vested
Units until completion of such stock exchange listing or other qualification of
such shares under any state or federal law, rule or regulation as the
Corporation may consider appropriate, and may require any Participant or
Beneficiary to make such representations and furnish such information as it may
consider appropriate in connection with the issuance or delivery of the shares
in compliance with applicable laws, rules and regulations.
11. Taxes.
The Corporation or any of its Affiliated Companies may make such
provisions and take such steps as it may deem necessary or appropriate for the
withholding of all federal, state and local taxes required by law to be withheld
with respect to any payments to be made under the Plan including, but not
limited to (i) deducting the amount so required to be withheld from any other
amount then or thereafter payable to a Participant or Beneficiary, and/or (ii)
requiring a Participant or Beneficiary to pay to the Corporation or any of its
Affiliated Companies the amount so required to be withheld as a condition of the
issuance, delivery, or distribution of any shares of Common Stock. With the
approval of the Compensation Committee, the Committee may permit such amount to
be paid in shares of Common Stock previously owned by the Participant, or a
portion of the shares of Common Stock that otherwise would be distributed to
such Participant in respect to his or her Vested Units, or a combination of cash
and shares of Common Shares.
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12. Designation and Change of Beneficiary.
Each Participant shall file with the Committee a written designation of
one or more persons as the Beneficiary who shall be entitled to receive any
amount, or any shares of Common Stock, payable under the Plan upon his or her
death. A Participant may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any previously designated
Beneficiary by filing a new designation with the Committee. The last such
designation received by the Committee shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Committee prior to the Participant's death, and in no event
shall it be effective as of a date prior to such receipt. If at the date of a
Participant's death, there is no designation of a Beneficiary in effect for the
Participant pursuant to the provisions of this Section 12, or if no Beneficiary
designated by the Participant in accordance with the provisions hereof survives
to receive any amount, or any shares of Common Stock, payable under the Plan by
reason of the Participant's death, the Participant's estate shall be treated as
the Participant's Beneficiary for purposes of the Plan.
13. Rights of Participants.
A Participant's rights and interests under the Plan shall be subject to
the following provisions:
(a) A Participant shall have the status of a general unsecured creditor
of the Corporation with respect to his or her right to receive any payment under
the Plan. The Plan shall constitute a mere promise by the Corporation or the
applicable Affiliated Company to make payments in the future of the benefits
provided for herein. It is intended that the arrangements reflected in the Plan
be treated as unfunded for tax purposes, as well as for purposes of any
applicable provisions of Title I of ERISA.
(b) A Participant's rights to payments under the Plan shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of the Participant
or his or her Beneficiary.
(c) Neither the Plan nor any action taken hereunder shall be construed
as giving any Participant any right to be retained in the employment of the
Corporation or any of its Affiliated Companies.
(d) No Participant shall have the right, by virtue of having been
selected as an Eligible Employee with respect to any Plan Year, to be
automatically treated as an Eligible Employee with respect to any subsequent
Plan Year.
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(e) No Restricted Units credited to a Participant's Account, and no
payments made with respect to such Units upon or after they become vested, shall
be considered as compensation under any employee benefit plan of the Corporation
or any of its Affiliated Companies, except as specifically provided in any such
plan or as otherwise determined by the Board of Directors.
14. Administration.
The Plan shall be administered by the Committee. A majority of the
members of the Committee shall constitute a quorum. The Committee may act at a
meeting, including a telephone meeting, by action of a majority of the members
present, or without a meeting by unanimous written consent. In addition to the
responsibilities and powers assigned to the Committee elsewhere in the Plan, the
Committee shall have the authority, in its discretion, to establish from time to
time guidelines or regulations for the administration of the Plan, interpret the
Plan, and make all determinations considered necessary or advisable for the
administration of the Plan; provided, however, that any questions as to the
rights under the Plan of any person who is an Elected Officer under Section
4.01(a), of the By-Laws of the Corporation, as amended on June 29, 1999 or
thereafter, shall be determined by the Compensation Committee instead of by the
Committee.
The Committee may delegate any ministerial or nondiscretionary function
pertaining to the administration of the Plan to any one or more officers of the
Corporation.
All decisions, actions or interpretations of the Committee or the
Compensation Committee under the Plan shall be final, conclusive and binding
upon all parties. Notwithstanding the foregoing, any determination made by the
Committee or the Compensation Committee after the occurrence of a Change in
Control that denies in whole or in part any claim made by any individual for
benefits under the Plan shall be subject to judicial review, under a "de novo",
rather than a deferential standard.
15. Amendment or Termination.
The Board of Directors may, with prospective or retroactive effect,
amend, suspend or terminate the Plan or any portion thereof at any time;
provided, however, that no amendment, suspension or termination of the Plan
shall adversely affect the rights of any Participant with respect to any Units
previously credited to the Participant's Account, without his or her written
consent.
16. Successor Corporation.
The obligations of the Corporation under the Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Corporation, or upon any successor
corporation or organization succeeding to substantially all of the assets and
business of the Corporation. The Corporation agrees that it will make
appropriate provision for the preservation of Participants' rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.
16
<PAGE>
17. Governing Law.
The Plan shall be governed by and construed in accordance with the laws
of the State of New York.
18. Effective Date.
The Plan was adopted effective as of June 29, 1999 by the Board of
Directors, acting by the Compensation Committee, subject, however, to approval
by the shareholders of the Corporation by a majority of the votes cast in person
or by proxy at the 1999 annual meeting of the Corporation's shareholders.
Restricted Units may be credited to the Accounts of Eligible Employees as
provided herein prior to such shareholder approval, subject to such approval
being obtained at such meeting.
As adopted by the Compensation Committee of
the Board of Directors on June 29, 1999,
amended by that Committee by Consent dated
October 1, 1999, and approved by shareholders
at the annual meeting on November 17, 1999.
17
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